Following the Court of First Instance (“CFI”) decision of 22 February 2013 (see previous blog post for details), an appeal was brought to the Court of Appeal (“CA”) challenging the decision that Nina Wang had given her estate of about HK$82.86 billion to Chinachem Charitable Foundation Limited (the “Foundation”) as a trustee holding it on charitable trust and not as an absolute gift. On 11 April 2014, the CA dismissed the appeal and upheld the CFI decision.
Although the Foundation was prepared to accept certain restrictions in changing its object clauses and that the court and the Secretary for Justice would still have power to monitor the affairs of the Foundation, the precise limits of that jurisdiction were disputed.
The CA dealt with the issue in appeal in two stages:
- The construction of the Will in terms of giving effect to the intention of Nina Wang as set out in the language used in the Will as a whole; and
- A consideration of the legal effect of the Will in light of the challenges presented by the Foundation against the validity of a charitable trust, which consisted of arguments in relation to (i) the rules that a charitable trust must be exclusively charitable and as to certainty of subject matter; and (ii) the Foundation acting ultra vires.
Construction of the Will
One of the key clauses of the Will was as follows:
“After I pass away, I wish to entrust ‘Chinachem Charitable Foundation Limited’ to the supervision of a managing organization jointly formed by the Secretary General of the United Nations; the Premier of the PRC Government as well as the Chief Executive of the Hong Kong Special Administrative Region. Under its supervision, not only must ‘Chinachem Charitable Foundation Limited’ continue all the projects which it has undertaken since its establishment to enable their developments continuously, but it must also continue to achieve the purpose of setting up a fund and a Chinese prize of worldwide significance similar to that of the Nobel Prize.”
Agreeing with the CFI, the CA noted that the starting point in the construction exercise is ascertaining the intention of the testator by reference to the natural meaning of the words used by Nina Wang in the Will, reading the Will as a whole and in its entire context.
The CA was in agreement with the CFI that Nina’s choice of firm and imperative language (such as “must”) strongly militates against the argument that the directions as set out in the Will were precatory or mere guidance (as opposed to mandatory). The CA concluded that the imperative language used, read together with the other parts of the Will, clearly showed that Nina’s intention was to impose binding legal obligations on the Foundation as to the purposes for which her estate was to be used after her demise.
Exclusively charitable and certainty of subject matter
Although it was accepted that there are both charitable and non-charitable objectives in the Will, the CA distinguished the current facts with case law which presented problems as to certainty of subject matter where there are both charitable and non-charitable objects.
The CA noted that the underlying rationale for the requirement as to certainty of subject matter is to enable the court to supervise properly the administration of the trust. In that regard, the CA decided that it was clearly Nina’s intention that the charitable objectives stated in her Will were to be the primary purposes to which the future income from the Chinachem Group should be used. Therefore, if the non-charitable gifts under the Will should fail, the whole of her estate would fall to be dealt with in accordance with the charitable gift clause. Nina’s clear intention that the charitable trust was to be the primary trust would therefore provide sufficient certainty to enable the court to determine, if necessary, whether the Foundation had properly applied part of the income each year for such objects. Thus there was sufficient certainty of subject matter to enable the court to supervise the administration of the trust.
The ultra vires point
In relation to the ultra vires point put forward by the Foundation with regards to the Chinese prize, the CFI held that the memorandum of the Foundation was not wide enough to enable the Foundation to set up a prize resembling the Nobel Prize in all material aspects. The Foundation invited the CA to reverse this holding and submitted that the setting up of the Chinese prize could come within the scope of the object clauses of the Foundation. Otherwise, it would create a problem for the Foundation as it would in effect require the Foundation to act ultra vires its own memorandum.
The CA concluded that the CFI had applied an unduly rigid approach and that the intention of the testator must depend on the relevant underlying factual matrix. The Will had stipulated two characteristics of the prize, namely; it had to be a Chinese prize and it had to be of worldwide significance. Another important underlying context is that the prize is to be administered by the Foundation. Thus, it would be relevant to consider what the Foundation could do in terms of its object clauses in ascertaining Nina’s intention as to the scope of this Chinese prize. Therefore, there would ultimately be some distinctions between the prize to be set up under the Will and the Nobel Prize. The CA concluded that there is no need for the Foundation to act ultra vires.
The CA thus held that the CFI was correct in coming to the conclusion that the Will provides that the Foundation holds the estate of Nina on a charitable trust.