Leung Choi Fai v. Wong Yee Fai and Others

HCA 1572/2022

[2025] HKCFI 3163

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1572 OF 2022

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BETWEEN

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D E C I S I O N

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INTRODUCTION

1.This is the appeal of the 6^th defendant (“D6”) against the Order of Master KW Wong (“the Master”) dated 13 November 2024 in which it was ordered, inter alia, that D6’s summons dated 5 March 2024 seeking to set aside the final judgment obtained by the plaintiff (“P”) against D6 on 13 December 2023 for the sum of HK$2,161,300 with interest (“the Setting Aside Summons”) be dismissed.

2.In addition to D6’s appeal against the Master’s decision, the following summonses / applications were taken out by the parties at the appeal hearing before me:

(a) P’s Garnishee Orders to Show Cause dated 8 January 2025 against DBS Bank (Hong Kong) Limited and against Standard Chartered Bank Limited (“P’s Garnishee Applications”);

(b) P’s summons dated 21 January 2025 to vary the Mareva Injunction Order dated 19 October 2022 (“the Injunction”) to allow payment out upon the granting of P’s Garnishee Applications (“P’s Variation Summons”);

(c) D6’s summons dated 21 February 2025 for leave to amend D6’s summons dated 5 March 2024 (“D6’s Amendment Summons”); and

(d) D6’s summons dated 24 February 2025 for leave to rely on the 3^rd affirmation of Wu Chong Long affirmed on 24 February 2025 (“D6’s 3^rd Aff”) (“D6’s Further Evidence Summons”).

3.The original date fixed for the appeal hearing on 27 February 2025 had to be vacated and adjourned to 7 March 2025 due to D6’s (i) delay in issuing D6’s Amendment Summons; (ii) delay in lodging and serving the Skeleton Submissions of D6; (iii) delay in issuing the Further Evidence Summons; and (iv) lodging a new reply submissions just before the commencement of the hearing.

4.About a week before the original date fixed for the hearing, ie on 21 February 2025, D6 paid into court the disputed sum of HK$2,161,300 (“the Disputed Sum”).

5.At the commencement of the appeal hearing, P set out his position as follows:

(a) As a result of D6’s payment of the Disputed Sum into court on 21 February 2025, P agrees with D6 that P’s Garnishee Applications and P’s Variation Summons are no longer necessary. However, as D6 has only belatedly paid the Disputed Sum into Court on 21 February 2025 (just 6 days before the hearing), rendering the costs incurred for P’s Garnishee Applications and P’s Variation Summons wasted, P asks that the costs of P’s Garnishee Applications and P’s Variation Summons (with all costs reserved) be paid by D6 to P.

(b) In respect of D6’s Amendment Summons, P does not oppose D6’s Amendment Summons save that costs of D6’s Amendment Summons should be paid by D6 to P.

(c) P opposes D6’s Further Evidence Summons and D6’s appeal.

6.In the morning of the original date fixed for the hearing, Mr Vincent Chiu, D6’s counsel, transmitted a 6-page reply submissions labelled as “The 6^th Defendant’s Speaking Note of Reply” (“the Reply Submissions”) by facsimile to the Court purportedly trying to deal with the issues raised by P’s counsel in his submissions. The hard copy of the Reply Submissions (together with two additional authorities) was provided to the Court less than 15 minutes before the commencement of hearing. Due to the fact that the Court did not have sufficient time to read the Reply Submissions, the Court refused to deal with it at the hearing.

7.I should also note here that D6 was represented by a different firm of solicitors and counsel at the hearing before the Master.

BACKGROUND

Factual background according to P

8.P has fully set out the background of P’s action in P’s 1^st affirmation dated 13 October 2022 (“P’s 1^st Aff”). Mr Thomas Nip, P’s counsel, in P’s skeleton submissions (“P’s Submissions”) has highlighted the following facts by way of background introduction to the case:

(a) P is a victim of a telephone fraud, and has provided the account number and password of his two bank accounts (“P’s Accounts”) to the fraudsters;

(b) A total of HK$586,000, HK$8,722,300 and HK$6,132,700 (totaling HK$14,133,000) has been transferred from P’s Accounts to the accounts of D1, D2 and D3 respectively as first layer of recipients;

(c) Among the HK$8,722,300 received by D2’s account, HK$1,300,300 has been dissipated to D6’s account in Chong Hing Bank (“D6’s Chong Hing Account”).

(d) Among the HK$6,132,700 received by D3’s account, HK$861,000 has been dissipated to D6’s Chong Hing Account.

(e) In other words, a total of HK$2,161,300 (ie the Disputed Sum in the form of HK$1,300,300 + HK$861,000) has been dissipated into D6’s Chong Hing Account, who together with D4, D5 and D7, allegedly acted as second layer of recipients.

9.On 19 October 2022, in reliance on P’s 1^st Aff, P obtained the Injunction. A summons regarding the Injunction was taken out and returnable on 25 November 2022 (“the Injunction Summons”).

10.At or about the same time, P also applied and obtained an Order from the Court requiring Chong Hing Bank to disclose D6’s address.

11.Upon receipt of the Court Order, Chong Hing Bank, by letter dated 15 November 2022, provided P’s solicitors Messrs Kitty So & Tong (“KST”) the following information:

(a) D6’s last known address is Room F, 7/F, Block 1, Classical Garden Phase 2, 8 Ma Wo Road, Tai Po, NT, Hong Kong (“Classical Garden Address”);

(b) A copy of D6’s Account Opening Application Form dated 31 May 2021, which shows that the Classical Garden Address was declared by D6 as D6’s residential address.

12.P commenced the present action by issuing the writ of summons on 15 November 2022, which was amended on 18 November 2022 (“Amended Writ of Summons”).

13.On 21 November 2022, the Amended Writ of Summons was inserted through the letter box at D6’s Classical Garden Address. As can be seen from the cover letter to D6, apart from the Amended Writ of Summons, the Injunction Summons was also inserted through the letter box at D6’s Classical Garden Address. It was also stated in the said cover letter that the next hearing is on 25 November 2022.

14.By a fax letter dated 24 November 2022 from D6 to the Court (“24 Nov 2022 Fax”), D6 identified himself as “第六與訟人” and requested the Court to reverse the Injunction made.

15.During the hearing of the Injunction Summons on 25 November 2022, leave was granted to P to re-amend the order sought.

16.Between 27 June 2023 and 18 August 2023, there was a series of correspondence between P’s solicitors and D6’s then solicitors Messrs Yip & Partners (“YP”).

17.P says that of particular relevance are the following letters:

(a) By letter dated 13 July 2023 to KST, YP requested for all documents of the proceedings;

(b) By letter dated 18 August 2023 to YP, KST provided YP all the requested documents, including a hearing bundle of the Injunction Summons returnable on 25 November 2022. The first item of the Hearing Bundle was the Amended Writ of Summons dated 18 November 2022.

18.YP received the letter dated 18 August 2023 and the documents enclosed, including the Amended Writ of Summons.

19.P says that, notwithstanding the above, D6 took no follow-up action, be it responding to KST or filing an acknowledgement of service.

20.As D6 failed to give any notice of intention to defend, P applied for default judgment against D6, which was granted on 13 December 2023 (“the Default Judgment”).

21.On 5 March 2024, D6 took out the Setting Aside Summons.

22.On 13 November 2024, the Master dismissed the Setting Aside Summons after a full hearing which lasted for half a day.

23.On 25 November 2024, D6 took out D6’s appeal.

D6’s case

24.In addition to the above background facts outlined by P, Mr Vincent Chiu for D6 has highlighted the following facts in D6’s skeleton submissions (“D6’s Submissions”).

25.Since March 2021, D6 has been trading in cryptocurrency USDT. Since June 2021, D6 started trading cryptocurrency with a buyer who identified himself as “chun_boyGod” (俊王) (“the Buyer”) on a trading platform known as Huobi (火幣網) (“the Platform”). D6 has produced the relevant records for those transactions between June 2021 and June 2022 in the hearing bundle[1]. The records show that D6 had engaged in more than 20 transactions with the Buyer.

