Re Tam Kwong Cheung

HCMP 699/2020

[2020] HKCFI 1387

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 699 OF 2020

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Before:  Deputy High Court Judge Paul Lam SC in Chambers

Date of Hearing:  22 June 2020

Date of Judgment:  2 July 2020

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J U D G M E N T

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A.   INTRODUCTION

1.This is the hearing of an ex parte originating summons taken out by the Applicant, namely, Tam Kwong Cheung pursuant to ss 42 and 45 of the Trustee Ordinance (Cap 29) (the “TO”) and the inherent jurisdiction of the Court.

2.The trust in issue (the “Trust”) was created long time ago in 1928.  At present, the Trust consists of, firstly, a property known as the Inland Lot No 5472 together with the building thereon known as 31 Wing Wo Street, Hong Kong (the “Property”); and secondly, the balance in the bank account numbered 015-219-40-00726-1 held by one Luen Hing Shing Co with The Bank of East Asia, Limited (the “Account”). The Property has been rented out whereas the Account has been used to receive the monthly rents, and pay the expense and outgoings relating to the Property. What is unusual about this case is that the sole trustee has passed away, and none of the beneficiaries of the Trust can be traced.  The Applicant was entrusted by the trustee to manage the trust properties.  As there is no trustee for the Trust, a new lease with the tenant cannot be signed, and the Account which has been frozen by the bank cannot be reactivated.  Hence, the Applicant applies for an order that his daughter be appointed as the new trustee of the Trust, with consequential vesting orders of the trust properties.

B.   THE FACTS

3.The Applicant’s family (the “Tam’s Family”) originates from a small village known as開平五寶鄉長興里 (the “Village”) in or around the then Hoi Ping District in the Guangdong Province in the Mainland.

4.In the 1920s, many villagers from the Village, including the Tam’s Family, who intended to work in or emigrate to the United States of America, would have to come to Hong Kong first to apply for US visas.  As the application process was lengthy and the waiting time may be up to a few years, more and more villagers were stuck in Hong Kong.

5.In the late 1920s, a Mr Tam Ching Mow (“Mr CM Tam”) found Luen Hing Shing Co (the “Firm”).  The Applicant’s grandfather, namely, Mr Tam Ka Yiu and one Mr Tam Leung Mow (“Mr LM Tam”) were also involved in the establishment of the Firm.  The Firm was intended to act as a base for villagers from which they could take shelter and seek assistance.  Mr CM Tam served as the General Manager of the Firm.

6.The Firm was an unincorporated association with shares initially allocated to the shareholders/partners, who were member of the Tam’s Family and their associated entities.  According to a shareholders’ list prepared in about 1989 for the last distribution of dividends, there were initially 81 shareholders.  The Applicant’s grandfather was one of them.  There were changes in the shareholdings over the years.  By the time of the said shareholders’ list, there remained 68 shareholders.  The Applicant is unaware of any further change.

7.On or about 9 January 1928, the Property was acquired by Mr CM Tam on behalf of the Firm.

8.The Property was a 3‑storey building known as “31 Wing Wo Street”.  In the early days, the Firm was engaged in some small‑scaled business of import and export trades.  The ground floor of the Property was used to operate a grocery store while the upper floors were used as an office and a hostel to accommodate shareholders/partners of the Firm and/or their families and relatives in Hong Kong.

9.Mr CM Tam executed a declaration of trust dated 19 April 1935 (the “Declaration of Trust”) which stated that the Property was “in fact purchased with the moneys of and are the property of Luen Hing Shing Firm” and it was “so assigned to me … as nominee of and as trustee for and on behalf of the said Luen Hing Shing Firm”.  Mr CM Tam declared that he would hold the Property “in trust for the said Luen Hing Shing Firm to be disposed of in such manner as the said Luen Hing Shing Firm shall from time to time in writing direct”.

10.Since about 1937, Mr LM Tam succeeded Mr CM Tam as the General Manager of the Firm.  However, Mr CM Tam remained to be the legal registered owner of the Property.

