Henry Shing Him Chow & Anor v Victor Ling Kam Tong & Ors [2025] 1 HKC 937, [2024] HKCFI 2737
Richard Todd KC (leading Chan Hei Ching) represented the 1st and 2nd defendants in Henry Shing Him Chow & Anor v Victor Ling Kam Tong & Ors [2025] 1 HKC 937, [2024] HKCFI 2737.
Two actions were commenced in 2021 in the Court of First Instance concerning a family trust created pursuant to a settlement deed. The trust comprised one property only, namely 100% shares in a company. The claim of the plaintiffs, being beneficiaries of the trust, was that the defendants, being the trustees, had transferred 99.95% of the shares of the company to C, the 3rd defendant in HCA 1521/2021, at no or grossly undervalued consideration. Further, the plaintiffs alleged that the trustees were in breach of their duty to distribute income to the beneficiaries including the plaintiffs according to the trust, as the beneficiaries had never been informed about the status of the trust and no income had ever been declared (the income claim). Under HCMP 1305/2021, the plaintiffs sought from the trustees information on the alleged transfer, and a true and perfect inventory and account of the trust. The plaintiffs applied for summary judgment for HCMP 1305/2021 pursuant to O 28 r 4 of the Rules of the High Court (Cap 4A) (the summary judgment application). The trustees and C both took out summonses, under both HCMP 1305/2021 and HCA 1521/2021 respectively, disputing the jurisdiction of the Hong Kong court and seeking a stay of the proceedings in favour of the courts of the British Virgin Islands (BVI) (the stay applications). Clause 17.1 of the settlement deed provided, ‘[a]ll rights under this Deed and its construction and effect shall be subject to the jurisdiction of the courts … of the British Virgin Islands’. Clause 17.2 provided, ‘[t]he courts of [the] British Virgin Islands shall be the forum for the administration of these trusts’. Further, the trustees took out summonses under both actions respectively to adduce further evidence relating to the proceedings which they commenced in the BVI (the new evidence applications). The applications raised the question as to whether following the decision of the Privy Council in Crociani v Crociani [2014] UKPC 40, in a trust context, it was appropriate for the court to carry out a Spiliada enquiry when exercising its discretion whether to give effect to an exclusive jurisdiction clause, and if the conclusion was that the non-stipulated forum was a more appropriate forum than the one stipulated in the trust, whether that would be a sufficiently good reason to allow a departure from the clause.
Held, dismissing the stay applications, allowing the new evidence applications, and allowing the summary judgment application, that:
Clauses 17.1 and 17.2
(1) Clauses 17.1 and 17.2 of the settlement deeds were jurisdiction clauses because they made express references to the word ‘courts’. It was plain that the intention behind the use of the word must have been to confer jurisdiction on the courts of the BVI over the subject matter stated in those two clauses. Crociani v Crociani [2014] UKPC 40, 17 ITELR 624 distinguished (paras 82-90).
(2) Clauses 17.1 and 17.2 were exclusive jurisdiction clauses. Even though the word ‘exclusive’ or ‘only’ was not used by the draftsman of the settlement deed, the omission in itself was not fatal. If one could collect from the text and the factual matrix an intention that the jurisdiction was to be exclusive, the court would give effect to such intention. The words such as ‘all’, ‘shall’ and ‘the’ in clause 17.1 and ‘shall’ and ‘the’ in clause 17.2 were all pointers in favour of interpreting the provisions to confer exclusive jurisdiction. Whilst, according the settlement deed, the trustees may change the proper law but not the forum at the same time, which raised the question whether the parties really intended the situation where they would be bound to litigate in a court which would decide the dispute under a foreign law, this point ought not to be taken so high as precluding a conclusion of exclusivity. The reasons why at some point in the future the trustees may choose to change the proper law and/or the forum to another country could be varied. There was not much information on the circumstances surrounding the making of the settlement deed. More weight should be placed on the pointers. The intention to be gathered from the settlement deed, primarily the actual wording used in Clause 17, was that the parties were obliged to resort to the courts of the BVI in relation to the subject matter set out in the Clause. Yu Lap Man v Good First Investment Ltd [1999] 1 HKC 622 considered; Crociani v Crociani (PC) (above) distinguished (paras 95-108).
