Ma Wah Yan and Others v. Dharma Realm Buddhist Association, Inc.

CACV 179/2016

[2019] HKCA 100

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 179 OF 2016

(ON APPEAL FROM HCA 1190, 1191, 1192 AND 1193/2007)

________________________

AND BETWEEN

______________________

(Consolidated by the Order of Master J Wong dated 18^th July 2012)

Before: Hon Lam VP, Yuen and Kwan JJA in Court

Date of Hearing: 15 November 2018

Date of Judgment: 24 January 2019

_____________________

JUDGMENT

_____________________

Hon Lam VP (giving the Judgment of the Court):

1.By a judgment of 3 August 2016, Au-Yeung J found, amongst other things, that the property at Flat A9, 5/F, Mirador Mansion, No 58, Nathan Road, Kowloon [“the Property”] was not subject to a charitable trust. Thus, upon the death of its registered owner Priest To-Lun [“the Deceased”] on 7 June 1995, the Property became the estate of Priest To-Lun and devolved in accordance with the Intestates’ Estates Ordinance.

2.The 1^st Defendant appealed against that part of the judgment.

3.We heard the appeal on 15 November 2018.  After hearing submissions, we reserved judgment in the appeal.

4.We now give our judgment.

5.The relevant factual background regarding the acquisition of the Property and its use since it came under the ownership of the Deceased were set out by the judge in her judgment at [6] to [10] and [65] to [70]:

“ 6. Priest To Lun was born in Mainland China in 1918.  He became a monk in 1937 at the age of 19 and was ordained in 1947.  In 1949, he came to Hong Kong to preach Buddhism.  Two years later, he established the Western Bliss Garden (西樂園) and preached there.

7. In between 1954 and 1958, Priest To Lun became registered owners of the 4 subject properties, tabulated below:

	Property name	Manner of acquisition	Donor	Use of the Property
1&2.	Lot No. 25 in DD No. 307, Lantau Island (“Lot 25”) Section A, Mang Cheung Po Lot No. 5, Mang Cheung Po, Lantau Island (“Lot 5A”) (collectively “the Lantau Properties”)	By a Deed of Gift dated 16 March 1954 (“the Deed of Gift”)	Donated by Tung Shau Hong董壽康 (“Tung”)	Tsz Hing Monastery (慈興寺) was built on it
3.	11/F, No. 31 Wong Nai Chung Road, Hong Kong (“the Happy Valley Property”)	By assignment dated 15 August 1957	Buddhist donors and funds of Priest To Lun	Established the Buddhist Lecture Hall (佛教講堂)
4.	Flat A9, 5/F, Mirador Mansion, No. 58, Nathan Road, Kowloon (“the Nathan Road Property”)	By assignment dated 15 November 1958	Allegedly Buddhist donors	Leased out for rent throughout the years

8. In February 1959, D1 was incorporated under its former name of “Buddhist Lecture Hall Inc” in California.  Contrary to paragraph 28 of the Amended Defence, Priest To Lun was not one of its founders.  Mr Miu (counsel for the Plaintiffs), however, accepts that Priest To Lun was the spiritual and de facto head of D1 during his lifetime, and that the directors and office holders of D1 were his followers and would obey his commands.

9. Priest To Lun used to preach at the Buddhist Lecture Hall until he departed for the USA in 1962 to continue preaching there. He had never since resided in Hong Kong except to return on 4 occasions to preach.

10. On 7 June 1995, Priest To Lun passed away in the USA.

…

65. Since Priest To Lun came to Hong Kong, there was no evidence as to his having any source of income as a monk.  Madam Lew’s evidence was that he had had no income bearing job.  Until his death in 1995, Priest To Lun had devoted his whole life as a monk to preaching Buddhism. 

66. All of the 4 properties were registered in Priest To Lun’s name as a Buddhist monk.  For 40 years up to 1995 (and thereafter), their respective uses have not substantially changed.  He had not personally used the 4 Properties except to preach on 4 occasions in 1974, 1978, 1981 and 1988.

67. Priest To Lun led a frugal life, never spending money for his own good.  He taught that “the very best thing for cultivators of the Way is to uphold the precept against touching money”.  There was a Shakya Fund set up by D1 to enable monks and nuns who would not touch money to apply for money, with justification.  Priest To Lun subjected himself to the same procedures under the Shakya Fund, just like his disciples, even to assist fellow villagers in need.  He practiced what he taught.

