Shalini Naresh Kumar Basant v. Sovereign Fiduciaries (Hong Kong) Ltd

HCMP 420/2021

[2022] HKCFI 3675

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 420 OF 2021

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Before:  Madam Recorder Rachel Lam, SC in Court

Date of Hearing:  3 March 2022

Date of Decision:  15 December 2022

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DECISION

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A. INTRODUCTION

1.In this matter, the Applicant, Shalini Naresh Kumar Basant (“Applicant”) applied by way of Amended Originating Summons dated 21 June 2021 (“Amended OS”) under S.42 of the Trustee Ordinance (“TO”) for an order to discharge and remove the Respondent, Sovereign Fiduciaries (Hong Kong) Limited (“Respondent” / “Trustee”), as sole trustee of the K.S. Shahani Trust (“the Trust”) and to appoint in the Respondent’s place a new trustee.

2.The application was heard before me on 3 March 2022 (“3 March Hearing”). At the time, the proposal in the Amended OS was to appoint Tricor Trust (Hong Kong) Limited (“Tricor”) in place of the Respondent.

3.After the 3 March Hearing had concluded, the Applicant filed another summons on 12 April 2022 (“the New Summons”) the purpose of which was to further amend the Amended OS by substituting another candidate, Mr Frank Yuen (“Mr Yuen”), as the proposed new trustee. The parties submitted their views by way of correspondence as to whether the New Summons should be determined first or whether the Court was to consider the Amended OS in its form as at the date of the 3 March Hearing. As a matter of case management, I considered it more expedient to consider the New Summons first, and then, if the amendment were allowed, to determine the application in its final intended form. Directions were given for the further conduct in view of the New Summons. Further evidence was filed in relation thereto, the relevant particulars of which I will refer to below.

4.As regards the New Summons, it seems to me to be pointless to consider the application on the previous form, given Tricor no longer consent to being appointed (being conscious of the litigation risk in light of the ongoing family dispute, discussed further below). On the other hand, Mr Yuen has indicated his willingness to take up the appointment should the Court see fit to appoint him in place of the Respondent. In the circumstances, I have decided to allow the amendment sought by the New Summons, and will consider the application on the basis that it is Mr Yuen who the Applicant seeks to appoint in the Respondent’s stead.

5.At the hearing, the Applicant was represented by Mr Stefano Mariani, Solicitor Advocate, and the Respondent was represented by Counsel Ms Sheena Wong.

B.  BACKGROUND

6.The present application was commenced against the backdrop of a longstanding family dispute.

7.The Trust was originally set up by Mr Kishinchand Lalchand Shahani (“Mr Shahani Sr”), the de facto settlor and sole asset contributor, by Trust Deed dated 23 January 1990 (“Trust Deed”) (as amended on 11 June 2001 and 4 January 2002).

8.Mr Shahani Sr passed away on 10 January 2000.

9.Pursuant to the the Schedule to the Trust Deed the “Eligible Beneficiaries” of the Trust are defined as:

(1)  Rajan K. Shahani (“Rajan”, Mr Shahani Sr’s eldest son), his widow and issue(s);

(2)  Dilip K. Shahani (“Dilip”, Mr Shahani Sr’s second son), his widow and issue(s); and

(3)  Shalini K. Shahani, the Applicant (Mr Shahani Sr’s youngest daughter), her widower and issue(s).

10.Rajan has two daughters, Nikita Shahani (“Nikita”) and Ayesha Shahani (“Ayesha”). Neither Dilip nor the Applicant have children. Thus, the Eligible Beneficiaries currently comprise Rajan, Dilip, the Applicant, Nikita and Ayesha.

11.There are various disputes ongoing between the Applicant on the one hand and Rajan and Dilip on the other (with Nikita and Ayesha also falling within this latter camp).

