Hong Kong & Shanghai Bank and Another v. The Incorporated Trustees of the Islamic Community Fund of Hong Kong and Others

HCMP000631/1981

Charitable trusts - Whether the words "assist in social welfare work" came within the concept of charity in Hong Kong - Failure of institution - Direction to settle scheme

A gift by the will of a Hong Kong domiciled testator of income in perpetuity to the "Allah Ditta Welfare Society, Padhana Border, Tehsil & District Lahore, West Pakistan, to apply the same for the maintenance and upkeep of the mosques and schools and also assist in social welfare work in and around Bhudhana, West Pakistan" was a gift for exclusively charitable purposes (I.R.C. v. Baddeley (1955) A.C. 572 distinguished), but the gift failed as the Allah Ditta Welfare Society was not in the court's view a properly constituted entity which could be regarded as suitable for receiving and administering the gift.

The court, therefore, had resort to a further provision in the will as to what was happen in the event of such failure, namely that the Trustees were to have absolute power and discretion to distribute and pay the income for similar purposes in other parts of the world with first preference to West Pakistan. The court directed that the Trustees and the Attorney General should submit a scheme to the court for its approval.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

Coram: Hon. Rhind, J.

Dates of Hearing: 30th and 31st January 1934

Date of Delivery: 5th March 1984 in open court.

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JUDGMENT

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1. Mr. Alla Ditta was born in what is now Pakistan, but came to Hong Kong at about the turn of the century. He worked in Hong Kong as a watchman, earning a fairly modest wage, but, nonetheless, when he died on the 7th April 1977, he managed to leave an estate worth over HK$600,000. By now, that estate has increased in value to almost HK$1½ million.

2. The secret to his fortune lay in the fact that the place where he carried out his duties as watchman was the building occupied by the Hong Kong Stock Exchange. Some of the stock-brokers there were kind to him, and gave him good advice as to how he should invest his modest earnings. In that way, he came to build up the fortune with which he died.

3. He left a will dated the 1st of June 1973 in which he declared himself to be domiciled in Hong Kong. Under his will, he appointed the Hong Kong & Shanghai Bank, Hong Kong (Trustee) Ltd. to be his executor and trustee. He had no children of his own and obviously did not want his more remote family to have any part of his money for, after directing that all debts and funeral expenses should be paid, the will, by clause 5(c), went on to provide the residue should be held:

I DIRECT that my Trustees shall accept the receipt of the Treasurer or other the proper officer for the time being of the said institutions or in the case of the trusts operative in and around Bhudhana the receipt of the Bank or Post Office in West Pakistan to which such income is remitted and paid as a full and complete discharge to my Trustees. IN THE EVENT of the failure of either or both of the Trusts aforesaid I DIRECT that my Trustees shall have absolute power and discretion to distribute and pay the income arising therefrom for similar purposes in other parts of the world with first preference to West Pakistan but without my Trustees being in any way responsible for the application of any sums so distributed and paid."

4. By the present originating summons, the court is asked to determine whether the gifts of income to the two organisations referred to in paragraphs 5(c)(i) and (ii) of the will are valid charitable gifts or not.

5. Dealing firstly with the gift of income to the Incorporated Trustees of the Islamic Community Fund of Hong Kong, I do not think there can be any doubt that is a valid charitable gift. My perusal of the constitution of that organisation has satisfied me that its objects are concerned solely with the advancement of religion or purposes necessarily ancillary thereto. In the circumstances I am, therefore, satisfied that the gift of income to the Incorporated Trustees of the Islamic Community Fund of Hong Kong is a valid charitable gift. I was also asked to consider whether the Incorporated Trustees of the Islamic Community Fund of Hong Kong were entitled to call for the share of capital which supports this income. The answer is they are not.