11.Mr CM Tam passed away on 9 March 1944.  On 24 December 1946, a letter of administration of his estate was granted to one Mr Tam Fai Sun (“Mr FS Tam”), the lawful attorney of Mr CM Tam’s wife, Ms Tam Yu Shi.  Mr FS Tam became the legal registered owner of the Property.

12.In about 1953, due to old age, Mr LM Tam passed on the management of the Firm to the Applicant’s uncle, Mr Tom (or Tam) Suey Mow (“Uncle Tam”).

13.In about 1960s, the Firm ceased its import‑export trade business.  Further, as it became unlikely that the shareholders/partners of the Firm, or their family members would need to seek accommodation at the Property, the Property ceased to serve as a hostel.  Uncle Tam began to explore the idea of selling or renting out the Property.

14.Pursuant to Uncle Tam’s application by ex-parte originating summons made on 3 July 1980, in Miscellaneous Proceedings No 587 of 1980 in the Supreme Court of Hong Kong, the Honourable Mr Commissioner Gittins QC ordered that:

“Tom (or Tam) Suey Mow be appointed as the sole trustee under the Declaration of Trust dated the Ninth day of April 1935 by Tam Ching Mow”

and that:

“[the Property] do vest in Tom (or Tam) Suey Mow and FURTHER IT IS DECLARED that the said property is held in trust by Tam Ching Mow deceased for Luen Hing Shing firm.”

15.By a letter dated 1 March 1988, Uncle Tam asked all shareholders/partners of the Firm whether they would agree to sell the Property.  The plan was subsequently abandoned as the Firm had lost contacts with many shareholders/partners, and there were few replies to the letter.  Uncle Tam focused on renting out the Property instead.

16.At that time, due to the aging of the Property, it became hazardous and was in desperate need of repairs and renovation.  However, the Firm did not have sufficient funds to carry out the necessary works.  General Target Limited (“General Target”), which was interested in renting the Property, offered to pay and in fact paid for the reconstruction of the Property.  In return and as a gesture of goodwill, by a lease dated 1 December 1989, Uncle Tam, as trustee for the Firm, agreed to let the Property to General Target for a term of 30 years at the monthly rent of HK$10,000 exclusive of rates, with an option to renew for another 30 years at the monthly rent of HK$20,000 (the “Lease”).  General Target paid the monthly rents by depositing them into the Account.

17.Uncle Tam and his family emigrated to Canada in about early 1990s.  As the Applicant was the only member of the Tam’s Family remaining in Hong Kong, Uncle Tam asked him to assist in the maintenance and management of the Property.  Uncle Tam handed over the control of the Account to him by naming him as an authorized signatory.  Uncle Tam also instructed the Applicant to withdraw about HK$5,000 from the Account every month as remuneration for managing the Property.  However, in fact, the Applicant only withdrew monies from the Account from time to time as there was not much money in the Account and the rental of the Property was the Firm’s only source of income.

18.Since around 1993, the Applicant also renewed the business registration and handled the tax affairs for the Firm.  As the Firm had not carried out any business, business registration was not renewed since 2006.

19.In recent years, the Applicant has been assisted by her daughter, Ms Tam Man Sze Marcia (the “Proposed Trustee”), in managing the Property and handling the relevant affairs.

20.It was originally intended that Uncle Tam would give a power of attorney to the Applicant so that the Applicant may deal with the Property when the Lease expired at the end of 2019.  However, no such power of attorney has been executed.

21.Recently, the Applicant was informed by his friends and family members living in Canada that Uncle Tam had passed away a few years ago.  The Applicant has not been able to contact the family of Uncle Tam, and has no means to ascertain whether any probate or letter of administration of Uncle Tam’s estate has been granted.

22.Moreover, by now, to the Applicant’s best knowledge and belief, many of the initial shareholders/partners of the Firm have passed away.  The Applicant has lost contacts with the descendants and family members of those shareholders/partners, and he has no means to ascertain their whereabouts.

