Wu Jun v. Captain Holdings Ltd (in Compulsory Liquidation) and Others

HCA 106/2022

[2024] HKCFI 2184

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 106 OF 2022

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JUDGMENT

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Introduction

1.This Judgment should be read together with the Judgment handed down on 22 August 2024 as [2024] HKCFI 2117.

2.On 19 May 2023, the Plaintiff obtained an ex parte on notice an injunction from Wong J restraining the 2^nd Defendant and the 3^rd Defendant, the 4^th Defendant, the 8^th Defendant and the 9^th Defendant, the 10^th Defendant and the 11^th Defendant, and the 12^th Defendant and the 13^th Defendant[1] from removing from Hong Kong or disposing of his/her/its assets up to the value of HK$22,175,344 (“Injunction”) until the return day ie 25 May 2023.

3.In accordance with normal practice, the Plaintiff issued a Summons dated 22 May 2023 (“Continuation Summons”) for continuation of the Injunction against those Defendants until final determination of the present Action.

4.On 25 May 2023, by Order of DHCJ K Wong,

a.  The ex parte Injunction against the 2^nd, 3^rd, 8^th and 9^th Defendants, who were absent at the hearing, was to continue until final determination of the Action.

b.  The Continuation Summons as against the 4^th, 12^th and 13^th Defendants was by consent adjourned for argument while the Injunction against them as varied was continued until the determination of the Continuation Summons or further Order.

c.  The Injunction against the 10^th and 11^th Defendants was by consent discharged upon their undertaking in lieu. Similarly, the Continuation Summons as against them was adjourned for argument.

5.This is the substantive hearing of the Continuation Summons as against the 10^th and 11^th Defendants. They oppose the Continuation Summons. They also requested the Continuation Summons against them be heard separately from that against the 4^th, 12^th and 13^th Defendants[2].

6.In a nutshell, the Plaintiff claims he is the victim of an complex scam (“Scam”) involving multiple participants ie the Defendants disguised as a gold bar purchase and leaseback scheme (“Scheme”) in order to defraud him of HK$22,175,344 (“Sum”). The Sum represents the payment made by the Plaintiff purportedly for the purchase of 68 (9999) gold bars (“Gold Bars”).

7.According to Mr Yeung, his cause of action principally lies in unlawful means conspiracy, the unlawful means being fraudulent misrepresentation, deceit, breach of trust, breach of fiduciary duties, knowing receipt and dishonest assistance.

8.Evidentially, the Plaintiff’s case is supported by his 4^th affirmation (“Wu 4”) and 10^th affirmation (“Wu 10”). The 11^th Defendant filed a 10-page affirmation (“Gaw 1”) on 1 August 2023 for himself as well as for the 10^th Defendant in opposition.[3]

9.Importantly, details of the Scam and the role of each of the Defendants, including themselves, are set out in the witness statements of the 5^th and 6^th Defendants dated 11 September 2022 which was filed in Court on 5 June 2023 and dated 31 January 2023 and filed in Court on 5 June 2023 respectively. They have indicated in their witness statements that they are prepared to testify in Court to verify their contents.

10.To start with, the fraudulent misrepresentation which induced the Plaintiff to purchase the Gold Bars on terms of the Scheme was pleaded at paras 3 and 4 of the Statement of Claim in these terms.

“3. The Plaintiff was introduced by a friend, Ms. Wong Lai Mei, to the 1^st Defendant at the end of March 2019. He was not particularly keen on investing in gold bars. The 5^th Defendant (acting for himself and on behalf of the other Defendants) made the following representations to the Plaintiff in order to induce the Plaintiff to make payments for purchase of gold bars:

3.1. There existed a scheme (the “Purchase and Lease-Back Scheme”) where the 1^st Defendant would provide ‘butler’ service to customers who purchased gold bars from it. The purchased gold bars would be subsequently leased back to the 1^st Defendant with a 12-month fixed term for the designated purpose of allowing the 1^st Defendant to (i) make further onward lease to the 7^th Defendant for its business use; and (ii) receive the rental fee for such use from the 7^th Defendant. On top of that, the 7^th Defendant, as the only end-user of the purchased gold bars, would provide guarantee to the 1^st Defendant to secure its obligations owing to the 1^st Defendant. According to the foregoing process, the customers would receive a fixed monthly rental fee from the 1^st Defendant (“Purchase and Lease-Back Scheme Representation”).

3.2. The 7^th Defendant was a listed company in Hong Kong which operated the widely-known brand “3DG Jewellery (金至尊)” in Hong Kong, Macau and Mainland.

3.3. The customers would also have a put option to sell the gold bars back to the 1^st Defendant at the end of the lease term at same price that the gold bars were purchased.

