DENG ZHONG LIANG v. CHOW HEUNG YUET

HCA 775/2017

[2022] HKCFI 2763

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 775 OF 2017

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JUDGMENT

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A.  INTRODUCTION

1.  This is a dispute concerning some 311,000 shares of CLP Holdings Limited (“CLP Shares”) which Deng Zhong Liang (“the Plaintiff”), claims against Chow Heung Yuet (“the Defendant”) and asserts that the Defendant held and is still holding the CLP Shares as trustee for and on behalf of the Plaintiff.  The Defendant denies the same.

2.  The Plaintiff claims against the Defendant for breach of trust and seeks a declaration that the Defendant holds the CLP Shares and the proceeds thereof for the Plaintiff. He also seeks the return of the CLP Shares and an account for all the income and profits derived from the CLP Shares.

3.  The Defendant’s case, as shown in her Amended Defence, is that the CLP Shares were purchased with her savings and a loan from Hung Shui Hing Lilian (“Hung”). The Defendant denies knowing the Plaintiff or receiving any sums from the Plaintiff.

4.  The Defendant was absent at trial. She had been represented at the commencement of the proceedings and filed, inter alia, an Amended Defence dated 19 January 2018 and a witness statement dated 21 September 2018. Yet, she could not be contacted or located since November 2021. The Plaintiff’s solicitors made multiple attempts to serve the court’s documents on her, but found that her phone number was cancelled and that she moved from her address for service. In fact, the trial was adjourned due to the last wave of COVID and this Court is satisfied that the Defendant has been notified of the new trial dates. Yet, she chose to be absent at trial. Pursuant to Order 35, rule 1(ii), the trial proceeded in the Defendant’s absence.

B.  MATERIAL BACKGROUND FACTS

5.  From the Plaintiff’s case and the Defendant’s Amended Defence, the pleaded material facts are as follows.

6.  Between 6 to 13 June 2013, the Defendant deposited a total sum of HK$1,551,482.88 into an account of SBI E2-Capital Financial Services Limited (“SBI”) for the purchase of shares of PPS International (Holdings) Limited (寶 聯 控股有限公司)   (Stock code 8201) (“PPS”), which was going to be listed on the Hong Kong Stock Exchange on 17  June 2013.

7.  On 17 June 2013, the Defendant was allotted 1,280,000 shares in PPS (“PPS Shares”). The Defendant gave Hung the originals of monthly statements of her SBI account from time to time.

8.  In about August 2014, the Defendant sold the PPS Shares and put the sale proceeds (“PPS Shares Proceeds”) in a monthly time deposit account with HSBC for one month (“the One-Month Time Deposit”).

9.  In October 2014, the Defendant purchased 311,000 CLP Shares with the PPS Shares Proceeds. The Defendant also gave Hung the original share certificate of the CLP Shares, signed, blank bought and sold notes for the shares and her bank statement from HSBC (“HSBC Statement”) recording the purchase of the shares.

10.  Hung passed away in January 2015.

11.  Subsequently, the Defendant made a declaration of loss of the original share certificate for the CLP Shares.

12.  On 30 March 2017, the Plaintiff commenced the present Action.

B1.  The Parties Respective Cases

13.  The Plaintiff’s case is that he funded the purchase of the PPS Shares, and subsequently, the CLP Shares, and that all the investments were made by the Defendant for him pursuant to a trust:-

(1)  The Plaintiff is a citizen of the People’s Republic of China (“PRC”) residing in the PRC, while his elder sister, Tang Chun Mui (“Tang”), resides in Hong Kong. He and Tang are close friends with Hung.

(2)  In early 2013, having known from Hung that PPS will be listed on 17 June 2013, the Plaintiff asked Tang to help purchase the PPS Shares, and Tang relayed the request to Hung. Hung then arranged her niece, the Defendant, to manage the investment, to which the Plaintiff agreed.

(3)  Pursuant to the agreement, the Plaintiff delivered a sum of $1,568,000 (“the Funds”) to Tang, who passed the Funds to Hung, and then to the Defendant. The Defendant then purchased and sold the PPS Shares, and re-invested the PPS Shares Proceeds in the CLP Shares according to the Plaintiff’s instructions.

