Taihei Dengyo Kaisha, Ltd v. Bok Joeng Hong Kong Co Ltd and Others

HCA 88/2022

[2023] HKCFI 2656

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 88 OF 2022

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J U D G M E N T

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A.  Introduction

1.This is the assessment of damages following a Default Judgment entered against the 1^st and 7^th Defendants on 28 July 2022 by K Yeung J (the “July 2022 Judgment”). 

2.The Plaintiff (“P”) is a victim of an email fraud, as a result of which it has paid out a total sum of HK$49,773,787.32 (“Total Sum” or “Defrauded Sum”) to the 1^st Defendant (“D1”).  In this action, P seeks to recover its losses from various defendants.  

3.I am only concerned with P’s claims against the 7^th Defendant (“D7”).  D7 is a second-tier recipient.  Based on the available bank transfer records, D7 received a sum of US$45,000 which are traceable proceeds of the Total Sum (“D7 Sum”), which were transferred from D1’s bank account.  

4.As will be explained below, the key issue in the present assessment is whether P should be entitled to judgment under conspiracy and dishonest assistance against D7 for the Total Sum or only the D7 Sum.  

5.In this action, D7 has not entered an appearance and has not filed any acknowledgement of service. Despite, as I accept, the fact that the notice of this hearing was validly served on D7, D7 did not appear at the hearing.  This Court proceeded with the assessment in D7’s absence. 

B.  Background

B1.  P’s Case

6.Mr Fukura Motohiro (“Mr Motohiro”), a Project Manager of P, is the only factual witness of P.  He has made two witness statements in support of P’s case, the contents of which he adopted in his oral evidence as his testimony.  His evidence, insofar as they relate to factual matters, is clear and supported by contemporaneous documents.  It goes without saying that his evidence is not challenged.  I have no reason not to accept his evidence in relation to most of the factual matters. 

7.However, Mr Motohiro’s witness statements also contain certain legal submissions or arguments, and also put forward certain factual inferences which he asks the Court to draw.  I attach no weight to the former.  As to the latter, these are really part of P’s arguments and submissions and are dealt with in more detail below. 

8.Mr Motohiro’s evidence, in summary, is that a fraud was perpetrated against P in the following circumstances:  

8.1    On 5 January 2022, Mr Motohiro received a call from someone (“Imposter”) who claimed to be Mr Nojiri, a director of P and the Representative Director, President, and Chief Executive Officer of P.  The Imposter informed Mr Motohiro that P’s Japan branch was going to acquire an overseas company, and asked Mr Motohiro to contact a Mr James who was allegedly a lawyer from an international law firm who was handling the said acquisition.  

8.2    According to Mr Motohiro, the number of the incoming call appeared to be the direct line of the real Mr Nojiri and the Imposter spoke like the real Mr Nojiri.  Mr Motohiro was therefore misled into believing that the Imposter was the real Mr Nojiri and there was genuinely an acquisition (which turned out to be a scam). 

8.3    On the same day, Mr Motohiro exchanged a few emails with Mr James and calls with the Imposter.  In short, Mr Motohiro was instructed by Mr James and the Imposter to make payments from P’s bank accounts to D1’s bank account maintained with Standard Chartered Bank (Hong Kong) Ltd. 

8.4    As a result, between 5 and 10 January 2022, P paid out by 3 tranches the total sum of HK$49,773,797.32 (ie the Total Sum) into the bank account of D1.  

8.5    Upon their receipt, part of the Total Sum was converted into US dollars and they were then dissipated to other defendants.  These all took place within a few days.  

8.6    For present purposes, US$45,000 was transferred from D1’s bank account to D7’s bank account with Bank of China (Hong Kong) Ltd (“BOC”) on 7 January 2022.  

8.7    On or around 12 January 2022, P discovered the fraud and reported the matter to the police. 

9.As against D1, the direct recipient of the Defrauded Sum, P’s case is that: 

9.1    The payments were made by P into D1’s bank account by a mistake of fact.  Further or alternatively, P was defrauded of the Defrauded Sum as a result of the Imposter giving instructions to Mr Motohiro, and P acting on those instructions. 

9.2    P has not had any business relationships or dealings with D1 and D1 had no valid or legitimate entitlement to receive or retain the payments. 

9.3    P therefore claims against D1 for the Total Sum under unjust enrichment or knowing receipt, and that D1 held the same under a constructive trust for P.  

10.P pleaded the following matters against D7:^[1]

10.1  D7 was a mainland resident holding a PRC ID card, with whom P has not had any business relationship or dealing. 

10.2  It is to be inferred that D7 participated in or perpetrated a fraudulent scheme against P and/or were used as a vehicle or an intermediary for the dissipation of the Defrauded Sum on behalf of the Imposter and/or D1. 

10.3  D7 knew (or were wilfully blind as to the possibility) that the sums transferred from D1’s account to her account were proceeds of fraud, or the circumstances were such that an honest and reasonable person should have made enquiries as to the source of the sums.  

10.4  It was and is unconscionable for D7 to retain the benefit of any part of the sums received from D1’s bank account as D7 never had any valid or legitimate entitlement to receive or retain the same.  

11.Based on these matters, P pleaded the following claims against D7: 

11.1  Unjust enrichment: on the basis that D7 has been unjustly enriched by the transfer of US$45,000 from D1’s bank account, and that she held the sum on constructive trust for P.^[2] 

11.2  Tracing: it is pleaded that P was entitled to trace the respective sums which had come into the hands of D7.^[3] 

11.3  Dishonest assistance: it is pleaded that D7 dishonestly assisted in the breach of trust by D1 in that D7 lent herself as a conduit to receive and/or channel the Defrauded Sum, and that D7 was dishonest, and that this resulted in loss by P of the Defrauded Sum.^[4] 

11.4  Conspiracy: P’s pleaded case is that D7 had an agreement with all other defendants to conspire with the predominant intent to injure P and/or to use unlawful means to cause damage to P, ie by misappropriating the Defrauded Sum from P, which resulted in the loss of the Defrauded Sum.  The overt acts pleaded, insofar as related to D7, are: (1) D7 caused and procured P to transfer the Defrauded Sum to D1; (2) D7 caused and procured D1 to dissipate the Defrauded Sum into the accounts of the second layer recipients, creating difficulties for P to recoup the same. ^[5] 

12.I would observe that essentially the same case was pleaded for all other defendants who were indirect recipients of the Defrauded Sum. 

B2.  Procedural history

13.On 20 January 2022, P obtained an ex parte injunction against D1. On 21 January 2022, P issued the Writ in this action against D1.  

14.On 28 January 2022, P obtained an ex parte injunction against the 2^nd to 14^th Defendants who were alleged to be second layer recipients of the Defrauded Sum.  The injunction against D7 was up to the amount of US$45,000 only.  