12.By a Letter of Wishes made in 1990 (“1990 LOW”), Mr Shahani Sr had indicated that Rajan would be “Controller” of the Trust, and requested that the Trustee would carry out the requests of the Controller regarding administration and investment of the Trust Fund, as well as seek prior advice of the Controller before exercising any power or discretion under the Trust Deed or altering the nature of investments. The 1990 LOW further provided that as to the distribution, appointment, advancement or allocation of capital or income comprising the Trust Fund, Mr Shahani Sr expressed his wishes that they be made 37.5% to Rajan, 37.5% to Dilip, and 25% to the Applicant. It was also indicated that the Applicant would not be entitled to take part in the management and control of any business or investment comprised in the Trust Fund, to the intent that the same would be left to Mr Shahani Sr during his lifetime and thereafter, to Rajan, “who shall have as much discretion and authority as possible”.

13.The sole material asset comprised in the Trust Deed is 65.44% of the issued share capital of Breland Limited (“Breland”), a company incorporated in the British Virgin Islands (“BVI”). The remaining 34.56% of the issued share capital of Breland is held by a Mrs Gobind Shahani, the paternal aunt of the Applicant.

14.Breland holds 100% of the issued share capital of Barondale Limited (“Barondale”), also a company incorporated in the BVI. Barondale effectively holds 100% of the issued share capital of Hongkong & Kowloon Estates & Properties Limited (“HKEPL”), a company incorporated in Hong Kong. HKEPL holds virtually all of the issued share capital of Lalchand & Sons Limited (“LSL”), also a company incorporated in Hong Kong.

15.LSL is the sole operating company comprised in the Trust Fund. It owns immovable properties in Hong Kong with an estimated market value of between HK$500 million and HK$700 million. The bulk of its trading income derives from property letting. Other than the income generated from LSL, the Trust does not have any liquid assets.

16.Rajan is a director of each of LSL, HKEPL, Barondale and Breland.

17.Mr Gobind Shahani, the husband of Mrs Gobind Shahani, was previously the only other director of LSL and HKEPL.

18.After the 3 March Hearing, various steps were taken in relation to HKEPL and LSL, whereby Dilip was appointed to the boards of HKEPL and LSL as well. There is a dispute as to the reason underlying these appointments. The Applicant says that it is indicative of Rajan’s camp seeking to “consolidate … control over the Trust Fund”, whereas Rajan’s camp places blame on Mr Gobind Shahani for failing to sign the audited accounts or annual returns of HKEPL and LSL, necessitating measures to be taken such that these could be rendered and filed.

19.In addition, Sanya Shahani (Rajan’s wife), and Nikita are also directors of each of Breland and Barondale.

20.The Applicant is not a director in any of the entities.

21.The Respondent was appointed on 24 February 2021 as sole trustee in place of Infiniti Trust (Asia) Limited (“Infiniti”). Mr Howard T. D. Bilton (“Mr Bilton”) is the founder and chairman of the Respondent.

22.Within a month of the Trustee’s appointment, the Applicant sought to lay various complaints before the Trustee in respect of matters finding their origin in the family dispute, which had taken place before its appointment. The Applicant also indicated that she wished for there to be a co-trustee to be appointed or alternatively, for the Trustee to agree to the Applicant’s share being “bought out of the Trust” (by payment of cash or kind for HK$120 million, or by transfer to her of a proportion of Breland’s shares), failing which she would take out proceedings against them. These proceedings were commenced against the Trustee shortly thereafter (in March 2021, with the amendment to the Originating Summons being filed in June 2021).

23.For the purposes of the application, evidence has been filed by the Applicant, the Respondent, as well as Rajan, Dilip, Nikita and Ayesha (pursuant to an order given by Master Hui on 18 June 2021 permitting the Eligible Beneficiaries to express their views on the matter).

24.In relation to the stance of the Eligible Beneficiaries, I note that at various junctures, Rajan, Dilip, Nikita and Ayesha have also sought, via their solicitors, to submit correspondence to the Court setting out their views on various developments or in relation to the parties’ submissions. Mr Mariani had objected, although not particularly vigorously, to such submissions at the 3 March Hearing and thereafter. At the hearing, I indicated that I would consider the correspondence on a de bene esse basis. In coming to the decision below, I have taken the submissions into account insofar as I consider them to be helpful indicators of the respective beneficiaries’ views.