4. A document titled “金尊1號-實物黃金條租賃保值增值計劃” containing the Purchase and Lease-Back Scheme Representation (the “Proposal”) was shown and passed to the Plaintiff to support the above representation.” (emphasis added)

The 10^th, 11^th, 12^th and 13^th Defendants

11.The 10^th Defendant is a Hong Kong Company with an office in Hong Kong. It was and is Member No. 160 of the Chinese Gold & Silver Exchange (“CGSE”). The CGSE is the sole exchange in Hong Kong which trades physical gold and silver. The named Executive Manager of Solid Gold on the CGSE is the 11^th Defendant.

12.The 11^th Defendant was at all material times its sole director and shareholder. In Gaw 1, he says he is a board member of the Gold and Silver Trading Exchange.

13.The 12^th Defendant is a Hong Kong company whose office is next door to the 10^th Defendant’s on the same floor of the same building. According to the 13^th Defendant’s affirmation (“Mak 2”) dated 8 August 2024 in opposition to the Continuation Summons, the 12^th Defendant did not have any membership with CGSE and did not carry on any bullion trading business, nor did it handle bullion, except for 1 transaction, which is the present case involving the Plaintiff.

14.The 13^th Defendant was at all material times the sole director and shareholder of the 12^th Defendant.

15.According to Mak 2, although the 10^th and 12^th Defendants were 2 separate legal entities, they were under the same group of companies and the 11^th Defendant was the ultimate owner of both. This is corroborated by the 5^th Defendant in his witness statement, albeit denied by the 11^th Defendant.

16.The 13^th Defendant claims that between 2011 to April 2018, she was employed by the 10^th Defendant as an accounting manager. Since March 2018, upon the 11^th Defendant’s instructions, she was reassigned to the 12^th Defendant and became its sole director and shareholder. Nevertheless, she continued to provide her services to the 10^th Defendant as an accounting manager under the name of the 12^th Defendant.

The other Defendants

17.The 1^st Defendant was a Hong Kong company and purportedly engaged in gold supplies, sales and trading to customers, as well as provision of storage and lease services for gold owners. It was wound up upon the Plaintiff’s petition on 3 February 2021 in HCCW 327 of 2020. The Plaintiff commenced the present Action against it after obtaining leave to do so.

18.The 2^nd Defendant was the ultimate controller and beneficial owner of the 1^st Defendant. According to the 6^th Defendant’s witness statement, he is an ordinary resident of the PRC.

19.The 3^rd Defendant was the 1^st Defendant’s sole director and shareholder. According to the annual return of the 1^st Defendant, he is also an ordinary resident of the PRC.

20.The 4^th Defendant was the Chief Executive Officer responsible for the 1^st Defendant’s business operation and management in Hong Kong. He was at all material times 1 of the 3 directing minds of the 1^st Defendant. The other 2 being the 2^nd and 3^rd Defendants who were residents of the PRC.

21.The 5^th Defendant was the technical director and the 6^th Defendant was the assistant Customer Service Manager of the 1^st Defendant. Both of them were in one way or another involved in the scam and are able and willing to give details of the scam and the role of the Defendants in their witness statements filed in Court.

22.The 7^th Defendant was a Hong Kong listed company principally engaged in retailing for gold and jewellery products under the brand “3DG Jewellery” in Hong Kong, Macau and the PRC.

23.The 8^th Defendant was at the material time a substantial shareholder and director of the 7^th Defendant and its actual controller.

24.The 9^th Defendant was at the material time an executive director of the 7^th Defendant and one of the principal assistants of the 8^th Defendant.

The Plaintiff’s overall case

25.The Plaintiff’s detailed case is set out at length in Mr Yeung’s skeleton. Based on the Statement of Claim and the affirmation evidence of all parties and in particular the witness statements of the 5^th and 6^th Defendants, it seems to this court the Plaintiff’s case can be simplified as follows, with a focus on the roles of the 10^th and 11^th Defendants in the scam.

26.At the direction of the 1^st Defendant, on 29 March 2019, the Plaintiff attended the office of the 10^th Defendant. The 5^th, 6^th and 13^th Defendants were present. The Plaintiff agreed to invest in the Gold Bars and paid the Sum by credit card to the 10^th Defendant. The 13^th Defendant “processed” the payment of the Sum on behalf of the 10^th Defendant.

27.The 10^th Defendant was the supplier of the Gold Bars and the direct recipient of the Sum at its office. The Gold Bars were inspected by and “delivered” to the Plaintiff at the 10^th Defendant’s office on 4 April 2019.

