Li Fook-shu And Others v Commissioner Of Estate Duty

Judgment Date06 January 1981
Judgement NumberCACV92/1979
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)


1979 No. 92

IN THE MATTER OF the estate of LIANG Chi-hao, Deceased
IN THE MATTER OF section 22 of the Estate Duty Ordinance (Cap. 111)

LI Fook-shu, LO (or LAW) Yuen-chi and Hilda LAI (the Executor and Executrices respectively of the Estate of LIANG Chi-hao, deceased) Appellants


Coram: Sir Alan Huggins, V.-P., Cons, J.A. and Penlington, J.

Date of Judgment: 6th January 1981.




Sir Alan Huggins, V.-P.:

1. This is another happy little appeal under the tax legislation. It raises two questions:

(i) whether a gift to trustees in trust for such charities as the trustees shall in their absolute discretion appoint is a bequest to, or for the benefit in the Colony of, a charitable institution within the meaning of s. 10(g) of the Estate Duty Ordinance, and
(ii) whether the exemption from estate duty granted by that provision in respect of property bequeathed to a charity out of a residuary estate is limited to that proportion of the residuary estate which consists of property otherwise liable to tax.

2. The testator devised and bequeathed all his estates real and personal whatsoever and wheresoever to trustees upon trust for sale. After payment of debts and proper expenses the residue was to be held upon trust, inter alia,

"(i) to donate one half thereof or $1,000,000.00 whichever be the lesser amount (to the intent that such donations shall in no case exceed $1,000,000.00) to such charities as shall in the absolute discretion of my Trustee appoint or desire;" (sic)

The trustees appointed one charitable institution within the Colony and their right so to do is not in issue. Roughly three quarters of the testator's property was in Hong Kong and one quarter outside Hong Kong at the time of the death and it is apparently common ground that, for convenience, all but $40,000.00 of the donation was in fact paid from the proceeds of sale of the foreign property. The Commissioner of Estate Duty took the view that as the residuary estate, out of which the donation was payable, included the proceeds of sale of property abroad, which was not liable to Hong Kong estate duty, there ought to be an apportionment of the amount of the donation so as to avoid what had the appearance of an allowance against property which was in any event not liable to tax, and an assessment was made accordingly. On an appeal by the executors to the Full Bench that court upheld the Commissioner's decision, but we do not have the benefit of any reasoned judgment, which we think is unfortunate.

3. The first question for consideration is whether there was any property which came within s. 10(g) at all. The paragraph reads:

"Estate duty shall not be payable in respect of -

(g) property devised or bequeathed by the deceased or otherwise passing on the death of the deceased to or for the benefit in the Colony of any charitable institution or trust of a public character, or to the Government for charitable purposes."

On the plain words of the will the property was not bequeathed "to" a charity but to the trustees. Upon the grant of probate the property would pass to them with effect from the date of the death. The trustees were not to take any beneficial interest. The gift to them was "for the benefit of "a charity, but it was not necessarily "for the benefit in the Colony of" such charity: that depended upon the exercise of the power of appointment. It was contended on behalf of the Commissioner that, if, under the terms of the will, a gift is not limited so that of necessity the benefit is within the Colony, there is no exemption at all. Here, Mr. Lee submitted, the will permitted the trustees to make an appointment which would not...

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