A Deed of Trust between Shiu Pak Nin and HSBC International Trustee Ltd, dated 10 March 1998 known as the Shiu Pak Nin Discretionary Trust

• Jurisdiction: Cayman Islands
• Judge: Mr. Justice Peter Cresswell
• Judgment Date: 04 February 2014
• Court: Grand Court (Cayman Islands)
• Docket Number: FSD CAUSE NO: 43 OF 2011 (PCJ)

In the Matter of a Deed of Trust between Shiu Pak Nin and HSBC International Trustee Limited, dated 10 March 1998 known as the Shiu Pak Nin Discretionary Trust

And in the Matter of the Trusts Law (2011 Revision)

The Hon. Mr. Justice Peter Cresswell

FSD CAUSE NO: 43 OF 2011 (PCJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

Appearances:

Mr Colin McKie, QC and Miss Lara Kuehl of Maples and Calder for the Trustee, HSBC International Trustee Limited

Mr Kenneth Farrow, QC of HSM Chambers as Amicus Curiae

In Open Court

TABLE OF CONTENTS

• 1. INTRODUCTION

• 2. OVERVIEW

• 3. THE DISCRETIONARY TRUST DEED AND TRUSTEE MEMORANDUM

• 4. SUMMARY OF THE SETTLOR'S FAMILY TREE

• 5. ISSUES TO BE DETERMINED BY THE COURT

• 6. THE 1998 HONG KONH PROCEEDINGS AND THE PROPOSED RESERVE

• 7. THE TRUSTEE'S SUBMISSIONS

• 8. THE SUBMISSIONS OF THE AMICUS CURIAE

• 9. ANALYSIS AND CONCLUSIONS

1. INTRODUCTION

1 HSBC International Trustee Limited (the “Trustee”) is the trustee of the Shiu Pak Nin Discretionary Trust (the “Discretionary Trust”) dated 10 March 1998 (the “Discretionary Trust Deed”) of which the settlor was Mr Shiu Pak Nin (the “Settlor”). By its Ex Parte Originating Summons dated 14 March 2011 (since amended), (the “Originating Summons”), the Trustee applies for certain declarations and directions pursuant to s.48 of the Trusts Law (2011 Revision) and/or GCR Order 85 and/or the inherent jurisdiction of the court with respect to the administration of the Discretionary Trust.

2 The court requested the Attorney General to appoint an Amicus Curiae. The Attorney General appointed Mr Kenneth Farrow QC as Amicus Curiae. The primary purpose of the appointment of an Amicus Curiae is to ensure that, in a case which is complex and where none of the interested parties, other than the Trustee, is currently represented by Cayman Islands attorneys, the merits and demerits of the Trustee's application are properly tested. Mr Farrow QC has been appointed to assist the court. He is completely independent of the Trustee and the interested parties. Since the Trustee's application does not raise any issue of public interest, the court does not consider that the burden of any part of Mr Farrow QC's fees for acting as Amicus Curiae should fall on the public purse and has accordingly ordered that those fees be indemnified out of the trust fund of the Discretionary Trust.

3 The Trustee is represented in this application by Messrs Maples and Calder, Cayman Islands attorneys.

4 The substantive evidence before the court comprises:

• 4.1 The Affidavit of Patrick Love dated 18 March 2011 (“Mr Love's Affidavit”) sworn on behalf of the Trustee;

• 4.2 The Affirmation of Shiu Yuen Chit dated 24 September 2013 (“Mr Shiu Yuen Chit's Affirmation”);

• 4.3 The Affirmation of Shiu Wan Ying dated 11 June 2012 (“Mrs Shiu Wan Ying's Affirmation”);

• 4.4 The First Affidavit of Shek Yuet Min Jacqueline dated 7 May 2013 (“Ms Shek's First Affidavit”) sworn on behalf of the Trustee;

• 4.5 The Second Affidavit of Shek Yuet Min Jacqueline dated 26 September 2013 (“Ms Shek's Second Affidavit”) sworn on behalf of the Trustee; and

• 4.6 The Third Affidavit of Shek Yuen Min Jacqueline dated 17 December 2013 (“Ms Shek's Third Affidavit”) sworn on behalf of the Trustee.

• 4.7 The Supplemental Affirmation of Shiu Yuen Chit of 13 January 2014

• 4.8 The First Affidavit of Shiu Wan Yee Francis sworn 20 January 2014

5 Mr Love's Affidavit sets out the background to these proceedings. In particular, he:

• 5.1 describes the members of the Settlor's “family tree”, to the extent known by the Trustee at that time;

• 5.2 summarises the relevant terms of the Discretionary Trust Deed and the contemporaneous Trustee Memorandum (the “Trustee Memorandum”);

• 5.3 summarises relevant matters relating to other instruments executed on or shortly before 10 March 1998; and

• 5.4 summarises three sets of related proceedings commenced in 1998, 1999 and 2003 in Hong Kong (the “1998 Hong Kong Proceedings”, the “1999 Hong Kong Proceedings”, the “2003 Hong Kong proceedings”, collectively the “Hong Kong Proceedings”).

