WING LUNG BANK LTD v. SARAH TONG KWOK HON WAH

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The defendant is the plaintiff's judgment debtor in a sum exceeding $7.2 million. She has a contingent interest under the will of the late Bunnan Tong (the deceased). On 21st May 1984 Master Wilson made an order nisi that this interest should stand charged with the payment of the said judgment debt. On 17th July last, Master Boa ordered this charge to be made absolute. The defendant now appeals that decision. She has no merit. The only question is whether the enabling legislation in Hong Kong entitles the court so to act.

2. Section 20(1) of the Supreme Court Ordinance (Cap. 4) empowers the court to charge a judgment debtors "land or interest in land". The same words appear in 0.50 r.1. They stem from section 35 of the Administration of Justice Act 1956 in England. These words were there held by the Court of Appeal in Irani Finance v. Singh (1971) Ch. 59, to empower the court to charge only a legal or equitable interest in land itself; not on interest in the proceeds of sale of land such as is created under a typical English Trust for Sale. The inconvenience of this conclusion was manifest. Following the recommendation of the Law Commission, the Charging Orders Act 1979 was enacted. This expressly empowered the court (inter alia) to charge "any interest held by the debtor beneficially ..... (2) under any trust": section 2(1)(a). Unfortunately Hong Kong has yet to follow this lead. If it had the plaintiff would clearly be entitled to the charge it seems to deserve. Instead much time and learning has gone into the difficult but barren question as to whether the plaintiff's interest under this Will can properly be said to be an interest in land itself or whether it is only an interest in the proceeds of sale or value of such land.

3. The defendant is a contingent beneficiary under a Trust created by Clause 16 of the Deceased's Will as substantially amended by the 1st Codicil theseto. The corpus of the Trust, described in the Codicil as "the said bequest", was two specific properties and a one-seventh share of the residue. The clause directs the trustee to "stand possessed of 25% of the said bequest" and:-

(1)	"pay the income thereof" to the defendant for a period of 10 years from the death of the deceased: and
(2)	at the end of this period "to transfer the said 25% of the said bequest" to the defendant absolutely subject to her then being alive, and having regard to the intervening death of her husband not having remarried.

4. In addition by clause 23 the deceased declared that "notwithstanding the trust for sale and anything hereinbefore contained my Trustees shall have power to retain the whole of my estate or any part thereof in its present form of investment and my Trustees may transpose any investments into others of such nature as my Trustees may think fit without being responsible for any loss." Further wide discretionary powers were given by clause 26.

5. The deceased died on 4th July 1976 so the defendant's capital entitlement remains contingent. I do not regard that as fatal. The fact that an interest is contingent does not in my view prevent it falling within section 20(1) and I accept the reasoning of the High Court of Australia in Hoystead v. Commissioner of Taxation (No. 1) (1920) 27 C.L.R. 400 at p.409.

6. What I am unable to accept is that this Will created in the defendant any interest in land contingent or otherwise. Mr. Yu for the Bank recognised his difficulty in relation to the one-seventh part of the residue comprised in the "said bequest", but argued that an equitable interest in 25% of the two properties had been created. To maintain this he had to contend that clause 23 did not apply to the Clause 13 Trust, because the existence of any right to convert is in my view inconsistent with any obligation to preserve the properties in specie for the beneficiary. I cannot accept that or escape the conclusion that the interest contingently created was not in these properties but in their value, or their replacements value, at the expiration of the 10 year period.

7. I reach this conclusion with regret, but in cases such as this the remedy, and the English precedent shows it to be a simple one, lies in the hands of the legislature. I must allow this appeal: Discharge the orders nisi and absolute: and make an order nisi that the defendant have her costs here and below.