(4)  After each transaction, the Defendant furnished the Plaintiff with the bank statements recording the transactions via Hung and Tang. After the respective shares purchases, the Defendant also passed some signed, blank bought and sold notes and shares transfer forms of the PPS Shares and CLP Shares, and the original share certificate of the CLP Shares to the Plaintiff via Hung and Tang.

(5)  In September 2015, the Plaintiff attempted to transfer the CLP Shares to himself but was unsuccessful. He discovered that someone unknown had made a declaration of loss of the original share certificate of the CLP Shares.

14.  In gist, the Defendant’s case is that:-

(1)  She did not know and had never heard of the Plaintiff nor Tang, and had never received the Funds from them;

(2)  The money used for the purchase of the PPS Shares was a combination of her savings of around $1,300,000 and a loan of $200,000 from Hung;

(3)  She invested in the PPS Shares, sold the PPS Shares and re-invested the PPS Shares Proceeds in the CLP Shares all pursuant to Hung’s advice, and she handed her bank statements for the investments to Hung for safekeeping;

(4)  She only passed the signed, blank transfer documents to Hung because she was instructed by Hung to do so, and because she intended that the CLP Shares or proceeds therefrom could be passed to her two children.

(5)  After Hung passed away, as the Defendant was unable to locate the original share certificate for the CLP Shares among Hung’s possession, she made a declaration of loss of the certificate.

C.  ISSUES TO BE DETERMINED

15.  I am of the view that the issues in dispute between the parties are as follows:

(1)  Whether the Funds of $1,568,000 originated from the Plaintiff or the Defendant (together with a loan from Hung) (“Source of Funds Issue”);

(2)  Whether an agreement was reached between the Plaintiff and Defendant (via Tang and Hung as their respective agents) that the Funds were to be held by the Defendant for the Plaintiff for investment purposes (“Agreement Issue”); and

(3)  Whether the Plaintiff gave instructions to the Defendant to sell the PPS Shares and purchase the CLP Shares, so that the CLP Shares are also held for the Plaintiff (“Ownership of the CLP Shares Issue”).

D.  ASSESSMENT OF EVIDENCE

16.  As the Defendant did not appear at trial, I do not attach any weight to her witness statement as she chose not to tender herself for cross-examination.  The Plaintiff, thus, had to strictly prove his case.

17.  I have summarised the Court’s approach to assessing evidence and oral testimony in Hang Kee Development Co Ltd v Ming Hing Civil Contractors Ltd [2022] HKCFI 455 at §20:

“(1) the Court starts with an analysis of the contemporaneous documentary evidence…;

(2) As to oral evidence, the Court would have regard to:

(a) whether the party’s case is inherently plausible or implausible;

(b) whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable;

(c) where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility; and

(d) the demeanour of the witnesses.”

18.  Lord Bingham insightfully observed in his book The Business of Judging p.6:-

“Every judge is familiar with cases in which the conflict between the accounts of different witnesses is so gross as to be inexplicable save on the basis that one or some of the witnesses are deliberately giving evidence which they know to be untrue. There are, no doubt, witnesses who follow the guidance of the Good Soldier Sveyk that ‘The main thing is always to say in court what isn’t true,’ as a matter of principle, but more often dishonest evidence is likely to be prompted by the hope of gain, the desire to avert blame or criticism, or misplaced loyalty to one or other of the parties. The main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely from case to case:

(1) the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred;

(2) the internal consistency of the witness’s evidence;

(3) consistency with what the witness has said or deposed on other occasions;

(4) the credit of the witness in relation to matters not germane to the litigation;

(5) the demeanour of the witness.

The first three of these tests may in general be regarded as giving a useful pointer to where the truth lies. If a witness’s evidence conflicts with what is clearly shown to have occurred, or is internally self-contradictory, or conflicts with what the witness has previously said, it may usually be regarded as suspect. It may only be unreliable, and not dishonest, but the nature of the case may effectively rule out that possibility.”

19.  I shall apply the above guidelines in my analysis of the Plaintiff’s and Tang’s oral testimony and the contemporaneous documents.

D1.  Source of Funds Issue

20.  The Plaintiff’s case is that the PPS Shares were invested with the Funds he passed to Tang. In particular:-

(1)  The Plaintiff submits that he delivered the Funds of $1,568,000 in cash to Tang at Shenzhen on 1 June 2013, who passed the Funds to Hung on 5 June 2013. Hung then passed the Funds to the Defendant.

