Zhang Hong Li and Others v. Dbs Bank (Hong Kong) Ltd and Others
Read the full judgment text of HCCL 2/2011 on BabelCite. This HCCL judgment was delivered on 13 April 2017.
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 1 st plaintiff, Zhang Hong Li, (“Zhang”), the 2 nd plaintiff, Ji Zhengrong (“Ji”), the 3 rd plaintiffs, Bruno Arboit and Roderick John Sutton (“Arboit” and “Sutton” respectively), and the 4 th plaintiff, Wise Lords Limited (“Wise Lords”), are based, not on “mis-selling” of inv
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HCCL 2/2011 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL ACTION NO 2 OF 2011 ______________________
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_______________ J U D G M E N T _______________ Index
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]. 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. 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 number of exhibits were also produced in the course of the trial[14]. The transcript of the proceedings is contained in the Transcript Bundles: T1- T5. Since 1 September 2014, practitioners dealing with cases involving a substantial quantity of documents are able to benefit from the use of E-Discovery and E-Filing protocols[15]. 12.Arboit gave evidence on the 3rd day of trial and adopted his witness statement and the schedules attached to that statement[16]. Mr Burns did not cross examine Arboit but reserved the question of the weight I should place on his evidence, submitting that no weight should be placed on those parts of the witness statement where he had expressed inadmissible expert opinion and where he spoke on matters that were either not within his personal knowledge or were not within the knowledge he had acquired from the documents he had identified in his witness statement[17]. I agree with those submissions[18] and place no weight on Arboit’s commentary that was based on his reading of the documents relating to matters of which he had no personal knowledge. However, his schedules were extremely helpful to me and enabled me to identify various transactions that had been entered into and the documents that related to those transactions. The main witness for the plaintiffs was Ji and she gave evidence from Day 3 to Day 7 of the trial[19]. She was followed by Zhang who gave evidence by videolink on Day 8 of the trial[20]. With that evidence, the plaintiffs closed their case so far as their factual evidence was concerned. 13.Mr Frank Mayes (“Mayes”), a director of DBS Trustee and DHJ Management, was the first witness called by the defendants. He gave evidence on Day 9 to Day 11 of the trial[21]. Linda Liu, vice president of and a relationship manager in DBS:PB, gave evidence on Day 12, and Day 14 to Day 16 of the trial[22]. The next witness was Mr Kenneth Cheung Chun Kwok (“Kenneth Cheung”), vice-president of the investment advisory team of DBS:PB. He gave evidence on Day 16[23] and adopted his amended Witness Statement[24] as his evidence. Edwin Lim, executive head of DBS:PB, was the next witness on Day 17 of the trial[25]. Peter Lee, head of DBS Bank’s Trust and Corporate Services division, executive head of DBS Corporate Services, and supervisor of DHJ Management, was the last factual witness for the defendants. He gave evidence on Day 18 to Day 20[26]. The first schedule to Arboit’s witness statement contains a helpful list of the DBS Group personnel giving evidence or mentioned in the evidence:
14.The parties were granted leave to adduce expert in the fields of derivative financial products and Jersey law[27]. Satyajit Das (“Das”) was the plaintiffs’ financial expert[28] and Pawan Malik (“Malik”) was the defendants’ financial expert[29]. They produced a Joint Report[30]. The experts on Jersey law were Jonathan Speck[31] (“Speck”) instructed by the plaintiffs and Professor Paul Matthews[32] (“Matthews”) instructed by the defendants. They also produced a Joint Report[33]. All the reports were adduced into evidence without the need to call the experts to give oral evidence. C. My finding on the disputed facts 15.The factual dispute between the parties was wide ranging and covered the following issues: the set up of the Trust; Ji’s appointment as Investment Advisor; the operational structure established by DBS Bank; the Trust’s objects and investment processes; the credit facility provided; the mutual fund transactions; the DEVA Note; foreign currency (“FX” or “forex”) trading and investments in currency linked notes producing enhanced returns called “Yield Enhanced Deposits” (“YEDs”); build up of exposure to Australian dollars (“AUD”) and purchase of Decumulators; proposed termination of the Trust and the request for distribution; DBS Trustee’s knowledge of the credit position of Wise Lords; the charges levied against the Trust; transfer to the new Trustees; and retention of US$1m. Each of these broad issues covered a large number of sub-issues. In making my findings of fact, I have considered all the relevant documentary and oral evidence including, in particular, the evidence identified by the parties in their Composite Table of Disputed Facts[34]. I do not apologise for the length of this judgment which is the product of the substantial dispute between the multiple parties over multiple issues, very many of which were of some complexity. The very many footnotes are testament to the substantial quantity of documentary evidence I have reviewed and referenced. Nevertheless, the delay in handing down this judgment is regretted. (1) Ji’s education and experience in investing 16.I was impressed by Ji’s high level of sophistication and intelligence. Although she was a housewife residing in Beijing with her 2 sons, she was well educated and quite well travelled, and travelled frequently to Hong Kong. She had also lived in the United States for about 3 to 4 years where she had worked in the human resources department of a small company[35]. Ji was born on 16 October 1962[36]. She has a Bachelor’s Degree in Economics from the Liaoning Institute of Finance and Economics. Ji also has a Master’s Degree in Economics from Northeast China University of Finance and Economics[37]. She majored in logistics, involving the management of goods and materials, in both her degrees[38]. She graduated in 1987 and started working in a minerals and metal company from October 1987. In 1989, she married Zhang. She moved to live in the United States in 1993 or 1994. Their elder son was born in the United States on 8 February 1995 and their younger son was born in Canada on 30 October 2001[39]. The statement in Ji’s Curriculum Vitae of Investment Advisor that Ji had obtained a degree from USA is probably the result of a misunderstanding by the person[40] who completed this document that Ji had signed in blank. 17.It was suggested on Ji’s behalf that her understanding and use of English only improved after taking a course after the commencement of these proceedings[41]. I find, however, that Ji was able to comprehend and converse in English and was reasonably proficient in English even before she took those lessons. She had lived in the United States for about 3 to 4 years when her husband Zhang had been posted there. In the DBS Private Banking Brochure, Ji jotted down her markings more against the English version than against the Chinese version[42]. Although the majority of the recorded telephone conversations with Linda Liu and other DBS Bank personnel were in Putonghua, Ji had many telephone conversations with them in English[43]. Email correspondence between Ji and DBS Bank personnel was also in English[44]. 18.Ji had worked in a minerals and metals company in China prior to her marriage to Zhang and also for 3 to 4 years in the United States. The first major conflict of fact turned on the source of the information recorded in Ji’s Personal Profile[45], that she raised US$5m capital from the sale of her shares in her business, in which she had invested US$5m for a period of 5 years, and that she earned an annual income of US$50,000 as a consultant, and the information that was recorded in the Call Report of a meeting on 21 September 2004[46] stating:
Ji denied ever telling Linda Liu about any such business connection and asserted that this was a fabrication by Linda Liu[48]. The figures of US$5m and US$10m in the 2 documents are clearly discrepant. The Call Report, signed by Linda Liu and dated 22 September 2004, was created only 2 days after the Personal Profile, originally prepared in April 2004 when the account was opened, had been last modified on 20 September 2004. Linda Liu was cross examined on these matters:
I also asked Linda Liu these questions:
19.I am satisfied that Linda Liu would not have fabricated a story that Ji had earnings from a Taiwanese food and agricultural business. I am satisfied that Ji must have had some connection with such a business and informed Linda Liu about it. But I am also satisfied that the figures of US$5m and US$10m and 5 years and 10 years are figures plucked out of the air by Linda Liu and inserted into the documents in order to “qualify” Jito become a customer of DBS:PB. I am satisfied that Linda Liu’s evidence about these figures is untrue. 20.Ji’s investment experience was limited to the purchase of bonds and mutual funds. However, the suggestion that she had 10 years’ previous experience in investing in mutual funds[50] was an exaggeration. It was common ground that she would not purchase shares. Linda Liu explained that, as her husband was working at a bank, approval was needed from the bank for any purchase of shares[51]. Ji gave evidence that, in 2003, the joint family assets were about US$20m[52], of which some US$6.5m were invested in the mutual funds in her Standard Chartered Bank (“StanChart”) account that were detailed in her email to Peter Lee dated 23 March 2004, and some US$3m were invested in bonds[53]. 21.Linda Liu also gave evidence that Ji had told her that she also had experience in yen FX trading and with premium deposits[54] in her StanChart account[55].Although Ji denied this, after considering the following recorded telephone conversations, I accept Linda Liu’s evidence and find that Ji had some experience in yen FX trading and with premium deposits when she was banking with StanChart:
(2) Initiation of the idea of a family trust 22.In around 2003 or 2004, one of Zhang and Ji’s friends passed away and the friend’s family experienced some issues with inheritance tax. The incident caused Zhang to think about the need to do something about his family assets[62]. Ji had been referred to Charles Tsang of the Treasury Priority Banking division of DBS Bank in 2004 by one of his subordinates who had met Ji when he was working at StanChart. The subordinate gave Ji’s contact details to Charles Tsang who then informed Linda Liu that Ji would like to get an understanding about trusts and that she was interested in setting up a trust to hold her family assets. Linda Liu contacted Ji by phone and also provided Ji with DBS Bank’s private banking account opening forms and trust and corporate services booklet[63] by courier[64]. Linda Liu then arranged for Ji to meet with staff members of the Trust and Corporate Services Department[65]. The contemporaneous documents showed that Ji wished to obtain information about setting up a trust before the initial meeting between Ji and DBS Bank and that Linda Liu did not persuade Ji to set up a trust[66]:
23.The Trust and Corporate Services booklet[67] contained the following statements:
The booklet contained the following disclaimer in small print on the bottom of the last page[77]:
(3) The interrelationships and responsibilities of the DBS Companies and Associates[78]; DBS Trustee’s Policies and Procedures Manual 24.DBS Trustee is a company incorporated in Jersey. It is (and was during the relevant period) regulated by the Jersey Financial Services Commission in the conduct of Trust Company Business, under the provisions of the Financial Services (Jersey) Law 1998. 25.Mayes joined Legal Trustee (Jersey) Limited in 1995 and became a director of the company later that year, having previously been employed as a senior tax manager of PriceWaterhouse in the United Kingdom. Legal Trustee (Jersey) Limited was acquired by New World Trustee (Jersey) Limited (“NWT”) in 2000. Until March 2013, Mayes was also a director of NWT. Mayes remained as a consultant with NWT until April 2013 when NWT was purchased by Nautilus Trustee (Jersey) Limited (“Nautilus Jersey”). In May 2014, Mayes was employed Nautilus Fiduciary Asia Limited, which was majority owned by Nautilus Jersey[79]. Peter Lee was a director of DBS Trustee from 21 January 2008. Edwin Lim was a director of DBS Trustee from 8 December 2010 to June 2011. 26.DBS Trustee did not have any employees of its own during the relevant period. By a Management Agreement dated 17 October 2001 between DBS Trustee (at the time Dao Heng Trustee (Jersey) Limited), DBS Bank (at the time Dao Heng Bank Limited), NWT and NWGH Limited[80],NWT was engaged to manage the business of DBS Trustee and to provide various management services specified in Schedule 1 to the agreement. Mayes was one of the NWT employees assigned to manage the business of DBS Trustee. When Nautilus Jersey took over NWT, it provided the management services to DBS Trustee that had been provided by NWT[81]. Different NWT employees were assigned to provide services to DBS Trustee from time to time, carrying out different functions, including but not limited to directors, administrators and officers. When I refer below to any acts and/or omissions of DBS Trustee, I am referring to the acts and/or omissions of the personnel of NWT[82] performing work for DBS Trustee; and when I refer to, say, Mayes of DBS Trustee, I am referring to Mayes of NWT or Nautilus Jersey performing work for DBS Trustee. I find that NWT acted throughout as the agent of DBS Trustee. Although the Management Agreement dated 17 October 2001 was governed by Jersey law[83], no evidence has been adduced before me to prove that the law in Jersey governing agents is different from Hong Kong law[84]. 27.Further, by a Delegation Agreement also dated 17 October 2001 executed amongst NWT, DBS Trustee (in its former name) and DBS Corporate (in its former name)[85], NWT delegated to DBS Corporate the management services specified in Schedule 1 to the Management Agreement dated 17 October 2001[86]. By an Agreement dated 30 August 2005 executed amongst DBS Trustee, NWT, NWGH Limited, DBS Bank and DBS Corporate[87], the Delegation Agreement was terminated and the Management Agreement was varied to provide, interalia, that NWT may delegate non-critical administrative and/or operational matters to suitably qualified entities (subject to the Trust business of DBS Trustee was to be managed and controlled from Jersey)[88], and that it was to assist in appointing DBS Corporate to provide corporation administration, investment advisory, investment management and custodial services in relation to companies owned by trusts administered by DBS Trustee[89]. 28.During the time Mayes was a director of DBS Trustee, its board of directors consisted of six directors most of the time, but there might have been five or seven directors during some interim periods. Peter Lee was a director of DBS Trustee from 21 January 2008[90]. Edwin Lim was a director of DBS Trustee from 8 December 2010 to June 2011. At all material times, DBS Trustee had three Jersey based directors, including Mayes. The Jersey based directors were responsible for the overall management of, and for making management decisions for, DBS Trustee in relation to its trusteeships. Administrative and daily operational functions were delegated to the trust administers and officers, who were supervised by the directors. Their works included liaising with DBS Corporate, which was located in Hong Kong. 29.The Jersey-based operated set up of DBS Trustee was adopted to avoid trusts administered by DBS Trustee from attracting unexpected tax liabilities as a result of uncertainty over the location of its management. Although Peter Lee was a director of DBS Trustee from 21 January 2008, he did not exercise management power over DBS Trustee or make any management decisions for DBS Trustee in relation to its trusteeships owing to the intentional offshore setup of the Trust[91]. Although Edwin Lim was a director of DBS Trustee between 8 December 2010 and June 2011, by reason of the offshore set up of the Trust, the daily operation of DBS Trustee in relation to the Trust was conducted by directors of DBS Trustee in Jersey[92]. 30.The plaintiffs complained that they were not informed that DBS Trustee did not have any employee of its own during the relevant period and that they were also not informed of the arrangements between DBS Trustee and NWT. In this regard, I accept the unchallenged evidence of Matthews[93] that there is no duty on the trustee, under Jersey law, to disclose to settlers and beneficiaries that the trustee has entered into an arrangement with a third party whereby it delegated its trustee duties to the third party to discharge. I find that there was no duty on the part of DBS Trustee to inform Ji and Zhang who, if anyone, DBS Trustee had engaged to manage its own business. 31.DBS Corporate was the main point of contact of DBS Trustee in Hong Kong and the two companies worked closely together. DBS Corporate did not have any employees and the work of DBS Corporate was performed by the colleagues of Peter Lee at DBS Bank’s Trust and Corporate Services Department[94]. When I refer below to any acts and/or omissions of DBS Corporate, I am referring to the acts and/or omissions of the personnel of DBS Bank’s Trust and Corporate Services Department performing work for DBS Corporate; and when I refer to, say, Edna Chan of DBS Corporate, I am referring to Edna Chan of DBS Bank’s Trust and Corporate Services Department performing work for DBS Corporate. The work of DBS Corporate included:
DBS Corporate and DBS Bank’s Trust and Corporate Services Department did not provide any legal and tax advice to clients[95]. 32.I accept the defendants’ case that, notwithstanding the said delegation, the services that DBS Trustee and NWT asked DBS Corporate to provide and that DBS Corporate provided were administration and operational services and secretarial support services, and at no time did DBS Corporate exercise any decision-making functions for DBS Trustee[96]. Mayes gave evidence that DBS Trustee was prohibited from delegating authority to DBS Corporate by the Jersey Financial Services Commission regulations[97]. 33.I find that DBS Corporate acted as a bridge of communication but did not possess or exercise any management functions over the trusts or their underlying companies. The services which NWT and DBS Trustee requested DBS Corporate to provide were administration and operational services as well as secretarial support services which were much more cost effective to be carried out in Hong Kong. DBS Corporate did not exercise any decision making functions for DBS Trustee. While some of the tasks required to be performed by DBS Corporate related to more substantive operational matters, such as completing Investment Advisor – Yearly Reviews, sending Investment Application forms to DBS Trustee for approval, sending notifications of activities form, sending applications to DBS Trustee to accept offers to increase credit facilities, keeping DBS Trustee informed regularly of the state of Wise Lords portfolio, posing detailed queries to DBS:PB on proposed investments, they were done to enable and facilitate DBS Trustee to perform its trustee functions. DBS Corporate did not carry out those functions or exercise any trustee powers itself. I find that there was no conflict between the role of DBS Corporate role and the role of DBS Trustee. In short, DBS Corporate acted throughout as the agent of NWT[98] and as agent of DBS Trustee, as Mayes himself acknowledged:
Although the Agreement dated 30 August 2005 was governed by Jersey law[100], no evidence has been adduced before me to prove that the law in Jersey governing agents was different from Hong Kong law[101]. In addition, on 13 September 2005, a Services Agreement, governed by Hong Kong law, was made between DBS Corporate, Wise Lords and DBS Trustee as trustee of the Trust, whereby DBS Corporate agreed to provide services including the incorporation of Wise Lords, the provision of a Nominee Director, Company Secretary services, the provision of a correspondence address and the provision of bank authorised signatories[102]. DBS Trustee was designated the “Principal” under this Services Agreement. In its letter dated 11 March 2011 addressed to Arboit and the predecessor of Sutton terminating this Services Agreement, DBS Corporate stated[103]:
34.DHJ Management is a company incorporated in BVI and provided nominee director services to companies. It did not provide investment or portfolio management services. It had the duty to manage the underlying PIC of the trust on a day to day basis. 35.At all material times prior to 17 August 2005, DHJ Management was a wholly owned subsidiary of DBS Trustee. On 17 August 2005, it became a wholly owned subsidiary of DBS Corporate. The transfer of the management of DHJ Management to Jersey was also done to avoid attracting unexpected tax liabilities as a result of the former location of its management in Hong Kong. In the vast majority of the trusts, DHJ Management was the director of the underlying company in the trust[104]. 36.On 13 December 2006, Mayes and Colin Walker of NWT (who were also two of the three Jersey based directors of DBS Trustee) were appointed as the only two individual directors of DHJ Management, following which they signed the board minutes of the underlying PIC, on behalf of DHJ Management, approving transactions[105]. Mayes was a director of DHJ Management between 13 December 2006 and 8 July 2008 and he continued working closely with DHJ Management until 13 March 2012, when the directors of DHJ Management were transferred to Geneva, Switzerland. Colin Walker was a director of DHJ Managementfrom 13 December 2006 and continued to be a director based in Geneva from March 2012 onwards. Kingly Management Limited was the sole corporate director of DHJ Management before 13 December 2006 and remained one of the directors after that date. Although Edwin Lim was a director of Kingly Management Limited between October 2010 and June 2011, by reason of the offshore set of the Trusts and their PICs, Edwin Lim was not involved in the daily operation of DHJ Management in relation to the PICs, which was conducted by directors of DHJ Management in Jersey and, later, in Geneva. 37.On the other hand, DHJ Management, as the director of the underlying PIC of the trust, had the duty to manage the affairs of the PIC on a day to day basis. DHJ Management did not have any employees and the work of DHJ Management in Hong Kong was performed by DBS Corporate, whose work was, in turn, performed by the colleagues of Peter Lee at DBS Bank’s Trust and Corporate Services Department[106]. Peter Lee was one of the authorised signatories of DHJ Management authorised to sign certain documents to facilitate these daily operations. As the authorised signatory, Peter Lee did not possess any decision making or management power over DHJ Management. 38.Although it never formed part of the plaintiffs’ pleaded case, a considerable amount of time was spent on the DBS Trustee’s Policies and Procedures Manual (“Procedures Manual”)[107]. Mayes accepted that a lot of the statements in the Procedures Manual were reproductions of statutory or regulatory positions[108]. Whilst he accepted that mistakes had been made in the past, he denied that the Procedures Manual was routinely and systematically ignored[109]. I accept that evidence and the further evidence of Mayes that §4.9 of the 2006 Procedures Manual, dealing with the appointment of investment manager[110], applied only to the situation where the trust assets were held directly by DBS Trustee in a trustee investment account rather than through a PIC[111]. Indeed, §4.9 of the Procedures Manual refers to the appointment of investment manager “for the trust”. However, the fact that most trusts used a PIC to hold the assets of the trust suggests to me that the vehicle of a PIC was used to hold the assets of most trusts in order to avoid the cumbersome obligations imposed by §4.9 of the Procedures Manual. 39.I accept the defendants’ submissions that the Procedures Manual did not create enforceable duties and obligations on DBS Trustee towards the beneficiaries of the Trust. The Procedures Manual did not alter or supersede the terms of the Trust Deed. It was an internal document, as was made clear by the words on its front cover that it was “Restricted to Staff”[112]. Indeed, Mayes described it as their “internal standards procedures”[113]. 40.The first meeting between Ji and DBS Bank was arranged for 18 March 2004 but actually took place on 22 March 2004 when Ji, Charles Tsang, Dicky Fong[114], Katherine Yu (Linda Liu’s assistant) were present. I do not accept Ji’s evidence[115] that Linda Liu was present at that meeting. I also find that Peter Lee did not drop in at the conclusion of the meeting to make a courtesy call, as it was suggested on his behalf[116]. Having regard to the contents of Ji’s email of 23 March 2004 that was addressed to Peter Lee rather than Dicky Fong, I find that Peter Lee took a more active role at that first meeting. 41.Following the sequence of the Checklist[117] prepared for the meeting on 22 March 2004:
42.On the same day, 22 March 2004, DBS Corporate’s Adrienne Lam emailed[125] the staff of NWT including Mayes, Peter Lee and Dicky Fong with their proposals for the setting up of the Trust. On 24 March 2004, NWT’s Gayle Blood replied to Adrienne Lam that NWT for DBS Trustee had no objection to the proposed trust structure and fee arrangement[126]. 43.Later, in mid-April 2004, DBS Corporate activated and provided Ji with Wise Lords’ incorporation documents[127] as part of the proposal to set up the Trust[128], together with a Wise Lords Director’s resolution of 16 April 2004 for the opening of its account with DBS[129]. 44.On 22 April 2004, Linda Liu’s Assistant, Katherine Yu of DBS:PB assisted Ji to open the Wise Lords’ bank account at DBS:PB[130]. The bank mandate made Ji, signing with the Wise Lords company chop, the sole signatory[131], but it also authorised Ji to operate the Wise Lords Account through the Remote Channel[132] by telephone or fax (with Ji’s designated telephone number and designated fax number recorded therein[133]). Under the terms of DBS’ then-prevailing Master Agreement (“Master Agreement”)[134] the Remote Channel Authority was revocable by notice in writing to DBS[135]. As can be seen from the top of the document, the Wise Lords’ bank mandate was held by DBS’ Account Processing Section which was responsible for checking that customer transactions were duly authorised by the customer’s authorised signatories[136]. 45.On the same day, 22 April 2004, DBS:PB opened an account for Ji to become a customer of DBS:PB by completing the DBS:PB Customer Profile[137] which was part of DBS’ KYC records. It noted that the DBS Trust Section was setting up the Trust, the purposes of which were: asset protection; smooth family wealth succession; taxation savings and confidentiality[138], with Wise Lords as the PIC for investment and asset protection[139]. 46.Having considered the above documents and the evidence, I find that, on 22 March 2004, after receiving a general explanation of the different types of trust available, Ji quickly made the decision to use their most common trust structure and to become the investment advisor of the trust to be set up[140], Subsequently, she was made the sole shareholder and director the BVI company, Wise Lords, to be used as the PIC of the Trust. I am satisfied from the documents identified above, many of which bore Peter Lee’s signature, that Peter Lee took a more active role than just a supervisory role in the set up of the trust and that he did give Ji general advice on the trust structure[141]. However, I am also satisfied from the emails of 24 and 25 March 2004[142] that he delegated the administrative work to Dicky Fong. I also find that Linda Liu was not involved in the set up of the trust[143]. 47.It is convenient at this juncture to deal with the dispute raised by the plaintiffs about the propriety of an account in DBS Singapore of a company called Maxy Fortune Trading Ltd. 48.In a call report dated 22 September 2004[144], it was stated that:
49.I accept as truthful the reasons given by Edna Chan in her email response made on 7 June 2006 to an enquiry from DBS Trustee about the use of this account[145]:
50.The Compliance Department of DBS Singapore also raised queries about this account and the fund flow from this account to Wise Lords’ account in DBS:PB on 2 occasions in February 2005 and March 2008 which were answered satisfactorily[146]. (5) April 2004 to January 2005 51.I have reviewed the documents relevant to this period. 52.On 30 March 2004, there was an email from Dicky Fong to Ji[147], in which Dicky wrote: “Linda and I had a discussion this afternoon regarding your concerns. She told me that she would meet up with you very soon to clarify the outstanding issues before you would give us the greenlight signal to proceed with the set up of the family trust”. Ji was trying to arrange for the family’s existing investments in mutual funds to be transferred to Wise Lords without incurring any redemption/subscription fees, as mentioned by her in her email of 23 March 2004[148]. 53.The DBS Trust Section prepared for a meeting to take place on 16 July 2004 at which it was contemplated that they would implement the establishment of the Trust. A Checklist for the meeting had been prepared[149] including a letter donating Wise Lords’ share into the Trust, an instrument of transfer of the share and letter of resignation by the director. However, that meeting did not take place and the process did not resume until December 2004. 54.On 21 September 2004, Linda Liu met Ji at DBS’ offices. A Call Record dated 22 September 2004[150] recorded that Linda Liu was working with the DBS’ Trust Section “to prepare the trust arrangement for Ms. Ji’s family”, with Peter Lee responsible for this and that the deadline for doing so was “by end of year 2004”[151]. 55.As accepted by Ji in her evidence[152], the delay was the need to transfer the mutual funds from StanChart without incurring any redemption/subscription fees and because it took some time to draft the Letter of Wishes. I do not accept Ji’s evidence that the delay was also due to the trust deed not being provided to her. This was a standard form document which was easily available. Indeed the Checklist for the 16 July 2004 meeting mentioned a trust deed to be signed by the settler[153]. Given that the parties did not proceed with the trust application at the time, the sum of HK$23,836, being the balance of the fees originally received for setting up the trust, was returned to Wise Lords on 27 May 2004[154]. 56.From April 2004 to January 2005, while the Trust was being set up, Ji and Zhang injected some funds into Wise Lords account with DBS:PB and Wise Lords entered into some investment transactions, which included a variety of mutual funds and other investment products such as YEDs. The transactions from 22 April 2004 to 29 December 2004 are listed in Arboit’s 2nd Schedule[155]. Linda Liu and Rocky Cheung[156] introduced investment products to Ji and Ji decided whether or not to acquire them. As Ji acknowledged under cross examination:
Over the course of this period, Ji acquired some experience in investing in these products. The defendants’ submission, which I accept, that, “by the end of December 2014, Ji had demonstrated her acumen in managing Wise Lords’ portfolio by the investment successes achieved in the period from April 2004 to January 2005 before the establishment of the Trust”[158], supports my finding that the need for Ji to acquire some investment experience also contributed to the delay in setting up the Trust. 57.There was a dispute about the custody of the Wise Lords company chop during this period of time. Ji claimed[159] that she was not given the company chop for Wise Lords, as the company was always intended to be transferred to DBS Trustee. However, Ji acknowledged receipt of Wise Lords’ company kit, including its company chop and common seal[160]. Given this acknowledgement, I find that she received the entire company kit, including the company chop. Ji’s evidence was that the company chop was kept by Linda Liu together with the setting up documents because Linda Liu had told her that the preparation of the trust would be finished very soon[161]. That was hardly the case and there was no good reason why Linda Liu would keep the chop. The company and the company kit had been provided by DBC Corporate and not by DBS:PB. 58.In advance of a meeting on 29 December 2004, which Peter Lee had attended[162], the DBS Trust Section’s Stella M.H. Yeung prepared a meeting Checklist[163] which she later used to record, in her distinctive handwriting[164], 11 Checklist items[165], namely:
59.The plaintiffs contend[191] that, noteably, Stella Yeung’s comprehensive Checklist made no mention of any document (such as an LPOA or any “Authorisation Letter”) whereby Ji was to be authorised to operate Wise Lords’ Account with DBS:PB. 60.On 30 December 2004, the DBS Trust Section’s Stella Yeung emailed a copy of items: (1) Background, (5) Fee Quotation, (4) Trust Structure, (9) Trust Deed (undated), and (6) Letter of Wishes (undated) of her Checklist to NWT’s Gayle Blood and Mayes[192] for their approval, which she received the same day[193]. 61.It was common ground that DBS Trustee signed the Trust Deed[194]. It was also common ground that Ji asked to take the Trust Deed back to Beijing for Zhang to sign as Zhang would not be coming to Hong Kong and that, on returning the Trust Deed, Ji told Liu that Zhang had signed the same and Liu then put down her signature as witness to Zhang’s signature although she did not actually witness him signing the document[195]. Nothing turns on the dispute whether or not Ji signed the Trust Deed in the presence of Linda Liu. It has not been suggested that the Trust Deed was invalidated or ineffectual because Linda Liu did not actually witness Zhang, or did not witness Ji and Zhang, sign it. It is also clear to me from this evidence that Linda Liu was willing to cut corners and signify that she witnessed parties signing documents when she had not done so. 62.Although they were requested to do so[196], I find that Ji and Zhang did not seek any legal advice before agreeing to establish the Trust and that this was known to Peter Lee and his team. The Trust Application dated 29 December 2004 and the Acceptance Form for DBS Trustee dated 30 December 2004 both stated “N/A” against that portion of these forms where details of the legal advisor were to be inserted[197]. 63.Upon the completion of these arrangements, the Trust was established and DBS Trustee owned the trust asset, which was the shareholding of Wise Lords. 64.The relationship between DBS Corporate, Wise Lords and DBS Trustee was the subject of a Services Agreement dated 13 September 2005[198], by which DBS Corporate was to perform or appoint one or more persons/companies as nominees (collectively the “Nominees”, which expression was stated in the agreement to include DBS Corporate) to perform the services specified in Schedule II of the agreement in relation to Wise Lords. The services specified were the provision of nominee director, provision of registered office and onward transmission of correspondence, record keeping by company secretary and provision of bank signatories. After Ji transferred the one share in Wise Lords to DBS Trustee for the set up of the Trust, DBS Trustee nominated DHJ Management, which, at that time, was a subsidiary of DBS Trustee, to act as director of Wise Lords. After DHJ Management became a subsidiary of DBS Corporate on 17 August 2005, DHJ Management continued to act as DBS Corporate’s nominated director of Wise Lords. E. Ji’s appointment as Investment Advisor 65.The plaintiffs contended that the Trust Structure stated that the settlers, not just Ji, would be appointed as the investment managers of the Trust, that no details of Ji’s investment background were provided to Jersey and that Mayes approved the structure without DBS Trustee having conducted any due diligence as to Ji’s suitability to act as investment advisor or investment manager. The defendants contended that Ji had made it clear from the outset that she would be the decision maker within whatever structure was eventually set up. As one of the settlors/beneficiaries of the trust, wife of the other settlor/adult beneficiary and the mother of the remaining minor beneficiaries, Ji was well able to determine the risk appetite of Wise Lords having regard to the purposes of the trust. At the time of setting up the trust, Ji signed the Curriculum Vitae and the same was received by DBS Corporate. DBS Corporate had a general understanding of the requirements which DBS Trustee would look for in an individual who was to be nominated as the investment advisor. DBS Corporate knew Ji’s qualifications and had discussions with DBS Trustee on her qualification as Investment Advisor. I now deal with these rival contentions. (1) The Curriculum Vitae of Investment Advisor 66.I accept Ji’s evidence that she signed the Curriculum Vitae of Investment Advisor[199] on a date she cannot remember and that, when she signed it, only the typewritten information was on the form. The handwritten part was filled in afterwards[200]. I accept Linda Liu’s evidence that the document was not prepared by her or her assistants and that she did not recognise the handwriting on the document[201]. I infer and find that the document was prepared by DBS Corporate, that it was signed by Ji sometime in December 2004, and that someone from DBS Corporate filled in the handwritten part. I have already found[202] that the statement that she had a degree from USA was a mistake and that the statement that she had 10 years’ experience in private investments was an exaggeration. DBS Trustee’s decision to approve the trust structure and Ji’s appointment as Investment Advisor was not influenced by the Curriculum Vitae of Investment Advisor, as this document had only been sent to DBS Trustee in December 2008[203]. (2) The Investment Advisor Agreement[204] 67.I have already found that, on 22 March 2004, after receiving a general explanation of the different types of trust available, Ji quickly made the decision to use their most common trust structure and to become the investment advisor of the trust to be set up[205]. The Investment Advisor Agreement was signed by Ji and by Peter Lee and another signatory on behalf of Wise Lords on or about 4 January 2005. By this agreement, Wise Lords appointed Ji to be its investment advisor. Although DBS Trustee did not become aware of the Investment Advisor Agreement until February 2007, when a copy was sent to DBS Trustee and included in the records of the Trust[206], DBS Trustee was aware from the outset an investment advisor would be appointed[207]. The documents also showed that DBS Trustee knew Ji was the designated investment advisor before 23 February 2007[208]. Although Ji sought to resile from this, suggesting the investments were driven by Linda Liu[209], I find that she knew[210] that she had been appointed investment advisor to Wise Lords, as she had accepted in the course of her telephone conversations with Linda Liu and Peter Lee[211]. (3) Due diligence as to Ji’s suitability 68.It is a common arrangement for family trusts that settlers act as investment advisors. In this case, Ji made the decision to be the investment advisor of the trust to be set up[212]. However, I am satisfied that any so-called due diligence on Ji’s suitability was cursory at best. I have already found that, although the Curriculum Vitae of Investment Advisor contained inaccurate information on Ji’s qualifications and experience, the DBS Trustee’s decision to approve Ji’s appointment as Investment Advisor was not influenced by the Curriculum Vitae of Investment Advisor[213]. Any knowledge that that DBS Trustee had of Ji’s qualifications and qualifications was flawed if it was based on the Curriculum Vitae of the Investment Advisor. Although Mayes gave evidence that he recalled having conversations with DBS Corporate in 2005 about Ji’s suitability and experience as an Investment Advisor[214], I find that any discussions DBS Corporate had with DBS Trustee on her qualifications as Investment Advisor were at best superficial. Mayes did not provide particulars of these conversations. At that time he had not seen the Curriculum Vitae of Investment Advisor, as this document had only been sent to DBS Trustee in December 2008[215]. Mayes’ witness statement contains[216] a post facto justification of Ji as Investment Advisor based on the Curriculum Vitae of Investment Advisor which Mayes had not seen at the relevant time. The absence of written records in the hands of DBS Trustee in 2005 is also made apparent by the email from Tim Pearson-Burton of DBS Trustee to Adrienne Lam of DBS Corporate dated 22 December 2008[217] that was sent after the receipt of a letter of complaint from Ji’s and Zhang’s solicitors dated 11 December 2008. This email asked for information on the ability of Ji to act as investment advisor. The approval was given for Ji to act as Wise Lords’ investment advisor without any real scrutiny by DBS Trustee of her qualifications. 69.However, I am satisfied that DBS Trustee was at least made aware of her experience in operating Wise Lords’ account from 22 April 2004 to 5 January 2005. During this time she purchased and redeemed a large variety of mutual funds and also acquired some YEDs with enhanced returns by reason of the fact that they were currency linked, some to Japanese Yen (“JPY”) and others to AUD. Much of Arboit’s witness statement is a historical narrative, based on the primary documents, on which I place little weight. My findings of fact have been made based on those primary documents and the evidence of witnesses who spoke with personal knowledge of the matters in dispute. Nevertheless, I found the Schedules produced by Arboit to be of considerable assistance[218]. The 2nd Schedule to his witness statement records every transaction carried out in Wise Lords’ account with DBS:PB and pp.1-5 thereof record the transactions from 22 April 2004 to 5 January 2005[219]. Further, as I have found below, Ji quickly became an astute and experienced investor. (4) The authorisation dated 5 January 2005[220] and cover letter dated 6 January 2005[221] 70.The authorisation letter, executed by DHJ Management as sole director on behalf of Wise Lords entitled “Appointing Authorised Representatives” and addressed to DBS Bank, is Wise Lords’ grant of authority to Ji to issue instructions on behalf of Wise Lords to DBS Bank to sell or purchase securities and to enter into foreign exchange transactions. The authorisation letter expressly excluded any authority to draw or transfer funds from Wise Lords’ bank accounts or to overdraw the bank account or to negotiate an overdraft facility for Wise Lords. The cover letter (supposedly with various enclosures[222]) dated 6 January 2005 was from Peter Lee on behalf of DBS Corporate to Linda Liu. The plaintiffs submitted that the authorisation letter and cover letter were false in that they were produced by Peter Lee in 2010 or later, and backdated, in order to try to protect the defendants from liability. I have already noted[223] the plaintiffs’ submissions that Stella Yeung’s comprehensive Checklist made no mention of any document (such as an LPOA or any “Authorisation Letter”) whereby Ji was to be authorised to operate Wise Lords’ Account with DBS:PB. The plaintiffs submitted that there were also various other features of the purported authorisation which suggested that it was false, including:
71.Shortly before the last Pre-Trial Review of this action on 20 May 2014, the plaintiffs had issued a summons for an extension of time to file an Order 27 rule 4(2) notice of non-admission in respect of the authorisation letter and the cover letter. On the second day of trial, Mr Barlow made a substantive, positive allegation of forgery, alleging that there had been deliberate backdating[225]. Although unpleaded, I allowed Mr Barlow to put this case to the witnesses. 72.Ji gave evidence that she did not become aware of the purported authorisation until after the commencement of proceedings[226]. Absent evidence of good record keeping by Ji, I cannot place any reliance on Ji’s recollection in 2014 that she had not seen this document in 2005. She might have seen it and forgotten that she had seen it. If the letter had been signed in January 2005 and not back-dated as alleged, then, even if Ji had not been shown this document, the authorisation would still be effective, being a letter addressed to DBS:PB confirming that Wise Lords had authorised Ji to execute trades on its behalf. 73.I accept the evidence of Mayes that the authorisation was not inconsistent with clause 12 of the Investment Advisor Agreement executed by Peter Lee on 4 January 2005, which provided that Ji was empowered to advise the directors of Wise Lords, but was not entitled to engage in any business on behalf of Wise Lords without the consent of Wise Lords[227]. Mayes was a very careful witness. His answers never strayed beyond the ambit of the question being posed. He gave evidence on this matter on Day 11 of the trial as follows: Mayes was referred to the rather inelegant wording of clause 3(a) of the Investment Advisor Agreement which stated that:
Mayes explained that the powers that were consistent with the office of investment advisor included an authorisation to execute transactions:
When questioned about clause 12 of the Investment Advisor Agreement which stated:
Mayes said the following:
My construction of the clauses in question accords with Mayes’ reading of the Investment Advisor Agreement. Even if the “business” of the company included the purchase of investments, the authorisation letter, executed by the director of Wise Lords upon the resolution of the board, would supply the consent required under clause 12 of the Investment Advisor Agreement[235]. I accept Mayes’ evidence that it is common for the investment advisor to have a power of attorney to execute transactions. 74.I find that there is no inconsistency between the authorisation letter and the trust and company management structures. I accept Mayes’ explanation that “[a] trustee owns the trust asset, which in this case is the shares of Wise Lords Limited. It then has supervisory powers over the underlying investments carried out by their underlying company”[236] and Peter Lee’s evidence[237] that Ji’s power to direct investments “was subject to the power of the Trustee and Wise Lords to override Ji’s decisions or reverse the transactions she conducted for Wise Lords”, although he conceded he had not come across any instance of reversal by the trustee[238]. There was no conflict between Ji’s authorisation and the fact that the approvals for Wise Lords’ investment transactions had to be and were routinely sought from DBS Trustee through DBS Corporate. Peter Lee gave evidence[239] which I accept that “[because] when Ms Ji placed the order, then it would be a matter concerning the bank and the account of Wise Lords. What we were asking here in the email for prior notice, that is for us, within DBS Corporate Services, to do checking.” 75.I do not accept the submission that Mayes acknowledged that he and DBS Trustee did not become aware of the purported authorisation until 2010 and that, accordingly, the authorisation did not play any role in DBS Trustee’s administration of the Trust. I understood Mayes to be saying in his evidence that he knew that, subsequent to the Investment Advisor Agreement, such a power was vested in Ji[240]. He did not say when he became aware of the authorisation letter. It was submitted that it was clear from the email of Peter Lee to Mayes and Tim Pearson-Burton dated 15 April 2010[241] and the response by Tim Pearson-Burton to that email[242], in connection with the change of trustees, that DBS Trustee did not have a copy of the authorisation letter. However, the subject matter of these emails was the documents relating to Ji’s appointment as investment advisor and not her authority to give investment instructions. Mayes explained that the statement in the email[243] to “any authorization record or minutes of the notification of the appointment of Ms Ji as the investment advisor for Wise Lords Limited” was “talking about minutes or some other form of approval by a company of a notification of the appointment of Ms Ji as investment advisor”[244]. That accords with my reading of the email and I find that it did not refer to the authorisation letter. 76.It was submitted that the authorisation letter, which was only signed by Peter Lee, raised grave doubts as to its authenticity as other documents signed by Peter Lee on behalf of DHJ Management, as sole director of Wise Lords, were all countersigned or initialled by a second signatory in addition to Peter Lee. The authorisation letter was not invalid because it was signed by only 1 person. A single authorised signatory of DHJ Management could sign and execute, on his own, relevant documents as was apparent from the resolution of DHJ Management that was effective from 14 October 2004[245]. There were a number of documents that had been referred to[246] in which an initial appeared next to Peter Lee’s signature. Peter Lee could not recognise the colleague of his who had placed the initial on those documents[247]. The initial, even if placed by an authorised signatory, might not even qualify as a “signature” within the meaning of the DHJ Management resolution. However, it was not the invariable practice of DHJ Management to require more than a single signature on its documents. For instance, the Financial Accounts of Wise Lords for the years ended 31 March 2006, 31 March 2007, and 31 March 2008[248], were all signed solely by Peter Lee on behalf of DHJ Management. 77.The plaintiffs submitted that the authorisation letter was contrary to the Procedures Manual[249]. However, this only came into effect on 11 December 2006, after the setup of Trust and the date of the Authorisation Letter[250]. I accept Peter Lee’s evidence that the authorisation letter and a LPOA was the same thing[251]. I also accept Peter Lee’s distinction between a specific power of attorney (for a particular matter such as acquiring landed property) and an LPOA (for example, for operating a bank account)[252]. He pointed out that an LPOA was not in fact mentioned in the Procedures Manual, which only contained provisions dealing with “general” powers of attorney and “specific” powers of attorney[253]. Even if the Procedures Manual applied, I find that the authorisation letter was not in breach of it. 78.The plaintiffs submitted that no mention was made of the authorisation letter in many documents and that cast doubt on the date when the authorisation lettercame into existence:
79.I accept the evidence of Peter Lee that the Board resolution approving the Investor Advisor Agreement, the Yearly Reviews, the Delegated Management Query Forms were standard form documents[262]. I do not find it surprising that they made no mention of the authorisation letter. I have already found that the subject matter of the emails of April 2010 was the documents relating to Ji’s appointment as investment advisor and not her authority to give investment instructions. I do not find it surprising that they make no mention of the authorisation letter. I also accept the evidence of Peter Lee[263] that he did not pay particular attention to the lack of reference to Ji’s authorisation in the documents at the time of the “tallying exercise” as the authorisation letter was “standard for each client”. The letters referred to in sub-paragraphs 78(f) and (g) above rightly make no mention of the authorisation letter as the authority of Ji to execute investment transactions on behalf of Wise Lords was not a subject of contention at the time. On the contrary, Ji clearly believed that she had the authority to execute orders on behalf of Wise Lords when she asserted in one of those letters that “I have the right to request DBS to cancel these three Notes and refund me the full amount of principal plus interests”[264]. When questioned why the Trustee Minutes resolving to add the Investment Advisor Agreement to the trustee’s own records did not mention the authorisation letter, Peter Lee said that he did not know[265] and Mayes said: “I do not know what particular aspects the trustee would or would not regard as requiring a minute, and I do not know as to what date the trust company became aware of that second document you’re referring to.”[266] I am not prepared to infer that the authorisation letter and the cover letter were backdated just because the Trustee Minutes and the Checklist of Stella Yeung made no reference to the authorisation letter. I do not want to speculate but the reason for its omission from the Checklist might be because the authorisation letter was to be executed by DHJ Management, not by Ji, after the “Transfer of BVI share to Trust documents”, the last item on the Checklist, was completed. 80.Although the board resolution of Wise Lords dated 6 January 2005 approving the authorisation has not been disclosed, I am unable to find that it never existed amongst Wise Lords’ records. Further, although there was no disclosed record of the authorisation letter being sent to DBS:PB’s account administration staff who would require it to ensure that Ji’s orders to purchase investments on Wise Lords’ DBS:PB account were properly given, the absence of such disclosure does not lead me to infer that the authorisation letter had not been sent to DBS:PB’s account administration staff, particularly as the forgery point was taken very late in the day. 81.The plaintiffs took issue with the absence of detail in the authorisation letter, such as the phone and fax numbers of Ji and her specimen signature, which the plaintiffs asserted[267] was unlike the Account Opening Form[268] of Wise Lords which dealt with “remote channel”. I accept the evidence of Peter Lee that the authorisation letter was a standard form of the Trust and Corporate services section. I do not find it surprising that it was different from the standard account opening form of the private banking section. Indeed, DBS:PB already had Ji’s details as she had been operating the account of Wise Lords since April 2004. 82.Peter Lee was far from being a good witness. The manner in which he answered questions during the course of his cross examination exasperated and annoyed me at times[269]. Nevertheless, I am able to accept much of his evidence as being true and correct. I am unable to find that he backdated the authorisation letter and the cover letter. I accept his evidence that the authorisation letter was a document that went in tandem with the Investment Advisor Agreement for every one of their clients[270]. I find that the authorisation letter and the cover letter were not backdated but were executed in January 2005. Peter Lee knew that it was wrong to backdate any document and he said as much in his email dated 27 November 2008 refusing Linda Liu’s request for the trustees to sign a “back-dated” offer letter[271]. In May 2006, the letterhead of DBS Corporate Services had changed[272]. The cover letter dated 6 January 2005 bore the old letterhead of DBS Corporate Services. The suggestion implicit in the plaintiffs’ case that Peter Lee or his staff created and backdated the cover letter in 2010, by locating and using letter paper bearing the old letterhead, is fanciful and one that I cannot accept. (5) The effect of the Investment Advisor arrangements 83.By the authorisation letter, Ji was authorised to execute investment transactions on behalf of Wise Lords. Wise Lords is a BVI-incorporated company with its account with DBS:PB in Hong Kong. Although Wise Lords was governed by the laws of BVI, no evidence has been adduced before me to prove that the law in BVI governing the right of directors to delegate was different from Hong Kong law[273]. I find that DHJ Management, as director of Wise Lords, was entitled to delegate particular functions, and to trust the competence and integrity of the delegatee to a reasonable extent. I find that that DHJ Management, as director of Wise Lords, was entitled to delegate the exercise of its powers and functions to others and that it was entitled to authorise Ji to execute investment transactions on behalf of Wise Lords. Ji’s power to direct investments was subject to the power of the DBS Trustee and DHJ Management to override Ji’s decisions or reverse the transactions she conducted for Wise Lords. I do not find any conflict between Ji’s authorisation and the fact that approvals for Wise Lords’ investment transactions had to be and were routinely sought from DBS Trustee, through DBS Corporate. DBS Trustee owned the trust asset, which was the shares of Wise Lords. DBS Trustee was obliged to carry out the terms of the Trust and to administer the trust assets for the benefit of the beneficiaries pursuant to the terms of the Trust Deed and subject to the Trusts (Jersey) Law 1984 (“the 1984 Law”). DBS Trustee had to take a high level supervisory role. The structure was deliberately designed to permit a measure of independence and flexibility on the part of Ji advising and executing investments, subject, however, to the Trustee’s overarching supervision, regular monitoring and responsibility to ensure that the value represented by the overall trust fund was subject to appropriate controls, reviews, investment expertise and management[274]. 84.The plaintiffs submitted that the authorisation letter had been rescinded by a resolution of Wise Lords on 11 May 2005, which was signed by Peter Lee on behalf of DHJ Management as sole director of the company[275]. The 11 May 2005 resolution dealt with the change of bank signatories. It provided that: “...all signing instructions previously given in relation to all the Company’s account(s) maintained with DBS Bank (Hong Kong) Limited be rescinded with immediate effect and that henceforth the said account(s) be operated by the new authorised bank signatories of DBS Corporate Services (Hong Kong) Limited...” The reference to the previous signing instructions that were to be rescinded was a reference to a similar previous resolution on 29 December 2004 appointing authorised signatories of the company[276]. There is no substance to this point. The authorisation letter conferred Ji with the authority to give instructions via phone/fax to the DBS:PB regarding investment transactions to be executed between DBS:PB and Wise Lords. The authorisation letter was not designed to make Ji an authorised signatory. She did not need to be an authorised signatory in order provide instructions to DBS:PB to execute investment transactions on Wise Lords private banking account. The 11 May 2005 resolution dealt with authorised signatories for Wise Lords’ bank account. Ji had no right to withdraw funds from the account or apply for credit facilities[277]. The two documents dealt with completely different matters. (6) The Securities and Futures Ordinance 85.Ji’s appointment as Investment Advisor to Wise Lords required her to provide “investment advice” to Wise Lords in Hong Kong (as the address of Wise Lords, as stated in the Investment Advisor Agreement and DBS’ correspondence records was in Hong Kong, and all dealings and investments took place in Hong Kong). The plaintiffs submitted that Ji was not registered to provide advice on investments in Hong Kong under the SFO and, consequently, the appointment was illegal. 86.S.114 of the SFO makes it an offence for a person, without reasonable excuse, to (1) carry on a business in a regulated activity or (2) perform any regulated function in relation to a regulated activity carried on as a business; or to hold himself out as doing (1) or (2). Further, s.115 of the SFOprovides that “if (a) a person actively markets ... whether in Hong Kong or from a place outside Hong Kong, to the public any services that he provides; and (b) such services, if provided in Hong Kong, would constitute a regulated activity, ... the provision of such services so marketed shall be regarded ... as carrying on a business in that regulated activity”. 87.There is no substance in this submission. Although Ji was appointed the Investment Advisor of Wise Lords, she did not “carry on a business” when she advised Wise Lords to purchase or sell securities. Ji was, at all material times, resident in and operated from Beijing[278]. There is no evidence that she marketed any services, actively or otherwise, that she allegedly provided [279]. (7) Periodical reviews of Ji’s performance 88.Periodic reviews were conducted in relation to the performance of Ji as the Investment Advisor. The exercise entailed the completion of the form entitled the Investment Advisor – Yearly Review by DBS Corporate. These documents described in a summary manner the nature of the investments which had been made on behalf of the Trust and described the performance of the account in percentage terms after setting out the account balance at the start of the period and comparing that with the account balance at the end of the period, after deducting any injection of funds into the account and after adding any distributions from the account. The reviews for January 2005 to March 2006[280], March 2006 to March 2007[281] and March 2007 to March 2008[282] recorded net increases in the value of Wise Lords’ assets by 32.7%, 15% and 20.4% respectively, and it was recommended in those reviews that Ji should continue in her role. 89.Wise Lords’ investment successes were also reflected in the Financial Accounts[283]. Zhang and Ji approved and signed the Accounts for years ended 31 March 2006[284] and 31 March 2007. The overall gain achieved by Wise Lords can be seen from the following table:
90.After these profit figures were put to Ji, I asked her, assuming that the figures were correct, whether she would be satisfied with those profits. Ji answered: “Of course”[285]. 91.In the review for March 2008 to March 2009, a net reduction of 70% in Wise Lords’ NAV was recorded. I shall address this matter when I deal with the events of this period. 92.DBS Trustee obtained, via DBS:PB and DBS Corporate, regular updated valuations and periodic financial accounts of Wise Lords’ portfolio, including quarterly and annual reports and financial accounts and information related to specific transactions[286]. 93.File Review for a Trust Managed by DBS Trustee were completed by David Muir of DBS Trustee dated 27 September 2006[287], 1 March 2007[288] and by Ben George of DBS Trustee dated 12 October 2007[289]. These file reviews recorded the communications involving DBS Trustee on the management of the trust, such as:
94.Delegated Management Query Forms were completed by DBS Corporate / Trust and Corporate Services division dated 20 November 2006[290], 20 December 2007[291], 24 July 2008[292], 3 June 2009[293], 11 May 2010[294]. The references in all these Delegated Management Query Forms to “RM of Hong Kong on advisory role” in answer to the question “how are the investments managed” were incorrect as the relationship between DBS Bank and Wise Lords was defined by the contractual documents to be one of “transaction execution service”[295]. 95.In addition to the reviews, there were many instances when the trustees would actively ask for information and/or raise queries about a proposed transaction by Wise Lords. Such requests would be posed either directly by trustees or via DBS Corporate/Trust and Corporate Services division. Some examples are set out in the following table for the period up to end March 2007:
96.By reviewing the portfolio summaries as and when they were received, DBS Trustee obtained an overview of the state of Wise Lords’ portfolio at particular points of time and Wise Lords’ performance over the years in question. As Mayes explained in his evidence, up to April 2008, DBS Trustee were only getting quarterly summaries of the position of the Trust and, at that time, they wanted to receive summaries on a more regular basis than every quarter[301]. F. THE TRUST’S OBJECTS AND INVESTMENT PROCESSES 97.The intention for setting up the Trust as reflected in the documents was for the purposes of confidentiality, caring for children, succession planning and avoidance of probate/estate duty and asset protection[302]. As can be seen from the Letter of Wishes, Zhang and Ji wanted the funds to be available for them and their children and remoter issue[303]. (2) The terms of the Trust Deed and the Trustee’s Duties 98.The administration of Trust was at all material times governed by the terms of the Trust Deed dated 4 January 2005[304]. The relevant aspects of the structure of the Trust Deed[305] are apparent from its index[306] namely:-
99.Pursuant to Clause 2 of the Trust Deed, the governing law of the Trust was Jersey Law. With leave of court, both parties have filed their own expert reports (“the Speck Report” and “the Matthews Report”) addressing questions under Jersey law with regard to the Trust. The appointed experts, Speck for the plaintiffs and Matthews for the defendants, have also filed a Joint Report identifying their few points of disagreement[307]. Speck qualified in England and, over the last 25 years, has practiced in Jersey, being centrally involved in most of the high profile, high value and complex trust disputes in Jersey[308]. Matthews is a Professor of Law in the University of London and Visiting Professor of Trust Law at the Institute of Law in Jersey, and author of books on both English and Jersey trust law. Although he has written extensively on Jersey trust law and acted as an expert witness there, he is not qualified to practice in Jersey[309]. 100.In the Matthews Report, the key point was made that the duties owed by the DBS Trustee as original trustee of the Trust from 2005 to 2011 were the statutory duties set out in the 1984 Law – save where modified or excluded by the express terms of the Trust Deed[310]. The key statutory duties under the 1984 Law included the following:
101.Paragraph 2 of the First Schedule of the Trust Deed (Powers of Investment) stated:
102.Matthews was of the opinion that Article 21(3) of the 1984 Law (duty to preserve and enhance trust assets) was negatived by clause 2(j) of the First Schedule to the Trust Deed; and clauses 2(b) (expressly permitting speculative investments) and 2(g) (negativing any duty to diversify investments) of that Schedule emphasised particular aspects of the general lack of a duty on the trustee to preserve or enhance the value of the trust property[311]. 103.Paragraph 4 of the First Schedule (Trustees Not Bound to Interfere in Business of Company in which Settlement is Interested) stated:
Paragraph 5 of the First Schedule (Trustees Not Bound to Obtain Information Regarding Company in which Settlement is Interested) stated:
104.Matthews was of the opinion that the duty of a trustee to obtain information about the affairs of a company in which the trust was interested as shareholder so as to enable it to make an informed decision whether to take any action for the protection of trust property in this case was modified or excluded by clauses 4 and 5 of the First Schedule. Clause 4 released the trustee from any obligation to interfere in the business of such a company, and clause 5 relieved it from any obligation to obtain information regarding such a company[312]. 105.Paragraph 11 of the First Schedule (Personal Interest of a Trustee) stated:
Paragraph 12 of the First Schedule (Power to Transact with Trustees of Other Trusts) stated:
Paragraph 13 of the First Schedule (Contracts with Individual Trustees):
106.Matthews was of the opinion that Article 21(4) (prohibition on profit from trusteeship) was derogated from by clauses 11 to 13 of the First Schedule, permitting a trustee to exercise a power whilst having a personal interest in its exercise, permitting a trustee to transact with the trustees of other trusts even though the trustee is one of those trustees, and permitting the trustee, in some circumstances, to contract with itself in a matter in which it was personally interested[313]. 107.Matthews was of the opinion that Article 23 (duty of impartiality and requirement not to advantage one beneficiary at the expense of another) was derogated from by various provisions, in particular, the powers of appointment contained in the Trust Deed, and by clauses 2(a), (c) to (e) of the First Schedule to the Trust Deed, which permitted the trustee to invest the trust property in ways which did not produce income or were wasting assets, even though they might in effect alter the interests of the beneficiaries under the Trust[314]. 108.Matthews was of the opinion that the provisions of the 1984 Law could, according to their own express words, be modified or negatived by the terms of the Trust Deed, and that the terms identified in this Trust Deed “were effective to modify or derogate from those statutory duties accordingly”[315]. 109.It is apparent from their Joint Report that there was very little difference between the opinions of Speck and Matthews. One difference of opinion was confined to the requirement to preserve and enhance the assets of the trust under Article 21(3) of the 1984 Law and the words “subject to the terms of the trust”:
Speck was of the view that such a duty could not be excluded in relation to money-box companies, especially if the director and administrator of the company were subsidiaries of the corporate trustee itself, as was the case here[317]. He considered the duties to preserve and enhance the assets of the trust to be fundamental duties owed by the trustee and, despite the legislator’s use of the words, “subject to the terms of the trust”, could not be excluded by the terms of the trust as that would “fly in the face of the fundamental concept of the trust”. In any event, he considered that no well-advised settlor would agree to terms doing so[318]. 110.I prefer the opinion of Matthews on this point. Whilst he accepted that it was perhaps more likely that parties would be seeking to minimise or exclude the statutory duties in the case of a trading company, he could not see how the type of company that was involved could prevent the clear terms of the trust taking effect. He did not see anything in statute or case law to support such a distinction[319]. Further, there was “no trace of such a characterisation of these duties as fundamental in the statute or case law (and in particular not in the leading (English) case of Armitage v Nurse [1998] Ch 241), and no authority suggesting that these duties cannot be excluded by appropriately drafted terms[320]” 111.Speck’s own analysis of Armitage v Nurse [1998] Ch 241 is that the “irreducible core of obligations” to a trust beneficiary comprises of the duties of trustees “to perform their role honestly and in good faith for the benefit of the beneficiaries”[321]. It is common ground that these duties are the core trust duties. However, these duties are very different from a specific duty to preserve or enhance trust assets, which is not a core trust duty. It is possible to have a trust in respect of a speculative investment fund. In that situation, as with any trust arrangement, the true core components of the trust arrangement are the holding of assets by the trustee, with the trustee required to act at all times with honesty and good faith. 112.I also accept the opinion of Matthews that one could not ignore the legislator’s deliberate use of the phrase “subject to the terms of the trust” in Article 21(3) of the 1984 Law, particularly when that phrase (or some similar phrase) had not been used elsewhere, for example in Article 21(1); and that many Jersey law trust instruments purported to exclude the duties to preserve and enhance the value of the trust property. 113.Speck’s view rested on a distinction between modification and exclusion which appears to be difficult to put into practice. Even if the distinction was practically sound, Speck has provided no legal authority for his distinction between “money-box” and trading companies. 114.The plaintiffs’ complained that no attempt had been made to explain that the fundamental duties to preserve and enhance the assets of the trust had been excluded by the terms of the trust and they referred the English Court of Appeal’s decision in Bogg v. Raper [1998] EWCA Civ. 661 in which Millett, L.J., as he then was, said at §53:-
Further, in the decision in West v Lazard [1993] JLR 165, the Royal Court found that the 1st plaintiff was not bound by the terms of the trust since, on the evidence, he had no knowledge of its exculpatory terms because the bank, which had set-up and sold the “off-the-shelf” trust to the 1st plaintiff, as settlor, had made no attempt to fulfil its duty to explain them to him. The Royal Court found[323]:-
The defendant in Bogg v. Raper [1998] EWCA Civ. 661 had a duty to explain the terms in his capacity as solicitor as did the bank in West v Lazard 1993 JLR 165. In the present case, the Trust Application dated 29 December 2004[324] contained the express note that client was advised to seek independent legal/tax advice and that DBS Trustee was not assuming any liabilities for any error or defects in the structure of the trust. It was thereby made clear to the intended settlers that DBS Bank was not assuming any duty to advise the intended settlors of the terms of the trust deed and of their effect. 115.Apart from the issue of preservation of assets, the only other area of disagreement identified in the Joint Jersey Report concerns the effect of Article 25(3) of the 1984 Law, which provided that:
However, both parties were in agreement that the difference was not relevant to any issue before me and that I need not resolve it[325]. 116.I note that Speck did not disagree with Matthews’ view[326] that there was nothing in the 1984 Law or relevant case law to impose a duty to disclose to the settlors and beneficiaries that the original trustee had entered into an arrangement with a third party to delegate trustee duties to the third party. Speck also did not disagree with Matthews’ reference[327] to the decision of the Jersey court that an outgoing trustee would normally be under a duty to hand over to an incoming trustee all documents and information which relate to the administration of the trust but that the court had a discretion to direct that documents or information are not to be supplied where the outgoing trustee can show why the normal rule should not be followed. Matthews referred to the distinction approved in case law between records, books or other papers belonging to the trust (which are to be delivered up to the new trustee) and other papers in the old trustee’s hands not belonging to the trust but containing information relating to the trust, such as minutes of trustee meetings, internal memoranda of a corporate trustee, and correspondence files (which the new trustee is entitled to inspect and copy). 117.I accept the defendants’ submissions that, under Jersey Law, there was no duty on the part of trustees in the position of DBS Trustee to pre-approve each investment made by its underlying company before it was made. The 1984 Law and the Trust Deed do not contain any provision to such effect and Matthews and Speck did not suggest the existence of such a duty. 118.It is common ground that the fundamental trust duties in this case comprised of the duties of honesty and good faith and the duty not to act in a grossly negligent manner. The duties which could not be altered by the express terms of the Trust Deed included:
119.Clause 19 of the Trust Deed mirrors Article 30(10) in stating that an outgoing trustee does not have any liability to any beneficiary or replacement trustee except insofar as such liability arises from the outgoing trustee’s fraud, wilful misconduct or gross negligence[332].The statutory position under Article 30(10) aligns with the English common law position under Armitage v Nurse[1998] Ch 241 referred to by both experts. The “irreducible core” of trust obligations identified in Armitage v Nurse consist of the duties of good faith and honesty, which, of course, prohibit acts of fraud and wilful misconduct. 120.I accept the analysis of Speck[333] that wilful misconduct requires an appreciation by the person guilty of the misconduct that what this person was doing was contrary to his duties as trustee, alternatively, recklessness consisting of this person’s shutting his eyes to the probability that his misconduct was in breach of his duty; and that while gross negligence does not itself “import any question of intentional or reckless fault”, it does mean “a serious or flagrant degree of negligence”, citing the judgment of the Jersey Court of Appeal in Midland Bank Trust Company (Jersey) Limited v Federated Pension Service [1995] JLR 352. Matthews has not offered a different view on this matter. 121.I have already found that Ji was reasonably proficient in English[334]. At the relevant time, Zhang held a senior position in Deutsche Bank. He gave evidence in English via videolink. He spoke excellent English. Zhang said he did not read the terms of the Letter of Wishes before he signed it[335]. Had he read it, I have no doubt that he would have understood its terms. I also have no doubt that Ji read the Letter of Wishes before she signed it and that she understood the terms of the Letter of Wishes[336]. Ji had the habit of reading every document provided to her at length before signing it[337]. 122.Mention has been made of a draft Letter of Wishes in Chinese[338] but a copy of that document has never been disclosed. Whatever its contents might have been, it is the signed written Letter of Wishes in English which applies to the Trust and which we must look at. The Letter of Wishes clearly provided for the following three scenarios:
The plainly expressed wish of the settlors for the trust fund to be invested in low risk investments only became relevant after the death of both settlors. There was nothing unusual or irrational about this arrangement, as it gave the settlors flexibility during their lifetime to provide input with regard to the investments to be made. 123.References to “caring for children” or “asset protection” did not imply that there must have existed an imperative to engage only in low risk investments. The motivation in setting up the Trust as a means of was caring for the children did not mean there was an intention to confine Wise Lords’ portfolio to low risk investments. Zhang and Ji were still in their prime, and Zhang would have had an expectation of a constant and long stream of income from a financially rewarding career. Ji and Zhang were also motivated, at least in part, to set up a family trust by reason of the inheritance tax issues experienced by their friend’s family and, to that extent, the Trust protected its assets from potential tax liabilities. The wish to protect assets also did not mean that the investments of the Trust must be confined to low risk investments. 124.In any event, the Letter of Wishes did not affect the terms of the Trust Deed. It was clear from the terms of the Trust Deed that the trust was allowed to engage in investments of a speculative nature. The terms also provided that DBS Trustee was under no duty to diversify investments or to see that the value of the trust fund was preserved or enhanced in any way[339]. 125.Zhang admitted that he was not aware of the investments made by Wise Lords from April 2004 onwards[340]. When shares of Wise Lords were settled into the Trust, Wise Lords was already holding a medium risk level investment portfolio. After the set up of the Trust, Ji was the Investment Advisor and authorised representative of Wise Lords with power to effect transactions for it. All investment decisions were made by Ji. The alleged low risk investment imperative was inconsistent with the risk level of the investments which Ji decided to make for Wise Lords, as evident from the numerous Declarations of Risk Awareness signed by Ji and Zhang[341]. 126.In the minutes of meeting dated 1 February 2006[342], held with Ji, Linda Liu, Matthew Lam and Edna Chan of DBS Corporate, Edna Chan isrecorded as stating that it was expressed in the Letter of Wishes that the trust fund should only engage in low risk investments. This was a misreading of the Letter of Wishes by Edna Chan. However, Ji responded at that meeting that she did not consider emerging markets and developing countries as high risk markets, as she had read thoroughly the market research available in books and newspapers, and that she was well aware of the emerging markets like Latin America and Eastern Europe. Ji also stated that the investments were long term. (4) Dealings between Ji, Zhang and DBS Group[343] 127.After the set up of the Trust, Ji was the Investment Advisor and authorised representative of Wise Lords with power to enter into transactions for Wise Lords. In such capacities, she communicated with DBS:PB personnel regularly (often on a daily basis, and sometimes making multiple calls per day) to obtain market and investment product information, give instructions to them to enter into investment transactions for Wise Lords and obtain information in respect of Wise Lords’ account. Linda Liu, who was the Relationship Manager of Wise Lords’ account, was Ji’s main point of contact at DBS:PB. 128.Linda Liu (or her assistant if she was not around) would forward information related to Ji’s instructions for Wise Lords to staff members of the Trust and Corporate Services Department, who would, in turn, forward the same to DBS Trustee and DHJ Management personnel. For matters related to the Trust, Ji liaised with staff members of DBS Corporate directly. 129.The roles assumed by DBS Trustee and DHJ Management were high level supervisory ones and they retained the power to override Ji’s investment decisions or reverse transactions she conducted for Wise Lords. 130.Linda Liu met Zhang on only 2 or 3 occasions, at his home in Beijing, and even then she did no more than introduce herself. Ji had made it clear that Zhang was a very busy man and Linda Liu was not to disturb him. 131.In the course of his evidence, Zhang sought to give protracted explanations why he had not read any of the banking and trust documents and why he had not made it his business to ascertain what they were before signing them[344]. A number of these documents bear Zhang’s signatures. Amongst them were:
His explanations were that he trusted his wife, he was extremely busy, and that he was a “macro guy”. 132.Sometimes Ji said she wanted to consult with Zhang before making investment decisions. Telephone recordings between Ji and DBS Bank staff suggest that Zhang had some knowledge and awareness about the state of Wise Lords’ portfolio[350]. Zhang also signed the financial accounts of Wise Lords and the Trust before December 2008. Notwithstanding these aspects of the case, and Zhang’s knowledge, as a senior banker, of banking, investment and trust matters, I find that Zhang deliberately distanced himself from matters concerning the Trust and from the investments in the Trust for the reason that he had great faith and confidence in his wife’s abilities to manage those investments. He was happy to “blindly” sign whatever document was placed before him in connection with the Trust and the investments of the Trust. 133.The plaintiffs’ Statement of Claim originally contained allegations of forged signatures on two “Recommendation Letters” relating to banking facilities, at paragraph 4 of Appendix A, but those allegations were deleted from the Statement of Claim by way of amendment[351]. In Appendix D to the Amended Reply[352], the plaintiffs set out a list of documents the authenticity of which was challenged by them, but no allegation of forged signatures was specifically pleaded or raised in the plaintiffs’ written or oral opening. In his witness statement, Zhang did not raise any allegations of forged signatures. At §14.3[353], he confirmed signing a facility letter dated 28 May 2008[354], which he later claimed to be unsure about when he gave evidence by videolink[355]. 134.It was only when Zhang gave evidence that he claimed that he was unsure if the signatures on three documents were his; and that he was certain that the signature on one particular document was not his. Those documents were:
The allegation has not been pleaded and I can disregard it. Even if the issue had been properly raised, in the absence of evidence from a handwriting expert, I am unable to find, simply from the expression of disquiet by Zhang, that the signatures on the first three documents he had identified were not his. Further, I am satisfied from the following evidence that the signature on the fourth document Zhang had identified, and that he had disputed, had been “signed” by Ji:
The legal issues arising in this case are unrelated to the Declaration of Risk Awareness dated 20 June 2007 that was “signed” by Ji. (5) Initiation of Investments and Provision of Advice; Remuneration of DBS and its staff 135.The Account Opening Form for Wise Lords[366], which was signed by Ji as the company’s sole director and dated 22 April 2004, provided that the DBS Private Banking Account Master Agreement[367], as might be varied from time to time, would govern the operation of the Wise Lords’ account with DBS:PB. The version current in April 2004 was Version 07/03. Subsequent versions included Version 09/05[368]. The provisions in the Mandate (which was within the Account Opening Form) and the Master Agreement governed and defined the general banking relationship between DBS:PB and Wise Lords. The relevant provisions in the Mandate and the Master Agreement[369] fell broadly into the following categories:
In short, it was expressly agreed, amongst other things, that DBS:PB only offered a transaction execution service, and was under no duty to provide any investment advice and that Wise Lords would exercise independent judgment in its investments notwithstanding DBS:PB might make available investment materials and information to it. The Delegated Management Query Forms completed annually[370] and sent to DBS Trustee incorrectly stated that Wise Lords' portfolio was managed by “RM of Hong Kong on an advisory role”. That was also Mayes’ evidence in court[371]. However, I do not understand him to be saying that DBS Trustee knew, at the relevant time, that the Delegated Management Query Forms had been completed incorrectly. I find that DBS Trustee acted on the basis that the Delegated Management Query Forms contained accurate information and that DBS:PB had undertaken advisory duties to Wise Lords[372]. 136.The relationship between Linda Liu and Ji has to be understood in the context of these contractual provisions. One could say that they were well matched for each other or even that, to put it colloquially, they were “made for each other”. 137.I have already found that Linda Liu was willing to cut corners and signify that she had witnessed parties signing documents when she had not done so[373]. 138.The Wise Lords account was clearly a high revenue earner for DBS:PB. By January 2007, Wise Lords had become DBS:PB’s “biggest client, the very top one”[374]. Linda Liu, as the relationship manager, was paid commission and bonuses based, in part, on the amount of the transactions her clients entered into. An email dated 30 June 2008 to Linda Liu showed that she was in the Top Tier Group of participants to increase clients’ investments in YEDs for the period July-Sept 2008 and eligible for a monthly prize of HK$20,000. However, she would not readily acknowledge that the more financial products were sold the more income she could expect to receive, as demonstrated by the following exchange during her cross-examination[375] when she was shown an email from Peter Lee to David Muir, Edna Chan and Matthew Lam dated 2 April 2007[376]:
She was evasive in the way she answered these questions and in the way she answered the following questions[377]:
Her refusal to acknowledge her own financial interest is also demonstrated in the following exchange[378]:
139.Linda Liu was very adept in her occupation as a relationship manager of a private banking account. She quickly developed a close relationship with Ji, as demonstrated by the many and very friendly telephone conversations between them, at times on a daily basis. She presented Ji with gifts on a number of occasions[380]. She would also flatter her[381]. Whilst she would not acknowledge it readily, Linda Liu was keen to increase the volume of transactions in Wise Lords’ account so as to enjoy bigger bonuses. This is readily apparent from her candid conversation with Rocky Cheung on 9 August 2007[382] during which she used the memorable line: “Hello brother Rocky, get ready to go for happy hour!”, and gloated to her colleague about having managed to persuade her “Big Boss”, i.e. Ji[383], to consent to increasing Wise Lords’ credit facility to US$40m so that “we will both be rich.” In her email of 31 July 2008 to Frederick Ko of the Credit Department and copied to Edwin Lim, she stated:
140.However, in many respects, Ji was an equal to Linda Liu. What she may have lacked initially in experience, she made up for quickly with her intelligence, keen interest and increasing acumen in financial products. 141.A review of the voice recordings and contemporaneous correspondence show the kind of investor Ji was and became over the course of Wise Lords’ banking relationship with DBS:PB. 142.From the start, Ji asserted her role and status as decision maker in respect of the investments. For instance, in the context of investing in mutual funds, she had said the following:
143.The voice recordings also show that, at all times, Ji was and insisted she should be in the driving seat as regards investment strategy and selection:
144.The following are examples of Ji making investment decisions and demonstrating decisiveness. For instance:
145.Ji was not an investor who blindly followed any recommendations that were given to her. She had clear views as to what directions and regions she did and did not favour as shown by these examples:
146.Ji accepted in her evidence that that she was not prepared to blindly follow recommendations:
147.Ji was in many respects a well-informed investor. She was regularly supplied with printouts containing information about investments or potential investments[403]. There were also occasions when Ji asked for documents to be sent to her via email or fax[404]. Ji presented herself in the witness box as a cautious, meticulous and assertive person. There were more than 10 occasions when she firmly asked for and took time to read the materials that were presented to her, or requested to read documents which she considered relevant, and she took time to digest them[405]. 148.As an investor, Ji would:
149.Ji was disinclined to make investments without the necessary information and knowledge. She:
150.In the course of Ji’s dealing with the bank personnel, she would not hesitate to make it clear that she could and did resort to the services of other banks[416]. Ji threatened to go to ABN AMRO which had Qualified Foreign Institutional Investor scheme (“QFII”) allocation and China “A” shares[417]. She did not hesitate to use her connections with StanChart as a bargaining chip with DBS Bank:PB:
151.Ji’s investment strategy can be characterised as generally bullish. She was prepared to take risks. There are numerous examples of conversations demonstrating this since the early stage of Wise Lords’ relationship with DBS:PB:
I do not accept Ji’s denial that she had uttered the words “gamble a bit” as recorded in two transcripts[424]. The Court Interpreter confirmed in her opinion dated 2 July 2014[425]that Ji was indeed saying “gamble” on both occasions. Ji has also beenrecorded as saying “I don’t mind volatility”[426]. 152.The recorded conversations between the bank personnel demonstrated what type of investor Ji was in their eyes:
153.The evidence also showed that Ji was at the time uninterested in investments with low risk and low return, such as:
154.I accept the evidence that the income structure of Linda Liu, Peter Lee and Edwin Lim was not commission-based, and that their bonus was of a discretionary nature, based on both financial and non-financial indicators, including the performance of DBS:PB, the performance of the operating unit to which the relevant individual belonged, and the general performance of the staff member concerned[431]. Nevertheless, I have no difficulty finding that Linda Liu and her team were very eager to increase the volume of transactions in the Wise Lords’ account so that they could enjoy higher bonuses. However, whilst Linda Liu and her team were more than happy to recommend products to Ji, there was no question of them pushing Ji to conduct investment transactions that she herself did not wish to undertake or fully independently consider. Of course, from the contractual standpoint, any such recommendations from Linda Liu and her team were not to be considered as investment advice from them. I accept the evidence of Linda Liu given in the course of her cross-examination on Day 14 of the trial[432], including in particular:
I also accept the evidence of Mayes and Kenneth Cheung to the effect that Ji made informed and strategic choices and did not accede to warnings given to her[434]. 155.It is appropriate that this juncture to make mention of the appointment of Wise Lords as a professional investor. Although she was not a director of Wise Lords, Ji was asked to sign, and she signed, on behalf of Wise Lords, Professional Investor Declarations dated 27 July 2006[435] and 6 August 2006[436], by which the company consented to being treated by DBS:PB as a professional investor. 156.Written explanations as to the risks and consequences of being treated as a professional investor were set out in writing in a 2- page document dated 26 July 2006[437]. A breach of the requirement of the prevailing The Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“SFC Code”)[438] would have occurred if the written explanation had not been faxed to Ji at the time when she was asked to sign the professional investor declaration. Ji said she never received the written explanation[439]. Unlike the signed declarations, the copy of the 2-page explanatory document appearing in the Core Bundles does not containing any markings to suggest that it had been faxed. 157.During a telephone conversation on 26 July 2006 at 16:55[440], Linda Liu said to Ji that she needed to sign the professional investor declaration, explaining that, with this qualification, she would be given priority to subscribe for things like preferential shares. At the time, something was wrong with Ji’s fax machine and Linda Liu told her that the declaration had been faxed to Ji’s clubhouse fax machine. Linda Liu asked what time Ji would go to the clubhouse and remarked that “there’s only 1 page”. 158.Shortly afterwards, at 18:49 on 26 July 2006, Linda Liu spoke to Ji again[441]:
159.It would appear from the fax transmission data appearing at the top and bottom on the signed declaration in CB1/210that the declaration was faxed to Ji on 26 July 2006 at 7.09 pm and that the signed declaration was faxed by Ji to DBS:PB at 7.19 pm on the same evening. 160.Linda Liu explained in her oral evidence that, while she was speaking on the phone, her assistant was faxing over the 3 page document[442]. Although Ji had no impression of the written explanation and although a copy with fax markings has not been produced, I find, on the evidence I have considered, that the 2 page written explanation had been faxed to Ji together with the one page declaration. If I am wrong in making this finding, then a breach of the requirement of the prevailing SFC Code[443] would have occurred. However, any failure on the part of Linda Liu’s assistant to fax the 2 page written explanation to Ji would not impact on any of the issues I have to determine, given Linda Liu’s belief, as demonstrated by the telephone conversation set out above, that 3 pages, being the 2 page explanation and the 1 page declaration, were being faxed to Ji. (6) The Investment Approval Process 161.There was an approvals process in place by which all investments by Wise Lords were approved by or on behalf of DBS Trustee and DHJ Management. After the settlement of the Trust, Ji was appointed the Investment Advisor and authorised representative of Wise Lords. She had the power of entering into investment transactions for Wise Lords. This was important as DBS Trustee and DHJ Management did not provide investment or portfolio management services[444]. Further, DBS Trustee and DHJ Management’s prior approval was not necessary and indeed, would have been difficult to procure in a timely manner, particularly with foreign exchange transactions, given the volatility of that market and DBS:PB’s requirement that the trade must be executed within 15 minutes of the order being placed[445]. It was denied by Mayes that the approvals for transaction already entered into had been backdated[446]. I accept Mayes’ evidence that there had been no backdating. The approval that was given on 4 July 2008 in respect of 2 YED transactions entered into on 27 June 2008 was not backdated. It was dated 4 July 2008, which was the date of the approval[447]. However, the statement, in the same minutes containing the approval, that the trustees were requested to approve the listed investments “to be made”, was a misdescription. Likewise, the resolution of DHJ Management that came into effect on 18 August 2008 authorising the sale of a decumulator was not back dated. However, the decumulator had been sold on 15 August 2008[448], so the resolutions for Wise Lords “to proceed with” the recommended transaction was inappropriate[449]. Likewise the resolution of DHJ Management, that came into effect on 1 September 2008, authorising the sale of a decumulator was not back dated. The decumulator had been sold on 29 August 2008[450], so the resolution for Wise Lords “to proceed with” the recommended transaction was also inappropriate. I do not accept Arboit’s description in his 2nd Schedule that authorisations given after the transactions had taken place were “backdated” authorisations[451]. 162.Mayes suggested that the information that the decumulator transaction had taken place on 29 August 2008 had not been made available to the directors[452]. This is consistent with the practice laid down by Peter Lee that the application for approval should not state that the transaction had been done[453]. I do not accept Peter Lee’s “lengthy” explanation why Linda Liu had to be spoken to orally, and could not be told in “black and white” about this practice[454]. Edna Chan’s draft email to Linda Liu that was not sent to her[455] stated that, where prices fluctuate within a short period of time, trustee could allow notification within 24 hours of the transaction but that for such cases the application for approval should not use the wording the transaction was “done”. I am able to infer from that draft email that the rationale for this practice was to avoid giving that impression that the trustee’s approval was a mere formality, which it was not. I find that the Investment Application forms[456] in respect of these foreign exchange decumulator transactions[457] did not deliberately conceal the fact that the transaction had already taken place. They were all dated on the date that the transactions had taken place. Mayes had acknowledged in his evidence that it was impractical, in respect of foreign exchange transactions, for the trustee and the director to be notified prior to the transaction as to do so might cause a loss of opportunity in the market[458]. I also find that that DBS Trustee appreciated that these foreign exchange decumulator transactions had been entered into on the dates of the application. 163.DBS Trustee and DHJ Management played a substantial, high-level supervisory role in respect of Wise Lords’ investments. The DBS Trustee was not involved in the day to day management of Wise Lords. The structure permitted a measure of independence and flexibility subject, however, to DBS Trustee’s overarching supervision, regular monitoring and responsibility[459]. As Linda Liu explained to Ji during a telephone conversation on 4 April 2008, “typically speaking, trustee has the right to refuse to accept the investment advisers’ opinions if he thinks that the risk is too high or a loss will be caused to the trustee’s portfolio, or there is a very great risk.[460]” Information provided to DBS Trustee and DHJ Management enabled them to perform their supervisory functions. Matters considered by them were recorded in Minutes. Information related to investment transactions directed by Ji for Wise Lords was passed by DBS:PB personnel to DBS Trustee and DHJ Management through DBS Corporate. The information also enabled DBS Corporate to carry out their book-keeping function in relation to transactions conducted by Wise Lords[461]. DBS Corporate also assisted DBS Trustee and DHJ Management to gather information frequently requested by DBS Trustee and DHJ Management in advance to facilitate their review. Although DBS Trustee and DHJ Management played a substantial, high-level supervisory role in respect of Wise Lords’ investments, it must, however, be noted that DBS Trustee had never reversed any of the 519 transactions that had been entered into by Wise Lords[462]. 164.From January 2005 to 4 April 2006, the process involved Linda Liu sending an email to Peter Lee or other staff of DBS Corporate requesting approval for a transaction. The staff would then send an email in response saying “on behalf of the Jersey trustee, please proceed”[463]. On 4 April 2006, this process was changed and the staff of DBS Corporate began responding with an email saying “noted”[464]. 165.From December 2006, as Wise Lords began borrowing money and investing increasing amounts in mutual funds focussed on China, the process sometimes varied. In particular, when the staff of DBS Corporate perceived certain investments in mutual funds to be high risk, they would notify DBS Trustee and also requested:
166.These documents were addressed to DBS Trustee. The Letters of Recommendation and Declarations of Risk Awareness to be signed by Ji and Zhang became more sophisticated with the passage of time, as can be seen from the sequence of documents starting from D2-113 through to D3/190, D4/205, D4/204, D4/213, D4/215, D4/216, D5/230 and D5/241. 167.The information in the Letters of Recommendation signed by Ji came from DBS:PB[465]. Sometimes, Ji signed the Letters of Recommendation in blank and the information was added later by DBS:PB[466]. Peter Lee gave evidence that the Letters of Recommendation and Declarations of Risk Awareness to be signed by Ji and Zhang, as well as the Letters of Recommendation to be signed by Linda Liu and her supervisor, were standard form documents and that it was done this way for each and every client[467]. 168.D4/216/3412 contains a draft Letter of Recommendation to be signed by Linda Liu and her supervisor[468]. The signed version of this draft bearing the date 1 December 2006 appears in D5/230/3635[469]. It stated:
Similarly worded Letters of Recommendation signed by Linda Liu and her supervisor appear at D9/341/4555, D9/360/4701 and D10/380/4799. 169.From 17 September 2007, the investment process was changed again, and an Investment Application form was introduced coupled with an express requirement that each investment be approved by DBS Trustee and DHJ Management by way of separate Trust and Board resolutions. Specifically, once Linda Liu sent an email to Peter Lee or other staff of DBS Corporate requesting approval for a transaction, they would complete an Investment Application form and send it to DBS Trustee. The application form confirmed that the transaction was within the Trust guidelines and that the Relationship Manager considered the investment to be for the benefit of the Trust. When the Investment Application form was received by DBS Trustee, DBS Trustee would approve the transaction by way of board resolution and DHJ Management would also approve the transaction by way of resolution of DHJ Management. The Investment Application form would then be signed on behalf of DBS Trustee and returned to Hong Kong. Once it was received, DBS Corporate would send an email to Linda Liu saying “noted”[470]. 170.The defendants contend that the Letters of Recommendation signed by DBS:PB did not constitute investment advice. It was submitted that they served as an administrative check on the reliability of the information provided by Ji to DBS Trustee and that they were also part of the procedure for informing and explaining to DBS Trustee of the nature of the products and the reason why Ji, as the Investment Advisor, saw fit to make those investments for Wise Lords. It was submitted that they were reports to DBS Trustee concerning the investment decision made by Ji. 171.I find that the effect of the Letters of Recommendation issued by DBS:PB was that DBS:PB was advising DBS Trustee that the investment transaction in question was a recommendable investment, in terms of the amount of investment and the percentage of concentration of the Trust, which, as account manager of Wise Lords’ account with DBS:PB, they could recommend to Wise Lords to enter into. Although the banking relationship between Wise Lords and DBS:PB was non-advisory and execution only[471], DBS Trustee understood from the incorrectly completed Delegated Management Query Form[472] that Wise Lords’ portfolio was managed by “RM of Hong Kong on advisory role”, i.e. that DBS:PB undertook advisory duties to Wise Lords. 172.I also find that the effect of the Investment Application forms signed by DBS Corporate was that DBS Corporate was advising DBS Trustee that the investment was within the Trust guidelines and that the DBS:PB Relationship Manager of Wise Lords’ account considered the investment to be for the benefit of the Trust. The latter statement would have been understood by DBS Trustee to mean that DBS:PB, which had undertaken advisory duties to Wise Lords, considered the investment to be for the benefit of the Trust. 173.I do not accept the evidence of Mayes[473] and Edwin Lim[474] to the effect that the Letters of Recommendation were simply for the purposes of ensuring that the reasons given by Ji in her Letter of Recommendation were consistent with those she gave to DBS:PB and that DBS:PB had not raised any objection. This evidence is contradicted by the actual terms of the Letters and also by the fact that the information in the Letters signed by Ji was put there by DBS:PB. G. THE TRANSACTIONS AND CREDIT FACILITY (1) The Mutual Funds: the period from January 2005 to April 2008 174.The initial period of investments between 4 January 2005 and April 2008 involved the Trust funds being principally invested in mutual funds. Wise Lords’ investments in mutual funds continued post-January 2005 in much the same way as they did in the earlier period. From the outset, there was a pattern of Wise Lords subscribing for mutual funds, holding them for a short time and then quickly selling them. In particular, between 22 April 2004 and 6 March 2008, Wise Lords entered into 344 mutual fund transactions, relating to 50 mutual funds (many of which were similar in nature) for a median holding period of just 161 days and an average holding period of just 184 days[475]. 175.As an investor, Ji displayed knowledge of the technical terms relating to mutual fund investments, and their operation:
176.Ji was active in identifying potential investments. DBS Bank provided Ji with information on investment opportunities and market updates, but Ji also actively identified and asked for information on potential mutual fund investments, an example being Ji’s request for funds on small and medium sized coal mining companies[487]. 177.Ji had a keen interest in emerging markets[488]. This was also recorded in the meeting minutes of DBS Corporate dated 1 February 2006[489], where it was stated that she was “well aware of the emerging markets like Latin America, Eastern Europe, oil funds”. Ji was even more enthusiastic on investments in Mainland China. The recorded conversations below illustrate that Ji:
178.Ji had a huge appetite for China Funds and quotas from the QFII as well as other emerging market funds:
179.Over the course of Wise Lords’ investments in the mutual funds, Rocky Cheung and Linda Liu had repeatedly cautioned Ji against over-exposure, but the warnings fell on deaf ears:
180.Rocky Cheung later explained again the risks and his concerns to Ji: “If you (put in) some more, then the risk will really be a bit too high ... so even a small problem has the potential of bringing down the entire portfolio”; “So when setting the portfolio, we can only -- cannot merely consider the good things, that is, right now I’m buying fifteen million... but, er, next month I’m going to buy more H shares... Well, 95 per cent of our portfolio would be in -- be in China, so -- so it ought to be more or less sufficient to buy one fund, ah. (But) this wouldn’t be so good. That’s why the way I see it is that we have to be prepared for some, er, unexpected, uh, situations”[518]. However, Ji did not “need to be educated”:
181.Linda Liu nevertheless cautioned Ji again and recommended that she should wait for the market to stabilise before making further purchases[520]. 182.Indeed, Linda Liu relayed Rocky Cheung’s warning that the price was too high to buy “A” shares then, but Ji insisted that there was still room for growth, and gave instructions for further purchases[521]. 183.In January 2008, Rocky Cheung suggested that Ji could take profit if she felt uncomfortable with the market fluctuations, upon which Ji said: “I don’t feel uncomfortable, I’m focusing on the long term”[522]. 184.Ji also declined to redeem the Schroder China Equity Fund. When Linda Liu conveyed Rocky Cheung’s view that Ji should first secure her profits, Ji only said, “I can have a look”[523]. 185.Linda Liu gave evidence about the warnings they gave about the risk of investing only in Chinese funds:
186.I do not accept Ji’s evidence that she was “tricked” and “tempted” by Linda Liu into making these investments in mutual funds and that she only tooka passive part[525]. The contemporaneous evidence presents a very different picture and shows that Ji took a highly proactive role in steering the direction of the portfolio’s investments. The recommendations and information which DBS Bank provided to Ji were actively sought by her. The evidence is also unequivocal that Ji made an informed decision and a strategic choice to accumulate China mutual funds. The point was aptly made in the following long exchange during Linda Liu’s cross examination:
187.From December 2006, Wise Lords’ portfolio of mutual funds became heavily concentrated on China and increasingly high risk, as Wise Lords began using leverage[527] and investing increasing amounts in DBS’ own mutual funds. In response to the mutual fund transactions which were becoming more substantial in value, additional procedures were adopted by DBS Trustee, including Letters of Recommendation from Ji as the Investment Advisor, Declarations of Risk Awareness, and Letters of Recommendation from DBS:PB’s Linda Liu and her superior Desmond Liu who was later replaced by Edwin Lim[528]. 188.The plaintiffs alleged that DBS:PB caused Wise Lords’ portfolio to be repeatedly reconstituted, which was “to the disadvantage of the Company (and the Trust) and for the sole purpose of generating the incidental, but unjustified additional fees and commissions for DBS and commensurate financial rewards for DBS’ Peter Lee, Edwin Lim and Linda Liu”[529] 189.In his 4th Schedule, Arboit focused on the losses incurred by the loss making mutual fund transactions, being some HK$13,810,068.95 and US$12,312,329.46[530]. Doing so does not help me. One needs to look at the entire picture and this showed the following profits and losses in the following currencies, from all mutual fund transactions carried out:
which made up an overall profit of more than HK$132.6m or US$17m (adopting the exchange rates as of the date of the defendants’ closing submissions)[532]. The point is clearly made in the oral evidence of Linda Liu:
190.These profits could not have been made without the increases in the credit facility provided to Wise Lords, which enabled to investments in mutual funds to grow from US$25.87m on 31 December 2006[535] to a height of US$106.37m on 31 October 2007[536], being 97.25% of the entire portfolio, before dropping to 91.32% in February 2008[537] and to 5.28% in May 2008[538], when the investments switched from mutual funds to AUDs and YEDs. 191.There is no denying that Ji made frequent trades, a strategy which could be better classified as trading in mutual funds rather than investing in them:
The reference to Ji “actively trading on mutual funds” also appears in emails from Linda Liu to Edna Chan dated 28 February 2006 and from Edna Chan to Mayes dated 3 March 2006[541]. 192.I do not accept Linda Liu’s evidence that Ji could be classified as a long term investor in mutual funds in that she had steered Wise Lords’ portfolio towards long-term concentration in a particular type of investment transactions (i.e. China-focused mutual funds)[542]. One could only be so classified when the funds were held for a long term. In Ji’s case, she conducted repeated trades in those funds or switched amongst those funds in seeking to maximise Wise Lords’ investment gains, which she did with notable success. Some funds were held for over a year but they had lock out periods[543]. Some funds were held for less than a month[544]. 193.Ji was clearly encouraged by Wise Lords’ investment successes in deciding to embark upon further transactions in mutual funds, having been regularly provided with tailor-made reports of Wise Lords’ portfolio as per her requests[545]. These transactions were carried out pursuant to Ji's express instructions. Ji knew the volume and the pattern of investments that she made in mutual funds. She was the decision maker and she could have chosen not to conduct further trades had she been dissatisfied at any time with the constitution or turnover of Wise Lords’ existing portfolio. 194.Of course, DBS:PB benefitted substantially from these frequent and substantial trades and Linda Liu and her team earned good bonuses as a result. Wise Lords’ account was one of DBS’ highest revenue generating accounts. However, it was not necessary for Linda Liu and her team to aggressively promote investment in mutual funds as Ji was herself very aggressive in this market. Further, there was nothing “dishonest” or “fraudulent” about the charging of fees, all of which was done in accordance with what had been contractually agreed[546]. Ji was herself clearly aware of the charging of subscription fees:
On the subscription form for the DBS Indochina Fund[548], Ji manually inserted “1.8%” as the rate for the bank’s chargeable fee on the subscription and placed her initials next to her manuscript insertion. 195.It was only towards March 2008 that Ji expressed regrets about not “getting out” of mutual fund investments earlier, back in October 2007, when profits were at their highest, and she indicated that she wanted to “get out quickly”[549]. Ji became concerned about the recession and said she would be happy if the money that she gained in the China market and the loss she incurred would even out[550]. In reality, Wise Lords had made an overall profit in its mutual fund investments. The overall gain achieved by Wise Lords can be seen from the table reproduced in §89 above. For the extended financial year from 5 January 2005 to 31 March 2006, the unrealised profits in the trust were US$5.35m, which represented a profit percentage of 32.75% of the capital funds in the trust of US$16.34m. For the financial year ended 31 March 2007, the unrealised profits in the trust were US$4.45m, which represented a profit percentage of 18.3% of the capital funds in the trust of US$24.35m. For the financial year ended 31 March 2008, the unrealised profits in the trust were US$8.53m, which represented a profit percentage of 26.65% of the capital funds in the trust of US$32.02m. As I noted in §90 above, after these profit figures were put to Ji, I had asked her, on the assumption that the figures were correct, whether she would be satisfied with those profits and Ji answered: “Of course”[551]. From the portfolio summaries, one can see that the value of the mutual funds acquired by Wise Lords was US$21.2m on 31 March 2006[552], US$34.6m on 31 March 2007[553], and US$89.9m on 31 January 2008[554], when she started redeeming them. The value of mutual funds in the portfolio did indeed fall from the height of US$106.3m on 31 October 2007[555] to US$89.9m on 31 January 2008. However, most investors know that it is only a handful of people who have the ability (or luck) to buy at or near the lowest historical price and sell at or near the highest historical price. 196.Although the plaintiffs’ pleaded case was that it was misrepresented to Ji that the DBS mutual funds did not have lock up periods barring early redemption[556], it was clear that Ji did not deny knowing, from the outset, about the primary (one year) lock-up periods for the DBS mutual funds. It was also clear that the plaintiffs were advancing a claim based on misrepresentation in that Linda Liu misrepresented to Ji that there were no other redemption restrictions beyond the lock-up periods, when, in fact, there were further restrictions in terms of redemption windows (quarterly in the case of the DBS China Advantage A Share Funds; and monthly for the DBS Indochina Fund) and ceilings (not more than 10% of units in issue for each of the funds). It was contended on behalf of the plaintiffs that, in reliance on this representation that there were no other redemption restrictions beyond the lock-up periods, Ji requested that the DBS mutual funds be redeemed as soon as the lock-up periods expired, but it was then disclosed that redemption was subject to restrictions. The plaintiffs alleged that Wise Lords suffered losses of US$1,091,541.42 as a result of the delay in redemption in respect of 2 DBS China mutual funds, DBS China Advantage A Share Fund and DBS Indochina Fund.[557] 197.The defendants’ case is that the representation, that there were no other redemption restrictions beyond the lock-up periods, if made, was negated by the terms of the following offering/information memoranda of each of the DBS mutual funds:
198.I am satisfied on the evidence that was adduced that Ji was routinely provided with all marketing materials and subscription documents of relevant mutual funds for her consideration before she gave instructions to enter into transactions. The documents were either couriered to Ji if she was in Beijing, or collected by her from Linda Liu’s office if she was in Hong Kong. If the volume of documents was not substantial, Linda Liu would fax them to her[569]. I am also satisfied that Ji actively sought information and materials with regard to mutual funds and would ask for the relevant term sheets, which she would read. The defendants rely on the above evidence and on the terms of the documents identified above, which Ji signed confirming that she had read the offering/information memoranda of each of the DBS Mutual Funds, to infer that she had read and knew of the other redemption restrictions beyond the lock-up periods. 199.I am unable to accept these submissions. I find that Ji would herself have raised these other redemption restrictions, if she had known about them, to challenge any representation made to her that that there were no other redemption restrictions beyond the lock-up periods. I find support for this conclusion from a telephone conversation on 25 July 2006[570], when Ji and Linda Liu had a discussion about redemption restrictions on China A share mutual funds. Linda Liu said they could not be bought and sold every day like other mutual funds. Linda Liu was then about to go to a presentation and she agreed to provide details and to send materials to Ji after she ascertained how the redemption procedure worked. Ji expressly stated that she was thinking about what kind of restrictions there were. 200.Was a misrepresentation made to Ji that there were no other redemption restrictions beyond the lock-up periods for the DBS China Advantage A Share Fund and the DBS Indochina Fund? From February 2008, there was a downturn in the China market and Ji wanted to redeem her DBS China mutual funds. Because of the other redemption restrictions, this could not be done. In a telephone conversation between Ji and Linda Liu on 19 February 2008[571], Linda Liu asserted that she was certain that Ji had been told about redemption restrictions in relation to the DBS China Advantage A Share Funds[572]. This is consistent with the conversation on 25 July 2006[573] about redemption restrictions being imposed on China A share mutual funds. In a conversation on 1 December 2006, Ji showed her knowledge of dealing and ceiling restrictions being imposed on China A share funds:
Further, on 15 October 2007, there was a conversation between Linda Liu and Ji during which Ji stated that China A share market has slowed down, that she had already earned quite a bit, and that she was thinking of selling Wise Lords’ holdings; and Linda Liu mentioned that there was a ceiling of 10% of the total holding that could be redeemed each time and that Rocky Cheung had spoken to her previously about this. Eddie joined in the conversation a little later and explained that the DBS China Advantage A Share Fund could only be sold every quarter up to a maximum of 10% of the total units issued. There was no protest from Ji at this conversation about not having been told about the redemption restrictions earlier.[575] 201.However, at the conversation on 19 February 2008, Linda Liu accepted that she and Rocky Cheung were not themselves aware of the redemption restrictions of the DBS Indochina Fund[576]. Linda Liu confirmed this to Edwin Lim in her email of 13 March 2008 wherein she stated that the redemption order for the DBS Indochina Fund had been “placed at 09-Feb-08 to our fund desk but the supplementary terms and conditions for the 10% cap was issued by email on 12-Feb-08”, the latter being a reference to the Supplemental Letter to the Information Memorandum for the DBS Indochina Fund dated 1 February 2007[577].At the time, Linda Liu was not aware, or had forgotten, that the Information Memorandum dated 1 February 2007[578] had set the restriction of monthly redemption and redemption limitation of 10% per dealing day. 202.On 19 February 2008, Linda Liu emailed her colleague Arivazhagan V. and Wendy Yung to press them to accede to Ji’s request to sell out all units in DBS China Advantage A Share Fund, DBS China Advantage A Share Fund II, and DBS Indochina Fund; in respect of the latter Linda Liu asserted that Ji did not know of the 10% ceiling and that she and Rocky Cheung “just knew about this ... when we received Wendy’s email dated 31-Jan-08”[579]. 203.From this time onwards, a lot of pressure was exerted by Linda Liu to lift the ceiling restrictions. On 5 March 2008, news arrived that the 10% redemption ceiling would be lifted on DBS China Advantage A Share Fund and DBS China Advantage A Share Fund II for the next dealing date on 31 March 2008[580]. On 31 March 2008, all units of these 2 funds were redeemed[581]. 204.However, the redemption ceiling on DBS Indochina Fund was not lifted, which prompted a number of complaint letters from Ji[582].On 17 March 2008, Edna Chan emailed Peter Lee summarizing a conference call with Linda Liu and Ji on 14 March 2008during which Ji claimed not to know of the redemption limit of 10% but Linda Liu said that the same was spelt out in the Information memorandum referred to in the Subscription/Nominee Arrangement Letter. The transcript of the telephone conversation bears this out[583] but does not support the erroneous statement in this email that Linda Liu said that “she had informed client about the redemption limit of 10%”. Edna Chan ended the conversation by stating that she would check to see where the redemption restrictions were set out in the subscription documents[584] and, after she had hung up, Linda Liu accepted Ji’s statement that she did not know about the 10% ceiling, which would have a big impact on her decision making[585]. 205.There was a telephone conversation between Ji, Linda Liu and Rocky Cheung on 4 April 2008[586]:
206.All units of the DBS Indochina Fund were eventually sold on 30 April 2008 and 30 May 2008[587]. 207.In her witness statement[588] and affirmed in her evidence-in-chief Linda Liu stated:
208.I remind myself of the applicable legal principles that apply in relation to a claim for misrepresentation, a summary of which, in the context of investment claims, can be found in the judgment of Christopher Clarke J, as he then was, in Raiffeisen Zentralbank Osterreich AG v The Royal Bank of Scotland [2011] 1 Lloyd’s Rep 123:
209.The defendants submitted, even assuming that alleged representations had been made, that, given Ji’s ferocious appetite for investments in the mutual funds, the overwhelming likelihood was that Ji would have caused Wise Lords to subscribe for the DBS mutual funds anyway even if it had been known to her from the start that she would not have the option of full redemption upon expiry of the lock-up periods. The alleged representation, therefore, was not the effective cause of Wise Lords’ alleged losses, causation being an essential ingredient before the claim for misrepresentation can be established. 210.Having carefully considered the evidence, I am satisfied that Linda Liu did not misrepresent the redemption restrictions in respect of the DBS China Advantage A Share Fund. When challenged by Ji during the telephone conversation on 19 February 2008[599], she immediately denied making any misrepresentation in respect to this fund, although she confessed that she had done so for the DBS Indochina Fund, as she had not been aware of the ceiling restrictions at the time. Ji was aware from the telephone conversation on 25 July 2006[600]and on 1 December 2006[601] that redemption restrictions were imposed on China A share mutual funds. The earlier conversation was 3 days before she bought a substantial quantity of the DBS China Advantage A Share Fund on 28 July 2006. There was no protest from Ji, during the 1 December 2006 conversation nor during the telephone conversation on 15 October 2007, when the dealing and ceiling restrictions were mentioned, about not having been told about these redemption restrictions earlier.[602]I find that Ji acquired these funds for Wise Lords with knowledge that there were dealing and ceiling restrictions in place after the lock out period expired. 211.If I am wrong to make this finding and if the alleged misrepresentation had been made to Ji that there were no redemption restrictions in respect of this fund other than the lock out period, I am satisfied, from the evidence set out in §§177(1), (2), (3), 178(1), 179-186 and, as I have already found in the preceding paragraph, that Ji would have insisted on Wise Lords purchasing the substantial quantity of units in the DBS China Advantage A Share Fund that Wise Lords actually acquired, even if she had known that she would not be able to redeem the entire holding upon expiry of the lock-up periods. I find that the misrepresentation would not have been the effective cause of these purchases. 212.However, after having carefully considered the evidence, I am satisfied that Linda Liu misrepresented to Ji that the only redemption restriction in place for the DBS Indochina Fund was the lock out period. Whilst Linda Liu understood that these restrictions were imposed on China A Share Funds, I find that she did not suspect that similar restrictions applied to the DBS Indochina Fund. She confessed to Ji that she had not known about the dealing and ceiling restrictions and repeatedly apologized to Ji for not informing her about them. After she learned about them, she pushed very hard to have the restrictions lifted. I do not accepther evidence and the defendants’ submissions that, during the telephone conversation on 4 April 2008, Linda Liu and Rocky Cheung wanted to placate Ji for the sake of maintaining a good relationship with her and, therefore, even though they did nothing wrong, they agreed to say sorry. 213.Did Ji rely on and was she induced by the said misrepresentation to acquire a substantial quantity of units in the DBS Indochina Fund on 27 February 2007? Did the misrepresentation play a causative part in inducing the purchase? Was this misrepresentation the effective cause of the purchases of the substantial quantity of units in the DBS Indochina Fund that Wise Lords acquired on 27 February 2007? I have already found that Ji acquired a substantial quantity of DBS China Advantage A Share Fund for Wise Lords with knowledge that there were dealing and ceiling restrictions in place after the lock out period expired. Ji also bought in excess of US$8m worth of units in the DBS China Advantage A Share Fund II, with knowledge of these restrictions[603] and complained vehemently of not being allotted more units on this fund[604]. I have also carefully considered the evidence set out in §§178(2) above and referred to the communications regarding the DBS Indochina Fund mentioned on p. 75 above. Again, I have come to the conclusion, having regard to this evidence and Ji’s resistance to advice to diversify and reduce the substantial amount of mutual funds kept in the portfolio, that the misrepresentation would not have been the effective cause of these purchases and that Ji would have insisted on Wise Lords purchasing the substantial quantity of units in the DBS Indochina that Wise Lords actually acquired, being US$8m worth of units in the fund[605], even if she had known that Wise Lords would not be able to redeem the entire holding upon expiry of the lock-up periods. 214.If I had found that the claim for misrepresentation was established, I would have awarded damages in the sum of US$78,891.17being the loss caused by the misrepresentation:
215.The first reference to a loan was made in the context of Ji seeking to get Wise Lords to subscribe for the DBS China Advantage A Share Fund II at its launch in the middle of January 2007, in circumstances where it was not expected that the money from Zhang’s payroll account would be available until February 2007. Ji, therefore, asked Linda Liu what sort of arrangement could be made given the time gap, in response to which Linda Liu suggested that Wise Lords could obtain a temporary loan, to which Ji agreed:
216.Instead of a temporary loan, Wise Lords ended up applying for a credit facility of HK$78m in December 2006, as explained by Linda Liu:
217.As a result, a facility letter dated 12 December 2006[608] was issued by DBS:PB and accepted by Wise Lords, with Peter Lee and another officer of DBS Corporate signing as authorised signatories of Wise Lords. The application was acknowledged by Ji and Zhang, who signed the relevant Letter of Recommendation dated 13 December 2006[609]. DBS Trustee and DHJ Management were notified by DBS Corporate on 13 December 2006 and members’ and board resolutions were executed on behalf of Wise Lords in Jersey on 18 and 21 December 2006[610]. Ji also signed the Guarantee and Indemnity dated 21 December 2006[611]. A Certificate of Registration of Charge was issued by the Registrar of Corporate Affairs on 18 June 2007 to secure the credit granted[612]. Other relevant documents in connection with this credit facility are identified in Row No. 1 of Appendix V of the defendants’ closing submissions. 218.This facility of US$10m was increased progressively to US$100m from 12 December 2006 to 21 July 2008 as follows:
The relevant documents in connection with these transactions are identified in Row Nos. 1 – 16 of Appendix V of the defendants’ closing submissions. 219.An accurate timeline of Wise Lords’ account is presented in Exhibit P1 which I have reproduced below. It has omitted one detail, namely, the date of the increase of the credit facility to US$100m, which was 21 July 2008: 220.I shall deal with the increases of and drawdown on the credit facilities in tandem with the transactions entered into from January 2007 to December 2008. 221.Godwin Ip of DBS:PB first provided details of the DEVA Note to Ji orally[613]. Linda Liu told Ji that two types of DEVA notes were available for subscription, one with 80% principal protection with a risk rating of 3 (i.e. 3 from a range of 1 to 5); and the other, which was not principal protected but had a higher potential coupon return, with a risk rating of 5 (being 5 out of 5, the highest risk rating). The marketing materials for the two notes were attached to an email from Godwin Ip to Aimex Kwong, which was in turn forwarded to Edna Chan and Linda Liu on 12 January 2007[614]. I accept he evidence of Linda Liu, based on her recollection of a Power Point presentation of the terms of the DEVA Note[615], that the materials were sent to Ji[616]. Ji preferredthe non-principal protected note over the principal protected one, which was consistent with her risk-taking approach to investments. When Rocky Cheung discussed the product with Ji, he alerted her to the risks of the product, including the maximum risk that the principal could be wiped out if “very, very big” events occurred, such as a world war or a nuclear bomb going off in the US but that, in the absence of such very big events, the DEVA Note would make profits in the long term[617]. Ji had initially wanted to invest US$5m to $8m, but, in the course of her conversations with Rocky Cheung, she indicated that she would invest US$3m[618]. There is no dispute that Ji was told about the lock-up period of one year until 28 January 2008[619]. The correspondence between DBS:PB and DBS Corporate regarding the DEVA Note can be seen at p. 74 above in the Table under §95 above against the entries dated 12 to 24 January 2007. A Declaration of Risk Awareness was signed by Ji[620]. 222.I accept Ji’s evidence that Linda Liu had represented to her that the expected returns from the note could be as high as 40% per annum.[621]. However, I also find that Ji would have read the materials sent to her and that she would have noticed the references to past returns and the warning that “[p]ast performance is not indicative of future performance”[622], a standard warning carried in marketing materials for investment products. 223.I have considered the expert evidence on the DEVA Note. Both experts agreed that the purchase of the DEVA note involved the investor (i.e. the Trust / Wise Lords) taking a market risk in the form of difference between the implied volatility captured by the VIX index[623] and the realised volatility[624]. Both experts agreed that a buyer of the DEVA Note adopts the view that the market expectation of future volatility in the S&P index would exceed actual volatility[625]. 224.Das expressed the view, which I accept, that the DEVA note did not entail a low risk arbitrage but exposed the Trust / Wise Lords to a risky option trading strategy. Malik did not express an opinion on this as he did not think this was a matter within the scope of his instructions.[626] 225.Both experts agreed that the DEVA Note were illiquid and both agreed that, since the DEVA Note was fully funded (by the purchase price paid by the Trust / Wise Lords), the DEVA Note itself would not expose the investor to any contingent liquidity requirements (i.e. a margin call)[627] but Das, noted, and I accept, that the purchase of the DEVA Note was funded by borrowed USD and that created a possible ‘contingent liquidity’ risk[628]. 226.On the complexity and risk of the DEVA note, Das was of the view, which I accept, that the DEVA notes were complex and risky and only suitable for sophisticated investors. Malik did not express an opinion on this as he did not think this was a matter within the scope of his instructions[629]. Das maintained his opinion that there was inadequate disclosure of the risks on the DEVA Note, which I accept, and Malik did not express an opinion as he considered this matter was not within the scope of his instructions[630]. 227.Ji alleged that she had suggested redeeming the DEVA Note in early 2008, but was advised not to do so by Linda Liu and Rocky Cheung. Ji claimed that this resulted in the note being sold only in June 2008 at a 40% loss (as compared with a 24.4% or a 25% loss had redemption took place back in January or March respectively)[631]. 228.There are indications from Ji, in the telephone transcripts in June and July 2007, that she wanted to redeem the note after the lock-up period if the price was “ok”[632]. Linda Liu did not dissuade her from doing so during these conversations. 229.On 23 January 2008, shortly before the lock-up period was expiring, Linda Liu told Ji that the latest price quotation for the DEVA Note was at 76 to 77% of its original value. Ji said the price was “too low”. Linda Liu then passed on the comments she had received from Godwin Ip, which was that “waiting for another 3 months to half a year would be good ... to slowly earn back the interest”. Throughout the conversation, Ji did not intimate that she wanted to sell the note[633]. 230.From January to April 2008, Godwin Ip issued regular updates to DBS investment advisers including Rocky Cheung that the value of the note was declining but advising that the prospects in the medium term were good and recommending that DBS clients retain their DEVA Notes[634]. 231.On 22 May 2008, Ji asked about the performance of the DEVA Note. Linda Liu said the price was at about 70% of its original value. Ji said that was “bad” price and “terrible” performance. Linda Liu then said that the note “coincided with the financial crisis”, which “came as a surprise and so could not be avoided”. She further said that “everyone has to be patient, sit it out, wait for it torecover”. Again Ji gave no indication at the time that she wanted to sell the note[635]. 232.By an email dated 15 June 2008[636], Ji stated for the first time that she wanted to sell the DEVA Note “ASAP”. By an email dated 16 June 2006[637], Linda Liu told Ji of the then current price of the note (which was 60% of the original value), in response to which Ji said: “No. I can’t sell it at this price right now. What a shame! Your advisor keep telling us to holder [sic] on this fund from Jan./08. He made us lost so much money!” However, although she was advised to hold on for 3 months to half a year, Ji was at liberty to sell the note anytime after the lock up period ended on 28 January 2008. On 30 June 2008, Ji gave instructions to sell the DEVA Note at the market price, which was then 60% of its original value,[638] the same price that she had been quoted on 16 June 2008. (5) Further increases of credit facility in 2007 and 2008 (up to 30 April 2008) 233.Between 13 December 2006 and 23 May 2007, there were 4 temporary increases of the credit facility to US$12m (HK$93.6m)[639], US$12.2m (HK$95.16m)[640], US$14.1m (HK$110m)[641], and US$12.5m (HK$97.5m)[642] respectively as evidenced by documents signed by Linda Liu, Desmond Liu, and by Andy Yeung and K H Leung of the Credit Department of DBS Bank. During this period, Ji was growing accustomed to drawing down on her loan facility to pay for purchases, notwithstanding that she knew there was an interest cost involved[643] and notwithstanding that she was told by Linda Liu that “the trust side’ did not agree to the loan exceeding one third of the value of Wise Lords’ portfolio and that it was safer if the loan did not exceed one third of the portfolio. Over the course of time, Ji asked for more and more credit to be extended to Wise Lords and Linda Liu helped Ji by getting approvals from the credit department of DBS Bank for more and more credit to be extended to Wise Lords[644]. Notwithstanding Linda Liu’s advice, Wise Lords’ loans significantly exceeded 1/3 of the value of its portfolio for considerable periods of time[645], with Linda Liu’s full knowledge and assistance. 234.During this period, the first tremors of the impending financial tsunami were registering on the financial equivalent of the Richter Scale. On 5 March 2007, HSBC announced that one portfolio of purchased sub-prime mortgages evidenced much higher delinquency than had been built into the pricing of these products[646]. 235.On 23 May 2007, the credit facility was increased to US$15m (HK$117m). Prior to that date, on 17 May 2007, Linda Liu had recommended the increase of the credit facility to this level. Her recommendation had been counter-signed by Edwin Lim and Desmond Liu and approved by K H Leung of the Credit Department[647]. However, the supporting documentation did not match the documents I identified in §217 above in connection with the first facility granted on or about 13 December 2006. On this occasion, the facility letter dated 23 May 2007, issued by DBS Bank, was accepted by Ji signing as authorised signatory on behalf of Wise Lords, and whose signature was witnessed by Linda Liu[648]. Further, instead of members’ and board resolutions being executed on behalf of Wise Lords in Jersey, Ji executed written resolutions dated 5 June 2007 as sole shareholder and sole director of Wise Lords to accept the increased credit facility[649]. DBS Corporate became aware of this increase and Edna Chan stated in her email dated 11 July 2007 that they needed to notify DBS Trustee of the position[650]. However, no document has been produced suggesting that DBS Trustee was notified of this increase until 16 August 2007 when DBS Corporate notified DBS Trustee[651] of the temporary increase to HK$110m on 30 March 2007[652], the increase of the facility to HK$117m on 23 May 2007, and the temporary increase to HK$226.2m[653]. 236.The same occurred at the next increase of the facility to US$20m (HK$156m) on 4 July 2007. Prior to that date, on 21 June 2007, Linda Liu had recommended the increase of the credit facility to this level. This was the day when Linda Liu and Ji had a conversation during which Linda Liu explained that if an investment had a high yield, one could use leverage as the high yield could offset fixed expenses[654], and promised to “fight” for Ji to increase the limit to US$20m[655] by offering the excuse that Ji would put in more cash in August 2007[656]. Her recommendation was again counter-signed by Edwin Lim and Desmond Liu and approved by K H Leung of the Credit Department[657]. Again, the facility letter dated 4 July 2007, issued by DBS Bank, was accepted by Ji signing as authorised signatory on behalf of Wise Lords, and whose signature was witnessed by Linda Liu[658]. Again, Ji executed written resolutions dated 16 July 2007 as sole shareholder and sole director of Wise Lords to accept the increased credit facility[659]. Further, no document has been produced suggesting that DBS Trustee was notified of this increase. 237.During this time, on 22 June 2007, Bear Stearns allowed its first hedge fund to collapse[660]. 238.By 11 July 2007, Edna Chan of DBS Corporate became aware of the credit facility for HK$117m (US$15M) and wrote an email to Linda Liu that was copied to Peter Lee, Edwin Lim and Aimex Kwong[661], amongst others. She wrote[662]:
239.On 23 July 2007 the DBS Corporate’s Matthew Lam emailed his colleague Edna Chan[663] as follows:-
240.Notwithstanding that she was told point blank by Edna Chan that what she was doing was wrong, Linda Liu persisted by getting approvals from the credit department based on documents signed by Ji as shareholder and director of Wise Lords on 29 August 2007[665] and 18 January 2008. 241.On 29 August 2007, the facility was increased to US$32m (HK$250m). Prior to that date, on 15 August 2007, Linda Liu had recommended the increase of the credit facility to this level. Her recommendation was again counter-signed by Desmond Liu and this time it was approved by Hee Ang of the Credit Department[666]. Again, the facility letter dated 29 August 2007, issued by DBS Bank, was accepted by Ji signing as authorised signatory on behalf of Wise Lords, and whose signature was witnessed by Linda Liu[667]. Again, Ji executed written resolutions dated 4 September 2007 as sole shareholder and sole director of Wise Lords to accept the increased credit facility[668]. No document has been produced suggesting that DBS Trustee was notified of this increase. 242.In the meantime, dark clouds continued to gather on the financial horizon[669]. On 9 August 2007, BNP Paribas halted redemptions on 3 of its money market funds that were exposed to sub-prime mortgages and the European Central Bank (“ECB”) injected 95 billion eurosinto European banks to improve their liquidity. On 10 August 2007, Linda Liu and Rocky Cheung met Ji and explained the recent sub-prime issues to her. Ji said that she will avoid the volatile European and US markets but she was optimistic about the Chinese market[670]. On 14 to 19 September 2007, the U.K.’s Chancellor of the Exchequer made a series of public announcements concerning the U.K. Government’s bailout of Northern Rock. On 12 December 2007, the U.S. Federal Reserve, the ECB and the Bank of England plus other central banks made a joint public announcement of measures they were taking in unison to relieve the pressures in the short-term funding markets, including the Federal Reserve’s establishment of a Term Auction Facility. On 10 January 2008, DBS:PB advised its customers holding DEVA Notes, including Wise Lords, that the “fall-out from the sub-prime crisis and the continuing drag from the housing market in the US may eventually hit the real economy in the US stocking recession fears[671]”. On 11 January 2008, Bank of America confirmed its purchase of the near-collapsed U.S. Countrywide Bank. On 17 February 2008, the UK Government publicly announced its “temporary” nationalisation of Northern Rock. On 16 March 2008, JP Morgan Chase agreed to buy Bear Stearns with the assistance of US$30b in non-recourse Federal Reserve funding[672]. 243.On 18 January 2008, the facility was increased to US$50m (HK$390m). Prior to that date, on 31 August 2007, Linda Liu had recommended the increase of the credit facility to this level. The approval by Monique Lau and Frederick Ko of the Credit Department came much later on 20 December 2007[673]. Again, the facility letter dated 18 January 2008, issued by DBS Bank, was accepted by Ji signing as authorised signatory on behalf of Wise Lords, and whose signature was witnessed by Linda Liu[674]. Again, Ji executed written resolutions, this time undated, as sole shareholder and sole director of Wise Lords to accept the increased credit facility[675]. This credit facility was subsequently accepted and ratified by DHJ Management and DBS Trustee on 30 April 2008 when signed written resolutions from them, as director and shareholder of Wise Lords respectively, were issued[676]. At about this time, the authorised signatories of Wise Lords signed another copy of the facility letter of 18 January 2008[677]. 244.When confronted during cross examination by Edna Chan’s email of 11 July 2007 and asked why she persisted in getting approvals from the Credit Department based on documents signed by Ji as shareholder and director of Wise Lords on 29 August 2007 and 18 January 2008, Linda Liu made the following responses:
245.After a careful consideration of all the evidence relevant to this issue, I have come to the conclusion that Linda Liu has not been truthful in her evidence that Ji insisted on signing all the documents and the facility letters and that the “trust department”, i.e. DBS Corporate, agreed that she could do so. I also reject Linda Liu’s evidence that the documents regarding the bank facilities existed in duplicate. There were no duplicate documents properly signed by DBS Trustee, as shareholder, and by DHJ Management, as director, of Wise Lords. I find that the statements contained in Edna Chan’s email of 11 July 2007 and in the handwritten note on the email of 24 April 2008[687] were true. Although Edna Chan pressed for properly executed documents for the facility granted on 23 May 2007 for US$15m (HK$117m), this was not done. Further, DBS Corporate had no record of the facility letters dated 4 July 2007 and 29 August 2008. 246.It was only on 16 August 2007 that DBS Corporate notified DBS Trustee[688] of the temporary increase to HK$110m on 30 March 2007[689], the increase of the facility to HK$117m on 23 May 2007, and the temporary increase to HK$226.2m on 26 July 2007[690]. There was no mention in this email of the temporary increase to US$25m (HK$195m) that was approved by the credit department of DBS:PB on 20 July 2007[691]. This could be the result of an omission on the part of DBS Corporate or its lack of knowledge of this particular increase. This notification to DBS Trustee was made pursuant to a request by Linda Liu to Desmond Liu, copied to Peter Lee and Edna Chan on 9 August 2007:
On 16 August 2007, Edna Chan wrote by email to Ben George, copied to Fran Mayes, Matthew Lam and Peter Lee, relaying the above request.[693] On the same day, the above notification of past increases, signed by the authorised signatories of DBS Corporate, was sent by fax.[694] DBS Trustee acknowledged receipt of the notification by email dated 17 August 2007 attaching a PDF file of the faxed notification which 2 Jersey directors of DBS Trustee had signed to acknowledge receipt[695]. The Minutes of DBS Trustee dated 16 August 2007 recorded the resolution to approve the increase of the credit facility from US$20m to US$40m[696]. However, the proposed increase of facility to US$40m was not processed any further. Instead, a facility of US$32m was granted on 29 August 2007[697] without the knowledge or approval of DBS Trustee. In the File Review completed by Ben George dated 12 October 2007, there is a reference to the loan of HK$78m (US$10m) but no mention of any additional facilities granted to Wise Lords[698]. 247.I find that Linda Liu proceeded on the basis that she did and kept on doing so, notwithstanding the injunction contained in Edna Chan’s email of 11 July 2007, in order to circumvent the oversight of DBS Corporate, DBS Trustee and DHJ Management. In his email to Edna Chan dated 30 March 2007[699], David Muir had stated that DBS Trustee would be very reluctant to approve further loans until evidence was provided that the settlor had repaid some of the loans drawn down. In his reply email dated 2 April 2007[700] Peter Lee intimated that he would, with the trustee’s authorisation (if indeed such authorisation was needed), “inform the RM and the Bank’s credit department to stop approving temporary loans to Wise Lords”. Clearly, Linda Liu was not having any of this and was on a campaign of her own. 248.DBS Corporate only notified DBS Trustee of the increase of facility on 4 July 2007, 29 August 2007 and 18 January 2008 by the email from Matthew Lam dated 30 April 2008[701] as follows:
249.Matthew Lam in this email tried to “cover up” the failure of DBS Corporate to notify DBS Trustee on a timely basis of the increase of credit facilities by stating that “those “facilities” (of 4 July 2007, 29 August 2007 and 18 January 2008) were just proposals and no formal facility letters were actually issued.” The description that the facility letters were mere proposals is an extreme euphemism for the grant and utilisation of credit facilities substantially in excess of the last notified increase of facility to US$29m (HK$226.2m) on 16 August 2008[702]. Mayes gave evidence that DBS Trustee had never seen resolutions signed by Ji as sole director and sole shareholder of Wise Lords[703]. 250.Consequently, the credit facility of US$50m (HK$390m) was accepted and ratified by DHJ Management and DBS Trustee on 30 April 2008 when signed written resolutions from them, as director and shareholder of Wise Lords respectively, were issued[704] and when, at about the same time, the authorised signatories of Wise Lords signed another copy of the facility letter of 18 January 2008[705]. The signed resolutions and a signed notification of activities form[706] was sent as a PDF attachment to an email dated 1 May 2008 from Ben George to Matthew Lam, and copied to the others involved[707]. The signed resolutions referred to the facility letters dated 23 May 2007, 4 July 2007, 29 August 2007 and 18 January 2008, collectively calling them “the Facility Letter”. Both resolutions stated that “the Facility Letter be and is hereby approved and confirmed”, thereby ratifying the acceptance of increased credit facilities enjoyed by Wise Lords from 23 May 2007 up to 30 April 2008 and accepting future credit facilities from 30 April 2008 up to the limit of US$50m (HK$390m). The Minutes of a meeting of DBS Trustee on 30 April 2008 contained a resolution accepting the increase of credit limit to US$50m (HK$390m)[708]. 251.On 31 January 2007, the net position of the portfolio, net of the loan drawdown of about US$11.1m, was slightly in excess of US$26.7m. According to the email from Matthew Lam dated 30 April 2008, the net position on 28 April 2008 was US$56,232,129.46[709]. The Yearly Review dated 21 April 2008[710] showed a NAV of US$34.16m on 31 March 2007 and a NAV of US$50.37 on 31 March 2008. Adding the injection of US$9.6m into the Wise Lords account to the sum of US$34.16m and deducting the distribution of US$1.93m from the said sum of US$34.16m, produces a sum of US$41.83m. This sum of US$41.83m had increased to US$50.37 on 31 March 2008, an increase of 20.4% in the course of 1 year. 252.For sake of completeness, I should mention that there was an approval granted for a temporary drawdown of US$31m (HK$241.8m) from DBS Bank’s “in-transit” account on 29 April 2008[711] but an application to increase the credit limit to US$200m (HK$1,560m) was turned down as being “too huge”[712]. I find that Linda Liu greatly exaggerated Ji’s and Zhang’s assets[713] (net worth of US$200m[714]) and annual income (of US$50m[715]) in support of the latter application. I have no hesitation in rejecting Edwin Lim’s weak attempt to support this gross exaggeration[716]. 253.An issue was raised about the validity of the guarantee signed by Ji. The plaintiffs alleged that Linda Liu “pressed and persuaded” Ji to provide a personal guarantee to DBS Bank of Wise Lords’ credit facility in circumstances where Ji did not understand the risk involved[717]. However, no proper legal basis has been raised to impugn the validity the Guarantee and Indemnity dated 21 December 2006[718]. Each page of the document was signed by Ji who also placed her signature on the Notice to Individual Third Party Security Provider[719], Security Provider and Solicitor’s Certificate[720] and Confirmation and Acknowledgement[721]. The last three documents were in English and Chinese. The relevant documents were couriered to Ji for her perusal[722]. They clearly set out the risks and liabilities of personal guarantors. I find that Ji was bound by the terms of the said documents by signing them and that she cannot now seek to avoid their legal effect simply by asserting, after the event, that she did not read them carefully or did not understand their contents[723]. Indeed, the signature page for the Guarantee and Indemnity[724] contained the following warning:
I accept Linda Liu’s evidence that she explained the contents of the first facility letter and the duties and obligations of personal guarantors to Ji:
Linda Liu’s account is consistent with Ji’s assertive and meticulous personality. 254.Linda Liu was clearly driven by the wish to enjoy bigger and bigger bonuses. I have already mentioned her candid conversation with Rocky Cheung on 9 August 2007[726] wherein she used the memorable line: “Hello brother Rocky, get ready to go for happy hour!”, and gloated to her colleague about having managed to persuade her “Big Boss”, i.e. Ji, to consent to increasing Wise Lords’ credit facility to US$40m so that “we will both be rich.” 255.Ji was no less greedy. The evidence shows clearly that Ji was demanding, proactively and oftentimes aggressively, larger and larger credit lines from DBS:PB. Ji persisted with her requests for larger credit facilities, and admonished the bank for lost opportunities:
256.Although the credit limit was raised to HK$390m (i.e. US$50m) in January 2008, Ji was still pressing for a further increase:
The last statement was prophetic. 257.Not only did Ji complain about the size of the credit limit, but she also protested about the delay in approving an increase, and exerted considerable pressure on the bank to speed up the process. She also represented that further collateral would be coming in:
258.On 28 May 2008, Wise Lords’ credit limit was increased to US$58m (HK$450m)[730]. When Ji was told about the proposal to increase the limit to US$58m, she commented that US$58m was “too little” and “meaningless” to her. She complained again of the slowness in approving an increase, and said she did not understand why the bank was worried[731]. Ji even threatened to sue the bank if her demands for increased facilities were not met. She also said she was “fighting this thing”, i.e. the credit application[732]. Apart from applying pressure over the telephone, Ji also kept chasing Linda Liu for increases in the credit line by email:
(6) The “no call’ representation 259.It is the plaintiffs’ case that in late August and early September 2007, Ji raised concerns about the possibility that the loan made to Wise Lords might be called. In response to those concerns, Linda Liu confirmed over the telephone that DBS would not call the loan. Linda Liu repeated this representation on a call in 14 May 2008[736]. In October 2008, DBS ignored these representations and issued margin calls on Wise Lords’ account. 260.On 20 August 2007, Ji had expressed concerns about the loan. Linda Liu explained to her that there should not be a problem as the asset to loan ratio at the time was very healthy[737]. On 28 August 2007, Linda Liu discussed with Ji the difference between calling a loan and a margin call:
Linda Liu also said that “In the event that your (asset’s) par value is lower than the loan, loan value, that is the worst-case scenario, you will have to think of a way to make up for the loan”[739]. 261.On 29 August 2007, Ji expressed concern about being locked into DBS products and about the fluctuation in prices, and requested Linda Liu to talk to the credit department with a view to giving comfort to her that the loan would not be called for a period of two years. Linda Liu said she would discuss the matter internally and talk to top management[740]. However, as the conversation progressed, clear representations were made by Linda Liu to Ji that loans up to US$20m used to purchase DBS mutual funds will not face margin calls for 2 years:
262.On 31 August 2007, Linda Liu confirmed Amy Yip’s agreement to this arrangement:
On 7 September 2007, Linda Liu said the matter was orally agreed but dependent on the maximum amount of the anticipated draw downs to purchase DBS mutual funds[746]. 263.Linda Liu confirmed in her evidence that these conversations had occurred and further stated that it was mentioned in a call report at that time that application was intended to be made for a 2-year loan[747]. 264.I find that Linda Liu on behalf of DBS:PB clearly and unequivocally represented that a margin call would not be made for a period of 2 years from its drawdown in respect of the maximum drawdown of US$20m on the credit facility of US$20m that was granted on 4 July 2007 and on the increased credit facility of US$32m of 29 August 2007 and which was used to invest in DBS mutual funds. I also find that Ji relied upon this representation. However, the representation was not made in respect of any loan drawdown that was used to invest in other products[748]. 265.When DBS:PB made the margin call to Wise Lords on or about 10 October 2008, after Linda Liu received a margin call advice from the credit department on 9 October 2008[749], the portfolio of Wise Lords no longer included any DBS mutual funds purchased with the loan of US$20m, as can be seen from Arboit’s 4th Schedule[750] and the portfolio summary of 30 September 2008[751]. Indeed, as at 30 September 2008, the portfolio did not include any DBS mutual funds[752]. Accordingly, the margin call of October 2008 did not fall within the scope of the representation made by Linda Liu, on behalf of DBS Bank, at the end of August and early September 2007. 266.I also find that Ji well understood that the “No Call” representation did not extend to loans used to purchase products other than the US$20m loan used to buy DBS mutual funds in July to October 2007. On 22 January 2008, Ji was still asking Linda Liu if the bank would call back the loan and requested the bank’s commitment for the whole of the loan, not just the loan of US$20m used to buy DBS mutual funds in July to October 2007[753]. The call report for meetings in January 2008[754] records that:
The call report listed DBS mutual funds in the portfolio with a value in excess of US$47m at that time. 267.There was further discussion about margin which took place from about mid-2008[755]. On 15 August 2008, Ji was still seeking a commitment from the bank not to make a call on Wise Lords’ loan for one year, in response to which Linda Liu said she would discuss the matter with her superiors. Ji further expressed her “hope” that within a year DBS Bank would support her and would not have to call the loan[756]. On 27 August 2008, there was yet another appeal from Ji for a “commitment” from the bank[757]. On 3 September 2008, Ji was still questioning the extent to which DBS Bank might agree to “support” her[758]. On 8 September 2008, Ji was still posing her one-year request, which Linda Liu said she would convey to Edwin Lim[759]. 268.I find, based on these telephone transcripts, that Ji knew that there was a possibility that a margin call could properly be made by DBS Bank and that she was pleading with Linda Liu for a commitment from DBS Bank not to do so for a period of 1 year. (7) Ji’s concern about margin trading 269.During her discussions with Linda Liu, Ji also expressed her concerns to Linda Liu about margin trading and said that she would not enter into those kinds of transactions. However, as can be seen from the recorded telephone conversations set out in the preceding section, Linda Liu had clearly explained to Ji the difference between opening an FX margin account and using the assets of the portfolio as collateral to obtain a loan to invest in products, otherwise known as leveraging. She also explained the difference clearly in her evidence:
270.Not only did Ji know that Wise Lords’ portfolio was leveraged, she dissatisfied with the bank management’s concern about the risks of Wise Lords’ leveraged portfolio:
(8) Commencement of investments in FX and YEDs and increase of credit limit to US$58m (HK$450m) 271.In 2008, Wise Lords began to invest more heavily in foreign exchange transactions, with a particular focus on AUDs and Euros, and YEDs. YED was the official product name adopted by DBS Bank[762]. However, it was generally referred to as a premium deposit in the banking industry. Ji had experience investing in premium deposits at SCB and was familiar with the term[763]. In 2004 and 2005, Ji had already conducted over 20 YED transactions for Wise Lords[764]. 272.Although called premium deposits, they were actually currency linked notes. There was no dispute between the experts on the key features of YEDs. In his report, Das stated:
273.The experts agreed that the investor assumed a currency risk in return for receiving a higher rate of interest and did so by entering into a carry trade to benefit from higher (in this case) AUD interest rates, the underlying assumptions of the investor being that AUD would be stable and trade within a relatively narrow range[766]. 274.I was not impressed by Ji’s evidence that she did not understand what was meant by the strike price[767]. She was reminded by Linda Liu about the operations of YEDs on many occasions in 2004 and 2005.[768] 275.Ji’s interest in foreign exchange was apparent well before 2008. Wise Lords had regularly carried out FX transactions in earlier periods[769]. Ji also frequently asked for market updates on foreign exchange:
276.On 22 November 2004, Ji told Linda Liu that she wanted to buy AUD. The exchange below shows that Ji was well versed in the mechanics of FX transactions and quick in placing orders:
277.Ji was at the same time talking to StanChart about FX: “I heard from that side today, Standard Chartered Bank called me, he said it looks like that level was reached, take a look at the Australian dollars”[772]. Ji’s interest in buying AUD continued in 2005[773]. She knew it was a good time to sell AUD when commodity prices were dropping[774]. 278.Ji would reject quotations from DBS:PB and asked for or chose to wait for a better rate[775]. She had the ability to obtain advantageous terms (on interest rate for example)[776]. 279.During 2008 Ji became disenchanted with mutual funds, thinking that the US market was going to turn bad (in her words, a “deep recession”), which would affect the global economy and, in turn, adversely affect the mutual funds[777]. 280.By around May 2008, almost all mutual fund holdings of Wise Lords were redeemed pursuant to Ji’s instructions[778]. The proceeds from the redemption were partly used to repay loans taken out by Wise Lords pursuant to the credit facilities granted by DBS Bank, and partly used for the purchase of foreign currencies. 281.In early 2008, Ji specifically indicated an interest for investments with high yield and high interest:
282.The evidence also demonstrates that the switch to foreign currencies, in particular AUD, was initiated by Ji:
283.In February 2008, Ji was already suggesting that Wise Lords should borrow in a currency with low interest to buy AUD or New Zealand dollars:
284.She did not like Japanese Yen because of its unstable stock market and considered borrowing in USD or Singapore dollars[789]. Ji was already aware that one could borrow in one currency with a lower interest rate to buy another currency to earn a higher interest rate when Linda Liu defined such a transaction as arbitrage[790], and suggested to Ji that she could use Wise Lords’ credit facility as an investment tool[791]. 285.Despite Ji’s having said earlier that that she would like to learn and accumulate experience in currency trades slowly, and that she would engage in low risk, conservative investments[792], in fact, she had embarked on a project to accumulate a vast amount of AUD, in accordance with her views on the currency and despite warnings from DBS:PB. 286.The recorded conversations show that Ji was of the firm view that AUD was strong and USD was weak. This drove Ji to accumulate a significant amount of AUD in Wise Lords’ portfolio. Ji’s outlook on the two currencies is apparent from her exchanges with DBS:PB personnel. Back in 2006, Ji already held the view that USD was weakening:
287.Ji had confidence in AUD and Euro in the long term[796] and did not want to keep any USD or Hong Kong Dollars[797]. On 15 April 2008, given Ji’s strong preference to hold AUD and not USD in the long run, Kenneth Cheung drew to her attention, through Linda Liu, to a USDAUD YED and suggested that Ji utilise loans that were not yet due to invest in the YED[798]. According to Kenneth Cheung:[799]
288.The above description of YEDs is singularly lacking in identifying the risk of loss to the investor if the AUD plunged in value such that the USD value of the returned AUD was less than the USD loan taken out to purchase the YED in the first place. However, Ji was herself aware of the unpredictable nature of the currency market[800] and she knew that if, on maturity, the exchange rate was at or below the “strike” exchange rate, Wise Lords would receive AUD at that rate and would suffer a loss if the AUD had depreciated against the USD and went below the strike exchange rate. 289.Ji stated that’s she was familiar with YEDs[801] and gave firm instructions to DBS:PB to invest in YEDs[802]:
290.Moreover, Ji conducted her own research into AUD[805]:
291.Ji demonstrated knowledge of market movements and familiarity with technical terms when it came to FX and YEDs. Ji paid attention to movements of AUD exchange rate[807]. She also demonstrated familiarity with limit orders[808]. 292.In the light of my findings I have little difficulty rejecting Ji’s evidence that the switch of emphasis to FX and YEDs was Linda Liu’s “new plot” and “trap”[809]. Indeed, from an early stage, Kenneth Cheung advised caution against Wise Lords’ accumulation of AUD: “we should not rush into it”; “I think after you finish buying these two there could be a short-term rebound, we can see whether there will be an opportunity, to buy in at a relatively lower level, and then take profit first before buying again.”[810] 293.Kenneth Cheung also discussed a number of products other than YEDs with Ji on many occasions. On 14 April 2008 he introduced a one year principal-protected linked note, and mentioned to Ji the need to diversify[811]. On 22 April 2008, he introduced a one month option structure to Ji[812]. On 13 May 2008, he introduced a three-month structured note to Ji to be purchased in USD and suggested that Ji should not invest a big sum into it, and that she could invest into other areas.[813]. Ji was not interested and preferred to focus on FX and YEDs. 294.Linda Liu and Kenneth Cheung had also repeatedly issued warnings to Ji as to the risk of over-concentration in AUD, but Ji chose to maintain her views[814]. This took place in the context of a rising currency: from January 2008 to May 2008 AUD rose against the USD from a rate of USD0.875 to AUD1 to USD0.95 to AUD1[815].
