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Estate of Mui Yim Fong

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Page 1

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 trust

would not be void if trustees not obliged to inform person he
was potential beneficiary - whether trust void because
beneficiaries had no enforceable rights against trustee
Wills, probate and succession - rule against delegation of
testamentary power in Hong Kong - rule did not represent law
in Hong Kong - in any event, giving property by will to trustees
of 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 "excluded
class"; C, a charitable organisation, was named as the final
repository; and cl.33 provided that T was not obliged to inform any
beneficiary or the final repository that it existed or that they were
named thereunder; and that any such person was not entitled to
demand or compel T to disclose any information or document
relating to the Trust. X also suggested in a non-binding trustee
memorandum (the Memorandum) that T "give due consideration to
[her] recommendations and suggestions", including paying $70,000
per month to M absolutely until her death. On the same day, X made
a will appointing T as executor and trustee and bequeathing her
residuary estate to the Trust (the Will). X passed away soon after
this. Less than a month later, T informed M that she was a
beneficiary 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, inter
alia, that the Trust was void because the beneficiaries had no
enforceable rights against T and cl.33 was an "excessive or
unnecessary power".
Held, dismissing the appeal, that:
(1)
The Trust was not null and void. First, T did owe
enforceable obligations to the discretionary objects under
the Trust, including M and C, who had a right to require T

to account for its trusteeship. It was unreal to say that

nobody could enforce the Trust. T had fiduciary duties
thereunder, and it was inconceivable that it would ignore
X's clear expression of her wishes in the Memorandum,
for example, in favour of M (Armitage v Nurse [1998] Ch
241, Schmidt v Rosewood Trust Ltd [2003] 2 AC 709,
Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR
405 applied). (See paras.63-69.)
(2)

Second, a discretionary trust would not be void if the

trustees were not obliged to inform any person that he
was a potential beneficiary. Indeed, such a beneficiary
might never know the identity of the trustees or the
existence of a trust. How much disclosure a discretionary
trustee should make was often a matter of judgment. In
the absence of wrongdoing by the trustee, it went to
whether to exercise the discretion rather than whether the
discretion existed at all. Here, T's non-disclosure of the
identities of other beneficiaries and of M's wishes making
provision for her, even though subsequently this decision
not to disclose was overruled by the Court, could not
render the Trust null and void (Whishaw v Stephens
[1970] AC 508, McPhail v Doulton [1971] AC 424, Re
Baden's Deed Trusts (No 2) [1973] Ch 9, Re Manisty's
Settlement [1974] Ch 17, Murphy v Murphy [1999] 1 WLR
282, Schmidt v Rosewood Trust Ltd [2003] 2 AC 709
applied). (See paras.70-83.)

(3)

It was not a breach of the rule against delegation of

testamentary power to give, as occurred here, property
by 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). (See
paras.88-90.)

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

Counsel in the Case:

Ms Tam Mei Kam, plaintiff, in person.Mr Albert Yau and Mr

Kevin Poon, instructed by Wong, Shum & Co, for the third
defendant.Mr Richard Leung, instructed by PC Woo & Co, for
the fourth defendant.Mayer Brown JSM, for the first and
second defendants, attendance excused.

Cases cited in the

judgment:

Gregory v Hudson (1997) 41 NSWLR 573

Gregory v Hudson (1998) 45 NSWLR 300
Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405
Randall v Lubrano (unrep., Supreme Court of New South Wales, 31
October 1975)

Page 3

Tatham v Huxtable (1950) 81 CLR 639

Armitage v Nurse [1998] Ch 241, [1997] 3 WLR 1046, [1997] 2 All
ER 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] 2
All 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] 3
All ER 785

Other materials
mentioned in the
judgment:

Encyclopaedia of Forms and Precedents (5th ed.) Vol.40(1), p.3628

Snell'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

plaintiff in these proceedings (the Plaintiff), as well as two elder brothers. An elder sister had
predeceased her.
2. The Deceased had suffered from cervical cancer since 2001. By the time she consulted Dr Peter
Teo Man Lung of the Hong Kong Sanatorium and Hospital in July 2003, the cancer had reached an
advanced 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 and
was 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 offshore
trust established under the laws of the Cayman Islands. The final repository of the Karen Trust is the
New Horizon Buddhist Association Ltd (New Horizon), the third defendant in the proceedings. The
Karen Trust was established with a nominal sum of $1,000. A pilot settlement with properties to be
added 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 is
the Karen Trust. HSBC was appointed as her executor and trustee. The Will was witnessed by Dr
Peter 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 of
administration of the estate of the Deceased.

