In China CITIC Bank International Limited v TUS-Holdings Co Ltd [2025] HKCFI 5264, the Defendant guarantor’s appeal against a summary judgment of US$643,949,900 was dismissed by Deputy High Court Judge Le Pichon. The core of the Defendant’s challenge was an objection to the Plaintiff bond trustee’s locus standi, arguing its appointment was invalid because in breach of the Trust Deed, the registered nominee bondholder, DB Nominees, did not attend the bondholders’ meeting or vote in favour of the appointment resolution (§9). Instead, the votes originated directly from the ultimate bondholders (i.e. the investors).
The Court was therefore required to determine (i) whether the trustee succession clause in the Trust Deed required an extraordinary resolution for the appointment of a successor trustee, and (ii) in any event, whether the defendant was entitled to dispute the appointment in light of the doctrines of estoppel by deed, estoppel by convention, and the irregularity principle.
Analysis
Trust Deed Construction: The Court first held that the trustee succession clause in question did not require an extraordinary resolution (§35). Focusing on the fact that the trustee succession clause in question expressly referred to the requirement of an extraordinary resolution in situations where the original trustee was removed by bondholders or the issuer (§25), the Court applied the maxim expressio unius est exclusio alterius (§26), holding that “[t]he deliberate omission of the requirement invites the application of the canon of construction that its exclusion was intentional.” (§28)
Estoppel by deed: The Court further held that the Defendant, having executed a deed that recited the passing of the extraordinary resolution and the appointment itself, was estopped by deed from denying the trustee’s appointment (§39). Rejecting the suggestion that estoppel by deed could not operate on matters of legal effect, the Court clarified that the doctrine was inapplicable only to (i) future events, and (ii) questions solely concerning the legal effect of a document (§§45-50).
Estoppel by Convention: DHCJ Le Pichon also found that the Defendant was estopped by convention to claim that DB Nominees must attend the bondholders’ meeting to vote when the parties’ common understanding was that such attendance was unnecessary (§§70-71). In this regard, the Court stressed the fact that “DB Nominees have never attended any bondholder meeting in the past. That is hardly surprising… The Trust Deed requires that there be a Certificate representing Bonds that will “initially” be registered in the name of a nominee of the Common Depository and/or of any other alternative clearing system. A nominee is just that. Those who successfully subscribe for Bonds and put up the funds for them are the ultimate beneficial owners” (§78).
Her Ladyship further dismissed the argument that the operation of the estoppel doctrine would be unjust or unconscionable given that DB Nominees “is a nominal party. It is bound by the relevant rules of procedure of the relevant clearinghouses to vote according to the ultimate bondholders’ instructions. It has no separate and independent interest to advance. How estoppel could adversely affect DB Nominees is simply unfathomable” (§84).
Irregularity principle: The Plaintiff further argued that any irregularity in the bondholders’ meeting would be immaterial as the outcome would have been the same when the ultimate bondholders had unequivocally expressed its wishes to appoint the Plaintiff as the trustee (§89). In this regard, the judge appears receptive to the application of the irregularity principle in the sphere of registered bondholder and ultimate bondholders, but ultimately found that whether or not the irregularity principle was applicable did not impact the outcome of the application (§§91-92).
Key Takeaways
This is not the first case where a bond trustee’s locus has been challenged on the ground that the registered bondholder (as opposed to the ultimate investors) had not given their consent: see, e.g., The Bank of New York Mellon v XJ International Holdings Co Ltd [2025] HKCA 481. This decision reflects the Court’s robust approach to overcoming such objections by focusing on the commercial reality that the bondholders’ economic interests are solely and exclusively vested in the ultimate investors.
Read the judgment here: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=174127&currpage=T
Mr Anson Wong SC and Mr Paul Law, instructed by Messrs. Ashurst Hong Kong, for the Plaintiff.
Mr Terrence Tai, instructed by Messrs. Hill Dickinson Hong Kong, for the Defendant.
