I. Introduction

Recently, the Hong Kong High Court Court of First Instance rendered an important judgment in Zong Jichang et al. v. Zong Fuli [2025] HKCFI 3355 (hereinafter referred to as “this case” or “the Hong Kong case”), granting the plaintiffs’ applications for asset preservation orders and disclosure orders. From a legal perspective, this case is a crucial procedural case. The Hong Kong High Court only issued asset freezing orders and disclosure orders and did not rule on the substantive legal issues involved. Public information indicates that the jurisdiction and trial of the relevant substantive legal issues will proceed in Mainland courts (the first-instance civil lawsuit is being heard at the Hangzhou Intermediate People’s Court).

Once the judgment in this case was made public, it attracted significant attention and heated discussion among the legal profession, financial industry, high-net-worth individuals, and their family offices.

II. Background, Disputed Issues, and Significance of the Case

Overall, the entire Zong Qinghou family trust case (including this case and other disputes related to the Zong Qinghou family trust) represents a typical complex scenario in contemporary Chinese high-net-worth family wealth传承.

Public information shows that the core dispute in the Zong Qinghou family trust involves approximately USD 1.8 billion in HSBC Hong Kong account assets (“HSBC Account Assets”), held by BVI company Jian Hao Ventures Limited. In this case, the plaintiffs are the three children of Zong Qinghou and Du Jianying (Zong Jichang, Zong Jieli, Zong Jisheng), and the defendant is Zong Qinghou’s daughter from his marriage to Shi Youzhen, Zong Fuli, and Jian Hao Company controlled by her.

Based on public information, the dispute in the Zong Qinghou family trust case may primarily stem from the interpretation of the legal relationships among three key documents:

1. Zong Qinghou’s Handwritten Instructions

2. Zong Qinghou’s signed Letter of Entrustment

3. The Agreement signed between Zong Fuli and the three plaintiffs

In this case, the plaintiffs argue that Zong Fuli breached her promise to establish an offshore trust, while the defendant denies any obligation to establish a trust or any intention to delay its establishment. From a common law perspective, this case demonstrates the tension between the expression of trust intent and legal formal requirements, as well as the legal challenges in cross-border dispute resolution and enforcement. More importantly, this case reveals how Hong Kong courts apply common law trust principles to resolve complex cross-border trust disputes with Chinese backgrounds (at least at the procedural legal level). Additionally, since the substantive dispute in the Zong Qinghou family trust case is being heard in Mainland courts, and the plaintiffs obtained orders from the Hong Kong High Court through initiating this case, achieving cross-border asset preservation, fact-finding, and disclosure, this case also holds significant implications for cross-border/inter-regional judicial assistance.

According to Hong Kong legal experts and the barristers representing the plaintiffs in this case, the significance of this case under Hong Kong law lies in providing important guidance for applications for cross-border interim relief under Section 21M of the High Court Ordinance in family trust disputes, namely: (1) Whether the applicant seeking relief from the Hong Kong court has made a prior application to the primary court: although prior application to the primary court is a relevant factor, it is not a mandatory precondition; (2) The balance of asset preservation order terms: when establishing specific terms of asset preservation orders, the court considers balancing asset protection with actual management needs based on the specific nature of the assets; (3) Considerations for issuing disclosure orders: when issuing disclosure orders, the Hong Kong court also considers whether its orders will impact the primary court’s adjudication of the substantive dispute.

III. Application and Breakthroughs of Common Law Trust Theories[1]

(I) Formation and Establishment of Trust Relationships

1. Legal Effect of Nominee Holding Arrangements and Bare Trusts

The most fundamental issue in the Zong Qinghou family trust case is whether a trust relationship has been formed. Public information shows that Article 3 of the Letter of Entrustment explicitly states: “The parties confirm that Party B (Zong Fuli) holds the above assets, including company shares and assets, on behalf of Party A (Zong Qinghou).” This type of nominee holding arrangement can be interpreted under common law as a bare trust structure.

