Cheung Man Yu v. Lau Yuen Ching and Others

HCMP 2421/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2421 OF 2000

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BETWEEN

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Before: Deputy High Court Judge L. Chan in Chambers

Dates of Hearing: 26 May and 1 June 2006

Date of Decision: 1 June 2006

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D E C I S I O N

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1.This matter was tried by me and I gave judgment on 4 May 2006 in favour of the 1st to 3rd respondents.  Since Mr Chong was not present on that occasion, I made no order as to costs on a nisi basis.  The 1st to 3rd respondents were not happy with that order nisi and have applied to vary it to an order for the applicant to pay them costs.

2.One of the issues in this matter was whether the 4^th respondent was a public charity, but that was not the only issue.  There were also the issues of whether the 4th respondent existed as an entity in its own right and whether the assets and properties were owned by the 4th respondent or they were the personal assets of Madam Lau Hing-lin. 

3.Mr Chain submitted that the 4th respondent was merely a label used by Madam Lau.  His case was that Lau was the 4th respondent and the 4th respondent was Lau; hence, whatever assets and properties owned by the 4th respondent were the personal properties of Lau.  These included the compensation money from the government for the resumption of the lots and the buildings at San Wan Tsai and the bank interest accrued thereon.  These moneys appeared to constitute the bulk of the assets and properties of the 4th respondent.

4.The lots in San Wai Tsai were purchased by Cheung Tim and Cheung Oi.  The buildings thereon were constructed mainly with donation moneys raised by them and Madam Wong Bo-yin in the 1930s and later on by Madam Lau in the 1970s.  Madam Wong was the first prioress of the 4th respondent.  These lots and buildings were handed down to Madam Lau, the third prioress, before they were resumed by the government.

5.Mr Chain argued that these properties and moneys belonged to Madam Lau personally and not to the 4th respondent because Madam Lau never kept any account for the 4th respondent and she had even advanced such moneys to fellow Taoists followers as loans.  I have dealt with these matters in my judgment and will not repeat them here.

6.Though I ruled in favour of the 1st to 3rd respondents that the 4th respondent was not a public charity, I ruled against them on the existence of the 4th respondent.  I held that the 4th respondent did exist as an entity in his own right.  I also held that Madam Lau treated everything under her name as the properties of the 4th respondent.  She also kept the moneys in joint accounts with her disciples who were the designated prioresses after her.  She also registered the two buildings of the 4^th respondent in the joint names of her and her designated future prioresses.  I said in paragraph 47 of my judgment that she did so obviously for passing of the properties of the 4th respondent from one prioress to the next, hence there was no detailed accounts kept of the assets of the 4th respondent.  Hence the 1st to 3rd respondents lost these two issues. 

7.These issues had been important issues for 1st to 3^rd respondents.  If I should have held that the 4th respondent did not exist, then they would have won the proceedings as well because there would be no charity for consideration at all.

8.Alternatively, if I should have held that the properties and moneys held in Lau’s name or in her name jointly with the designated future prioresses belonged beneficially to Madam Lau or to the holders of the bank accounts or title deeds but not to the 4th respondent, then regardless of whether I would have held the 4th respondent as an entity in its own right or whether the 4th respondent was a public charity, I might not have ordered the 1st and 2nd respondents to return the funds that they had removed from the bank account of the 3rd respondent.

9.There is no dispute that the bulk of the $18 million taken away from the bank account of the 3rd respondent came from the compensation money paid by the government for the resumption of the lots and buildings at San Wai Tsai (see paragraph 28 of the 2nd respondent’s affirmation filed on 27 June 2001).  These moneys can be traced back to the lots and buildings in San Wai Tsai.

10.Though the 2nd respondent said in her affirmation that part of the $18 million came from her savings, she is an illiterate old woman now in her 80s.  She had been adopted by Lau at the age of 7 and had since been residing in the 4th respondent.  Apart from very small sums of money that Lau paid her for her work in the vegetable fields, there is no evidence of any income she had made or would have been able to make.  I would not accept her allegation that the $18 million had included savings of hers, particularly when she has not given any evidence at the hearing.  I would take her admission of compensation money and interest thereon to cover the whole of the $18 million (see also paragraph 29 of the 2^nd respondent’s third affirmation filed on 18 September 2003).

