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Zhang Hong Li And Others v Dbs Bank (Hong Kong) Ltd And Others

Judgment Cited authorities 15 Cited in Precedent Map Related
Vincent
Judgment Date13 April 2017
Year2017
Judgement NumberHCCL2/2011
Subject MatterCommercial Action
CourtHigh Court (Hong Kong)
HCCL2/2011 ZHANG HONG LI AND OTHERS v. DBS BANK (HONG KONG) LTD AND OTHERS

HCCL 2/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 2 OF 2011

______________________

BETWEEN
ZHANG HONG LI 1st Plaintiff
JI ZHENGRONG 2nd Plaintiff
BRUNO ARBOIT and RODERICK JOHN SUTTON 3rd Plaintiffs
(suing in their capacity as the current Trustees of the Amsun Trust)
WISE LORDS LIMITED 4th Plaintiff

and
DBS BANK (HONG KONG) LIMITED 1st Defendant
NAUTILUS TRUSTEES ASIA LIMITED 2nd Defendant
(formerly DBS TRUSTEE H.K. (JERSEY) LIMITED)
(in their capacity as the former Trustee of the Amsun Trust)
DBS CORPORATE SERVICES (HONG KONG) LIMITED 3rd Defendant
DHJ MANAGEMENT LIMITED 4th Defendant
LEE KWOK TAI, PETER 5th Defendant
LIM LEUNG YAU, EDWIN 6th Defendant
LIU HIU HONG, LINDA 7th Defendant

______________________

Before: Hon Bharwaney J in Court
Dates of Hearing: 26-30 May 2014, 4-6, 9-12, 17-19, 23-24 June 2014,
7-8, 10 July 2014, 23, 26 September 2014, and
29-30 October 2014
Dates of Defendants’ Note on Queries raised by Court and Further Correspondence Exchanged: 6 and 11 November 2014
Date of Judgment: 13 April 2017

_______________

J U D G M E N T

_______________

Index

A. THE PARTIES
B. THE EVIDENCE
C. MY FINDING ON THE DISPUTED FACTS
D. THE SET UP OF THE TRUST
(1) Ji’s education and experience in investing
(2) Initiation of the idea of a family trust
(3) The interrelationships and responsibilities of the DBS Companies and Associates; DBS Trustee’s Policies and Procedures Manual
(4) The meeting on 22 March 2004: Initial approval of Trust with Ji as investment advisor and Wise Lords as private investment company
(5) April 2004 to January 2005
E. JI’S APPOINTMENT AS INVESTMENT ADVISOR
(1) The Curriculum Vitae of Investment Advisor
(2) The Investment Advisor Agreement
(3) Due diligence as to Ji’s suitability
(4) The authorisation dated 5 January 2005 and cover letter dated 6 January 2005
(5) The effect of the Investment Advisor arrangements
(6) The Securities and Futures Ordinance
(7) Periodical reviews of Ji’s performance
F. THE TRUST’S OBJECTS AND INVESTMENT PROCESSES
(1) The objects of the Trust
(2) The terms of the Trust Deed and the Trustee’s Duties
(3) Ji’s and Zhang’s Wishes
(4) Dealings between Ji, Zhang and DBS Group
(5) Initiation of Investments and Provision of Advice; Remuneration of DBS and its staff
(6) The Investment Approval Process
G. THE TRANSACTIONS AND CREDIT FACILITY
(1) The Mutual Funds: the period from January 2005 to April 2008
(2) Redemption Restrictions
(3) The Credit Facility
(4) The DEVA Note
(5) Further increases of credit facility in 2007 and 2008 (up to 30 April 2008)
(6) The “no call’ representation
(7) Ji’s concern about margin trading
(8) Commencement of investments in FX and YEDs and increase of credit limit to US$58m (HK$450m)
(9) Investments in AUD and EUR only and increase of credit facility to US$100m (HK$780m)
(10) The Decumulators
H. THE EVENTS FROM SEPTEMBER 2008 ONWARDS
(1) The Meeting of 1 September 2008 and the Events thereafter
(2) Proposed termination of the Trust, the request for distribution and Ji’s complaints
(3) Charges levied to the Trust
(4) Transfer to New Trustee and Transfer of the Trust Funds
(5) Retention of US$1m as Indemnity for Tax Purposes
(6) Commencement of Legal Proceedings
I. THE LEGAL CONSEQUENCES
(1) The Claims against DBS Trustee
(2) The Claims against the Other Parties
(a) The claims against DBS Bank/DBS:PB
(b) The claims against DBS Corporate
(c) The claims against DHJ Management
(d) The claims against Linda Liu, Peter Lee and Edwin Lim
(e) The claims of knowing assistance
(f) Other than the claims of Arboit and Sutton against DBS Trustee and Wise Lords against DHJ Management, the claims against the defendants are dismissed
(3) Further Conduct of the Proceedings
Annex