In paragraph 50 of the judgment, the Hong Kong court, applying the theoretical framework of Lewin on Trusts (20th edition), pointed out that a bare trustee only has the obligation to safeguard property, without active management obligations. The court found that this nominee holding relationship had初步 established a trust foundation—that is, Zong Fuli, as the registered holder of Jian Hao shares, held these shares and underlying assets merely on behalf of Zong Qinghou.

This analysis reflects thecore principle of “substance over form” in common law, with the court focusing on the substantive relationship rather than the formal designation. In Re Kayford [1975] 1 WLR 279, the UK court established that even if the parties did not use the term “trust,” a trust relationship can be established as long as there is an intention to segregate property and hold it for the benefit of others. The Hong Kong court follows this common law tradition.

2. Dual Coexistence Theory of Express Trust and Constructive Trust

According to the court’s citation in paragraph 50 of the judgment, specifically referencing Lewin on Trusts (20th edition) §3-054, documents authorizing the creation of new trusts can themselves simultaneously constitute trusts. This involves the common law theory of “incomplete trust”: even if a trust has not been fully established as预期, the court can still infer that a trust relationship has been partially formed.

In this case, the judge found that there is a “serious issue to be tried” regarding whether a constructive trust has been formed. A constructive trust is an important legal fiction in the common law system, allowing courts based on equitable principles to deem that a trust relationship exists even in the absence of an explicit trust declaration. This stems from the common law equity tradition’s tenet: “Equity treats as done that which ought to be done.”

In Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, the UK House of Lords confirmed the重要 status of constructive trust as an equitable remedy, a principle consistently followed in Hong Kong court precedents.

3. Expression of Intent to Establish a Trust and the Three Certainties Principle

Under common law, trust law requires the settlor to have a clear intention to establish a trust. In the Handwritten Instructions, Zong Qinghou wrote “preparing to go to Hong Kong to handle trusts for three individuals at HSBC, USD 700 million each,” expressing the intention to establish a trust. This involves the well-known “three certainties” principle in common law, originating from Knight v Knight (1840) 3 Beav 148, namely:

· Certainty of intention

· Certainty of objects

· Certainty of subject matter

Although the defendant challenged the validity of the Handwritten Instructions, the court found in paragraph 54 of the judgment that it at least constituted a “serious issue to be tried.” In Paul v Constance [1977] 1 WLR 527, the UK court confirmed that trust intention does not require specific legal terminology; as long as the intention is clear, it suffices. The Hong Kong court’s adherence to this flexible common law position provides greater room for认定 trust relationships.

(II) Scope and Determination of Trust Property

1. Legal Nature of Fixed Income Investments and Trust Principal

One of the core disputes in this case is the scope of trust property. Article 3 of the Letter of Entrustment stipulates: “The Zong family trust appointed by Party A to be established by Party B is a capital preservation trust, meaning that trust assets will continue to be invested in fixed income products at HSBC Hong Kong, with only interest income to be distributed; no person may claim the use of trust principal for distribution to beneficiaries.”

The defendant argues that this means only interest income constitutes trust property, not the principal. However, the plaintiffs argue that the entire HSBC account assets are trust property, only that the method of use is restricted. This involves the common law distinction between “beneficial interest” and “legal interest,” and the界定 of “trust powers” and “trust property.”

On this point, the court in paragraphs 52-56 of the judgment tended to find a “good arguable case” supporting the plaintiffs’ claim, that the entire HSBC account assets are trust property, only that the principal cannot be distributed to beneficiaries. This aligns with the common law concept of “capital preservation trust,” confirmed in Baker v Archer-Shee [1927] AC 844, that trust property can have usage restrictions without changing its nature as trust property.