68. Priest To Lun had provided money to relieve his parents and their village from poverty and flooding.  Such financial assistance differed amongst persons.  The financial assistance to Priest To Lun’s brother was to repay the latter for taking care of their parents, as admitted by Madam Bai.  Priest To Lun also sponsored the trip of his brother and his family to the USA.  No witness could tell the source of such sponsorship.  All of these did not detract from Buddhist precepts.

69. I accept the evidence of Reverend Heng Sure and Madam Fu that people donated because they were impressed by Priest To Lun.  The donations were made to Priest To Lun.  Donors would not ask him to account for the money or ask for receipts from him.  They simply trusted him to use it for advancement of Buddhism.  There was no evidence that he abused that trust.  The Oral Wills pointed in the same direction.

70. When Priest To Lun died, he left no personal assets, whether in Hong Kong or the USA, except the subject properties.  See the Schedule of Properties attached to the grant of letters of administration to his estate and the evidence of Madam Lew and Reverend Heng Sure.”

6.The judge’s assessment of the evidence regarding the Property was set out at [105] to [113] of the judgment:

“ 105.   D1’s case is that the Nathan Road Property was acquired with donations.  The original intention of Priest To Lun was to use it as a lecture hall.  Because of the noisy and complicated environment, that intention was never fulfilled. The Nathan Road Property has all along been leased out for rent to support the charitable work of D1. 

106.   The Nathan Road Property was purchased in the name of Priest To Lun, ie in his office as a monk.  According to the land search record, it was purchased with cash without the need for a mortgage. Madam Lew and Madam Fu had been told by Priest To Lun that the purchase price came from donations, and Reverend Heng Sure had been told by Priest To Lun that all the properties in his name came from donations. There was no evidence that Priest To Lun had other sources of income.

107.   Madam Fu testified that donors like her would make donations to Priest To Lun without specifying how he should use them.  They merely trusted Priest To Lun to be fair and not selfish and do good deeds.  Such evidence was irrelevant as the Nathan Road Property was purchased before she came into the picture.

108.   According to the sale and purchase agreement relating to the Nathan Road Property, there were 4 other properties in the same building purchased at the same time.  Madam Fu could not tell whether those 4 were adjacent to the Nathan Road Property and how they were disposed of.  There was simply no evidence as to why Priest To Lun saw fit to keep only the Nathan Road Property but disposed of the other 4.

109.   I have alluded to the possibility of Priest To Lun having personal assets at his disposal in paragraph 62 above.  Even if what the defence witnesses said as to original intention and source of purchase money was entirely accepted, a fundamental change of purpose upon completion of the Nathan Road Property would fail to satisfy the 1^st criterion of Cheung Man Yu.

110.   The Nathan Road Property was never used for advancement of Buddhism.  The 3^rd criterion of Cheung Man Yu that the institution must be exclusively charitable was not satisfied.

111.   According to Madam Lew, a Mr John Man has been handling the Nathan Road Property pursuant to a power of attorney from Priest To Lun.  He received the rental by auto-deposits and applied them to defray expenses (such as taxes and maintenance) and occasionally to donate to charities and needy students.  Mr Man had to ask for D1’s approval to disburse large sums of money, but it never occurred.

112.   The power of attorney, bank records of Mr John Man or accounts books of D1 (who has allegedly been “managing” the Nathan Road Property) which could have shed light on the use of the rental were not produced. The 2^nd criterion of Cheung Man Yu that the institution existed for the benefit of the public was not satisfied. 

113.   I am not satisfied that the Nathan Road Property was subject to a charitable trust.”

7.The judge applied the criteria extracted from the judgment of Tang VP (as he then was) in Cheung Man Yu v Lau Yuen Ching [2007] 4 HKC 314 which the judge discussed at [16] to [22] of the judgment.  Those criteria were examined by this Court (Lam VP and Poon JA) in the present appeal in the Reasons for Judgment of 2 March 2017 at [21] to [25] when the Court refused leave to the Plaintiffs to file a respondent’s notice out of time.  In those paragraphs, the Court held:

“ 21. Properly understood, the following principles are affirmed in the judgment of Tang V-P (as he then was) in Cheung Man Yu, which was substantially based on the discussion of the law on charity in the judgment of Cross J in Neville Estates Ltd v Madden [1962] Ch 832.

