Law Shuk Hoi v. Lo Lok Fung Kenneth and Others

CACV 203/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 203 OF 2010

(ON APPEAL FROM HCMP NO. 1053 OF 2008)

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Before: Hon Tang VP, Cheung JA and Barnes J in Court

Date of Hearing: 1 June 2011

Date of Judgment: 30 June 2011

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JUDGMENT

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Hon Tang VP:

Introduction

1.Mr Law Ting Pong (the Deceased) transferred certain assets to his 2^nd son, the Plaintiff, pursuant to a Letter of Wishes dated 23 April 1996.

2.The Letter of Wishes is homemade and in Chinese.  There is an English translation. However, neither the learned judge nor the parties referred to the translation.  I shall proceed on the original Chinese, which I set out in full below.

“羅定邦先生意願書

花無百日紅，人無千歲翁。慎始者必慎於終。余年已晚，疊次與吾妻楚思，談論身後事，對去世後我倆之財產處理方法，每因彼此尊重對方意見反而提不出一具體實施方案。昨日會談中得一具體結論現分列於下：-

A) 我委任羅蜀凱為執行人全權依照我生前所列出意願全權處理，一經他拍板決定便無需他人參與意見。

B) 我擁有Kandos, Venus, LPHL和Ostar等家族公司之權益，連同現有部份現金，物業和股票債卷等資產處理方法如下：-

（1） 將我應得權益和資產轉入羅蜀凱名下或其指定代理人。

（2） 生前上述資產和權益由我全權管理，蜀凱須遵我意願行事。

（3） 死後我授權蜀凱「全權」管理我在上述家族公司應得權益和上述資產，包括擁有，授予，分配，行善，資助和投資。唯蜀凱將視乎日後實際環境及情況盡量遵照下列分配和執行之管理大綱：

將我應得權益，收益和資產平均分為3份，目標如下：

(a) 用作資助「羅氏家族子孫」日後在香港脫出遭遇可能出現困境和突破。

- 資助可作為送贈，借貸，週轉，贊助或奬賞；

- 資助金額，時間長短，收息與否，利率多少由蜀凱全權決定；

- 羅氏家族子孫指羅定邦之子孫後代可追溯族譜名稱，如有爭議，蜀凱可全權給予確認或拒絕而無須給予任何解釋；

- 突破指在學業上，事業上，行為上，成績表現卓越，見義勇為或為家族或為民族爭光但因財力出現困難之資助和為此之奬賞及鼓勵。

(b) 用作「慈善事業」之捐獻和「援助」之送贈：

- 慈善事業不單止指政府認可之慈善機構，亦包括羅氏家族名義所開辨之學校，醫院和安老院，世界各地因天災橫禍而引致病，死，殘廢，無家可歸，飢荒，寒冷，老弱，孤寡之捐助；

- 援助指需要幫助人仕，包括現在，過去或將來羅氏家族之同事，親戚和朋友。援助性質亦包括升學，創業，醫療，嫁娶，移民，生育，購置物業之幫助；

- 上述慈善捐獻和援助之決定，釐定金額，一概由蜀凱全權處理。

(a)及(b) 兩點我妻陳楚思絕對贊同她將來處理其財產亦本此。

(c)       流亡海外仍未回歸兒子一經証實認同回歸或我已去世經現在兒女兩人已上証實認同回歸即將此部份財產無條件全部贈與以補償我過去未盡父親之責任過失。”

3.For convenience, I also set out the English translation.  The translation could be used as a rough guide. 

"Letter of Wishes of Mr Law Ting Pong

Colours of flowers would fade away, man could not live forever. Those who are careful at the beginning would also be careful to the end. I am old, I have discussed with my wife Chor Si several times, about the arrangements after we pass away and how our assets should be handled.  Everytime, due to our respect for each other's opinion, we could not come up to any specific proposal.  During a conversation yesterday, we came up with a specific conclusion, which is as follows:-

A)   I appoint Law Shuk Hoi as the administrator, with full power to handle [my assets] in accordance with the wishes that I had set out when I am alive.  Once he makes any decision, participation or opinion from others is not necessary.