11.Since the money in her bank account jointly held with Madam Lau belonged to the 4th respondent, the disposal of the money was obviously at the direction of Madam Lau, who was the then prioress.  It was the common case of all parties that Lau wanted to incorporate the 3^rd respondent so that her good work could be continued by the future prioresses of the 4th respondent through the 3rd respondent.  The 3^rd respondent had the same name as the 4th respondent, save that it is a limited company.  It was also Lau’s idea that the $18 million should be transferred from the joint account owned by her and the 2nd respondent (see paragraphs 20 and 27 of the 2nd respondent’s second affirmation filed on 30 March 2001).

12.I also note that the 1st and 2nd respondents initially in these proceedings did not suggest that the applicant had to contribute any money to the 3rd respondent.  The allegation only came in the affirmation of the 1st respondent, filed on 18 September 2003.  However, after thorough and searching attempts to fathom into the details of savings held in bank accounts in the joint names of the applicant and Madam Lau, nothing was thrown up which could corroborate this part of the case of the 1st to 3^rd respondents.

13.Mr Chain may argue that this part of the case was not one of the matters that I had to decide.  I cannot agree.  This part of the case was put forward by the 1st to 3rd respondents to justify their removal of the money from the 3rd respondent on the ground that the applicant had failed to contribute to the 3rd respondent.  Applications were made by them immediately before and also during the trial for bankers’ evidence orders with a view to support this part of the case that there should be at least $10.5 million sitting in the joint bank accounts of the applicant and Madam Lau which should be contributed by the applicant to the 3rd respondent. 

14.If this part of the case could be established, it may also affect my finding of whether the moneys indeed belonged to the 4th respondent and hence whether the 4th respondent is indeed an entity in existence in its own right.  However, despite the searching bankers’ evidence orders, this part of the case of the 1st to 3rd respondents failed in total.

15.There however remained a common case that the $18 million, or at least the bulk of it, were intended by Lau to be used for charitable work to be done through the 3rd respondent.

16.I said in paragraph 29 of my judgment that it appeared to be Lau’s idea that both the applicant and the 2nd respondent should have control over the use of the money as they were joint signatories of this account.  It was thus wrong for the 1st and 2nd respondents to jointly change the signatory mandate of the bank account of the 3rd respondent and took the money elsewhere. 

17.The plaintiff brought these proceedings for the purpose of recovering the money of the 4th respondent so that the wishes of Madam Lau could be carried out and the work of the 4th respondent could continue.  Her failure in this task did not veil the blatant breach of trust by the 1st and 2nd respondents in removing all the money from the account of the 3^rd respondent.  I refer to Ritter v Godfrey [1920] 2 KB 47 at 60 to 61 where Atkin L J (as he then was) said,

“It is not easy to deduce from these authorities what the precise principles are that are to guide a judge in exercising his discretion over costs.  And yet, as the discretion is only to be exercised where there are materials upon which to exercise it, it seems important to ascertain the principles upon which a judge is to discern whether the necessary materials exist.  In the case of a wholly successful defendant, in my opinion the judge must give the defendant his costs unless there is evidence that the defendant (1.) brought about the litigation, or (2.) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3.) has done some wrongful act in the course of the transaction of which the plaintiff complains.  These principles require further expansion.

By (1.) is meant - has so conducted himself as to lead the plaintiff reasonably to believe that he had a good cause of action against the defendant, and so induce him to bring the action.  The authority for this proposition is Bostock v Ramsey [1900] 2 QB 616.  It is wide, for in terms it is not limited to unreasonable or improper conduct, or to conduct other than that which constitutes the alleged cause of action.  …

… (2.) and (3.) may possibly overlap.  (2.) I think, would include improper conduct in or connected with the litigation calculated to defeat or delay justice.  Such conduct would also be included in (3.), which I think further extends to cases where the facts complained of, though they do not give the plaintiff a cause of action, disclose a wrong to the public; King v Gillard [1905] 2 CH 11, by which I understand some criminal or quasi criminal misconduct, e.g., a fraud or crime or preparation for a fraud or crime, or possibly some act of serious oppression.  Such conduct must, however, be in the course of the transaction complained of.”

