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Tam Mei Kam And Others v Hsbc International Trustee Ltd And Others

Judgment Cited authorities 14 Cited in Precedent Map Related
Vincent
Judgment Date22 June 2015
Subject MatterCivil Action
Judgement NumberHCA1856/2014
CourtHigh Court (Hong Kong)
HCA1856/2014 TAM MEI KAM AND OTHERS v. HSBC INTERNATIONAL TRUSTEE LTD AND OTHERS

HCA 1856/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1856 OF 2014

____________

BETWEEN
TAM MEI KAM 1st Plaintiff
MUI PAK NING RUSMUND 2nd Plaintiff
MUI PAK WAI 3rd Plaintiff
and
HSBC INTERNATIONAL TRUSTEE LIMITED 1st Defendant
NEW HORIZON BUDDHIST ASSOCIATION LIMITED 2nd Defendant
LAU KAI, EDDIE 3rd Defendant

____________

Before: Deputy High Court Judge Marlene Ng in Chambers
Date of Hearing: 15 June 2015
Date of Handing Down Decision: 22 June 2015

________________

DECISION

________________

I. INTRODUCTION

1. The 1st plaintiff (“Mother”) is the mother of the late Mui Yim Fong (also known as Anita Mui, “Deceased”). The 2nd and 3rd plaintiffs (“Nieces”) were the daughters of the 2nd son of the Mother. Poon Chun Ho, Royce and Poon Man Ho, Kenny (“Nephews”) were the sons of the eldest daughter of the Mother.

2. On 3 December 2003, the Deceased executed a last Will, a Settlement/Trust Deed and a Trustee Memorandum (“Will”, “Trust Deed” and “Trustee Memorandum”). The Mother challenged the validity of the Will and Trust Deed in HCAP2/2004, but on appeal the Court of Appeal (“CA”) in CACV200/2008 and the Court of Final Appeal (“CFA”) in FACV11/2010 upheld the validity of both the Will and Trust Deed.

3. The Trust Deed entered into between the Deceased as settlor and the 1st defendant (“HSBC Trustee”) as trustee constituted an irrevocable inter vivos discretionary trust (“Karen Trust”).[1] HSBC Trustee was/is the professional trustee of the Karen Trust.

4. The following were some relevant provisions of the Trust Deed:

(a) Under clause 22(a), HSBC Trustee was vested with full discretionary powers:

“Every discretion or power hereby conferred on the Trustee shall be an absolute and uncontrolled discretion or power and the Trustee shall not be held liable for any loss or damage including without limiting to the generality of the foregoing any diminution in value of any part of the Trust Fund occurring as a result whether directly or indirectly of its exercising or refusing or failing to exercise any such discretion or power other than loss or damage arising from the wilful default, gross negligence, fraud or dishonesty of the Trustee.”

(b) Under clause 5(a), HSBC Trustee had powers over inter alia appointment of the trust fund and income:

“The Trustee shall stand possessed of the Trust Fund and the income thereof UPON TRUST and with full power from time to time and at any time before the Vesting Date by resolution to appoint pay or apply the whole or any part of the Trust Fund and the income thereof for the advancement maintenance education or benefit of all or such one or more to the exclusion of the other of the Beneficiaries and in such proportions or manner and upon such other terms and conditions as the Trustee shall in its absolute and uncontrolled discretion deem appropriate PROVIDED THAT no payment, appointment or advancement made herein:-

shall be made if it is a Perpetuiity; and

(ii) shall be revoked or be revocable

AND in exercising the aforesaid powers the Trustee shall not be bound as such trustee to see to the application by any person of any moneys paid.”

(c) Under clause 5(c), HSBC Trustee had powers over appointment of beneficiaries:

“The Trustee may in its absolute discretion at any time by deed appoint additional persons not being members of the Excluded Class to become beneficiaries.”

(d) Under clause 1(c), “Excluded Class” included HSBC Trustee and the Settlor (ie the Deceased), and did not include the 2nd defendant (“New Horizon”) and/or the 3rd defendant (“Lau”).

(e) Under clause 7, the Trustee had powers over the vesting of the Karen Trust:

“(a) The Trustee may in its absolute discretion by deed at any time declare an earlier Vesting Date which shall be any date not earlier than the date of this Deed nor later than the last day of the Perpetuity Period.

(b) Subject to any appointment payment or application pursuant to Clause 5(a) above the Trustee shall on the Vesting Date stand possessed of the Trust Fund and the income thereof upon trust to distribute the same to the Beneficiaries or any one or more of them to the exclusion of the other of them as the Trustee shall in its absolute discretion determine, such discretion to be exercised in writing before the Vesting Date and in default of such determination for all of the Beneficiaries then living or in existence in equal shares.