28.The Scheme in fact never existed:

a.  The 7^th Defendant in its Defence confirmed that on 5 June 2018, the 9^th Defendant had without authority from its Board, entered into a Strategic Cooperation Framework Agreement on Gold Leasing Business (“Framework Agreement”) with the 1^st Defendant and issued an announcement on the 7^th Defendant’s website about the Framework Agreement. The 7^th Defendant denied it had entered into any gold leasing agreement with the 1^st Defendant. Nor had it leased any gold bars from the 1^st Defendant. Further, it had never provided any guarantee in respect of the leasing gold bars by 1^st Defendant.

b.  The 5^th Defendant, in his witness statement, confirmed the Scheme was a scam devised by the 2^nd and 8^th Defendants. The 4^th Defendant was one of the principal assistants of 2^nd Defendant. He, among others, was well aware of the scam and had actively participated in it.

c.  There existed a WeChat group for the Scheme in as early as June 2018 (“WeChat Group”). The 2^nd, 3^rd, 4^th and 5^th Defendants were participants. From the WeChat Group, they all knew the involvement of the 8^th Defendant in the scam.

d.  In around October[4] 2018, the 3^rd Defendant conveyed in the WeChat Group that the 1^st Defendant would “borrow” gold bars from the 10^th Defendant for client inspection (‘亞Neil [D4]呢你就幫手誒同堅固 [D10]果邊呢同佢傾果個借金吖，借金吖，借金到時俾客戶可以驗金吖 ’).

e.  In his witness statement, the 5^th Defendant confirmed that when the 1^st Defendant had difficulty honoring its rental income payment or returning the gold bars to its other customers under the Scheme, in September 2019, the 4^th Defendant continued to persuade the 5^th Defendant to (i) carry on seeking subscriptions to the Scheme, and (ii) stop existing subscribers from redeeming, and instead to convince them to renew subscriptions.

f.  Under the Scheme and the Proposal, the Gold Bars were scheduled to be delivered to the Plaintiff on 4 April 2019 for leaseback to the 1^st Defendant for onward lease to the 7^th Defendant. As pleaded in paras 8 and 9 of the Statement of Claim:

“8. On around 4 April 2019, the Plaintiff was taken by the 5^th and 6^th Defendants to the office of the 10^th Defendant where he was shown gold bars which the 5^th, 6^th and 13^th Defendants (acting for themselves and on behalf of the other Defendants) represented to be the purportedly purchased Gold Bars for the lease arrangement under the Lease Agreement[5] (“Gold Bars Collection Representation”). The Plaintiff also received an invoice and a packing list both dated 4 April 2019 and issued by the 10^th Defendant reflecting purported sale of the Gold Bars to the Plaintiff.

9. Induced by and in reliance of the Gold Bars Collection Representation, and acting on the faith and truth thereof, the Plaintiff on 4 April 2019 signed acknowledgment of receipt of the Gold Bars (in the quantity of 68) from the 10^th Defendant.” (emphasis added)

g.  But then the 1^st Defendant sold the Gold Bars to the 12^th Defendant on 2 April 2019. This is wholly inconsistent and incompatible with the Scheme.

29.The 2^nd and 8^th Defendants were masterminds behind the scam.

30.The 4^th Defendant would customarily act in accordance with 2^nd Defendant’s instructions. The 8^th Defendant was the substantial shareholder of the 7^th Defendant and has de facto control over it. The 9^th Defendant, the executive director and CEO of the 7^th Defendant and one of the 8^th Defendant’s representatives in the 7^th Defendant, would act in accordance with the 8^th Defendant’s instructions.

31.The Purchase and Lease-Back Scheme Representation and the Gold Bars Collection Representation were made by the 5^th, 6^th and 13^th Defendants, the 13 Defendant being a representative of the 10^th Defendant and the sole shareholder and director of the 12^th Defendant.

a.  They were the persons who attended to the Plaintiff when he (i) agreed to purchase and paid for the Gold Bars on 29 March 2019 and (ii) inspected and “collected” the Gold Bars on 4 April 2019. On both occasions, the above took place at the 10^th Defendant’s office.

b.  The 5^th Defendant knew the 1^st Defendant borrowed the Gold Bars from the 10^th Defendant for the Plaintiff’s inspection only, thus the falsity of the Scheme.

c.  The 6^th Defendant, in his witness statement, confirmed he realized shortly after he had joined the 1^st Defendant in August 2018 that gold bars purportedly purchased by customers from the 1^st Defendant under the Scheme would in fact be returned to the 13^th Defendant after presenting to customers for inspection, after which they would be purportedly sold by the 1^st Defendant to the 12^th Defendant or its affiliate, Well Sky International (HK) Limited (佳天國際（香港）有限公司) (“Well Sky”). Well Sky’s sole shareholder and director was also the 13^th Defendant^. The 10^th and 12^th Defendants would receive “service fee” as reward.