15.The 2^nd to 14^th Defendants were also added as defendants by an amendment to the Writ on 31 January 2022. 

16.The Statement of Claim was filed on 2 March 2022.  

17.A number of the defendants, including D7, did not file an acknowledgment of service and default judgment was originally entered against them on 12 May 2022 (“May 2022 Judgment”). In the May 2022 Judgment, the amount awarded against D7 was only US$45,000, ie the D7 Sum (as well as interest and fixed costs).  

18.By a Summons issued on 23 June 2022, P (insofar as is relevant for present purposes) applied to set aside the May 2022 Judgment as against D7, and to enter a new default judgment against D7: (1) judgment for the D7 Sum and a declaration of trust for the D7 Sum in D7’s bank account (and other consequential orders) based on unjust enrichment; (2) as well as judgment for the Total Sum on the basis of dishonest assistance and conspiracy to injure.  

19.This came before K Yeung J at a hearing on 28 July 2022.  After hearing submissions from P’s solicitors, the learned Judge entered default judgment against D7 (i.e. the July 2022 Judgment) under (1) above, but refused to grant (2).  Instead, K Yeung J was only prepared to enter default judgment for:   

19.1  a sum to be assessed by the Court, as equitable compensation for D7’s dishonest assistance for breach of trust by D1; and  

19.2  a sum to be assessed by the Court, as damages for D7’s conspiracy to injure against P. 

C.  Effect of the July 2022 Judgment against D7

20.Before I go on to the assessment exercise, I need to consider the basis of this assessment by reference to the July 2022 Judgment.  This is of some importance because I detect a tendency in P’s submissions to argue that, because the July 2022 Judgment already found liability against D7 on dishonest assistance and conspiracy, and because of the matters pleaded in the SOC,^[6] it should follow, as an application of the law on the liability of a defendant who participated in a conspiracy or provided dishonest assistance, I should find D7 liable for the full sum.  The underlying idea appears to be that the July 2022 Judgment must be treated as having established the matters pleaded in the SOC.  This does not appear to me to be right.  

21.In his Decision dated 28 July 2022, K Yeung J explained his reasons for not entering judgment against D7 for the Total Sum at §8:  

“8. The position of D7 is different:

(a) This being an application under O.13 r6(1) and O.19 r7(1), and as explained at §19/7/11 of Hong Kong Civil Procedure 2022, this Court cannot receive any evidence, but must give judgment according to the pleadings alone;

(b) According to the Statement of Claim, D7 has only received US$45,000;

(c) The pleaded facts against D7 in respect of the causes of action of dishonest assistance and conspiracy are scanty. The matters and analysis put forward by Mr Yuen are not pleaded;

(d) On the face of pleadings, there is insufficient basis for this court to grant judgment against D7 for the Total Sum.”

22.I should add that:

22.1  Regarding §8(a) quoted above, the point made by the learned Judge was that because this was an application for default judgment under Order 19 rule 7(1), the rule provided that the Court can only grant judgment “as the plaintiff appears entitled to on his statement of claim”, and cannot receive any evidence.  

22.2  In §8(c) quoted above, the reference to “matters and analysis put forward” by P were, I believe, to certain additional evidence relating to D7’s bank accounts and cases cited by P, both of which I will deal with in more detail below.  The additional evidence was not admissible for the reason explained above. 

23.It appears to me that:

23.1  K Yeung J was of the view that the pleaded facts in the SOC do not necessarily support a judgment for the Total Sum based on dishonest assistance or conspiracy, otherwise he would have granted default judgment for the Total Sum and would not have ordered an assessment. 

23.2  It follows that there was a possibility, which K Yeung J must have contemplated by directing an assessment, that upon assessment of damages, P may not be able to prove liability against D7 for the Total Sum in full. 

23.3  It further follows that in this assessment exercise, it would not be right for me to conclude, simply on the basis of the matters pleaded in the SOC, that as a matter of law, it must follow that D7 should be liable under conspiracy and dishonest assistance for the whole loss caused by the fraud (ie the Total Sum), and that as a result I should assess the damages or equitable compensation at the Total Sum.  This would have been contrary to the reasoning or intention of K Yeung J in his decision for granting the July 2022 Judgment, and there would have been no point for having an assessment. 

23.4  So it is for me, in this assessment exercise, to look at the evidence now adduced before me to see to what extent D7 was involved in the fraudulent scheme, and accordingly, the extent of her liability.  

23.5  It would therefore appear to me that the crucial point is whether, on the basis of the evidence now before me, I can draw the following inferences which P invited me to draw:  

(a)  that D7 has facilitated the fraud and the misappropriation of the Defrauded Sum (and not just the D7 Sum) by providing money-laundering assistance, and thereby creating difficulties for P to recoup the Defrauded Sum (and not just the D7 Sum); or

(b)  that D7 has knowingly and dishonestly assisted D1 in breach of trust by offering its bank account to facilitate the receipt of US$45,000 from D1. 

24.At the assessment trial, I put the above propositions to Ms Euchine Ng, Counsel for P.  She agreed to these propositions.  

25.Having further reflected on the matter, it appears to me that the position explained above is explicable on the basis that a default judgment (such as the July 2022 Judgment) only stands for the points which were necessarily decided by the default judgment, and such points must be capable of being identified with complete precision.  This must be right given that there was no trial and no finding of facts in a default judgment. 

26.An analogy can be drawn with the principles applicable as to the extent that a default judgment would give rise to an issue estoppel in separate proceedings. 

26.1  In New Brunswick Railway Co Ltd v British & French Trust Corp Ltd [1939] AC 1, Lord Maugham LC said at 21:

“In my opinion we are at least justified in holding that an estoppel based on a default judgment must be very carefully limited. The true principle in such a case would seem to be that the defendant is estopped from setting up in a subsequent action a defence which was necessarily, and with complete precision, decided by the previous judgment; in other words, by the res judicata in the accurate sense.”

26.2  In Kok Hoong v Leong Cheong Kweng Mines[1964] AC 993, Viscount Radcliffe said at 1012:

“… default judgments, though capable of giving rise to estoppels, must always be scrutinised with extreme particularity for the purpose of ascertaining the bare essence of what they must necessarily have decided and, to use the words of Lord Maugham L.C., they can estop only for what must “necessarily and with complete precision” have been thereby determined.”

27.Such reasoning must apply by analogy in considering the effect of a default judgment in the proceedings in the same action.  

28.It therefore seems to me that the effect of the July 2022 Judgment was simply that D7 was liable for damages or equitable compensation for some conspiracy or had provided some dishonest assistance, but not necessarily to the full extent as pleaded in the SOC. 

29.I find support of this in the case of Ozer Properties Ltd v Ghaydi [1988] 1 EGLR 91:

29.1  There, Ms Ghaydi became an occupant of a room in a rooming house, and she believed she dealt with a representative of the owner and was granted a tenancy.  In fact that person had no authority from the owner and on proper analysis Ms Ghaydi had no tenancy at all. See: 91M-92A, 92B.  

