The Variable Nature of the Fiduciary Duty to Account: Insights from Jong Yat Kit v Li Mun Hok Steven

The fiduciary duty to account is often described as a cornerstone of relationships involving trust and confidence. However, its application is not uniform across all fiduciary relationships.

The recent High Court decision in Jong Yat Kit, as Sole Administrator of the Estate of LI CHUNG, deceased v LI MUN HOK STEVEN ([2025] HKCFI 1764, HCA 1767/2017), delivered by Deputy High Court Judge KC Chan, provides a valuable analysis of how the scope and rigour of this duty are determined by the specific nature and context of the relationship between the parties.

The case involved a claim by the administrator of a substantial estate against the deceased’s youngest son concerning withdrawals totalling HK$36.49 million made from the deceased’s bank account, for which the son was an authorised signatory. While the facts involved complex family dynamics and considerations of gifts and the presumption of advancement, the court’s detailed examination of the defendant’s duty to account offers significant guidance.

The plaintiff was the administrator of the estate of the late Mr Li Chung (“Li Senior”), a successful businessman. The defendant, Steven, was Li Senior’s youngest son. Li Senior opened a Hang Seng Bank account (“the HSB Account”) in his sole name but made Steven an authorised signatory. Over approximately one year before Li Senior’s death, Steven signed for 17 withdrawals from the HSB Account, transferring the funds primarily to his own accounts and, in one instance, HK$10 million to his wife’s account.

The Administrator claimed Steven breached his fiduciary duties concerning these withdrawals, asserting they were held on trust for the Estate. Steven’s defence was that the withdrawals were authorised by Li Senior, with HK$30 million being express gifts and the remainder covered by the presumption of advancement.

A central battleground in the litigation was the nature and extent of the fiduciary duty Steven owed to Li Senior regarding the HSB Account. Both parties accepted Steven stood in a fiduciary relationship, but they diverged significantly on the scope of the resultant duties, particularly the duty to account.

The Administrator’s Position: The Administrator argued for a broad and rigorous duty, akin to that of a trustee. This was based partly on two letters from November 2005 signed by Li Senior, addressed to his companies but concerning Steven, which used the term “custodian” in relation to Steven’s actions assisting Li Senior with transactions involving company funds being transferred to Li Senior’s personal accounts. The Administrator contended these letters established Steven as a “custodian’ of the funds in the HSB Account (opened shortly after the letters).

Consequently, Steven owed the “irreducible core obligation” to provide a full account, justifying each withdrawal by explaining when and how authorisation was given, the purpose behind each withdrawal, as well as providing records to support the aforesaid.

The Administrator argued this duty was particularly stringent as Steven was both the fiduciary and a recipient of the funds. Failure to meet this standard constituted a breach, and this demanding duty precluded reliance on the presumption of advancement. Authorities concerning the duties of trustees, executors, and those in similar positions of control over assets were cited (e.g., Wroe v Seed (1863) 66 ER 773, Henchley v Thompson [2018] WTLR 1289). The Administrator also relied on Hollingworth v Juson [2006] 3 HKLRD 381, where an account was ordered against someone assisting an elderly person with finances.

Steven’s Position: Steven argued that while he was a fiduciary, the scope of his duty had to be moulded to the specific relationship. He relied on authorities emphasizing the variability of fiduciary duties, such as Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681, Kao Lee & Yip v Donald Koo Hoi Yan [2003] 3 HKLRD 296, and the cautionary words of Fletcher Moulton LJ in Re Coomber [1911] 1 Ch 723 against applying the same standards to all fiduciaries.

Steven contended his role was highly circumscribed: due to Li Senior’s age and physical limitations (hand tremor, failing health), Steven merely acted as a conduit, relaying Li Senior’s specific instructions to the bank and signing the mandate. He had no discretion, did not typically know the purpose of the transactions, and Li Senior retained ultimate control (checking statements/passbooks, bank verification protocols for large sums).