6. The position with regard to the Allah Ditta Welfare Society is not quite so straight-forward. The first question is whether the testator has made a gift for a valid charitable purpose. There is no doubt that a gift for the maintenance and upkeep of mosques and schools comes within the ambit of a valid charitable purpose (Re Parker; ⁽¹⁾ Haji Salleh bin Haji Ismail's case; ⁽²⁾ The Abbey Malvern Wells Ltd. v. Ministry of Local Government Planning,⁽³⁾ ) but can the same be said about the words "and also assist in social welfare work"? It is only if the whole of the gift is for exclusively charitable purposes that the gift will be upheld as a valid charitable bequest. In the event of any part of the gift to the Allah Ditta Welfare Society being for a non-charitable purpose, the whole of the gift will fail on the basis that it offends the rule against perpetuities.

7. It was suggested in argument before me that the words "assist in social welfare work" were too vague and uncertain for the gift to qualify as a charity. In the English case of I.R.C. v. Baddeley, ⁽⁴⁾ it was held that the words "social well-being" were too vague and uncertain to give rise to a valid charity, and it was urged upon me that the use of the words "social welfare work" in a will in Hong Kong should similarly fail.

8. Regardless of the meaning attributed to the words "social well-being" in England, I am satisfied that the words "social welfare work" bear a well understood meaning in Hong Kong which satisfies the concept of "charitable" in law. The meaning of the words "social welfare'' in Hong Kong is coloured by the fact that one of the best known organs of Government in Hong Kong has long borne the title of the "Social Welfare Department". When people in Hong Kong use the expression "social welfare work", I think they use it in the sense of the type of work done by the Social Welfare Department here. When the testator made that reference to "social welfare work" in his will, I presume he would have had in his mind the type of work which everyone in Hong Kong knows that the Social Welfare Department here devotes itself to. Needless to say, all the objects of the Social Welfare Department in Hong Kong are concerned with the public benefit. (See Incorporated Council of Law Reporting for England and Wales v. Attorney General ⁽⁵⁾ )

9. To give an idea what is meant by "social welfare" in Hong Kong, I will cite an extract from the Hong Kong Year Book for 1973 which is when the testator made his will:-

"The Social Welfare Department is and will continue to be responsible for carrying out government policies for social welfare. It operates through the following divisions: the Group and Community Work Division which aims at the development of responsible citizenship; the Family Services Division which is responsible for a wide range of social welfare services to help individuals and families; the Probation and Corrections Division which provides probation services in the courts and rehabilitation in its correctional institutions for young offenders; a newly formed Rehabilitation Division which is concerned with services for the disabled; the Public Assistance Division which is responsible for the administration of the public assistance scheme; the Training Section which is responsible for in-service training and field work placement for university students; the Planning and Development Section which is responsible for planning and co-ordination of welfare services; the Research and Evaluation Unit which has responsibility for social welfare research, evaluation of services, and statistical matters; and the Public Relations Unit."

10. In my opinion, all of those listed functions of the Social Welfare Department come within the meaning of "charitable" as understood in the law, or are otherwise necessarily ancillary thereto.

11. Whether a purpose is charitable can be gathered from the preamble to the Charitable Uses Act 1601 which is often referred to as the Statute of Elizabeth I. In the modernised English used at page 8 of Picarda's Law and Practice Relating to Charities that preamble is as follows:-

"The relief of aged, impotent and poor people; the maintenance of sick and maimed soldiers and mariners, schools of learning, free schools and scholars in universities; the repair of bridges, ports, havens, causeways, churches, sea-banks and highways; the education and preferment of orphans; the relief, stock or maintenance of houses of correction; the marriages of poor maids, the supportation, aid and, help of young tradesmen, handicraftsmen and persons decayed; the relief or redemption of prisoners or captives; and the aid or ease of any poor inhabitants concerning payment of fifteens, setting out of soldiers and other taxes."

12. A list of objects nowadays considered charitable is set out at page 12 of the same work:-

relief of poverty

advancement of education

advancement of religion

promotion of health

provision of recreational facilities

municipal betterment and relief of the tax and rating burden

gifts for the benefit of a locality

certain patriotic purposes

protection of life and property

social rehabilitation protection of animals

other miscellaneous objects that are beneficial to the community.