22. To qualify as a public charity three conditions must be satisfied, see [24] of Cheung Man Yu:

(i)  The purposes of the institution must have charitable character;

(ii)  The institution must exist for the benefit of the public;

(iii)  It must be exclusively charitable.

23. Regarding the first requirement, ownership of the property is a relevant but not determinative consideration.  In respect of property held under private name(s) for the use of an unincorporated institution, its beneficial ownership could be held in three different ways as discussed in Neville Estates Ltd v Madden, supra.  If the terms or circumstances of the gift or the rules of the association of the unincorporated institution show that the property in question is not to be at the disposal of its members for the time being, but is to be held in trust for or applied for the charitable purposes of the association as a quasi-corporate entity, like the establishment of a place of public worship, it would be a charitable trust, see [41] to [46].  In this connection, it does not matter that the donors or the title holders did not appreciate the legal consequence of the dedication of the property to such purposes. Once a charity has been set up, the legal owners cannot re-convert the property back to private ownership for non-charitable purposes.  Further, when the evidence supports the existence of a charity, the court should be not astute to find otherwise.  On the facts in Cheung Man Yu, and also in Neville Estates Ltd v Madden, the courts were able to conclude that members of the institutions could not have envisaged for a moment that the property were to be divided between the members for the time being and there was enough in the circumstances to show that the fund was to be held on a trust for or to be applied for the charitable purposes notwithstanding that there was no formal declaration to such effect by the donee and no provision in the rules of the institution to that effect, see [45] and [54] to [56] of Cheung Man Yu.

24. Regarding the second requirement, the public character refers to the institution existed for the benefit of the community or an appreciably important section of the community.  These involve consideration of two closely related questions: whether the purposes of the institution confer a benefit on the public or a section of the public; and secondly whether the class of persons eligible to benefit constitutes the public or a section of it.  See [26] of Cheung Man Yu citing Tudor on Charities.  A religious institution set up for the sole benefit of members of a priory live in seclusion was therefore not a public charity (as held in Gilmour Coats [1949] AC 426).  However, a religious institution set up as a place of public worship by persons who live in the world and mix with their fellow citizens would be a public charity as the court is entitled to assume that some benefit accrues to the public from the attendance of such worship.  See [72] and [73] of Cheung Man Yu citing Neville Estates Ltd v Madden, supra. 

25. Regarding the third requirement, the use of part of the property for private accommodation, serving of vegetarian meals and the installation of ancestral tablet at a fee could be incidental, ancillary or auxiliary to the charitable purpose and it would not be inconsistent with the charitable character of the institution, see [60] to [70].  In this connection, Secretary for Justice v Joseph Lo Kin Ching (2015) 18 HKCFAR 169 at [11], [67] to [72] (see also discussion in the Court of Appeal’s judgment in CACV 44 of 2013, at [92] to [116]) provides another example of the court holding that a charitable trust was established notwithstanding that there were provisions in the will for the exercise of fiduciary powers for private purposes.” 

8.Before us, there was no dispute on any of these principles.

9.Though 3 grounds of appeal were given in the Notice of Appeal of the 1^st Defendant, Mr Chong (appearing with Mr Yip for the 1^st Defendant) summed up these grounds as follows at paragraph 15 of his skeleton submissions of 18 October 2018:

“ Having accepted that the Nathan Road Property was purchased using donation money, and that people donated money to the Deceased for the purpose of advancement of Buddhism, the learned trial judge erred in failing to hold that the Nathan Road Property was held on charitable trust.”

10.With respect, there is an erroneous premise in this submission.  Though the judge had accepted that the Property was purchased using “donation” money, the judge had not accepted that the people who gave such donation had done so for the purpose of advancement of Buddhism.

11.Mr Chong relied on [69] of the judgment to advance his premise.  However, in that paragraph, the judge referred to the evidence of Reverend Heng Sure (whom the Deceased first met in the US in 1970) and Madam Fu, both of whom came into the picture long after the acquisition of the Property.  In the context of the events that occurred prior to such acquisition, the judge observed (as she was entitled to) at [107]:

“ Madam Fu testified that donors like her would make donations to Priest To Lun without specifying how he should use them. They merely trusted Priest To Lun to be fair and not selfish and do good deeds. Such evidence was irrelevant as the Nathan Road Property was purchased before she came into the picture.”

