RE KOWK LAI Ying

HCMP5179/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 5179 OF 2001

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J U D G M E N T

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1.  This is an application by the executrices made under section 3(1)(b) of the Variation of Trusts Ordinance, cap.253, seeking the court’s sanction to vary the trust created by the last will of Madam Kwok Lai Ying dated 11 June 1995 (“the Will”).  Madam Kwok died on 4 July 1995.

2.  The plaintiffs and the 6^th defendant are the five executrices appointed under the Will.  By agreement between them, the plaintiffs would apply for grant of probate with power reserved to the 6^th defendant.  On 12 November 2001, probate of the Will was granted to the plaintiffs.

3.  By the provisions of the Will, the income from the estate is to be given to the beneficiaries for a period of 80 years.  At the end of the 80 years’ period, the residue estate is to be donated to such Buddhist charitable institution as the executrices think fit. 

4.  The 1^st to 3^rd, 5^th to 29^th defendants are the surviving income beneficiaries under the Will.  The Secretary of Justice is joined in her capacity as the representative of the HKSAR government as parens patriae of charitable trust. The executrices have all along been paying the part of the income designated for worshipping the deceased to the 4^th defendant, who has been performing the worshipping services.

5.  There was at one stage a suggestion that the trust might be void, but that is no longer in issue. 

6.  The estate is a substantial one.  The estimated value was HK$370 million at the time of the death of the deceased, and HK$434,528,578 as at 30 June 2004. 

7.  In substance, the proposed variations aim to achieve the immediate capitalization of the estate and an immediate distribution of the estate.  The executrices have also decided that the residuary estate should go to the 4^th defendant, a renowned Buddhist charitable institution, of which the deceased had been a devoted follower.

8.  The principal reasons for the proposed variations can be summarized as:

(1)              To avoid any uncertainty caused by the long duration of the trust.

(2)              To relieve the undue burden on the existing executrices in administering the trust.

(3)              To avoid the high management costs if professional trustees were to be engaged to administer the trust.

9.  All the income beneficiaries are in agreement to the proposed variations.  They had executed a Deed of Arrangement dated 11 September 2001 and two Supplemental Deeds dated 13 May 2003 and 24 September 2004 respectively, in which the proposed variations are set out.

10.  Before the hearing, the Secretary for Justice representing the interest of the charity, had expressed reservation on one point. It relates to whether allowance should be made for capital growth in calculating the shares of the beneficiaries.  The difference has been closed, with the parties agreeing that the charity, i.e. Beneficiary 35, should receive no less than HK$10 million, which is based on an assumed capital growth of 0.5%.   Any deficiency is to be borne by the 1^st to 29^th defendants, except the 1^st and 3^rd defendants who are the infant beneficiaries. The agreement is reflected by the terms of the Second Supplemental Deed, an executed copy of which had been shown to me at the hearing.

11.     Having regard to the papers before the court and the submissions of counsel, I am satisfied that a case for varying the trust as proposed has been made out.

12.  Among the beneficiaries are two minors, namely, the 1^st and 3^rd defendants.  The parents for the 1^st defendant are proposing to set up a trust in Hawaii to take care of the distribution to be made to her.  A copy of the draft trust deed is before the court.  Clause 2.2.2 proposes that the four trustees were to hold the distribution on trust for the 1^st defendant until she attains 28 years of age.  It is now agreed to change the age of 28 to that of 21.   Her father, Mr Gordon Fujino, will file an affirmation exhibiting a copy of the executed trust deed within 14 days of its being executed by the four trustees.

13.  As for the 3^rd defendant, it is proposed that the distribution to be made to her shall be paid into, held and invested by the Suitors’ Fund until she becomes18 years old or until further order of the court. 

14.  I have considered the Joint Advice of their legal advisers on the proposed variations of the trust and the proposed manners in which the infant beneficiaries’ shares are to be dealt with.  I have also considered the expert advice on the trust and tax law in Hawaii, in connection with the proposed trust to be set up for the 1^st defendant in Hawaii.  I am satisfied that the proposed variation and manners of management of the distribution are to the benefit of the two infant beneficiaries. 

15.  Accordingly, I will sanction the proposed variations to the trust and make orders dealing with the distributions to be made to the 1^st and 3^rd defendants along the terms set out in the draft orders prepared by their legal advisers.

16.  The parties’ costs of these proceedings had been provided for in the Deed of Arrangement as amended by the First and Second Supplemental Deeds.  With the consent of all parties, I provide that, in the event the parties are in disagreement over the amount of their costs and expenses, the matter may be referred to the court for taxation, in the case of the plaintiffs, the 1^st and 3^rd defendants to be taxed on trustee basis, in the case of the 4^th to 29^th defendants to be taxed on indemnity basis, and in the case of the Secretary for Justice to be taxed on common fund basis.