In February 2009, the Court of Final Appeal finally put to rest the issue of whether claims against a dishonest assister are subject to a limitation period in its decision in Peconic Industrial Development Ltd v Lau Kwok Fai [2009] HKCU 284 (FACV 17 & 18 of 2008). The decision also gives guidance on the burden a plaintiff has to satisfy in order to avail itself of a postponement of the limitation period by reason of fraud or deliberate concealment.

Background Facts

In 1991 the Agricultural Bank of China was the victim of a fraud. A businessman, Chio Ho Cheong, dishonestly induced the Bank to invest in a piece of land in the New Territories. Chio made false representations to Bank officials regarding the development potential and resale value of the land, which, in fact, could not be redeveloped as it was a designated site of special scientific interest and an important bird sanctuary.

The purchase price of the land was about HK$515 million. The Bank funded the purchase through a joint venture company called Peconic Industrial Development Ltd, of which the Bank was a 75% shareholder and Chio was a director and 25% shareholder. The vendor was Asiagreat Ltd, a newly formed company which had just contracted to buy the land from a number of individual owners for about HK$151 million. Chio falsely represented to the bank that Asiagreat was controlled by a third party, but he and his girlfriend, Elsie Chan, a Hong Kong film and television celebrity, were in fact its beneficial owners. Chio personally made a secret profit of some HK$350 million from the transaction, while the Bank made a very considerable loss.

In 1999, the Bank commenced proceedings against Chio, his girlfriend and various other individuals who had participated in the fraud. Throughout the sale, Asiagreat was represented by Danny Lau Kwok Fai, a partner of solicitors' firm Messrs Albert KK Luk & Co, and in 2002, the Bank commenced separate proceedings against Danny Lau, Albert KK Luk & Co, and KF Lau & Co (a firm which he later formed) alleging that Danny Lau had dishonestly assisted Chio in the fraudulent breach of his fiduciary duties to Peconic and that the two solicitors?firms were vicariously liable.

At first instance, Cheung J found Danny Lau and the two solicitors?firms liable. The learned judge decided that someone who dishonestly assists in a breach of trust is not entitled to any limitation defence by reason of s 20 of the Limitation Ordinance (Cap 347). Cheung J further held that even if Danny Lau had in principle been entitled to the statutory six year limitation period, the commencement of that period would have been postponed until a date less than six years before the issue of the writ by virtue of s 26 of the Ordinance.

The defendants appealed. The Court of Appeal allowed the appeal, unanimously as to the availability in principle of a limitation defence and by a majority on the ground that Peconic could with reasonable diligence have discovered the fraud more than six years before the issue of the writ. Peconic appealed this decision to the Court of Final Appeal which unanimously dismissed the appeal on both grounds.

The Availability of a Limitation Defence to a Dishonest Assister

The CFA determined that a dishonest assister was not a trustee within the meaning of s 20 of the Limitation Ordinance. In his judgment, Lord Hoffman NPJ analysed the construction of s 20 of the Limitation Ordinance (adopting the wording of s 19 of the UK Limitation Act 1939), which states:

(1) No period of limitation prescribed by this Ordinance shall apply to an action by a beneficiary under a trust, being an action ?

(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or a privy; or
(b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.

The Court had to ask itself two questions: (i) was Danny Lau a trustee within the meaning of s 20 of the Limitation Ordinance; and (ii) if not, could the action against him come within the section on the ground that it was 'in respect of' a fraud to which 'the trustee' - ie Chio - was a party?

Was Danny Lau a trustee under s 20?
The English Court of Appeal in Paragon Finance v DB Thakerar and Co (a firm) [1999] 1 All ER 400 had previously considered whether constructive trustees fell within the definition of trustees for the purposes of s 20 of the UK Limitation Act 1939. The CFA largely followed the analysis of Millet LJ (as he then was) in that decision. First, constructive trustees are divided into 2 types: fiduciaries and non-fiduciaries.