d.  The 13^th Defendant confirmed in her affirmation she knew the Plaintiff bought the Gold Bars, scheduled to be delivered on 4 April 2019, for leaseback to the 1^st Defendant. She was actually in the office of the 10^th Defendant on 4 April 2019 when the Plaintiff went there to inspect and “collect” the Gold Bars. Yet, she knew all along that the 1^st Defendant intended to sell the Gold Bars to the 12^th Defendant. She also knew the 12^th Defendant had placed a purchase order for the Gold Bars for the consideration of HK$21,358,859.26 and had paid for them. Out of that part of the purchase price ie HK$11,739,888, the 12^th Defendant paid HK$8,832,912 to the 1^st Defendant and HK$2,906,977 to the 3^rd Defendant on 2 and 3 April 2019 respectively. The balance of the purchase price was paid to the 1^st Defendant on 4 April 2019.

e.  The 13^th Defendant admitted in her affirmation that she provided accounting services to the 10^th Defendant under the name of the 12^th Defendant. As such, she would be in control or at least had access to the accounting records of the 10^th Defendant.

f.  The 13^th Defendant knew the Scheme to be non-existent. She nevertheless endorsed the presentation to the Plaintiff the Gold Bars for inspection and “delivery” on 4 April 2019.

g.  The 11^th Defendant (the sole director and shareholder of the 10^th Defendant) stated in his affirmation that (i) the Plaintiff was introduced to the 10^th Defendant by the 13^th Defendant for gold trading; (ii) the Plaintiff’s purchase of the Gold Bars was handled by the 13^th Defendant.

32.The 10^th Defendant and the 12^th Defendant rendered assistance in (i) facilitating to the Plaintiff the false picture of “delivery” of the Gold Bars to the Plaintiff and then the 1^st Defendant; and (ii) conjuring up a transaction to conceal the wiring away of the Sum supposedly paid to the 10^th Defendant ie on 2 April 2019, the 1^st Defendant sold the Gold Bars to the 12^th Defendant for HK$21,358,859.26, of which HK$8,832,912 and HK$2,906,977 and were transferred on 2 and 3 April 2019 to the 1^st and 3^rd Defendants respectively, with the balance transferred to the 1^st Defendant on 4 April 2019 and by a credit note on 3 June 2019.

33.The 4^th Defendant was the person who signed the authorization letter dated 2 April 2019 to direct the 12^th Defendant to transfer part of the Sum ie HK$8,832,912 and HK$2,906,977 to the 1^st and 3^rd Defendants.

34.The Plaintiff’s case is that the purchase price paid by the 12^th Defendant to the 1^st Defendant came from the Sum and the transaction was to facilitate the dissipation of the Sum.

35.In the process, the 10^th and 12^th Defendants earned around HK$816,484.74, being the difference between the Sum and HK$21,358,859.26. Such rewards represented the “benefits” for their participation in the Scheme.

36.The 13^th Defendant must have been a part of the Scam. She knew that the Plaintiff bought the Gold Bars from the 1^st Defendant for leaseback to the 1^st Defendant. On 2 April 2019, she also procured the purchase of the Gold Bars by the 12^th Defendant from the 1^st Defendant. She prayed in aid the Lease Agreement[6] in order to justify her claim that the purchase was bona fide, which means she had seen a copy of the Lease Agreement. When she saw the Plaintiff attended the 10^th Defendant’s office to inspect and accept “delivery” of the Gold Bars on 4 April 2019, she did not raise any enquiry with the Plaintiff. Instead, she procured the 10^th Defendant to issue a receipt to the Plaintiff acknowledging his “collection” of the Gold Bars.

37.The 13^th Defendant confirmed in her affirmation that the sale of the Gold Bars from the 1^st Defendant to the 12^th Defendant was explained to and endorsed by the 11^th Defendant. The 11^th Defendant must have been a part of the Scam.

38.The 1^st Defendant defaulted in the payment of the rental fees in breach of the Lease Agreement since October 2019, in respect of which the Plaintiff had obtained default judgment against the 1^st Defendant and ultimately led to its winding up in February 2021.

39.The Plaintiff progressively uncovered the Scam and officially made a report to the police in April 2020.

40.The end result of the Scam is that the Plaintiff has lost the Sum and the Gold Bars, the rental income since October 2019 and the profits he would have made had the Gold Bars been returned to him after the 12-month lease period[7].

Deliberation

41.The applicable legal principles are trite. A plaintiff seeking a domestic mareva injunction must satisfy the Court that:

a.  it has a good arguable case;

b.  there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, which would render the plaintiff’s judgment of no effect;

c.  the balance of convenience is in favour of grant.

