Read the full judgment text of HCA 1555/2018 on BabelCite. This Court of First Instance judgment was delivered on 23 January 2019 before Mr Recorder Eugene Fung SC.
Civil procedure – interlocutory injunction – Mareva injunction – proprietary injunction – continuation of ex parte injunction – ex parte application – duty of full and fair disclosure – material non-disclosure – good arguable case – tort of deceit – non-disclosure – dishonest assistance – conspiracy – negligence – unjust enrichment – constructive trust – balance of convenience – risk of dissipation – assets within jurisdiction – variation of Mareva injunction – fortification of cross-undertaking as to damages – costs – 67 Mainland-resident individual investors alleged to be victims of a bullion trading fraud scheme involving the defendant, a Hong Kong-licensed Chinese Gold and Silver Exchange Society member operating an internet gold trading platform, and Mutong, the defendant's Mainland agent – plaintiffs alleged Mutong used their deposited funds of US$13,147,992.99 to buy and immediately sell gold at a loss – whether ex parte Injunction restraining disposal of defendant's assets up to US$10,578,027.07 should be continued as a proprietary injunction – held no, plaintiffs adduced no evidence that the sum or its traceable proceeds was held by or under the control of the defendant, funds were admittedly mixed and untraceable – whether Mareva injunction should be continued – whether plaintiffs had a good arguable case in deceit – held no, pleaded case based on non-disclosure with no pleaded or established duty to disclose, and Armstrong v Jackson stockbroker analogy failed because plaintiffs characterised defendant as counterparty not agent – whether good arguable case in dishonest assistance – held no, mere status as counterparty and ability to set spreads did not amount to dishonesty absent rebuttal of standard market practice – whether good arguable case in conspiracy – held no, no specific evidence or particulars of the alleged combination or understanding – whether good arguable case in negligence – held yes, supported by affidavit evidence – whether good arguable case in unjust enrichment and constructive trust – held no, no good arguable proprietary claim – whether assets within jurisdiction – held yes, defendant had HK$26,166,675.09 in Hong Kong – whether balance of convenience favoured continuation – held no, no proprietary claim, defendant had legitimate ongoing business with over 2,500 customers, and plaintiffs resident outside Hong Kong made undertakings as to damages hard to enforce – whether real risk of dissipation – held no, no good arguable fraud case – whether material non-disclosures on ex parte application – held yes, the 1st non-disclosure (failure to disclose that Mutong was the plaintiffs' sole trading agent under the Account Services Agreements, with positive evidence suggesting the agreements did not affect the claim, making it deliberate) was particularly serious, the 2nd non-disclosure (failure to inquire into and disclose standard market practice as to counterparties and spreads) and the 3rd non-disclosure (failure to draw attention to absence of provision for ordinary and proper business expenses deviating from the standard form under Practice Direction 11.2) were also material; the 4th non-disclosure as to the 1st plaintiff's undertaking was not accepted – whether Injunction should be varied to allow defendant HK$2 million for legal advice and HK$140,000 per week for business expenses – held no, defendant failed to show no other assets available, and unchallenged evidence showed assets in the Mainland – whether cross-undertaking should be fortified in RMB 7.5 million – held no, defendant showed no good arguable case of loss and no intelligent estimate, and the amount was simply the value of Mainland properties – Injunction discharged, Continuation Summons dismissed, no substantive order on Variation Summons, costs of the Injunction and Continuation Summons to plaintiffs to defendant, 25% of costs of the Variation Summons to plaintiffs to defendant, liberty to defendant to apply for inquiry as to damages under the cross-undertaking.
Legal issues: Whether the Injunction should be continued as a proprietary injunction · Whether the plaintiffs have a good arguable case in deceit · Whether the plaintiffs have a good arguable case in dishonest assistance · Whether the plaintiffs have a good arguable case in conspiracy · Whether the plaintiffs have a good arguable case in negligence · Whether material non-disclosures were made on the ex parte application · Whether the Injunction should be varied to allow the defendant to meet expenses · Whether the cross-undertaking as to damages should be fortified
Outcome: The Injunction was discharged and the Continuation Summons was dismissed on grounds including material non-disclosure. No substantive order was made on the Variation Summons except for costs.
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