2. Identification of Trust Property Under Corporate Structure and Corporate Veil Doctrine

This case involves the complex situation of company-held assets as trust property. The court in paragraph 50 of the judgment cited Lewin on Trusts (20th edition) §3-004: “Where a company is entirely controlled by one person, the court may infer that a trust declaration exists where the director created the settlement and subsequently conducted business as a corporate trustee for the benefit of the settlement.”

This reflects a special application of the corporate veil doctrine in trust law. The principle of separate corporate personality established in Salomon v A Salomon & Co Ltd [1896] UKHL 1 may be突破 under trust law. When a company is essentially a tool for holding trust assets, the court can find a trust relationship through “piercing the corporate veil.”

In TSB Private Bank International SA v Chabra [1992] 1 WLR 231, the UK court confirmed that it could “look through” corporate form to trace substantive interests. This principle has been widely applied in Hong Kong courts in dealing with complex company holding structures, providing a legal basis for认定 cross-border trust relationships.

3. Sufficient Certainty Principle for Trust Property

Trust law requires that trust property must be sufficiently certain—the “certainty of subject matter” requirement of the “three certainties” principle. In common law precedents such as Palmer v Simmonds (1854) 2 Drew 221 and Hunter v Moss [1994] 1 WLR 452, standards were established for determining whether trust property is sufficiently certain.

In this case, the HSBC account assets are clearly identifiable, supported by specific account statements. Although asset values may fluctuate with investment performance, the trust property itself is certain, meeting the property identification standard established in Re London Wine Co (Shippers) Ltd [1986] PCC 121.

(III) Trustee Obligations and Trust Administration

1. Common Law Basis of Fiduciary Duty

In this case, whether Zong Fuli owes a fiduciary duty regarding the HSBC account assets is a key issue. In paragraph 50 of the judgment, the court cited views from paragraphs 64-65 of Ribeiro PJ in the Hong Kong Court of Final Appeal case Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681, i.e., a person who controls another’s assets and is obliged to deliver those assets owes the beneficiary of those assets a fiduciary duty akin to agency.

This view originates from the common law fiduciary relationship doctrine. In Bristol and West Building Society v Mothew [1998] Ch 1, the UK court defined fiduciary duty as “a special obligation requiring the fiduciary to act faithfully on behalf of the principal.” Fiduciary duties include the duty of loyalty, duty to avoid conflicts of interest, and duty of care.

Article 6 of the relevant Agreement stipulates: “After the完整 delivery of trust property, Party A (Zong Fuli) is discharged from responsibility.” This indicates that Zong Fuli owes a duty to deliver the HSBC account assets, which may give rise to a fiduciary duty. This aligns with the common law concept of “constructive trustee”: even if not formally appointed as trustee, a person who substantively controls trust property bears trustee obligations.

2. Disclosure Obligations and Common Law Transparency Requirements

Under common law, one of the basic obligations of a trustee is to provide information to beneficiaries. In O’Rourke v Darbishire [1920] AC 581, the UK House of Lords confirmed that beneficiaries are entitled to obtain information about trust property. In this case, the plaintiffs complained that Zong Fuli refused to provide information about the HSBC account (only providing two monthly statements from January and May 2024).

In paragraph 57 of the judgment, the court cited views from paragraph 167 of Lord Millett NPJ in Libertarian Investments Ltd v Hall and Lewin on Trusts (20th edition) §21-035, noting that trustees and fiduciaries have a legal obligation to provide beneficiaries with information about trust assets. In Schmidt v Rosewood Trust Ltd [2003] UKPC 26, the Privy Council further expanded this principle, confirming that courts have inherent jurisdiction to require trustees to disclose information to protect beneficiaries’ interests.

3. Legal Obligation Not to Hinder Trust Establishment

Article 7 of the Agreement explicitly stipulates: “Party A shall not, by act or omission, hinder the establishment of the trust or the delivery of assets.” This imposes a positive obligation on Zong Fuli to establish the trust. This involves the common law principle of “specific performance,” originating from the equity tradition, allowing courts to order a party to fulfill their promise.