42.The threshold of “a good arguable case” is higher than “a serious issue to be tried”. But the applicant need not go so far as to persuade the Court that it is likely to win but it needs to show a case which is more than barely capable of serious argument, albeit not necessarily one that the judge believes to have a better than 50% chance of success.

43.Where a party opposes the continuation of the injunction at the interlocutory stage, the burden is on him to put up a defence and evidence of sufficient cogency so as to water down the merits of the applicant’s claim to an extent that it no longer amounts to a good arguable case: Toyota Boshoku Europe N. V. v Kingsville (HK) Enterprises Limited & Others [2023] HKCFI 1393 at [11] per DHCJ Le Pichon.

44.The court is not to resolve disputes of facts and difficult points of law on an interlocutory basis: Toyota Boshoku Europe N. V. at [12].

45.The existence of a “good arguable defence” does not necessarily negate a “good arguable case”. It is entirely possible to have, at the interlocutory stage, both the claim and the defence being more than barely capable of serious argument and not necessarily having a better than 50% chance of success. There is no requirement that the applicant of a mareva injunction must show that he has a “much better” case or argument than the opposing party: Toyota Boshoku Europe N. V. at [13] – [14].

Good arguable case vs the 10^th and 11^th Defendants

46.As far as good arguable case is concerned, Mr Yeung has succinctly set it out in his executive summary.

47.In gist, the 10^th and 11^th Defendants (as the sole shareholder and director of the 10^th Defendant), knowingly assisted in the Scam:

a.  the 10^th Defendant “lent” the Gold Bars to the 1^st Defendant for inspection by the Plaintiff to conceal the falsity of the Scheme and to complete the Scam. It participated in the Dissipation Arrangement[8] by delivering the Gold Bars to the 1^st Defendant for its sale to the 12^th Defendant (confirmed by the 13^th Defendant in Mak 2 as a sister company of the 10^th Defendant) on 2 April 2019 which is inconsistent and incompatible with the Scheme. The HK$21,358,859.26 out of the Sum were wired back to the 1^st Defendant and the 3^rd Defendant. The 10^th and 12^th Defendants received reward for their participation.

b.  According to Mak 2, the 11^th Defendant knew and endorsed the 10^th Defendant’s participation in the Gold Bars lending arrangement and the Dissipation Arrangement. The 13^th Defendant confirms that the 11^th Defendant was explained about and agreed to the 12^th Defendant’s purchase from the 1^st Defendant of the Plaintiff’s Gold Bars.

48.In the 10^th and 11^th Defendants’ Defence, their case is one of bare denial.

49.In Gaw 1, apart from denial of knowledge of the Scam, not knowing the Plaintiff personally or having any association with the Defendants save and except the 12^th and 13^th Defendants, their case is that the 10^th Defendant had sold and delivered the Gold Bars to the Plaintiff and received the Sum, period. This is what the 11^th Defendant said in Gaw 1:

“The Transaction with the Plaintiff

14. Besides providing accounting and management services to Solid Gold, Ms. Mak sometimes would introduce clients to Solid Gold for gold trading.

15. The Plaintiff in this case is one such client introduced by Ms. Mak. I do not know the Plaintiff personally and I have not met him before. In so far as I know, before this case, Solid Gold had no business dealings with the Plaintiff.

16. As for the other defendants in this case, other than Ms. Mak and HK Fortune, I do not know them either.

17. As for the relationship and interactions between the Plaintiff and other defendants in this case, I am completely unaware and have not been involved in any such matters, if there were any.

18. In the present case, Solid Gold sold a batch of approximately 68KGS of gold (Au Gold) to the Plaintiff on or about 29 March 2019. According to the documents of Solid Gold, the plaintiff paid a sum of HKD $23,326,336 to Solid Gold through Union Pay for the purchase of 68KGS of gold bars.

19. Since the Plaintiff was introduced by Ms. Mak, the transaction was handled through her, and I did not have direct contact with the Plaintiff during this transaction. There is now produced and shown to me exhibit marked “GA-2”, copies of the payment records and the acknowledgment of receipt duly signed by, whom I verily believe, the Plaintiff.

20. I categorically deny any involvement or participation, whether by myself and/or by Solid Gold, in the alleged Gold Bars Collection Representation as suggested by the Plaintiff.

21. I crave leave to refer to paragraph 35 of [Wu 4]. I have no knowledge of the alleged Dubious Arrangement[9]. In so far as I know, the involvement of Solid Gold in relation to the Plaintiff in the present case is the sale of the above-mentioned gold bars to the Plaintiff. Other than the said sale of the gold bars to the Plaintiff as introduced by Ms. Mak, Solid Gold and I have never participated and/or involved in any of the alleged dealings and/or representations, which are denied, as suggested by the Plaintiff.

