EMPIRE SUMMIT INTERNATIONAL LTD (IN COMPULSORY LIQUIDATION) v. SUN HONGMEI AND OTHERS

EMPIRE SUMMIT INTERNATIONAL LTD (IN COMPULSORY LIQUIDATION) v. SUN HONGMEI AND OTHERS

Where a director wrongfully transferred company funds to a third party, those funds were held on resulting and constructive trust for the company; the company may trace the funds into shares held at a broker and obtain declarations, vesting and transfer orders under Trustee Ordinance s52(1)(e), an equitable charge...

Source-derived case information.

Citation
[2024] HKCFI 907
Parties
Plaintiff/applicant: Empire Summit International Limited (in compulsory liquidation); Defendant/1st Respondent: Sun Hongmei; 2nd Respondent: Orient Securities (Hong Kong) Limited; 3rd Respondent: Industrial and Commercial Bank of China (Asia) Limited
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
14 March 2024
Case Number
HCMP729/2023
Procedural Posture
Civil Trust and Proprietary Claims Arising From Company Funds/insolvency / Default Judgment Application and Originating Summons for Vesting (decision)
Outcome
Default judgment for Empire Summit International Limited (in compulsory liquidation). Declarations and orders granted in favour of Empire Summit and against Sun; vesting and transfer of shares ordered; costs on indemnity basis awarded to Empire Summit.
Legal Topics
Resulting Trust, Constructive Trust, Tracing, Vesting Order (trustee Ordinance S52), Equitable Charge, Restitution, Default Judgment, Indemnity Costs, Interest
Source Language
en
Trusts Equity Company Law Insolvency Civil Procedure Resulting Trust Constructive Trust Tracing +6 more

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Parties

Empire Summit International Limited (in compulsory liquidation)

Plaintiff/applicant

Sun Hongmei

Defendant/1st Respondent

Orient Securities (Hong Kong) Limited

2nd Respondent

Industrial and Commercial Bank of China (Asia) Limited

3rd Respondent

Procedural Posture

Civil Trust and Proprietary Claims Arising From Company Funds/insolvency / Default Judgment Application and Originating Summons for Vesting (decision)

Legal Issues

  1. 1 Whether funds transferred by a director in breach of fiduciary duty gave rise to a resulting trust in favour of the company
  2. 2 Whether the recipient (Sun) held the funds on constructive trust for the company
  3. 3 Whether Empire Summit can trace the trust monies into shares held at OSL and obtain vesting/transfer orders

Ratio Decidendi

Where a director wrongfully transferred company funds to a third party, those funds were held on resulting and constructive trust for the company; the company may trace the funds into shares held at a broker and obtain declarations, vesting and transfer orders under Trustee Ordinance s52(1)(e), an equitable charge over other shares for the discharged debit amount, interest and indemnity costs; default judgment was appropriate where defendant did not acknowledge service.

Court Disposition

Default judgment for Empire Summit International Limited (in compulsory liquidation). Declarations and orders granted in favour of Empire Summit and against Sun; vesting and transfer of shares ordered; costs on indemnity basis awarded to Empire Summit.

Orders

  • Declaration that Sun holds HK$40,433,247.93 (or its traceable proceeds/substitutes, including 19,887,592 Greater China Financial Holdings Ltd shares and 1,126,000 ShiFang Holding Limited shares) on trust for Empire Summit
  • Order that Sun remit or transfer the sum (or its traceable proceeds/substitutes, including the shares) to Empire Summit