THE LUK HOI TONG COMPANY LTD v. SIT PO KWAN AND ANOTHER

HCMP 698/2018

[2025] HKCFI 1339

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 698 OF 2018

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D E C I S I O N

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1.  Before the court today are:

(1)  the re-re-amended originating summons dated 1 November 2024;

(2)  the summons of the 6^th and 8^th defendants dated 12 July 2023; and

(3)  the summons of the plaintiff dated 31 August 2023.

2.  The parties, who are before the court today, have managed to resolve all the issues save for two, namely (1)  the identity of the judicial trustee to be appointed, and (2)  how to deal with the costs of the re-re-amended originating summons, in particular the costs of today’s hearing.

3.  In order to resolve these two outstanding issues, there is a prior issue to be determined.  The prior issue is whether there have been any disputes among the beneficiaries over their entitlements under the trust.

Prior issue

4.  Ms Ching, a representative of the plaintiff, has gone on affidavit to say that there have been such disputes since about 2011.

“21. Despite the Deed of Family Arrangement, there have always been disputes amongst the descendants and/or next-of-kin of the Deceased which render it extremely difficult for the Plaintiff to discharge its duty as trustee. Their disputes simmered sometime in 2011 and aggravated since December 2013.

22. The disputes amongst the descendants/next-of-kin of the Deceased would be summaried as follows:-

(a)  some of them suggest that entitlement to the said Shares and Certificates and dividends to be derived therefrom should be distributed according to ‘per head basis’ instead of in terms of the Deed of Family Arrangement; and

(b)  some of them even challenge the entitlement of descendants/ next-of-kin individual suggesting that they are not entitled to any interest in the said Shares and Certificates inclusive of payment of dividends.

23.  As a result of the disputes, the role of the Plaintiff has becoming extremely difficult and a lot of efforts have been invested by the Plaintiff in dealing with these disputes with no practical result.”

5.  I do not think I am in a position to reject her affidavit evidence outright in this hearing.

6.  When the originating summons was first taken out in 2018, the court was asked to make a determination on the construction and validity of the Chinese memorandum and the deed of family arrangement and the vesting of the trust property in the beneficiaries.  The existence of the disputes was not the focus of the construction exercise.  Rather, it was more a background piece of information leading to the application itself.

7.  Mr Abel Lam, appearing with Mr Kenny Kwok for the 1^st, 6^th to 8^th defendants, is now making criticism of the lack of particulars of those disputes in the plaintiff’s affidavit evidence.  There may well be lack of particulars.  However, given that the disputes only formed the backdrop of the application at that time, I do not consider that the lack of particulars should be taken as showing that there were in fact no disputes in the first place.

8.  Furthermore, counsel’s advice was sought by the plaintiff in 2014.  There were a number of references to those disputes in the advice, albeit with no particulars.  See these references: “disputes arising from beneficiaries”, “the continuous dispute”, “the belligerent attitude of members of the fongs and the female representatives” and “the belligerent attitude amongst the beneficiaries”.

9.  In using the above phrases, it is true that counsel might well have been reciting the instructions given by the plaintiff in his advice.  However, I find it inherently implausible that instructions would have been given to counsel to that effect if there had been no disputes amongst the beneficiaries at that time.

10.  Mr Lam points out that there is a discrepancy in the plaintiff’s evidence in that Ms Ching referred to the disputes commencing in 2011 whereas counsel referred to them commencing in 2013.  It is not known how the discrepancy came about.  But, in my view, that discrepancy does not materially undermine the gist of the plaintiff’s evidence that there were disputes among the beneficiaries. 

11.  For the above reasons, for the purpose of today’s applications, I would proceed on the basis that the plaintiff considered that there were in fact disputes amongst the beneficiaries over the entitlements under the trust.  But I should make clear that I am not saying that these disputes justify the stopping of the payment of dividends from about 2011 onwards.  Whether that is the case or not is not a matter before me today.

Issue: the identity of the judicial trustee to be appointed

12.  I now turn to the question of who should be appointed as the judicial trustee. 

13.  The choice is between Mr Wong Tak Shing, as nominated by the plaintiff, and Mr Ip Woon Shun, as nominated by the 1^st, 6^th to 8^th defendants.

14.  Both Mr Wong and Mr Ip are experienced probate practitioners.  Their expertise and credentials are not being challenged.

15.  The main objection with regard to Mr Wong is that he is nominated by the plaintiff.  The defendants who appear before me today contend that Mr Wong is therefore not an impartial person to be appointed to the office of the judicial trustee.  This is particularly so because the beneficiaries may have a claim against the plaintiff for breach of trust as no dividends have been paid since 2011 and the judicial trustee may have to commence litigation against the plaintiff.  The defendants therefore have doubt over Mr Wong’s independence and impartiality in the administration of the trust.

16.  I reject that contention.  That may well represent the subjective sentiment of some of the defendants, who are aggrieved by the plaintiff’s failure to pay dividends.

17.  However, before me, there is nothing which suggests any prior or existing relationship between the plaintiff and Mr Wong.  There is nothing before me which suggests that Mr Wong would not uphold the professional standard expected of him in his discharge of the duty of the judicial trustee, if appointed.