(2)  The Plaintiff relies on a 「借款書」 signed between Tang and the Defendant stating that the Funds were lent to the Defendant on 6 June 2013 (“the Loan Agreement”), which Tang received from Hung subsequently.

(3)  The Plaintiff also relies on the HSBC Transaction Advice records in Tang’s possession as evidence that the Funds were duly deposited to purchase the PPS Shares.  The records show that $1,551,482.88 were deposited into the Defendant’s SBI securities account between 6 to 13 June 2013.

21.  The Defendant’s case is, simply, that she purchased the PPS Shares with her own savings of around $1,300,000 and a loan of $200,000 from Hung, her aunt-in-law, and she never signed on the Loan Agreement. She adduced a statement from her HSBC bank account showing a series of cash deposits from 5 to 13 June 2013 totalling $1,548,000, where she marked the cash deposit on 5 June as the loan from Hung and the others from 6 to 13 June as her own savings.

22.  The court begins with an analysis of the contemporaneous documentary evidence. In my judgment, it is more likely than not that the Funds provided by the Plaintiff were the source of funds for the purchase of the PPS Shares.

23.  First, the Loan Agreement is one piece of cogent evidence showing that the Funds had been passed to the Defendant. In particular, the Loan Agreement records that a sum of $1,568,000 was lent by Tang to the Defendant on 6 June 2013, which tallies exactly with the amount of the Funds. The Loan Agreement was signed by the Defendant with her HKID number, and attached with the Defendant’s HKID copy.

24.  While the Defendant denied signing on the Loan Agreement, both parties’ handwriting experts, Mr SC Leung and Mr Grant R Sperry (“the Handwriting Experts”), in their respective and joint expert reports concluded that it is more probable than not that the Defendant wrote the signature on the Loan Agreement.

25.  This means that the Defendant knew the Plaintiff and Tang, or at least, Tang. This affects the Defendant’s credibility as her evidence is that she never heard of and did not know the Plaintiff or Tang. The Loan Agreement proves exactly the opposite.

26.  Secondly, while the Defendant stated that the PPS Shares were purchased with her savings, she has produced no evidence showing an accumulated savings of the said sum over time, or a transfer of the said savings into her HSBC account, from which she then transferred to her SBI account.

27.  I am not persuaded that the cash deposits in the Defendant’s bank statements were the Defendant’s savings. It is hard to believe that one would put savings of $1,300,000 in cash and not in a bank account over years. On the contrary, the Defendant’s bank statement suggests that it is more probable than not that the cash deposits came from Plaintiff:-

(1)  First, the total sum deposited into the Defendant’s HSBC account was close to the amount of the Funds;

(2)  Secondly, the first deposit was made on 5 June 2013, the day on which Tang gave the Funds to Hung; and

(3)  Thirdly, between 6 to 13 June 2013, after the cash was deposited into the Defendant’s HSBC account, a similar or an equivalent sum was withdrawn on the same day. The withdrawals match with the HSBC Transaction Advice records in Tang’s hands, which showed transfers of money from the Defendant’s HSBC account to her SBI account. The Transaction Advice records all bear the Defendant’s signature, which the Handwriting Experts also opined as being more likely than not written by the Defendant.

(4)  Fourthly, Tang testified at court that the HSBC Transaction Advice records were passed to her together with the Loan Agreement, and the records made her reassured that the Funds were deployed according to the instructions. I accept that the records were passed to Tang also as evidence of receipt of the Funds.

28.  I note, however, that the Loan Agreement states Tang as the lender, which may contradict the Plaintiff’s case that the Funds belonged to the Plaintiff.

29.  When asked by this Court why the Plaintiff had not clarified that he was the lender, the Plaintiff testified that he did not find issues with the statements, because his sister, Tang, was acting on behalf of him. This is supported by Tang’s evidence, as Tang also clearly indicated that the Funds were given to her by the Plaintiff and that she liaised with Hung and the Defendant on behalf of the Plaintiff. Tang also unequivocally confirmed at court that the Plaintiff owns the CLP Shares and she does not claim for the CLP Shares.

