Iq Eq (Ntc) Trustees Asia (Jersey) Limited And Another v Bruno Arboit And Roderick John Sutton And Another

CourtCourt of Final Appeal (Hong Kong)
Judgment Date22 Nov 2019
Neutral Citation[2019] HKCFA 45
Citation(2019) 22 HKCFAR 392
Judgement NumberFACV2/2019
SubjectFinal Appeal (Civil)
FACV2/2019 IQ EQ (NTC) TRUSTEES ASIA (JERSEY) LIMITED AND ANOTHER v. BRUNO ARBOIT and RODERICK JOHN SUTTON AND ANOTHER

FACV No. 2 of 2019

[2019] HKCFA 45

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 2 OF 2019 (CIVIL)

(ON APPEAL FROM CACV NO. 138 OF 2017)

_________________________

BETWEEN
ZHANG HONG LI 1st Plaintiff
JI ZHENGRONG 2nd Plaintiff
BRUNO ARBOIT and RODERICK JOHN SUTTON
(suing in their capacity as the current Trustees of the Amsun Trust)
3rd Plaintiffs
(1st Respondent)
WISE LORDS LIMITED 4th Plaintiff
(2nd Respondent)
and
DBS BANK (HONG KONG) LIMITED
1st Defendant
IQ EQ (NTC) TRUSTEES ASIA (JERSEY) LIMITED
(formerly known as DBS TRUSTEE HK (JERSEY) LIMITED, NAUTILUS TRUSTEES ASIA LIMITED and
FIRST NAMES (NTC) TRUSTEES ASIA LIMITED)
(in their capacity as the former Trustee of the Amsun Trust)
2nd Defendant
(1st Appellant)
NAUTILUS CORPORATE SERVICES LIMITED
(formerly DBS CORPORATE SERVICES (HONG KONG) LIMITED,
NAUTILUS CORPORATE SERVICES LIMITED and
NAUTILUS CORPORATE SERVICES (HONG KONG) LIMITED)
3rd Defendant
DHJ MANAGEMENT LIMITED
4th Defendant
(2nd Appellant)
LEE KWOK TAI, PETER
5th Defendant
LIM LEUNG YAU, EDWIN 6th Defendant
LIU HIU HONG, LINDA 7th Defendant

_________________________

Before: Mr Justice Ribeiro PJ, Mr Justice Fok PJ,Mr Justice Cheung PJ, Mr Justice Tang NPJ and Lord Neuberger of Abbotsbury NPJ

Dates of Hearing: 21-22 October 2019

Date of Judgment: 22 November 2019

_________________

JUDGMENT

_________________

Mr Justice Ribeiro PJ, Mr Justice Fok PJ and Lord Neuberger of Abbotsbury NPJ:

1. At the conclusion of the hearing of this appeal on 22 October 2019, the Court reserved its judgment and indicated that it would hand down its judgment on a date to be advised to the parties. On 5 November 2019, the parties wrote to the Registrar to inform him that they had reached an in principle agreement to settle the appeal. By that time, a draft judgment had already been completed and was in the final stages of preparation in readiness for handing down. The Registrar replied, telling them that the judgment had been prepared and would soon be ready for delivery, and indicating that if informed by the parties that they had concluded a settlement agreement, the Court would decide whether to proceed to hand down its judgment.

2. The parties subsequently confirmed that they had settled the appeal and submitted a consent summons for the appeal to be stayed on terms agreed by the parties. The Court duly made the order sought. For the reasons which follow, the Court has decided that notwithstanding the settlement, judgment should be handed down.

3. The question of the scope of a court’s discretion to deliver judgment in a case notwithstanding the settlement of a case after argument but before judgment is delivered has not previously arisen in any reported decision in Hong Kong. However, in England and Wales, the applicable principles were established by the Court of Appeal’s decision in Barclays Bank plc v Nylon Capital LLP,[1] stated by Lord Neuberger of Abbotsbury MR (as his Lordship then was) as follows:

“73. I turn now to deal with a very different issue. After Thomas LJ had prepared his judgment in draft, and circulated it to Etherton LJ and me, the parties notified the court that they had reached agreement and effectively requested the court not to give judgment.

74. Where a case has been fully argued, whether at first instance or on appeal, and it then settles or is withdrawn or is in some other way disposed of, the court retains the right to decide whether or not to proceed to give judgment. Where the case raises a point which it is in the public interest to ventilate in a judgment, that would be a powerful reason for proceeding to give judgment despite the matter having been disposed of between the parties. Obvious examples of such cases are where the case raises a point of law of some potential general interest, where an appellate court is differing from the court below, where some wrongdoing or other activity should be exposed, or where the case has attracted some other legitimate public interest.

