Yan Yu Ying v. Leung Wing Hei
Read the full judgment text of HCA 2295/2019 on BabelCite. This High Court CFI judgment was delivered on 7 June 2022.
1. Before the court are the following matters:
Cited by 7 cases · Cites 10 cases
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HCA 2295/2019 [2022] HKCFI 1660 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2295 OF 2019 ______________ BETWEEN
______________ Before: Hon K Yeung J in Chambers Date of Hearing: 25 and 26 April 2022 Dates of Supplemental Submissions and Reply by the Plaintiff: 3 and 12 May 2022 Date of Supplemental Submissions by the Defendant: 10 May 2022 Date of Decision: 7 June 2022 ______________ DECISION ______________ A. Matters before the court 1.Before the court are the following matters:
2.Mr Laurence Li SC leading Mr Foster Yim and Mr Jasper Wong appeared for P. Mr Bernard Man SC leading Ms Vivian Henrietta Ho and Mr Jonathan Ng appeared for D. 3.Despite the 2 days reserved, there was insufficient time for all the above matters to be covered. Towards the end of the hearing, I gave directions for parties to file further written submissions on the issue of costs in relation to the Variation Summons, with the view of that issue being dealt with on the papers. Parties have since done that. B. Events leading to the present applications 4.The dispute between the parties relates to 999.9900261[1] Bitcoins (the “Subject Bitcoins”). P says that D has stolen them from her. D’s case is that P transferred them to him in exchange for 885,210.866 of D’s The Public Coin (the “TPC”) under a swap agreement reached between them in March 2018 (the “Swap Agreement”). TPC is said to be another and a newer type of cryptocurrency. 5.In August 2018, P reported her alleged loss of the Subject Bitcoins to the police. In September 2018, D was arrested. 6.On 12 December 2019, P took out the writ herein. The claim is based on fraud and internet theft. She seeks amongst others restitution of the Subject Bitcoins, a declaration that D holds them and all assets derived from them in unjust enrichment or on trust for her, or damages in the alternative. 7.The Injunction Summons first came before Lisa Wong J on 10 January 2020. It was adjourned for substantive argument (subsequently fixed to take place on 25 April 2022 with 2 days reserved, i.e. the present hearing). 8.When before Her Ladyship on that occasion, P made an application for interim-interim relief. It was refused. 9.Subsequently D was charged and prosecuted for the alleged theft of the Subject Bitcoins. His trial took place in the District Court between late October and early November 2020 before Deputy District Judge Colin Wong (the “Criminal Trial”, the “Learned Deputy District Judge”). P gave evidence as one of the prosecution witnesses. D also chose to testify. A number of expert witnesses were also called. On 4 December 2020, D was acquitted of all charges he faced. 10.On 30 September 2021, P took out an ex parte summons on notice (the “Ex Parte Summons”). It came before me as the Summons Judge on 8 October 2021. P renewed thereby her application for interim-interim relief pending the hearing of the Injunction Summons. Change of circumstances was relied upon, principally the lapsing of the letter of no consent which the police had previously issued in relation to the Subject Bitcoins. Having heard parties, I on 8 October 2021 granted the Interim-interim Injunction and stated the reasons in my decision of 8 October 2021 (the “8/10/21 Decision”)[2]. The 8/10/21 Decision may be referred to if necessary. I will also so far as possible and unless specified otherwise adopt the same terms and abbreviations as they are used in that Decision. 11.Paragraph 4 of the Interim-interim Injunction orders D to disclose by affidavit the number of the Subject Bitcoins that remain in his possession, custody and control and their current whereabouts. 12.On 28 October 2021, D’s 2nd affidavit (dated 21 October 2021) was filed (“D/Aff2”). Certain disclosure was made. 13.P was not happy with the extent of the disclosure. Correspondence between the parties ensued. 14.On 22 November 2021, P filed the Variation Summons with the intention of seeking further disclosure from D. A draft amended order is attached thereto (“Draft Ver.1”). 15.The Variation Summons was returnable before this Court on 17 December 2021. 16.On 22 December 2021, D’s 3rd affidavit (dated 9 December 2021) was filed (“D/Aff3”). Certain further disclosure was made. 17.On 10 December 2021, apparently before sight of D/Aff3, Mr Li filed his written submissions in support of the Variation Summons. Attached to it is a version of the draft amended order (“Draft Ver.2”) which is different from Draft Ver.1. Comparing Draft Ver.1 with Draft Ver.2, one notes that:
18.Having had sight of D/Aff3, Mr Li filed his Supplemental Skeleton Submissions. At §8 thereof, Mr Li accepted that D had by then disclosed most of the key information which Mr Li said had been missing. He proposed that the Court needed not formally determine the Variation Summons. He submitted that P should however be entitled to costs. 19.In the meantime, D filed the 1st Fortification Summons for fortification of P’s undertaking as to damages which D may suffer as a result of the Interim-interim Injunction. It was returnable before this court also on 17 December 2021. 20.The estimated time for the Variation Summons was said to be 30 minutes, and that of the 1st Fortification Summons 15. As a result, those matters came before this Court on 17 December 2021 during a 9:30 slot. At the hearing, the Variation Summons was formally withdrawn. There was insufficient time to deal with the issue of costs, or the 1st Fortification Summons. Both matters were adjourned to be heard together with the Injunction Summons. 21.On 21 March 2022, D took out his 2nd Fortification Summons, and seeks an order that in the event that the Interim-interim Injunction being continued or a new injunction being granted, the injunction shall be conditional upon payment in court by P a sum stated in §§15 to 18 of D’s 5th affidavit of 16 March 2022 (“D/Aff5”). 22.Hence, all the matters as set out in §1 above are now before this Court. C. The main affirmations 23.P has made 5 affirmations (“P/Aff1” to “P/Aff5”)[3]. She also relies on the 2 affirmations of Mr Ronald Pong (“Pong”, “Pong/Aff1” and “Pong/Aff2”)[4]. Pong is the Chief Executive Officer of Nexusguard Consulting Limited (“NCL”). NCL is a consulting firm in the area of information security and defence. Pong’s evidence is adduced as expert evidence primarily on the authenticity of certain messages between P and D on an instant messaging platform called Secret-Message (“SEC-M”). 24.D has made 6 affirmations (“D/Aff1” to “D/Aff6”)[5]. He has himself in his affirmation referred to certain expert opinions given by other information technology experts, principally those of Mr Alan Jeffries (“Jeffries”)[6], Mr Ilia Frankstein[7], and Dr Chow Kam Pui[8] (“Dr Chow”). D. Two preliminary matters D1. Application to expunge part of the evidence 25.Mr Man invites this court to expunge §§19, 20, 23 to 30 and 36 to 37 of P/Aff4 on the basis they are not matters in reply to D/Aff4, and are hence outwith the leave granted to P to file P/Aff4 (which is to respond to D/Aff4). Mr Man further submits that there is no reason for YYY-35, which is said to be “the full transcript of [D’s criminal] trial”, to be produced. 26.On the first day of the hearing, Mr Man informed this court that he was content to have those matters placed before the court on a de bene esse basis, and that I would rule on their admissibility in the end. 27.In my view:
28.YYY-35 is not the full transcript of D’s criminal trial. It is only the transcript of the oral evidence of PW4, D and Jeffries. I do not accept Mr Man’s submissions that YYY-35 serves no purpose. As explained by P[9], the reason why she produces the full transcript of the evidence of those witnesses is to avoid unnecessary argument over selective production of chosen pages of the same. 29.I order only §§26 to 28 of P/Aff4 to be expunged. D.2. Whether P should be confined to the draft order annexed to the Injunction Summons 30.The draft order annexed to the Injunction Summons is not the same as that annexed to the Ex parte Summons. The former seeks a Mareva Injunction, whilst the latter seeks both a proprietary and a Mareva Injunction. 31.The Interim-interim Injunction is proprietary in nature. I have explained that in the 8/10/21 Decision. 32.In his written submissions, Mr Li urges this Court to grant an injunction in terms of the draft order annexed to Ex Parte Summons. 33.Mr Man initially objected to this, on the basis that the Ex Parte Summons had already been disposed of by this Court on 8 October 2021, that no summons has been taken out for the continuation of the Interim-interim Injunction, and that the present hearing concerns the Injunction Summons, which seeks an order in terms of the draft order annexed thereto. Ultimately, in the light of certain prior communications between the parties discovered in the course of the hearing[10], the objection is no longer maintained. E. The Injunction Summons 34.I consider the Injunction Summons first. 35.The applicable legal principles are not in dispute and have been repeated before me. The onus is on P to establish serious issues to be tried in relation to his application for a proprietary injunction, and good arguable case for a Mareva injunction. Given the nature of the allegations P makes against D, the Re H principles has been highlighted. I bear the above in mind. 36.Mr Man submits that the Injunction Summons must be dismissed on the following main reasons:
37.In the course of his oral submissions, Mr Man placed specific emphasis on the following matters. Mr Man urged this Court to look at the application in a macro matter. There are very serious disputes between the parties. The court would have to decide on a course which would cause the least injustice. P has not bothered to tell the court whether she is good for her undertaking for damages. There is also little risk of dissipation when gauged in the light of the history of the matter and P’s delay in prosecuting her application. 38.Despite the manner in which Mr Man has skillfully made his oral submissions, I prefer to approach the application in the established and principled approach in accordance with America Cyanamid. F. Whether a good arguable case / any serious issue to be tried 39.There are multiples factual issues relevant to the merits of the parties’ respective underlying cases which are in dispute. They cannot be resolved on affirmations. They need not and ought not to be, bearing in mind the thresholds in relation to proprietary and Mareva injunction. I reiterate the warning Parker LJ gave in Derby & Co Ltd v Weldon [1990] 1 Ch 48 against any attempt to persuade a court to resolve disputed questions of fact whether relating to the merits of the underlying claim in respect of which a Mareva is sought or relating to the elements of the Mareva jurisdiction such as that of dissipation. 40.Mr Man pointed out in the course of his oral submissions that Derby was an extreme case, which application took 26 days before the judge. Whilst this application is not such a case, the same principles and considerations in my view apply. 41.There can be no dispute that the Subject Bitcoins originally belonged to P. There is further no dispute that they subsequently got transferred to D. The circumstances in which they were so transferred, and the reason therefor, are factual issues crucial to P’s claim and D’s defence. 42.I consider first the circumstances in which the Subject Bitcoins were transferred to D. 43.To appreciate those rather unusual circumstances which I am going to explain, the following features of Bitcoin, the digital keys, their storage in “wallets”, and how wallets are initialized are relevant[11]:
44.What exactly happened is in dispute. P’s case in summary is that after D had assisted her in the sale of some of her Bitcoins, he had gained her trust. D then expressed concern about the security of P storing her Bitcoins in hot wallet. He urged her to store them in cold wallet, and offered to assist her in setting one up. On 5 March 2019 in the afternoon, they met for that purpose (the “5/3 Meeting”). P had purchased 3 what he claimed to be new Trezor wallets for her. He on the spot set one up for P (“Trezor X” containing “Wallet X”). P took it home. In that same evening, she used her desktop computer at home and transferred the Subject Bitcoins into Wallet X contained in Trezor X. She then locked it in a safe. On 13 June 2018 when she intended to sell some of the Subject Bitcoins and when she accessed Trezor X for that purpose, she discovered the Subject Bitcoins had gone. 45.As things turned out, and there is and can be no dispute about it, what meant to be Trezor X containing Wallet X, and what P took away after 5/3 Meeting thinking that they were, were in fact not a new Trezor hardware set up during that meeting, but was a Trezor hardware (“Trezor A”) which D had set up himself at his home earlier that day, and contained Wallet A D himself created. 46.As Trezor A was set up by D, he had the recovery seed. As explained by Dr Chow, with the recovery seed, and with a new Trezor device, D had the ability to re-create Wallet A, and could then have access to the private keys associated with the Subject Bitcoins which P subsequently in the evening of 5 March 2018 transferred to Wallet A (whilst believing it to be Wallet X, and without knowing that D had access to it). 