Alfred Victoria Ltd v. Sun Wing Ping

HCA 273/2021

[2026] HKCFI 3076

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 273 OF 2021

_________________

_________________

______________

J U D G M E N T

______________

Introduction

1.This is the Plaintiff’s application for summary judgment against the 4^th Defendant. 

The Plaintiff’s Case

2.The Plaintiff is a company based in the United Kingdom and operates in the industry of selling bathroom products.  The Plaintiff’s case is that it is the victim of a fraudulent scheme administered by persons who claimed to be Mainland customs officers and police officers.  The fraudsters contacted the Plaintiff’s director Ms Huang Ting (“Huang”) saying that she is involved in the investigation of a money-laundering case.  As a result, Huang transferred a total of £5.4 million to various accounts designated by the fraudsters in December 2020, £2.5 million of which was transferred in 25 tranches (£100,000 in each tranche) to an HSBC account no. 139-241947-833 held by one Huang Chang Wei (“HCW Account”).  

3.Two sums of the Plaintiff’s money were transferred from HCW Account to the 4^th Defendant’s account no. 020-625-200-2394-8 in Wing Lung Bank (“D4 Account”); including (a) HK$397,000 on 7^th December 2020 and (b) HK$1,000,000 on 14^th December 2020 totaling HK$1,397,000 (“the Sum”). 

4.The fraud was eventually discovered in late December 2020 when Huang realised that the monies were not returned as promised and looked up on Google to find out that she was a victim of a scam. 

5.On 2 January 2021, the Plaintiff obtained an injunction and disclosure reliefs against HCW Account and on 18 February 2021, the Plaintiff commenced the present action and obtained an interlocutory injunction against the 4^th Defendant of the Sum.  On 17 March 2021, the 4^th Defendant made a payment into Court in the amount of the Sum after which the injunction against him was discharged. 

The 4^th Defendant’s Case

6.The 4^th Defendant raised “bona fide purchaser without notice” and “change of position” as his defence.  It is his case that he has no knowledge of the alleged fraudulent scheme, and the Sum was received in exchange of the Renminbi (“RMB”) that he paid in Mainland.  He needed Hong Kong currency to pay for insurance premiums but at that time he was prevented from handling it in person due to the COVID lockdown. 

7.The 4^th Defendant also commented that the Plaintiff’s case is highly dubious as it is difficult to believe that Huang, who was supposed to be an experienced businesswoman, would have so naively believed the assertions from someone she did not know and could have so easily transferred such a large sum to an unknown account. However, the 4^th Defendant made it clear that for the purpose of this application, he is prepared to proceed on the assumption that the money transferred from the Plaintiff’s account to HCW Account was induced by fraud. 

8.In his affirmation filed in opposition of the Plaintiff’s application, the 4^th Defendant produced evidence to show all the exchange transactions he had in December 2020, of which the subject transactions were two of them. 

Issues

9.As the 4^th Defendant is prepared to proceed on the assumption that the money transferred from the Plaintiff’s account to HCW Account was induced by fraud, for the purpose of the present application, the Plaintiff has shown a prima facie case for its proprietary claim and also unjust enrichment claim. 

10.The main issue for determination is therefore: whether the 4^th Defendant can show an arguable defence on bona fide purchaser without notice or change of position. 

11.The Plaintiff argued that (a) the 4^th Defendant’s factual case is not capable of belief and (b) the purported defence is not available due to foreign illegality. 

12.In view of the evidence filed by the 4^th Defendant proving the exchange transactions he had in December 2020, there is no ground to suggest that the 4^th Defendant’s case is not capable of belief.  On the contrary, I am of the view that there is a real chance that the factual version of the 4^th Defendant might be accepted by the Court on balance in the end. 

13.In the circumstances, I shall focus on the issue of foreign illegality in this application. 

