Ubs Ag v. Lam Chung Yiu Charles and Another
Read the full judgment text of HCA 413/2021 on BabelCite. This High Court CFI judgment was delivered on 20 December 2024.
1. On 16 March 2021, the Plaintiff (“P”) issued a writ of summons with a general indorsement of claim against the 1 st Defendant (“D1”) and the 2 nd Defendant (“D2”).
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HCA 413/2021 [2024] HKCFI 3655 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 413 OF 2021 ____________ BETWEEN
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______________ J U D G M E N T ______________ Introduction 1.On 16 March 2021, the Plaintiff (“P”) issued a writ of summons with a general indorsement of claim against the 1st Defendant (“D1”) and the 2nd Defendant (“D2”). 2.On 7 April 2021, D1 filed an acknowledgment of service, giving notice of his intention to defend these proceedings. 3.On 6 October 2021, as no notice of intention to defend was given by D2, P obtained an interlocutory judgment against D2 for equitable compensation (for dishonestly assisting D1 in his breach of his duty of fidelity and good faith to P) and/or for damages to be assessed (on the basis that D1 and D2 had agreed to act in concert to cause injury to P by unlawful means). 4.On 2 June 2021, an order by consent staying these civil proceedings against D1 was made by Master S.H. Lee as there were ongoing criminal proceedings against D1. After D1 had been convicted and sentenced in the Court of First Instance (“CFI”), the stay was lifted on 6 August 2024. 5.On 5 September 2024, P filed the statement of claim and made an application for summary judgment against D1 by way of a summons of the same date (“Summons”) supported by affirmation evidence. On 12 November 2024, D1 filed an affidavit in opposition to the Summons. 6.On 29 November 2024, this Court heard the Summons and reserved its Judgment to be handed down. This is the Court’s Judgment. Background 7.D1 and D2 were and are husband and wife. 8.P is incorporated in Switzerland and registered as a licensed bank in Hong Kong. All of its branches worldwide, including the Hong Kong branch, operate globally under the same legal entity. 9.At the material times, D1 was employed by P as an associate director at its Hong Kong branch and he was the head of a project to compensate clients who had been overcharged by P in previous business transactions (“Project”). For the Project, P had provisioned a sum of about US$17 million to effect refunds to about 4,300 of its clients. 10.In November 2020, P discovered that the provision set aside for the Project had been exceeded and there were indications that some of the refunds were not paid to eligible former clients but to unconnected third parties. An internal investigation conducted by P revealed that there were at least 215 unauthorized transfers totaling US$8,120,967.16 (i.e. some HK$63.1 million) from P’s bank accounts to recipients other than its clients (“the 215 unauthorized transfers”). A full list of the 215 unauthorized transfers which was annexed to P’s statement of claim is annexed to this Judgment (“the Annex”). 11.On 3 December 2020, D1 was arrested at the Hong Kong International Airport by the Hong Kong Police. At the time of arrest, D1 was carrying a backpack and a luggage. Inside the backpack were documents for moving his dog from Hong Kong to the United Kingdom and a transfer of residence approval letter addressed to D1 and issued by the United Kingdom’s HM Revenue & Customs. Inside the luggage he had with him 40 Rolex watches serial number tags, 60 Rolex watches green tags, bank letters in the name of D2, a boarding pass in D1’s name for a flight from Hong Kong to London, and internet banking security devices of D1’s and D2’s bank accounts.[1] The criminal proceedings 12.D1 was later charged in Hong Kong. He pleaded guilty before a Magistrate to 2 counts of theft and 2 counts of money laundering; and on 17 April 2023, he was committed to the CFI for sentence. On 7 November 2023, D1 confirmed his pleas and admission to a Summary of Facts (“SOF”) before DHCJ Douglas Yau (as he then was, “Judge”). He was duly convicted in the CFI of the 4 offences and given a total sentence of 7 years’ imprisonment. 13.For the two theft offences, D1 pleaded guilty to stealing the funds in two of P’s bank accounts, being the funds involved in 46 out of the 215 unauthorized transfers as follows:-
14.According to the SOF, in order to perpetrate five of these unlawful transfer transactions, D1 had even changed his name at different times to Yow Wayne (“Yow”) and Koh Pang-an (“Koh”), being names that matched with those of two of P’s actual clients who needed to be compensated under the Project. D1 then opened the following bank accounts in those names, and the first five payments (US$569,581.03 in total) as set out in the table at §13 above were paid to these bank accounts created and controlled by D1:-