Liability of fiduciaries
The CFA defined 'fiduciaries' as persons who, though not expressly appointed as trustees, have assumed the duties of a trustee by a lawful transaction which is independent of and preceded the breach of trust. Such persons include trustees de son tort and directors who, though not strictly trustees, are in an analogous position.

These fiduciaries are treated in the same way as express trustees, with no limitation period applying to their fraudulent breaches of trust as their possession of property, like that of an express trustee, is never by virtue of any right of their own but is taken for and on behalf of beneficiaries. Their possession is therefore treated as the possession of the beneficiaries, with the result that time does not run in the trustees favour against the beneficiaries.

Liability of non-fiduciaries
The second class of constructive trustee, which the CFA defined as 'non-fiduciaries' covers strangers to a trust who have not assumed any prior fiduciary obligations. Constructive trustees under this category obtain a trust-like obligation as a direct consequence of their dishonest acts of interference. The court will impose a remedial constructive trust upon these dishonest assisters so that they are required to account to the plaintiff.

It has been held that constructive trustees within this second class are not trustees at all, and so a six year limitation period applies to their fraudulent breaches of trust. The CFA quoted Ungoed-Thomas J in Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 1 WLR 1555 at 1582, who said that while people in this category are also called constructive trustees this is 'misleading, for there is no trust and usually no possibility of a proprietary remedy; they are nothing more than a formula for equitable relief'.

Similarly, the CFA referred to the Privy Council decision in Taylor v Davies [1920] AC 636 (considering s 47 of the Ontario Limitations Act 1914), where Viscount Cave said (at p 653):

"The expressions 'trust property' and 'retained by the trustee' properly apply, not to a case where a person having taken possession of the property on his own behalf is liable to be declared a trustee by the court; but rather to a case where he originally took possession upon trust or on behalf of others. In other words they refer to cases where a trust arose before the occurrence of the transaction impeached and not to cases where it arises only by reason of that transaction."

The CFA held that Taylor v Davies was an authoritative statement on the construction of the Trustee Act 1888 and also, therefore, its successor, the Limitation Act 1939. This is in line with Millett LJ's reasoning and clear statement in Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366 at 404 that a dishonest assister who is not a fiduciary can plead limitation as a defence. Consequently, constructive trustees falling into the second class were held by the CFA not to come within the definition of trustees in s 20 of the Limitation Ordinance.

The CFA rejected the opposite viewpoint, which was supported by the dicta of Lord Esher MR and Bowen and Kay LJJ in Soar v Ashwell [1893] 2 QB 390, and stated that:

"... the principle is not that the limitation defence is denied to people who were dishonest. It plainly applies to claims based on ordinary common law fraud. The principle is that the limitation period is denied to fiduciaries. But dishonest assisters are not fiduciaries. It might be surprising, as Millett LJ said in the Paragon Finance case (at p 414), if a person primarily liable was entitled to plead the Limitation Act when someone who assisted him could not. But there seems no reason in fairness or logic why the reverse should not be true. And in any case, Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 shows that the liability of a dishonest assister is independent of the dishonesty of the trustee or other fiduciary."

Danny Lau was not a fiduciary and was therefore not a 'trustee' for the purposes of s 20 of the Limitation Ordinance and could plead a limitation defence.

Could an action against Danny Lau come within s 20 Limitation Ordinance on the ground that it was 'in respect of any fraud'?

The CFA considered the appellant's alternative argument that, as a matter of construction, a claim against a dishonest assister may fall within s 20 of the Limitation Ordinance because it is 'in respect of' the actual trustee's fraudulent breach of trust. The CFA held that, while it is true that in certain contexts the words 'in respect of' a fraud may have a very wide meaning, in the context of s 20 of the Limitation Ordinance, it simply means that the beneficiary must be claiming against the trustee for a fraudulent breach of trust that the trustee has committed.

As Danny Lau was not a fiduciary, the appellants also failed with this argument.

Postponement under s 26 of the Limitation Ordinance

The final question before the Court was whether Peconic could successfully rely upon the provisions of s 26 of the Limitation Ordinance to postpone commencement of the limitation period until "the plaintiff had discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it" to bring its claim within the limitation period.