26.In the indorsement of claim (“Indorsement of Claim”), P stated the basis of D6’s liability to be “alternative” to those of D2 and D3. P says D6 has received HK$1,300,300 from D2 and HK$861,000 from D3, a total of HK$2,161,300.

27.Based on the bank statements obtained by P from Chong Hing Bank, the relevant receipts of D6 making up the Disputed Sum are set out by Mr Chiu as follows:-

Date	D6’s Receipt of HKD	Payor	Corresponding Sale of USDT (“Subject Trades”) in hearing bundle
28.6.2022	315,000	D3	[A2/294]
28.6.2022	253,000	D2	[A2/295]
29.6.2022	301,000	D3	[A2/296]
29.6.2022	183,300	D3	[A2/297]
30.6.2022	301,000	D3	[A2/298]
30.6.2022	400,000	D2	[A2/299]
30.6.2022	200,000	D3	[A2/299]
5.7.2022	208,000	D2	[A2/300]
Total	2,161,300

28.Based on the records, the total amount paid from D3 to D6 was HK$1,300,300 and the total amount paid from D2 to D6 was HK$861,000. It would appear that the Indorsement of Claim has mistakenly mixed up the two total sums paid to D6 and their respective sources. In the Indorsement of Claim, it was stated that D6’s liability arises from (i) transfer of HK$1,300,300 from D2 (§5) and (ii) transfer of HK$861,000 from D3 (§6). D6 says that, preliminarily, such mistake is inexplicable and must render the Default Judgment irregular as the factual basis upon which it was entered was wrong.

29.Turning to the Subject Trades, Mr Chiu says that each of the D6 Receipts is corroborated by the respective sale of USDT to the Buyer and supported by the contemporaneous evidence produced by D6 as set out in the table.

30.The bank statements however do not show the identity of the counterparty of the above payments of HKD to him.

31.P reported the matter to the police on 14 July 2022.

32.On 26 July 2022, D6 came under investigation of the police. He was not charged and was released from police bail on 30 January 2023.

33.On 13 October 2022, P commenced these proceedings.

34.By the Amended Writ of Summons, P asserts both proprietary and personal claims against all Ds (ie unjust enrichment, money had and received, and breach of constructive trust). In respect of D6, the basis of claim was alternative to P’s claims against D2 and D3.

35.Mr Chiu highlighted the fact that when P sought a Mareva injunction against all Ds on 19 October 2022, the basis for the injunction is purely a Mareva injunction without a proprietary injunction.

36.On 21 November 2022, D6 claims that the Amended Writ was purportedly served on D6 at his Classical Garden Address by way of insertion into letterbox. At that time, D6 says that he had already moved out from Classical Garden.

37.Despite D6’s purported clear indication that he would contest the injunction application by the 24 Nov 2022 Fax, D6’s then legal representatives had allegedly failed to file an acknowledgement of service with notice of intention to defend.

38.Meanwhile, based on a court search conducted by D6’s current solicitors, D6 found out that in around May 2023 (ie before the Default Judgment was entered), P had reached settlement with D3 and D7: See Notice of Discontinuance dated 12 May 2023 against D3 and D7. Despite the effort of D6’s current solicitors, Grandall Zimmern (“GZ”), to seek confirmation from P as to whether he had made any recovery from D3, P’s solicitors had failed to answer GZ’s query. However, it was subsequently confirmed by Mr Nip in P’s Submissions that P did not receive any sum from D3. Thus, there was nothing for P to disclose when applying for the Final Judgment and no credit needs to be given[2].

39.On 13 December 2023, P entered the Default Judgment against D1, D2, D4, D5, and D6. In this connection, D6 says that:-

(a) The basis for entering Default Judgment against these Ds was Order 13 (ie in default of notice of intention to defend).

(b) Importantly for present purposes, despite ample time to do so, P did not file a statement of claim and proceed under Order 19 and seek for example declaratory reliefs concerning his (alleged) proprietary claims (ie based on constructive trust).

40.As mentioned above, on 5 March 2024, D6 took out the Setting Aside Summons. On 13 November 2024, D6’s Setting Aside Application was dismissed.

41.On 27 January 2025, D6 instructed his current solicitors GZ.

Payment into Court made by D6 on 21 February 2025

42.This is a significant event in the context of this case in that D6 has, after his Setting Aside Summons was dismissed by the Master and a few days before the appeal hearing, voluntarily made a payment into court of the entire Disputed Sum of HK$2,161,300 on 21 February 2025 (“the Payment In”).

43.D6 says that the Payment In acts as security pending the trial of the action. Mr Chiu submits that this should weigh significantly in favour of setting aside the Default Judgment against his client. After all, D6 is asking for his day in court given the very serious allegations of money laundering and the lack of good faith in the cryptocurrency transactions made against him. Besides, Mr Chiu submits that as P has not even filed his statement of claim setting out his case against D6 based on D6’s lack of bona fide and D6’s alleged involvement in money laundering. Mr Chiu submits that with the entire claimed sum secured in court, there is no prejudice to P if the Default Judgment is set aside and the matter proceeds to trial.

44.However, I would like to note here that the Payment In was made more than 2¼ years after the Default Judgment was entered against D6 and only after the Garnishee Applications were taken out by P. Further, it was also only made a week before the original date fixed for the appeal hearing. I noticed that D6 has not explained the reason(s) for the delay in making the Payment In.

Summonses disposed of at the outset of the hearing

45.The following summonses / matters have been disposed of by the Court at the beginning of the adjourned hearing on 7 March 2025.

46.First, given the fact that D6 had made the Payment In of the Disputed Sum on 21 February 2025, it renders P’s Garnishee Applications and P’s Variation Summons no longer necessary. This is agreed by counsel on both sides: See §75 of D6’s Submissions and §4 of P’s Submissions. The only outstanding matter in relation to these summonses are in relation to costs as the Payment In was made only 6 days before the original hearing date.

47.Mr Nip for P submits that due to the belated Payment In by D6, the costs incurred by P in issuing those summonses were wasted and therefore they should be entitled to those costs. Mr Chiu does not seriously dispute this.

48.I agree with Mr Nip’s submission on this and would order D6 to pay for the costs of P’s Garnishee Applications and P’s Variations Summons (with all costs reserved), such costs to be taxed if not agreed. In my view, it is clear that had D6 made the Payment In earlier, the issuance of these applications / summonses by P would not have been necessary. Hence, P is entitled to those costs.

49.In respect of D6’s Amendment Summons, Mr Nip indicated in P’s Submissions that P does not oppose to the application but he asked the costs of D6’s Amendment Summons to be paid by D6 to P.

50.I consider that is reasonable and would order D6 to pay the costs of D6’s Amendment Summons.

51.Hence, resulting from the above, only D6’s Further Evidence Summons and the appeal to the Setting Aside Summons have to be dealt with by the Court at the hearing.

52.The parties agreed that I should hear D6’s Further Evidence Summons first.

D6’s Further Evidence Summons

53.It is not disputed by Mr Chiu that in order for the Court to accept the new evidence, D6 has to satisfy the requirements in Ladd v Marshall.

54.Accordingly, D6 must first satisfy the Court that the evidence as contained in D6’s 3^rd Aff could not have been obtained at the hearing below with reasonable diligence: HKCP 2025 at §§59/10/8-9.

55.D6’s complaint is that his case was not prepared properly by his previous legal team. However. D6 does not contend in D6’s 3^rd Aff that the further evidence could not have been obtained at the hearing below with reasonable diligence. Instead, D6 complains that he did not disclose such further evidence because of the lack of advice from his legal representative.

56.I agree with Mr Nip that the principles in Ladd v Marshall must be strictly applied. When the requirements in Ladd v Marshall are not satisfied, the mere following of the advice of legal adviser is not sufficient to admit the new evidence: Chan Koon Nam v Ng Man Sum (unrep., CACV 281/2011, 5 March 2013) at §§44-48 per Kwan JA (as the VP then was).

57.In the present case, I agree with P that D6’s explanation must be rejected. D6 deposes that his previous affirmations were not prepared properly by his previous legal team and seems to suggest that he did not truly understand the meaning of his previous affirmations. However, I notice that D6’s 1^st and 2^nd affirmations were clearly interpreted to him before he signed on them. Any suggestion that D6 did not approve or understand his previous affirmations must be rejected.