29.2  At one stage, the original owner of the property contracted to sell the property to one Selous Investment Ltd, whose representatives tried to evict Ms Ghaydi from the property: 91L, 92C.  For this incident, Ms Ghaydi commenced proceedings against Selous.  In the particulars of claim, she pleaded the facts relating to her alleged tenancy and claimed a declaration that she held the premises as a protected tenant under the Rent Act 1977.  See: 92D-F. 

29.3  These proceedings were not defended by Selous and Ms Ghaydi obtained a default judgment for damages to be assessed (and this was later assessed): see 92F-H. 

29.4  In fact, the contract of sale with Selous did not go through and the original owner had sold the property to Ozer Properties Ltd, which sale was completed: 91L-M.  

29.5  Ozer Properties commenced separate proceedings seeking possession from Ms Ghaydi. On the basis that Ozer Properties was a privy to Selous, the issue was raised whether the prior default judgment created a res judicata that Ms Ghaydi was a protected tenant under the Rent Acts: 92H.  

29.6  This argument was rejected by the English Court of Appeal. Stocker LJ held at 92J-K:

“… it seems to me plain from the terms of the order itself which I have just recited that no case of res judicata could arise. In order for a judgment in default to create such a situation there must be, as it seems to me, an issue which, when formulated, necessarily and with complete precision determined the rights of the parties. In my view it is really not possible to say that that judgment, which was a judgment for damages to be assessed, in any way determines the issue as to whether or not Miss Ghaydi was a tenant and whether or not that tenancy had the protection of the Rent Act 1977. The judgment was a judgment for damages to be assessed, and those damages were in fact assessed. It is not necessary in order to support the judgment to postulate that Miss Ghaydi had a tenancy of any kind. She would have been entitled to damages having regard to the events of her eviction even if she had not been a tenant or had not had the benefit of the Rent Acts.”

29.7  In other words, the earlier default judgment did not decide the issues or facts pleaded in the particulars of claim by Ms Ghaydi, even though they were the basis for which Ms Ghaydi advanced her claim.  It seems to me that this is equally applicable to the situation in the present case.  The July 2022 Judgment, entered by default, did not rule and decide on the facts pleaded in support of the conspiracy or dishonest assistance claims, and those facts are not to be treated as the basis of this assessment.  

30.For the avoidance of doubt, I would make clear that the points at §23 above and §§25 to 29 above are separate and independent reasons for my conclusion at §20 above.  

31.It is on the basis explained above that I now proceed to the assessment exercise.  

D.  Applicable principles

D1.  Liability for dishonest assistance and conspiracy

32.The elements for establishing dishonest assistance are well-established.  There must be (i) a breach of trust or fiduciary duty by someone other than the defendant; (ii) the defendant’s assistance; (iii) dishonesty; and (iv) resulting loss: Cheung Sai Lon v Cheung Sai Ha [2020] HKCFI 2551 at §21.

33.In the context of money-laundering, the concealment of misapplied trust moneys can constitute assistance.  If a defendant acts as a conduit for another person to dissipate part of the defrauded sums, by way of providing money-laundering assistance, that can amount to dishonest assistance of that other person’s breach of trust: Predicine Holdings Ltd v Bianchi (Hong Kong) Ltd [2021] HKCFI 123 at §87 (Coleman J).  

34.Conspiracy takes the form of a combination of parties to act with the intention of causing damage to a third party who thus incurs the intended damage.  It requires an agreement, combination, understanding, or concert to injure, involving two or more persons: Clerk & Lindsell on Torts (23^rd ed) at §§23-98, 23-100.  

D2.  Extent of liability of a defendant who provided dishonest assistance, or was party to a wider conspiracy

(a)  P’s submissions

35.In contending that D7 should be liable for the Total Sum and not just the D7 Sum, Ms Euchine Ng, in her Opening Submissions, appears to suggest that D7 should be liable for the full sum simply because she has received part of the Defrauded Sum.  

36.Ms Ng relies on a number of authorities.  

37.In the context of conspiracy:

37.1  Ms Ng relies on the observations by DHCJ Simon Leung in Hypertec Systems Inc v Yifim Ltd[2022] 1 HKLRD 1141 at §25 that: (1) there would usually be no direct evidence of combination between the defendants and the fraudsters; (2) the defendants have not appeared or shown any intention of coming clean as merely innocent parties or offering restitution to the plaintiff, and have been retaining the sums so received for no legitimate reason; (3) in such circumstances, there is basis for the court to draw inference against the defendants as parties facilitating the perpetration of the fraud against the plaintiff. 

37.2  Ms Ng also relies on Hypertec Systems Inc §26, and contends that once conspiracy is established against the defendant, the plaintiff is entitled to damages in the same amount out of its pocket as a result of the fraud against the defendant.  

37.3  Ms Ng then submits that,^[7] on the basis of these principles non-direct recipients (ie not first layer recipients) in email fraud cases have been held liable for the entire defrauded sum despite they might only have received a small fraction of such sum, citing the cases of Natures Mark HK Ltd v Hongkong Honxintai Trading Co Ltd [2022] HKCFI 1382 and 800 Columbia Project Company LLC v Xiang Yang Logistics Ltd [2020] HKCFI 1527. 

38.In the context of dishonest assistance, Ms Ng also relies on Snell’s Equity (34^th ed) at §30-081 and Predicine Holdings Ltd v Bianchi (Hong Kong) Ltd [2021] HKCFI 123 at §88.  In the latter, Coleman J stated that:

“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.”

39.Based on the above, Ms Ng submitted that:^[8] (1) once it is shown that the defendant had provided assistance to another for breach of trust, he is liable for the losses arising from the trustee’s breach; (2) the plaintiff’s claim is not limited to the amount received by the person providing the dishonest assistance.  The plaintiff is entitled to claim its full loss, being the entirety of the trust assets handled; (3) the relevant enquiry is simply as to what loss or damage resulted from the breach of trust which has been dishonestly assisted.  

(b)  Further authorities identified by the Court

40.It appears to me that these authorities and Ms Ng’s (somewhat categorical) submissions do not fully reflect the nuances in the applicable principles.  This Court has identified the following cases which explain that, while a defendant might have participated in the fraud in question, his/her extent of participation may be limited and this may mean that he or she is not liable for the whole loss caused by the fraud (whether under conspiracy or dishonest assistance). 

41.The first case is Grupo Torras SA v Al Sabah[1999] CLC 1469, which concerned a highly complex and sophisticated fraudulent scheme, involving 56 defendants, pursuant to which substantial funds were misappropriated from the plaintiffs over a period of 4 years.  The plaintiffs’ case was that each transaction involved a separate conspiracy to which different defendants may have become party at different times or for different periods.  Mance J (later Lord Mance) therefore had to consider the liability of various defendants who were alleged to have participated in one of these fraudulent transactions. 