Legal Principles

14.The applicable legal principles regarding foreign illegality have been comprehensively set out by Deputy High Court Judge Winnie Tsui (as Madam Justice Tsui then was) in her judgment in She Ching Yan v Cai Yunxiang & others [2023] HKCFI 592. 

15.In She Ching Yan, the plaintiff was a victim of a scam where she was defrauded by a person who proclaimed a romantic interest in her and eventually deceived her into transferring sums over HK$11 millions to different bank accounts, and the 18^th defendant’s account is one of the 2^nd tier recipients.  The plaintiff applied for summary judgment against the 18^th defendant.  The 18^th defendant put forward a defence that the money (HK$150,500) deposited to her account was under a currency exchange arrangement she made with a person and in exchange she transferred RMB139,212 from her account in the mainland to an account designated by that person.  The plaintiff adduced evidence on PRC law that this kind of currency exchange arrangement is illegal and there is no evidence from the 18^th defendant to rebut the same. 

16.In other words, the Court in She Ching Yan faced the same legal issues on foreign illegality as in the present case.  Her Ladyship set out the relevant issues in the following terms:

“66. The relevant defences here are change of position and bona fide purchaser for value without notice. The burden is on the 18^th defendant to demonstrate that the defences are arguable or there are triable issues in relation to them.

…

69. The legal issue which arises in the present case is this. Where a defendant’s change of position is tainted with foreign illegality, is the defence still available to him? To use the terminology in Lipkin Gorman[1], in that circumstance, is the defendant a “wrongdoer” so that it would not be inequitable to require him to make restitution to the plaintiff? As the authorities stand, the current debate more specifically revolves around the following. (1) Would any foreign illegality have the effect of depriving the defendant of the defence? (2) Or should the court examine the type and seriousness of the illegality in each case together with other relevant circumstances in order to decide whether the defence is still available notwithstanding the foreign illegality? One can readily see that the former is an absolute approach, under which the effect of foreign illegality is automatic. This is to be contrasted with the latter approach, in which the court is to engage in an evaluation exercise.”

17.For the defence of bona fide purchaser, Her Ladyship viewed that the same principles shall apply:

“73. … I consider the pertinent question here to be the same as that arising in relation to change of position. That is, would every illegality have the automatic effect of rendering the transfer to be regarded as providing no value?”

18.As summarized by DHCJ Jonathan Wong in Chang Anna I No v Caibaolong Trading Ltd [2023] HKCFI 2782[2], Her Ladyship in She Ching Yan held that:

“(1) a distinction between domestic and foreign illegality has to be made and the latter is governed by conflict of laws principle: Ryder Industries Ltd v Chan Shui Woo (2015) 18 HKCFAR 544 (She Ching Yan §82);

(2) the relevant foreign exchange transaction concerned a foreign illegality (She Ching Yan §§90-92);

(3) applying Ryder[3], the relevant impugned transaction was a “Type 2” case, namely one where “the performance of the contract requires or necessarily involves conduct which is illegal under the laws of the place where it is required to be performed” (She Ching Yan §§101-103);

(4) for “Type 2” cases, the relevant contract will not be given effect regardless of its proper law and the defences of change of position and bona fide purchaser for value without notice are not available (She Ching Yan §§108-113).”

19.In my view, the principles on foreign illegality set out in She Ching Yan are directly applicable to the present case. 

Discussion

20.As submitted by Mr Ernest Ng, counsel for the Plaintiff, the Plaintiff has adduced uncontradicted evidence of the relevant PRC law by way of expert evidence and also findings or decisions on a question of PRC law under O 38 r 7 of the RHC. 

21.The Memorandum of Opinion issued by Chance Bridge Law Firm has stated that the exchange transaction of currencies as alleged by the 4^th Defendant is a typical “match order” transaction which is illegal under PRC law.  It breaches (1) Article 45 of the PRC Administrative Regulations on Foreign Exchange and (2) Articles 30 and 39 of the PRC Foreign Exchange Measures for Individuals.  Such breaches are “serious” in terms of public policies under PRC Law. 

