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

HCA 1190, 1191,
1192 and 1193/2007

[2021] HKCFI 257

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 1190, 1191, 1192 AND 1193 OF 2007

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BETWEEN

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AND BETWEEN

(By Counterclaim)

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

Before: Hon Au-Yeung J in Chambers

Closing Date for Written Submission: 25 September 2020

Date of Decision: 28 January 2021

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D E C I S I O N

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A. INTRODUCTION

1.This decision on enforcement should be read with the judgment handed down on 3 August 2016 (“Judgment”), and all abbreviations therein are adopted. 

2.By the Judgment, this Court declared that the Happy Valley Property and Lantau Properties (“the Two Properties”) were subject to a public charity for the advancement of Buddhism and did not form part of the estate. This Court declared that the Nathan Road Property formed part of the estate and ordered D1 to deliver vacant possession to the Plaintiffs within 3 months from the date of the Judgment; and D1 had to pay damages of HK$1,255,200 and mesne profits at the rate of HK$170,400 per annum from 7 June 2016 until D1’s delivery of vacant possession. 

3.D1 appealed against that part of the Judgment relating to the Nathan Road Property but the appeal was dismissed by the Court of Appeal on 24 January 2019.

4.D1 did not deliver vacant possession of the Nathan Road Property.  The Plaintiffs invoked the bailiff’s assistance to recover possession on 20 January 2020.  D1 paid costs to the Plaintiffs but did not pay the damages and mesne profits as ordered.

5.Pursuant to this Court’s order dated 3 February 2017 (“2017 Order”), SJ and D1 set up a new company called Dharma Realm Buddhist Association (Hong Kong Branch) Company Limited (“Newco”) to hold the Two Properties.

6.The Plaintiffs took out the present summons on 11 May 2020, amended on 27 July 2020, for various reliefs:

(1) That D1 do within 21 days from the date of the order pay a sum of HK$1,872,550,82 being the damages in respect of the Nathan Road Property, with interest as ordered; and HK$6,600 being agreed costs as ordered by Master Roy Yu dated 5^th September 2019 (“order to pay”);

(2) Should D1 fail or neglect to pay the above sums, the Plaintiffs shall be at liberty to enforce the Judgment by resorting to the Two Properties and

(i) sell any or both of them and use the proceeds of sale to satisfy the sums in §(1) (“Judgment Sums”) and costs of this application and pay the balance to Newco (“order to sell”); or

(ii) charge the Judgment Sums together with costs of this application against the Two Properties after transferring the Two Properties to Newco by way of gift, notwithstanding that Newco is not a party to these proceedings and is in law a separate legal entity from D1 (“order to charge”).

7.The summons stated that the application was taken out pursuant to Order 45, rules 1 and 9, Order 50, rule 1 of the Rules of the High Court, Cap 4A and the inherent jurisdiction of the Court.  The further arguments of the Plaintiffs upon amendment to the summons rely on the Court’s power to approve ex gratia payments from charitable funds under the principles of Re Snowden and Re Henderson [1970] Ch 700.

8.D1 and SJ share the same views on legal principles – that there are simply no statutory bases for the Court to impose a charge and there is only jurisdiction to order a sale in enforcement of a charging order.

9.SJ further submits that if the Court has any inherent jurisdiction to impose a charge, it should not be exercised in favour of the Plaintiffs.

10.I shall analyze each order sought in turn, and then consider the question of inherent jurisdiction.

B. ORDER TO PAY

11.There were already orders requiring D1 to pay.  I fail to see why the Court needs to make the same orders again.

12.D1 did not dispute the amount of the Judgment Sums.  However, Mr Kee, counsel for D1, puts forth 2 lines of argument:

(1) He was instructed that D1 should not be liable to bear mesne profits from the date of the Judgment because the Nathan Road Property had been handled and managed by one Mr John Man pursuant to a power of attorney from Priest To Lun, but not by D1. See paragraph 111 of the Judgment.

(2) The remedies for enforcement have been laid down in Order 45, rule 1, RHC.  The Plaintiffs should have resorted to those instead of issuing the present summons.

13.The first line of argument, without disrespect, has no merits.  The instructions to counsel were not only irrelevant but contradictory to D1’s stance at the trial.  D1 had claimed to be in actual or constructive possession of the Nathan Road Property (§13 of the Judgment). The Judgment in respect of that Property was directed at D1, not John Man.  D1 has appealed against that part of the Judgment and lost.  D1 must pay.

