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Connaught West Ltd v Global Fiduciary Solutions Ltd And Others

Judgment Cited authorities 5 Cited in Precedent Map Related
Vincent
Judgment Date07 January 2019
Neutral Citation[2019] HKCFI 40
Year2019
Judgement NumberHCA525/2017
Subject MatterCivil Action
CourtCourt of First Instance (Hong Kong)
HCA525/2017 CONNAUGHT WEST LTD v. GLOBAL FIDUCIARY SOLUTIONS LTD AND OTHERS

HCA 525/2017

[2019] HKCFI 40

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 525 OF 2017

____________

BETWEEN
CONNAUGHT WEST LIMITED Plaintiff
and
GLOBAL FIDUCIARY SOLUTIONS LIMITED 1st Defendant
FOGGO MICHAEL JOHN 2nd Defendant
TRIBUNE LIMITED 3rd Defendant

____________

Before: Deputy High Court Judge William Wong SC in Chambers

Dates of Hearing: 11 December 2018

Date of Supplemental Written Submissions: 21 December 2018

Date of Decision: 7 January 2019

__________________

D E C I S I O N

__________________


1. By summons dated 29 May 2018 (the “Summons”), the Plaintiff, Connaught West Limited, applies for a preservation order that the 1st, 2nd and 3rd Defendants do pay into court or otherwise secured as the court considers just pursuant to Rule of High Court, Cap 4A, Order 29, rule 2(3) and/or the inherent jurisdiction of the court:

(1) The sums of US$686,496 and GBP1,107,000 transferred on 19 and 20 December 2016 respectively from the GFS Superannuation Scheme 2 (the “Scheme”) to an ICBC bank account in the name of Churchill Nominees (Hong Kong) Limited; and

(2) A sum of GBP531,458.02 transferred from the Scheme to an account of Interactive Brokers in the name of Brite Advisors Pty Ltd.

MATERIAL FACTS

2. On 2 July 2013, by a trust deed signed between the 1st Defendant as principal employer and the 2nd Defendant as trustee (the “Deed of Trust”), the Scheme was established.

3. The Scheme is an occupation retirement scheme registered with the Mandatory Provident Fund Scheme Authority (“MPFA”) under Scheme No R028832(1) in accordance with the Occupational Retirement Schemes Ordinance, Cap 426 (the “Ordinance”).

4. The 1st Defendant is a limited liability company incorporated in Hong Kong on 31 May 2012. It was and is still the principal employer under the Scheme and the holder of a multicurrency saving account (Account Number: 701 530 024 389) (the “Trust Account”) with Industrial and Commercial Bank of China (Asia) Limited (“ICBC”). The Trust Account has been used to hold contributions and accrued benefits of the Scheme.

5. The Plaintiff’s case is that the 2nd Defendant was the original trustee of the Scheme from 31 May 2015 until his resignation on 28 June 2016.

6. The 3rd Defendant is a limited liability company incorporated in Hong Kong on 27 November 2014 and is wholly owned by Churchill Nominees (Hong Kong) Limited (“Churchill”), which in turn is and was wholly owned by the 2nd Defendant.

7. It is the Plaintiff’s case that pursuant to the Deed of Retirement and Appointment signed between the Plaintiff, the 1st Defendant and the 2nd Defendant dated 29 June 2016 (the “DRA”), the 2nd Defendant retired as a trustee of the Scheme and the Plaintiff was appointed and registered as the sole trustee thereof from 30 June 2016 to date.

8. The DRA was duly signed and executed by the Plaintiff, defined as the “New Trustee”, the 1st Defendant, defined as the “Principal Employer” and the 2nd Defendant, defined as the “Retiring Trustee”.

9. The DRA provides:

“Whereas:

(i) This Deed is supplemental to the Deed of Trust made between the Principal Employer and the Retiring Trustee on 2nd July 2013, establishing the GFS Superannuation Scheme 2, an Occupational Retirement Scheme with Mandatory Fund Schemes Authority ORSO Schemes Section reference R028832(1).

(ii) The Retiring Trustee hereby declares that it is desirous of retirement from and being discharged as trustee of the Trust.

(iii) The Principal Employer hereby consents to the retirement of the Retiring Trustee.

Now this deed witnesses:

(i) In exercise of the power conferred upon it by the Trust Deed and of every other power so enabling it, the Principal Employer HEREBY APPOINTS the New Trustee as trustee of the Trust in place of the Retiring Trustee who HEREBY RETIRES and is discharged as trustee of the Trust with immediate effect.

(ii) By executing this Deed, the New Trustee HEREBY ACCEPTS the appointment as a trustee of the Trust as at the date hereof and DECLARES that it shall henceforth hold as the trustee of the Trust all such of the trust property transferred to it upon the trusts of and subject to the terms and conditions of and with the powers contained in or arising from the Trust Deed.