7. The first and second defendants were HSBC as the executor and trustee named in the Will and the
trustee 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 and
Lau Kai Eddie (Eddie Lau) who had *73 been joined as the third and fourth defendants to defend the
Plaintiff's claim.
8. After an 18-day trial, where the Plaintiff was represented by leading and junior counsel, Andrew
Cheung J pronounced for the force and validity of the Will and ordered that probate be granted to
HSBC, the executor named in the Will. He also made a declaration that the Karen Trust is and was at
all material times a valid trust. However, he made no adverse costs order against the Plaintiff because
he took the view that the action:
[291] falls within the second exception to the general rule that costs generally follow the
event 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, to
be taxed if not agreed, on a common fund basis.
10. This is the Plaintiff's appeal. She appeared in person, but had submitted various written
submissions including, as her main submissions, a 32-page written submission in English dated 11
May 2010. The third respondent is represented by Mr Albert Yau and Mr Kevin Poon, who had
represented the third defendant below. Likewise Mr Richard Leung appeared for the fourth
respondent. They have also submitted written submissions. The trial was conducted in English. The
judgment (104 pages) is in English. The Plaintiff's main submissions are in English. Hence, this
judgment 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:

Page 5

A Discretionary Trust is one which gives a beneficiary no right to any part of the income of the
trust 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 when
the income becomes available, but if they fail to distribute in due time, the power is not
extinguished so that they can distribute later. They have no power to bind themselves for the
future. 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 nothing
which his creditors or assigns can claim, even if it is a case where a person has settled property
on himself.
*74 12. Discretionary trusts are often employed for estate planning purposes. Such purposes include
the reduction of estate duties and the desire that the objects of the settlor's bounty should be
protected from their profligacy. The estate duties avoided may include estate duties otherwise
payable on the death of the settlor, as well as those payable on the death of, say, a beneficiary of the
estate.
13. Very often, wide discretions are conferred on the trustees under a discretionary trust, such that
expressions 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 if
they decide in good faith at appropriate times to give none of the income to any of the
beneficiaries the court cannot pronounce their reasons to be bad. And similarly if they decide to
give some or all of the income to a particular beneficiary the court would not review their decision.
That was decided by this house in Gisborne v Gisborne [1877] 2 AC 300. But their "absolute
discretion" must, I think, be subject to two conditions. It may be true that when a mere power is
given to an individual he is under no duty to exercise it or even to consider whether he should
exercise it. But when a power is given to a trustee as such, it appears to me that the situation
must be different. A settlor or testator who entrusts a power to his trustees must be relying on
them in their fiduciary capacity so that they cannot simply push aside the power and refuse to
consider whether it ought in their judgment to be exercised. And they cannot give money to a
person who is not within the classes of persons designated by the settlor: the construction of the
power is for the court.
14. A settlor will wish the trustees to know his wishes. For that purpose, it is common for a
discretionary trust to be accompanied by a memorandum of wishes. On the same date as the Karen
Trust, 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 the
recommendations and suggestions put forward by her in all matters concerning the
Trust 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 the
Settlor 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 by
thirty days, then the Trustee would consider holding the share of the Trust Fund which
would have been held for Eddie in the manner as described in para.3.2(3) below.

