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

Applying PRC and Hong Kong law to the facts, the court found that under the ESO scheme the employees were the actual contributors and owners of the economic interests; when 1,000,000 CSI shares were transferred to management on 11 April 2005 the equitable interests in 617,669 shares (523,668 held by Zhang; 94,001 held by Li) vested in the participating employees and a fixed trust relationship (or equivalent proprietary equitable interest) arose in their favour; the November 2005 BVI discretionary trust deeds could not validly resettle or defeat those pre‑existing fixed equitable interests as against the beneficiaries; the 2008 Confirmation did not amount to an informed ratification of BVI...

Citation
[2018] HKCFI 195
Parties
Plaintiffs: Relevant employees whose CSI shares were held by ZHANG CAIKUI (1st Group); Plaintiffs: Relevant employees whose CSI shares were held by LI YANMIN (2nd Group); Plaintiffs: LI MING and other individual plaintiffs in HCA 1282/2017 (2,019 plaintiffs represented by SH); 1st Defendant: ZHANG CAIKUI; 2nd Defendant: LI YANMIN
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
31 January 2018
Case Number
HCA2191/2014
Procedural Posture
Civil Consolidated Actions Concerning Trusts and Proprietary Rights in Shares / Judgment Following Full Trial (court of First Instance, 31 January 2018)
Outcome
Judgment for the plaintiffs: court declares plaintiffs beneficial owners of the claimed CSI shares and grants orders transferring the shares and terminating receivership; costs awarded to plaintiffs (order nisi)
Legal Topics
Discretionary Trust, Fixed Trust, Constructive Trust, Employee Stock Ownership Scheme (eso), Ratification, Receivership, Statements of Truth/strikeout
Source Language
EN
Trusts Company Law Equity Conflict of Laws Civil Procedure Discretionary Trust Fixed Trust Constructive Trust +4 more

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Parties

Relevant employees whose CSI shares were held by ZHANG CAIKUI (1st Group)

Plaintiffs

Relevant employees whose CSI shares were held by LI YANMIN (2nd Group)

Plaintiffs

LI MING and other individual plaintiffs in HCA 1282/2017 (2,019 plaintiffs represented by SH)

Plaintiffs

ZHANG CAIKUI

1st Defendant

LI YANMIN

2nd Defendant

Procedural Posture

Civil Consolidated Actions Concerning Trusts and Proprietary Rights in Shares / Judgment Following Full Trial (court of First Instance, 31 January 2018)

Legal Issues

  1. 1 Whether participating employees held beneficial ownership of CSI shares or were mere objects of discretionary BVI trusts
  2. 2 Whether BVI discretionary trusts were validly constituted with effect from 11 April 2005 or valid as against the employees
  3. 3 Whether a Hong Kong fixed trust can be inferred to have arisen on 11 April 2005 over the relevant CSI shares

Ratio Decidendi

Applying PRC and Hong Kong law to the facts, the court found that under the ESO scheme the employees were the actual contributors and owners of the economic interests; when 1,000,000 CSI shares were transferred to management on 11 April 2005 the equitable interests in 617,669 shares (523,668 held by Zhang; 94,001 held by Li) vested in the participating employees and a fixed trust relationship (or equivalent proprietary equitable interest) arose in their favour; the November 2005 BVI discretionary trust deeds could not validly resettle or defeat those pre‑existing fixed equitable interests as against the beneficiaries; the 2008 Confirmation did not amount to an informed ratification of BVI...

Court Disposition

Judgment for the plaintiffs: court declares plaintiffs beneficial owners of the claimed CSI shares and grants orders transferring the shares and terminating receivership; costs awarded to plaintiffs (order nisi)

Orders

  • Declaration that Zhang Caikui held 456,325 shares of CSI on trust for the plaintiffs individually in the proportions in the statements of claim
  • Order that the Receivers (and Zhang Caikui to the extent necessary) take steps forthwith to transfer the 456,325 CSI shares registered in the Receivers' name to the plaintiffs or persons nominated by them