B)    My interest in family companies such as Kandos, Venus, LPHL and Ostar etc., together with some existing cash, properties and shares, debentures etc shall be handled in the following manner:-

1)    Transfer the interests and assets which I am entitled to into the name of Law Shuk Hoi or his designated agent.

2)    During my lifetime, I shall have full power to manage the abovesaid interests and assets, Shuk Hoi should act according to my wishes.

3)    After I pass away, I grant 'full power' to Shuk Hoi to manage my interest in the above family companies and the above assets , including owning, conferring, distributing, carrying out charitable works, sponsoring and investing.  But Shuk Hoi should, depending on the actual condition and circumstances in the future, follow the management outline for distribution and administration below as far as possible:

To divide the interests, income and assets which I am entitled to into 3 equal shares, for the following objectives:-

a)     To render financial assistance to 'descendents of the Law's family' who may in Hong Kong in the future escape from possible adverse conditions and breakthrough

-  Financial assistance can take the form of gift, loan, temporary financial aid, sponsorship or reward;

-  Shuk Hoi shall have the full power to determine the amount and duration of the financial assistance and whether to charge interests and if so, the interest rate;

-  Descendents of the Law's family mean sons, grandsons and descendents of Law Ting Pong, who can be traced from the genealogy. If there is any dispute, Shuk Hoi has the full power of recognition or refusal without the need to give any reason;

-  Breakthrough means being brilliant and outstanding academically, professionally or behaviourally, acting gallantly for just cause or gaining honour for the family or the nation, but due to financial difficulties financial assistance is required and reward and encouragement because of this.

b)   Use for donations to 'charitable operations' and gifts made to 'aid':

-      Charitable operations are not limited to charitable organisations recognised by the government, but also include schools, hospitals and elderly homes established under the name of the Law's family, donations and assistance made in relation to illness, death, disability, homelessness, famine, coldness, weak and elderly, orphans and widows resulting from natural disasters and accidents around the world;

-      Aid means those who need help, including present, past and future colleagues, relatives and friends of the Law's family.  The nature of aid also include assistance for advancing in education, starting business, medical treatment, marriage, immigration, giving birth and purchasing real property;

-      Shuk Hoi shall have the full power to make decision on the abovesaid charitable donations and aid, and to determine the amount.

My wife Chor Si agrees to points (a) and (b) absolutely and she will deal with her assets in this way in the future.

c)   The son who is in exile abroad and yet to return, once verified and recognised to have returned or after I passed away verified and recognised to have returned by two of my existing children such part of the estate shall be gifted to him without any condition so as to compensate for my fault in the past in failing to discharge my paternal duties."

4.The Letter of Wishes provided that the assets transferred to the Plaintiff should be divided equally for the purposes set out in Clause B(3).

5.There is no dispute over Clauses B(3)(b) and B(3)(c).  The Plaintiff accepted and accepts that he holds the respective one-third under Clause B(3)(b) on a charitable trust and Clause B(3)(c) on trust for a lost son.

6.In respect of Clause B(3)(a), the main protagonists before Lam J were the Plaintiff on the one side, and the 2^nd to 5^th, 7^th and 8^th Defendants on the other side.

