Jurisdiction - Hong Kong
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Hong Kong – Guide To Private Wealth.

 14 September, 2012

 

Legal News & Analysis – Asia Pacific – Hong Kong – Dispute Resolution

   

1 Is a Will a public document in your jurisdiction?
 
Once probate is applied for and the Will lodged at the Probate Registry, the Will becomes a document open to inspection (subject to the control of the court) (see Section 73 of the Probate and Administration Ordinance (Cap. 10) (“PAO”) for further information).
 
2 What are the principal formal requirements for a valid Will or other
testamentary disposition in your jurisdiction?
 
Please include in your answer any special requirements relating to execution.
A Will must be in writing (various forms are accepted, e.g. written by pen, pencil, typewritten, printed) and signed by the testator (“testator” refers to both a testator and testatrix) or such person as directed by the testator in the testator’s
presence.
 
The testator must also sign either his/her Will or acknowledge his/her signature in the presence of two or more independent witnesses present at the same time.
 
There is no requirement that the Will must be executed before a notary or other authority (see Section 5(1) of the Wills Ordinance (Cap. 30) (the “Wills Ordinance”) for further details).
 
3 In what circumstances will a court in your jurisdiction regard a Will as duly
executed even though it does not fulfil these formal requirements (for
example, because it fulfils the requirements for the execution of a Will in
another jurisdiction)?
 
Section 5(2) of the Wills Ordinance provides that a document purporting to embody the testamentary intentions of a deceased person shall be deemed to be duly executed (notwithstanding that it has not been executed in accordance
with the usual formal requirements). The court must be satisfied that there can be no reasonable doubt that the document embodies the testamentary intentions of the deceased person. 
 
Further, Section 24 of the Wills Ordinance states that a Will shall be treated as properly executed if its execution conforms to the internal law in force in the territory where it was executed. 
 
The law takes a different approach to movable and immovable property. Generally, in relation to immovable assets the valid execution of a Will is determined by the law of the place where those assets are situated. However, the law of the deceased’s domicile at the date of their death determines the valid execution of a Will relating to movable assets.
 
4 How can a Will be amended or revoked and what is the effect of marriage
and divorce in this regard?
 
Amendments to the text of a Will after execution are generally not valid unless such alteration is executed by the testator “in a manner in which they could validly execute a Will at the time such alteration was made”. 
 
The Will, with any such alteration, shall be deemed to be duly executed if the signature of the testator, and the signature of each witness if any is required, is made: 
 
  • (i) On some other part of the Will opposite or near to such alteration; or
  • (ii) At the foot or end of or opposite to a memorandum referring to such alteration and written on some other part of the Will. 
 
See Section 16 of the Wills Ordinance for further details.
   
Pursuant to Section 17 of the Wills Ordinance, a Will may also be amended by way of a codicil (being a short document amending a Will). 
 
A Will can only be revoked by:
 
  • (i) The testator’s marriage (unless it is the testator’s clear intention as recorded in the Will, prior to the marriage, that the Will would not be revoked by the marriage);
  • (ii) Another valid Will that revokes an existing Will;
  • (iii) A written revocation executed in a manner in which the testator could validly execute a Will; or (iv) The burning, tearing or otherwise destroying of the Will by the testator, or by some other person in their presence  and by their direction, with the intention of revoking it.
 
A partial revocation will result from a valid dissolution, annulment or voidance of the testator’s marriage i.e. an appointment of the former spouse as executor / trustee / beneficiary will lapse, as will any gift to the former spouse, unless a contrary intention appears in the Will (see Sections 13 to 15 of the Wills Ordinance).
 
5 Can an overseas Will govern movable and immovable assets in your
jurisdiction?
 
The devolution of immovable property in Hong Kong is governed by Hong Kong law as the law of the jurisdiction in which that property is situated. Movable property wherever situate is governed by the law of the deceased’s domicile at the date of death.
 
The Hong Kong court usually takes into account and respects a grant or order issued by a foreign court when considering an application for a local grant of probate and letters of administration.
 
6 Would an executor or administrator appointed under another jurisdiction be
recognised in your jurisdiction as having the power to collect in assets?
 
The court recognises grants of probate and letters of administration issued by a court in a designated country or place as provided in Schedule 2 of the PAO (which currently are the Australian states of Tasmania, Victoria and South Australia, the Northern Territory of Australia, New Zealand, Singapore, Sri Lanka and the United Kingdom) and will reseal the said probate/letters of administration in Hong Kong. They will effectively hold the same force and effect as a grant of probate/letters of administration issued by the Hong Kong court itself, and an executor or administrator appointed in these countries would be accordingly recognised in Hong Kong.
 
Where an executor or administrator is appointed in a jurisdiction not named in Schedule 2 of the PAO, s/he will need to apply to the Hong Kong courts for a fresh grant of probate or letters of administration.
 