295.Ji’s interest in AUD continued. As at May and June 2008, Ji still wanted to buy AUD or to invest in USDAUD YEDs[820]. She considered AUD a “relatively safe bet”[821] and she still wanted to buy “a little” AUD despite its dropping[822]. Whilst Ji’s views on Euros had changed (as the performance of the Eurozone economy showed signs of decline in mid-2008), her confidence in AUD remained[823]. 296.Ji’s appetite for AUD was large. Wise Lords bought 3 million AUD in March 2008[824]. She expressed the wish to buy “a large batch” when the price was good[825], and expressed surprise that she had so little facility to do FX transactions[826]. Wise Lord’s portfolio summaries show a drastic increase in AUD holdings after February 2008. At the end of March 2008, Wise Lords held AUD deposits valued in excess of US$15m against loans of US$7.74m[827]. At the end of April 2008, Wise Lords held AUD deposits valued in excess of US$8m and YEDs in excess of US$59m against loans of US$45.36m[828]. At the end of May 2008, Wise Lords did not hold any AUD deposit, just a USD deposit valued at US$4.7m and YEDs in excess of US$52m against loans of US$19.39m[829] . At the end of June 2008, Wise Lords held a deposit of AUD43.48m and YEDs of almost US$8m in value against loans of US$17.41m[830]. At the end of July 2008, Wise Lords held deposits of almost AUD66m and YEDs of almost US$45m in value against loans of US$71.2m[831]. 297.In June 2008, Kenneth Cheung told Ji that AUD was at a record high level and noted that Ji had purchased a lot of AUD. He asked Ji if she wanted to sell[832]. Kenneth Cheung also suggested that Ji could sell half of her 43 million AUD holding and take profit, and alerted Ji to the risk of a possible USD rebound and a fall of the AUD[833]. However, Ji said she would not do anything with the AUD[834]. 298.I now turn to deal with the financial experts’ evidence on YEDs. In their joint report[835]:
299.At trial, it was put to Linda Liu that she had referred to YEDs as low risk products and she explained that YEDs had a risk rating of 2 out of 5[847]. During a telephone conversation on 25 April 2008[848], Linda Liu exaggerated somewhat by describing YEDs as having “very low risk”. This took place in the course of a conversation when she said that she would try to raise the credit facility to US$150m-200m, an attempt which failed.I accept the evidence that the risk of YEDs was relatively low being 2 out of 5, and I accept the evidence of Malik set out in §298(a) above. As set out in §298(c) above, the risk created by Ji’s investment strategy, being long AUD and short borrowed USD funds, was that losses occurred when AUD declined: a weaker AUD resulted in loss to the portfolio and increased exposure to AUD as the YEDs were redeemed in AUD, which would also lower the asset cover for the USD borrowings, an effect caused by Wise Lords borrowing in USD to invest in YEDs. The risk could have been ameliorated if the redeemed AUD had been converted to USD, which would have limited losses that would otherwise increase by holding a declining currency. A more diversified portfolio would also have limited losses from AUD YEDs. 300.The FX and YED transactions would be notified by DBS:PB to DBS Corporate for approval[849] and DBS Corporate would send Investment Applications to DBS Trustee for approval[850] which were granted[851]. Between mid April to the end of May 2008, DBS Trustee approved a number of YEDs without fully understanding how they operated and Ben George, by email to Matthew Lam on 28 May 2008, sought clarification of their exact nature[852]. On the same day, Matthew Lam provided an accurate description of their nature as a currency option and of the risks involved, namely, that losses might be caused on maturity by receiving a weakening currency[853]. 301.Although the attempt at the end of April 2008 to increase the credit facility to US$150m-200m failed, on 28 May 2008, the credit facility was increased from US$50m (HK$390m) to US$58m (HK$450m)[854]. The increase to US$58m (HK$450m) had been recommended by Linda Liu on 29 April 2008 and accepted by Frederick Ko and Monique Lau of DBS Bank on 23 May 2008[855]. Linda Liu again greatly exaggerated Ji’s and Zhang’s assets[856] (net worth of US$200m[857]) and annual income (of US$50m[858]) in support of the latter application. A signed Notification of Activities form[859] was sent by DBS Corporate by fax on 3 June 2008. An email dated 3 June 2008 was also sent by Matthew Lam to Ben George, and copied to the others involved[860] informing of the offer to increase the facility and requesting a director’s resolution to be issued. A letter of recommendation was signed by Ji dated 16 May 2008 and a Declaration of Risk Awareness was signed Ji and Zhang on the same day[861]. Both letters stated that the increased facility was sought for “forthcoming investment opportunity especially in [YEDs]”. The increase was approved by DBS Trustee on 4 June 2008[862]. The increase was also accepted and ratified by DHJ Management on 4 June 2008 when a signed written resolution from them, as director of Wise Lords respectively, was issued[863] and when, at about the same time, the authorised signatories of Wise Lords signed a copy of the facility letter of 28 May 2008[864]. (9) Investments in AUD and EUR only and increase of credit facility to US$100m (HK$780m) 302.Since mid-2008, Ji preferred buy and sell FX directly rather than YEDs which Ji thought produced too little return:
I asked Linda Liu why Wise Lords held so much AUD and she explained:
303.The last AUDUSD YED was purchased on 22 July 2008 maturing on 25 August 2008. The last EURUSD YED was purchased on 24 July 2008 maturing on 5 August 2008[867]. The “carry trade” strategy of borrowing in USD to buy AUD or EUR to earn higher interest was successful when AUD and EUR appreciated against USD. Substantial losses would occur when these 2 currencies depreciated against the USD. At the end of July 2008, Wise Lords held deposits of almost AUD66m and YEDs of almost US$45m in value against loans of US$71.2m[868]. On 18 August 2008 the position was substantially different with the portfolio containing AUD deposits of almost AUD122.6m, YEDs of US$20m against loans of US$96.4m[869]. The increase of the credit limit to US$100m is dealt with below. 304.This change in the holding of AUD, almost doubling from AUD66m to AUD122.6m, occurred against a backdrop of substantial market nervousness created by the sub-prime crisis:
305.I have already referred[874] to Ji’s email dated 18 July 2008[875], where she wrote: “... By the way, KEEP WORKING ON INCREASE MY CREDIT LIMIT. I’ll need it very soon. (When AUD and Euro is dropping, I want to buy LARGE AMT. of it.)” Instead of dissuading Ji from further AUD carry trades, Linda Liu arranged for Wise Lords credit facility to be increased from USD58m to a whopping USD100m to fund further purchases of AUD at a time when severe jitters were felt all around the financial world. 306.The attempt to increase the credit facility to US$100m (HK$780m) had been made on 15 July 2008 when Linda Liu recommended the increase and which was approved by Frederick Ko and Monique Lau of DBS Bank on 17 July 2008[876]. Linda Liu again greatly exaggerated Ji’s and Zhang’s assets[877] (net worth of US$200m[878]) and annual income (of US$50m[879]) in support of this application[880]. On 18 July 2008, Linda Liu wrote an email to Edna Chan of DBS Corporate informing her that “[as] per Ms Ji’s request, we have proceeded to apply for her to increase her credit limit ... to HKD780mio from our credit department already. After discussion with Credit, they agree to approve this increment as the client will invest to YED and FX only subject to their sufficient collateral.”[881] 307.The facility offer letter was issued dated 21 July 2008[882] and, ignoring the advice of Edna Chan given a year ago[883], that such a document should be signed by the director of Wise Lords, and not by Ji, the offer letter was dispatched to Ji for her signature and was signed by Ji sometime later as the original letter had been misdelivered[884]. A Notice to Guarantor of Amendment of Credit Facilities was also signed by Ji[885]. A Letter of Recommendation dated 11 July 2008 was signed by Ji and a Declaration of Risk Awareness also dated 11 July 2008 was signed Ji and Zhang[886]. Both letters wrongly stated that the increased facility was sought for “forthcoming investment opportunity especially in [YEDs]”. By then, Ji had already intimated that she wished to purchase AUD directly. 308.By a Letter of Recommendation dated 11 July 2008 addressed to DBS Trustee and DBS Corporate and signed by Linda Liu and Edwin Lim, the signatories, as Relationship Manager and Managing Director of DBS:PB respectively, and “[as] account manager to the Trust and the Company’s account with [DBS:PB]” recommended that Wise Lords’ credit facility be increased to US$100m for “forthcoming investment opportunity especially in [YEDs]” and that the increase is recommendable “in view of the projected prospect in YED with yield at 5-10% p.a.”[887]. Edwin Lim was not very forthcoming about the part he played in obtaining the increased facility:
309.Even before the ink was dry, even before the offer was accepted by a director of Wise Lords, and even before approval was given by DBS Trustee[889], the additional credit facility, which almost doubled the existing facility of US$58m to US$100m, was utilised to purchase AUDs from 24 July to 5 August 2008. During that period of 13 days, US$96m was sold to buy AUD[890]. The following chain of emails will cause many eyebrows to be raised, and, certainly, judicial ones:
310.Instead of correcting his error and informing Frederick Ko that the borrower was the PIC of the Trust and that Ji was only the Investment Adviser, Linda Liu wrote an email on 31 July 2008 to Frederick Ko and Edwin Lim as follows:
311.I reject Linda Liu’s explanation that by “under current circumstance” she meant that shares were not doing well[894]. I find that she was referring to the events highlighted in §304 above: Lehman Bros had announced quarterly net losses of US$2.8b on 16 June 2008; the U.S. Treasury had publicly announced rescue plans for Fannie Mae and Freddy Mac on 13 July 2008; the U.S. Federal Reserve banned naked short-selling on 15 July 2008; and just the day before the World’s Central Banks had publicly announced further bank liquidity enhancing measures. In that email, Linda Liu was gloating that even in those troubled financial times they were still enjoying a very “happy hour” moment. 312.I also reject the rather smart sounding so-called “explanation” given by Linda Liu in the following exchange:
The explanation is laughable. I accept the opinion of the defendants’ own expert, Malik, who stated[896]:
AUD is not similar to gold. If the economy contracts after a financial crisis, commodity prices will fall, as will AUD which falls in tandem with commodities, as Ji well knew.[900] 313.Exhibit D3 shows that the amount of AUD held in the portfolio surged by over USD100m in that 13 day period between 24 July and 5 August 2008 which coincided with the approval of the US$100m credit facility and its utilisation. From 21 July 2008[901] to 1 August 2008, AUD dropped against the USD from a rate above USD0.9750 to AUD1 to below USD0.93 to AUD1[902]. In his witness statement, Edwin Lim said that, as the financial crisis continued to worsen throughout 2008, the exchange rate of the AUD to the USD began to decline sharply in around mid-July 2008 and that, at that time, the market was in a state of panic[903]. I remarked in the course of counsel’s final submissions: “If the bank is cautioning her about the accumulation why is the bank giving her money to get more?[904]” On 1 August 2008, England Zai, Investment Adviser of DBS:PB responsible for FX trading, wrote by email to Linda Liu stating ‘[we] care about Ms Ji’s position in FX and YED. Please see ‘Exit’ strategies listed below for your reference.” Linda Liu simply forwarded the mail to Ji with the covering words “[for] your kind reference”[905]. An earlier email from England Zai, also dated 1 August 2008, which was forwarded by Linda to Ji, cautioned that customers with long positions in AUD should be well prepared for exit strategy, citing an article which appeared in the Daily Telegraph that day[906]. England Zai again expressed about long positions in AUD and offered strategies for unloading long AUD positions in her email dated 4 August 2008 which was forwarded to Ji[907]. 314.Instead of dissuading Ji from further AUD purchases, an additional US$63m of AUD was purchased from 30 July 2008 to 4 August 2008. The position on 7 August 2008 is shown clearly from Linda Liu’s email to Eric Lim, England Zai and Aimex Kwong of the same date[908]. I have added the last 2 columns showing transaction dates and cross referencing Arboit’s 2nd Schedule:
315.Although I am unable to find documents evidencing Wise Lords’ resolutions and Trustee’s approvals and Minutes in respect of the transactions numbered (3) and (4) in the above Table, I am able to infer from the other documents identified in the preceding paragraph and from the portfolio statements of 18 August 2008[922], showing that the amount of AUD purchased in these 2 transactions remained in Wise Lords’ account, that proper approval was obtained for the transactions in question. The documents identified on Appendix C[923] of the defendants’ “Note on Queries Raised by the Court” dated 6 November 2014, but not produced in court, namely, an email from DBS Corporate to DBS Trustee attaching 2 Investment Applications, may well have been in respect of this transaction. Items (1) to (11) in the table above are also listed in Appendix D of the defendants’ “Note on Queries Raised by the Court” dated 6 November 2014 totalling AUD100,913,483.05. Items (12) and (13) are listed in the said Appendix D as YED conversions. 2 further YED conversions that occurred on 22 August 2008 and 25 August 2008 are also listed in the Appendix D. The 4 conversions totalled AUD37,035,234.68. The total purchases and accumulations of AUD from end July 2008 to end August 2008 totalled AUD137,948,717.73. 316.What I find extremely surprising, from my review of the relevant documents, is the absence of any query by DBS Trustee why Wise Lords was acquiring so much AUD and how it was paying for them. In case the documentation produced in court during this period of time was incomplete, I asked the defendants for a summary of the correspondence involving DBS Trustee in 2008. This has been produced in the form of Appendix C of the defendants’ “Note on Queries Raised by the Court” dated 6 November 2014 which confirms that there was no query raised by DBS Trustee why Wise Lords was acquiring so much AUD and how it was paying for them. 317.Although the increased facility had been utilized up to US$96.37m by 18 August 2008[924], a signed Notification of Activities form was only sent, much later, by DBS Corporate by fax on 26 August 2008 stating that the proposed date of the increased facility was 25 August 2008. The following email exchange[925] is quite extraordinary:
318.The result of this exchange was that the increase of the credit facility was approved[931]. What is extraordinary about the exchange is that DBS Trustee only had a portfolio statement showing loans of US$27m which would have been the position at the end of June 2008[932]. I accept that the extent of the loans obtained by Wise Lords is accurately shown on Appendix 3 of the the defendants’ “Note on the Queries raised by the Court” dated 6 November 2014. The outstanding loans of US$27m at the end of June 2008 were reduced to US$15m on 1 July 2008, before rising and hovering between US$20m to US$36m in the month of July 2008. Between 30 July 2008 and 7 August 2008, loans to the extent of US$94.5m were drawn by Wise Lords[933]. DBS Corporate did not see fit to inform DBS Trustee on 26 August 2008 that the increased facility, which had been made available from 21 July 2008, had already been utilized to the extent of US$94.5m by 7 August 2008 and which utilization stayed at or above this level up to the end of August 2008[934]. As can be seen from the portfolio statement of 18 August 2008[935], the portfolio was highly leveraged, the loan of UD$96.37 as that date constituting about 73% of the total portfolio value of US$131.8m[936]. As stated above, from 24 July to 5 August 2008 US$116m was sold to buy AUDs. The statement in the last email quoted above that “the facility [of] HKD780mio is for standby purpose to provide funds for future investment opportunities, such as investment in FX and Yield Enhanced Deposits” was false. The grant of and the drawdown on the increased facility was already a fait accompli. From 1 August 2008 to 26 August 2008, AUD dropped against the USD from a rate below USD0.93 to AUD1 to a rate below USD0.85 to AUD1[937]. It was not only a fait accompli but a fait accompli that was incurring substantial losses. It would appear from the email of Tim Pearson-Burton to Adrienne Lam of DBS Corporate and others dated 28 November 2008 that the drawdown of the US$100m facility was still not known to DBS Trustee as at that date. The email reads[938]:
DBS Trustee did not give proper consideration to the increase of the credit facility to US$100m and, indeed, were prevented from doing so by DBS Corporate who omitted critical information from and gave untruthful information to DBS Trustee. I do not accept the evidence of Mayes insofar as he was suggesting otherwise in his witness statement[939]. I also do not accept the defendants’ submissions in this regard in the defendants’ “Note on Queries Raised by the Court” dated 6 November 2014[940], including the submission that ‘it was, in the circumstances, not unreasonable at the time to expect some recovery [in AUD] to take place”. I cannot find in these submissions any support for the decision on the part of DBS Trustee to approve the purchases of AUD100m that took place between 24 July and 5 August 2008[941]. I have set out the circumstances prevailing at that time in §§304 and 311-313 above. 319.In approving the purchase of over AUD100m from 24 July and 5 August 2008, and in approving the increased credit facility at the end of August 2008, DBS Trustee failed to discharge its high level supervisory duty over the investments made by Wise Lords and DHJ Management failed to discharge its duty as director of Wise Lords. 320.There is no difference of opinion between Das and Malik on the losses caused by the depreciating AUD. In his report Das stated[942]:
321.In his report, Malik stated[944]:
322.As can be seen from the above table, the cumulative losses that occurred as AUD declined in value against the USD were very substantial. On one view of the matter, it may be said that the portfolio did not suffer loss as the total amount of AUD remained in the portfolio and was not lost. However, I accept the evidence of the experts that the portfolio should be expressing its profit and loss in USD terms[945]. The loss to the portfolio measured in US dollars was substantial. 323.Instead of taking stock of the unfurling sub-prime mortgage crisis, and responding to those signals appropriately, the combined unbridled greed of the main players of this drama led to a course of action that drove them to the eye of the perfect financial storm. 324.An email dated 8 August 2008 forwarded by Linda to Ji which contained a message from England Zai and a presentation[946] which set out the latest market information and analysis on AUD, gave a warning to be cautious on AUD long positions, and suggested putting a stop loss order on all positions at a level of around 0.9000 to limit exposure to further declines in the value of AUD[947]. 325.The above email was followed by a call from England Zai and Linda Liu to Ji repeating the caution of remaining long in AUD. However, Ji remained bullish and resisted the idea of closing out Wise Lords’ positions:
326.I accept Linda Liu’s evidence that, despite the worrying AUD situation and the repeated warnings issued to Ji, she was unwilling to unload Wise Lords’ positions at anything less than breakeven point[949]. Linda Liu then introduced decumulators to Ji as an AUD exit strategy[950]. 327.There was no difference between the experts on the structure of a decumulator and how they operated. Das gave a clear exposition of decumulators in his first report[951]:
328.Both experts also broadly agreed on the payoffs of the Decumulator Notes and that they entailed the investor assuming currency risk, and in this case, specifically exposure to depreciation of the AUD against the USD. In return for the opportunity to sell AUD for USD at a higher than market rate, the investor bore the risk of the exchange rate falling below the knock out rate. In this case, the investor also gave up the interest that could be earned on the AUD deposit in order to obtain a higher strike rate[953]. 329.I accept Malik’s opinion that the intentions behind the trade and whether the Decumulator Notes fulfilled them are matters of fact. However, if I were to find that the Decumulator Notes were entered into as a mechanism for liquidating the investor’s exposure to AUD and for realigning the currency mismatch, then the opinion of Das on the issue will become relevant. I accept his opinion that the Decumulator Notes were not designed to and could not function as a hedge against the investor’s AUD exposure for the reason that they were conditional: if the AUD declined, the knock out event would deactivate the hedge leaving the investor’s AUD holdings exposed to depreciation. The experts also agreed that the currency risks were asymmetric, “that is the investor has limited potential gains[954] and theoretical unlimited losses”[955]. If the AUD depreciated below the knock out rate and continued to depreciate throughout the course of the 1 year deposit period, the investor would not be able to access the AUD committed to the Decumulator Notes: the investor would only receive the weekly instalment payment in AUD of 1/52 of the total AUD deposit, which the investor could convert at current market rate but the balance of the AUD deposit would be locked up and could not be sold. In effect, the ability to sell AUD was de-activated when the AUD declined sharply, when protection was most needed. Instead of being an effective hedge, the instrument exacerbated the currency risks in the portfolio[956]. 330.The experts were agreed that the decrease in the value of the Decumulator Notes would lower the value of the asset cover for the USD borrowings used to enter into the investments[957]. I accept Malik’s opinion that this was not a characteristic of the Decumulator Notes itself but a consequence of borrowing USD. 331.Both experts agreed that the investor would benefit from entering into AUDUSD Decumulator Notes where the rate was relatively stable and traded between the Strike Rate and the Knock Out Rate[958]. 332.Both experts agreed that the Decumulator Notes were illiquid and that the most likely means of terminating the Decumulator Notes would be to unwind the transaction with the issuer, which would incur breakage costs. Indeed, breakage costs of about AUD400,000 and AUD1.1m were paid on the 2 AUDUSD Decumulator Notes unwound in November 2008[959]. I accept the opinion of Das that there was a significant risk that the Decumulator Notes would need to be terminated before maturity if the AUD depreciated sharply: given the significant leverage and currency mismatch, the investor would need to realise assets to repay borrowings or meet margin calls[960]. 333.Since the Decumulator Notes were fully funded (by the purchase price paid by Wise Lords), they did not expose the investor to any contingent liquidity requirements (i.e. a margin call). However, I accept Malik’s opinion that the purchase of the Decumulator Notes was funded by borrowed USD and that created a possible “contingent liquidity” risk[961] 334.Das maintained his opinion that there was inadequate disclosure of the risks on the Decumulator Notes. Malik did not express an opinion on this issue[962]. 335.The introduction of decumulators to Ji and her response to them occurred in the following manner:
336.Further conversations took place on 15 August 2008 at 11:03[973], 17:41[974], 17:59[975], 18:23[976] involving Linda Liu and Kenneth Cheung concerning the possible investment in an AUD to USD decumulator.[977] During those conversations, the structure and mechanics of a decumulator were further discussed. Ji said “we will try to understand this slowly...will learn this one slowly”[978] and Linda Liu responded “...[for] risk control, this type ... this one is not bad, there is not much risk with this one, that is, there is no major risk” and that “this...can hedge your risk”[979]. Under cross examination, Linda Liu explained that the decumulator had a risk rating of 3 out of 5 as it had no margin element[980]. I place no weight on DBS:PB’s risk rating nor on Linda Liu’s understanding of the risk. In the light of my findings based on the expert evidence I have reviewed above, I find that the risk of being locked into a product of one year duration with the currency depreciating well below the knock out rate was substantial and was a risk that Linda Liu and Kenneth Cheung well understood. In the email dated 15 August 2008[981] from Kenneth Cheung to Linda Liu, the worst case scenario was spelt out:
On the same day, 15 August 2008, at 17:54, Linda Liu forwarded the above email from Kenneth Cheung to Ji giving her details of the AUD decumulator[982]. 337.Ji would have understood from the above email and telephone conversations that:
338.Ji clearly understood all of the above and asked for better terms (such as a knock out price at a lower level), and suggested on her own volition to put in a larger quantity (US$30m) in exchange for more favourable terms[988]. The worst scenario was not at the forefront of her concerns. She was keen to secure a lower knock out rate but not so willing to have the strike rate lowered. 339.After checking with the treasury department, Kenneth Cheung and Linda Liu called Ji again on the same day[989]:
340.Ji was not impressed by these suggestions. She maintained the view that investing a small amount such as US$10m into the decumulator was insufficient to solve Wise Lords’ liquidity problem[995]. Ji instructed Kenneth Cheung to set the strike price at 0.9650 and try to obtain the best knock out price possible[996]. Ji also insisted on investing US$20m instead of US$10m as Kenneth Cheung had suggested[997]. 341.Wise Lords eventually placed an order for a one year AUD/USD decumulator to be issued by DBS Bank, in the amount of AUD20.8m with the strike price at USD 0.9650/AUD and knock out price at USD 0.8275/AUD (“1st Decumulator”)[998]. 342.On 18 August 2008 at 16:59, Linda Liu sent Ji an email attaching a copy of the Final Termsheet of the 1st Decumulator[999]. The email contained the product description, worst scenario and risk level (3 out of 5) about the 1st Decumulator. 343.In a telephone conversation starting on 18 August 2008 at 16:40, Linda Liu said that she had sent the aforesaid email to Ji. During the same conversation Ji said she had opened the email and could see it:
344.Ji made no complaints about not being able to open the email attachment then or subsequently. In fact, during the conversation, it was Ji herself who expressly requested Linda Liu to email (rather than fax) documents over to her. It was only after the commencement of these proceedings that Ji claimed she was unable to open the Final Termsheets of all the decumulators purchased which were attached to Linda Liu’s emails to her. Ji said she only received them in September 2008 when Linda Liu sent them over to her by DHL[1001]. 345.In support of her case, Ji relied[1002] on two emails dated 7 July 2008[1003] and 5 November 2008[1004]respectively. In the first email in respect of the sale of the DEVA Note, Linda Liu said: “I understand you might not open the attachment. Please kindly give me your fax number if you have so that I may send it to you”. In the second email Ji herself said in reply to Linda Liu’s email that: “I can’t open your attachment. pls send me by fax”. The attachment in question was the “updated MTM value of 3 De-cumulator NOTE as at 04 November 2008”[1005]. 346.The 2 emails do not support Ji’s case. They show that Ji would make known to Linda Liu that she could not open an attachment rather than just stay silent. I find that Ji would have asked Linda Liu to send the decumulator termsheets by fax if she could not open the email attachments in the same way as she had asked her, in her email of 5 November 2008, to fax over the update to the 3rd Decumulator[1006]. 347.I do not accept Ji’s contentions. She clearly said in her telephone conversation on 18 August 2008 that she had opened the attachment in respect of the 1st Decumulator and she also gave instructions for the 2nd and 3rd Decumulators[1007] to be purchased shortly afterwards. It is unlikely that she would have done so had she not been provided with the termsheet for the 1st Decumulator. 348.After the purchase of the 1st Decumulator, Kenneth Cheung gave Ji updates regarding its performance[1008]. 349.At the request of Ji, Kenneth Cheung also provided Ji with information on a Euro/USD decumulator for her consideration, and answered Ji’s questions on the mechanics of the product. Ji said she would be interested in it if the price could be better, and asked Kenneth Cheung to look for better terms[1009]. 350.Ji was once again warned about the risks of decumulators, including the risks of market downturn[1010], and of being locked in for the whole term of the decumulator, getting back only the depreciating currency:
351.In the email from Kenneth Cheung to Linda Liu dated 27 August 2008 at 14:55[1012], he wrote: “Having told [Ji] the structure is NO early redemption feature (Hold at maturity) and reinforce the downside. Risk of unsettled notional, client replied she did recognize and agreed to buy this NOTE”. 352.On 27 August 2008, Ji placed an order for a one year Euro/USD decumulator in the amount of Euro 6,396,000 with strike price at USD 1.568/Euro and knock out price at USD 1.419/Euro (“2nd Decumulator”). 353.Linda Liu sent Ji the termsheet of the 2nd Decumulator under the cover of her email dated 27 August 2008 at 17:05[1013]. The body of the email contained the product description, important notes, risk level (3 out of 5), and worst case scenario: “if a Knock-out Event occurs in every Monitoring Period, the Noteholder will receive AUD Instalment Amounts throughout the tenor of the Notes and may incur substantial cost in converting such AUD Instalment Amounts into USD”. 354.Although Ji claimed that she could not open the attachment to the said email, the issue was never raised by Ji at the time when she confirmed receipt of the email.
355.Immediately after Ji placed an order for the 2nd Decumulator, she asked Kenneth, in the same conversation, to study a further AUD/USD decumulator for her. 356.Further discussions ensued between Ji, Kenneth and Linda on the AUD/USD decumulator.[1015] Prices were quoted to Ji but she rejected them and asked for better terms based on her own views about AUD and interest rate[1016] : “The amount can be increased, but that one, this one is not good, I don’t want to do it. And there’s no meaning doing it like that”[1017]; “Because Australia is about to increase the interest rate, that’s not very good. These few days won’t make any difference to me”[1018]; “... that Australia dollar, I want that to be even better”[1019]; “I don’t want to do this; I feel that it is not meaningful. Also, are there no better ones? 10% - the previous kind is fine; I don’t feel like doing this one”[1020]; (“... you ask first, negotiate and see if we can add a little bit more...”)[1021]; “I think one year, a year and two weeks is fine, for 58 weeks would be too long, the interest isn’t possible to calculate for that”[1022]. 357.Finally, Ji decided to place an order for a 58-week AUD/USD decumulator in the amount of AUD 56,260,000 with strike price at USD 0.9520/AUD and knock out price at USD 0.8310/AUD (“3rd Decumulator”). 358.The termsheet of the 3rd Decumulator was sent to Ji under the cover of an email dated 29 August 2008 which was copied to her[1023]. The body of the email contained the product description, important notice, risk level (3 out of 5), and worst scenario: “If a Knock-out Event occurs in every Monitoring Period, the Noteholder will receive AUD Instalment Amounts throughout the tenor of the Notes and may incur substantial cost in converting such AUD Instalment Amounts into USD”. 359.I find that Ji was sufficiently informed of the operation and risk features of the product through her many discussions with Kenneth Cheung and Linda Liu and from the above mentioned termsheets. Indeed, Ji was sufficiently knowledgeable about decumulators to be in a position to negotiate better terms each time before Wise Lords made a purchase. 360.Ji herself accepted that she was told at the time about the risk of being locked up in a currency for the term of the decumulator:
361.Ji’s complaint about “the lack of principal protection” is misconceived so far as the decumulators were concerned. Ji knew that Wise Lords could potentially be locked into the significant amount of AUD it had invested into the decumulators for the entire duration of their terms if no conversion was to take place. However, Wise Lords would not lose any of its principal since it would get back, albeit by instalments, the AUD which it put into the decumulators. This aspect of the operation of decumulators was explained in detail by Kenneth Cheung in his evidence and well understood by Ji:
I understand from her evidence that what she was complaining of was the failure to get back the US Dollar cost of the AUDs Wise Lords had purchased. By loss of principal, Ji meant the loss of the US Dollars that had been expended. 362.Whilst the lock up period of the AUD deposit and the loss of interest during the lock up period was well understood by Ji, it was the depreciation of the value of Wise Lords’ AUD and EUR holdings during the lock up period, when they could not be accessed, which was the substantial cause of loss, a risk which was not brought out so explicitly. In the conversation on 15 August 2008, set out in §337(4) above, Kenneth could have brought out more clearly the risk of being locked into a depreciating currency:
As Das explained[1027], the suggestion that the risk of the decumulator was merely non-conversion is incomplete. Indeed, it was that fact that the non-accessible AUD EUR holdings would remain exposed to currency risk, that ought to have been highlighted, particularly when the currency was at a serious risk of depreciation. However, the risk was identified on the last page of the termsheets: “If a Knock-out Event occurs in every Monitoring Period, the Noteholder will receive AUD Instalment Amounts throughout the tenor of the Notes and may incur substantial cost in converting such AUD Instalment Amounts into USD”. Even that could have been made clearer with a statement that each successive AUD instalment would be worth less in USD terms if AUD continued to depreciate. Nevertheless, it must be said that Ji knew about the lock out period and, being as astute as she was, she must have realized that the locked up AUD would continue to depreciate in value if AUD continued to depreciate against the US Dollar. Indeed, to be fair to Kenneth Cheung, the risk of the non-accessible deposit depreciating throughout the 1 year lock out period was mentioned during the conversation on 27 August 2008 set out in §350 above. Why then did she cause Wise Lords to purchase these decumulators? She wanted to sell Wise Lords’ substantial holdings of AUD at the rate that she wanted and she was willing to take a substantial risk to do so. By peddling these very risky decumulators, very risky because of the high strike rate Ji wanted and the lengthy lock out period, Linda Liu and Kenneth Cheung of DBS:PB put Wise Lords in a worse position than it would have been had it simply continued to hold the AUD deposits in the depreciating currency. 363.At the trial, I explored with Kenneth Cheung whether Ji could have been provided with decumulator notes of a shorter term so that Wise Lords’ AUD deposits did not have to be locked up for so long. Indeed, initially Ji was introduced to the HSBC and RBS notes, both of which allowed for early redemption when the “knock out” level was triggered. Ji, however, did not choose to invest in either of these notes:
364.The main question I asked Linda Liu in this regard was why AUD decumulators were purchased instead of selling AUD outright:
365.In her email to Edwin Lim dated 15 August 2008, Linda Liu stated[1034]:
366.The defendants submitted that the purchase of decumulators made rational sense at the time given that Wise Lords held AUD 144m plus Euro 3.2m against a loan of USD 96m and that the decumulators allowed for an opportunity for Wise Lords to sell AUD or Euro and buy USD at no further leverage. 367.I find that the decumulators were being purchased partly as a hedge against the AUD and EUR holdings, as confirmed by the evidence of Edwin Lim and the above email of 15 August 2008. An email from Linda Liu to Ji dated 12 August 2008 also stated that the AUD Decumulator was for clients who wanted to exit their long AUD positions[1035]. During her conversation with Ji on 15 August 2008, Linda Liu said that “this [i.e. a decumulator] can hedge your risk”[1036]. Later on that day, she again said “... we ... tailor make something special for you, that is to help you lower your position ... actually this is hedging to help you ...[1037]” I find that the main purpose of the purchase of the decumulators was to enable Wise Lords to sell its AUDs at the rate that Ji wanted. However, the likelihood of achieving that purpose, viewed objectively in the circumstances that prevailed, was slim. 368.I totally disagree with the submission that the purchase of decumulators made rational sense. I accept the expert opinion of Das that “hedge” meant the elimination or minimization of an exposure, in this case changes in the AUD/USD exchange rate and that the decumulators were not designed to act and could not function as a hedge of Wise Lords’ AUD exposures because they were conditional: if the AUD declined then the knock out event would deactivate the hedge leaving the AUD holdings exposed to depreciation of the currency[1038]. Wise Lords could only have hedged against changes in the AUDUSD exchange rate by[1039]:
However, as I have found above, Ji was not prepared to sell the AUD she had acquired for Wise Lords below cost price and, given the continual depreciation of AUD, these alternative strategies were not acceptable to her. During the conversation on 15 August 2008, the following exchange took place:
369.From 15 August 2008 to 14 November 2008, AUD dropped against the USD from a rate of USD0.8676 to AUD1 to USD0.6627 to AUD1[1043]. From 15 August 2008 to 14 November 2008, EUR dropped against the USD from a rate EUR1 to USD1.4695 to a rate of EUR1 to USD1.2731[1044]. As matters transpired, in addition to termination costs of AUD400,000 and AUD1.1m[1045] on the AUDUSD decumulators, Wise Lords lost about US$15m on the AUDUSD decumulators and also lost about US$1.2m on the EURUSD decumulators as at 14 November 2008 (the unwind date of the AUDUSD decumulators)[1046]. 370.Linda Liu emailed DBS Corporate on 18 August 2008 seeking approval for the 1st Decumulator transaction[1047] and, on the same day, Sheran Chan sent DBS Trustee an Investment Application form dated 15 August 2008[1048] which was the date of the transaction. DBS Trustee signed the form, signifying that they had considered and approved the application, and returned the Investment Application form by fax on the same day[1049]. The Minutes of DBS Trustee resolving to approve the investment was also signed and dated on 18 August 2008[1050]. Following upon the trustee’s approval, Wise Lords’ resolution was also signed and dated on 18 August 2008[1051]. 371.On 27 August 2008, Linda Liu emailed DBS Corporate seeking approval for the purchase of the 2nd Decumulator[1052], which was the EUR Decumulator. On the same day, Sheran Chan emailed Ben George of DBS Trustee and sent to him the Investment Application form dated 27 August 2008, the date of the transaction, explaining that, as Peter Lee was on leave, they would arrange for him to sign the form when he returned[1053]. On the same day, Frank Mayes emailed Sheran Chan questioning whether the transaction was a sale of an existing investment[1054]:
372.On 28 August 2008, Sheran Chan replied stating[1055]:
373.On 29 August 2008, Tim Pearson-Burton of DBS Trustee returned the Investment Application form for the EUR Decumulator, signed by DBS Trustee, signifying that they had considered and approved the application [1056]. The Minutes of DBS Trustee resolving to approve the investment were also signed and dated on 28 August 2008[1057]. Following upon the trustee’s approval, Wise Lords’ resolution was also signed and dated on 28 August 2008[1058]. 374.At 6:58 pm on 29 August 2008, Linda Liu emailed Sheran Chan seeking approval for the 3rd Decumulator[1059]. Later that evening, Linda Liu emailed Sheran Chan attaching the final termsheet for the 3rd Decumulator[1060]. Linda Liu also notified Edwin Lim about the transaction[1061]. 375.On Monday 1 September 2008, Sheran Chan emailed Tim Pearson-Burton of DBS Trustee and sent an Investment Application for the 3rd Decumulator for approval dated 29 August 2008, the date of the transaction, stating[1062]:
376.After DBS Trustee had already approved the 1st Decumulator and the 2nd Decumulator, on 1 September 2008, in response to her request regarding the 3rd Decumulator, Tim Pearson-Burton emailed Sheran Chan and, for the first time, sought an explanation of what a decumulator was[1063]:-
377.On 2 September 2008, Sheran Chan replied[1064]:-
378.On the same day, Tim Pearson-Burton replied to Sheran Chan and sent her the Investment Application form for the 3rd Decumulator duly signed by DBS Trustee, signifying that they had considered and approved the application [1065] :
379.The Minutes of DBS Trustee resolving to approve the investment was also signed and dated on 1 September 2008[1066]. Following upon the trustee’s approval, Wise Lords’ resolution was also signed and dated on 1 September 2008[1067]. 380.Mayes gave evidence that a decumulator was an investment product that he was not aware of[1068]. 381.I find that DBS Trustee did not give proper consideration to investment applications to purchase the decumulators before approving them. DBS Trustee was unable to give proper consideration as they had no knowledge about this investment product and the risks inherent in them. Even when the product was explained to them by Sheran Chan of DBS Corporate, critical information regarding the substantial risk of being locked in for the entire term with a depreciating currency was omitted. I repeat the circumstances prevailing at that time that I have set out in §§304 and §§311-313 above. The likelihood of being able to sell AUD, at the high strike rate that Ji wanted for a substantial period of the term, viewed objectively in the circumstances that prevailed, was slim. Even if Ji was unwilling to sell the AUD at the spot rate, or to sell forward at a better than the spot rate but less than the rate she wanted, it was better for Wise Lords to hold on to its depreciating AUD than to purchase these very risky decumulators. In approving the purchase of 3 Decumulators, DBS Trustee failed to discharge it high level supervisory duty over the investments made by Wise Lords and DHJ Management failed to discharge its duty as director of Wise Lords. H. The Events from September 2008 Onwards (1) The Meeting of 1 September 2008 and the Events thereafter 382.On 1 September 2008, Ji met with Linda Liu and Edna Chan and Adrienne Lam of DBS Corporate. Ji voiced a number of complaints. About six weeks after the meeting took place, DBS Corporate prepared a meeting note that was signed by Peter Lee[1069]. The note recorded that they discussed about the Trust’s aim to make conservative and long-term investments and that future riskier investments should be undertaken through a new BVI company (which DBS Corporate would provide to Ji). This proposal was abandoned soon afterwards. At this meeting, Ji was reminded to sign and the draft Declarations of Risk Awareness for the sale of the DEVA Note and the purchase of the Decumulators[1070] but she did not do so. She also did not sign a revised Fee Quotation letter. 383.AUD continued to decline sharply after the 2 AUD/USD Decumulators were executed and the relationship between Ji and DBS:PB became more acrimonious. From a rate of 0.8563 on 29 August 2008[1071], it soon fell below the knock out rate under the 2 AUD Decumulators (0.8275 and 0.8310 respectively). As a result, there was only 1 instalment of USD received under the 1st Decumulator but none under the 3rd Decumulator, which raised the possibility of a margin call on Wise Lords[1072]. To avoid margin calls, Ji had no alternative but to place orders, which she did on 11 September 2008, to sell over AUD60m of Wise Lords’ AUD cash holdings at rates ranging from 0.8147 to 0.7970[1073]. By the end of September 2008, AUD deposits of less than AUD3m remained in Wise Lords’ account [1074]. 384.The global financial storm was at its apex in September 2008 when many financial institutions collapsed[1075]:
385.As the AUD continued to deteriorate in September and October 2008 DBS:PB issued a “Top Up” margin call on 9 October 2008 and a “Sell Out” margin call to Wise Lords on 9 and 13 October 2008 respectively[1078]. Again, Ji had no alternative but, in October 2008, to cause Wise Lords to borrow AUDs and EURs from DBS Bank in order to sell them[1079] and use the USD proceeds to reduce the USD loans, thereby converting the USD loan portfolio to an AUD and EUR loan portfolio, and which was repaid by the weekly return of AUDs and EURs from the 3 decumulators[1080]. Doing so also avoided the currency mismatch. As mentioned above, on 14 November 2008, the 2 AUD decumulators were unwound, leaving only the EUR decumulator[1081]. (2) Proposed termination of the Trust, the request for distribution and Ji’s complaints 386.From September 2008 onwards, the parties adopted a combative stance, Ji writing many letters of complaints[1082] and refusing to terminate the Trust[1083], whilst, on the bank’s side, refusing Ji’s request to distribute HK$7m to pay Zhang’s tax[1084] unless Ji and Zhang signed the Declarations of Risk Awareness in respect of the sale of the DEVA Note, the 3 decumulators, the sale of AUD in October 2008, and Awareness letters of the decrease in NAV of the portfolio at end August 2008[1085] and end September 2008[1086]. DBS:PB attempted to refute Ji’s complaints by its letter dated 7 November 2008[1087]. DBS:PB also relayed the response of DBS Trustee to Ji’s complaints by its letter dated 9 December 2008[1088]. Many of these complaints are the subject matter of these proceedings. I need not address and resolve those complaints which are not the subject matter of these proceedings. However, I note the email from Adrienne Lam to Peter Lee dated 26 November 2008[1089] complaining about the pressure put on her by Linda Liu to get DBS Trustee to sign a back dated increased facility offer letter of 21 July 2008[1090] to replace their approval given much later on 25 August 2008 and Peter Lee’s response that: “the Jersey directors will not back date any document, this is their golden rule”[1091]. 387.The dispute escalated when Ji and Zhang engaged solicitors who wrote to DBS Trustee on 11 December 2008[1092] setting various complaints and claiming US$50m as losses caused by breaches of duty by DBS Trustee and DBS:PB. DBS Trustee responded to the various complaints by letter dated 11 February 2009[1093] and concluded by suggesting that if Ji and Zhang wished to commence legal proceedings then the current trustees would need to resign and a replacement trustee appointed in their stead. (3) Charges levied to the Trust 388.The plaintiffs complain that the agreed arrangements were that no additional charges beyond the fixed annual fee would be charged to the Trust and paid by Wise Lords without Ji’s knowledge and approval but that, from the beginning of 2009, DBS Corporate and DBS Trustee secretly withdrew large sums of money from Wise Lords’ account without disclosing this to Ji and Zhang and that this continued even after the new trustees were formally appointed and DBS Corporate had terminated its Services Agreement with Wise Lords. 389.The claims for repayment of amounts overcharged to the Trust are set out in Appendix B of the RASOC[1094]. I have reproduced below, the more relevant particulars from this appendix and have separated the claims for repayment of wrongful charges that were made in USD and in Pounds Sterling (“GBP”):
390.Whilst it was common ground that the annual fee that was agreed was US$5,000, the fee quotation dated 29 December 2004 signed by Ji[1097], made it clear:
In addition, paragraph 7 of First Schedule to the Trust Deed[1098], provided that:
I accept the evidence of Mayes[1099] that DBS Corporate, as agent of DBS Trustee, was entitled to charge for services for any additional work done for the Trust or Wise Lords that was not listed under sub-paragraph (1) above. 391.Having considered the invoices in question, my findings are as follows: I deal first with the invoices issued in respect of legal advice obtained.