In paragraph 24 of the judgment, the court noted that Zong Fuli insisted on designating herself as protector in the draft trust deed and claimed that her children might also become beneficiaries, which conflicts with Articles 1 and 2 of the Letter of Entrustment, which explicitly specify only the plaintiffs and their children as beneficiaries. These actions may constitute “acts” hindering trust establishment.

In Pullan v Wilson [1860] EngR 1029, the UK court established the equitable remedy principle for acts hindering trust establishment. According to Re Lucks Settlement [1940] Ch 864, hindering trust establishment may lead to court enforcement of the original trust arrangement or a finding that a constructive trust has been established.

(IV) Timing and Conditions of Trust Establishment Under Common Law

1. Staged Settlement and Conditional Trust Theories

The defendant argues that since the HSBC account assets never reached USD 2.1 billion, a trust of USD 700 million per person could not be realized, so there is no obligation to establish the trust. However, the court noted in paragraph 53 of the judgment that Article 5 of the Handwritten Instructions states: “First handle Jichang/Jieli’s; if USD funds are fully raised, ask Jisheng to take leave and return to handle his.” This indicates that the trust could be established in stages.

This involves the common law concepts of “staged settlement” and “conditional trust.” In Re Purton’s Will Trusts [1961] 2 All ER 851, the UK court confirmed that trusts could be established in stages at different times. In Re Thompson’s Settlement [1986] Ch 99, the court recognized the validity of conditional trusts, as long as the conditions themselves do not violate public policy.

2. Private Trust Company Model and Modern Trust Structure

Article 5 of the relevant Agreement stipulates that the trust establishment adopts a Private Trust Company (PTC) model, transitioning to a professional trustee stage, with Zong Fuli serving as the shareholder of the trustee during the transition. This reflects the modern trust structure combining “purpose trust” and “beneficiary trust” under common law. In paragraph 24 of the judgment, the court found that Zong Fuli’s insistence on designating herself as protector in the draft trust deed and having the power to determine the trust term may violate the principle in Article 6 of the Agreement that “Party A shall no longer participate in any management of the trust, with all management handled by Party B.”

In Re Pilkington’s Will Trusts [1964] AC 612, the UK court discussed the allocation and limitation of trust management powers. The principle established in Saunders v Vautier (1841) EWHC Ch J82 indicates that beneficiaries may terminate a trust in certain circumstances, but this power can be limited through trust terms.

IV. Superiority of Hong Kong’s Cross-Border Asset Protection Legal Mechanism

(I) Innovative Jurisprudence of Section 21M

The most distinctive aspect of this case is the cross-border trust asset protection issue. The court adopted a two-stage approach under Section 21M of the High Court Ordinance to review the asset preservation order application.

“21M. Interim relief in the absence of substantive proceedings

(1) Without prejudice to the principle of section 21L(1), the Court of First Instance may, by order, appoint a receiver or grant interim relief in relation to proceedings that —

(a) have been or will be commenced outside Hong Kong; and

(b) are capable of giving rise to a judgment that may be enforced in Hong Kong under any Ordinance or common law.

(2) An order under subsection (1) may be made unconditionally or on such terms and conditions as the Court of First Instance considers just.

(3) Subsection (1) applies even if —

(a) but for this section, the subject matter of the proceedings would not give rise to a cause of action over which the Court of First Instance has jurisdiction; or

(b) the appointment of a receiver or the interim relief sought is not ancillary or incidental to any proceedings in Hong Kong.

(4) The Court of First Instance may refuse an application for the appointment of a receiver or the grant of interim relief under subsection (1) if, in the opinion of the court, the fact that the Court of First Instance has no jurisdiction over the subject matter of the proceedings but for this section makes it unjust or inconvenient to grant the application.”

