Predicine Holdings Ltd v. Bianchi (Hong Kong) Ltd and Others

HCA 1195/2020

[2021] HKCFI 123

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1195 OF 2020

________________________

________________

Before: Hon Coleman J in Chambers (Open to Public)

Date of Hearing: 14 January 2021

Date of Decision: 18 January 2021

______________

D E C I S I O N

______________

A. Introduction

1.The plaintiff (“P”) bases its claim on the allegation that it is the victim of an email fraud (“Fraud”).  As a result of fraudulent email instructions – given by fraudsters in place of, and impersonating, the real intended recipients of the funds – on 7 July 2020 P transferred US$1,333,609.23 to the HSBC bank account of the 1^st defendant (“D1”), as the ‘first-tier recipient’.

2.Subsequently, albeit broken down into four tranches, on 9 July 2020 D1 transferred a total of US$1,289,250 into the Standard Chartered Bank (“SCB”) bank account of the 2^nd defendant (“D2”) as ‘second-tier recipient’.  Insofar as it may be relevant later, it can be noted here that, immediately before the receipt of those four tranches, the balance in the account stood at US$521,685.04.

3.The 3^rd defendant (“D3”) is a ‘third-tier recipient’.  On 9 July 2020, the same day that D2 received the funds from D1, D2 transferred various sums totalling US$2,111,788 out of its account.  Of that sum, four tranches totalling US$1,151,143 (“D3 Sum”) were transferred into D3’s bank account with the United Overseas Bank Ltd (“UOB”) in Singapore.

4.Starting on 17 July 2020, P applied for and obtained various forms of injunctive relief, and disclosure orders.  The original orders were made against D1 and D2.  Though it will be necessary to consider the precise terms and effects of the orders as granted, P says it applied for and obtained both proprietary and Mareva injunctions. Subsequently, disclosure orders were made against D1 and D2, and bankers’ books orders were made against HSBC and SCB.

5.With the benefit of the disclosure obtained, on 25 August 2020 P obtained an ex parte worldwide Mareva injunction against D3, and it says also a proprietary injunction to freeze D3’s UOB bank account.  (At the time, D3 was an intended party, but it was subsequently added as a party and leave to serve D3 out of the jurisdiction was granted.)  The ancillary disclosure orders sought against D3, as to its assets and the details and activity in D3’s UOB bank account, were adjourned to further argument.

6.Neither D1 nor D2 has entered any appearance or taken any part in these proceedings.  Therefore, neither of them has raised any alleged defence to the claim, or attempted to challenge in any way the various orders made against them.

7.The current contest is between P and D3 only.  P seeks the continuation of the worldwide Mareva injunction and the proprietary injunction, as well as the ancillary Mareva disclosure of assets order.  P also seeks a disclosure order relating to the UOB bank account records and statements for tracing purposes.  The paragraph of the summons which sought a bankers’ books order against UOB was not pursued (and was withdrawn by previous order).

8.D3 opposes those applications, including on the two bases that (1) it was a bona fide purchaser for value without notice of the Fraud in respect of the D3 Sum (“BFP Defence”), and (2) that it has changed its position in good faith (“COP Defence”).

9.The Statement of Claim identifies that P relies on causes of action against D3 in (1) unjust enrichment; (2) dishonest assistance; (3) knowing receipt; and (4) a trust claim.  D3 has filed a Defence to the Statement of Claim, setting out its BFP Defence and its COP Defence, and identifying that it received the D3 Sum as partial payment for a legitimate commercial sale in the ordinary course of its business, the sale being of vegetable fat for industrial use made to a long-term commercial contracting partner in Nigeria, namely Givanas Nigeria Ltd (“GNL”).

10.P relies on the two affidavits of (Jessie) Qin Wang, its CFO, and three affirmations of Wong Yin Yee, an associate solicitor acting for P.  D3 relies on the only affirmation filed for it, being that of Yeong Kexiong Samuel, a director of D3 since 14 June 2018.

11.In that context, the following issues have been identified as requiring determination at this hearing:

(1)  Should there be a continuation of the proprietary injunction?

(2)  Independently, should there be a continuation of the worldwide Mareva injunction (and if so what should be the sum frozen)?

(3)  Should there be an ancillary disclosure order made against D3, requiring D3 to disclose its assets whether in or outside Hong Kong?

(4)  Should there be an order for disclosure of D3’s UOB bank account records and statements?

12.P was represented at the hearing by Counsel, Mr Felix Ng.  D3 was represented at the hearing by Counsel, Mr Byron Chiu.  Both Counsel filed prior written skeleton arguments.

B.     Form of Existing Order

13.A point arises on the form of the existing order granting injunctive relief in favour of P against D3.

14.The first order made against D3, before it was formally added as a party, was upon the ex parte application made by P to K Yeung J on 25 August 2020.  In Mr Ng’s skeleton submissions filed for the purposes of that application, he made reference to an ex parte summons of the same date by which P was (1) applying for a worldwide Mareva injunction against D3 up to the value of US$1,333,609.23, and also (2) seeking a proprietary injunction to freeze D3’s UOB account.

15.The skeleton argument also indicated that the action was commenced to assert a proprietary claim over the defrauded sum and traceable assets against, as well is to recover personal damages from, each of the three defendants.  Having set out the principles and submissions in support of a Mareva injunction, Mr Ng also identified the further or alternative argument that P was entitled to a proprietary injunction specifically to freeze D3’s UOB account.  The skeleton said that on the basis of the analysis provided “no withdrawals should be allowed to be made from those two accounts [apparently intended to include reference to D3’s UOB account] during the subsistence of the injunction order”.

16.On the hearing of the return date on 4 September 2020, also before K Yeung J, Mr Ng’s skeleton submissions filed for that occasion identified that the Judge had previously granted both an ex parte Mareva injunction and an ex parte proprietary injunction.  Mr Chiu was present and represented D3 at that hearing (though he, and those instructing him, had only recently been instructed).  Nevertheless, it seems that no one at the hearing – neither the advocates nor the Judge – suggested that a proprietary injunction had not previously been granted.

17.At the hearing on 4 September 2020, K Yeung J made an order continuing his previous order, albeit apparently only until the full inter partes substantive hearing of the continuation summons dated 27 August 2020 might be heard.  (It is that substantive hearing with which this present hearing is concerned).

18.The sealed order drawn up to reflect the order made on 4 September 2020 was effectively simply a duplicate of the ex parte order.  For example, its preamble referred to the making of an ex parte application on 25 August 2020, and the order was stated to remain in force up to and including 4 September 2020, and the order was even dated 25 August 2020.  That error was picked up by an amendment made on 11 September 2020, re-dating the order to 4 September 2020 (as well as making a minor amendment to make clear that the exceptions to the order were to permit D3 weekly spending figures).  But there was still no reference to the holding of the first inter partes hearing, or to the fact that whatever order was made was apparently without prejudice to the full inter partes hearing which would be fixed and heard subsequently.  Further, though the Judge gave specific directions for a timetable for evidence, that does not seem to have been reduced into a sealed order.

19.That approach seems to me to be at least bad practice.  The order which ought to have been drawn up by P’s solicitors and sealed following the 4 September 2020 hearing either (a) should have simply stated that the Judge continued the ex parte order (as may have been varied in any way) pending full inter partes argument, and recording any directions for the filing of evidence in advance of that argument, but otherwise adjourning the inter partes summons to the argument to be fixed, or (b) should have set out in full the terms of the order continued, including properly identifying the duration of the order and removing from what was stated in the sealed ex parte order any ‘spent’ items, as well as adding any new features which were not present in the ex parte order.

20.In any event, the actual terms of the operational (and, indeed, other) parts of both the ex parte order and the order sealed following the 4 September 2020 hearing follow the standard form of Mareva injunction order provided for in Practice Direction 11.2. In so far as is material for present purposes, those terms were, as follows (bold in original):

1.   Restriction on disposal of assets

(1)   The Intended 3^rd Defendant must not –

(a)  Remove from Hong Kong any of his assets which are within Hong Kong, whether in his own name or not, and whether solely or jointly owned, up to the value of the value of US$1,333,609.23 or its Hong Kong Dollars equivalent, or

(b)  in any way dispose of or deal with or diminish the value of any of his assets, whether within or outside Hong Kong, whether in his own name or not, and whether solely or jointly owned up to the same value.  This prohibition includes the following assets in particular:

any money in [D3’s UOB Bank Account])

(2)   If the total unencumbered value of the Intended 3^rd Defendant’s assets in Hong Kong exceeds the value of US$1,333,609.23 or its Hong Kong Dollars equivalent, the Intended 3^rd Defendant may remove any of those assets from Hong Kong or may dispose of or deal with them, other than the D3’s UOB Bank Account, so long as the total unencumbered value of his assets still in Hong Kong remains above the value of US$1,333,609.23 or its Hong Kong Dollars equivalent.

(3)   If the total unencumbered value of the Intended 3^rd Defendant’s assets in Hong Kong does not exceed the value of US$1,333,609.23 or its Hong Kong Dollars equivalent, the Intended 3^rd Defendant must not remove any of those assets from Hong Kong and must not dispose of or deal with any of them, but if he has other assets outside Hong Kong the Intended 3^rd Defendant may dispose of or deal with those assets so long as the total unencumbered value of all his assets, whether in or outside Hong Kong, remains above US$1,333,609.23 or its Hong Kong Dollars equivalent

…

EXCEPTIONS TO THIS ORDER

(1)   This Order does not prohibit the Intended 3^rd Defendant from spending HK$50,000 [per week] towards his ordinary and proper business expenses, and also HK$50,000 [per week] on legal advice and representation.

