Bank of China v. Kwong Wa Po and Others
Read the full judgment text of HCA 5291/2001 on BabelCite. This High Court CFI judgment was delivered on 18 July 2005.
1. This is an action by the plaintiff for moneys received by the defendants. The plaintiff’s cause of action is that the defendants received the moneys in question with knowledge that the same were stolen from the plaintiff. The plaintiff says that the moneys had been stolen from the plaintiff by its three ex-employees when they were in the plaintiff’s employ.
Cited by 2 cases · Cites 1 case
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HCA5291/2001 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 5291 OF 2001 --------------------- BETWEEN
---------------------- Before: Deputy High Court Judge L. Chan in Court Dates of Hearing: 13 June 2005 Date of Delivery of Judgment: 18 July 2005 ------------------------- J U D G M E N T ------------------------- Background 1.This is an action by the plaintiff for moneys received by the defendants. The plaintiff’s cause of action is that the defendants received the moneys in question with knowledge that the same were stolen from the plaintiff. The plaintiff says that the moneys had been stolen from the plaintiff by its three ex-employees when they were in the plaintiff’s employ. 2.The plaintiff bank has a sub-branch in Kaiping County, Guangdong Province 開平支行 (“KP BoC”). Three former employees 許超凡 Xu Chaofan (also known as Hui Yat Fai 許日暉) (“Xu”), 余振東Yu Zhendong (“Yu”) and 許國俊 Xu Guojun (also known as Hui Kit Shun 許結信) (“Hui”) used to work there. Xu was the head of KP BoC from 1992 to August 1998. He was then promoted to the Guangdong Branch of the plaintiff in Guangzhou. Yu succeeded Xu’s position in August 1998 and remained there until January 2000 when he was promoted to the Huizhou Sub-Branch in Huizhou County. Hui succeeded Yu’s post in January 2000 and remained there until the three of them fled to Hong Kong on 13 October 2001 and then to Vancouver, Canada on 15 October 2001. They fled in the same flight. They fled the Mainland because the plaintiff had started to investigate their misconduct in KP BoC. The evidence 3.The plaintiff has called Mr. Liao Hai, the Deputy Director of its Guangdong Province Branch, as its witness. Mr. Liao was all along responsible for the plaintiff’s internal audit work. He has made two witness statements for use in this action. He also adopted a witness statement made by Mr. Liu Dong Hai, the Deputy General Manager of the same branch of the plaintiff.
4.Mr. Liao is the second person in charge of the investigation team and had been to KP BoC on many occasions to investigate the fraud of Xu, Yu and Hui. He said that Xu, Yu and Hui had caused KP BoC to advance huge sums of money to various entities in the Mainland purportedly as loans. The entities included中暉複合纖維母粒有限公司Zhong Hui Factory (“Zhong Hui”) and廣東省開平滌綸厰Dik Lun Factory (“Dik Lun”). The funds were transferred on the strength of purported loan applications submitted by these entities to KP BoC. These purported loans, after having been credited into the accounts of these entities maintained with KP BoC, would be withdrawn from the accounts and paid to KP BoC with instructions to KP BoC to remit the same to Hong Kong into a bank account of a company called潭江實業有限公司Ever Joint Properties Ltd. (“Ever Joint”) in Hong Kong. Huge sums belonging to the plaintiff were channeled to Ever Joint by this modus operandi. These purported loans are all outstanding. Some of the purported borrowing entities have ceased to exist and their responsible personnel no longer traceable. For those entities that are traceable, they have all denied of having applied for or obtained these loans. 5.Mr. Liao said that these were not genuine loans as there were no supporting documents. If a loan was required to finance a purchase of equipment, the purchase contract would be provided by the borrower to support the loan application. Furthermore, Xu did not have any authority to approve any loan in excess of US$5 million. 6.Mr. Liao had studied the documents of KP BoC from 1992 to October 2001 when the three ex-employees fled. He had not studied the earlier documents except when they were related to the money misappropriated later. His study showed that Xu, Yu and Hui had had misappropriated from KP BoC about HK$1,964 million during this period. Of this sum, HK$1,654 million were transferred from the plaintiff to Ever Joint between 6 October 1992 to 6 January 2000 over 244 occasions. They were recorded in Ever Joint’s vouchers as credits in Ever Joint’s current account with KP BoC. They were described as remittances by the plaintiff or by one of the above-mentioned borrowing entities on behalf of the plaintiff. The balance of HK$309.75 million were transferred to Ever Joint on 10 occasions in the short period between 4 November 1997 to 13 January 1998. They were treated as receipts by Ever Joint on behalf of Xu and credited into Xu’s current account with Ever Joint. The dates and amounts of these transfers from the plaintiff to Ever Joint and to Xu are shown in Appendices 1 and 2 annexed hereto. 7.In the year 1998 alone, the sums so channeled from the KP BoC to Ever Joint and Xu amounted to US$95 million. However, despite the keeping of a purported current account with the plaintiff, Ever Joint was never a customer of KP BoC. 8.Ever Joint was a company under the control of Xu, Yu and Hui. The plaintiff has studied its documents. The documents were initially provided by one Hui Yat Sing, who operated Ever Joint for Xu. Afterwards, they were provided by the Hong Kong police. The study of the documents showed that there was no genuine business transaction underlying the transfers of these moneys. The moneys transferred to Ever Joint were also not recorded as loans from the plaintiff. I note that the consolidated audited accounts of Ever Joint and its subsidiaries from its incorporation on 12 November 1991 to 31 December 2000 showed that the total liabilities of the group had never gone beyond HK$528 million. They included secured bank overdrafts, bank loans, short-term bank loans, accounts payable and accruals, amounts due to related companies and amounts due to directors. These audited liabilities do appear to include the sums transferred from the plaintiff. 9.I also note that the turnover of the Ever Joint group also do not demonstrate a scale of trading that would reflect the need for the amount of funds transferred from KP BoC to it. The funds transferred to it could not have been transferred in the course of ordinary trading. The funds transferred from KP BoC to Ever Joint and the turnover of the Ever Joint group for the years from 1992 to 2000 are as follows:
10.I also note that the profits and losses of the Ever Joint group do not support any suggestion of substantial trading which may explain the substantial transfers of money. The said consolidated audited accounts showed the accumulated consolidated profits and losses of this company and its subsidiaries as follows: -
11.The plaintiff has in HCA No. 4529 of 2001 obtained default judgment against Xu, Yu and Hui for US$95 million. This is about the sums transferred to Ever Joint and Xu in the year 1998 alone. 12.The Public Security Bureau of Guangdong Province has also investigated into this matter and concluded that it was a nasty crime of theft of money by Xu, Yu and Hui from a state-owned bank. Mr. Liao Hai further said that there were other people in the Mainland who were involved in this matter and they had been arrested for investigation. Mr. Liao’s evidence on these matters has not been challenged.