Could Peconic with reasonable diligence have discovered the fraud earlier?
The question for the CFA was therefore when Peconic and those in control of Peconic could with reasonable diligence have discovered the fraud.
The CFA stated that the question must be answered dispassionately and without regard to what may be perceived as the merits.

It was the CFA's opinion that the Bank was on any view extremely foolish to invest a large sum of money without any independent expert advice about the planning situation.

The CFA clarified the purpose of s 26 of the Limitation Ordinance by first stating that its intention was not to allow people to escape liability for fraud, but instead, stated:

"... it may incidentally have that result, but that is not the policy which underlies it. Its purpose is to avoid the investigation of whether the defendant was fraudulent after a lapse of time which could prejudice his ability to rebut the charge. The fact that this sometimes allows people who were undoubtedly fraudulent to escape liability is the price which the legislature was willing to pay for having a general and clear-cut rule."

The burden is upon the plaintiff to show that it could not with reasonable diligence have discovered the fraud. Further, if the evidence of what the plaintiff actually did is lacking, they are not entitled to ask the court to assume that they had done actions which reasonable diligence would have required. Therefore, it was for Peconic to show that they took whatever steps that could reasonably have been taken to discover any fraud.

The meaning of 'reasonable diligence'
The CFA, in discussing the meaning of 'reasonable diligence' stated that the word 'reasonable' denoted an objective standard, yet since it is the plaintiff who is supposed to have shown reasonable diligence, it was open to argument the extent to which the personal characteristics of the plaintiff should to be taken into account when deciding what diligence he could reasonably have been expected to have shown.

The CFA held that for the purposes of the inquiry into what the plaintiff could have done, he must be assumed to have suffered the loss which he actually suffered. In Peconic's case, one assumes that they had lost some HK$400 million. When Peconic discovered (or could reasonably have discovered) that it had suffered the loss, it must be assumed to have displayed some curiosity about why this should have happened. The question before the court is then: what steps could Peconic have reasonably taken to try to obtain a remedy?

Is the plaintiff assumed to have had only the resources and other opportunities for investigation which he actually had, or should this also be determined according to some objective standard? The CFA quoted Millet LJ in Paragon Finance at 418, where he said that the test was:

"How a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency."

Peconic must be assumed not merely to have employed its own expertise, but to have engaged whatever specialist services reasonable diligence would have suggested, in the same way that a victim of personal injury is expected to seek medical advice.

The CFA stated that the purpose of the inquiry into whether Peconic could with reasonable diligence have discovered Danny Lau's fraud was to establish when they could reasonably have been expected to commence proceedings. For that purpose, Peconic needed only to know facts which amounted to a prima facie case. It was the court's view that Danny Lau's representation that a person other than Chio was the beneficial owner of Asiagreat and his concealment of Chio's girlfriend's role was enough to make out a case which called for an answer.

The CFA therefore found that Peconic could with reasonable diligence have discovered Danny Lau's involvement earlier than they actually did. As such, it held that s 26 of the Limitation Ordinance did not assist Peconic.

The lesson to be learnt here then is that one must constantly be vigilant to the possibility of fraud. In particular, where transactions involve large sums of money, the court would perhaps expect a plaintiff to have sufficient approval processes and record keeping facilities for such business. It would, indeed, be foolish for any person to invest a large sum of money without conducting the necessary due diligence and without keeping track of where the money has gone.