30.  This Court also asked the Plaintiff and Tang as to why the arrangement, prime facie, is a loan instead of an investment in equity. Both the Plaintiff and Tang told this Court that the Plaintiff asked for an acknowledgment of receipt and Hung/the Defendant passed the Loan Agreement for her to sign. As Tang was primarily concerned with whether there was an acknowledgment of receipt, coupled with her possession of the pre-signed bought and sold notes, she considered that to be sufficient. Whilst that is a bit strange, on balance, I am of the view that it is not a real loan agreement. The Defendant’s case is also not that there is any lender-borrower relationship between her and the Plaintiff.

31.  On balance, I am, therefore, of the view that the purchase monies for the PPS Shares came from the Plaintiff.

D2.   Agreement Issue

32.  The Plaintiff’s case is that an agreement was formed between himself and the Defendant (via Tang and Hung as their respective agents) giving rise to an express trust, the terms being that the Defendant would invest and hold the Funds and any proceeds of investment thereof for the Plaintiff.

33.  In particular, the Plaintiff relies on the following contemporaneous documents: -

(1)  In relation to the purchase of the PPS Shares on 17 June 2013:

(a)  the monthly statements of the Defendant’s SBI Account showing the value of the PPS Shares held in the account (“SBI Statements”) which Tang received from Hung monthly; and

(b)  an original blank Bought and Sold Note, a blank SI Request Form to SBI (「股票交收指示表格」) and a blank instructions form to SBI for transfer of the PPS Shares, all bearing the Defendant’s signature which Tang received after the purchase of the PPS Shares.

(2)  In relation to the One-Month Time Deposit of the PPS Shares Proceeds in August 2014, an HSBC Time Deposits Confirmation showing that $19,978,422.26 had been deposited into the Defendant’s account; and

(3)  In relation to the purchase of the CLP Shares in November 2014:

(a)  An original share certificate issued by CLP dated 21 October 2014 certifying the Defendant as the registered holder of 311,000 shares of CLP;

(b)  Originals of shares transfer forms of CLP signed by the Defendant in blank;

(c)  Bought and Sold Notes signed by the Defendant as the seller and specifying the name of shares “CLP Holdings Limited” but otherwise in blank;

(d)  A photocopy of the Defendant’s Hong Kong Identity Card (“HKID”);

(e)  A Chinese document titled 「證明書」signed by Hung on 29 October 2014 (“Letter of Proof”) stating that:-

(i)    Hung instructed the Defendant to hold the PPS Shares for Tang during 2013 to 2014, sell the PPS Shares in 2014, and buy 311,000 CLP Shares with the PPS Shares Proceeds; and

(ii)   Tang had asked the Defendant to hold the CLP Shares for her until further notice; and

(f)  An HSBC Statement showing the transaction records of the CLP Shares;

All received by the Plaintiff from Tang, who received the same from Hung, in November 2014.

34.  I note that the signatures on the blank SI Request Form to SBI, blank instructions form to SBI, shares transfer forms of CLP and the Bought and Sold Notes of the PPS Shares and CLP Shares were all examined by the Handwriting Experts, who both generally opined that the signatures are more likely than not written by the Defendant. The Handwriting Experts opined that there were some disparity in their opinions regarding some of the signatures, but they commonly agreed that the disparity was minor and not fundamental, and does not disturb their findings.

35.  The Defendant’s case is that:-

(1)  She made all the decisions on her own volition with Hung’s advice;

(2)  She only handed her SBI Statements and HSBC Statements to Hung for safekeeping because she did not want her husband to find out her investment; and

(3)  In respect of the blank shares transfer documents,

(a)  For the PPS Shares, she only signed some blank SI Request Forms as instructed by Hung; and

(b)  For the CLP Shares, she handed Hung the original share certificate for the CLP Shares and some signed, blank transfer forms only because she had to carry out a major operation in late 2014 and intended that the CLP Shares or proceeds therefrom could be passed to her two children in case she did not survive the operation.

36.  Thus, it is common ground that the Defendant had made the transactions; she only disputed it on the ground that she made all the investment decisions on her own volition.

37.  On the basis of the Plaintiff’s and Tang’s evidence and the contemporaneous documents, on balance, I found that an oral agreement giving rise to an express trust had been established between Tang and Hung as agents for the Plaintiff and the Defendant respectively. I therefore find that an express trust was formed between the Plaintiff and Defendant for the following reasons.

