Ip (or Yip) Cheung (or Chiang) Kwok Also Know As David Ip or Yip v. Ip Siu Bun and Others

HCA007440/1984

IN THE HIGH COURT OF HONG KONG

ACTION NO. A7440 OF 1984

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BETWEEN

(by original action)

AND BETWEEN

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Coram: The Hon. Mr. Justice Godfrey in Court.

Dates of Hearing: 14 - 30 September 1987, 1 - 7 October 1987, and 11 - 29 April 1988

Date of Delivery of Judgment:  18 May 1988

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JUDGMENT

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1. In these proceedings the court is concerned with three properties in Queens Road Central, Hong Kong. The first is no. 152; the second and third are nos. 154 and 156.

2. The question is : What are the trusts upon which these properties are held?

3. The plaintiff in the action is Ip Cheung Kwok. He claims to be beneficially interested in these properties as the only living person interested or alternatively, as one of the living persons interested, in the estate of Ip Koo Chi ("the settlor"). It appears that, in 1875, the settlor purchased 152, and also 154 and 156, with his own money, causing all these properties to be assigned to Yip On and Yip Yuen. As to 152, Yip On and Yip Yuen were expressed in the assignment (dated 8th September 1875) to take as "Trustees of the Ip Cheong Kwong Tong Loan Association for and on behalf of the said Association". As to 154 and 156, Yip On and Yip Yuen were expressed in the assignment (dated 28th September 1875) to take as "Trustees of the Tung Yan Sheen Tong Loan Association for and of behalf of the said Association". The plaintiff says that these "Associations" never existed and that the properties are accordingly held upon a resulting trust for the estate of the settlor. In the course of the trial, on 21st September 1987. I appointed him to represent the estate of the settlor for the purposes of these proceedings.

4. The legal title to the properties is now vested in new trustees, namely, Ip Siu Bun, the first defendant, and Sin Hua Bank Trustee Limited, the fourth defendant. They hold 152 by virtue of a deed of appointment of new trustees made on 2nd April 1979; and they hold 154 and 156 under an Order of the Court dated 31st March 1979.

5. Ip Cheung Kit Yee the second defendant (and the wife of the first defendant), is a former trustee. So is Ip Siu Kwong, the third defendant. During the course of the trial I gave leave to the plaintiff to discontinue the action against the third defendant, whose position I need not further consider. The plaintiff has indicated that he makes no claim against the second defendant as a former trustee (or in her personal capacity). But, again in the course of the trial, on 6th October 1987, I appointed the second defendant to represent, for the purposes of these proceedings, all persons claiming to be members for the time being of "The Yip Cheong Kwong Tong Loan Assoication" and "The Tung Yan Sheen Tong Loan Assoication"; because, on one view of the matter, the members for the time being of the first-named Loan Assoication (if any) might be beneficially interested in 152 and the members for the time being of the second-named Loan Association (if any) might be beneficially interested in 154 and 156.

6. The first defendant, as well as being a trustee, claims that he is or may be beneficially interested in the properties. He does not claim to be a direct descendant of the settlor, but he does claim to be a descendant of one Ip Sze Shing (of whom I shall have more to say later), a common ancestor of the plaintiff and of the first defendant. In 1875 there was already in existence an ancestral fund founded for the veneration of ancestors of the Ip Clan beginning with Ip Sze Shing and known as the Ip Cheong Kwong Tong. The first defendant, on the footing that the Ip Cheong Kwong Tong has or may have an interest in the properties or one or some of them, claims to be one of the persons interested in the Ip Cheong Kwong Tong, and accordingly, in the course of the trial, on 13th April 1988, I appointed the first defendant to represent, for the purposes of these proceedings, all persons for the time being claiming to be members for the time being of the Ip Cheong Kwong Tong. The first defendant also says that if the trusts on which the properties or one or some of them are held are found to be charitable trusts (see below) or valid private trusts then he is one of the persons entitled directly or indirectly to benefit under those trusts.

