The Secretary for Justice v. Joseph Lo Kin Ching and Others
Read the full judgment text of HCMP 853/2012 on BabelCite. This High Court CFI judgment was delivered on 22 February 2013.
1. This action represents yet another round of legal battle over the vast estate of the late Nina Wang. It concerns the construction of the will that she made on 28 July 2002 (“the Will”). The background may be briefly stated as follows.
Cited by 10 cases · Cites 1 case
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HCMP853/2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 853 OF 2012 ------------------------------
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AND
(By original originating summons and order to carry on) AND
(By original originating summons and order to carry on) ----------------------------- Before : Hon Poon J in Court Dates of Hearing : 17-19 December 2012 Date of Judgment : 22 February 2013 ------------------------- J U D G M E N T ------------------------- 1.This action represents yet another round of legal battle over the vast estate of the late Nina Wang. It concerns the construction of the will that she made on 28 July 2002 (“the Will”). The background may be briefly stated as follows. A. BACKGROUND A1. Nina Wang 2.Nina Wang was a well-known figure. She and her late husband, Teddy Wang, had worked hard since the 1960s to build up the Chinachem Group, which eventually became one of the largest property developers in Hong Kong.[1] Since 1990, she had been the chairwoman of the Chinachem Group. She was also the Group’s sole ultimate owner. Extremely successful, Nina was reputedly one of the richest women in Asia. Unfortunately, she was diagnosed with uterine cancer in early 2004 and had been seriously ill since July 2006. On 3 April 2007, she died at the age of 70. The present estimated value of her estate is about HK$82.86 billion.[2] A2. The Foundation 3.Nina was a dedicated philanthropist in Hong Kong, the Mainland and internationally. During her life time, nearly all of her charitable donations were channeled through Chinachem Charitable Foundation Limited (“the Foundation”). It is a company limited by guarantee that Nina and Teddy set up in August 1988. The couple was the subscribers of the Memorandum and Articles of Association and the first directors. Since its inception, the Foundation has been treated as a charitable institution exclusively, exempted from tax under section 88 of the Inland Revenue Ordinance.[3] 4.The original objects of the Foundation were set out in Clause 3 of the Memorandum. Its main objects were contained in sub‑clauses (1) and (2) :
5.Clause 3 was altered by a special resolution passed on 14 February 2004. In sub-clause 3(1)(b), the words “non-profit making” were added before “schools”. In sub-clause 3(3), the words “In furtherance of the objects, but not otherwise the Foundation may exercise any of the following powers :-” were introduced at the beginning. The original sub-clauses 3(3) to (17) were re-numbered as Clauses 3.1 to 3.15. The alteration introduced in 2004 did not really change the substance of Clause 3. 6.Clause 5 of the Memorandum provided that the income and property of the Foundation shall be applied solely towards the promotion of the objects of the Foundation as set forth in its memorandum and prohibited distributions of its income or property to its members. 7.Clause 8 stipulated that upon winding up or dissolution of the Foundation, any surplus shall not be distributed to its members but shall be given or transferred to some charitable institution(s) to be determined by its members at or before the time of dissolution, or in default, by a Judge of the High Court. 8.Under Article 36 of its Articles of Association, the business of the Foundation shall be managed by the Board of Governors. Teddy and Nina were the first Governors. On 2 April 1990, two employees of the Chinachem Group were appointed as Governors. On 10 April 1990, Teddy was kidnapped and had since disappeared. On 31 July 1995, one of the two Employee-Governors resigned. Two additional employees of the Chinachem Group were appointed as Governors. In September 1999, Teddy was sworn to be dead and ceased to be a Governor. From then on up to 1 April 2007, the Board of Governors consisted of Nina and the three loyal employees. On 1 April 2007, Nina’s three siblings, Dr Kung Yan Sum (“Dr Kung”), Ms Gong Zhong Xin and Ms Kung Yan Sum (“Mrs Tong”), were appointed as Governors while one of the Employee-Governors resigned. Nina died two days later and ceased to be a Governor. The Board now consisted of the three siblings and two employees of the Chinachem Group. The composition of the Board remains the same to date. 9.On 2 November 2007, special resolutions were passed to amend the Articles of Association of the Foundation. Articles 49(a) and (b) were added to empower the Board of Governors to invite persons to serve as patron and vice-patrons of the Foundation, and to establish a Supervisory Board the duty of which is to advise the Board of Governors on any matter affecting the Foundation or its administration. 10.The undisputed evidence shows that during Nina’s life time, the Foundation had not engaged in any charitable activity other than making donations as instructed by Nina. According to Dr Kung,[4] when Nina wished to make a donation, she would indicate to Chan Kam Por, one of the Employee-Governors, how much she wanted to give and to whom. Chan would then arrange for the Foundation to make the donation. He would advise Nina as to which company in the Chinachem group would give the funds for the donation. Nina was not herself concerned with which company would give the funds to the Foundation so long as the purpose of the donation was achieved. In short, it was Nina who designated the donees and specified the amounts of donations to be made. The Foundation then acted as a conduit through which funds received from the companies of the Chinachem Group were donated to the donees on her behalf. 11.Other than that, no discernible pattern emerged from the donations made by Nina through the Foundation over the years. According to the annual donations made by the Foundation between 1992 and 2007,[5] the donees and donations made embraced a very wide range of organizations and causes. Some were clearly charitable in nature, such as Po Leung Kuk, the Community Chest of Hong Kong, hospitals, universities, children support/welfare groups and disaster relief bodies/funds. Some were clearly not, such as the Democratic Party and the Liberal Democratic Federation of Hong Kong. Some donations were sporadic, even one off. The more regular ones were made to Po Leung Kuk (HK$90,000 annually between 1995 and 2000) and the Community Chest of Hong Kong (ranging from HK$10,000 to HK$180,000). Some donation was as small as HK$1,000. The largest was HK$30 million made in March 2007 to the China Association of Social Workers in respect of the planning of the Nina Home, a home for AIDS orphans in Zhoukou, Henan Province. The pattern of donations was quite irregular indeed. 12.Undoubtedly, the Foundation was very important to Nina. In interviews she gave, she explained that she and Teddy had set up the Foundation as their joint idea. They had agreed for some time that they would leave their immense wealth to charitable works, rather than to family members. This brings me to the Will. A3. The Will 13.In July 2002, some 5 years before her death, Nina called Mrs Tong and asked her to assist in drafting a will. According to Mrs Tong :[6] “4. Approximately a few days before 13 July 2002, [Nina] telephoned me hoping that I would draft a will for her. At that time, I felt a bit astonished because I did not have any experience in drafting wills. At that time, I suggested [Nina] to instruct lawyers to draft a will formally, but [Nina] requested me to draft a will for her reference. At that time, most of the documents which [Nina] had to write in Chinese were drafted by me. This could be the reason why [Nina] requested me to help her to draft a will.