13.The 1st defendant is the brother-in-law of Xu as Xu married his younger sister in 1992. He and Xu are both natives of Kaiping County. His re-re-amended defence stated that he was acquainted with Xu and Yu since childhood and they grew up together in the city of Kaiping. He was also aware that they had joined the plaintiff in the 1980s. He was introduced by them to Hui in 1998. The plaintiff therefore submitted that he should have known that Xu, Yu and Hui were only employees of the plaintiff earning an income of less than RMB7,500 per month. 14.However, in the period between 1994 to 2001, the 1st defendant had received from Xu, Hui, Yu and Ever Joint 32 transfers of money. The respective total sums he received from Xu, Hui, Yu & Ever Joint were HK$234.5 million, HK$1.87 million, HK$1.3 million and HK$108.6 million or a grand total of HK$346.27 million. The HK$1.3 million from Yu were transferred to his account with the Standard Chartered Bank on 16th October 2001 by way of a cheque. Yu was then on the run. 15.It is the plaintiff’s case that because of their relationship and the numerous dealings between them, the 1st defendant should have known that Xu, Yu and Hui had worked for the plaintiff for almost 20 years. The plaintiff thus submitted that he should have known that they would not have millions of dollars at their disposal or had any legitimate reason to pay him those moneys. He should also have known that Xu was a director and one of the beneficial shareholders of Ever Joint and Ever Joint would not have millions of dollars at its disposal. I note from the audited consolidated cumulative profits and losses of the Ever Joint Group as listed above which do not suggest that Ever Joint would have over HK$100 million to transfer to him. There is also no evidence of any legitimate or commercial reason for these transfers. 16.After Xu, Yu and Hui had fled Hong Kong on 15th October 2001, the 1st defendant also fled Hong Kong on 16th October 2001 to the USA. He has not come back since and is wanted by the Hong Kong police. He is currently in Vancouver, Canada. Though he has not appeared in this trial, he was legally represented. A re-re-amended defence and a witness statement have been filed for him. Since he has not appeared at the trial, I will not pay regard to the contents of his defence and his witness statement save admissions. 17.A study of the documents of Ever Joint and copy cheques and documents obtained from various banks showed that some of the transfers by Ever Joint to the 1st defendant were purportedly made as loans, but most of them were not on commercial terms as interest was not charged. There is also no evidence of repayment or extension of time to repay these alleged loans. The particulars of the 32 transfers totaling HK$346.27 million as revealed in these documents are shown in Appendix 3 annexed hereto. The yearly total of the sums transferred are as follows:
18.On 16 October 2001 when the 1st defendant was on the run, he transferred CAD250,000 to an account of the 2nd defendant with the Royal Bank of Canada in Canada (which became CAD249,990 after deduction of charges), HK$600,000 to her account with the Standard Chartered Bank in Hong Kong, HK$2.4 million to her account with the Hang Seng Bank no. 763030244888 in Hong Kong and US$150,000 to his own account with the Royal Bank of Canada in Canada. 19.After Xu, Hui, Yu and the 1st defendant had fled Hong Kong, the plaintiff has made enquiries with various casinos. The investigation revealed that the four of them together with the 2nd defendant had gone on a private jet from Vancouver to Las Vegas on 2 October 2001. This was confirmed by the 2nd defendant in her evidence. The plaintiff’s enquiry also revealed that Xu had given a tip of over US$1,200 to those who provided the jet service. On that occasion, Xu lost US$2,368,400 in Caesar’s Palace and Paris casinos. Xu also claimed in his other name Hui Yat Fai on a credit application form of Caesar’s Palace Inc. that he was the president of Top Honest Holdings Ltd. The 1st defendant was then a director of Top Honest. On about 15 October 2001 when Xu, Yu and Hui were on the run, they went to Las Vegas again and was joined by the 1st defendant there. On this occasion, Xu in his alias Hui Yat Fai and Hui lost US$934,000 to a casino there.