47.D accepts that P ended up having his Trezor A containing his Wallet A. There is no dispute that P had in fact transferred the private keys associated with the Subject Bitcoins into Wallet A, and that they got transferred out from Wallet A. 48.D’s defence is that he took Trezor A along to the 5/3 Meeting for the purpose of receiving P’s Subject Bitcoins pursuant to the Swap Agreement. D says that P however refused to effect the transfer then. There was then an inadvertent mix-up during the 5/3 Meeting, which P ended up having Trezor A, and he ended up having possibly Trezor X, though he is not sure. He is not sure as he in the evening simply wiped clean that device, and re-created Wallet A with that device using the recovery seed. 49.In the above regards Mr Man relies heavily on certain forensic evidence suggesting that during the 5/3 Meeting, 2 different Trezor devices had been plugged into the laptop computer which P brought along. He submits that that is consistent with and support D’s case. 50.I have taken the relevant forensic evidence into account. Whilst it may be more consistent with D’s case, it hardly leads to the conclusion that P has shown no serious issue to be tried. 51.I note another aspect of the forensic evidence: 52.Whether P plugged Trezor X in her desktop on 5 March 2018:
53.The reality of the matters is that D ended up having control of the wallet (Wallet A) into which P transferred the private keys associated with the Subject Bitcoins. He had the ability to access the Subject Bitcoins. The circumstances in which that state of affairs arose warrant serious and thorough consideration during the trial. Did D have knowledge of what he called a mix-up? If he did, why he did not inform P of that, knowing that P would transfer digital keys of very valuable Bitcoins into it? If he did not, which apparently is his case, the issue arises as to whether that is believable given the way Trezor A and Trezor X were respectively initialized. 54.The reason for the transfer is also in hot dispute. 55.As I have mentioned before, P’s case is that it was a theft. D’s case is that the Subject Bitcoins were swapped with TPC as a result of the Swap Agreement. 56.In the course of the Criminal Trial, D produced the SEC-M records. I have considered them. There can be little doubt that those records (the messages and the related transcript), if genuine, go a very long way in proving the existence of the Swap Agreement. 57.In the Criminal Trial, the Learned Deputy District Judge was not satisfied on the evidence before him that the prosecution was able to prove beyond reasonable doubt that the SEC-M records were fabricated[16]. That finding also bore adversely upon his view on P’s credibility as a witness[17]. 58.However, since D’s acquittal, P has obtained the transcript of the Criminal Trial. She has engaged Pong. In Pong/Aff1:
59.Pong’s report has not however comprehensively tackled all issues relevant to the alleged fabrication of the SEC-M records. He acknowledges that at §16 of Pong/Aff1. He explains that in the expert reports prepared on his behalf, reliance has been placed on a “blue tick” next to P’s alleged SEC-M account (the “good account”), which allegedly shows that the account had been verified by email. 60.In Jeffries/Rep3, Jeffries highlights what he describes as 3 key features in the SEC-M records, namely the registration date of the good account, the blue tick and the modified dates of the backup files. 61.Mr Man criticizes the demonstration given by Pong, in that he could not have missed those other features given in particular the reliance by the Learned Deputy District Judge upon them. 62.But as Mr Li has pointed out in his oral reply, the Learned Deputy District Judge has indeed at §69 of the Reasons for Verdict raised as an important point the issue relating to the accuracy and genuineness of the SEC-M records. I do not find it entirely unreasonable for Pong to deal with that issue first. 63.As things turned out, and as explained by Pong also in Pong/Aff1, when he came back to the SEC-M website and tried to do further tests, he found that the SEC-M system had become inoperative, and he was unable to even log on the same. 64.Whilst those might be the reasons behind, the bottom line remains that there are aspects of the SEC-M records in support of D’s case which P/Pong have not been able at this stage to deal with. 65.I have on the other hand considered the other evidence which Mr Li has highlighted to me. There is the existence WeChat messages found on the phone seized by the police which are consistent with P’s case but not D’s, which messages according to D’s case were only a smokescreen. There is also what D has stated in his affirmation filed in support of his bail application, wherein he complained that he was not able to have access to his Chat account on his phone or computer which the police had seized, when in fact the SEC-M messages were according to his defence subsequently run in a special purpose phone that had been lost in the Mainland, but had never been seized by the police. 