(2)   This Order does not prohibit the Intended 3^rd Defendant from dealing with or disposing of any of his assets in the ordinary and proper course of business, but except in any way dealing with, diminishing the value, creating encumbrances or disposing of D3’s UOB Bank Account.

(3)   The Intended 3^rd Defendant may agree with the Plaintiff’s solicitors that the above spending limits should be increased or that this Order should be varied in any other respect, but any such agreement must be in writing.

(4)   This Order shall cease to have effect if the Intended 3^rd Defendant provides security by paying the sum of US$1,333,609.23 or its Hong Kong Dollars equivalent into court or makes provision for security in that sum by some other method agreed with the plaintiff’s solicitors or approved by the court.

21.I do not think that order properly identifies any proprietary injunction.  Rather, it is simply the form of a Mareva injunction, properly following the relevant Practice Direction (including the heading to the operative paragraph stating ‘Restriction on disposal of assets’).  Had it been a proprietary injunction, I would have expected it to have identified that fact by a clear heading, and to have identified with some precision the particular asset or assets over which the proprietary claim had been asserted, and that that asset or those assets are to be maintained (in some specified way or place) and not to be dealt with in any way as might defeat the proprietary claim.

22.On the other hand, there is no suggestion that K Yeung J intended – or stated that he intended – to grant the Mareva injunction but to refuse the proprietary injunction.  Rather, though I have not seen any formal transcript of the ex parte hearing on 25 August 2020, what seems to have happened is that the Judge expressed himself satisfied that a case for an international proprietary/Mareva injunction against the intended defendant (D3) had been made out.  Further, though I have not seen any formal transcript of the hearing on 4 September 2020, what seems to have happened then is that the Judge simply ordered the ex parte injunction as varied to continue until disposition of the inter partes summons, or further order (and he also gave directions for filing of evidence).

23.This is not just some dry point about drafting. In this case, as in other potential cases, matters of real substance are involved.  First, an injunction is a serious matter, potentially (usually) constituting a serious interference with a defendant’s rights otherwise to deal with property as he sees fit.  Any restriction needs to be clear and precise, so that the defendant knows with clarity and precision what he can and cannot do.  Secondly, where two forms of restriction may have two different effects and consequences, it seems to me to be necessary for those forms of restriction to be separately identified.  Thirdly, there is a difference between restraining a person from dealing with his own property and restraining that person from dealing with property said to belong to someone else.  A Mareva injunction restrains a defendant from dealing with his own assets.  A proprietary injunction restrains a defendant from dealing with assets said to be in his possession, but which are claimed to belong to the plaintiff. Fourthly, where the proprietary claim relates to money said to have been stolen from a plaintiff, that may be relevant both to whether a proprietary injunction is necessary and appropriate (see below), and, if so, as to its precise terms.

24.Further, in this particular case, the question has arisen as to whether D3 has acted in breach of K Yeung J’s order, and that question arises specifically because of the way in which the order has been drafted and sealed.  As will be referred to again below, following the 4 September 2020 hearing, and where it had previously dealt with the D3 Sum by expending it from its UOB account, on 8 September 2020 D3 chose to pay a sum of money into the account specifically so as to restore its available balance to a figure in excess of the US$1,333,609.23 ‘ceiling figure’ in the Mareva order.  Thereafter, D3 has continued to operate/use the UOB account, by various making deposits and withdrawals, albeit whilst maintaining a minimum available balance in excess of that figure.

25.During the hearing, Mr Chiu handed up (and provided to Mr Ng) a redacted copy of a bank statement for D3’s UOB bank account for the period of the month of September 2020.  He did so without prejudice to his primary argument that there is no obligation upon D3 to provide any financial disclosure, and that no order should be made against D3 requiring it to provide any such financial disclosure.

26.Though heavily redacted except for a few entries, the document identifies the available balance – apparently as at the printout date of 12 January 2021 – as US$1,412,327.41, against a ledger balance of US$2,745,936.64.  The difference between those figures is US$1,333,609.23 which is described as “Earmark” (and is clearly the amount frozen by the order).  It seems UOB will not permit any use of the earmarked amount.  The document also identifies (a) a significant number of withdrawal and deposit transactions in the account between 1 and 8 September 2020 (but all detail is redacted); (b) a deposit of US$1,400,000 on 8 September 2020, bringing the ledger balance immediately after the transfer to the sum of US$2,097,174.41 (from which it can be deduced that, immediately before that payment into the account, its balance stood at US$697,174.41); (c) a significant number of withdrawal and deposit transactions after that transfer until and including 30 September 2020 (but all detail is redacted); and (d) a closing ledger balance as at 30 September 2020 in the sum of US$2,625,283.52.

27.Though no further bank statements, redacted or otherwise, have been provided for any period since 30 September 2020, the clear inference is that D3 has continued to operate the bank account, albeit that UOB has apparently ‘earmarked’ (which I presume to mean that it has ring-fenced) the frozen sum.  Mr Chiu acknowledged that fact, and made clear that on D3’s understanding of the intention and effect of the order currently in place, D3 was perfectly entitled to continue to operate its UOB account in that way, so long as at all times the available balance was maintained at or above the frozen sum.

28.Mr Ng says the payment into D3’s UOB account on 8 September 2020 and the continued operation by D3 of D3’s UOB account in that way is a breach of the order, because it constitutes dealing with the account.  He refers in particular to sub-paragraph 1(1)(b) of the order, including the second part of that sub-paragraph which refers specifically to the monies in D3’s UOB account.  Mr Ng wishes to rely on that alleged breach as being one of the circumstances from which it would be appropriate to infer that there is a real risk of dissipation of assets.  He also complains that, with each deposit into and withdrawal from D3’s UOB account, the proprietary tracing exercise may be rendered increasingly difficult.

29.I acknowledge the potential force in that last point.  But that seems to me to identify why clear and precise orders need to be sought and obtained.  In my view, the wording of the order currently in place is only a Mareva injunction.  It operates to prevent dealing with, disposing of, or diminishing assets.  Those assets include the money in D3’s UOB account, but only up to the amount of the sum frozen.  Further, the account is not itself an “asset”, but is simply the location where money assets are held.  Therefore, once D3 put funds into its UOB account to bring the available balance above the frozen sum, and as long as the available balance is always maintained at or above that frozen sum, dealing with its money assets held in the account above that figure seems to me to be something which is plainly permitted by the order.

30.Further, though it may be correct that paying money into D3’s UOB account potentially confuses any proprietary tracing exercise, I do not think such a payment into the account was a breach of the order.  It is certainly an unusual thing to have happened, and Mr Chiu relies on it as demonstrating D3’s good faith and the lack of any risk of dissipation.  But whether or not that submission is accepted, the deposit made on 8 September 2020 increased the funds actually ‘caught’ by the Mareva injunction to the full amount of the sum intended to be frozen.  As a matter of practice, it may not have been the best way of setting aside or ring-fencing that amount, but it can be seen as a possible alternative to that provided for in the order itself, namely paying the sum of money into court.

31.Depending on the bank in any case, there may also be practical difficulties in continuing to operate a ‘frozen’ account.  As I understand it, in the face of Mareva injunctions, many banks as a practical matter treat the account as a whole as being frozen, rather than treating a particular sum in the account as being frozen (with any excess amount in the account ‘open’ for other dealings).  Therefore, on a practical basis, it would seem preferable that if part of the funds in an account are to be treated as frozen, or earmarked, it would be ‘cleaner’ if that part and the remainder were in some way separated for operation purposes.  One obvious way would be to take advantage of the express provisions of the standard Mareva injunction order which provides for the injunction to be discharged if the sum frozen is paid into court.

32.I note that there is a potential difference between what happened on and after 8 September 2020, and what happened in the period between D3 being given notice of the injunction order made on 25 August 2020 (as continued on 4 September 2020) and 8 September 2020.  In that period, there is a much stronger argument that the operation of the account was in breach of the order – at least for any part of that period during which the available balance was less than the frozen sum (as must have been the case for at least part of the period precisely because the payment made into the account was to take the balance above that sum).

33.An added ‘wrinkle’ in this case is that the inter partes summons dated 27 August 2020, with which I am now dealing, on its face merely asks for the worldwide Mareva injunction order made by K Yeung J on 25 August 2020 to be continued until trial or further order.  There is no reference to the making of, or the intended continuation of, any proprietary injunction.

34.Nevertheless, where no one could have misunderstood that it was always P’s intention to have applied for both a Mareva injunction and a proprietary injunction, and where the written and oral arguments have addressed both forms of injunction, it seems to me that I can and should proceed on the basis that (at least now) P is making application for both forms of injunction to be continued and/or put in place until trial or further order.

35.If I am persuaded that it is appropriate to grant a proprietary injunction, I will require the terms of that injunction to be separately and distinctly set out in the form of the order to be sealed (whether the Mareva injunction is also continued or not).

36.I would also point out that the problems relating to the form of the order, in failing clearly to identify a proprietary injunction, also seem to apply to the orders obtained against D1 and D2.  I leave it to P to decide what action, if any, to take in consequence of that point.

C.     Further Factual Matters

37.It is helpful at this point to set out what the evidence now before the court does show, and what it does not show.

38.There is strong evidence that the payment made by P to D1 on 7 July 2020 was the result of the Fraud.  There is also a strong inference to be drawn that the onward transfer of funds to D2 on 9 July 2020, in four separate amounts but on the same date, were part of and/or to assist or facilitate the Fraud.  P had no prior dealings with either of D1 or D2 and there is no suggestion as to any legitimate purpose for those transfers.

39.But the further onward transfer of funds comprising the D3 Sum to D3 on 9 July 2020 requires some further consideration, including of the prior context.

40.D3 is a family business, which trades in vegetable oils and fats (amongst other things).  It is incorporated in, and trades from, Singapore.  It says it has a global distribution network, and charges for its traded product only in US Dollars.  It says it has developed a strong business relationship with the Givanas Group (of which GNL is a part) and that, from around 2018, that business came to include the oil and fat business.