38.  To begin with, the Plaintiff’s possession of all the proofs of the transactions constitutes cogent evidence that the Defendant was making the investments for him pursuant to his instructions, and was therefore under a duty to account to him the proofs and updates of the investment. These include:-

(1)  The HSBC Transaction Advice records that Tang received after she passed the Funds to the Defendant via Hung;

(2)  The SBI statements that Tang received from Hung monthly, showing the value of the PPS Shares held in the Defendant’s account each month;

(3)  The HSBC Time Deposits Confirmation; and

(4)  The HSBC Statement showing the purchase of the CLP Shares, which the Plaintiff received in the same month of the purchase.

39.  In respect of the One-Month Time Deposit, the Plaintiff also testified that he gave express instructions for the PPS Shares Proceeds to be deposited into a time deposit account.

40.  The Plaintiff’s case is further supported by Hung’s Letter of Proof, where Hung stated that she had passed on the instructions to the Defendant and that the Defendant had all along held the PPS Shares and the CLP Shares for the Plaintiff. Tang further testified that Hung signed the Letter of Proof in front of her. This corroborates with the Plaintiff’s case that Hung had relayed his instructions to the Defendant, and that the Defendant had not made the transactions on her own.

41.  More significantly, the Plaintiff’s possession of the original share certificate of the CLP Shares, the blank bought and sold notes and the blank transfer forms of both the PPS and CLP Shares constitute salient evidence that the Defendant had agreed to hold the PPS Shares, and subsequently, the CLP Shares, on trust for the Plaintiff.

42.  First, original share certificates are the legal proof of ownership of the shares. One can only transfer the shares and realise its value with the share certificates. I shall highlight that the PPS Shares Proceeds amounted to approximately $19,000,000, so considerable value is vested in the 311,000 CLP Shares. If the shares are not held for the Plaintiff, it is wholly inexplicable why Hung would pass the share certificates on to Tang and the Plaintiff.

43.  Further, if the Defendant considered herself as having ownership of the CLP Shares, it is also inconceivable why she would give up the share certificate, the signed transfer forms and bought and sold note. I found that the stamp duty for the transfer form had even been paid. The only inference that can be drawn from these acts can only be that the CLP Shares do not belong to the Defendant, nor does she regard so, as she could not have taken such a risky move to give an unqualified right to anyone who fills their name onto the blank shares transfer form to transfer the CLP Shares to themselves.

44.  That said, it will be recalled that a Loan Agreement was signed between Tang and the Defendant, stating that the Funds were lent to the Defendant for personal use and was repayable within the same day of demand. If the parties intended to create a loan, it would run contrary to the intention of creating a trust. The Plaintiff will only be able to sue on a debt if he only intended to create a loan; he cannot trace the Funds to the PPS Shares, and subsequently, into the CLP Shares.

45.  As mentioned in paragraph 30 above, when asked by this Court why Tang had signed a Loan Agreement, both the Plaintiff and Tang separately testified that the Plaintiff initially intended to and asked for a receipt. Tang admitted that she did not read the substance of the Loan Agreement and was only concerned to check that the correct amount of Funds had been stated and that it was duly signed by the Defendant. That said, both the Plaintiff and Tang did not find issues with the Loan Agreement because they were reassured that Funds were well-received and properly invested when they received HSBC Transaction Advice records together with the Loan Agreement. Tang further indicated that she was reassured by the signed, blank transfer forms enabling the Plaintiff to transfer the PPS Shares back to himself anytime.

46.  Applying the guidelines on assessing the credibility of witnesses, I accept that the witnesses and their proffered explanations are credible:-

(1)  First, I find their evidence consistent with what is clearly shown by other contemporaneous documents. I find it credible that the witnesses did not intend to enter into a loan agreement, because the Defendant could not have passed the monthly SBI statements and the blank bought and sold note of the PPS Shares if the Defendant was not under a duty to invest for the Plaintiff.

(2)  Secondly, I accept that the Plaintiff had asked for a receipt to document the transfer of Funds to the Defendant. Given that the parties were in a personal relationship (and not in a commercial transaction), both the Plaintiff and Tang entrusted Hung in managing the investment, and they were reassured by the HSBC Transaction Advice records, I accept that the Plaintiff and Tang were satisfied with the Loan Agreement as evidence of receipt of the Funds, and did not find it necessary to change the Loan Agreement into a receipt.