7. The fourth defendant has no interest in these proceedings save as a trustee. It says that, whatever the trusts are upon which the properties are held by the first defendant and the fourth defendant, the plaintiff has no interest under them; for even if the properties are held upon a resulting trust for the estate of the settlor, the plaintiff is not a person interested in that estate. Since I have appointed the plaintiff to represent the estate of the settlor for the purposes of these proceedings, this is not a point I need at this stage consider further. But the fourth defendant, although it has no interest in the proceedings save as a trustee has advanced a case of its own. First, it has argued that the trusts on which the properties, or one or some of them, are held are charitable trusts, and accordingly (and rightly) it has brought the Attorney-General into these proceedings as a defendant by counterclaim. However, the Attorney-General has declined to argue that the trusts on which the properties, or any of them, are held are charitable trusts. Secondly, it has argued that it holds the properties, or one or some of them, on valid private trusts, for the benefit, in the case of 152, of a legal entity (corporate or quasi-corporate) known as the Tun Shin Tong and, in the case of 154 and 156, of a legal entity (corporate or quasi-corporate) known as the Tung Yan Sheen Tong; alternatively, for the benefit of the members for the time being of these two Tongs (being descendants of Ip Sze Shing).

8. The plaintiff was represented throughout the trial by leading and junior counsel. So was the fourth defendant. The other defendants to the action appeared in person. I dispensed with the attendance of the third defendant when the Plaintiff elected to claim no relief against him. I dispensed also with the attendance of counsel for the Attorney-General when he indicated that he was not prepared to argue that any of the properties were held upon charitable trusts. The fourth defendant should not, in my judgment, have attempted in these circumstances to shoulder the burden of an argument in favour of the Court's declaring that the trusts upon which the properties, or one or some of them, are held were charitable trusts. The Attorney-General is the only person who can represent the general body of beneficiaries under a charitable trust (see Tudor, Charities, 7th edition, 1984, at p.337; Ware v. Cumberledge [1855] 20 Beav. 503, per Romilly MR at 511; In re King [1917] 2 Ch. 420; and most recently Hauxwell v. Barton-upon-Humber UDC[1974] Ch. 432, in which Brightman J said (at p.450) that he was able to discern nothing in the cases cited to him to indicate that anyone save the Attorney-General was entitled to maintain an action to establish the existence of a charitable trust). I would therefore hold that it is not open to me in these proceedings to find that any of these properties are held upon charitable trusts, in the teeth of the refusal of the attorney-General, the proper party to represent the interest of charity, so to argue. But in case I should be wrong about this I will, later in this judgment, consider the fourth defendant's arguments in favour of charity and express my conclusions upon them.

9. My findings of fact are as follows :

10. On a date in the second half of the 15th century, Ip Sze Shing settled in the village of Gut Tai in what is now Zhuhai, Chungsan County, Kwantung province, China.

11. His descendants flourished there and by 1836 there had been constructed in the village a "great ancestral worshipping hall of the Ip clan". By 1875 there had also been constituted an ancestral worshipping fund of Ip Sze Shing known as "The Ip Cheong Kwong Tong", A "Tong" of this character is one the primary object of which is the veneration of ancestors, any surplus income being used to provide welfare benefits for male descendants.

12. There had also been constituted by, or in, 1875, two further tongs, the Tun Shin Tong and the Tung Yan Sheen Tong.

13. On 31st December 1875 the settlor made some Rules ("the Rules") for the two tongs last mentioned. The original of the Rules was not in evidence; but the Rules are set out in an Appendix (written, as were the original Rules, in the Chinese language) to a letter dated 17th June 1920 from Ip Pak Hang to Ip Chi Suen, which I propose to treat as secondary evidence of the Rules and to accept both as proof of the making of the Rules under the hand of the settlor and of the contents of these Rules.

14. The Rules state (I paraphrase slightly) that the two last mentioned tongs own the properties with which this case is concerned. 152 is said to be the property of the Tun Shin Tong, and 154 and 156 are said to be the property of the Tung Yan Sheen Tong. The Rules state that the properties were purchased and donated by the settlor, using his own money, and were separate from the common property purchased by the clan itself; but the rents were "to be used in the case of the one tong to supplement any shortfall in the ancestral worshipping fund of the first ancestor Sze Shing and in the case of the other tong to assist in the common welfare in the village" The words I have quoted are important. I have taken them from a translation of the Rules which, I was told from the Bar, represented the view of a difficult passage preferred as the better translation by both Dr. H.D.R. Baker (who gave expert evidence before me on behalf of the plaintiff) and by Mr. A.R. Dicks (who gave expert evidence before me on behalf of the fourth defendant). This (the "preferred translation") is more favourable to the argument of the fourth defendant than the alternative and perhaps more literal translation ("the alternative translation") which would have it that the rents "were to be used on the one hand to supplement any shortfall in the ancestral worshipping fund of the first ancestor Sze Shing and on the other hand to assist in common welfare in the village". The Rules went on to provide for the election of managers by and from amongst members of the clan and concluded with the following expression on the part of the settlor of the triumph of hope over experience: "For fear that in days to come the descendants of the clan in the village should multiply and be ignorant of the origins of the two tongs ...... or that there should arise disagreement and disputes, I now specially set up these Rules as clear evidence for the future. I must hope that each descendant of the clan will always respect and observe these rules and not violate them, and that is truly my expectation."