The Trustee would set aside a sum of HK$1,700,000 upon trust for the Settlor's nieces
and nephews, namely Mui Pak Ning (), Mui Pak Wai (), Poon Chun Ho (
) and Poon Man Ho () (collectively, the "Nieces and Nephews"), and to
make an annual payment of HK$100,000 each to such of the Nieces and Nephews
while he or she is pursuing full time tertiary education, whether in Hong Kong or
elsewhere, 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 the
Nieces and Nephews notwithstanding that any of the Nieces and Nephews shall be
under 18 at the time of payment and the Trustee would in such event pay, transfer or
deliver the payment in direct disbursement of the educational expenses of the Nieces
and Nephews; and

*76 (c)upon the last one among the Nieces and Nephews to attain the age of 25, if any part
of the Trust Fund set aside is not fully disposed of under this paragraph, then my
Trustee would consider distributing the remaining balance of such part of the Trust
Fund 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 of
HK$70,000 for her use and benefit absolutely and upon the death of the Settlor's
mother, or if she shall not survive the Settlor, then upon the death of the Settlor, to
distribute the entire balance of the Trust Fund then remaining to New Horizon
Buddhist Association Ltd, a company incorporated in Hong Kong, absolutely or if the
same 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 New
Horizon.
[85] It is convenient to record here that the Deceased's close association with the 3rd
defendant 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 the
evidence given. There were more than sufficient reasons for naming the 3rd defendant
as the final repository. It should be noted that under the trust deed, the position of the
final repository need not be taken into account when the trustee considers how to
exercise its wide discretions. According to Mrs Lau's and Mrs Ho's evidence, both the
deceased 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 schedule
under the words "'Beneficiaries' *77 means and includes". However, "beneficiaries" was defined in
cl.1(b) to mean her and:
(ii)
any person or class of persons as may be appointed from time to time by the Trustee
in 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

Page 7

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 executor
and trustee, inter alia, to hold her residuary estate:
upon trust for HSBC International Trustee Ltd acting in its sole capacity as the trustee for the
time being of the Karen Trust.

The facts:
19. Before dealing with the Plaintiff's specific submissions, we turn to the facts as found by the
learned Judge. We can state them briefly since they have been carefully set out in the judgment of
Cheung 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. As
noted, 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 number
of 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 and
thrombocytopenia (reduction in blood platelets). After discharge, she flew to Japan to shoot a
television commercial. She felt ill during her short stay in Japan and immediately upon her return to
Hong 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 2003
when her consent was necessary before further treatment could be given to the Deceased who was
by 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 Sheila
Ho (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 also
carefully considered the contents of their oral evidence and the documents made by
them (including witness statements and so forth), other evidence including other
witnesses' evidence as well as the documentary evidence that has been adduced, the
surrounding circumstances of the case, as well as the inherent probabilities and
improbabilities of their evidence. As I say, I have no doubt that they were truthful and
reliable 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 a
name 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 particular
name 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 had
treated and taken care of the Deceased as if she were one of her daughters. They had
a 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

learned Judge said:

[40] She was a highly experienced private trust professional, having worked in HSBC for
21 years. Her professionalism *79 and experience in the field was plain to see when
she 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 time
the director of the Comprehensive Oncologist Centre as well as the director of the
Department 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 the
Deceased 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, Mr
Chan Chi Hung SC, who appeared for the Plaintiff together with Mr Jerome Liu, abandoned the
allegation.
28. In the section headed "Detailed account of the facts", the learned Judge recounted the evidence
of Mrs Ho, who said that the Deceased consulted her in early 2003 about making provisions for her
mother after her death. The Deceased told her that she wanted to provide for her mother's living
expenses for the rest of her life and she expressed the concern that as her mother was not good at
managing her finances, she might be cheated of her money if she was to be given a lump sum. Mrs
Ho 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 set
up a discretionary trust.
29. She was then told by the Deceased in July or August 2003 that she wanted to retain Mrs Lau and
HSBC for the intended services.
30. Mrs Lau told the Court that on 19 October 2003, she received a call from the Deceased who
asked her some general questions regarding estate and succession planning. The learned Judge's
detailed account of the facts dealing with "Idea of setting up a trust and making a will" up to "3
December 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 her
conversations and meetings with the Deceased. She said, for example, that on 19 October 2003, she
received a telephone call from the Deceased who had asked her some general questions regarding
estate and succession planning. After giving her some general advice over the phone, Mrs Lau *80
advised the Deceased to ask her accountant (Rachael Lo) to liaise with Mrs Lau and to prepare for
her details of the Deceased's assets so that she could carry out an initial appraisal of the same before
arranging a meeting with the Deceased. The Deceased's accountant (Rachael Lo) then supplied to
Mrs Lau the requisite information about a week after the initial telephone conversation, on the basis of
which Mrs Lau prepared a chart of the Deceased's companies and assets and arranged a meeting
with the Deceased at her home on 31 October 2003, which was "well documented by another file note
prepared by Mrs Lau after the meeting" (para.43) and which corroborated the oral evidence given by
Mrs Lau and by Mrs Ho about that meeting. Mrs Lau explained to the Deceased the benefits of
placing her assets into a discretionary trust, and that as the asset contributor (settlor), the Deceased
should be excluded from being a beneficiary so as to minimise the exposure to challenge by the
Estate Duty Office.
32. The learned Judge said:
[44] The Deceased said she was particularly appreciative of the fact that in appointing a
professional trustee, she could be sure that her wishes regarding disposal of her
assets would be respected and the trustee would act in good faith and in the best
interest of the beneficiaries.

