HONG KONG's 'King of Steel' can rest easy with last week's landmark High Court ruling upholding his complicated trust arrangements, which were designed, at least in part, to save his widow and their seven children from about $40 million in estate duty.
Pong Ding-yuen (also known as Pong Ten Un) founded what is now Hong Kong's last remaining steel company, Shiu Wing Steel, in 1958 and was still at the helm as chairman in 1983. He died five years later, aged 85, two days short of fulfilling a three-year legal requirement for non-taxable gifts that might have allowed his estate to pass smoothly to his heirs without making legal history.
But that was not to be.
Instead, Mr Pong's widow, Hong Siu-chu, and their five sons and two daughters have faced a five-year battle with the Commissioner of Estate Duty. On Thursday, they - and their patriarch - were vindicated largely in a Court of First Instance judgment handed down by Mr Justice James Findlay.
Mr Pong had followed the law, the judge said, and if revenue officials were unhappy that the law allowed his estate to escape duty, they should change the law, not seek redress in court. 'A tax should not be imposed by the courts,' he wrote.
Consequently, the Pongs do not have to pay the estate duty, and the commissioner must pay the family's court costs. The Inland Revenue Department has six weeks to appeal, however, and is considering whether to do so.
The case involves a round of transactions, most of which were undertaken on a single day in January 1990. The money circle started when Mrs Hong borrowed a substantial sum from a bank in Macau and lent it to the trustee of an offshore Pong-family trust. This initiated a string of deals that caused the funds to pass through Mr Pong's own account and those of several family trusts. At the end of the day, the money was back with Mrs Hung, who returned it to the bank.