7.The learned judge identified the issues before him as follows:

"5.  Through oral submissions, the differences between Mr Shieh and Mr Yu were further narrowed down to the following issues,

(a)   Whether the Clause set up a discretionary trust over one third of the assets transferred to the Plaintiff so that he is obliged to exercise his discretion to make a distribution from time to time when the criteria laid down in that clause were satisfied (Mr Yu's contention) or it merely conferred a fiduciary power upon the Plaintiff that he is obliged to consider whether to exercise from time to time but without obliging him to make any distribution at all (Mr Shieh's contention);

(b)   At the end of the perpetuity period, whether there shall be equal distribution in favour of all the descendants of Law Ting Pong born before he passed away (Mr Yu's primary contention) or an implied trust in favour his descendants who are worthy (Mr Yu's alternative contention) or a gift over of the remainder of the one third in favour of the Plaintiff absolutely (Mr Shieh's primary contention) or a resulting trust in favour of the estate of the Deceased (Mr Shieh's alternative contention and Mr Yu's further alternative contention)."

8.We are not concerned with the second issue where the learned judge found in favour of a resulting trust.

9.By his judgment dated 26 July 2010, Lam J made the following orders:

"1.  Paragraph B(3)(a) of the Letter of Wishes dated 23 April 1996 (the 'Letter of Wishes') of Law Ting Pong (the 'Deceased'), deceased, created a discretionary trust as defined in paragraph 30 of the Judgment in respect of one-third of the Deceased's property referred to in the Letter of Wishes for the benefit of those individuals who satisfy the criteria laid down in that paragraph, namely those descendents of the Law family who is in a state of destitute/adversity and/or achieve a breakthrough in Hong Kong within the meaning of paragraph B(3)(a) of the Letter of Wishes;

2.   paragraph B(3)(a) of the Letter of Wishes did not create any gift in favour of the Plaintiff, nor any charitable trust or non-charitable purpose trust;

3.   the trust referred to in paragraph 1 above:-

(1)  is not void for uncertainty, or for breach of the rule against perpetuities;

(2)  is valid until the end of the period calculated by reference to the lives of such descendants of the Deceased who were in being on 23 April 1996 plus 21 years; and

4.   in the event that the property held under the trust referred to in paragraph 1 above has not been exhausted by the end of the period specified in paragraph 2(2) above, the balance of the property under the trust shall be vested in the estate of the Deceased by operation of the doctrine of resulting trust."

10.On 17 January 2010 the learned judge made the following relevant orders on costs:

"2.  the Plaintiff shall personally pay 85% of the costs of the 2nd to 5th, 7th and 8th Defendants in respect of the Application on party to party basis to be taxed if not agreed;

3.   the Plaintiff is disallowed to be indemnified from the Trust in respect of his own costs or his liability as to the costs of the 2nd to 5th, 7th and 8th Defendants; and

4.   the Plaintiff shall personally pay the costs of the 2nd to 5th, 7th and 8th Defendants in respect of the hearing on 10 December 2010 on party to party basis to be taxed if not agreed."

The Appeal

11.This is the Plaintiff's appeal.  In the Plaintiff's Amended Notice of Appeal, he asked that Lam J's judgment be varied:

"… such that the disposition created under paragraph B(3)(a) of the Letter of Wishes is a power exercisable at the discretion of the Plaintiff and that the objects of such power are such of the descendants of Law Ting Pong who is in a state of destitute/adversity and/or who has achieved a breakthrough in Hong Kong within the meaning of paragraph B(3)(a) of the Letter of Wishes and not a trust"

12.The Plaintiff also asked in respect of the judgment on costs, that the costs of the Plaintiff and the 2^nd to 5^th , 7^th and 8^th Defendants' costs in respect of the Plaintiff's originating summons be paid out of the trust fund. 

Discussion

13.The learned judge in para 15 of his judgment stated that "even though the document was called a Letter of Wishes (意願書)", it contained not just mere wishes but instructions to the Plaintiff.  In para 15(a) to (g), he explained why.  The learned judge held that the Plaintiff held the one-third in relation to Clause B(3)(a) as trustee.

14.The Plaintiff now accepts that he is not beneficially entitled to this one-third in any event or at all.  Nor does he deny that he holds this one-third as a trustee.  Nor that the trust is a discretionary trust.  The only issue between the parties is whether the Plaintiff as such trustee has been conferred a trust power or a mere power. 