Page 9

The Deceased then told Mrs Lau how she wanted her assets to be distributed via a
trust arrangement, and this was meticulously recorded in the file note prepared by Mrs
Lau 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 her
nephews' 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 mother
should be given a monthly allowance until her mother's death to maintain her present
life style: one chauffeur, two domestic helpers. She said it should be about HK$70,000
per month. (She said, rather sadly, that her mother would live a much longer life than
she would.)
[The Deceased] said very determinedly that she would not want her estate to pass
outright to her mother for fear that she would be incapable of managing wealth and
would end up penniless for the rest of her life.
*81 [47]
Lastly, the Deceased wanted to name the 3rd defendant the final repository of the
trust.
[48]

According to Mrs Lau's oral evidence in Court, which I have no difficulty in accepting in
full, the Deceased told her at the meeting that she had carefully thought through the
provisions to be made after her death. She wanted to maintain her mother at the same
level that she was then enjoying (two maids plus one chauffeur). She told Mrs Lau that
her relationship with her mother was not particularly good and her mother had poor
financial discipline. If she were to leave her mother a lump sum of money for her living
for 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 was
the right amount.

[49]

The Deceased also told Mrs Lau emphatically that apart from her mother and her
nieces and nephews, she did not want any part of her estate to pass to any other
Muis.

[50]

Indeed, according to Mrs Ho and Eddie Lau, the deceased had a very bad relationship
with her eldest brother. Their evidence in this regard was not challenged in
cross-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. It
was 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 trust
itself, 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 other
things, it would take time to inject assets into the trust. Mrs Lau left with the Deceased
a "will appointment questionnaire" to fill in, after going through with her the information
required 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:

According to Mrs Ho, both she and the Deceased treated the questionnaire as a
preliminary document to provide information to HSBC both for the purposes of setting
up the trust and for making a will as a backup measure. The *82 setting up of the trust
and the making of the Will were, according to Mrs Ho, "twin sisters". It was throughout
the intention of the Deceased, after learning of the device of discretionary trusts, to set
up 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 of
the 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 to
retain PricewaterhouseCoopers for the necessary advice on establishing the trust. During that
conversation, Mrs Lau "obtained the Deceased's definite instructions to proceed with setting up the
trust". 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 any
way affected by the deterioration of the Deceased's condition while she was shooting
the television commercial in Japan. In any event, the telephone conversation took
place on the very day the Deceased returned from Japan to Hong Kong which was
followed 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 the
communications between HSBC's Trust Department and its Probate Department which was
responsible for drafting the will on the basis primarily of the questionnaire. In paras.68-70 of the
judgment, the learned Judge set out the details regarding the various draft wills which were prepared
by the Probate Department of HSBC. None of the drafts mentioned the setting up of a trust and the
first draft provided for 50% of the residuary estate to be left to the Plaintiff and 50% to the third
defendant. Also:
[68] despite the Deceased's specific request to Mrs Lau to keep confidential the identity
of the specific devisee, the name of Eddie Lau appeared prominently on the first page
of the draft will
38. On 28 November 2003, three further drafts were prepared "as alternatives or variations by the
Probate 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 the
Deceased'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 in
accepting Mrs Lau's and Mrs Ho's respective accounts of the same. In particular, I
accept Mrs Lau's evidence that in her view, the colleagues in the Probate Department
had misunderstood the Deceased's instructions in the questionnaire (as understood by
her) and the contents of the various draft wills did not reflect the Deceased's true
intentions. I will presently return to this theme when I deal with Mr Chan's argument on
knowledge 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:

Page 11

the "matching" concern could be eliminated by naming the trust as sole beneficiary
under the will so that all assets of the estate would pass to the trust to be distributed in
accordance with the terms of the trust
42. The learned Judge said:
[79] Mrs Ho relayed the message to the Deceased for her instructions after the
telephone conversation and after the Deceased expressed the view that this was the
best arrangement to make, Mrs Ho called Mrs Lau on the same day to pass on the
message. She instructed Mrs Lau to set up the trust first and name it as the sole
beneficiary under the will. She also told Mrs Lau that the Deceased had named the
trust "The Karen Trust". Mrs Lau told Mrs Ho that a doctor would need to be present
when the documents were executed to certify the Deceased's mental capacity in view
of 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's
standard 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 Phoenix
Lam.
44. The documents were ready on 2 December 2003. However, the documents contained an error in
that the trustee memorandum provided:
[83] monthly sum of $70,000 to the mother was to be on top of the rental income of a
property situated at Happy Court, Village Road in Happy Valley. Mrs Ho spotted the
mistake and in a subsequent telephone conversation (after confirming the same with
the Deceased), she clarified with Mrs Lau that the Deceased's intention was only to
give $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 the
learned Judge's account of Dr Teo's evidence:
[86] From his interaction with the Deceased that evening (2 December 2003), Dr Teo
told the Court, he formed the view that the Deceased was most alert and concerned
about her condition. She had no difficulties in understanding Dr Teo's explanations,
she asked questions (including leading questions) and her responses quite clearly
showed 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, the
Deceased 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 testified
in Court that most probably, he and the deceased again discussed the results of the
CT scan after the Deceased had time to digest what she had been told the previous
evening. Although Dr Teo could not be 100% sure, he probably had discussions with
the Deceased in two or three ward rounds on the CT scan results which painted a very
gloomy picture. Dr Teo testified that on 3 December, the Deceased was her *85
normal self, fully alert and as attentive, responsive and smart as before. Thus, when
Mrs Lau arrived at around 11 am that day at the hospital and he was asked to be
present to witness the explanation and execution of the documents, he had no
hesitation whatsoever in advising Mrs Lau that in his view, the Deceased had full
mental capacity and was of a "sound and clear mind" to execute the documents. And
Dr Teo did not consider it necessary at all to consult a neurologist or psychiatrist on
the matter.

46. That was also the impression of Mrs Lau and Mrs Ho:
[89] Mrs Lau, who quite plainly possessed an excellent memory, gave detailed evidence
on what happened that morning. She first explained the contents of the trust deed to
the Deceased. She explained it clause by clause although not line-by-line. What is
important for our purposes is that the Deceased, according to all those present,
followed the explanation well and gave appropriate responses. She asked pertinent
questions and reacted appropriately in words, facial expressions and body languages.
After the explanation, the Deceased executed the trust deed and Mrs Lau signed the
same 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, Mrs
Lau and Mrs Ho. Dr Teo and Mrs Lau then signed the will in each other's presence as
attesting witnesses. The process took about 45 minutes and throughout Dr Teo was
present 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 remained
in 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 by
Mrs Ho), the Deceased fully followed and agreed to the contents of the trustee
memorandum. The trustee memorandum was not required to be signed by the
Deceased, 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 the
Deceased, in relation to different provisions in the Karen Trust, showed that she was fully aware of
the contents of the trust deed that she was about to execute. For example:
*86
[90] (a) She asked about whether she could change her wishes after setting up the trust
and 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 would
appear in the trustee memorandum.

(c)

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

(d)
[97]

(e)

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

She also asked what procedures had to be followed if she herself should want to change
the beneficiaries later.

48. Regarding the Will, the learned Judge said:

[101] the Deceased expressed her understanding that under the will everything would go
to the trust. As regards the other standard and detailed terms in the will giving the
executor/trustee various powers, the Deceased observed that they would not really be
required 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

Page 13

Trust as well as the Will.

