Lai Kiat Yeong v Hsbc (Malaysia) Trustee Berhad (WA-24NCvC-3689-08/2023)

The Plaintiff files an Originating Summons pursuant to s.12(5) and 12(6) of the Public Trust Corporation Act 1995 (PTCA) read together with s.51 and s.52 of the Specific Relied Act 1950 (SRA) seeking for the following orders - 1) To prohibit the Defendant and/or its servants and/or its agents and/or its employees and/or anyone acting under its control or direction from appointing Amanah Raya Berhad (ARB) and/or any 04/03/2025 08:31:33 WA-24NCvC-3689-08/2023 Kand. 30 2 other person as the new or additional trustee of ‘The Lai Fook Kim Trust” (Trust) with a view that such new or additional trustee replace the Defendant as trustee of the Trust; 2) To prohibit the Defendant and/or its servants and/or its agents and/or its employees and/or anyone acting under its control from commencing any legal proceedings and/or from filing any applications in Court for an order that ARB and/or any other person be appointed as the new or additional trustee of the Trust with a view that such new or additional trustee replace the Defendant as trustee of the Trust.

After hearing all parties, this Court dismissed the Plaintiff’s claim with cost. The reasons are as deliberated. BRIEF FACTS [3] The Trust was established on 14.11.1983 pursuant to a Trust Deed between one Madam Moo Nyuk Yin and the Defendant (Trust Deed).

It is common ground that-

the Defendant is the sole trustee of the Trust and has been its sole trustee since its inception;

the Plaintiff is the appointor of the Trust;

the Trust’s assets comprise primarily of shares in various investment holding companies, which are the ultimate holding companies of subsidiary companies that hold land; and

the surviving specified beneficiaries of the Trust are the Plaintiff alongside his siblings, Joe Lai Kiat Hiung, Ramona Lai Ai Fong (Ramona) and Cassandra Lai Lee Fong (Cassandra) (collectively as the Specified Beneficiaries). [5] On or about 2016, the Defendant has informed the Plaintiff of its intention to exit the trustee services business for private and family trusts which is now a legacy business of the Defendant. In this regard, the Defendant no longer provides services for private trusts and requested the Plaintiff, to appoint a new trustee to substitute the Defendant. [6] Thereafter, on 1.7.2021, the Plaintiff’s solicitors, Messrs. Cheong Kee Fong & Co. (Messrs. CKF), informed the Defendant that the Plaintiff was agreeable to take steps to appoint a new trustee and accordingly requested the Defendant to provide the particulars of various trust companies who could potentially take over on the Defendant’s role as sole trustee of the Trust. [7] Premised on the above, the Plaintiff sought to engage PB Trustee Services Berhad (PBTSB) as a potential new trustee of the Trust. However, the Plaintiff did not proceed with the proposed appointment because the Plaintiff was unable to accept the terms and conditions proposed by PBTSB. [8] After series of correspondences, Messrs Skrine & Co. acting on behalf of the Defendant, had issued a letter dated 4.8.2023 (August 2023 Letter), by giving notice that the Defendant would apply to the Court for directions, to appoint ARB as the new trustee of the Trust, and that all cost and expenses arising from the Defendant’s exit as the trustee of the Trust will be borne by the Trust. The Plaintiff’s Contention [9] The Plaintiff contended that the August 2023 Letter served as a notice of the proposed appointment of ARB under s.12(5) of the PTCA. Accordingly, the Plaintiff filed this OS to comply with the 21-day timeline, as imposed by s.12(6) of the PTCA. [10] The Plaintiff also contended that the records from the Companies Commission of Malaysia (CCM) disclose that the Defendant’s principal activities have remained unchanged and that it continues to operate and derive revenue from private trusts till to date. [11] Thus, the Plaintiff submitted that the Defendant has not assigned any reasonable cause to justify its retirement from the Trust for any other person to be appointed as a new trustee in its place and relied on the case of M’Ewan v. Drummond [1857] D 936. [12] In addition, the Plaintiff contended that the Trust would also be burdened with Incidental Costs such as real property gain tax, arising from the Defendant’s retirement as Trustee. The Defendant’s Contention [13] On the other hand, the Defendant contended that the August 2023 Letter does not amount to a notice under s.12(5) of the PTCA. Therefore, the Originating Summons is premature and without any basis. [14] The Defendant contended that the August 2023 Letter is not a “notice” of the “proposed” appointment of ARB under s. 12(5) PTCA as it contained-