(3) When a trust instrument contained a clause providing that the courts of a designated country shall be the forum for the administration of the trust, there arose a question as to what the word ‘administration’ encompassed. There were two schools of thoughts on this. One contended that the forum clause referred to the locus of internal administration which could, if necessary, engage the supervisory jurisdiction of the court, rather than the resolution of hostile litigation between beneficiaries and trustees. The other contended that the forum clause should cover not only ‘friendly’ litigation but also hostile one. The latter view should be preferred. First, the word ‘administration’ as appearing in the forum clause, when read on its own, had no well-established technical significance attached to it, and should bear its plain and natural meaning, which was that it covered all aspects of the administration of a trust, whether it be seeking directions from the court on non-contentious matters or seeking an adjudication from the court on a breach of trust claim. Secondly, the scope of an administration action had always included contentious litigation. There was no reason to limit the expression ‘administration’ to ‘friendly litigation’ only. Thirdly, solely looking at the forum clause, it was difficult to deduce an intention that the draftsman had intended it to cover only one type of litigation but not other types of litigation. If Clause 17.2 was to be read alone, it should bear the construction that the jurisdiction which it conferred on the BVI courts covered all types of litigation. In any event, Clause 17.2 should be read against its proper context and that context was Clause 17.1, which was the other jurisdiction clause in the settlement deed. Clause 17.1 provided that all rights under the deed should be subject to the jurisdiction of the BVI courts. There appeared to be no reason why the word ‘all’ should not bear its plain meaning. It was reasonable to conclude that the draftsman must have intended that the jurisdiction to be conferred on the BVI courts by virtue of Clause 17 would cover all kinds of litigation, whether friendly or hostile. Clauses 17.1 and 17.2 should be read in a consistent way. Therefore, Clauses 17.1 and 17.2 conferred exclusive jurisdiction on the BVI courts over matters relating to the trust and that the jurisdiction included both friendly and hostile litigation. Crociani v Crociani (PC) (above) considered. Crociani v Crociani [2014] JCA 089 (CA) and Ivanishvili v Credit Suisse Trust Ltd [2020] SGCA 62, 23 ITELR 707 not followed (paras 109-124).
Setting aside applications
(4) The court was not bound by the exclusive jurisdiction clause, but had a discretion to decide whether to stay the proceedings or not. For a party who wished to bring proceedings in a non-stipulated forum, he must show strong reasons to convince the court why he should be freed from his contractual bargain. The same should apply to trust cases. A beneficiary who wished to take advantage of a trust could be expected to accept that he was bound by the terms of the trust. The autonomy of the settlor should be respected. It also promoted certainty in the administration of the trust, which should be beneficial to the beneficiaries. In other words, whereas in a stay application based on a contractual exclusive jurisdiction clause, the question before the court was whether the contractual bargain should be enforced, in a stay application based on a trust exclusive jurisdiction clause, the question before the court may be said to be whether the settlor’s autonomy should be respected and his intention upheld. Analysed this way, first, the question of whether the settlor’s autonomy should be respected and the question of which forum was more convenient to try the disputes were different questions warranting different treatments. Secondly, the fact that the non-stipulated forum was more convenient was generally not a sufficiently good reason for not respecting the settlor’s wishes, as the beneficiary was expected to defer to the settlor if he wished to take under the trust. Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631, [2008] HKCU 1009 applied. Crociani v Crociani (PC) (above); A v B (above); Re Lam Kwok Hung Guy [2023] 4 HKC 93, (2023) 26 HKCFAR 119, [2023] HKCFA 9; Re Lam Kwok Hung Guy [2022] 6 HKC 534, [2022] 4 HKLRD 793, [2022] HKCA 1297; Ace Insurance SA-NV v Zurich Insurance Co [2001] 1 All ER (Comm) 802; and Hiromi Okada v Tomohiro Okada [2018] HKCFI 2310, [2019] HKCU 613 considered (paras 126-151).
(5) In deciding whether to exercise the discretion to require the parties to adhere to Clause 17, it was not appropriate to conduct a Spiliada exercise in the first place. Convenience itself did not amount to a sufficiently good reason for departing from Clause 17. Furthermore, none of the connecting factors by themselves constituted sufficiently good reasons for not respecting the autonomy of the settlors. When the trustees’ stay applications were viewed on their own without having regard to the existence of the claims against C, the present proceedings as between the plaintiffs and the trustees should be stayed in favour of the BVI courts. Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd (above) applied (paras 153-154).