50. The learned Judge had also dealt in some detail with the expert medical evidence on the mental
capacity 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, the
picture was bleak
*87 52. On the late afternoon of 3 December 2003, Dr Teo ordered the testing of the Deceased's
blood ammonia level:
[108] According to Dr Teo, it was an exercise to gather more information on the liver
function 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 the
abnormally high level of ammonia, Dr Teo made the suspected diagnosis of hepatic
pre-coma, which can mean either stage 1 or stage 2 HE.
[110] In short, HE is a reversible functional brain disorder characterized by disturbances of
consciousness and other neuro-psychiatric manifestations due to metabolic
disturbances associated with liver disease. According to Dr Woo, the pathogenic
mechanism is felt to be the failure of the liver to remove toxic substances from the
blood 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 and
experimental 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 on
the expert evidence actually adduced before the Court, there is a substantial
proportion of patients suffering from HE who have a normal level of ammonia in their
blood. Conversely, there is also a substantial proportion of liver patients who do not
develop 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 to
7 or 8 December 2003, the Deceased was in a drowsy state and Dr Teo accepted in
oral evidence that without a proper mental state examination (and none was done at
the time), he could not be sure whether the Deceased was of sufficient mental
capacity to make a will or to sign other legal documents during that period of time. He
frankly accepted that the suggestion in his aide memoire that until the last 48 hours of
her 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 8
December as well as the period after 24 December (when the Deceased was
intubated) from his statement. Having made that concession in the box, Dr Teo
remained adamant that on 3 December when the legal documents were explained to
and executed by the Deceased, she was of a sound and logical mind, with good
mental 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 has
overcome the burden on testamentary capacity. Likewise, the Deceased's mental
capacity 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 will
and trust arrangement.)

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 was
executed in the presence of Ms Jacklyn Ng, a solicitor from JSM, who explained the relevant
documents 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. She
followed 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's
evidence.
57. Mrs Doris Lau was present on that occasion because HSBC was the donee under the enduring
power of attorney. By then, the necessary documents for injecting the Deceased's assets into the
Karen Trust were ready for execution. So she asked the Deceased whether she wanted to execute
them before Christmas, as Mrs Lau was taking a vacation over Christmas. The Deceased replied that
she would like to execute the documents after Mrs Lau's return from her holidays. Obviously nobody
thought the Deceased would die within a matter of days. Unfortunately,
*89 [115]
The Deceased's liver condition continued to deteriorate. She eventually lapsed into
a coma and died of acute liver failure resulting from cytomegalovirus infection on 30
December

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 several
sub-issues) or the crucial question for this Appeal is:
What were the true testamentary intentions/instructions of the Deceased during
19/10/2003 and 3/12/2003? OR
Whether the Will/Trust Scheme in its present form, truly incorporates all the
testamentary intentions of the Deceased in the Law of Probate, which are binding and
shall without exception but certainty be executed/performed by her Executor, or
enforced by a Court of Law, without the risk of being frustrated at will or wish of her
Executor 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 the
judgment:
[259] I can be very brief with this issue which can be disposed of on the facts. On the facts
and 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 occasions
during 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 appoint
beneficiaries were wide discretionary powers. The Deceased's suggestions set out in
the trustee memorandum or any wishes to be communicated by her to HSBC in future
were nothing more than suggestions and wishes, which HSBC would no doubt bear in
mind and seriously consider. But what is important is that HSBC did not bind itself to
complying with those suggestions and wishes without independent consideration and
judgment. That applies to the suggestions set out in the trustee memorandum; that
also applies to whatever wishes that the Deceased might have wanted to
communicate to the *90 trust manager after the setting up of the Karen Trust (which,
of course, never happened).

