Clark Quantum Kent (Formerly Known As John Mohammad Clark And John Julius Tasca) v Hai Tin Ltd (Formerly Known As Allied Finance Asia Ltd)and Others

HCA 961/2017

[2019] HKCFI 2758

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 961 OF 2017

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BETWEEN

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DECISION

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1. This was an application of IHAG Holding AG (“D4”) and Privatbank IHAG Zürich AG (“D5”) by summons dated 29 October 2018 for an order discharging (1) the order of Master M Wong dated 17 April 2018 granting leave to Clark Quantum Kent (formerly known as John Mohammad Clark and John Julius Tasca) (“the plaintiff”) to serve his Amended Concurrent Writ of Summons (“the amended writ”) on D4 and D5 out of the jurisdiction, and (2) the amended writ. At the conclusion of the hearing, my Decision was reserved which I now give.

Introduction

2. The plaintiff is the sole discretionary beneficiary under the Monfred Trust (“the Trust”) established pursuant to a Trust Deed dated 3 July 2007 made between the settlor Jura Management Trust Reg and Hai Tin Limited (formerly Allied Finance Asia Limited), a company incorporated in Hong Kong (“D1” or “the Trustee”).

3. The matters pleaded in the statement of claim were largely derived from a Judgment dated 1 February 2017 of the Zürich District Court (“the Judgment”) in respect of a criminal complaint for embezzlement against the 8^th defendant Rolf Peter Schnellmann (“D8”) and a civil claim for losses brought by the Trustee as private plaintiff (“the Swiss proceedings”) and material from the prosecution file of the Swiss court[1].

4. D8 was found guilty of qualified embezzlement and sentenced to 3 ½ years’ imprisonment and in respect of the civil claim, the Swiss court awarded the private plaintiff (namely, the Trustee) damage compensation in the sum of €4.346 million.

5. The present action concerns the maladministration of the funds and assets of the Trust (“Trust Funds”) involving a number of transactions (all without the plaintiff’s knowledge or consent), directed to transferring the Trust Funds to D5 whose parent company, D4, is one of the participating interests in the Trustee.

6. The following organisational chart summarises the corporate structure of the AFP Group[2]:

7. The shares in AFP Holdings Limited (the “AFP Group”) the ultimate holding company of the Trustee are owned directly or indirectly as to one-third each by the 7^th defendant Roderic Noel Anthony Sage (“Mr Sage”), the 6^th defendant Bernhard Wilhelm Lampert (“Mr Lampert”) and D4 (the parent company of D5). Each of them has a beneficial one- third interest in the Trustee.

8. Mr Lampert was the CEO and authorised representative with single signature authority of the Trustee until about August 2010.

9. He was also the ultimate beneficial majority shareholder of Allied Finance Corporation, a Panama incorporated company which heads a group of companies (“Allied Finance Group”) of which Allied ME, Allied Finance Trust AG (“AF”), Allied Finance Trust AG (Zürich) (“AFTAG Zürich”), Allied Finance Trust AG (Vaduz) (“AFTAG Vaduz”) and Allied Finance Services SA (“AFS”) are members.

10. The AFP Group and the Allied Finance Group are affiliated through Mr Lampert’s cross beneficial shareholding. The AFP Group and the Allied Finance Group, inter alia, formed and administered off-shore companies for fund management and trust administration and management for third parties including D5.

11. D8 was a director and an authorised representative with single signature authority of the Trustee. He was also “head” of AFTAG Zürich, engaged by AFS (acting through Mr Lampert) to provide such services. His engagement was terminated on 31 July 2010.

12. Mr Sage was the CEO of the AFP Group at the time.

Background

13. This narrative is based on the plaintiff’s case as disclosed in his Statement of Claim (“SOC”) dated 23 April 2017 and the 1^st and 8^th affidavits of Marc Nicholas Sturzenegger (“MNS”) respectively dated 6 April 2018 and 12 February 2019.

14. In about March 2009, the plaintiff who was the sole discretionary beneficiary of the Trust requested the distribution of liquid trust assets in order to invest in German real estate. As at 31 March 2009, the Trust Funds were held at Mirabaud & Cie SA (“Mirabaud”) and had a value of just over €5 million, 90% of which consisted of liquid funds (“Liquid Trust Funds”) and the balance being an illiquid hedge fund investment (“the Illiquid Trust Funds”).

