Target Insurance Co Ltd v. Ng Yu and Others

HCA 305/2022

[2023] HKCFI 7

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 305 OF 2022

________________________

BETWEEN

________________________

Before:  Deputy High Court Judge Burns SC in Chambers

Dates of Hearing:  5 December 2022, 6 December 2022

Date of Decision:  3 January 2023

________________________

DECISION

________________________

INTRODUCTION

1.On 25 March 2022, on the ex parte application of the Plaintiff (“P”), S.T. Poon J made an order granting P (a)  a proprietary injunction as against the 2^nd Defendant (“D2”), the 3^rd Defendant (“D3”), the 4^th Defendant (“D4”)  and the 5^th Defendant (“D5”)  to preserve assets over which P has asserted a proprietary claim; (b)  as against the 1^st Defendant (“D1”)  and the 6^th Defendant (“D6”), a Mareva injunction; (c)  ancillary relief and (d)  leave to serve the writ on D2, D3 & D4 out of the jurisdiction (“the Ex Parte Order”).

2.By inter partes summons issued by P on 28 March 2022, an order is sought for the continuation of the ex parte injunctions.

3.By summons issued by D1, D3 & D4 on 21 April 2022, an order is sought for the discharge of the Ex Parte Order as against those Defendants.

4.On the hearing of the inter partes summonses before me on 5 & 6 December 2022, whilst P on the one hand and D1, D3 & D4 on the other were represented by leading and junior counsel, D2, D5 & D6 were unrepresented and did not attend.

THE PARTIES

5.P is an authorized insurer in Hong Kong and is a wholly owned subsidiary of Target Insurance (Holdings)  Ltd (“TIHL”), a company listed on the Main Board of the Hong Kong Stock Exchange.

6.D1 has, since 13 January 2020, been a substantial shareholder of TIHL, holding 22.19% of the issued shares; he held the position as Chairman and Executive Director of TIHL from 23 December 2020 until his resignation on 27 May 2022 and held the position as Executive Director of P from 17 July 2021 to 19 January 2022.

7.According to information provided by D1 to the Insurance Authority (“the IA”)  by Notice dated 8 September 2021 as proposed “Controller” of P, served pursuant to section 13B(2)(a)  of the Insurance Ordinance, cap 41 (“Form A”):

a.  D2 is a Cayman company, the management shares of which are wholly owned by D1.

b.  D3 is a BVI company of which D1 is the sole director and its 100% shareholder.

c.  D4 is a Singaporean company of which D1 is a director and its 100% shareholder

d.  D5 is a Hong Kong company of which D1 is a director and its 100% shareholder

8.D6 was at the times material to these proceedings a director of Nerico Brothers Limited (“NBL”), a brokerage firm with which P maintained a managed account.

THE FACTS

9.The basic facts can be stated shortly.

10.In or around June 2020, P opened a managed account with NBL, for the trading of securities and spot foreign currency exchange (“Spot Forex”). At the material time, P’s point of contact at NBL was D6.

11.By October 2021, P had transferred approximately 90% of its cash (“P’s Funds”)  to NBL. This caused concern to the IA, largely by reason of the apparent concentration of a large part of P’s available cash on a single type of investment and with a single service provider. As a consequence, the IA requested P to call for the return of these funds (or a substantial part thereof)  to P pending a full review. However, apart from 2 sums of US$2.3 million and US$29.5 million, returned on 1 November 2021 and on 16 November 2021 respectively, no other funds were returned by NBL to P and inconsistent explanations were given by NBL as to the whereabouts of the funds.

12.On 4 January 2022, the IA wrote to P stating that it had discovered that P’s Funds had been transferred to and were held by Amber Hill ES Currency Arbitrage Fund SP (“Amber Hill ES Fund”), a segregated portfolio owned by D2.

13.In these circumstances, on 7 January 2022, the IA exercised its powers under the Insurance Ordinance and appointed Derek Lai and Forrest Kam, both of Deloitte Touche Tohmatsu (“Deloitte”)  as the joint and several managers of P (“the Managers”)  to carry out investigations into P’s affairs including as to the whereabouts of P’s Funds.