41.The way in which it is put in the evidence apparently suggests that there was a prior business relationship before 2018, as is also suggested by the assertion that D3 has built a very strong relationship with the Givanas Group “over the years” and that GNL is considered one of its “long term business partners” (but see below).  Indeed, it is said that it is on the basis of the “prior dealings with the Givanas Group in such large volumes and on regular basis” that D3 does not require deposits for its sales to GNL (but also see below).

42.D3 says it shipped goods to Nigeria to the value of about US$9 million in 2019 and that GNL took up an approximate 60% of the shipment.  It also says that, usually at the beginning of the year, it would discuss with GNL the expected annual volume of the fat required to be purchased and to work out the schedule of delivery ahead of time.  No document is produced to evidence that assertion.

43.D3 says that the relevant transfers of the D3 Sum relate to 3 contracts – numbered 23/GA-I/20, 30/GA-I/20 and 43/GA-I/20 dated 15, 17 and 28 January 2020 respectively – under which GNL was to purchase from D3 a total of 2,200 metric tonnes of H vegetable fat for industrial use (“Goods”) at the total invoiced consideration of US$2,094,400. Subsequently, between 4 February 2020 and 3 March 2020, D3 issued four invoices to GNL for settlement of the total purchase price.  D3 relies on the fact that the sales contracts and the invoices which make reference to those contracts – copies of which have been exhibited – all pre-date the alleged Fraud.

44.D3 says it supplied and shipped the Goods between 4 February 2020 and 3 March 2020, and the Goods were duly received in Nigeria and discharged by GNL on or around 20 April 2020, 28 May 2020, 27 May 2020 and 14 July 2020 respectively.  Copies of the various shipping documentation, including bills of lading, have also been exhibited.  Whilst it is correct that not all of the various certificates and other documents required by the contracts has been exhibited, I do not think that really counts against D3 at this stage.

45.Indeed, there is nothing to suggest that the contracts, invoices and shipping documentation as has been produced are anything other than genuine.  Nor does P positively suggest to the contrary (though it may have reserved its position).

46.D3 says that, because it required customers to pay in US Dollars, GNL would arrange for its related entities or remitting agents or third-party paying agents to pay D3 on GNL’s behalf in US Dollars. But D3 has no knowledge nor notice about whatever arrangement is made between GNL and those who settle the invoices on its behalf.  Typically, D3 would not be given advance notice or forewarning of any particular payment coming in, and it would be only after the event that payment has been deposited that GNL would advise D3 of the exact amount remitted and the invoice or invoices for which the payment was intended.  Further, GNL would not typically inform D3 of the identity of the remitting agent or third-party paying agent, though D3 might subsequently find out from information on bank documents.  However, once GNL provided the correct amount of deposit, and D3 could match it with a deposit entry, D3 would know that GNL has made payment of the relevant invoice or invoices.

47.It can be pointed out here that no documentary support for the above arrangements has been provided by D3 in its evidence – even though the arrangements are stated to be “typical”.

48.As to the four sums comprising the D3 Sum, as the payment terms were 90 days from the bill of lading date, the four invoices were respectively due and payable between 6 May 2020 and 1 June 2020.  D3 has produced in evidence a WhatsApp exchange between its sales representative, Mr Dino Affandy, who is the point of contact vis-à-vis GNL and GNL’s representative, Mr Ali I Kandil. 

49.The exchange contains two audio clips dated 8 June 2020, which have been transcribed as follows:

(Audio clip at 9:52pm for 1 minute and 14 seconds)

“Hey Dino, how are you? Dino, I have … a third party that he sells Dollars and we buy from him to other suppliers …… hee has a million dollar that I can buy, for you. Can I use third party to pay you, or we should be waiting the central bank and the coronavirus? And things taking too much time.

I have the money; I have the Dollars. You want from me money, I want to pay you, and I have the solution. I can send you official letter saying from Givanas that, this guy is a … trader that we buy from him dollars because of the non-availability of dollar and …… the banks in Nigeria, we are forced to use him this time because we are offered you, and the dollar is not available or the dollar is scarce.

Just confirm, on the telex also it will be written reason of payment: … Vegetable fat, Givanas.

Please confirm so I can work on it another 1 million so at least you will be happy that I am pushing money.”

(Audio clip at 9:57pm for 15 seconds, in response to Mr. Affandy’s questions “Where is the 3^rd party from? Personal or company”)

“It is a company. Normally … it … it comes, … the accounts are … I think Shanghai accounts … the money comes from … Shanghai.”

50.The transcription is said to have been made “with the help of” D3’s Hong Kong solicitors, but the audio recording itself has not been exhibited.  Indeed, D3 has chosen to provide little context surrounding the screenshot of just one page of the message chain which contains the two audio clips.  Mr Yeong’s affirmation does not refer to most of the typed messages shown on the page, and focuses only on the two audio messages. But, on that page, it appears that the first voice message was simply preceded by a typed message from Mr Affandy asking “how are you”.  After the first voice message, Mr Affandy asked “where is the third party from?” and “personal or company?”.  After the second voice message, Mr Affandy asked “so from china ya?” and “shanghai”.  Mr Kandil’s response was “Yes”.  Mr Affandy then said “let me check with my singapore part and let you know the outcome”, to which Mr Kandil responded “Ok”.

51.There is no specific reference in any of the messages, typed or audio, referring to any particular shipment or contract or invoice.  No context is provided as to why the subject matter was brought up when it was (though it can be noted that the payments on the three contracts and four invoices were already past due).  Nor does the evidence put forward by D3 identify what happened next, and whether there was any discussion between Mr Affandy and his “singapore part”, and if so what that discussion was.  I confess that I would have expected to see that evidence.  For example, there is no suggestion that D3 followed up on Mr Kandil’s apparent offer to obtain an ‘official letter’ speaking to the propriety of using a trader for GNL’s purchase of US Dollars, nor to provide the confirmation specifically sought.

52.On 9 July 2020, D3 received the four sums comprising the total amount of the D3 Sum.  The four payments were: (1) US$320,165 (“Payment 1”); (2) US$313,039 (“Payment 2”); (3) US$305,783 (“Payment 3”); and US$212,774 (“Payment 4”) (totalling US$1,151,761).  D3 says that those sums/payments were sent to settle, and were applied to settle, the four invoices, as follows:

Invoice	Amount of the Invoice	Alleged application of funds
1st Invoice	US$431,200	US$122,295 out of Payment 1 (on the basis that a deposit of US$308,905 had already been paid)
2nd Invoice	US$431,200	US$197,870 out of Payment 1 + US$233,330 out of Payment 2
3rd Invoice	US$422,400	US$79,709 out of Payment 2 + US$305,783 out of Payment 3 + US$36,908 out of Payment 4
4th Invoice	US$809,600	US$175,866 out of Payment 4 (leaving a balance of US$633,734)
Total:	US$2,094,400	US$1,151,761

53.It is noteworthy that the four payments do not meet any of the four invoices directly, but instead the proceeds are said to have been provided and allocated in the rather convoluted manner set out in the table.  I do not agree with D3’s suggestion that it is a clear fact that payment was attributable to a specific invoice, tied to a particular sales contract.  The explanation from D3 as to how the funds are said to be allocated apparently heralds from the explanation later provided to D3 by GNL in a letter dated 2 September 2020.  If D3 has made any further enquiries of GNL as to why GNL chose to settle four separate invoices by making four separate payments all on the same day but which failed to match any one of the invoices, and which did not in fact settle the amounts outstanding, D3 has not informed the court of the result of those enquiries.

54.D3 has exhibited the letter to it dated 2 September 2020 from GNL.  The letter is given the subject heading “FX purchase for [D3]”, and the body of the letter includes the following:

Due to the Central bank of Nigeria (CBN) circular Number TED/FEM/FPC/GEN/01/010, and due to the scarcity of the USD in the Nigerian Market, we were obliged to use third parties to settle the outstanding with [D3].

Therefore, we did four payments from MINCHENG TRDG CO LTD as following:

[table of payments]

The Total amount of 1,151,761.00USD is covering the below invoices and Bills of lading:

[table identifying the purported allocation of payments across the various invoices/bills of lading]

Kindly, make sure not to return any funds as we already received the goods and sold it.  Moreover, we already paid the Naira equivalent of the 1,151,761 USD to the third party after receiving the confirmation from you that the funds have been received and credited in your account.

55.In passing, I note that the heading of the letter might suggest on its own that the US Dollars had been purchased by GNL for D3 (as its agenet).  However, in the context of the letter as a whole, it more likely means the US Dollars have been purchased by GNL to settle monies owed to D3.

56.In any event, it seems to me to be tolerably clear that this document was generated by, and for the purposes of, this litigation.  In D3’s evidence it is explained that a large volume of documents in the action were received at D3’s registered office on 31 August 2020. As D3 did not know either P, D1 or D2, and did not even know that P’s alleged claim related to the four sums comprising the D3 Sum, enquiries were made with Mr Affandy, who apparently tried to make enquiries with GNL’s people. That led to the receipt of the letter of 2 September 2020, from which D3 appreciated that P’s claim related to those payments.

57.There is real force in the point made on behalf of P that the letter smacks of an after-the-event rationalisation of the transfer of the funds comprising the D3 Sum.  I have already referred to the fact that D3 has given no evidence as to any subsequent enquiries or discussions with GNL, as to why the four invoices were purportedly paid (but in fact only part paid) in that rather convoluted way.  Nor has D3 chosen to inform the court as to how the remaining balance of US$633,734 was settled (if it was settled).