42.In terms of conspiracy, Mance J said at 1635D-G:

“Prima facie, participation in conspiracy makes all conspirators jointly liable for the loss caused thereby. Certain defendants before me submit that this cannot extend, in the case of a conspirator joining a conspiracy at a late stage to making him liable for (i) loss which can be shown already to have been caused by the conspiracy before he joined it, or even for (ii) loss which would have been caused whether or not he joined it. The second proposition does not appear to me to have either support or merit. An after the event attempt to analyse the working of a conspiracy in order to allocate causative responsibility for particular loss between conspirators who were party to the conspiracy when the loss was caused could be a difficult, not to say incongruous, exercise. The position in respect of loss which can be shown to have occurred before a particular conspirator became involved in the conspiracy was touched on briefly in Kuwait Oil Tanker Co SAK v Al Bader. Moore-Bick J there treated it as axiomatic that Captain Stafford — who became party from September 1998 to what was viewed as a single conspiracy to misappropriate the Plaintiffs’ assets in different ways on numerous different occasions — had no liability ‘for specific losses incurred by the plaintiffs before that date’. In the present case, the point might arise if any defendant were shown by the plaintiffs to have become party to a conspiracy at a relatively late stage, for example at what the plaintiffs have called its ‘cover up’ stage. …”

43.As to dishonest assistance, Mance J said this at 1667B-E:

“[Counsel for the 53^rd defendant] submits that a plaintiff must prove that the dishonest assistance has itself caused the loss suffered by the plaintiff. Otherwise, he submits, the plaintiff’s claim should fail for lack of causation or lack of any relevant assistance. The starting point in my view is that 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. The relevant enquiry is in my view what loss or damage resulted from the breach of trust or fiduciary duty which has been dishonestly assisted. In this context, as in conspiracy, 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. To that extent the accessory nature of the liability presently under consideration distinguishes the present from the situation in Target Holdings Ltd v Redferns (a firm) [1995] CLC 1052; [1996] AC 421, where the House of Lords was concerned with a simple breach of trust. But it is necessary to identify what breach of trust or duty was assisted and what loss may be said to have resulted from that breach of trust or duty. An allegation of a single and continuing conspiracy to commit and cover up a misappropriation is one thing. But it may involve a series of breaches of trust or fiduciary duty. The actual loss may have resulted at the early stage of misappropriation, rather than from the cover up. Dishonest assistance confined to the cover up stage may not or not necessarily attract liability for such previous loss.” (emphasis added)

It can be seen that the statement by Coleman J in Predicine §88 (quoted at §38 above) was taken from the above passage of Mance J in Grupo Torras, but the qualification in the underlined part was not encompassed in the statement in Predicine§88.  

44.Derksen v Pillar (Chancery Division, Case No HC 02C01394, 17 December 2002) was concerned with a fraud perpetrated on the plaintiffs over a period of almost 4 years.  Deputy Judge Michael Briggs QC (now Lord Briggs), having reviewed the authorities (including Grupo Torras), summarised the legal principles at §33 as follows:

“From those passages I would draw the following necessarily tentative^[9] conclusions:

(1) The law does not prescribe any single or rigid mode of analysis of conspiracy, where a series of frauds or other wrongs is inflicted upon a claimant by a changing group of defendants, acting loosely in concert but with different degrees and periods of involvement in the specific wrongs complained of. Sometimes, the events may best be analysed as a series of separate conspiracies between those concurring in each of the relevant frauds. In other cases the better analysis may be that there was a single conspiracy to injure the claimant by all available means, implemented at different times by different defendants by a series of acts capable of being categorised as separate frauds.

(2) Because it will rarely if ever be possible to prove an express agreement between the defendants, the extent or scope of their combination will usually be a matter of inference, to be arrived at by a careful and painstaking review of the acts and omission of each of them, considered as a whole.

(3) The law as to the responsibility of a conspirator for acts done by other conspirators either before he joined or after he left the conspiracy has yet to be clearly settled. At present, the prevailing view (exemplified by the citation by Mance LJ in Grupo Torras of Moore-Bick J’s view on the point in Kuwait v Al Bader, is that a conspirator is liable only for loss caused by acts done (whether by himself or by others) pursuant to the conspiracy while he was a member of it.

(4) The position is even less settled in relation to the extent of the responsibility of one who dishonestly assists in a breach of trust by another, but it is unlikely that the assister would be liable for loss caused by breach of trust committed prior to the date when he agreed to assist or began assisting.” (emphasis added)

45.Otkritie International Investment Management Ltd v Urumov [2014] EWHC 191 (Comm) is another case concerned with a highly complex and sophisticated fraud, involving large scale money-laundering activities and a total of 19 defendants. 

45.1  For present purpose, the relevant claim is the one made against Ms Kovarska (the 19^th defendant), which was based on events following a fraudulent conspiracy whereby one of the plaintiffs was deceived into purchasing certain Argentinean warrants at a grossly inflated price: §32.  

45.2  Ms Kovarska’s husband, Mr Pinaev (the 5^th defendant) was one of the main fraudsters who was found liable for deceit, conspiracy, breach of fiduciary, dishonest assistance and knowing receipt: §404.  US$36,998,000 of the defrauded funds were subsequently received by Pleator (the 7^th defendant), a company beneficially owned by Mr Pinaev: §§21, 53, 452.  Pleator was a second level recipient: §53.  

45.3  The plaintiffs claimed against Ms Kovarska for knowing receipt (because she received funds from Pleator – she was thus a third level recipient) and dishonest assistance: §452.  It was not the plaintiffs’ case that Ms Kovarska was in any way involved in the actual commission of the fraud: §452.  Rather, the plaintiffs claimed that she assisted Mr Pinaev in the laundering of the proceeds of the fraud: §454.  There was no claim under conspiracy against Ms Kovarska.  

45.4  Eder J concluded that Ms Kovarska knew full well that the monies received by Pleator were monies which Mr Pinaev was not entitled to, or at the very least, that she suspected that this was the case but deliberately did not ask the obvious: §457. 

