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Westlaw HK Delivery Summary

Request made by : BERNARD MAN_OLD

Request made on: Friday, 26 June, 2015 at 14:38 HKT

Content Type: Cases

Title : Estate of Mui Yim Fong

Delivery selection: Current Document

Number of documents delivered: 1

Sweet & Maxwell is part of Thomson Reuters. 2015 Thomson Reuters Hong KongLtd.

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Estate of Mui Yim Fong

2 July 2010

Court of Appeal

CA

Civil Appeal No 200 of 2008

CACV 200/2008

Citations: [2010] 4 HKLRD 69 English Judgment

[2010] HKEC 1059 English Judgment

Presiding Judges: Tang V-P, Yeung and Yuen JJA

Phrases: Trusts - discretionary trusts - validity - discretionary trustwould not be void if trustees not obliged to inform person hewas potential beneficiary - whether trust void becausebeneficiaries had no enforceable rights against trustee

Wills, probate and succession - rule against delegation oftestamentary power in Hong Kong - rule did not represent lawin Hong Kong - in any event, giving property by will to trusteesof pre-existing discretionary trust did not breach rule

Facts: *69 X, the deceased, was a well-known local singer and actress.She set up an offshore discretionary trust (the Trust) under which,inter alia: her mother, M, was the only person named under"Beneficiaries" but T, the trustee company, had the power to add"any person or class of persons" except those in the "excludedclass"; C, a charitable organisation, was named as the finalrepository; and cl.33 provided that T was not obliged to inform anybeneficiary or the final repository that it existed or that they werenamed thereunder; and that any such person was not entitled todemand or compel T to disclose any information or documentrelating to the Trust. X also suggested in a non-binding trusteememorandum (the Memorandum) that T "give due consideration to

[her] recommendations and suggestions", including paying $70,000per month to M absolutely until her death. On the same day, X madea will appointing T as executor and trustee and bequeathing herresiduary estate to the Trust (the Will). X passed away soon afterthis. Less than a month later, T informed M that she was abeneficiary under the Trust. M brought an action, claiming that the*70 Will was invalid; the Trust was void; and X had died intestate.This was dismissed at first instance, and M appealed arguing, interalia, that the Trust was void because the beneficiaries had noenforceable rights against T and cl.33 was an "excessive orunnecessary power".

Held, dismissing the appeal, that:

(1) The Trust was not null and void. First, T did oweenforceable obligations to the discretionary objects underthe Trust, including M and C, who had a right to require T

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to account for its trusteeship. It was unreal to say thatnobody could enforce the Trust. T had fiduciary dutiesthereunder, and it was inconceivable that it would ignoreX's clear expression of her wishes in the Memorandum,for example, in favour of M(Armitage v Nurse [1998] Ch241,Schmidt v Rosewood Trust Ltd [2003] 2 AC 709,

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR405 applied). (See paras.63-69.)

(2) Second, a discretionary trust would not be void if thetrustees were not obliged to inform any person that hewas a potential beneficiary. Indeed, such a beneficiarymight never know the identity of the trustees or theexistence of a trust. How much disclosure a discretionarytrustee should make was often a matter of judgment. Inthe absence of wrongdoing by the trustee, it went towhether to exercise the discretion rather than whether thediscretion existed at all. Here, T's non-disclosure of theidentities of other beneficiaries and of M's wishes makingprovision for her, even though subsequently this decisionnot to disclose was overruled by the Court, could notrender the Trust null and void (Whishaw v Stephens[1970] AC 508, McPhail v Doulton[1971] AC 424, ReBaden's Deed Trusts (No 2)[1973] Ch 9,Re Manisty'sSettlement [1974] Ch 17,Murphy v Murphy [1999] 1 WLR282,Schmidt v Rosewood Trust Ltd [2003] 2 AC 709applied). (See paras.70-83.)

(3) It was not a breach of the rule against delegation oftestamentary power to give, as occurred here, propertyby will to the trustees of a valid pre-existing trust. When T

performed their fiduciary duties pursuant to the Trust,they would not be exercising X's testamentary powers(Tatham v Huxtable (1950) 81 CLR 639 not followed;Gregory v Hudson (1997) 41 NSWLR 573 followed). (Seeparas.88-90.)

Appeal

This was an appeal against the judgment of Andrew Cheung J on 16June 2008 ruling as valid both the will and discretionary trust of theplaintiff's late daughter (see[2008] HKEC 999). The facts are set outin the judgment.

Counsel in the Case: Ms Tam Mei Kam, plaintiff, in person.Mr Albert Yau and MrKevin Poon, instructed by Wong, Shum & Co, for the thirddefendant.Mr Richard Leung, instructed by PC Woo & Co, forthe fourth defendant.Mayer Brown JSM, for the first andsecond defendants, attendance excused.

Cases cited in thejudgment:

Gregory v Hudson (1997) 41 NSWLR 573


Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405

Randall v Lubrano (unrep., Supreme Court of New South Wales, 31October 1975)
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Tatham v Huxtable (1950) 81 CLR 639

Armitage v Nurse [1998] Ch 241, [1997] 3 WLR 1046, [1997] 2 AllER 705

Baden's Deed Trusts (No 2), Re [1972] Ch 607, [1971] 3 WLR 475,[1971] 3 All ER 985

Baden's Deed Trusts (No 2), Re [1973] Ch 9, [1972] 3 WLR 250,[1972] 2 All ER 1304

Baden's Deed Trusts, Re [1967] 1 WLR 1457, [1967] 3 All ER 159

Baden's Deed Trusts, Re [1969] 2 Ch 388, [1969] 3 WLR 12, [1969]1 All ER 1016

Beatty, Re [1990] 1 WLR 1503

Beddoe, Re [1893] 1 Ch 547

Edward's Will Trusts, Re [1947] 2 All ER 521

Ladd v Marshall [1954] 1 WLR 1489, [1954] 3 All ER 745

Manisty's Settlement, Re [1974] Ch 17, [1973] 3 WLR 341, [1973] 2All ER 1203

McPhail v Doulton, sub nom Re Baden's Deed Trusts (No 1) [1971]AC 424, [1970] 2 WLR 1110, [1970] 2 All ER 228

Murphy v Murphy [1999] 1 WLR 282, [1998] 3 All ER 1

Schmidt v Rosewood Trust Ltd [2003] UKPC 26, [2003] 2 AC 709,[2003] 2 WLR 1442, [2003] 3 All ER 76

Whishaw v Stephens [1970] AC 508, [1968] 3 WLR 1127, [1968] 3All ER 785

Other materialsmentioned in thejudgment:

Encyclopaedia of Forms and Precedents (5th ed.) Vol.40(1), p.3628Snell's Equity (31st ed., 2005) para.20-51

Judgment :

Tang V-P:

*72 Introduction:

1. Ms Mui Yim Fong (the Deceased) was a well-known singer and actress. She passed away on 30

December 2003 when she was 40. She was survived by her mother Madam Tam Mei Kam, the

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plaintiff in these proceedings (the Plaintiff), as well as two elder brothers. An elder sister hadpredeceased her.