58.There is also some inconsistency in the facts that (a) D3 says that, because of its long and trusted relationship with GNL, it did not require GNL to make any deposits or payments in advance of shipment, and (b) the 1^st Invoice had apparently been the subject of the payment of a deposit.  I also note that no detail has been volunteered as to how that deposit was paid, or when – or, for that matter, why.  I do not agree with D3’s suggestion that the points relating to the deposit and the remaining balance are irrelevant.

59.D3 emphasises in its evidence that before it could express any agreement or disagreement to the mode of payment, GNL had already effected the transfers, which were dealt with by the banks even before D3 knew about the remittances.  Against the content of the WhatsApp messages, I do not think that is correct.  From those messages, it appears that Mr Affandy was going to take instructions from someone at D3 (presumably in Singapore) and, after doing so, to let Mr Kandil know whether the proposal was acceptable.  The suggestion that GNL might effect payment through someone in Shanghai was made on 8 June 2020.  There was a gap of one month before the four payments were transferred by D2 to D3 on 9 July 2020 (and, as it happens, from Hong Kong, and not Shanghai).  As I have already pointed out, there is simply no evidence produced by D3 to explain what occurred in response to Mr Affandy’s contact with Mr Kandil in that month.

60.There is also the unexplained gap which appears between D2’s transfer (on D3’s case, as paying agent for GNL) of four sums on 9 July 2020 and the identification of the reason for the transfer of those sums only as late as 2 September 2020, and apparently only in response to enquiries made of GNL as part of the response to D3 being served with the documents in these proceedings.  Unless D3 did not care as to whether or when it was being paid for the Goods it says it sold to GNL, when payment was on any view not made on time, it seems unlikely that D3 had not seen the four sums arrive in its UOB bank account from a source which it did not know, and from a source which it did not expect, and in amounts which apparently did not match any outstanding invoices.  It seems to me that it might properly be asked what D3 was doing in that roughly eight-week gap, and if it was doing nothing why it was doing nothing.

61.I acknowledge that Mr Chiu has pointed me to the part of Mr Yeong’s affirmation where he states that after receipt of the four sums in question, “we informed GNL that we had received the funds and requested GNL to confirm the invoice numbers to match” those sums.  No particulars are provided as to when or how GNL was informed of receipt of funds, or why D3 would have contacted GNL (as opposed to someone else) about the receipt of funds, and when GNL gave any response to the request for confirmation of the invoice numbers.  No document is provided other than the letter of 2 September 2020 from GNL.  It seems to me that the fair reading of the affirmation as a whole is that confirmation was requested in enquiries made by D3 after receiving notice of these proceedings and the orders made against it, and the confirmation was only provided by the 2 September 2020 letter (which does not refer to any previous occasion when the invoices were identified), and that letter was only sent after and in response to those enquiries made in light of the receipt by D3 of the documents and order.

62.But, in the context of the allegations of risk of dissipation, D3 wishes to emphasise that although, at the time of the ex parte injunction order granted against it, the balance then standing in D3’s UOB account was below the amount stated in the injunction order, D3 in fact paid the difference into the account, so that the account has not only a balance equivalent to, but in excess of the D3 Sum.

63.Originally, no documentary evidence has been exhibited in support of that statement.  However, via Mr Chiu’s skeleton argument, D3 offered to produce at the hearing a redacted statement to show the amount in the account remains above the relevant figure.  As already indicated, the redacted statement for September 2020 was handed up at the hearing.  But, no other financial or corporate information or document been provided by D3 about D3.  Instead, D3 has chosen to provide a PowerPoint presentation and printouts of the company website of the Givanas Group and GNL.

64.Such corporate information as there is about D3 in the evidence currently before the court has been provided by P.  It is found in the form of an online business profile, apparently maintained by the Accounting and Corporate Regulatory Authority of Singapore.  It identifies that:

(1)  D3 was registered on 1 February 2018 (which shows that D3 could not have had a very long-term business relationship with the Givinas Group or GNL by early 2020, or even mid-2020 – and which negates any suggestion of a relationship before 2018);

(2)  D3 had 50,000 issued ordinary shares of one US Dollar each, but none of them were paid up;

(3)  the sole shareholder of all 50,000 ordinary shares was another Singaporean company called Universal Wellbeing Pte Ltd (about which there is no other information);

(4)  there were two directors, being Julianto Lee (an Indonesian citizen, appointed 1 February 2018) and Mr Yeong (a Singaporean citizen, appointed 14 June 2018);

(5)  Mr Lee is also the secretary, having been appointed to that role also on 1 February 2018;

(6)  the last AGM was 29 June 2019;

(7)  the last annual return was 31 July 2019;

(8)  the date of the accounts laid at the last AGM was 31 December 2018;

(9)  no other information was updated between the last annual return and the date of the request for the business profile on 11 August 2020.

65.If the information has since been updated by any further filings, D3 has chosen or failed to provide it.

66.The matter giving rise to this claim has been reported to the Commercial Affairs Department (“CAD”) of the Singapore Police Force.  Via its Singapore solicitors on 1 September 2020, P has been informed that the CAD had sight of the bank records of D3, but discovered the funds were no longer in the account at that juncture, and so decided not to exercise the powers to freeze the account as of yet.  Further, CAD expressed the view that D3 “may in fact be a legitimate business” and that CAD “cannot be certain that this juncture that monies were not genuinely received”.  The CAD was to arrange interviews with officers of the company to further investigate the matter, and would keep P (or its solicitors) updated of developments.

67.By a further email dated 25 November 2020, the CAD confirmed that its investigations against D3 were still ongoing, and it was not able to comment on the matter.

68.D3 has not provided any evidence as to what enquiries or investigations were made by the CAD, or what responses were given by D3, or any other relevant information.

D.     Applicable Principles

D.1    Proprietary Injunctions

69.The ordinary American Cyanamid principles apply to an application for an interim injunction to protect a claim for trust property.  Therefore, the applicant must show (a) a serious issue to be tried on the merits of the claim, (b) the balance of convenience is in favour of granting the interlocutory injunction, and (c) it is just and convenient to grant the injunction.  It is settled that it is not necessary to show that irremediable damage would be caused absent the injunction, and courts readily find that the balance of convenience favours the preservation of the fund or trust assets pending trial.

70.A ‘serious issue to be tried’ means that the court should be satisfied that the claim is not frivolous or vexatious.  It is not a very difficult hurdle to overcome, and if the opposing party seeks to show that there is no serious issue to be tried, the threshold for doing so is high, as it amounts to demonstrating that the claim should be struck out.

71.Further, an applicant for a proprietary injunction does not need to show that there is a risk of dissipation (as would be necessary on an application for Mareva injunction relief).  Further, ordinarily, proprietary injunctions are not subject to the usual liberties and exceptions found in a Mareva injunction order.

72.However, a proprietary injunction will not be granted if a monetary award will be an adequate remedy for the plaintiff.  In particular, where the proprietary claim of a plaintiff is not to any specific real or personal property but to money, the plaintiff can be adequately compensated by a monetary award, unless there is evidence which calls into question the ability of the defendant to meet the award (for example its solvency), so that a proprietary injunction is not necessary or justified: see Essilor Manufacturing (Thailand) Co Ltd v G Doulatram and Sons (HK) Ltd [2021] HKCFI 30, at §§58-60.

73.To that point, I would add that a proprietary injunction may be considered necessary or justified where there is evidence which calls into question the willingness of the defendant to meet any award, or which sufficiently demonstrates an intention from which it can be inferred it would not meet an award.  In other words, though it is not necessary to show a real risk of dissipation for the purposes of obtaining a proprietary injunction, if such a risk is demonstrated it may be an additional factor which points in favour of the grant of a proprietary injunction.

D.2    Worldwide Mareva Injunctions

74.The principles applicable to an application for a worldwide Mareva injunction are well established.  An applicant for a Mareva injunction having extraterritorial effect needs to show that: (a) he has a good arguable case on his claim; (b) there are no or insufficient assets within Hong Kong to satisfy the claim, but there are assets outside the jurisdiction; and (c) there is a real risk of dissipation or secretion of those assets so as to render nugatory any judgment which the plaintiff may obtain.

75.The ‘good arguable case’ threshold is higher than that of ‘a serious issue to be tried’.  However, the existence of a good arguable defence does not necessarily negate a good arguable case.  It is possible, at the interlocutory stage, that both the claim and the defence seem more than barely capable of serious argument but not necessarily having a better than 50% chance of success.

76.As to what is meant by a ‘real risk of dissipation’, recent decisions have emphasised the need to scrutinise the evidence to see whether the alleged conduct of the defendant really points to the conclusion that assets may be dissipated.  In Universal Entertainment Corporation v Kazuo Okada [2020] HKCFI 1406 at §37, I identified the necessary considerations – which I apply in this case – as follows:

(1)  The applicant must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets.

(2)  In this context, dissipation means putting the assets out of reach of a judgment whether by concealment or transfer.  Whilst it may not always be necessary to demonstrate a nefarious intent, there must be something more than the mere ordinary or usual dealing with assets.

(3)  What must be threatened is unjustified dissipation.  It is not the purpose of a freezing order to provide security for the claim.  Rather, the purpose is to restrain a defendant from evading justice by disposing of, or concealing, assets otherwise than in the normal course of business, in a way which will have the effect of making the defendant judgment-proof.

(4)  The purpose of a freezing order is not to prevent a corporate defendant from dealing with its assets in the normal course of business, or to restrict an individual defendant from conducting his personal affairs in the way he has always conducted them, provided that such dealing and conduct are legitimate.

(5)  Where there is more than one respondent to the application, the risk of dissipation must be established separately against each respondent.

(6)  The burden is on the applicant to show a real risk of dissipation, which must be established by solid evidence.  Mere inference or generalised assertion is not sufficient.  Neither are unsupported or bare statements of fear, which will carry little weight.  Resort to mantras such as “low commercial reality” are of little value unless supported by solid evidence.