a warning that ARB could possibly be appointed “as the new trustee of the Trustee in replacement of HSBC Trustee by virtue of the provisions under the Public Trust Corporation Act 1995” as a result of the Defendant’s intended application to Court; and

a further warning that the Defendant’s intended application to Court would indeed be made “within twenty-one (21) days from the date of this letter” if the Plaintiff did not provide written confirmation with regards to a replacement trustee. [15] Thus, the OS is premature as the August 2023 Letter is not a “notice” of the “proposed” appointment of ARB under s. 12(5) read with s. 12(6) PTCA. There appears to be another step where the Defendant would file such application in Court and the Plaintiff will then be given 21 days to challenge the proposal. [16] The Defendant also seeks to rely on Clauses D3(18) and H2(1)(f) of the Trust Deed that it is empowered to appoint a new or additional trustee of the Trust. ANALYSIS AND FINDINGS [17] It is this Court’s observation that the stalemate lies on the issue of who would bear the Real Property Gain Tax (RPGT) and other incidental costs in the event that the Trust’s assets were to be vested in a new trustee pending the termination of the Trust. [18] For ease of reference, s.12(5) and (6) of PTCA provide that-

Notice of any proposed appointment of the Corporation either as a new or additional trustee shall, where practicable, be given to all persons beneficially interested who are resident in Malaysia and whose addresses are known to the person proposing to make the appointment, or, if such beneficiaries are minors, to their guardians.