66.There are problems in relation to the forensic evidence which P faces. However, despite those problems, given the forensic evidence before me at this stage, I remain of the view that the authenticity of the SEC-M records, and according the existence of the Swap Agreement, remain serious issues to be tried, which need to be investigated during the trial. 67.On all the evidence before me, for the above reasons, and without meaning to conduct any mini-trial on affirmation at this stage, I am of the view that P has established serious issues to be tried. However, given the problems highlighted above, I am not satisfied that good arguable case has been established. G. Risk of unjustified dissipation 68.I repeat §15 of the 8/10/21 Decision. As explained by Flaux J in Madoff Securities International Ltd & Anor v Raven & Ors [2012] 2 All ER (Comm) 634, at §§127 – 128, that:
69.Given my findings above, P’s application for a Mareva injunction will fail. On the other hand, when it comes to her application for a proprietary injunction, it is not necessary to show any risk of dissipation. 70.I note however the following facts, which can be relevant when I come to take a macro view of the matter which Mr Man urges me to take. 71.Between the transfer of the Subject Bitcoins and D’s arrest, there was a time gap of some 6 months. 72.When D was arrested, around 600 of the 1000 Subject Bitcoins were still with him. 73.Upon D’s acquittal in December 2020, and between the time when the police returned to D those around 600 of the 1,000 Subject Bitcoins and the date of the Interim-interim Injunction, there was another gap of about 10 months. As revealed by D’s disclosure pursuant to the Interim-interim Injunction, he still has about 400 of the Subject Bitcoins with him. 74.Whilst D has indeed since March 2018 alienated around 600 of the 1,000 Subject Bitcoins, this is not a case in which D has rushed off dissipating all the Subject Bitcoins and rendering them beyond P’s reach. H. Balance of convenience, fair and convenience, and fortification 75.Whilst it should be acknowledged that balance of convenience, fair and convenience, and fortification are conceptually distinct matters, very often the relevant considerations overlap. For example, when balancing the convenience, one needs to consider whether the defendant would if need be adequately compensated under the plaintiff’s undertaking as to damages, which question of adequacy in turn is related to the question of fortification. 76.On the facts of the case, and given the issues which parties have raised, I am of the view that balance of convenience, fair and convenience, and fortification may best be considered together in the round. 77.400 of the 1,000 Subject Bitcoins which D still have can be traced back to P. They are part of the very subject matters of P’s claim. 78.I have found that P has established serious issues to be tried. 79.I see in the circumstances good reasons for those 400 of the Subject Bitcoins be preserved. 80.The granting of interlocutory injunction, the requirement to give cross-undertaking for damages, and whether the plaintiff is good for the undertaking are all interlinked. As Ribeiro J (as the Permanent Judge then was) sitting in the Court of Appeal explained in Wah Nam Holdings Co Ltd v Excel Noble Development Ltd [2000] 3 HKC 118 at 126B, intrinsic to the nature of an application for interim restrain is the grant of such relief without the merits having been canvassed. As a safeguard for the defendant which enables the court to do that, the plaintiff will, save in extremely rare cases, be required to provide a cross-undertaking as to damages. That requirement is a necessary part of the mechanism for granting injunctions. 81.Not all cross-undertakings as to damages are required as a rule to be fortified. Fortification is not the necessary starting point. Mr Man accepts that. As has been usefully summarized by Anthony To J in Sun Yan v Superb Jade Ltd (HCA 813/2014, 23 October 2015) at [11], and recently applied by Deputy Judge Douglas Lam SC in Banco De Chile v Yong Ming Tai Technology Trade Co Ltd [2019] 1 HKLRD 1290 at §15, that:
82.Whilst fortification is not the necessary starting point, and whilst noting Wah Nam is a case on material non-disclosure of the plaintiff’s financial position in the context of the adequacy of its undertaking as to damages, I am of the view that the approach suggested by Ribeiro J Wah Nam at page 129C-D is equally valid when deciding whether it is just and proper to order fortification. The approach is whether a plaintiff’s financial position is such that, viewed fairly, may be said to raise realistic doubts as to the plaintiff’s ability to honour the cross-undertaking. 83.In that same context, the absence of financial disclosure by a plaintiff might also entitle adverse inference as to his ability to meet his cross-undertaking to be drawn – see Banco De Chile above. 84.I have observed and found that whilst P has established serious issues to be tried, no good arguable case has been established. This is hence not a case in which the merits of P’s case are such that it is not just and proper to make the protection of a meaningful undertaking available to D. 85.P has described herself as a housewife[19]. 86.D has in his affirmations on at least two occasions raised the challenge that P had not adduced any evidence to show that she had the financial means to satisfy the undertaking[20]. 87.Despite such express challenges, P has still chosen not to. In P/Aff5 filed specifically in opposition of the 2nd Fortification Summons, P says that it is not just and fair for fortification to be ordered as a pre-condition to allowing the Injunction Summons in light of her strong case against D of fraudulent misappropriation. I have expressed my view on her case. She further criticizes D’s application by saying that there is “[no] intelligent estimate of [D’s] loss”. There remains no evidence on her financial worth or means to satisfy her undertaking. 88.In his oral reply:
89.On the evidence before me, there is no evidence showing that P is good for her undertaking. She has chosen not to adduce any evidence in that regard despite express challenges. The evidence, viewed fairly, at least raises realistic doubts as to P’s ability to honour the cross-undertaking. 90.I repeat the matters I note and observe in §§70-74 above, which have to be noted in D’s favour. 91.Mr Li then relies on Banco De Chile and submits in effect that irrespective of P’s financial position, D has failed to show the likelihood of a significant loss arising as a result of the injunction. In that regard, he also relied on of JSC v Pugachev [2016] 1 WLR 160 (CA), wherein Lewison LJ observed at §99 that:
92.In D/Aff5, D says that he would invest his assets in different products, sectors and geographical locations for diversification. He has given “some examples of [his] investments”, namely an overseas real property in Brisbane purchased in May 2018, investments in 2 unit trust funds in July 2021, certain pre-IPO investments in Great Health Investment Limited Partnership and We Doctor Holdings Limited (“We Doctor”), investment in Creator Universal Limited, Kingly Interior Design Limited, in the film industry, and an aborted contemplated investment in a cryptocurrency fund known as VQR. He has provided some particulars on some of those investments. 93.Mr Li, relying on P’s evidence in P/Aff5, criticizes those investments, primarily on the absence of any particulars on their returns. He also queries the genuineness of D’s investments in We Doctor (as the related IPO application had lapsed) and VQR (as its founder had been convicted and sentenced for fraud). In reply, D in D/Aff6 says that the mere fact that We Doctor’s previous IPO application was unsuccessful does not detract from the nature of his pre-IPO investment, and that recent news suggest that We Doctor is looking for alternative listing options. In relation to VQR, D says that he was mistaken about the name of the fund involved, but that the point remains that he has always been looking for investment opportunities. 94.Mr Li also criticizes those investments for their timing, on the basis that they all took place after the alleged misappropriation of the Subject Bitcoins. No authority has however been placed before me which shows the relevance of the criticism. If D’s defence turns out to be accepted by the court, he would have a case for seeking damages arising from his inability to invest the Subject Bitcoins as a result of any interim injunction. 95.Mr Man has referred this Court to §§52 and 53 of Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2015] 1 WLR 2309 where Tomlinson LJ observed that:
96.On the evidence before me, I am satisfied that D has shown a likelihood of a significant loss arising as a result of the Injunction, to the threshold of “a good arguable case”. 97.To the above I add this. I am discussing this question of fortification in the context of a proprietary injunction covering the number of the Subject Bitcoins which D still retains. I note the discussion on symmetry. On the facts of this case, given my view on the evidence, I am not concerned with the interesting issue as to whether D only needs to surmount the threshold of “serious issue to be tried”. 98.On the evidence before this court, having balanced the convenience, and having looked at the macro picture of overall justice, I am of the view that this is an appropriate case to order some fortification of P’s undertaking for damages. 99.That leaves the issue of the amount. 100.A number of factors (both on facts and law) have been urged upon me:
101.Another difficulty this court faces is the values of Bitcoins, which fluctuate significantly. 102.I note §18 of D/Aff5. He is there dealing with the scenario of this Court granting an injunction covering those of the Subject Bitcoins which D still has (which according to D/Aff2 and D/Aff3 are 364.46378963 Bitcoins). He values them at around USD14.5 million. Taking 5% per annum as the current best lending rate, and assuming 2 years between the injunction and trial, he seeks fortification in the amount of USD1.45 million. 103.That amount of USD1.45 million is calculated on the basis of D borrowing the full USD14.5 million for 2 years. However, the investment pattern D has demonstrated does not show any pattern of him investing all the assets he has had. As submitted by Mr Li, according to the evidence, the value of the Subject Bitcoins on 5 March 2018 was around USD11.6 million. The total value of the investments D has disclosed in D/Aff5 is in the region of HK$30 million. That represents strictly in terms of arithmetic calculation about one third of the total value of the Subject Bitcoins. That however is not entirely accurate given the time period over which those investments were made and the fluctuation of Bitcoins in the meantime. 104.Given the difficulties this Court faces as outline above, noting that any proprietary injunction of the 364.46378963 Bitcoins will keep D from their use, Mr Man’s submissions that D is a businessman in the blockchain industry[25] and that trading in Bitcoins (rather than sitting on it) is the thing he does, that he has previously realized about 64% of the Subject Bitcoins, but noting on the other hand the investment pattern he has shown, and making the best I can an intelligent estimate, I direct that P shall pay fortification to cover the costs for D borrowing 50% of the value of the 364.46378963 Bitcoins for two years, which I round off at HK$5,500,000. I. Disposition of the Injunction Summons and the Fortification Summonses 105.For the reasons set out above:
106.For the sake of completeness and to avoid doubt, I add two matters:
J. The costs of the Variation Summons 107.With the view to the costs of the Variation Summons being dealt with on the papers, parties have (between 3 and 12 May 2022) filed further written submissions. 108.I have summarized above the events leading to the withdrawal of the Variation Summons, and in particular, the difference between Draft Ver.1 and Draft Ver.2. I have also highlighted the scope of the disclosure which P had been seeking. 109.The starting point is that P did not get any of the discovery she sought. This is thus not even those cases in which an applicant withdraws an application because he has or has substantially, for example from the materials filed by the respondent in opposition, got what he set out to obtain, so that there is no longer any need to keep the application going. 110.P’s main complaint is that in D/Aff2, the disclosure he made was ambiguous. In particular, P complained that when disclosing the whereabouts of those Subject Bitcoins that remained with him (except 3.4920), he disclosed only three codes which he described as “public key”. Upon receipt of those codes, P engaged an expert called Dr Chow to investigate into the matters. I refer to the affirmation of Edwin Yun of 22 November 2021 filed on behalf of P in support of the Variation Summons. It is said therein that the “public keys” do not of themselves allow for the monitoring of the disposal of the Subject Bitcoins. It is also said therein that to P’s surprise, Dr Chow discovered that the Bitcoins balances associated with 2 of the disclosed “public keys” were zero. It is then said that D has been disposing of some of the Subject Bitcoins. 111.As later revealed, those “public keys” which D disclosed in D/Aff2 are actually “extended public keys”. 112.There is no clear expert evidence before me as to what the differences are between “public keys” and “extended public keys”. I gather from the submissions that an “extended public key” corresponds to multiple Bitcoins addresses. What appears has happened is that when Dr Chow investigated the “public keys” disclosed by D in D/Aff2, he did not investigate all the addresses that correspond to them, and hence the inaccurate results he obtained. Those of the Subject Bitcoins which D retains are still there. 113.However, irrespective of whether it might be said to be misleading to use the term “public key” as opposed of “extended public key” in D/Aff2, Ho & Ip on D’s behalf in the course of correspondence by letter of 4 November 2021 (the “4/11 Letter”) informed P through her legal advisers that:
114.As has been pointed by Ms Ho in her written submissions of 10 May 2022, the Variation Summons was only issued on 22 November 2021, well after the 4/11 Letter. 115.D/Aff3 has added little beyond D/Aff2 and the 4/11 Letter combined. 116.As I have summarized above, it has been accepted that D has disclosed most of the key information which P once claimed had been missing. 117.On the facts of this case, I am not satisfied that P has discharged the burden of demonstrating that she had meritorious grounds to take out the Variation Summons in the first place – see Cheng Siu Fai v Swenson Global Opportunities Funds SPC [2021] HKCA 1005 at §30 (Kwan VP). 118.I order that P should bear the costs of the Variation Summons. 119.I add that this case is a useful illustration that in future applications of similar natures, when it comes to the scope of discovery in aid concerning the whereabouts of digital assets, cryptocurrency in particular, it may be necessary to specify with more technical accuracy the information that has to be disclosed. Whilst discovery is not a game of words, it is only fair that the discovery duty, backed up by pain of sanction, should be clear and unambiguous. Such clear delineation will also avoid disputes, save costs, resources, and court time. K. Overall costs 120.On the question of costs, I make the following orders. 121.In relation to the Injunction Summons, a costs order nisi, that:
122.In relation to the Fortification Summonses, a costs order nisi, that:
123.In relation to the Variation Summons, a costs order (not nisi) that P shall bear the costs of the same. 124.For all three sets of costs, there be certificate for 2 counsel. 125.Given the prospect that certain of the costs are to be costs in the cause (albeit of specific parties), and that even the costs of the Variation Summons would require apportionment, I am not at this stage minded to order summary assessment. 126.Subject to any application for variation in the meantime, the costs orders nisi are to become absolute within 14 days. Any application for variation may be made to this court by letter directly, upon receipt of which this court will hand down further directions. Agreed proposed directions are encouraged.
Mr Laurence Li SC, leading Mr Foster Yim and Mr Jasper Wong, instructed by Edwin Yun & Co, for the Plaintiff Mr Bernard Man SC, leading Ms Vivian Henrietta Ho and Mr Jonathan Ng, instructed by Ho & Ip, for the Defendant [1] There is a discrepancy amongst the pleadings, affirmations and other documents as to whether the number of Bitcoins concerned are 999.9000261 or 999.9900261. I will adhere to the latter, as that is the number that appears on the Interim-interim Injunction. [3] Of 18 December 2019, 18 December 2020, 30 September 2021, 28 March 2022 and 7 April 2022. [4] Of 30 September 2021 and 28 March 2022, the second of which supplements merely his declaration as an expert. [5] Of 13 April, 21 October and 9 December 2021, and 11 February and 16 March 2022. The 6th one has yet to be signed, and is exhibited to the 5th affirmation of Yip Kim Wing of 14 April 2022. [6] In the form of 3 reports adduced as D as “LWH-21” (“Jeffries/Rep1”), “LWH-19” (“Jeffries/Rep2”) and “LWH-30” (“Jeffries/Rep3”). [7] LWH-11. [8] LWH-4. [9] P/Aff4 at §5.8. [10] By letter of 6 January 2021, the then solicitors for P wrote to solicitors for D (“Ho & Ip”) and sought D’s consent in amending the draft order annexed to the Injunction Summons to include a proprietary injunction. By letter of 25 April 2022 (after the first day of the present hearing), the current solicitors for P revealed to Ho & Ip records suggesting that D’s then solicitors had orally indicated that no consent summons contemplated in the letter of 6 January 2021 was required to be taken out. [11] See Dr Chow’s report of 4 March 2019. [12] [C/436]. [13] §62(c) of his said report. [14] [121]. [15] See §§156-160 of P/Aff3, and YYY-34 at [1168 – 1200]. [16] §75 of the Reasons for Verdict [D/861]. [17] §93 of the Reasons for Verdict [D/866-867]. [18] Exhibited as YYY-26 [E/1029-1071]. [19] §1 of the Statement of Claim and §6 of P/Aff1. [20] §138 of D/Aff1 [A/133], and§22 of D/Aff3 [G/1412]. [21] Citing Hui Chi Ming v Koon Wing Yee & Ors [2001] 2 HKC 185 at §§44-45. [22] [E/1135]. [23] [A/167]. [24] And see also Taihan Global Holdings Limited v Lau Siu Ming, (unreported, HCA 1687/2011, 25 November 2011) per DHCJ Lok (as he then was) at §18. [25] Defence §§3-4 [A/43]. | |||||||||||||||
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