15. In fact, by 1920 or earlier, differences had arisen within the clan over the management of the properties and the distribution of income. Many accusations and counter-accusations of incompetence and worse were bandied about. These differences still continue. Only the personalities have changed.

16. In 1937 one trustee obtained an order against the other for an account of rents and profits; with which the latter did not comply.

17. In 1939 the properties were redeveloped and, in 1940, let. But the years of friction continued, although it was not until 1977 that the properties again came to the notice of the Court.

18. On 24th April 1965, the first defendant was appointed a trustee of 152 (and probably of 154 and 156 also, but the instrument of appointment is unclear).

19. On 14th February 1977, two strangers to the trusts, Tsao Youn Zain and Chen Cheng Yuen, instituted proceedings concerning the properties against Yip Chi Keung (a trustee) and Ip Siu Bun (the first defendant in the present proceedings). The two plaintiffs were managers of the Sin Hua Trust Savings and Commercial Bank Limited; they had been appointed attorneys of seven Ips from the village of Gut Tai ("the 7 village Ips"). The 7 village Ips claimed to represent the Ip Cheong Kwong Tong and the Tung Yan Sheen Tong. After a number of steps in the action, including changes of parties, the 1977 proceedings were stayed by consent and the first defendant and the fourth defendant were constituted trustees of 154 and 156 by the order of 31st March 1979 to which I have already referred. They were similarly constituted trustees of 152 by the appointment of 2nd April 1979.

20. Needless to say, this did not put an end to the differences within the clan.

21. On 15th April 1980, the 7 village Ips purported to sell the properties to Gainer Limited, a Hong Kong company, for HK$28,750,000. Nothing came of this but more trouble. The vendors did not complete, On 31st July 1981 Gainer Limited instituted proceedings against the tongs, the 7 village Ips, and the trustees of the properties, for specific performance. One of the trustees, the first defendant in the present proceedings, put in a home-made Defence; and the 1981 action then went to sleep.

22. In 1982 the plaintiff in the present action came on the scene, advancing the usual wide selection of accusations. Getting no satisfaction, he instituted these proceedings on 1st November 1984.

23. Those are the facts. The trusts I have to consider are trusts for the application of the rents and profits of immoveable property in Hong Kong for the purposes specified by the settlor in the 1875 Rules. They are trusts of indefinite duration.

24. The Court cannot uphold a trust of indefinite duration for the application for ancestral worship of the income of immoveable property in Hong Kong. In Lau Leung Shi v. Lau Po Tsun (1911) 6 HKLR 149, Mr. Justice Gompertz considered (at p.171) a gift made by a testator of funds to be invested by his executors for his "ancestral sacrificial fund". He said this: "In my own view he meant his executors to invest this fund at, or near, his native place, with his other ancestral property and this is what no doubt the would naturally do. If they should attempt to settle property in perpetuity in Hong Kong, the Court will know what to do, when the matter comes before it". This last sentence may be oracular but it is hardly cryptic. Whatever the law on the point may be in Heung Chau or Homantin, in Hong Kong it is the same as it is in Honiton.

25. So far as 152 is concerned, that is the end of the case. The 1875 Rules provide for the application of the rents "to supplement any shortfall in the ancestral worshipping fund" of Ip Sze Shing (on the preferred translation, the whole of the rents; on the alternative translation, at least part of the rents). The trust fails and there is a resulting trust for the settler.

26. So far as 154 and 156 are concerned, the difference between the preferred translation and the alternative translation assumes some importance.

27. On the alternative translation the provision for the application of the rents made by the 1875 Rules is the same for 154 and 156 as for 152 and the result must be the same, too.