14.Mrs Tong went on to describe how the draft was amended[7] until it was finalized on 18 July 2002. A few days later, Nina showed Mrs Tong the Will, which she had already signed.
16.The Will and another will allegedly made by Nina in 2006 were the subject matters of dispute in HCAP8/2007. In the course of the trial, evidence was adduced to illustrate Nina’s charitable intention, which was accepted by Lam J (as he then was).[9] On 2 February 2010, Lam J delivered a reasoned judgment, pronouncing the 2002 Will in solemn form.[10] On appeal, the Court of Appeal also made a number of concurrent findings on Nina’s charitable intention.[11] Lam J’s order was upheld.[12] 17.After the validity and force of the Will had been determined conclusively, the Secretary for Justice commenced the present action in May 2012, seeking the court’s construction of the Will. B. THE PARTIES 18.In bringing these proceedings under the parens patriae jurisdiction in relation to charity, the Secretary represents the interests of charity for the public benefit. 19.The 1st defendants are the current interim administrators of Nina’s estate appointed by Chu JA’s order dated 26 March 2012. By another order of Chu JA dated 13 September 2012, the 1st defendants were authorized to participate in these proceedings. They adopt a neutral stance and do not advocate a particular outcome for these proceedings. 20.The 2nd defendant is the Foundation. As already seen, it is named as the sole beneficiary of Nina’s estate under the Will. 21.The 3rd defendant is Nina’s 98 years old mother. She is joined because she would be interested if there were a partial or total intestacy. She has, however, indicated in her acknowledgment of service that she has no intention to defend. She has since taken no further step in the proceedings. 22.By a letter dated 31 October 2012 from her solicitors, Wang Tak Shyan, Teresa, one of Teddy’s siblings, expressed her views on the construction of the Will and some other matters. Notice of the proceedings was then given to her under Order 15, rule 13A of the Rules of the High Court[13] on 8 November 2012 so that if she so wished, she might join as a party. But she has not filed any acknowledgment of service. Nor has she otherwise taken part in the proceedings. C. THE PRINCIPAL ISSUE 23.In the originating summons, the Secretary posed four questions of construction for the court’s determination :
24.Because of how the submissions were advanced before the court, the principal issue now dividing the Secretary and the Foundation is centred on Question 1 only, namely, whether Nina intended to vest her estate :
D. AN OVERVIEW OF SUBMISSIONS 25.Both the Secretary and the Foundation agreed that Clause 1 of the will constitutes a bequest of Nina’s entire estate to the Foundation. They differed as to whether it is an absolute gift or to be held on trust. 26.Mr Hinks, QC, for the Foundation submitted that the appropriate construction of the Will is this. The bequest in Clause 1 is an absolute gift of the entirety of Nina’s estate in favour of the Foundation, to be applied for its purposes as they exist from time to time. Clauses 2, 3, 4(3) reflect Nina’s wishes as to how the Foundation should conduct its affairs, or those of the Chinachem Group, or otherwise how it should use the bequest. Some parts of these clauses are highly aspirational, others are more mundane. They are variously expressed as desires or instructions to the Foundation, using terms such as “wish”, “shall” and “must”. They give valuable guidance to the Foundation but are non‑binding in effect. Clauses 4(1) and (2) are personal obligations enforceable in equity upon the Foundation as the “quid pro quo” for the bequest made in Clause 2, in particular because otherwise the Foundation might not be able to give them any effect. 27.Mr Taube, QC, for the Secretary, submitted that when the Will is construed in the light of the admissible evidence of the circumstances surrounding its execution, Nina evinced an intention that the Foundation, under external supervision, should apply her estate for charitable purposes. She did not intend to give the Foundation a free rein though. Instead her intention was that the Foundation should hold her estate primarily upon trust to carry out the charitable purposes specified in Clause 2 of the Will, as well as to give effect to the directions expressed in Clauses 3 and 4. Clause 4 in particular contains powers that the Foundation may exercise as trustee. E. GENERAL APPROACH TO CONSTRUCTION 28.In construing a will, the first and foremost duty of the court is to ascertain the testamentary intentions of the testator. 29.The starting point of the inquiry is to deduce the testator’s intention by giving the words of the will the meaning that they naturally bear, having regard to the contents of the will as a whole : Sammut v Manzi.[14] It is the natural meaning of the words used by the testator that matters. For the question is not what the testator meant to do when he made his will, but what the written words he uses mean in the particular case, that is, what are the expressed intentions of the testator : Perrin v Morgan.[15] 30.In ascertaining the testator’s intention, the court adopts a holistic approach by looking at the entire context of the will : In re Williams.[16] The testator’s intention is to be collected from the whole will and the meaning of the will and every part of it is determined according to that intention.[17] The court must also try to give a sensible meaning and effect to every part of a will under construction.[18] 31.The court does not construe a will in vacuo. Instead, it construes the will of a testator according to its language in view of the surrounding circumstances known to him when he made the will : In re Williams.[19] Evidence of the circumstances surrounding the testator at the date of his will is therefore admissible as an aid in the construction of the will. As figuratively described by James LJ in Boyes v Cook :[20]
