KOO WAI ON MINA v. TAI SAU LIN

1994 M.P. No. 1733

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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INTRODUCTION

1. Mina Koo is the daughter of Koo Hong Wai and his wife, Madam Cheng Shun Yee. Mina is now 14 years old. Madam Cheng died in 1993, but in September 1992 she had given her aunt, Madam Tai Sau Lin, $1.8 m. to pay for Mina's education, and for Mina's use after she left school. In the course of time, relations between Mr. Koo and Madam Tai became strained. The result was that on 6th July 1994 Mr. Koo, as Mina's next friend, issued an originating summons on Mina's behalf against Madam Tai seeking relief under Section 42 of the Trustee Ordinance (Cap. 29) ("the Ordinance").

2. The originating summons came before me exactly a year later on 6th July 1995. At the conclusion of the hearing, I made various orders, but since it was late in the afternoon I said I would hand down my reasons at a later date. This I now do.

THE CONSTRUCTION OF THE LETTERS CREATING THE TRUST

3. In one respect, the relief sought by Mr. Koo on Mina's behalf had been overtaken by events. In para. 1 of the originating summons, Mr. Koo had sought a determination of the question whether, according to the terms of the trust, Madam Tai was required to pay for Mina's education out of the trust fund if Mina went to school elsewhere than in the U.K. At one stage, Mr. Koo had wanted Mina to leave the school in England where she was, and go to school in Vancouver, which was where he had emigrated to with his other children after Madam Cheng's death. Madam Tai had argued through her solicitors that, on a proper construction of the letters from Madam Cheng which created the trust, the trust fund could only be used to pay for Mina's school fees as long as she continued to go to school in England. That issue was one which both parties agreed I did not now need to decide. That was because Mr. Koo no longer intended, for the time being at any rate, to remove Mina from her school in England. I therefore made no order on para. 1 of the originating summons, though it may be of assistance to Mr. Koo and Madam Tai (in case Mr. Koo decides, at some time in the future, to send Mina to school outside England) if I indicate that Madam Cheng's letter to Mr. Koo of 5th September 1992 (in which she wrote that Mr. Koo would have to bear the cost of Mina's education if she went to school outside England) is a powerful indicator of Madam Cheng's intention when she wrote the letters to Madam Tai creating the trust.

THE PROVISION OF PROPER ACCOUNTS

4. In para. 5 of the originating summons, Mr. Koo sought an order that, so long as Mina remains an infant, a full and accurate account of the trust fund be rendered to Mr. Koo at the end of each financial year of the trust. Such an order was sought because at one time there had been problems over the provision of information to Mr. Koo as to how the trust fund was being used. However, after the issue of the originating summons, Madam Tai filed an affirmation in which she deposed that she had no objection to rendering to Mr. Koo a full and accurate account of the trust fund at the end of each financial year of the trust, while Mina remained an infant, provided that the cost of preparing and rendering such accounts was to be paid out of the trust fund. In those circumstances, I made an order in terms of para. 5 of the originating summons, though that order (a) was to be subject to the proviso that the cost of preparing and rendering such accounts was to be paid out of the trust fund, and (b) identified the financial year of the trust as being 1st September to 31st August.

THE IDENTITY OF THE TRUSTEES

5. At the beginning of the hearing before me, an issue arose as to (a) whether Madam Tai was the only trustee under the trust, (b) whether Madam Cheng was also a trustee from the date when she withdrew the $1.8 m. from the account in the joint names of herself and Mr. Koo until her death, and (c) whether Madam Cheng had appointed Madam Tai's husband, Mak Hon Kai, as an additional trustee in December 1992. After hearing argument, I ruled that Madam Cheng had indeed become a trustee in September 1992, and that she accordingly had had power to appoint Mr. Mak an additional trustee in December 1992, though whether she had exercised that power was dependant on facts which were in dispute. I said that I could not decide that issue without the oral examination of the deponents on their affidavits and affirmations.

6. That ruling prompted Mr. K. Y. Thong for Mina to decide not to argue that Mr. Mak had not become an additional trustee in December 1992. Once Mr. Mak was to be treated as an additional trustee, the relief sought in para. 4 of the originating summons could no longer be pursued. Para. 4 had sought an order requiring Madam Tai to transfer the trust fund, including accrued interest, to an account in her sole name. That order had been sought because the trust fund had been held in an account in the joint names of Madam Tai and Mr. Mak. Mr. Koo had objected to Mr. Mak (who Mr. Koo at the time regarded as a stranger to the trust) having access to the trust fund. Since Mr. Mak was to be treated as an additional trustee, that objection could no longer be sustained. Accordingly, I refused to make the order sought in para. 4 of the originating summons.