2. The Deceased had suffered from cervical cancer since 2001. By the time she consulted Dr PeterTeo Man Lung of the Hong Kong Sanatorium and Hospital in July 2003, the cancer had reached anadvanced and incurable stage. Dr Teo advised her to make a will.

3. In September 2003, the Deceased made a public announcement that she had cervical cancer andwas receiving treatment.

4. On 3 December 2003, she executed a deed establishing a discretionary trust (the Karen Trust).The trustee of the discretionary trust was HSBC International Trustee Ltd (HSBC). It is an offshoretrust established under the laws of the Cayman Islands. The final repository of the Karen Trust is theNew Horizon Buddhist Association Ltd (New Horizon), the third defendant in the proceedings. TheKaren Trust was established with a nominal sum of $1,000. A pilot settlement with properties to beadded later by a settlor is a common practice. Encyclopaedia of Forms and Precedents (5th ed.)Vol.40(1), p.3628.

5. On the same day, the Deceased made a will (the Will). The beneficiary of her residuary estate isthe Karen Trust. HSBC was appointed as her executor and trustee. The Will was witnessed by DrPeter Teo Man Lung as well as Ms Doris Lau, a director of HSBC.

6. This action was commenced on 4 May 2004. By this action, the Plaintiff claimed:(a) For a pronouncement against the validity of the Will;

(b) A declaration that the Karen Trust was void;

(c) A declaration that the Deceased had died intestate and a grant to the Plaintiff of letters ofadministration of the estate of the Deceased.

7. The first and second defendants were HSBC as the executor and trustee named in the Will and thetrustee of the Karen Trust respectively. Following directions given by Lam J in a

Beddoe

application, HSBC had not taken any active step in the proceedings, leaving it to New Horizon andLau Kai Eddie (Eddie Lau) who had *73 been joined as the third and fourth defendants to defend thePlaintiff's claim.

8. After an 18-day trial, where the Plaintiff was represented by leading and junior counsel, AndrewCheung J pronounced for the force and validity of the Will and ordered that probate be granted toHSBC, the executor named in the Will. He also made a declaration that the Karen Trust is and was atall material times a valid trust. However, he made no adverse costs order against the Plaintiff becausehe took the view that the action:

[291] falls within the second exception to the general rule that costs generally follow theevent where opposition to a will is unsuccessful

9. He ordered that the defendants' costs be borne by and paid out of the estate of the Deceased, tobe taxed if not agreed, on a common fund basis.

10. This is the Plaintiff's appeal. She appeared in person, but had submitted various writtensubmissions including, as her main submissions, a 32-page written submission in English dated 11May 2010. The third respondent is represented by Mr Albert Yau and Mr Kevin Poon, who hadrepresented the third defendant below. Likewise Mr Richard Leung appeared for the fourthrespondent. They have also submitted written submissions. The trial was conducted in English. Thejudgment (104 pages) is in English. The Plaintiff's main submissions are in English. Hence, thisjudgment is also in English.

The Karen Trust:

11. The nature of a discretionary trust can be gathered from an oft-cited passage in Snell's Equity(31st ed., 2005) para.20-51:

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A Discretionary Trust is one which gives a beneficiary no right to any part of the income of thetrust property, but vests in the trustees a discretionary power to pay him, or apply for his benefit,such part of the income as they think fit. The trustees must exercise their discretion as and whenthe income becomes available, but if they fail to distribute in due time, the power is notextinguished so that they can distribute later. They have no power to bind themselves for thefuture. The beneficiary thus has no more than a hope that the discretion would be exercised in

his favour, and so, except as to any money which has already been paid to him, there is nothingwhich his creditors or assigns can claim, even if it is a case where a person has settled propertyon himself.

*74 12. Discretionary trusts are often employed for estate planning purposes. Such purposes includethe reduction of estate duties and the desire that the objects of the settlor's bounty should beprotected from their profligacy. The estate duties avoided may include estate duties otherwisepayable on the death of the settlor, as well as those payable on the death of, say, a beneficiary of theestate.

13. Very often, wide discretions are conferred on the trustees under a discretionary trust, such thatexpressions such as "uncontrollable or absolute discretions" are used. But as Lord Reid said in

Whishaw v Stephens [1970] AC 508

, 518:

The trustees are to act in their fiduciary capacity. They are given an absolute discretion. So ifthey decide in good faith at appropriate times to give none of the income to any of thebeneficiaries the court cannot pronounce their reasons to be bad. And similarly if they decide togive some or all of the income to a particular beneficiary the court would not review their decision.That was decided by this house in Gisborne v Gisborne [1877] 2 AC 300. But their "absolutediscretion" must, I think, be subject to two conditions. It may be true that when a mere power isgiven to an individual he is under no duty to exercise it or even to consider whether he shouldexercise it. But when a power is given to a trustee as such, it appears to me that the situationmust be different. A settlor or testator who entrusts a power to his trustees must be relying onthem in their fiduciary capacity so that they cannot simply push aside the power and refuse toconsider 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 thepower is for the court.

14. A settlor will wish the trustees to know his wishes. For that purpose, it is common for adiscretionary trust to be accompanied by a memorandum of wishes. On the same date as the KarenTrust, HSBC signed a trustee memorandum in which the settlor's wishes were recorded:

3. The Settlor's Suggestions

3.1 During the lifetime of the Settlor, the Trustee would give due consideration to therecommendations and suggestions put forward by her in all matters concerning theTrust Fund of the Trust including the investment, management and distribution thereof.

3.2 Upon the death of the Settlor, the Trustee would consider holding and distributing the

Trust Fund in the following manner:*75 (1)The Trustee would hold and distribute all shares of and in the following companies

comprising the Trust Fund to Lau Kai Eddie (Eddie) absolutely if he shall survive theSettlor by thirty days:

(a) Leisure Gain Ltd, a company incorporated in Hong Kong on 28 October 1988; and

(b) Well Future Investment Ltd, a company incorporated in Hong Kong on 4 October 1988

PROVIDED THAT if Eddie shall predecease the Settlor or shall not survive her bythirty days, then the Trustee would consider holding the share of the Trust Fund whichwould have been held for Eddie in the manner as described in para.3.2(3) below.

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The Trustee would set aside a sum of HK$1,700,000 upon trust for the Settlor's niecesand nephews, namely Mui Pak Ning (), Mui Pak Wai (), Poon Chun Ho () and Poon Man Ho () (collectively, the "Nieces and Nephews"), and tomake an annual payment of HK$100,000 each to such of the Nieces and Nephewswhile he or she is pursuing full time tertiary education, whether in Hong Kong orelsewhere, and before he or she reaches the age of 25,

PROVIDED THAT:

(a) the distribution payable to each of the Nieces and Nephews under this para.3.2(2)shall not be more than HK$400,000 in aggregate;

(b) no payment pursuant to this para.3.2(2) shall be made to the parent or guardian of theNieces and Nephews notwithstanding that any of the Nieces and Nephews shall beunder 18 at the time of payment and the Trustee would in such event pay, transfer ordeliver the payment in direct disbursement of the educational expenses of the Niecesand Nephews; and

*76 (c)upon the last one among the Nieces and Nephews to attain the age of 25, if any partof the Trust Fund set aside is not fully disposed of under this paragraph, then myTrustee would consider distributing the remaining balance of such part of the TrustFund in accordance with para.3.2(3) below.