20.She is the cohabitant and younger sister-in-law of the 1st defendant. The 1st defendant had married her elder sister in 1988 and they have three daughters. They separated in 1996 and had a divorce in 1997. The 2nd defendant began living with the 1st defendant in 1996. She also admitted to be the personal assistant of the 1st defendant. She is 38 years old and had received education up to Form 3. She had worked as an accounts clerk and an insurance salesperson until 1999 when she stopped working and relied wholly on the support of the 1st defendant. She used to live with the 1st defendant in a flat in Sceneway Garden in Lam Tin, Kwun Tong. Most of her moneys came from the 1st defendant. 21.She and the 3rd defendant together filed a re-re-amended defence. She admitted of having received substantial sums of money from the 1st defendant. Between January to February 2001, she had received a total of HK$7.6 million from the 1st defendant. The moneys were transferred as follows: -
22.Mr. Liao’s evidence shows that of this HK$7.6 million, part of it at HK$6.8 million are traceable to two sums of HK$25 million each transferred from Ever Joint to the 1st defendant on 19 December 2000. The remaining part of HK$800,000, being part of the HK$4.2 million, were traceable to another deposit of HK$1.5 million into the 1st defendant’s account. 23.I have already referred to the 2nd defendant’s receipts from the 1st defendant of CAD249,990, HK$600,000 and HK$2.4 million all on 16 October 2001 when the 1st defendant was on the run. She has also received from Yu on 15 October 2001 two sums of US$199,990 and CAD1,002,688.11 in her account with the Royal Bank of Canada in Canada when Yu was on the run. (These two sums had been charged by an order of the Supreme Court of British Columbia, Canada made on 5 July 2004 and have later been returned by the 2nd defendant to the plaintiff.) 24.She returned from Vancouver to Hong Kong on 22 October 2001 and withdrew from her account with the Standard Chartered Bank HK$800,000. On 23 October 2001, she tried to remit CAD140,000 from her Hong Kong Bank account to Canada but the bank declined her instructions. On this HK$800,000, she said she had, according to the telephone instructions of the 1st defendant, given it to one of his clients Ah Chung. 25.She and the 3rd defendant were arrested by the Hong Kong police on 25 October 2001 at the Hong Kong International Airport when they were about to leave Hong Kong. The police found that she had cash of CAD50,000 with her. When charged by the police for “dealing with property known or believed to represent the proceeds of an indictable offence”, she admitted under caution that the 1st defendant had told her to keep the money for him temporarily and she had, on his instructions, arranged various bank transfers between 22nd to 25th of October 2001. She was tried and convicted of this offence by His Honour Judge Wright in the District Court on 8 September 2003. The plaintiff at this trial relies on the verdict and findings of the learned Judge to prove her knowing assistance, knowing receipt and dealing with money she knew to represent proceeds of an indictable offence. 26.The plaintiff submitted that the manner in which the 2nd defendant received moneys from Yu and the 1st defendant was unusual and suspicious. The plaintiff further submitted that the 2nd defendant knew or must have knowledge that Yu had been employed by the plaintiff for almost 20 years and should not have millions of dollars at his disposal. The plaintiff therefore submitted that the 2nd defendant received the moneys from Yu and the 1st defendant with acknowledged that such moneys were misappropriated from the plaintiff or were proceeds of such misappropriation. 27.On her receipt of CAD250,000 (or CAD249,990), HK$600,000 and HK$2.4 million on 16 October 2001 from the 1st defendant when he was on the run, the 2nd defendant pleaded in the re-re-mended defence that these sums were intended to cover the personal and other expenses of the 1st and 2nd defendants in Vancouver. The expenses included the maintenance for the 1st defendant’s ex-wife, the living and tuition expenses of his children, the mortgage payments for the 1st defendant’s home in Richmond, Vancouver and the down-payment for a new home that the 1st and 2nd defendants intended to purchase in Vancouver. The 2nd defendant further pleaded that these deposits and the HK$7.6 million deposited in early 2001 by the 1st defendant to her were not unusual or suspicious. On the contrary, she pleaded that it was entirely usual for the 1st defendant to make periodic lump sum deposits into her bank accounts to provide for her personal and other expenses referred to above. 28.She further pleaded that since 1997, she had maintained an affluent lifestyle with the financial support of the 1st defendant. She knew that the 1st defendant was a very successful businessmen engaged in, among other things, organizing casino trips and junkets for wealthy and high net worth punters. The 1st defendant enjoyed a very substantial income from his many businesses which were all legitimate. His business of organizing casino trips and junkets involved frequent and substantial deposits to and withdrawals from his bank accounts. She acted as his personal assistant. He and his clients would from time to time deposit substantial cash into her bank accounts and she would, according to his instructions, pay various sums to his clients and/or other third parties. To her knowledge, the deposit of substantial sums into her accounts by the 1st defendant and his clients was done in the normal course of the 1st defendant’s business and was legitimate. 29.On the deposit by Yu of US$199,990 and CAD1,002,688.11 into her account with the Royal Bank of Canada in Canada, she pleaded that the sums did not belong to her and she did not claim any beneficial interest in them. 30.She pleaded the following to explain her return to Hong Kong on 22 October 2001. She said on about 18 October 2001, the Royal Bank told her that her accounts would be temporarily suspended for internal checks on the provenance of the three deposits of US$199,990, CAD1,002,688.11 and CAD250,000. Such checks were necessary because of the September 11 terrorist attacks. She needed funds to cover her personal and other expenses mentioned above. She did not have other account in Canada. She therefore opened new accounts with the CIBC and HSBC in Canada on 19 and 22 October 2001 respectively. She then came back to Hong Kong on 22 October 2001 to withdraw and remit funds to these new accounts. On 23 October 2001, she attempted to remit CAD140,000 from her Hong Kong Bank account and CAD270,000 from her Hang Seng Bank to her CIBC account both in Canada. (The attempted transfer of CAD140,000 turned out to be unsuccessful.) She also withdrew CAD20,000 and CAD30,000 cash from Hang Seng Bank and Standard Chartered Bank on 22 and 23 October 2001 with a view to use them for gambling in Vancouver pending the receipt of the remittances. 31.In her evidence in chief, she said the 1st defendant had various businesses which were in real estate, trading in bedding and accessories and organizing gambling junkets. He had many companies of which she could remember the names of a few. He also had two restaurants named Kwun Loong with one in Castle Peak Road and the other one in Ngau Tau Kok. He had an office which occupied two office units in Jordan Road and she visited it a few times a month. He originally had 5 to 6 members of staff which were reduced to 2 at a later stage. When he was busy, she would assist him in paying utilities and miscellaneous bills. He started organizing casino junkets in 1999 with partners Wong Hon Chee and Wong Wing Yeen. They had credit facilities with the casinos. She had assisted him in receiving and disbursing funds for this business. 