45.5  However, applying the test in Grupo Torras(see §43 above), Eder J went on to hold (at §§458-459) that such knowledge was not sufficient to found liability for dishonest assistance for the entire amount received by Pleator: 

“458. … given that (as the claimants accept) Ms Kovarksa was not in any way involved in the actual commission of the Sign-On Fraud or the Argentinean Warrants Fraud, it seems to me that the burden remains on the claimants to show – at the very least – what actual assistance has been provided dishonestly by Ms Kovarska in relevant respect; and, in my view, the claimants cannot succeed in their case for dishonest assistance against her in respect of the entire amount received by Pleator (i.e. US$ 36,998,000) by simply asserting generally … that Ms Kovarska assisted Mr Pinaev over a period in dissipating the proceeds received into the Pleator Bordier account and identifying only some acts of dishonest assistance by Ms Kovarska with regard to only part of such monies. Nor do I consider that such conclusion is necessarily justified simply on the basis that Ms Kovarska had a power of attorney over Pleator’s Bordier account. For example, there is no evidence whatsoever that Ms Kovarska provided any dishonest assistance at all with regard to the Ferraris which were purchased by Mr Pinaev using part of these monies; and I see no proper basis for imposing liability on her in relation to the use of such monies to purchase the Ferraris even if, as I have found, she knew that Mr Pinaev was not entitled to such monies. To this extent, it seems to me that Ms Kovarska stands in a slightly different position from that of Ms Balk.

459. In light of these observations, it is my conclusion that the claim against Ms Kovarska for dishonest assistance for the entire amount received into the Pleator account fails. …” (emphasis added)

46.Having considered these authorities identified by the Court, Ms Ng informed me at the hearing that she does not dispute the principles laid down in these cases.  Her submissions focused on distinguishing them or applying them to the facts of the present case.  

47.I believe points (1) and (2) made in Derksen v Pillar at §33 (see §44 above) are particularly relevant for present purposes – the extent of the defendant’s liability really depends on whether the events may best be analysed as an overall conspiracy encompassing all the wrongful acts, or a series of conspiracies where some defendants may only be involved in some of them.  This depends on an analysis of the facts.  The points made at (3) and (4) in Derksen v Pillar§33 on the timing of when a defendant joins a conspiracy are really a demonstration of (1) and (2) – if the defendant only joined at a later stage, it is much more likely that he was not party to the earlier conspiracies or the overall conspiracy. 

48.The same analysis applies to dishonest assistance.  As explained by Mance J in Grupo Torras(see the underlined part in the quote at §43 above), the whole set of events involved in a fraud (“a single and continuing conspiracy”) may involve a series of breaches of trust or fiduciary duty.  The fact that a defendant was involved at some stage does not necessarily mean she had assisted in each and every single breach.  Again, this would depend on an analysis of the facts.  As to point (4) in Derksen v Pillar§33 on timing, this is again a demonstration that it is less likely that a defendant who was only involved at a later stage would have assisted in the earlier breaches of trust or duty.  

49.Thus, it appears to me that these principles, while often discussed by reference to the timing the defendant participated or joined in the conspiracy, are not necessarily limited to that. They also apply to the scenario where the defendant was not party to the whole fraud, even though his/her involvement may well have been at the same time as the occurrence of the main fraud. 

50.For example, in the case of a second level recipient of a typical email fraud, it is possible that he or she was not a party to the overall fraud^[10] (being the actual email fraud against the victim), but was only a party to a scheme to dissipate the fraudulent proceeds, in the limited extent that he/she had knowledge that these were illicit money, but was not aware that there was a prior fraud.  In such a case, it would seem to me that the defendant should not be liable for the whole loss caused by the fraud beyond the amounts actually handled by him/her, whether under conspiracy or dishonest assistance.  Analytically, this would be so because he/she was not part of the overall conspiracy to commit the email fraud (as opposed to only being party to a scheme to launder illicit money, and only those money which he/she received), and he/she did not assist in the overall fraud or overall dissipation of all the proceeds (as opposed to only assisting in laundering the illicit money he/she received).  In such a case, he/she should not be liable for the full loss caused by the overall fraud. 

51.This is also demonstrated by the facts in the claim against Ms Kovarska in Otkritie – she was not liable for the sums dissipated from the Pleator account which were used to purchase Ferraris: §458.  This was not because she only became involved after the Ferraris were purchased –  this was not a “timing” point. 

52.I would record that I had at the hearing put to Ms Ng the proposition at §49 above and she did not dispute the same (at least in the general sense) – this can also be seen from her stance recorded at §75 below.  

53.For completeness, I should deal with Ms Ng’s submissions in a set of Supplemental Submissions where she deals with the above cases. 

54.In respect of Grupo Torras and Derksen, Ms Ng submits that they are distinguishable because they each involved a fraud committed over a lengthy period, whereas in this case, the fraud committed and the dissipation to and receipt by D7 took place almost simultaneously.  The point seems to be that D7 cannot rely on those cases to say that she only joined the fraud at a later stage, because of the proximity in time of the email fraud and the dissipation.^[11]  The answer to this seems to me to be the point I made at §§49-51 above.  

55.As to Otkritie, Ms Ng submitted that the facts are distinguishable, because the court was not satisfied with the element of assistance by Ms Kovarska, and that the position of D7 is more similar to Pleator.^[12]  I do not agree: 

55.1  Ms Kovarska was likewise a recipient of the funds further dissipated by Pleator (§452), yet Eder J considered that the claimant did not discharge the burden of showing what actual assistance Ms Kovarska had provided with respect to the other funds dissipated from Pleator (such as those used to buy the Ferraris). This shows that an indirect recipient of part of the proceeds from a payor may not necessarily be liable for the full sum received by his/her payor in dishonest assistance.  

55.2  Eder J remarked that the claimant cannot succeed “by simply asserting generally… that Ms Kovarska assisted Mr Pinaev over a period in dissipating the proceeds received into the Pleator Bordier account and identifying only some acts of dishonest assistance by Ms Kovarska with regard to only part of such monies.” (§458).  This seems to me to be exactly the position in respect of D7 here.  

55.3  Ms Ng’s response resorts back to the fact that it is P’s pleaded case that D7 was party to the overall fraud.^[13]  As explained above, this is not a good point, and whether D7 was a party to the overall fraud remains to be assessed on the evidence.  

(c)  The authorities relied on by P

56.I should now come back to deal with the authorities originally cited by Ms Ng (see §§37 & 38 above).  

57.It seems to me that the case of Hypertec is clearly distinguishable from the present case.  There, the 1^st and 2^nd defendants were the direct recipients of almost the entire defrauded sum.  The plaintiff was deceived into paying US$1,360,500 and US$250,000 to the 1^st and 2^nd defendants respectively, and the sums that ended up in their respective bank accounts were US$1,360,384.93 and US$249,892.30 respectively (§2).  One can therefore understand that if the defendants did not come forward to explain their innocence, it may be inferred that they were parties to the actual fraud.  In the present case however, D7 is merely a second layer recipient who received a relatively insignificant sum (compared to the Total Sum).  I therefore do not find the observations of DHCJ Simon Leung in that case to be applicable to the present case. 

58.As to the cases of Natures Mark and 800 Columbia, both are decisions of default judgment, where the Court granted judgment by reference to the pleadings only: see Natures Mark at §§21-22 and 800 Columbia at §§8-9.  They were therefore not cases where the Court had to assess damages on the basis of evidence before it.  The present case is different – the present assessment of damages was necessitated because K Yeung J was not satisfied on the pleadings that D7 is liable for the Total Sum, and therefore refused to grant default judgment. 

