What is Pet Trust?

In the past 15 years, Hong Kong has seen a surge in pet ownership.[1]  However, and despite this increase, it has become more and more common to see pets being discarded on streets. Sadly for these animals, many of their owners have passed away without first arranging who would be their pets’ caregiver after their demise, with no one in the family showing any willingness to take up that responsibility.

The creation of a Pet Trust can be a solution. A Pet Trust is an arrangement set up by pet owners for providing care and maintenance of their pets in the event of the owners’ death.  It allows owners to designate a trustworthy caregiver for their pets, to formally outline the quality of care they want their pets to receive, and to provide funding for their pets’ care.  The instructions given by owners can be brief or specific – from keeping the pets alive to bringing them to the veterinarian every month.  Most importantly, those instructions will be legally enforceable. 

There are often suggestions that pet protection agreements and conditional gifts are alternatives to Pet Trust.  However, there are critical drawbacks to these methods.  The effectiveness of pet protection agreement is undermined by the fact that no one might be bothered to enforce it after the owners’ death due to difficulties in getting specific performance order from the court (because it would require the court’s constant supervision) and in quantifying loss (i.e. loss of the pets).  Moreover, such agreement is only a personal arrangement with one particular caregiver so if one day he is unable to perform the agreement for any reason (e.g. illness or death), the pet’s fate will become uncertain.  Similarly, for gifts of money conditional upon the caregiver’s maintenance of the pets, the caregiver can change his mind and reject the gift without consequences after the death of owners and then the owners’ arrangement will be frustrated.  To the contrary, in the case of Pet Trust, the trustee is legally obliged to perform the trust according to its terms and the court would have its usual power to supervise the trustee.  Therefore, although the model of Pet Trust might vary from one jurisdiction to another, it is generally believed that the introduction of Pet Trust will advance the welfare of pets by providing them a continuous and familiar lifestyle despite the change of carers.

Why is Pet Trust unavailable in Hong Kong?

Although Pet Trust is the most desirable solution, it has not been widely used in Hong Kong due to legal obstacles. 

To recap, a trust may be described as an arrangement where a person (“the trustee”) has an equitable obligation to hold property (“the trust property”) for the benefit of a person (“the beneficiaries”).  One fundamental hurdle for Pet Trust is the well-established beneficiary principle underpinning English trust law – that is, except for charitable trusts, a trust must have ascertained or ascertainable beneficiaries.[2]  There is no doubt that Pet Trust is not a charitable trust because it will be set up for particular animals mentioned in the trust and not the benefit of animals generally.[3]  Since animals are regarded as property under the law and cannot be a beneficiary, Pet Trust would fall foul of the beneficiary principle.  Although the English Court has upheld trusts set up for the maintenance of the settlor’s animals,[4] those trusts are described as “trusts of imperfect obligation” because the trustees are not in fact under a duty to carry out the specified purpose and no one can compel the trustee’s performance.[5]  In other words, the pets’ welfare cannot be guaranteed despite the validity of the trusts.

Another obstacle is the rule against perpetuities.  In Hong Kong, the rule is preserved in relation to private purpose trusts.[6]  According to the rule, a private purpose trust is void unless it can be certain from the outset that there will be absolutely entitled beneficiaries by the end of the 21 years from the death of the last lives in being.[7]  Even though the court has somehow relaxed the rule by taking judicial notice of the normal life expectancy of a cat and upholding a trust (which had not stated any time limit) for its benefit,[8]  the rule still creates obvious difficulty for establishing a trust for the maintenance of pets which have a longer lifespan, such as turtles.  Although the court in Re Dean seemed to suggest that “lives in being” could refer to animals’ lives such that a trust lasting for as long as the pets shall live would not violate the rule, that decision has not been followed subsequently.[9] 

How might Pet Trust be possible in Hong Kong?

Given the aforesaid legal difficulties, it appears that if Pet Trust has to be legitimate in Hong Kong, conceptual breakthrough will be required.  For instance, if animals were treated as a legal person, then they can be a beneficiary in law and the trust, being a “people trust”, will not be subject to the rule against perpetuities.[10]  Nevertheless, granting animals legal personhood could bring about far-reaching implications in other areas of law, for example, it may oblige the family court to decide issues relating to pets in their best interests rather than on the basis of property ownership.  For consistency within the law, that step understandably can be taken only after further consultation and study.

However, for the purpose of recognising Pet Trust, the law does not have to go that far. A practical step, which I proposes can be workable, is to launch statutory Pet Trust in Hong Kong. In the United States, all fifty states and the District of Columbia have recognised some form of statutory Pet Trust.[11]  The US statutes generally provided for the creation of both inter vivos and testamentary Pet Trusts, with a private trustee being appointed by pet owners or by the court to administer the trust.[12] Some of them have even modified the rule against perpetuities by allowing the trust to last for the duration of the animal’s life, even if that is longer than 21 years after the owners’ death.[13] 

In Hong Kong, there is also precedent of statutory trust, for instance the newly established Special Needs Trust (“SNT”).[14]  The SNT was established to resolve a similar problem, namely parental care for children with special needs would be upset after their parents’ passing.  Analogous to the situation of pet owners, those parents have difficulties in finding relatives or friends who are trustworthy and capable of managing their wealth for the benefits of their vulnerable children.  Under SNT, the Director of Social Welfare will be the trustee to manage the assets of the deceased parents, and to make disbursements to carers according to the letter of intent and care plan.  The Government trustee, bearing the usual duty of care as provided in the Trustee Ordinance, is obliged to supervise (and if needed, remove and sue) the caregivers to ensure the children’s welfare. If this model is followed for establishing statutory Pet Trust in Hong Kong, the Agriculture, Fisheries and Conservation Department (the “AFCD”), which has the duty of safeguarding animal welfare,[15] can be the trustee for the purposes of managing the fund and disbursing it to caregivers designated by the pet owners.  The Government trustee will then be obliged to monitor the performance of the trust and thus ensuring the pets’ quality of living.