58.Further, I agree with Mr Nip that the transaction records that D6 belatedly intended to produce are websites and/or records obtained by D6 from the platform in which he allegedly traded cryptocurrency. It is not D6’s case that these further evidence did not exist or could not have been obtained prior to the hearing below. These records clearly could have been obtained at the hearing below with reasonable diligence.

59.Despite his best efforts, Mr Chiu was not able to explain on behalf of his client why those new evidence in terms of the information provided by the trading platform could not be obtained much earlier and produced under his previous affirmations. Hence, I found D6 was not able to overcome the first requirement under the rule in Ladd v Marshall and therefore D6’s Further Evidence Summons was dismissed by me with costs in favour of P at the hearing.

DISCUSSION

D6’s Appeal on the Setting Aside Summons

60.In D6’s Amendment Summons, the grounds relied on by D6 can be briefly summarized as follows:

(a) Since 11 October 2022, D6 has been residing at House 112, Boulevard De Fontaine, the Beverly Hills, No. 23 Sam Mun Tsai Road, Tai Po, New Territories, Hong Kong (“Beverly Hills Address”). Therefore, the service of the Amended Writ of Summons had been ineffective;

(b) D6 has a meritorious defence with a real prospect of success against the claims of P;

(c) The Final Judgment was irregular in that P is not entitled to the reliefs sought against D6 when P abandoned his proprietary claim over the sums transferred to D2; and

(d) The Final Judgment was irregular in that P has failed to account for the recovery he received from D3 and/or D7.

Applicable legal principles for Setting Aside Summons

61.The parties do not dispute that D6’s appeal should be dealt with by an actual rehearing of the Setting Aside Summons: HKCP 2025 at §58/1/2.

62.In respect of setting aside a default judgment, Order 13, rule 9 provides that:

“Without prejudice to rule 7(3) and (4), the Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order.”

63.As stated by the learned authors of HKCP 2025 at §13/9/2 at p.331, the Hong Kong Courts still distinguish between a judgment that was obtained irregularly and one that was not so obtained.

64.Where a judgment is irregularly obtained, the judgment will be set aside ex debito justitiae without regard to the merits of the proposed defence: Bluesun Capital Ltd v Tewoo Group Finance No 3 Ltd & Others [2021] HKCFI 2040 (14 July 2021) at §40 (Recorder Manzoni SC). Default judgment can only be obtained for the relief which is pleaded in the statement of claim. If the relief is not claimed in the statement of claim, the judgment must be irregular: Bluesun Capital, supra, at §§29-33.

65.As the facts on which the plaintiff's claim is based are deemed to be admitted in a default judgment scenario, judgment will only be given on the plaintiff's claim provided the pleaded facts give rise to the relief sought. Where, however, the facts do not give rise to the relief sought, then unless the writ or statement of claim is amended, no judgment will be given: Lam Chi Fat v Liberty International Insurance [2002] 3 HKLRD 480　(Ma J, as the CJ then was) at §§26-27.

66.A judgment may also be irregular if there was no due proof of service of the writ: HKCP 2025, §13/0/13.

67.The principles on setting aside a regular default judgment are summarised by Wilson Chan J in Xian Hongying, the executrix of the estate of Shew Yun, deceased v Man Wong & Another [2024] HKCFI 784 at §§20-23:

(a) The major consideration is whether the defendant has shown a defence on the merits which the court should pay heed, not as a rule of law, but as a matter of common sense.

(b) The court will have regard to all relevant factors in the exercise of its discretion, including, inter alia, why the default occurred and any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside. The dominant factor would be the merits of the case.

(c) On the issue of merits, the defendant has to show he has a “real prospect of success”. In considering this, the Court should consider whether the defence could well be established at trial.

(d) The Court is not required to undertake a mini-trial on the affirmations as to the likely outcome if the matter goes to trial. Instead, the correct approach is for the court to have to form a provisional view as to “whether or not the defendant has a realistic prospect of successfully defending the action”. The assessment has to be carried out “mindful of the interlocutory nature of the application and with a sense of proportionality”.

68.I shall deal with the D6’s grounds as stated in the Amended Setting Aside Summons in turn.

(i) whether the Amended Writ of Summons was properly served on D6

69.As Mr Nip has pointed out in P’s Submissions, although D6 maintains the objection based on invalid service at the Classical Garden Address (see §72 of D6’s Submissions), no detailed submissions have been advanced by D6. In fact, no real attempts were made by D6 to argue this point through counsel at the appeal hearing. In my view, this is significant in the sense that if D6 is found to be unbelievable or being dishonest on this issue, it would also affect the credibility and reliability on the defence raised by him. After all, his conduct after he had notice of proceedings is one of the matters that the Court should take into consideration when deciding whether D6 has a meritorious defence or not.

70.As Mr Nip has reminded the Court, the Final Judgment against D6 was obtained on the following basis:

(a) the Amended Writ of Summons dated 18 November 2022 was served to the Classical Garden Address on 21 November 2022;

(b) However, D6 had failed to give notice of intention to defend.

71.Order 10, rule 1(2) RHC provides that:

“(2) A writ for service on a defendant within the jurisdiction may, instead of being served personally on him, be served—

(a) by sending a copy of the writ by registered post to the defendant at his usual or last known address, or

(b) if there is a letter box for that address, by inserting through the letter box a copy of the writ enclosed in a sealed envelope addressed to the defendant.

(3) Where a writ is served in accordance with paragraph (2)—

(a) the date of service shall, unless the contrary is shown, be deemed to be the seventh day (ignoring Order 3, rule 2(5)) after the date on which the copy was sent to, or as the case may be, inserted through the letter box for, the address in question.”

72.P accepts that in addition to the compliance of the procedural requirement, the service only becomes regular when the defendant has notice of the proceedings: Cosec Nominees Ltd & Another v Lau Hon Ming [2001] 2 HKLRD 581 at 588C-E; Phillip Securities (HK) Ltd v Lam Chi Bin Stanley [2002] 1 HKC 432 at §§12-13.

73.To show that the defendant has notice of the proceedings, it was made clear that convincing and compelling evidence is required for the defendant to show that he has no notice, but how much evidence is required to discharge that heavy burden must depend on the circumstances of the case: Re Chan Chi Ho [2008] 5 HKLRD 871 at §24.

74.In the present case, I accept Mr Nip’s submission that the service (and hence the Final Judgment) is regular because:

(a) The Amended Writ of Summons has been inserted through the letterbox at Classical Garden Address, which is D6’s usual or last known address at the time of service; and

(b) D6 had notice of the present proceedings.

Classical Garden Address is D6’s last known address

75.Mr Nip in P’s Submissions has reminded me that the legal principles regarding “usual or last known address” have been summarized in The Hong Kong Mortgage Co Ltd v Ching Kit Yu & Another (unrep., HCMP 2226/2002, 15 April 2023) per DHCJ To at §§10-13 as follows:

“10. The crucial words of Order 10 rule 1(2)(a) and (b) are “usual or last known address”. The first point to note is the disjunctive, “or”, between “usual” and “last known”. In the context of rule 1(2), this word must be given its ordinary meaning, so that it must be read disjunctively. Had it been intended otherwise, the conjunctive “and” would have been used.

11. Secondly, according to the Oxford English Dictionary, the word “address” means “details of where a person lives, works or can be found, and where letters, etc. may be delivered.” Thus the meaning of the word is not confined exclusively to a person's residence. The essence really is a location where the person may be reached or where contact or communication in written form, such as by letter, could be established. If so, a person may have at the same time a number of addresses. A student residing in hostel may have a home address and a hostel address in which he resides. Communication may be established with him through any of those addresses. Likewise, a person may be reached through his place of work, his home, or his quarters if the nature of his work so requires him to reside in quarters. None of those places ceases to be his address. Thus a person may have at the same time a number of addresses through which communication or contact with him may be established. Accordingly, at the same time, he may have a number of last known addresses. It would be absurd to say that he must be last known at his residential address and not at his place of work where he spends most part of the day or his quarters where he spends most nights of the week.