(3) Subject as aforesaid, to hold the balance of the Trust Fund for the Settlor's mother,Tam Mei Kam ( ), while she is alive and make a monthly distribution ofHK$70,000 for her use and benefit absolutely and upon the death of the Settlor'smother, or if she shall not survive the Settlor, then upon the death of the Settlor, todistribute the entire balance of the Trust Fund then remaining to New HorizonBuddhist Association Ltd, a company incorporated in Hong Kong, absolutely or if thesame has ceased to exist or amalgamated with another institution, then to such other

charitable organization as the Trustee shall in its absolute discretion determine.

15. This is what the learned Judge said about the relationship between the Deceased and NewHorizon.

[85] It is convenient to record here that the Deceased's close association with the 3rddefendant and her spiritual master was testified to by a director of the 3rd defendant,whose evidence was not challenged at all. I have no reason not to accept theevidence given. There were more than sufficient reasons for naming the 3rd defendantas the final repository. It should be noted that under the trust deed, the position of thefinal repository need not be taken into account when the trustee considers how toexercise its wide discretions. According to Mrs Lau's and Mrs Ho's evidence, both thedeceased and Mrs Ho were fully aware of that.

16. Under the Karen Trust, the Plaintiff's name was the only name appearing in the third scheduleunder the words "'Beneficiaries' *77 means and includes". However, "beneficiaries" was defined incl.1(b) to mean her and:

(ii) any person or class of persons as may be appointed from time to time by the Trusteein accordance with cl.5(c).

Clause 5(c) is very widely drawn.17. The Deceased was defined as a member of "excluded class". So too were effectively HSBC and

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all those who are associated with them.

The Will:

18. On the same day (3 December 2003), the Deceased made a will appointing HSBC as executorand trustee, inter alia, to hold her residuary estate:

upon trust for HSBC International Trustee Ltd acting in its sole capacity as the trustee for thetime being of the Karen Trust.

The facts:

19. Before dealing with the Plaintiff's specific submissions, we turn to the facts as found by thelearned Judge. We can state them briefly since they have been carefully set out in the judgment ofCheung J. With respect, we are in full agreement with the learned Judge's findings.

20. We deal first with the circumstances leading to the execution of the Karen Trust and the Will. Asnoted, the Deceased first consulted Dr Teo in July 2003. Between 23 July 2003 and 17 October 2003,she had been admitted to hospital more than 10 times, usually for blood and platelet transfusions.Apart from those admissions, Dr Teo had visited her at her home to give her treatment on a numberof occasions. After a series of eight concerts at the Hong Kong Coliseum in November 2003, she was

admitted to HK Sanatorium and Hospital from 21-23 November 2003 because of fever, anaemia andthrombocytopenia (reduction in blood platelets). After discharge, she flew to Japan to shoot atelevision commercial. She felt ill during her short stay in Japan and immediately upon her return toHong Kong on 27 November 2003, she was admitted to the Hong Kong Sanatorium and Hospital,where she remained until she died on 30 December 2003 due to liver complications.

21. The Plaintiff, however, was not aware of her admission into the hospital until 28 December 2003when her consent was necessary before further treatment could be given to the Deceased who wasby then unable to give consent. Nor had the Plaintiff been told (para.13):

*78 of the making of the will and the setting up of the Karen Trust.

22. Several witnesses gave evidence in support of the will and the Karen Trust, they were: Mrs SheilaHo (Mrs Ho), Mrs Doris Lau and Dr Teo. All of whom the learned Judge found to be "honest, credible

and reliable witnesses" (para.27). He explained:[28] Returning to my acceptance of the factual evidence of the three crucial witnesses, my

point is that I have borne in mind not only their demeanour in Court, but have alsocarefully considered the contents of their oral evidence and the documents made bythem (including witness statements and so forth), other evidence including otherwitnesses' evidence as well as the documentary evidence that has been adduced, thesurrounding circumstances of the case, as well as the inherent probabilities andimprobabilities of their evidence. As I say, I have no doubt that they were truthful andreliable witnesses at trial.

23. Mrs Ho and her late husband Mr Ho Koon Cheung - a co-founder of Golden Harvest, a movie

production and distribution company, were the godparents of the Deceased. The Deceased had aname in Chinese "", by reason of such relationship. The learned Judge said:

[10] There is little doubt that the name of the trust, "Karen", was based on this particularname of the Deceased - "" (which sounds like Karen in Cantonese).

24. Regarding their relationship, the learned Judge said:

[58] ever since the Deceased became her goddaughter back in the 1980s, she hadtreated and taken care of the Deceased as if she were one of her daughters. They hada very close relationship and for all practical purposes, they regarded (and addressed)each other as mother and daughter

25. Mrs Lau was a private trust director of HSBC, a non-bank member of the HSBC group. The

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learned Judge said:

[40] She was a highly experienced private trust professional, having worked in HSBC for21 years. Her professionalism*79 and experience in the field was plain to see whenshe was in the box.

26. As for Dr Teo:

[11] Dr Peter Teo is a well-known and experienced oncologist. He is and was at the timethe director of the Comprehensive Oncologist Centre as well as the director of theDepartment of Radiotherapy at Hong Kong Sanatorium and Hospital Dr Teo,together with a team of expert colleagues at the hospital, were in charge of treating theDeceased during her final admission until her eventual demise on 30 December 2003.

27. Although the Plaintiff had alleged undue influence against Mrs Ho, on the first day of trial, MrChan Chi Hung SC, who appeared for the Plaintiff together with Mr Jerome Liu, abandoned theallegation.

28. In the section headed "Detailed account of the facts", the learned Judge recounted the evidenceof Mrs Ho, who said that the Deceased consulted her in early 2003 about making provisions for hermother after her death. The Deceased told her that she wanted to provide for her mother's livingexpenses for the rest of her life and she expressed the concern that as her mother was not good atmanaging her finances, she might be cheated of her money if she was to be given a lump sum. MrsHo suggested the Deceased should consider employing a professional to advise her and:

[38] she introduced to her Mrs Doris Lau of HSBC, with whom Mrs Ho herself had setup a discretionary trust.

29. She was then told by the Deceased in July or August 2003 that she wanted to retain Mrs Lau andHSBC for the intended services.

30. Mrs Lau told the Court that on 19 October 2003, she received a call from the Deceased whoasked her some general questions regarding estate and succession planning. The learned Judge'sdetailed account of the facts dealing with "Idea of setting up a trust and making a will" up to "3December 2003 morning: executing will and trust documents" covered paras.37-107 of the judgment.We will not repeat them.