There are two legal implications of having statutory Pet Trust.  Firstly, it will be a statutory exception to the beneficiary principle. That is, however, not a radical step to take because, as aforementioned, the court has for centuries recognised private purpose trusts for the maintenance of pets as an exception to such principle (despite those trusts being the trusts of incomplete obligation).  In particular, the court has noted that it is not the least “illegal or obnoxious to the law” to establish a pet trust, relying upon the fact that English law has always recognised charitable trusts to benefit animals generally.[16]  What the statutory Pet Trust does is merely to institutionalise the anomalous arrangements as upheld in Re Dean and Pettingall v Pettingall by imposing management duties on the trustees.  Secondly, it will be a statutory exception to the rule against perpetuities.  One must, however, note that the rule is founded upon consideration of public policy, i.e. to prevent the mischief of making property inalienable.[17]  If the new statute imposes a duty on trustees to invest the fund in the Pet Trust (as in the SNT model), then the trust fund will be put to circulation in the market and there will be no need to apply the rule to ensure that the fund would not be tied up in a trust.[18]

Conclusion

There is a strong case for initiating statutory Pet Trust in Hong Kong with reference to the aforementioned US and local precedents.  That being said, there remains a number of difficult questions to be dealt with.  For example:  What exact duties should the trustee bear?  Can the trust begin operating before the death of pet owners if they are no longer capable of taking care of their pets?  Can the trust fund be applied to provide care and maintenance to new-borns of the pets?  What types of pets can be the beneficiaries of the trust?  To find a satisfactory answer to these questions would require not only the efforts of the legal minds in Hong Kong, but also the participation of the public.

Mahatma Ghandi once said, "the greatness of a nation and its moral progress can be judged by the way its animals are treated."  I believe it is our common wish that legal rules will not be applied inflexibly in Hong Kong to compromise the welfare of pets.

Courtesy of Jeremy H Y Lam.

References

[1] Report of consultancy study on veterinary profession in Hong Kong released, The Government of the Hong Kong Special Administrative Region (Press Releases), https://www.info.gov.hk/gia/general/201705/02/P2017050200511.htm.

[2] Leahy v Attorney General for New South Wales [1959] A.C. 457, 479.

[3] Re Dean (1889) 41 Ch. D. 552, 556.

[4] See, e.g. Pettingall v Pettingall (1842) 11 L.J. Ch. 176; Re Dean (n3 above).

[5] Ben McFarlane and Charles Mitchell, Hayton and Mitchell: Text, Cases and Materials on the Law of Trusts and Equitable Remedies (14 ed.) (Sweet & Maxwell, 2015), [5-008].

[6] Section 3C of the Perpetuities and Accumulations Ordinance (“PAO”) (Cap. 257).

[7] L Tucker, N L Poidevin QC and J Brightwell, Lewin on Trusts (20th ed) (Sweet & Maxwell, 2020), §6-057.

[8] Re Haines (1952) times, 7th November.  C.f. Re Kelly [1932] I.R. 255, 260-1.

[9] Re Kelly (n8 above), 260.

[10] Section 3A of the PAO.

[11] Map of States with Companion Animal (Pet) Trust Laws, Animal Legal & Historical Centre, https://www.animallaw.info/content/map-states-companion-animal-pet-trust-laws.

[12] See, e.g. Mass. Gen. Laws Ch. 203E, §408 (2012) (state pet trust law in Massachusetts); N.Y. EST. Powers & Trusts Law §7-8.1 (McKinney 2010) (state pet trust law in New York); 20 PA. Cons. Stat. §7738 (2006) (state pet trust law in Pennsylvania).

[13] Mass. Gen. Laws Ch. 203E, §408(h); N.Y. EST. Powers & Trusts Law §7-8.1(a); 20 PA. Cons. Stat. §7738(a)

[14] For details of the Special Needs Trust, see https://www.legco.gov.hk/yr18-19/english/panels/ws/papers/ws20190311cb2-924-3-e.pdf.

[15] Role of the Department, Agriculture, Fisheries and Conservation Department, https://www.afcd.gov.hk/english/aboutus/abt_role/abt_role.html.

[16] Re Dean (n3 above), 557.

[17] Kan Fat-Tat (also known as Kan Fat) v Kan Yin Tat (also known as Kan Tat) [1987] HKLR 516, 526C-D.

[18] “Report of the Bills Committee on Trust Law (Amendment) Bill 2013” LC Paper No. CB(1)1468/12-13, §11(a), https://www.legco.gov.hk/yr12-13/english/bc/bc03/reports/bc030717cb1-1468-e.pdf.