25.The Respondent has made clear that it maintains a neutral position in the family disputes, and is not insistent on remaining as Trustee. It has, however, set out various observations and has also continued to oppose any allegation of wrongdoing.

C.  THE RELEVANT LAW

26.There is no great dispute between the parties as to the applicable law.

27.S.42 of the Trustee Ordinance (Cap. 29) (“TO”) provides as follows:

“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 [...]”

28.The Court may thus appoint a new trustee whenever: (1) it is expedient to do so, and (2) it is found inexpedient, difficult or impracticable so to do without the assistance of the Court.

29.The Court also has inherent jurisdiction to appoint new trustees as part of its supervisory jurisdiction over the administration of a trust (See Re Tam Kwong Cheung [2020] HKCFI 1387 at §32).

30.S.57(1) of the TO provides as follows:

“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.There is no dispute in the present case that the Applicant has the relevant standing to make the application.

32.To show that the new appointment is “expedient”, actual misconduct on the part of the trustee need not be shown, but the court must be satisfied that its continuance in office would be prejudicial to the due performance of the trust or impede the effectual execution of the trusts, and so adversely affect the interests of the beneficiaries: see Koo Wai On Mina, an infant by Koo Hong Wai, her father and next friend v Tai Sau Lin (HCMP 1733/1994, 21.7.1995); The Ban Khi v The Loei Beng[2019] HKCFI 1492, §39.

33.In particular, where criticisms levelled are only justified to a limited extent, even if there was breakdown of trust between the trustee and beneficiary, that would not necessarily warrant appointment of new trustee: Koo Wai On Mina.

34.Generally, the act or omission must be such as to endanger the trust property or to show a want of honesty or want of proper capacity to execute the duties, or a want of reasonable fidelity: Lewin on Trusts (20^th ed.) §14-076.

35.In deciding whether to exercise its discretion to appoint a new trustee, the Court will take into account: (i) the wishes of the person by whom the trust was created, (ii) the interests, which may be conflicting, of all the beneficiaries, and (iii) the efficient administration of the trust, and whether the appointment would promote or impede the execution of the trust: see The Ban Khi at §40.

36.As stated in Re Tam Kwong Cheung at §34:

“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.”

37.It was thus the Trustee’s position that it rarely suffices to say that a beneficiary has fallen out with the trustee, and friction or hostility between trustees and the beneficiaries is not of itself a reason for the removal of a trustee.  The Court will not remove a trustee at the mere caprice of the beneficiary without any reasonable cause shown, or because the trustee has refused from honest motive to exercise a power requested: see Lewin§§14-077, 14-083.

38.In a slight contrast to the above, in Letterstedt v Broers & Anor (1884) 9 App Cas 371 (a case which the Applicant places particular emphasis on), the Privy Council held that in exercising its statutory and/or inherent authority to remove a trustee, the Court may do so if it were:

“… satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate [...] if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign, and does so. If, without any reasonable ground, he refused to do so, it seems to their Lordships that the Court might think it proper to remove him; but cases involving the necessity of deciding this, if they ever arise, do so without getting reported” (at 386, per Lord Blackburn).

D.  THE PARTIES’ RESPECTIVE POSITIONS

39.The Applicant relies on the following grounds in support of her application, in summary:

(1)  There is a conflict of interest, or real risk of conflict of interest, in light of the alleged close personal and business relationships between Rajan and Dilip on the one hand and Mr Bilton on the other. (“Conflict of Interest Issue”) (citing Phipps v Boardman [1967] 2 AC 46 at 124B-C).

(2)  Rajan exercises control over the various companies in the Trust Fund as director, and has exercised a dominant and undue influence on the finances of the Trust, and the management and control of the Trust Fund. The Respondent has demurred from its fiduciary duty to get in and properly manage the Trust assets in a fair and disinterested manner, in that the Trustee has acquiesced or otherwise tolerated Rajan’s conduct. (“Acquiescence Issue”).

(3)  Given the past conduct of Rajan and the Trustee, who are said to be possibly acting in concert, there is a real and serious risk of future prejudice to the Applicant’s interest in the Trust if the Trustee is not discharged. (“Prejudice Issue”).