Lewis Man
Partner
Gall & Lane

Katherine Harvey
Trainee Solicitor
Gall & Lane

向詐騙者提出的申索是否須受時效期所規限﹖ 
Lewis Man和Katherine Harvey討論了終審法院在Peconic Industrial Development Ltd案件中的裁決及其含義。

2009年2月，終審法院在Peconic Industrial Development Ltd v Lau Kwok Fai [2009] HKCU 284 (FACV 17 & 18 of 2008)一案中，就「向不誠實的協助者提出的申索，是否須受時效期所規限」這一問題下了結論。該項裁決還就原告人欲以欺詐或蓄意隱瞞為由，要求法庭批准將時效期延後而須提出的證明提供了指引。

背景資料

1991年，中國農業銀行成為了一宗欺詐案件的受害人。一位名叫Chio Ho Cheong的商人通過不誠實手段，誘使該銀行投資於新界的一幅地皮。Chio就該地皮的開發潛力和轉售價值對銀行的人員作出了虛假陳述。其實，該地皮無法重新發展，因為它是一塊被指定為具有特別科學價值的土地，並且是重要的鳥類保護區。

該地皮的購買價格約為5.15億港元。該銀行通過一家名為Peconic Industrial Development Ltd的合營公司為該項收購提供資金，銀行在其中持有75%的股份，Chio擔任董事，並持有25%股份。該項交易的賣家是Asiagreat Ltd，它是一家新成立的公司，並剛與一些個體業主簽訂合約，從他們手中購得該土地，總買價約為1.51億港元。Chio向銀行訛稱Asiagreat是由第三方所控制，而事實上他和女友陳奕詩（香港的一名影視藝人）乃該公司的實益所有人。Chio個人從該項交易中秘密獲利約3.5億港元，而銀行則蒙受重大損失。

1999年，銀行對Chio、其女友及參與欺詐的多名其他人士展開法律程序。在整個銷售過程中，Asiagreat的代表律師是劉國輝（律師行Messrs Albert KK Luk & Co的合夥人）。2002年，銀行對劉國輝、Albert KK Luk & Co和KF Lau & Co（他後來成立的一家律師行）展開單獨的法律程序，指控劉國輝通過不誠實手段協助Chio，從而欺詐性地違反他對Peconic的受信責任，而該兩家律師行因他人作為而須承擔法律責任。

在原訟階段，張舉能法官裁定劉國輝及兩家律師行須承擔法律責任。他指出根據《時效條例》（第347章）第20條，通過不誠實手段為違反信託提供協助的人士，無權享有時效期限方面的抗辯。張舉能法官續稱，即使劉國輝原則上享有六年的法定時效期，但根據《條例》第26條，該期限的起算日期亦會推遲至在令狀發出前的六年內的某一個日期。

被告人提出上訴。上訴法庭一致認為原則上可提出以時效期作為抗辯理據，並以大多數裁定被告人上訴得直，理由是假如Peconic運用合理審慎，應當可以在令狀發出的六年以前發現該宗欺詐。Peconic就該項裁決向終審法院提出上訴，而終院根據該兩項理由一致駁回了上訴。

違反信託中的不誠實協助者
可否以時效期作為抗辯理據

終審法院裁定，不誠實協助者並非《時效條例》第20條所指的受託人。在其判決中，非常任法官賀輔明勳爵分析了《時效條例》第20條的解釋（採納《1939年英國時效法》第19條的用語），該條款稱：

(1) 本條例所訂明的時效期，不適用於受益人根據信託而提出的訴訟，如該訴訟為—
(a) 關乎任何欺詐或欺詐性違反信託，而受託人乃其中一方或參與者；或
(b) 向受託人追討在他管有中的信託財產或信託財產的所得收益，或之前已由他收取並轉為己用的信託財產或信託財產的所得收益。

法院必須自行回答以下兩個問題： (i) 劉國輝是否為《時效條例》第20條所指的受託人；(ii) 如果不是，但基於它是「關乎」一宗欺詐，而「受託人」（即Chio）乃其中一方，因此向他提起的訴訟是否在該條的範圍內？

劉國輝是否為第20條所指的受託人？
在Paragon Finance v DB Thakerar and Co (a firm)（[1999] 1 All ER 400）案件中，英格蘭上訴法庭之前曾考慮構定受託人是否符合《1939年英國時效法》第20條的受託人定義。終審法院基本上遵循了Millet LJ（他當時的職務）在該裁決中的分析。首先，構定受託人分為兩類：受信人和非受信人。