I now deal with the charges levied by DBS Corporate:
392.I find that DBS Trustee overcharged the Trust to the extent of GBP13,325 and DBS Corporate overcharged the Trust to the extent of US$68,825. (4) Transfer to New Trustee and Transfer of the Trust Funds 393.There was protracted and heated correspondence and a substantial delay of over 2 years before DBS Trustee retired and the new trustees were appointed by deed dated 31 January 2011[1102]. Instead of transferring the funds in Wise Lords’ DBS:PB account, documents to transfer the share in Wise Lords and in respect of the resignation of directors in Wise Lords were executed and sent to the new trustees in mid-May 2011. Allegations and cross allegations have been made about the causes of the delay and ulterior motives have been assigned for them. I need not address and resolve them. Doing so does not assist me to resolve the many disputes between the parties which are the subject matter of these proceedings. (5) Retention of US$1m as Indemnity for Tax Purposes 394.The dispute over the retention of US$1m as indemnity for tax purposes falls within a narrow compass. There is no dispute that the retention of US$1m by DBS Trustee was pursuant to clause 7 of the Deed of Appointment Retirement and Indemnity[1103]. That was a clause that had been agreed. Ji’s and Zhang’s solicitors had written on 10 March 2010 that:
395.Clause 7 provided that to enable the retained funds to be released, written confirmation had to be provided
396.I construe the above clause to mean that written confirmation had to be provided that that there were no fiscal or tax liabilities outstanding of:
and which will be payable for the period during which DBS Trustee was trustee. 397.The plaintiffs’ case is that on 18 November 2011[1106], DBS Trustee was provided with written confirmations that there were no fiscal or tax liabilities outstanding and, therefore, DBS Trustee was obliged to return the retained funds of USD1m but wrongly refused to do so. The only issue for my determination is whether the two declarations issued by CCIF CPA Limited[1107] satisfied the requirements of Clause 7 and were sufficient for the release of the retained sum. 398.In its letter addressed to DBS Trustee in respect of Zhang dated 25 October 2011, CCIF CPA Limited stated:
399.In its letter addressed to DBS Trustee in respect of Ji also dated 25 October 2011, CCIF CPA Limited stated:
This letter also repeated the same last 3 paragraphs contained in their letter sent in respect of Zhang which I have quoted above. 400.I am satisfied that CCIF CPA Limited was an accountancy firm of size and standing that ought to have been acceptable to DBS Trustee. Indeed, in their response[1108] denying the validity of the 2 written confirmations, DBS Trustee did not suggest that CCIF CPA Limited was an accountancy firm of insufficient size or standing. Their expressed reasons were these:
401.Clearly DBS Trustee had adopted a combative mode and were playing “hardball”. I can find no justification in their reasons for denying payment of the retained sums. Written confirmation was required from either the Chinese and Hong Kong revenue authorities or a partner on behalf of a Chinese and or Hong Kong law or accountancy firm of size and standing acceptable to [DBS Trustee] [my emphasis]. This requirement was satisfied. The requirement for written confirmation to be provided that:
was also satisfied by the written opinions provided by CCIF CPA Limited that I have set out above. The fact that that the letters did not specify what distributions had been received from the Trust and the fact that CCIF CPA Limited had not audited or otherwise attempted to verify the accuracy, truthfulness or completeness of the tax returns, statements and information previously submitted by Zhang to the aforesaid tax authorities, nor of the declaration of Ji, and, accordingly, expressed no opinion thereon, did not prevent their written opinions from satisfying the requirements of Clause 7. (6) Commencement of Legal Proceedings 402.Legal proceedings were commenced on 28 February 2011 by the issue of the Writ of Summons in the Commercial List of the High Court. (1) The Claims against DBS Trustee 403.Clause 19 of the Trust Deed exempted liability on the part of DBS Trustee, as outgoing trustee, except, amongst others:
404.For the reasons set out in the preceding paragraphs, I order DBS Trustee to repay to the Trust the sums of US$68,825 and GBP13,325 being amounts wrongfully paid out from the Trust for charges which were unrelated to the administration of the Trust. I also order DBS Trustee to pay interest on the said sums of US$68,825 and GBP13,325 from the dates that these amounts were paid out from the Trust to the date hereof at the per annum rate of 1% over HSBC US$ Prime and 1% over HSBC GBP Prime respectively during this period of time. 405.For the reasons set out in the preceding paragraphs I order DBS Trustee to repay to the Trust US$1m and to pay interest on the said sum of US$1m from 19 November 2011 to the date hereof at the per annum rate of 1% over HSBC US$ Prime during this period of time. 406.I refer to my findings on the duties of DBS Trustee set out in Section F (2) above and, in particular, in §§118-120 above. DBS Trustee had to act honestly and in good faith, with due diligence, as would a prudent person, to the best of their ability and skill, only in the interests of the beneficiaries, and in accordance with the terms of the trust, and not in a grossly negligent manner. By gross negligence is meant a serious or flagrant degree of negligence. 407.I refer to my findings in Section G (9) above and, in particular, to §§303-305 and 309-319 above. In approving the purchase of a very substantial quantity of AUD from 24 July to 5 August 2008, DBS Trustee failed to discharge their high level supervisory duty over the investments made by Wise Lords. I refer to §§314-315 above. Whilst I am prepared to accept that DBS Trustee did not fail to discharge their high level supervisory duty over the investments made by Wise Lords in respect of the first 2 purchases, set out in the Table in §314 above, in the sums of US$13m, I find that they ought to have queried and not given approval for the further purchases of US$83m worth of AUD, set out in the Table in §314 above, from 24 July 2008 to 5 August 2008, and that DBS Trustee failed to discharge their high level supervisory duty over the investments made by Wise Lords in respect of these purchases. Their failure constituted a breach of their duty to act with due diligence, to act as would a prudent person, to act to the best of his ability and skill, and to act only in the interests of the beneficiaries. Approving the further purchases of US$83m worth of AUD from 24 July 2008 to 5 August 2008, is not something which a trustee, complying with the duty to act prudently, could reasonably have done. I find, for the reasons set out in the afore-mentioned paragraphs of my judgment, that, in approving the further purchases of US$83m worth of AUD from 24 July 2008 to 5 August 2008, DBS Trustee acted in a negligent manner and that their degree of negligence was a serious or flagrant degree of negligence. 408.I refer to my findings in Section G (9) above and, in particular, to §§303-315 and 317-319 above. In approving the increased credit facility at the end of August 2008, DBS Trustee failed to discharge their high level supervisory duty over the investments made by Wise Lords. Their failure constituted a breach of their duty to act with due diligence, to act as would a prudent person, to act to the best of his ability and skill, and to act only in the interests of the beneficiaries. Approving the increased credit facility at the end of August 2008 is not something which a trustee, complying with the duty to act prudently, could reasonably have done. I find, for the reasons set out in the afore-mentioned paragraphs of my judgment, that, in approving the increased credit facility at the end of August 2008, DBS Trustee acted in a negligent manner and that their degree of negligence was a serious or flagrant degree of negligence. 409.I refer to my findings in Section G (10) above and, in particular, to §§324, 362-381 above. In approving the purchase of 3 Decumulators, DBS Trustee failed to discharge their high level supervisory duty over the investments made by Wise Lords. Their failure constituted a breach of their duty to act with due diligence, to act as a prudent person, to act to the best of his ability and skill, and to act only in the interests of the beneficiaries. Approving the purchase of 3 Decumulators is not something which a trustee, complying with the duty to act prudently, could reasonably have done. I find, for the reasons set out in the afore-mentioned paragraphs of my judgment, that, in approving the purchase of 3 Decumulators, DBS Trustee acted in a negligent manner and that their degree of negligence was a serious or flagrant degree of negligence. 410.Insofar as the aforementioned breaches of duty were caused or partly caused by the acts and omissions of DBS Corporate set out in Sections G(9) and (10), and in particular, in those paragraphs of my judgment mentioned in the preceding paragraphs, including the failure to inform DBS Trustee in a timely fashion of the offer of increased credit facility and, misinforming DBS Trustee about the purpose of increasing the credit facility, DBS Trustee are liable for those acts and omissions of DBS Corporate who was their agent and/or sub-agent (being the agent of NWT)[1111]. I do not accept the defendants’ submissions that DBS Corporate was not an agent but merely “an administrative conduit”[1112] or that, if DBS Trustee had not been informed by DBS Corporate of the increases in Wise Lords’ credit facilities, then there could be no basis to accuse them of breach of trust by failing to intervene[1113]. 411.Insofar as the aforementioned breaches of duty were caused or partly caused by the acts and omissions of DBS Corporate referred to in the preceding paragraphs, I find that the said acts and omissions of DBS Corporate amounted either to wilful misconduct[1114] on the part of DBS Corporate or that, by such acts and omissions, DBS Corporate acted in a negligent manner and that their degree of negligence was a serious or flagrant degree of negligence. If I am wrong to find that any of DBS Corporate’s acts and omissions, referred to in the preceding paragraphs, amounted to wilful misconduct, I would find, nevertheless, that the same conduct amounted to DBS Corporate acting in a negligent manner and that their degree of negligence was a serious or flagrant degree of negligence. 412.The defendants have relied on Clause 15 of the Trust Deed as exempting DBS Trustee from liability for any wrong committed by DBS Corporate[1115]. However, Clause 15 must be construed together with Clause 19 of the Trust Deed. Clauses 15 and 19 of the Trust Deed provided[1116]:
I construe these clauses as exempting DBS Trustee from liability from the acts of DBS Corporate except those acts of DBS Corporate which amounted to wilful misconduct or gross negligence on the part of DBS Corporate. I do so by applying Jersey law as set out in §§118-120 above. 413.I am satisfied that Arboit and Sutton have established their claims against DBS Trustee as pleaded in §§44(4), §§72-74, §§75-81, §§104(3), (4) and (8), §106(3) of the RASOC and are entitled to the reliefs claimed against DBS Trustee under sub-paragraph (3) of the RASOC for equitable restitution to the Trust for breach of trust in order to reconstitute the assets of the Trust so as to place the Trust in the position it would have occupied but for the said breaches; and for payment of the sums wrongly charged to the Trust in the sum of US$68,825 and GBP13,325 and of the retained sum of US$1m. 414.By its counterclaim[1117], DBS Trustee, relying on Clause 5 of the Deed of Appointment Retirement and Indemnity[1118], sought an indemnity from Arboit and Sutton against the claims made by them. Clause 5 provided:
415.“Liabilities” was defined in Clause 1(c) of the said Deed[1120] as all actions, proceedings, accounts, claims and demands of any kind (and all costs and expenses incurred in connection therewith) which were brought or made or might be brought or made or threatened to be brought or made by any beneficiary under the Trust or any person (whether in existence or not and whether actually or prospectively interested under the Trust Deed) in connection with the trusts of the Trust Deed or in any way relating thereto or to the capital or income of the Trust Fund from time to time whether the same should be enforceable in law or not and whether or not in respect of a period or event falling wholly or partly after or prior to the date thereof. 416.However, the proviso under Clause 5 limited the indemnity in these terms:
417.I refer to Clause 19 of the Trust Deed[1121] which I have set out in §§403 and 412 above and to my findings as to the liability of DBS Trustee. I find that the proviso under the said Clause 5 applies to the liability that has been established against DBS Trustee, being a liability in respect of which DBS Trustee would not have been entitled to reimbursement out of the trust fund if DBS Trustee had remained trustee. Accordingly, DBS Trustee cannot claim an indemnity from Arboit and Sutton, or from any other party, against the said liability. 418.I am not satisfied that the plaintiffs, or any of them, have any valid claims against DBS Trustee, other the claims of Arboit and Sutton in respect of the matters set out in the preceding paragraphs. 419.I refer to my findings in Section E (3) and Section G (1) above in respect of Ji’s suitability as Investment Advisor, the investments in mutual funds, and the allegation of churning of investments. In the light of these findings, the claims against DBS Trustee for approving Ji as Investment Advisor and for approving the many and frequent investments in mutual funds must fail. 420.I refer to my findings in Section G (4) above in respect of the DEVA Note. Despite my finding the DEVA Note was complex and exposed Wise Lords to a risky option trading strategy, I am satisfied that, in approving this investment in the sum of US$3m, DBS Trustee was not in breach of its duty as trustee. Prior to the purchase of the DEVA Note, Wise Lords’ portfolio was invested in mutual funds to the extent of over US$21m and had fixed deposits of almost US$5m. The net position was just short of US$26m[1122]. After the purchase of the DEVA Note, the net position was US$26.7m[1123]. The investment in the DEVA Note represented less than 11.5% of the total portfolio. Even though the DEVA Note was complex and exposed Wise Lords to a risky option trading strategy, DBS Trustee cannot be faulted for approving a risky investment that formed a small part of the entire portfolio. If I am wrong to make these findings, I would find, nevertheless, that the degree of negligence in granting the approval to purchase the DEVA Note did not amount to a serious or flagrant degree of negligence. 421.I refer to my findings in Sections G (5) (7) and (8) above in respect of the investments in FX and YEDs and the increases in credit facilities up to US$58m (HK$450m). DBS Trustee did not act in breach of its duty as trustee when, on 30 April 2008, it ratified the acceptance of increased credit facilities enjoyed by Wise Lords from 23 May 2007 up to 30 April 2008 and accepted future credit facilities from 30 April 2008 up to the limit of US$50m (HK$390m). As I have noted in §195 above, for the financial year from 1 April 2007 to March 2008, the unrealised profits in the trust were US$8.53m, which represented a profit percentage of 26.65% of the capital funds in the trust of US$32.02m[1124]. From February 2008, Ji switched from mutual funds to FX and YEDs. The increased holdings in AUD deposits and YEDs in Wise Lords’ portfolio has been set out in §296 above. During this period from February to May 2008, Wise Lords was enjoying profits from this investment strategy. The AUD rate had gone up from USD0.9035 to AUD1 from 1 February 2008, to USD0.9419 to AUD1 on 30 April 2008, and to USD0.9604 to AUD1 on 4 June 2008[1125]. Malik’s calculations showed cumulative profits from AUD deposits of US$78,083 as at 13 May 2008[1126] and cumulative profits from YEDs of US$463,133 as at end May 2008[1127]. Having regard to the rising profits in the portfolio, DBS Trustee cannot be faulted for approving the investments in FX and YEDs and ratifying the past increased facilities that had been offered and utilised and accepting new facilities from 30 April 2008 up to the limit of US$50m (HK$390m). Although DBS Trustee did not, at an initial stage, fully understand YEDs, they had been provided with a satisfactory explanation by 28 May 2008[1128]. Nor did DBS Trustee act in breach of its duty as trustee when, on 4 June 2008, it approved the increase of the credit facility from US$50m (HK$390m) to US$58m (HK$450m)[1129]. If I am wrong to make these findings, I would find, nevertheless, that the degree of negligence in granting these approvals did not amount to a serious or flagrant degree of negligence. 422.I refer to §135 above and to my findings that, notwithstanding that the relationship between DBS:PB was transaction execution only, DBS Corporate misinformed DBS Trustee when it stated in the Delegated Management Query Forms that Wise Lords' portfolio was managed by “RM of Hong Kong on an advisory role”; and that DBS Trustee acted on the basis that the Delegated Management Query Forms contained accurate information that DBS:PB had undertaken advisory duties to Wise Lords. Many Letters of Recommendation addressed to DBS Trustee had been signed by Linda Liu and Edwin Lim of DBS:PB recommending that DBS Trustee grant approval for the application in question[1130]. As I have found in §171 above, the effect of the Letters of Recommendation issued by DBS:PB was that DBS:PB was advising DBS Trustee that the investment transaction in question was a recommendable investment which, as account manager of Wise Lords’ account with DBS:PB, they could recommend to Wise Lords to enter into. DBS Trustee relied on these Letters of Recommendation in granting approval and did so on the basis that DBS:PB was discharging its advisory duty to Wise Lords in making these recommendations. I find that, by misinforming DBS Trustee that Wise Lords’ portfolio was managed by “RM of Hong Kong on an advisory role”, DBS Corporate was in breach of its duty to provide correct information to DBS Trustee. However, I also find that the degree of negligence on the part of DBS Corporate in misinforming DBS Trustee as aforesaid did not amount to a serious or flagrant degree of negligence. Accordingly, I do not find DBS Trustee liable to Arboit and Sutton for breach of trust on this ground. 423.I summarised the law of equitable restitution or equitable compensation in my judgment in Akai Holdings Ltd. (In Compulsory Liquidation) v. Everwin Dynasty Ltd. & Ors (No. 2) [2016] 3 HKC 307 at §§464-475 as follows:
424.These principles apply to the present claim. It is not in dispute that DBS Trustee was under a fiduciary duty to the Trust. I am satisfied that the breaches of duty by DBS Trustee, that I have found to have been established, have directly caused loss of the assets of the Trust in that they have directly led to diminution of the value of the assets held in Wise Lords’ portfolio. Our case also falls into the first category identified by Ribeiro PJ above[1133], being a case where the breaches of duty by DBS Trustee have led directly to losses being suffered by Wise Lords’ portfolio, i.e. a case where “there are breaches leading directly to damage to or loss of the trust property”. 425.This is a case where it is appropriate to award equitable compensation against DBS Trustee in favour of Arboit and Sutton, that is to say, not compensation for loss but compensation that is restitutionary or restorative. I do not find any assistance from the plaintiffs’ submissions on the basis upon which I should award equitable compensation[1134]. It is not necessary to order an account as the assets in Wise Lords’ portfolio are well documented. I intend to adopt a robust approach to assess the equitable compensation by, firstly, attempting to determine the value of the assets in Wise Lords’ portfolio on the date of the issue of the Writ in these proceedings on 28 February 2011; and, secondly, by attempting to assess what that value might have been on 11 February 2011 if Wise Lords had not acquired US$83m worth of AUD from 24 July to 5 August 2008 and had not purchased the 3 Decumulators but had carried out the other transactions listed in Arboit’s 2nd Schedule that were unrelated to the purchases of US$83m worth of AUD from 24 July to 5 August 2008 and unrelated to the purchases of the 3 Decumulators[1135]; and, thirdly, by awarding the difference between the 2 values to Arboit and Sutton, being the trustees of the Trust, as equitable compensation. I need further assistance from the financial experts, Das and Malik, to enable me to do so and I give further directions below for a further joint report to be obtained from them. (2) The Claims against the Other Parties 426.By reason of the findings I have made in Sections D to G above, I dismiss the claims of the other plaintiffs against the defendants other than the claims of Wise Lords against DHJ Management. (a) The claims against DBS Bank/DBS:PB 427.The plaintiffs advanced many allegations against DBS Bank and its Private Banking Division, DBS:PB, in respect of investment transactions made in the course of the banking relationship and the credit facilities that were provided for those transactions. Although DBS:PB, being a division of DBS Bank was not a separate legal entity, I prefer to make a distinction between DBS:PB and DBS Bank as they were engaged in different activities. DBS:PB provided private banking services to Wise Lords and DBS Bank provided credit facilities to Wise Lords. 428.It was claimed that DBS:PB (along with Linda Liu, Peter Lee and Edwin Lim) “assumed a statutory or common law duty of care” to Zhang and Ji[1136]:
429.It was also claimed that DBS Bank and DBS:PB “took on contractual, equitable and statutory duties” to Wise Lords and/or the Trust (as beneficial owner of Wise Lords)[1137]:
It was alleged that DBS Bank and DBS:PB breached the above duties and caused loss and damage to the plaintiffs. 430.I find that DBS Bank, DBS:PB, Linda Liu, Peter Lee and Edwin Lim did not owe any statutory or common law duties of care to Zhang and Ji. The banking relationship between the bank and its customer was exclusively governed by contract. In this case, the only contract was between DBS Bank, DBS:PB and Wise Lords. I also find that DBS Bank and DBS:PB did not owe any contractual or statutory duties to the Trust. The fact that the single share in Wise Lords formed the asset of the Trust did not make the Trust a party to the banking contract. 431.It was common ground that DBS Bank and DBS:PB owed to Wise Lords, the duties to act honestly and fairly and to act with reasonable skill and care, being implied duties arising from the banking relationship between DBS Bank, DBS:PB and Wise Lords. Apart from the exaggeration of Ji’s abilities and exaggerations by Linda Liu of Ji’s and Zhang’s assets to support the increased credit facilities, no breach of any such duty occurred such as, for example, a failure to execute a trade accurately and without delay. The exaggeration of Ji’s abilities did not cause any loss and damage as Ji quickly became an astute and experienced investor[1138]. The exaggerations by Linda Liu of Ji’s and Zhang’s assets to support the increased credit facilities[1139] was a wrong done by Linda Liu to DBS Bank who granted the facilities and did not create a cause of action in favour of any of the plaintiffs. If I am wrong to make these findings, I would find, nevertheless, that the exaggerations by Linda Liu of Ji’s abilities and Ji’s and Zhang’s assets to support the increased credit facilities did not cause any loss or damage to any party, such that any breach of contractual duty by DBS:PB to Wise Lords would only attract an award of nominal damages. Wise Lords did not suffer any loss or damage from the grant of the credit facilities or the increased credit facilities: they were suffered from the substantial purchase of AUDs from 24 July 2008 to 5 August 2008 and the purchase of the 3 decumulators. 432.On my construction of the express contractual arrangements between the parties, the relationship between Wise Lords and DBS Bank, and DBS:PB was not advisory but transaction execution only. DBS Bank and DBS:PB did not assume either contractual or common law duties of care to advise and/or ensure the suitability of investments for Wise Lords. Given that the relationship between Wise Lords and DBS:PB was not advisory but transaction execution only, the complaints by Das of inadequate disclosure did not amount to a breach of any express contractual duty. I also find, given that the relationship was transaction execution only and given the extent of the disclosure that had been made, that the complaints by Das of inadequate disclosure did not amount to a breach of the implied the duties to act honestly and fairly and to act with reasonable skill and care. 433.Although sections 108 and 277 of the SFO have been referred to in sub-paragraphs (2) and (3) of §429 above, no case has been pleaded or advanced based on section 277 of the SFO or in respect of any alleged misrepresentation within the meaning of section 108 of the SFO. 434.Although the SFC Code was relied upon, how SFC Code was incorporated into the contract between the parties was not pleaded. I find that the SFC Code was not incorporated into the contract between DBS Bank, DBS:PB and Wise Lords. It has been stated in Snell’s Equity(33rd ed.) at 7-005:
In DBS Bank (HK) Ltd. v San-Hot HK Industrial Co. Ltd. [2013] 4 HKC 1, the defendants abandoned their claim at trial that fiduciary duties were owed by the bank towards them and Deputy High Court Judge Pow commended them for doing so[1140]:
I can find no “exceptional circumstances” in the present case which would have required DBS Bank or DBS:PB to subordinate its interests to those of Wise Lords, or which would have justified the parties in believing that this would have been necessary or appropriate. The relationship which arose between the bank and Wise Lords was a banker-customer relationship governed by express contractual documents. 436.For the reasons set out in Section G (2), the plaintiffs’ claims for damages for misrepresentation in respect of redemption restrictions are dismissed. (b) The claims against DBS Corporate 437.On 13 September 2005, a Services Agreement, governed by Hong Kong law, was made between DBS Corporate, Wise Lords and DBS Trustee as trustee of the Trust, whereby DBS Corporate agreed to provide services specified in Schedule II of the agreement in relation to Wise Lords, including the incorporation of Wise Lords, the provision of a Nominee Director, Company Secretary services, the provision of a correspondence address and the provision of bank authorised signatories[1142]. The relationship between DBS Corporate, Wise Lords and DBS Trustee was the subject of this agreement by which DBS Corporate was to perform or appoint one or more persons/companies as nominees (collectively the “Nominees”, which expression was stated in the agreement to include DBS Corporate) to perform the services. The services specified were in the nature of record keeping, signatory, correspondence and provision of nominee director. The role played by DBS Corporate in relation to Wise Lords after the Trust was set up in January 2005 and prior to the Services Agreement was essentially the same and the Services Agreement served to formalise the arrangement[1143]. 438.After Ji transferred her one share in Wise Lords to DBS Trustee in the course of the setup of the Trust, DBS Trustee nominated DHJ Management (at the time still a subsidiary of DBS Trustee) to act as director of Wise Lords. After DHJ Management became a subsidiary of DBS Corporate on 17 August 2005, DHJ Management continued to act as DBS Corporate’s nominated director of Wise Lords[1144]. 439.Clause 3 of the Services Agreement provided inter alia that:
440.I reject outright the plaintiffs contention that the Services Agreement was “a sham purported contract”[1145]. The services which DBS Corporate contracted to provide under the Services Agreement were indeed provided by it. 441.The plaintiffs contend that DBS Corporate and DHJ Management each took on the following fiduciary duties to Wise Lords by accepting their respective appointments:
Applying the principles set out in §435 above, I find that the relationship between Wise Lords and DBS Corporate did not give rise to any fiduciary duties. Whether before or after the execution of the Services Agreement, there was nothing “exceptional” in the relationship (one of corporate services provision) that warranted the designation of DBS Corporate as a fiduciary of the company. 442.The acts and omissions of DBS Corporate mentioned in §§410-411 above were committed as the agent of DBS Trustee in respect of which I have already found DBS Trustee liable. DBS Corporate was not in breach of its Services Agreement with Wise Lords. (c) The claims against DHJ Management 443.DHJ Management, on the other hand, as director of Wise Lords owed the duties of a director to Wise Lords. Even though it was providing directorship services pursuant to the Services Agreement, it was subject to, and had to properly discharge, the duties of a director. These duties included the duty to Wise Lord to act bona fide in the best interests of the company; and to exercise reasonable care, skill and diligence in the performance of their functions and their management of the company’s affairs. 444.As explained by Mayes, during the time that he and Colin Walker served as directors of DHJ Management from 13 December 2006 (until 8 July 2008 for Mayes), they acted in two capacities in relation to the Trust – both as directors of the trustee and as directors of the underlying company’s corporate director:
445.I have already found that DHJ Management was entitled to authorise Ji to execute investment transactions on behalf of Wise Lords and that Ji’s power to direct investments was subject to the power of the DBS Trustee and DHJ Management to override Ji’s decisions or reverse the transactions she conducted for Wise Lords[1149]. 446.The duties of a company director who has delegated particular functions have been summarised by Morritt L.J. in Re Barings plc (No. 5) [2000] 1 BCLC 523 (C.A.) per at 535i - 536c, §36:
447.I refer to §§31, 33, 35 and 37 above. On 17 August 2005, DHJ Management became a wholly owned subsidiary of DBS Corporate. DHJ Management did not have any employees and the work of DHJ Management in Hong Kong was performed by DBS Corporate, whose work was, in turn, performed by the colleagues of Peter Lee at DBS Bank’s Trust and Corporate Services Department. The operational duties performed by DBS Corporate for DBS Trustee set out in §33 above, such as sending Investment Application forms to DBS Trustee for approval, sending Notifications of Activities forms, sending applications to DBS Trustee to accept offers to increase credit facilities, keeping DBS Trustee informed regularly of the state of Wise Lords portfolio, posing detailed queries to DBS:PB on proposed investments, that were done to enable and facilitate DBS Trustee to perform its trustee functions, were also done to enable and facilitate DHJ Management to perform and discharge its duty as director of Wise Lords. Just as DBS Corporate acted as agent of DBS Trustee in respect of the above operational matters so it also acted as agent of DHJ Management in respect of the same operational matters which were done to enable and facilitate DHJ Management to perform and discharge its duty as director of Wise Lords. 448.I refer to my findings in §407 above. For the same reasons as set out therein, I find that, in approving the further purchases of US$83m worth of AUD from 24 July 2008 to 5 August 2008, DHJ Management failed to discharge their duties as a director of Wise Lords to act in the best interests of the company and to exercise reasonable care, skill and diligence in the performance of their functions and their management of the company’s affairs. For the same reasons as set out therein, I find that DHJ Management acted in a negligent manner and that their degree of negligence was a serious or flagrant degree of negligence. 449.I refer to my findings in §408 above. For the same reasons as set out therein, I find that, in approving the increased credit facility at the end of August 2008, DHJ Management failed to discharge their duties as a director of Wise Lords to act in the best interests of the company and to exercise reasonable care, skill and diligence in the performance of their functions and their management of the company’s affairs. For the same reasons as set out therein, I find that DHJ Management acted in a negligent manner and that their degree of negligence was a serious or flagrant degree of negligence. 450.I refer to my findings in §409 above. For the same reasons as set out therein, I find that, in approving the purchase of the 3 decumulators, DHJ Management failed to discharge their duties as a director of Wise Lords to act in the best interests of the company and to exercise reasonable care, skill and diligence in the performance of their functions and their management of the company’s affairs. For the same reasons as set out therein, I find that DHJ Management acted in a negligent manner and that their degree of negligence was a serious or flagrant degree of negligence. 451.I refer to my findings in §§410-411 above. For the same reasons as set out therein, I find that DHJ Management are liable for those acts and omissions of DBS Corporate who was their agent. I also repeat my findings in §411 above. 452.The defendants have relied on Clause 3(a) of the Services Agreement as exempting DHJ Management from liability. By reason of my findings above, Clause 3(a), which exempts liability on the part of DHJ Management “except in the case of bad faith or negligence of the Nominees [including DHJ Management]” does not apply to the present case. The defendants also counterclaim for an indemnity in reliance on Clause 3(b) and Clause 7 of the Services Agreement. Clause 7 must be construed together with Clause 3(b) which requires Wise Lords to indemnify DHJ Management except “in the case of gross negligence of the Nominees [including DHJ Management]”. Again, by reason of my findings above that this was a case of gross negligence on the part of DHJ Management and their agent, DBS Corporate, the counterclaim fails and is dismissed. 453.I now consider whether the relief of equitable compensation is available against DHJ Management. This turns on whether or not the duties breached by DHJ Management were fiduciary duties. Ribeiro PJ dealt with this question in Libertarian Investments Limited v Thomas Alexej Hall (2013) 16 HKCFAR 681 in the following manner at pp.703-706:
Applying these principles, I conclude that the duty of DHJ Management to act bona fide in the best interests of Wise Lords is a fiducial obligation, the breach of which entitles Wise Lords to claim the relief of equitable compensation against DHJ Management. 454.I refer to §423 above. These principles apply to the present claim. I am satisfied that the breaches of duty by DHJ Management, that I have found to have been established, have directly caused loss of the assets of Wise Lords in that they have directly led to diminution of the value of the assets held in Wise Lords’ portfolio. The present claim also falls into the first category identified by Ribeiro PJ above[1159], being a case where the breaches of duty by DHJ Management have led directly to losses being suffered by Wise Lords’ portfolio, i.e. a case where “there are breaches leading directly to damage to or loss of the trust property”. 455.This is a case where it is appropriate to award equitable compensation against DHJ Management in favour of Wise Lords, that is to say, not compensation for loss but compensation that is restitutionary or restorative. As I stated in §423 above, it is not necessary to order an account as the assets in Wise Lords’ portfolio are well documented. I intend to adopt the same robust approach to assess the equitable compensation by the same exercise as set out in §425 above. 456.I am satisfied that Wise Lords have established their claims against DHJ Management as pleaded in §§44(4), §§72-74, §§75-81, §§105(3) and (4), and §106(4) of the RASOC and are entitled to the reliefs claimed against DHJ Management under sub-paragraph (5) of the RASOC for equitable restitution to Wise Lords for breach of fiducial obligations in order to reconstitute the assets of Wise Lords so as to place Wise Lords in the position it would have occupied but for the said breaches. 457.I have made a similar finding in favour of Arboit and Sutton against DBS Trustee. As the Trust owns the entire shareholding of Wise Lords it owns, via its shareholding, the assets Wise Lords. The law does not permit double recovery. If Arboit and Sutton obtain complete satisfaction from DBS Trustee, then Wise Lords cannot seek equitable compensation from DHJ Management and vice versa. If Arboit and Sutton obtain partial satisfaction from DBS Trustee, then Wise Lords can seek equitable compensation from DHJ Management for the balance and vice versa. 458.I am not satisfied that the plaintiffs, or any of them, have any valid claims against DHJ Management, other the claims of Wise Lords in respect of the matters set out in the preceding paragraphs. For the reasons set out in §§419 to 421, I find that DHJ Management were not in breach of its duty as director of Wise Lords in respect of the matters set out therein. (d) The claims against Linda Liu, Peter Lee and Edwin Lim 459.The plaintiffs’ pleaded case against the individual defendants is that Peter Lee, Edwin Lim and Linda Liu all assumed statutory or common law duties of care to Zhang and Ji[1160], which they had breached by the conduct alleged in §102 of RASOC[1161]. The alleged conduct related to advocating the trust and company management structures, pressing Ji to provide a personal guarantee, advising Wise Lords to concentrate on China-focused mutual funds and trading on margin, making the “No Call Representation”, and generating “false”, “forged”, “misleading” and/or “disingenuous” documents. 460.It was asserted that Peter Lee and Linda Liu are liable in damages to Zhang and Ji for these breaches[1162], and that Peter Lee, Edwin Lim and Linda Liu are also liable to pay damages or equitable compensation either to the Trust or to Wise Lords for his or her knowing assistance in fraudulent or dishonest wilful breaches of trust by DBS Trustee and dishonest breaches of fiduciary duty by each of DBS Corporate and DHJ Management[1163]. 461.I refer to my finding in §430 above. These claims against the individual defendants fail. I can see no basis to find that the individual defendants assumed statutory or common law duties of care to Zhang and Ji. The customer of the bank was Wise Lords (not Zhang or Ji) and its relationship with DBS Bank and DBS:PB (and individual bank officers) was one defined and governed by contract. Whilst Ji was the person who had dealings and interactions with the bank personnel, she did so for and on behalf of Wise Lords (first as the company’s sole director and subsequently as its Investment Advisor). 462.In addition, the high-level, supervisory positions which Peter Lee and Edwin Lim occupied within DBS Bank and DBS:PB is another factor that strongly militates against the assumption of personal duties by them towards Zhang and Ji. 463.My factual findings on the conduct of Linda Liu, Peter Lee and Edwin Lim appear in Sections D to G above. (e) The claims of knowing assistance 464.I now deal with claims of “knowing assistance” that were advanced against DBS Bank, DBS:PB and the individual defendants with regard to the various alleged breaches of trust or fiduciary duties by DBS Trustee, DBS Corporate and/or DHJ Management. I note that the only reference to “knowing assistance” is in §106(5) of the RASOC[1164] which pleaded the entitlement to a remedy. 465.For a claim of knowing assistance to be established:
466.Further, Linda Liu did not occupy any positions within DBS Trustee, DBS Corporate or DHJ Management. I have also found that she did not have any substantive involvement in the matters of the Trust. Although I have faulted her conduct as Relationship Manager of DBS:PB, I find that she did not act dishonestly. 467.Edwin Lim:
468.Peter Lee:
469.The claims of knowing assistance by DBS Bank, DBS:PB, Linda Liu, Peter Lee and Edwin Lim have not been established to my satisfaction. 470.On 26 September 2014, I had ordered that:
471.In the transcript of that hearing I am recorded to have said that:
472.Even if a claim for knowing assistance by DBS Bank, DBS:PB, or by Linda Liu, Peter Lee and Edwin Lim, had been originally made, the claims have not been established to my satisfaction and I need not make any further order in respect of the proposed amendment to §44 of the RASOC. 473.The claims for breaches of duty on the part of DBS Bank, DBS:PB, Peter Lee, Linda Liu have not been established to my satisfaction. 474.The claims against DBS Corporate have not been established to my satisfaction. 475.The claims against DHJ Management have not been established to my satisfaction, other than the breaches of duty that I have found above to have been established. 476.The claims knowing assistance have not been established to my satisfaction. 477.Consequently, I dismiss the following claims made by the plaintiffs:
478.This type of “carpet bombing” litigation is to be frowned upon. Raising multiple and serious allegations, some spurious, against every individual and entity involved with the Trust has resulted in this complex, costly and prolonged litigation. (3) Further Conduct of the Proceedings 479.I refer to §§425, 455 and 457 above. Unless the parties or any of them apply within 28 days to me to vary this direction, I direct that the solicitors for Arboit and Sutton and Wise Lords and the solicitors for DBS Trustee and DHJ Management jointly appoint and instruct Das and Malik to prepare an expert report within 42 days setting out the value of the assets in Wise Lords’ portfolio as at the date of the issue of the Writ in these proceedings on 11 February 2011; and, secondly, setting out their opinion on what that value might have been on 11 February 2011 if Wise Lords had not acquired US$83m worth of AUD from 24 July to 5 August 2008 and had not purchased the 3 decumulators but had carried out the other transactions listed in Arboit’s 2nd Schedule that were unrelated to the purchases of US$83m worth of AUD from 24 July to 5 August 2008 and unrelated to the purchases of the 3 decumulators. The report should be filed in court when it is produced. 480.Within 28 days of the said joint expert report being filed in court, the parties are to exchange and file written legal submissions[1178]; and within 14 days thereafter, the parties are to exchange and file written legal submissions in reply[1179]. These submissions should deal with the quantum of the award of equitable compensation that I should make against DBS Trustee and DHJ Management; interest; and costs of the proceedings. I may give further directions for an oral hearing after I have received these submissions. I also grant liberty to apply. 481.I cannot conclude this judgment without expressing my gratitude to counsel for the assistance they have rendered to me.