15. The Trustee apparently had grave concerns over the plaintiff’s mental state and was unable to obtain the protector’s approval to the distributions as he was not responding. It then emerged that the plaintiff had adopted US citizenship causing the Trustee some anxiety and Mirabaud wanted to end its client relationship with the Trust.

16. On 28 April 2009, D8 informed the Trustee[3] that “AF [AFTAG Zürich and/or AFTAG Vaduz] in Zürich has taken over the lead in dealing with this client.” D8/AFTAG Zürich thus assumed control of the trust monies. D4 and D5 maintain that they were not involved in the alleged delegation of control of the Trust Funds in April 2009.

17. At about that time, in April 2009, D8 on behalf of AFTAG Zürich was preparing for its client D5 draft documentation[4] for a scheme being devised for clients referred by D5 with special status (ie clients which otherwise would soon be asked to leave D5). The eventual solution proposed[5] was to get US clients off form A (a disclosure form) and have them invest through a structure where D4/D5 have control and use of funds without having a reporting problem.

18. Various meetings were held in Hong Kong and elsewhere for the formulation and/or implementation of what developed into Cash Transfer Structure schemes (“the CTS schemes”) and that, amongst others, Mr Michael Gubser and Mr Daniel Wachli representatives of D4 and/or D5 were involved in such meetings.

19. The maladministration mentioned earlier involved a number of transactions directed to transferring the Trust Funds to one of the participating interests in the Trustee, namely D4 and its related entities and included the following:

(1) The “Trust CTS Scheme”

20. This was formulated and implemented to anonymize the plaintiff’s beneficial ownership. Its implementation involved the transfer of liquid trust assets in May 2009 [6] from Mirabaud through special-purpose vehicles (three of which were Hong Kong companies) to the non-interest-bearing account of a newly incorporated/acquired Ras Al Khaimah (“RAK”) company (ie a Dubai offshore company), Karim Limited (“Karim”).

21. On 24 June 2009, €4,457,355 [7] of funds belonging to the Trust Funds (the “Scheme Trust Monies”) were deposited in Karim’s account.

22. The objective of the Trust CTS Scheme was the ultimate transfer of the Scheme Trust Monies in Karim’s account to an account with D5 (which is owned by D4) for investment in the Rosmerta Fund with no obligation on D5 to identify the beneficial ownership but for the sole risk and benefit of Karim. The arrangement was intended for Karim to appear in the records of D5 as the beneficial owner of the shares in the Rosmerta Fund with no attribution of ownership to the Trust. The Rosmerta Fund was registered in St Vincent & the Grenadines and Helvetic Investments Pte Limited, a wholly owned subsidiary of D4 was the designated manager of that portfolio.

(2) The Titian Transfer Scheme

23. When the Trust CTS scheme could not be completed as intended because the Scheme Trust Monies remained blocked in Karim’s account, D8 devised a substitute scheme for the purpose of attaining the ultimate objective of transferring the Scheme Trust Monies to the Rosmerta Fund.

24. An option/sales agreement dated 23 March 2010 was created between Karim and Baltera Limited (“Baltera”) (controlled by D8) whereby Karim would buy an option from Baltera to sell an old master painting by Titian (“the painting”) for €5 million. It was a condition of the put option that the sale of the painting be completed by 31 December 2010, failing which the transaction would be revoked.

25. The price of the put option was €4.35 million. It was based on an earlier agreement of December 2009 under which the painting had been sold by D8 via AFTAG Zürich to Kentaur Investments SA for €5 million but that transaction was never completed. The plan which was for the proceeds of sale of the painting to be deposited by Karim without any need to attribute them to the Trust or to declare the plaintiff’s ultimate beneficial ownership of them therefore unravelled.

26. By way of initial implementation of the Titian Transfer Scheme, D8 procured the transfer of approximately €4.35 million of the Scheme Trust Monies to Baltera’s account in Liechtenstein on 23 March 2010. A month later D8...