Earlier today, the Hong Kong Court of Final Appeal handed down judgment in Zhang Hong Li v DBS Bank and others a case which has been the cause of considerable discussion in the private wealth and trusts world. The Court of Final Appeal reversed the Court of Appeal’s findings and ruled that the anti-Bartlett clause contained in the trust deed effectively excluded any “high level supervisory duty” with any purported residual obligation on the part of the trustee in relation to the losses caused by risky investment decisions made on behalf of the trust’s underlying investment company. The Court of Final Appeal similarly found that the corporate director of the investment company also had no such high level supervisory duty and was not in breach its fiduciary duties. The case was heard in the Hong Kong courts and the governing law of the trust was Jersey law. The principles will therefore likely be applicable in most of the major common law trust jurisdictions.

This is our initial take on the decision with more detailed analysis to come over the next few days.


Cheung JA in the Court of First Instance depicted the background as follows:

In this epic saga of greed and great wealth gained and lost, the backdrop is the heady days of the financial bubble in the years leading to the global financial tsunami of 2008 and the period thereafter. The two leading characters are the 2nd plaintiff (‘Ji’) and the 7th defendant (‘Linda Liu’) whose common goal when they were dealing with each other was the pursuit of money. Ji was an astute and knowledgeable investor whose thirst for high returns and her own perception of market performance blinded her to the high risk involved with such investments. Ji’s company, the 4th plaintiff (‘Wise Lords’) was at the relevant time the largest customer of the 1st defendant (‘DBS Bank’). Linda Liu was Ji’s private banker in DBS Bank and she fed Ji’s greed by peddling to her high risk financial products (which Ji was willing to accept after her own study of the products) and by acceding to Ji’s request for more and more credit facilities so that Ji would continue to indulge in her thirst for wealth. The tragic ending was inevitable when the tsunami unfurled its fury and the bubble burst.” (per Cheung JA)

Following the financial crisis, proceedings were brought against (i) DBS Trustee HK (now known as IQ EQ) as trustee of the trust through which the investments were made and (ii) DHJ Management Limited as the corporate director for breach of duty for failing to intervene in relation to the investment in the high risk products.

In the Court of First Instance, the Court found that DBS Trustee HK had been in “serious and flagrant” breach of its duties and had breached its “high level of supervisory duty” when allowing the purchase of the high risk products which led to large losses in the financial crisis.

The trust documentation included an anti-Bartlett clause. Such clauses are often thought to protect the trustee against a claim such as this. The Court of Appeal therefore examined the clause and its effectiveness and upheld the Court of First Instance’s decision. The Court of Appeal found that DBS had a “residual obligation” to monitor the investments of the trust and that this obligation could not be limited by an anti-Bartlett clause.

DBS appealed this decision and applied to the Court of Final Appeal to provide guidance on the true extent of a trustee’s duty.

The key questions for the Court of Final Appeal were whether despite the anti-Bartlett clause, a duty could be established and if that duty was breached.

Court of Final Appeal Judgment

In its judgment, the Court of Final Appeal held that a duty could not be established for either DBS Trustee HK as trustee or DHJ Management Limited as the corporate director because the effect of the anti-Bartlett clause was to effectively exclude that duty. Importantly, the Court of Final Appeal directly disagreed with Cheung JA’s analysis and stated that “there is no basis for equating the high level supervisory duty found by the Judge with any purported residual obligation.”

As for DHJ Management Limited, it was stated that:

There is no basis for treating DHJ Management as being subject to the same “high level supervisory duty” arising from the purported residual obligation. The only basis upon which DHJ Management could have been held liable was if it could be shown to have failed in its duties as a director of Wise Lords, and that that breach of duty amounted to gross negligence.”

Secondly, the court held that even if such duty could be established, such a duty had not been breached because the plaintiff had not proven that the actions of approving the investments were serious enough to amount to gross negligence.


This is an important decision (and rare high level decision on this issue) which may reassure private wealth and trusts practitioners of the strength and scope of anti-Bartlett clauses.