32.After she had become the 1st defendant’s girlfriend, she came to know Xu and Yu in dinner gatherings. She also came to know Hui in dinner gatherings but met him less frequently. She said that the 1st defendant might have some business dealings with Xu, Hui and Yu but was not clear about it. 33.The 1st defendant used to give her household expenses of over HK$100,000 every month on the average. She applied the money for their household expenses in Hong Kong, the maintenance and support of her elder sister and her nieces in Canada, the mortgage installments of the 1st defendant’s home in Canada and his credit card expenses. However, she had no idea as to how much was required by the mortgage. 34.In operating the gambling junkets, the 1st defendant and his partners would purchase for their clients special chips that could only be used for gambling but could not be redeemed for cash. If the clients could win in the gamble, the chips won could then be redeemed for cash. The special chips were sold by the casino at a discount and the 1st defendant and his partners would earn this discount. She had been to these junkets with the 1st defendant but had not been involved in it. The 1st defendant’s clients were his business associates and friends and Xu, Hui and Yu were also his clients. 35.She also tried to account for the HK$7.6 million which she received from the 1st defendant between January to February 2001. For the HK$500,000 received on 15 January 2001, she said she had transferred the same to one of his clients immediately but she could not remember who as he had many clients. For the HK$400,000 received on 19 January 2001, she withdrew HK$250,000 on 20 January 2001 and gave it to the 1st defendant as he was going overseas and needed money. For the rest, she used it for miscellaneous purposes. For the HK$4.2 million received on 12 February 2001, she used the same as part of the HK$4,245,300 which she paid one of his clients on the same day. For the HK$2.5 million which she received on 19th February 2001, she used it as part of the HK$2,978,800 which she paid one of his clients on the same day. She did these receipts and disbursements for the 1st defendant because he was frequently not in Hong Kong and would ask her to do it for him. However, this is not her pleaded case on how these funds were used by her. Her pleaded case is that these sums were for her personal and other expenses as referred to above. 36.In September 2001, she went to Vancouver to visit her nieces. She was later joined by the 1st defendant. The two of them and Xu, Hui and Yu later went to Las Vegas in a private jet. After that, she returned to Vancouver alone. She then went around to inspect houses with a view to buy one for herself and the 1st defendant, but she did not have any price range in mind. Later on, the 1st defendant told her on the telephone that he would remit CAD250,000 to her for payment of deposit if she should find the right house. Shortly thereafter, the Royal Bank of Canada telephoned her advising her of receipt of three remittances at US$199,990, CAD1,002,688.11 and CAD250,000 with the first two sums from one Mr Yu but refusing to give the full name. She then telephoned the 1st defendant advising him about the two remittances from one Mr Yu and was told that these two sums did not belong to them and she should not touch them. 37.She also tried to account for the HK$600,000 and HK$2.4 million that were deposited by the 1st defendant into her account on 16 October 2001. She came back to Hong Kong on 22 October 2001. She then withdrew $800,000 in cash from her Standard Chartered Bank account on the same day and paid it over to the 1st defendant’s client Ah Chung at a restaurant in Mongkok on the same day. Regarding the HK$2.4 million, she remitted HK$1 million (in CAD201,045.44) (together with a separate sum of CAD100,452.03 from her Hong Kong Bank account) to the 1st defendant’s account with the Royal Bank of Canada on 18 October 2001 before returning to Hong Kong. She then transferred HK$1 million to one of his clients on 22 October 2001. She also withdrew HK$99,160 in the form of CAD20,000 cash on the same day. Her evidence in chief on why the 1st defendant had transferred these two sums to her is again at variance with her pleaded case which stated that they were to provide for her personal and other expenses referred to above. 38.In cross-examination, she said she knew Xu was working for the plaintiff either at the KP BoC or the plaintiff’s Guangzhou branch. She knew that Hui and Yu were also working for the plaintiff. She had not considered why the casino had given them the private jet treatment when they were merely staff of the plaintiff. 39.Regarding her intended purchase of a house in Vancouver, she said she had inspected some houses and had shortlisted two to three of them for the 1st defendant to pick. She had not discussed with the 1st defendant on the price range and she could not recall if he had inspected any of them. 40.She also said that in mid October 2001, the 1st defendant told her that his clients had problems but the problems had nothing to do with him. She did not know that the 1st defendant had absconded from Hong Kong on 16 October 2001 which was the same day when he remitted her CAD250,000. She had no idea whether the 1st defendant had passed through Vancouver between 16 to 18 October 2002. She came back to Hong Kong on 22 October 2001, but she did not know where he was between 22 to 25 October 2001. She had no idea if he had come back since then. She also did not know when he would come back as she had not asked him. She knew that he was being sued in Hong Kong, but had not considered why he did not come back to defend the proceedings. 41.On the HK$600,000 transferred to her on 16 October 2001, she said before she came back to Hong Kong on 22 October 2001, the 1st defendant had transferred the money to her and told her to repay it to Ah Chung. He later changed his instruction to HK$800,000. She had previously met Ah Chung for five to six times but could not remember at what place. She had no idea about Ah Chung’s address or phone number. It was Ah Chung who called her to arrange payment. All her money dealings with Ah Chung were in cash. The payment of HK$800,000 was not the first cash payment to him and she was not surprised why she had to pay him cash. However, when she made a cautioned statement to the police after her arrest, she said she did not know why the 1st defendant had transferred to her the HK$600,000. 42.His Honour Judge Wright in his verdict in the criminal case referred to above also found that she had on 18, 22 and 23 October 2001 conducted 12 banking transactions involving 6 bank accounts. She did not give evidence in the criminal case. From her evidence in this case, it is now clear that she had in these transactions dealt with the HK$600,000 and HK$2.4 million that were transferred to her by the 1st defendant on 16 October 2001. Judge Wright also found that she had on 22 and 23 October 2001 withdrawn CAD46,000 and HK$2,924,910.70 in cash from her accounts. The HK$2,924,910.70 included the HK$800,000 allegedly paid to Ah Chung in cash and the HK$1 million alleged by her in evidence in chief that she had transferred to one of the 1st defendant’s clients on 22 October 2001. 43.When she was cross-examined on this HK$1 million, she said she had lost some money in a casino in Richmond, Vancouver and had to pay back the loss to the casino. But that was not the only sum she withdrew for payment to the casino. On the same day, she also withdrew cash in HK$500,000 from another account of Hang Seng Bank. On 23 October 2001, she again withdrew HK$624,910.70 in cash from the Standard Chartered Bank and closed the account there. These three sums and the HK$800,000 allegedly paid to Ah Chung together make up the cash of HK$2,924,910.780 referred to in the verdict of Judge Wright. She said she withdrew these three sums with a view to settle account with the casino through one Mary. The amount she had to pay was CAD120,000 principal plus daily interest though at another time she said there were mutual set-offs in Hong Kong dollar and Canadian dollar. The calculation was done by Mary and she said she trusted Mary. They had a settlement of account on the phone and Mary said that they would have a detailed settlement when they meet. She could not recall how much interest Mary had charged her or the total amount that she had paid though it was more than CAD100,000. She had said at another time that she had paid HK$1 million odd. The payment was made to an intermediary of Mary. This man phoned her up and they agreed to meet somewhere in Mongkok. She then handed over to him the cash in a brown envelope. She had not thought of paying the money into a bank account of the casino because the person who took the money from her was in the business of lending money in a casino. This evidence in cross-examination differed from her evidence in chief referred to above. 