32.This so-called arm-chair principle derives from the notion that the testator must have his own surrounding circumstances in mind when he made his will and used the words in his will with reference to those circumstances.[21] So in ascertaining the meaning of the words that the testator had used in his will, the court of construction is entitled to put itself in the position of the testator, and to consider all material facts and circumstances known to the testator with reference to which he is to be taken to have used the words in the will, and then to declare what is the intention evidenced by the words used with reference to those facts and circumstances which were or ought to have been in the mind of the testator when he used those words : Allgood v Blake.[22] 33.Mr Taube drew my attention to the recent decisions of the English House of Lords including Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd[23] and Investors Compensation Scheme Ltd v West Bromwich Building Society[24] and the decision of our Court of Final Appeal in Jumbo King Ltd v Faithful Properties Ltd.[25] He submitted that these decisions have led a shift in the court’s approach to the interpretation of all legal documents, including wills, and a greater focus on the admissible evidence of surrounding circumstances.[26] 34.Now is not the occasion to discuss how the modern approach derived from the recent authorities may have impacted on the approach to construction of wills. Indeed, for present purposes, it really matters not if I were to proceed under the traditional “arm-chair principle” or the modern approach. One way or the other, I will take into account the undisputed evidence on the surrounding circumstances when Nina made the Will. 35.Further, section 23B of the Wills Ordinance[27] enables the court to have regard to extrinsic evidence in construing a will when it is meaningless or ambiguous :
36.Finally, in construing a will or a trust document, the court is disposed in favour of charities. As Lord Loreburn said in Weir v Crum‑Brown :[28]
F. ESSENTIAL REQUIREMENTS OF A CHARITABLE TRUST 37.Since the present task is to determine if Nina intended to create a charitable trust, it is useful, I believe, to remind myself of the essential requirements of a charitable trust as guidance in construing the Will. They are :[29]
G. CONSTRUING THE WILL 38.With the principles in Parts E and F in mind, I proceed to construe the Will. G1. Clause 1 39.Clause 1 of the Will begins with the first sentence that the Foundation was set up by Nina and her husband, Teddy. It then provides in the second sentence that : “After I pass away, all of my properties shall be bequeathed to [the Foundation]”. There can be no doubt whatsoever that by virtue of the second sentence of Clause 1, Nina intended to vest her entire estate in the Foundation. It is in essence a bequest to a charitable company. 40.In construing a bequest to a charitable company, the general rule is that a bequest to a charitable company is usually construed as a gift to the body beneficially unless there are circumstances to show that the testator intended to impose a trust. Buckley J stated the rule in Re Vernon’s Will Trusts thus :[30]
41.Mr Hinks cited a line of cases, starting from Bowman v Secular Society,[31] In re ARMS (Multiple Sclerosis Research) Limited,[32] Liverpool and District Hospital for Diseases of the Heart v Attorney General,[33] to Re Wedgwood Museum Trust Limited (in administration),[34] which in short confirms the well-established proposition that a bequest to a charitable company without more constitutes an absolute gift beneficially as an accretion to its general assets. He then argued that the second sentence of Clause 1 is an absolute gift of the entirety of Nina’s estate to the Foundation, entirely free from any qualification or words of limitation. As such, it is a gift to the Foundation generally, to hold beneficially in accordance with its Memorandum and Articles as they exist from time to time, which Mr Hinks argued, can “broadly” accommodate the charitable intentions expressed in Clauses 2 to 3 to the extent that they are binding. 42.Mr Hinks placed particular reliance on the first sentence of Clause 1. He submitted that the first sentence of Clause 1 is unusual in that it records a fact but is of no operative effect. It demonstrates the importance of the Foundation to Nina and why she should want her estate to be given specifically to the Foundation. It strongly supports the construction of the second sentence in the same Clause as an absolute gift. 43.At this stage of his submissions, Mr Hinks seemed to be focusing on the meaning and effect of Clause 1 only. This blinkered approach, if truly intended, is contrary to the holistic approach that the court should adopt in construing a will. It runs the risk of undermining the true effect of other provisions in the Will in the process of collecting Nina’s testamentary intention. (For example, Mr Hinks described Clauses 2 to 4 as secondary wishes when, as will be seen below, they are in fact important directions.) And as rightly submitted by Mr Taube, it would have rendered Clauses 2 to 4 of the Will superfluous. I do not think Clause 1 should or can be isolated and read alone. Instead, it must be considered together with all the other provisions of the Will and, if necessary, with the aid of the admissible evidence surrounding its execution, for the purpose of ascertaining Nina’s intention. 44.The cases relied on by Mr Hinks do not detract in any way from the correctness or applicability of the general rule of construction as stated by Buckley J in Re Vernon’s Will Trusts. While I will bear in mind the starting position that a bequest to a charitable company is usually construed as a gift absolutely, I must still look at entire context of the Will and all the other relevant circumstances to ascertain what Nina’s intention really is. 45.I will return to Mr Hinks’ argument that the Memorandum of the Foundation can “broadly” accommodation the charitable intentions in Clauses 2 and 3 to the extent that they are binding in a moment. At this juncture, I only need to point out that on a proper reading, the Memorandum does not fully cover all the charitable intentions in Clause 2. 46.Mr Hink’s reliance on the importance of the Foundation to Nina does not take his submission any further. In my view, Nina made three points when she so introduced or described the Foundation in the first sentence of Clause 1. First, she highlighted the Foundation’s close connection with her and her late husband. Second, that close connection explained why she named it as the sole beneficiary under the Will. Third, she dedicated her entire estate to charity, the Foundation being a charitable institution set up by her and her late husband. However, it does not necessarily follow that because of its particular importance to her, Nina must have intended in the second sentence of Clause 1 to vest her entire estate in the Foundation as an absolute gift beneficially. For the first sentence is equally consistent with the notion that Nina had intended the Foundation, a corporate vehicle which she had consistently used in the past to channel her charity donations as per her instructions, to act as her trustee to apply her estate in order to implement her testamentary directions as expressed in Clauses 2 to 4. 47.I next turn to Clauses 2 to 4. G2. Clauses 2 to 4 48.These provisions are recapitulated as follows. 