Zhang Yongping v. Gahood Holding Company Ltd and Another

HCA 1480/2025

[2025] HKCFI 3735

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1480 OF 2025

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BETWEEN

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REASONS FOR DECISION

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INTRODUCTION

1.The Plaintiff fell victim to a fraud engineered by D2 and transferred a total of HK$24 million to the bank account of D1, a corporate vehicle wholly owned and controlled by D1. This inter partes summons was filed on 11 August 2025 by the Plaintiff against the Defendants for an injunction freezing their assets and ancillary disclosure orders. I granted the orders sought at the hearing and ordered costs to be in the cause. Here are my reasons.

BACKGROUND

2.The Plaintiff is the father of 5 children. After acquiring Hong Kong residence status in April 2023, he wanted to put his children in international schools in Hong Kong for the academic year commencing in September 2023. However, he was not familiar with the admission system.

3.In around August 2023, the Plaintiff first met D2 through the invitation of a mutual friend. D2 made 2 representations to the Plaintiff (collectively, “the Representations”):

(1) That the purchase of debentures issued by Harrow International School HK (“Harrow HK”), Chinese International School (“CIS”) and ISF Academy (“ISF”) was necessary for securing places at those schools and such purchase had to be done through D2, as he was the only person in Hong Kong who was able to make such arrangement (“the Purchase Representation”); and

(2) The Sum would be refunded in full if the purchase of debentures failed (“the Refund Representation”).

4.Induced by the Representations, the Plaintiff transferred a total of HK$24 million (“the Sum”) in August 2023 to D1’s bank account at Bank of Communications (Hong Kong) Limited (“BOCOM”), at the directions of D2. The transfers were supported by bank advices and WeChat messages between the Plaintiff, D2 and D2’s assistant. The Sum was to purchase a total of 5 placements in 3 schools.

5.D2 never mentioned to the Plaintiff the progress of acquisition of the debentures. When the Plaintiff chased him on progress, D2 messaged the Plaintiff, giving the latter an impression that 2 seats in Harrow HK were confirmed and that there was negotiation for a third; and that formalities (like interviews) were required.

6.As the start of the school term drew near, the Plaintiff made his own enquiries with Harrow HK and ISF in late August 2023. He was told that neither School had been informed of his interest in acquiring debentures. Neither School had debentures available for sale. It was also clear that D2 was not in a position to arrange for the purchase of the alleged debentures for any of the 3 Schools. In any event, any School debenture did not have to be done through D2 as the debentures would have been available from current holders in the secondary market, as disclosed in the Schools’ webpages.

7.Given the failure to D2 to purchase the debentures, the Plaintiff sought refund of the Sum in October 2023. D2 initially adopted an evasive approach but eventually expressly refused to refund by December 2023.

8.The Plaintiff reported the matter to the police on 24 December 2023.

9.The Plaintiff instructed his current firm of solicitors in early 2025. In around April 2025, upon enquiries by the Plaintiff’s solicitors, the Plaintiff was informed by the police that D1’s BOCOM account had been suspended and the balance already fell short of the Sum.

10.It came to the notice of the Plaintiff, through a land search in July 2025, that each Defendant has landed properties in Hong Kong. The Plaintiff also became aware through online news media that 2 properties of D2 in Cheung Chau may be subject to an order for sale by auction on 20 August 2025.

11.The Plaintiff issued the writ on 11 August 2025.

12.On the same day, the Plaintiff issued the present summons for a Mareva injunction and a disclosure order.

13.Despite being served with the writ and the summons, the Defendants have not appeared at this hearing.

LEGAL PRINCIPLES

14.To establish fraudulent misrepresentation, it must be shown that a representation was made with the intention that it should be acted upon by the plaintiff, that the representation was made with knowledge that it was wilfully false or the defendant had no genuine belief that it was true, that the plaintiff acted in reliance on it, and that the plaintiff suffered detriment by so doing: Haifa International Finance Co Ltd v Concord Strategic Investments [2009] 4 HKLRD 29, §15 (CA).

15.The plaintiff has to show a good arguable case, that there is a real risk of dissipation of assets and that the balance of convenience lies in favour of the grant of an injunction. The principles have been summarized in Convoy Collateral Ltd v Cho Kwai Chee [2020] HKCA 537:

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

(2) A solid basis to support an inference of risk of dissipation is to be contrasted with unsupported or bare statements of fear which would carry little weight (§41).

(3) There are cases where a good arguable case on the underlying substantive claims could also be regarded as supporting a case of real risk of dissipation. The Court needs to scrutinize with care whether the allegations in respect of the claims justify the inference of likelihood of dissipation (§42).

(4) In the context of fraud cases where dishonesty is at the heart of the claim, the Court may well find itself able to draw the inference that the making out, to the necessary standard, of that case against the defendant also establishes sufficiently the risk of dissipation of assets. Thus, evidence of dishonest and fraudulent conducts or other serious wrongdoings which form the basis of the claims, and which reflect adversely on the integrity of the defendant could point powerfully towards an inference of such risk (§§43-53).