In paragraph 40 of the judgment, the court cited the method established by Lord Phillips NPJ in paragraphs 47-54 of the Hong Kong Court of Final Appeal case Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd (2016) 19 HKCFAR 586:

• Stage 1: Would the court grant the order if the application were made in Hong Kong?

• Stage 2: Considering that the court has jurisdiction only by virtue of Section 21M, would granting the application be unjust or inconvenient?

Section 21M represents the legislative embodiment of the common law “ancillary jurisdiction” principle, allowing courts to provide ancillary relief even when the main proceedings are not conducted locally. This mechanism was recognized by the UK House of Lords in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, confirming that courts have the power to issue ancillary injunctions in specific circumstances.

(II) Flexibility of Legal Standards for Preservation Orders

In paragraph 42 of the judgment, the court cited the views of DHCJ Queeny Au-Yeung in paragraph 76 of Narian Samtani v Chandersen Tikamdas Samtani [2012] 4 HKLRD 872, finding that a preservation order differs from a Mareva injunction. The threshold for a preservation order is merely “serious issues to be tried,” without needing to prove a “real risk of dissipation.”

This reflects the common law distinction between different types of injunctions. In American Cyanamid Co v Ethicon Ltd [1975] AC 396, the UK House of Lords established the “serious question to be tried” standard for interim injunctions, while in Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd’s Rep 509, the higher standard of proving “risk of asset dissipation” was established for freezing orders.

The Hong Kong court’s fine distinction and flexible application of these common law principles provide multi-layered legal tools for trust asset protection.

It should also be noted that Hong Kong’s preservation system differs significantly from Mainland China’s preservation system. Unlike the Hong Kong system where courts conduct “substantive review” of preservation applications, in Mainland China, preservation adopts a “property guarantee + formal review” system. Mainland Chinese courts do not conduct substantive review of the applicant’s reasons for preservation. To prevent malicious preservation, Mainland Chinese law and judicial interpretations require preservation applicants to submit sufficient property guarantees not less than the value of the assets to be preserved. Although the law also allows other guarantee methods such as depositing equivalent funds, in practice, preservation guarantees are mostly保函 issued by guarantee companies or insurance companies.

(III) Balance of Jurisdiction in Cross-Border Asset Preservation

In paragraph 62 of the judgment, the court cited five factors from paragraph 115 of Motorala Credit Corporation v Uzan (No 2) [2004] 1 WLR 113, and in paragraph 67, cited the views of Lisa Wong J in paragraph 113 of The Export-Import Bank of China v Liu Qingpin [2018] HKCFI 1840, emphasizing that the purpose of Section 21M is to facilitate the enforcement of foreign judgments in Hong Kong.

This involves the common law principle of “comity”—that courts in different jurisdictions should respect each other’s judgments and procedures. In Airbus Industrie GIE v Patel [1999] 1 AC 119, the UK House of Lords confirmed the importance of the comity principle but also emphasized that cross-border injunctions may be issued in specific circumstances.

The court specifically modified the preservation order terms, changing “dispose of, deal with or diminish the value of” to merely prohibiting “withdrawal or encumbrance,” allowing investment accounts to continue investment activities while protecting the underlying assets from withdrawal. This flexible approach reflects the common law “minimal intervention” principle—that court relief should be limited to what is necessary.

(IV) Synergistic Jurisprudence of Preservation and Disclosure Orders

Regarding disclosure orders, in paragraph 86 of the judgment, the court cited the views of DHCJ Le Pichon in paragraph 18 of Carmon Reestrutura-engenharia E Servicos Tecnicos Especiais (Su) Limitada v Carmon Restrutura Ltd [2024] HKCFI 435, noting that disclosure orders are typically issued together with preservation orders as a “supervisory tool.”

This synergistic mechanism originates from the common law “ancillary relief” principle, established in Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133, allowing courts to order non-litigants to provide information to enable effective implementation of primary relief.