49.In the first sentence of Clause 2, Nina expressed her wish to entrust the Foundation to the supervision of a managing organization (“the Managing Organization”) formed by the three distinguished persons she had nominated. Upon the creation of the Managing Organization, the Foundation would for the first time since its incorporation be subject to external supervision. 50.In the second sentence of Clause 2, Nina directed that the Foundation should, subject to the supervision of the Managing Organization, deal with its “projects” undertaken since its incorporation and the setting up of the Chinese Prize, which is a very specific purpose. 51.In Clause 3, Nina directed how the Directors of the Foundation should, subject to the supervision of the Managing Organization, manage the Foundation and through the Foundation, the Chinachem Group and to apply part of the profits to charitable business. These directions concerned the business of the Foundation and the Chinchem Group generally with the specific requirement that some of the distributable profits of the Chinachem Group should be dedicated to the charitable business of the Foundation till eternity. 52.Finally, in Clause 4, Nina directed the Foundation to provide for the senior members of the Wang family (Clause 4(1)); Teddy Wang’s siblings, in particular Wang Teh Hwa, and their children (Clause 4(2)); and the care and assistance of the staff of the Chinachem Group and their children (Clause 4(3)), in the manner as stipulated. 53.I now consider if on a proper construction, the three essential requirements for a charitable trust are present in these Clauses. G2.1. Imperative language 54.I begin with the language used by Nina to see if it was on the whole imperative so that a trust was intended by her. 55.Running through Mr Hinks’s submissions on the construction of Clauses 2 to 4 is this repeated general theme : with the exception of Clauses 4(1) and (2), the provisions are all precatory, non-binding in nature, which give valuable guidance to the Foundation only and no more. In this connection, Mr Hinks relied on Baley v Public Trustee where Cooper J said :[35]
56.However, as rightly recognized by Mr Hinks, it is ultimately a matter of construction of the words used as to whether a trust is intended. As Lindley LJ said in re Williams :[36]
57.In short, it all depends on a proper construction of the words used by Nina in Clause 2 to 4 if she intended to bequeath her entire estate upon the Foundation as an absolute gift or to be held on trust. It is therefore necessary to examine more closely the provisions to determine what Nina’s intention was. 58.The first important point to note is that Nina began Clause 2 with her wish to subject the Foundation to the outside supervision of the Managing Organization. She went on in Clauses 2 and 3 to direct how the Foundation and its Directors should conduct themselves under the supervision of this powerful and prestigious body. Subjecting the Foundation to the outside supervision of the Managing Organization is on any view an important matter. But Nina used the word “wish”. What intention of hers can be deduced from this? 59.Mr Hinks submitted that the word “wish” reflects Nina’s aspiration only. It does not make the bequest on the Foundation in any way conditional on the creation of the Managing Organization. Further, since the operative word in Clause 2 is “wish”, it qualifies the word “must” which appears in the second sentence by reference to the highly aspirational Managing Organization. If the creation of the Managing Organization is not a binding obligation, the second sentence in Clause 2 equally cannot be binding. The reference in Clause 3 back to the Managing Organization strongly suggests that this Clause is an expression of wishes. Clauses 2 and 3 are therefore guidance only. 60.With respect, this analysis is too simplistic and overlooks the surrounding circumstances when Nina made the Will. 61.When Nina came to Clauses 2 to 3, she was evidently contemplating how the Foundation should operate after her death. During her life time after Teddy’s disappearance,[37] Nina was the person in control of the Chinachem Group and the Foundation. In the case of the Foundation, although there were other Governors, who were employees of the Chinachem Group, it was she and she alone who decided to whom and how much the Foundation should donate. Nina must have realized that this would all change after her death when she would no longer be in control of the Chinachem Group or the Foundation. Further, Nina must have understood that once the Foundation acquired her vast estate, the nature and scale of its operations would have changed fundamentally. Nina’s immense wealth consists solely of her shareholding in the various companies which form the Chinachem Group. And she would be bequeathing all her shareholding to the Foundation. The Foundation would then become the ultimate shareholder of the Chinachem Group. It would no longer act a mere conduit to channel her donations from time to time. Her entire estate would now be available for charity. With these considerations in mind, Nina was dealing with the following matters when she made Clauses 2 and 3 :
62.As rightly submitted by Mr Taube, in stating her wish to entrust the Foundation to the Managing Organization, Nina evinced a clear intention that she would not simply leave the Foundation to its Directors or Governors after her death when she could no longer in control. She was plainly concerned if the Foundation, under the stewardship of its Directors and Governors alone, would be competent enough to act on its own, in particular, in giving effect to her directions in Clauses 2 and 3, and to manage the Foundation and through the Foundation the Chinachem Group, without outside supervision. She wanted to ensure that the Foundation, its Directors and Governors would be able to do so by imposing the outside supervision by the Managing Organization. 63.It is perfectly understandable for Nina for use the word “wish”. However strong her desire of entrusting the Foundation to the Managing Organization might be, it is entirely up to the three distinguished persons to decide if they would form or join the Managing Organization. She must have been aware that in reality it might not be possible that all of the three eminent office holders would be able and willing to act as such. Mr Hinks referred to Mrs Tong’s evidence that judging by Nina’s reaction to her suggestion she appeared to have regarded the involvement of the UN Secretary General in the Managing Organization as a source of amusement and aspirational. He argued that this is not the reaction of a person who intended Clause 2 to be legally binding. In my view, Nina’s reaction only shows that she must have realized that in reality the UN Secretary General might not be able or willing to join the Managing Organization. In the circumstances, the best that Nina could do was to express her wish. 64.However, it does not necessarily follow, as Mr Hinks contended, the word “wish” denotes a mere aspiration and no more. In my view, such a wish demonstrates Nina’s clear intention that she was not content and did not intend to simply give the Foundation and its Directors and Governors a complete free rein after her death. 