[1] Yang Hsueh Chi Serena [2] Mong Sien Yee Cynthia [3] Mong Tak Yeung David [4] Mong Wai Yee Viola [5] Mong Tak Fun Stephen [6] Mong Jo Yee Josephine Appellants v [1] Equity Trustee Ltd [2] Wong Pui Fan [3] Mong Pui Yee Perlie Respondents

• Jurisdiction: British Virgin Islands
• Judge: Farara JA,Justice of Appeal [Ag.],Chief Justice,Dame Janice M. Pereira, DBE,Joyce Kentish-Egan
• Judgment Date: 29 September 2014
• Neutral Citation: VG 2014 CA 13
• Judgment citation (vLex): [2014] ECSC J0929-5
• Docket Number: BVIHCMAP2013/0012
• Court: Court of Appeal (British Virgin Islands)
• Date: 29 September 2014

[2014] ECSC J0929-5

EASTERN CARIBBEAN SUPREME COURT IN THE COURT OF APPEAL

Before:

The Hon. Dame Janice M. Pereira, DBE Chief Justice

The Hon. Mr. Gerard St. C. Farara, QC Justice of Appeal [Ag.]

The Hon. Mde. Joyce Kentish-Egan Justice of Appeal [Ag.]

BVIHCMAP2013/0012

Between:

[1] Yang Hsueh Chi Serena

[2] Mong Sien Yee Cynthia

[3] Mong Tak Yeung David

[4] Mong Wai Yee Viola

[5] Mong Tak Fun Stephen

[6] Mong Jo Yee Josephine

Appellants

and

[1] Equity Trustee Limited

[2] Wong Pui Fan

[3] Mong Pui Yee Perlie

Respondents

Appearances:

Ms. Shân Warnock-Smith, QC, with her, Mr. Raymond Davern for the Appellants

Mr. David Brownbill, QC, with him, Mr. Mungo Lowe for the First Respondent

Mr. Nicholas Le Poidevin, QC, with him, Ms. Arabella di Iorio and Mr. Brian Lacy for the Second and Third Respondents

Commercial appeal — Trust fund — Entitlements of beneficiaries — Construction of provisions of trust deed — Whether trustee had power to effect variation of trust deed in accordance with wishes of settlor — First appellant removed from list of beneficiaries and entitlements of remaining beneficiaries altered by settlor — Whether 'words of entitlement' in annexure of trust deed by which appellants were initially made beneficiaries conveyed immediate, absolute and indefeasible interest in trust assets in favour of appellants — Whether any power granted in deed to trustee to change beneficiaries and/or percentage entitlements rendered otiose

The first respondent, as trustee of a trust fund which was established by deed dated 20 ^th November 1989 ("the Trust Deed"), brought a claim in the court below, seeking the court's assistance with the proper construction of certain provisions of the Trust Deed. The construction of these provisions would determine the validity of certain actions taken by the trustee which affected the entitlements of the six appellants to the trust's assets, the appellants being the initial, sole beneficiaries of the trust. The ultimate settlor of the trust was one Dr. William Mong (now deceased), who, at the time the Trust Deed was established, was married to the first appellant ("Madam Yang"). The second to sixth appellants are Dr. Mong's five surviving children from his marriage to Madam Yang. The appellants had been made beneficiaries of the trust by item (26) of Annexure I of the Trust Deed. This provision began with the wording 'The Specified Beneficiaries and their respective entitlements are: …', and went on to list the six appellants along with their respective percentage entitlements to the trust's assets. It is the meaning of these initial words of item (26) that was at the core of the issues raised by the first respondent's claim in the court below.

Madam Yang filed for divorce in February 2001. A couple months later, on 11 ^th April 2001, Dr. Mong, at a meeting with the first respondent, indicated his wish to remove Madam Yang as a Specified Beneficiary of the trust and to alter the percentage entitlements of the remaining five beneficiaries. The following day, the first respondent, by instrument in writing, removed Madam Yang altogether as one of the Specified Beneficiaries in item (26) of Annexure I of the Trust Deed, and deleted the original percentage entitlements of the remaining beneficiaries. These actions of the first respondent (among others) were called into question by letter dated 20 ^th August 2010 from Hong Kong solicitors acting on behalf of the second to sixth appellants, about one month after Mr. Mong had passed away.

In making a determination on the issues raised by the first respondent in its claim brought in the court below, the learned judge, having examined various provisions of the Trust Deed, confirmed the validity of the first respondent's actions and held that on the true construction of the trust, the first respondent had the power to distribute the income and corpus of the trust in accordance with the wishes of the late Dr. Mong.

