A proposal to introduce a new statutory duty of care for trustees in the Trustee Ordinance has won overwhelming support, the Financial Services & the Treasury Bureau says.

It today published conclusions drawn from a public consultation held June to September. Thirty-six submissions were received and respondents backed most of the reform proposals, including trust service providers and practitioners, professional bodies, chambers of commerce and other stakeholders.

There was overwhelming support for the proposed introduction of a new statutory duty of care for trustees. For trustees' default power of investment, most backed the suggested retention of the list of default-authorised investments currently specified in the ordinance's second schedule.

The bureau said it will review and update the second schedule to make it less prescriptive to meet evolving market needs. It will invite input from professionals and financial regulators.

Default powers

It will also provide trustees default powers to delegate, employ agents, nominees and custodians, and take out insurance, plus introduce a statutory charging clause for professional trustees to receive remuneration.

Certain trustee exemption clauses will be subjected to statutory control if they seek to exempt professional trustees, who are remunerated for their service, from liability for breach of trust due to fraud, wilful misconduct or gross negligence.

Beneficiaries will be provided with the right to remove trustees by way of a court-free process under certain conditions. The Perpetuities & Accumulations Ordinance will also be amended to abolish the rule against perpetuities and that against excessive accumulations of income except for charitable trusts. Both abolitions will apply to new trusts to be formed after the amendments come into force.

Some respondents proposed amendments to sections eight, 11, 12 and 34 of the law to clarify and modernise the provisions to meet current market needs. The Government considers these proposals reasonable and will include them in the legislative amendments.

Other issues

The bureau said some issues will require further study, such as beneficiaries' right to trust information, which is highly complex and controversial, and the case law is still developing. The Government will study the subject and consider the evolution of the law in comparable jurisdictions.

Another issue concerns whether the law should allow the creation of non-charitable purpose trusts. Due to diverse public views, and as the issue involves a fundamental change to the common law concept of trust law and requires new legislation to implement the proposal, the subject matter will be considered separately.

The bureau will implement the reform proposals by legislative amendments and will table the revisions at the Legislative Council in 2010-11, noting a modern and user-friendly ordinance will benefit key parties of trusts by providing more clarity and certainty in law for the efficient management of trusts.

Click here for the consultation conclusions.