Pacific Rainbow International Inc v. Shenzhen Wolverine Tech Ltd and Others
Read the full judgment text of HCA 3023/2016 on BabelCite. This High Court CFI judgment was delivered on 2 May 2017.
1. On 18 November 2016, prior to the issue of the writ in this action, the plaintiff applied for and obtained ex parte from Zervos J:
Cited by 13 cases · Cites 9 cases
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HCA 3023/2016 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 3023 OF 2016 ________________________
________________________ Before: Deputy High Court Judge Douglas Lam SC in Chambers Date of Hearing: 16 March 2017 Date of Decision: 2 May 2017 ________________________ DECISION ________________________ A. Procedural Background 1.On 18 November 2016, prior to the issue of the writ in this action, the plaintiff applied for and obtained ex parte from Zervos J:
2.The writ was issued 3 days later on 21 November 2016, with the 1st defendant named as the sole defendant. On 25 November 2016, being the return date of the D1 ex parte order and in default of appearance by the 1st defendant, Anthony Chan J continued the order with minor amendments until trial or further order. 3.On 8 December 2016, the plaintiff applied for and obtained ex parte from DHCJ Kent Yee:
4.On 16 December 2016, being the return date of the D2, D3 and D4 ex parte orders, the 2nd defendant indicated that he would oppose the continuation of the D2 ex parte order. The 3rd and 4th defendants did not appear. DHCJ Kent Yee adjourned the plaintiff’s return date summons and ordered the continuation of the ex parte orders pending the determination of the summons or further order, but subject to a variation that inter alia the 2nd defendant be allowed to spend (1) HK$5,000 per week towards ordinary living expenses and HK$10,000 per week towards his ordinary and proper business expenses for a 12-week period; and (2) HK$150,000 on legal advice and representation. The judge also gave directions for the filing of evidence by plaintiff and the 2nd defendant. 5.The plaintiff’s adjourned summons came before me on 16 March 2017. I was informed by Mr Kerby Lau, counsel for the plaintiff, that the 3rd and 4th defendants have since filed acknowledgements of service and have consented to the continuation of the D3 and D4 ex parte orders. After hearing the parties, I reserved my decision and continued the D2 ex parte order until further order. B. Factual Background 6.The plaintiff, a company incorporated in California, USA, is an importer and wholesaler of raw materials in the food and other industries, and has had a trading relationship with a company known as Xiamen Kingdomway Limited (“KDW”), a supplier of raw materials, since 2010. 7.The 1st and 3rd defendants are Hong Kong incorporated companies. The 2nd defendant has been registered as a sole proprietorship under the Business Registration Ordinance (Cap 310) (“BRO”) since 5 August 2015. The 4th defendant is and was at all material times the sole director and shareholder of the 3rd defendant. 8.The root of these proceedings is what appears to have been an email fraud perpetrated on the plaintiff. 9.On 22 March 2016, the plaintiff placed an order with KDW for materials for a sum of US$1,480,000. On or about 8 November 2016, the plaintiff received an email purportedly from one Belinda Han, the general manager of KDW’s international trade department, asking if the plaintiff could make early payment for the goods to assist with KDW’s cash flow issues, in return for a 2.5% discount from the original price. 10.The plaintiff agreed, and on 10 November 2016, the plaintiff received a further email purportedly from Ms Han directing payment to be made to the 1st defendant, which was said to be a subsidiary of KDW. The email attached a payment authorisation and revised invoice instructing payment to be made to D1’s HSB Account. On the belief that the emails were genuine, on 15 November 2016, the plaintiff remitted the said Sum into D1’s HSB Account. 11.On 16 November 2016, the plaintiff sent to Ms Han an email with the bank confirmation slip showing the remittance, whereupon it was discovered that neither Ms Han nor anyone at KDW had sent the emails on 8 and 10 November 2016 and had never authorised payment into D1’s HSB Account. In fact, KDW had no business transactions or dealings with the 1st defendant. 12.From the information obtained pursuant to the 1st and 2nd HSB discovery orders and the BEA discovery order, it can be seen to some extent what happened to the said Sum. 13.Insofar as D1’s HSB Account was concerned:
14.Insofar as D2’s BEA Account is concerned:
15.Insofar as D3’s HSB Account was concerned:
C. The plaintiff’s case 16.The plaintiff’s case against the defendants, as pleaded in its amended statement of claim dated 21 February 2017, may be summarised briefly as follows. 17.The plaintiff paid the said Sum to the 1st defendant by reason of fraud, and as a result, the 1st defendant held the said Sum as constructive trustee for the plaintiff. 18.The plaintiff, as the equitable owner of the said Sum, is entitled to trace such part of the said Sum and/or its proceeds as are in the hands of each of the 2nd and 3rd defendants, who holds the same on trust for the plaintiff; 19.Further or alternatively, each of the 2nd and 3rd defendants received parts of the said Sum knowing that the same were proceeds of fraud, and each of the 2nd, 3rd and 4th defendants dishonestly assisted the 1st defendant’s breach of its duties as constructive trustee by receiving and/or dissipating the said Sum or parts thereof. 20.Further, the 1st, 2nd and/or 3rd defendants have been unjustly enriched at the expense of the plaintiff as the plaintiff paid the said Sum to the 1st defendant by reason of a mistake of fact, and the 1st, 2nd and/or 3rd defendants have no entitlement to the same. 21.Further, the 1st, 2nd, 3rd and/or 4th defendants conspired to injure the plaintiff using unlawful means by their participation in the fraud and/or the dissipation of the proceeds of the fraud. 22.The plaintiff claims against, amongst others, the 2nd defendant for inter alia (1) a declaration that he holds the sums traceable to the said Sum on trust for the plaintiff; (2) restitution of such part of the said Sum as received by him; (3) equitable compensation and/or damages in the amount of the said Sum or to be assessed; and (4) accounts and inquiries. D. The 2nd defendant’s case 23.By his 2nd affirmation dated 10 February 2017 and his pleaded defence dated 7 March 2017, the 2nd defendant contends, in essence, that he had no knowledge or involvement in the 1st defendant’s fraud, if any, and he is in any event a bona fide recipient for value without notice. His case may be summarised as follows. 24.Since 2005, the 2nd defendant has been engaged in the mobile phone manufacturing and trading business. In 2009, he started a business in Shenzhen that operated a factory to manufacture, assemble, refurbish and repair mobile phones and liquid crystal displays for mobile phones on an OEM basis. 25.In 2012, the 2nd defendant changed his business model, and has since, in business partnership with a “Mr Zhen”, been buying second-hand and defective mobile phones and mobile phone parts for repair, refurbishment and resale in Shenzhen and overseas. He acquired East Winner International Limited (“East Winner”), a Hong Kong incorporated company, in March 2012 and registered his sole proprietorship in 2015 for the purpose of this business. 26.The 2nd defendant met the 4th defendant (the sole shareholder and director of the 3rd defendant) in around May or June 2010 through colleagues, and his business dealings between the 3rd and 4th defendants have primarily been the grey market exchange of Hong Kong dollar and RMB due to currency controls in Mainland China. 27.The 2nd defendant met one Ma Xue Du (“Mr Ma”), now the shareholder and director of 1st defendant, in 2010. Mr Ma was one of the 2nd defendant’s previous customers in respect of D2’s previous OEM business, although they had not kept in contact after the 2nd defendant ceased to take OEM orders. 28.For the 2nd defendant’s present business, he needs to visit regularly the Shenzhen Tong Tian Di Mobile Phone Market, and on one such occasion in or around July 2016, he met Mr Ma again. 29.Since that time, the 1st and 2nd defendants entered into 9 transactions between August 2016 and November 2016 for the sale and purchase of 3 models of Blackberry phones. These 9 orders were placed by Mr Ma on behalf of the 1st defendant with either the 2nd defendant or Mr Zhen, through face-to-face meetings or by telephone. The 2nd defendant has set out particulars of these transactions in a schedule to his affirmation, and has exhibited some purchase orders, invoices and delivery notes. 30.The sums received by the 2nd defendant from the 1st defendant relate primarily to the 8th and 9th orders, which were for the sale and purchase of a total of 32,787 units of Blackberry phones:
In respect of these orders, the 2nd defendant has also set out in a schedule particulars of the orders he placed with his suppliers to fill the orders and has exhibited some purchase orders, invoices and delivery notes. 31.Payment for these two orders, together with an outstanding balance from the 7th order of RMB160,650, was received by the 2nd defendant on 15 November 2016:
32.The subsequent transfers out of D2’s BEA Account on 17 and 21 November 2016 were payments to the 2nd defendant’s suppliers and “for his [own] genuine and ordinary living and business expenses”:
33.As to the timing of the transfers out of D2’s BEA Account, the 2nd defendant points out that the D2 to D4 ex parte orders were not obtained until 8 December 2016, several weeks after the transfers. Further, he had no prior knowledge of the D1 ex parte order. In the circumstances, there was nothing sinister about the timing of the transfers, including the transfer to D2’s Canadian Account on 21 November 2016. 34.Since being served with the D2 ex parte order, the 2nd defendant has been in touch with Mr Ma by way of WeChat, telephone and a face-to-face meeting. The 2nd defendant has exhibited an excerpt of a WeChat conversation and a CD-ROM containing a recorded telephone conversation with Mr Ma. These conversations show that the 2nd defendant had previous business dealings with the 1st defendant in the months prior to the alleged fraud, that the 1st defendant assured him that he was unaware of any problem with the funds, and that he urged the 1st defendant to seek legal advice and to inform the court that the business transactions between them were genuine. 35.A flowchart showing the movement of funds based upon the BEA and HSB discovery orders as well as the 2nd defendant’s own evidence (which, for the avoidance of doubt, is not admitted by the plaintiff) is contained in the annexure to this decision. E. Principles for Proprietary and Mareva Injunctions 36.There is no dispute between the parties as to the relevant principles upon which the court will order an interim proprietary injunction and a Mareva injunction, or the differences between the two types of injunctions. See eg Lewin on Trusts 19th edition at §§38-10 to 12; Zimmer Sweden AB v KPN Hong Kong Limited & Or (unreported) HCA 2264/2013, 2 May 2014 at §§72 to 77. 37.For an interim injunction to protect a claim for trust property, the principles in American Cyanamid Co v Ethicon Ltd[1975] AC 396apply, although irremediable damage need not necessarily be shown and the court will readily find that the balance of convenience favours the preservation of the fund pending trial. See eg Lewin (supra) at §38-14; A v C [1981] QB 956; CY Foundation Group v Cheng Chee Tock & Ors [2012] 1 HKLRD 532 at §§14, 37. 38.On the other hand, for a Mareva injunction, a plaintiff must show a real risk of unjustifiable dissipation of those assets, such that any judgment or award would then go unsatisfied. Such a risk must be supported by some credible material and should not be too readily inferred. See eg Eastman Chemical Limited v Heyro Chemical Company Limited [2012] 3 HKLRD 307 at §26. 39.The threshold in terms of the substantive merit of the claim is also different for the two types of injunction:
40.Notwithstanding the higher threshold in terms of the substantive merits for a Mareva injunction, it is important to bear in mind Parker LJ’s observations in Derby & Co Ltd v Weldon (No 1) [1990] Ch 48 at 58:
41.Although a plaintiff may have had at the ex parte stage a good arguable case, the defendant may be able to put up a defence and evidence of sufficient cogency as to “water down” the merits of the claim to an extent that it no longer amounts to a good arguable case (or even a serious issue to be tried). See eg Arrow ECS Norway AS v Xin Cheng Holdings (International) Company Limited (unreported) HCA 239/2016, 12 May 2016 at §§46, 61. 42.That said, the existence of a good arguable defence does not necessarily negate a good arguable case. This was fairly accepted by Ms Lau, as it is entirely possible to have, at the interlocutory stage, both the claim and the defence being more than barely capable of serious argument and not necessarily having a better than 50% chance of success. For a Mareva injunction, there is no requirement that the plaintiff show that he has a “much better” case or argument than the defendant. See eg Kazakhstan Kagazy plc v Arip [2016] 2 All ER (Comm) 711, CA, at §25. F. Preliminary Observations 43.Before examining whether the proprietary and Mareva injunctions in the D2 ex parte order should be continued, I make the following observations. 