The appellants appealed, arguing that the initial wording of item (26) of Annexure I which included them in the class of 'Specified Beneficiaries', took precedence over all the other provisions of the Trust Deed, and vested in them, an immediate, absolute and indefeasible interest in and entitlement to the entirety of the assets of the trust, in the percentages stated opposite their names. The respondents argued that item (26) had the limited function of naming and describing the class of 'Specified Beneficiaries' and the first part of the provision, which included 'the words of entitlement' ('The Specified Beneficiaries and their respective entitlements …'), were not intended to have any legal effect, but were merely a statement of the then 'wishes' of the settlor as to how trustees were to exercise their discretion under the trust.

Held: dismissing the appeal, and confirming the decision of the learned judge that the questions raised in the claim were to be answered in the affirmative, that:

1. The learned judge rightly held that 'the words of entitlement' in item (26) were incapable of being, and were not declaratory of, any trusts enforceable in law. While no particular form of words need be used to declare a trust, 'the words of entitlement' do not speak to a 'trust' being created or pretend to pertain or attach to any particular asset or property of the trust. In item (26), there was no mention of any property, like the corpus or income of the trust, to which other provisions of the Trust Deed expressly applied in declaring various trusts. 'The words of entitlement' were intended to and could only have been meant to operate to name the initial persons constituting the class of 'Specified Beneficiaries', as instructed by Dr. Mong, and the percentage opposite each name was not intended to confer on those persons a fixed and absolute interest in any specific trust property or assets.

2. The 'words of entitlement' fall to be construed by ascertaining what a reasonable person with all the relevant background knowledge at the time of execution of the Trust Deed, and construing the words in their natural and ordinary meaning within the overall context of the scheme of the trust, would conclude was the intention of the parties. The appellants sought to attach too much importance and significance to the natural and ordinary meaning of 'the words of entitlement' (particularly, the word 'entitlement') used in item (26). Their interpretation failed to attach enough weight or importance to the context in which those words were used, in a provision, which, pursuant to clause S(46), was clearly intended to provide a definition of the initial 'Specified Beneficiaries', and not to declare any new trusts which, on any construction, would be clearly in contradiction to and in derogation of the other trusts of the corpus and income declared elsewhere in the Trust Deed. Furthermore, the appellants' approach to the construction of 'the words of entitlement', disregards the second part of item (26), which clearly makes the constituting of the class of Specified Beneficiaries, subject to the powers granted to the trustee under clauses Q1 and Q5 of the Trust Deed, to add to or remove persons from that class. The entire provision at item (26) falls to be construed, and the second part cannot be disregarded.

Re Sigma Finance Corporation (in administrative receivership)[2010] 1 All ER 571 applied.

3. Where specific words are shown by evidence to have been inserted into what is otherwise a standard precedent or document, at the request or behest of one or more of the parties, then a court ought, as a means of determining the intention of the parties, to give some weight to the chosen words or provisions of the parties, especially where other 'standard' provisions may conflict with or be inconsistent with the chosen words or provisions, and, where appropriate, to accord precedence to those words. These are all relevant factors which form the factual and contextual background and, accordingly, fall to be taken into account by a court in construing the relevant provisions of the document.

Homburg Houtimport BV v Agrosin Private Ltd (The Starsin)[2003] UKHL 12 considered.

1 Farara JA[AG]: This is an appeal from the judgment and decision of Bannister J delivered 19 ^th June 2013 by which, based on his findings and conclusions therein, he answered in the affirmative the questions posed in the amended fixed date claim form dated and filed on 25 ^th July 2011 (originally filed on 17 ^th June 2011) by the first respondent, in claim no. BVIHC ( COM) 0072 OF 2011. By the amended claim form, the first respondent, as Trustee of 'The Huge Surplus Trust', a trust established by deed dated 20 ^th November 1989 and governed by the Laws of the Virgin Islands, sought the court's assistance with and answers to certain questions concerning the construction of certain provisions of the Trust Deed; and, accordingly, the validity of certain actions taken by the Trustee under the settlement, which actions were called into question by letter dated 20 ^th August 2010 from the Hong Kong solicitors representing the second through sixth appellants.

2 In particular, the first respondent, in its amended fixed date claim, posed the following questions for the determination of the court:

• (1) Whether on the true construction of the settlement (the Trust) established pursuant to a deed made between International Holdings Corporation (as Settlor) and the Claimant (as trustee), the Claimant, as trustee of the Trust, had the power, whether by way of a removal from the class of Specified Beneficiaries under clause Q4 of the Trust deed, a variation under clause L1 of the Trust deed, or otherwise, to effect the deletions and variations contained in the Claimant's deed dated 12 ^th April 2001, that is to say:

  • (i) To delete Ms Yang Hsueh Chi from the class of Specified Beneficiaries (as defined in...