Baker McKenzie's Dispute Resolution team in Taipei, including Anna Hwang, Chien-Hung Lai and Robert Lee, led a team of UK and Bermuda counsels to act for Tony Wang (王文堯, “Tony”), as supported by his family, in a series of trust and wealth litigations in Bermuda, the UK and the US, including the joint appeals in Wen-Young Wong and others v Grand View Private Trust Company Ltd. (“Case”) before the Privy Council, the Court of Final Appeal for the UK Overseas Territories and Crown Dependencies. In its unanimous decision handed down on 8 December 2022, the Privy Council adopted our arguments of "proper purpose rule", reversed the decisions of the Court of Appeal for Bermuda and ruled in Tony's favor.
Background of the Case
Tony's late father, Mr. Yung-Tsai Wang (王永在), together with his elder brother, Mr. Yung-Ching Wang (王永慶) built the Formosa Plastic Group (FPG) in the 1950's. Under their leadership, the FPG became one of the largest business conglomerates in Taiwan.
In 2001, the two brothers established the Global Resource Trust (“GRT”) and the Wang Family Trust (“WFT”) in Bermuda. Being a discretionary trust, the GRT included individual members of the two brothers' respective families (the “Wang family”) as beneficiaries. On the other hand, the WFT was a purpose trust conferring no benefit on members of the Wang family or any other persons. The estimated assets of the GRT as of 2019 were approximately USD 560 million.
In 2005, the GRT trustee resolved to exercise the powers to add and exclude discretionary objects and to appoint the entire fund to the trustee of the WFT, effectively depriving all the Wang family members of any possibility of benefit under the GRT. It is this decision and its implementation that were challenged in the Case. The establishment of other overseas trusts (including the WFT) by the two brothers and the transfer of their assets thereto are the subject of challenge in other legal proceedings, in which Baker McKenzie's Dispute Resolution team in Taipei acted for Tony as well.
Issues and decisions
The heir of Yung-Ching Wang (王永慶), Winston Wong (“Winston”) challenged the decision by the GRT trustee based on the "substratum rule" before the Supreme Court of Bermuda, the court of the first instance, and obtained a summary judgment in his favor. Tony was not aware of and thus did not join the Case until it was appealed to the second instance, before the Court of Appeal for Bermuda, which subsequently reversed that summary judgment and rejected the challenge.
Tony and Winston appealed to the Privy Council, the court of final appeal. Separate from Winston's arguments which was mainly based on the substratum rule, Tony argued that the GRT trustee contravened the proper purpose rule that trustees must exercise a trust power for the purpose for which it has been granted and that its decision to exclude the Wang family as beneficiaries should be void. The proper purpose rule "involves identifying the purpose for which the power has been exercised and asking whether such purpose is a purpose for which the power has been given."
The Board of the Privy Council took the view that "the relevant question is whether the purpose for which the power was exercised was outside the purpose, or the range of purposes, for which the power was conferred." After deliberation, it adopted Tony's argument and found that the decision by the GRT trustee was made for an improper purpose and thus was void.
Commentary
Commenting on this case, Anna Hwang, Chair of the Dispute Resolution Group at Baker McKenzie Taipei, said:
“We are pleased with this significant win before the Privy Council. The clients appreciate the dedication and efforts by the legal teams consisting of excellent lawyers in Taiwan, Bermuda and the UK who worked seamlessly as one team which contributed to this successful outcome.
We believe this Privy Council judgment not only provides guidance on the proper scope of the trustee’s powers in Bermuda and the wider common law world, but also places significant importance on the emerging trust law jurisprudence in Taiwan.”
Baker McKenzie Taipei's Dispute Resolution Group includes an impressive lineup of Taiwan’s leading litigators, arbitrators, compliance practitioners, former prosecutors and judges. Leveraging Baker McKenzie's international network, Baker McKenzie Taipei offers local and international law advice across the full range of dispute resolution services, including corporate disputes, white-collar defense, multi-jurisdictional disputes, compliance investigations and contentious litigations.