(5) Delay in seeking relief per se would not necessarily bar relief. The ultimate question is still whether the plaintiff could show a real risk of dissipation despite delay, as equity does not act in vain. If the Court is satisfied on the evidence that there remains a real risk of dissipation it should grant an order, notwithstanding delay, even if only limited assets are ultimately frozen by it. The significance of delay in each case must be considered on its own circumstances. An unexplained delay however, in a case where the assets are here and that the defendant has knowledge of the claim, can be fatal to showing a risk of dissipation of assets (§§54, 77-79)

16.Where assets are obtained by fraud, equity imposes a constructive trust on the fraudulent recipient so that the money is recoverable and traceable in equity: Predicine Holdings Ltd [2021] HKCFI 123, §90.

17.A Quistclose Trust arises where a transferor transfers property (usually money) to a transferee to be applied for a specific purpose and that purpose only, such that the same is not at the free disposal of the transferee. The transferee holds the same in favour of the transferor subject to the power or duty of the former to apply the property for the specific purpose. The transferor’s retention of a beneficial interest in the property is not something that the parties need to have intended, whether subjectively or objectively, or even anticipated or foreseen, in order for the trust to arise in the first place. See China Life Trustees Ltd v China Energy Reserve and Chemicals Group Overseas Co Ltd (2024) 27 HKCFAR 359, §§2, 3, 7 and 8.

MAREVA INJUNCTION

18.By reason of the facts stated in paragraphs 5 and 6 above, the Purchase Representation was plainly false and known to D2 to be false when it was made. Neither D1 nor D2 had any other reason to ask the Plaintiff for transfer of the Sum to D1, which was beneficially owned by D2. The Plaintiff acted in reliance on the Representations and suffered loss.

19.D2 simply had no intention to refund the money. The Defendants had dissipated the Sum. The Refund Representation was also false.

20.D2 was the directing mind and will of D1. D1’s conduct was to further the fraudulent intention and conduct of D2. As the Sum was obtained by fraud, equity imposes a constructive trust on D1 and D2.

21.The 4 questions to be asked as set out in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §104 are all answered in favour of the Plaintiff:

(1) The Defendants were enriched in retaining and using the money. Based on what the police told the Plaintiff, the Defendants had plainly misappropriated the Sum or part of it at their free will.

(2) The enrichment was at the expense of the Plaintiff in that the source of the Sum was from the Plaintiff and the use of the Sum was not to fulfill the express purpose for which the Sum was transferred by the Plaintiff. The Defendants’ use of the money was also in breach of a Quistclose Trust.

(3) The enrichment was unjust as the Defendants have no entitlement to the retention or use of the Sum when the purchase of the debentures had failed.

(4) There is no defence put forth by any of the Defendants.

22.I find there to be a good arguable case as to fraudulent misrepresentation, constructive trust, breach of Quistclose Trust and unjust enrichment.

23.There is real risk of dissipation of assets by the Defendants:

(1) The Defendants knew or ought to have known that the Plaintiff was chasing him for money, D2 is now disposing of his properties, with an auction date on 20 August 2025; and

(2) Dishonesty was at the heart of the Representations; and

(3) There was unacceptably low commercial morality in using the Sum in such a short time of its receipt for unknown purposes despite the Plaintiff’s demands for repayment within two months of his transfers; and

(4) Money realized on sale of a property is easier to dissipate than properties themselves; and

(5) D2 is already subject to judgments with charging orders registered against his properties. A news article dated 7 August 2025 stated that he was chased for money, with his properties foreclosed. He appears to have consistently failing to honour judgments or financial obligation.

24.The balance of convenience lies in favour of the grant of an injunction because:

(1) The Sum rightfully belonged to the Plaintiff in the first place and the purpose he transferred the money to D1 could not be fulfilled. There was no other reason on the face of the evidence to justify the Defendants’ retention and use of the Sum. Grant of a Mareva injunction appears to carry the lower risk of injustice should it turn out to be wrong after a trial. There is no prejudice at this stage to the Defendants and any prejudice or loss caused to the Defendants is likely to be compensable by money.

(2) The Plaintiff is a businessman running a property business in Beijing and has undertaken to indemnify the Defendants and third parties if it turns out that the interlocutory injunction ought not to have been granted.

25.The Plaintiff applied for an injunction only about 2 years after the fraud was committed. He explained that he was under the mistaken belief that the police would freeze the Defendants’ assets whilst the fraud was being investigated.

26.I accept the explanation and hold that the delay would not prejudice the Plaintiff’s application.

27.For the reasons given in paragraphs 18-26 above, I granted the Mareva injunction.

Disclosure Order

28.The Plaintiff seeks disclosure from the Defendants only, but not BOCOM, of the Defendants’ assets at a value of HK$10,000 or above, especially on the Defendants’ accounts held with BOCOM.

29.It is well established that a disclosure order can be granted in aid of an injunction. It helps to ascertain the balance and location of the Sum, enable tracing and identify third parties to whom notice of this injunction ought to be given. The Plaintiff has established a sufficient case and I ordered a disclosure to be granted.

30.I thank Mr Yeung for his assistance.

Mr Mike Yeung, instructed by Cheung & Liu, for the Plaintiff

The 1^st and 2^nd Defendants were not represented and did not appear