15.Both Mr Edward Chan SC, for the Plaintiff, and Mr Benjamin Yu SC, for the 2^nd to 5^th, 7^th & 8^th Defendants, have referred us to para 29-22 in Lewin on Trusts (18^th ed) which states:

"Imperative powers and permissive powers — trust powers and mere powers

29-22   A power may be and commonly will be altogether discretionary or permissive, in that the donee is under no obligation to exercise it, though in the case of powers vested in trustees and other fiduciary powers the donee will be under an obligation to consider its exercise from time to time.  But a fiduciary power may be imperative, in that the donee is required to exercise it and has a discretion, if any, only as to the timing or manner of the exercise.  The former is called a mere power, the latter a trust power.  Though the distinction is equally applicable to administrative and to dispositive powers, the terminology is associated with dispositive powers and in particular with powers of appointment.  If and to the extent that the donee does not exercise a mere power of appointment, the property subject to the power will pass to those entitled in accordance with a gift over in default of appointment or, if there is no default trust, the property will result to the settlor.  But a power of appointment which is a trust power is different, because it is a power of which the objects are intended to take in any event.  The donee is under a duty to exercise the power ‑ he holds the property on trust to exercise it ‑ with the consequence that if he does not exercise it the court will do so for him, by directing an equal or unequal division amongst the objects or some of them."

16.Lewin on Trusts went on to explain that in para 29-23 the term "discretionary trust" has no precise meaning.  It could be used where a trustee has been conferred a trust power or a mere power.

17.I find the following description of trust power in Discretionary Trusts by Hardingham and Baxt particularly helpful:

"… In conferring a trust power upon a trustee the settlor is, without himself creating a direct trust in favour of the objects, manifesting an intention that the objects are to receive the distributable subject-matter.  It is to be left to the trustee to determine how they are to take, but if, for any reason, the trustee fails to make a determination, the objects are not for that reason to be defeated.  A trustee with a trust power may determine how objects are to take but not whether they are to take at all."

18.In McPhail v Doulton [1971] AC 424, the issue before the House of Lords was whether a deed under which a settlor would transfer to trustees shares in a company to form the nucleus of a fund for the benefit of the staff of the company, their relatives and dependants, created a trust or a power.  Both at first instance and in the Court of Appeal (but by a majority), it was held that the relevant provision conferred a power as opposed to a trust. 

19.There the relevant provisions were:

"… Clause 9 provided:

'(a)       The trustees shall apply the net income of the fund in making at their absolute discretion grants … in such amounts at such times and on such conditions (if any) as they think fit … (b) The trustees shall not be bound to exhaust the income of any year or other period in making such grants … and any income not so applied shall be … [placed in a bank or invested].  (c) The trustees may realise any investments representing accumulations of income and apply the proceeds as though the same were income of the fund and may also … at any time prior to the liquidation of the fund realise any other part of the capital of the fund … in order to provide benefits for which the current income of the fund is insufficient.'

Clause 10 provided that all benefits being at the discretion of the trustees, no person had any interest in the fund otherwise than pursuant to the exercise of such discretion."

20.Both at first instance (Goff J) and in the Court of Appeal, the learned judges were strongly influenced by the belief that if the provisions had created a trust, it must fail for uncertainty because of the impossibility of ascertaining all the possible beneficiaries, but that if the document be construed as creating a power, there was at least a fair chance that it might be considered good.

21.Russell LJ dissented.  It is important to note what he said:

"… It is common ground that if Clause 9(a) had run 'the trustees shall apply the net income or so much thereof as they shall in their absolute discretion think fit' in making etc., it could not be said that there was a trust of the income for the class: it would be a mere power."