44.Despite the fact that the 3rd defendant was living with her in the same house in Vancouver and they came back to Hong Kong on 22nd October 2001 on the same plane and sitting next to each other, she had no idea that the 1st defendant had given the 3rd defendant a cheque for HK$11 million and she did not know why the 3rd defendant was coming back. She had not asked the 3rd defendant any question and the 3rd defendant did not volunteer any information. She later met the 3rd defendant in a bank. She told the 3rd defendant that she was going back to Vancouver and the 3rd defendant said to her the same thing. She had no idea as to what the 3rd defendant had done in Hong Kong between 22 and 25 October 2001. 45.She was also cross-examined on her case that she had assisted the 1st defendant in receiving and disbursing funds for his junket business. She said the 1st defendant had to rely on her as she had an account with a passbook which could reveal deposits instantly and she did not have to wait for the monthly statement. But she has not explained why the 1st defendant could not have obtained a similar bank account in his own name. 46.She was also cross-examined on the HK$7.6 million transferred to her by the 1st defendant between January to February 2001. For the HK$500,000 received on 15 January 2001, she said the 1st defendant had a cheque for HK$500,000 which could not be changed into cash on the same day. She had enough cash in her account and he thus paid the cheque into her account and obtained cash therefrom to pay four clients. But she could not remember who these clients were. However, she had said in her evidence in chief that she gave this sum to one client only. For the HK$400,000 received on 19 January 2001, she said she had paid HK$250,000 it to a client and spent the rest for miscellaneous purposes. This was different form her evidence in chief when she said she had withdrew HK$250,000 on 20 January 2001 and gave it to the 1st defendant as he was going overseas and needed money. For the HK$4.2 million received on 12 February 2001, she confirmed that it was withdrawn by the 1st defendant from his account in cash and deposited into her account and he was in Hong Kong on that day when he made the withdrawal. She then paid HK$4,245,300 to one of his clients on the same day but could not recall who it was. For the HK$2.5 which she received on 19th February 2001, she again confirmed that they were withdrawn by the 1st defendant in cash and deposited into her account and he made the withdrawal in Hong Kong. This sum was consolidated with two other sums and a larger sum of HK$2,978,800 was paid to a client the particulars of whom she again could not recall. Her pleaded case on these sums was that they were to provide for her personal and other expenses referred to above. 47.On the deposit by Yu of US$199,990 and CAD1,002,688.11 into her account with the Royal Bank of Canada in Canada on 15 October 2001, she said in evidence in chief that she just left the two sums in her account. She also confirmed in cross-examined that she had not used these two sums. She admitted that she had used no less than CAD945,000 of the CAD1,002,688.11 together with other sums to purchase CAD1.2 million Guaranteed Income Certificate which she regarded as a type of fixed deposit with a higher rate of interest. However, when confronted with documents, she had to admit that she had used about CAD150,000 of this sum when she tried to withdraw CAD400,000 from this account and pay CAD100,000 to each of her elder sister and her three daughters. She tried to make these transfers so that there would be more accounts from which she could withdraw cash and more cash could be withdrawn. For some unknown reason, this transaction was reversed by the bank and the four attempted transfers became aborted. Nevertheless, her attempt to use part of this sum from Yu for her own purposes was beyond dispute. This admission also contradicted what she had previously said on affirmation.
48.She is the younger sister of Xu. She was acquainted with the 1st defendant when she was still very young. The 1st defendant is the elder brother of her elder sister-in-law. She received her secondary education in the Mainland. She immigrated to Ontario, Canada in 1995 and received further education there. In 1999, she obtained a diploma in accountancy. She then worked as a salesperson at a mobile phone shop in Scarborough, Ontario until March 2001. She then relied on Xu’s support. 49.She said in evidence in chief that Xu was made the deputy head of KP BoC when he was only 27 years old. He was diligent and many people had high regard for him. In 1994, he was also elected one of the 10 outstanding young persons in Kaiping. She knew that Ever Joint was Xu’s company in Hong Kong. She knew that Xu also owned a hotel in Kaiping called the Ever Joint Peninsular Hotel潭江半島酒店. She also knew that Xu had some business of trading in raw materials with some factories and also some realty business in Hong Kong. She learnt these by overhearing Xu’s conversations with friends over dinner gatherings. 50.In September 2001, she returned from Canada to visit her mother in Kaiping. Her mother was not in good health. She came back to Hong Kong in October. On 15 October, the 1st defendant called her on the phone asking to meet her at the Lam tin MTR station. She met him there half an hour later and he gave her a cash cheque for HK$11 million drawn by a casino in Macau. He told her to open an account at the nearby Standard Chartered Bank with it. She asked him why and he replied that he was busy and had no time to deposit the cheque. But he did not appear to her to be very busy and was just as usual. He asked her to keep the money for him and transfer it to back him later. He then left. She thought he was busy and would leave the money with her for a while. The cheque was from a casino and she knew that he was in the gambling business. She then deposited the cheque into a new account that she opened with the Standard Chartered Bank on the same day. She also deposited HK$85,000 into her account with the Hong Kong Bank no. 046840 on the same day. She said this was her savings she brought from Kaiping. She returned to Canada on the next day and stayed in the 1st defendant’s house in Richmond, Vancouver, Canada. She met the 2nd defendant there. 51.Whilst in Richmond, she got a phone call from the 1st defendant whose whereabouts she did not know. The 1st defendant asked her to convert the money in the cheque to Canadian currency and transfer it to her account in Canada. She phoned the bank and converted HK$10.2 million into Canadian dollars. For the transfer of the money to Canada, the bank required a letter and she duly sent it to the bank. After that, the 1st defendant phoned her again and told her to come back to Hong Kong to take the money as remittance into Canada would be frozen because of the “September 11” incident. He also told her that one John would tell her at the Hong Kong International Airport and tell her what to do. John was a friend of the 1st defendant and she had met him for five to six times in dinner gatherings in Hong Kong. However, she knew almost nothing about John save that he was in his 40s. 52.She arrived in Hong Kong on 22 October 2001. She went out to the greeting area of the airport to meet John and left the 2nd defendant behind to collect the baggage. John met her and gave her a Hong Kong mobile phone sim card. He then disappeared before the 2nd defendant had appeared and the 2nd defendant did not know that he had come. 53.John later phoned her at 11:00 to 12:00 p.m. and asked to meet her at the Mongkok Bank Centre. She used the funds in the Standard Chartered Bank account and bought 2 cashier orders of HK$2 million each. She then deposited them into her Hong Kong Bank account and a new account no. 339653 opened with the Hang Seng Bank. She did all these at John’s directions. John then told her to withdraw HK$2 million from the Standard Chartered Bank. But she could only withdraw 3 sums of HK$500,000, HK$500,000 and HK$510,000 as more cash withdrawal required prior arrangement with the bank. He gave this HK$1.51 million cash to John and he left with the money. 