12. I now turn to the words “last known” or “last known address”. This phrase means the address last known to the plaintiff. The plaintiff is entitled to ascertain from whatever available source that address, i.e. the details of where the defendant lives, works or can be found, and where letters, etc. may be delivered. There is no reason why it should be qualified to mean the address which the defendant last intentionally made known to the plaintiff. The rule would be render nugatory if such a qualification is added. With such a qualification, a defendant may intentionally make known to the plaintiff an address at which he could not be reached and hence evade service. The rule provides for the means as to how service may be effected. It could not have been drafted to defeat its own purpose. Hence, I hold the words “last known address” mean the address last known to the plaintiff from whatever source and a defendant may have a number of addresses last known to the plaintiff, depending on the circumstances and the diligence of the plaintiff's inquiries.

13. I now turn to the word “usual” or “usual address”. This must mean one of the above addresses where a person may usually be reached. While the word “usual” conveys the idea of a habitual or frequent connotation, the rule does not say "the most usual address" as to require the address to be one where a person may in most probability be reached. Thus, a person may have a number of usual addresses. He may be usually reached during office hours at his office address or during other hours at his home address. This may be one of the last known addresses or an alternative address, for example, an address which the defendant intentionally made known to the plaintiff. Anyway, the “usual address” and “last known address” are alternative addresses for service under Order 10 rule 1(2) of the Rules of the High Court.” (emphasis added)

76.Further, the phrase “last known address” means the defendant’s address last known to the plaintiff. A defendant’s last known address must have been intended to be an alternative to a defendant’s usual address in case the plaintiff was unaware of a recent change in defendant’s usual address: Cosec Nominees Ltd at 587H-J.

77.I agree with the principles as set out in the above 2 cases.

78.In the present case, I agree with Mr Nip that the Classical Garden Address must be D6’s last known address based on the following facts:-

(a) For the purpose of commencing proceedings against D6, P applied for an order requiring Chong Hing Bank to disclose D6’s address.

(b) By letter dated 15 November 2022 (which was only few days before P’s service to the Classical Garden Address), Chong Hing Bank specifically informed P that D6’s last known address is the Classical Garden Address, and attached D6’s account opening application form, which also shows that D6 has declared the Classical Garden Address as D6’s residential address. It is trite that D6’s last known address to the Plaintiff does not necessarily have to come from D6 himself and P is entitled to ascertain from whatever available source that address: The Hong Kong Mortgage Co Ltd at §12;

(c) The mere fact that D6 has moved from the Classical Garden Address to the Beverly Hills Address since 11 October 2022 (even if believed) is irrelevant. D6 may have a number of last known addresses at the same time and D6’s last known address does not have to be D6’s residence at the material time: The Hong Kong Mortgage Co Ltd at §11;

(d) Lastly, as can be seen in the bail form of the police, D6 has provided another address “2/F, House 2, Lane 1, Liu Pok, Liu Pok Road, Sheung Shui, North District, New Territories”. This is not the Classical Garden Address or the Beverly Hills Address. Further, even on 26 October 2022 (which according to D6, he has already moved to the Beverly Hills Address), D6 did not provide the Beverly Hills Address to the police but continued to provide the said address in Sheung Shui. This is strong evidence that D6 may have more than one address at the material time.

Whether D6 had notice of the proceedings long before the Final Judgment

79.D6 claims that he only has notice of the Amended Writ of Summons in August 2023, when YP obtained the Hearing Bundle from KST. In my view, this is simply not believable.

80.As stated by Coleman J in Cheung Sai Lon v Cheung Sai Ha & Another [2021] HKCFI 904 at §14:

“The Court does not have to accept a defendant’s assertion that he has not received the writ, which the defendant must show by compelling evidence. The relevant time is the time at which the default judgment was entered; therefore, it is for the defendant to show that he did not have notice of the writ at that time.”

81.In this case, I find D6 must have notice of the proceedings by 24 November 2022 due to the following facts as highlighted by Mr Nip in his submissions:

(a) The Amended Writ of Summons (and other court documents including the Injunction and the Injunction Summons) have been served to the Classical Garden Address on 21 November 2022. Three days later, D6 was able to identify himself as the 6^th defendant (“第六與訟人”) in the action HCZZ 121/2022 in the 24 Nov 2022 Fax. The obvious point is that if D6 did not receive the Amended Writ of Summons, he would not possibly know that he is the 6^th defendant in the Injunction.

(b) In D6’s affirmations, D6 tried to get around the 24 Nov 2022 Fax with two purported explanations, namely, (1) he was told by the officer of CH Bank as to the Injunction; and (2) after Mr David Fong left his previous firm, he had no legal representation and had to issue the 24 Nov 2022 Fax under his own name.

(c) As to (1), D6 in his 1^st affirmation deposed to the following:

“Having been released by the Police, I discovered in about June 2023 that my CH Bank A/C was still frozen. On my enquiry, the bank officer informed me that the amount was subject to an injunction order against me issued by the High Court under HCZZ 121/2022, and the solicitors concerned were Messrs. Kitty So & Tong…” (emphasis added)

(d) In D6’s 2^nd affirmation, D6 deposed to the following:

“I must clarify that the Fax was about the injunction (case reference HCZZ 121/2022), the knowledge of which, as I already reported in D’s 1^st Affirmation, was from the officer of CH Bank and subsequent correspondence between my then legal representatives Messrs. Yip & Partners (“YP”) and KST…”

(e) One would immediately notice that the 24 Nov 2022 Fax was issued on 24 November 2022, that is prior to D6’s alleged discovery of this action from the bank officer in June 2023.

(f) There is simply no plausible explanation from D6 as to how D6 could have issued the 24 Nov 2022 Fax yet continue to claim that he only knew about this in June 2023. Therefore D6’s explanation must be false.

(g) As to (2), it is D6’s evidence that Mr David Fong left his firm in October 2023, which again is after the issue of the 24 Nov 2022 Fax. Accordingly, the fact that Mr David Fong left his firm in October 2023 has nothing to do with “without legal representation, I could only send the Fax to the Court by myself to object to the continuation of the injunction”. Therefore, D6’s explanation is simply incredible and must be false.

(h) Further, the letter from KST to D6 dated 21 November 2022 included, inter alia, the Amended Writ of Summons and the Injunction Summons which was returnable on 25 November 2022. The fact that D6 issued the 24 Nov 2022 Fax, one day before the hearing of the Injunction Summons, suggest that D6 must have been well aware of the hearing on 25 November 2022. D6 must have received the letter from KST to D6 dated 21 November 2022 serving the Injunction Summons and the Amended Writ of Summons to the Classical Garden Address.

(i) In light of the above evidential gap and inconsistency, D6 has plainly failed to adduce compelling and convincing evidence that he only had knowledge of the proceedings in June / August 2023. I find D6 must have received notice of this action when the Amended Writ of Summons was served to the Classical Garden Address on 21 November 2022.

82.In light of the above irrefutable evidence, I am not surprised that Mr Chiu did not put up any real attempt to explain how D6 could say that he did not receive service of the Amended Writ of Summons (and other documents) at the Classical Garden Address at the time of service on 21 November 2022.

83.For the above reasons, I find the service of the Amended Writ of Summons was regular and the Final Judgment was a regular judgment.

(ii) Whether D6 has a meritorious defence

84.I will now turn to this next issue which in my view is the real crux of D6’s appeal.

Legal principles involved

85.The legal principles in this area is trite and is not disputed. Basically, the power to set aside a default judgment which has been entered regularly is discretionary and such power is unconditional: HKCP 2025 at §13/9/12.

86.It is not to say that a defendant who is able to demonstrate a defence which has a real prospect of success has an automatic entitlement to have the default judgment set aside. In exercising the discretion under this rule, the Court has regard to all relevant circumstances. What will be relevant as a factor in any particular case will depend on the individual facts of that case. The usual factors are: why the default occurred; the defendant’s conduct after he had notice of the proceedings; an explanation for the time taken where there has been delay in making the application; and any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside. These other relevant factors will then have to be weighed against the dominant factor of the merits in order to see where the justice of the case lies. Further, the fact that a defendant has told lies in seeking to explain the delay may affect his credibility and may, therefore, be relevant to the credibility of his defence and the way in which the court should exercise its discretion: HKCP 2025 at §13/9/13.