Page 15

That the parties fully contemplated that under normal circumstances, the trustee
would, after due consideration, act in accordance with the suggestions and wishes of
the settlor is one matter. To elevate such suggestions and wishes to legally binding
instructions by the settlor to the trustee so that the trustee has no discretion nor need
exercise 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.) (See
para.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 Final
Repository 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 such
expressions. The Trustee shall not in any way be obliged to contact any Beneficiary or
the Final Repository or any of them until any of them becomes absolutely and
indefeasibly entitled to any part of the Trust Fund and the Trustee shall then provide
the Beneficiary so entitled with information relating to his entitlement and such other
information relating to this Trust as may be reasonably required by him for the
compliance of his reporting or tax obligations arising under all applicable laws. Subject
to the above no Beneficiary or Final Repository shall be entitled to demand or compel
the Trustee to release or disclose any information or document relating to the Trust or
the exercising of the Trustee's powers and duties hereunder. For the avoidance of
doubt, it is hereby declared and confirmed that none of the Beneficiaries nor the Final
Repository has any interest right or claim of whatever nature in and to the Property
comprised in the Trust Fund.

62. The Plaintiff submitted that cl.33 conferred upon HSBC "excessive or unnecessary power". The
Plaintiff also submitted that *91 as a result it is void relying on the dictum of Millett LJ (as he then
was) 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 liability
for constructive or equitable fraud. There, Millett LJ accepted the submission that there is an
irreducible 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 Council in
Schmidt 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:

 no matter how wide the trustee's discretion in the administration and application of a
discretionary trust fund and even if in all or some respects the discretions are expressed in the
deed 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 under
the 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 of
the discretionary objects (which for brevity sake we shall refer to as "beneficiary") it is void. The Karen
Trust is entitled to the residuary estate under the Will. So the existence of the Karen Trust is a matter
of 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 the
Plaintiff 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 defendants
were also informed. It is unreal to say that nobody was in a position to enforce or to seek enforcement
of the Karen Trust. HSBC has fiduciary duties under the Karen Trust, and it is inconceivable that they
would 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 the
Deceased'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 terms
of the trustee memorandum because HSBC only gave her a redacted form of the trust deed. Nor did
she know her daughter's wishes regarding the provisions for her. HSBC had refused to disclose this
information, and HSBC was eventually ordered to make the disclosure. How much disclosure a
discretionary trustee should make is often a matter of judgment. In any event, the non-disclosure of
such information by HSBC, even though subsequently overruled by the Court, could not render the
Karen Trust null and void.
71. The following authorities support the view that a discretionary trust would not be void if the
trustees are not obliged to inform any person that he is a potential beneficiary. Indeed, such a
beneficiary 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 July
1941, cl.9(a) of which provided:
The trustees shall apply the net income of the fund in making at their absolute discretion grants to
or for the benefit of any of the officers and employees or ex-officers or ex-employees of the
company (Mathew Hall and Co Ltd) or to any relatives or dependants of any such persons in
such 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 over
the validity of the deed was protracted. In 1963, the trustees raised two issues for determination. We
are 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 was
valid. On appeal, [1969] 2 Ch 388
, the Court of Appeal by a majority upheld Goff J, but having regard to the *93 intervening decision of
the House of Lords on 31 October 1998 in Whishaw v Stephens, remitted the case to Goff J for
further consideration of the issue of validity. The executors, however, went on to the House of Lords
in 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 regards
uncertainty were the same as if the trustees had been given mere powers:

Page 17

namely, that the trust is valid if it can be said with certainty that any given individual is or is not
a 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 of
appointment. The possible objects of the power were numerous and were defined in such wide
terms that it could certainly be said that the class was unascertainable. The decision of this
House was that the power was valid if it could be said with certainty whether any given individual
was or was not a member of the class, and did not fail simply because it was impossible to
ascertain every member of the class.
75. The House of Lords remitted the matter to the Chancery Division to determine whether on such
tests 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 the Court of Appeal ([1973] Ch 9). Sachs LJ in the Court of Appeal
emphasised 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 or
wrongly matters not, by the phrase "someone under a moral obligation" and contrasted with the
certainty of the words "first cousins"). Once the class of persons to be benefited is conceptually
certain it then becomes a question of fact to be determined on evidence whether any postulant
has on enquiry been proved to be within it: if he is not so proved, then he is not in it. That position
remains the same whether the *94 class to be benefited happens to be small (such as "first
cousins") or large (such as "members of the X Trade Union" or "those who have served in the
Royal 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 large
class, would surely never require the preparation of a complete list of names, which anyhow
would 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 give
away and the means at his disposal, as to the composition and needs of particular categories
and of individuals within them; decide upon certain priorities or proportions, and then select
individuals according to their needs or qualifications. If he acts in this manner, can it really be
said 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 discretionary
trusts:
may give no reliable indication of who will in the event benefit from the settlement. Typically, it
will contain very wide discretions exercisable by the trustees (sometimes only with the consent of
a so-called protector) in favour of a widely defined class of beneficiaries. The exercise of those
discretions may depend on the settlor's wishes as confidentially imparted to the trustees and the
protector.
81. In Schmidt v Rosewood Trust Ltd, the claimant applied to the High Court of the Isle of Man for
disclosure of documents relating to two settlements of which his deceased father was a co-settlor and
under 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 the
claimant was not a beneficiary under the settlements and his father was never more than an object of