18.  The main objection with regard to Mr Ip is that he may be in a position of conflict because his firm, Hugill & Ip, have been representing the 6^th and 8^th defendants since 2020, and the 1^st and 7^th defendants since recently, in the present proceedings.

19.  I find that objection to be valid.  

20.  On the basis that there have been disputes amongst some of the beneficiaries over their entitlements under the trust, these disputes might re-emerge in the course of the future administration of the trust.  Mr Ip, as trustee, would need to act in an impartial manner and deal with each of the beneficiaries on an equal footing.  However, if in the present proceedings, he or his firm had been given instructions by, and he or his firm had given advice to, the four defendants who are now before me today on the same subject matter, this would seem to me to be a clear case of actual conflict or perceived conflict.  

21.  This is because Mr Ip is supposed to act in the interests of all the beneficiaries as a whole but he may not be able to do so or do so fully because of the instructions and advice previously given.  For instance, he will not be able to share what he had learned from the defendants, if any, with the other beneficiaries, which may be material or relevant to the disputes.  His duties owed to the defendants thus potentially conflict with his duties owed to the beneficiaries.

22.  I should record here that it is also Mr Lam’s submission that any dispute in relation to the deed of family arrangement which was made in 1989 would be time-barred.  Hence, the disputes would not give rise to any problem of conflict of interest on the part of Mr Ip.  In my view, it would be premature to come to any definitive view that any dispute in relation to the deed would be time-barred.  This point, if it arises, will need to be further looked into by the incoming trustee. 

23.  Mr Lam urges the court to accede to the preference expressed by the majority of the beneficiaries and nominate Mr Ip to be the judicial trustee.  

24.  There is a dispute as to how many beneficiaries there are and hence what constitutes the majority.  For today’s purpose, I will assume that Mr Ip is in fact the preference of the majority beneficiaries.  The majority view is something that I should give considerable weight to.  However, in this case, the majority wish would be outweighed by the actual or potential conflict of interests which Mr Ip may face in the future.

25.  I therefore would appoint Mr Wong to be the judicial trustee.

Issue: what order should be made in respect of the costs of the re-re-amended originating summons and the costs of today’s hearing?

26.  The last issue is what order should be made in respect of the costs of the re-re-amended originating summons and the costs of today’s hearing.

27.  I would allow the plaintiff’s costs of the re-re-amended originating summons including the costs of today’s hearing, which should be paid out of the dividends.  The costs of the 1^st, 6^th to 8^th defendants should similarly be paid out of the dividends. 

28.  I do not find that when taking out the originating summons, the plaintiff acted unreasonably or improperly.  It had obtained counsel’s advice on how to be relieved of its duties under the trust.  Pursuant to that advice, it took out the originating summons in 2018.  The court was asked to determine questions in relation to the Chinese memorandum and the deed of family arrangement and the vesting of the trust property in the beneficiaries.  On the face of it, these answers are relevant and material to the ongoing administration of the trust.  I do not think it would be right to say that the plaintiff was doing something unreasonable there.  

29.  It is true that by taking out the summons in 2023, it no longer seeks the relief asked for in the originating summons.  It now simply asks for it to be relieved of its duties as trustees.  But that change of course does not render what it did in 2018 to be unreasonable.

30.  There appears to be delay on the part of the plaintiff to seek directions from the court.  Counsel’s advice was obtained in 2014.  The originating summons was issued in 2018.  However, I do not consider that the delay itself would justify depriving the plaintiff of its costs of the re-re-amended originating summons.  The taking out of the present proceedings is a necessary step.  As to whether the defendants can have recourse in relation to the apparent delay, that is not something which I can decide today.

Orders

31.  For the above reasons, I make an order in terms of the plaintiff’s proposed orders as amended as follows:

(1)  The plaintiff be relieved of its duties as trustee of the 1,401 Ordinary Shares and 2 Promoters’ Certificates of Title of The Luk Hoi Tong Company Limited (“Shares”)  registered in the name of the late Sit Chie But, also known as Sit Che But and Sit Chi But, deceased and all undistributed dividends (“Dividends”)  derived from the Shares (“Trust Property”).

(2)  Mr Wong Tak Shing (“Mr Wong”)  be appointed as judicial trustee in place of the plaintiff in respect of the Trust Property.

(3)  The fees for Mr Wong shall be charged at $4,000 an hour.  His fees will be subject to the cap in section 60(2)(b)  of the Probate and Administration Ordinance, Cap 10.

(4)  The Trust Property be vested in Mr Wong in his capacity as the judicial trustee of the Trust Property.

(5)  Leave for the re-re-amended originating summons to be discontinued.

(6)  The plaintiff’s costs of the re-re-amended originating summons, the 6^th to 8^th defendants’ summons and the plaintiff’s summons, including costs of today’s hearing, be paid out of the Dividends, to be taxed on a trustee basis.

(7)  The defendants’ costs of the re-re-amended originating summons, the 6^th to 8^th defendants’ summons and the plaintiff’s summons be paid out of the Dividends, to be taxed on a trustee basis if not agreed.