31. The evidence of Mrs Lau, as expected, was supported by file notes which she kept of herconversations and meetings with the Deceased. She said, for example, that on 19 October 2003, shereceived a telephone call from the Deceased who had asked her some general questions regardingestate and succession planning. After giving her some general advice over the phone, Mrs Lau *80advised the Deceased to ask her accountant (Rachael Lo) to liaise with Mrs Lau and to prepare forher details of the Deceased's assets so that she could carry out an initial appraisal of the same beforearranging a meeting with the Deceased. The Deceased's accountant (Rachael Lo) then supplied toMrs Lau the requisite information about a week after the initial telephone conversation, on the basis ofwhich Mrs Lau prepared a chart of the Deceased's companies and assets and arranged a meetingwith the Deceased at her home on 31 October 2003, which was "well documented by another file noteprepared by Mrs Lau after the meeting" (para.43) and which corroborated the oral evidence given byMrs Lau and by Mrs Ho about that meeting. Mrs Lau explained to the Deceased the benefits ofplacing her assets into a discretionary trust, and that as the asset contributor (settlor), the Deceasedshould be excluded from being a beneficiary so as to minimise the exposure to challenge by theEstate Duty Office.

32. The learned Judge said:

[44] The Deceased said she was particularly appreciative of the fact that in appointing aprofessional trustee, she could be sure that her wishes regarding disposal of herassets would be respected and the trustee would act in good faith and in the bestinterest of the beneficiaries.

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The Deceased then told Mrs Lau how she wanted her assets to be distributed via atrust arrangement, and this was meticulously recorded in the file note prepared by MrsLau after the meeting

33. In short, first, two properties (owned by two companies) were to be given to a "very special friend"(Eddie Lau, the fourth defendant). Second, she wanted to set aside some funds to subsidise hernephews' and nieces' tertiary education:

[46] Third and most importantly, according to the file note:

[The Deceased] said that she would like to make sure that upon her death, her mothershould be given a monthly allowance until her mother's death to maintain her presentlife style: one chauffeur, two domestic helpers. She said it should be about HK$70,000per month. (She said, rather sadly, that her mother would live a much longer life thanshe would.)

[The Deceased] said very determinedly that she would not want her estate to passoutright to her mother for fear that she would be incapable of managing wealth andwould end up penniless for the rest of her life.

*81 [47]Lastly, the Deceased wanted to name the 3rd defendant the final repository of thetrust.

[48] According to Mrs Lau's oral evidence in Court, which I have no difficulty in accepting infull, the Deceased told her at the meeting that she had carefully thought through theprovisions to be made after her death. She wanted to maintain her mother at the samelevel that she was then enjoying (two maids plus one chauffeur). She told Mrs Lau thather relationship with her mother was not particularly good and her mother had poorfinancial discipline. If she were to leave her mother a lump sum of money for her livingfor the rest of her life, she feared that her mother would lose all money and become

penniless in no time. She said she had made calculations and $70,000 per month wasthe right amount.

[49] The Deceased also told Mrs Lau emphatically that apart from her mother and hernieces and nephews, she did not want any part of her estate to pass to any otherMuis.

[50] Indeed, according to Mrs Ho and Eddie Lau, the deceased had a very bad relationshipwith her eldest brother. Their evidence in this regard was not challenged incross-examination. Nor was it denied by the Plaintiff when she gave evidence.

34. Mrs Lau had also advised the Deceased to seek independent tax advice from an accountant. Itwas agreed that Mrs Lau should approach PricewaterhouseCoopers for a quotation:

[54] Mrs Lau also advised the Deceased of the advantage of making a will as a"backup" measure pending the decision to set up a trust and the setting up of the trustitself, having ascertained from the Deceased that she had not made any will at all.This would avoid the situation of partial or total intestacy because amongst otherthings, it would take time to inject assets into the trust. Mrs Lau left with the Deceaseda "will appointment questionnaire" to fill in, after going through with her the informationrequired to be supplied in the standard form.

35. The Will appointment questionnaire was duly filled out by Mrs Ho at the request of the Deceased.

Mrs Ho explained:

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According to Mrs Ho, both she and the Deceased treated the questionnaire as apreliminary document to provide information to HSBC both for the purposes of settingup the trust and for making a will as a backup measure. The *82 setting up of the trustand the making of the Will were, according to Mrs Ho, "twin sisters". It was throughoutthe intention of the Deceased, after learning of the device of discretionary trusts, to setup a trust to make provisions regarding her estate. It was never her intention to make

a will alone. Mrs Ho said in Court, most convincingly, that if it had been the intention ofthe Deceased to make a will only, she need not have approached HSBC or Mrs Lau -rather she would have approached a solicitor with ease.

36. On 27 November 2003, Mrs Lau and Mrs Ho obtained the Deceased's instructions to proceed toretain PricewaterhouseCoopers for the necessary advice on establishing the trust. During thatconversation, Mrs Lau "obtained the Deceased's definite instructions to proceed with setting up thetrust". Also that the Deceased wished to have the Will prepared and executed as soon as possible.The learned Judge said:

[66] It is not clear from the evidence whether that request of the Deceased was in anyway affected by the deterioration of the Deceased's condition while she was shooting

the television commercial in Japan. In any event, the telephone conversation tookplace on the very day the Deceased returned from Japan to Hong Kong which wasfollowed by her immediate admission to Hong Kong Sanatorium and Hospital

37. In para.67 of the judgment, the learned Judge set out the evidence on the extent of thecommunications between HSBC's Trust Department and its Probate Department which wasresponsible for drafting the will on the basis primarily of the questionnaire. In paras.68-70 of thejudgment, the learned Judge set out the details regarding the various draft wills which were preparedby the Probate Department of HSBC. None of the drafts mentioned the setting up of a trust and thefirst draft provided for 50% of the residuary estate to be left to the Plaintiff and 50% to the thirddefendant. Also:

[68] despite the Deceased's specific request to Mrs Lau to keep confidential the identityof the specific devisee, the name of Eddie Lau appeared prominently on the first pageof the draft will

38. On 28 November 2003, three further drafts were prepared "as alternatives or variations by theProbate Department so that the client could have more options to choose from". (para.68.)

*83 39. After Mrs Lau had read the drafts, she:

[72] realized that her colleagues in the Probate Department had misunderstood theDeceased's wishes as set out in s.H of the questionnaire.

40. The learned Judge went on to find:[73] Although the faxing over of the draft wills and the subsequent telephone conversation

were not evidenced by any file note, after due consideration I have no difficulty inaccepting Mrs Lau's and Mrs Ho's respective accounts of the same. In particular, Iaccept Mrs Lau's evidence that in her view, the colleagues in the Probate Departmenthad misunderstood the Deceased's instructions in the questionnaire (as understood byher) and the contents of the various draft wills did not reflect the Deceased's trueintentions. I will presently return to this theme when I deal with Mr Chan's argument onknowledge and approval.