65.Mr Hinks referred to the evidence that Nina had not taken any practical step to form the Managing Organization before her death. In September 2005, when she approached to involve the Procurator General, she did not conform to the wishes stated in the Will. Two days before her death, she appointed three siblings to be Governors to strengthen its Board. He argued that these events show that Nina did not take the creation of the Managing Organization seriously. But they all relate to something Nina did or did not do after the execution of the Will. It is simply not admissible evidence for construing the Will. 66.In my view, Nina must have the same intention of not giving the Foundation a complete free hand in deciding how to manage and apply her estate to its charitable objects after her death. This explains the mandatory, imperative language she adopted in giving her directions in Clauses 2 to 4. Nina’s choice of language strongly militates against Mr Hinks’s argument that the directions in Clauses 2 and 3 are precatory or mere guidance. (Indeed, that very argument does not sit well with his submission that the same words “must” and “shall” used in Clauses 4(1) and (2) impose binding obligations, albeit personal obligations.) The directions in Clauses 2 and 3 are intended by Nina to be binding obligations. 67.Although the Foundation or the Directors, as the case may be under Clauses 2 and 3, were instructed to perform the directions under the supervision of the Managing Organization, plainly Nina would not have intended to make those directions conditional on the creation of the Managing Organization, an event which, as she must have been aware, might not happen in reality. Rather, she must have intended and expected the Foundation and its Directors to faithfully follow and abide by those directions, which are firmly binding, with or without the Managing Organization. 68.Dealing with Clause 2 more specifically, Mr Hinks, as I understand his submissions, took five points in arguing that the provision is precatory. 69.First, it is not in dispute that during Nina’s life time, the Foundation had no projects as such. It only channeled donations as instructed by Nina. Mr Hinks submitted that by adopting a literal construction, the word “projects” refers to the good causes or recipients who had received donations from the Foundation as instructed by Nina. It is inconceivable that Nina intended her whole estate of some HK$82 billion to be applied for the exclusive benefit of those good causes or recipients or the Chinese Prize. Nina could not have intended the Foundation to apply her estate to such limited purposes. She would have wanted the very general charitable objects to apply and for the Foundation to be able to use the enormously valuable bequest for new projects or otherwise in pursuance of its general objects. It is therefore not an obligation to apply the whole estate to the two limited purposes. It is mere guidance. 70.Indeed, it is simply inconceivable that Nina intended after her death, the Foundation should only make donations to the same good causes and recipients before. The size of her estate is so large that Nina could not have intended to restrict the Foundation’s charitable activity including donations in this way. So the literal meaning for “projects” advocated by Mr Hinks cannot possibly reflect Nina’s true intention. Further, Nina charged the Foundation to continue and develop the “projects”. And under the last portion of Clause 3, the Foundation should plough back some of the distributable profits of the Chinachem Group in developing its charitable business till eternity. Nina’s directions carry a forward looking connotation without limiting to past donations. I agree with Mr Taube that the term “projects” should be construed as a reference to activity within the Foundation’s charitable objects. 71.Second, Mr Hinks submitted that even if Nina said in Clause 2 that the Foundation was to hold her estate for its general purposes, it is not sufficient to impose a trust. He relied on the judgment of Neuberger J (as he then was) in In re ARMS Ltd,[38] where he rejected the submission of the Attorney-General that where a testator makes a gift to a company established for charitable purpose, the natural inference must be that the purpose of that gift is not so much, or not merely, to benefit the company, but to have the relevant charitable purpose accomplished. He held that the obvious inference that the testator intended the bequest be charitable was not sufficient to justify any other conclusion. Nor was it sufficient that the gift was stated to be for the general purpose of the charity. 72.However, as Neuberger J had pointed out, it is ultimately a matter of construction of the will in question.[39] Here, Nina’s direction in Clause 2 is not confined to the general charitable purposes of the Foundation. It also covers the setting up of the Chinese Prize which is, as will be seen shortly, an additional purpose falling outside its Memorandum. In re ARMS Ltd is clearly distinguishable. 73.Mr Hinks submitted that establishing the Chinese Prize obviously falls within the existing objects of the Foundation. He argued, albeit in a footnote to his written submissions, that on the true construction of the Memorandum, it would be possible to establish a price identical to the Nobel Prize by combining provision in Clause 3(2) and Clause 3(1)(a), (c), (d) and (g). I disagree for the simple reason that his argument is not borne out by the provisions themselves. 74.The provisions in Clause 3 of the Memorandum can be found at paragraph 4 above. They are not repeated here. Properly read, they are not wide enough to enable the Foundation to set up a prize identical to or resembling the Nobel Prize, which has a far much grander purpose : to honour annually a few distinguished individuals selected from all over the world for their outstanding achievements and contributions in the fields of chemistry, physics, medicine, literature and economics and promotion of peace. 