(3)  Thirdly, I find that the Plaintiff and Tang are not sophisticated and well-versed persons to commercial matters. I accept that, while they appreciate the difference between a loan agreement and a receipt, they did not appreciate the effect of the label of 「借款書」. I accept that they were only concerned to check whether the amount of Funds stated therein is correct and whether it was duly signed by the Defendant.

(4)  Fourthly, I find there is internal consistency in the witnesses’ oral evidence and their respective witness statements, and among themselves, and I accept that the Plaintiff and Tang are credible witnesses. I also note that their evidence has not been challenged at court.

47.  In this regard, I am satisfied that, on balance, the Plaintiff did not intend to enter into a loan agreement. On the contrary, in view of the documentary evidence in the Plaintiff’s possession, I find, on balance, that an agreement giving rise to an express trust had been reached between the Plaintiff and the Defendant via their respective agents, Tang and Hung, the terms being that the Defendant will hold and invest the Funds for the Plaintiff.

D3.   Ownership of the CLP Shares Issue.

48.  Having found that an express trust has been established, I shall now examine whether the CLP Shares was purchased pursuant to the parties’ agreement, in accordance with the Plaintiff’s instructions.

49.  On balance, I find that the Plaintiff had given instructions to the Defendant to purchase the CLP Shares and that CLP Shares are held by the Defendant for the Plaintiff for the following reasons:-

(1)  As I found above, an agreement had been reached between the parties that the Defendant will hold and invest the Funds for the Plaintiff;

(2)  Pursuant to the agreement, the Plaintiff had given investment instructions to the Defendant on multiple occasions, which she duly followed, including the purchase and sale of the PPS Shares and the deposit of the PPS Shares Proceeds into the One-Month Time Deposit;

(3)  It is also the Defendant’s case that she purchased exactly 311,000 CLP Shares in October 2014, which fits perfectly with the Plaintiff’s case, except for her defence that it was made on her own volition;

(4)  Yet, I find the Defendant’s explanation incredible. As analysed in §§41-42 above, the Defendant could not have passed to the Plaintiff the original share certificate of the CLP Shares and the signed blank transfer forms with stamp duty paid, if she deemed herself as the owner of the CLP Shares.

(5)  In view of the above evidence, I find the Plaintiff’s evidence that he indirectly gave instructions to the Defendant to purchase the CLP Shares credible.

50.  That said, I am conscious that there is no documentary evidence of the Plaintiff’s instructions for investment, albeit they are strongly corroborated by the Plaintiff’s and Tang’s evidence and the Plaintiff’s possession of contemporaneous documents. In this regard, I shall also address whether the Plaintiff will have beneficial ownership of the CLP Shares if I were wrong to find that an express trust has been established.

51.  If an express trust is not established, I shall find in the alternative that the Defendant holds the CLP Shares on resulting trust for the Plaintiff. This is on the basis that I have found that:-

(1)  the Funds came from the Plaintiff;

(2)  the Defendant acknowledged receipt of the Funds in the Loan Agreement; and

(3)  it is common ground that the Defendant had made one investment with the Funds – the investment in the PPS Shares, which was then sold, and re-invested into the CLP Shares, at the same time, in the same order, with the same amount as that claimed in the Plaintiff’s case.

52.  It follows that the Plaintiff can assert a continuing interest in the Funds and trace the Funds into the CLP Shares (Foskett v McKeown [2001] 1 AC 102 at 127-128 per Lord Millett).

53.  At this juncture, I shall note that Mr Ho for the Plaintiff relied on Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 and submitted that the Loan Agreement could give rise to a Quistclose trust.  He referred the court to the headnotes of the judgment, which read “that arrangements of this character for the payment of a person's creditors by a third person gave rise to a relationship of a fiduciary character or trust in favour, as a primary trust, of the creditors, and, secondly, if the primary trust failed, of the third person”.

54.  I do not accept that the Quistclose trust analysis assists the Plaintiff in this case. First, the “arrangements of this character” in the headnotes only refer to arrangements which clearly express that funds transferred to the recipient was not to form part of the recipient’s general assets, but was to be used exclusively for specifically designated purposes. In Barclays Bank Ltd v Quistclose Investments Ltd, Quistclose lent money to Rolls Razor Ltd, another company in the same corporate group, on clear terms that the money was to be paid as dividends to Rolls Razor’s shareholders. The money was then paid into a separate account opened specifically for that purpose with Barclays Bank, which knew that the money was borrowed and would only be released for the purpose of paying the dividend.