41. In order to address the concern of the possibility of a mismatch between the dispository provisions

in the Will and the trust, Mrs Lau advised on 1 December 2003 on the phone that:

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the "matching" concern could be eliminated by naming the trust as sole beneficiaryunder the will so that all assets of the estate would pass to the trust to be distributed inaccordance with the terms of the trust

42. The learned Judge said:

[79] Mrs Ho relayed the message to the Deceased for her instructions after thetelephone conversation and after the Deceased expressed the view that this was thebest arrangement to make, Mrs Ho called Mrs Lau on the same day to pass on themessage. She instructed Mrs Lau to set up the trust first and name it as the solebeneficiary under the will. She also told Mrs Lau that the Deceased had named thetrust "The Karen Trust". Mrs Lau told Mrs Ho that a doctor would need to be presentwhen the documents were executed to certify the Deceased's mental capacity in viewof the fact that she was then hospitalised.

*84 43. Mrs Lau then gave instructions to her colleagues to prepare the trust deed (based on HSBC'sstandard form) and a trustee memorandum, and to redraft the Will. The instructions were evidenced

by an internal memo dated 1 December 2003 which Mrs Lau had sent to Gladys Lo and PhoenixLam.

44. The documents were ready on 2 December 2003. However, the documents contained an error inthat the trustee memorandum provided:

[83] monthly sum of $70,000 to the mother was to be on top of the rental income of aproperty situated at Happy Court, Village Road in Happy Valley. Mrs Ho spotted themistake and in a subsequent telephone conversation (after confirming the same withthe Deceased), she clarified with Mrs Lau that the Deceased's intention was only togive $70,000 per month to her mother

After clarification, the documents were corrected and finalised for execution on 3 December 2003.

Mental capacity:

45. As for the Deceased's mental capacity on the morning of 3 December 2003, the following is thelearned Judge's account of Dr Teo's evidence:

[86] From his interaction with the Deceased that evening (2 December 2003), Dr Teotold the Court, he formed the view that the Deceased was most alert and concernedabout her condition. She had no difficulties in understanding Dr Teo's explanations,she asked questions (including leading questions) and her responses quite clearlyshowed that she was fully following what was going on

[87] When Dr Teo saw the Deceased again at around 8:30 am on 3 December, theDeceased had already woken up and had breakfast. She could remember the colour

of her urine that morning, which was independently verified by Dr Teo. Dr Teo testifiedin Court that most probably, he and the deceased again discussed the results of theCT scan after the Deceased had time to digest what she had been told the previousevening. Although Dr Teo could not be 100% sure, he probably had discussions withthe Deceased in two or three ward rounds on the CT scan results which painted a verygloomy picture. Dr Teo testified that on 3 December, the Deceased was her *85normal self, fully alert and as attentive, responsive and smart as before. Thus, whenMrs Lau arrived at around 11 am that day at the hospital and he was asked to bepresent to witness the explanation and execution of the documents, he had nohesitation whatsoever in advising Mrs Lau that in his view, the Deceased had fullmental capacity and was of a "sound and clear mind" to execute the documents. AndDr Teo did not consider it necessary at all to consult a neurologist or psychiatrist onthe matter.

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46. That was also the impression of Mrs Lau and Mrs Ho:

[89] Mrs Lau, who quite plainly possessed an excellent memory, gave detailed evidenceon what happened that morning. She first explained the contents of the trust deed tothe Deceased. She explained it clause by clause although not line-by-line. What isimportant for our purposes is that the Deceased, according to all those present,followed the explanation well and gave appropriate responses. She asked pertinentquestions and reacted appropriately in words, facial expressions and body languages.After the explanation, the Deceased executed the trust deed and Mrs Lau signed thesame as a witness. Then Mrs Lau explained the contents of the will to the Deceased.Following explanation, the Deceased executed the will in the presence of Dr Teo, MrsLau and Mrs Ho. Dr Teo and Mrs Lau then signed the will in each other's presence asattesting witnesses. The process took about 45 minutes and throughout Dr Teo waspresent although he had to leave the ward on two or three occasions to answer calls.Then Dr Teo left to attend to some other business and only the three ladies remainedin the ward. Mrs Lau continued to explain the trustee memorandum to the Deceased.Again from the Deceased's responses as observed by Mrs Lau (and corroborated byMrs Ho), the Deceased fully followed and agreed to the contents of the trusteememorandum. The trustee memorandum was not required to be signed by theDeceased, who however signed a number of related trust documents.

47. In paras.90-105, the learned Judge explained in some detail how the questions asked by theDeceased, in relation to different provisions in the Karen Trust, showed that she was fully aware ofthe contents of the trust deed that she was about to execute. For example:

*86 (a)[90] She asked about whether she could change her wishes after setting up the trustand her confirmation of the terms in the trustee memorandum

(b) She also noticed that the name of the fourth defendant did not appear in the third schedule

of the trust deed where the beneficiaries are named:[90] She felt relieved evidently when she was told that the name of Eddie Lau wouldappear in the trustee memorandum.

(c) She could remember HSBC's fees structure. She also noted the wide indemnity which wasprovided in the trust deed and said that the trustee "". (para.93.)

(d)[97] In relation to cl.33 (absence of any responsibility on the part of the trustee to informthe beneficiaries their interest in the trust), the Deceased asked how the trustee was todistribute the assets in favour of the beneficiaries if they were not aware of the trust.

(e) She also asked what procedures had to be followed if she herself should want to changethe beneficiaries later.

48. Regarding the Will, the learned Judge said:

[101] the Deceased expressed her understanding that under the will everything would goto the trust. As regards the other standard and detailed terms in the will giving theexecutor/trustee various powers, the Deceased observed that they would not really berequired to be exercised as everything would be given to the trust.

49. On such evidence, it does not surprise that the learned Judge found for the validity of the Karen

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Trust as well as the Will.

50. The learned Judge had also dealt in some detail with the expert medical evidence on the mentalcapacity of the Deceased.

51. The evidence was that:

[86] On the late afternoon of 2 December 2003, the abdomen and pelvis CT scan results of

the Deceased were out. The results were not encouraging and as a matter of fact, thepicture was bleak

*87 52. On the late afternoon of 3 December 2003, Dr Teo ordered the testing of the Deceased'sblood ammonia level:

[108] According to Dr Teo, it was an exercise to gather more information on the liverfunction of the Deceased

53. The result of the blood ammonia test was available at around 11 am on 4 December 2003:

[109] The ammonia level was 99, three times the upper limit of the normal range (9-33).According to the notes made by Dr Teo after his morning ward round on 4 December,

the Deceased was "drowsy" and had "interrupted speech". Together with theabnormally high level of ammonia, Dr Teo made the suspected diagnosis of hepaticpre-coma, which can mean either stage 1 or stage 2 HE.

[110] In short, HE is a reversible functional brain disorder characterized by disturbances ofconsciousness and other neuro-psychiatric manifestations due to metabolicdisturbances associated with liver disease. According to Dr Woo, the pathogenicmechanism is felt to be the failure of the liver to remove toxic substances from theblood circulation so that the latter accumulate and disturb the functions of the brain.Although the exact culprit is still unknown, a substantial amount of clinical andexperimental evidence indicates that ammonia as one of those toxic substances

probably plays a major role in the pathogenesis of HE. On the other hand, based onthe expert evidence actually adduced before the Court, there is a substantialproportion of patients suffering from HE who have a normal level of ammonia in theirblood. Conversely, there is also a substantial proportion of liver patients who do notdevelop HE despite a very high level of ammonia in their blood.

