Read the full judgment text of CACV 457/2019 on BabelCite. This Court of Appeal judgment was delivered on 30 April 2021 before Kwan VP, Cheung JA and Au JA.
Civil law – appeal – civil fraud – knowing receipt – dishonest assistance – fraudulent trading – appellate review of trial judge's findings of fact – proper approach to credibility findings – Court of Appeal's restraint in overturning trial judge's factual findings on fraud – Hong Kong company (Galleria (Hong Kong), Limited) in compulsory liquidation and its joint and several liquidators (Cosimo Borrelli and G Jacqueline Fangonil Walsh) sued DBS Bank Ltd, Hong Kong Branch, one of the company's largest creditors, on three causes of action: knowing receipt, dishonest assistance and fraudulent trading – claim arose from alleged fraud perpetrated by the directors of Galleria (Cheri and Thomas Fu) in obtaining credit by submitting 19 false bills of lading in March 2006 – allegation that DBSHK through its Senior Credit Officer Albert Mak had actual knowledge or wilful blindness to the falsity of the bills of lading and turned a blind eye, continued to lend to Galleria and thereby reduced its own exposure at the expense of other banks – DBSHK's officers sent 23 bills of lading to the International Maritime Bureau of the International Chamber of Commerce (ICC-IMB) for random checking, and the IMB Reports stated 19 of the 23 bills were 'false' or 'not in order' and advised 'extreme caution be exercised' – whether the trial judge erred in dismissing the claim by accepting DBSHK's witnesses as credible and finding they had no knowledge of the fraud and did not turn a blind eye – whether the judge made a fundamental error in his approach to knowledge by mischaracterising the plaintiffs' case, conflating knowledge and dishonesty, and failing to make specific findings on Albert's knowledge and suspicions – whether the judge erred by failing to infer dishonesty from Albert's failure to make obvious enquiries, by misunderstanding the significance of the IMB Reports, and by wrongly treating inherent improbability and absence of motive as decisive – whether the judge erred in the claim for knowing receipt by treating the lower standard of unconscionability as equivalent to dishonesty and by holding that setting aside the loan agreements was a precondition to liability – whether the judge applied the wrong test for fraudulent trading in finding that knowledge of fraudulent transactions was insufficient and that the defendant was not a party to carrying on GHK's business for a fraudulent purpose – whether the judge erred on quantum in finding that L/C proceeds received by DBSHK were not recoverable – respondent's notice raised two additional grounds: that the plaintiffs' claims were time-barred under the Limitation Ordinance, Cap 347, and that the plaintiffs failed to prove causation of loss – principles governing appellate intervention in trial judge's findings of fact and credibility – where allegation is one of fraud, appellate court should only interfere on clearest grounds – the two-stage test for dishonesty from Royal Brunei Airlines v Tan – blind-eye knowledge and wilful blindness – knowledge of fraudulent B/Ls versus knowledge of wider fraud – bank as victim of fraud, not party to it – unconscionability in knowing receipt – whether setting aside loan agreements is a precondition for knowing receipt claim under Criterion Properties Plc v Stratford UK Properties LLC – whether knowledge of fraudulent transactions equates to knowledge of business carried on for fraudulent purpose – 'some nexus' test for fraudulent trading – whether the IMB Reports communicated actual knowledge of falsity of bills – whether the judge was plainly wrong to find bank officers honest – appeal dismissed on all grounds – plaintiffs to pay defendant's costs of the appeal, save for costs relating to the respondent's notice, with certificate for two counsel – postscript reminder to liquidators regarding proper use of private examination powers.
Legal issues: Whether the judge made a fundamental error in his approach to knowledge · Whether the judge erred regarding absence of enquiries and the significance of the IMB Reports · Whether the judge wrongly treated inherent probabilities and absence of motive as decisive · Errors relating to the claim for knowing receipt · Errors relating to the claim for fraudulent trading · Whether the judge erred on quantum · Whether the plaintiffs' claims are time-barred · Whether the plaintiffs proved causation of loss
Outcome: Appeal dismissed; trial judge's findings of fact on knowledge and dishonesty not disturbed.
Cited by 18 cases · Cites 3 cases