44.First, although the plaintiff has through the BEA discovery order and the 1st and 2nd HSB discovery orders been able to ascertain the movements in and out of the 1st to 3rd defendants’ HSB and BEA accounts, the orders do not enable the plaintiff or the court to see what happened to the sums after they had been remitted out of those accounts but otherwise remain in the hands of the defendants — for instance, in other bank accounts or in the form of cash or other assets outside the jurisdiction (and therefore not covered by the disclosure order in the Mareva injunction). The persons in the best position to provide that information are the defendants themselves. That is why in cases such as the present, disclosure orders are often sought and almost invariably granted by the court requiring a recipient of trust monies to make full disclosure as to the whereabouts and what, if anything, has become of such monies or their proceeds. To date, however, no such disclosure has been sought from the 2nd defendant. In the circumstances, the court does not have a complete picture of what has happened to the said Sum. 45.Second, as mentioned above, on 16 December 2016, the court continued the D2 ex parte order subject to a variation that (1) the 2nd defendant be allowed to spend (1) HK$5,000 per week towards ordinary living expenses and HK$10,000 per week towards his ordinary and proper business expenses for a 12-week period; and (2) HK$150,000 on legal advice on representation. The allowance draws no distinction between funds subject to the proprietary or the Mareva injunction. I am informed by Mr Lau (who did not appear at that hearing) that no issue was raised by the plaintiff’s legal representatives as to the constraints generally imposed on the release of funds that are subject to a proprietary claim to pay for legal costs. See eg Wharf Limited & Ors v Lau Yuen How & Ors (unreported) HCA 1535/2008, 21 January 2010 at §13, applying Ostrich Farming Corporation Ltd v Ketchell [1997] EWCA Civ 2953 (10 December 1997). 46.On 16 December 2016, being the same day as the first return date hearing, the 2nd defendant filed his affirmation disclosing the location and value of his assets in Hong Kong. It does not appear from the continuation order that the affirmation was before the court at the hearing. The totality of his assets (of an individual value in excess of HK$20,000) in Hong Kong is said to be:
47.At the hearing, I inquired with Ms Lau as to when the motorcar was purchased and when the deposit was paid for the property in Tai Po. Ms Lau informed the court, upon instructions, that both were acquired prior to the receipt, and paid for without the use, of any of the monies traceable to the said Sum. 48.I was also informed by Ms Lau that pursuant to the variation, the 2nd defendant was in the process of obtaining the release from BEA of the balance of HK$148,565.11 in his account to pay for his legal costs and living and business expenses (as he was entitled to do under the variation order, notwithstanding that the balance or the bulk of it was subject to the original proprietary injunction). 49.Assuming that the 2nd defendant’s disclosure of his assets is true and correct, that would leave the share of East Winner (the value of which is unknown), the motorcar and the interest in the Tai Po property as the only assets of the 2nd defendant in Hong Kong restrained by the D2 ex parte injunction. G. Credibility and cogency of the 2nd defendant’s evidence 50.The present case is somewhat different from ordinary commercial disputes where the court would normally have to decide between two (or more) competing versions of events. Here, the plaintiff seeks to trace and recover monies it has paid to the 1st defendant due to an apparent fraud and which have subsequently been transferred onwards to the 2nd and 3rd defendants. The plaintiff has no personal knowledge of the circumstances or the reasons why the monies were transferred to the 2nd and 3rd defendants, or whether the 2nd to 4th defendants are participants in the apparent fraud or are in fact innocent parties. These are matters known only to the defendants themselves. At this stage, the court can only look at the 2nd defendant’s version of events and form a broad brush view as its credibility based on inherent probabilities and whether it is supported by the contemporaneous materials which have been (or which should have been) disclosed by the 2nd defendant. 51.The premise of the 2nd defendant’s case is that he is a legitimate businessperson who has been operating a legitimate business for a number of years, and the transactions between him and the 1st defendant were, at least to the best of his own knowledge, genuine transactions entered into in the course of that business. 52.As mentioned above, it is the 2nd defendant’s evidence that he has been conducting his present business of buying and selling second-hand mobile phones and parts in partnership with one “Mr Zhen” since 2012. The sole proprietorship was also established in 2015 for that purpose. 53.However, as submitted by Mr Lau, the supporting evidence in this regard is sparse:
54.As mentioned above, in support of the transactions that the 2nd defendant is said to have entered into with his suppliers and the 1st defendant, the 2nd defendant has exhibited a number of purchase orders, receipts and delivery notes, including, in particular, documentation relating to the 8th and 9th orders. 55.In his submissions, Mr Lau made a number of criticisms as to the credibility of the documentation produced by the 2nd defendant. I bear in mind that commercial men are not lawyers and do not create and retain perfect documentation in anticipation of future litigation. Moreover, commercial practice in the Mainland (where the 2nd defendant’s suppliers appear to be based) may be different from that in Hong Kong. That said, I must say that there is some force to Mr Lau’s criticisms:
56.I consider next how the 2nd defendant dealt with the funds that he received, whether directly or indirectly, from the 1st defendant. This would undoubtedly have a bearing, at least at this stage, on the credibility of the 2nd defendant’s case that he received them in good faith and in the normal course of business. 57.From the records of D2’s BEA Account and the 2nd defendant’s own evidence, it can be seen that:
58.It can be seen, therefore, that other than HK$2,688,000, which was transferred directly to third parties, the bulk of the HK$11,166,063 received from the 1st defendant was in fact transferred to the 2nd defendant himself outside of the jurisdiction in the Mainland and in Canada. 59.As to the funds remitted to himself in the Mainland, the 2nd defendant said in his affirmation that they were being used for ordinary living and business expenses. Other than the HK$2,000,000 received through the 3rd defendant that was said to have been used to make partial payment to his suppliers to fill the 8th and 9th orders, no particulars have been given as to what has happened to the other sums. From the receipts purportedly issued by Mr Li and Mr Xiong, some RMB 6.1 million had been paid to Mr Li and Mr Xiong on or after 15 November 2016. It is possible that the funds transferred to the Mainland were used to make those payments, although the 2nd defendant does not say so expressly. In any event, the inadequacies of these receipts have already been discussed above. 60.In the absence of a convincing explanation, the hasty withdrawals and transfers out of D2’s BEA Account inevitably gives the impression of an attempt to dissipate the funds received from the 1st defendant, or at least to frustrate their recovery by moving them out of the jurisdiction. The coincidental timing of the transfer of CAD 300,000 to D2’s Canadian Account, being the first business day after the D1 ex parte order was made, only adds to that impression, notwithstanding the reasons given by the 2nd defendant for the transfer and his evidence that he was unaware of the D1 ex parte order at the time. 61.I have considered the 2nd defendant’s explanation that he needed cash in RMB in the Mainland to pay his suppliers and operating costs and that there was no point for him to keep much cash in Hong Kong, other than living expenses. Although the defendant said he travelled frequently between Hong Kong, Shenzhen, Canada, the United States and Japan for his business, and that he grew up in Canada and has family members living in Canada, it is not in dispute that he is now based in Hong Kong. In the annual returns of East Winner and in the account opening form of his BEA account, he gave his residential address as a flat in Mei Foo Sun Chuen. He also owns a motorcar in Hong Kong and has paid the deposit for a residential unit in Tai Po. And yet, other than his asset disclosure affirmation, which clearly does not represent the whole of his assets, his financial position is opaque. When viewed against the speed in which the monies from the 1st defendant have been moved out of the jurisdiction, plainly there are serious questions that need to be answered. 62.As to the transfers totalling HK$2,688,000 to third parties purportedly on the instructions of the 2nd defendant’s suppliers, other than short excerpts of WeChat conversations, which do not contain any context or information as to the underlying transactions, there is no explanation at all as to the basis of those payments. The true nature and purpose of those payments will have to be investigated at the trial. 