[111] Leaving that aside for the time being, it is a fair summary of the evidence that from 4 to7 or 8 December 2003, the Deceased was in a drowsy state and Dr Teo accepted inoral evidence that without a proper mental state examination (and none was done atthe time), he could not be sure whether the Deceased was of sufficient mentalcapacity to make a will or to sign other legal documents during that period of time. Hefrankly accepted that the suggestion in his aide memoire that until the last 48 hours ofher life, the Deceased was throughout of a sound and logical mind was an

over-statement. He qualified it in*88 Court by excluding the period from 4 to 7 or 8December as well as the period after 24 December (when the Deceased wasintubated) from his statement. Having made that concession in the box, Dr Teoremained adamant that on 3 December when the legal documents were explained toand executed by the Deceased, she was of a sound and logical mind, with goodmental capacity to understand and execute the documents.

54. After giving full consideration to the evidence (paras.143-217), the learned Judge concluded:

[218] I have no difficulty in concluding that the 3rd defendant as propounder of the will hasovercome the burden on testamentary capacity. Likewise, the Deceased's mentalcapacity to make the trust arrangement has been duly established. (For the same

reasons, I also find that the Deceased knew and approved of the contents of the willand trust arrangement.)

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55. With respect, we are in full agreement with the learned Judge's conclusions.

56. The Deceased had also executed an enduring power of attorney on 20 December 2003. That wasexecuted in the presence of Ms Jacklyn Ng, a solicitor from JSM, who explained the relevantdocuments to the Deceased and attended to the execution. The learned Judge said:

[114] the Deceased appeared to her to be fully aware of what she was doing. Shefollowed her explanation and asked questions. She understood the effect of signing an

enduring power of attorney and knew what she was doing. I fully accept Ms Ng'sevidence.

57. Mrs Doris Lau was present on that occasion because HSBC was the donee under the enduringpower of attorney. By then, the necessary documents for injecting the Deceased's assets into theKaren Trust were ready for execution. So she asked the Deceased whether she wanted to executethem before Christmas, as Mrs Lau was taking a vacation over Christmas. The Deceased replied thatshe would like to execute the documents after Mrs Lau's return from her holidays. Obviously nobodythought the Deceased would die within a matter of days. Unfortunately,

*89 [115] The Deceased's liver condition continued to deteriorate. She eventually lapsed intoa coma and died of acute liver failure resulting from cytomegalovirus infection on 30December

The appeal:

58. The issues identified in the Plaintiff's written submissions are:

[9] The sole key issue (which can be framed in multiple ways, leading to severalsub-issues) or the crucial question for this Appeal is:

What were the true testamentary intentions/instructions of the Deceased during19/10/2003 and 3/12/2003? OR

Whether the Will/Trust Scheme in its present form, truly incorporates all thetestamentary intentions of the Deceased in the Law of Probate, which are binding andshall without exception but certainty be executed/performed by her Executor, orenforced by a Court of Law, without the risk of being frustrated at will or wish of herExecutor or due to other human elements, beyond the jurisdiction of the Court?

59. The short answer to this so-called key issue can be found in the following passages in thejudgment:

[259] I can be very brief with this issue which can be disposed of on the facts. On the factsand evidence, I wholly reject the notion that the Deceased's wishes were anything

more than wishes. This matter has been directly dealt with on various occasionsduring Mrs Doris Lau's evidence. She was adamant, and I fully accept her evidence,that everyone involved - HSBC, the Deceased as well as Mrs Sheila Ho - knew,understood and agreed completely that the powers given to HSBC to appointbeneficiaries were wide discretionary powers. The Deceased's suggestions set out inthe trustee memorandum or any wishes to be communicated by her to HSBC in futurewere nothing more than suggestions and wishes, which HSBC would no doubt bear inmind and seriously consider. But what is important is that HSBC did not bind itself tocomplying with those suggestions and wishes without independent consideration andjudgment. That applies to the suggestions set out in the trustee memorandum; thatalso applies to whatever wishes that the Deceased might have wanted tocommunicate to the*90 trust manager after the setting up of the Karen Trust (which,of course, never happened).

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That the parties fully contemplated that under normal circumstances, the trusteewould, after due consideration, act in accordance with the suggestions and wishes ofthe settlor is one matter. To elevate such suggestions and wishes to legally bindinginstructions by the settlor to the trustee so that the trustee has no discretion nor needexercise any independent judgment, but must follow those instructions from the settlor,is quite another matter. I am certain that in the present case, the situation is just the

former, not the latter.

60. We have already expressed our agreement with the learned Judges' conclusion that:

the Deceased knew and approved of the contents of the will and trust arrangement.) (Seepara.55 above.)

61. Clause 33 of the Karen Trust provided:

No obligation to inform beneficiaries of this Trust

33. The Trustee shall not be obliged to make known to any Beneficiary or the FinalRepository that this Trust exists or any matters in relation thereto or that they are

named as such or that they are now or at any time hereafter included in any of suchexpressions. The Trustee shall not in any way be obliged to contact any Beneficiary orthe Final Repository or any of them until any of them becomes absolutely andindefeasibly entitled to any part of the Trust Fund and the Trustee shall then providethe Beneficiary so entitled with information relating to his entitlement and such otherinformation relating to this Trust as may be reasonably required by him for thecompliance of his reporting or tax obligations arising under all applicable laws. Subjectto the above no Beneficiary or Final Repository shall be entitled to demand or compelthe Trustee to release or disclose any information or document relating to the Trust orthe exercising of the Trustee's powers and duties hereunder. For the avoidance ofdoubt, it is hereby declared and confirmed that none of the Beneficiaries nor the FinalRepository has any interest right or claim of whatever nature in and to the Propertycomprised in the Trust Fund.

62. The Plaintiff submitted that cl.33 conferred upon HSBC "excessive or unnecessary power". ThePlaintiff also submitted that *91 as a result it is void relying on the dictum of Millett LJ (as he thenwas) in

Armitage v Nurse [1998] Ch 241

, 253H that:

If the beneficiaries have no rights enforceable against the trustees there are no trusts

63. Armitage v Nurse was concerned with the validity of an exemption clause which exempted liabilityfor constructive or equitable fraud. There, Millett LJ accepted the submission that there is anirreducible core of enforceable obligations owed by the trustee to the beneficiaries which is

fundamental to the concept of a trust.

64. It is true that HSBC has a very wide discretion. But as the judgment of the Privy Counci l inSchmidt v Rosewood Trust Ltd [2003] 2 AC 709

delivered by Lord Walker of Gestingthorpe made clear at p.724:

It is fundamental to the law of trusts that the court has jurisdiction to supervise and, if appropriate,intervene in the administration of a trust, including a discretionary trust.