(7)  It is not enough to establish a sufficient risk of dissipation merely to establish a good arguable case that the defendant has been guilty of dishonesty.  It is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets may be dissipated.

(8)  It is also necessary to take into account whether there appears at the interlocutory stage to be properly arguable answers to the allegations of dishonesty.

(9)  An assessment of the risk of dissipation necessarily involves an evaluative and predictive judgment.  The evidential burden can be satisfied by drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk, including matters which point against such risk.

(10)  Where the court accepts that there is a good arguable case that a respondent has engaged in wrongdoing against the applicant relevant to the issue of dissipation, that holding will, or may, point powerfully in favour of a risk of dissipation.

(11)  Hence, where the dishonesty alleged is at the heart of the claim against the defendant (being either the substantive claim or the claim for an injunction), the court may find it able to draw the inference that the making out of that case to the necessary standard also establishes sufficiently the risk of dissipation of assets.  But the evidence of dishonesty must be relevant to the risk of dissipation and not simply the underlying claim.

(12)  Evidence of delay in making the application may be relevant in the assessment of risk of dissipation.  Delay after a defendant gained knowledge of a plaintiff’s claim can militate against the risk of dissipation because that defendant has already had the opportunity to dispose of assets, should he be inclined to do so.  But the lay of itself does not necessarily bark relief. The ultimate question remains whether the plaintiff can show a real risk of dissipation despite delay.

(13)  Each case is fact specific, and the relevant factors must be looked at cumulatively.

D.3    Unjust Enrichment

77.Unjust enrichment is a receipt-based cause of action, and it does not depend on proving fault on the part of the defendant.  Irrespective of whether the defendant still has the assets in question, the plaintiff may have a personal claim against the defendant, subject always to a defence of change of position.  The defendant’s personal accountability will not be dependent upon proof of fault or “unconscionable” conduct on his part; his accountability, in this regard, will be “strict”: see Criterion Properties plc v Stratford UK Properties LLC [2004] 1 WLR 1846 at §4.

78.As identified in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, at 104, a useful framework for approaching such claims involves asking for questions: (1) was the defendant enriched? (b) was the enrichment at the plaintiff’s expense? (c) was the enrichment unjust? and (d) are any of the defences applicable?

D.4    Knowing Receipt

79.Liability for knowing receipt is established by the plaintiff proving that the defendant had knowledge that he had received property impressed with a trust.  Where trust assets are misapplied, a recipient of the misapplied assets or their traceable proceeds may incur an equitable personal liability to the trust’s beneficiaries for knowing receipt. He will do so if he received the misapplied assets or their traceable proceeds beneficially, in circumstances where he cannot claim to take free of the beneficiaries’ interest, and if he knows that the assets have been transferred to him in breach of trust at the time he receives the assets, or if not, then at some later time whilst he still holds the assets or their traceable proceeds: see Goff & Jones ‘The Law of Unjust Enrichment’ 9^th Ed at §8-196.

80.There is a single test of knowledge for knowing receipt.  The recipient’s state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt.  In the context of a commercial transaction, constructive knowledge would only suffice if on the facts actually known to the defendant, a reasonable person would either have appreciated that the transfer was probably (as distinct from possibly) in breach of trust or would have made enquiries or sought advice which would have revealed the probability of breach of trust: see ‘Lewin on Trusts’ 20^th Ed at §§42-073 and 42-076; and DBS Bank (Hong Kong) Ltd v Tian Wen Quan (unreported, HCA 3228/2016, 12 October 2019) at §§21-22, as affirmed in the Court of Appeal [2018] HKCA 65.

D.5    Dishonest Assistance

81.To establish a claim in dishonest assistance, the plaintiff must prove the necessary mental element of dishonesty.  Nothing less will suffice.

82.The dishonest state of mind may consist in knowledge that the transaction is one in which he cannot honestly participate (for example, a misappropriation of other people’s money), or it may consist in suspicion combined with a conscious decision not to make any enquiries which might result in knowledge.  Although a dishonest state of mind is a substantive mental state, the standard by which the law determines whether it is dishonest is objective.  If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards: see Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37 at §10.

83.A person’s subjective states of mind – such as whether or not he suspected misappropriation and whether he consciously decided not to ask questions about the transactions in which he was assisting – are facts.  Since there is no window into another mind, the only way to form a view on such matters is to draw inferences from what the person knew, said and did, both then and later, including what the person might say in evidence.

84.As regards both dishonest assistance and knowing receipt, reference can be made to High Fashion Garments Co Ltd v Ng Siu Tong [2005] 4 HKC 8 at §62.  There, it was pointed out that the defendants in that case might not have known for sure that the person giving directions as to payments had misappropriated part of the payments, the defendants were not acting honestly in making split payments according to those directions without asking any questions.  As was pointed out there was simply no need to split the payments if they were paid to the legitimate payees, and it was not in accordance with ordinary course of business.

85.In the same paragraph, reference is also made to Heinl v Jyske Bank (Gibraltar) Ltd [1999] 1 Lloyd’s Rep Banking 511 at 535, where Colman J said:

If the accessory knows facts which fall short of constituting a breach of trust, but which lead him to believe that other facts exist which do amount to an actual breach of trust or will involve a future breach, although he cannot be certain that those facts exist, he will be judged to have been acting dishonestly if he renders assistance when in all the circumstances an honest man, having that knowledge, would not have done so, either at all or without making further enquiry or taking some other steps to satisfy himself that there was no breach of trust.

86.Whilst the High Fashions case was itself concerned with a defendant who made split payments, and the current case concerns a defendant (D3) who received split payments, nevertheless the applicable logic is the same.  Depending on the circumstances, the splitting of payments (whether they are made or received by a defendant) will often suggest that the payments are not being made in accordance with the ordinary course of business, and the person making or receiving such payments would not be acting honestly if he did not ask any questions.

87.In the context of money-laundering, the concealment of misapplied trust monies in that way can constitute assistance. Therefore, if a defendant acts as a conduit for another person to dissipate at least part of a defrauded sum, by way of providing money-laundering assistance, that can amount to dishonest assistance of that other person’s breach of trust: see, for example, the Heinl case at 523.

88.As to quantum, the plaintiff is entitled to claim its full loss, being the entirety of the trust assets handled.  The claim against the defendant who has provide the dishonest assistance to the breach of trust is not limited to the amount (if any) received by the person providing the dishonest assistance.  This is because the claim is one of accessory liability, and the requirement of dishonest assistance relates not to any loss or damage which may be suffered but to the breach of trust or fiduciary duty. In such a case, it is inappropriate to become involved in attempts to assess the precise causative significance of the dishonest assistance in respect of either the breach of trust or fiduciary duty or the resulting loss.  The relevant enquiry is simply as to what loss or damage resulted from the breach of trust or fiduciary duty which has been dishonestly assisted.

D.6    Trust Claim

89.The legal principles applicable to a trust claim (as regards the aspect of breach of a constructive trust) were identified in Guaranty Bank and Trust Company v ZZZIK Inc Ltd (unreported, HCA 1139/2016, 18 July 2016) at §§28-34 as follows.

90.When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient, so that the money is recoverable and traceable in equity.  Even if the recipient is not a party to the fraud, if his state of knowledge is such as to make it unconscionable for him to retain the money, the defrauded claimant has a tracing remedy, that is the property is held on constructive trust for the claimant.

91.Knowledge does not have to be acquired at the time of receipt, but can be acquired subsequently while the money is still in the recipient’s hands.  Therefore, the recipient may, for example, gain knowledge of the fraud from any injunction order, pleadings and other court documents served on that recipient.

92.Reference can also be made to Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 715-716, which emphasises that the mere receipt of monies, in ignorance of the mistake under which was paid, gives rise to no trust, but the retention of the monies after learning of the mistake may well have given rise to a constructive trust.  Further, stolen monies are traceable in equity.  But the proprietary interest which equity is enforcing in such circumstances arises under a constructive, not a resulting, trust.  Where property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient, and the property is recoverable and traceable in equity.  Specifically, monies stolen from a bank account can be traced in equity.

D.7    Bona Fide Purchaser for Value Without Notice

93.To establish this defence, the defendant needs to satisfy the court that: (1) there is a purchase for value; (2) of the legal state in property; (3) in good faith; (4) without notice; (5) at the time of the transfer of the legal estate: see Lewin on Trust 20^th Ed at 44-119.

94.The test of knowledge as developed in the context of knowing receipt – under which liability depends upon whether the defendant’s state of knowledge is such as to make it unconscionable for him to retain the property received (see above) – does not apply to the defence of purchase without notice.  Rather, notice may be classified into actual notice and constructive notice.  Actual notice includes actual knowledge, and also includes knowledge which would have been acquired but for wilfully shutting one’s eyes to the obvious, or wilfully and recklessly failing to make such enquiries as an honest and reasonable man would make: see Lewin at §§44-125, and 44-126.

95.Constructive notice is sufficient to negate the defence of bona fide purchaser for value without notice: see, for example, Falcon Private Bank Ltd v Borry Bernard (unreported, HCA 1934/2011, 9 July 2012).

D.8    Change of Position

96.The defence of change of position is potentially applicable to a claim in unjust enrichment.  In Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, the defence was described as being where the defendant’s position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively restitution in full.

97.The onus of pleading and proving the change of position defence is on the defendant, who must put forward ‘fairly and squarely’ so that its factual merits can be explored at trial, which requires a juicing evidence and giving disclosure in support of the defence.

98.The defence would also be negated if either (a) the defendant fails on a requirement of showing good faith, for the defendant must be an “innocent” defendant, or (b) he fails the ‘but for’ test of establishing that the claimed change in position is causally linked to the enrichment.