23.Clause 7 of the Lease grants to General Target an option to renew for a further term of 30 years at the monthly rent of HK$20,000 exclusive of rates, Government rent, property tax and all outgoings chargeable in respect of the Property, which may be exercised by serving a notice of not less than 3 months.  By a written notice dated 26 June 2019, General Target exercised the option.  However, as Uncle Tam has passed away, no one could sign a new lease with General Target.  Upon the expiry of the Lease on 30 November 2019, General Target continued to rent the Property by paying a monthly rent of HK$20,000 into the Account up to February 2020.

24.In early March 2020, the Bank of East Asia informed the Applicant that, since it had not received the Firm’s renewed business registration, the Account would be frozen.  When the Applicant attempted to renew the business registration, he was informed by the Business Registration Office that he could not do so as he is not a shareholder/partner of the Firm.  As he has no means to contact the Firm’s shareholders/partners or their descendants, he is unable to reactivate the Account.  The Account has been frozen since 14 March 2020.  The Applicant has not been able to operate the Account, including to receive the monthly rent from General Target. Hence, no rent has been paid since March 2020.  The latest balance in the Account as at 29 February 2020 was HK$104,694.10.

C.   THE APPLICATION

25.The Applicant submits that, in these circumstances, a new trustee should be appointed so that the legal title of the Property could be vested into the new trustee; further, a new trust account to be held by the new trustee should be opened for the purpose of receiving the rents, and paying the expenses and liabilities regarding the Property; and the credit balance in the Account should be transferred to the new trust account.

26.The Applicant proposes her daughter to be the new trustee.  He and his immediate family are the only known members of the Tam’s family who are currently residing in Hong Kong.  Although he cannot exclude the possibility that some of the shareholders might have relocated back to Hong Kong, he does not have the means to ascertain their whereabouts.  In view of his old age, he has in recent years entrusted her daughter to manage the Property.  She is now aged 47.  She completed her second year of Bachelor Degree in Arts at York University in Toronto; and is now a General Manager of D.A.K. Industrial Company Limited, a company specialized in polyresin home and seasonal decorations production.  She is responsible for overseeing and supervising the daily operation of the company including its design team, sales team and production line.  She is not a shareholder/partner of the Firm; and hence, not a beneficiary of the Trust.

D.   ANALYSIS

D1.   Ex parte application

27.I accept the Applicant’s evidence that the sole trustee, namely, Uncle Tam, has passed way; and the Applicant is unable to contact his family members or ascertain whether any personal representative of his estate has been appointed.  I also accept the Applicant’s evidence that it is likely that many of the shareholders/partners of the Firm have already died; for those who are still alive, he does not know whether they are in Hong Kong or how to contact them irrespective where they are; and for those who have passed away, he has lost contacts with their descendants or family members.

28.In the circumstances, I am satisfied that it is appropriate to make this application ex parte (cf Re Daiei Sanko Co Ltd, HCMP2940/2014 (20 January 2015, unreported), §5).  However, the Court must proceed cautiously as it is being asked to make final orders which would have significant impact on the Trust, and none of the beneficiaries is before the Court.

D2.   Appointment of a new trustee

29.S 42(1) of the TO provides that:

“The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee…”

30.However, s 57(1) of the TO provides that:

“An order under this Ordinance for the appointment of a new trustee or concerning any interest in land, stock, or thing in action subject to a trust, may be made on the application of any person beneficially interested in the land, stock, or thing in action, whether under disability or not, or on the application of any person duly appointed trustee thereof.”