55.  In Twinsectra Ltd v Yardley [2002] 2 AC 164, which followed Barclays Bank Ltd v Quistclose Investments, the House of Lords further highlighted that the mere fact that the lender had paid the money to the borrower for a particular purpose is not enough; the lender is required to demonstrate clear mutual intention between itself and the borrower that the money was paid for an exclusive purpose. As Lord Millett held at §§73-74:-

“73 A Quistclose trust does not necessarily arise merely because money is paid for a particular purpose. A lender will often inquire into the purpose for which a loan is sought in order to decide whether he would be justified in making it. He may be said to lend the money for the purpose in question, but this is not enough to create a trust; once lent the money is at the free disposal of the borrower. Similarly payments in advance for goods or services are paid for a particular purpose, but such payments do not ordinarily create a trust. The money is intended to be at the free disposal of the supplier and may be used as part of his cashflow. Commercial life would be impossible if this were not the case.

74 The question in every case is whether the parties intended the money to be at the free disposal of the recipient: In re Goldcorp Exchange Ltd [1995] 1 AC 74, 100 per Lord Mustill. His freedom to dispose of the money is necessarily excluded by an arrangement that the money shall be used exclusively for the stated purpose, for as Lord Wilberforce observed in the Quistclose case [1970] AC 567, 580:

‘A necessary consequence from this, by a process simply of interpretation, must be that if, for any reason, [the purpose could not be carried out,] the money was to be returned to [the lender]: the word 'only' or 'exclusively' can have no other meaning or effect.’”

56.  In the present case, while the Plaintiff intended that the Funds were to be invested in the PPS Shares, nowhere in the Loan Agreement is such purpose specified. The Loan Agreement only states that the Funds are repayable upon demand. It is impossible for the Court to find any mutual intention that the Funds were to be ringfenced for the investment in PPS Shares from the Loan Agreement.

57.  I am further of the view that the Quistclose trust does not assist the Plaintiff in any event. As Lord Wilberforce further held at Barclays Bank Ltd v Quistclose Investments (at 581G) that, in a Quistclose trust, when the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose, but when the purpose has been carried out, the lender only has remedy against the borrower in debt.

58.  Adopting this analysis, even if the Plaintiff can establish that the Funds were to be held on Quistclose trust, the Quistclose trust ended when the Funds were duly applied for the specific purpose, i.e. investment in the PPS Shares. The Plaintiff would only be left with the remedy of debt. 

59.  I should mention that although the Plaintiff also relies on unjust enrichment, there is no plea on what unjust factors the Plaintiff relies upon. In any event, given the factual findings as set out above, the Plaintiff does not need to rely on this ground in order to prevail in his claims. As the plea on unjust enrichment is defective, it does not assist the Plaintiff.

E.     DISPOSITION

60.  By reason of the analysis of the evidence as set out above, I find that the Defendant holds the CLP Shares or its proceeds thereof on express trust or resulting trust for the Plaintiff. Thus, I make the following orders:-

(1)  A declaration in the terms sought:

“the Defendant held and holds on trust for Plaintiff the CLP Shares held or formerly held in the Defendant’s name under the Share Certificate dated 1 October 2014 (Certificate Number CL 11750144) or the proceeds thereof (“the Trust Property”), the said Trust Property representing returns or proceeds yielded by the investment of the sum around 6 June 2013 (“the Funds”) under an agreement whereby the Defendant would invest and hold the Funds and any proceeds of investment thereof on the Plaintiff’s behalf”;

(2)  An order that the Defendant transfer the CLP Shares to the Plaintiff;

(3)  An order that the Defendant account for all the income and profits derived from the CLP Shares;

(4)  An order that the Defendant pay all sums found due to the Plaintiff from the Defendant upon account or inquiry or otherwise, and

(5)  An injunction restraining the Defendant from disposing of, encumbering or otherwise dealing with the Trust Property, its income or profits.

(6)  An order that the security for costs paid in by the Plaintiff pursuant to the Order of Master Chow dated 22 May 2017 be released forthwith to the Plaintiff.

61.  I also make a costs order nisi that the Plaintiff is entitled to the costs of and occasioned by this action and the same is to be paid by the Defendant, on a party to party basis, if no agreement cannot be reached by the parties. The above costs order nisi will be made absolute within 14 days unless an application is made to vary the same within the 14-days period.