12.In any event, the judge did not make a finding in [69] that the donors specifically gave the donations for the purpose of advancement of Buddhism.  Instead, the judge found that the donations were made to the Deceased without asking him to account for the money or asking for receipts.

13.Whilst the judge also found that the donors trusted the Deceased using donations for advancement of Buddhism, that had to be read together with her findings at [62] and [68].  In those paragraphs the judge found that the Deceased had personal property at his disposal and he had used some property for purposes that cannot as a matter of common law be regarded as charitable purposes[1].  At [109] and [110], the judge further found that he had a free hand in deciding on the use of the Property which, notwithstanding the original but aborted intention of setting up a Buddhist lecture hall there, had never been used for the advancement of Buddhism.

14.In short, the judge found that in the eyes of the law the so-called donations were actually gifts made to the Deceased and he was at liberty to use the same as he deemed fit.  It was up to the Deceased to decide whether the monies would be used to purchase a flat for a Buddhist lecture hall or for other purposes.  Hence, the judge alluded to the change of purpose in respect of the acquisition of the Property at [109] and observed at [111] to [112] that there was insufficient evidence to show that the Property had been used exclusively for the advancement of Buddhism.

15.In the light of such finding, we cannot fault the judge in her conclusion that the criteria in Cheung Man Yu were not satisfied.

16.Mr Chong submitted that Madam Fu also gave evidence based on what she had learnt from the Deceased.  The short answer is that whilst hearsay evidence is admissible, the weight to be attached to it is a matter for the judge.  As we observed above, the judge was entitled to find that such evidence of Madam Fu as regards the intention of the donors was not of sufficient weight to establish a charitable intention on the latter’s part as required by law in light of the other matters the judge alluded to.

17.Mr Chong placed reliance on the Oral Will of the Deceased of 1994.  The judge referred to that at [44] of the judgment.  She discussed the implications of it (together with the other Oral Will of 1995) at [45] to [48] of the judgment.  There is nothing in the grounds of appeal in the Notice of Appeal or the submissions of Mr Chong which caused us to doubt the validity of the judge’s analysis in those paragraphs.  At [48], the judge summed up the effect of these so-called “Oral Wills”[2],

“ The Oral Wills, made 8.5 months apart, consistently showed a good monk following Buddhist precepts with no intention to benefit himself but his sangha(s).  There were clear statements of his intention to apply personal assets to charitable causes.  However, they were far from defining the terms of the trust or the beneficiaries.  There was also no evidence that the “trust” was carried out or that Priest To Lun had effectively divested himself of all beneficial interests in his own assets.”

18.In light of such a finding (with which we have no reason to interfere), we cannot accept Mr Chong’s submissions that the judge erred in her findings as regards the Property by failing to take account of the Oral Wills.  In particular, the Oral Wills could not have any probative value in establishing that the intention of the donors of gifts to the Deceased before the acquisition of the Property.

19.In the appeal, Mr Chong also contended that as the Deceased held a charitable office, all donations made to him should be regarded as charitable.  In this connection, counsel relied on the judgment of Jenkins LJ in In re Spensley’s WT [1954] Ch 233 at 243,

“ Where there is a gift to a person who holds an office the duties of which are in their nature wholly charitable and the gift is made to him in his official name and by virtue of his office, then, if the purposes are not express in the gift itself the gift is assumed to be for the charitable purposes inherent in the office.”

20.He also cited In re Rumball [1956] Ch 105 at 114, 116-118, 122-124 and Tudor on Charities, 10 Edn, paragraphs 2-110, 2-114 to 2-116.

21.The judge did not allude to this line of argument by the 1^st Defendant in the judgment.  We have checked the written submissions advanced below and it does not appear that Mr Chong (who also appeared with Mr Yip at the court below) had run this argument.  Nor were these authorities cited. 

22.An examination of the pleadings of the 1^st Defendant shows that this is also not the case of the 1^st Defendant advanced in its Amended Defence and Counterclaim of 10 March 2016.  In particular, there was no plea that the priesthood of the Deceased was an office and that donations made to him were to be treated as donations made to a charitable office.  There is also no plea as to whom that office was bestowed upon after the demise of the Deceased. 

23.In such circumstances, in our judgment, it is impermissible for Mr Chong to run such a line of argument for the first time on appeal. 