受信人的法律責任
根據終審法院的定義，「受信人」是指雖未被明確委任為受託人，但由於獨立於且先於違反信託行為發生的合法交易而承擔了受託人職責的人士。該等人士包括無權的受託人及雖非嚴格意義的受託人，但乃處於類似地位的董事。

該等受信人應該獲得如明訂受託人一般的方式對待。 他們欺詐性違反信託的行為並不適用時效期限 ，因為像明訂受託人那樣，他們從不通過自身的權利管有財產，而是代受益人託管，他們的管有乃視作受益人的管有，因此時間的計算不會以針對受益人的方式而有利於受託人。

非受信人的法律責任
終審法院將第二類構定受託人定義為「非受信人」，包括未承擔任何先前授信義務的信託局外人。屬於這個類別的構定受託人，會基於其不誠實干預行為的直接後果而取得類似於信託的義務。法院會對這些不誠實協助者施加補救性構定信託，使他們必須向原告人負責。

曾有看法認為，第二類構定受託人根本不是受託人，因此其欺詐性違反信託的行為適用六年的時效期限。終審法院引述了Ungoed-Thomas J在Selangor United Rubber Estates Ltd v Cradock (No 3)（[1968] 1 WLR 1555，第1582頁）案件中的觀點，指出雖然屬於該類別的人士亦稱為構定受託人，但這種稱呼具有「誤導性，因為並不存在信託，通常亦不存在所有權補救的可能性；他們只不過是獲取衡平法上的濟助的一項程序」。

同樣，終審法院提述了樞密院在Taylor v Davies（[1920] AC 636）案件中的裁決 （關於《1914年安大略時效法》第47條），在該案件中，Viscount Cave指出（第653頁）：

「『信託財產』和『由受託人保管』的說法，並不適用於為自己管有財產而被法院宣告為受託人的情形，而是適用於他原來是根據信託或代他人管有的情形。換句話說，它們是指在發生受指摘交易前的一項信託產生的情形，而非僅基於該項交易而產生信託的情形。」

終審法院裁定，Taylor v Davies 判例是解釋《1888年信託法》的權威判例，因此亦權威性地解釋了其後續的《1939年時效法》。這合乎Millett LJ在Dubai Aluminium Co Ltd v Salaam（[2003] 2 AC 366，第404行）案件中的推理和清楚說明，即：並非受信人的不誠實協助者可以提出時效作為抗辯理據。因此終審法院認為，屬於第二類的構定受託人不符合《時效條例》第20條的受託人定義。

終審法院拒絕接受Lord Esher MR、Bowen and Kay LJJ在 Soar v Ashwell（[1893] 2 QB 390）案件中的附帶意見所支持的相反觀點，而是指出：

「… 原則並非是不誠實人士不得進行時效抗辯。這顯然適用於基於一般普通法欺詐的申訴。原則在於，受信人不得受時效期保障。但不誠實協助者並非受信人。正如Millett LJ在Paragon Finance 判例（第414頁）中指出，如果主要責任人有權以《時效法》為由進行抗辯，而協助其行事的人士卻不能，這可能會令人驚訝。但是，無論從公平角度還是從邏輯角度看，看來均沒有理由說明為何不能持有相反的觀點，而在任何情況下，Royal Brunei Airlines Sdn Bhd v Tan （[1995] 2 AC 378）案件均表明，不誠實協助者的法律責任與受託人或其他受信人的不誠實無關。」

劉國輝並非受信人，因此並非《時效條例》第20條所指的「受託人」，故可以提出時效抗辯。

對劉國輝的起訴，是否可以其乃「關乎任何欺詐」，因而符合《時效條例》第20條的規定？

終審法院考慮了上訴人的其他論點，即：從法律解釋角度看，針對不誠實協助者的申訴可能符合《時效條例》第20條，因為其「關乎」實際受託人欺詐性違反信託。終審法院認為，雖然在某些語境中，「關乎」欺詐一詞確實有非常寬泛的含義，但在《時效條例》第20條的語境中，它僅意味著受益人必須因受託人所犯的欺詐性違反信託，而提出針對受託人的申索。