…

27. …The Gold Bars were duly delivered to and received by the Plaintiff on 4 April 2019. In fact, in this transaction, other than selling the Gold Bars to the Plaintiff, neither I nor Solid Gold authorized or participated in any of the matters mentioned by the Plaintiff in his Statement of Claim.” (emphasis added)

50.The evidence of the 5^th Defendant is particularly damning. In his witness statement filed in Court, he said this of the 10^th and 11^th Defendants:

“10. 第十被告堅固金業是向原告吳先生出售黃金的直接售賣人，是收取原告支付黃金購買款的直接收款人，是福臨集團共享營業和註冊地址的關聯公司，是嘉柏倫控股提供「租黃金 “道具” 」、虛假黃金買賣、虛假驗收黃金和幫助資金收取和轉移資金的黃金供應方和執行人，是幫助嘉柏倫控股向包括原告吳先生在內的其他受害人完成虛假 “購買黃金”和 “驗金”欺詐的黃金供應方。

11. 第十一被告吳金奇先生是堅固金業和福臨集團的實際控制人和投資人、堅固金業的執行董事。

12. 第十二被告福臨集團與堅固金業是關聯公司，辦公場所和職員的共享者。”

51.To conclude, for the above reasons, this court is satisfied that there is a good and arguable case against the 10^th and 11^th Defendants.

Real Risk of Dissipation

52.The approach on assessment of risk of dissipation in the context of an application for a mareva injunction was examined by the Court of Appeal in Convoy Collateral Limited v Cho Kwai Chee [2020] HKCA 537. At [35], Lam VP (giving judgment of the Court of Appeal) quoted with approval the judgment of Haddon-Cave LJ in Lakatamia Shipping Co Ltd v Toshiko Morimoto [2019] EWCA Civ 2203 at [34] where his Lordship adopted (with a slight modification) the principles set out by Popplewell J (as he then was) earlier in Fundo Soberano de Angola v dos Santos [2018] EWHC 2199 (Comm) as follows:

“(1) The claimant must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets. In this context dissipation means putting the assets out of reach of a judgment whether by concealment or transfer.

(2) The risk of dissipation must be established by solid evidence; mere inference or generalised assertion is not sufficient.

(3) The risk of dissipation must be established separately against each respondent.

(4) It is not enough to establish a sufficient risk of dissipation merely to establish a good arguable case that the defendant has been guilty of dishonesty; it is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets may be dissipated. It is also necessary to take account of whether there appear at the interlocutory stage to be properly arguable answers to the allegations of dishonesty.

(5) The respondent's former use of offshore structures is relevant but does not itself equate to a risk of dissipation. Businesses and individuals often use offshore structures as part of the normal and legitimate way in which they deal with their assets. Such legitimate reasons may properly include tax planning, privacy and the use of limited liability structures.

(6) What must be threatened is unjustified dissipation. The purpose of a [World Freezing Order] is not to provide the claimant with security; it is to restrain a defendant from evading justice by disposing of, or concealing, assets otherwise than in the normal course of business in a way which will have the effect of making it judgment proof. A WFO is not intended to stop a corporate defendant from dealing with its assets in the normal course of its business. Similarly, it is not intended to constrain an individual defendant from conducting his personal affairs in the way he has always conducted them, providing of course that such conduct is legitimate. If the defendant is not threatening to change the existing way of handling their assets, it will not be sufficient to show that such continued conduct would prejudice the claimant's ability to enforce a judgment. That would be contrary to the purpose of the WFO jurisdiction because it would require defendants to change their legitimate behaviour in order to provide preferential security for the claim which the claimant would not otherwise enjoy.

(7) Each case is fact specific and relevant factors must be looked at cumulatively.”

53.Lam VP went on to state that subject to certain elaborations, the aforesaid principles are applicable in Hong Kong:

“37. On the onus borne by a party seeking such draconian relief, whilst there are no doubt respectable authorities referring to the need for a solid evidential basis to establish a real risk of dissipation …we prefer to describe the burden as solid basis for concluding that there is such a real risk.

…

40. Since the assessment is in respect of the risk of dissipation as opposed to the fact of actual dissipation, the exercise necessarily involves an evaluative and predictive judgment. Thus, the evidential burden can be satisfied by drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk, including matters which point against such risk…

…

42. There are cases where a good arguable case on the underlying substantive claims could also be regarded as supporting a case of real risk of dissipation. As highlighted in proposition (4) in Popplewell J’s summary, the court needs to scrutinise with care whether the allegations in respect of the claims justify the inference of likelihood of dissipation.

