HSBC TRUSTEE (HONG KONG) LTD v. ALEXANDER LAUFER AND OTHERS

HSBC TRUSTEE (HONG KONG) LTD v. ALEXANDER LAUFER AND OTHERS

The Court directed the Executor to pay the negotiated UK IHT settlement of £1,615,000 plus statutory interest out of the Estate and treated the tax as an administration expense payable before division of residue. The Will (Clauses 4(a)–(c)) manifests the Deceased's intention that debts, testamentary expenses and estate duty (broadly construed to include UK IHT) be paid from the estate prior to dividing the residuary estate; Hong Kong law governs construction (s23B) and IHTA s41(b) does not override the Deceased's clear intention. Accordingly the tax burden is to be borne pro rata by all beneficiaries as an expense of administration.

Citation
HSBC TRUSTEE (HONG KONG) LTD v. ALEXANDER LAUFER AND OTHERS
Parties
Plaintiff/executor: HSBC Trustee (Hong Kong) Limited; 1st Defendant: Alexander Laufer; 2nd Defendant: Antony Sellers; 3rd Defendant: Peter Sellers; 4th Defendant: Jonathan Sellers; 5th Defendant (uk Charity): Cancer Research UK (formerly Cancer Research Fund); 6th Defendant (uk Charity): Macmillan Cancer Support (formerly The Cancer Relief Macmillan Fund); 7th Defendant (uk Charity): The Salvation Army; 8th Defendant: The Community Chest of Hong Kong; 9th Defendant (uk Charity): British Red Cross
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
27 September 2016
Case Number
HCMP2967/2015
Procedural Posture
Application for Directions Under Order 85 of the Rules of the High Court (estate Administration) / Decision on Directions in Chambers (recorder Lisa K Y Wong Sc)
Outcome
Application granted: Executor authorised to pay UK IHT settlement and to treat tax as administration expense payable before residue is divided
Legal Topics
Estate Administration, Executor Duties, Apportionment of Tax, Domicile and Will Construction, Enforceability of Foreign Tax, Charitable Exemptions
Source Language
EN
Trusts and Estates Inheritance Tax Conflict of Laws Civil Procedure Charity Law Estate Administration Executor Duties Apportionment of Tax +3 more

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Parties

HSBC Trustee (Hong Kong) Limited

Plaintiff/executor

Alexander Laufer

1st Defendant

Antony Sellers

2nd Defendant

Peter Sellers

3rd Defendant

Jonathan Sellers

4th Defendant

Cancer Research UK (formerly Cancer Research Fund)

5th Defendant (uk Charity)

Macmillan Cancer Support (formerly The Cancer Relief Macmillan Fund)

6th Defendant (uk Charity)

The Salvation Army

7th Defendant (uk Charity)

The Community Chest of Hong Kong

8th Defendant

British Red Cross

9th Defendant (uk Charity)

Procedural Posture

Application for Directions Under Order 85 of the Rules of the High Court (estate Administration) / Decision on Directions in Chambers (recorder Lisa K Y Wong Sc)

Legal Issues

  1. 1 Whether the Executor should pay UK inheritance tax (IHT) at the negotiated discounted sum
  2. 2 Whether the IHT should be borne pro rata by all beneficiaries including UK charities or apportioned differently
  3. 3 Construction of the Will and Codicil to ascertain deceased's intention regarding payment of foreign tax

Ratio Decidendi

The Court directed the Executor to pay the negotiated UK IHT settlement of £1,615,000 plus statutory interest out of the Estate and treated the tax as an administration expense payable before division of residue. The Will (Clauses 4(a)–(c)) manifests the Deceased's intention that debts, testamentary expenses and estate duty (broadly construed to include UK IHT) be paid from the estate prior to dividing the residuary estate; Hong Kong law governs construction (s23B) and IHTA s41(b) does not override the Deceased's clear intention. Accordingly the tax burden is to be borne pro rata by all beneficiaries as an expense of administration.

Court Disposition

Application granted: Executor authorised to pay UK IHT settlement and to treat tax as administration expense payable before residue is divided

Orders

  • Executor to pay HM Revenue & Customs £1,615,000 plus statutory interest out of the Estate
  • UK IHT treated as an administration expense to be borne pro rata by all beneficiaries when distributing the residuary estate