31.It is implicit in s 57(1) of the TO that nobody other than a trustee or beneficiary has standing to seek the appointment of new trustees under the TO (Lewin on Trusts (20^th ed, 2020), vol 1, §15‑083, p 711; London Capital & Finance plc (in Administration) v Global Security Trustees Ltd [2019] EWHC 3339 (Ch), §17).  As the Applicant is neither a beneficiary nor a trustee of the Trust, he accepts that he is not entitled to invoke s 42 of the TO.  He relies on the inherent jurisdiction of the Court instead.  Ms Ng, acting for the Applicant, refers me to London Capital & Finance plc (in Administration) v Global Security Trustees Ltd [2019] EWHC 3339 (Ch), §§ 16-18, 60-68, per Chief Master Marsh; and Bridge Trustees Ltd v Noel Penny (Turbines) Ltd [2008] EWHC 2054 (Ch).  In London Capital & Finance plc (in Administration) v Global Security Trustees Ltd [2019] EWHC 3339 (Ch) at §18, Chief Master Marsh noted that it is common ground between the parties that the Court has power under its inherent jurisdiction to remove a trustee and appoint some other person or persons to act as trustee.

32.It is clear that the Court has an inherent jurisdiction to appoint new trustees as part and parcel of its general power to supervise the administration of a trust:

(a)  Halsbury’s Laws of England (5^th ed, 2013), vol 98, §47 provides that:

“Moreover, besides the jurisdiction given to it by statute, the court has a limited inherent jurisdiction to alter the terms of trusts, and in exercise of its inherent jurisdiction may intervene in the management and administration of a trust where, for example, there is no trustee to carry it on or the trustee refuses to act, and, where expedient, the court may order the trust fund to be paid into court.”

And §652 states:

“Under its inherent jurisdiction to supervise, and where appropriate intervene in, the administration of trusts, a court of equity will interfere in the management and administration of a trust where there is no trustee to carry it on, or where the trustee wrongfully declines to act or refuses to disclose trust accounts and supporting documents or is otherwise acting improperly, or where difficulties have arisen which cannot be removed without the assistance of the court, or where the decision of the court on a doubtful question connected with the trust or on its proper administration is sought by the trustee or by the beneficiary.”

(b)  Underhill and Hayton, Law of Trusts and Trustees (19^th ed, 2016), §71.28 at p 1031:

“The court has an inherent jurisdiction to appoint trustees in proceedings where an order has been made for administration or execution of the trusts.”

33.To be more specific, in Halsbury’s Laws of England (5^th ed, 2013), vol 98, §289, on appointment of new trustees by the Court, the author states that:

“The court may, whenever it is expedient to appoint a new trustee or new trustees and it is found inexpedient, difficult or impracticable to do so without the assistance of the court, make an order for the appointment of a new trustee or new trustees either (1) in substitution for or in addition to any existing trustee or trustees; or (2) although there is no existing trustee.”

Most importantly, footnote no 4 to the above paragraph states:

“Trustee Act 1925, s 41(1). This reflects the inherent jurisdiction of the court…” (emphasis added)

S 42(1) of the TO was modelled on, and is identical to, s 41(1) of the Trustee Act 1925.

34.In London Capital & Finance plc (in Administration) v Global Security Trustees Ltd [2019] EWHC 3339 (Ch) at §18, Chief Master Marsh noted that there was a difference between the parties about the circumstances in which the Court should exercise its inherent power: one party submitted that use of the power under the inherent jurisdiction is “exceptional” and it is necessary to show strong grounds for its use whilst the other party submitted that there is no basis for imposing a test that is more stringent than that under s 41 of the Trustee Act, which is that of expediency.  Chief Master March held at §24:

“To my mind the difference between the parties on this point is, in reality, minimal. The exercise of the court’s inherent jurisdiction to remove a trustee is exceptional in the sense that it is not a jurisdiction that is commonly exercised, because the power under section 41 usually suffices. There is no basis, however, for adding a threshold test of exceptionality and the corollary that a strong case must be made out if the application is made under the inherent jurisdiction. This is because the jurisprudence dealing with the exercise of the power, whether exercised under section 41 or under the inherent jurisdiction, already has built within it adequate checks and balances. The court will never remove a trustee lightly. The court will always wish to consider the application in light of the circumstances, with the welfare of the beneficiaries firmly in mind. If there has been misconduct by the trustees, it is likely that an order for removal will be made. On the other hand, the fact that the beneficiaries have fallen out with the trustee is likely to be insufficient on its own.”