75.Third, Mr Hinks submitted that the references such as “worldwide significance” and “similar to that of the Nobel Prize” are inherently uncertain and subjective. There is no evidence that Nina had the precise ambit of the Chinese Prize in mind, still less the terms of Alfred Nobel’s will. I do not think there is any uncertainty or subjectivity as contended. There is only one Nobel Prize in the world. It is unique in its worldwide significance and standing. And the honour bestowed on the laureates is widely regarded as an achievement of a lifetime. When she used the words “similar” and “with worldwide significance” in describing the Chinese Prize, Nina must have intended that the Prize should resemble the Nobel Prize in all material aspects. 76.Fourth, Mr Hinks submitted that the competitive objectives of continuing with existing projects and setting up the Chinese Prize is inherently a matter of judgment to be exercised by the Board, and is inconsistent with these provisions being more than mere words of guidance. I do not accept that the two purposes are necessarily competing. In any event, while the Board will have to exercise their best judgment as to how to give effect to the two purposes, it does not detract from the mandatory directions given to the Foundation by Nina in the clear and imperative language used. 77.Finally, in his oral submissions, Mr Hinks alluded to the notion of flexible discretionary obligations in Clause 2 on the Foundation even if it took the estate absolutely. He likened the directions in Clause 2 to a letter of wishes addressed to a trustee by a settler. However, it is trite that a letter of wishes is not binding on the trustee. This argument is just another way of saying that the directions are guidance, which must be rejected. 78.Moving to Clause 3, Mr Hinks argued that it is vague and far too uncertain to enforce. To recap, Clause 3 directed the Board of Directors of the Foundation to practically manage the Foundation’s businesses and capital, safeguard and expand the Chinachem Group as well as the businesses “we” set up, to ensure the continuous growth of the business empire of the Foundation and with part of its profits, to continuously develop the charitable business till eternity. 79.Mr Hinks asked two questions : “what are the businesses which ‘we’ have set up in contradistinction to the Chinachem Group?” and : “what part of the profits should be used for charitable business?” I do not think there is any uncertainty regarding the meaning of “we” or “our” business. “We” must mean Nina and Teddy in the entire context of the Will. “Our” business must mean the business Nina and Teddy had set up which, on the evidence before me, must refer to the Chinachem Group. (I would add that the reference to “the business empire of the Foundation” must mean the Chinachem Group.) As to how much of the profits should be used for charitable purpose, it is evidently a question to be decided by the Directors in exercise of their best judgment. 80.Mr Hinks went on to submit that how to manage the business of the Chinachem Group prudently; to expand its businesses whilst using excess profits for charitable purposes; and to decide how much is to plough back to the Foundations are all matters inherently for the judgment of the Board. So Nina was just giving valuable guidance to the Directors, allowing them flexibility in the exercise of their duties and judgment for attaining the objectives laid down by her. It is therefore precatory. 81.Mr Hinks’s submission ignores one very crucial aspect of the effects intended by Nina when she made Clause 3. As said, she had to address how the Foundation is to conduct itself as the sole and ultimate beneficial owner of the Chinachem Group after her death. In Clause 3, Nina directed the Foundation, as the sole and ultimate shareholder of the Chinachem Group, to safeguard and expand the businesses; to ensure its continuous growth; and to decide how much of the profits are to be ploughed back to the Foundation for its charity business. The Foundation can meaningfully perform these functions only if it remains as the sole and ultimate beneficial shareholder of the Chinachem Group. So as rightly submitted by Mr Taube, in instructing the Directors in Clause 3 as she did, Nina was directing them to hold her shares in the Chinachem Group as investments and to maintain its status as the ultimate shareholder so that it can exercise its rights in that capacity to give effect to her directions. Her directions are not mere guidance. They define the scope of the Foundation’s duties as a trustee, although in discharging the duties, the Foundation and its Directors would have to exercise a considerable degree of judgment. 82.To complete the discussion on the question if Clauses 2 and 3 only provide guidance, I need to deal with two further points raised by Mr Hinks very shortly. He first referred to the fact that the Foundation has recently established an education fund for the employees of the Chinachem Group. He said the Foundation has followed and will follow Nina’s guidance as expressed in the Will. Mr Hinks next submitted that the Foundation is willing to be subject to the supervision of the Secretary and the court. In fact, he has prepared a draft order which embodies various undertakings by the Foundation to that effect should the court rule that Nina’s bequest is an absolute gift. What the Foundation has done or is prepared to do has no bearing on the construction of the Will whatsoever. 83.For the above reasons, I hold that by using the clear and imperative language in giving her directions in Clauses 2 to 4, Nina did intend to impose a trust. The first element of a charitable trust is satisfied. G2.2. Charitable purpose 84.I next consider the question of charitable purpose. 85.As seen, Clause 2 specifies two purposes. 86.First, the Foundation must continue all the projects which it has undertaken since its establishment to enable their developments continuously. I have already construed the term “projects” to mean activity within the Foundation’s charitable objects. Continuing the “projects” undertaken by the Foundation since its inception is surely a charitable purpose. 87.Second, the Foundation must continue to achieve the purpose of setting up a fund and a Chinese prize of worldwide significance similar to that of the Nobel Prize. It is common ground that the funds governing the Nobel Prize are charitable trusts. The Nobel Prize consists of prizes awarded annually in different areas. The Nobel Prizes for chemistry, physics, medicine, literature and economics seek to promote the advancement of knowledge and education. They are all charitable. The Nobel Prize of Peace, as the name suggests, promotes peace and elimination of war. It can be regarded as charitable as well : see Re Harwood;[40] and Re Blyth.