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A claim to recover trust property can constitute a “debt” founding a statutory demand – Re Lee Ming Cheung

13 Mar 2020

In Re Lee Ming Cheung [2020] HKCFI 297, DHCJ Le Pichon confirmed that a claim by a beneficiary to recover trust property can, in appropriate cases, constitute a “debt” founding a statutory demand for the purpose of bankruptcy proceedings.

The debtor/applicant in this case applied for an order that the bankruptcy petition against him be adjourned or stayed pending the determination of his appeal from the decision of DHCJ William Wong SC dismissing his application to set aside the statutory demand on which the bankruptcy petition was based.

As one of his grounds of appeal, the debtor contended that the petitioner/respondent’s claim could not found a statutory demand or a bankruptcy petition as it was not a liquidated claim, but one against the debtor as trustee for breach of trust. In those circumstances, it was argued that the appropriate remedy lay in an account.

In response, it was submitted on behalf of the petitioner that both the English case of Barnett v Creggy [2017] PNLR 4 and the Hong Kong Court of Final Appeal authority of Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681 supported the proposition that the petitioner’s claim being one for breach of trust could constitute a liquidated claim. In particular, the petitioning debt was a claim for investment proceeds held on trust and those proceeds were capable of being ascertained as a mere matter of arithmetic, based on the market data of the relevant shares.

DHCJ Le Pichon found for the petitioner. She held that the nature of a claim to recover trust property was restitutionary in nature, to restore the trust fund to what it should be. In that regard, it was no different from a claim at common law for a fixed sum of money provided the amount was a sum certain and capable of precise quantification by arithmetical calculation.

Further, as the debtor repeatedly admitted and acknowledged the petitioning debt to be due and payable, it was factually distinguishable from the case of Libertarian where the order for equitable compensation could only be made after there had been a trial.

Rosa Lee acted for the petitioner in this case