7 Are there forced heirship rules in your jurisdiction?
 
No. Subject to issues relating to maintenance (see section ten below), Hong Kong recognises full testamentary freedom.
 
8 In what circumstances can an executor, administrator or equivalent be
removed?
 
The court has discretion to substitute a personal representative. Relevant factors when exercising that discretion can include whether the executor:
  • (i) Has become disqualified (e.g. been sentenced to a term of imprisonment);
  • (ii) Is incapable of performing his duties (e.g. due to physical or mental disability); or
  • (iii) Is unsuitable for the position (e.g. failed to render a full and proper account or has been unjustifiably dilatory in distribution of monies).
 
Separately, a grant of probate or letters of administration could also be revoked where it ought not to have been granted (e.g. for technical reasons).
 
See Section 33 (in particular Subsection (3)) of the PAO, and Paragraph D3/33/1 of the Hong Kong Civil Procedure 2012 for further details.
 
9 Other than the failure to observe the formal requirements, how else can a Will
be challenged?
 
A Will is invalid if the testator has
 
  1. (i) No knowledge of or has not approved the contents of the Will; or
  2. (ii) Does not have the requisite mental capacity (known as “testamentary capacity”) to make such a Will.
 
A testator’s testamentary capacity is determined by the four limbs of the test established under Banks v. Goodfellow [1870] LR 5 QB 549 (applied in Hong Kong). The first three the testator must understand and the fourth one must not apply to him:
 
  • (i) The nature and effects of the document he is signing (i.e. that it is a document that will take effect on his death, governs his assets and the effect that it will have over those assets);
  • (ii) The nature and extent of his assets (in broad terms and not to the last dollar);
  • (iii) The people who might have “moral claims” on his estate (i.e. the people who might sensibly be expected to be considered as beneficiaries); and 
  • (iv) “…no disorder of the mind shall poison the Testator’s affections, pervert his sense of right or prevent the exercise of the natural faculties”.
 
A Will can also be invalidated in cases of fraud, forgery or undue influence. An example of forgery is where someone writes another person’s Will and forges the testator’s signature. The deceased’s Will must also be the “offspring of his
own volition, and not the record of someone else’s”. Otherwise, the court may conclude that it has been obtained by undue influence.
 
10 If someone dies intestate, how are the assets administered and distributed?
 
The law of intestacy is governed by the Intestates’ Estates Ordinance (Cap. 73) (the “IEO”). It provides for the distribution of assets to relatives, firstly identified by named relationships (e.g. spouse, children, parent, etc.) followed by relatives restricted to close blood relationships (e.g. grandparents and persons descended thereof). Legitimate and illegitimate children are treated in the same way. The various scenarios are described under Section 4 of the IEO. 
 
Regarding administration of an intestate estate, a beneficiary can apply for letters of administration. Rule 21 of the Non-Contentious Probate Rules (Cap. 10A) provides for the following order of priority:
 
  • (i) The surviving spouse or the surviving partner or partners to a union of concubinage (e.g. the second wife (and the third, etc.) taken during the life of the first wife) entered into before 7 October 1971;
  • (ii) The children of the deceased including any children born of a union of concubinage entered into before 7 October 1971, or the issue of any such child who has died during the lifetime of the deceased;
  • (iii) The father or mother of the deceased; then
  • (iv) The brothers and sisters of the deceased or the children of any deceased brother or sister of the deceased who has died during the lifetime of the deceased.
 
The High Court, under Section 36 of the PAO, has the power to appoint a person who is not in the above hierarchy to administer the estate.
 
Whilst the matter of the letters of administration is being determined, Section 10 of the PAO provides that the estate of the intestate shall in the interim be vested in the Official Administrator (defined as the Registrar of the High Court) who may, if he thinks fit, receive and take possession of the same. Furthermore, the Official Administrator may apply under Section 16 of the PAO to obtain a grant to administer the intestate’s estate. 
 
11 If a Will is valid, can someone who feels they have been inadequately
provided for bring a claim?
 
Yes. A disappointed party may make a claim for reasonable financial provision as long as he/she meets the requirements under the Inheritance (Provision for Family and Dependants) Ordinance (Cap. 481) (the “I(PFD)O”). Potential applicants include those who were financially dependent on the testator, such as the testator’s spouse, former spouse (who has not remarried and was maintained by the testator immediately before death), parent, children and/or nother relations under specific circumstances (see Section 3 of the I(PFD)O).
 
12 Is there inheritance tax (or any equivalent such as stamp duty) in your
jurisdiction?
 
No. This was abolished as of 11 February 2006.
 
13 Does your jurisdiction recognise trusts or other separation of legal and
beneficial ownership?
 
Yes.
 
14 Is your jurisdiction a party to the Hague Convention on the Law Applicable to
Trusts and on their Recognition?
 
Yes.
 