40.The Respondent, whilst remaining neutral, has raised the following matters for the Court’s consideration:

(1)  At the time of appointment, the Eligible Beneficiaries were already embroiled in the family disputes in question. It had no desire to be drawn into the dispute, and further recognized that it remains accountable and owes duties to all of the Eligible Beneficiaries.

(2)  The Trustee vehemently denies any wrongdoing. It thus puts forward the position that the bases on which the Applicant seeks its removal are misconceived and without merit.

(3)  It draws attention to the fact that 4 out of 5 of the Eligible Beneficiaries (i.e. everyone apart from the Applicant) have expressed a preference to retain the Respondent, primarily on the grounds that there is no merit in the Applicant’s complaints and that the change would therefore create unnecessary expense in respect of the Trust and is detrimental to their interests. (The Eligible Beneficiaries state that there is no particular preference for the current Trustees over any other qualified trustees, but rather a preference to avoid unnecessary change and expenses).

(4)  It points in particular to the expense that would inevitably be incurred in the appointment of a new trustee, and submits that this would not be an expedient course to take in the circumstances.

41.At the 3 March Hearing, the Applicant further indicated to the Court via Mr Mariani that:

(1)  If the Court were minded to make an order discharging the Respondent, then the Applicant would undertake to bear the costs of transfer of the Trust Fund from the Respondent to the new trustee (at the time, proposed to be Tricor, later Mr Yuen). Insofar as the transfer might incur costs, the Applicant would bear the relevant costs and indemnify the Respondent.

(2)  In view of the neutral stance adopted by the Respondent, the Applicant would further not object to the Respondent being indemnified out of the trust fund for the costs of the present proceeding, to be assessed on a gross sum basis.

42.The Respondent, whilst continuing to object to the allegations levelled against it, naturally would accept the indemnification and the undertakings referenced above, in the event that an order were made discharging it. This confirmation at the hearing (which I understood subsequently remained in place notwithstanding the change of candidate to Mr Yuen) thus took away one of the concerns that had been raised, viz. that unnecessary expenses would be incurred for the Trust and thus any change of trustee would not be in the interests of all the Eligible Beneficiaries. What remains for the Court to consider is the reasons proffered by the Applicant in support of her application, and whether it was expedient to do as she asks in the circumstances.

43.With the above in mind, I turn to address each of the issues raised by the Applicant.

E.  DISCUSSION

44.Given the disputes between the Eligible Beneficiaries, it is apparent that it is inexpedient, difficult or impracticable to replace the Trustee without the assistance of the Court. The question is whether it is expedient to do so taking into account all the circumstances. This is discussed in the context of the issues below.

E1.    Conflict of Interest Issue

45.The Applicant points to the following matters in support of her argument that the Trustee has placed itself in a position where there is a conflict of interest (or at the very least, a real risk thereof):

(1)  Mr Bilton is the chairman and founder of the Sovereign Group (which comprises the Respondent entity), and he is a friend of Rajan and Dilip.

(2)  Mr Bilton and Dilip are business partners, producing wine under the label ‘Howard’s Folly’ in Portugal. (This fact is accepted by all parties).

(3)  The Applicant asks the Court to place little weight on what she says is a bare assertion that Mr Bilton has “effectively recused himself” from the management and control of the Respondent, pointing to inter alia the prominent position he occupies on the Respondent’s website.

46.In answer thereto, the Respondent puts forward the following points:

(1)  It denies any wrongdoing, and points to the thin basis upon which it is said that this alleged conflict arises. Specifically, it says that all that the Applicant is able to truly point to are the following facts: (i) Mr Bilton has met Rajan on a few occasions at Shahani family gatherings, where the Applicant was also present; (ii) Dilip is a business partner of Mr Bilton in respect of a winery in Portugal; and (iii) whilst Mr Bilton considers himself as a friend of the Shahani family as a whole, the Applicant does not consider Mr Bilton a friend of hers.