THE APPOINTMENT OF NEW TRUSTEES

7. The only issue which I had to decide was whether Mr. Koo was entitled, on Mina's behalf, to the relief sought in paras. 2 and 3 of the originating summons. What he sought was the appointment of new trustees in place of, or in addition to, Madam Tai, with consequential directions as to the account into which the trust fund was to be transferred. Three criticisms were levelled at the trusteeship of Madam Cheng :

(i) Mina's school fees for a number of terms were not paid by Madam Tai out of the trust fund. Instead, they were paid by Mr. Koo. That was admitted by Madam Tai, though she claimed that Mr. Koo had insisted on paying them himself. I was not able to decide that issue definitively without the oral examination of Mr. Koo and Madam Tai, though it looks as if what happened was that for the sake of convenience Mr. Koo had paid the school fees himself in the belief that he would be reimbursed his expenditure from the trust fund in due course. In the event, he subsequently decided not to press for the reimbursement of his expenditure.

(ii) It took over six months for Madam Tai, despite repeated requests, to provide Mr. Koo with trust accounts. She only did so when faced with irrefutable legal authority that she was obliged to do so, having previously put forward a number of untenable excuses for not having done so earlier. I agree with that criticism of her.

(iii) The account in the joint names of Madam Tai and Mr. Mak into which the trust fund had been placed was an Asset Vantage account with the Hong Kong Bank. That account gave Madam Tai and Mr. Mak overdraft facilities with the trust fund as security. However, it is accepted that that was not done in bad faith : a better rate of interest is earned on sums in such an account, and the bank statements show that the overdraft facilities were not in fact used.

8. The Court's power under Section 42 of the Ordinance to appoint trustees arises when it is "expedient" to do so. "Actual misconduct on the part of the trustee need not be shown, but the court must be satisfied that his continuance in office would be prejudicial to the due performance of the trust, and so to the interests of the beneficiaries" : Hanbury and Maudsley, "Modern Equity", 13th ed., p. 478. Thus, if the relationship between the trustee and the beneficiary's guardian has broken down to such an extent that the beneficiary's interests are being adversely affected by the continuance of the trustee in office, it would be appropriate for new trustees to be appointed. Looking at the particular criticisms levelled at Madam Tai, and taking into account the limited extent to which those criticisms are justified, I did not believe that the undoubted breakdown of trust between Mr. Koo and Madam Tai had reached the stage when Mina's interests were being so adversely affected that Madam Cheng's wish to entrust Mina's education to Madam Tai should no longer be implemented. Accordingly, I did not regard it as expedient for new trustees to be appointed, whether in addition to, or in substitution for, Madam Tai and Mr. Mak. For these reasons, I refused to make the orders sought in paras. 2 and 3 of the originating summons.

COSTS

9. The issue of costs was argued before me. Since I was going to hand down my reasons at a later date, I decided to reserve my decision as to costs.

10. The effect of Ord. 62 r.6(2) is that Madam Tai is entitled to the costs of these proceedings unless she has acted unreasonably, or for her own benefit rather than for the benefit of the trust fund. No question of her acting for her own benefit arises. The only question is whether she has acted unreasonably. Apart from the provision of the trust accounts, I do not think that she has acted unreasonably. Even in relation to them, though, once copies of the accounts to date had been sent to Mr. Koo's solicitors in December 1993, no further demand for trust accounts was made before relief in relation to them was sought in para. 5 of the originating summons. Madam Tai did not object to that relief in the affirmation which she promptly made in response to the originating summons.

11. Moreover, having read the correspondence marked "Without prejudice save as to costs", I do not think that Madam Tai can fairly, in the light of this judgment, be said to have acted unreasonably in not accepting the offers made by Mr. Koo's solicitors. After all, (a) the letter of 11th April 1995 required Madam Tai to pay the costs of the proceedings personally (including Mr. Koo's costs as well as her own), and (b) the letter of 22nd June 1995 required Madam Tai to agree to an order for the appointment of an additional trustee.

12. For these reasons, Madam Tai should have her costs of the originating summons to be taxed if not agreed. The only remaining question is whether those costs should be paid by Mr. Koo, or whether they should be paid out of the trust fund. In the exercise of my discretion, and having regard to all the circumstances of the case, I order that they be paid out of the trust fund.