[41] It must follow that Nina’s direction of setting up the Chinese Prize is a charitable purpose. Nina must have intended the Chinese Prize to have the same charitable characteristics similar to Nobel Prize. Just for completeness, if there is suggestion that the direction to set up the Chinese Prize is ambiguous, the benignant construction in favour of a charitable intention[42] will apply : see IRC v McMullen;[43] and Guild v IRC.[44] The result would just be the same. 88.The two purposes specified in Clause 2 are charitable. The second element of a charitable trust is also met. G2.3. Subject matter of trust 89.I finally come to the subject matter of the trust. 90.On a proper reading of the Will as a whole, there can be no doubt that Nina intended to impose obligations on the Foundation to apply the entire estate to the two purposes in Clause 2, subject to Clause 4, which I will deal with in a moment. I do not think there is any uncertainty of subject matter of trust. 91.In arguing that the subject matter of trust is uncertain, Mr Hinks first relied on his construction of the word “projects”, which means only past recipients of donations. As Nina could not have intended to apply her vast estate to such limited purpose, the subject matter of trust is unclear. This argument must be rejected now that I have accepted the construction that Mr Taube sought to place on “projects”. 92.Mr Hinks then submitted that the Will does not require the bequest itself to be used for those projects or for the Foundation’s charitable businesses. It merely requires the projects/business to continue, potentially out of the Foundation’s own funds and other sources of income in relation to which Nina has no power to declare a trust. This submission is in stark contradiction of the effect of the Will read as a whole. Further, there is simply no evidence to support the assertion that the Foundation had its own funds and other resources of income other than funds received from the Chinachem Group before Nina’s death or her bequest thereafter. 93.Mr Hinks next argued that uncertainty arose because of Clause 4. One is not sure how much is needed to give effect to the directions in Clause 4, which would in turn leave the subject matter of trust under Clause 2 in doubt. This apparent difficulty is overcome when, as will be seen below, the true effect of Clause 4 is understood. Any uncertainty arising from Clause 2 will not affect the subject matter of the charitable trust imposed by Nina. 94.In any event, even assuming that it is uncertain precisely how much will be required to satisfy the claims in Clause 4, it does not really matter. For as rightly submitted by Mr Taube, if the intended gifts in Clause 4 fail because of uncertainty, then it must be inferred that Nina intended the Foundation to hold her estate solely in trust for the charitable purposes stated in Clause 2 of the Will. 95.The third element of a charitable trust is satisfied. G2.4. True effect of Clause 4 96.What remains is the true effect of Clause 4. 97.To recap, Clause 4 directs the Foundations to continue to provide for the senior members of the Wang family (Clause 4(1)); to support Teddy’s siblings, in particular Wang Teh Hwa and their children (Clause 4(2)); and to provide for the employees of the Chinachem Group (Clause 4(3)) in the manner as prescribed. 98.Mr Hinks submitted that Clauses 4(1) and (2) are personal obligations binding on the Foundation in equity. 99.In Re Williames, Brett MR explained the concept of personal obligations thus :[45]
Put bluntly, it is the price to be paid for the benefit of the bequest : Messenger v Andrews.[46] 100.The requirements for personal obligations in equity are briefly :[47]
101.As rightly submitted by Mr Taube, Mr Hinks’s personal obligation theory suffers from two difficulties. Couched in their present form, Clauses 4(1) and (2) do not give rise to any enforceable obligation because of lack of certainty. Further, if the Foundation were dissolved before Nina’s death, all the persons named therein would receive nothing from the Foundation. This is plainly not Nina’s intention. 102.Mr Hinks argued that Clause 4(3) is mere guidance Nina gave the Foundation for its management. This is rejected for the reason stated below. 103.Mr Taube submitted that the only way in which the court could give effect to Clause 4 would be to treat them as having conferred powers on the Foundation, exercisable at its discretion, to apply income or capital in the estate in favour of the private individuals mentioned during the period as permitted under section 8(3) of the Perpetuities and Accumulations Ordinance.[49] But subject to that, the Foundation would hold Nina’s estate in trust for the charitable purposes specified in Clause 2 of the Will. I agree with Mr Taube’s analysis. I find his powers theory wholly consistent with the charitable trust applying to her estate as intended by Nina. G3. Conclusion 104.Upon a proper construction of the Will, I find that all the three requirements of a charitable trust are satisfied. Admittedly, Nina did not use the word “trust”. But nothing turns on that. For one thing, the absence of such a technical term in the Will, a home-made will drafted by Nina with the assistance of Mrs Tong, is understandable.[50] More importantly, no particular form of expression is necessary for the creation of a trust if, on the whole, it can be gathered that a trust was intended.[51] 105.Mr Hinks submitted that Nina could not have intended to impose a trust on the Foundation because the concept of trust was alien to her. Nina’s ignorance of the trust concept is not borne out by the evidence. More fundamentally, it is trite that the settler need not even understand that his words or conduct have created a trust if they have this effect on their proper legal construction.[52] 106.Finally, Mr Hinks submitted that it is more convenient to hold that Nina’s bequest is an absolute gift to the Foundation. The court of construction is not concerned with convenience. Its only task is to ascertain Nina’s intention by construing the Will according to established principles. 107.I hold that by making the Will, Nina intended to vest her estate in the Foundation as trustee to give effect to the directions in Clauses 2 and 3, in particular, the two specific charitable purposes in Clause 2, with the powers to apply the estate in favour of the individuals mentioned in Clause 4 in the manner as stipulated. H. DISPOSITIONS 108.I answer Question 1(a) in the negative and Question 1(b) in the affirmative. Questions 2 to 4 do not arise. 109.The Secretary for Justice is directed to lodge with the court a draft order for approval within the next 21 days. 110.The parties are further directed to lodge with court and exchange their submissions on costs within the next 21 days. I will then dispose of costs on paper.