14.Despite repeated requests made by the Managers, NBL continued to fail to return the amount standing to the credit of P’s account with NBL which left the amount of approximately US$154,000,000 still standing to the credit of the account (“the Sum”).

15.Deloitte’s investigations revealed that:

a.  The Sum was transferred from NBL to a DBS account of Amber Hill ES Fund;

b.  The purported purpose of the transfers of the Sum from NBL to Amber Hill ES Fund was to subscribe for various products offered by D2, and

c.  The Sum was subsequently transferred from the DBS account of Amber Hill ES Fund to an account of D2 at Malayan Banking Berhad, Singapore and to accounts of D3, D4 & D5.

16.Solely for the purposes of the hearing of these applications, D1, D3 & D4 accepted that the Sum was transferred as Deloitte’s investigations indicated it was, ending with D2, D3, D4 & D5.

17.However, in January, 2022, TIHL and Amber Hill Financial Holdings Limited issued announcements stating:

a.  The funds placed by P with NBL had been “maintained in cash form solely for conducting spot foreign currency trading”, and

b.  As purportedly confirmed by NBL, none of such funds had been deposited into the Amber Hill ES Fund.

18.After the Managers were appointed, they procured P to present a petition for the winding up of NBL and to apply for the appointment of provisional liquidators. In resisting the application for the appointment of provisional liquidators, D6 made an affirmation deposing that:

a.  The Sum was used to purchase liquidity provider units (“LP Units”)  in a Cayman Fund named Four Dimensions Global Strategy Fund (“Four Dimensions”)  from Amber Hill ES Fund;

b.  The purported reason why NBL purchased LP Units from Amber Hill ES Fund rather than in the open market was that Four Dimensions is allegedly a closed end hedge fund in which public subscription is not possible;

c.  NBL allegedly held an account with Four Dimensions in respect of which the closing position as at 18 November 2021 was US$202,170,171 (of which the Sum was said to form part);

d.  NBL was unable to withdraw the Sum from Four Seasons because of Cayman regulatory requirements;

e.  The Sum has all along been with Four Seasons (not with Amber Hill ES Fund)  and was used to purchase shares held by Amber Hill ES Fund (as seller)  in Four Dimensions.

19.6 “Share Unit Transfer Forms” were exhibited to D6’s Affirmation. The first 5 of these forms (dated between 7 January 2021 and 27 August 2021)  were purportedly concerned with the transfer by Amber Hill ES Fund to NBL of units in Four Dimensions whilst the 6^th form (dated 16 November 2021)  was purportedly concerned with the transfer by NBL to Amber Hill ES Fund of US$29,500,000 worth of units in Four Dimensions (i.e. the same amount as that which was returned to P on 16 November 2021 – see paragraph 11 above).

20.At the hearing of the application for the appointment of provisional liquidators over NBL, counsel for NBL informed the court that units in Four Dimensions had been subscribed for by NBL for the purpose of hedging its own risk of carrying out forex transactions for P.

21.The deputy judge hearing P’s application for the appointment of provisional liquidators over NBL found the evidence of D6 unbelievable, rejected the submissions made on behalf of NBL and made an order that provisional liquidators be appointed.

22.On the basis of investigations conducted by Deloitte, it would appear that D6’s suggestion that the Sum has all along been with Four Dimensions does not withstand scrutiny and that the authenticity of a number of the documents he produced, purportedly evidencing transactions between NBL and the Amber Hill ES Fund, is doubtful. In particular:

a.  The forensic examination of some of the documents produced by D6 show that they were created long after the purported dates of the transactions to which they relate;

b.  a power point presentation purportedly given by “Hermann” of Four Dimensions to introduce Four Dimensions to NBL was in fact authored by D6 himself;

c.  Emails purporting to be from D6, “Maria” (supposedly, the introducer of Four Dimensions to D6)  and “Hermann” contain similar grammatical mistakes, suggesting that they were all authored by the same person;

