PETER WILLIAM LORD v. BALZAC LTD

HCMP 130/2019

[2019] HKCFI 1694

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 130 OF 2019

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D E C I S I O N

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Introduction

1.  This is an application for the appointment of a judicial trustee pursuant to Section 63 of the Trustee Ordinance, Cap 29 (“the Ordinance”).

2.  The Applicant seeks an order of the court to appoint, in substitution of the Respondent, Lutea (Hong Kong) Limited (“the Nominated Trustee”) as sole judicial trustee of a trust under Section 63 of the Ordinance and, by consequence, for the Trust fund to be vested in the Nominated Trustee.

Background

3.  The facts are taken from the helpful summary of Mr Stefano Mariani, solicitor for the Applicant.

4.  The Applicant is a British subject currently residing in the United Kingdom.  He makes this application in his capacity as the sole current beneficiary of the Trust.

5.  The Trust is governed by Hong Kong law and was constituted 3 December 1996 as a personal pension plan for the Applicant.  At that time, such personal retirement plans were popular wealth and tax planning vehicles.  The Applicant’s advisor in setting up the Trust was Mr David Charles Douglas Reoch (“Mr Reoch”).

6.  At all material times, Mr Reoch was the sole beneficial owner of the Respondent.  He held 100% of its share capital via a number of interposed offshore companies.  Because the Trust was structured as a pension plan, the notional employer of the Applicant was a company apparently incorporated in the British Virgin Islands, Shanghai Management Limited.

7.  Since 26 August 1997, the Trust has been treated as a recognised retirement scheme at Hong Kong law.

8.  At all material times and till now, the Applicant was the sole beneficiary of the Trust.  It was not envisaged either by Mr Reoch or the Applicant that any other person would be a beneficiary thereof during the lifetime of the Applicant.

9.  In November 1997, the Applicant resolved to transfer the trusteeship to Lutea Trustees Limited (“LTL”), a company incorporated in Jersey and associated with the Nominated Trustee.  On 24 February 1998, the Applicant established a new pension plan with LTL as trustee (“the Lutea Trust”).

10.  On 17 December 1999, the Applicant requested Mr Reoch to transfer the Trust fund to LTL as trustee of the Lutea Trust, so as to consolidate the Applicant’s pension holdings into a single trust.  However, no further action had been taken for the next 3 years. 

11.  On 25 June 2002, Mr Reoch died.  No attempt was made either by the administrators of his estate or by his heirs to continue to maintain the Respondent or to perform the Trust.  Each of the nominee directors and company secretary of the Respondent had resigned.  The Respondent was consequently dissolved and struck off from the Register of Companies (“the Register”) on 7 April 2006 under section 291 of the old Companies Ordinance (“Cap 32”).

12.  The sole material asset comprised in the fund of the Trust is a managed capital account (“the Policy”) with an entity called Old Mutual International (“OMI”).  As at 19 September 2018, the capital value of the Policy was GBP38,312.59.  The Policy does not generate income.

13.  OMI is, as a regulatory matter, unable to transfer the Policy to the name of any other person as trustee of the Trust or otherwise without an order of the court.

14.  The Applicant made multiple attempts to contact the executors of the estate of Mr Reoch and his heirs, but to no avail.  They in effect abandoned the trust business managed by Mr Reoch without taking any steps to, for example, arrange for an orderly transition in the trusteeship of the various trusts he administered before his death.

15.  The Applicant had sought in HCMP 131/2019 to apply for the restoration of the Respondent to the Register for the purposes of this application.

16.  Under Section 765(1) of the Companies Ordinance (“Cap 622”), an application for restoration of a company dissolved under section 291 of Cap 32 may only be made by a person who: (a) was a director or member or creditor of the company; and (b) feels aggrieved by the striking off of the company. 

17.  Being a beneficiary of a trust does not make the Applicant a creditor of the trustee for any item of trust property: Lo Kwong Hung & ors v Registrar of Companies [2017] 1 HKLRD 173 at [21]-[22], G Lam J.

18.  Whilst the provisions for the restoration of a company struck off from the Register under Cap 622 in section 765(4) are considerably more generous in enabling any person “who appears to the court to have an interest” in the restoration to make such an application, companies struck off from the Register under Cap 32 are subject to the narrower restoration provisions in section 765(1) of Cap 622.

19.  The Registrar of Companies affirmed that he was not minded to derogate from the orthodox construction of that section. Accordingly, to save court’s time and costs, the Applicant withdrew the application in HCMP 131/2019.

20.  Under section 292(2) of Cap 32, the property “vested in or held on trust for” the Respondent became bona vacantia upon its dissolution.  However, the Trust property has not become bona vacantia because it is held on trust for the Applicant, not the Respondent.

21.  The Applicant does not request for a vesting order for the Trust property, he wishes to continue the performance of the Trust on the terms of the Deed, with the Nominated Trustee as sole trustee.

Analyses of application

22.  This is a case where the Respondent cannot be restored for lack of a person with locus to do so.  In any case, no one interested (former directors, shareholders, their personal representatives or heirs) is traceable.  It is simply not possible to serve the originating summons.  Dispensing with service will not cause prejudice to anyone as the Applicant is the only one with interest in the Trust.

23.  As the Respondent remains struck off and hence ceased to exist, it can no longer discharge its fiduciary obligations, thereby leaving the Trust rudderless.  The fundamental maxim of equity is that equity will not allow a trust to fail for want of a trustee.

24.  I find sufficient cause shown for the appointment of a fit and proper judicial trustee to replace the Respondent.

Nominated Trustee

25.  The Nominated Trustee is a trust company, and is a member of Lutea undertaking, which specialises in providing wealth management and trust services.  It is a trusts and corporate services provider in Hong Kong.  It is willing and able to act in such capacity.

26.  The Applicant and the Lutea group in general have had a longstanding client relationship.  I am satisfied that the Nominated Trustee is a fit and proper person to act as judicial trustee.

27.  The Policy is the sole material asset comprised in the fund of the Trust and the valuation statement prepared by OMI proved its value.

28.  Under Rule 8 of the Judicial Trustee Rules, Cap 29B (“the Rules”), the judicial trustee has to furnish a complete statement of the trust property accompanied with an approximate estimate of the income and capital value of each item.  Having regard to the longstanding relationship between the Applicant and the Lutea group, the court may and I do exercise its discretion to waive the requirement, as the Trust assets are already ascertained.

29.  Under Rule 9(2) of the Rules, a judicial trustee has to give security.  Having regard to the relationship of mutual trust between the Applicant and the Nominated Trustee, and at the request of the Applicant, I dispense with the requirement for the judicial trustee to give security.

30.  The Applicant would continue to instruct the Nominated Trustee to act as a professional trustee of certain other assets he holds, and the two parties already have an active commercial relationship for the provision of trusts services. 

31.  The Nominated Trustee does not propose to be remunerated specifically for acting as judicial trustee and accordingly the regime governing the remuneration of judicial trustees in Rule 17 would not be relevant.  Instead, the Nominated Trustee will continue to be remunerated on the basis of its ongoing commercial relationship with the Applicant.

Conclusion

32.  I therefore dispense with service of the originating summons.  I appoint the Nominated Trustee as the sole judicial trustee of the Trust and make an order in terms of the draft submitted by the Applicant’s solicitors.