The November 2005 “custodian” letters, he argued, related to past audit confirmations for company accounts, not future management of Li Senior’s personal HSB Account. His duty was limited to faithfully executing authorised instructions. If withdrawals were authorised by Li Senior, the duty did not extend to accounting for Li Senior’s reasons or purpose.

Deputy High Court Judge KC Chan favoured the defendant’s characterization of the relationship and the resultant duties.

1. Variable Nature Affirmed: The Court explicitly endorsed the principle that fiduciary duties are not monolithic and must be determined by reference to the “nature and character of the particular relationship” (§§177-178, citing Libertarian and Kao Lee & Yip).
2. Rejection of Trustee/Custodian Analogy: The court rejected the Administrator’s premise that Steven was a trustee or custodian of the funds in the HSB Account (§189). Key factors included:
   • Li Senior’s established practice of maintaining tight control over his finances.
   • The finding that Li Senior implemented a verification protocol with the bank for significant withdrawals from the HSB Account (§128).
   • Steven’s role being purely mechanical – executing specific instructions without discretion or needing to understand the purpose (§§188, 191).
   • Li Senior’s awareness of Steven’s limitations due to his Bipolar disorder (§188). The court found Steven’s role “much more akin to the ‘errand boy’ example given by Fletcher Moulton LJ in Re Coomber” (§189).
3. Interpretation of “Custodian” Letters: The Court held the November 2005 letters were prepared for audit purposes concerning past transactions involving the company They confirmed Li Senior’s authorisation of transfers assisted by Steven into Li Senior’s accounts, treating them as loans from the companies to Li Senior. They did not appoint Steven as a general custodian of Li Senior’s personal funds, nor did they relate prospectively to the HSB Account opened shortly thereafter (§§84-95). The term “custodian” was used loosely in that specific context (§94).
4. Distinguishing Hollingworth v Juson: The court distinguished Hollingworth on the basis that the defendant there had broader authority to manage the principal’s financial affairs, possessed the cheque book and ATM card, received bank statements, and made withdrawals without the principal’s specific instructions or authorisation for those particular transactions (§§190-191). Steven’’s situation was fundamentally different as he acted only on specific instructions for each authorised withdrawal.

Based on this analysis, the court defined Steven’s fiduciary duties narrowly (§192) to include duties:

1. To faithfully relay and execute Li Senior’s specific instructions to the bank.
2. Not to abuse his signing authority by making unauthorised transactions.
3. To account for any unauthorised withdrawals (i.e., those made without Li Senior’s instruction).

Having found as a fact that all 17 Withdrawals were authorised by Li Senior (§§121, 142), the Court concluded that Steven’s duty to account did not extend to explaining Li Senior’s purpose behind those authorised transactions (§194). Since the duty was limited in this way, it did not, as a matter of principle, prevent Steven from relying on the presumption of advancement for those authorised withdrawals paid to him that were not proven to be express gifts (§§194-196). The court rejected the Administrator’s argument that a fiduciary’s duty to account invariably overrides the presumption (§174, §194)

The Court ultimately dismissed the Administrator’s claim entirely, finding no breach of the fiduciary duties owed by Steven, given that all withdrawals were authorised and the duty did not extend to accounting for the principal’s purpose behind authorised transactions.

Jong Yat Kit v Li Mun Hok Steven serves as a critical reminder that the label “fiduciary” does not automatically import the full, rigorous suite of duties applicable to a trustee. Courts will meticulously examine the factual matrix, the express or implied understanding between the parties, the level of discretion afforded, and the degree of control retained by the principal to ascertain the precise scope of the fiduciary duties undertaken.

The full judgment is available at:

https://legalref.judiciary.hk/doc/judg/word/vetted/other/en/2017/HCA001767_2017.docx

Mr Anson Wong SC leading Mr Lai Chun Ho instructed by King & Wood Mallesons for the Defendant.