Wenda Co Limited v Wang Jinhong & Ors

In a commercial arrangement, fiduciary duties arise where a party has undertaken to act exclusively in another’s interests and the relationship goes beyond ordinary arm’s-length activity. The court must identify the parties’ objective agreement and must not impose a trust merely because one party receives money for another or because the arrangement is described in fiduciary language.

Where fiduciary duties exist, unauthorised profits, improper deductions and failures to account may constitute breaches. The accounting party bears the burden of proving authorised retentions and payments. Dishonest assistance requires assistance in a primary breach and dishonesty assessed by the Ivey standard.

Wenda, a Chinese chemical-ingredients business, claimed that its former CFO, Wang Jinhong, had used Syner and Effs to misappropriate monies arising from an invoice-financing arrangement. Syner was an English subsidiary controlled by Wang Jinhong; Effs was a BVI company which she also controlled. Wenda alleged express trusts, fiduciary breaches, dishonest assistance, knowing receipt, conspiracy, inducing breach of contract and deceit. Mr Petit, who later became Effs’ shareholder and director, was also sued for dishonest assistance and knowing receipt.

The central issues were the terms of the 2012 arrangement, whether trusts or fiduciary duties arose, the amount properly due, and the liability of the individual defendants.

1. Nature of the arrangement. The 2012 agreement was construed objectively. Syner was established to obtain cheaper UK invoice financing for Wenda’s sales. It was required to account to Wenda for sums advanced by lenders or paid by customers, subject to necessary authorised costs. It was not authorised to retain financing arbitrage or conduct independent trade. The same principles applied to Effs.
2. No express trust. The evidence did not establish an agreement that the future proceeds were to be held on trust or that Syner and Effs were to be accountable as trustees. The absence of trust terminology was not decisive, but the parties’ agreement gave Syner flexibility over payment timing, expenses and the operating procedure, which was inconsistent with a trust.
3. Fiduciary duties. Syner and Effs nevertheless owed fiduciary duties. They had undertaken to act exclusively in Wenda’s interests, had no intended commercial interest of their own, and operated beyond ordinary self-interested commercial activity. Breaches included unauthorised independent trade, use of the HIF facility for that trade, unauthorised profit, improper expense deductions and failure to account timeously.
4. Accounting and loss. Wenda proved the customer receipts and payments made to it. Syner and Effs, as accounting parties, bore the burden of proving authorised deductions and discharge. Their culpable failure to preserve and disclose Effs’ banking records justified resolving remaining uncertainty in Wenda’s favour. The court accepted the forensic calculation of a net shortfall of US$2,962,690, subject to credit for any recovery in the Chinese proceedings.
5. Individual liability. Wang Jinhong dishonestly assisted the breaches by procuring false HIF and rental invoices, operating unauthorised trade, withholding monies, manipulating accounting records and giving dishonest evidence. Her conduct was dishonest by ordinary standards after the court determined her actual knowledge and belief. Effs and Wang Jinhong were also liable in knowing receipt.
6. Other claims and orders. The accommodation claim was not proved. The US$3.75m payment was found to be money to which Wenda was already entitled, although the form of any declaration was reserved. The claims against Mr Petit were dismissed because dishonesty and receipt of the relevant proceeds were not proved. Consequential orders, including costs, were left for agreement or further directions.

Not an appeal. The judgment was a first-instance decision of the High Court in a commercial claim.