87.In order to set aside a regular judgment, the defendant has to show a meritorious defence with a real prospect of success or which carries some degree of conviction. Unless a defendant can produce potentially credible affidavit evidence demonstrating a real likelihood that he will succeed on fact, he cannot be said to have shown he has a real prospect of success: Southwest Securities (HK) Brokerage Limited v Liu Su Heng & Another [2021] HKCFI 863 at §10 (per DHCJ To).

88.Thus, there is a substantial onus on an applicant who seeks to set aside a regular judgment. The defendant should “explain precisely what the proposed defence will be so that the Court can be assisted in forming a value judgment as to whether it can be satisfied that there is some degree of conviction and a real prospect of success in the proposed defence”. Expressing the defence with the usual obscure wording of a pleading would not be sufficient: Tong Yi Sang & Another v Fung Law & Ng & Another [1993] 2 HKC 665 at 672B-E.

89.Mr Chiu relies on the case of LTC (BVI) Limited v Tempest Storm Company Limited & Others [2023] HKCFI 3167, where Recorder Manzoni SC found that the relevant defendant therein was a trader in cryptocurrency and refused to grant summary judgments against the said defendant who received funds from the plaintiff through an intermediary. In particular, Mr Chiu relies on the following passages at §§25-27 of the judgment to support his argument:-

“25. I accept, for the purposes of this hearing, that crypto currency trading was, in 2021, largely unregulated. In those circumstances, and quite probably in any event, it does not come as a great surprise that there may be operators within the industry who transacted in huge sums of money without the safeguards that one would normally expect of a significant business. Therefore, whilst I understand the various criticisms of the 3^rd Defendant’s case which have been made by the Plaintiff, I do not think that they are such as to render the propositions of the 3^rd Defendant as mere moonshine.

26. I also accept that the Plaintiff may ultimately prove correct in its suggestion that the intermediaries are unidentified and that the 3^rd Defendant cannot demonstrate a proper business of the type alleged being carried out through them. It is perhaps surprising to many that such huge sums could be transacted with unknown persons using nothing other than a nickname and a WhatsApp message. The 3^rd Defendant has, on its side of the transaction, the safety of the receipt of money prior to purchasing crypto currency, but the intermediary would not have such safety, and it is perhaps here that the surprise might come. However, the mere fact that something is surprising does not justify a summary judgment if the court is told, perhaps with some justification, that the industry does indeed work in this manner. The propositions will have to be tried on the basis of full evidence.

27. I have also considered the suggestion that the 3^rd Defendant either knew or ought to have known that the money it received from the 1^st Defendant was tainted. Again, the Plaintiff may prove to be correct, but in my view there is clearly a triable issue in that regard. US$600,000 does not appear to be a particularly large sum from the 3^rd Defendant’s perspective. It was a minority portion of the US$3,687,032 received on 18 May 2021. That US$3,687,032 was received in 23 different transactions most of which appear to be with different counterparties. I can easily recognise that there is a triable issue over why the 3^rd Defendant should consider the particular US$600,000 which was stolen from the Plaintiff as being tainted. As far as the 3^rd Defendant might be concerned there was nothing special about that US$600,000. It was simply one (or in fact three) of the 23 transactions that took place that day.”

90.Mr Nip on the other hand has referred me to the recent District Court decision of Yasakart Corporation v Haogong Technology Co Ltd & Another [2023] HKDC 1514.

91.In Yasakart, the plaintiff was a victim of fraud and was deceived to transfer payments to the 1^st defendant. Part of the payment to the 1^st payment was transferred to the 2^nd defendant. The plaintiff obtained default judgment against the 2^nd defendant. The 2^nd defendant argued that the payment was received as a result of selling cryptocurrency. The 2^nd defendant’s application to set aside default judgment was dismissed by Master. In dismissing the 2^nd defendant’s appeal, Deputy District Judge B. Mak stated the following at §§29-30:

“29. The buying and selling of cryptocurrency is not ordinary business. The mechanism of the business transaction is not readily understood by people in the street. It is therefore up to the 2^nd defendant to demonstrate how the business was done including but not limited to the receiving of the order from Mr Pang; the then available sources of USDT; the then market rate of USDT quoted by the different sources; how the purchase of the USDT was performed; how the purchased USDT was credited into the designated account of the 1^st defendant and the nature of such an account.

30. It is fair to say that there is a total lack of information on how the 2^nd defendant ran the business of cryptocurrency trading …” (emphasis added)

92.I note the facts in the above 2 cases are somewhat different from our present case as in other cases involving cryptocurrency transactions. These cases are all fact-sensitive and therefore it is not particularly helpful to the Court in how to apply the legal principles to the particular factual scenario of a particular case by relying on them. In my view, each case must be considered based on the particular factual circumstances of the case to see if a defendant is able to establish a bona fide purchaser defence. Further, I note that LTC (BVI) Limited involved a summary judgment application by the plaintiff which applies a different legal test as in a setting aside judgment application.

93.However, perhaps one common feature which runs through both of the above two cases is the fact that trading in cryptocurrency is a relatively new business or phenomenon　back in 2021/2022 when they were largely unregulated. Thus, it is incumbent upon the party who relies on a bona fide purchaser defence to explain to the Court how the business was done and how the transactions in question in that particular case were conducted, including but not limited to those matters stated by Deputy District Judge B. Mak in §29 of Yasakart.

Was D6 a bona fide purchaser without notice?

94.D6 argues that he has a meritorious defence in that he was a bona fide purchaser for value without notice or change of position.

95.In his 1^st affirmation, D6 stated that his meritorious defence is based on the fact that the HK$2,161,300 received was money paid to him by a buyer as consideration of his sale of USDT during legitimate cryptocurrency trade on a legitimate platform.

96.Mr Chiu in D6’s Submissions states that (1) there was no evidence to show that D6 had actual notice of the fraud; and (2) D6 does not have constructive notice for the following 5 reasons.

97.First, there was no reason for D6 to suspect anything untoward about the Buyer purchasing USDT from him:-

(a) D6 has been trading in cryptocurrency since March 2021 and has had a longstanding track record of trading with the Buyer since June 2021 up to 21 June 2022, ie just 1 week before the Subject Trades took place. No issues arose from those transactions at all.

(b) Indeed, both D6 and the Buyer are users with verified identity on the Platform.

98.Second, as demonstrated above in the table prepared by Mr Chiu (as reproduced at §27 above), each of D6’s receipt from D2 and D3 from 28 June 2022 to 5 July 2022 making up the Disputed Sum was fully accounted for by way of the corresponding USDT sale transactions, with reference to contemporaneous documents. There can be no question about such transactions having taken place.

99.Third, the bank statements of Chong Hing Bank (ie D6’s bank) do not make available information regarding the identity of the payors. Therefore, D6 could not have been put on notice about anything untoward regarding the different identity of the payors.

100.Fourth, P launched aggressive attacks on the credibility of D6’s defence in his affirmation in opposition. Those points are akin to closing submissions at trial and rendered the whole exercise like a mini-trial on affidavits.

101.Fifth, and in any event, significant weight should be attached to the fact that D6 came under investigation by the police in respect of P’s complaint for obtaining property by fraud, but was eventually released from bail without being prosecuted at all.

102.D6 also relies on the change of position defence in that Mr Chiu submits that D6 had carried out the Subject Trades and changed in position in good faith by parting with his USDT in corresponding amounts. He relies on the same facts as above to support the change of positon defence.

Legal principles in relation to establishing a bona fide defence

103.In AXHT Company Ltd v Wing Wo Lung Company Ltd & Others [2024] HKCFI 3678, Recorder Khaw SC set out the following principles concerning bona fide purchaser defence:-

77. To establish the defence of bona fide purchase (“BFP Defence”), a defendant should demonstrate (1) a purchase for value, (2) of the legal title in property, (3) in good faith, (4) without notice, (5) at the time of transfer of the legal title…

78. It is well-established, and as accepted by P’s counsel during his oral opening submissions, that the BFP Defence is available not only to a claim asserting title to property, but also to defeat a claim to recover the traceable proceeds of property or a personal claim in unjust enrichment ...