d.  According to the former fund administrator of Four Dimensions, NBL was never on its investor list;

e.  The document provided by D6 purporting to be Four Dimensions’ Private Placement Memorandum makes no mention of LP Units or forex trading investments (which D6 claimed were acquired to provide risk hedging for NBL). On the contrary, it expressly stipulates that Four Dimensions should not invest in foreign exchange;

f.  Legal advice concerning the regulatory regime in Cayman has shown that the protestation that Cayman regulations are responsible for the hold up of any transfer of funds from Four Dimensions is likely to be false;

g.  The responses from Four Dimensions to Deloitte’s enquiries and questions raised have been evasive.

23.In TIHL’s appeal to the Insurance Appeals Tribunal against the IA’s appointment of Managers over P, D1 made several statements which bear on the issues which arise in these proceedings. In D1’s 4^th statement dated 18 March 2022:

a.  D1 referred, inter alia, to (i)  a statement provided by D6, giving an account of how P did business with NBL and the various transactions carried out by NBL with its counterparts which D1 said were not known to P and (ii)  a statement provided by Mr. Lin Feng of TIHL explaining P’s “stance’ that the “NBL money” was held by Four Dimensions and was pending return subject to regulatory issues.

b.  D1 stated that he had no knowledge of the acquisition by P of LP units and referred to D6’s explanation that “…NBL in fact had bought from Amber Hill Arbitrage Fund the [LP Units] offered by Four Dimensions. Amber Hill Arbitrage Fund was holding Four Dimensions LP units but to the best of my knowledge Amber Hill Arbitrage Fund had never issued its own liquidity provider units.”

c.  D1 stated that the subscription forms which D6 exhibited to his affirmation filed in P’s application for the appointment of provisional liquidators of NBL (see paragraph 18 above), were “……not accurate on their face because, as confirmed by [D6], the actual liquidity provider units are from Four Dimension (sic)  and not Amber Hill [ES Fund]. I have made enquires with Ms Maria-Theresa Stelzig (“Maria”), a director of the Amber Hill [ES Fund] who provided those forms to NBL, and understand that those forms served as instructions for the Amber Hill [ES] Fund’s administrator to accept incoming monies from NBL”.

P’S CASE

24.P alleges that it is the victim of a “massive fraud” perpetrated by D1 and D6, utilising various corporate entities including NBL (as first layer recipient), D2 (as second layer recipient)  and D3, D4 & D5 (as third layer recipients), resulting in the misappropriation of the Sum.

25.P’s case which was advanced during the hearing of these applications was that P never authorized NBL to invest any part of its funds in the Amber Hill ES Fund and had never authorized subscriptions in LP Units.

26.In circumstances where there is a good arguable case that all the corporate entities (including NBL and D2, D3, D4 & D5)  are corporate vehicles of D1 (and D1 is the common denominator in all the entities)  the compelling inference is that NBL was controlled and used by D1 and D6 to perpetrate the fraud by misappropriating the Sum from P.

27.In support of the proposition that D1 controlled and used NBL to perpetrate the alleged fraud, the following were relied upon:

a.  D1 had “relations” with NBL going back to late 2019 as indicated by an announcement by Amber Hill Financial (a company in which D1 is a 72.75% shareholder through D3)  to the effect that D1 had “acquired” NBL sometime between 2017 and 2019 (albeit that the Managers’ understanding is that the transaction did not complete);

b.  D1’s Form ‘A’ signed by D1 suggests that D1 is sole director and 100% shareholder of a company by the name of “AH Holdings international Limited (formerly known as Nerico Brother)”, and

c.  NBL previously acted for entities controlled by D1.

28.In trying to obstruct P’s recovery of the Sum and conceal its true whereabouts, D6 put forward a false story (endorsed by D1), to the effect that the Sum had been deposited with Four Dimensions.

