Viewpoint... Analysis of the relief path of investors in business trust disputes.

Rigid payment means that after the maturity of the trust product, the trust company must pay the investor's principal and income, regardless of whether the trust product can not be paid or payment difficulties. Rigid payments can be seen as the trust's commitment to investors.

In order to promote the sale of trust products, some salespeople deliberately exaggerate the nature of the products due for payment, leading investors to believe that there is no risk of non-payment of trust products. Therefore, when the trust product cannot distribute the investment principal and income on schedule, some investors believe that they can require the trust company to pay the investment principal on the grounds that there is a rigid payment agreement in the trust contract, and pay the investment income at the expected rate of return agreed in the contract.

The Guiding Opinions on Regulating the Asset Management Business of Financial Institutions stipulate that "asset management business is the off-balance-sheet business of financial institutions, and financial institutions shall not promise to protect capital and income when carrying out asset management business", therefore, when financial institutions carry out asset management business, they promise to protect capital and income is a rigid payment.

In judicial practice, there are certain disputes over whether the contract terms belong to rigid payment. For example, in the case of the dispute between Shenzhen XXX Co., Ltd. and Minsheng Trust Business Trust [(2021) No. 18221 of Beijing 0101 Minchu], Article 8.4 of the Trust Contract stipulates that the redemption fund-the number of trust units redeemed by the beneficiary × 1 yuan, the trust income corresponding to each redemption of the trust unit -1 yuan x the highest reference annualized rate of return applicable to the trust unit x the actual number of days of existence of the trust unit as of the opening date ÷ 365-the trust income actually distributed during the life of the trust unit. In the opinion of the Court, the above agreement is an agreement to guarantee principal and fixed income.

In the case of Luo Moumou and Minsheng Trust Business Trust Dispute [(2021) Jing 0101 Min Chu No. 16279], the plaintiff claimed that if the trust units of Phase I are fully or partially redeemed/redeemed and converted as stipulated in Article 8.1, paragraph 7 of the trust contract, the trust units shall be deemed to be terminated. If the beneficiary redeems the trust unit successfully, the redemption fund of each successfully redeemed trust unit = 1 yuan, and the trust benefit = 1 yuan × the highest reference rate of return corresponding to the trust unit × the number of days from the establishment date of the trust plan or the successful subscription date of the trust unit to the successful redemption date ÷ 365-the trust unit has actually received the distribution of trust income, the principal and proceeds of redemption under this agreement are fixed. The defendant claimed that the expression of the highest reference trust benefit and the highest reference trust benefit expressly stipulated in Article 11.5 of the trust contract does not mean that the trustee guarantees that the beneficiary obtains the corresponding amount of trust benefit, does not mean that the trustee guarantees that the principal of the trust will not be lost, is only a reference, and is specifically distributed according to the realization of assets. The court consolidated the relevant terms of the trust contract redemption application, suspension of redemption, special agreement, etc., and held that the trust contract did not guarantee a fixed return on principal and interest and the plaintiff's principal was not lost.

The Guiding Opinions on Regulating the Asset Management Business of Financial Institutions were issued and implemented on April 27, 2018, and the regulatory authorities have made it clear that financial institutions shall not promise to guarantee capital and income when carrying out asset management business; when there are difficulties in payment, financial institutions shall not advance funds in any form. Article 92 of the "Minutes of the National Court Civil and Commercial Trial Work Conference" also clarifies that "if financial institutions such as trust companies, commercial banks and other financial institutions, as trustees of asset management products, enter into contracts with beneficiaries that contain guaranteed principal and interest fixed returns, guaranteed principal against losses, etc. or just-in-time clauses, the people's court shall find such clauses invalid". Therefore, the agreement on rigid payment should be considered invalid.

In the case of Luo Moumou and Minsheng Trust Business Trust Dispute, and the case of Shenzhen Moumou Co., Ltd. and Minsheng Trust Business Trust Dispute, the court held that: According to relevant regulations, the trust company as the trustee of the asset management product and the beneficiary entered into a contract containing guaranteed principal and interest fixed return, guaranteed principal against loss and other guaranteed or just-in-time clauses are invalid.

Therefore, the agreement on rigid payment in the trust contract will also be found by the court to be invalid.