14.However, I agree with the second line of argument.  Under Order 45, rule 1, the Plaintiffs could have used, at least, a writ of fieri facias or garnishee proceedings against D1.  And yet as of the date of the summons, the Plaintiffs has not even attempted to do any of those.

C. ORDER TO CHARGE

15.It is logical to deal with the order to charge first before an order to sell in view of paragraph 8 above.  The power to grant an order to charge should be considered under 3 limbs:

(1) Section 20A of the High Court Ordinance (Cap 4) (“HCO”);

(2) Order 45, rules 1 and 9; and

(3) The court’s power to approve ex gratia payments out of charity funds under the principles of Re Snowden and Re Henderson.

C1. Section 20A of HCO

16.Section 20A(1) of HCO authorizes the Court to impose a charge:

“(1) Subject to subsection (3), a charge may be imposed by a charging order only on—

(a) an interest held by the debtor beneficially—

(i) in any asset of a kind mentioned in subsection (2) [ie land, securities or funds in court] or

(ii) under any trust; or

(b) an interest held by a person as trustee of a trust (in this paragraph referred to as the trust), if the interest is in an asset of a kind mentioned in subsection (2) or is an interest under another trust and—

(i) the judgment or order in respect of which a charge is to be imposed was made against that person as trustee of the trust;

(ii) the whole beneficial interest under the trust is held by the debtor unencumbered and for his own benefit; or

(iii) in a case where there are 2 or more debtors all of whom are liable to the creditor for the same debt, they together hold the whole beneficial interest under the trust unencumbered and for their own benefit.

17.In respect of section 20A(1)(a), a judgment creditor has to verify, by affirmation, that the interest to be charged is owned beneficially by the judgment debtor: Order 50, rule 1(3)(d).

18.Plainly, the Plaintiffs are unable to so verify because the Two Properties are not beneficially owned by D1 but the public charity.  In his submission dated 23 June 2020, Mr Miu, counsel for the Plaintiffs, has conceded that the beneficiary was not D1.  There is no dispute that there is no identified beneficiary such that the Plaintiffs/the Court needed to hear his/her views, apart from the representations from SJ.

19.As regards HCO s.20A(1)(b), only limb (i) is applicable.  A charging order can be imposed against the defendant as trustee of the trust where the liability was incurred by virtue of the bare legal ownership of the property in question together with the concomitant rights necessary for its enjoyment (ex hypothesi authorised by the trust): Beckenham MC Ltd v Centralex Ltd [2004] EWHC 1287 (Ch), §§30-31.

20.Applying Beckenham,

(1) D1 has never been the legal owner of the Nathan Road Property; and

(2) The Judgment Sums cannot be remotely considered as incurred for the enjoyment of the public charity or the Two Properties.

21.Therefore, no charge can be imposed upon the Two Properties according to section 20A HCO against D1.

C2. Order 45, rules 1 and 9

22.The Plaintiffs submits that Newco is in substance the alter ego of D1.  An order to charge can be imposed on it, notwithstanding that it had not come into existence when the Judgment was handed down.  The Plaintiffs rely on Order 45, rules 1 and 9, RHC and Sam Ming City Forestry Economic Co & anor v Lam Pun Hung & anor unrep., CACV 279 of 2000, 27 June 2001.

23.I am unable to accept that Newco is the alter ego of D1.  Under §§2 and 3 of the 2017 Order, Newco’s Memorandum and Articles of Association and the composition of the first board of directors were subject to comments and approval of SJ, acting as a protector of the public charity.  Newco was only incorporated on 7 January 2020 for holding the Two Properties as a trustee for the advancement of Buddhism.  Newco has never been in possession of the Nathan Road Property and the Judgment Sums were not incurred by it.

24.As for Order 45, rule 9, it provides that:

“Any person, not being a party to a cause or matter, who obtains any order or in whose favour any order is made, shall be entitled to enforce obedience to the order by the same process as if he were a party.” (underline added)

25.I am unable to see how this rule assists the Plaintiffs.  It is Newco who was a non-party.  Newco does not seek to enforce the Judgment.  Order 45, rule 9 has no application.