99.The degree of bad faith or fault needed to disqualify a defendant from the defence of change of position has been said not to be limited to dishonesty itself, but to be capable of embracing a failure to act in a commercially acceptable way, and sharp practice of the kind that falls short of outright dishonesty: see Niru Battery Manufacturing Co v Milestone Trading Ltd (No. 1) [2002] EWHC 1425 at §135 (later affirmed at [2003] EWCA Civ 1446).

100.The necessary link between the claimed change in position and the enrichment arises from the fact that the defence, in essence, gives rise to a balancing exercise.  The defence is established when (a) the injustice arising from calling upon an innocent defendant who has so changed his position to repay or to repay in full outweighs (b) the injustice of denying the plaintiff restitution.

E.     Alleged Material Non-Disclosure

101.Before turning to any further analysis, it is convenient to deal with D3’s allegations that P was guilty of material non-disclosure when making the ex parte application for injunctive relief.  D3’s allegation is made in its affirmation evidence, and I note that it has not been pursued in argument by Mr Chiu.  Nevertheless, I can deal with the point in brief.

102.The alleged material non-disclosure includes a failure to disclose that before D2’s SCB account received the four sums from D1, there was a balance of US$521,685.04 in D2’s SCB account.  Mr Ng’s is to point to the fact that the relevant bank balance was disclosed; he says it was disclosed “at the 144^th page of Exhibit “WYY-7” to Wong’s 4^th [affirmation]”. However, the ability to point (after the ex parte hearing) to a small line of typed figures on one page out of hundreds of pages of exhibits filed in support of an application (but not specifically identified in the body of the evidence or in submission at the ex parte hearing) does not seem to me to satisfy the requirement of disclosure.  Proper disclosure of material information requires proper identification of that information by specific reference in evidence and/or submission, so as to be reasonably sure that the matter has been brought to the attention of the court.

103.Similarly, it is no answer to an allegation of material non-disclosure to say that the matter not disclosed is a matter which is one in favour of the grant of an injunction.  Something is ‘material’ if it is relevant to the weighing exercise to be conducted by the court, in other words if it is relevant either to the grant or refusal of the application. Questions of materiality and of the weight to be given are questions for the court.  To assert that the matter which was not previously disclosed is something which militates in favour of the grant of the injunction is precisely to identify that it was material to the weighing exercise, and so ought to have been properly disclosed.

104.However, I do not think the alleged non-disclosure in this case is actually so material as to affect the exercise of my discretion now.  For the purposes of equitable tracing, the identity of the plaintiff’s money is not lost simply because it is put into an account which already had other funds in it.  If necessary, resort maybe had to accounting rules such as the ‘first-in-first-out’ rule.  The banking materials provided identify that the first four payments made out of D2’s account on 9 July 2020 together totalled US$520,027 (only a very slight difference from the sum held in the account immediately prior to receipt of funds from D1).  That strongly suggests that the prior balance was dispersed by way of those four payments – itself, perhaps, evidence of a laundering exercise.

105.But, on the chronology of this case, where the defrauded sum was substantially transferred by D1 to D2 within two days, and where an amount comprising a very significant part of that sum was then transferred by D2 to D3 on the same day in four further split transfers, the inference is readily open to be drawn that the D3 Sum was part of, or attributable in equity to, the sum defrauded from P.

106.A further suggestion of material non-disclosure relates to the 1 September 2020 email from the CAD – which stated that D3 may have received funds as part of a legitimate business arrangement (see above).  Obviously, because of its date, that email could not have been produced by P on the ex parte application made on 25 August 2020.  Further, P says it was produced to the same Judge who heard the first return date hearing on 4 September 2020, by placing the email in the hearing bundle.  Whilst I agree with Mr Chiu that at that first return date the ex parte obligation of full and frank disclosure probably continued, and simply placing the document in the hearing bundle would not have effected proper disclosure to the Judge, I am not persuaded that there was a material non-disclosure.  I also note that, whether or not the Judge had himself read the email or had it drawn to his attention, Mr Chiu appears to have told the Judge at that hearing that D3 received the D3 Sum as part of its legitimate business, so the thrust of the point was well known to the Judge when he granted the continuation order.  In any event, the point is not one which would fundamentally affect the exercise of my discretion as to the grant or refusal of the orders now being sought.

107.Nor do I think there is anything in the other suggestions of material non-disclosure, which are really more akin to argument as to the proper weight that ought to be given to the evidence and the submissions made on the basis of the evidence.

F.     Argument and Analysis

F.1     Overview

108.Mr Ng summarises that each of the causes of action against D3 raises a serious issue to be tried, and that there is also a serious issue to be tried as to whether the D3 Sum represents the traceable proceeds of the sum extracted from P by the Fraud.  The starting point is that a constructive trust has arisen over the defrauded sum, and neither of the defences raised by D3 has merit, or sufficient merit.

109.Mr Chiu summarises D3’s submission as follows:

(1)  Even without looking at the merits, the Mareva injunction and the proprietary injunction ought to be discharged.  There is neither the requisite risk of dissipation to justify a Mareva injunction, nor a need for proprietary injunction as damages is an adequate remedy.

(2)  Looking at the merits, the causes of action in (a) knowing receipt and (b) dishonest assistance are hopelessly unmeritorious and ought to be dismissed outright.

(3)  In respect of all four causes of action relied upon by P, D3 has a valid and complete defence (a) as a bona fide purchaser for value without notice of the alleged Fraud or the relevant breaches of trust and/or (b) having changed its position in good faith.

110.Mr Chiu also suggests that P is going after D3 (a Singaporean company that received the D3 Sum in its Singaporean bank account) in Hong Kong only because it is unlikely to succeed in Singapore where the claim should properly be brought.  I think this suggestion – perhaps, to be fair, put forward only as a forensic flourish – can be put aside for the moment.  Absent any formal challenge to the jurisdiction of this court, and where any such challenge must be made at least difficult following the filing of a formal Defence, it simply falls to me to assess the application on its merits in accordance with the appropriate principles as are applicable in Hong Kong.

F.2     Serious Issue to be Tried

111.I think I can deal with this point shortly.  Subject to the consideration of the potential defences raised, I am satisfied that P has demonstrated a serious issue to be tried on its claims.

112.For example, on the claim in unjust enrichment, I accept Mr Ng’s submission (put by reference to the questions identified in the Shanghai Tongji case) that there is at least a serious issue to be tried that the receipt of the D3 Sum by D3 was an enrichment of D3 at P’s expense, which was unjust because of the mistake of fact or the total failure of consideration (in the sense that there was no proper basis for the transfer).

113.As a result, focus can be placed on the issues relating to (a) the alleged risk of dissipation, (b) the need for a proprietary injunction, (c) the BFP Defence, and (d) the COP Defence. It is those issues which will be determinative of the current application.

F.3     Risk of Dissipation

114.On the authorities, Mr Ng accepts that P must show that the conduct of D3 must be unjustifiable and go beyond merely impairing the judgment creditor’s ability to enforce a judgment, even if P is not required to show that D3 intends to deal with its assets with the purpose of ensuring that any judgment will not be met.  But Mr Ng submits that the real risk of dissipation can in this case be inferred from what he says is D3’s “sharp commercial practice and/or objective dishonesty and low commercial morality of the underground banking arrangement by which D3 had received” the D3 Sum.

115.Mr Ng relies in particular on his submissions that: (1) the frozen funds could easily be further dissipated through use of an underground banking arrangement; (2) D3 has not been forthcoming in the disclosure of evidence regarding its relationship with GNL, and GNL’s relationship (qua D3’s agent) with D2; (3) D3 has not been forthcoming in the disclosure of evidence regarding the previous course of dealings with GNL, or in relation to enquiries made with GNL concerning the legitimacy of the source of the D3 Sum; (4) D3 has not been forthcoming in disclosing its financial information in support of its bare assertion that it is a legitimate business; (5) the documentary exhibits produced by D3 do not lend support to any genuine defence; and (6) D3 acted in breach of the previous order.

116.Mr Chiu emphasises that D3 is not a ‘fly-by-night’ business, but rather appears as a reputable company with an unblemished track record.  I accept that D3 might have provided more evidence to emphasise its legitimacy and reputation, but in the evidence filed in answer to D3’s evidence there is nothing from P really challenging the point that there was a legitimate business.  The emphasis is on the blind eye turned to the suspicious circumstances of the payment made by GML to D3.

117.Mr Chiu points to the fact that D3 chose to pay more money into the frozen account, so that there was more than the amount identified in the injunction order, as the clearest evidence of good faith and the lack of any risk of dissipation.  I accept this is a factor pointing away from a risk of dissipation (though it must be balanced by the suggestion that the account was operated in breach of the order before the balance was restored – see above).

118.Mr Chiu also submits that P makes various serious but baseless allegations of “sharp commercial practice”, “objective dishonesty” and “low commercial morality of the underground banking arrangement by which D3 received the D3 Sum”.  But, he says, resort to such mantras are unhelpful, and it is necessary instead to focus scrutiny on the evidence.

119.D3 denies that it engaged in any “underground banking arrangement”.  Mr Chiu submits that, at best, it could be said that GNL might have used such an arrangement, but there is no proper evidence on Nigerian law to suggest impropriety or illegality of the payment arrangements made by GNL.  However, it seems to me that even absent evidence of Nigerian law, the other evidence does suggest that GNL was proposing to take steps to get around perceived difficulties in obtaining US Dollars in a more straightforward fashion, by purchasing US Dollars from a trader, rather than from a bank.  Whether or not the proposed method was intended to circumvent foreign exchange control regulations in Nigeria, even GNL seems to have thought it necessary or appropriate to run the idea past D3 (via Mr Affandy) before taking that step.