28. But on the preferred translation, the 1875 Rules provide for the application of the rents of 154 and 156 "to assist in common welfare in the village." If this is a public, or charitable, trust (and not, like a trust for ancestor worship, a private trust) the fact that it is a trust of indefinite duration does not affect its validity. And gifts in general terms for the benefit of a local community have sometimes been held to be charitable. The leading case is Goodman v. Saltash Corporation (1882) 7 App. Cas. 633. I am emboldened, not disheartened, by the fact that the decision in this case was described in Harris v. Earl of Chesterfield [1911] AC 623, as "a splendid effort of equitable imagination" (see per Lord Ashbourne at p.633). If a gift for the benefit of a village is charitable (as it is) I am not prepared to hold that a gift for the welfare of a village is not. It was decided in In re Moss [1949] 1 All ER 495 that a gift for "work for the welfare of cats and kittens needing attention" was a valid charitable gift. Even given the deep-rooted English preference for pets over people I cannot believe that the law of England would hold to be charitable a gift for the welfare of animals but not one for the welfare of a village. But, be that as it may, the Court must construe the words "to assist in the common welfare of the village" with reference to the context in which they appear.

29. At this point, the "local charity" argument starts to run into difficulties.

30. In 1875 the village of Gut Tai was a clan village. It had been settled by the Ip clan. There was already in existence in the village the grand ancestral hall of the Ip clan; and (to the extent that the two do not overlap anyway) the Ip Cheong Kwong Tong. At some time before 31st December 1875 the Tun Shin Tong and the Tung Yan Sheen Tong (referred to in the introductory words of the 1875 Rules ) had been set up by the clan. The Rules provide that the managers are to be elected by and from amongst members of the clan. The settlor addresses his exhortation to "the descendants of the clan in the village", I conclude that the settlor's intention was to benefit his clan in the village, and not the inhabitants of the village as such whoever they might be. If that conclusion is correct, the trust assumes the character of one for the welfare of relations rather than of one for welfare of a particular locality. And a trust for the welfare of relations (unless limited to the relief of poverty, which this is not) is not charitable, because there is not sufficient of an element of Public benefit about it: see In re Compton [1945] Ch.123.

31. Can the trusts affecting the properties be upheld, even if not charitable?

32. An engaging attempt was made to persuade me that the trustees held 152 upon trust for a corporate entity, alternatively, a quasi-corporate entity, known as the Tun Shin Tong, and 154 and 156 upon trust for a corporate entity, alternatively a quasi-corporate entity, known as the Tung Yan Sheen Tong.

33. The suggestion that the tongs are corporate entities is unsustainable. There was no evidence whatever to prove that they had at any time been clothed with that separate legal personality which is the essential characteristic of incorporation. I do not overlook the provisions of Article 6 of the Law governing the application of the General Principles of the Civil Code (of the Chinese Republic) under which a foundation which came into existence before the coming into force of the General Principles of the Civil Code and whose object was for the promotion of public welfare and which possesses independent property, is regarded as a juristic person. But the object of the tongs is not the promotion of public welfare and the operation of Article 6 is in my judgment excluded anyway in the present case by the provisions of Article 9, which declares that its provisions are not applicable to ancestral halls, monasteries and temples and those independent properties used for the purpose of maintaining a family. Even if I had found it possible to hold that the tongs were corporate entities, it would have been of no assistance. A gift to a corporation, not for its general purposes but, as here, for particular purposes is governed by exactly the same rules as a gift to individuals for such purposes. If the gift is a gift of income for a period of indefinite duration the gift (unless exclusively charitable) will fail even if the donee is a corporation.

34. The suggestion that the tongs are quasi-corporate entities is more plausible but of no greatar assistance. If the tongs are unincorporated associations, they are not of that type of unincorporated association the beneficial interest in the property of which is by contract vested in the "quasi-corporators" for the time being. On the contrary, they are of that type of unincorporated association the property of which is intended to be held on trust for or applied for the purposes of the association as a quasi-corporate entity.

35. The dispositions made by the settlor were either a disposition to the present and future "quasi-corporators" indefinitely, or dispositions for the purposes of the tongs. If the former, the result was the creation of private trusts which fail for perpetuity. If the latter, the result might have been the creation of public trusts, but only if the purposes were exclusively charitable (which in fact they were not). These conclusions are clearly dictated by the decisions in Neville Estates v. Madden [1962] Ch. 832 (see esp. at p, 849) and In re Recher's Will Trusts [1972] Ch. 526 (see esp. at pp. 538, 539).

