A Hong Kong court on Wednesday ruled against the matriarch of Great Eagle, one of the city’s richest real estate clans, in her bid to prevent some of her children from taking control of the family conglomerate.
The Court of First Instance ruled against Lo To Lee-kwan, 99, who launched the legal action in 2016 against HSBC International Trustee, manager of a family trust that held the majority shares in the Hong Kong-listed Great Eagle Holdings.
She wanted the trust manager removed because she said it was acting for one of her sons and had lost its impartiality.
But in a 247-page judgment, Mr Justice Wilson Chan Ka-shun said such a suggestion was without basis, and what had since escalated into a courtroom drama stemmed from the genuine, yet misguided, beliefs of Lo.
The matriarch suggested during the trial that it was commonly understood that she had strict control over the trust at the time it was formed, even though trust documents formulated four decades ago showed the HSBC arm had discretion to not follow.
Had the version Lo suggested been true, Chan said, the practice would have been “a fraudulent scheme to defraud the Inland Revenue Department”.
“It may be that the plaintiff genuinely – but misguidedly – believes that she is entitled to give instructions to the defendant regarding the administration of the trust,” he added.
The real estate firm was co-founded by Lo and her husband, property tycoon Lo Ying-shek, in 1963. Lo Ying-shek died in 2006.
While the trust arm of HSBC was tasked in a 1984 agreement to ensure the company did not fall into the hands of just one or a few of their nine children, Lo To Lee-kwan argued the bank had favoured her third son Lo Ka-shui, the current chairman of Great Eagle Holdings.
The six sons and three daughters had reportedly split into two warring factions, one siding with their mother and the other with Lo Ka-shui.
During the trial, while second son Lo Yuk-sui and Lo Kai-shui, the sixth son, testified for their mother, Ka-shui, Vincent Lo Hong-sui, the fourth son, and Archie Lo Ying-sui, the fifth, gave testimony for the trust manager.
The bank was named the defendant because it failed to follow the mother’s instruction to take action against Ka-shui, who had been aggressively purchasing Great Eagle Holdings’ shares.
But the judge found the widow played little role in founding the trust, leaving most of it to her husband at the time. She therefore lacked an understanding that the trust was actually founded on a discretionary basis when answering to her requests, Chan found.
At one point, the mother complained, Ka-shui held at least 27 per cent of the company’s shares, while the family trust owned about 33 per cent.
Fearing Ka-shui would become the single largest shareholder, Lo To Lee-kwan wrote to the bank on four occasions, starting in 2016, asking it to increase her number of shares, a request the HSBC arm had refused.
Chan, however, found that stopped short of being a threat. “He was in fact doing the opposite … that the Lo family’s control of Great Eagle as a whole could be maintained and also for the benefit of Great Eagle,” he ruled.
There were also allegations that Ka-shui was having “inappropriately close relations” with Paulina Lau, a senior HSBC employee assigned to manage the trust. The court evidence also featured a glimpse into the boardroom drama in which Ka-shui threatened to kick his siblings out.
But the judge dismissed those concerns saying it was natural for Lau to look for Ka-shui, who was the key contact point for the family. At best, Chan said, what happened in the boardroom was a dispute, but Ka-shui then held no power to kick out siblings.
Ka-shui and two of his younger brothers, Vincent and Archie, wrote to the trust manager opposing their mother’s suggestion to buy more shares, the court had heard.
Lo Ka-shiu said he respected the court’s decision, adding that he hoped the matter would be over soon. “Mother can come home for a reunion and the family will be in harmony,” he said.
During the trial, the nonagenarian gave testimony in a wheelchair, praising Ka-shui as a “smart and good” son growing up.
More from South China Morning Post:
- Matriarch of Hong Kong property empire living in hotel praises son she’s feuding with as ‘good and smart’
- ‘It’s my decision’: 97-year-old Lo matriarch says she pushed for lawsuit to dismiss HSBC