A Tale of Greed and Great Wealth Gained and Lost1

In October 2019 I had the great pleasure and privilege of appearing2 in the Hong Kong Court of Final Appeal on behalf of the successful Appellants in the anxiously-awaited appeal in Zhang Hong Li and others v DBS Bank (Hong Kong) Limited and others. The case had become widely known in the private wealth and banking worlds over the past couple of years, primarily because it highlighted the potential exposure of trustees to liability for breach of trust where investments made by a company the shares of which are held in trust suffer a disastrous decline. The unanimous judgment of the CFA delivered on 22 November 2019 ([2019] HKCFA 45) came as a considerable relief to many, particularly trustees and their advisers. It is (so far as is known) the only final appellate level decision in the common law world in relation to the operation of so-called “anti-Bartlett” provisions.

Such was the general importance of the points at issue that the CFA decided to deliver its judgment even though the parties had resolved their differences after the hearing. Although that rendered the decision unnecessary as between the parties, it nevertheless represents a highly authoritative expression of view on the part of five distinguished judges of the highest standing and on that basis is bound to be influential throughout the common law world.

What went wrong?

DBS Trustee was appointed as the trustee of a family discretionary trust, the Amsun Trust, settled by a mainland Chinese couple, Zhang and Ji, in January 2005. Madam Ji was already a customer of DBS Bank’s private banking arm and proved to be an astute as well as aggressive investor, initially in mutual funds but later more sophisticated investment products and foreign currency transactions. In due course she became the Bank’s largest individual private banking client on the back of substantial loans from the Bank, ultimately running to more than US$100 million.

DBS Bank had previously arranged the creation of a BVI private investment company, Wise Lords Ltd., as an investment vehicle for Madam Ji who was initially its director and shareholder. When the sole share in Wise Lords was subsequently settled into trust, DBS Bank’s affiliate DHJ Management was appointed its sole director. The Bank provided its standard form discretionary trust which was governed by Jersey law. Madam Ji, as well as being co-settlor of the trust and one of its discretionary beneficiaries (with her husband and their minor children), was appointed investment advisor to Wise Lords with authority to direct its investments.

In July and August 2008, while the global financial crisis was unfolding, three particular transactions were undertaken by Wise Lords that proved to be of particular significance in the litigation; (1) an increase of Wise Lords’ borrowing facility by US$100 million which was used to fund (2) a very substantial investment in Australian dollars (AUD), later sought to be unwound by (3) significant purchases of “decumulators” offered by DBS Bank when Madam Ji was unwilling to reduce exposure to AUD holdings.

The AUD fell sharply against the US dollar and Wise Lords suffered very significant losses. Both DBS Trustee and DHJ Management (amongst many others and in particular individual members of DBS Bank’s staff) were sued by the Settlors and replacement trustees to recover those losses. The Judge at first instance castigated what he described as “carpet bombing” litigation on the part of the Plaintiffs in proceeding against multiple defendants on multiple grounds. He rejected all the claims with the notable exceptions of those which alleged breach of duty on the part of DBS Trustee and DHJ Management. Which takes us to the provisions of the Trust itself.

The anti-Bartlett provisions

For those readers unfamiliar with the expression, “anti-Bartlett” clauses are so named because they seek to counter the duties of trustees in relation to companies in which they hold shares which were held to arise on the facts of the English case of Bartlett v Barclays Trust Co. Ltd [1980] 1 Ch. 515. Such clauses are very common in trusts created as private family wealth holding and management structures to such an extent that they appear in practically every precedent used by trust service providers and their advisors. However, they come in all shapes and sizes and often detailed consideration of them is an afterthought when things have already gone wrong.

The particular variant of the anti-Bartlett clause included in the Amsun Trust deed is one in frequent use around the world. It was explicit in instructing DBS Trustee not to interfere in the affairs of the company. In particular it imposed a mandatory requirement on DBS Trustee to leave the administration management and conduct of the business of Wise Lords to the directors and other authorised persons, including Madam Ji as the company’s investment adviser, unless DBS Trustee had actual knowledge of dishonesty.

As the CFA observed:

“…the trustees are being consistently told to keep their noses out of the company’s business and to leave those having conduct of the same free to manage it without interference.”

Despite those apparently clear terms, both the Judge at first instance and the Court of Appeal found DBS Trustee liable for breach of what was described as a “high level supervisory duty” which required a trustee to intervene in certain circumstances even where there was no notice of dishonesty. DHJ Management was similarly found liable. But how could that be, in the face of the anti-Bartlett provisions?

