HONG KONG SAR, CHINA Law and Practice Contributed by: Alfred Ip, Hugill & Ip
5.2 Mechanism for Compensation The mechanisms for compensating aggrieved parties in Hong Kong wealth disputes vary according to the nature and basis of the claim. In contentious probate proceedings, if a will is found to be invalid ‒ whether for want of testamentary capacity, undue influence, fraud, or failure to comply with the formal execution requirements under the Wills Ordinance (Cap. 30) ‒ the estate will be distributed in accordance with the most recent prior valid will, or, in the absence of any valid will, in accordance with the intestacy rules under the Intestates’ Estates Ordinance (Cap. 73). For claims under Cap. 481, the court has a wide dis - cretion to make such orders as it thinks fit, including orders for periodic payments, a lump sum, a transfer of specific property, a settlement of property, or a vari - ation of an ante-nuptial or post-nuptial settlement. The court’s primary consideration is the financial needs and resources of the applicant, though for surviving spouses the standard is higher and encompasses a broader assessment of what is fair and reasonable in all the circumstances. In trust disputes, the primary remedy for a breach of fiduciary duty is equitable compensation, which aims to restore the trust fund to the position it would have been in “but for” the breach. Where a trustee has made an unauthorised profit ‒ for example, by accepting a commission or entering into a self-dealing transaction ‒ the court will order the trustee to personally account to the beneficiaries for that profit. Trustees may also be removed and replaced by the court under its inher - ent jurisdiction or under the Trustee Ordinance. The availability of injunctive relief, including freezing orders and search orders, makes Hong Kong an effective jurisdiction for asset protection in the context of trust and estate disputes. 6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries Corporate and professional fiduciaries occupy a central role in Hong Kong’s private wealth ecosys - tem. Licensed trust companies ‒ regulated under the Trustee Ordinance (Cap. 29) and, where they carry
on regulated activities, by the Securities and Futures Commission ‒ are routinely engaged by high net worth families to administer complex, multi-jurisdictional trust structures. The use of a professional corporate trustee provides several advantages: • it ensures continuity of administration across gen - erations; • it brings specialist expertise in investment manage - ment, tax compliance, and beneficiary communica - tions; and • it provides a degree of independence that is essen - tial for the trust to withstand legal challenge. Professional trustees are held to a higher standard of care than lay trustees. Under Cap. 29, a trustee who acts in the course of a business or profession must exercise the special knowledge and skill that it holds itself out as possessing. This elevated standard reflects the trust that settlors and beneficiaries place in professional fiduciaries and provides a meaning - ful and legally binding basis for accountability. For a discussion of trust administration disputes and the duties of trustees, see Kerby Lau on Trust and Estate The personal liability of trustees in Hong Kong is a well-developed area of law. A trustee is personally liable for any breach of trust, including unauthorised investments, failure to diversify, self-dealing, and fail - ure to act in the best interests of the beneficiaries as a whole. However, the Trustee Ordinance provides several mechanisms for limiting or relieving trustee liability. For instance, the trust deed may contain an exon - eration clause, which excludes the trustee’s liability for certain categories of breach. Following the 2013 reforms to the Trustee Ordinance, such clauses can - not exclude liability for any breach of trust arising from the trustee’s own fraud, and cannot exclude liability for breach of the statutory duty of care in relation to investment and delegation functions. This represents a meaningful floor of accountability for professional trustees. Administration Disputes. 6.2 Fiduciary Liabilities
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