59.As to the Predicine case:

59.1  §88 was a part of the judgment where the Court was stating the general principles where a claim is made against a defendant who provided dishonest assistance to the breach of trust (§§81-88).  The hearing was concerned with whether an injunction should be continued (§7), which means that the plaintiff only had to show a serious issue to be tried or a good arguable case (§§74-75, 108), and this was not an occasion where the Court had to consider in detail the application of these principles as to causation and quantum to the facts (see §§111-113).  

59.2  Further, as noted above, it appears that this statement at §88 came from Mance J’s statement in Grupo Torras, but did not encompass the qualifications also stated by Mance J (underlined in the quote at §43 above).  There is no reason to think that Coleman J was disapproving those parts of Mance J’s statement. 

60.In the context of dishonest assistance, Ms Ng also referred to §24 of Natures Mark^[14] which simply cited Snell’s Equity §§30-080 and 30-081, which also cited Grupo Torras.  I do not believe it purports to state any principle of law different from that set out by Mance J in Grupo Torras.

E.  The assessment

61.From my view of the effect of the July 2022 Judgment and the authorities on conspiracy and dishonest assistance discussed above, it follows that I have to assess the evidence as to whether D7’s involvement in the fraud was such that she should be liable for the full amount of the Total Sum, whether under conspiracy or dishonest assistance.  

E1.  Evidence relating to D7

62.As set out in §8 above, between 5 and 10 January 2022, P was defrauded into paying in 3 tranches the Defrauded Sum ie HK$49,773,787.32 into D1’s account. Upon receiving the Defrauded Sum, D1 converted part of the Defrauded Sum into USD.  On 7 January 2022, US$45,000, coming from such USD funds, were transferred from D1’s bank account to D7’s BOC account. 

63.From the history of the proceedings, it would appear that P was initially content with claiming against D7 in the amount of the D7 Sum only.  Apparently, upon obtaining further information in relation to D7’s bank account, P seeks to claim against D7 for the Total Sum.  It is to these further evidence that I now turn. 

64.I would first record the matters that may be gleaned from the documents relating to D1’s bank account.  These were also included in P’s evidence, although they perhaps do not directly relate to the position of D7.  These documents show that:

64.1  D1 was incorporated only in September 2021, shortly prior to the fraud perpetrated against P with a small share capital (of HK$10,000). 

64.2  Shortly before the fraud, D1’s former director (who is also its sole shareholder) and company secretary resigned. 

64.3  D1 has not filed any annual return, and had not appointed any company secretary since 12 October 2022.  

64.4  D1’s HKD, EUR and USD accounts only had minimal balances before the Defrauded Sum was received.  Upon receipt of the Defrauded Sum, the same was swiftly dissipated (some after being converted into foreign currencies) either on the same day or within one or two days, leaving only minimal closing balances in all accounts on 11 January 2022. 

65.P submits that all these suggest that D1 had no genuine or legitimate business, and no legitimate basis to receive the Defrauded Sum, and suggest that D1 was a vehicle of fraud used for money laundering activities.  I am not as such concerned with the position of D1 (as full judgment against it had already been obtained by P), but I have no quarrel with these submissions.  

66.Turning now to the bank account documents of D7’s BOC account:

66.1  The account was opened in 2018.  The account opening form suggests that D7 is a PRC individual who claimed (1) that she was employed as a “buyer” by “China Duty Free Group”; (2) to have a monthly income in the range of HK$10,001 to HK$25,000 only; and (3) that her account was for receiving salary, with expected monthly remittance of 0 to 25 times and in the expected aggregate amount of no more than HK$50,000. 

66.2  P has adduced a statement of D7’s BOC account for the period from 5 to 28 January 2022, which shows that:

(a)  As at 6 January 2022, which was before the receipt of the D7 Sum, the account balance was US$325,713.92.  

(b)  The account received the D7 Sum (US$45,000) on 7 January 2022.  Both before and after, there were transfers into this account of amounts of similar magnitude up to 25 January 2022:

Date	Amount received (US$)
6 January 2022	$58,805
7 January 2022	$45,000 (ie the D7 Sum)
7 January 2022	$13,708
11 January 2022	$8,700
11 January 2022	$50,061
12 January 2022	$58,823
13 January 2022	$61,915
14 January 2022	$60,386
17 January 2022	$60,406.96
18 January 2022	$59,045
20 January 2022	$61,298.96
25 January 2022	$63,025.99

(c)      Throughout the period of this statement, there were no withdrawals from the account, save for an insignificant remittance of US$343 on 18 January 2022. 

(d)  As at the end date of 28 January 2022, the account balance was US$926,755.77. 

67.Based on these documents, Ms Ng submits that:^[15]

67.1  D7’s account shows no normal personal banking activities, but displays large and frequent deposits which are not commensurate with her alleged background, occupation or income level.  

67.2  There could be no legitimate reason for D7 to receive monies from D1 (which allegedly trades in “toy”), let alone a sum of US$45,000 which far exceeds D7’s alleged salary or expected monthly remittance amount.  

67.3  Ms Ng therefore submits that the irresistible inference to be drawn is that “D1 and D7 were part of a coordinated network of money laundering entities which had knowingly participated in and facilitated the fraud perpetrated against P”.

67.4  Because D7 has not filed any witness statements or adduced any documentary evidence, the “uncontroverted and unchallenged evidence of P should be accepted”.

68.In terms of D7’s liability for conspiracy and dishonest assistance, Ms Ng submits that:^[16]

68.1  In terms of conspiracy, P’s pleaded case is that D7 had an agreement with all other defendants to conspire to use unlawful means to damage P, resulting in the loss of the Defrauded Sum.  

68.2  Based on the objective evidence, the irresistible inference to be drawn is that D7 has facilitated the fraud and the misappropriation of the Defrauded Sum by providing money-laundering assistance, and thereby creating difficulties for P to recoup the Defrauded Sum. 

68.3  In terms of dishonest assistance, it is P’s pleaded case that D7 dishonestly assisted the breach of trust by D1 (in dissipating the Defrauded Sum) by lending herself as a conduit to receive and/or channel the Defrauded Sum, resulting in the loss of the Defrauded Sum.  

68.4  Based on the objective evidence, the irresistible inference to be drawn is that D7 has knowingly and dishonestly assisted D1 in breach of trust by offering her bank account to facilitate the receipt of US$45,000 from D1.  

68.5  It is said that the facts are indistinguishable from Natures Mark and 800 Columbia.  Thus D7 should be liable for the Total Sum. 