43. Notwithstanding the broad statement of Godfrey J in Honsaico Trading Ltd v Hong Yiah Seng Co Ltd [1990] 1 HKLRD 235, Hong Kong judges have been vigilant in scrutinizing the allegations in a claim with care before drawing the inference of risk of dissipation. Chu J (as she then was) in Hornor Resources v Savvy Resources [2010] 4 HKC 50 cautioned that the court must examine with care allegations of dishonesty before inferring therefrom a real risk of dissipation.

…

47. Wrongdoing relevant to the issue of dissipation can be some dishonest or wrongful acts which were not themselves acts of dissipation. In VTB Capital v Nutritek International [2012] 2 CLC 431, the alleged wrong committed by the defendant was the procurement of a loan from CCL by fraudulent misrepresentation as to the value of the assets of the borrower and the disappearance of the proceeds in a complex web of corporate entities. Lloyd LJ said at [177]:

‘… However, where (as here) the dishonesty alleged is at the heart of the claim against the relevant defendant, the court may well find itself able to draw the inference that the making out, to the necessary standard, of that case against the defendant also establishes sufficiently the risk of dissipation of assets.’

…

49. Another illustration is the judgment of Saville LJ in Grupo Torras SA v Al-Sabah (21 March 1997) which was cited in the judgment of Flaux J in Madoff Securities International Ltd v Raven [2011] EWHC 3102 (Comm) . The defendant in that case was an investment adviser in Switzerland. The judge found there was a good arguable case that he was implicated in a scheme of fraud and the nature of the allegation was such that there was a strong fear of dissipation….” (emphasis added)

54.At [53], Lam VP summed up the position as follows:

“53. To sum up, the approach set out by Haddon-Cave LJ in Lakatamia Shipping Co Ltd v Toshiko Morimoto, supra at [51] provides good guidance. The ultimate question is whether CCL succeeds in showing objectively there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant. That question is to be answered by examining the evidence holistically. Evidence of dishonest and fraudulent conducts or other serious wrongdoings which form the basis of the claims, and which reflect adversely on the integrity of the defendant could point powerfully towards an inference of such risk.” (emphasis added)

55.At [54], Lam VP also pointed out that evidence of delay is relevant in the assessment of risk of dissipation.

“54.…Delay after a defendant gained knowledge of a plaintiff’s claim can militate against the risk of dissipation as such defendant would already have the opportunity to dispose of assets should he be inclined to do so.”

56.In Mr Yeung’s skeleton, he pointed to (i) the clear involvement of the 10^th and 11^th Defendants, and their association with the 12^th and 13^th Defendants in the Dissipation Arrangement[10], being part and parcel of the complex Scheme to defraud the Plaintiff, as a strong indicator of the serious dishonesty on their part individually, (ii) the hopelessness of their bare denial demonstrated the continuation of their serious dishonesty and fraudulent conduct. In this regard, the 11^th Defendant’s disclaimer of the association between the 10^th and 12^th Defendants notwithstanding what was stated in Mak 2 is an added consideration.

57.Mr Yeung also submits in his skeleton that the Plaintiff has been trying to trace the whereabouts of the Sum from the 10^th Defendant but in vain. Whereas it was quite clear that the 10^th Defendant received the Sum, confirmed by the 11^th Defendant, the Plaintiff resorted to interrogatories against the 10^th and 11^th Defendants dated 18 December 2023 which were not answered at the time. The Plaintiff had complained to the solicitors of the 10^th and 11^th Defendants about this by letter dated 23 January 2024. It is only on 11 July 2024, the solicitors of the 10^th and 11^th Defendants purported to answer the interrogatories by the 2^nd affirmation of the 11^th Defendant (“Gaw 2”). In para 2 of Gaw 2, he admitted that the Sum had been remitted to the 10^th Defendant’s bank accounts at the Bank of Communication and HSBC and then to the 12^th Defendant’s bank accounts at the DBS Bank and the Bank of Communication. Gaw 2 also confirmed the transfers were made on 2 and 3 April 2024.

58.Most important of all, where are the Gold Bars which the 10^th Defendant claims had sold and delivered to the Plaintiff while the 13^th Defendant claimed the 1^st Defendant had sold them to the 12^th Defendant? Mr Yeung told this court he did not know.

59.In Mak 2, at para 71, she suggested that the Gold Bars belonged beneficially to the 12^th Defendant and thus were in the possession of the 12^th Defendant at the material time. However, In Mak 1, she claimed the 12^th Defendant did not have any asset of value of more than HK$10,000. As stated in a letter from the Hong Kong Police to the Legal Aid Department dated 30 August 2023, the Police had not seized any of the Gold Bars. So the question is: where are the Gold Bars now?