35.The above-mentioned extract in Halsbury’s Laws of England states expressly that s 41(1) of the Trustee Act reflects the inherent jurisdiction of the Court, implying that in exercising its inherent power, the Court should apply the same principles applicable to the exercise of its statutory power.  In Wong Keung and others v Chung Lap and others, HCA8817/1983 (11 April 1986, unreported), the plaintiffs asked for the trustees to be replaced under the Court’s inherent power or under s 42(1) of the TO. Nazareth J (as he then was) held at p 22 of his judgment that:

“The principles guiding a court in the exercise of its inherent jurisdiction, which in my view apply equally to the exercise of the powers under Section 42(1), are stated at page 408 of the 11^th edition of Lewin on trusts…”

36.In my view, the correct principles may be summarized as follows:

(a)  The Court has an inherent jurisdiction to appoint new trustees (and remove the existing trustees) in addition to its statutory power under s 42 of the TO.

(b)  It would only be in exceptional circumstances that the Court would need to exercise its inherent jurisdiction (in particular, when there is no trustee or beneficiary of the trust who can make an application under the TO).

(c)  If and when it becomes necessary for the Court to exercise its inherent jurisdiction, the Court should apply the same principles applicable to the exercise of its statutory power.

37.Accordingly, in considering how I should exercise the Court’s inherent jurisdiction in this case, I shall apply the test of expediency embodied in s 42(1) of the TO: whether it is expedient to appoint a new trustee, and it is inexpedient, difficult or impracticable so to do without the assistance of the Court.  As observed in Lewin on Trusts (20^th ed, 2020), vol 1, §15-087 at p 714, cases of expediency may arise where there is great difficulty in obtaining administration to the deceased trustee or last surviving trustee, or where there is no personal representative of a sole surviving trustee.  The authors cite, among other cases, Re Davis’ Trusts (2871) LR 12 Eq 214 and Re Matthews 53 ER 976; (1859) Beav 463, which are also the authorities that Ms Ng draws my attention to.

38.I have no doubt that the test of expediency is satisfied in this case.  It is plain and obvious that a new trustee must be appointed as soon as practicable to deal with the Property, in particular, to sign a new lease with General Target, to receive the monthly rents and use them to meet expenses and liabilities relating to the Property.  It is also plain and obvious that no new trustee can be appointed without the assistance of the Court.  Uncle Tam, the sole trustee, has passed away.  As the Applicant has lost contact with his family members, it is extremely difficult, if not virtually impossible, to even ascertain whether any personal representative has been appointed for his estate, let alone get in touch with him/her if one has been appointed.  The Applicant has also lost contact with all shareholders/partners of the Firm, who would be the beneficiaries of the trust. It is indeed doubtful whether any of them is still alive bearing in mind that the Firm was established in the 1920s.  For those who have passed away, as the Applicant do not know how to contact their family members, it is equally extremely difficult, if not virtually impossible, to even find out whether any personal representatives have been appointed for their estates, let alone get in touch with them.  In these circumstances, this is a clear case in which the Court should exercise its inherent jurisdiction to appoint a new trustee.

39.The next question is who should be appointed as the new trustee.  The person appointed must be fit to act as a trustee, and the Court will in general require evidence of his fitness (Lewin on Trusts (20^th ed., 2020), vol 1, §15-088 at p 714).  Based on the evidence given by the Applicant, I am satisfied that the Proposed Trustee is fit to be appointed as the new trustee.  She is a member of the Tam’s Family; and the daughter of the Applicant, who has been helping him in managing the Property for some time.  In view of her academic qualification and working experience, I am satisfied that she is capable of managing the Trust properly.  Having said that, in general, the proposed new trustee should produce a written consent to act as trustee (Lewin on Trusts (20^th ed, 2020), vol 1, §15‑085, p 713).  The Applicant undertakes that he will file an affirmation to exhibit the Proposed Trustee’s signed confirmation of her consent to act as trustee.  Subject to this undertaking, I shall appoint her to be the new trustee.