65. The judgment went on to quote with approval what Holland J said in the Australian case of

Randall v Lubrano (unrep., Supreme Court of New South Wales, 31 October 1975)

, cited by Kirby P (as he then was) in

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 416:

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no matter how wide the trustee's discretion in the administration and application of adiscretionary trust fund and even if in all or some respects the discretions are expressed in thedeed as equivalent to those of an absolute owner of the trust fund, the trustee is still a trustee.(p.724F.)

66. Lord Walker went on to indicate that the discretionary object's rights included "a right to require

the trustees to account for their trusteeship". (p.732H.)

67. Thus, it is clear that HSBC does owe enforceable obligations to the discretionary objects underthe Karen Trust, which, of course, include the Plaintiff and the final repository.

68. Another complaint is that because HSBC is not obliged to make known the Karen Trust to any ofthe discretionary objects (which for brevity sake we shall refer to as "beneficiary") it is void. The KarenTrust is entitled to the residuary estate under the Will. So the existence of the Karen Trust is a matterof public record. It is submitted that since cl.33 provides that HSBC is not obliged to inform any"beneficiary" of any detail about the Karen Trust or that he/she had been named as a "beneficiary",that would render the Karen Trust void, presumably because neither the fourth*92 defendant nor thePlaintiff would know that he/she could enforce the Karen Trust.

69. HSBC informed the Plaintiff voluntarily less than a month after the death of the Deceased that she

was one of the beneficiaries under the Karen Trust. Presumably, the third and the fourth defendantswere also informed. It is unreal to say that nobody was in a position to enforce or to seek enforcementof the Karen Trust. HSBC has fiduciary duties under the Karen Trust, and it is inconceivable that theywould ignore the clear expression of the Deceased's wishes in the trustee memorandum, for example,in favour of her mother. As soon as a monthly payment is made to the Plaintiff in accordance with theDeceased's wishes, the Plaintiff would know that she is a beneficiary.

70. The Plaintiff also complained that she was not told the identity of other beneficiaries in the termsof the trustee memorandum because HSBC only gave her a redacted form of the trust deed. Nor didshe know her daughter's wishes regarding the provisions for her. HSBC had refused to disclose thisinformation, and HSBC was eventually ordered to make the disclosure. How much disclosure adiscretionary trustee should make is often a matter of judgment. In any event, the non-disclosure ofsuch information by HSBC, even though subsequently overruled by the Court, could not render theKaren Trust null and void.

71. The following authorities support the view that a discretionary trust would not be void if thetrustees are not obliged to inform any person that he is a potential beneficiary. Indeed, such abeneficiary might never know the identity of the trustees or the existence of a trust.

72. In

McPhail v Doulton [1971] AC 424

, also reported as Re Baden's Deed Trusts (No 1), a fund was established by deed dated 17 July1941, cl.9(a) of which provided:

The trustees shall apply the net income of the fund in making at their absolute discretion grants toor for the benefit of any of the officers and employees or ex-officers or ex-employees of thecompany (Mathew Hall and Co Ltd) or to any relatives or dependants of any such persons insuch amounts at such times and on such conditions (if any) as they think fit.

73. At the date of the deed, the company had a pay roll of some 1,300 employees. The litigation overthe validity of the deed was protracted. In 1963, the trustees raised two issues for determination. Weare only concerned with the second, namely, whether the trust was void for uncertainty.Goff J ([1967]1 WLR 1457)

held that the deed gave mere powers as opposed to constituting a discretionary trust; and that it wasvalid.On appeal, [1969] 2 Ch 388

, the Court of Appeal by a majority upheld Goff J, but having regard to the *93 intervening decision ofthe House of Lords on 31 October 1998 in Whishaw v Stephens, remitted the case to Goff J forfurther consideration of the issue of validity. The executors, however, went on to the House of Lordsin McPhail v Doulton where, on 6 May 1970, it was determined that the relevant provisions constituted

a discretionary trust and not mere powers and that (by a majority) the tests applicable as regardsuncertainty were the same as if the trustees had been given mere powers:
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namely, that the trust is valid if it can be said with certainty that any given individual is or is nota member of the class. (per Lord Wilberforce at p.456C.)

74. Lord Wilberforce said of the decision in Whishaw v Stephens, p.454D:

That case was concerned with a power of appointment coupled with a gift over in default ofappointment. The possible objects of the power were numerous and were defined in such wideterms that it could certainly be said that the class was unascertainable. The decision of thisHouse was that the power was valid if it could be said with certainty whether any given individualwas or was not a member of the class, and did not fail simply because it was impossible toascertain every member of the class.

75. The House of Lords remitted the matter to the Chancery Division to determine whether on suchtests there was or was not an invalidating uncertainty.

76. That was resolved by Brightman J (as he then was) in

Re Baden's Deed Trusts (No 2) (Ch) [1972] Ch 607

in favour of validity and affirmed by theCourt of Appeal ([1973] Ch 9). Sachs LJ in the Court of Appealemphasised the important difference between conceptual uncertainty and evidential uncertainty. The

latter, as Lord Wilberforce had said in McPhail v Doulton, p.524: the court can appropriately deal (with) on an application for direction

77. Sachs LJ said at p.20:

(Conceptual uncertainty was in the course of argument conveniently exemplified, rightly orwrongly matters not, by the phrase "someone under a moral obligation" and contrasted with thecertainty of the words "first cousins"). Once the class of persons to be benefited is conceptuallycertain it then becomes a question of fact to be determined on evidence whether any postulanthas on enquiry been proved to be within it: if he is not so proved, then he is not in it. That positionremains the same whether the *94 class to be benefited happens to be small (such as "firstcousins") or large (such as "members of the X Trade Union" or "those who have served in theRoyal Navy"). The suggestion that such trusts could be invalid because it might be impossible to

prove of a given individual that he was not in the relevant class is wholly fallacious

78. Lord Wilberforce had also said at p.450 in Whishaw v Stephens:

Correspondingly a trustee with a duty to distribute, particularly among a potentially very largeclass, would surely never require the preparation of a complete list of names, which anyhowwould tell him little that he needs to know. He would examine the field, by class and category;might indeed make diligent and careful inquiries, depending on how much money he had to giveaway and the means at his disposal, as to the composition and needs of particular categoriesand of individuals within them; decide upon certain priorities or proportions, and then selectindividuals according to their needs or qualifications. If he acts in this manner, can it really besaid that he is not carrying out the trust?

79. We believe it is implicit in the Re Baden's Deed Trusts decisions that a discretionary trustee is not

obliged to inform any potential beneficiary of his potential interest under a discretionary trust.

80. Indeed, in Schmidt v Rosewood Trust Ltd, p.715G, Lord Walker said that offshore discretionarytrusts:

may give no reliable indication of who will in the event benefit from the settlement. Typically, itwill contain very wide discretions exercisable by the trustees (sometimes only with the consent ofa so-called protector) in favour of a widely defined class of beneficiaries. The exercise of thosediscretions may depend on the settlor's wishes as confidentially imparted to the trustees and theprotector.

