In 2021, a long-running trusts dispute went to an 80-day trial in the Supreme Court of Bermuda. We at Baker McKenzie are acting for the claimant.
Background: the Wang family
We have been instructed for several years by Dr. Winston Wong, a very successful Taiwanese entrepreneur, academic and philanthropist, in relation to litigation arising from the death of his father, Wang Yung-Ching (aka YC Wang), the founder of the Formosa Plastics Group (FPG) headquartered in Taipei.
YC Wang and his younger brother, Wang Yung-Tsai (aka YT Wang), spent half a century transforming FPG into the multinational, multibillion-dollar conglomerate it is today, before their respective deaths in 2008 and 2014.
At the time of their deaths, they were two of the richest men in Taiwan. In addition to their Taiwanese estates, they had accumulated an enormous fortune offshore, managed in secret by a devoted employee. In family terms, the brothers each fathered numerous children with multiple women. Of these children, seventeen are officially acknowledged as heirs.
Given these complex business and family arrangements, the vast wealth created and the fact that one of the brothers died without any valid will, it is perhaps unsurprising that litigation has ensued.
What points are under dispute?
The Bermudian case concerns the ownership of shares and other assets worth now more than USD 20 billion, which are held in a network of offshore purpose trusts set up between 2001 and 2013 (the last of which was created after YC’s death) to hold various BVI companies.
Dr. Wong, who is the administrator of YC’s intestate estate, sued five trustee companies controlled by two of the daughters from his third family and two of YT’s sons, as well as the employee who once managed the assets (and who died before trial). Two of YT’s other children also joined the proceedings, one of them supporting Dr. Wong’s case and bringing parallel claims of his own on behalf of YT’s estate.
Among other things, Dr. Wong alleges that his father, who never learned to read, write or speak English and who never spoke to a lawyer about the trusts, did not understand that, in approving the creation of these structures, he was giving up control of his wealth forever and that his heirs could never benefit from the fortune he spent his life creating. He maintains that this mistake is sufficiently serious to justify setting the trusts aside.
The defendants, however, contend that the trusts were intended to preserve family control of FPG’s listed companies through an ever increasing offshore stake in the shareholdings of FPG so that the companies could be maintained in perpetuity and could provide employment and financial support for external projects in line with YC and YT’s long-term strategic vision for “giving back to society”.
The trusts in question have no beneficiaries but were created for the fulfilment of specified non-charitable purposes, under the auspices of Bermuda’s Trusts (Special Provisions) Act 1989 (as amended). Dr. Wong alleges that the purposes as drafted are insufficiently certain to allow the trusts to be carried out,[1] and that the trusts are void as a result. He also contends that the trusts’ purposes are, impermissibly, a mixture of charitable and non-charitable purposes, which also renders them void under Bermudian law.
Neither of these arguments is known to have been considered by a court before, in relation to the widely used — yet still relatively new — concept of a statutory, non-charitable purpose trust.
Dr. Wong also alleges that the transfers of certain BVI companies to the trusts were ineffective because the assignment of YC and YT’s equitable interest was not evidenced in writing,[2] as required by the English Statute of Frauds of 1677. This led to fascinating arguments at trial about whether this ancient English Parliamentary enactment forms part of the law of the British Virgin Islands. Experts in Caribbean colonial history gave rival opinions on whether the BVI was acquired by settlement or conquest and — if settled — when the date of settlement was and thus when the cut-off date was for the reception of English law into the colony.
Again, no court appears to have considered such questions in such detail before.
Why is the matter significant?
The case is the largest in value ever to come before the Bermudian courts and is believed to be one of the most valuable private wealth cases ever tried anywhere in the world. The litigation has spanned well over a decade and has been pursued in Taiwan, Hong Kong, various US states, Bermuda and the British Virgin Islands. It has involved a number of Baker McKenzie offices and other legal and professional teams.
The Bermudian trial was due to be held in person on the island between April and September 2021, in a specially constructed courtroom large enough to accommodate more than 50 lawyers from London, the US, Taiwan and Hong Kong who were actively involved in this aspect of the case.
However, only two weeks before the trial started, the island suffered a spike in COVID cases and the judge (Assistant Justice Kawaley, former Chief Justice of Bermuda) made a last-minute decision to order a virtual trial. Four associates who had already travelled to Bermuda were soon sent home. The trial then took place entirely on Zoom, with most of the legal teams based in London.
The judge dialled in from his home in Bermuda, often starting his working day at 6 am to accommodate the various time zones involved, and the witnesses and experts gave evidence via video link from an arbitration centre in Taipei (often being cross-examined until after 10:30 pm local time).
Perhaps surprisingly, the trial concluded precisely on schedule and without any major technological hitches.
What’s next for virtual trials?
The trial took place at a time when courts around the world were suddenly shifting from in-person, paper-based hearings to bespoke online solutions in response to the pandemic. For the first time, answers had to be found urgently to questions that have rumbled along in the legal community for many years: whether ‘virtual’ or ‘remote’ trials are a good thing and, if so, precisely how and for what types of matters they should operate. In our case, the parties attempted as much as possible to replicate the majesty of a traditional courtroom, but this will not be straightforward in every case.
The question now is whether and to what extent court hearings should revert to type. The considerations vary from case to case, but given the climate emergency, more thought will surely be given to the environmental impact of traditional, paper-based trials. The Baker McKenzie London team estimates that they avoided printing over 840,000 pages of hearing bundles and saved 137 tonnes of carbon by not flying to and from Bermuda. Solicitors, advocates and judges have all had to embrace electronic working, many of them enthusiastically so. Necessity is the mother of invention, as the saying goes, and the circumstances required rapid adaptations and innovations by all involved. There were, consequently, many learnings and unexpected advantages to conducting a trial in this manner. We hope the example of this trial will encourage others to seek to emulate those advantages in the future.
Conclusion
Judgment in the Wong case is expected in the spring of 2022. Given the value of the dispute and the number of novel legal issues it raises, the outcome is very likely to be appealed to the Bermudian Court of Appeal and then the Privy Council in London, whichever way the decision goes at first instance. A separate case, also on appeal from Bermuda, was heard by the Privy Council in early March 2022,[3] and related cases are ongoing in Hong Kong and the US District of Columbia.
By Anthony Poulton (Partner), Luke Richardson (Senior Associate) & Rachael Cederwall (Senior Associate) Dispute Resolution practice at Baker McKenzie, London
For more information
Click here to see our infographic on the trial, with details of the scale and the sustainability-related benefits of holding a virtual trial.
You may access our thought leadership pieces on virtual hearings and mediations, some of which are in partnership with KPMG UK, on our Future of Disputes hub.
[1] Contrary to s.12A of the 1989 Act (as inserted by legislation in 1998).
[2] Students of equity will remember the Vandervell litigation: [1967] 2 AC 291.
[3] Grand View Private Trust Company and another (Respondents) v Wong and others (Appellant) No 2 (Bermuda) – Judicial Committee of the Privy Council (jcpc.uk)