The “high level supervisory duty”

The courts below identified two possible sources for such a duty. One was DBS Trustee’s own evidence describing itself as having a “high level supervisory role” arising out of its having “approved” or “noted” the investments made by Wise Lords after they had been made. The second was the report of one of the two Jersey law experts which suggested that there are circumstances in which a trustee might have a “residual” duty to interfere with the management of the company despite the existence of an otherwise valid anti-Bartlett provision, for example where it was informed by an apparently credible source that dishonesty was involved in the company’s management. But both Jersey law experts agreed that the anti-Bartlett clause was effective according to its terms and that already included the exception for knowledge of dishonesty. Is there a difference? Did it mean that there are circumstances other than dishonesty in which a trustee must get involved or did it mean only that the clause was properly drafted so as to recognise that a trustee could not ignore dishonesty?

The CFA judgment

The CFA unanimously rejected the view that some unspecified high level supervisory duty exists which trumped the anti-Bartlett clause. In this case the clause disapplied any duty of supervision and positively prevented the Trustee from interfering in the company’s affairs. Nor did the role which in practice was discharged by DBS Trustee give rise to a duty. The clause means what it says. The Court also felt able to read the Jersey law advice consistently with the particular provision in the Trust so the expert’s “residual duty” referred only to knowledge of dishonesty. In consequence DBS Trustee was not liable for breach of trust nor, in the particular circumstances, was DHJ Management liable for breach of duty as the director of Wise Lords.


Before the judgment of the CFA clarified the position, there had been widespread anxiety that commonly-used clauses of this kind could not be safely relied on to circumscribe the duties and powers of trustees. That was not merely a worry for trustees and their advisers but also for those settlors whose aim was to create a proper trust but also to reserve the ability either to run the underlying company themselves or to appoint their chosen management to run it without interference. That is the basis on which “reserved powers” trusts operate and in such cases the trust legislation of most international financial centres expressly relieves the trustees from breach of trust where that is done. The trust in question in this case was not a reserved powers trust, rather a conventional discretionary trust, but the thinking is much the same where settlors want to include an anti-Bartlett clause. It would be wrong to think of them as simply attempts by trustees to get off the hook or as pure exoneration clauses. Their rationale is to enable a separation of functions between the trustees, discharging their usual dispositive and administrative powers at trust level, and those involved in the commercial management of the company. As always, clear drafting is everything. Not every anti-Bartlett clause is as specific and clear as the one under examination in this case.

A word about equitable compensation

One other significant and valuable aspect of the judgment is the Court’s analysis of the correct approach to equitable compensation in such a case as this. The courts below had treated the case as one calling for, in effect, reconstitution of the trust fund on the basis that the disputed transactions had not occurred. Was this the correct approach?

In his influential judgment in Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at p.687 Tipping J had distinguished three types of breach of trust: breaches leading directly to damage to or loss of the trust property (category 1), breaches involving an element of infidelity or disloyalty which engage the conscience of the fiduciary (category 2) and breaches involving a lack of appropriate skill or care (category 3). We argued on behalf of the Trustee that, if there had been any breach in this case, it fell into category 3 case. The significance of that is, as previously explained by the CFA in Libertarian Investments Limited v Hall [2013] 16 HKCFAR 681, the rules of causation apply with varying degrees of strictness depending on the category. In category 1 cases a strict “but for” causation test is applied and common law rules of remoteness and foreseeability do not apply – it is a substitutive claim for restoration of the trust property either in specie or by value. In category 3 cases, however, the common law rules of causation, foreseeability and remoteness apply and it would be for the complainant to plead and prove his case on that basis. The claim is reparative rather than substitutive. For further elucidation of these interesting issues the reader is referred to Ribeiro PJ’s paper Equitable Compensation for Breach of Fiduciary Duty delivered at the Asia-Pacific Judicial Colloquium in Singapore in May 2019.

The CFA was satisfied that, had a breach been established, the case would indeed have fallen into category 3, being one in which the trust property itself (the share in Wise Lords) remained intact - the essence of what was complained of was a lack of care and skill in maintaining or enhancing its value.

1 The opening words of the judgment of the Court of Appeal
2 With Ashley Burns SC and Bonnie Cheng both of Temple Chambers, Hong Kong, instructed by Mayer Brown, Hong Kong.


Barrister-at-Law, Chancery Chambers in London and the Cayman Islands

Shân Warnock-Smith QC is a leading English barrister who practises from chancery chambers in London and the Cayman Islands. She specialises in trusts, succession and other private wealth issues. Shân has an international practice which takes her around the world to advise and litigate, including in Hong Kong, and has appeared in many of the leading cases internationally which involve private wealth issues. Shân also provides expert opinions and gives expert evidence on English and Cayman Islands law and is an accredited mediator of trust and probate disputes.