(iii) The Trust assets in their entirety shall vest in the New Trustee at the date hereof and on and after such date and the Retiring Trustee HEREBY COVENANTS with the New Trustee to take all and any such further action as may be reasonably necessary or desirable to vest the Trust assets in their entirety in the New Trustee.” (Emphasis added.)

10. The Deed of Trust provides, inter alia, that:

“6. COVENANTS OF THE PRINCIPAL EMPLOYER

The Principal Employer covenants with the Trustee as follows:

(d) The Principal Employer will co-operate with the Trustee (and will procure the co-operation of any Participating Employer) to any extent necessary to enable the Trustee to discharge the functions of the “designated person” and the “administrator” (within the meaning of ORSO) in relation to the Scheme to the extent that such functions are applicable to the Scheme.

8. COVENANTS OF THE TRUSTEE

(e) to cause the Trust Fund to be kept separate and distinct from and not to form part of the assets of the Principal Employer or the assets of the Trustee.

9. REMOVAL AND RESIGNATION OF INDVIDUAL TRUSTEE

(g) Any person who acts as Trustee shall on ceasing to be a Trustee pursuant to this clause do everything necessary to vest the assets of the Scheme in the remaining or new Trustee and shall deliver all records and other books to the remaining or new Trustee.”

11. The Plaintiff’s case is that:

(1) In breach of Clause 9(g) of the Deed of Trust, the 2nd Defendant failed to vest all the trust assets of the Scheme in the Plaintiff. As a result of the said breach, the Plaintiff cannot discharge its duties and functions as the trustee of the Scheme.

(2) On 8 December 2016, the 1st Defendant, despite having no power to do so, appointed two additional co-trustees, namely, (i) the 2nd Defendant; and (ii) the 3rd Defendant to the Scheme without the prior knowledge and approval of the Plaintiff as the sole trustee. As such the 2nd and the 3rd Defendants are currently wrongfully registered in the MPFA website as designated agents/trustees of the Scheme along with the Plaintiff.

(3) Under the Deed of Trust, after the appointment of the Plaintiff as trustee to the Scheme pursuant to the DRA, the 1st Defendant had no power to appoint any other trustee to the Scheme, thus the purported appointments of the 2nd Defendant and the 3rd Defendant as additional trustees of the Scheme are null and void.

(4) Importantly, on 19and 20 December 2016, without prior knowledge and approval of the Plaintiff, the Defendants, in breach of trust and not in the usual course of the business of the Scheme, transferred the following sums of money out of the Trust Account:

(a) US$686,496 and GBP1,107,000 to the ICBC bank account of Churchill, the company wholly owned by the 2nd Defendant; and

(b) GBP531,458.02 to Interactive Brokers LLC’s account in the United States of America (collectively, the “Trust Monies”).

12. The Plaintiff, qua trustee, therefore claims against the Defendants for intermeddling with trust property. It also prays for an entitlement both at common law and in equity to trace and recover from the Defendants the Trust Monies or assets acquired directly or indirectly with such Trust Monies.

13. It is against such background that the Plaintiff took out the Summons for a preservation order in terms as outlined in paragraph 1 above.

14. The Defendants filed their Defence and Counterclaim on 4 September 2018. In essence, the Defendants pleaded that:

(1) The DRA has no legal effect and is not binding on the 1st Defendant because:

(a) Pursuant to a Heads of Agreement entered into by Mr Christopher John Beale of the 1st Defendant and Mr David Wilkinson (“Mr Wilkinson”) of the Plaintiff, the purported intent of which was the transfer of the whole business of the 1st Defendant to Mr Wilkinson and his nominees. With effect from the date of the execution of the Heads of Agreement, Mr Wilkinson became a de facto director of the 1st Defendant with access to the bank accounts of the 1st Defendant and the Scheme in his capacity as an authorised signatory of those accounts.

(b)Pursuant to section 25 of the Ordinance, where a registered scheme is governed by a trust, the sole trustee shall not be an employer trustee where employer trustee is defined to include an associate of such employer. Given Mr Wilkinson’s common control of the 1st Defendant and the Plaintiff, the 1st Defendant and the Plaintiff were at all material times associate companies and given further Mr Wilkinson’s control as an authorised signatory of the assets of the Scheme, the Plaintiff could not be appointed as a trustee of the Scheme. As such, the DRA is void as being in breach of the mandatory provisions of the Ordinance. (paragraph 9 of the Defendants’ Defence and Counterclaim)

(2) The Plaintiff was not entitled to and has wrongly charged and received the sums of HK$63,941.96 and GBP116,000 purportedly in settlement of fees incurred by the Plaintiff.

15. This court notes that the Statement of Truth of the Defendants’ Defence and Counterclaim was signed by Mr Peter David Manktelow (“Mr Manktelow”), as director of the 1st Defendant and Mr Michael John Foggo for himself and as a director of the 3rd Defendant.

16. The real issue in contention in this action is the validity of the DRA, the validity of the appointment of the Plaintiff as the new trustee, in other words, who is or are the properly...

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