6 Mr Shiu Yuen Chit's Affirmation provides some details concerning the Settlor's residence prior to settling in Hong Kong in or after 1946. He also gives details of the marriage of the Settlor to Madam Law Wan Yuk and then children, and Mr Shiu Yuen Chit's own marriage, children and grandchildren.

7 On 11 June 2012 Mrs Shiu Wan Ying swore her Affirmation on her own behalf and on behalf of Shiu Wan Mei. She exhibits her birth certificate.

7 a On 20 January 2014 Mrs Shiu Wan Yee Francis swore an affidavit in which she set out her contentions as to legitimacy and descent of herself and her brother Shiu Yuen Chi. She exhibited their respective birth certificates.

8 Ms Shek's First Affidavit summarises the work performed by the Trustee and its service providers from the commencement of this matter on 18 March 1998 until 31 January 2013. The Affidavit is in support of the Trustee's application under paragraph 8 of the Originating Summons, as amended, for an order to approve the Trustee's costs and those incurred by its service providers during that period. Ms Shek's Second Affidavit provides an update as to matters that took place between 31 January 2013 and 26 September 2013, in particular:

• 8.1 the status of the Hong Kong Court's taxation of costs (the “Hong Kong Taxation”) due to the Trustee in the 1998 Hong Kong Proceedings;

• 8.2 the deaths of Shiu Yuen Lim and Siu Yuen Shing, and the consequences of their deaths in the context of these proceedings; and

• 8.3 steps taken by the Trustee to address certain points of evidence raised by Mr Farrow QC.

9 Ms Shek's Third Affidavit provides:

• 9.1 a further update as to the status of the Hong Kong Taxation; and

• 9.2 evidence in respect of the Trustee's costs and expenses between 1 February 2013 and 30 November 2013.

2. OVERVIEW

10 The Settlor was a successful businessman. On 10 March 1998 he settled certain of his assets upon the Trustee on the terms of two trusts: the Discretionary Trust and the Fixed Trust. The Discretionary Trust is constituted by the Discretionary Trust Deed. The Discretionary Trust Deed is governed by Cayman Islands law. No issues arise under the Fixed Trust for determination by the court, although the terms of the deed constituting the Fixed Trust (according to the Trustee) form part of the relevant background to the Discretionary Trust, including the identity of the beneficiaries of the Fixed Trust and the proportions of the assets of the Fixed Trust trust fund that each of those beneficiaries received.

11 The assets of the Discretionary Trust comprise cash deposits of approximately HK$62.5 million (approximately US$8 million) plus the amount receivable pursuant to the costs order of the Hong Kong Court dated 12 August 2011 (and amended on 1 November 2011) in the 1998 Hong Kong Proceedings, which is currently the subject of an ongoing taxation in Hong Kong.

12 The “Eligible Beneficiaries” under Clause 1(e) of the Discretionary Trust Deed are the Settlor; and:

“all such issue of the Settlor as shall be born prior to the Perpetuity Date” (emphasis added).

Clause 1(k) defines “issue” as:

“all lineal descendants male and female and any person legally adopted shall be treated as the child of their adoptive parents whether such adoption shall occur on or before or after [10 March 1998] and any reference to the issue of any person shall include the children and remoter issue of such persons through all degrees”.

Clause 1(b) defines “child” and “children” to include:

“a child or children legally adopted whether before or after [10 March 1998]”.

As far as the Trustee is aware no relevant person has been adopted.

13 At or about the time that the Settlor executed the Discretionary Trust Deed, the Trustee memorialised in the Trustee Memorandum the Settlor's wishes with respect to how, after the Settlor's death, the Trustee should exercise its powers of appointment under the Discretionary Trust Deed.

14 Clause 2 of the Trustee Memorandum names eleven persons, each of whom would receive 1/12 of the entire trust fund, and two others who would each receive 1/24 of the entire trust fund, Together these people are referred to herein as the “Original Named Persons”.

15 Clause 3 of the Trustee Memorandum provides that if any of these Original Named Persons should not survive the Settlor or should die before his or her share is distributed but leaves “issue”, subject to any contrary request that may be given by the deceased Original Named Person during his / her lifetime, such issue shall stand in place of the deceased Original Named Person and take their deceased parent's share (per stirpes and equally if more than one).

16 The relevant terms of the Discretionary Trust Deed and the Trustee Memorandum are summarised below.

17 The Settlor died on 26 March 2008. Following his death, the Trustee had proposed simply to distribute the assets of the Discretionary Trust to the Original Named Persons in the shares set out in the Trustee Memorandum. However, such information and evidence as is available to the Trustee contains a number of inconsistencies that are not readily reconcilable and which throw doubt as to which, if any, of the Original Named Persons is in fact the Settlor's “issue” within the meaning of Clause 1(e) of the Discretionary Trust Deed, and therefore within the definition of Eligible Beneficiaries. Two of the Original Named Persons (Shiu Yuen Lim and Siu Yuen Shing) are now known by the Trustee to have died since the death of the Settlor. Any of the Original Named Persons who have now died are referred to hereafter as “Deceased Named Persons.”

18 The Trustee proposes the following practical solution.

(On the assumption that the court holds that (i) the true construction of “issue” in the Discretionary Trust Deed...