(2)  There is, it says, no instance where such facts have actually given rise to any partiality or wrongful act, nor any “real sensible possibility” of conflict of interest, nor any other reason why the Respondent’s continuous execution of the Trust would be detrimental to the welfare of the beneficiaries.

(3)  It further emphasizes that Mr Bilton is a professional (a barrister) who has decades of experience in trusts law and practice, and that he has no involvement in the daily management of the Trust.

(4)  Moreover, it points to the fact that all decisions regarding the appointment of the Trust Fund and its income are required to be sanctioned by the Appointor (Stevensec Services Limited, an independent third party), such that there are sufficient checks and balances in place.

47.I do not accept the suggestion (if in fact the Applicant pitches her case so highly) that there has been an actual conflict of interest which resulted in there having been any overt or express acts of partiality or wrongdoing on the part of the Respondent. Any such allegation is, of course, a serious one, and in order to successfully level such an allegation against a party, the evidence must be cogent.

48.I do accept, however, that the Applicant has a sense of grievance which has arisen from the appointment of a trustee whom she perceives to be more closely affiliated with her brothers’ “camp” than her, and which she considers to have a negative impact on the perceived partiality of the Trustee in its ongoing administration of the Trust. Viewing the objective circumstances from the perspective of a reasonable man, one might legitimately question whether there is a real risk of conflict, considering:

(1)  Mr Bilton’s ongoing business involvement with Dilip in the winery in Portugal. This is notwithstanding the fact that he has recused himself from the administration of the Trust (which the Court has no reason to doubt his assertion). Such ongoing business liaison outside of the Trust, particularly where it is now known to the Trustee that there is such a deep-seated and long running family dispute, is not conducive to the Trustee being able to say with conviction that there is no objective risk at all of any conflict or partiality.

(2)  The above is further bolstered by the apparent logistical support which the Sovereign Group has given to Rajan during the course of negotiations between the Eligible Beneficiaries as to how to solve or settle the long running dispute (as to which see the discussion on the Prejudice Issue below).

E2.    Acquiescence Issue

49.On the Acquiescence Issue, the Applicant points to the following matters:

(1)  Rajan has utilized his position as director of LSL to defray personal expenditure by procuring that LSL make direct payments to him or for his benefit. In so doing, he does not need to rely on distributions from the Trust, since he has direct access to and control of the funds of LSL. In this regard, he is in a superior position to the Applicant.

(2)  By virtue of the directorships of Sanya and Nikita on the board of Breland, Rajan’s position as director further up the chain, and subsequent to the 3 March Hearing, the appointment of Dilip to HKEPL and LSL, it is said that his “camp” controls Breland and indeed various other entities, such that the Trust could be starved of liquid funds by declining to declare a dividend to the Respondent as Trustee.

(3)  There is no dispute that there has not been any distribution from the Trust since 2019 (i.e. the Applicant has not had the benefit of any funds therefrom), whereas since that time, Rajan has continued to use his position as director to obtain funds from LSL for his own purposes.

(4)  The Applicant says that the Respondent has the ability, as majority shareholder of Breland, to compel Rajan to act in a manner consistent with his fiduciary duties as director. By failing to do so, the Applicant says that the Respondent has breached the irreducible core of its fiduciary obligations, standing by whilst one beneficiary co-opts trust funds to the detriment of another (citing Armitage v Nurse [1998] Ch 241 at 253-254).

(5)  The Applicant also points to the failure of the Respondent to apply for a Beddoe order before defending the present application.

50.In response to this issue, the Respondent has laid emphasis on the fact that many of the substantive complaints concern personal grievances stemming from the family dispute which have been misguidedly targeted at the Respondent, pointing to:

(1)  The fact that many of the events complained of took place before the Respondent’s appointment. This included: (a) the appointment of Sanya and Nikita to the boards of LSL and HKEPL; and (b) the prior method of administration of the Trust by Infiniti (whom the Applicant alleges was similarly guilty of acquiescence and deference to Rajan’s acts).