22.Similar to the situation in She Ching Yan and Chang Anna I No, the subject transaction here is plainly a “Type 2” Case under Ryder and therefore, the relevant exchange transactions will not be given effect and the defences of change of position and bona fide purchaser for value without notice are not available. 

23.Mr Damian Wong, counsel for the 4^th Defendant, submitted that whether and how foreign illegality taints the matter in the eye of our law is a difficult and developing subject[4] and as such, it is inappropriate to deal with it in a summary manner. 

24.Mr Wong submitted further that according to the expert opinions adduced by the Plaintiff, the penalty for breaching the foreign exchange rules in PRC is warning, fines or confiscation of illegal proceeds and does not include detention or imprisonment.  This casts doubt on the seriousness of the breach and whether the rule is only administrative measures of which the breach may not be considered as contrary to public policy in Hong Kong. 

25.Besides, it is Mr Wong’s submission that there are other cases[5] contrary to the Court’s findings in She Ching Yan and this Court should not determine the legal issues involved at the summary stage. 

26.With respect to Mr Wong, his arguments had been fully dealt with by the Court in She Ching Yan:

“118. First, as the 18^th defendant has failed to adduce any PRC law evidence to rebut the determination in Pan Jing, by operation of section 59(2) of the Evidence Ordinance, I am in a position (and am indeed bound) to make the factual finding, which I have done above, on the PRC law. There is no dispute at all in this regard. Unlike Lesnina, the PRC law evidence was in dispute there and that was one of the reasons why summary judgment was refused: para 58.

119. Secondly, the 18^th defendant’s factual case is very straightforward. I shall assume everything which she says now is true. In fact, given the nature of her case, the expectation is that even if the case is to go to trial, there is not much more she will add to her factual case. In any event, the burden is on her to raise triable issues now, not later.

120. Thirdly, and crucially, I am of the view that her case involves illegality falling with the type 2 case discussed in Ryder. As seen above, the effect is automatic. There are no further facts to be explored which warrant a trial.

121.  For all these reasons, in my view, a trial would serve no purpose and this is a case which can be disposed of in a summary manner.”

27.I agree with Mr Ng that the situation of the present case is next to no difference from that of She Ching Yan. 

28.Just before handing down of this judgment parties wrote to me seeking to file further submissions in light of the recent judgment of the Court of Final Appeal (“CFA”) in Wong Chi Hung v Lo Wing Pun [2026] HKCFA 14.  I acceded to parties’ request and they duly filed their supplementary written submissions concerning the CFA’s decision. 

29.In Wong Chi Hung, the plaintiff and the defendants entered into an agreement to exchange RMB for Hong Kong dollars (“HKD”) whereby the plaintiff would deposit RMB into a Mainland account designated by the defendants and the defendants would then deposit the corresponding amount of HKD to the plaintiff’s account in Hong Kong.  This is similar to the arrangement entered into by the 4^th Defendant in the present case.  Pursuant to the agreement the plaintiff in Wong Chi Hung deposited RMB 1 million to the defendants’ Mainland account but the defendants failed to deposit any money to the plaintiff’s Hong Kong account.  The plaintiff sued the defendants for breach of contract and also unjust enrichment.  The defendants raised illegality as their defence.  

30.The trial was heard before Deputy District Judge Gary CC Lam (“Judge”) (as he then was) at the District Court.  The Judge ruled in favour of the plaintiff based on the unjust enrichment claim.  Regarding the contractual claim, the Judge viewed that the situation fell under type 2 of the classification in Ryder and therefore, notwithstanding the proper law of the agreement being Hong Kong law, the agreement is unenforceable due to foreign illegality. 

31.The defendants appealed against the Judge’s decision but there was no cross-appeal against his ruling on the contractual claim.  In dismissing the appeal, the Court of Appeal upheld the plaintiff’s unjust enrichment claim but expressed reservation over the Judge’s classification of the subject contract as under type 2 in Ryder. 