13. In my opinion, a person in Hong Kong who uses the words "social welfare work" means work of public benefit and utility of the type which comes within the definition of "charitable" at law. I do not think the words "social welfare work", as used by persons in Hong Kong, extend to any purposes which could not be regarded as charitable. The words "assist in social welfare work" used by the testator in his will accordingly must be taken to have the effect of keeping his gift within the ambit of what is charitable. I am satisfied, therefore, that the whole of the gift to the Allah Ditta Welfare Society was for objects which count as exclusively charitable.

14. Although I am satisfied that the testator's gift was for charitable purposes, I do not, however, consider the Allah Ditta Welfare Society to be a properly constituted entity which is suitable to receive and administer the gift. According to such evidence as is before me, the Allah Ditta Welfare Society is an unincorporated association which has not carried out any functions since 1976. It does not seem even to have had a written constitution until one was prepared for the purposes of the present proceedings. Nor does it have a bank account. The only time this organisation appears to have functioned was between the years 1973 and 1976 when it would distribute such moneys as Mr. Alla Ditta sent to it for the poor and needy. The court in Hong Kong cannot see its way to treating this organisation as a suitable vehicle for adminis-tering charitable funds in perpetuity. (See Wellbeloved v. Jonee⁽⁶⁾) In view of the lack of activity by the persons composing the Allah Ditta Welfare Society since 1976, the court feels that the society has to be treated as an entity which, in effect, had ceased to exist by the time the testator died.

15. Although the gift to the Allah Ditta Welfare Society is charitable, it must fail because there was not a properly constituted entity to carry it into effect at the time when the testator died; nor is there any such properly constituted entity now. This appears plainly to be one of those situations described in Chapter 26 of Picarda's book "The Law and Practice Relating to Charities" where despite a general charitable intent, an institution has failed. See also Pettit's "Equity and the Law of Trusts" at page 228.

16. The court here in Hong Kong can see no practicable way in which it could come up with a scheme which would result in the Allah Ditta Welfare Society in Padhana becoming properly constituted. The court could not permit a scheme which, being out of the jurisdiction, could not be properly supervised, and I see no practical way in which such supervision could be given.

17. As the gift to the Allah Ditta Welfare Society must fail, I propose to have resort to the provision of the will which deals with what is to happen in the event of such a failure.

18. The court regards it as essential that this income should find its way into a trust that the court can adequately supervise. Such a trust will come into existence if the court gives effect to the testator's direction that his trustees, namely The Hong Kong & Shanghai Bank, Hong Kong (Trustee) Ltd., shall have absolute power and discretion to distribute and pay the income which would otherwise have gone to the Allah Ditta Welfare Society for similar purposes in other parts of the world with first preference to West Pakistani. As the purposes for which the money was to be given to the Allah Ditta Welfare Society were charitable, it, of course, follows that similar purposes will likewise be charitable.

19. I direct that the moiety referred to in clause 5(c)(ii) of the will is to be held by the Hong Kong & Shanghai Bank, Hong Kong (Trustee) Ltd. on trust having absolute power and discretion to dis-tribute and pay the income arising therefrom for purposes similar to the maintenance and upkeep of the mosques and schools and also assist in social welfare work in any parts of the world with first preference to West Pakistan.

20. So as to make it easier for the court to exercise its supervisory powers and so that the Hong Kong & Shanghai Bank, Hong Kong (Trustee) Ltd. will have guidance on how it should in practice set about implementing this trust, I direct that a scheme should be sub-mitted by the Hong Kong & Shanghai Bank, Hong Kong (Trustee) Ltd. and the Attorney General to the court for its approval.

21. Counsel can now address me as to how long they need to settle such a scheme.

(1) (1859) 4 H & N 666

(2) (1935) S.S.L.R. 5

(3) (1951) Ch 728

(4) (1955) A.C. 572

(5) (1972) 1 Ch 73

(6) (1822) 1 Sin & St. 40

Representation:

Mr. Patrick Fung (J.S.M.) for plaintiff

Mr. H. Hoosenally of H.A. Hoosenally & Co. for 1st defendant

Mr. I. Wingfield, Senior Crown Counsel (Legal Dept.) for 4th defendant

No appearance for 2nd, 3rd and 5th defendants, other than Mr. Maqbool Ahmad of the 3rd defendants attending court on 31.1.84 to make representations.