69.In particular, Ms Ng submits that D7 was a co-conspirator and had agreed to assist by providing money-laundering assistance at the outset.  In this regard, Ms Ng places heavy reliance on the proximity in time between the initiation of the fraud on 5 January 2022 and D7’s receipt of fraud proceeds on 7 January 2022 because, as she submits, by the time the Imposter approached P on 5 January 2022, plans must have already been for money-laundering entities (including D7) to receive proceeds of the fraud.^[17] 

70.Pausing here, I note that Mr Motohiro’s evidence^[18] is that since the police confirmed that there are no other victims claiming against D7, the entire balance in D7’s account came from the Defrauded Sum paid out by P.  However, Ms Ng fairly accepted that this cannot be made out, given that (1) there was about US$325,713 in D7’s account prior to the receipt of D7 Sum; and (2) the other deposits into the account cannot be traced back to the Defrauded Sum.  

71.I would also note that, in P’s evidence, references were made to the “indicators” of money laundering identified in guidance notes and/or guidelines issued by the Joint Financial Intelligence Unit and the Securities and Futures Commission, and points were made that the activities in D7’s bank account “largely match with” these descriptions of suspicious transactions.^[19] 

E2.  Analysis

72.In my view, however, there are a number of pointers to suggest that D7 was not a party to the whole fraud: 

72.1  First, D7 only received US$45,000 (equivalent to about HK$351,000) out of the total Defrauded Sum of about HK$49.77 million. 

72.2  Second, D7 received other deposits in similar amounts which are not traceable back to the Defrauded Sum.  This suggests that there were other reasons unconnected to the present fraud for which D7 would receive deposits in similar amounts.  

72.3  Third, as mentioned above, there were already significant funds (by deposits in amounts of similar magnitude) standing in D7’s account before the receipt of the D7 Sum. 

72.4  Fourth, there were no withdrawals from D7’s account at all (save for a negligible sum) and the account retained a significant balance at the end of January 2022.  If D7 was truly a party to the fraud and was offering her account to facilitate dissipation of the fraudulent proceeds, one would expect that the funds received into D7’s account (at least the D7 Sum) would have been further dissipated. 

72.5  This is particularly so when one takes into account the timing of P’s recovery steps. As noted above, on 20 January 2022, P discovered the fraud and obtained an injunction against D1.  On 28 January 2022, P obtained an injunction against D7 (as well as other defendants).  In other words, no steps were taken by D7 to remove the funds received from this fraud from 7 January 2022 until 28 January 2022.  

72.6  In this respect, Ms Ng said to me at the hearing that it is P’s understanding that the account of D7 was subject to a letter of no consent from the police and/or an administrative freeze by the bank following an injunction, but P has no information as to the timing these steps were put in place.  Although this is not in evidence, I am prepared to accept that these are steps that may be taken in respect of the account.  However, the account movements show that there was a transfer out of US$343 on 18 January 2022.  This shows (which Ms Ng agrees) that the letter of no consent and/or the administrative freeze did not take effect at that stage.  In fact, the injunction against D7 was only obtained on 28 January 2022, which would tend to suggest that the letter of no consent or administrative freeze did not take effect before that date.  

72.7  In other words, even though there was nothing to prevent withdrawals from the account from 7 January 2022 up to at least 18 January 2022 or possibly 28 January 2022, there was no withdrawal from the account during this period.  

72.8  This does not appear to me to be consistent with the typical pattern of bank account activities for an account involved in dissipating fraudulent or criminal proceeds.  Indeed, large withdrawals and matching payments out immediately after a deposit are some of the indicia of money laundering identified in the guidelines referred to in the evidence (see §71 above), but they are missing in this case.

73.I would note that only the bank statement for the period of 5 to 28 January 2022 is before the Court. There is no information as to the position before or after.  Such information would be relevant, because information before this period may show that the pattern of account movement was all along like this; and information after this period may show that there had not been any withdrawal all along (according to P, the letter of no consent and/or the administrative freeze was eventually lifted).  

74.From my discussion with Ms Ng, it would appear that there are the following possibilities as to the extent of D7’s involvement in the fraud:

74.1  D7 was a knowing party to the whole fraud (covering the situation where D7 knew of D1’s plan to commit a fraud of some kind, although not necessarily against P nor the full details).  

74.2  D7 merely lent her account for general money laundering purposes, but had no knowledge of D1’s fraud.  

74.3  D7 merely lent her account for underground banking purposes, or was a user of underground banking herself.  Ms Ng accepts that the use of underground banking is a common occurrence. 

74.4  D7 was completely innocent.  

75.Ms Ng accepts that under the third possibility, D7 would not be liable for the Total Sum.  It seems to me that D7 would also not be liable for the Total Sum under the second situation because, as a matter of legal analysis, (1) under conspiracy, D7 was at most only a party to a conspiracy to general money laundering, but not party to a conspiracy by D1 to commit the email fraud; and (2) under dishonest assistance, D7 did not provide assistance to or was not aware of (and thus was not dishonest in relation to) the breach of duty at the stage of the committing of the fraud against P, but only at most at the dissipation stage (by “stage” I am not making a “timing” point, rather I am referring to the extent of D7’s involvement or knowledge). 

76.In my view, the evidence before the Court is, taken at its highest, equally consistent with each of the first three scenarios.  There is nothing to indicate that the first situation is more likely than the second or third – there is simply no evidence and no basis to draw any inference as to what exactly was D7’s knowledge or involvement in the overall fraud.  In fact, the pointers I identified in §72 above suggest that the first scenario is less likely.  It may perhaps also be said that the second scenario is also less likely, given that there had been no withdrawals from the account.  

77.In her submissions, Ms Ng also relies on (1) the fact that D7 did not come forward to defend P’s claims, and (2) the default judgment on liability. 

77.1  On (2), P cannot rely on the default judgment for the reasons explained at §§20-31 above. 

77.2  As to (1), it seems to me that Ms Ng’s reliance on the fact that D7 did not come forward to defend these proceedings is akin to asking this Court to draw an adverse inference against D7.  Yet, valid service on D7 does not necessarily mean that D7 knew of these proceedings and the allegations made against her.  

77.3  In this connection, Ms Ng informed me at the hearing that in December 2022, P’s solicitors received a call from a firm of solicitors who claimed to have instructions to act for D7.  In my view, this does not assist P as this is not in the evidence, and it is not very reliable evidence that the caller was indeed acting for D7.  In any case, if one considers this in the context of drawing an adverse inference, (1) there is no prima facie case given the analysis at §§72-76 above, and (2) the lack of response may not necessarily be because D7 was party to the whole fraud, given the possibility that D7 was involved in other wrongdoings (such as offering her account for general money laundering activities or receiving the proceeds from another fraud, if one follows P’s logic that the account activities are suspicious).  I also repeat what I have said about the Hypertec case at §57 above. 

78.It follows that I am unable to accept Ms Ng’s submissions set out at §§67.3-67.4 and 68-69 above.  