15.D1 also admitted in the SOF that the remaining 41 payments were made to various watch and/or handbag merchants for him to purchase luxurious watches and handbags and none of them were P’s clients. D1 further admitted selling 32 luxurious watches of a total value of HK$8,738,700 to a watch dealer. 16.D1 further admitted that he had utilized P’s system in the Hong Kong office, which tracked the client details and payments, to alter the information of the rightful beneficiaries under the Project; and by altering the information, he managed to direct the 46 unauthorized payments to be made to his designated accounts.[2] 17.In considering the appropriate sentences for the two counts of theft, the Judge held that D1 had engaged in the same methodology in stealing, exploiting his position as the project head, arranging for the moneys to be diverted to recipients of his choosing and ultimately benefiting himself; that the thefts were meticulously planned; and that the commission of the offences by D1 was calculated and carefully executed.[3] 18.As to the first money laundering offence, D1 admitted having received in Koh’s Nanyang Commercial Bank accounts cash deposits of HK$159,500 and of US$314,067.26 from unknown sources, the Plaintiff and a watch retailer between 28 May 2020 and 30 October 2020. Those funds were swiftly withdrawn and a significant number of the remittances were made to overseas counterparties. 19.As to the second money laundering offence, D1 admitted having received in his own HSBC multi-currency account 67 cash deposits in Hong Kong dollars, US dollars and British pounds in the total value of some HK$3.77 million from unknown sources between 13 March 2020 and 8 December 2020. This HSBC account further received 40 deposits in Hong Kong dollars and British pounds from D2’s Nanyang Commercial Bank account in the total value of some HK$4.4 million between March 2020 and November 2020. During the same period, D2’s account received 35 cash deposits from unknown sources, totaling HK$2.7 million. A substantial amount of the money deposited into D1’s HSBC account was transferred out within a relatively short period of time. 20.In sentencing, the Judge held that the offences of theft and money laundering were all interconnected, as the money laundering would have allowed D1 to benefit from the thefts more easily and when he was overseas, given that a significant amount of the funds in the first count of money laundering were remitted to overseas counterparties.[4] The application for summary judgment in these proceedings 21.In these proceedings, P seeks summary judgment in relation to all of the 215 unauthorized transfers. As pleaded in the statement of claim, P’s claims are made on a number of bases, including unjust enrichment, restitution, unlawful means conspiracy and breach of employment contract or duty of fidelity and good faith. 22.In opposition, D1 admits liability only to 46 out of the 215 unauthorized transfers (in respect of which he had pleaded guilty in the criminal proceedings) but asserts that (1) P fails to show a prima facie case against him regarding the remaining 169 unauthorized transfers; (2) there are triable issues which require witnesses to be called; and (3) there are some other reasons for trial as D1 being remanded faces severe difficulty in gathering evidence. 23.Indeed, prior to the hearing on 29 November 2024, the parties had filed a consent summons with the Court seeking an order to grant judgment (for part of the claims) in respect of the 46 transfers (involving US$1,875,030.64) out of the 215 unauthorized transfers. At the hearing, the Court made an order by consent that judgment be entered against D1 for him to give restitution and pay P the sum of US$1,875,030.64, being part of the claims herein. The parties then invited the Court to hear the application for summary judgment in respect of the remaining 169 unauthorized transfers (involving US$6,245,936.52). 24.At the hearing, D1 did not dispute that his criminal convictions and the SOF which he had admitted in the criminal proceedings (or the admissions therein) could be used against him in these proceedings: see e.g. Asia Energy Logistic Group Ltd v Chan Tat Chee, HCA 870/2009 (unreported, 19 January 2010) at §§4-9 and 13; The Boston Consulting Group (Brasil) Ltd v Kaisheng Technology Co., Ltd and Ors. [2022] HKCFI 447 at §§11-12; and section 62 of the Evidence Ordinance, Cap. 8. 25.In D1’s skeleton submissions, the main argument was that P could not show D1 to have been enriched by the 169 unauthorized transfers as it could not be shown that the recipients were connected to D1. At the hearing, counsel for P, Mr. Phang, confirmed that P would be content for the Court to grant summary judgment on the sole basis of D1’s breach of his employment contract (by being involved in the 169 unauthorized transfers) such that the Court would not need to go on to deal with the other bases including that of unjust enrichment. On the other hand, counsel for D1, Mr. Wong, accepted that if D1 could be shown, prima facie, to have been involved in the 169 unauthorized transfers and there was no plausible defence offered by D1, the Court could find D1 liable for damages for breach of his employment contract. 26.It is trite law that in an application for summary judgment under Order 14, the plaintiff only has to demonstrate a “plausible and prima facie sustainable case”. The obligation falls on the defendant to condescend to particulars and show a fair probability or reasonable grounds that a bona fide defence exists: Toy Major Trading Co Ltd v Hang Shun Plastic Toys Ltd [2007] 3 HKLRD 345 at §12 per Ma CJHC (as he then was). 27.Therefore, in the context of the present case, the primary questions that this Court has to decide are whether P could show a “plausible and prima facie sustainable case” of D1’s involvement in the other 169 unauthorized transfers; and whether D1 could show any bona fide and believable defence. Prima facie case against D1? 