In the case of Luo Moumou and Minsheng Trust Business Trust Dispute, the court held: "In this case, the disposal of trust property has not been determined. The plaintiff clearly stated that in this case, the defendant does not advocate that the defendant, as the trust manager, has any other breach of contract except for failing to pay the principal and income, does not claim that the defendant violates the financial institution's suitability obligation or other legal and agreed fiduciary obligations, and does not require the defendant to bear the liability for compensation corresponding to its fault, only the defendant is required to pay rigidly. Because the plaintiff's claim lacks factual and legal basis, this court will not support it." In the case of a dispute between Shenzhen XX Limited and Minsheng Trust Business Trust, the court held: "In this case, the disposition of trust property has not yet been determined, and XX also made it clear that it only requires Minsheng Trust to pay rigidly in accordance with the terms of the contract and does not claim liability for breach of contract. The court of first instance did not support its claim because of the lack of factual and legal basis for its claim." In the above case,The parties only required the trust company to pay the principal and income of the investment on the basis of the rigid payment agreement, and the court finally decided to reject the claim.

In the case judgments of Luo Moumou and Minsheng Trust Business Trust Dispute and Shenzhen Moumou Co., Ltd. and Minsheng Trust Business Trust Dispute, the court held that if the plaintiff believed that the defendant, as a trust manager, violated his obligations as a trustee and caused his property losses, he could claim separately. So how should investors argue?

In the case of Xu XX and Minsheng Trust Business Trust Dispute [(2021) Beijing 0101 Minchu No. 16275], the trust company claimed that the Zhongmin HSBC No. 3 pooled fund trust plan was terminated early on May 14, 2021 and is currently in liquidation. The court found that the trust company's unilateral termination without agreement and legal procedures, without preparing a property liquidation report, and without reporting the beneficiary seriously violated the contract and legal provisions. The court ultimately upheld the plaintiff's loss of interest on the principal and proceeds of the investment and the period during which the funds were occupied.

Most of the trust contracts agree on the automatic extension of the trust term, in which case it is difficult for the investor to require the trust company to pay the principal and income of the investment on the grounds of the expiration of the product term. However, if the investor discovers that the trust company has other breach of contract, he may request the termination of the trust contract and compensation for various losses on the grounds that the trust company constitutes a fundamental breach of contract and the purpose of the contract cannot be realized.

1. Breach of contract where the purpose of the contract cannot be achieved

The focus of the dispute in such cases is whether the trust company has any breach of contract in the process of performing the trust contract, which leads to the failure of the purpose of the contract. In principle, it is to judge whether the trust company has violated the contract and legal obligations, whether it has fulfilled its duties, handled the trust affairs for the best interests of the beneficiaries and performed the fiduciary obligations in accordance with the principles of honesty, credit, prudence and effective management. In terms of specific behavior, the breach of contract of the trust company mainly includes the following: the use of trust funds does not conform to the contract, the use of multi-layer nested investment methods, the management and use of trust property in violation of the rigid requirements of the regulatory authorities, and insufficient information disclosure. Infringement of investors' right to know and other situations.

2. Several ways to prove the existence of a breach of contract by a trust company

(1) Regulatory opinion on trust company investigation

In the case of the dispute between Xu Moumou and Minsheng Trust Business Trust [(2021) Beijing 0101 Minchu No. 16275], Xu Moumou reported to the regulatory authorities on the management of HSBC No. 3 product by Minsheng Trust Company. On January 10, 2022, the Beijing Supervision Bureau of the China Banking and Insurance Regulatory Commission issued the "Investigation Opinion on Reporting Illegal Acts of Banking and Insurance" No. YJ2021303-271 by the Beijing Banking and Insurance Regulatory Commission.

In the case of a dispute between Beijing XXX Software Company and Minsheng Trust Business Trust [(2021) Beijing 0101 Minchu No. 23386], the Beijing Supervision Bureau issued the Beijing Banking and Insurance Supervision Review YJ2021303-45 and No. 193 "Investigation Opinion on Reporting Illegal Acts in Banking and Insurance".

In the case of Li Moumou and Minsheng Trust Business Trust Dispute [(2021) Beijing 0101 Minchu No. 18645], Li Moumou once reported Minsheng Trust to the Beijing Banking and Insurance Regulatory Bureau on Zhixin No. 828, and the Beijing Banking and Insurance Regulatory Bureau issued an investigation opinion on the reporting of bank insurance violations by the Beijing Banking and Insurance Regulatory Bureau on No. YJ2021303-41.

In the case of a dispute between Song Moumou and Minsheng Trust Business Trust [(2021) Beijing 0101 Minchu No. 21855], Song Moumou once reported Minsheng Trust to the Beijing Banking and Insurance Regulatory Bureau on Zhixin No. 828, and the Beijing Banking and Insurance Regulatory Bureau issued an investigation opinion on the report of bank insurance violations by the Beijing Banking and Insurance Regulatory Bureau on No. YJ202XXXX-XX.