29.In the premises the monies which P paid to NBL were impressed with a constructive trust in favour of P (see Westdeutsche Landesbank Girozentrale v. Islington London Borough Council[1] at 716C-D)  as well as being the subject of an express trust by virtue of the fact that the Client Agreement between P and NBL refers to NBL as being P’s agent and trustee.

30.The various purported contractual documents were used as a legal façade and are vitiated by the alleged fraud since “fraud unravels all”: China Agri-Products Exchange Ltd v Wang Xiu Qun[2]; HIH Casualty and General Insurance Ltd v Chase Manhattan Bank[3], at [15] & [16].

31.By reason of the alleged unlawful conspiracy between D1, D6 and the various corporate entities (including NBL and D2, D3, D4 & D5), they are all jointly and severally liable for the entirety of the sum allegedly defrauded: South American International Bank Curacao NV v Ying Xin Trading  Co Ltd[4], at [24].

32.Consequently, P is entitled to both proprietary and personal remedies against the alleged wrongdoers: FHR European Ventures LLP v Cedar Capital Partners LLC[5], at [7]; Wismettac Asian Food Inc v United Top Properties Ltd[6], at [15].

THE MAIN DEFENCES OF D1, D3 AND D4

33.The main defences advanced on behalf of D1, D3 and D4 are as follows:

a.  P’s case is nor made out as a matter of law, in particular, P has no proprietary interest in the Sum and/or its “traceable proceeds”. Hence there could not have been any misappropriation by D1 of the same and, in any case, the Managers have elected not to rescind the contracts for the purchase of LP units and cannot therefore assert any proprietary claim over the Sum.

b.  D1’s alleged involvement in the alleged fraud is at best speculative.

c.  The funds transferred by D2 to D3 and D4 were legitimate transactions and consequently D3 and D4 are bona fide purchasers for value without notice.

THE 1^ST DEFENCE – P’S CASE IS NOT MADE OUT AS A MATTER OF LAW

34.Notwithstanding the case advanced on behalf of P on the hearing of these applications to the effect that NBL was the 1^st layer recipient in the alleged fraud, it is submitted on behalf of D1, D3 and D4 that the validity of the transfers of the Sum by P to NBL for investment had never previously been challenged and indeed that there was no basis on which they could properly be challenged or impugned.

35.D1, D3 & D4 say they had no knowledge of how NBL invested the Sum on P’s behalf. However, on the assumption that LP Units were acquired pursuant to the Subscription Agreements, it is argued on their behalf that such investment was permissible pursuant to the mandate given by P to NBL under the client agreement which governed the managed account opened by P with NBL, namely that NBL was entitled “at its discretion effect [Foreign Currency Exchange] and leveraged [Foreign Currency Exchange] transactions through its affiliate or third party.”.

36.If therefore subscriptions had been made by NBL under the Subscription Agreements in return for LP Units it is submitted that the Sum would have been paid to D2 as consideration therefor and NBL would now be holding such units on behalf of or on trust for P.

37.D1, D3 & D4 contend that the Managers have never suggested that the LP Units which were the subject of the Subscription Agreements do not exist or are not owned by P and point to passages in the 1^st Affirmation of Derek Lai in support of P’s ex parte application as at least impliedly acknowledging that they do. They add that there is no suggestion or evidence that the LP Units are worthless.

38.It is also submitted on behalf of D1, D3 & D4 that the Managers have made an election not to rescind the Subscription Agreements and cannot therefore assert any proprietary interest in the Sum which was the price paid by NBL on behalf of P in return for the LP Units.

39.It is further argued that, in the application for the appointment of provisional liquidators and in the appeal before the Insurance Appeal Tribunal, the characterization by the Managers of the Sum as being NBL’s asset is inconsistent with the case advanced on the present application and that it constitutes an election from which P/the Managers cannot resile.