If any person to whom such notice has been given applies to the Court within twenty-one days from the receipt of the notice, the Court may, if having regard to the interest of all the beneficiaries it considers it expedient to do so, make an order prohibiting the appointment being made: Provided that a failure to give any such notice shall not invalidate any appointment made under this section. [19] It comes to this Court’s attention that s.12 is a provision relating to the appointment of a corporation as trustee or executor. Therefore, the sub sections must be read in that context. [20] The issue is aptly clear. Whether the notice given in the August Letter served as a notice required under s.12 of PTCA? If the answer is yes, then this action is valid and not premature. But if it is in the negative, then obviously, this action is a premature action by the Plaintiff. [21] s. 12(5) PTCA requires a person to give “notice” of any “proposed” appointment of a new or additional trustee; and a recipient of such “notice” has a right, under s. 12(6) PTCA, to apply to Court for an order prohibiting the appointment of such. [22] In order for a notice to qualify as one under s.12(5) of the PTCA, it must contain a “direct and definite statement” of the appointment of ARB as envisaged in s. 12(1) of the PTCA. This means that a notice under s. 12(5) of the PTCA should contain a “direct and definite statement” that the Defendant will either be exercising its powers under the Trust Deed or making an application to Court, to appoint ARB to be the trustee of the Trust, or to perform any trust duty, either as an original, new or additional trustee. Thus, this Court finds that, based on the facts, this August 2023 Letter did not contain any such statement. [23] This Court is of the view, based on the facts of the case, that the August 2023 Letter is just a letter to inform the Plaintiff that it is in the best interest of the Trust, “as the matter has been long outstanding”, if the Defendant make an application to the Court for directions, to expeditiously resolve the issues pertaining to the appointment of a new Trustee and thus, the possibility that the proposed application for directions, if allowed by the Court, will result in the appointment of ARB, as a new Trustee. [24] Furthermore, the August 2023 Letter further states that “the appointment of a certain family member(s) (up to four 4) of the Specified Beneficiaries or any other person or persons as the replacement trustee of the Trust may be an option”. [25] The question also lies on the fact that if the notice is a notice as provided under s. 12(5) PTCA, then can the Defendant withdraw itself as a Trustee? Thus, this Court has also dealt with this question. Clauses D3(18) and H2(1)(f) of the Trust Deed [26] Clause D3(18) of the Trust Deed provides that a trustee of the Trust has a “reserved power” to appoint a new trustee in conditions or circumstances which the trustee thinks “expedient” and that such appointment is subject to the intended new trustee having “terms and conditions similar to those declared by this Deed”. The said clause reads as follows- “(18) the power subject to the proviso hereto in any conditions or circumstances which the Trustees think expedient to appoint either in respect of the whole of the Trust Fund or any part thereof new trustees wheresoever resident or incorporated and to transfer assign and set over the assets for the time being included in the Trust Fund or any part thereof to any such new trustees upon the same trusts and subject to terms and conditions similar to those declared by this Deed but not so as to create a perpetuity and either subject to the control of the Trustee of the trusts constituted by or under this Deed or to the exclusion of such control Provided That this power is a Restricted Power within the meaning of clause R4 of this Deed and any exercise of it is subject to clause R5 of this Deed and the Trustees shall be indemnified and held harmless against any loss which may arise from the exercise of this power notwithstanding that the same occurs through the neglect or default of such new trustees or any of them;” [27] Clause R4(a) of the Trust Deed further provides that the power in Clause D3(18) above is a “Restricted Power”, which is also subject to Clause R6 of the Trust Deed. Clause R5(4) of the Trust Deed requires a trustee to first serve a “written notice on the Guardian of their intention to exercise such power” and to set out “the manner in which they propose exercising such power” prior to any exercise of any Reserved or Restricted Power. [28] In this regard, Clause R5(4) of the Trust Deed further stipulates that a trustee may only exercise the Reserved or Restricted Power “in the manner specified in such a notice” and only after “the expiry of the period of fourteen days after the said notice has been served”. Clause R5(5) of the Trust Deed, inter alia, provides that a notice pursuant to Clause R5(4) “shall lapse and cease to have effect unless the Trustees exercise the power referred to therein within sixty days of the date of service”. [29] Further, Clauses H2(1)(a) to H2(1)(c) of the Trust Deed empowers the appointor of the Trust to remove any trustee(s), to appoint any additional trustee(s) and/or to appoint new trustee(s) in place of an existing trustee. Clause H2(1)(f) of the Trust Deed however, provides that a sole trustee may exercise the aforesaid powers of the appointor for the purposes of removing itself as sole trustee and appointing a new trustee in its place. This power is only exercisable where-

“...a sole Trustee has called upon the Appointor to remove that sole Trustee and appoint a new Trustee or new Trustees in place of that sole trustee...”; and

“...the Appointor has failed to remove that sole Trustee and appoint a new Trustee and appoint a new Trustee or new Trustee within 90 days after being called upon...”. [30] Accordingly, the Defendant may appoint a new trustee under s.40(1) of the Trustee Act 1949 as well as provided under the Trust Deeds, particularly Clauses D3(18) and H2(1)(f), if the Plaintiff as Appointor is not able or willing to appoint a new trustee. [31] Additionally, in a book entitled Malaysian Trust Law, Second Edition by Mary George and Sujata Balan, has stated as follows at page 673- “[13.024] Section 40 of the Trustee Act 1949 deals with the power of appointing new or additional trustees. They may be appointed, according to section 40(1) in the following circumstances; …