Mr Barrie Barlow SC and Mr Chan Pat Lun, instructed by Reed Smith Richards Butler, for the 1st to 4th plaintiffs Mr Ashley Burns SC, Mr Abraham Chan and Ms Bonnie Cheng, instructed by Mayer Brown JSM, for the 1st to 7th defendants [1] §17.4 of plaintiffs’ speaking note dated 30 October 2014. [2] [D1/5/2687] [3] [D1/27/2788-2800] [D1/39/2809] [4] [CB/4/78-89] [D66/584/17834-17845] [5] See 2nd Schedule of Witness Statement of Arboit [B/1/546-548] [6] [CB/7/102-109] [D1/61/2847-2854] [7] [D1/46/2829-2840] [D2/67/2880] [D2/84/2977-2979] [8] [CB1/131-168][D2/75/2931-2968] [9] Day 13 on 17 June 2014, after hearing submissions lasting less than half an hour. The adjournment was sought on account of 11 bundles of newly discovered documents. [10] Day 21 on 23 September 2014 and Day 22 on 26 September 2014. See my Order dated 26 September 2014 [A2/(489-8)-(489-10)] [11] The pleadings occupied 2 bundles: A1 and A2. The witness statements were in Bundle B. The expert reports and their exhibits occupied 8 bundles: C1-C8. [12] 26 May 2014 to 12 June 2014 [T4/Day18/7(10)-(13)] [T4/Day19/1(6)-(20)] [13] [F/23994§§5-6] [14] P1-P7 and D1-D3. [15] As I had observed on Day 13 of the trial [T3/Day13/12(9-18)]. See Practice Direction SL1.2 – Pilot Scheme for Discovery and Provision of Electronically Stored Documents in Cases in the Commercial List. The Judiciary has formed a Committee on Information Technology which is starting a consultation process on the use of E-Services, including E-Filing. The Pilot Scheme provides: “M Presenting Documents and Other Materials to Court at the Trial 32. Pursuant to paragraph 8(4) of this Practice Direction where Documents and other materials are required to be presented to Court at trial, parties may choose to adduce evidence in the format of Electronic Documents. They may need to bring along their own devices equipped with necessary software or specialised technology for presenting the Electronic Documents to Court.” [16] [B/1/490-603-27] [17] [T1/Day3/50(1)-55(9)] [18] Defendants’ closing submissions pp.13-17. [19] [B/3/611-638-1] [T1/Day3/55(2) – T2/Day7/73(25)] [20] [B/2/604-610] [T2/Day8/1(18)-55(12)] [21] [B/7/715-744] [T2/Day9/89(21) – T3/Day 11/130(25)] [22] [B/4/639-677] [T3/Day12/24(7)-91(20)] [T3/Day14/5(9) – T4/Day16/19(14)] [23] [T4/Day16/21(2)-82(22)] [24] [B/6/694-714] The Witness Statement had been amended to delete inadmissible opinion evidence and matters on which he had no personal knowledge. [25] [B/5/678-693] [T4/Day17/2(15)-56(4)] [26] [B/8/745-785] [T4/Day18/1(3) - T4/Day20/97(1)] [27] The expert reports were contained in Bundles C1-C2 and the exhibits to their reports in Bundles C2-C8. [28] [C1/3/861-947] [29] [C1/4/948 - 1034-1] [30] [C2/6/1050 - 1064-5] [31] [C1/1/786-818] [32] [C1/2/819-860] [33] [C2/5/1035-1049] [34] Annex VIII to the final submissions of the plaintiffs. The defendants had re-written the last 2 columns setting out their contentions on the facts and the evidence that they relied upon in support: [T5/Day21/2(11)-3(7)]. [35] [T1/Day3/91(9-20)] [36] [CB1/12/91] [37] [D1/2/2634] [D1/1/2629-2633] [38] [T1/Day3/86(2)-88(12)] [39] [T1/Day3/91(9-10); 93(3)-(17)] [40] Linda Liu did not prepare this document [T3/Day14/26(10)-27(13)]. [41] [T1/Day1/52(22)-53(23)] [42] [D1/25/2749, 2756,2758,2760,2762] [43][E4/43/19490-19499] [E4/44/19510-19547] [E7/62/20268-20274] [D18/758/6910-D19/758/6963] During this conversation Ji invited Kenneth Cheung, who handled FX trading at DBS:PB, to speak in English [E7/62/20276]. Under cross examination, Ji acknowledged that she had telephone conversations with Kenneth CheungandWendy Yung, DBS:PB Investment Advisor, entirely in English [T1/Day4/7(25)-8(20)]. [44] Emails written by Ji in English in 2004 can be found in [D1/7/2712], [D1/22/2744-2745] [45] [CB1/94] last modified on 20/09/2004 and printed on 30/12/2004. This had been prepared by Linda Liu [T3/Day12/53(15-18)]. [46] [CB1/100] [47] U.S Dollar (“USD”) [48] [T1/Day4/65(8)-(23)] [49] Know-Your-Customer (“KYC”) [50] [D21/900/7631][B/3/613§7] A 5 year investment in the Taiwanese company became a 10 year investment and this could have been the source of the suggestion that Ji had 10 years’ investment experience in mutual funds. [51] [T3/Day14/25(23)-26(9)] [52] She had initially mentioned US$30 million but later corrected that figure to US$20 million [T2/Day7/5(18)]. [53] [B/3/612/§§6-7] [D1/22/2744-2745] [T1/Day3/94(4-23)] [54] Premium deposits were currency linked notes that were the same as DBS Bank’s YEDs. [55] [T3/Day14/24(10)-25(25)] [56][E2/21/§§21-32 (10 December 2004)] [57][E2/21/§§51-52 (10 December 2004)] [58][E2/24/§§21-23 (5 January 2005)] [59][E2/25/§39 (5 January 2005)] [60] [E2/30/§§283-285 (6 April 2005)] [61] [E3/34/§7 (13 May 2005)] [62] [B/4/2§6] [T2/Day8/16(2)-17(4)] [63] [CB1/35-51] [64] [B/4/642§8] [T3/Day12/28(8)-(13)] [65] [D1/11/2716] [66] [D1/8/2713] [D1/10/2715] [67] [CB1/35-51] [68] [CB1/37] [69] [CB1/37] [70] [CB1/39] [71] [CB1/39] [72] [CB1/41] [73] [CB1/41] [74] [CB1/47] [75] [CB1/49] [76] [CB1/51] [77] [CB1/51] [78] [B/7/715-719] [B/8/746-747] Defendants’ Opening p.38-39§§131-134 [79] [T2/Day10/5(9)-6(4)] [80] [D1/3/2639-2676] [81] [T2/Day10/5(9)-6(4)] [82] Or Nautilus Jersey from April 2013. [83] Clause 25 [D1/3/2668] [84] Dicey, Morris and Collins The Conflict of Laws (15th ed.) Vol 1 §9-025 [85] [D1/4/2677-2686] [86] Clause 1.1 [D1/4/2679] [87] [D2/98/3003-3006] [88] Clause 2(b) [D2/98/3004] [89] Clause 2(c) [D2/98/3004] [90] [B/8/746§3] [91] [B/8/781-2§101] [92] [B/5/681§12] [93] [C1/2/852§90] [94] [T4/Day19/5(25)-6(16),9(24)-10(11)] [95] [B/8/746-747§§6-7] [96] [B/7/718§10] [B/8/750§16] [97] [T2/Day9/103(15)-(18)] [98] Or Nautilus Jersey from April 2013. [99] [B/7/729§43] [100] Clause 3 [D2/98/3004] [101] Dicey, Morris and Collins The Conflict of Laws (15th ed) Vol 1 §9-025 [102] [D2/101/3013-3017] [103] [D27/1020/9002] [104] [T2/Day9/100(9)-(12)] [105] [B/7/718-719,731-735§§11-14,52,56,60] [106] [T4/Day19/5(25)-6(16),9(24)-10(11)] [107] See 2006 Procedures Manual at [D4/228/3473-3475, 3488, 3493, 3516, 3521-3522] and 2010 Procedures Manual at [D24-25/952/8315-8318, 8352, 8405, 8414]. [108][T2/Day9/112(2)-(7)]. Appendix 11 of the 2010 Procedures Manual at [D25/952/8509] was the Codes of Practice for Trust Company Business issued by the Jersey Financial Services Commission. [109][T2/Day9/109(2)-110 (18)] [110] [D4/228/3521-3522] [111] [T3/Day10/16(1) to 23(9)] [T3/Day11/6(11) to 8(19)] [112] [D4/228/3464] [113] [T3/Day9/109(8)] [114] A senior manager of the Trust and Corporate Services Department [B/8/754§27] [115] [B/3/614§8] [T1/Day4/17(5)-(15)] [116] [B/8/754-755§§27-28] [T4/Day18/43(10)-48(10)] [CB3/798-799] [D1/22/2744-2745] [117] [CB1/52] [118] [CB1/53-60] The words “Long Form Irrevocable” were handwriting under §4 dealing with the nature of the trust to be established. [119] [F1/2/24004] that was disclosed by the defendants on 16 June 2014 after the plaintiffs had closed their case. [120] That is both Ji and Zhang. [121] [CB1/61-62] [122] [CB1/63] [123] [CB1/65] [124] [T1/Day4/23(10)-24(4)] [125] [CB1/66] [126] [CB1/68] [127] [D1/29/2790] [CB1/70-77] with both Linda Liu and Peter Lee signing off on the arrangement [CB1/77]. [128] [CB1/71] [129] [EB/16] [130] [CB1/78-82] [131] [CB1/82] [132] [CB1/82] [133] [CB1/79] [134] [CB1/1-34] [135] [CB1/15: Section H’s sub-para. (v)] [136] [CB1/78-82: at top] [T3/Day12/61/10-21] [T4/Day18/65/3-13]. [137] [CB1/90-99] The information had been acquired over the course of a number of days in March and April 2004: [B/4/646§18]. [138] [CB1/90-99] [139] [CB1/96] [140] [B/3/614§12,616§27] [T1/Day4/21(3)-(13)] [141] [B/8/751§20, 762§50] [142] [D1/22/2744] [143] [B/4/642-643§10-11] [T3/Day12/25-35] [144] [CB1/100-101] [145] [D3/174] [146] See the emails at [D2/86][D12/450-457] [147] [D1/23/2746] [148] [D1/22/2744-2745] [149] [F1/4/24011] First disclosed on Day 13. [150] [CB1/100-101] [151] [CB1/101] [152] [T1/Day4/31(18)-32(14)] [153] [F1/4/24011] [154] Invoice for USD$4,500 or HK$35,100 being the trust set up fees and receipt [CB1/6/63], [CB1/7/65]. DBS Bank Deposit Advice dated 27.05.2004 [D57/16/15737] [155] [B/1/550-554, items 1-68] [156] DBD:PB Investment Advisor [157] [T1/Day4/46(1)-(5)] [158] Composite Table of Disputed Facts p.8 [159] [B/3/615§19] [160] Receipt of statutory records including company chop signed by Ji [D1/28/2789]. [161] [T2/Day7/15(13)-16(9)] [162] [T4/Day18/69(21)-p71(19)] [163] [EB/17] [164] [CB1/173] [T4/Day19/60(5-18)] [165] Item 8 has been split into 2 items 8A: CV of Investment Advisor and 8B: Investor Advisor Agreement. [166] [CB1/115] [167] [EB/17] [168] [CB1/106-113] [169] [CB1/112] [170] Thereby indicating that the Settlors were not obtaining independent legal advice. [171] [CB1/113] [172] [EB/17] [173] [EB/17] [174] [D1/Tabs 46-52] [175] [CB1/129] [176] [EB/17] [177] [CB1/102-3] [178] [EB/17] [179] [CB1/177-178] [180] [EB/17] [181] [CB1/169] [182] [CB1/170-172] [183] [CB1/172] [184] [CB1/105] [185] [CB1/131-168] [186] [EB/17] [187] [D1/Tabs 46-52] [188] [D1/46/2829] [189] [CB1/113-1] [190] i.e. the previous authorisation given to Ji [CB1/82]. [191] [T4/Day18/73(17)-78(7)] [192] [CB1/114-129] [193] [CB1/130] [194] [CB1/168] [195] [T4/Day14/32(11)-33(12)) [196] The Trust Application dated 29/12/2004 [D1/61/2853] (which contains the note that client is advised to seek independent legal/tax advice). [197] [D1/61/2853] and [D2/73/2929] [198] [CB1/179 to 183] Clause 9 stated that it was governed by Hong Kong law. [199] [D1/59] [200] [T1/Day3/64-65] [T1/Day4/74-76] [201] [T3/Day14/26(23)-(25)] [202] See §§16 and 20 above. [203] [D21/875] [D21/877/7489,7491] [204] [CB1/170] [205] See §46 above. [206] [D7/300] [D7/313] [CB2/320]. [207] [T2/Day10/100(21-22)] [CB1/122] [208] Structure chart dated 29 December 2004 shows settlers would be appointed as investment managers under the Trust [CB1/121]. Email from Edna Chan to Mayes and David Muir dated 5 December 2006 in which Edna mentioned client “being the investment advisor” [D3/190/3361]. Email from Colin Walker to Mayes dated 8 December 2006 in which Colin remarked “This type of investment does demonstrate the advantages of a Settlor directed trust” [D4/221/3418]. Email from David Muir to Edna Chan dated 22 February 2007 in which David Muir said the trustees, in considering whether to grant approval to Wise Lords’ intended USD8M subscription for the DBS Indochina Fund, had “carried out a review of all the documentation sent and considered other factors, such as the investment advisory credentials of Ms Ji Zhengrong as well as her location and nationality”. In the same email, David Muir said the trustees did not have the Investment Advisor Agreement in their records [CB2/320]. [209] [T1/Day4/74(6)-76(40),80(15)-82(11)] [210] [B/3/616/§§26-27] [211] [E6/60/§5][E21/208/§§158-159][E21/211/§91] [212] See §46 above. [213] See §§16, 20 and 66 above. [214] [T2/Day10/105(17)-(21)] [215] [D21/875] [D21/877/7489,7491] [216] [B/7/§36] [217] [CB3/841] [218] Mr Burns said as much in his closing submissions. [219] [B/1/550-554] [220] [CB1/174] [221] [CB1/175] [222]The Investment Advisor Agreement and Wise Lords’ board resolutions dated 4 and 6 January 2005 authorising Ji to operate the company’s bank account regarding investments (but excluding withdrawal of money) with copies of her specimen signature and passport. [223] At §59 above. [224] [CB1/171] [225] Mr Barlow initially suggested that the backdating took place at the end of 2008 but later alleged that it occurred in 2010 [T1/Day2/3(18)-(22)][T4/Day19/69(17)-70(7)]. [226] [T1/Day3/71(25)-72(5)] [227] [CB1/170] [228] [CB1/170] [229] [T3/Day11/21(10)-(12)] [230] [T3/Day11/24(12)-(16)]. I accepted his answer and asked Mr Barlow to carry on with his cross-examination [T3/Day11/24(17)-(18)]. [231] [T3/Day11/31(11)-(12)][CB/174] [232] [CB1/171] [233] [T3/Day11/22(11)-(17)] [234] [T3/Day11/24(24)-25(5),(17)-(30)] [235] [T4/Day19/72(15)-73(4)] [236] [T3/Day11/39(19)-(24)] [237] [B/8/769/§69] [238] [T4/Day20/7(14)-(19)] [239] [T4/Day20/65(16)-66(2)] [240] [T3/Day11/21(10)-(12)] [241] [CB3/890-891] [242] [CB3/890] [243] [CB3/890-891] [244] [T3/Day11/36(20) to 37(4)][T4/Day19/69(4)-(8)] [245] [D28/1063/9262] [246] [D1/46/2829] [D1/48/2831] [D1/49/2832] [D1/52/2835] [D1/57/2840] [247] [T4/Day18/78(16) to 79(1)] [248] [D3/186/3287] [D10/401/4967] [D24/947/8273] [249] Version 1.0 of 11 December 2006 [D4/228/3464 to 3620] [250] [T4/Day18/23(14), 39(16)][T4/Day19/59(21)-(22)] [251] [T4/Day19/91(12)-(14)] [252] [T4/Day18/32(6)-(15)] [253] For example, paragraph 4.5.1 provided that: “If the Power of Attorney grants the Power to operate a bank account, which should be in practice almost never, it should specify the relevant bank, branch and account type” [254] [CB1/169] [255] [D8/315/4313] [256] For e.g. the first one was dated 4 May 2006 [CB1/203] [257] For e.g. the first one was dated 20 November 2006 [CB1/219] [258] [CB3/824 to 827] [259] [CB3/737-1 to 737-2; 739-1; 740-1 to 740-2 (translations)] [260] [CB3/843 to 847] [261] [CB3/872-874] [262] [T4/Day19/70(8)-72(10)] [T4/Day20/61(21)-62(9)] [T4/Day20/62(10)-(17)] [263] [T4/Day19/65(20)-70(8)] [264] [CB3/740-1/§1] [265] [T4/Day20/19(6)-(14)] [266] [T3/Day11/47(17)-(20)] [267] [T4/Day19/82(3)-85(3)] [268] [CB1/82] [269] [T4/Day19/18(3)-19(19)][T4/Day20/8(10)-9(20)][T4/Day20/29(1)-(13)] [270] [B/8/770/§71] [271] [D54/294/15202-15203] [272] [D3/186] [T4/Day20/95(14)-96(22)] [273] Dicey, Morris and Collins The Conflict of Laws (15th ed.) Vol 1 §9-025 [274] Reviews conducted by DBS Trustee:[CB1/203][D9/342/4580][D12/460/5432][D21/909/7677] [CB1/215 to 216][D8/322/4482 to 4483][D9/372/4767 to 4768][CB1/219][CB2/400] [D14/542/5781]; [D22/921/7725]; [D26/968/8729]. Inquiries raised by DBS Trustee: [D2/109/3039][CB1/197][D3/190/3361][D3/19/3363][D3/192/3364] [D3/193/3366][D3/198/3372][D4/216/3408][D5/230/3634][D5/263/3747][D5/262/3767][D5/263/3773] [D5/267/3775+][D5/270/3788][D5/273/3812][D5/280/3827][D5/281/3829][D6/289/3973][D6/290/3976] [D6/296/4063][D7/297/4065][D7/301/4274][CB2/320][CB2/325][D7/314/4311][D8/332/4514] [D8/334/4521][D8/335/4531][CB2/341][D8/339/4546][D9/357/4665][D9/358/4668][D9/375/4772] [D9/376/4773][D12/475/5469][D13/478/5493][D13/486/5510][D13/500/5543][D13/501/5545] [D13/508/5600][D14/575/5920][D14/576/5927][D14/579/5940][D14/582/5952][D15/592/5966] [D15/595/6002][D15/596/6004][D15/597/6007][D15/601/6017][D15/607/6049][D15/611/6063] [D15/612/6064][D15/633/6152][D16/638/6272][D18/742/6841][D18/745/6851][D19/803/7136] [D20/860/7364] [D20/869/7417] [B/7/729-730, 732-733][T3/Day11/39(21)-(24)][T4/Day20/65(16)-66(2)] [275] [D57/52/15792 to 15793] [T1/Day2/42(8)-46(18)]. [276] [D1/57/2840] [277] [T4/Day20/70(9)-(21)] [278] [B/3/612 §3] [279] Butterworths Hong Kong Securities Handbook (4th ed.) at pp.292, 293 and 295. [280] [CB1/203] [281] [D9/342/4580] [282] [D12/460/5432] [283] Financial accounts of Wise Lords/the Trust: [D3/186/3285]; [D3/186/3280]; [D10/400/4956]; [D10/401/4962]; [D11/443/5139]; [D11/443/5135]. [284] It was recorded in the Meeting Note for Trust and Corporate Service and DBS Bank dated 12 May 2006 [D3/171/3193] that Edna Chan had reviewed the trust accounts for the year 2006 with Ji, and that Ji had raised questions and was satisfied with the explanations offered. [285] [T1/Day5/56(23)-57(2)] [286] Family trust performance reports for trusts with accounts opened with DBS Bank: [D57/62/15814-15817][D57/63/15818-15822][D57/64/15823-15827][D57/65/15828-15832][D58/118/16099-16103][D58/119/16104-16108][D59/120/16109-16124][D59/121/16125-16135][D59/202/16337-16346][D60/205/16361-16366][D60/206/16367-16386][D60/208/16388-16401][D66/574/17777-17784][D66/577/17793-17801][D66/578/17802-17810][D66/579/17811-17823][D67/602/17925-17938][D67/603/17939-17950][D67/604/17951-17966][D67/605/17967-17977][D68/622/18054-18063][D68/623/18064-18074][D68/624/18075-18084], [D68/625/18085-18094] [287] [CB1/215 to 216] [288] [D8/322/4482 to 4483] [289] [D9/372/4767 to 4768] [290] [CB1/219] [291] [CB2/400] [292] [D14/542/5781] [293] [D22/921/7725] [294] The Form of May 2010 recorded that the account had “only time deposits now” and that “settlors recommended change of trustee”: [D26/969/8729]. [295] [T2/Day10/101(18)-102(5)] [296] The loan jumped to US$13.9m by 31 March 2007 pursuant to temporary increases of facility that were only notified to DBS Trustee on 16 August 2007 [D59/167/16259]. See §246 below. [297] See §246 below. [298] See §246 below. [299] See §248-250 below. [300] See §248-250 below. [301] [T3/Day11/78(12)-(19)] [302] Background statement [D1/63/2857] [303] Letter of Wishes §3 [CB1/27/177] [304] [CB1/131-168]. The relevant provisions of the Trust Deed are set out in Appendix II to the defendants’ closing submissions. [305] [CB1/131-168] [306] [CB1/132-133] [307] [C2/5/1035-1049]. [308] [C1/1/811] [309] [C1/2/819-820,§§2-5] [310] §§82 83 and 85 of the Matthews Report [311] §84 of the Matthews Report [312] §87 of the Matthews Report [313] §84 of the Matthews Report [314] §84 of the Matthews Report [315] §85 of the Matthews Report [316] §2.3 of the Joint Report [317] §2.4 of the Joint Report [318] §2.6 of the Joint Report [319] §2.5 of the Joint Report [320] §2.7 of the Joint Report [321] [C1/1/795§3.22] [322] An authoritative U.S. textbook. [323] At p.289 §7 [324] [D1/61/2853] [325] Plaintiffs’ closing submissions p.110§9.4(b); defendants’ closing submissions p.222§453. [326] [C1/2/852§90] [327] [C1/2/854§95] [328] [C2/7/1082] [329] [C2/7/1083] [330] [C2/7/1081-1082] [331] [C2/7/1086] [332] Or arises from any liability in respect of actions to recover, from the outgoing trustee, trust property in possession of the outgoing trustee [CB1/148]. [333] [C1/1/793§§3.11-3.12] [334] See §17 above. [335] [T2/Day8/26(13-14)] [336] Letter of Wishes [CB1/27/177-178] [337] [B/4/642§9] [338] [T1/Day4/21-22(11)] [T2/Day8/25(9-21)] [339] Trust Deed §§2(b), (g) and (j) of the First Schedule [CB1/20/152-153] [340] [T2/Day8/22(10)-23(3))] [341]Declarations of Risk Awareness: [D5/230/3637][D45/273/13002][D40/203/12029] [D41/227/12236][D41/227/12233][D41/227/12230][D41/225/12210][D41/231/12262][D41/231/12278][D42/237/12306][D43/242/12741][D43/245/12770][D44/246/12785][D9/371/4754][D10/380/4806][D10/380/4801][D10/381/4818][D10/386/4865][D10/385/4847][D10/387/4877][D10/388/4885] [D10/289/4896][D44/272/12989][D45/279/13125][D61/283/16612] [D14/535/5736]. [342] [D2/115/3047] [343][B/2/§§6,8-9,11,13][B/4/§§4,6,12-13,30-33,39,41][B/5/§6][B/7/§§8,10,46-47,53-67,71][B/8/§§6, 13-15,23,69][T1/Day4/72][T2/Day8/47-48,50,53-55] [T2/Day9/101] [T2/Day10/27-28][T3/Day12/35,48,49,52-54][T3/Day15/88] [T4/Day20/50] [344] [T2/Day8/25(22) to 27(5); 33(10)-36(7)] [345] [CB1/131 to 168] [346] [T2/Day8/49(15) to (25)] [347] [CB1/177 to 178] [348] [T2/Day8/25(22)-26(17)] [349] [T2/Day8/33(10)-(24)] [350]E2/19(§§41-60)][E3/36(§§120,132,150)][E6/55(§§125-170)][E6/61(§§152,176-182)][E9/79(§41)][E9/80(§26)] [E9/81(§§7, 57, to 87)] [E12/105(§202)] [E16/141(§125)] [351] [A1/2/75] [352] [A2/7/465] [353] [B/2/608] [354] [CB3/620 to 624] [355] [T2/Day8/44(9) to 45(11)] [356] [CB1/277][T2/Day8/36(10) (15),51(12)- (23)] [357] [CB3/620-624] [T2/Day8/44(9)-45(11)] [358] [CB3/625-1, 625-2][T2/Day8/45(20)-(25)] [359] [D41/231/12262][ [T2/Day8/52(3)-(13)] [360] [D13/496/5529] [361] [D13/496/5527] [362] [D13/496/5529] [363] [E15/128-1/§§4-27] [364] [D13/506/5590] [365] [D13/496/5529] [366] [CB1/78-89] [367] [CB1/1-34] [368] [CB1/178-1 - 178-63] [369] The relevant provisions are set out in Appendix I of the defendants’ closing submissions. [370] See for example [CB1/219]. [371] [T2/Day10/101(18)-102(5)] [372] For an exposition of the advisory duties of a private banker see Chang Pui Yin & Ors v. Bank of Singapore Ltd. HCCL 12 of 2013, 8 August 2016, pp.114-118. [373] §61 above. [374] As mentioned by Linda Liu in a conversation with Ji on 16 January 2007 [CTB1/6/55/20122] [375] [T3/Day12/71(2) – 72(25)] [376] [CB2/341] [377][T3/Day12/73(1)-74(2)] Other examples can be found at: [T3/Day12/62(15)-63(9)] [T3/Day12/64(24)-65(18)]. [378] [T3/Day12/75(13) –76(25)] [379] This was obviously a mistaken reference. DBS Trustees was located in Jersey. [380] [D13/509/5603] [D65/486/17551] [381] [E3/35/§§129-135 (13 May 2005)] [382] [CTB1/E8/20534-20538,lines 39-57] [T3/Day15/55(19) –59(15)] [383] [CTB1/E8/20531-20532] [384] [CB3/645] [385] [E9/80/§§14-17 (15 October 2007)] [386] [E2/30/§§218-229 (6 April 2005)] [387] [E3/36/§§189-194 (3 June 2005)] [388] [E4/44/§§99-110 (9 May 2006)] [389] [E6/60/§§3-5 (6 February 2007)] [390] [E5/50/§§426-429 (21 November 2006)] [391] [E1/1/§§58-82 (13 September 2004)] [392] [E1/10/§§7-19 (11 October 2004)] [393] [E6/60/§§33-37 (6 February 2007)] [394] [E3/35/§§129-135 (13 May 2005)] [395] Brazil Russia India China [396] [E3/38/§§36-46 (5 August 2005)] [397] [E6/61/§§4-15 (9 February 2007)] [398] [E6/60/§§9-32 (6 February 2007)] [399] [E1/1/§§61-66 (13 September 2004)] [400] [E2/30/§§269-277 (6 April 2005)] [401] [E5/52/§§210-223 (1 December 2006)] [402] [T1/Day4/51(3)-(8)] [403] [E1/1/§§106-107 (13 September 2004)] [E1/2/§§9-10 (13 September 2004)] [E1/4/§§6-16 (13 September 2004)] [404][E1/9/§§9-11 (11 October 2004)] [E1/11/§§13 (15 November 2004)] [E1/17/§§46-47 (7 December 2004)] [405] [T1/Day4/5(18),(24),21(17),29(3),(6),30(18),36(17),53(16),54(1),(19),58(12), 67(18)][T1/Day5/8(15)-(17),15(8)][T2/Day 6/24(21), 35(4)] [406] [E1/4/§§75-78 (13 September 2004)] [407] [E1/11/§§75-81 (15 November 2004)] [408] [E1/7/§§10-12 (11 October 2004)] [409] [E9/78/§§5, 24-25 (7 September 2007)] [410] [E1/14/§ 280 (26 November 2004)] [411]This means that the NAV of a mutual fund is valued based on the most current market valuation. [412] [E1/18/§§4-28 (7 December 2004)][T3/Day14/54(21)-55(12)] [413] [E2/30/§§1-83 (6 April 2005)] [414] [E1/12/§§78-80 (22 November 2004)] [415] [E1/17/§§30-41 (7 December 2004)] [416] [E1/10/§§19(11 October 2004)][E1/15/§12 (1 December 2004)] [417] [E5/50/§§346-368 (21 November 2006)] [418] [E3/41/§§53-58 (28 February 2006)] [419] [E1/3/§§19-27 (13 September 2004)] [420] [E1/4/§68 (13 September 2004)] [421] [E1/12/§§42-46 (22 November 2004)] [422] [E3/38/§§95-96 (5 August 2005)] [423][E3/38/§§105-112 (5 August 2005)] [424] [E1/§3/13][E1§/4/68] [425] Exhibit P7 [426][E6/53/§§95(10 January 2007)] [427][E3/31/§§3-7 (6 April 2005)] [428] [E1/1/§§11-22 (13 September 2004)] [429] [E6/53/§§54-56, 81-87 (10 January 2007)] [430] [E1/4/§§93-94 (13 September 2004)] [431] [B/5/684§18] [432] [T3/Day14/79(24)-87(18)] [433] [T3/Day14/87(1)-(18)] [434] [T2/Day10/94(11)-95(18),101(18)-102(5)] [T4/Day16/34(9)-38(13)] [435] [CB1/209] [436] [CB1/210] [437] [CB1/206-7] [438] Exhibit P4 [439] [T1/Day5/26(14)-(21)] [440] [CTB1/E4/46/143-145] [441] [E4/47] [442] [T3/Day14/68(3)- (17)] [443] Exhibit P4 [444] [B/4/655-656§§ 41-42] [B/7/731-733§52] [B/8/773§75] [445] [T3/Day11/40(18)-41(15)][T3/Day14/20(22)-21(11)][T4/Day19/39(22)-(40(15)) [446] [T3/Day11/48-60] [447] [D62/389/17024] [448] [D14/573/5910] [449] [D65/480/17543] [450] [D15/607/6049] [451] [B/1/550] [452] [T3/Day11/59(21)-60(7)] [453] [D9/345] [D9/346] [D9/347] [D9/348] [454] [T4/Day20/62(24)-65(15)] [455] [D9/346] [456] See §169 below. [457] [EB/A25-1/4][D14/576/5928][CB3/709] [458] [T3/Day11/40(18)-41(15)] [459] [B/7/729-730§§46-47] [460] [CTB2/E12/617/§131] [461] [B/7/731-733§57] [B/8/773§76] [462] [T4/Day20/6(24)-7(23)] [463]See for example [D2/92] and [D2/93]. [464] [D3/152] [465] [D4/218] is an example of a request from Aimex Kwong of DBS:PB to Wendy Yung also of DBS:PB for information on the rating, projected return and other information of a mutual fund to be provided to the trustee. [466] See for example [D8/338] [D8/339]. [467] [T4/Day19/20(9)-22(18)] [468] Why this draft, which related to a transaction in December 2006, bore a date in September 2012 was not explained. That might have been the date when the soft copy of the email and draft were printed. [T4/Day19/22(20)-23(12)]. [469] The same document appears in [CB1/245]. [470] See for example[D9/363] [D9/364] [D9/366] [F1/16/24164]. [471] See §135 above. [472] See for example [CB1/219]. [473] [B/7/735-736§64] [474] [T4/Day17/36(17)-41(17)] [475] Arboit’s 3rd and 4th Schedules [B/1/597-603-18] [476] [E1/11 (15 November 2004)] [477] [E1/4/§§12-14(13 September 2004)]; [E1/6/§§2-5(13 September 2004)]; [E1/11/§§21, 29, 33-37 (15 November 2004)] [478] [E12/102/§§12-13 (10 March 2008)] [479] [E1/17/§39 (7 December 2004)] [480] [E1/16/§§ 6-12 (6 December 2004)] [481] [E1/17/§§19-24 (7 December 2004)] [482] [E2/20/§§48-58 (9 December 2004)]; [E3/35/§111 (13 May 2005)] [483] [E2/30/§§171-175 (6 April 2005)] [484] [E3/35/§§87, 97, 103 (13 May 2005)] [485] [E3/35/§117 (13 May 2005)] [486] [E6/61/§§176, 182 (9 February 2007)] [487] [E3/37/§§2, 12, 14 (5 August 2005)]; [E3/38/§80 (5 August 2005)] [488] [E1/7/§§4-6 (11 October 2004)]; [E6/53/§91 (10 January 2007)] [489] [CB1/199] [490] [E4/48/§§55-69, 157-159 (10 November 2006)] [491] [E3/35/§83 (13 May 2005)] [492] [E5/52/§§232-241 (1 December 2006)] [493] [E8/76/§§147-149 (31 August 2007)] [494] [E9/83/§§66-70 (8 January 2008)] [495] [E10/90/§§127-146 (30 January 2008)] [496] [E5/50/§§274-277 (21 November 2006)] [497] [E7/66/§59 (21 June 2007)] [498] [E4/48/§§157-173 (10 November 2006)] [499] [E4/44 (9 May 2006)] [500] [E4/45/§§11, 52, 101-103, 159 (25 July 2006)] [501] [E4/48/§§33-38 (10 November 2006)] [502] [E5/49/§§62-63 (16 November 2006)] [503] [E5/49/§§77-83, 93-97, 105, 111-113 (16 November 2006)] [504] [E5/50/§§22-26, 44-51, 61, 82-83, 115-125 (21 November 2006)] [505] [CB1/242-259, 272] [506] [CB1/236] [507] [CB1/247][CB1/248] [508] [E6/55 (16 January 2007)] [509] [E6/56/§§19, 25-27 (17 January 2007)] [510] [E7/64/§§119-122 (15 June 2007)] [511] See call report for meeting between Linda and Ji at Ji’s home on 27 February 2007 [D59/137/16179] [512] [D8/318/4321] [513] [E7/64/§§132-134 (15 June 2007)] [514] [E7/66/§§83-86, 133-135 (21 June 2007)] [515] [E8/76/§§73-75, 133 (31 August 2007)] [516] [E9/79/§§3-19 (15 October 2007)] [517] [E5/52/§§21, 76-85 (1 December 2006)] [518] [E5/52/§§98, 147 (1 December 2006)] [519] [E6/55/§§220-223 (16 January 2007)] [520] [E8/72/§§7-9 (20 August 2007)] [521] [E8/74/§§28-32, 55 (28 August 2007)] [522] [E10/89/§§130 to 133 (25 January 2008)] [523] [E10/90/§§5-6, 74-75 (30 January 2008)] [524] [T3/Day14/78(24)-79(9)] [525] See e.g. [T1/Day 5/9(21)-10(5); 12(21)-14(3)] [526] [T3/Day 14/79(24)-85(1)] [527] See below on the increases in the credit facility provided to Wise Lords. [528] See §§165-168 above. [529] §46 of the Re-Amended Statement of Claim (“RASOC”) [A1/2/44] [530] [B/1/603-18] [531] Euros (“EUR”) [532] Defendants’ closing submissions p.89-90 §220 [533] [T3/Day 15/5(7)-(12)] [534] [T3/Day 15/13(23)-14(15)] [535] Portfolio Summary of 31 December 2006 [D39/178] [536] Not counting the DEVA note valued at US$3m. See Portfolio Summary of 31 October 2007 [D44/258]. [537] Portfolio Summary of 29 February 2008 [D45/295] [538] Portfolio Summary of 31 May 2008 [D47/387] [539] [T3/Day 15/11(3)-(11)] [540] [T3/Day 15/13(1)-(7)] [541] [D2/129][D2/138] [542] [T3/Day15/2(2)-(10)] [543] [T3/Day15/6(13)-(16)] [544] [T3/Day15/7(3)-(8)] [545] Day 14 at 54(21)-55(11) and 82(7)-(20); Day 15 at 12(16)-(25) [546] See Bank Charges Provisions in Appendix I of the defendants’ closing submissions. [547] [T3/Day 15/11(12)-(23)] [548] [CB2/310] [549] [E12/101/§§92-103 (7 March 2008)] [550] [E12/102/§§40-46 (10 March 2008)] [551] [T1/Day5/56(23)-57(2)] [552] [D37/92] [553] [D40/206] [554] The position in January 2008 as recorded on the February 2008 summary[D45/295] [555] [D44/258] [556] §§61-66 of the RASOC [A1/2/49-51] [557] §§57-60 of the RASOC [A1/2/48-49]; see also Arboit’s Witness Statement at §76 for the alleged losses to Wise Lords [B/1/518-519] [558] [D3/182/3210-3261] [559] [D3/182/3240-3243] [560] [D6/290/3979-4028] [561] [D6/290/4010-4013] [562] [D7/297/4142-4163] [563] [D7/297/4157/§23] [564] [D3/184/3273] [565] [CB1/211-214] [566] [D3/187/3328] [567] [CB2/298-300] [568] [CB2/309-311] [569] [B/4/658-659 §51] [570] [E4/45/19629 §§96-100] [571] [E10/92] [572] [E10/92/§§108-162] [573] [E4/45/19629 §§96-100] [574] [E5/52/§§232-241 (1 December 2006)] [575] [E9/79/§§37, 42-44, 67-106] [576] [E10/92/§128] [577] [D40/191/11864-11915] 10% cap mentioned in §23 at p.11883. [578] [D7/297/4142-4163] [579] [D10/407/5009] [580] [D10/409/5014-5015] [D11/416/5039-5042] [D11/417/5043-5045] [D11/429/5080-5082] [581] [D10/408/5010-5013] [D10/410/5016-5022] [D11/429/5080-5082] [582] [D11/416/5039-5042] [D11/418/5046-5047] [D11/417/5043-5045] [D11/419/5048-5051] [D11/423/5062-5064] [D11/426/5072-5074] [D11/427/5075-5077] [D11/431/5087] [583] [E12/104/§§69-88] (14 March 2008) [584] [E12/104/§§79-80] (14 March 2008) [585] [E12/104/§§91-92] (14 March 2008) [586] [E12/106/§§59-67; §§78-84; §§288-291 (4 April 2008)] [587] [D13/502/5549-5554][D11/438/5106-5115][D13/479/5497][D13/502/5549-5554] [D13/512/5609-5611] [588] [B/4/659-660/§§53-54] [589] See §81 [590] See §82 [591] See §84 [592] See §85 [593] See §86 [594] See §87 [595] See §153 [596] See §162 [597] See §171 [598] See §173 [599] [E10/92] [600] [E4/45/§§96-100] (25 July 2006) [601] [E5/52/§§232-241 (1 December 2006)] [602] [E5/52/§§232-241 (1 December 2006)] ; [E9/79/§§37, 42-44, 67-106] (15 October 2007)] [603] No misrepresentation claim has been advanced for this transaction. [604] See §178(1)(v) above: Ji wanted to purchase US$15m worth of units in this fund which would have amounted to 93.7% of the total fund size. [605] About 8% of the total estimated fund size of US$100m [D8/320/4480]. [606] [CTB1/E5/pp159-164 (30 November 2006)] [607] [T3/Day 14/69(13)-70(11)] [608] [CB1/260-264] [609] [CB1/277] [610] [D5/246/3731] [CB1/266-268] [611] [CB1/283-290] [612] [CB2/371-373] Another charge was registered on 10 July 2007 [D51/67/14396-14397]. [613] [B/4/660§55] [614] [D5/281/3829-3852] [615] [B/4/660§55] [616] See presentation materials in Chinese and English at [D6/286/3926-3967] [617] [E6/53/§§33-52 (10 January 2007)] [618] [B/4/660§55]; deal confirmation dated 19 January 2007 [D6/284/3855] [619] [B/3/621§47] [620] [D6/285/3902] [621] [B/3/620§46] [T1/Day 5/61(19)-64(6)] [622] [D6/286/3959-3964] [623] A Volatility Index published by the Chicago Board Options Exchange Market based on the implied volatility of the S&P 500 equity index options [C1/3/876/§H.12]. [624] [C2/6/1054-1055§E.6] [625] [C2/6/1055§E.7] [626] [C2/6/1055§E.7] [627] [C2/6/1055§E.10] [628] [C2/6/1055§E.11] [629] [C2/6/1057§E.19] [630] [C2/6/1057§E.20] [631] [B/3/621§48] [632] [E7/65/§71 (15 June 2007); E7/69/§§19 to 22 (25 July 2007)] [633] [E9/88/§§18-20] (23 January 2008) [634] [D10/395/4930-4935] [D10/402/4750-4982] [D10/412/5027-5033] [D12/446/5320-5321] [D12/459/5429-5431] [635] [E15/130/§§65-73] [636] [D13/510/5604] [637] [D13/511/5608] [638] [B/4/662§58] [639] Approved on 26 January 2007 for settlement of the DEVA Note [D50/27/14250-14253]. [640] Approved on 28 March 2007 as a temporary increase for 3 months [D50/39/14287-14290]. [641] Approved on 29 March 2007 as a temporary increase for 3 months [D50/40/14291-14293]. [642] Requested by Linda Liu on 15 May 2007 as a temporary increase for 1 month and approved much later on 15 September 2007 by Andy Yeung [D50/58/14325-14327]. [643] See the transcript of the telephone conversation on 9 February 2007 [E6/61/§§122-169] and 14 May 2007 [E7/63/§§119-130] [644] See §218 above. [645] See Portfolio Summaries for March 2007 [D40/206]; June 2007 [D41/235]; August 2007 [D43/243]; October 2007 [D44/258]; November 2007 [D44/270]; December 2007 [D45/275]; January 2008 as recorded in the February 2008 summary [D45/295]; February 2008 [D45/295]; April 2008 [D46/352]; and July 2008 [D48/481]. [646] Exhibit P3: Bank of England’s Timeline of Key Crisis Events since Spring 2007 [647] [D50/59/14328] [648] [CB2/347-352] [649] [CB2/354,356] [650] See §238 below. [651] [D59/167/16259] [652] See §233 footnote 641 above. [653] See §240 footnote 665 below. [654] [E7/66/§58 (21 June 2007)] [655] [E7/66/§126 (21 June 2007)] [656] [E7/66/§90 (21 June 2007)] [657] [D51/62/14358] [658] [CB2/362-363] [659] [CB2/364,366] [660] Exhibit P3 [661] Linda Liu’s assistant [662] [CB2/370] [663] [CB2/380] [664] Another charge was registered on 10 July 2007 [D51/67/14396-14397]. [665] Between 4 July 2007 and 29 August 2007, there were temporary increases to US$25m (HK$195m), approved on 20 July 2007[D51/67/14391], and to US$29m (HK$226.2m), approved on 3 August 2007 [D51/76/14436]. An attempt to increase the facility on 14 August 2007 to US$40m (HK$312m) did not materialize [D59/166/16258]. [666] [D51/77/14448] [667] [CB2/381-382] [668] [CB2/383,385] [669] Exhibit P3 [670] See Call Report dated 30 August 2007 [D59/165/16257] [671] [CB2/412] [672] Exhibit P3 [673] [D52/166/14720] [674] [CB2/402-403] [675] [CB2/404,405] [676] [CB2/408,409] [677] [CB2/407,410] [678] [T3/Day15/32(7)-33(18)] [679] [T3/Day15/36(1)-(9)] [680] [T3/Day15/38(20)-39(4)] [681] As can be seen from [D59/167/16259], DBS Trustee was only notified on 16 August 2007, not within 1 month of Edna Chan’s email of 11 July 2007. [682] [T3/Day15/40(5)-(12)] [683] [T3/Day15/42(15)-43(8)] [684] [T3/Day15/44(23)-45(11)] [685] The “second occasion” referred to in the question was a reference to the handwritten note on the hard copy of the email sent by Aimex Kwong to Matthew Lam dated 24 April 2008. The handwritten note stated that “Ji is not the authorized signer & we had no records of the fac. Letters of 4/7/07 and 29/8/07”. [686] [T3/Day15/47(3)-(8)] [687] See footnote 685 above. [688] [D59/167/16259] [D9/357/4666-4667] [689] See §233 footnote 641 above. [690] See Footnote 665 above. [691] [D51/67/14391] [692] [D9/355/4663] [693] [D9/357/4665] [694] [D9/357/4665-4667] [695] [D9/358/4668-4670] [696] [F1/15/24132] [697] See §241 above. [698] [D9/373/4767-4768] [699] [CB2/340] [700] [CB2/341] [701] [D12/475/5469] [CB3/603] [702] See Portfolio Summaries for October 2007: US$48m loan [D44/258]; November 2007: US$44m loan [D44/270]; December 2007: US$47m loan [D45/275]; January 2008 as recorded in the February 2008 summary: US$53m loan [D45/295]; February 2008: US$45m loan [D45/295]; April 2008: US$45m loan [D46/352]. [703] [T3/Day11/74(5)-77(9)] [704] [CB2/408,409] [705] [CB2/407,410] [706] [CB3/606] [707] [CB3/605] [708] [F1/15/24140] [709] See §248 above. [710] [D12/460/5432] [711] [D12/473/5463,5466][D13/481/5501] [712] [D12/476/5476] [713] [CB3/615] [714] Their net worth was stated to be US$50m from 21 June 2007 to November 2007 [D51/62] [D51/67] [D51/76] [D51/77] [D52/166]. [715] Their net annual income was stated to be US$10m from 21 June 2007 to November 2007 [D51/62] [D51/67] [D51/76] [D51/77] [D52/166]. [716] [T4/Day17/32(4)-(19)][T4/Day 17/46(4)-(23)] [717] §52 of the RASOC [A1/2/47] [718] [CB1/283 to 290] [719] [CB1/291] [720] [CB1/292] [721] [CB1/293] [722] [E6/54/§§10-11 (15 January 2007)] [723] [E7/68/§§26-28 (25 July 2007)]; [T1/Day5/34(23)-35(7)]; [T2/Day7/66(3)-68(23)] [724] [CB1/287] [725] [T3/Day15/32(14)-(25)] [726] [CTB1/E8/20531,lines 39-57] [T3/Day15/55(19)-59(15)] See §139 above. [727] [E8/76/§§73-75, §133, §§146-149 (31 August 2007)] [728] [E13/116/§§10-17, 20-24 (24 April 2008)] [729] [E14/119/§§25-39, 45-59, 69-70 (2 May 2008)] [730] [D13/503/5555-5559] [CB3/620-624] [731] [E14/120/§§9-15, 23-25, 87-89 (6 May 2008)] [732] [E15/127/ §§169-195, 335-336 (14 May 2008)] [733] [D52/179/14799] [734] [D13/525/5692] [735] [D14/539/5763] [736] [CTB2/E15/127/§§257-258 (14 May 2008)] [737] [E8/72/§§41-48, 88, 102] (20 August 2007)] [738] [E8/73/§§3-7 (28 August 2007)] [739] [E8/73/§§21 (28 August 2007)] [740] [E8/75/§§7-10 (29 August 2007)] [741] [E8/75/§§53-57 (29 August 2007)] [742] [E8/75/§§118-134 (29 August 2007)] [743] [E8/75/§§146-156 (29 August 2007)] [744] [E8/75/§§169-172 (29 August 2007)] [745] [E8/76/§§6-8 (31 August 2007)] [746] [E8/77/§§23-26 (7 September 2007)] [747] [T3/Day15/60(25)-63(4)] Call Report of 11 September 2007 stated that Ji “would maintain US$20mio for long term investment on our DBS mutual funds” [D59/168/16261]. [748] See, in particular, the conversation on 29 August 2007 at §§122-127 [E8/75/§§118-134 (29 August 2007)]. [749] Also copied to Edwin Lim and Aimex Kwong [CB3/743]. [750] More than US$20m of DBS mutual funds were purchased from 30 July 2007 to 16 October 2007. These DBS mutual funds were all redeemed at the end of February 2008 and early March 2008 [B/1/603-10]. [751] [D49/523] [752] The DBS fixed income products listed in this summary were not DBS mutual funds. [753] [E9/86/§§11-16, 36-43, 66-73, 85-89 (22 January 2008)]. In §73, Ji asked for a commitment for the “whole”, i.e. the whole loan. [754] [D10/396/4936] [755] [E16/140/§§33 (15 August 2008)]; [E16/141/§§33-34 (15 August 2008)] [756] [E16/141/§§47-51; 79-84; 131-139 (15 August 2008)] [757] [E17/151/§34 (27 August 2008)] [758] [E17/165/§§125-133 (3 September 2008)] [759] [E17/167/§§103-111 (8 September 2008)] [760] [T3/Day15/70(3)-72(7)] [761] [E14/121/§§221-248 (7 May 2008)] [762] [B/6/697§14] [763] [E2/21/§§21-32, §§51-52 (10 December 2004)] [E2/24/§§21-23, §39 5 January 2005] [E2/30/§§283-285 (6 April 2005)] [E3/34/§7 (13 May 2005)] [764] [B/4/665§64] Arboit’s 2nd Schedule[B/1/550-562] [765] [C1/3/883-884] [766] [C2/6/1058-1059§F.2] [767] [T2/Day6/11(8)-12(15)] [768] [E2/21/§§38-41](10 December 2004)] [E2/22/§§18 (10 December 2004)] [E2/25/§§4-6 (5 January 2005)] [769] See monthly statements concerning investments of Wise Lords which were sent to Ji: [D28/1062/9259-9260] [D34/41/10390-10392]; [D34/43/10395-10396], [D34/46/10458-10459]; [D34/52/10567-10568]; [D2/102/3020]; [D35/65/10865-10866]; [D37/90/11123-11124] and [D3/150/3143-3144]; [D3/167/3185] [770] [E1/11/§§53-56 (15 November 2004)] [771] [E1/12/§§8-34 (22 November 2004)] [772] [E1/15/§§12 (1 December 2004)] [773] See E1/16/§§15-35 (6 December 2004); E2/29/§§10-24 (16 March 2005) [774] E3/32/§19 (6 April 2005); E3/35/§83 (13 May 2005) [775] See e.g. [E2/28/§§8-9, §§18-19, §37 (16 March 2005)]; [E2/29/§§5-26 (16 March 2005)]; [E3/32/§19 (6 April 2005)] [776] [E13/114/§§87-109 (22 April 2008)] [777] [E12/101/§§93-103 (7 March 2008)]; [E12/102/§§30-44 (10 March 2008)] [778] [D47/387] [779] Although she professed to have little experience with FX and YEDs, she had dealt with them in 2004 and 2005, as I have set out in §271, §§274-278 above. [780] [E11/98/§§57-74; §§87-95 (4 March 2008)] [781] [E11/99/§90 (4 March 2008)] [782] [E12/100/§23 (5 March 2008)] [783] [E10/91/§96-98 (5 February 2008)] [784] [E10/92/§§279-281; 353 (19 February 2008)] [785] [E10/93/§§11-25 (20 February 2008)] [786] Redemption of the mutual funds. [787] [E12/100/§§23-24, 41 to 43 (5 March 2008)] [788] [E11/95/§§86-88 (26 February 2008)] [789] [E11/95/§§94-118] [790] I.e. leveraged forex trading. [791] [E13/112/§§140-142 (16 April 2008)] [792] [E11/98/§§63-65 (4 March 2008)] [793] [E4/48/§23 (10 November 2006)] [794] [E11/95/§259 (26 February 2008)] [795] [E13/107/§§17-20 (9 April 2008)] [796] [E13/109/§§31-33 (14 April 2008)] [797] [E13/112/§71 (16 April 2008)] [798] [E13/111 (15 April 2008)] [799] [B/6/700/§22] [800] E14/123/§96 (13 May 2008)] [801] E13/117/§§102-113 (25 April 2008)] [802] See E14/124/§§5-29 (13 May 2008); E14/125/§§14-15 (14 May 2008)] [803] [E12/103/§§107-112; §§138-145 (14 March 2008)] [804] [E12/105/§§52-63 (17 March 2008)] [805] See also [E13/110/§§77-83 (15 April 2008)]. On one occasion, Ji said to Linda “Right now I am still researching, and I haven’t finished researching yet. I can’t buy it blindly.” [E15/127/§319 (14 May 2008)]. [806] [E14/126/§§ 32-42 (14 May 2008)] [807] [E11/95/§253 (26 February 2008)] [808] [E11/96/§§77-80 (27 February 2008)] [809] [T1/Day 5/68(20)-69(1) 78(9)-(19)] [810] [E12/100/§§23-26 (5 March 2008)] [811] [E13/109/§§80-164 (14 April 2008)] [812] [E13/114/§§43-47 (22 April 2008)] [813] [E14/123/§§13-60, §§91-92 (13 May 2008)] [814] See also [T4/Day16/34(9)- 38(9); 62(22)-63(10)] [815] See Exhibit P2. [816] [E14/118/§§103-104, §§109-116 (25 April 2008)] [817] [E14/120/§§52-61 (6 May 2008)] [818] [E14/121/§§225-228 (7 May 2008)] [819] [E15/131/§§20-26 (26 May 2008)] [820] [E14/120/§§17-19 (6 May 2008)] [821] [E14/124/§78 (13 May 2008)] [822] [E15/127/§§16-25 (14 May 2008)] [823] [E14/123/§72 (13 May 2008)] [E15/132/§12 (27 May 2008)] [E15/133/§19 (6 June 2008)] [824] [E12/103/§§106-114 (14 March 2008)] [825] [E13/110/§§ 41, 77-83 (15 April 2008)] [826] [E15/136/§§24-44 (12 June 2008)] [827] [D46/326/13270-13271]. The proceeds from the redemption of the mutual funds had been used to reduce the loan of US$45.59m at the end of February 2008 to US$7.74 at the end of March 2008. [828] [D46/352/13359-13362] [829] [D47/387/13459-13462] [830] [D47/438/13659-13661] [831] [D48/481/13817-13819] [832] [E15/137/§§9, §21 (20 June 2008)] [833] [E16/138/§§10-35 (24 June 2008)] [834] [E16/138/§163 (24 June 2008)] [835] [C2/6/1058-1062] [836][C2/6/1059/§F.3] This was agreed by Kenneth Cheung in the course of his cross-examination [T4/Day16/66(6)-(13)]. [837] Deposit notional amount converted at trade date to USD using Bloomberg FX rates, Tokyo close of business. [838] As shown in Appendix I [C1/4/1033][C1/4/967§3.2.5][C2/6/1059/§F.4] In Malik’s report, he pointed out that of the 51 trades, 29 were AUDUSD and 22 were EURUSD. Of the 29 AUDUSD trades, 24 were “long” AUD (i.e investor benefited if AUD appreciated) and 5 were “short”, that were all entered in June and July 2008 (i.e. investor benefited if AUD depreciated). 10 EURUSD YEDs were long and 12 were short [C1/4/967§3.2.2]. The losses on AUDUSD YEDs were responsible for the overall loss on the 2008 YEDs. The EURUSD YEDs showed a small profit [C1/4/970§3.2.11] [839] [C2/6/1059-1060/§§F.5-F.6] [840] [C2/6/1060/§F.6] [841] [C2/6/1060/§F.7] [842] [C2/6/1060/§F.10] [843] [C2/6/1061/§F.11] [844] [C2/6/1061/§F.13] [845] [C2/6/1062/§F.16] [846] [C2/6/1061-1062/§§F.14- F.15] [847] [T3/Day15/66(6)-(14)] [848] [E13/117/§§80-85 (25 April 2008)] [849] See by way of example [D11/422/5061] [850] See by way of example [D11/432/5088-5091] [D13/499/5541] [851] See by way of example [D13/500/5544]. Investment applications for forex transactions and YEDs and DBS Trustee Minutes approving them dated March 2008 to August 2008 can be seen in [F1/16/24209-24315]. [852] [D13/500/5543] [853] [D13/501/5544-5546] [854] See also §258 above where I recorded Ji’s complaints about the increase being too small and meaningless. [855] [D13/498/5535] [856] [D13/498/5535] [857] Their net worth was stated to be US$50m from 21 June 2007 to November 2007 [D51/62] [D51/67] [D51/76] [D51/77]. [858] Their net annual income was stated to be US$10m from 21 June 2007 to November 2007 [D51/62] [D51/67] [D51/76] [D51/77]. [859] [D13/506/5582] [860] [D13/506/5581] [861] [D13/506/5589-5590] [862] [D13/508/5599-5600] [863] [D61/289/16643-16644] Notice of amendment of facility was given to Ji as guarantor [D61/289/16646]. [864] [D61/289/16637-16642] [865] [E15/135/§§16-18 (11 June 2008)] [866] [T4/Day16/13(13)-14(18)] [867] [D49/509/13943-13950] [D48/486/13836-13846] See also Malik’s Appendix 1 [C1/4/1033]. [868] [D48/481/13817-13819] [869] [D49/505/13924-13927] [870] Royal Bank of Scotland [871] Halifax Bank of Scotland which subsequently merged with Lloyds TSB on 18 September 2008 on account of the liquidity crisis created by the Global Financial Crisis of 2008. [872] European Central Bank [873] Swiss National Bank [874] In §258 above. [875] [D14/539/5763] [876] [D14/552/5812-5820] [877] [D14/552/5813]` [878] Their net worth was stated to be US$50m from 21 June 2007 to November 2007 [D51/62] [D51/67] [D51/76] [D51/77] [D52/166]. [879] Their net annual income was stated to be US$10m from 21 June 2007 to November 2007 [D51/62] [D51/67] [D51/76] [D51/77] [880] See the queries raised by Frederick Ko and Linda Liu’s answers: [D14/538/5761-5762] [881] [D14/540/5778] [882] [CB3/639-640] [883] See §238 above. [884] [CB3/644] [885] [CB3/641] [886] [D14/535/5735][CB3/638] [887] [D14/535/5734] [888] [T4/Day17/55(14)-(24)] [889] As Mayes said in §69 of his witness statement, Ji was not authorised to take loans on behalf of Wise Lords and any loan properly taken on by Wise Lords needed to be approved by the Director in advance [B/7/738]. [890] See Arboit’s 2nd Schedule from Items 477 to 498 [B/1/592-594]. 2 transactions on 5 August 2008 were YED repayments in AUD and not purchases of AUD: see Appendix D of the defendants’ Note on Queries Raised by the Court. By way of example, see items 485 and 486 of Arboit’s 2nd Schedule: approvals were sought from Edna Chan by email on 28 July 2008 for 2 purchases of AUDs for US$10m and US$10m respectively for value date 30 July 2008 [D48/478/13805]. The Investment Application signed by DBS Corporate and sent to DBS Trustee for these trades were returned by email by Ben George dated 28 July 2008 and were signed by 2 Jersey signatories signifying their approval [D48/473/13783-13784]. The Minutes of DBS Trustee approving this investment appears at [F1/16/242/99-24301]. Wise Lords’ resolution appears at [D64/459/17453-17454]. [891] [D14/550/5795-5797] [892] Total loans in Wise Lords’ portfolio had gone up from US$17.41m on 30 June 2008 [D47/438/13659] to US$71.21m on 31 July 2008 [D48/481/13817] to US$96.37m on 18 August 2008 [D49/505/13924]. [893] [D14/550/5795] [894] “That’s not what I meant. The shares were not good at that time, but the foreign exchange was very good” [T3/Day15/86(12)-(16)] [895] [T4/Day16/15(2)-(12)] [896] [C1/4/971] [897] Exhibit PM2: Young, C. “Australian Dollar Declines as Returns on Fixed Income Diminish” Bloomberg News, 27 August 2008 [C7/9/2363-2364]. [898] This saw investors seeking safe haven in perceived “safer” currencies, particularly USD. [899] Exhibit PM2 [C7/9/2363-2364]: Consequently, the market was buying “safe” USD and selling AUD, as the money markets began to expect imminent AUD rate cuts which are traditionally a powerful driver of a weakening FX rate. [900] See §277 above. [901] Having reached a 25 year high of USD0.9849 to AUD1 on 16 July 2008: see Exhibit PM2 [C7/9/2363]. [902] See Exhibit D3. [903] [B/5/687§29] [904] [T5/Day21(actually Day 23 as 2 days had been spent on the amendment application)/67(9)-(11)] [905] [D14/554/5824-5829] [906] [D14/553/5821] [907] [D14/556/5836] [908] [D/14/557/5840] [909] For Wise Lords’ resolution see [D64/458/17451-17452]. For Trustee’s Minutes see [F/16/24296-24698]. [910] For Wise Lords’ resolution see [D64/458/17451-17452]. For Trustee’s Minutes see [F/16/24296-24698]. [911] The only document evidencing this transaction appears to be Edna Chan’s email dated 29 July 2008 noting Linda Liu’s request to obtain approval [D48/477/13798-13804]. [912] The only document evidencing this transaction appears to be Edna Chan’s email dated 29 July 2008 noting Linda Liu’s request to obtain approval [D48/477/13798-13804]. [913] For Wise Lords’ resolution see [D64/459/17453-17454]. For Trustee’s Minutes see [F/16/24299-24301]. For Ben George’s email dated 28 July 2008 attaching Trustee’s approval see [D48/473/13783-1374]. [914] For Wise Lords’ resolution see [D64/459/17453-17454]. For Trustee’s Minutes see [F/16/24299-24301]. For Ben George’s email dated 28 July 2008 attaching Trustee’s approval see [D48/473/13783-1374]. [915] For Wise Lords’ resolution see [D65/467/17486-17488]. For Trustee’s Minutes see [F/16/24304-24307]. For Ben George’s email dated 31 July 2008 attaching Trustee’s approval see [D48/480/13812-13816]. [916] For Wise Lords’ resolution see [D65/467/17486-17488]. For Trustee’s Minutes see [F/16/24304-24307]. For Ben George’s email dated 31 July 2008 attaching Trustee’s approval see [D48/480/13812-13816]. [917] For Wise Lords’ resolution see [D65/467/17486-17488]. For Trustee’s Minutes see [F/16/24304-24307]. For Ben George’s email dated 31 July 2008 attaching Trustee’s approval see [D48/480/13812-13816]. [918] For Wise Lords’ resolution see [D65/469/17496-17498]. For Trustee’s Minutes see [F/16/24312-24313]. For Ben George’s email dated 1 August 2008 attaching Trustee’s approval see [D48/482/13831-13832]. [919] For Wise Lords’ resolution see [D65/473/17507-17509]. For Trustee’s Minutes see [F/16/24314-24315]. [920] Arboit’s 2nd Schedule is slightly erroneous as regards this and the next item. These 2 items represent proceeds from 2 YEDs that matured on 5 August 2008: [D48/483-484/13833-13834] and see email from Linda Liu to Ji dated 4 August 2008 [D48/486/13836]. [921] See preceding footnote. [922] The AUD deposits were more than 122m [D49/505/13924-13925]. [923] [DLOD/A31/2]: on p. 16 of Appendix C against the date 28/7/2008, which refers to these 2 transactions in the third column. [924] [D49/505/13924] [925] [CB3/678-680] [926] It was missing Peter Lee’s signature [F/15/24157]. The receipt of the Notification of Activities form was acknowledged by 2 Jersey directors who signed the form [F/15/24157]. Peter Lee also signed at some stage [F/15/24158]. [927] Subsequently signed on behalf of Wise Lords [D14/535/5738-5739] and by Linda Liu [CB3/721-722]. [928] This was dated 11 July 2008 [D14/535/5735] [929] This was dated 11 July 2008 [D14/535/5736] [930] The director’s minutes noting the resolution to accept the increased facility was subsequently signed and dated 28 August 2008 [CB3/723-724] Wise Lords’ resolution, noting the trustee’s approval, was also signed and dated 28 August 2008 [D65/485/17550]. [931] The Minutes of DBS Trustee approving the increased facility was dated 28 August 2008 [F1/15/24155-24156]. [932] Total loans in Wise Lords’ portfolio had gone up from US$17.41m on 30 June 2008 [D47/438/13659] to US$71.21m on 31 July 2008 [D48/481/13817]. [933] Appendix C of the defendants’ “Note on the Queries raised by the Court” dated 6 November 2014. [934] [D49/513/14055-14056] and Appendix C of the defendants’ “Note on Queries raised by the Court” dated 6 November 2014. [935] [D49/505/13924] [936] See §320 below: Das stated that this was a leverage of around 272% (loan value USD96,367,192.31 divided by NAV of USD35,432,996.04). [937] See Exhibit D3 and Exhibit PM2 [C7/9/2363]. By end August 2008 it had dropped 13% from a 25-year high of USD0.9849 to AUD1 on 16 July 2008: see Exhibit PM2 [C7/9/2363]. [938] [D54/295/15204] [939] [B/7/738§70] [940] In §§6-9, 16-25. [941] See Appendix D of the defendants’ “Note on the Queries raised by the Court” dated 6 November 2014. [942] [C1/3/892-893] [943] [D49/505/13924-13927] [944] [C1/4/962-963] [945] [C2/6/1060/F.6] See §298(b) above. [946] [D14/558/5841-5863] [947] At p.14 of the presentation: [D14/558/5856]. [948] [E16/139/§§51-65, §§73-115, §§127-129 (8 August 2008)] [949] [B/4/668§72, 671§80] [950] [B/4/668§73] [951] [C1/3/896§§J.9-J.10, 898§J.16] Although he used the AUDUSD Decumulator to explain its operation, the EURUSD Decumulator worked in the same way: [C1/3/899§J.16] [952] Whilst equity accumulators were common, I accept the opinion of Das that decumulators were less common: [C2/6/1064-2§G.16]. [953] [C2/6/1062§§G.1-G.3] [954] The Strike Rate was fixed and capped the potential gain from AUD appreciating beyond the Strike Rate. [955] [C2/6/1063§§G.4-G.6] [956] [C1/3/911§J.70(2)] [C2/6/1064-2§G.17] [957] [C2/6/1064§G.7] [958] [C2/6/1063§G.6] [959][C2/6/1064§§G.10 and G.11] [960] [C2/6/1064-1§G.12] [961] [C2/6/1064-2§G.14] [962] [C2/6/1064-3§G.18] [963] [D14/561/5868] [964] [D14/563/5872] [965] [CB3/651] [966] [E16/140 (15 August 2008)] [967] See §§9-36, §§134- 137 [E16/140 (15 August 2008)]. [968] See §§37-39 [E16/140 (15 August 2008)]. [969] See §§41-128 [E16/140 (15 August 2008)]. [970] See §§113-121 [E16/140 (15 August 2008)]. [971] See for example §§48, 54 (“what are the advantage[s], the disadvantage”), 66, 68, 70, 71, 78, 80, 82, 84, 86, 102 [E16/140 (15 August 2008)]. [972] See §127 [E16/140 (15 August 2008)]. [973] [E16/141] [974] [E16/142] [975] [E16/144] [976] [E16/145] [977] It appears that the first conversation related to the RBS or HSBC decumulator and the last three conversations relate to the 1st Decumulator (see §341 below). [978] [E16/141/§151] [979] [E16/141/§152§164] [980] [T3/Day15/72(22)-73(4)] [981] [CB3/655] [982] [CB3/653-654] [983] See §341 below. [984] [E16/144/§§11-13] [985] [E16/144/§15] [E14/145/§§20-21] [986] See [D14/561/5868] [CB3/651] [987] [E16/144/§§13-50] [988] [E16/144/§§72-97] [989] [E16/145] [990] See §§9-10 of [E16/145]. [991] See §§11-12 of [E16/145]. [992] See §§16-20 of [E16/145]. [993] See §§20-22 of [E16/145]. [994] See §§31-73 of [E16/145]. [995] See §§23-30 of [E16/145]. [996] See §§126-138 of [E16/145]. [997] See §89 of [E16/145]. [998] See email from Linda Liu to Edwin Yim and Frederick Ko dated 15 August 2008 at 19:10 referring to the transaction [CB3/657]. [999] [D14/574/5913+] [1000] [E16/147/§§29-55 (18 August 2008)] [1001] [CB3/710-734] [1002] [T2/Day 7/64(14)-65(17)] [1003] [D13/523/5663] [1004] [D20/828/7233] [1005] See Linda Liu’s earlier email to Ji on the same page [D20/828/7233] [1006] See §357 below. [1007] See §§352 and 357 below. [1008] [E17/148/§§40-44 (21 August 2008)] [1009] [E17/149/§77+ (26 August 2008); [E17/152/§30+ (27 August 2008); see also email from Kenneth Cheung to Linda Liu on 27 August 2008 at 11:49 [D14/585/5956] [1010] [E17/149/§200 (26 August 2008)] [1011] [E17/153/§§35-53 (27 August 2008)] [1012] [D15/587/5958] [1013] [D15/593/5967-5991] [1014] [E17/156/§§14-22 (27 August 2008)] [1015] [E17/154 (27 August 2008)] [1016] [E17/155 (27 August 2008)] [1017] At [E17/155/§34] [1018] At [E17/155/§38] [1019] [E17/156/§§38-52 (27 August 2008)] [1020] [E17/157/§17 §§4-21 (28 August 2008)] [1021] [E17/162/§37 (29 August 2008)] [1022] [E17/163/§10 (29 August 2008)] [1023] [D15/603/6020-6027] [1024] [T2/Day 6/45(17)-46(2)] [1025] [T4/Day 16/39(24)-40(21)] [1026] [E16/144/§§38-50] (15 August 2008) [1027] [C1/3/904§J.37-39] [1028] [T4/Day 16/17(14)-18(10)] [1029] [T4/Day 16/41(3)-(25)] [1030] [T4/Day 16/45(17)-46(2)] [1031] [T4/Day 16/15(16)-16(18)] [1032] [T4/Day 16/39(22)-40(21)] [1033] [T4/Day 17/48(18)-(24), 49(5)-(15)] [1034] [CB3/657] [1035] [D14/565/5877-5878] [1036] [E16/141/§164 (15 August 2008)] [1037] [E14/146/§8, §20 (15 August 2008)] [1038] [C1/3/903-904§§J.34-36] [1039] [C1/3/903-904§J.33] [1040] An option contract that gives the holder the right to sell the underlying security at a specified price for a certain fixed period of time. [1041] An option contract that gives the holder the right to buy the underlying security at a specified price for a certain fixed period of time. [1042] [E16/144/§§67-69 (15 August 2008)] [1043] See Exhibit P2 at pp.5 and 7. [1044] See Exhibit P2 at pp.5 and 7. [1045] [C2/6/1064 §§G.10 and G.11] [1046] [C1/4/975-976 §3.3.12 §3.3.15] [1047] [D14/575/5920-5926] [1048] [D14/576/5927-5928] [1049] [D14/576/5928] [1050] [F1/15/24149-24151] [1051] [D65/480/17543] [1052] [D15/592/5966] [1053] [D14/584/5955] [1054] [D15/589/5960-5961] [1055] [D15/595/6002-6003] [1056] [D15/597/6007-6008] The signature of Peter lee was missing from the form. [1057] [F1/15/24152-24154] [1058] [D65/484/17548] [1059] [D15/601/6017-6018] [1060] [D15/603/6020-6027] [1061] [D15/604/6028-6035] [1062] [D15/607/6049] [D15/612/6066] [1063] [D15/611/6063] [1064] [D15/612/6064] [1065] [D15/612/6064,6066] [1066] [F1/15/24159-24161] [1067] [D65/487/17552] [1068] [T3/Day11/56(5)-(18)] [1069] [D15/610/6059-6062] [D18/736/6833 to D18/738/3835] [1070] [D26/960/8704] [1071] Exhibit P2, p. 6 [1072] As mentioned by Linda Liu during a telephone conversation on 3 September 2008 [CTB3/817§132]. [1073] See Arboit’s 2nd Schedule items 503-508 [B/1/595] and Portfolio Summary of 30 September 2008 [D49/523/14076]. [1074] [D49/523/14075] [1075] Exhibit P3 p.59 [1076] Securities and Exchange Commission [1077] Wachovia in fact merged with Well Fargo on 3 October 2008: Exhibit P3 p.60. [1078] [CB3/743] [D18/708] [1079] At rates ranging from 0.7097 on 16 October 2008 to 0.6184 on 28 October 2008 [D49/522-527/14071-14126]. See also Exhibit 2 pp.6-7. [1080] [B/5/691§39]. See Arboit’s 2nd Schedule items 509-517 [B/1/595-596]. See Portfolio Summary dated 31 October 2008 [D20/823/7201-7212]. [1081] See Arboit’s 2nd Schedule items 518-519 [B/1/596]. See Portfolio Summary dated 31 November 2008 [D20/862/7386-7394]. [1082] See, for example, [CB3/735] [CB3/737-1-739] [CB3/739-1-740] [CB3/740-1-742]. [1083] As recommended by Peter Lee for a fee of US$3,000 [CB3/747-753]. [1084] [CB3/754] [1085] A decrease of NAV of about US$12m. [1086] A decrease of NAV of about US$10m [CB3/774-785]. [1087] [CB3/824-827] [1088] [CB3/835-837] [1089] The subject of the email was aptly described as “Wise Lords Limited - Escalation Report” [CB3/827-3-827-4]. [1090] To increase the facility to US$100m. [1091] [CB3/827-3] [1092] [CB3/831-834] [1093] [CB3/843-847] [1094] [A1/2/79-81] [1095] Appendix B of the RASOC sets out the total amount as US$106,175. This is a typographical error as the total, including the transfer of US$5,950 on 10 March 2011 produces a total of US$106,125. However, the claim advanced in Annex IV the plaintiffs’ final submissions is a claim for the sum of US$95,175. The reduction is proper as the first item of claim should be in respect of the overcharge of US$200, not US$5,200: it was common ground that the annual fee was US$5,000. I shall proceed to assess this claim of US$95,175. [1096] This total accords with the total amount set out in Appendix B of the RASOC. I do not understand and, therefore, disregard the claim for GBP40,859 set out in Annex IV the plaintiffs’ final submissions. [1097] [CB1/102-103] [1098] [CB1/157-158] [1099] [B/7/728-729§43] [1100] See footnote 1095 above. [1101] See footnote 1095 above. [1102] [CB3/894-902] A supplemental deed, having only prospective effect, was executed a month later on 28 February 2011 [CB3/903-907]. [1103] [CB3/899] [1104] [D26/963/8712] [1105] [CB3/899] [1106] [D28/1058/9238-9239] [1107] [D28/1058/9249-9250] [1108] [D28/1060/9255-9256] [1109] See §396 above. [1110] [CB1/148] [1111] See Section D (3) above and §§24-33. [1112] Defendants’ Note on Queries Raised by the Court §10. [1113] Defendants’ Closing Submissions pp.261-262 §518(5). [1114] In the sense that the persons acting on behalf of DBS Corporate knew that what DBS Corporate was doing or omitting to do was contrary to the duty of DBS Corporate acting as the agent of DBS Trustee; alternatively, recklessness consisting of the persons concerned shutting their eyes to the probability that their conduct was in breach of the duty of DBS Corporate acting as the agent of DBS Trustee: see §120 above. [1115] Defendants’ Note on Queries Raised by the Court §11. [1116] [CB1/145-146,148] [1117] [A1/4/§§331-332] [1118] [CB3/898-899] [1119] Defined in clause 1(b) [CB3/897] to include the Retiring Trustee (i.e DBS Trustee) and its successors, its current and former directors, plus its parent and associated companies. [1120] [CB3/897] [1121] [CB1/148] [1122] [D39/178/11613] [1123] [D39/184/11807] [1124] See also the Table in §89 above. [1125] Exhibit P2 pp. 3-4 [1126] See Table [C1/4/963]. [1127] See Table [C1/4/968]. [1128] See §300 above. [1129] [D13/508/5599-5600] [1130] Such as, for example, the Letter of Recommendation referred to in §308 above. [1131] In this case, the fiduciary duty of DBS Trustee is not disputed. [1132] Our case also falls into the first category being a case where the breaches of duty by DBS Trustee have led directly to losses being suffered by Wise Lords’ portfolio, i.e. a case where “there are breaches leading directly to damage to or loss of the trust property”. [1133] See §470 of my judgment in Akai Holdings Ltd. (In Compulsory Liquidation) v. Everwin Dynasty Ltd. & Ors (No. 2) cited above. [1134] Annex IV to the plaintiffs’ final submissions is most unhelpful. The questions I asked during final submissions were largely unanswered: see [T5/Day21/77(15)-(22)][T5/Day21/113(14)-(17)] [T5/Day21/118(10)-(12)]. [1135] I have considered the submissions contained in pp13-15 of the Defendants’ Note on Queries Raised by the Court. My assessment is being made on the simplistic basis that no other transactions are being entered into other than the other transactions listed in Arboit’s 2nd Schedule that were unrelated to the purchases of US$83m worth of AUD from 24 July to 5 August 2008 and unrelated to the purchases of the 3 Decumulators. [1136] §36 of the RASOC [A1/2/39] [1137] §37 of the RASOC [A1/2/39-40] [1138] See §§68-69 above. [1139] See, for example, §§301 and 306 above. [1140] At §213 [1141] [2012] SGHC 248 at §§104-115. [1142] See §33 above [D2/101/3013-3017][CB1/179-183]. [1143] [B/8/764§54] [1144] See also §34-37 above [1145] See Amended Reply at paragraph 54(2)(a) [A2/7/458] [1146] §39 of the RASOC [A1/2/40]. [1147] [B/7/733§56] [1148][B/7/734-735§60] See also [B/7/718-719§§12-13]. [1149] See §83 above. [1150] Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 96 (Mason J); Breen v Williams (1995-96) 186 CLR 71, 92 (Dawson and Toohey JJ), 107 (Gaudron and McHugh JJ). [1151] (1995-96) 186 CLR 71, 82. [1152] [1998] Ch 1, 17. [1153] In Permanent Building Society v Wheeler (1994) 14 ACSR 109, 157. [1154] Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 98. [1155] Maruha Corp v Amaltal Corp [2007] 3 NZLR 192, [21]. [1156] [1999] 1 NZLR 664, 686. [1157] Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 99. [1158] (1995-96) 186 CLR 71, 137. Sometimes it is put in terms of fiduciary duties arising where a person “act in a representative character in the exercise of his responsibility”, per Dawson and Toohey JJ, 93. [1159] See §470 of my judgment in Akai Holdings Ltd. (In Compulsory Liquidation) v. Everwin Dynasty Ltd. & Ors (No. 2) cited above. [1160] §36 of the RASOC [A1/2/39] [1161] [A1/2/67] [1162] §106(1) of the RASOC [A1/2/69] [1163] §106(5) of the RASOC [A1/2/70] [1164] [A1/2/69-70] [1165] [B/5/681-682§12] [1166] See §36 above. [1167] [B/8/746§3] and see §28 above. [1168] See §37 above. [1169] P.18I-L [1170] [A1/2/67] [1171] [A1/2/42] [1172] [A1/2/47] [1173] [A1/2/45-46] [1174] [A1/2/46-47] [1175] [A1/2/63-64] [1176] [A1/2/67-68] [1177] [A1/2/68] [1178] Not exceeding 40 pages. [1179] Not exceeding 25 pages. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCCL 2/2011