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Hong Kong courts

Great Eagle Holdings co-founder tells Hong Kong court HSBC International Trustee favours her third son in family dispute

Trust manager accused of conflict of interest in two-year legal battle dividing one of city’s richest real estate clans

PUBLISHED : Tuesday, 29 May, 2018, 4:52pm
UPDATED : Tuesday, 29 May, 2018, 11:50pm

Hong Kong’s largest bank committed a “serious breach of trust” when it favoured one side of a family feud that split one of the city’s richest real estate clans, the High Court was told on Tuesday.

The row for control of the Hong Kong-listed Great Eagle Holdings, valued at HK$27.7 billion (US$3.55 billion), stems from a lawsuit filed two years ago by the widow of property tycoon Lo Ying-shek, who died in 2006.

Lo To Lee-kwan, 98, wants to dismiss HSBC International Trustee which has been tasked since 1984 with ensuring the company, co-founded by the couple in 1963, would not end up falling into the hands of just a few of the nine children.

In a packed courtroom, the widow’s legal counsel Benjamin Yu SC said the trust manager had failed because it had acted in favour of Lo Ka-shui, the couple’s third son, amounting to a breach of trust and an “obvious conflict of interest”.

“The situation is dire and serious,” Yu said.

The top barrister said the matriarch noticed Lo Ka-shui had been aggressively purchasing Great Eagle Holdings’ shares. At one point, he held at least 27 per cent of the company’s shares, while the family trust owned about 33 per cent.

Fearing Lo 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 the number of shares.

Yu said the bank never acceded to the requests.

“They are favouring Mr Lo,” the barrister said.

“Here you have the defendant acting for both KS Lo and for the family. The failure [to act] … would facilitate KS Lo becoming the single largest shareholder.”

Yu also said Lo Ka-shui, who was a non-executive director at the bank, was told by Paulian Lau – an HSBC officer – about the content of a document his mother had written to the trust manager, without her authorisation. Lau, Yu added, was once invited to a board meeting at Great Eagle.

The family of six sons and three daughters has been reportedly divided into two warring factions. But only the bank has been named a defendant.

During the first day of the trial, Yu also said Lo Ka-shui and two of his younger brothers, Vincent Lo Hong-sui and Archie Lo Ying-sui, wrote to the trust manager opposing their mother’s suggestion to buy more shares.

Yu said Lo To Lee-kwan had been left in a “critical position” because while the family was locked in the present court battle, Lo Ka-shui could continue to buy shares, making fewer available.

The mother was particularly concerned about an incident in 2015, when she claimed her son threatened to oust others from the family business, Yu said.

‘It’s my decision’: Lo matriarch says she pushed for lawsuit to dismiss HSBC

He also noted Lo To Lee-kwan would remain in control of the trust until her death.

Amid a string of media reports labelling it as a family row over the late Lo Ying-shek’s inheritance, Yu redirected the focus and said this case was about the widow and the bank, rather than the disputes among children.

Last year, Lo To Lee-kwan said that it was her, not her children, who had decided take the trust manager to court.

“My husband and I gained all the money over the years. If I do not own these assets, who owns them?” Lo said at the time, accompanied by her two eldest sons Anthony Lo Hong-sui and Lo Yuk-sui, her youngest son Lo Kai-shui and two daughters – Gwen Lo Wai-ki and Lo Hung-suen.

Lo, in a wheelchair with a shawl draped over her shoulders, stayed for part of Yu’s opening remarks. She was accompanied by Lo Yuk-sui and Lo Kai-shui.

Outside court, Lo Kai-shui shrugged off suggestions his mother was fighting over the shares for him. “If your mother had put her life savings in a bank and she could not retrieve it, will you help her?” he asked.

A spokesman from HSBC said the trustee would “vigorously defend itself against the claim”.

The case continues before Mr Justice Wilson Chan Ka-shun.