79. The test of notice was set out by Lord Clarke in Papadimitriou v Credit Agricole Corp and Investment Bank [2015] 1 WLR 4265 at §13:

“a reasonable person with their attributes (i.e. those of a responsible large bank with the benefit of highly experienced insolvency practitioners as their appointed administrative receivers) should either have appreciated that a proprietary claim probably existed or should have made inquiries or sought advice, which would have revealed the probable existence of such a claim.”

80. At §14, Lord Clarke set out three circumstances relating to notice:

(1) The first is where the recipient in fact appreciates that a proprietary right in the property probably exists, so that it has actual notice of the right.

(2) The second is where a reasonable person with the attributes of the recipient should have appreciated based on facts already available to it that the right probably existed, in which case the recipient has constructive notice of the existence of the right.

(3) The third is where the recipient should have made inquiries or sought advice which would have revealed the probable existence of such a right.

81. Dealing with the third category, Lord Clarke added at §20 that:

“... the [recipient’s] knowledge of facts indicating the mere possibility of a third party having a proprietary right would not be enough to put the [recipient] on inquiry but, on the other hand, it is not necessary for the [recipient] to conclude that it probably had such a right. The test is somewhere in between. It may be formulated in this way. The [recipient] must make inquiries if there is a serious possibility of a third party having such a right or, put in another way, if the facts known to the [recipient] would give a reasonable [person with the attributes of the recipient] serious cause to question the propriety of the transaction. …” (emphasis added)

82. As Lord Sumption put it at §33:

“We are in the realm of property rights, and are not concerned with an actionable duty to investigate. The hypothesis is that the claimant has established a proprietary interest in the asset, and the question is whether the defendant has established such absence of notice as entitles him to assume that there are no adverse interests. The mere possibility that such interests exist cannot be enough to warrant inquiries. There must be something which the defendant actually knows (or would actually know if he had a reasonable appreciation of the meaning of the information in his hands) which calls for inquiry.… But if there are features of the transaction such that if left unexplained they are indicative of wrongdoing, then an explanation must be sought before it can be assumed that there is none.”

83. The analysis in Papadimitriou was adopted [in Hong Kong] ...

84. Further, although “bona fide” and “without notice” are in principle distinct elements of the BFP Defence, it is difficult to envisage a situation in reality where a defendant is found not to have notice and yet still to have acted in bad faith ... It would be rare for an absence of bona fides to prevent the purchaser of the legal estate without notice from asserting priority over a prior equitable interest ...

85. As to the requirement of consideration, it must be valuable, not nominal, and have been executed. The satisfaction of an existing debt is a valuable consideration for the purposes of this defence ...”

104.I respectfully agree with the learned Recorder’s summary of the law in the above passages.

105.Thus, in order to raise the defence of bona fide purchaser for value without notice, D6 has to prove:

(a) there was a purchase for value;

(b) of the estate in property;

(c) in good faith / bona fide;

(d) without notice; and

(e) at the time of transfer of the legal estate.

106.Specifically in relation to the element of “bona fide”, it was said in Chau Lai Bing v Li Rongqiang & Others [2022] HKDC 1389 by Deputy District Judge Gary CC Lam (as His Honour Judge Gary CC Lam then was) at §46 that:

“46. To prove bona fide, the burden lies on the 3^rd defendant to prove a triable issue as to (1) whether a reasonable person with the attribute of her would not have appreciated on facts available to him that a proprietary right probably existed; or (2) whether she had already made inquiries or sought advice which would have revealed the probable existence of such a right: see Ling Weixian v Tsoi Ai Tong [2022] HKDC 967 at §21 per DDJ Rebecca Lee. Further, the nature and extent of the inquiry called for depends on the circumstances of the particular case: see at Globenet Droid Ltd v Hong Kong Hang Lung Electronic Co [2016] 3 HKLRD 863 §54 per DDJ Gary CC Lam.”

Whether D6 was a bona fide purchaser?

107.In my judgment, on a close examination of the evidence, D6 has failed to show that he was a bona fide purchaser on multiple fronts.

108.First, I agree with Mr Nip that D6 has failed to produce credible evidence in his affirmations demonstrating a meritorious defence for the following reasons:

(a) Notwithstanding that D6’s profile in the Huobi platform has been exhibited, there is no evidence as to whether the transaction records in WCL-2, WCL-3 and WCL-6 actually belonged to D6’s account.

(b) According to D6, the HK$2,161,300 was the total sum received from the Buyer from selling USDT to him on 7 occasions.

(c) According to the transaction record allegedly between D6 and the Buyer, the total number of USDT sold by D6 in the 7 transactions was around 273,236:

39,823 + 31,985 + 38,053 + 23,173 + 38,053 + 75,853 + 26,296

(d) However, according to D6’s purchase record of USDT, D6 has only purchased a total number of 5,501 USDT:

5,001 + 500

(e) Obviously, the total number of USDT purchased by D6 was insufficient for D6 to complete the 7 transactions with the Buyer.

(f) By applying a similar reasoning as that stated in Yasakart at §§26-28, before D6 is able to deliver USDT to the Buyer, D6 must first spend an amount of money to purchase the same amount of USDT either from the USDT issuing company or at the open market. As stated above, even assuming that the record is D6’s account (which has not been admitted by P), D6 has only produced record that he has purchased 5,501 USDT. There is no explanation from D6 how the remaining USDT came about. Further, according to the bank statement disclosed by D6, there is no evidence that D6 has expended sufficient money to purchase the equivalent amount of USDT.

(g) As such, there is simply no evidence showing that D6 had the sufficient number of USDT, let alone the source of USDT, how the purchase of USDT was performed, and how the USDT was credited to D6’s account in the Huobi platform before D6 could have made the 7 transactions with the Buyer.

(h) Further, there is no evidence showing that a total of around 273,236 USDT has been deducted from D6’s account, let alone evidence showing the change of number of USDT in D6’s account with reference to date / time.

(i) As stated in Tong Yi Sang at 672B-E and Yasakart at §29, the burden is on D6 to adduce sufficient evidence to show that he has a real prospect of success. In this particular case, I agree with Mr Nip that it is for D6 to demonstrate how the cryptocurrency transactions were done and adduce sufficient evidence, including how the business was done, the sources of USDT, the market rate of the USDT at that time, how the purchase of USDT was performed and how the purchased USDT was credited to the Buyer’s account.

(j) In the absence of sufficient evidence despite being provided with two occasions to file affirmation, D6 has only himself to blame for not providing sufficient evidence to establish his defence.

109.Secondly, I agree with Mr Nip that D6’s affirmation evidence, even if believed, fails to satisfy the element of bona fide for the following reasons:

(a) According to D6, in all the 7 transactions, he was dealing with the Buyer;

(b) However, surprisingly, D6 did not receive the corresponding amount from the Buyer, but from D2 and D3.

(c) For example, for the transaction on 28 June 2022, despite claiming that he was dealing with the Buyer, D6 received HK$315,000 from D2 and received HK$253,000 from D3.

(d) Even more surprisingly, in relation to the particular USDT transaction with the Buyer on 30 June 2022 involving the sum of HK$600,000, the HK$600,000 was paid to D6’s bank by two separate transactions (ie by a transfer of HK$400,000 and another transfer of HK$200,000). Even more alarming, although D6 claims that he was dealing with the same party (ie the Buyer), the money for that particular transaction was not paid by one party, but by D2 and D3 separately (HK$400,000 was paid by D3 while HK$200,000 was paid by D2). However, both D2 and D3 were not his counterpart in the USDT transaction in the Huobi platform.

(e) The situation is even more alarming when one looks at other transactions with the Buyer. For example, in relation to the particular USDT transaction on 30 June 2022 with the Buyer involving the sum of HK$557,200, the sum was again not paid by the Buyer himself, but D2 (HK$357,200) and a person named Yang Yun (HK$200,000).

(f) It is simply surprising that when according to D6, he was dealing with the same buyer, the payments would have come from at least three different counterparties.

(g) It is now claimed by D6 that he could not have been put on notice about anything untoward regarding the different identities of the payors: (§40 of D6’s Submissions).