26.The position of P2 in Sam Ming City illustrated my point.  A judge refused to set aside an ex parte order granting leave to Ps to enforce a Mainland arbitration award against Ds and gave judgment in favour of P2.  D2 appealed. The Court of Appeal dismissed the appeal and upheld the judge’s decision that P2, who was not a party to a Mainland arbitration proceedings but was the sole beneficiary of the Mainland arbitration award, may enforce it in Hong Kong pursuant to s.40B(2) of the Arbitration Ordinance, Cap 341.

C3. The Court’s power to approve ex gratia payments from charitable funds under the principles of Re Snowden

27.The Plaintiffs rely on Re Snowden to invite the court to order charity trustees or SJ to make a voluntary payment out of the Two Properties or their sale proceeds to meet the Judgment Sums pursuant to a moral obligation.  Cross J dealt with the estates of Snowden and Henderson in Re Snowden.

28.In Re Snowden, the testator left his shares to 3 legatees and the residuary estate to some charities.  The testator sold the shares in his lifetime, with the result that the charities received so large a gift under the will which the testator might have never intended to give. Six charities voluntarily gave up part of their shares in the residuary estate in favour of the 3 legatees. 

29.In Re Henderson, the testatrix made a holograph will with pecuniary gifts to K and A.  At some date, which could not be identified as having been before or after execution of the will, the testatrix added in red ink the words “or ½ each of my shares” to the right of the names of K and A in the will.  The will as proved did not contain the words in red ink.  The administrator sought directions as to whether the gifts to K and A might be increased and paid out of the residuary estate, such that the gift to charity would be reduced from £6,500 to some £1,500.

30.The applications by the executor/administrator was to give effect to the wishes of the charities and the legatees.  The Attorney-General (“AG”) had no objection in both cases.

31.Cross J held that the court and the AG had power to authorize charity trustees to make ex gratia payments out of funds held on charitable trusts. It was, however, a power which was not to be exercised lightly or on slender grounds but only in cases where it could be fairly said that, if the charity were an individual, it would be morally wrong of him to refuse to make the payment. (at 710F-G)

32.Cross J illustrated his holding further:

“An honourable man when satisfied that part of a legacy which he has been paid was not intended by the testator for him at all but for someone else, and that it has only come to him through some oversight or legal technicality, would certainly feel under a moral obligation to hand that part over to the person who was intended to have it”. [1^st category] On the other hand, if a testator in the exercise of his legal right to dispose of his property as he likes chooses to give his estate to A rather than to B the fact that B is bitterly disappointed and considers that the testator acted very wrongly is not in itself a reason why A should feel under a moral obligation to hand over the estate or any part of it to B. [2^nd category] I do not of course, mean to say that there can never be cases in the second category in which an ex gratia payment out of charity funds would be justified; a case in which it would, perhaps, be justified might be where the testator in making the gift to a charity was breaking a solemn, though legally unenforceable, promise to leave it to someone else … But I think that the cases in which ex gratia payment would be justified would be rarer in the second category than the first.” (at 710H-711B)

33.Cross J approved the applications on the bases of the testator/testatrix’s perceived intentions under the will.

(1) In Re Snowden, he found it highly likely that the testator overlooked the effect which the sale of the shares had on his testamentary dispositions and that if he had realized the effect of the sale, he would have left pecuniary legacies of a substantial amount in order to compensate the 3 legatees for the loss of the shares (at 707H-708A).

(2) In Re Henderson, he found it probable that by the red ink addition, the testatrix intended to indicate that if her shares were worth more than £6,000, the two legatees were to share the excess and that she did not contemplate that so large a sum as £6,500 would pass under the words “anything over for charity” (at 708C-D).

34.Re Snowden and Re Henderson are plainly distinguishable from the present case:

(1) The Judgment and the 2017 Order cannot be compared to a will.  In Re Snowden and Re Henderson, the charities received so large a gift from the will which the testator might have never intended to give. In the present case, the Judgment was reached after consideration of the law and facts to declare that the Two Properties came under a public charity.  The 2017 Order was to implement the Judgment as regards the Nathan Road Property.  There was no and could not be any challenge to the “intention” of the Judgment or the 2017 Order.

(2) Unlike Re Snowden, the public charity has never intended to make ex gratia payments to the Plaintiffs.  In fact, there was no evidence of the Plaintiffs or D1 ever approaching SJ for that purpose.