Where the trustee desires to be discharged, whether from the whole or part of the trust.” Reasonable cause for retirement [32] In the case of M’Ewan (supra), it was held- “...It has been said, in a case reported by Lord Hailes, that “trustees must not imagine that whenever they are tired of their office they can slip their necks out of the collar and leave the trust to be extricated by the Court;” and it is an old principle, that if once a trustee accepts office, he cannot get rid of it by mere caprice. Now, a judicial factor is just a trustee, and if he accepts office he must assign reasonable cause for resigning...” [33] In M’Ewan (supra), the Court has allowed the Petitioner’s application to withdraw himself as factor loco tutoris and to appoint a new factor. The facts were that, the Petitioner was appointed as factor loco tutoris to the children of the late John Comrie. The children are minor. Therefore, a factor loco tutoris is appointed to manage their estate and make decisions for them. In M’Ewan (supra), the Court held that the reason given by the Petitioner was a sufficient reason as to why he should not be prevented to withdraw himself from the position, even though there were objections to his petition. His reason was that his cautioner had died and he was unable to find new caution “due to the annoyance that his former cautioner had experienced from litigations at the instance of the children’s mother”. [34] Applying the case of M’Ewan (supra), this Court finds that the reason submitted by the Defendant to retire as Trustee of the Trust that it is exiting from the “trustee services business” as a reasonable cause and thus, is a sufficient reason. [35] The Defendant has made it clear that it wanted to exit from and discharge itself as Trustee to the Trust since 2016 due to the fact that its trustee services business for private and family trusts is now a legacy business of the Defendant, that the Defendant is not providing services for private trusts, anymore. [36] It was observed that efforts by multiple discussions with the Plaintiff/Appointor about exiting the Trust, had also been unsuccessful. The Defendant had even requested that the Plaintiff/Appointor take the necessary steps to appoint a new trustee but to no avail. [37] Therefore, it is evident from the events that have transpired that the Plaintiff/Appointor refuses and is unwilling to have a new trustee appointed in place of the Defendant. [38] It is the position of this Court that a Trustee ought not to be compelled to continue to act as Trustee of a Trust, against its wish, if a reasonable cause had been explained, and as in this case, the explanation given by the Defendant is a reasonable cause. Furthermore, the Trust Deed has all the provisions that enable the Trustee/ Defendant to exercise its powers if such situation arises. [39] Reference is also made to the case of Chak Kong Yin (Plaintiff) and HSBC (Malaysia) Trustee Berhad, High Court of Malaya at Kuala Lumpur (Civil Division) Suit No. WA- 22NCVC-264-05/2017 that held- “The new Trustee, Rockwills was properly and lawfully appointed by the Defendant pursuant to a valid legal instrument, the Deed. The appointment was inevitable and, unavoidable given the Defendant’s closure of it’s Private Wealth Solutions Department which prevented the Defendant’s continued performance of it’s [sic] obligation and duty, as the estate’s Trustee.” [40] The High Court in Chak Kong Yin (supra) dismissed the Plaintiff’s entire suit including to declare the appointment of Rockwills Trustee Berhad as the new Trustee, to be null and void. The Plaintiff appealed. The appeal was then dismissed by the Court of Appeal and affirmed the decision of the High Court (see Appeal No: W- 02(IM)(NCvC)-1864-09/2018). CONCLUSION [41] Therefore, after careful scrutiny and judicious consideration of all the evidence before this Court, including the written and oral submissions of both parties, this Court dismissed the Plaintiff’s Originating Summons with costs. -SGD- (DR. SUZANA BINTI MUHAMAD SAID) PESURUHJAYA KEHAKIMAN NCVC 1 MAHKAMAH TINGGI KUALA LUMPUR Dated: 2 March 2025 COUNSELS FOR THE PLAINTIFF Tetuan Steven Thiru & Sudhar Partnership Peguambela & Peguamcara Unit No. A1-12-01, Arcoris Mont Kiara, Jalan Kiara 50480 Mont Kiara Kuala Lumpur FOR THE DEFENDANT Tetuan Skrine Peguambela & Peguamcara Tingkat 8, Wisma UOA Damansara 50, Jalan Dungun Bukit Damansara 50490 Kuala Lumpur