22.I think it is in that context that one should read the following passage from the judgment of Lord Wilberforce at page 449:

"With this background I now consider whether the provisions of clause 9 (a) constitute a trust or a power.  I do so briefly because this is not a matter on which I or, I understand, any of your Lordships have any doubt.  Indeed, a reading of the judgments of Goff J. and of the majority in the Court of Appeal leave the strong impression that, if it had not been for their leaning in favour of possible validity and the state of the authorities, these learned judges would have found in favour of a trust.  Naturally read, the intention of the deed seems to me clear: clause 9 (a), whose language is mandatory ('shall'), creates, together with a power of selection, a trust for distribution of the income, the strictness of which is qualified by clause 9 (b), which allows the income of any one year to be held up and (under clause 6 (a)) either placed, for the time, with a bank, or, if thought fit, invested. Whether there is, in any technical sense, an accumulation seems to me in the present context a jejune inquiry: what is relevant is that clause 9 (c) marks the difference between 'accumulations' of income and the capital of the fund: the former can be distributed by a majority of the trustees, the latter cannot.  As to clause 10, I do not find in it any decisive indication.  If anything, it seems to point in favour of a trust, but both this and other points of detail are insignificant in the face of the clearly expressed scheme of clause 9.  I therefore agree with Russell L.J. and would to that extent allow the appeal, declare that the provisions of clause 9 (a) constitute a trust and remit the case to the Chancery Division for determination whether on this basis clause 9 is (subject to the effects of section 164 of the Law of Property Act, 1925) valid or void for uncertainty."

23.Before us, Mr Yu for the Plaintiff agreed to reformulate his submission (recorded in para 5(a) of the judgment, see para 7 above), and accepted that the Plaintiff has a discretion whether to distribute or not.  He has always accepted that the Plaintiff has a discretion over how much distribution should be made, and, if made, whether by way of "gift, loan, temporary financial aid, sponsorship or reward". 

24.Reformulated para 5(a) will read:

"(a)      Whether the Clause set up a discretionary trust over one third of the assets transferred to the Plaintiff so that he is obliged to exercise his discretion whether to make a distribution from time to time when the criteria laid down in that clause were satisfied."

25.I have no doubt that a mere power was conferred on the Plaintiff.  It was not a trust power, because the person(s) qualified under Clause B(3)(a) would not be entitled to either the income or the capital under Clause B(3)(a) in any event. 

26.Indeed, as the learned judge has found, at the end of the perpetuity period, any asset remaining under Clause B(3)(a) would go to the estate of the Deceased on a resulting trust and not to the "beneficiaries" under the power in any event. 

27.It is to be noted that in 29-22 Lewin ibid it was stated:

"… But a power of appointment which is a trust power is different, because it is a power of which the objects are intended to take in any event." [Emphasis added]

28.The observation of Russell LJ quoted in para 21 above also supported my view. 

29.I turn to consider para 30 of the learned judge's judgment where he said:

"30.      In my judgment, in answer to the key question, on proper construction of the terms of the Settlement, the Deceased did intend to benefit the objects of the power, viz. those descendants who satisfied the criteria laid down in the Clause.  The Plaintiff has a duty to provide financial assistance out of the one third estate if the criteria are satisfied though he has a discretion in deciding the mode and the terms of such assistance."

30.With respect, I agree with the learned judge that the Deceased intended to benefit the objects of the power, namely, those descendants who satisfied the criteria laid down in the clause.  But it does not follow that he had created a trust power as opposed to a mere power. 

31.With respect, the second sentence in para 30 of the judgment is obscure.  I am not sure what the learned judge meant by "duty" to provide financial assistance.  The parties apparently took that to mean that a trust power as opposed to a mere power was created.  If so, for the above reasons, I respectfully disagree.