(3) The Judgment expressly found that the Nathan Road Property was not used for the advancement of Buddhism (§110). Even if the concept of moral obligation is applicable here, there is no moral obligation on the charity (set up for the purpose of advancement of Buddhism) to assist D1 to settle the Judgment Sums. 

(4) D1’s conduct was in breach of the Judgment.  Even on moral grounds, the charity should not aid and abet such breach.

(5) Re Snowden, at best, only dealt with payment out of charity funds.  It did not order a charge or sale of properties that were subject to a public charity.

35.In summary, none of the bases in support of an order to charge are established.  I refuse to grant an order to charge.

D. ORDER TO SELL

36.Under section 20B(3) of the HCO:

“a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand.”

37.The remedy under an equitable charge under hand is sale: Hong Kong Civil Procedure 2021, Vol 1, §50/9A/18.

38.There appears no basis for this Court to consider an order to sell ahead of the imposition of a charging order. As there is no legal basis for the imposition of a charging order, there is no need to consider an order to sell.

39.Mr Miu submits that a judgment creditor who has obtained a charging order will need an order to sell but a trustee does not need such an order. All that the trustee needs is the Court’s sanction about the way that he proposes to deal with the proceeds of sale of the trust property.

40.With respect, the trustee (whether Mr Miu meant SJ or Newco) has not proposed to sell or deal with proceeds of sale of the Two Properties. There is nothing for the Court to sanction. 

41.Further, the Judgment declared that the Two Properties and not their proceeds of sale are subject to a public charity for the advancement of Buddhism.  An order to sell, not for the purpose of advancement of Buddhism is against the letter and spirit of the Judgment.

E. INHERENT JURISDICTION

42.Inherent jurisdiction provides a most useful source of procedural law which the Court may draw upon as necessary whenever it is just or equitable to do so: Halsbury’s Laws of England, 5^th ed, Vol 11, §23.  It is difficult to formulate a formula for its application.  Factors which affect the exercise of inherent jurisdiction include the facts of the case, the type of order which the court seeks to protect or enforce, the conduct of the parties and the court’s perception of where the balance of justice lies. Ultimately, it is an exercise of the Court’s discretion.  The phrase “fairness, necessity and proportionality” says it all: Falcon Private Bank Ltd v Borry Edouard Charles Ltd & anor [2013] HKEC 962, HCA 1934/2011, §§18-19, To J.

43.In Falcon Private Bank, To J ordered that unless the defendant paid the plaintiff’s costs of HK$3 million ordered in 2 previous hearings, the defendant’s defence be struck out and judgment be entered in favour of the plaintiff in the sum of US$10 million.

44.In JSC BTA Bank v Ablyazov (No. 8) [2013] 1 WLR 1331, the defendant was found to be in contempt of court for breaching disclosure orders and lying under cross-examination.  He was sentenced to 22 months’ imprisonment but had absconded.  On the application of the plaintiff, the judge ordered that the defendant should surrender himself to custody and file an affidavit disclosing his world-wide assets or be debarred from defending 8 sets of commercial court proceedings.

45.One immediately notes that the 2 authorities were examples of how the Court invoked its inherent powers to ensure that a recalcitrant defendant complied with court orders and to ensure justice to a plaintiff.

46.However, the Court may not fall back upon its inherent jurisdiction to circumvent a clear statutory provision.  See Halsbury’s Laws of Hong Kong, §90.0034.

47.Given the statutory provisions in section 20A HCO above, I do not see any room for the existence of inherent jurisdiction.

48.Mr Miu submits that the Plaintiffs are invoking the equitable jurisdiction of the Court and he cites various maxims of equity only in his reply submission.  It is not necessary to set out all his arguments.  Suffice it to say that equity is not a weapon that can fend off applicable statutory provisions and established principles.

49.In any case, the order to charge and order to sell are forms of enforcement of a debt available not as of right but by exercise of the court’s discretion.  If I do have inherent jurisdiction, I bear in mind that it was hostile litigation between the Plaintiffs and D1.  The Plaintiffs ended up with what appeared to be empty judgment against a foreign defendant.  For the following reasons, I would not exercise my discretion in favour of the Plaintiffs to order a charge or a sale.

50.Firstly, the Plaintiffs have not exhausted all available remedies.  They had not levied execution before issuing the present summons.  It appeared that D1 operated in Hong Kong but there was no attempt to apply for garnishee orders.