2^ND DEFENCE – NO PROPER INFERENCE CAN BE DRAWN AGAINST D1 THAT HE WAS INVOLVED IN THE ALLEGED FRAUD

40.It is submitted on behalf of D1 that an inference of fraud should not be drawn unless it is compelling: Nina Kung v. Wan Din Shin[7] and, in particular that D1’s alleged connections with D2, D5, D6 and NBL cannot provide the proper basis for any such inference.

41.D1 contends that no proper inference can be drawn against him that he was involved in the alleged fraudulent scheme by reason of the following:

a.  D1 has been open about his connections with D2 to D5 (eg. the filing of Form A). It is therefore inconceivable that he would have used entities which are easily traceable to himself to perpetrate any fraud;

b.  there is no evidence that D1 ever had any control or influence over NBL’s investment decisions or was ever in a position to give directions to NBL as to the disbursement of the Sum;

c.  the 1^st 2 Subscription Agreements (dated 7 January 2021 and 7 July 2021)  were entered into before D1 became a director of P at a time when Dr. Haywood Cheung was chairman and executive director of P;

d.  there are no grounds to contradict D1’s statement that he was not entitled to and did not exercise any influence over the operations of either D2 or D3 and no grounds to infer that he did;

e.  D1 made consistent and responsible efforts to facilitate the recovery of the Sum from NBL, and

f.  The notion that D1 misappropriated P’s funds is improbable bearing in mind that, in early 2021, he injected HK$400m into P and on 24 February 2022 one of D1’s wholly owned companies granted a revolving facility of US$750 million to TIHL.

3^RD DEFENCE – D3 & D4 AS BONA FIDE PURCHASER WITHOUT NOTICE

42.The case of D3 and D4 is that they were bona fide purchasers for value without notice in respect of the funds transferred to them in that:

a.  the transfers to D3 on 10 August and 15 October 2020 were attributable to the redemption of “Amber Hill ES Currency Arbitrage Fund SP – Class c Shares – Series 10”, and

b.  the transfers to D4 on 12 January, 21 January, 21 July and 15 September 2021 were attributable to deposits allegedly made by D2 which were subsequently withdrawn by D2.

PRINCIPLES FOR THE GRANT OF A PROPRIETARY INJUNCTION

43.The principles applicable to the grant of a proprietary injunction are well established. These are as follows:

a.  It must be shown that there is property which is bona fide the subject matter of the cause or matter;

b.  the court must be satisfied that something ought to be done for the security of the property which may involve showing that damages may not be an adequate remedy;

c.  there is however no need to show risk of dissipation;

d.  even if there is delay in making the application which would justify the refusal of a freezing injunction, a proprietary injunction may nevertheless be granted;

e.  an enquiry into the relative merits of rival claims is not necessary;

f.  in respect of the merits of the claim, the party seeing the preservation order need only show that there is a serious issue to be tried on the merits.

See: Pacific Bulk Investment Ltd v. Chu Kong & Ors[8], at [41] – [42]

44.The usual American Cyanamid principles apply to an application for a proprietary injunction, i.e. whether there is a serious issue to be tried; whether damages are an adequate remedy and the question as to where the balance of convenience lies. As regards the 1^st of these (whether there is a serious issue to be tried), “If the opposing party seeks to show that there is no serious issue to be tried, the threshold is high, as it would be necessary to demonstrate that the claim should be struck out.” See Toyota Boshuku Europe NV v Hong Kong Longshenyuan International Trade Ltd[9] at [19] – [20].

P’S APPLICATION FOR CONTINUATION OF THE PROPRIETARY INJUNCTION

45.I am satisfied that, even if the initial transfer of funds from P to NBL is unimpeachable, the issue as to whether the transactions whereby the Sum was transferred into the account of Amber Hill ES Fund and then into the accounts of D3, D4 & D5 was pursuant to a fraudulent scheme is a serious issue to be tried. Certainly, in my view the surrounding circumstances which I have summarized above (in particular the discredited evidence of D6)  suggest that the transfer of the Sum to those defendants was as a result of a dishonest or fraudulent scheme. The documentation relied on by the defendants purportedly to justify the transactions in question will obviously have to be scrutinized and tested by cross examination at the trial of this action.