……”

(f) Under clause 1(o), “Vesting Date” meant “the date which is the last day of the Perpetuity Period or such earlier date as the Trustee may in accordance with Clause 7(a) hereto declare to be the Vesting Date for the purposes of this Deed”.

(g) Under clause 1(d), “Final Repository” meant “the party or the parties named in the Sixth Schedule”, and the Sixth Schedule named New Horizon as the Final Repository.

5. HSBC Trustee was appointed as the sole executor and trustee under the Will, which devised all the Deceased’s estate to HSBC Trustee (as trustee under the Will) upon trust for HSBC Trustee acting in its sole capacity as the trustee for the time being of the Karen Trust to be held subject to and upon the trusts powers terms conditions and provisions as were set out in the Trust Deed.[2]

6. The Trustee Memorandum set out the Deceased’s non‑binding suggestions in respect of the Karen Trust. The relevant provisions of the Trustee Memorandum were as follows:

“3. The Settlor’s Suggestions

……

3.2 Upon the death of the Settlor, [HSBC Trustee] would consider holding and distributing the Trust Fund in the following manner:

(1) [HSBC Trustee] would hold and distribute all shares of and in the following companies comprising the Trust Fund to [Lau] absolutely if he shall survive the Settlor by thirty days: ……

……

(3) Subject as aforesaid, to hold the balance of the Trust Fund for the Settlor’s mother, [the Mother], while she is alive and make a monthly distribution of HK$70,000 for her use and benefit absolutely and upon the death of the Settlor’s mother, …… to distribute the entire balance of the Trust Fund then remaining to [New Horizon] …… absolutely or if the same has ceased to exist or amalgamated with another institution, then to such other charitable organization as [HSBC Trustee] shall in its absolute discretion determine.”

7. The Deceased passed away on 30 December 2003. The Mother, Nieces and Nephews were named as the original/initial beneficiaries of the Karen Trust.[3] On 29 June and 2 November 2005 respectively, HSBC Trustee by deed (“Appointment Deeds”) appointed Lau and New Horizon as additional beneficiaries of the Karen Trust (“2005 Appointments”).

8. On 25 April 2012, the Mother was adjudged bankrupt, apparently because of her inability to pay legal fees in HCAP2/2004. On 12 June 2012, Wong Teck Meng and Chan Pui Sze were appointed joint and several trustees of the Mother’s property (“Trustees in Bankruptcy”).

9. There had been numerous litigation proceedings between the Mother and HSBC Trustee (in its capacity as executor and trustee of the Estate) and/or other parties. According to the Mother and Nieces, it appeared in the course of one of these proceedings that HSBC Trustee informed the court on 7 February 2014 that the Deceased’s estate then consisted of about $129 million in cash and Hong Kong landed properties against liabilities of about $30 million plus $570,000.

10. On 16 May 2014, the Mother wrote to HSBC Trustee (“Mother Letter”). In the Mother Letter, the Mother (a) claimed she had “full authority and capacity to act also for [the Nieces and Nephews] …… The 4 will speak the same voice for matters contained herein”, and (b) contended the 2005 Appointments were defective, so there remained only the 5 original/initial beneficiaries, ie the Mother, Nieces and Nephews, hence she demanded as follows:

“In the capacity of Beneficiaries of the Karen Trust all of full age and are absolutely entitled to the subject matter of the trust, [the Mother, Nieces and Nephews] hereby give [HSBC Trustee] formal notice to terminate the Karen Trust forthwith, with immediate effect. [HSBC Trustee] are hereby asked to take steps to wind up the Karen Trust. ……”

The Mother relied on the principle that strict formalities must be complied with,[4] and the rule that “all beneficiaries of a trust who are all sui juris and are all in agreement they can bring the trust to an end irrespective of the wishes of the trustee(s) or of the creator of the trust”.[5]

11. The Mother Letter referred to clause 10 of the Trust Deed[6] and the information about the Deceased’s estate in paragraph 9 above, and suggested that the net trust fund of the Karen Trust “ought still to be substantial, and be vested in [HSBC Trustee] in any event. Please let [the Mother] know the updated net cash position”.

12. On 26 June 2014, HSBC Trustee through Appleby (Cayman) Ltd (“Appleby”) replied to dispute the assertions in the Mother Letter:

(a) the Karen Trust was governed by the laws of the Cayman Islands;

(b) the Mother Letter was not a valid request to terminate the Karen Trust because not all of the Karen Trust’s beneficiaries (ie the Mother, Nieces, Nephews, New Horizon and Lau) were in agreement to terminate such trust;

(c) the 2005 Appointments validly appointed New Horizon and Lau as beneficiaries of the Karen Trust, and the Mother had not provided any documentary evidence to demonstrate she had lawful authority to act on behalf of the Nieces and Nephews;

(d) the Karen Trust was fully discretionary in nature, and HSBC Trustee might, on its own motion, exercise its powers of appointment in favour of any one or more of the beneficiaries to distribute...

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