The Power To Add And Remove Beneficiaries: Wong Wen-Young & Ors. v Grand View Private Trust Company

• Published date: 02 October 2023
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation, Trusts
• Law Firm: ISOLAS
• Author: Mr Adrian Pilcher

ISOLAS LLP Partner Adrian Pilcher explains why this case is so important and how the Privy Council decision affects how trustees should exercise their powers of adding and removing members to and from the class of beneficiaries, as well as factors that should be considered when establishing a trust.

Background

The underlying story dates back more than two decades. On the same day in May 2001, Wang Yung-Ching, the founder of the Formosa Plastics Group in Taiwan ('FPG') and his younger brother Wang Yung-Tsai, placed assets worth more than US$20bn into two separate trusts.

The first of these trusts, the Wang Family Trust, was (despite its name) a non-charitable purpose trust established to allow for the continued growth and prosperity of FPG, as well as for additional philanthropic purposes, including the provision of 'mutual assistance to mankind and help to those in need' and to 'improving the standard of living for mankind' ('the Purpose Trust'). A second trust, the Global Resource Trust, was a discretionary trust established for the benefit of the Wang brothers' children and their descendants (respectively 'the Family' and 'the Family Trust').

Four years later, the trustee of the Family Trust, on or around the same time, (1) excluded all Family members from the class of beneficiaries of the Family Trust; (2) replaced them with the trustee of the Purpose Trust as sole beneficiary; (3) appointed all the assets of the Family Trust to the trustees of the Purpose Trust; and (4) terminated the Family Trust. Ostensibly the rational behind this was the fact that the children had ended up benefitting from direct ownership rights in FPG, which was something that has not been envisaged by the settlors at the time the trust were established. As a result, it was felt that the purpose of the Family Trust had fallen away.

One of the children, Dr Winston Wong OBE, claimed that, among other things, the trustees had exercised their powers to add and remove beneficiaries both (1) for an improper purpose i.e. for a purpose which fell outside the scope of the powers conferred on them and (2) in a manner which altered the fundamental purpose or 'substratum' of the Family Trust, which had been, he argued, to benefit the Family. Other Family members joined the claim.

The trustee of the Purpose Trust (Grand View Private Trust Company) counterargued that the settlors' intention when they established the original settlements was for the Family Trust to be as flexible as possible...