In the case of a dispute over a business trust between a certain company in Langfang and Minsheng Trust [(2021) Jing 74 Min Chu No. 590], the Beijing Regulatory Bureau of the China Banking and Insurance Regulatory Commission issued the "Investigation Opinion on Reporting Illegal Acts in Banking and Insurance" No. YJ2021303-209 by the Beijing Banking and Insurance Regulatory Commission.

In the above-mentioned cases, the investigation opinions of the Beijing Regulatory Bureau on the trust company showed that after verification, some of the trust company's behavior violated the "Administrative Measures for Trust Companies' Collective Funds Trust Plans" and "Guiding Opinions of the General Office of the China Banking Regulatory Commission on Risk Supervision of Trust Companies. The investigation opinion of the Beijing Supervision Bureau was used by the court as an important basis for determining the facts.

(2) Access to evidence by the court

In the case of a dispute between Shenzhen XXX Co., Ltd. and Minsheng Trust Business Trust [(2021) Beijing 0101 Minchu No. 18216], the court of first instance obtained the transaction flow of the special trust account involved in the case ex officio.

In the case of dispute between Han Moumou and Minsheng Trust Business Trust [(2021) Beijing 0101 Minchu No. 18347], the court of first instance obtained the transaction flow of the special trust account involved.

In the above-mentioned cases, although there is a lack of regulatory investigation of the trust company, the court has ex officio access to the transaction flow of the trust account involved, which is an important basis for determining whether the trust company has fulfilled its fiduciary obligations.

(3) Require trust companies to disclose relevant information

In the case of Xu and Minsheng Trust business trust dispute, in the course of the case, the court of first instance explained and gave the time limit for proof, Minsheng Trust did not submit the case to the court involved in the trust account bank transaction flow, for the trust property corresponding to the underlying assets situation can not be explained.

In the case of Han and Minsheng Trust Business Trust dispute, Minsheng Trust Company refused to provide the investment direction of the product after the court of first instance explained, according to the evidence in the case, the proportion of its investment deposits, bonds and other debt categories is significantly lower than the regulatory requirements of 80%.

In the case of a dispute between a certain company in Langfang and Minsheng Trust's business trust, the court explained that Minsheng Trust said it could not provide evidence to prove the investment of Huitian No. 1 trust funds and the holding of the underlying assets.

From the above cases, it can be seen that the trust company, as a trustee, should bear the corresponding burden of proof for managing the trust property in accordance with the contract and legal provisions, and require the trust company to disclose relevant information in the court explanation, and the trust company can not provide, it should bear the corresponding consequences of adverse proof.

3. What losses can be claimed by the trust company

(1) Remaining investment principal

According to Article 566 of the the People's Republic of China Civil Code: "After the termination of the contract, if it has not been performed, the performance shall be terminated. If the contract is terminated due to breach of contract, the person with the right of release may request the breaching party to bear the liability for breach of contract, unless otherwise agreed by the parties. After the termination of the main contract, the guarantor shall still be liable for the civil liability of the debtor, unless otherwise agreed in the guarantee contract." According to the above provisions, after the termination of the trust contract, the trust company shall return the trust funds delivered by the investor. If the contract is terminated due to a fundamental breach of contract by the trust company, the trust company shall also compensate the investor for the loss, which may include the loss of interest in the performance of the contract.

(2) Loss of expected earnings or loss of capital occupation.

In the business trust dispute between the investor and the trust company, more investors claim that the trust company pays the expected loss of income on the basis of the performance comparison benchmark agreed in the trust contract. However, it can be seen from the statistics of court cases that the court believes that the scope of compensation includes the investment income and capital occupation loss from the performance of the contract. However, the performance comparison benchmark is not the fixed income standard agreed by both parties, and the actual rate of return after the normal performance of the contract cannot be confirmed. Investors claim that there is no basis for the loss of investment income. The court adjusts this according to the LPR standard for the same period of one year.

(3) About other expenses

Investors in order to claim rights and interests, hire a lawyer to pay legal fees, apply for property preservation to pay preservation insurance premiums and other costs, whether these costs can be claimed, need to be judged according to the agreement of the trust contract. If the trust contract is expressly agreed upon, the investor may claim it. If there is no direct agreement in the trust contract, the court considers that the attorney's fees, preservation insurance premiums and other expenses are not direct losses, and the investor's claim lacks a contractual and legal basis, and the judgment does not support such claims.