28.It was D1’s contention that his criminal convictions do not assist P for he had only pleaded guilty to 46 out of the 215 unauthorized transfers and despite thorough police investigations, the prosecution had not charged him for the remaining 169 unauthorized transfers. D1 further asserted that the recipients of the 169 transfers were different from those of the 46 transfers, and the 169 transfers also happened on various dates, not necessarily the same dates as the 46 transfers. It was further contended that there was no evidence to show any connection between D1 and the recipients of the 169 transfers. In short, D1 maintained that there was no or no sufficient evidence put forward by P to show a prima facie case that D1 was involved in the 169 unauthorized transfers. 29.In the Court’s view, the fact that D1 was not charged with the remaining 169 transfers does not assist him in these civil proceedings. Plainly, a different standard of proof is involved in criminal proceedings, whereas in an Order 14 application, all that needs to be shown by an applicant is a “prima facie” case. 30.In the Court’s view, the pleaded facts in the statement of claim as supported by P’s affirmation evidence do show a prima facie case of D1’s involvement in the remaining 169 transfers. In particular, NG Ching Yee (P’s executive director, “NG”) affirmed in her 2nd Affirmation that apart from the 46 transfers for which D1 was convicted, there were another 169 transfers to online watch sellers by which D1 had used the same methods to unlawfully divert P’s funds, with the relevant CHATS records and SWIFT messages produced as exhibits. The SOF admitted by D1 in the criminal proceedings as well as the Judge’s reasons for sentence, as exhibited to NG’s 2nd Affirmation, also support such a prima facie case against D1. 31.In particular, the 215 transactions involved a number of merchants being paid repeatedly and they must have been chosen by the perpetrator for stealing and converting the funds. The proximity of the timing and dates of the transactions can also be the bases from which proper inferences could be drawn against D1. At the hearing, counsel for D1, Mr. Wong, accepted that. 32.Indeed, if one looks at the dates of all the 215 unauthorized transfers as set out in the Annex and as pleaded in the statement of claim, they were effected over the period from 13 March 2020 to 27 October 2020, whereas the 46 transfers to which D1 admitted and pleaded guilty also covered and spanned over exactly the same period. 33.Further, on a large number of the dates of those 46 admitted transfers, there were other unauthorized transfers (which were not included in the theft charges):-
34.As can be seen from the table above, all these 91 other unauthorized transfers took place on the same dates as 43 out of the 46 transfers admitted by D1. For instance, D1 admitted that he had caused two transfers on 21 October 2020 and on that very same date, there were 13 other transfers. All these transfers must have been “meticulously planned” and “calculated and carefully executed” – as was observed by the Judge to be the case as regards the theft offences involving the 46 transfers[5]. When the other transfers took place on the same dates as most of the 46 transfers, an inference may be drawn that these 91 other transfers were also caused by D1. 35.Further, it is more likely than not that the perpetrator would have carefully chosen and used the same merchants in order to realize the ill-gotten gains. Some of the merchants paid by these 46 plus 91 unauthorized transfers were paid again by other unauthorized transfers on other dates. An inference may be drawn that those other transfers involving the same merchants were also caused by D1, bearing in mind P’s evidence that none of the merchants were its clients. A further inference may be drawn that other unauthorized transfers that happened on the same dates as those which paid those merchants were also caused by D1:-
36.Therefore, analyzing all the transactions in the above manners, inferences may be properly drawn to show that D1 was involved in causing all of the 215 unauthorized transfers:-
37.The above inferences may be more readily drawn against D1 when seen in the context of his admissions in the criminal proceedings[14] that D1 had utilized P’s system in the Hong Kong office to alter the information of the rightful beneficiaries under the Project; and that by altering the information, D1 managed to direct 46 payments to be made to his designated accounts. When there was no suggestion in the evidence from P or D1 to show any other person’s dishonest involvement in the other 169 unauthorized transfers, it appears, prima facie, that D1 had used the same methodology in the stealing, exploiting his position as the project head, arranging for the moneys in these other 169 transfers to be diverted to recipients of his choosing and ultimately benefiting himself.[15] 38.The Court observes that the above inferences against D1 are also supported by the affirmation evidence from several of the staff who had worked under D1 which is produced by P in these proceedings. That evidence shows that D1 was the head of the Project team who was involved in and exercised supervision at each and every stage of the workflow for processing the payment refunds, including performing the final checks for the payments.[16] 39.In light of all of the above, D1’s submission that P cannot demonstrate a prima facie case against him to show his involvement in the other 169 transfers is simply untenable. A bona fide defence? 