張才奎所託管中國山水投資有限公司股份相關員工 AND OTHERS v. 張才奎 AND ANOTHER

張才奎所託管中國山水投資有限公司股份相關員工 AND OTHERS v. 張才奎 AND ANOTHER

The court found that under the ESO scheme and relevant Mainland law the participating employees were the actual beneficial owners of the relevant interests and that when CSI shares were transferred on 11 April 2005 those shares were held by Zhang and Li as trustees on fixed trusts for the individual participating employees in proportion to their entitlements; the November 2005 BVI discretionary trust deeds could not validly resettle assets already subject to fixed equitable trusts and were ineffective as against the plaintiffs; the 2008 Confirmation did not amount to informed ratification of the BVI trusts; consequential relief including declaration and transfer of 456,325 CSI shares to...

Citation
[2018] HKCFI 195
Parties
Plaintiffs: Participating employees (K & L Gates group); Plaintiffs: Participating employees (Stephenson Harwood group); 1st Defendant: ZHANG CAIKUI; 2nd Defendant: LI YANMIN
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
31 January 2018
Case Number
HCA1661/2014
Procedural Posture
Consolidated Civil Actions Concerning Proprietary and Equitable Claims (trusts) Arising From an Employee Stock Ownership Scheme and Company Restructuring / Trial Judgment at First Instance (court of First Instance) — Final Determination and Consequential Orders
Outcome
Judgment for the Plaintiffs on proprietary/equitable claims relating to 456,325 CSI shares; strikeout application declined in the exercise of discretion
Legal Topics
Discretionary Trust, Fixed Trust, Nominee/beneficial Ownership, Employee Stock Ownership Scheme, Ratification, Constructive Trust, Resettlement of Trust Assets, Breach of Fiduciary Duty, Strikeout Under O.41 a R.6
Source Language
EN
Equity and Trusts Company Law Mainland PRC Law (conflict Issues) Civil Procedure Discretionary Trust Fixed Trust Nominee/beneficial Ownership Employee Stock Ownership Scheme +5 more

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Parties

Participating employees (K & L Gates group)

Plaintiffs

Participating employees (Stephenson Harwood group)

Plaintiffs

ZHANG CAIKUI

1st Defendant

LI YANMIN

2nd Defendant

Procedural Posture

Consolidated Civil Actions Concerning Proprietary and Equitable Claims (trusts) Arising From an Employee Stock Ownership Scheme and Company Restructuring / Trial Judgment at First Instance (court of First Instance) — Final Determination and Consequential Orders

Legal Issues

  1. 1 Whether the CSI shares acquired on 11 April 2005 were held on BVI discretionary trusts or fixed trusts for individual participating employees
  2. 2 Whether any discretionary BVI trusts were validly declared in April 2005 or could be given retrospective effect by deeds executed on 28 November 2005
  3. 3 Whether the 2008 Confirmation signed by participating employees amounted to informed ratification of the BVI trusts

Ratio Decidendi

The court found that under the ESO scheme and relevant Mainland law the participating employees were the actual beneficial owners of the relevant interests and that when CSI shares were transferred on 11 April 2005 those shares were held by Zhang and Li as trustees on fixed trusts for the individual participating employees in proportion to their entitlements; the November 2005 BVI discretionary trust deeds could not validly resettle assets already subject to fixed equitable trusts and were ineffective as against the plaintiffs; the 2008 Confirmation did not amount to informed ratification of the BVI trusts; consequential relief including declaration and transfer of 456,325 CSI shares to...

Court Disposition

Judgment for the Plaintiffs on proprietary/equitable claims relating to 456,325 CSI shares; strikeout application declined in the exercise of discretion

Orders

  • Declaration that ZHANG CAIKUI held 456,325 shares of and in China Shanshui Investment Company Limited on trust for the plaintiffs individually in the proportions set out in the statements of claim schedules
  • Order that the Receivers (and ZHANG CAIKUI to the extent necessary) take steps forthwith to transfer the 456,325 CSI shares currently registered in the Receivers’ name to the plaintiffs or to persons nominated by them