46.Moreover, notwithstanding passages in the 1^st affirmation of Mr Lai which could be interpreted as an acknowledgment that the LP units exist, the fact is that, despite investigations conducted by Deloitte, they have not been identified or found and there must be real doubt as to whether they do indeed exist or whether the Sum was in fact used to purchase any such units. The question as to whether the purchase of LP Units fell within NBL’s mandate as per the agreement between P and NBL governing P’s managed account and in particular whether LP Units fall within the description “leveraged forex transactions” is in my view another serious issue to be tried.

47.At this stage of the proceedings therefore it would not be right to come to any firm conclusion as to whether the Sum was in fact paid for LP Units or whether LP units were in fact acquired, whether pursuant to the Subscription Agreements or otherwise. Even if the genuineness of the Subscription Agreements were to be accepted, I do not accept the argument that P has lost any proprietary claim over the Sum by not rescinding those agreements. Quite apart from anything else, P was not, on the face of those agreements, a party thereto. Further, I do not accept the argument that the proprietary claim now advanced by P is inconsistent with the characterization for the purposes of the application for the appointment of provisional liquidators of the Sum being an NBL asset - it is perfectly possible for the legal title in the Sum being vested in NBL whilst the beneficial ownership of it rested with P. After all, the agreement between P and NBL in respect of P’s managed account referred to NBL as being P’s trustee.

48.It is well established that where property is obtained by fraud, equity imposes a constructive trust on that property.

49.Even if it could be said that the recipient of property obtained by fraud was not a party to the fraud the defrauded claimant has a tracing remedy if the recipient’s state of knowledge is such as to make it unconscionable to retain the money. In this respect knowledge does not have to be acquired at the time of receipt; it can be acquired subsequently while the money is still in the recipient’s hands: Guarantee Bank and Trust Co v ZZZIK Inc Ltd[10], at [28] – [34].

50.Unless and until D2, D3, D4 or D5 can show that they changed their position in good faith or that they were bona fide purchasers for value without notice, each of those defendants would hold the respective traceable proceeds of the Sum that it had received on trust for P. Such explanations as have been given by D1 as to the circumstances in which D2, D3, D4 and D5 received the funds in question and the rationale for such receipt will need to be tested at trial after cross examination.

51.I am satisfied that damages would not be an adequate remedy against the corporate defendants. This being a case of fraud, there is in my view a risk that their assets may well be depleted or dissipated away and the consequent risk of P ending up with an empty judgment.

52.I have also concluded that the balance of convenience is in favour of continuing the proprietary injunctions as against D2, D3, D4 and D5 which will have the effect of maintaining the status quo pending trial and it is therefore right to continue those injunctions against them. In this respect I have considered the submissions made on behalf of D3 and D4 concerning the prejudice they claim they will suffer by reason of the continuation of the injunctions against them but in my view this is outweighed by the potential prejudice which may be suffered by P should the injunctions be discharged.

53.It is submitted on behalf of D3 and D4 that the injunctions should be discharged on the grounds that there was no justification for making an ex parte application (no urgency and no case for secrecy)  and on the grounds of material non disclosure. I am not persuaded by these submissions.

54.I do not consider that there was inordinate delay; the Managers were only appointed in January 2022. Time was needed to conduct investigations in this matter. The Managers presented a winding up petition against NBL and applied for the appointment of provisional liquidators in February 2022. The ex parte application in March 2022. Plainly complex questions of fact and law were involved in all of these tasks which were time consuming. In any case, I do not regard delay by itself as a bar to proprietary relief: see China Medical Technologies, at [55].

55.The duties which fall upon an applicant for an ex parte injunction of disclosing facts material to the application and the court’s weighing operation are well established. I will not repeat the them or the relevant principles here. As regards D3 & D4, complaint is made that P/the Managers did not draw the Court’s attention to the fact that the Subscription Agreements had not been rescinded by the Managers or that there was an argument that P had no proprietary interest in the Sum. I have addressed these issues above. In view of the fact that P was not a party to the Subscription Agreements I do not consider that the issue would have been relevant to the weighing operation which the court was called upon to make in deciding whether or not to grant the order sought and it was not therefore unreasonable for P not to have drawn attention to this point on the ex parte application.

