CHEUNG SAU MEI AND OTHERS v. ONE HERITAGE TRUST LTD

HCA 986/2024

[2024] HKCFI 3587

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 986 OF 2024

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D E C I S I O N

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1.  This is the application of the 1^st to 7^th, 9^th to 10^th, 13^th to 17^th, 20^th, and 22^nd to 23^rd plaintiffs (“the relevant plaintiffs”) by summons filed on 5 November 2024 for judgment against the defendant in default of defence.

2.  The facts pleaded in the Statement of Claim (“SOC”) are that between 2019 and March 2024, the relevant plaintiffs were induced by the defendant to invest in an investment product with a plan period of 1 year, with certain guaranteed dividends which would be distributed on the 15^th day of each month. For the purposes of the investment, each relevant plaintiff was asked to sign documents including a trust deed under which a discretionary trust was set up with the relevant plaintiff as the beneficiary. Following the execution of those documents, each relevant plaintiff paid various sums into the defendant’s accounts at DBS and CITIC.

3.  In April 2024, the guaranteed dividends were either not received on the due date or postponed date, or not at all. On 24 April 2024, persons who visited the defendant’s office found that it was empty and staff were missing. On 8 May 2024, a letter was sent by the relevant plaintiffs’ solicitors to the defendant and other companies in the defendant’s group which were purportedly participating in investment and asset management, asking about past performance of the investment product, operations, and the whereabouts of the funds, but no reply has been received from any of them. After May 2024, no dividends or other funds have been received at all, nor any explanation therefor. Searches disclosed that the company purported to be the fund manager had in fact been dissolved in August 2023, the staff of the company purportedly the investment consultant have all departed, and the auditor had resigned in October 2023.

4.  In the circumstances, it is the relevant plaintiffs’ case that the defendant had induced them into thinking that trusts would be set up for investment (for which the plaintiffs paid monies to the defendant) when that was not true.

5.  On 23 May 2024, Deputy High Court Judge Kent Yee granted an ex parte proprietary injunction against the defendant, and made a bankers books order. This was served by leaving at the defendant’s registered office, but there has been no response.

6.  On 19 July 2024, the plaintiffs filed the SOC. This was duly served, but no notice of intention to defend has been filed by the defendant.

7.  As the relief sought by the relevant plaintiffs includes a declaration, under Order 13 rule 6 of the Rules of the High Court (“RHC”), the plaintiffs proceeded with the action as if the defendant had given notice of intention to defend.

8.  The defendant has not filed a defence. Accordingly, the relevant plaintiffs have applied under Order 19 rule 7 RHC for judgment in default of defence.

9.  After considering the papers, my only concern was an arbitration clause in the trust deed which provided at clause 21.1 that “all disputes arising out of or in connection with this Trust shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by 3 arbitrators appointed in accordance with the said Rules”. Clauses 21.2 and 21.3 provided that all settlors, trustees, protectors, and beneficiaries agreed to be bound by clause 21.1. However, it seems to me that the matters pleaded in the SOC (especially the failure - by all of the participants supposedly involved in the investment - to give any information on past performance of the investment product, operations, and the whereabouts of the funds) support the case in the pleaded SOC that the defendant did not intend to set up a trust as such, but used it as a device to procure funds from the relevant plaintiffs. Accordingly, the relevant plaintiffs are entitled to rescission of the trust deeds, which include the arbitration clause.

10.  As service of the SOC has been effected, and the defendant has not filed a defence, the court will assume that the facts pleaded in the SOC have been impliedly admitted. Hence, it is not necessary to consider evidence in support of the claim[1].

11.  I am satisfied, on the facts pleaded in the SOC, that a constructive trust arose on the transfer of the funds into the defendant’s bank accounts. Having scrutinized the application carefully, I am also satisfied that a declaration should be granted by the court even though the claim involves fraud, and that it is not necessary to hold a trial. This is in line with a number of High Court judgments where fraudulent scams had resulted in the transfers of funds[2].

12.  Accordingly, I made an order in terms of the Revised Draft Order amended to reflect the relief for each of the relevant plaintiffs. As for costs, having considered the Statement of Costs, I would summarily assess the costs to be paid by the defendant to the relevant plaintiffs under both parts of the statement at $645,000.