E3.  Conclusion and disposition

79.For the above reasons, P has failed to establish its pleaded case against D7 (see §§11.3 & 11.4 above), or the matters set out at §§67.3, 68.2 and 68.4 above, and has failed to establish liability against D7 for the Total Sum under conspiracy and dishonest assistance.  

80.Accordingly, I assess damages for conspiracy and equitable compensation for dishonest assistance at US$45,000.  Since P has already recovered from D7’s account the sum of HK$350,884.79^[20] (which is equivalent to US$45,000), there will be no further award of this amount against D7 as a result of this assessment.

81.In terms of costs, since P has failed to prove that D7 should be liable for the Total Sum, and P already had a judgment against D7 for US$45,000, I consider that there should be no order as to costs of the present assessment of damages.  This is an order nisi and shall be made absolute 14 days from today. 

82.Lastly, I thank Ms Ng for her abled assistance.  

F.  Postscript

83.After the hearing of the assessment, this Court received a series of correspondence from Messrs Oldham Li & Nie (“OLN”), P’s solicitors. 

84.By a letter dated 10 May 2023, OLN wrote to K Yeung J (copying me) seeking to obtain the transcript of the hearing of the default judgment application on 28 July 2022 before him.  The letter stated the following:  

“3. At Trial, Master has made enquiries as to basis of the Default Judgment. His concerns were as follows:-

a. If His Lordship was satisfied that the 7^th Defendant should be liable for the entire sum as the 1^st Defendant, he would have had made Default Judgment for the entire sum at the Hearing and there would have had no need for the Trial;

b. His Lordship might not therefore want to allow for the entire sum; and

c. Master therefore doubted that notwithstanding the establishment of liability at the Default Judgment, he would have to assess each and every transaction as per the bankers’ record to see which are connected with the present fraud and which are not, deviating from the precedent case in Natures Mark HK Limited v Hongkong Honxintai Trading Co Limited [2022] HKCFI1382 which a non-direct recipient (i.e. not 1st layer recipient) has been held liable for the entire defrauded sum, and in 800 Columbia Project Company, LLC v Xiang Yang Logistics Limited [2020] HKCFI 1527 which allowed for damages against conspirator on the entire sum.”

85.This description is not entirely accurate.  The observations made by this Court at the hearing are reflected at §23 above.  The point made by me was that: (1) the learned Judge thought that the pleaded facts were not sufficient; (2) thus the point of the assessment is to see if the evidence, which was not then admissible, would support a full claim; (3) it must follow that an award of the full sum and an award of nothing were contemplated as possible outcomes; and (4) if the full sum must be awarded without regard to the evidence, then the assessment would be pointless.  As noted above, Ms Ng had accepted these at the hearing before me. 

86.On 12 May 2023, K Yeung J granted P’s application for the transcript.  

87.By a letter dated 31 May 2023 (“31 May Letter”), OLN wrote to this Court, enclosing the transcript. The letter stated the following:   

“3. We understand that at Trial, the learned Master had, in particular, the following concerns:-

(i) The Honourable Mr. Justice Keith Yeung might have reservation that the 7^th Defendant should [not] be liable for the entire sum as the 1^st Defendant; and

(ii)  Notwithstanding the establishment of liability by the Default Judgement, Master might have to assess each and every transaction as per the bankers’ record to see which are connected with the present fraud.”

88.One can see that the wording used in this letter recording my observations at the hearing is different from that in the letter to K Yeung J.  

89.The 31 May Letter went on at §5:

“His Lordship [K Yeung J] was unable to allow the entire sum as Judgment sum against the 7^th Defendant at the hearing right away simply out of technicality reason. His Lordship referred the Plaintiff to White Book paragraph 19/7/11 whereby it is stated that the Court cannot receive evidence in cases hereunder but must give judgment according to the pleadings alone. Therefore, while the evidence put forward in the Plaintiff’s supporting affirmation for the Default Judgment was a compelling one, the Court cannot admit such evidence since it did not form part of the pleadings. The pleadings against the 7^th Defendant, which is the Statement of Claim, however was written prior to the analysis of the bankers’ documents, and no particulars as detailed in the supporting affirmation could have then been included. The facts pleaded against the 7^th Defendant are therefore “scanty”. In other words, but for the technicality that the supporting affirmation does not form part of pleadings, His Lordship would have allowed the entire sum as Judgment sum against the 7^th Defendant on the ground of conspiracy and dishonest assistance.” (Emphasis original)

90.Having reviewed the very short transcript of the hearing before K Yeung J (8 pages in total), I am unable to accept the above statements as correct.  What the learned Judge said at the hearing which relates to D7 is as follows:

90.1  The learned Judge first indicated that he has read the papers but had a couple of concerns (Transcript p 4E-H).  He indicated:

“For the purpose of this application, and in particular for the purpose of the application for default judgment against D1 and D7… the fourth affirmation of Dexter Yuen has been filed. Is it admissible? Is it … is this court permitted to admit evidence for the purpose of… an application for default judgment?” (Transcript p 4I-M)

90.2  The learned Judge then referred to §19/7/11 of the Hong Kong Civil Procedure 2023 Vol 1, which explains that the Court cannot receive any evidence in a default judgment application, and must give judgment according to the pleadings alone (Transcript p 4O-Q).  

90.3  The learned Judge then noted that in the case of D7, she only received US$45,000, and indicated his view that:

“[D7 received only or her account received only US$45,000. And what you have pleaded against D7, on the face of the Statement of Claim, in respect of the causes of action of dishonest assistance and conspiracy, the facts as pleaded are very scanty.” (Transcript p 5E-F)

90.4 The learned Judge commented that P had filed affirmation evidence seeking to reinforce the pleaded case by some analysis therein, but those evidence and analysis are not admissible, and he was not permitted to read them (pp 5H-L).

90.5 The learned Judge stated for conspiracy and dishonest assistance, he was only prepared to grant judgment for damages to be assessed. He then remarked:

“But again, no criticism. You may take these as straightforward applications, but what evidence is admissible and what not remains strict.” (Transcript p 6A)

90.6 The learned Judge then asked if the solicitors representing P had any further submissions, to which the response was no (Transcript p 6D-F). The learned Judge then proceeded to read his reasons for decision.

91.Thus, it is abundantly clear that the learned Judge did not say anything to the effect that: (1) he was unable to enter judgment for the Total Sum “simply out of technicality reason”; (2) the evidence put forward in P’s supporting affirmation was “compelling”; (3) he would have entered judgment for the Total Sum against D7 but for the technicality that the supporting affirmation is not admissible.  It would appear that these are merely submissions by P’s solicitors (which I do not accept) and they were not what was said or conveyed by the learned Judge at the hearing.  

Ms Euchine Ng, instructed by Oldham, Li & Nie, for the Plaintiff

The 7^th Defendant was not represented and did not appear