WONG TIN CHEE TINLY AND OTHERS v. WONG TO YICK AND ANOTHER

HCMP 1316/2018

[2018] HKCFI 2548

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1316 OF 2018

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DECISION

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The application

1.  This is the plaintiffs’ application to terminate the trust (“the Trust”) over a property known as Office A, 1^stFloor, Fu On Commercial Building, Nos 190 – 192 Cheung Sha Wan Road, Kowloon (“the Property”)and have the Property assigned and transferred to a party designated by them, namely WTY World Dynamic Limited (“WTY World”), or alternatively to the 1^st to 4^thplaintiffs (“P1” to “P4”) as tenants in common in the respective shares of 40%, 20%, 20% and 20%.

2.  This is the first hearing of the Originating Summons.  The plaintiffs invite me to grant the application here and now.

The plaintiffs’ case

3.  The 1^st and 2^nd defendants (“D1” and “D2”) were husband and wife.  They were divorced in 2003.  They are the parents of the plaintiffs, who are all blood brother and sisters.

4.  The plaintiffs have each filed an affirmation.  They are all sui juris.  They all consent to the application. 

5.  The plaintiff produced a written confirmation from D2 stating that (1) she and D1 have been holding the Property as trustees for the plaintiffs; (2) all the defendants are sui juris, and (3) she is willing to revert the Property to the defendants.

6.  According to P3, D1 in a letter of 17 February 2017 from his solicitors (a copy of which P3 has produced) acknowledged that he was holding the Property as trustee for the plaintiffs.  He indicated that by reason of his age, he no longer wished to hold interest in the Property as trustee and would like to vest the interest upon the plaintiffs.  P3 states further in her affirmation that however, when the plaintiffs subsequently decided to sell the Property to WTY World and advised D1 accordingly, D1 failed to cooperate.  He did not even raise any alternative proposal which he was prepared to accept. 

7.  Relying upon the so-called rule in Saunders v Vautier (1841) 4 Beav 115, and claiming that they are the only beneficiaries to the Trust, they seek termination of the Trust and assignment of the Property in the way they have indicated and directed. 

The Trust

8.  The Court has been referred to an Assignment of the Property dated 8 September 1977 (registered via Memorial No 1437247, “the Assignment”).  A company called Fu Kin Company Limited was the vendor.  The two defendants were the purchasers.  According to the Assignment, Fu Kin Company Limited assigned the Property unto:

“ the Purchaser as Joint Tenants … UPON TRUST for sale for [P1] Student, [P2] Married Woman, [P3] Student and [P4] Student … as Tenants in Common in the following shares that is to say as to two equal undivided 5th parts or shares thereof unto [P1] as to one equal undivided 5th part or share thereof unto [P2] and as to one equal undivided 5th part or shares thereof unto [P3] and as to the remaining one part or share thereof in [P4] with power to sell the same and to postpone such sale without referring to the sale beneficiaries or joining them as parties in the relevant deed of Assignment for such sale and with further power without referring to the said beneficiaries to mortgage or otherwise charge the said premises in favour of any person firm corporation or bank for the purpose of raising money by way of banking facilities, overdraft or immediate advance either for the use of the Purchasers, the beneficiaries or for other principal and persons and upon such terms and conditions as the Purchasers shall think fit and with further power to sign seal and deliver suchdeed of mortgage or charge and to receive the mortgage principal and give valid receipt thereof and/or to operate all accounts in respect of the said banking facilities or overdraft without having the said beneficiaries joined in the Deed or Mortgage ….”

9.  I highlight the following points relevant to the nature of the Trust:

(a)  It is a trust for sale.  Hence, strictly speaking, the duty of the defendants is to sell the Property and hold the sale proceeds as trustees for the beneficiaries;

(b)  But the defendants as the trustees have the power to postpone any sale; and

(c)  Pending such sale, the defendants as trustees have the power to mortgage or charge the Property; and

(d)  Importantly, the purpose of such mortgage or charge may be to raise money “for the use of the Purchasers, the beneficiaries or for other principal and persons.”

The rule in Saunders v Vautier

10.  In her written submissions, Ms Sabrina Ho (who together with Mr Tommy Cheung appear for the plaintiffs) submits that “It is well established that all beneficiaries, if sui juris and together entitled to the whole beneficial interest, can put an end to the trust and direct the trustees to hand over the trust property as they direct.  This is generally referred to as ‘the rule in Saunders v. Vautier’”.  Ms Ho also refers me to paragraph 29-030 of Snell’s Equity (33^rded).

11.  I accept that the rule in Saunders v Vautier exists.  It also makes perfect sense.  A person who is sui juris can do what one likes with one’s property.

12.  The operation and application of that rule however is premised upon the beneficiaries making the application having together the entire interest in the property concerned.  As explained in Snell’s Equity at paragraph 29-030:

“ Again, where trustees are directed at their absolute discretion to pay or apply the whole or any part of the income of a fund to or for the benefit of A, and are told to pay or apply to or for the benefit of B any part of the income not applied for A’s benefit,A and B, if both sui juris, can together compel the trustees to pay the whole income as they direct, for they are the sole owners of each slice of income. But the rule does not apply if other persons have possible interests in the income, so that A and B alone could not control the trustees’ application of the income.”

In Berry v Green [1938] AC 575, at 582, Lord Maugham LC observed and explained:

“ My Lords, upon this construction of the will it is not now in dispute that the rule in Saunders v. Vautier does not apply, the reason being that that rule has no operation unless all the persons who have any present or contingent interest in the property are sui juris and consent. That is not the case here as regards all the persons who have rights as next of kin to a share in the released income. ”

13.  Ms Ho in her written submissions has not sought to deal with the nature of the Trust or the limitation concerning the operation of the rule in Saunders v Vautier.

Discussion

14.  I come back to the Assignment and the nature of the Trust.  I at this stage proceed on the basis that the Trust is not void and is to be administered as it is.  As I have observed above, it is a trust for sale, with power to postpone the sale and to, in the meantime, mortgage or charge the Property “for the purpose of raising money … either for the use of the Purchasers, the beneficiaries or for other principal and persons”.

15.  Once the nature of the Trust and the powers of the defendants astrustees are noted, it immediately becomes apparent that the plaintiffs are not all the persons who have all present and contingent interest in the Property.  There are also “the Purchasers” and “other principal and persons”.  The rule in Saunders v Vautier potentially has no application.

16.  There are in fact other possibilities.  As said, I have been proceeding on the basis that the Trust is not void.  Because of the use of the words “other principal and persons”, the funds raised by a mortgage or charge of the Property can in fact be used for or by anyone.  Will that wide and undefined power and purpose render the Trust void?  If that is so, the Property may revert back to the settlors, who were the defendants.  On the other hand, may that wide and undefined purpose and power be severed, read down or somehow impliedly defined?  These are all issues which the plaintiffs have not yet addressed.

Disposal

17.  In the circumstances, I refuse to grant the application at this stage.  Should the Originating Summons proceed any further, the plaintiffs should, I expect, address those issues identified above (on top of any other which the parties may discover).

18.  Upon Ms Ho’s request, I give directions on the filing of further evidence.

19.  I reserve the costs of this hearing.