54.On 23 October 2001, she again went to the Bank Centre at John’s instructions. She transferred from the Standard Chartered Bank account HK$1.5 million each to her Hong Kong Bank account and her Hang Seng account no. 339653, withdrew the balance in HK$2,200,521.70 and CAD50,333.64 and closed this account. She further withdrew HK$1.5 million from her Hang Seng account no. 339653. These were all at John’s directions. She handed all three sums to John. She had to transfer HK$1.5 million from the Standard Chartered Bank to the Hang Seng Bank and withdraw it from the latter bank because she had only arranged with the Standard Chartered Bank to withdraw HK$2 million cash and could not have withdrawn HK$3.5 million cash from it. 55.On 24 October 2001, she went to see John again at the Bank Centre. She opened a Prestige account with the Hang Seng Bank and transferred HK$1.04 million from her Hang Seng account no. 339653 to this account. This account offered more banking functions. She then bought CAD30,000 at HK$150,090 and withdrew HK$800,000 from the Hang Seng account no. 339653. The balance left in this account was HK$10,000. She then put the HK$800,000 and CAD20,000 in a safe deposit box she opened with the Nag Seng Bank the day before. All these were at John’s directions. The remaining CAD10,000 was for her plane ticket back to Canada and her expenditure. On the same day, she at John’s directions used HK$1,561,200 in her Hong Kong Bank account to purchase US$200,000 and further withdrew HK$2.07 million from this account. She gave John the US$200,000 and HK$70,000 to John and put the HK$2 million cash into the safe deposit boxes. The balance in this account was at HK$5,449.40. 56.Between 22 to 24 October 2001, she had allegedly given John HK$5,280,521.70, CAD50,333.64 and US$200,000. Of the remaining HK$3.9 million or thereabouts, she kept HK$2.8 million and CAD20,000 (or a total of about HK$2.9 million) in her safe deposit boxes, HK$1.04 million in her Prestige account with the Hang Seng Bank, HK$10,000 in her Hang Seng account no. 339653, HK$5,449.40 in her Hong Kong Bank account and CAD10,503 and HK$10,250 with herself. The total appears to exceed HK$11 million slightly because she had a small fund in her Hong Kong Bank account originally. The banking transactions on the HK$11 million are shown in the table below.
57.She said she had no reason to believe that the HK$11 million were from an illegal source of the 1st defendant was in the casino business and the cheque was issued by a casino. She also said she did not find the many banking transactions John told her to do in those three days suspicious as the 1st defendant and told her to follow John’s directions. She also denied knowledge that Xu was a fugitive on the run. 58.She was arrested at the Hong Kong International Airport on 25 October 2001. She then admitted in a cautioned statement that the 1st defendant had given her the HK$11 million cheque and told her to open an account with it. All the above-mentioned transactions were done at the instructions of the 1st defendant. She was also charged with “dealing with property known or believed to represent the proceeds of an indictable offence” and was tried and convicted by His Honour Judge Wright in the District Court on 8 September 2003. 59.In cross-examination, she said when the 1st defendant gave her the cheque on 15 October 2001 and told her to open a bank account with it, she did not asked him any question on why he could not have done it by himself or could not have asked other people to do it for him as she had not thought about these. Furthermore, she had already planned to go back to Canada on the next day and did not have any plan to come back to Hong Kong yet. However, she did not tell him this as she said he just gave her the cheque and left. She did not explain why she could not have told him this by other means. 60.After she had returned to Vancouver, she lived with the 2nd defendant in the same house. On 18 October 2001, the 1st defendant instructed her to convert the HK$11 million to Canadian dollars and transfer them to her account in Canada. On 19 October 2001, the 1st defendant phoned her again and asked her to come back to Hong Kong to get the money. This was not in accordance with her plan and she found it troublesome. But she did not say a word to the 2nd defendant about the HK$11 million cheque and all these matters despite the 1st defendant had not told her to keep them secret. She and the 2nd defendant then came back to Hong Kong on the same plane, but she still did not tell the 2nd defendant a word about the HK$11 million cheque and these matters or why she was coming back here after having returned to Canada only for four days. The 2nd defendant also did not ask. She also did not tell the 2nd defendant about John and incidentally the 2nd defendant had gone to collect the baggage when John appeared at the airport and it chanced they did not meet. Her story about John appearing for a moment and not meeting the 2nd defendant was different from that in her witness statement where she said John picked them up at the airport. 61.She also said that from the time when she arrived in Hong Kong on 22 October to 25 October 2001, she had not talked to the 1st defendant though she had his mobile phone number. She had not thought of giving the 1st defendant a cheque when she was asked by John to hand over substantial cash totaling HK$5,280,521.70, CAD50,333.64 and US$200,000 (or about HK$6.9 million). She had not asked the 2nd defendant on the whereabouts of the 1st defendant. She also had not confirmed with the 1st defendant on the correctness of John’s many banking instructions. Analysis and Judgment Flow of money to Ever Joint 62.Mr. Liao’s evidence shows that Xu, Yu and Hui had procured many loans to be advanced by KP BoC to various entities in the Mainland. There was no supporting document for these loans. For loans in excess of US$5 million, they were also granted in excess of Xu’s loan approval authority. The borrowers, as far as they could be located, had all denied of having applied for or obtained these loans. The proceeds of these loans were all channeled to Ever Joint in Hong Kong. Ever Joint was owned and controlled by Xu, Yu and Hui. The total sum so channeled between 1992 and October 2001 was at HK$1,964 million. In the year 1998 alone, a sum of US$95 million was channeled to Ever Joint. The amounts of funds transferred to Ever Joint from time to time did not tally with the scale of Ever Joint’s business as shown in its audited accounts. These sums also do not appear in Ever Joint’s accounts as loans from the plaintiff to Ever Joint. There is also no evidence of any genuine business conducted between KP BoC and Ever Joint. There is also no evidence of any flow of funds from Ever Joint to the plaintiff. The flow of funds was all one-way. I accept Mr. Liao’s evidence. The Public Security Bureau of Guangdong Province has also investigated and concluded that Xu, Yu and Hui have through the said modus operandi stolen the funds from the plaintiff. In the light of all these, the inescapable conclusion must be that the loans were all fictitious and their proceeds were misappropriated by Xu, Yu & Hui into Ever Joint. This also explains why they had to fled the Mainland and Hong Kong in mid October 2001.