a power and as such had no entitlement to trust documents or other information. On appeal, the Privy
Council held that a beneficiary's right to seek disclosure of trust documents is one aspect of the
court's inherent and fundamental jurisdiction to supervise and if appropriate intervene *95 in the
administration of a trust including a discretionary trust. It decided that the jurisdiction did not depend
on any distinction between transmissible and non-transmissible or discretionary interests, or between
the 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 the
exercise 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 of
trustees 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 (as
opposed to being someone with a vested beneficial interest in the trust property) and that there is
no suggestion of wrongdoing on the part of the trustees appear to me to go to the question of
whether 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 trustees
of a settlement, and the settlor (who reserved the power of appointment of trustees) refused to
tell them it would be surprising - indeed, I suggest, remarkable - if the court had no power to
compel 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 follow
that one would expect the court at least to have jurisdiction to require the settlor in such
circumstances 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 trustees
to consider exercising the power and in particular to consider a request on his part for the power
to be exercised in his favour. The trustees must consider this request, and if they decline to do so
or can be proved to have omitted to do so, then the aggrieved person may apply to the court
which may remove the trustee and appoint others in their place. This, as I understand it, is the
only 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 issue
before the Court of Appeal in New South Wales included the question whether the trustees might take
into consideration a settlor's wishes as stated in documents such as the trustee memorandum. Not
surprisingly, 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 take
under a discretionary power of the nature and extent of that possibility. As I have indicated, a
class of possible beneficiaries under a discretionary trust may be wide and may be capable, as in
this case, of significant extension. I doubt that it is the duty of a trustee to seek out such persons
and inform them of the possibility that, in certain circumstances, they may acquire rights under
the trust. I do not think that, for example, where property may be appointed among a group of
employees, past, present and future, of a company, the trustee has a duty to seek out and
convey 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.

Page 19

87. This argument has been rejected by the learned Judge, for reasons with which we are in
respectful agreement. We cannot see how it can be suggested that the Karen Trust has been
incorporated 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 favour
of the Karen Trust by will is invalid because it infringes the rule against delegation of testamentary
power. 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 Trust
perform their own fiduciary duties they would not be exercising the testamentary powers of the
deceased. If the Deceased had bequeathed her residuary estate to a charitable trust, it is difficult to
see how it could be said that she had delegated her testamentary power. We see no relevant
difference between the two. Support *97 for this view can be found in
Gregory v Hudson (1997) 41 NSWLR 573
, 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 give
property 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. For
the 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 Fullagar
J'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 at
trial. We cannot allow a new case to be made on appeal. Moreover, the new case lacks particularity
and 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 were
suppressed by Doris Lau who instead fabricated typewritten purported file notes to mislead the
court to confuse the two different nature of trusts. Doris Lau and Sheila Ho must have both been
guilty of perjury.
92. The Plaintiff complained that her counsel at trial had not put forward such a case. On the material
made available to us, we can only say no responsible counsel would have advanced a case of
collusion 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 another
way of saying that the learned Judge's acceptance of their evidence is flawed. The learned Judge had
accepted their evidence and he was entitled to do so. We see nothing in the submission which makes
us 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 unless
such evidence: (a) could not have been obtained with reasonable diligence for case at the trial; (b) is
such that, if given, it would probably have an important influence on the result of the case, though it
need 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 the
Deceased's brothers assisted her in organising her performance in Las Vegas. They are produced to

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

Disposition:
95. For the above reasons we would dismiss the appeal and make an order nisi that the third and
fourth 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:

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