75. It will also be relevant in most cases to consider how far the preparation of any judgment had got by the time of the request. In the absence of good reason to the contrary, it would be a highly questionable use of judicial time to prepare a judgment on an issue which was no longer live between the parties to the case. On the other hand, where the judgment is complete, it could be said (perhaps with rather less force) that it would be a retrospective waste of judicial time and effort if the judgment was not given.

76. The concerns of the parties to the litigation are obviously also relevant and sometimes very important. If, for their own legitimate interests, they do not wish (or one of them does not wish) a judgment to be given, that request should certainly be given weight by the court. (Of course, in some cases, the parties may request a judgment notwithstanding the fact that there is no longer an issue between them).

77. Where there are competing arguments each way, the court will have to weigh up those arguments: in that connection, the reasons for any desire to avoid a judgment will be highly relevant when deciding what weight to give to that desire.”

4. Barclays Bank was adopted by the Supreme Court of Victoria in Clarke v Great Southern Finance Pty Ltd[2] and similar principles were applied by the Queensland Court of Appeal in Voss v Suncorp-Metway Limited (No.1).[3] Principles similar to those laid down in Barclays Bank, were also applied by the Supreme Court of New Zealand in Osborne v Auckland Council.[4]

5. We are satisfied that the principles set out in the citation from Barclays Bank at [3] above should be adopted in this jurisdiction in exercising the Court’s discretion whether or not to deliver judgment in an appeal notwithstanding the parties’ settlement.

6. The present case involves issues of law of general importance and, as was pointed out in argument, has attracted considerable public interest in Hong Kong and internationally. The draft judgment was completed and in the final stages of preparation for handing down when the parties informed the Registrar of the impending settlement. As will be seen in the reasons which follow, we are differing from the judgments appealed from and consider it necessary to correct certain erroneous propositions accepted below. Publication of this judgment will not impinge on any issues regarding confidentiality or privacy as it does not go beyond the detailed account of the parties’ dealings set out in the judgments below. The parties have not made any submissions indicating any opposition to the judgment being handed down. For all these reasons, we consider that in the proper exercise of our discretion, we should hand down our judgment notwithstanding the settlement.

A. Introduction

7. This appeal arises out of claims made in respect of the administration of a trust established to hold the sole share of a private investment company which was used by the clients of a private bank to invest in various financial products. The issues on appeal relate to the two heads of claim which succeeded below. Those issues, raised by the appellants, who were the former trustees of the trust in question and the corporate services company which was the sole director of the private investment company through which the financial investments were made, relate to the bases on which the trial judge found liability established against them and on which he directed the assessment of equitable compensation, which were affirmed by the Court of Appeal.

8. The underlying facts are complicated and gave rise to litigation which the Judge described towards the end of his 378-page judgment as “complex, costly and prolonged” and we will in this judgment first provide a broad summary of the background before setting out some of the facts that may need to be examined in greater detail when addressing the issues raised.

A.1 The parties and trust structure involved

9. The genesis of the trust arose from the introduction, in 2004, of Madam Ji Zhengrong (the 2nd plaintiff) (“Ji”) and her husband Zhang Hong Li (the 1st plaintiff) (“Zhang”) to DBS Bank (Hong Kong) Limited (the 1st defendant) (“DBS Bank”), the Hong Kong subsidiary of DBS Bank Limited of Singapore. Ji and Zhang had concerns about the protection of family assets from inheritance tax and were interested in setting up a trust for that purpose. The trust structure used by Zhang and Ji was DBS Bank’s most common trust structure and contemplated the use of a BVI company as the trust’s private investment company, with Ji acting as the company’s investment advisor. The Judge, before whom Ji testified at trial, was impressed by her high level of sophistication and intelligence.

10. Prior to the establishment of the trust in January 2005, through the assistance of DBS Corporate Services (Hong Kong) Limited (the 3rd defendant) (“DBS Corporate”), Ji and Zhang procured the incorporation of Wise Lords Limited (the 4th plaintiff) (“Wise Lords”), a BVI company of which Ji was sole director and shareholder. In the period from April 2004 until January 2005, with Ji as its sole signatory, Wise Lords made investments through a private banking account with DBS Bank. Ji and Zhang injected funds into Wise Lords’ account with the private banking division of DBS Bank (“DBS:PB”) and Wise Lords invested in various mutual funds and other investment products, including currency linked notes called Yield Enhanced Deposits (“YEDs”).

11. Ji and Zhang established the trust at the heart of this case, called the Amsun Trust (“the Trust”)...

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