32.That is not to say that the Plaintiff as trustee with a mere power has no duties.  Lord Reid said:

"… One argument, as I understand it, is that because this is admitted to be a mere power, it really imposes no duties on them at all.  I find that difficult to understand.  It is a power given not to the individuals who happen also to be trustees but to the trustees as such so that new trustees duty assumed or appointed can exercise it.  In my view it must follow that the trustees are to act in their fiduciary capacity.  They are given an absolute discretion.  So if they decide in good faith at appropriate times to give none of the income to any of the beneficiaries the court cannot pronounce their reasons to be bad. And similarly if they decide to give some or all of the income to a particular beneficiary the court will not review their decision.  That was decided by this House in Gisborne v. Gisborne (1877) 2 App.Cas. 300.  But their 'absolute discretion' must, I think, be subject to two conditions.  It may be true that when a mere power is given to an individual he is under no duty to exercise it or even to consider whether he should exercise it.  But when a power is given to trustees as such, it appears to me that the situation must be different.  A settlor or testator who entrusts a power to his trustees must be relying on them in their fiduciary capacity so they cannot simply push aside the power and refuse to consider whether it ought in their judgment to be exercised.  And they cannot give money to a person who is not within the classes of persons designated by the settlor: the construction of the power is for the court."  In re Gulbenkian's Settlement [1970] AC 508 at 518.

Disposition

33.So for the above reasons, I would rephrase para 1 of the Order and say that the Plaintiff holds the assets under Clause B(3)(a) under a discretionary trust, and that he is obliged to exercise his discretion whether to make a distribution from time to time, when the criteria laid down in that Clause are satisfied. 

34.To the extent that I differ from Lam J, the appeal is allowed.  

35.So far as the Plaintiff's appeal against Lam J's costs order is concerned, Mr Chan has rightly not pressed it.  However, the fact that I have differed from the learned judge and rephrased para 1 of the Order may have to be reflected in the costs order.  I invite the parties to make written submissions on the appropriate costs order within 14 days.

Hon Cheung JA:

36.For my part I would dismiss the appeal.

Matter of construction

37.My view is that the nature of the task (I choose to use a neutral term) that the plaintiff has to perform is a trust power or a power in the nature of a trust.  It is not a mere power.  This is purely a matter of construction as demonstrated by the House of Lord’s decision of McPhailand Others v. Doulton and others [1971] AC 424.

38.The term ‘discretionary trust’ has been used in these proceedings.  It is necessary to understand the context in which this term is used.  I find the following discussion in Parker and Mellows at paragraph 6—050 useful :

‘ It is important to note that these terms [i.e. trust power or power in the nature of a trust] have traditionally been used to denote two quite distinct situations. The first is where the person subject to the obligation has the property in question vested in him as a trustee; in this case the term trust power or power in the nature of a trust is virtually indistinguishable from the term discretionary trust—indeed in the leading case of McPhail v. Doulton, the two terms were used interchangeably. The second is where the person subject to the obligation is not himself a trustee of the property in question so that his only role is that of exercising the discretion or power; in this case, although he may be described as the donee of a trust power or a power in the nature of a trust, he certainly cannot be described as a discretionary trustee since he is not a trustee of anything.’

39.The Judge also used the term ‘fiduciary power’ to describe the plaintiff’s case.  Lewin on Trusts (18^th Ed), para 30-22 stated that,  

‘ A trust power is by definition fiduciary. A mere power may or may not be. It will be necessarily be fiduciary if vested in trustees in virtue of their office.’

40.The plaintiff accepted before the Judge that he was a fiduciary donee of a mere power.  Hence the term ‘fiduciary power’ was used and it must be understood in that context.