24.The authorities cited by Mr Chong concerned gifts made to the holder of an office for the time being.  Thus, the questions mentioned below do not arise.  Further, even in the context of gifts to an office holder of a religious institution, there were English cases which decided that the mere fact that the donee held such office was not sufficient to render the gift charitable if the donee was given absolute discretion to use the gift: In re Davidson [1909] 1 Ch 567; Dunne v Byrne [1912] AC 407; In re Jackson [1930] 2 Ch 389; In re Stratton [1931] 1 Ch 197; In re Davies (1932) 49 TLR 5; Farley v Westminster Bank [1939] AC 430. 

25.In In re Rumball, supra, the Master of the Rolls acknowledged that the distinction between a valid charitable gift and an invalid one could be a fine one.  At p. 115-116, Evershed MR accepted the argument that it was a question of construction based on the terms of the gift whether it conferred upon the donee the discretion to used it for non-charitable purposes as well as charitable purposes. 

26.Hence, there would have to be some investigation into the precise circumstances under which the gifts were made.  In the present context, the terms of the “donations” were not made or evidenced in writing. Actually, as discussed, the judge did not find sufficient evidence as regards the circumstances surrounding the “donations” as far as the purchase of the Property was concerned.

27.If a case of gift to a charitable office had been pleaded and run at the court below, the court would have to investigate the institutional underpinning for the priesthood of the Deceased.  At least the following questions have to be looked into: the institutional authority ordaining the Deceased, the extent to which that institution can be regarded as charitable under common law and whether the priesthood can be regarded as an office (with a successor being appointed to fill such vacancy upon death of the Deceased) as opposed to a mere honorific in addressing a monk.

28.There cannot be a proper consideration of these questions when the issue had not been pleaded and the Plaintiff had not been given the opportunity to adduce the necessary evidence on the same.  It is unsatisfactory to allow this argument to be run on appeal when the judge had not ruled on the same and this Court does not have the benefit of the analysis on the evidence available at the trial on this issue by the judge.

29.We are therefore not impressed by Mr Chong’s submissions on donations being made to the office of the Deceased.

30.The above analysis also addressed Mr Chong’s argument based on the description of the Deceased in the documents for acquisition of the Property as “Priest To Lun” and his address as the Buddhist Lecture Hall.

31.Mr Chong also submitted that the judge erred in taking account of the subsequent use of the Property (or the lack of evidence that the Property was exclusively used for advancement of Buddhism).  He submitted that the charitable trust crystallized when the Deceased, as he originally intended, decided to purchase the Property for use as a Buddhist Lecture Hall.

32.It is clear from the judgment that the judge considered the evidence regarding the actual use of the Property in the assessment based on the Cheung Man Yu criteria, which was the only basis on which the case on charitable trust had been argued in the final submissions at the court below.  Like the argument based on office, the argument of the Deceased setting up a charitable trust when he entered into an agreement to purchase the Property based on his unwritten dedication of it for the exclusive use of the 1^st Defendant was not pleaded nor run at the trial below.  All along, the case of trust as argued below was based on a trust arising from the intention of the followers of the Deceased who made donations for the purpose of the furtherance of Buddhism (see paragraphs 8, 18 to 33 of the Amended Defence).  With respect, counsel again tried to run the case of the 1^st Defendant on a footing which had not been canvassed properly before the judge. 

33.In any event, Mr Chong failed to address the conundrum arising from the apparent liberty taken by the Deceased to complete the purchase on one unit whilst the agreement was for the purchase of four units and to change the use of Property upon completion.  Such liberty is inconsistent with a charitable trust already having been established when the sale and purchase agreement was made. 

34.Though we agree with Tang VP at [46] of Cheung Man Yu that subsequent conduct could not change the nature of the trust, the learned Vice President also said in the same paragraph that subsequent events or conduct might throw light on whether a charitable trust had been established.

35.We reject Mr Chong’s argument on the use of the Property.

36.For these reasons, we are not persuaded that the judge was wrong in her conclusions in respect of the Property.

37.We shall dismiss the appeal with an order that the 1^st Defendant shall pay the Plaintiffs’ costs of this appeal. Such costs are to be taxed if not agreed.  The Plaintiffs’ costs are to be taxed according to Legal Aid Regulations.

Mr Nelson Miu, instructed by Hobson & Ma assigned by Director of Legal Aid, for the plaintiffs (by original action)

Mr KM Chong and Mr Richard Yip, instructed by Y.C. Lee, Pang, Kwok & Ip, for the 1^st defendant (by original action)