D3.   Consequential vesting orders and other reliefs

40.Upon appointment, the new trustee acquires the right to call for the trust assets to be vested in him or her.  But it does not, in the absence of statutory sanction, go further than that; and the trustee obtains neither equitable nor legal interest in the property merely by virtue of appointment.  Thus steps must be taken to achieve it separately.  See Underhill and Hayton, Law of Trusts and Trustees (19^th ed, 2016), §73.2, pp 1047-1048.

41.S 45(a) of the TO provides that, where the Court appoints or has appointed a trustee, it may make an order (called a vesting order) vesting the land in the new trustee.  Similarly, s 52(1)(a) of the TO provides that, where the Court appoints or has appointed a trustee, it may make an order vesting the right to sue for or recover the thing in action (ie a chose in action) in the new trustee; and s 52(5) provides further that the Court may give directions concerning the manner in which the right to transfer anything in action vested under the provisions of the TO is to be exercised.

42.As I have agreed to appoint the Proposed Trustee as the new trustee, I shall exercise the Court’s power under s 45(a) of TO to vest the Property in her.  This would enable her to execute a new lease with General Target, and handle relevant matters relating to the Property.  The balance in the Account is, in law, a thing in action in that it represents a debt owed by Bank of East Asia to the Firm.  In view of the intention to open a new trust account, I shall exercise the Court’s power under s 52(1)(a) and (5) of the TO to direct that the balance in the Account shall be transferred to a new trust account to be opened under the Proposed Trustee’s name.

E.   ORDER

43.For the above reasons, upon the Applicant’s undertaking that he shall file an affirmation within 21 days hereof to exhibit the Proposed Trustee’s signed confirmation of her consent to act as the new trustee, I make the following orders largely in terms of the originating summons:

(a)  TAM MAN SZE MARCIA (HKID: [to be inserted in the formal court order]) be appointed as the sole trustee of the trust as evidenced by the Declaration of Trust dated 19 April 1935 (the “Trust”) in place of the late Tom (or Tam) Suey Mow to hold the Inland Lot No 5472 together with the building thereon known as 31 Wing Wo Street, Hong Kong (the “Property”) and all income and proceeds therefrom;

(b)  The Property do vest in TAM MAN SZE MARCIA (HKID:[to be inserted in the formal court order]) in her capacity as the sole trustee of the Trust;

(c)  The credit balance in the bank account numbered 015‑219‑40‑00726‑1 held by Luen Hing Shing Co with The Bank of East Asia, Limited (the “Account”) be paid into a trust account to be set up by TAM MAN SZE MARCIA (HKID: [to be inserted in the formal court order]) at a licensed bank incorporated in Hong Kong for the purpose of managing the Property and all income and proceeds therefrom on behalf of Luen Hing Shing Co in her capacity as the sole trustee of the Trust; and

(d)  The Applicant’s costs of and incidental to this application assessed at HK$84,885.00 be indemnified out of the assets of the Trust.

44.As a postscript, it appears to me that there is little point to keep the Trust: the original objective of setting up the Trust has long gone; and, in reality, it is most improbable that any beneficiary of the Trust, or his/her personal representative, would come forward to claim any interest in the Property.  Apparently, the Trust continues solely because General Target has exercised the option to renew the Lease.  The new lease will be for a term of 30 years, which will expire only in late 2049.  In the meantime, in the light of the modest amount of rental incomes and the length of the tenancy, it is unlikely that any third party would be interested to buy the Property.  Nevertheless, eventually, it seems that the appropriate way to put an end to the Trust is to sell the Property, and then pay the net sale proceeds (with the remaining rental proceeds, if any) into Court.  A notice may then be published to the public to give the beneficiaries of the Trust (or their personal representatives) a last chance to claim their shares of interest in the Property.  If no one makes any claim within a reasonable time, the funds in Court would become bona vacantia.  I would urge the Proposed Trustee to give some thoughts on how to manage, and eventually terminate, the Trust in a proper and lawful manner.  If necessary, she should seek further directions from the Court.

Ms Euchine Ng, instructed by Kok & Ha, for the Applicant