(6) Whilst the respective claims against the trustees and C were based on different legal formulations, they arose out of the same facts. The act complained about was the alleged transfer of the shares in the company from the trustee to C at no or grossly inadequate consideration. For that reason, the trial of the claims against the trustees and the trial of the claims against C would take the same shape, except that the former would be of a slightly broader scope as it also covered the income claim, which was only made against the trustees. Hence, if a Spiliada exercise would be appropriate, the answer to the question of which court was more suitable to try the case should be broadly the same whether it was about the claims against the trustees or it was about those against C (paras 156-157).
(7) The failure of the trustees and C to put forward any defence was not a ground in itself to dismiss their stay applications. Their burden was to show that there existed a foreign forum which was more suitable to try the case. There was no burden to put forward a defence as such. VTB Capital plc v Nutritek International Corporation [2013] UKSC 5, [2013] 2 AC 337; and 張才奎所託管中國山水投資有限公司股份相關員工 v 張才奎 [2015] HKCU 1068 (HCA 1661, 1766 & 2191/2014, G Lam J, 13 May 2015, unreported) followed. Bayer Polymers Co Ltd v The Industrial and Commercial Bank of China, Hong Kong Branch [2000] 1 HKC 805 considered. Xu Ziming v Ruifeng Petroleum Chemical Holdings Ltd [2014] HKCU 2013 (HCA 450/2013, Deputy High Court Judge Wilson Chan, 27 August 2014, unreported); High Hope Zhongding Corporation v 廈門墩峰進出口有限公司 [2017] HKCU 120 (HCA 2485/2015, Lok J, 16 January 2017, unreported); and China Railway (Hong Kong) Holdings Ltd v Chung Kin Holdings Co Ltd [2023] HKCFI 132, [2023] HKCU 274 not followed (paras 158-170).
(8) Where issues under foreign law arose, as a matter of principle, the foreign court should be better placed to determine them than the Hong Kong court. There was a risk that the latter may arrive at a wrong conclusion on the foreign law. However, as regards the cause of action concerning the transfer of shares, it would appear that the common law trust principles would apply. Hong Kong courts were well placed to decide on and apply these principles. The trustees or C did not identify any relevant or material difference between BVI law and Hong Kong law which applied to the facts. It had also not been suggested that there was any novel, complex or obscure issue under the laws of the BVI which arose from the facts of the present case. With proper expert evidence, the risk of the Hong Kong court coming to an incorrect conclusion on the BVI law which may feature at trial was not significant. The governing law may be said to be a factor of little significance. The same observations applied to the income claim. Gomez v Gomez-Monche Vives [2008] EWCA Civ 1065, [2009] Ch 245; 李明實 v Ace Lead Profits Ltd [2022] HKCFI 3342, [2022] HKCU 5450; 張才奎所託管中國山水投資有限公司股份相關員工 v 張才奎 (above); and Navigators Insurance Co v Atlantic Methanol Production Co LLC [2003] EWHC 1706 (Comm) considered (paras 171-181).
(9) The location of the witnesses pointed to Hong Kong being the more convenient forum. For expert witnesses, when it came to the valuation of the company, Hong Kong valuers, in respect of real property and other business operations, would be a natural choice. The likelihood that Hong Kong experts would be engaged with their location being Hong Kong, was a connecting factor in favour of the Hong Kong court. For location of documents, the administration of the trust was likely to have been carried out in Hong Kong. The documentation relating to the setting up and administration of the trust was likely to be Hong Kong. The company’s head office was in Hong Kong and its substantial assets were also located here. The documentation relating to the assets of the company would be in Hong Kong. Lastly, given that the trustees and C had both been residing in Hong Kong, it was possible that the physical act of the alleged shares transfer had taken place in Hong Kong. The documentation in relation to the transfer would likely be in Hong Kong. In summary, the location of documents as a connecting factor was in favour of having the trial in the Hong Kong court (paras 182-188).