32.On appeal to the CFA, the CFA agreed with the Court of Appeal on its decision on the unjust enrichment claim and also expressed reservation on the Judge’s ruling on the contractual claim.  The CFA held that the “range of factors” approach propounded by the majority in Patel v Mirza [2017] AC 647 is the correct approach in considering the defence of foreign illegality in the context of an unjust enrichment claim arising from an unenforceable currency agreement tainted by illegality in the Mainland.

33.Mr Wong submitted that, although the CFA’s decision in Wong Chi Hung was given in the context of an unjust enrichment claim, “as a matter of logic and coherence”, the same range of factors approach should be applied to the equitable defence of bona fide purchaser for value without notice and/or change of position as in the present case.  

34.With respect to Mr Wong, in my judgment, the CFA’s decision does not affect in any way my views set out under paragraphs 14 to 27 above. 

35.First and foremost, in the present case, the Plaintiff is not part of any agreement tainted with illegality.  The Plaintiff is a victim of fraud enforcing its proprietary rights. The competing interests here is between that of a victim of fraud and a party to an agreement tainted with illegality whereas in Wong Chi Hung, it was between the parties of the illegal agreement themselves. 

36.Secondly, although the CFA generally endorsed the approach in Patel, Ryder remains the leading authority for foreign illegality and such approach has actually been reflected under the type 4 situation in Ryder.  If the alleged agreement of the 4^th Defendant fell under type 2 but not type 4 of Ryder, as in the situation of She Ching Yan, the 4^th Defendant would not be able to plead bona fide purchaser without notice or change of position and there is no need for the court to adopt the range of factors approach.  

37.Although the Court of Appeal and CFA in Wong Chi Hung both expressed reservations against the Judge’s classification of the subject agreement as under type 2, the basis of the reservations is lacking in the present case.  In Wong Chi Hung, the only remaining performance of the agreement was the defendants’ payment in Hong Kong pursuant to the agreement which is not in itself illegal in Hong Kong.  It was based on this factor that G Lam JA expressed his reservations as to the correctness of the Judge’s classification.  In the present case, the agreement tainted with illegality has been completely performed.  By pleading the defence of bona fide purchaser without notice or change of position the 4^th Defendant is asking the court to give effect to the agreement which is illegal under foreign law, which is totally different from asking the court to order an act which is not unlawful in Hong Kong, as in Wong Chi Hung. 

38.In my judgment, the 4^th Defendant has failed to raise any arguable defence to the Plaintiff’s claims. 

Disposition

39.Judgment be entered in favour of the Plaintiff against the 4^th Defendant in the following terms: -

(1)  The 4^th Defendant do pay the Plaintiff the sum of HK$397,000 together with interest thereon from 7 December 2020 at 1% above prime rate until the date of this judgment and at judgment rate thereafter until payment;

(2)  The 4^th Defendant do pay the Plaintiff the sum of HK$1,000,000 together with interest thereon from 14 December 2020 at 1% above prime rate until the date of this judgment and at judgment rate thereafter until payment;

(3)  A declaration that the sums of HK$397,000 and HK$1,000,000 paid into D4 Account from HCW Accounton 7 and 14 December 2020 respectively belong to the Plaintiff (as its property) as at the time of receipt. 

(4)  On a nisi basis, that the costs of and incidental of this Action insofar as between the Plaintiff and the 4^th Defendant (including the Plaintiff’s costs of the Summons as well as all costs reserved) be paid by the 4^th Defendant to the Plaintiff, to be taxed if not agreed.  In the absence of any application from the parties to vary the same within 14 days from the date of this Judgment, the costs order nisi will become absolute.

40.I thank counsel for their assistance. 

Mr NG, Ernest C.Y. instructed by Messrs Tanner De Witt, for the Plaintiff

Mr Wong, Damian & Ms Lau, Ka Yu Sabrina instructed by Messrs Lau, Wong & Chan, for the 4^thDefendant