Mr Simon Taube QC leading Mr Ambrose Ho SC and Mr Michael Yin, instructed by the Department of Justice, for the plaintiff Mr Anson Wong, instructed by Allen & Overy, for the 1st defendant Mr Frank Hinks QC leading Mr Patrick Fung SC, Mr Johnny Ma and Mr Jeremy Chan, instructed by Wilkinson & Grist, for the 2nd defendant Annex I, Kung Yu Sum, solemnly make my will as follows : 1. “Chinachem Charitable Foundation Limited” was set up by me and my husband, Wang Teh Huei, jointly. After I pass away, all of my properties shall be bequeathed to “Chinachem Charitable Foundation Limited”. 2. After I pass away, I wish to entrust “Chinachem Charitable Foundation Limited” to the supervision of a managing organization jointly formed by the Secretary General of the United Nations; the Premier of the PRC Government as well as the Chief Executive of the Hong Kong Special Administrative Region. Under its supervision, not only must “Chinachem Charitable Foundation Limited” continue all the projects which it has undertaken since its establishment to enable their developments continuously, but it must also continue to achieve the purpose of setting up a fund and a Chinese prize of worldwide significance similar to that of the Nobel Prize. 3. The Board of Directors of “Chinachem Charitable Foundation Limited” shall practically manage the company’s businesses and capital under the supervision of the abovementioned supervising organization, to safeguard and expand the “Chinachem Group” as well as all the business which we have set up, to ensure the continuous growth of the business empire of the “Chinachem Charitable Foundation Limited” and with part of its profits, to continuously develop the charitable business till eternity. 4. “Chinachem Charitable Foundation Limited” must continue to achieve :
[1] The Group employs some 3,300 employees and has an operating profit of HK$2.48 billion for the year ended 30 June 2012. [2] This is the estimated value of the Chinachem Group which Nina solely and ultimately owned. [3] Cap 112. [4] See paras 10-11 of his second affirmation dated 6 November 2012. [5] See exhibit KSY-13 to Dr Kung’s 2nd affirmation. [6] Her affirmation dated 3 August 2012. [7] The parties confirmed that the various amendments to the draft have no bearing on the question of construction of the Will now before the court. [8] A certified English translation is annexed to this judgment. Although the Will is written in Chinese, the parties have based their submissions on the English translation. That being the case, I will refer to English translation for the purpose of this judgment. [9] As highlighted at para 16 of the first affidavit of Ms Siu Wing Sze, Senior Government Counsel, dated 2 May 2012. [10] See HCAP8/2007, unreported, 2 February 2010, at para 932. [11] See Ms Siu’s first affidavit, at para 17. [12] See CACV62/2010, unreported, 14 February 2011. The Appeal Committee refused leave to appeal to the Court of Final Appeal on 24 October 2011 in FAMV20/2011. [13] Cap 4A. [14] [2009] 1 WLR 1834, PC, per Lord Phillips at paras 4 and 6. [15] [1943] AC 399, HL, per Viscount Simon LC at p 406. [16] [1897] 2 Ch 12, per Lindley LJ at p 18. [17] Williams on Will (9th Edn), Vol 1, para 50.1 at p 559. [18] Williams on Will, supra, para 50.16 at p 567. [19] Supra, per Smith LJ at p 22. [20] (1880) 14 Ch D 53, at p 56. [21] See Theobald on Wills (17th edn), para 14-027 at p 278. [22] (1873) LR 8 Ex 160 at p 162. [23] [1997] AC 749. [24] [1998] 1 WLR 896. [25] (1999) 2 HKCFAR 279. [26] See also Williams on Trust, supra, at para 50.1 at p 558, where the learned editors stated that the admissible background knowledge includes “absolutely anything which would have affected the way in which the language of the will would have been understood by a reasonable man”. [27] Cap 30. Section 23B replicates section 21 of the English Administration of Justice Act 1982. [28] [1908] AC 162, at p 167. [29] See generally Halsbury’s Laws of England (5th edn), Vol 8, paras 84-96. [30] [1972] 1 Ch 300, at p 303E-G. [31] [1917] AC 406. [32] [1977] 1 WLR 877. [33] [1981] 1 Ch 193. [34] [2011] EWHC 3782 (Ch). [35] (1907) 27 NZLR 659, at p 671. [36] Supra, at p 18. [37] The evidence is not clear as to whether before Teddy’s disappearance she alone or Teddy alone or she and Teddy together controlled the Chinachem Group and the Foundation. But it does not matter as it is beyond dispute that after Teddy’s disappearance Nina was in absolute control of the Chinachem Group and the Foundation. [38] Supra, at pp 882-883. [39] At p 882E-F, where he referred to the rule of construction propounded by Buckley J in In re Venon’s Will Trusts, supra. [40] [1936] 1 Ch 285, which held that a gift to a body established for the promotion of peach was charitable. [41] [1997] 2 Qd R 567, where Thomas J observed at p 579 that the trend of judicial interpretation suggested that a trust for the purpose of elimination of war should be regarded as charitable. [42] See para 36 above. [43] [1981] AC 1, per Lord Hailsham at p 14. [44] [1992] 2 AC 310, per Lord Keith at p 322. [45] (1885) 54 LT 105. [46] (1828) 4 Russ 478, per the Lord Chancellor at p 483. [47] See generally TC Thomas, Conditions in Favour of Third Parties (1952) CLJ 240; Jacobs’ Law of Trusts in Australia (7th edn) at para 234. [48] See Gill v Gill (1921) 21 SR (NSW) 400. [49] Cap 257. Section 8(3) is not cited there as it is not necessary to do so for present purpose. [50] See Williams on Wills, supra, para 50.2 at p 559. [51] Snell’s Equity (34th edn), para 22-013 at p 654; and Picarda on the Law and Practice relating of Charities (4th edn), at pp 512-515. [52] Snell’s Equity, ibid. Please refer to CACV44/2013 for the relevant appeal(s) to the Court of Appeal. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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