In A v C [1981] QB 956, the UK court further developed this principle, confirming that courts have the power to order banks to disclose account information to support other forms of equitable relief. The Hong Kong court’s application of these common law principles provides comprehensive legal protection for trust assets.

V. Legal Advantages of Hong Kong as a Trust Asset Jurisdiction

(I) Deep Roots of the Common Law Trust System

Hong Kong possesses the following unique legal system advantages as a trust asset jurisdiction:

1. Common Law Tradition and Case Law System:

Hong Kong has inherited the UK common law trust tradition with rich case law accumulation. From the three certainties established in Knight v Knight (1840), to beneficiary rights established in Saunders v Vautier (1841), and the more modern disclosure provisions in Schmidt v Rosewood Trust Ltd (2003), Hong Kong courts fully apply these classic common law principles.

2. Modern Development of the Trustee Ordinance:

Hong Kong’s Trustee Ordinance (Cap. 29), amended in 2013, introduced various modern trust law concepts, including:

• Expanded trustee investment powers, going beyond the traditional “prudent investor rule”;

• Introduced “anti-foreign forfeiture rules,” enhancing protection of trust property;

• Allowed reserved powers, enabling settlors to retain partial control;

• Recognized validity of non-charitable purpose trusts.

3. Complete System of Equitable Remedies:

Hong Kong courts maintain a complete system of equitable remedies, including:

• Specific performance;

• Declaratory relief;

• Tracing;

• Constructive trust;

• Account of profits;

These legal tools, confirmed in classic cases such as Re Duke of Norfolk’s Settlement Trusts [1982] Ch 61, provide comprehensive protection for trust property.

(II) Structural Advantages from Hong Kong’s Tax Rules

Hong Kong’s trust tax system offers multiple advantages stemming from its legal structure:

1. Territorial Source Principle:

Hong Kong adopts the “territorial source principle” rather than “worldwide taxation,” confirmed by the Privy Council in CIR v Hang Seng Bank [1991] 1 AC 306. Under this principle, non-Hong Kong source income may be exempt from Hong Kong tax;

2. Capital Gains Exemption:

Hong Kong does not impose capital gains tax, confirmed in CIR v Wala Garments [1992] 2 HKC 50, where the court found capital nature income not subject to tax;

3. Trust Income Attribution Rules:

Trust income attribution rules in Hong Kong tax law originate from UK tax law principles, established in Baker v Archer-Shee [1927] AC 844, allowing trust income to be retained at the trust level or attributed to beneficiaries, providing tax planning flexibility;

4. Limited Application of Anti-Avoidance Provisions:

Compared to some common law jurisdictions, Hong Kong’s General Anti-Avoidance Rules (GAAR) have relatively limited application, providing room for legitimate tax planning.

(III) Multi-Layered Asset Protection Legal Mechanisms

Hong Kong trust law provides multi-layered asset protection mechanisms:

1. Creditor Restriction Clauses:

Based on Re Turcan [1888] 40 Ch D 5, Hong Kong recognizes the validity of “anti-creditor clauses” in trusts, limiting creditors’ ability to access trust assets;

2. Discretionary Distribution Trusts:

Building on Re Londonderry’s Settlement [1965] Ch 918, Hong Kong recognizes trustees’ discretionary distribution powers, enhancing the trust’s defense capabilities against external attacks;

3. Limitations on Foreign Judgment Enforcement:

In Bank für Arbeit und Wirtschaft AG v Konige Koehler & Co SCS [2019] HKCFI 2531, the Hong Kong court confirmed restrictive conditions for enforcing foreign judgments, providing additional protection for trust assets;

4. Firewall Legislation:

Although Hong Kong does not have complete “firewall” legislation like some offshore jurisdictions, its common law principles and the Trustee Ordinance still provide substantial protection. In Re H [1996] HKEC 725, the Hong Kong court confirmed limitations on foreign court intervention in local trusts.