63.Finally, as to the 2nd defendant’s conversations with Mr Ma of the 1st defendant on WeChat and on the telephone, which seem to suggest that there was no wrongdoing on the part of either the 1st and 2nd defendants, in the light of all the circumstances, they plainly cannot be taken at face value. H. Proprietary Injunction 64.Ms Lau does not dispute that if the sums received by the 2nd defendant from the 1st defendant were the proceeds of an apparent fraud, the plaintiff would be entitled to claim in equity the sums and/or their proceeds in the hands of the 2nd defendant, subject to any defence of bona fide purchaser or recipient for value without notice. 65.Ms Lau submitted (although I do not understand her to have strongly pressed the point), however, that the 2nd defendant has by his evidence established a sufficiently strong defence bona fide recipient for value without notice that there is not even a serious issue to be tried in respect of the plaintiff’s claim. Ms Lau acknowledges that the hurdle for the 2nd defendant is high: as mentioned above, the 2nd defendant must be able to show that the plaintiff’s claim is liable to be struck out. Despite Ms Lau’s valiant submission, it is obvious that there is at the very least a serious issue to be tried. 66.On the question of balance of convenience, as mentioned above, the balance will generally lie in favour of preserving assets subject to a trust claim. There are no strong countervailing factors against such preservation in this case. The balance therefore is firmly in favour of maintaining the proprietary injunction. 67.In the circumstances, the proprietary injunction is to be continued until judgment or further order, and I so order. For the avoidance of doubt, the injunction includes specifically:
68.In his Defence, the 2nd defendant contended that the plaintiff’s proprietary claim, if any, would extend only to CAD 290,000 out of the CAD 300,000 since the latter sum comprised a sum of CAD 10,000 originally in the Canadian dollar savings sub-account. Mr Lau, however, relies upon the principle that where there is a mixture of funds of an innocent contributor with those of the wrongdoer, a punitive presumption applies against the wrongdoer contributor with the effect that the court will aim to preserve the value contributed by the innocent contributor to the mixed fund at the expense of the value contributed by the wrongdoer. The result is that the innocent contributor can trace into whatever was purchased with the first withdrawals from the mixed bank account or the remaining monies, whichever is in his best interests. See eg Snell’s Equity 33rd Edition, at §§30-056 to 057. 69.Ms Lau does not dispute the principle above. However, she points out that from the bank statements of D2’s BEA Account, it is clear there was in fact a pre-existing balance of CAD 12,011 in the Canadian dollar savings sub-account prior to the transfer of CAD 290,000 into that sub-account on 21 November 2016. Hence, she argues, there can be no presumption that the CAD 10,000 out of the CAD 300,000 was traceable to the said Sum. 70.In my view, although the savings account in the 2nd defendant’s BEA Account comprised sub-accounts with different currencies, there is at least a serious issue to be tried that the sub-accounts together constituted one balance in the savings account. This is supported by the presentation of the bank statements, which appear to consolidate all the different currencies in the savings sub-accounts into one account balance. If this were correct, then the punitive presumption contended by Mr Lau may nonetheless be applicable, notwithstanding that part of the balance in the savings account was denominated in Canadian dollars prior to the receipt of the transfers from the 1st defendant. It is at least arguable, therefore, that a presumption should operate such that the whole of the CAD 300,000 is traceable to the said Sum. I. Mareva Injunction 71.There is no serious dispute between the parties, at least for present purposes, as to the legal principles underlying the plaintiff’s claims of knowing receipt, dishonest assistance, unjust enrichment and conspiracy. Rather, the focus of Ms Lau’s submissions was that, having regard to the 2nd defendant’s defence and the evidence now before the court, the plaintiff is unable to establish on the facts a good arguable case for these claims. 72.Ms Lau submitted, correctly of course, that receipt and dealing with the funds from the 1st defendant are by themselves insufficient to found liability for knowing receipt, dishonest assistance and conspiracy using unlawful means, and that the plaintiff must be able to show at least a good arguable case that the 2nd defendant had the requisite knowledge and state of mind. 73.She further submitted that that the plaintiff’s case on these claims is founded primarily upon inferences to be drawn from the transfers into and out of D2’s BEA Account and the timing of those transfers. There is no direct evidence showing that the 2nd defendant had participated in or had knowledge of any fraudulent scheme. She also reminded the court that:
74.The principles above on assessing probabilities and the drawing of inferences in cases where serious misconduct is alleged (as in the present case) are of course well established. However, these principles must be viewed in the context of deciding whether there is a good arguable case at the interlocutory stage. The court is not making any findings of fact, but merely taking a view as to whether, on the materials now before the court, a case has been shown that is “…barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success”. That said, in taking such a view, the court will take into account all of the circumstances, including the inherent improbabilities of serious misconduct. 75.I accept for present purposes that the 2nd defendant has presented an arguable defence to the plaintiff’s claims. However, for the reasons I have set out above, the 2nd defendant’s evidence is far from conclusive, and indeed raises a number of questions that will have to be investigated at the trial. I am of the firm view that the plaintiff has maintained a good arguable case for its claims of knowing receipt, dishonest assistance and conspiracy using unlawful mean against the 2nd defendant, including the inferences to be drawn as to the requisite knowledge and state of mind of the 2nd defendant. It follows that the plaintiff has also demonstrated a good arguable case on its claim of unjust enrichment. 76.Insofar as the risk of dissipation is concerned, Ms Lau accepted that this would stand and fall with the court’s determination of the question of whether the 2nd defendant has a good arguable case that it is a bona fide purchaser in that he has simply been using funds in the ordinary course of business. I would put it this way: the same facts and circumstances that give rise to a good arguable case against the 2nd defendant for knowing receipt, dishonest assistance, and conspiracy, including in particular the hasty withdrawal and transfer of funds from D2’s BEA Account out of the jurisdiction, must also give rise to a real risk of dissipation. 77.I have also taken into consideration the balance of convenience, although in the context of a Mareva injunction, once a real risk of dissipation has been shown, the balance will normally weigh in favour of granting the injunction. In the present case, as mentioned above, the 2nd defendant’s assets that are subject to the Mareva injunction are in fact fairly limited. Moreover, on the 2nd defendant’s own evidence, he does not need to maintain much cash in Hong Kong. As to his complaint that the Mareva injunction would prevent him from selling his property in Tai Po, the plaintiff has indicated that it would not oppose any such sale, provided that the proceeds of sale are secured. 78.I also note that it is open to the 2nd defendant to apply for leave to repatriate some or all of the funds traceable to the said Sum that he had moved outside of the jurisdiction, including the CAD 300,000 in D2’s Canadian Account. Provided that those funds are then secured, the amount of the Mareva injunction can be correspondingly reduced to reflect those amounts. 79.The 2nd defendant further complains that the Mareva injunction has caused and will continue to cause him embarrassment, inconvenience and loss of business opportunities. That may be unavoidable, and if it eventually transpires after the trial that the injunction should not have been granted, the 2nd defendant may have recourse in the plaintiff’s cross-undertaking in damages. 80.In the circumstances, I am of the view that the Mareva injunction should be continued until judgment or further order, and I so order. 81.As to the costs, I consider that an appropriate order to be plaintiff’s costs in the cause (including any reserved costs), and I make an order nisi to that effect. 82.Last but not least, I thank both counsel for their helpful written and oral submissions.
Mr Kerby Lau, instructed by Dentons, for the plaintiff Ms Queenie Lau, instructed by Gall, for the 2nd defendant The 1st, 3rd and 4th defendants were not represented and did not appear
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