A Privy Council case that clarified the boundaries of trustee powers in Bermuda has been featured in a prestigious law journal in the Far East.

An article in Asia Business Law Journal by Helen Wang, a partner in the Singapore office of international law firm Carey Olsen, and the firm’s associate lawyer Ryan Chong, addresses the high-profile case of Wen-Young Wong & Others v Grand View Private Trust Company and another.

The case involved two trusts established in Bermuda in 2001.

The authors write that the trust settlors were two brothers who founded Formosa Plastics Group, one of the largest business conglomerates in Taiwan.

The principal asset of Global Resource Trust No 1, the authors explained, was an investment holding company owning Formosa Plastics Group’s shares, which were estimated to be worth $560 million in 2019.

The trustee had a discretionary power to apply the whole or part of the capital and income of the fund to, or for the benefit of, the children, and remoter issue of the founders.

The power at issue in the dispute was the trustee’s power to add or exclude “any person or class or description of persons” as beneficiary, as set out in Clause 8 of the GRT trust deed, the authors said.

Simultaneously with the establishment of the GRT, the founders had also established the Wang Family Trust, for charitable and non-charitable purposes.

But importantly, the authors wrote, it conferred no benefit on members of the Wang family or any other persons.

The trustees of GRT and WFT were separate entities, but they had common directors — two daughters of one founder and two sons of the other founder.

In September 2005, the authors wrote, the GRT trustee resolved to exercise powers to add and exclude discretionary objects and appoint the entire fund to the trustee of WFT.

The authors wrote: “This was immediately followed by the trustee’s exercise of its discretionary dispositive power to appoint the whole trust fund of GRT to WFT, thereby bringing the settlement to an end.”

They added: “By way of background to this decision, the GRT trustee referred to ‘the founders’ firm intention to leave the vast majority of their wealth to society, rather than to their children and their wives, all of whom were then enjoying ample wealth and privilege’.

“This was the exercise of power by the GRT trustee that was challenged by the founders’ other family members in proceedings commenced in Bermuda in 2018.”

The Supreme Court of Bermuda held on a summary judgement application that the trustee had invalidly exercised its powers, the authors wrote.

An appeal against this decision was allowed by the Court of Appeal of Bermuda, which granted leave to appeal to the Privy Council.

The authors wrote: “The key issue before the formal body of advisers to the UK sovereign was whether the trustee of a settlement ‘exercised for a proper purpose’ an express power contained in the trust deed to add and exclude discretionary objects, having added a purpose trust as an object and removed all family members comprising the entire class of objects.”

They added: “In a unanimous decision, the board of the Privy Council determined that the GRT trustee had exercised its powers for an improper purpose.”

Summing up, Ms Wang and Mr Chong wrote: “This is a valuable decision exploring the nature and scope of trustee power to add and exclude beneficiaries, which is a power that does not come into the spotlight very often.

“According to the Privy Council, this is a power of potentially different character compared with administrative powers of a trustee.”

They added: “The Privy Council also went through a detailed analysis of relevant authorities to discern legal principles for applying the proper purpose rule.

“Instead of applying a hard and fast substratum rule — or relying on an overriding principle that all powers of the trustee must be exercised in the interests of some or all beneficiaries — the board chose to refer to terms of the trust instrument and circumstances in which the trust was created in deciding the purpose of powers under Clause 8.

“This is a reminder that every trust settlement is a tailored solution. There is no one-size-fits-all type of rule or principle that determines the purpose of the trustee’s powers.”