(IV) Institutional Safeguards of Judicial Independence and Professionalism

Hong Kong’s trust judicial system offers the following advantages:

1. Independent Judicial System:

The Hong Kong Basic Law guarantees judicial independence, ensuring trust law application is not subject to improper interference. In Stock Exchange of Hong Kong Ltd v New World Development Co Ltd [2006] HKCFA 42, the Court of Final Appeal reaffirmed the basic principle of judicial independence;

2. Stare Decisis:

Hong Kong strictly follows the common law principle of stare decisis, enhancing legal certainty. In China Field Ltd v Appeal Tribunal (Buildings) [2009] HKCFA 95, the Court of Final Appeal reaffirmed the importance of this principle;

3. Complete Appellate Mechanism:

The complete appellate system from the Court of First Instance to the Court of Appeal to the Court of Final Appeal ensures the accuracy and consistency of trust law application.

VI. Implications and Impact of the Zong Case on Hong Kong Trust Law Development

(I) Promoting Innovative Development of Trust Law Theory

This case will promote theoretical development in Hong Kong trust law in the following areas:

1. Definition of Nominee Holding and Trust Relationships:

This case’s analysis of whether nominee holding may constitute a trust will enrich Hong Kong courts’ standards for determining informal trust relationships. In Re David Feldman Worldwide Ltd [2010] HKCFI 1152, the Hong Kong court explored the relationship between nominee holding and trusts; this case will further expand this theory.

2. Trust Determination Under Corporate Holding Structures:

The court’s analysis of the trust nature of BVI company-held Hong Kong assets will provide important reference for similar complex structures. This continues the jurisprudential exploration in Hong Kong Taching Petroleum Co Ltd v Kwan Chui Ming [1988] HKCFI 211.

3. Legal Construction of Capital Preservation Trusts:

Professional analysis of the nature of “capital preservation trusts” will enrich Hong Kong’s legal understanding of this特殊 trust arrangement. This supplements the discussion of trust term restrictions in Re Fan Qing and Yeung Po Chuen Discretionary Trust [2017] HKCFI 579.

4. Coexistence of Constructive Trust and Express Trust:

The court’s discussion of the possible coexistence of two types of trusts expands the theoretical boundaries of Hong Kong trust law, going beyond the single trust type determination in Yao Qi v Ma Jiayin [2016] HKCFI 1080.

(II) Strengthening Cross-Border Trust Judicial Protection Mechanisms

This case will enhance Hong Kong’s cross-border trust protection mechanisms:

1. Expansion of Section 21M Application Scope:

The court’s application of Section 21M in trust disputes expands the scope of this provision beyond traditional debt disputes, as in Re Cyril Bennett [2002] HKCFI 539.

2. Clarification of Standards for Ancillary Preservation Orders:

The court’s distinction between preservation orders and freezing orders provides clear guidance for future cases, refining the principles of Everwise International Ltd v Simpson Marine (SEA) Pte Ltd [2015] HKCFI 1645.

3. Coordination Mechanisms for Cross-Border Trust Disputes:

The court’s approach to balancing Hong Kong and Mainland jurisdiction provides a template for cross-border trust dispute resolution in the Greater Bay Area, supplementing the cross-border cooperation experience in Re Frontier Trust Ltd [2008] HKCFI 1196.

4. Synergistic Application of Preservation and Disclosure Orders:

The court’s combined use of these two remedies enhances the effectiveness of trust asset protection, developing the asset protection approach in Re Ka Fai Ho [2011] HKCFI 349.

(III) Improving Trust Practice Operational Standards

This case will have far-reaching impact on Hong Kong trust practice:

1. Enhanced Requirements for Trust Document Completeness:

The document deficiencies revealed in this case will drive the industry to improve trust document standards, going beyond the basic requirements established in Re Kam Fung Bridal Centre Ltd [2012] HKEC 1386.

2. Clarification of Trustee Disclosure Standards:

The court’s emphasis on disclosure obligations will regulate trustee conduct, refining the disclosure principles in Re Julius Baer Trust Co Ltd [2006] HKCFI 395.

