Introduction

An appointor acts as a “protector” of the trustee in a trust structure, providing a check and balance on the trustee’s powers. However, what happens when the appointor itself becomes a source of conflict? In the recent decision of Sheley Yeung Lai Ming Aldred & another v Elysium Limited & another [2026] HKCFI 783, the Court of First Instance ordered the removal of the appointor of a discretionary family trust and appointed an independent professional in its place. This case provides important guidance on the Court’s willingness to intervene to protect the interests of all beneficiaries.

Background

The Compass Trust (the “Trust”) was established in 2014 under Hong Kong law as a discretionary trust. Its main asset was all shares in Cementaid International Holdings Limited, the holding company for the multinational “Cementaid Business” founded by the settlor’s father. The Trust was created to provide succession and asset protection for the Aldred family.

The original trustee was Winterbotham Trust Company (Hong Kong) Limited, later replaced by Castle Fiduciary Limited (the “Trustee”). The appointor was Elysium Limited (the “Appointor”). Under the trust deed, the Appointor held significant powers, including the right to remove the Trustee and appoint a replacement, the right to receive full information of the Trust, and to be notified by the Trustee before major decisions.

Michael Aldred (“Michael”) was one of four brothers who built up the Cementaid Business. During his lifetime, he had beneficial ownership of all the shares in the Appointor. Following a declaration of trust in 2015, the shares in the Appointor were held by a nominee, Tempio Limited, on trust for Michael. After Michael died intestate in 2021, his widow, Pamela, became the sole beneficiary of his estate. As a result, control of the Appointor came, in substance, to rest with Pamela.

The family later split into two camps of beneficiaries: Group A (Michael’s three surviving brothers, their families, and his half-siblings) and Group B (Michael’s widow Pamela, their two daughters, and a son-in-law). In particular, the Appointor asserted that Pamela and her daughters had an entitlement to 60% of the Trust’s assets. Therefore, the Applicants, who belonged to Group A, became concerned that the Appointor, now under Pamela’s control, would exercise its powers to favour Group B at the expense of Group A.

The Applicants sought the following reliefs:

1.      a declaration that the powers of the Appointor of the Trust are fiduciary;

 

2.      a declaration that the Appointor has a potential or actual conflict of interest in acting or continuing to act as the Appointor of the Trust; and

 

3.      an order to remove the Appointor and appoint International Fiduciaries Limited (“IFL”) as its replacement.

Nature of the Appointor’s powers

The central issue was whether the Appointor’s powers were “beneficial” (exercisable for the personal benefit of the Appointor or its controller) or “fiduciary or limited” (exercisable for the benefit of all beneficiaries).

The trust deed originally contained a clause stating that the Appointor’s powers “are not intended to be fiduciary in nature”. However, the Court held that this did not transform them into beneficial powers. The general rule is that if the donee of a power holds an office under the trust, it is “ordinarily impossible to construe its powers as beneficial”. The Appointor exists for the protection of the trust and its beneficiaries as a whole.

The Court concluded that, even if not strictly fiduciary, the Appointor’s powers were “limited powers”, meaning they must be exercised in good faith for the purposes for which they were given, and could not be exercised for the personal benefit of the donee or a subset of beneficiaries.

The Court identified several factors demonstrating that the Appointor’s powers were never intended to be exercised for personal benefit. First, the powers were vested in the Appointor as a corporate entity, not in its beneficial owner. The Appointor itself was incapable of benefiting from the Trust and was not an object of any power under the trust deed. Second, neither Pamela nor Michael had ever been the donee of the Appointor’s powers. The powers were always held by the Appointor and exercised through an independent director. Third, the historical arrangement, under which an independent third party served as director of the Appointor, indicated that the Appointor’s powers were intended to be exercised impartially for the benefit of all beneficiaries as a class, not for any subset. Accordingly, the Court declared that the powers of the Appointor of the Trust are not beneficially owned by the Appointor or its beneficial owner.

Court’s jurisdiction to remove an appointor

The Court confirmed that it has an inherent jurisdiction to remove an Appointor for good cause, just as it does for trustees. This power is prophylactic, which can be exercised before a breach has actually occurred if there is a real risk of conflict of interest arising. In Re The K.S. Shahani Trust [2023] 1 HKLRD 512, the Court removed the trustee where a reasonable person might legitimately question whether there is a real risk of a conflict of interest, even before any default had occurred.

The Privy Council in Letterstedt v Broers & Anor (1884) 9 App Cas stated that its “main guide must be the welfare of the beneficiaries”. In the present case, where there was a fundamental breakdown in trust and communications between the Appointor and a group of beneficiaries, and where the Appointor was in a position of conflict, the Court may order the removal of the Appointor.

Court’s decision

The Court found that the Appointor, under the control of Group B beneficiaries, was treating its powers as beneficial and intended to exercise them in favour of Group B to the prejudice of Group A. The Court noted that the Appointor “endorses Pamela’s view without any reservation” regarding her claim to 60% entitlement to the trust fund. This conduct, combined with the “fundamental breakdown in trust and communications” between the two camps of beneficiaries, justified the Court’s intervention.

The Court held that the prudent and fair arrangement was to replace the Appointor with an independent third party. This would ensure that the Appointor’s decisions would be made impartially, in the best interests of all beneficiaries. Accordingly, the Court ordered the removal of the Appointor and appointed IFL as the new Appointor.

Takeaways

1.      Appointor’s powers are not beneficial: Even if a trust deed contains a clause stating that an appointor’s powers are not fiduciary, the Court may still construe them as “limited powers” that cannot be exercised for personal benefit.

 

2.      Risk of conflict: An appointor may be vulnerable to removal if it demonstrates an intention to act in the interests of one beneficiary over another.

 

3.      Court intervention: There is no need to prove an actual breach of duty for the Court to intervene. A real risk of misuse of powers to the detriment of the trust is sufficient for the Court to exercise its inherent jurisdiction to remove the Appointor pre-emptively.

 

4.      Importance of independence: where there are disputes in a family trust, the appointment of an independent appointor can be a crucial step to restore stability, preserve trust assets, and ensure that the trust operates effectively and impartially.

 

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2026