Timmerton Company Inc v. Equity Trustee Ltd and Another

HCA 2167/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2167 OF 2012

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D E C I S I O N

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1.I am satisfied that the plaintiff has shown that it has a good arguable case that its claims against the defendants, for breach of trust to which the defendants were parties or privy, or to recover trust property or proceeds received by the defendants, fall within O 11 r 1(1) (a), (b) or (p), and that on the merits, there is a serious issue to be tried on these claims. The defendants argue that plaintiff’s claims against them, for breach of trust or recovery of trust property, are time barred and do not fall within the provisions of s 20(1) of the Limitation Ordinance. Relying on Paragon Finance v DB Thakerar [1991] 1 All ER 400 and Peconic Industrial Development Ltd v Lau Kwok Fai [2008] 4 HKLRD 473, it was argued by the defendants that any trust obligation asserted by the plaintiff against the defendants in this case arose as a consequence of the unlawful transactions sought by the plaintiff to be impeached in these proceedings, such that the defendants cannot properly be said to be trustees, for s 20 to apply. There being no serious question to be tried on the merits of the plaintiff’s claims against the defendant, it was argued that the order granting the plaintiff leave to serve the writ on the defendants should be set aside.

2.I accept the arguments advanced on behalf of the plaintiff, that the plaintiff’s case against the defendants is on the basis of 1) the defendants having received trust property; 2) with notice of the late Mr Mong having acted in breach of his fiduciary duties as director of the plaintiff company; and 3) with knowledge that such trust property had been acquired by the defendants for no value, or at a substantial undervalue.  According to the Statement of Claim, the defendants’ receipt of property under the Huge Surplus Trust was procured or pursuant to a scheme devised by the defendants’ principal, Ernst & Young, for Mr Mong.

3.On the issue of whether the order for leave to effect service out of Hong Kong should be discharged on the ground that there is no serious issue to be tried, the defendants have to demonstrate that the plaintiff’s claim ought to be struck out as disclosing no reasonable cause of action, or is frivolous or vexatious, or may prejudice, embarrass or delay the fair trial of the action or is an abuse of process (see GDL Ltd v Creditors Co Ltd [2008] 5 HKLRD 895 and Ren Yun Liang v China Merchants Bank Company Limited unreported HCA 1456 of 2005). 

4.On a careful reading  of the Court of Final Appeal judgment in Peconic Industrial Developent Ltd v Lau Kwok Fai (2009) 12 HKCFAR 139, it is seriously arguable that in a case such as the present, where the 1^st defendant as trustee under the Huge Surplus Trust had received trust assets from the late Mr Mong and had been holding the assets under a trust, it can properly be called a “fiduciary” in the sense referred to by Lord Hoffman, and can be treated in the same way as an express trustee, such that the limitation period defence is not available to it.   

5.Bearing in mind what eminent judges have as recently as in Williams v Central Bank of Nigeria [2012] 3 All ER 579 referred to as “the uncertainty that appears to attend this sphere of the law” concerning the proper construction of section 21 of the Limitation Act 1980 and section 20 of our Limitation Ordinance, it would not be appropriate in my judgment to set aside the order for service of the writ on the defendants on the basis that there is no serious issue to be tried.  Much will depend on the evidence and the facts showing the role of the defendants, and these are not available at this stage for a full consideration of the matter by the court.  It suffices to say at this stage that there is a serious question to be tried on the plaintiff’s case against the defendants as constructive trustees, on the basis of the defendants’ knowing receipt and handling of trust property.

6.For these reasons, I dismiss the defendants’ application to set aside the Order made by the Master granting leave to serve the Writ out of the jurisdiction on the defendants.  The costs of the application should be paid by the defendants to the plaintiff. 

Mr N Hunsworth, of Mayer Brown JSM, for the plaintiff

Mr Victor Joffe, instructed by Baker & McKenzie,   for the 1^st and 2^nd defendants

Please refer to CACV53/2014 for the relevant appeal(s) to the Court of Appeal.