40.Turning now to the defence that D1 has offered in these proceedings as disclosed in his affirmation filed herein. In short, whilst admitting that he had no defence for the 46 transfers, D1 simply claimed that he was “not related to and did not cause the 169 other transfers (in whole or in part)”. He maintained that they could simply have been caused by others, but without suggesting who were or could have been the other perpetrators. He indicated his wish to provide the Court with evidence but asserted that because he was being remanded in custody, he had no access to the company materials (including the transfer history) and he was unable to look for and contact any witness. 41.This Court observes that D1 has not indicated what witnesses he wishes to contact and what evidence they can give in his favour, if any. Nor has he indicated what other company materials or transfer records, if any, may support his defence and in what ways, especially when the relevant CHATS records and SWIFT messages[17] have already been filed and served as exhibits herein. The obligation is on D1 to condescend to particulars and show a fair probability or reasonable grounds that a bona fide defence exists. In the Court’s view, D1 has utterly failed to do so and his bald denial has no substance in light of all the evidence and inferences against him as mentioned above. 42.Further, P has actually filed affirmation evidence to demonstrate that apart from the 46 transfers, D1 could be shown to have caused at least another four unauthorized transfers: D1 had bought watches with the use of the same false name of “Koh Pang An” and the purchases were shipped to the last known address of D1 and D2.[18] It is remarkable to note that D1 has made no attempt to challenge or rebut that evidence. Seen in the light of that evidence, D1’s bare assertion that he was not involved in all the other 169 transfers is clearly untrue and lack of bona fide. 43.This Court therefore finds that D1 has failed to show any bona fide and believable defence; that there are no triable issues warranting a trial; and that there are no reasons why summary judgment should not be entered against D1 in respect of the other 169 unauthorized transfers. Damages for breach of employment contract 44.Counsel for D1, Mr. Wong, conceded at the hearing that if this Court finds a prima facie case that D1 was involved in the other 169 transfers and there is no plausible defence, D1 should be liable to pay damages for breach of his employment contract with P. That contract dated 20 August 2015 provides that D1 shall use his best endeavours to promote and protect the general interests and welfare of P (§1.3); and that D1 should avoid situations where his personal interests may conflict or appear to conflict with the interests of P (§10.4). By being involved in causing the 169 transfers such that funds were misappropriated out of the Project, D1 had clearly contravened those terms and others in his employment contract with P. 45.As counsel for P, Mr. Phang, confirmed at the hearing, instead of seeking full damages to be assessed, P was content to limit the damages to the amount of funds misappropriated by way of the 169 transfers (involving a total of US$6,245,936.52). Counsel for D1, Mr. Wong, did not seek to challenge that. This Court will therefore order D1 to pay the sum of US$6,245,936.52 to P as damages. Declaratory reliefs 46.As mentioned in §§ 13 and 14 above, D1 admitted in criminal proceedings that he had stolen funds from P by causing 5 transfers (of US$569,581.03 in total) to be made to three bank accounts that he had opened with false names. P seeks declarations that it is the owner of and has a proprietary interest over such funds in those accounts, and that D1 is liable to account to P for the funds as a constructive trustee. Doing the fullest justice to P to which it is entitled in the circumstances of this case, the Court will grant the declarations sought[19]. 47.I therefore make the following orders:-
48.Lastly, I thank counsel acting for the parties for their assistance.
Mr. Roger Phang, instructed by Messrs. Clifford Chance, for the Plaintiff Mr. Benson Wong and Ms Vicky Lau, instructed by Messrs. Ngans Lawyers LLP, for the 1st Defendant
[1] As admitted by D1 in §§15-17 of the Summary of Facts for sentencing in the CFI. [2] See §6 of the Summary of Facts. [3] See §§44, 45 and 71 of the Reasons for Sentence. [4] See §70 of the Reasons for Sentence. [5] See §§45 and 71 of the Reasons for Sentence. [6] Including one transfer to LD Time and one transfer to C+F Handelskontor GMBH. [7] Including one transfer to Montauk Group Ltd. [8] Including one transfer to C+F Handelskontor GMBH. [9] Including one transfer to Xelor BV. [10] Including one transfer to Xelor BV. [11] Including one transfer to Swiss Made Corp and one transfer to C+F Handelskontor GMBH. [12] Including one transfer to C+F Handelskontor GMBH. [13] Including one transfer to LD Time and one transfer to C+F Handelskontor GMBH. [14] See §6 of the Summary of Facts. [15] As the Judge found in respect of the 46 transfers at §44 of his Reasons for Sentence. [16] See e.g. the 3rd Affirmation of NG at §15. [17] They were produced by P as exhibits (of 215 pages) to NG’s 2nd Affirmation. [18] These four transfers are transactions 3, 88, 137 and 187 in the Annex: see NG’s 3rd Affirmation at §17. [19] See WRE Investments LLC v SMW Ltd, HCA 1746/2022, [2023] HKCFI 1893 at §31 per Au-Yeung J. |
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