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 held that the participating employees were the actual contributors and equitable owners of the relevant interests, that on 11 April 2005 an equitable/fixed trust in favour of the employees over 617,669 CSI shares arose (such that 456,325 shares are held for the plaintiffs in specified proportions), that the later BVI discretionary trusts executed in November 2005 could not validly resettle or defeat the pre-existing fixed trusts without informed consent, and that the 2008 Confirmation did not constitute informed ratification of BVI discretionary trusts; accordingly a declaration and transfer of 456,325 shares to the plaintiffs (or nominees) was ordered and the receivership...

Citation
[2018] HKCFI 195
Parties
Plaintiffs (k & L Gates Group): Relevant employees whose shares in China Shanshui Investment Company Limited were held by ZHANG CAIKUI on trust (The 1st Group of Plaintiffs); Plaintiffs (stephenson Harwood Group): Relevant employees whose shares in China Shanshui Investment Company Limited were held by ZHANG CAIKUI or LI YANMIN on trust and who transferred to HCA 1282/2017 (The SH plaintiffs); 1st Defendant: ZHANG CAIKUI (張才奎); 2nd Defendant: LI YANMIN (李延民)
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
31 January 2018
Case Number
HCA939/2015
Procedural Posture
Consolidated Civil Actions Concerning Trusts, Company and Equitable Claims / Trial on Facts and Law Before Court of First Instance; Judgment Delivered
Outcome
Plaintiffs' claims succeed in respect of 456,325 CSI shares: declaration of trust and transfer ordered; BVI discretionary trusts not effective to defeat pre-existing fixed trusts; receivership to cease; costs awarded to plaintiffs (limited)
Legal Topics
Discretionary Trust Vs Fixed Trust, Declaration of Trust, Employee Stock Ownership Scheme (eso), Constructive and Resulting Trusts, Ratification and Informed Consent, Fiduciary Duties and Breach, Receivership, Retrospective Settlement
Source Language
EN
Equity and Trusts Company Law Conflict of Laws Civil Procedure Mainland PRC Law Discretionary Trust Vs Fixed Trust Declaration of Trust Employee Stock Ownership Scheme (eso) +5 more

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Parties

Relevant employees whose shares in China Shanshui Investment Company Limited were held by ZHANG CAIKUI on trust (The 1st Group of Plaintiffs)

Plaintiffs (k & L Gates Group)

Relevant employees whose shares in China Shanshui Investment Company Limited were held by ZHANG CAIKUI or LI YANMIN on trust and who transferred to HCA 1282/2017 (The SH plaintiffs)

Plaintiffs (stephenson Harwood Group)

ZHANG CAIKUI (張才奎)

1st Defendant

LI YANMIN (李延民)

2nd Defendant

Procedural Posture

Consolidated Civil Actions Concerning Trusts, Company and Equitable Claims / Trial on Facts and Law Before Court of First Instance; Judgment Delivered

Legal Issues

  1. 1 Whether the CSI shares transferred on 11 April 2005 were held on discretionary BVI trusts or on fixed trusts for individual employees
  2. 2 Whether a discretionary BVI trust could be created or declared retrospectively effective from 11 April 2005
  3. 3 Whether the 2008 Confirmation constituted informed ratification of BVI discretionary trusts by the employees

Ratio Decidendi

The court held that the participating employees were the actual contributors and equitable owners of the relevant interests, that on 11 April 2005 an equitable/fixed trust in favour of the employees over 617,669 CSI shares arose (such that 456,325 shares are held for the plaintiffs in specified proportions), that the later BVI discretionary trusts executed in November 2005 could not validly resettle or defeat the pre-existing fixed trusts without informed consent, and that the 2008 Confirmation did not constitute informed ratification of BVI discretionary trusts; accordingly a declaration and transfer of 456,325 shares to the plaintiffs (or nominees) was ordered and the receivership...

Court Disposition

Plaintiffs' claims succeed in respect of 456,325 CSI shares: declaration of trust and transfer ordered; BVI discretionary trusts not effective to defeat pre-existing fixed trusts; receivership to cease; costs awarded to plaintiffs (limited)

Orders

  • Declaration that ZHANG CAIKUI held 456,325 shares of China Shanshui Investment Company Limited on trust for the plaintiffs individually in proportions set out in pleadings' schedules
  • 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