36. The argument that the properties are held for the benefit of the two loan associations mentioned in the 1875 assignments is mortally affected for the want of any evidence that any such loan associations ever existed at all, let alone what their purposes were or who belonged to them. And there is no ground on which I could find that the properties are held for the benefit of the Ip Cheong Kwong Tong.

37. Either the trusts on which the properties are held are those declared by the Rules (as the plaintiff and the fourth defendant, but no other party accept), or they are not. If the trusts are so declared on no permissible construction of the Rules could the Court hold that the properties were declared to be held for the benefit of the Ip Cheong Kwong Tong, as the first defendant argued. Even if the Court were so to hold, the trusts would fail for the same reasons as are given in this judgment in relation to the trusts which, on the correct construction of the Rules, are in fact thereby created. And if the trusts on which the properties are held are not those declared by the Rules, then they fail anyway; for then, on the evidence, the trusts (whatever they might be) cannot be said to have been declared in writing by the settlor, as required by the Statute of Frauds. (There is no evidence, apart from the Rules, of any such writing at all. )

38. So the properties are held on a resulting trust for the estate of the settlor. What is to be done?

39. I can grant no relief to the plaintiff in his personal capacity. In that capacity he has no interest in the properties. In his capacity as the person appointed to represent the estate of the settlor for the purposes of these proceedings I am of the view that he is entitled to a declaration that the trustees hold the properties upon a resulting trust for that estate. But he represents that estate only for the purposes of these proceedings. He is not a person to whom letters of administration to that estate have been granted. It seems to me desirable that such a grant of representation should be made as soon as possible. Other grants of representation to the estates of deceased intestate male next-of-kin might in due course also be required. In this connection, I should note that I received much evidence about the male descendants of the settlor. Although I cannot make any findings of fact binding on anybody not a party this action it may helpful if I state my provisional views upon that evidence. These are as follows.

40. The settlor had two sons who survived him, namely Ip Wah Cho and Ip Wah Kui. Ip Wah Cho had (at least) one son, Ip Chi Suen. Ip Chi Suen had (at least) one son, Ip Hin Bun. Ip Hin Bun had two sons, ID Chi Keung and Ip Chi Ying. The only living direct male descendants of the settlor are the last-named two sons of Ip Hin Bun, Further than this I do not think it desirable for me to go. In particular, I do not think it would be right for me to express a view as to who is or may be entitled to a grant of administration to the settlor's estate, which may for all I know become a matter for contest before the court in the exercise of its probate jurisdiction; nor for me to express a view as to who is or may be (directly or indirectly) beneficially interested in the settlor's estate.

41. On this latter point, it seems to me that the personal representative of the settlor, when properly constituted, should institute an administration action and apply in that action for the making of inquires as to next-of-kin. (He might find it useful in this, connection to consider the guidance given in Heward's Chancery Practice 1983, pp.82 to 92, and the specimen form of Order set out in Heward's Chancery Orders, 1986 at p.177. )

42. The settlor's personal representative should also call on the first defendant and the fourth defendant to transfer the properties to him, and to account to him for all moneys came to their hands as trustees of the properties.

43. As trustees I would expect the first defendant and the fourth defendant to comply with this request since I will have declared in this action that they hold the properties upon trust for, the estate of the settlor. If they do not comply with this request then (as Mr. Justice Gompertz put it in another context see above) "the Court will know what to do".

44. The settlor's personal representative should also apply to be joined as a party to the 1977 action (mentioned above) and to have it dismissed. He should take the same course in relation to the 1981 action (also mentioned above).

45. The parties will want time to consider the implications of this judgment and may want to invite me to hear further argument. Accordingly, I will adjourn further consideration of these proceedings to a date and time to be fixed, when I will consider with counsel any further matters they may wish to raise (including the possibility of an order for sale of the properties, which appear to be derelict), the form of the order to be made, and any question that may arise as to the costs of these proceedings down to the date of the order.

Representation:

Mr. John McDonnell, Q.C., Mr. K. John Cheung (14th - 30th September 1987 & 1st - 7th October 1987), & Mr. B, Van Buuren (11th - 29th April, 1988) instructed by Messrs, King & Co. for the Plaintiff.

Mr. Charles China, Q.C ., Mr. Denis Chang, Q.C, & Mr. K.B. Ng instructed by Messrs, Woo & Woo for the fourth Defendant.

1st, 2nd & 3rd Defendants in person.