15 Does a professional executor or trustee (or equivalent) in your jurisdiction
require a licence?
 
No licence is required. However, certain investment advisory activities may require the trustee (i.e. a trust company) to be licensed by the Securities and Futures Commission. Once such trust company is registered under Part VIII of the
Trustee Ordinance (Cap. 29) (the “Trustee Ordinance”), it is exempt from licensing with regard to the following activities (according to Schedule 5 of the Securities and Futures Ordinance (Cap. 571)):
 
  • (i) Type 1 (dealing in securities);
  • (ii) Type 4 (advising on securities);
  • (iii) Type 5 (advising on futures contracts);
  • (iv) Type 6 (advising on corporate finance); and
  • (v) Type 9 (asset management).
 
16 What are the duties of a trustee (or equivalent) in your jurisdiction?
 
There is no statutory duty of care in Hong Kong and thus the duties of a trustee are governed by common law in Hong Kong. There are general principles but the actual duties will depend on a particular trust, with reference to the terms of the instrument creating that trust. These terms can vary or even abrogate the general duties (except the duty of good faith) of a trustee. 
 
Some of the general duties include (with various exceptions under each duty):
 
  • (i) Duty of care;
  • (ii) Duty to get in the trust property;
  • (iii) Duty to insure trust property;
  • (iv) Duty of loyalty;
  • (v) Duty to keep accounts and supply information;
  • (vi) Duty to consider the likely consequence of a proposed exercise of power (i.e. dispositive power) on the beneficiary and the trust fund;
  • (vii) Duty to act impartially between beneficiaries; and
  • (viii) Duty not to distribute trust capital.
 
17 In what circumstances can a trustee (or equivalent) be removed?
 
In addition to any express removal provisions in the trust deed, Hong Kong follows the position in England and Wales that a trustee can be removed by the court for the welfare of the beneficiaries. This is on the basis that the trustee’s acts or omissions:
 
  • (i) Are such as to endanger the trust property or to show a want of honesty;
  • (ii) Indicate the trustee does not have the proper capacity or reasonable fidelity to execute his duties; and/or
  • (iii) Effectively prevent the trust from being properly executed. In addition, there are statutory powers to substitute a trustee including specific provisions where the trustee:
  • (i) Has passed away;
  • (ii) Has been outside of Hong Kong for more than 12 months;
  • (iii) Has been sentenced to a term of imprisonment; and/or
  • (iv) Is mentally unable to act as trustee.
 
18 To what extent can a trustee limit its liability in a trust deed?
 
A trust deed’s exemption clause can validly exempt trustees from liability of all breaches of trust except fraud.
 
Hong Kong is currently considering updating its Trustee Ordinance and the most recent consultation paper indicates that exemption clauses applying to professional trustees will be limited in scope such that a trustee will not be able to restrict liability for its own wilful misconduct or “reckless act”. The current discussions suggest that the scope of “reckless act” is to range between “negligence” and “wilful misconduct”.
 
19 How can a trustee protect itself if it needs to bring or defend proceedings?
 
Where a trustee is proposing to engage in litigation (either defending or pursuing) it can – by way of a Beddoe application – apply to the court to determine the appropriateness of it taking such action.
 
Such an application allows the trustee to protect itself against any costs incurred during the course of, and as a result of, proceedings he brings as trustee or executor, as between himself and the beneficiaries. Although a trustee is entitled to be indemnified out of the trust fund for expenses properly incurred, there is always a risk that such expenses are not considered “properly” incurred. The application allows the trustee to seek an order from the court authorising
him to continue with the proceedings and to be indemnified out of the trust fund in respect of any costs he may be required to pay to another party in the proceedings.
 
20 What regime is there in your jurisdiction if someone loses capacity e.g. a
Guardianship Board?
 
If someone loses capacity, a guardian can be appointed by way of applying to the Guardianship Board, an independent body corporate which operates under Part IVB of the Mental Health Ordinance (Cap. 136).
 
A guardian is appointed if the following criteria are satisfied:
 
  • (i) The person concerned has a mental disorder or mental handicap of a nature or degree which warrants his/her reception into guardianship;
  • (ii) The mental disorder or handicap limits him/her in making reasonable decisions in respect of all or a substantial proportion of the matters which relate to his/her personal circumstances;
  • (iii) His/her particular needs may only be met or attended to by guardianship and no other less restrictive or intrusive means are available in the circumstances; and
  • (iv) It is in the interests of his/her welfare or the protection of others that he/she should be so received.
 

 

For further information, please contact:
 
Mark Johnson, Partner, Herbert Smith
mark.johnson@herbertsmith.com  
 
Gavin Lewis, Partner, Herbert Smith
gavin.lewis@herbertsmith.com
 
Gareth Thomas, Partner, Herbert Smith
gareth.thomas@herbertsmith.com
 
Richard Norridge, Herbert Smith
richard.norridge@herbertsmith.com

  

 

 

 

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