56.In all the circumstances I have concluded that the Proprietary Injunctions granted ex parte should continue.

PRINCIPLES FOR THE GRANT OF MAREVA RELIEF

57.In order to invoke the jurisdiction of the court to grant a Mareva Injunction, a plaintiff has to satisfy the court that:

a.  There is a good arguable case;

b.  There is a real risk of dissipation or removal of assets so as to render any judgment nugatory;

c.  The balance of convenience lies in favour of granting a Mareva Injunction, and

d.  There are assets within the jurisdiction.

See Hong Kong Civil Procedure 2023, Volume 1, §29/1/65

58.A “good arguable case” is shown if the case is more than barely capable of serious argument yet not necessarily one having a higher than 50% chance of success: Nimemia Maritime Corporation v Trave Schiffahrtsgesellschaft GmbH[11]

THE APPLICATION FOR THE CONTINUATION OF THE MAREVA INJUNCTION AS AGAINST

59.I have no hesitation in concluding that there exists as against D6 a good arguable case for the proposition that either he was the architect of a dishonest scheme for the misappropriation of the Sum or that he dishonestly assisted in it or that he was part of a conspiracy to misappropriate the Sum. In my view his discredited evidence to which I have referred above negatives any cogency that might otherwise have attached to his defence.

60.As is now well established, the requirement of showing a risk of dissipation is very often discharged by means of “inferential evidence” including evidence of “low commercial morality” on the part of a defendant which is often inferred where a good arguable case is shown for a claim in fraud or dishonesty: see Pacific Concepts (HK)  Ltd v Michel Brennion[12], at [24] – [25]; Link Fish Import & Export SL v Multiply Import & Export HK Ltd[13] and China Medical Technologies Inc v Samson Tsang Tak Yung[14], at [38] & [48]. I am satisfied that D6’s discredited evidence does suggest low commercial morality on his part and that that is sufficient to give rise to a risk of dissipation of assets.

61.It follows from all of the above, that in my view the balance of convenience lies in favour of continuing the Mareva injunction as against D6.

62.In Mr Lai’s first affirmation in support of the ex parte application, Mr Lai deposed to the fact that D1 maintained at least one Hong Kong bank account, namely an account at HSBC which he identified. On this basis I am satisfied that the requirement of showing that D6 has assets in the jurisdiction has been met.

63.For all the above reasons I have concluded that the Mareva Injunction as against D6 should continue until the trial of this action or until further order.

THE APPLICATION FOR THE CONTINUATION OF THE MAREVA INJUNCTION AS AGAINST D1

64.I am not prepared to draw the inferences P has invited me to draw as to the alleged involvement of D1 in the alleged fraudulent scheme. In the first place, there is little, if anything of substance to link D1 with either NBL or with D6:

a.  P relies on “relations” between D1 and NBL going back to 2019 which are unparticularized save as to a proposed acquisition by D1 of NBL which did not come to fruition;

b.  P also relies on D1’s Form ‘A’, signed by D1, which suggests that D1 is sole director and 100% shareholder of a company by the name of AH Holdings International Limited (“AH Holdings”)  which, according to Form ‘A’ was formerly known as Nerico Brother. However, there must be some doubt as to whether AH Holdings was ever formerly known by any such name (it was submitted on behalf of D1 that it never was and that the suggestion in Form ‘A; that it was an error).  In this respect, there were produced at the hearing (a)  copies of certificates of change of name, showing that Nerico Brothers Limited was formerly named Glory Sky Global Markets and that Glory Sky Global Markets was, previous to that, named Glory Sky Futures Limited and (b)  a certificate of incorporation showing the incorporation of Glory Sky Futures limited on 4 September 2000, and

c.  Lastly P relies on the fact that in July 2020 NBL acted as sole placing agent of Amber Hill Financial in its placing of new shares and the fact that in September 2021 it acted as sole offer agent of Smart Neo (a company controlled by D1)  in its offer to acquire all the issued shares in TIHL (which, in the event, did not proceed).