The distinction depends on obligation

41.The distinction between, on the one hand, trust power or power in the nature of a trust and, on the other hand, mere power depends on whether the trustee is obliged to exercise the power.  As pointed out in Parker and Mellows : The Modern Law of Trusts (9^th Ed) at paragraph 6—050,

‘ Where it is up to the trustees, or for that matter to some other person, to decide either whether a particular individual will receive a benefit from a trust at all or the extent of the benefit of any particular beneficiary, the discretion or power vested in the trustees or other person will be one of two broad types, depending on whether or not there is any obligation to exercise it. If the trustees, or other persons, are under an obligation to exercise their discretion or power, then they are said to hold a trust power, also sometimes called a power in the nature of a trust.’ (emphasis added)

42.Lord Upjohn observed in Whishaw v. Stephens (In re Gulbenkian’s Settlements)[1970] AC 508 at 525 that,  

‘ Again the basic difference between a mere power and a trust power is that in the first case trustees owe no duty to exercise it and the relevant fund or income falls to be dealt with in accordance with the trusts in default of its exercise, whereas in the second case the trustees must exercise the power and in default the court will. It is briefly summarised in Halsbury’s Laws of England, 3rd ed., vol. 30 (1959), para. 445: “The court will not exercise or compel trustees to exercise a purely discretionary power given to them; but the court will restrain the trustees from exercising the power improperly, and, if it is coupled with a duty, the court can compel the trustees to perform their duty.” It is a matter of construction whether the power is a mere power or a trust power and the use of inappropriate language is not decisive: Wilson v. Turner (1883) 22 Ch.D. 521, 525.’

43.This was affirmed in McPhail where Lord Wilberforce after referring to Lord Upjohn’s judgment, stated at 457 that,

‘ I would venture to amplify this by saying that this court, if called upon to execute the trust power, will do so in the manner best calculated to give effect to the defendant’s or testator’s intentions. It may do so by appointing new trustees, or by authorizing or directing representative persons of the classes of beneficiaries to prepare a scheme of distribution, or even, should the proper basis for distribution appear by itself directing the trustees so to distribute.’

The dispute

44.The plaintiff has now narrowed the dispute between the parties to one short point, namely, whether the plaintiff is under an obligation to distribute the benefit.  The plaintiff accepts that he is a trustee (hence the usage of fiduciary power) but maintains that the power is a mere power.  He argues that, while he has a duty to consider the exercise of the power imposed on him, he has no duty to distribute upon such consideration.  Reliance is placed on Lewin on Trusts (18^th ed, 2008), para 30-21 that,

‘ It is a question of construction of the instrument creating the power whether a mere power or a trust power has been conferred and the point is often difficult. The terms of the instrument may clearly impose a duty on the donee to distribute the fund amongst at least some of the objects and then the power is a trust power. Conversely, the terms of the instrument may be clear in the opposite sense…” (emphasis added)

My view

45.When the plaintiff said he has a duty to ‘consider the exercise of the power’, this must necessarily mean that he has an obligation to inquire and ascertain whether a descendant fulfils the conditions in Clause 3(a).  Any other interpretation will make the ‘consideration’ meaningless.  In my view, apart from this obligation the plaintiff is also obliged to distribute.

(1)    The deceased’s Letter of Wishes「意願書」was a self-made document.  The content showed that the deceased was someone who had received education but was not of high literacy.  One should eschew construing the document in a pedantic way but should instead ask what was the intention of the deceased?  The content showed that the deceased had one lasting personal regret, namely, that he was unable to take care of one of his sons and he wished to make amends for him.  At the same time the content showed that he was an altruistic person.  He intended to make provisions for two classes of person, namely, first, those members of the community who are in need and second, deserving members of his own descendants. 

(2)    In the context of this case, 「意願書」should properly be understood as Letter of Intention rather than Letter of Wishes.  However, nothing turns on the translation.  What should be emphasised is that the ‘wishes’ of the deceased were not merely his ‘hopes’ but his intention which he had entrusted the plaintiff to implement. 

(3)    The plaintiff was described as the 「執行人」 of the deceased’s intention.  Properly translated, he is someone to execute, carry out, implement and perform the intention of the deceased.  In other words he is under an obligation to carry out the deceased’s intention.  He is given ‘full power to handle’ the deceased’s assets, but in the context of the Letter of Wishes, this merely means that he is not required to consult others in his task.