18.Woo JA referred to this in Ho Ho Shu Kwong v Chiang Chun Yuen [2002] 3 HKLRD 419 at 427. 

19.Even if it cannot be said that the 1st to 3rd respondents had not brought about this litigation, it is obvious that the breach of trust by the 1st and 2nd respondents was the act that was connected with the institution of this litigation.  Such act was also wrongful to the applicant as she is a co-prioress of the 4th respondent and has the duty to protect the interests of the 4th respondent and perpetrate its work with its resources.

20.I also say that the conduct of the 1st to 3rd respondents had occasioned unnecessary costs and expenses in this matter.  Such conduct included the denial of the existence of the 4th respondent, wrongly alleging that the 4th respondent was a place for advice for astrology, feng shui and gazing of the crystal ball with a view to argue that the 4th respondent was not doing charitable work, and alleging that the lots and buildings in San Wai Tsai were acquired by adverse possession, and its belated but unsupported case of the applicant having failed to contribute to the 3^rd respondent’s project in the Mainland.  Without these arguments and allegations, a lot of costs could have been saved. 

21.I do not overlook that the applicant has also made a few wrongful allegations about the 2nd respondent but they did not produce the same amount of wastage on costs.

22.Since the breach of trust of the 1st and 2nd respondents was the cause for these proceedings and the conduct of the 1st to 3^rd respondents in these proceedings has produced unnecessary wastage, I think it is right not to make any order of costs.  I therefore dismiss this application. 

23.I do not discuss the case of Lo Siu Lan & Another v Hong Kong Housing Authority, CACV378/2004 as I do not think that case is applicable here.

24.Now, on the costs of this application, is there any submission that I should not order the 1st to 3rd respondents to bear them?

(Submission by Mr Chain on costs)

25.I also order that the 1st to 3rd respondents do pay the applicant the costs of this application to vary the costs order nisi.

(Submission by Mr Chain for leave to appeal on breach of trust matter and on money belonging to the 4th respondent.)

26.These findings that I refer to in my reasons for not varying the costs order nisi were made on the basis of the evidence and submissions and these were in fact findings in my judgment on 4 May 2006.  I think the case of breach of trust is made mainly on the basis of admissions of the 2nd respondent.  The 2nd respondent’s only reason at the initial stage for removing the money from the 3rd respondent is the so-called badgering by the applicant.  She has not even come to give viva voce evidence to support that.  I think the breach of trust is transparent.

27.On ownership, even if there were no 4th respondent and the money did not belong to the 4th respondent, it would still belong to the 3^rd respondent.  There cannot be any argument on the ultimate source of the money, namely from the lots and buildings in San Wan Tsai.  The 2^nd respondent has clearly admitted that.  The 2nd respondent has also admitted that the 3rd respondent was set up per Madam Lau’s idea and Madam Lau also directed the $18 million to be transferred to the 3^rd respondent to do good work or charitable work through it.

28.Even without the 4th respondent in existence, to take away the $18 million from the 3rd respondent is also a breach of trust.

29.I further say that the applicant as a co-prioress (as proved by the documentary evidence) has the right and duty to control the use of that money.  To deprive her of such right and the opportunity to discharge such duty is a further breach of trust.

30.I dismiss the application by the 1st to 3rd respondents for leave to appeal against my not making any order of costs in the main proceedings or my order of costs in the application for variation of the order nisi.

Mr K M Chong, instructed by Messrs Ho & Partners, for the Applicant

Mr Benjamin Chain, instructed by Messrs Louis K Y Pau & Co., for the 1st, 2nd and 3rd Respondents

The 5th Respondent, absent