81. In Schmidt v Rosewood Trust Ltd, the claimant applied to the High Court of the Isle of Man fordisclosure of documents relating to two settlements of which his deceased father was a co-settlor andunder which the claimant claimed that he had a discretionary interest both in his own capacity as well

as being the administrator of his father's estate. The trustee resisted disclosure on the ground that theclaimant was not a beneficiary under the settlements and his father was never more than an object of

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a power and as such had no entitlement to trust documents or other information. On appeal, the PrivyCouncil held that a beneficiary's right to seek disclosure of trust documents is one aspect of thecourt's inherent and fundamental jurisdiction to supervise and if appropriate intervene *95 in theadministration of a trust including a discretionary trust. It decided that the jurisdiction did not dependon any distinction between transmissible and non-transmissible or discretionary interests, or betweenthe rights of an object of a discretionary trust and those of an object of a mere power of a fiduciary

character. The beneficiaries' proprietary right was therefore neither sufficient nor necessary for theexercise of the court's discretion.

82. In

Murphy v Murphy [1999] 1 WLR 282

, a potential beneficiary under discretionary trusts sought an order for disclosure of the identities oftrustees of the fiduciary trusts against the settlor. Neuberger J (as he then was) said at p.290:

The facts that in this case the Plaintiff is merely within the class of discretionary beneficiaries (asopposed to being someone with a vested beneficial interest in the trust property) and that there isno suggestion of wrongdoing on the part of the trustees appear to me to go to the question ofwhether to exercise the discretion [to exercise what the judge called the equitable jurisdiction]rather than whether the discretion exists at all.

Then at p.291:If all the discretionary beneficiaries wished, for good reasons, to know the identity of the trusteesof a settlement, and the settlor (who reserved the power of appointment of trustees) refused totell them it would be surprising - indeed, I suggest, remarkable - if the court had no power tocompel him to do so. Similarly, if all but one or two of the beneficiaries wished to know,particularly if the one or two were receiving all the income. If that is right, it would seem to followthat one would expect the court at least to have jurisdiction to require the settlor in suchcircumstances to give the information to a single discretionary beneficiary.

83. In

Re Manisty's Settlement [1974] Ch 17

, 25F, Templeman J (as he then was)said:

If a person within the ambit of the power is aware of its existence he can require the trusteesto consider exercising the power and in particular to consider a request on his part for the powerto be exercised in his favour. The trustees must consider this request, and if they decline to do soor can be proved to have omitted to do so, then the aggrieved person may apply to the courtwhich may remove the trustee and appoint others in their place. This, as I understand it, is theonly right and only remedy of any object of the power

*96 84. Hartigan Nominees Pty Ltd v Rydge was concerned with a discretionary trust. The issuebefore the Court of Appeal in New South Wales included the question whether the trustees might takeinto consideration a settlor's wishes as stated in documents such as the trustee memorandum. Notsurprisingly, all three members of the Court thought that it was proper to do so.

85. Mahoney JA went on to say:

For myself, I doubt whether it is the duty of a trustee to inform all persons who may possibly takeunder a discretionary power of the nature and extent of that possibility. As I have indicated, aclass of possible beneficiaries under a discretionary trust may be wide and may be capable, as inthis case, of significant extension. I doubt that it is the duty of a trustee to seek out such personsand inform them of the possibility that, in certain circumstances, they may acquire rights underthe trust. I do not think that, for example, where property may be appointed among a group ofemployees, past, present and future, of a company, the trustee has a duty to seek out andconvey information of this kind. (p.432.)

One Testamentary instrument:

86. Another submission is that by reason of the doctrine of incorporation (

Re Edward's Will Trusts [1947] 2 All ER 521), the Will and the trust deed are part and parcel of one testamentary instrument.
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87. This argument has been rejected by the learned Judge, for reasons with which we are inrespectful agreement. We cannot see how it can be suggested that the Karen Trust has beenincorporated into the Will. The Karen Trust is the residuary beneficiary.

Rule against delegation of testamentary power:

88. The submission is that even if the Karen Trust was validly established inter vivos, a gift in favourof the Karen Trust by will is invalid because it infringes the rule against delegation of testamentarypower. In support, the Plaintiff relies on the dictum of Fullagar J in

Tatham v Huxtable (1950) 81 CLR 639

, a decision of the High Court of Australia.

89. The Karen Trust was properly constituted. The Deceased had exercised her testamentary power:she bequeathed her residuary estate to the Karen Trust. When the trustees of the Karen Trustperform their own fiduciary duties they would not be exercising the testamentary powers of thedeceased. If the Deceased had bequeathed her residuary estate to a charitable trust, it is difficult tosee how it could be said that she had delegated her testamentary power. We see no relevantdifference between the two. Support*97 for this view can be found in


, on appeal,(1998) 45 NSWLR 300

, where it was held that it is not a breach of the rule against delegation of testamentary power to giveproperty by will to the trustees of a valid pre-existing trust, in that case, also a discretionary trust.

90. In any event, this argument has been fully dealt with by the learned Judge in paras.220-241. Forthe reasons given by Hoffmann J in

Re Beatty [1990] 1 WLR 1503

, which the learned Trial Judge had adopted (para.228), we are respectfully of the view that FullagarJ's view does not represent the law in Hong Kong.

Collusion and conspiracy:

91. The Plaintiff sought to argue that there was collusion and conspiracy. Neither had been raised attrial. We cannot allow a new case to be made on appeal. Moreover, the new case lacks particularityand is no more than wild conjecture. We give one allegation as example:

there may well be handwritten file notes of Doris Lau reflecting such hard truth which weresuppressed by Doris Lau who instead fabricated typewritten purported file notes to mislead thecourt to confuse the two different nature of trusts. Doris Lau and Sheila Ho must have both beenguilty of perjury.

92. The Plaintiff complained that her counsel at trial had not put forward such a case. On the materialmade available to us, we can only say no responsible counsel would have advanced a case ofcollusion and conspiracy.

Holes in evidence:93. We will not deal with the so-called holes in the evidence of Mrs Lau and Mrs Ho, which is anotherway of saying that the learned Judge's acceptance of their evidence is flawed. The learned Judge hadaccepted their evidence and he was entitled to do so. We see nothing in the submission which makesus doubt the correctness of the learned Judge's conclusion. Indeed, with respect, we agree with them.

Evidence:

94. The Plaintiff wanted leave to adduce new evidence. New evidence will not be admitted unlesssuch evidence: (a) could not have been obtained with reasonable diligence for case at the trial; (b) issuch that, if given, it would probably have an important influence on the result of the case, though itneed not be decisive;*98 and (c) is such as is presumably to be believed.

Ladd v Marshall [1954] 1 WLR 1489

. The new evidence included press and magazine cuttings in 1999-2000 showing that one of theDeceased's brothers assisted her in organising her performance in Las Vegas. They are produced to

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show that the Deceased was on good terms with her brother. Such evidence does not satisfy theLadd v Marshall tests.

Disposition:

95. For the above reasons we would dismiss the appeal and make an order nisi that the third andfourth defendants' costs are to be paid out of the estate, to be taxed if not agreed on a common fund

basis. We also make an order nisi the Plaintiff should indemnify the estate in respect of such costs.

Reported by Shin Su Wen:

2015 Thomson Reuters Hong Kong Ltd.

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