(10) The chronology of the BVI proceedings, in the absence of any explanation, showed that it was merely a tactical move of the trustees to commence them. It was doubtful that the proceedings would be genuinely pursued by them. In any event, the proceedings had not passed beyond the stage of the initiating process. The existence of the BVI proceedings was not a relevant factor when determining the appropriate forum. Emirates Shipping Line DMCEST v Trans Asian Shipping Services PVT Ltd [2015] HKCU 2919 (HCCL 2/2013, Ng J, 30 November 2015, unreported) considered (paras 189-192).
(11) The dispute had overwhelming connections with Hong Kong. Apart from the governing law and the BVI proceedings which were neutral factors, every other factor pointed to the Hong Kong court being the more appropriate forum for the trial of the present claims. Therefore, if a Spiliada exercise would be appropriate, these proceedings as between the plaintiffs and the trustees should not be stayed in favour of the BVI courts on the ground of forum non conveniens. The analysis applied equally to the dispute between the plaintiffs and C (paras 195-197, 204).
(12) C was not a party to the settlement deed. He could properly be described as a stranger to the trust. He was not a beneficiary. He had no role in the trust or no claim under the trust. He simply had no relationship with the trust. That being the case, he could not rely on Clause 17 and require the plaintiffs to sue him in the BVI courts (paras 198-202).
(13) The stay applications should be dismissed. When one left aside the claims against C, the Hong Kong proceedings as between the plaintiffs and the trustees should be stayed by reason of Clause 17. On the other hand, when one left aside the concurrent claims against the trustees, the proceedings as between the plaintiffs and C should be allowed to carry on in Hong Kong. These different conclusions led to two questions: (i) Should the present proceedings against the trustees and against C be heard in two jurisdictions? (ii) If not, in which forum should they be heard? For the first question, the present proceedings should all be tried in one single forum. The material consideration was the fact that the claims against the trustees and those against C were inextricably linked as they arose from one single incident, namely the alleged transfer of the shares of the company. These claims should be tried together in one jurisdiction to avoid duplication of costs arising from two separate trials and inconsistent findings by the two courts. For the second question, the Hong Kong court should be better placed to hear the present proceedings. When the claims against C were also taken into account, there were sufficiently good reasons to depart from Clause 17. There was a genuine need to avoid parallel proceedings. The Hong Kong court was the better option because first, the plaintiffs should be allowed to sue C in Hong Kong; secondly, the trustees were sued here as of right; and thirdly, Hong Kong was clearly the more appropriate jurisdiction from a forum non conveniens perspective. It followed that it would be in the interest of justice to have the case tried in Hong Kong. The El Amria [1981] 2 Lloyd’s Rep 119; Donohue v Armco Inc [2001] UKHL 64, [2002] 1 All ER 749; and Quaestus Capital Pte Ltd v Everton Associates Ltd [2021] 4 HKC 605 applied. Crociani v Crociani (PC) (above) considered. Lammas Global Corporation v Barclays Bank (Suisse) SA [2011] HKCU 724 (HCA 2411/2009, Saunders J, 13 April 2011, unreported) distinguished (paras 205-232).
Summary judgment application
(14) The unopposed expert evidence was that there was no specific statutory provision in the BVI on disclosure under trust law. A beneficiary had a right to seek disclosure of trust documents. As part of its inherent jurisdiction to supervise, and where appropriate to intervene in the administration of trusts, the court had the power to order disclosure. The beneficiary must demonstrate why it was appropriate for the court to exercise the discretion in his favour. The power was to be exercised for enabling the beneficiary to hold the trustee to account for its stewardship of the trust. In the present case, the plaintiffs deposed to the alleged transfer. They had demonstrated a prima facie case for disclosure. They should be allowed access to the documents so as to find out whether there was a breach and to seek remedies accordingly. On the other hand, no substantive defence had ever been put forward by the trustees to rebut the allegation. In their opposing affirmation, the trustees only referred to their jurisdiction challenge. They did not say anything about why disclosure should not be ordered. They had not discharged the burden to show an arguable defence under RHC O 28 r 4. Accordingly, summary judgment should be entered. Schmidt v Rosewood Trust Ltd [2003] UKPC 26, [2003] 2 AC 709 applied; Bank of China (Hong Kong) Ltd v Twin Profit Ltd [2010] 2 HKLRD 1065, [2010] HKCU 718 and Tchenguiz v Rawlinson & Hunter Trustee SA BVIHCM 2017/0026 considered (paras 234-240).
[The above is excerpted from the headnote to the report in HKC.]