110.In my judgment, all the above unusual features of payments must give rise to an experienced cryptocurrency trader like D6 “serious cause to question the propriety of the transaction” as Lord Clarke has stated at §20 in Papadimitriou. In my view, they would be sufficient to put D6 on enquiry.

111.Mr Chiu in his submissions makes the point that all the money received by D6 from his dealings with the Buyer was via FPS (Fast Payment System), each entry of the bank records only shows a long string of characters without any meaning at all. Thus, one cannot really deduct whether those characters were part of the name of an account holder or just another two characters that made up the description of these transfers.

112.This may be true. However, it must have been obvious to D6 that the payments for some of those transactions were made by two different parties rather than one single party. In my view, that itself should have raised suspicion in D6’s mind and caused him to make enquiry.

113.However, the suspicious transfer of payments which in my view would give rise for enquiry on the part of D6 did not stop there because the following events have also taken place during his dealing with the Buyer.

114.Reading from D6’s June 2022 bank statement with Chong Hing Bank, it is quite obvious that, even on the face of the document, that some of the funds were received from D2 but not from the Buyer. Yet D6 did not feel the need to make any enquiry.

115.What is also alarming to read in this case is that D6 did not state in D6’s 1^st or 2^nd affirmations that he did not know who deposited the funds into his bank account. In fact, when D6 was faced with the allegation that the funds in his bank account came from different individuals (including D2, D3 and a Yang Yun), D6 did not deny that he had such knowledge when the transfers were made. Instead, D6 simply said such a matter was irrelevant: See §16 of D6’s 2^nd affirmation.

116.In my judgment, in view of the mismatch of counterpart in the Huobi platform and counterpart in the bank transfer, D6 ought to have refused the transfer, or at least enquired about the transactions: Chau Lai Bing at §46.

117.However, there is no evidence that D6 has made any enquiries, whether to the Buyer, D2 or D3.

118.Further, D6 has not adduced any evidence as to the market value of the USDT at and around the time of his transactions with the Buyer. It is unknown whether the sale price was much higher or much lower than the market value at the time which would have attributed notice to D6 and that he should have made proper enquiries: Chau Lai Bing at §47.

119.In my view, the mere fact that both D6 and the Buyer have verified identity on a well-established platform does not mean D6 should not have made inquiries or sought advice in the unusual circumstances of how the payments were made for the alleged transactions he had with the Buyer in this case.

120.Lastly, the fact that D6 was released from bail by the police in my view simply means that D6 was not charged with any criminal offence. I agree with Mr Nip that it does not mean that D6 should not have made inquiries or sought advice.

Whether D6’s summary judgment cases are applicable?

121.Mr Chiu relies on Lesnina H DOO, JG8 LLC and LTC (BVI) Limited in D6’s Submissions. However, I notice that all these 3 cases concerned summary judgment applications instead of setting aside of default judgment applications.

122.As the present case concerns an application to set aside the Final Judgment, as submitted by Mr Nip, the standard required on the part of the defendant is higher than resisting a summary judgment application. It is simply not sufficient for D6 to show a merely “arguable” defence that would justify leave to defend under a summary judgment application: HKCP 2025 at §13/9/14.

123.Indeed, as is reminded by DHCJ H. Au-Yeung (as he then was) at §26 of JG8 LLC, it is normally fruitless to refer to the Court’s comments in other cases which were made on the facts of those cases, and the issues must be considered on a case-by-case basis. P submits that this is even more so when the applications (and hence the applicable legal principles) are different, especially when a higher standard is required in setting aside applications as compared with summary judgment applications. I agree with Mr Nip that the mere fact that the defendants in the 3 authorities referred to by D6 were able to resist summary judgment application does not mean D6 in the present case has adduced sufficient evidence to the requisite standard to set aside a regular judgment.

124.D6 also criticized the Master had embarked on a mini-trial on affidavits at the instigation of P: (See §4.4 of D6’s Submissions). In my view, this criticism is unfair as the Court must form a “provisional view of the probable outcome of the action”: HKCP 2025 at §13/9/14. To do that, the Master naturally looked at the evidence filed by the parties. In this case, D6 was given full opportunities to set out his proposed defence and grounds for setting aside the Final Judgment. He has filed 2 affirmations with whatever supporting documents he wished to present to the Court, which demonstrate that he has indeed showed a defence with a real prospect of success which carries some degree of conviction. P is equally entitled to file his affirmation and evidence to dispute D6’s claims. It is based on those evidence filed by the parties that the Master embarked on an exercise to evaluate whether D6 has shown a defence of real prospect of success. In my view, it was not a mini-trial on affidavits. It was a proper exercise of his power of adjudication for such application.

125.Based on the above analysis, I do not consider D6’s defence based on the bona fide purchaser enjoys any real prospect of success.

126.I consider that the above reasoning applies equally if D6 were to rely on the change of position defence. I therefore also find that D6 has failed to establish that there is any real prospect of success if he were to rely on the alleged change of position as a defence.

Other Alleged Irregularities

127.Mr Chiu in D6’s Submissions also relies on other alleged irregularities of the Default Judgment obtained by P. They included:

(a) The Final Judgment was entered on a wrongful factual basis in that the amounts received from D2 and D3 by D6 as per the bank records do not match those stated in the Indorsement of Claim.

(b) By obtaining Default Judgment against D2 under Order13, P elected to abandon the proprietary claims against D2 despite seeking the same against D2 in the general endorsement.

(c) P has failed to account for the sums he appeared to have retrieved from D3 and/or D7.

(d) There was no satisfactory proof of service.

128.I shall briefly deal with them below.

(a) Wrongful factual basis for entering the Default Judgment

129.D6 alleges in D6’s Submissions that the factual basis for D6’s liability is wrong, and hence the Final Judgment was irregular.

130.As stated by the learned authors of HKCP 2025 at §13/9/20 at p.342, if a defendant wishes to set aside a judgment for irregularity, the irregularities must be specified in the summons.

131.However, despite taking out the Amendment Summons (which was only taken out on 21 February 2025 and a few days before the original hearing date), D6 has not stated anywhere in the Amendment Summons that this is a ground for setting aside the Final Judgment and this ground is only first raised in D6’s Submissions.

132.Accordingly, in my judgment, D6 is barred from relying on this ground as it is not specified in the Amendment Summons at all.

133.In any event, by failing to give notice of intention to defend, D6 is deemed to have admitted all the facts as contained in the writ of summons: HKCP 2025 at §13/0/10 at p.321 and Lam Chi Fat at §26 (per Ma J, as CJ Ma then was).

134.It is thus not open to D6 to argue that the factual basis as contained in the Amended Writ of Summons is wrong. The Court is only entitled to look at the facts pleaded and any extraneous evidence is not admissible irrespective of what the facts now demonstrate: Lam Chi Fat at §33.

135.Further, as can be seen from the letter from the police to KST on 16 September 2022, it was stated by the police that D2 transferred HK$1,300,300 to D6 and that D3 transferred HK$861,000 to D6.

136.In respect of the bank documents, it can be seen that D2 has transferred HK$1,218,000 to D6 and that D3 has transferred HK$1,300,000 to D6.

137.Accordingly, the total sum transferred by D2 and D3 to D6 was in fact HK$2,518,000 (ie HK$1,218,000 + HK$1,300,000), which is more than the Disputed Sum of HK$2,161,300.

138.I agree with Mr Nip that the mere fact that P has claimed for less than what he could have claimed does not render the Final Judgment irregular.

(b) Abandonment of Proprietary Claims

139.Mr Chiu submits in §§55-67 of D6’s Submissions that once P has abandoned his proprietary claims against D2 and D6, there was no basis for P to rely on unjust enrichment to seek judgment against D6.

140.I respectfully would disagree with Mr Chiu on his above submission.

141.Firstly, I agree with Mr Nip that P is under no duty to give prior notice of his election to abandon any form of relief which he originally claimed. The abandonment of P’s proprietary claim only takes place when P enters the Final Judgment. Accordingly, immediately prior to the entering of the Final Judgment, P maintains his proprietary claim against D2 and D6. P is entitled to Final Judgment against D6 on the basis of unjust enrichment.