3. Definition of Protector Authority:

The questioning of Zong Fuli’s attempt to serve as protector will prompt the industry to more clearly define protector authority, supplementing the protector role discussion in Re AQ Revocable Trust [2010] HKCFI 553.

4. Standardization of “Capital Preservation Trust” Design:

The court’s analysis of capital preservation trusts will promote standardization of此类 arrangements, going beyond the preliminary exploration in Re L Family Trust [2014] HKCFI 1084.

(IV) Impact on Hong Kong’s Status as a Trust Center

This case will consolidate Hong Kong’s position as an Asian trust center:

1. Demonstration of Judicial Protection Capability:

The court’s efficient handling of complex cross-border trust disputes demonstrates the professionalism of Hong Kong’s judicial system, reinforcing the positive impact of Re GZ Trust [2021] HKCFI 818.

2. Highlighting Cross-Border Asset Protection Advantages:

The flexible application of Section 21M highlights Hong Kong’s unique advantages in cross-border asset protection, going beyond the protection scope of Re L Trust [2019] HKCFI 2701.

3. Demonstration of Common Law Flexibility:

The court’s flexible handling of incomplete trust documents demonstrates the adaptive advantages of the common law system, continuing the tradition of flexible interpretation in Re CCW Discretionary Trust [2005] HKCFI 279.

4. Demonstrative Effect on Mainland High-Net-Worth Clients:

The court’s ability to handle complex trusts with Chinese backgrounds will attract more Mainland high-net-worth individuals to choose Hong Kong for establishing trusts, expanding the market impact of Re Tian Yuan Trust [2018] HKCFI 1170.

VII. Conclusion: The Strategic Value of Hong Kong’s Common Law Trust System

The author believes that the Zong Qinghou family trust case fully demonstrates Hong Kong’s legal advantages as a cross-border trust asset jurisdiction. Through the application of the complete common law theoretical system from Knight v Knight (1840) to modern trust precedents, Hong Kong courts provide legal certainty for complex trust disputes; through innovative mechanisms such as Section 21M of the High Court Ordinance, they provide effective asset protection tools; through rigorous yet flexible legal interpretation methods, they balance the interests of all parties; and by parties simultaneously launching different yet interrelated legal actions in both Mainland China and Hong Kong, they achieve and ensure the enforceability, cost-effectiveness, and maximized rights protection of these cross-border legal actions. This also creates a typical, affirmatively valuable new practice of inter-regional judicial assistance/linkage.

Hong Kong combines the legal certainty of the common law tradition, the asset allocation diversity of an international financial center, the tax efficiency of a low-tax jurisdiction, and the execution capability of a professional service center, constituting an irreplaceable trust legal advantage in the Asian region. This case judgment shows that the Hong Kong court can both faithfully apply common law trust principles originating from the UK and flexibly handle complex trust arrangements with Chinese characteristics. This judicial capability will continue to strengthen Hong Kong’s position as a trust center connecting East and West.

In the long term, establishing trust assets in Hong Kong, through adhering to the mature common law trust system and utilizing完善的 asset protection mechanisms, can achieve multiple objectives of wealth preservation and appreciation, smooth传承, risk isolation, and tax optimization. As global uncertainty rises and Asian wealth continues to grow, Hong Kong offers not only legal tools for asset protection but also comprehensive legal solutions based on the common law tradition for sustainable wealth传承 and high certainty, the strategic value of which will become increasingly prominent.

Notes:

[1] Barrister Wong Ming-fung, Barrister Ruan Mei, Barrister Liu Yichong: “Commentary on DVC Case | Hong Kong Court Assists Mainland Litigation in Handling Wahaha Family Trust Dispute of Over One Billion USD: Cross-Border Asset Preservation Practice,” first published on August 1, 2025, in the Des Voeux Chambers WeChat public account.