APAC Monthly Private Wealth Legal Developments – May 2020

Welcome to Herbert Smith Freehills’ new monthly private wealth industry updates in Asia.

Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format. The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region. Continue reading

SFC clarifies licensing obligations of PE firms and family offices which conduct business in Hong Kong

On 7 January 2020, the Securities and Futures Commission (SFC) issued two circulars to clarify aspects of the licensing obligations applicable to private equity (PE) firms and family offices which conduct business in Hong Kong.

The circulars have been issued in response to enquiries from industry participants and their professional advisers.

An overview of the key aspects covered by the circulars is set out below. New entrant PE firms and family offices should take note of the circulars when determining whether an application for a licence should be made to the SFC. Existing PE firms and family offices should also review the circulars to ensure that they comply with the relevant licensing requirements.

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APAC Monthly Private Wealth Legal Developments – December 2019

Welcome to Herbert Smith Freehills’ new monthly private wealth industry updates in Asia.

Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format. The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region. Continue reading

APAC Monthly Private Wealth Legal Developments – November 2019

Welcome to Herbert Smith Freehills’ new monthly private wealth industry updates in Asia.

Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format.  The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region. Continue reading

TRUSTEES TAKE COMFORT – HIGH COURT UPHOLDS BROAD SCOPE OF EXONERATION CLAUSES

Summary

Trustees often seek to limit their liability in the form of exoneration clauses in trust deeds. As such,  it is generally difficult for a beneficiary to challenge a trustee’s decision that falls within the scope of the exoneration clause.

In Sofer v SwissIndependent Trustees SA [2019] EWHC 2071 (Ch), the England and Wales High Court confirmed just how high the bar can be for beneficiaries to overcome the limitation on liability provided by exoneration clauses and also set out a test for doing so. Here the defendant (the trustee) applied for striking out or summary judgment of a claim pursued by a beneficiary for breach of trust, on the basis that the trustee’s relevant action was covered by an exoneration clause. The strike out was granted.

The judgment is also noteworthy in particular for Hong Kong and Australian trustees and beneficiaries. The judge relied on both English and Australian case law and highlighted that “the relative homogeneity of trust law in this and other Commonwealth jurisdictions” meant the Australian case law had “considerable persuasive value”. Continue reading

Zhang Hong Li v DBS Bank – Much awaited Hong Kong Court of Final Appeal decision on anti-Bartlett clauses handed down

Earlier today, the Hong Kong Court of Final Appeal handed down judgment in Zhang Hong Li v DBS Bank and others a case which has been the cause of considerable discussion in the private wealth and trusts world. The Court of Final Appeal reversed the Court of Appeal’s findings and ruled that the anti-Bartlett clause contained in the trust deed effectively excluded any “high level supervisory duty” with any purported residual obligation on the part of the trustee in relation to the losses caused by risky investment decisions made on behalf of the trust’s underlying investment company. The Court of Final Appeal similarly found that the corporate director of the investment company also had no such high level supervisory duty and was not in breach its fiduciary duties. The case was heard in the Hong Kong courts and the governing law of the trust was Jersey law. The principles will therefore likely be applicable in most of the major common law trust jurisdictions.

This is our initial take on the decision with more detailed analysis to come over the next few days.

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APAC Monthly Private Wealth Legal Developments – October 2019

Welcome to Herbert Smith Freehills’ new monthly private wealth industry updates in Asia.

Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format.  The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region. Continue reading

HONG KONG HIGH COURT REVERTS DEPARTURE FROM GENERAL RULE ON COSTS IN DISPUTE BETWEEN BROTHERS

Background

In Chan Chi Wai v Chan Sau Wah [2019] HKCFI 1662 an application was made to vary a costs order nisi granted by the Hong Kong High Court regarding a dispute between five brothers over the legal and beneficial ownership of two houses in the New Territories (Original Proceedings). The applicants were two of the brothers and the plaintiffs in the Original Proceedings.

In the Original Proceedings, the court had departed from the general cost rule that the successful party should be entitled to costs of the proceedings by handing down a costs order nisi that there be no order as to costs despite judgment being made in favour of the plaintiffs. This departure from the normal costs order was on the basis that the nature of the plaintiffs’ claim was unfair and unconscionable. In short, the judge made this finding based on the fact that the plaintiffs had already been occupying one of the houses to the exclusion of their other brothers but nevertheless sought to exclude the other brothers from the second house despite the plaintiffs being co-owners of that second house. 

At the time the Court made the costs order nisi, the Court was not aware of the parties’ without prejudice correspondence. The parties had made a number of failed without prejudice offers to one another and, significantly, the plaintiff had made a particularly generous offer while the defendants’ counter offer was particularly nonsensical. The plaintiffs’ offer had in fact been more favourable to the defendant than the outcome of the Original Proceedings.

The plaintiffs applied for the court to reverse its decision and instead order costs of the action in their favour.  Alternatively, the plaintiffs asked for costs incurred after the date of one of the “Without Prejudice Save as to Costs” letters issued by the plaintiffs to the defendants or such date as the court thought fit, to be paid by the defendants to the plaintiffs.

Judgment

After being presented with the without prejudice communication at the costs hearing, the court found that the original concern as to the unfairness of the plaintiffs’ claim now ceased to be a reason to depart from the general rule on costs. The court also placed weight on the fact that the defendants in the Original Proceedings had rejected the plaintiff’s offer which was more favourable than what the defendants obtained at trial.

As a result, the court set aside its order nisi and made an order that the plaintiffs should have costs after the date of the without prejudice offer issued by the plaintiffs to the defendants.

Comment

In the court’s decision, the general legal principles set out in Order 62, rule 3(2) of the Rules of the High Court (Cap. 4A) (RHC) were noted, namely that when making decisions as to costs, the starting point is that the successful party should be entitled to costs of the proceedings. The burden falls on the losing party to show why a different costs order should be made. The discretion to depart from the general rule should be exercised to achieve a just result having regard to the circumstances of the case and should be exercised with due circumspection since too ready a departure from the general rule encourages unnecessary arguments.

This case is a good illustration of the court’s approach to assessing costs issues – when the court considers it is appropriate to depart from the general rule; and when it is appropriate to reverse that decision.  In particular, the judgment reiterated that the court’s discretion as to costs should be exercised by reference to the factors set out in Order 62, rule 5(1) RHC.  One of these factors is to consider the underlying objectives set out in Order 1A, rule 1 RHC which sets out the modern post-Civil Justice Reform approach to litigation where parties are encouraged to take positive steps towards settlement of disputes.

This case might be especially relevant in heated disputes between family members where even if one party’s conduct is found to be unfair and unconscionable justifying departure from the normal costs order, a without prejudice settlement offer can nevertheless shield that party from some of the cost consequences of bringing an unfair and unconscionable claim.

Authors

Richard Norridge
Richard Norridge
Partner
+44 20 7466 2686
Joanna Caen
Joanna Caen
Partner
+852 21014167
William Cheung
William Cheung
Senior Associate
+852 21014183

Hong Kong courts clarify legal rules surrounding suitability and capacity of next friends

Next friends act on behalf of parties in legal proceedings who are not able to act themselves (for example, because of mental incapacity). In two recent decisions, the courts took the opportunity to reiterate the legal principles relating to the appointment and authority of a next friend and to make clear the capacity of a next friend.

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Monthly Private Wealth Legal Developments – APAC

Welcome to Herbert Smith Freehills’ new monthly private wealth industry updates in Asia.

Every month we survey a number of Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format.  The jurisdictions covered in the updates are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region. Continue reading