120.However, I do not see how that constitutes GNL as D3’s “agent” (as Mr Ng suggests).  Nor do I think it correct that D3 somehow should have known about what was stated in D2’s SCB bank account opening documents etc (which were only available to anyone, other than D2, as a result of a court order).

121.Anyway, Mr Chiu says, even if D3 used an underground banking arrangement, that cannot amount to a risk of dissipation. Mr Chiu relies on the rejection of a similar argument made in the Essilor case.  As in that case, P in this case does not allege that D3 was knowingly participating in siphoning away money which belonged to P; and there is nothing to suggest anything but a commercial transaction between D3 and GNL.  Therefore, even if the conduct of D3 is to be regarded as commercially (or even legally) reprehensible, that is only in the way in which D3 chose to conduct its business with GNL which was not part of any fraud against P.  So, the submission goes, that could not give rise to an inference of real risk of dissipation in the sense that there is a solid basis to infer that D3, in the light of that conduct, is the kind of entity which may seek to render itself judgment proof.

122.On balance, I agree.  Whilst I accept that questions properly arise – and those questions are probably only emphasised by the significant gaps in the limited evidence offered by D3 (see above) – as to whether D3 actively chose to go along with or at least turned a blind eye to an arrangement which ought to have led to obvious enquiries about potential money-laundering, of itself that conduct does not seem to me to give rise to an inference of a real risk of dissipation.  I do not think the fact that D3 may have been actively, or blind eye, content to have received funds in this way means that there is any real risk of dissipation by use of a similar banking arrangement.

123.On that basis, I would refuse to continue the Mareva injunction.  I do not need to, and do not, set aside the injunction in place up to this point.

F.4     Need for Proprietary Injunction

124.On the basis that P has satisfied that it has a claim with a serious issue to be tried, and that there is at least a serious issue to be tried that the D3 Sum is comprised of part of the sum defrauded from P by D1, and transferred via D2, Mr Ng submits that the balance of convenience and justice point to the grant of the proprietary injunction, and its continuation.

125.Mr Chiu submits that the proprietary claim is in respect of money, so that P can be adequately compensated by a monetary award.  He says that other than scattered attacks on D3’s commercial integrity, P has not been able to call into question the ability of D3 to meet any such award.

126.But I do not think that is the correct way of addressing the relevant question.  Mr Chiu himself relies on the authority which identifies that a proprietary injunction may still be necessary or appropriate if there is some evidence to suggest that D3 will not be in a position to pay an amount equivalent to the defrauded sum, if P were able to obtain against D3 judgment for that sum by way of an order for payment of a liquidated sum of damages.  But Mr Chiu’s focus on what he says is P’s burden of calling into question D3’s solvency is, in my view, misplaced.  As with most issues, looking at where the burden lies is probably unhelpful; ultimately, the question is what the evidence as a whole demonstrates. Further, when I refer to the evidence as a whole, that necessarily includes material which might be expected to be produced in evidence but which is absent, and which might give rise to proper inferences accordingly.

127.I accept, of course, that there may not be any general obligation on D3 to provide financial disclosure in this case.  However, it is up to D3 to decide what financial disclosure to give in order to seek to deal with, that is to meet, the application it faces.  It has chosen to give none, and does not even give a general picture of its business turnover and profit (or loss) figures.  As I have already pointed out, it has also chosen to give no corporate disclosure of any kind, save for the documents relating to the particular contracts, shipments and invoices.

128.Albeit by reference to a profile search conducted in mid-August 2020, the last set of accounts produced at an AGM of D3 were those dated 31 December 2018.  I do not know, because I am not told, whether any subsequent accounts have been prepared and/or approved, or what financial information they might reveal.

129.In the circumstances, it seems to me that the evidence as a whole (including the gaps in evidence) does not show that D3 would be in a position to pay a monetary judgment, if one is awarded against it in favour of P.  Damages may not be an adequate remedy.  There is also the possibility of other competing claims to sums held by D3, and P has not yet elected to pursue only a personal claim to damages rather than its proprietary claim.  In those circumstances, and subject to the points relating to the defences raised (see below), I think that the grant and continuation of a proprietary injunction in this case is necessary and appropriate.

130.As I have identified in the section of this Decision dealing with the applicable legal principles, it may be that a balance will need to be made between the relative injustices.  Preserving the position until the court is properly able to affect that balancing exercise seems to me to be the appropriate way of achieving justice in the current interim circumstances.  In other words, at this stage and in the exercise of my discretion, it seems to me that the potential injustice in the grant of a proprietary injunction (where it may later turn out that such an injunction should not have been granted) is less than the potential injustice in the refusal of a proprietary injunction (where it may later turn out that such an injunction should have been granted).

F.5     The BFP Defence

131.Mr Chiu submits that P simply relies on what it says are “suspicious circumstances” by and large relating to the assertion that there were (a) underground banking payments made by GNL to D3, and that (b) such arrangements were made to circumvent exchange control regulations in Nigeria.  In response, Mr Chiu makes two points.

132.First, he says there is no evidence that what GNL did was illegal or invalid under Nigerian law, and makes the point (which I accept) that the plaintiff’s deponents are in no position to give any reliable evidence on Nigerian law.  Mr Chiu then says that, if anything, GNL would be in a better position to determine the applicable regulations.  But, I reject the idea that whatever was said by GNL through Mr Kandil’s WhatsApp messages or through the letter of 2 September 2020 is capable of amounting to any expert evidence as to Nigerian law either.

133.In any event, it seems to me at least one reading of what was said by Mr Kandil is “You want to be paid.  We want to pay you.  But we cannot obtain US Dollars from the banks in Nigeria.  So, if you want to be paid, we have to use a trader who sells US Dollars.  This is the solution to avoid delay”.  Possibly implicit is the recognition that not buying US Dollars from the bank would be in circumvention of some rule.  Mr Affandy’s response was “Well, I will have to ask Singapore about that.  I will let you know”.  Possibly implicit in that is the recognition that what was being proposed is something that would need to be considered by and approved by head office.  All of those points seem to identify that what is being suggested is something new, and (contrary to D3’s unsupported assertion) not something which has been the typical way of providing funds over a lengthy period of time.

134.Secondly, Mr Chiu says the point about underground banking was dealt with in the DBS Bank case (see above), where Anthony Chan J dealt with a similar point at §§23-29.  There, the Judge held that the guilty knowledge alleged against the defendant was tenuous.  In substance, the suggestion was that the defendant had received a large sum of money from a total stranger with no legitimate reason, such that an honest person would have made enquiry about the provenance of the funds. But, the Judge held that ignored the fact of the third party agent payment transaction, and it was a matter of common sense that the transferor of the exchanged funds in such a transaction would be unknown to the recipient. Secondly, the defendant had been told to expect to receive the money in Hong Kong dollars, so what took place was expected.  Therefore, there was no reason why the defendant should have made enquiry over the provenance of the funds. The Judge also referred to previous authority in which the court had held that the mere fact that a defendant was in receipt of funds remitted through an underground banking system is not sufficient to establish the requisite knowledge to defeat a defence of bona fide purchaser for value without notice.  So mere receipt of such funds would not amount to unconscionable knowledge for the purpose of knowing receipt (let alone dishonesty).

135.Mr Chiu submits the facts of this case are akin to those in the DBS Bank case.  As part of the transaction with GNL, D3 would receive and expected to receive, amongst other things, the D3 Sum in US dollars.  Therefore, what took place was as expected, and there is no reason why D3 should make enquiry over the provenance of the funds.

136.Of course, the DBS Bank case was decided on its own facts, and it is Anthony Chan J’s analysis of those facts on the law he stated which the Court of Appeal subsequently considered was not flawed in any material respect.  But, the facts of that case seem to me to be rather different from the facts of the present case.  For example, the particular transaction in the case was itself a currency exchange transaction.  Hence, the defendant specifically anticipated an exchange of currency in place of that provided by him, and he subsequently used the money exchanged to purchase shares on behalf of a friend who had arranged the whole transaction.  I do not think that the particular factual situation of that case makes the current case an a fortiori situation.  So I reject Mr Chiu’s suggestion that it is because (he says) the defendant was himself a participant in the underground banking arrangement, yet that did not translate to an imputation of knowledge of a fraud or breach of trust.

137.In this case, whilst D3 has sought to put the receipt of the D3 Sum in the context of similar payments made by third parties, no actual documentary evidence has been provided to support that context, and the contact between the representatives of GNL and D3 tends rather to suggest this was a departure from the previous way of dealing.  What was suggested was also even a departure from alleged previous dealings, in that the payment would apparently come from China as opposed to previous payments through the Middle East.  Further, D3 was in effect asked for permission (“can I …”) to perform the particular payment in the manner suggested, and there is a complete absence of evidence as to what was the response of D3 (in circumstances where the evidence shows that it was going to be asked for a response, and one was expected by GNL).

138.Further, the amounts of the sums paid bore no relation to the amounts of the invoices supposedly settled by them.  There was the oddity in receiving 4 separate amounts from the same source on the same day.  The amounts paid did not even total the amount of the invoices, or any combination of some of them.  Monies were received by D3 on 9 July 2020, by four split tranches, more than a month after a method of payment was raised, from an unknown source in an amount which did not match any outstanding invoice, yet D3 on the evidence apparently took no real steps to investigate or identify the purpose of those receipts until after receiving the documents in these proceedings which strongly suggested that the sums might have been part of monies defrauded from P, after being passed through D1 and D2.

139.In those circumstances, I do not think can be said (at least at this stage) that what took place was “as expected”, or that there was no reason why D3 should have made enquiry over the provenance of the funds.  In other words, whatever merit there is in the BFP Defence is insufficient to negate the existence of the necessary merits in the claim as might underpin interlocutory injunctive relief.