1. This is yet another action that has arisen from the global financial collapse of 2008. It differs from the host of other claims that have made their way to our courts in that the claims in this action, brought by the 1st plaintiff, Zhang Hong Li, (“Zhang”), the 2nd plaintiff, Ji Zhengrong (“Ji”), the 3rd plaintiffs, Bruno Arboit and Roderick John Sutton (“Arboit” and “Sutton” respectively), and the 4th plaintiff, Wise Lords Limited (“Wise Lords”), are based, not on “mis-selling” of investment products, but primarily on alleged dishonest breach of trust by the 2nd defendant, Nautilus Trustees Asia Limited formerly DBS Trustee H.K. (Jersey) Limited (in their capacity as the former Trustee of the Amsun Trust) (“the DBS Trustee”), and alleged dishonest breach of fiduciary duty by the 3rd defendant, DBS Corporate Services (Hong Kong) Limited (“DBS Corporate”), and by the 4th defendant, DHJ Management Limited (“DHJ Management”), that were allegedly committed with the knowing assistance of each of the 1st defendant, DBS Bank (Hong Kong) Limited (“DBS Bank”), the 5th defendant, Lee Kwok Tai Peter (“Peter Lee”), the 6th defendant, Lim Leung Yau Edwin (“Edwin Lim”), and the 7th defendant, Liu Hiu Hong Linda (“Linda Liu”)[1].

A. The parties

2. Zhang, Ji’s husband, is a senior banker with well over 20 years of experience in the banking and finance industry, having occupied senior positions at, amongst other financial institutions, Goldman Sachs (US) and Deutsche Bank. He did not deal directly with any of the defendants.

3. Ji is Zhang’s wife. She is a home maker based in Beijing where she lives with the couple’s two sons. She had studied in China and has a Master’s degree in logistics from a university in Dalian.

4. Wise Lords was incorporated by DBS Corporate in British Virgin Islands (“BVI”) on 20 February 2004[2]. Ji subsequently became the company’s first director and sole shareholder[3]. Wise Lords’ private banking account was opened with DBS Bank on 22 April 2004. The Account Opening Form was signed by Ji as the sole director[4]. From April 2004 to early 2005, Ji, as director of Wise Lords, conducted a considerable number of investments through Wise Lords’ account[5].

5. Arboit and Sutton are the current trustees of the Amsun Trust (“the Trust”), a Jersey family trust which was set up in 2005 for the benefit of Ji’s family, namely, Zhang, Ji and their 2 minor sons. In December 2004, Ji submitted an application form to DBS Trustee for the setting up of a trust[6]. Upon the execution of various documents[7] and, ultimately, the Settlement Deed dated 4 January 2005 (the “Trust Deed”)[8], the Trust came into existence. When the Trust was set up Wise Lords became the Private Investment Company (“PIC”) holding the assets of the Trust.

6. DBS Bank is the Hong Kong subsidiary of DBS Bank Limited of Singapore. DBS Bank is and was a licensed bank in Hong Kong and registered and licensed under the Securities and Futures Ordinance (Cap. 571)(“SFO”) to advise on, deal in and manage securities. DBS Bank was the parent company of DBS Trustee, DBS Corporate and DHJ Management and the employer of Peter Lee, Edwin Lim and Linda Liu.

7. DBS Trustee was a wholly-owned Jersey subsidiary of DBS Bank carrying on business as a professional trustee/trust management company. DBS Corporate was DBS Bank’s Hong Kong corporate services and corporate nominee subsidiary. DHJ Management was DBS Bank’s BVI corporate management/corporate services subsidiary.

8. Peter Lee was head of DBS Bank’s Trust and Corporate Services division, executive head of DBS Corporate Services, and supervisor of DHJ Management. Edwin Lim was executive head of the Private Banking Division of DBS Bank (“DBS:PB”) and licensed under the SFO. Linda Liu was vice president of and a relationship manager in DBS:PB. She was also licensed under the SFO.

B. The evidence

9. In this action, the plaintiffs were represented by Mr Barrie Barlow SC leading Mr Chan Pat Lun, and the defendants were represented by Mr Ashley Burns SC leading Mr Abraham Chan and Ms Bonnie Cheng.

10. I received a substantial amount of evidence over the course of the trial of this case which took 24 days, including 2 days for the plaintiffs’ opening submissions, over half a day for the defendants’ opening submissions, a day when I granted an application to adjourn[9], 2 days for final submissions, and 2 days to deal with an application to re-amend the Amended Statement of Claim, which I allowed in part[10].

11. The documentary evidence was substantial and was contained in the following Bundles:

(a) 18,719 pages of documents were contained in 70 bundles: D1 – D70[11]. Section 1, comprising of documents referred to in the witness statements and in Schedule 6 of Arboit’s witness statement, were contained in 28 bundles: D1 - D28. Section 2, comprising of documents referred to in Schedules 2, 3, 4 and 5 of Arboit’s witness statement, were contained in 21 bundles: D29 - D49. Section 3, comprising of documents relating to loan facilities were contained in 6 bundles: D50 - D56. Section 4, comprising of documents not referred to in the witness statements, were contained in 14 Bundles: D57 to D70. Section 5, comprised of electronic documents stored on 2 DVDs that were inserted in D70. Hard copies of relevant electronic documents were kept in a bundle marked EB. A Core Bundle of the documents in D1 to D70 was provided marked CB. More helpful, however, have been 3 further core bundles, called Composite Core Bundles, containing the most relevant documents dating from 2003 to 2011, and marked...

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