由於劉國輝並非受信人，上訴人的上述論點亦不能成立。

《時效條例》第26條下的推遲

法院最後審視的問題是：Peconic是否可以成功藉《時效條例》第26條推遲時效期的開始時間，直至「原告人發現欺詐、隱瞞或錯誤（視情形而定）或按合理審慎原本可以發現該情況」，從而在時效期內提出申索？

Peconic按合理審慎是否原本可以更早發現欺詐？
因此終審法院須審視的問題是，Peconic及控制Peconic的人士按合理審慎本可以在何時發現欺詐。

終審法院指出必須冷靜回答該問題，而不理會可能被視為具可取之處的地方。

終審法院的意見是，從任何角度看，銀行沒有就規劃狀況取得任何獨立專家意見便投資大量資金，那是極其愚蠢的行為。

終審法院澄清了《時效條例》第26條的目的，首先稱其意圖並非允許人們逃避欺詐的責任，而是：

「… 它可能偶然具有這種效果，但其背後的相關政策並非如此。其目的是避免在經過一段時間後，對被告人是否欺詐開展調查，因為這可能影響其反駁指控的能力。這有時候會讓確定無疑開展了欺詐的人士逃避法律責任，但這是立法機關為具備統一而清晰的規則所願意付出的代價。」

原告人有責任表明自己即使合理審慎，亦不可能發現欺詐。此外，假如缺乏有關原告人實際行事的證據，便無權要求法院假設他們已按合理審慎的要求採取了行動。因此，Peconic有責任證明，他們已經採取可以合理採取的必要步驟以發現欺詐。

「合理審慎」的含義
終審法院在探討「合理審慎」的含義時指出，「合理」一詞表示客觀標準。然而，由於應當是原告人證明合理審慎，因此在決定應當合理期望他證明什麼樣的審慎時，在何種程度上應當考慮到原告人的個人特點，仍是一個可以爭論的問題。

終審法院認為，為了對原告人原本可以如何行事展開查證，故必須假定原告人已經蒙受了他實際蒙受的損失。在Peconic案件中，他們被假定損失了約4億港元。 當Peconic發現（或本可以合理發現）其蒙受損失時，便必須假定其已經對為何會發生這種情況表現出一定程度的詫異。那麼，法院所須審視的問題是：Peconic本可以合理採取哪些步驟，力求取得補救機會？

是否應該假定原告人只能以他實際擁有的資源和其他機會來進行調查工作，還是也應當根據某些客觀標準來對此加以確定？終審法院引述了Millet LJ在Paragon Finance 判例中的觀點（第418頁）。他在該案件中指出，檢驗標準是：

「假如開展相關類型業務的人士具備充足但非無限的人員和資源，並且受合理但非過分的緊迫感驅動，那麼他將會如何行事。」

我們必須假定，Peconic不僅運用了自身的專業知識，並且亦聘用了在合理審慎下所須的任何專家服務，就像人身傷害的受害人預期會尋求醫療意見一般。

終審法院指出，查證Peconic按合理審慎是否本可以發現劉國輝的欺詐，其目的在於確證可以預期他們何時可以展開法律程序。就此而言，Peconic僅須瞭解構成「表面」情況的事實。法院認為，劉國輝聲稱 Chio以外的其他人是Asiagreat的實益擁有人，並且其隱瞞Chio女友的角色，這便足以構成需要答辯的情況。

終審法院因此裁定，Peconic按合理審慎原本可以在較實際情形更早地發現劉國輝的參與。因此認為，《時效條例》第26條並不能作為Peconic的支持。

從本案中我們可吸取的教訓是，我們必須時刻警惕欺詐的可能性。特別是，假如交易涉及巨額資金，法院可能會要求原告人為該等業務提供充分的審批程序和紀錄保留設施。確實，任何人若未開展必要的審慎查證，又不追蹤資金的去向便投入巨額資金，這實屬愚昧的行為。



Lewis Man
合夥人
Gall & Lane

Katherine Harvey
實習律師
Gall & Lane