142.In Li Xiuhua v FT Electronic Co., Limited & Others [2023] HKCFI 1828, the plaintiff applied for summary judgment against a defendant who was a 2^nd and 3^rd tier recipient of funds. Having confirmed that the plaintiff was only proceeding with the unjust enrichment and tracing claim (which the Court ultimately held at §§35-36 that tracing was not a standalone cause of action), and that the plaintiff will abandon other causes of action (including constructive trust and knowing receipt claims) (§§9-10), DHCJ Suen SC nevertheless found at §§16-17 that the plaintiff was able to raise a prima facie case of unjust enrichment and it was for the defendant to demonstrate its defence.

143.In D6’s Submissions, Mr Chiu contends that D6’s enrichment could not have been at the expense of P once P abandons his proprietary claim against D2.

144.I do not agree.

145.In this regard, I accept that as long as there is a “sufficient causal connection, in the sense of a sufficient nexus or link” between the loss to the plaintiff and the benefit received by the defendant, it will suffice: See 巨展皮具香港有限公司 v 上海兄弟海運有限公司 & Another [2018] HKCFI 53 at §§18 and 25(i) per DHCJ Keith Yeung SC (as he then was).

146.This is further supported by the case of Heitkamp & Thumann KG v Living Profit Trading Develop Limited & Others [2018] HKCFI [1006], where DHCJ Marlene Ng (as she then was) at §88 explained that for a claim of unjust enrichment, there was no need to demonstrate a direct payment from the plaintiff to the defendant nor a proprietary link between them because the relevant question was whether there was “sufficient causal connection” in the sense of a sufficient nexus or link between the loss to the plaintiff and the benefit received by the defendant.

147.Accordingly, based on the above authorities, I agree with Mr Nip the test to be applied in Hong Kong is still the “sufficient causal connection” test yet the fact that P can trace an interest in the defendant’s property should be one of the means to satisfy such test.

148.In the present case, I find the transfer of funds from P to D2 to D3, and subsequently to D6 satisfies the “sufficient causal connection” test.

149.Furthermore, a claim for unjust enrichment is completed at the time of receipt of the benefit (when all the ingredients of the cause of action were present): Goff & Jones on Unjust Enrichment (10th Ed.) at §1-20.

150.In RPB SA v Xinwangyi Trade Limited [2022] HKCFI 2541, in respect of the plaintiff’s unjust enrichment claim against defendants who were not direct recipients of the relevant sums from the plaintiff, DHCJ Jonathan Chang SC held at §26(2)-(3) that the fact that the traceable sums no longer remains in the hands of those defendants is immaterial as the liability for unjust enrichment crystallized at the time of receipt.

151.As Mr Nip has demonstrated from the above cases, in order to rely on the claim of unjust enrichment, it is thus unnecessary for P to in fact obtain a declaration or proceed with his proprietary claim in order to establish a claim of unjust enrichment. I agree with him. In my view, so long as P can establish a sufficient causal connection (and that the other elements for unjust enrichment are present), that will be sufficient to rely on the claim of unjust enrichment and such claim crystallized at the time of receipt.

152.Accordingly, in my judgment, when D6 received the Disputed Sum from D2 and D3 back in 2022, P’s claim for unjust enrichment crystallized and it is immaterial whether P elects to pursue a proprietary or personal claim against D6.

153.Further, P can establish a traceable interest in the Disputed Sum by different means.

154.In LTC (BVI) Limited, in a summary judgment application against a second-layer recipient, Recorder Manzoni SC stated the principles on tracing at §§12-14 and held that the punitive presumption rule can only apply if it is established that the defendant was a wrongdoer. Accordingly, the ultimate issue was whether the defendant was able to establish a triable issue to the plaintiff’s unjust enrichment claim.

155.Further, in Predicine Holdings Ltd v Bianchi (Hong Kong) Limited & Others [2021] HKCFI 123, Coleman J held at §§90-91 that when property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient, so that the money is recoverable and traceable in equity. Even if the recipient is not a party to the fraud, if his state of knowledge is such as to make it unconscionable for him to retain the money, the defrauded claimant has a tracing remedy, that is the property is held on constructive trust for the claimant. Further, knowledge does not have to be acquired at the time of receipt, but can be acquired subsequently while the money is still in the recipient’s hands. Therefore, the recipient may, for example, gain knowledge of the fraud from any injunction order, pleadings and other court documents served on that recipient.

156.In the Indorsement of Claim, it has been expressly pleaded that the funds received by D6 came from D2 and D3 and that P’s claim against D2 and D3 was based on, inter alia, unjust enrichment and breach of constructive trust.

157.In my view, that is sufficient to establish:

(a) That the Disputed Sum came from D2 and D3, which in turn came from P (and hence traceable pursuant to the principles of tracing, in particular the punitive presumption). Accordingly, P can (albeit P chose not to do so) trace an interest into the Disputed Sum and is thus entitled to the Final Judgment at the time when D6 received the funds from D2 and D3; and

(b) That there was a constructive trust claim as against D6 when D6 acquired knowledge to make it unconscionable for him to retain the Disputed Sum. The claim for unjust enrichment crystalized at that moment. Although P elected not to pursue the constructive claim, that does not mean that, at the time of D6’s receipt of the funds from D2 and D3, P cannot trace an interest into the Disputed Sum.

158.During Mr Chiu’s oral submission, he relies heavily on the case of Manheimer. However, in Manheimer, the Court noted that the plaintiff did not contend that the money which was received by the 1^st layer recipient from the plaintiff can be traced into the money received by the 2^nd layer recipient (see §12(5)). Accordingly, it was not the plaintiff’s case in Manheimer that the funds received by the 2^nd layer defendant had a sufficient nexus or link with the plaintiff’s expenses. Therefore, one can easily see why the Court did not consider that the plaintiff had an arguable case on unjust enrichment in order to continue the injunction obtained.

159.In any event, even if the Court accepts D6’s submissions (which is denied by P), I agree with Mr Nip for P that this only affects the sums transferred by D2 to D6 but does not affect the sums transferred by D3 to D6. The Court is thus entitled to only set aside a judgment in part: HKCP 2025 at §13/9/17.

(c) Alleged Recovery from D3

160.D6 alleges in §§68-70 of D6’s Submissions that P should give credit to any sums recovered from D3. I have already dealt with this in §38 above. The short answer to this point is that P did not recover any sum from D3. Accordingly, there was nothing for P to disclose when applying for the Final Judgment and no credit needs to be given. I find there is no substance on this point.

(d) Service of Process

161.In §71 of D6’s Submissions, D6 argues that there is no due proof of service.

162.I also find there is no substance in this argument for the following reasons.

163.First, this argument is not contained in the Amendment Summons but is only first raised in D6’s Submissions. Hence, D6 is not entitled to rely on this ground.

164.Second, I agree with P that it is wrong for D6 to say that the affirmation of Chan Pak Ki was filed for the purpose of obtaining the Final Judgment. The affirmation of Chan Pak Ki, affirmed on the 24 November 2022, was filed for the hearing of the Injunction Summons on 25 November 2022.

165.For the purpose of obtaining the Final Judgment, P has filed the 2^nd affirmation of Chan Pak Ki on 15 May 2023 deposing, inter alia, that the Amended Writ of Summons should have come to the knowledge of D6 within 7 days thereafter (See §9 thereof).

166.Thus, in my view, the Final Judgment is regular.

DISPOSITION AND ORDER

167.Based on the aforestated, I would dismiss D6’s appeal on the Setting Aside Summons. I would also order the Payment In for the Disputed Sum which represented the Judgment Sum in this case to be paid out to P.

168.Costs should follow the event. Besides the costs order I made in relation to the other summonses I have disposed of in §§45-50 & 59 above, I would make an order nisi that D6 to pay the costs of the appeal to P, including the costs caused by the adjournment on the first date of the hearing on 27 February 2025, such costs to be taxed if not agreed. The costs order will be made absolute 14 days after the handing down of this decision in the absence of any application by the parties to vary the same.

169.Lastly, I would like to thank counsel on both sides for their very helpful submissions in this case.

Mr Thomas Nip, instructed by Kitty So & Tong, for the plaintiff

Mr Vincent Chiu, instructed by Grandall Zimmern Law Firm, for the 6^th defendant