(2)  Insofar as the “control” by Rajan is concerned, the Respondent says that this is in line with:

(a)  The 1990 LOW, the material provisions of which are set out in paragraph 11 above; and

(b)  Clause 17(d)(i)(B) of the Trust Deed, which provides that the trustee shall have no obligation to “inquire into or in any manner question or bring any action suit or proceeding or in any manner whatsoever seek to interfere with the management government or control of the directors as the case may be” of any private company, the shares of which are included in the Trust Fund. Such clause is typically referred to as an “Anti-Bartlett Clause”, the exonerating effect of which has been upheld by the Court of Final Appeal in Zhang Hong Li v DBS Bank (Hong Kong) Ltd (2019) 22 HKCFAR 392.

(3)  Accordingly, the Respondent says that it has all along been carrying out its duties in accordance with the above, giving due regard to Mr Shahani Sr’s wishes and the way in which the Trust was structured from the outset. It further points to the fact that the Applicant is neither a shareholder nor a director of the various entities, and thus would not have any right to participate in the management thereof.

(4)  Finally, insofar as there have been expenses defrayed, it points to Clause 9(r) of the Trust Deed, which expressly permits that the Controller shall be entitled to have rent-free residential accommodation at properties owned by the entities.

51.In relation to the above, I do not consider that the Applicant has established with sufficient cogency that the Trustee has been so deficient that it can be said that the Trustee has breached its fiduciary duties:

(1)  The complaint, at its core, is one of inaction on the part of the Trustee.

(2)  One must consider the background and context, and the chronology of events which led to the present application. There is no dispute that the Trustee was appointed in circumstances when the Trust had been established long ago and its manner of operation appears to have been relatively consistent insofar as the dominance of Rajan and his position within the various entities is concerned.

(3)  As a matter of timing, the Trustee was faced with various complaints lodged against Rajan within the first few weeks of its appointment, and it would require time and due consideration to bottom out whether there was any merit in the complaints at all. The present application was initiated not long after the Trustee’s appointment in early 2021. So, I certainly do not think that there was sufficient basis to suggest that the Trustee had taken an improper position as at the time of initiation of these proceedings.

(4)  Insofar as subsequent developments are concerned, upon investigating and understanding the further complexities of the family dispute, the Trustee took the position that it would give due regard to the 1990 LOW and the provisions of the Trust Deed, which at least prima facie placed Rajan and those in his “camp” in a more advantageous position in terms of control of the Trust and/or the entities concerned therein.

(5)  Whilst I accept that the failure to declare dividends since 2019, as well as the continued use of LSL’s funds to defray Rajan’s personal expenses raises queries on the part of the Applicant, it was not unreasonable for the Trustee to take the stance that they did when faced with the history of the matter, and bearing in mind the 1990 LOW and the Anti-Bartlett clause in the Trust Deed.

52.Looking at matters in the round, I do not consider that this is a basis upon which the Applicant can justify the proposed change of trustees.

E3.    Prejudice Issue

53.On the Prejudice Issue, the Applicant points to the following matters:

(1)  It is said that the Respondent has evidenced a pattern of conduct (in failing to address the concerns discussed above) that falls short of the loyalty and probity expected of a professional trustee, such that the Applicant has a reasonable basis to fear that the future exercise of its powers will be prejudicial to her interests.

(2)  This also included, inter alia, efforts by it or an associate entity to assist Rajan in resettling the Trust as a Guernsey settlement, of which it is said that the Respondent must have been aware.

(3)  This further included the Respondent’s rejection of the Applicant’s attempts to settle the family dispute by way of her requests that she be appointed her notional ‘share’ of the Trust Fund absolutely (i.e. by way of distribution in specie of the capital on a pro rata basis to her). The Applicant’s stance is that the rejection was contrary to the above-mentioned involvement in the proposed resettlement, when the draft resettlement documents contemplated a transfer in specie of 25 per cent in Breland to the Applicant.

(4)  Because of these inconsistent stances, and the involvement of the Respondent (or those associated with it) in the proposed resettlement discussions, the Applicant levels an allegation of “collusion” between Rajan and the Trustee, such that the Applicant says there is a real risk she may be prejudiced.

(5)  The Applicant also raises a query why a Beddoe application was not made prior to the Respondent defending the present application.