65.The absence of any evidence of a firm link between D1 on the one hand and either NBL or D6 on the other, let alone evidence that NBL is in any way controlled by D1 or that D1 has any influence on decisions or acts of NBL is in my view a crucial missing link in P’s case that D1 was the mastermind in the alleged fraudulent scheme.

66.Furthermore, (a)  although the announcements made by Amber Hill Financial Holdings in January 2022 (see paragraph 17 above)  were, at best, misleading, and (b)  in his evidence to the Insurance Appeal Tribunal (see paragraph 23 above], he referred to the Four Dimensions story advanced by D6 without demur, there is nothing to contradict D1’s evidence that he was not involved in the management of the Amber Hill entities; was not himself aware of how the Sum was disbursed by NBL or thereafter by D2 and had no knowledge of the acquisition of LP Units.

67.In all the circumstances I am not satisfied that P has shown there to be a good arguable case against D1.

68.On any basis, I am not satisfied that P has shown that, without a Mareva Injunction, there would be a real risk that D1 might dissipate his assets. In this respect I consider that there is some force in the points made on D1’s behalf which I have endeavoured to summarise in paragraph 41 above.

69.For these reasons I decline to grant an order for the continuation of the Mareva injunction as against D1 and have concluded that the injunction which has been granted against him be discharged.

ORDER FOR SERVICE OUT OF THE JURISDICTION ON D3 & D4

70.The gateways on which P relied in seeking leave to serve the writ on D3 & D4 out of the jurisdiction were Order 11 rr 1(1)(b), (f)  and (p).

71.As regards gateway (b)  in respect of the seeking of injunctive relief. However no injunctive relief is expressly claimed in either the Writ or Statement of Claim and it is therefore questionable as to whether gateway (b)  was properly available.

72.I am however satisfied that gateway (f), which is concerned with a claim founded on tort for damages sustained in Hong Kong or resulting from an act committed in Hong Kong, was properly invoked. Both the alleged fraud and the allegedly fraudulent transfers took place in Hong Kong. In AA v Persons Unknown[15], at [68] it was held that the equivalent tort gateway in England was available in respect of a proprietary claim by a victim of a hacking fraud resulting in monies being misappropriated.

73.I am also satisfied that gateway (p), which is concerned with a claim against a defendant as constructive trustee in respect of acts committed within the jurisdiction. In my view, this gateway is fully engaged. In short, as I have found there is a good arguable case for the proposition that P is entitled to assert a proprietary claim and pursue its claims against D3 & D4 as constructive trustees.

74.In the premises, I decline to set aside or discharge the order made for leave to serve the writ out of the jurisdiction on D3 & D4.

CONCLUSION

75.I therefore order that the Injunction Orders granted by the Honourable Mr. Justice S.T. Poon dated 25 March 2022 be continued as against D2, D3, D4, D5 & D6 but discharged as against D1.

76.I will make the following costs order nisi:

a.  D1’s costs of and occasioned by the applications made by P’s summons and by the summons issued by D1, D3 & D4 to be D1’s costs in the cause;

b.  P’s costs of and occasioned by the application made by P’s summons (as regards the orders sought as against D2, D3, D4, D5 & D6)  to be P’s costs in the cause, and

c.  P’s costs of the application by D3 & D4 to set aside the order for service out of the jurisdiction be P’s in any event.

Mr Jonathan Chang SC and Mr Martin Ho, instructed by DLA Piper Hong Kong, for the Plaintiff

Mr Robert Whitehead SC and Mr Jeff Yau, instructed by Lawrence Chan & Co., for the 1^st, 3^rd and 4^th Defendants

The 2^nd, 5^th and 6^th Defendants were not represented and did not appear