(4)    The words ‘as far as possible’ in relation to the ‘full power’ to be exercised by the plaintiff after the deceased’s death, do not mean that the plaintiff can ignore the instructions, but rather reaffirmed the requirement that, save in impossible situations, he is to perform his task in accordance with the instructions.

(5)    The assets that were transferred to the plaintiff were not intended to benefit him personally but rather to be held by him for the purpose of carrying out the deceased’s intention.

(6)    The deceased had expressly spelt out how he would like the three portions of his assets to be used.  No choice is being given to the plaintiff.

(7)    Specifically in relation to Clause 3(a), the deceased’s intention was to benefit those descendants who have achieved a ‘breakthrough’ (in terms of being brilliant and outstanding academically, professionally or by their conduct) and in adverse conditions (in this context, this must include someone who is in a difficult financial state).  The deceased had again defined the ambits.  An obligation must be imposed on the plaintiff to consider whether a descendant fulfills the conditions.

(8)    Proceeding on the basis that the deceased intended to benefit those descendants who satisfied the conditions, I really do not see why the plaintiff is not under an obligation, after ascertaining that a descendant fulfils the two conditions, also to make a distribution to him.  The task imposed on the plaintiff would be meaningless and the deceased’s intention frustrated, if despite making the inquiry and satisfying himself that the conditions have been met, he could simply decide not to distribute.  Arguments advanced by the plaintiff of extreme situations such as a descendant who achieved a breakthrough but had gambled away his fortune do not really assist in the construction.  It may be relevant in the inquiry stage but if after the inquiry, the plaintiff is satisfied that the conditions are fulfiled then what is the justification for withholding distribution?

(9)    I do not regard Mr. Yu’s acceptance that the plaintiff has a discretion whether to distribute or not means a concession of the plaintiff’s argument and of the appeal.  This must be understood in the context of Mr. Yu’s case that the duty to be performed by the plaintiff is a trust power which obliges him to consider the discretion as a whole.  Mr. Yu is not confining himself to the issue of distribution as now contended by the plaintiff.

Fiduciary power

46.In any event, as explained by Lord Reid in McPhail and referred to by Tang VP, the fiduciary power must be exercised properly.  One may ask how can the fiduciary power be exercised properly, if despite the plaintiff being satisfied that a descendant fulfils the conditions, nonetheless, he can still decide not to distribute the money which the deceased had intended to be given to a deserving descendant?  In my view the plaintiff’s fiduciary power also carries with it the requirement that he has to distribute upon being satisfied that a descendant meets the requirement

Resulting trust

47.The issue of resulting trust does not assist in the task of construction.  A resulting trust may arise where property has been transferred on express trusts which do not dispose of the entire beneficial interest in property, or where an express trust fails at the outset : Snell’s Equity 32^nd Edition paragraph 25—022.

48.The present case is not one where a resulting trust may come into existence because the trust has not been effectively created or that the plaintiff has not effectively exercised his discretion (which he is obliged to do).  It arises in the event that the fund has not been exhausted by the end of the perpetuity period.  This is made clear by the judgment of Lam J.

Hon Barnes J:

49.I agree with the reasoning and judgment of Tang VP and have nothing to add.

Hon Tang VP:

50.By a majority, to the extent stated in para 33 above, the appeal is allowed.  The parties to make written submissions on the appropriate costs order within 14 days.

Mr Edward Chan SC, Mr Paul Shieh SC and Mr Eugene Fung, instructed by Messrs Mayer Brown JSM, for the Plaintiff

Mr Benjamin Yu SC and Ms Sara Tong, instructed by Messrs Kok & Ha, for the 2^nd to 5^th, 7^th & 8^th Defendants

Mr Victor Lee, instructed by Messrs Lau, Wong and Chan, for the 1^st Defendant

Messrs S K Lam, Alfred Chan & Co., for the 6^th Defendant (Appearance excused)

Department of Justice, for the 9^th Defendant (Appearance excused)