54.In answer to the above, the Respondent says that:

(1)  It was not “substantively involved” in the various settlement attempts which are “completely irrelevant” to the Trustee’s fitness and properness to administer the Trust.

(2)  The complaint regarding the failure to make a Beddoe application is misguided since it is well established that it is inappropriate for a trustee facing an application for removal (however unmeritorious the beneficiary’s claim) to make a Beddoe application or seek a prospective costs order.  See Lewin§§48-075, 48-086.

55.I accept the Respondent’s point about the approach to the Beddoe application. There is no obligation and indeed it would have bene inappropriate for them to make such application in the circumstances.

56.I do, however, have some concerns as to the apparent involvement of the Sovereign Group in the resettlement negotiations and their assistance to Rajan. Whilst I do not accept that there has been “collusion” (again, a serious allegation), the level of ease of communication with Rajan on the one hand, and the failure to answer the Applicant’s queries satisfactorily on the other, indicates a prima facie disparity in treatment of the beneficiaries. Notwithstanding this, I do not consider that this by itself would be a standalone basis upon which to discharge the Respondent and appoint a new trustee. Rather, the Respondent’s conduct goes into the mix of factors which I consider might raise objective concerns as to there being a real risk of conflict of interest.

E4.    Conclusion on the Issues Raised

57.I thus accept that the present circumstances lend themselves to a conclusion that there is a real risk of a conflict of interest (but not an actual one per se). Coupled with this, in light of the Applicant’s apparent distrust of the Respondent, and taking into account the approach in Letterstedt, I accept that the present position is not conducive to the Respondent being able to effectively administer the Trust. On such basis, and bearing in mind the undertaking by the Applicant to defray and indemnify the expenses and costs in question, I consider it expedient to appoint a new trustee in place of the Respondent.

F.       THE NEW TRUSTEE

58.The Applicant had originally proposed that Trident Trust Company (HK) Limited be the new trustee. Thereafter, she changed the proposal to Tricor (by the amendment in June 2021). Now, following the indication by the former two candidates that they were no longer willing to take up the appointment, she proposes Mr Yuen.

59.The Respondent has drawn to the Court’s attention the following matters:

(1)  The Respondent, Trident and Tricor are professional trust companies licensed to carry on trust businesses in Hong Kong under Part 5A of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap 615). Mr Yuen has not indicated that he is so licensed, and the Respondent queries whether, in light of his curriculum vitae (wherein he says he deals with corporate liquidation, personal bankruptcy, receivership, estate / trust administration and financial investigations), he is “fit and proper and duly qualified” for the task at hand.

(2)  Mr Yuen appears to be a litigation specialist, and his appointment could very well further inflame the present family dispute.

60.In relation to the above:

(1)  I understand that accounting professionals are exempt from the aforementioned Part 5A licensing requirements (S.53B, Cap 615). Mr Yuen is a member of the Hong Kong Institute of Certified Public Accountants, and would thus be exempt. In any event, whilst licensing under Cap 615 might be an indicator of the fitness and suitability of the candidate in question, it is by no means determinative.

(2)  Having considered Mr Yuen’s CV, I am satisfied he would be a fit and proper person with the due qualifications and experience to take up the appointment.

(3)  Insofar as there are concerns of the new trustee inflaming the ongoing disputes, the reality appears to be that the parties are already heavily embroiled in such disputes anyway. There is nothing before the Court to suggest that Mr Yuen will act in a manner partial to either camp, and given his qualifications and experience, one would expect he should act in a responsible manner when administering the Trust.

61.In the circumstances, I will make the order discharging the Respondent and appointing Mr Yuen. The parties are directed to endeavour to agree the form of order within 14 days hereof, taking into account the undertakings as to costs as communicated to the Court at the 3 March Hearing (paragraph 41 above). If they are unable to do so, then the matter is to be listed before me for a 1-hour hearing to finalize the terms of the order, including on costs.

62.I thank Mr Mariani and Ms Wong for their assistance.

Mr Stefano Mariani of Deacons for the Applicant

Ms Sheena Wong instructed by Tanner De Witt for the Respondent