51.Secondly, the Plaintiffs made an informed choice to defer execution.  It was only in the reply submission of Mr Miu that the Court was told that the Plaintiffs had applied for and obtained a combined writ of possession and fieri facias against the Nathan Road Property and Happy Valley Property on 6 November 2019.  They recovered the Nathan Road Property but the writs in respect of the Happy Valley Property were not executed until the day before the reply submission (ie 24 September 2020).  By then, D1 had moved out and the Happy Valley Property has been occupied by another Buddhist lecture hall.

52.According to Mr Miu, execution of the writ of fieri facias would disrupt and disable operation of the Happy Valley Property as a place of Buddhist worship but with little prospect of substantial financial gain.  As Buddhists themselves, the beneficiaries to the estate found it sacrilegious to sell Buddha statutes or other religious paraphernalia seized in a place of Buddhist worship.  As it has become a subject of criticism (and by that he meant by the Court, D1 and SJ in the course of dealing with this summons), the Plaintiffs attempted to levy execution.

53.This was giving evidence through written submission.  It was not even clear if Mr Miu’s submission was based on instructions or his own views.  In any case, that submission revealed that the Plaintiffs made a deliberate choice, under legal advice, to delay execution.  They have to bear the consequence of that choice.

54.Thirdly, and worse still, the execution on 24 September 2020 was in breach of an order for stay of execution made on 24 June 2020.  The Plaintiffs has never applied for uplifting of the stay.  If any maxim of equity is applicable, the one which says he who comes to equity must come with clean hands apply and bars the Plaintiffs from relief.

55.Fourthly, there was no suggestion that D1 had no means to pay, as D1 had settled part of its legal costs to the Plaintiffs already.

56.Fifthly, the Plaintiffs could have enforced the Judgment in the United States where D1 is resident.  The fact that the Plaintiffs need to incur extra expenses and time to enforce against a foreign defendant is not a basis to ask the Court to exercise its discretion to order a sale or charge of the Two Properties. In any case, apart from a bare assertion, the Plaintiffs have not said anything about actual difficulty in enforcement in the United States.

57.Sixthly, to sell properties that come under a charitable trust, the purpose must be for public interest.  Payment of damages on behalf of D1 who breached a court order comes nowhere near public interest.

F. OTHER ORDERS

58.In the reply submission, the Plaintiffs invite the Court to consider whether the 2017 Order should be implemented or varied.

59.The Plaintiffs do not challenge the propriety of the 2017 Order but invite to the Court to consider, in the light of events in the last couple of years which led to this summons, whether the Two Properties should be vested, not on Newco but on another charitable Buddhist organization that may be nominated by SJ. 

60.With respect to the Plaintiffs, they cannot apply to vary the 2017 Order under the “such other directions and orders as the Court may deem fit” limb of their summons.  Still less should they apply only in their submission in reply.  If they want a variation to the 2017 Order, that should be done properly, supported by affidavit.

61.That said, the Court on its volition will follow up on the implementation of the 2017 Order given D1’s apparent breach of the Judgment.

G. CONCLUSION

62.This application for enforcement of judgment debts owed by D1 by seeking an order to sell or to charge properties that form the subject matter of a charitable trust is novel and entirely against established principles under sections 20A of HCO, Order 45, rules 1 and 9 of RHC.  Re Snowden and Re Henderson are wholly distinguishable.  There is no inherent jurisdiction in the Court to grant the reliefs sought and even if there is, the facts are against the exercise of discretion in favour of the Plaintiffs.  I therefore dismiss the amended summons.

H. COSTS

63.On a nisi basis, costs of D1 should follow the event and be borne by the Plaintiffs, to be taxed if not agreed.  The Plaintiffs’ costs should be taxed in accordance with the Legal Aid Regulations.  Costs of SJ should be borne out of the charity, as SJ has been invited by the Court to make submissions.

64.I thank counsel for their assistance.

Written Submissions by Mr Nelson Miu, instructed by Hobson & Ma assigned by Director of Legal Aid, for the Plaintiffs

Written Submissions by Mr Vincent Kee, instructed by Law Offices of Y.C. Lee, for the 1^st Defendant

Written Submissions by Mr Aaron Lam, Government Counsel for the Secretary for Justice