60.In Mr Ng’s skeleton, his submission on no real risk of dissipation is, with respect, perfunctory.

61.His main point is about the Plaintiff’s delay in applying for the Injunction after issuing the Writ in the present Action in January 2022. Meanwhile, the 10^th Defendant has been conducting business after the incident in April 2019.

62.On the question of delay, it is true that while the present Action was commenced in January 2022, the application for the Injunction was only made in May 2023. The explanation has been set out in Wu 4 at paras 55 to 59 and further explained in Mr Yeung’s skeleton.

63.In gist, Mr Yeung submits that (i) the Plaintiff all along considered that there existed a real risk of asset dissipation by the Defendants[11], (ii) with the real risk of asset dissipation in mind, the Plaintiff’s (mis)understanding was that his interest was adequately protected in the interim for so long as the police investigation continued, (iii) in May 2023, the Plaintiff learnt from the police that investigation of his complaint might conclude without any charges against the arrested persons, which would entail the end of the interim protection afforded by the police and which would leave the issue of real risk of asset dissipation unaddressed, (iv) as the police only referred to the freezing of the 10^th Defendant’s bank account[12] during the exchanges with the Plaintiff’s legal advisers, the Plaintiff became uncertain as to whether the bank accounts of those Defendants other than the 10^th Defendant had in fact been frozen – the Plaintiff was unable to obtain further information from the police, and was advised to resort to the Court for interim protection.

64.This court accepts the Plaintiff’s explanation of the delay as inherently probable and would not count it against him on real risk of dissipation. This is a Scam. The Plaintiff is not expected to know the details of it.

65.To conclude, taking a holistic of the evidence as a whole, this court is satisfied that for the present purpose, there is a real risk of dissipation in relation to the 10^th and 11^th Defendants.

Balance of convenience

66.Ultimately, at the interlocutory injunction stage, “the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one, may win. The court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong. This ‘fundamental’ principle is the source of the guidelines that have evolved for the determination of interlocutory injunctions”: Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR, 670, 680D-G (per Hoffmann J as he then was); Music Advance Ltd. v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041 at [12 (d)] (per Ma J as he then was).

67.On the evidence before this court, it seems the course which carries the lower risk of injustice if it should turn out that this court is wrong is to continue instead of discharge the Injunction and this court shall so rule.

Material non disclosure

68.The 10^th and 11^th Defendants’ complaint is that the Plaintiff had intentionally not drawn the Court’s attention to the 2^nd Clause 7.2 of the Lease Agreement. Mr Ng submits that there is no doubt that the said clause would significantly weaken, if not destroy, the Plaintiff’s alleged misrepresentations of his case. It is difficult to see how the Plaintiff would have believed and/or been induced by the alleged misrepresentations, if Cl.7.2 clearly stipulated that the 1^st Defendant had the right to sell the Gold Bars.

69.It is really the 2^nd Clause 7.2 which gave the 1^st Defendant full authority to sell the Plaintiff’s Gold Bars and was completely inconsistent and incompatible with the Scheme. However, a plaintiff is only obliged to disclose matters which are or may be adverse to his case and the test of materiality is an objective one: Gee Commercial Injunctions 7^th Ed. para 9-003. This court’s view is that objectively, the existence of the 2^nd Clause 7.2 only strengthens the culpability of the 1^st Defendant and its sale of the Gold Bars to the 12^th Defendant, as well as the 10^th and 11^th Defendants’ acquiescence of it. In other words, it is not and may not be adverse to the Plaintiff’s case.

70.The fact of the matter is that the 10^th and 11^th Defendants did not apply to set aside the Injunction on the ground of material non-disclosure on the return day[13]. If the point is so straightforward, it is hard to imagine they would not seek to discharge the Injunction on this ground alone. This fact points to their lack of conviction of their material non-disclosure ground.

71.In any event, given the seriousness of the Scam and the participation of the 10^th and 11^th Defendants in it, this court is not minded to set aside the Injunction on this ground, and even assuming the Injunction is to be set aside, this court has no hesitation in re-granting the Injunction on the same terms.

Disposition and costs order nisi

72.For all the above reasons, this court is prepared to and shall order that the Injunction be continued against the 10^th and 11^th Defendants until the final determination of the present Action or further Order.

73.There shall be a cost Order nisi that costs of the Continuation Summons be the Plaintiff’s costs in the cause, to be taxed if not agreed, with certificate for counsel.

Mr Mike Yeung, instructed by M/s Hugo Leung & Lawyers, for the Plaintiff

Mr Tony Ng, instructed by M/s Tang, Wong & Cheung, for the 10^th and 11^th Defendants