F.6     The COP Defence

140.D3 says that the four invoices in the documents produced in relation to the invoices support its COP Defence to P’s unjust enrichment claim.  But P says D3 has not acted in good faith in the alleged change of position, and has failed to establish a causal link between the change of position and the receipt of the D3 Sum.

141.As to the good faith point, P relies on the principle from the Niru Battery case (see above).  Mr Ng submits that, in light of the suspicious circumstances surrounding the transfer of the D3 Sum, D3 was put on enquiry as to the wrongdoing underlying the transfer itself.  The wilful shutting of its eyes means that D3 has acted dishonestly in the “objective” sense as described in Barlow Clowes case.

142.I agree.  I have touched on the reasons above.  In fact, when one looks at the contact between GNL and D3 in June 2020, D3 was clearly and expressly given the opportunity to make enquiries when Mr Kandil told Mr Affandy what he had in mind and Mr Affandy responded by saying he would contact his “singaporepart” and let him know.  D3’s problem in the context of the current argument is that there is simply no evidence as to what happened in the period between that conversation and the transfer of the four payments which constituted the D3 Sum.

143.I also think that the content of the conversation, fairly read, identifies a proposed new way of dealing with funds.  I do not think it is consistent with the case put forward by D3 (but not supported by any documents) that receiving funds through third-party (non-bank) payers was the typical means of receiving funds from GNL.  Also, when the monies arrived as they did, it was so unusual – four sums all arriving on one day, all sent from the same account, from Hong Kong not Shanghai, none matching any invoice, etc – that those circumstances also gave rise to obvious enquiries as any reasonable person would make.

144.Of course, Mr Chiu emphasises that even if enquiries were triggered, it is necessary for P to show that those enquiries would probably (and not just possibly) have revealed the Fraud or the breach of trust.  It would not be enough, for example, merely to show the enquiries would or might have revealed currency exchange violations.  I see the force in that point, but it seems to me to be a point which necessarily requires further exploration.  What would have happened had enquiries been made, when as a matter of fact they were not, is obviously to an extent engaging in the hypothetical.  But, on a proper exploration of all the circumstances, factual findings can be made as to what would have happened.  That it can be said that there might not ultimately be factual findings that enquiries would probably have revealed the Fraud seems to me to identify that there is a potential defence, but not one that necessarily must defeat the sufficiently arguable claim which also exists.

145.As to the causal link point, Mr Chiu submits that, in the absence of any case that all of the contract, shipping and invoice documentation was fabricated, there must have been some reason for D3 to have received the D3 Sum.  The only logical conclusion is that the D3 Sum is preferable to the supply of the Goods (and if not the actual Goods, then some other goods).

146.But, I do not agree that this is necessarily the only logical conclusion.  Again, D3’s problem relates to the lack of surrounding evidence, compounded by the fact that the four payments constituting the D3 Sum do not in fact match any of the outstanding invoiced amounts, and do not pay the entirety of the outstanding invoiced amounts (nor exactly the combination of any of them).  To point this out does not seem to me to be, as Mr Chiu suggests, “pure speculation”.

147.Mr Chiu further submits that P’s argument that D3 was supplying goods to GNL without considering whether D3 would be paid or not is incomprehensible.  There is more force in this point.  As Mr Chiu says, it is commonplace for payment upon delivery of goods or within a certain period after delivery of goods.  The very point of providing credit terms on a sale – here said to have been 90 days after bill of lading – shows that the person selling and delivering the goods anticipates and expects to be paid.  Mr Ng accepts that the but for test can be satisfied despite the alleged change of position occurring before all the receipt of the funds.  Therefore, if one seeks to match the delivery of the Goods to subsequent payment, there probably is a causal link (though I also wonder whether the prior delivery is the correct factual matter for focus when considering an alleged change of position).

148.Nevertheless, by reference to my other findings, I do not think it can be said that the merits of the COP Defence are sufficient to remove any merit in the unjust enrichment claim.  Again, I would point also to the balancing exercise between competing injustices as might be necessarily performed in this context.  That is unlikely to be an exercise which a court is able properly to perform on a summary basis on evidence which is clearly lacking in significant and material respects.

F.7     Amount of Proprietary Injunction

149.Whilst I think that a Mareva injunction would properly have been granted, if granted at all, with the ceiling figure which was used in this case, the approach to a proprietary injunction is different. The only amount held at any time by D3, over which P can assert a proprietary claim, is the amount of the D3 Sum.

150.Therefore, the proprietary injunction will be granted over US$1,151,143.

G.     Ancillary Disclosure

151.Where I am not prepared to grant the continuation of the Mareva injunction order, the disclosure sought ancillary to such an order simply falls away.  But, in any event, the primary purpose of ancillary Mareva disclosure is to enable the Mareva injunction itself to be enforced or policed.  In this case, D3 has made clear that it has put aside (and the bank, which has been served with the injunction order, has earmarked) the frozen sum within its UOB bank account.  Looking strictly at the position from a Mareva injunction, no further information would be required.

152.Nevertheless, I think it is appropriate to order disclosure for the purposes of the proprietary claim, and the relevant tracing exercise, so as to enable P to identify and trace further in relation to proceeds which represent the defrauded sum.  This seems to me to be so, notwithstanding that I am making an order – in the form of the proprietary injunction – in effect continuing to freeze the D3 Sum in the hands of D3. Whilst Mr Chiu is correct that P may ultimately, if successful in its claim, receive a monetary award by way of a sum of damages, at this stage it is not necessary to put P to its election as to whether to pursue the proprietary claim (including its tracing and other consequences) or a personal claim to damages.

153.By paragraph 3 of the summons, P seeks disclosure within seven days (followed by liberty to inspect and to take copies of the relevant documents) of:

(1)  details, records and/or documents in connection with the opening of the UOB bank account; and

(2)  details and/or records of all transactions in the UOB bank account including, without limitation, bank statements, bank vouchers, forms, instructions, transaction advices, checks and correspondence between UOB and any person or entity involved in the operation of the UOB bank account for the period from 9 July 2020 to the date of this order.

154.I accept that those documents should be disclosed as asked.  It seems to me that they would be disclosable under ordinary discovery in due course in any event.  However, where a proprietary and tracing claim is maintained, the earlier the tracing exercise can be performed, the better.  But, I agree with Mr Chiu that the period of disclosure relevantly ceases (at least in the first instance) on the date on which D3 paid the sum of US$1.4 million (back) into D3’s UOB bank account.  I put the word “back” in brackets, because it is of course not yet clear whether the source of those funds was (or whether any parts of it were) directly attributable to the D3 Sum.  Therefore, it seems to me that one of the matters which D3 must also disclose is the source of that US$1.4 million.

155.I make the order without prejudice to any further application disclosure as might be considered.

H.     Result

156.I decline to continue the Mareva injunction.

157.However, I grant the proprietary injunction.

158.As to the terms of the proprietary injunction, it seems to me that the appropriate terms should provide that D3 must not in any way dispose of or deal with or diminish the sum of US$1,151,143 (or any part of it) (“Funds”) transferred by D2 to D3’s UOB bank account on 9 July 2020, or the traceable fruits or proceeds of the Funds (including any interest earned or other income received derived therefrom and any remaining balance in the account) wherever they may be held, in respect of which P claims a proprietary interest.

159.It should be made clear, including to UOB, that the earmarking of the amount comprising or equivalent to the Funds should continue (notwithstanding the removal of the Mareva injunction).  That is to cater, at least for present purposes, for the fact that the amount of US$1,151,143 held in D3’s UOB bank account appears to comprise the Funds or the traceable proceeds of those Funds.

160.I would also respectfully suggest that clarity is best achieved by some proper arrangements being put in place to ring-fence that sum.  Payment into court is one possibility (though I do not think it would remove the continuing need for the proprietary injunction in relation to a proprietary and tracing claim).

161.Further, as the injunction granted is a proprietary injunction, it is not subject to the exceptions suitable for a Mareva injunction which allow a defendant nevertheless to expend certain sums on business or legal expenses.  In any event, in this case, it is clear from the evidence that D3 has access to sufficient other funds as unable it to continue the ordinary conduct of its business and to pay for such legal representation as it considers necessary.  The injunction is intended to keep the sum of US$1,151,143 intact, pending trial or further order of the court.

162.I also grant the order for disclosure in support of the proprietary tracing exercise, limited to the period from 9 July to 8 September 2020 (both dates inclusive).

163.Against the history of this case, I also give liberty to apply as to the precise form of the orders to be made and sealed.

164.As to costs, I have not heard any argument.  In light of the somewhat mixed result on the application, I propose to reserve costs to be dealt with by me following written submissions.  The parties (P and D3) are to file and exchange written submissions within seven days, identifying the costs order that each of them says is appropriate, and brief reasoning as to why, limited to 8 pages.  Within seven days thereafter, each party may file and exchange a response to the other party’s first-round submissions, limited to 5 pages.

165.Lastly, Mr Ng asked me to stay execution of my order if I were to refuse to continue the injunction, pending consideration of any next step.  Though I have put in place a clear proprietary injunction, I have refused to continue the Mareva injunction.  Nevertheless, I have made clear that the sum of US$1,151,143 is to remain ‘frozen’ in the UOB account, as that is where the monies over which P makes its proprietary claim are now held.

166.If it is later wished that the sum of US$1,151,143 be moved, so as to be held in a more clearly ring-fenced way, application should be made to me to approve that proposal.  In the circumstances, I do not accede to any stay of the cessation of the Mareva injunction.

Mr Felix Ng, instructed by W.K. To & Co., for the plaintiff

The 1^st and 2^nd defendants were not represented and did not appear

Mr Byron Chiu, instructed by Zhong Lun Law Firm, for the 3^rd defendant