63.Mr. Ng submitted that Ever Joint probably had some other source of funding apart from KP BoC. He referred to Ever Joint’s purchase of Union Park Centre on 13 August 1992 at HK$194.28 million. Part of the purchase price was funded by a mortgage loan of HK$95 million advanced by the Canadian Eastern Finance Ltd. The plaintiff’s evidence shows that as at that date, KP BoC had only transferred to Ever Joint HK$25,739,762.88. There was still a shortfall of HK$73,540,237.12. Mr. Chan for the plaintiff however referred to the audited accounts of Ever Joint for the period from its incorporation on 12 November 1991 to 31 December 1992 which shows a liability for bank loan at HK$169,291,972.26 which probably included the long term liabilities at HK$103,121,782.23. The bank loan at HK$169,291,972.26 together with the HK$25,739,762.88 transferred from KP BoC totaled HK$195,031,735.14 which was more than the HK$194.28 million required for the purchase of Union Park Centre. I also note that there were transfers of HK$30 million odd in October 1992, HK$30 million odd in April 1993 and nearly HK$78 million in June 1993. Though they were only transferred after the purchase of the building, they should have been ample for servicing its loans. The evidence thus shows that the bank loan and the transfers from KP BoC were enough for the purchase of Union Park Centre. There is also no evidence of any other source of substantial funding for Ever Joint. Each of Xu, Yu and Hui was earning no more than RMB7,500 per month from the plaintiff at the material times and they could not have generated any substantial funding for Ever Joint. I therefore cannot hold that Ever Joint has any other source of substantial funding save the transfers from KP BoC. 64.Mr. Ng has also submitted that Ever Joint had interest income, rental income, dividend income and other income from business. However, I refer to Foskett v. McKeown & Ors [2001] AC 102 where Lord Millett said at p. 127F and p. 133C-E: -
65.Furthermore, judging from the HK$1,964 millions that had been transferred from the plaintiff to it, the relatively insignificant scale of its trading, the relatively small amounts of its profits and losses over the years, its cumulative loss from incorporation to the end of the financial year 2000 at HK$64,348,715 and the lack of evidence of any other substantial source of funding for it, I on a balance of probability conclude that the funds Ever Joint had spent including the funds transferred from it to the 1st defendant were the proceeds of misappropriation by Xu, Yu and Hui from the plaintiff and their derivatives. These were proceeds obtained in breach of trust. Even though Ever Joint might have borrowed funds on the strength of the plaintiff’s money and used such funds to speculate in the properties and share markets and gamble in various casinos and might have obtained had some profits and winnings, I accept the plaintiff’s submission that all those profits and winnings are the traceable proceeds of the money misappropriated from the plaintiff as the funding of those activities all come from the plaintiff’s money.
66.The 1st defendant denies that the moneys he received from Xu, Yu, Hui and Ever Joint had been misappropriated by them from the plaintiff. Mr. Ng submitted on his behalf that the four sums of HK$25 million each he received on 19 and 27 December 2000 were inadvertent remittances. Regarding the other moneys he received, it was submitted that they were either proceeds of loans or of property transactions between the 1st defendant and Ever Joint between 1994 and 2000 or payments in connection with his casino junket business between 1999 and 2001 or other miscellaneous transaction like repaying gambling debt for Xu. It was further submitted for him that all these transactions were bona fide transactions entered into in good faith and that substantial sums were commonly remitted into his bank account by Xu and Ever Joint in connection with his casino junket business. 67.The 1st defendant had not received any transfer of money in 1992 to 1993. In 1994, there was a loan of HK$4 million advanced on 8 July 1994. This loan carried interest at 12% per annum and was supposed to be repayable on 31 December 1994. There is however no evidence of repayment. There was again no transfer in 1995 to 1996. The total sum transferred in 1997 was HK$13 million with 2 sums of HK$5 million each in April, 1997. The HK$3 million loan transferred directly to Ching For Ming on 29 December 1997 were said to have been repaid by the 1st defendant on 7 January 1998. The sums transferred in 1998 and 1999 were HK$6 million and HK$23.5 million respectively. In 2000, it suddenly surged to HK$271 million which then went down to HK$28.77 million in 2001. The total transferred to him was HK$349.77 million. 68.Of these sums, it is the 1st defendant’s case that he had repaid HK$75 million to Ever Join/Xu/Hui. Apart from HK$3 million repaid on 7 January 1998, the remaining HK$72 million were repaid between 27 October 2000 and 25 May 2001. They are as follows:
69.It is also the 1st defendant’s case that he had channeled HK$90,183,300 for Xu and Ever Joint to STDM which operates a number of casinos in Macau and to his casino junket partners Wong Hon Chee and Wong Wing Yeen. It is also his case that he had channeled HK$1.5 million for Hui to Xu. They are as follows:
70.He is the brother-in-law of Xu as Xu married his younger sister in 1992. He and Xu are both natives of Kaiping City and he was acquainted with Xu and Yu since childhood. They grew up together in that city. He knew that Xu and Yu had joined the plaintiff in the 1980s. He was also introduced by them to Hui in 1998. By virtue of their close relationship, I accept the plaintiff’s submission and find that the 1st defendant should have known that Xu, Yu and Hui had worked for the plaintiff for almost 20 years and were successively in charge of the operation of KP BoC. He should also have known that they were earning salaries of no more than RMB7,500 per month. Therefore, save the HK$4 million transferred on 8 July 1994, he should also have known that they would not have tens of millions of dollars from a legitimate source or sources to transfer to him. 71.For the HK$4 million transferred in July 1994, it was an isolated payment. There was no transfer in the two years before it or the two years after it. This sum is not so big that Xu could not have obtained it from a legitimate source or sources. I cannot say that on a balance of probability, he should have known that this sum should have been obtained by Xu through irregular means. 72.By reason of their close relationship and by reason of the numerous transfers of money from Ever Joint to him, I also find that he should have known that Ever Joint was owned and controlled by Xu, Yu and Hui and, save the HK$4 million discussed above, that Ever Joint would also not have millions of dollars from a legitimate source or sources to transfer to him. He should thus have known that the moneys he received from Ever Joint, save the said HK$4 million, came from an irregular source or sources. Even if he was not expressly told about the source, he should have known and it was very likely that the three of them had misappropriated the moneys from the plaintiff as they had all worked for the plaintiff and were successively in charge of KP BoC. To say the least, he should have enquired about the source of the moneys. The lack of evidence of any legitimate or commercial reason for these transfers from Ever Joint to him supports my findings. 73.Furthermore, after Xu, Yu and Hui had fled Hong Kong on 15th October 2001, he also fled Hong Kong on 16th October 2001 to the USA. When he was fleeing, he also instructed the 2nd and 3rd defendants to launder and dissipate money. The plaintiff’s subsequent inquiries with casinos also revealed that he, 2nd defendant, Xu, Yu and Hui had on 2 October 2001 gone on a private jet from Vancouver to Les Vegas during which Xu had tipped US$1,200 for the jet service and lost US$2,368,400 in two casinos. Xu had also in his other name Hui Yat Fai claimed on a credit application form of Caesar’s Palace Inc. that he was the president of Top Honest Holdings Ltd., a company for which he served as a director. All these draw them closer to one another and strongly buttress my findings above. 74.For the same reasons, I also find that even if HK$90,183,300 out of the HK$349.77 million were transferred to him in connection with his so-called casino junket business, he received the HK$90,183,300 knowing the same to have come from an irregular source or sources and were probably the proceeds of misappropriation from the plaintiff. In receiving the money and channeling it to STDM and his so-called junket partners, he was merely assisting the three of them to launder the money. 75.The law of knowing receipt has been set forth by Hoffmann LJ (as he then was) in El Ajou v Dollar Land Holdings [1994] 2 All ER 685 at 700, a decision of the English Court of Appeal, which has been cited in para. 35 of the judgment of Deputy Judge Lam (as he then was) in PBM (Hong Kong) Ltd v. Tang Kam Lun and others, HCA 12138/1997:
76.On the question of the third element “knowledge”, Deputy Judge Lam has in para. 36 of his judgment referred to the judgment of Nourse LJ in BCCI (Overseas) Ltd. v Akindele [2001] Ch 437, another decision of the English Court of Appeal, at 455C to G:
Nourse LJ also said at 448H that while a knowing recipient will often be found to have acted dishonestly, it has never been a prerequisite of the liability that he should. 77.Regarding the remedy for this wrong, Lord Nicholls in an essay entitled Knowing Receipt: The Need for a New Landmark in a book called Restitution: Past, Present & Future, Essays in Honour of Gareth Jones which was published in 1998 (before the judgment in BCCI (Overseas) Ltd. v Akindele and talked about dishonest recipients rather than the single test of knowledge for knowing receipt) said at p. 243: -
78.Lewin on Trusts, 17th Ed also deals with the remedy of innocent receipt and knowing receipt in para. 7-21 at p.191 and para. 42-57 at p.1365 as follows:
79.On the law of knowing assistance, I can again refer to the PBM judgment of Deputy Judge Lam (as he then was) at para. 13: -
80.I also refer to Lewin on Trusts, 17th Ed at para. 7-21 which states: -
81.Regarding the test of dishonesty for knowing assistance, Deputy Judge Lam quoted extensively from the judgments of the House of Lords in Royal Brunei Airlines v. Tan [1995] 2 AC 378 and Twinsectra v Yardley [2002] UKHL 12, 25 March 2002 as follows:
82.There is also the “blind eye dishonesty” discussed by the English Court of Appeal in Grupo Torras SA and another v Al-Sabah and others [2001] Lloyd’s Rep PN 117 at paras. 112 and 113: -
83.On the remedy for knowing assistance, I would refer to Snell on Equity, 31st Ed, which states at p. 693: -
84.Of the HK$349.77 million transferred to the 1st defendant, he had clearly channeled HK$90,183,300 to STDM and his so-called junket partners for money laundering purpose. I do not think he had channeled the moneys for his own gambling purpose. He did not have so much money to gamble. His re-re-amended defence has admitted to a number of loans from Xu, Yu and Ever Joint as follows:
85.His re-re-amended defence also pleaded that “by early 1999, following the economic downturn in Hong Kong triggered by the onset of the Asian Financial Crisis, the 1st defendant’s businesses were performing poorly and in urgent need of capital” (para. 8(12). That led to the sale by him to Ever Joint of certain properties in Zhengzhou and he got HK$8.5 million from the deal. The plaintiff of course said that this HK$8.5 million had nothing to do with the sale and purchase of those properties. I do not accept the 1st defendant’s pleaded case as there is no evidence in support of it and the plaintiff has in fact provided evidence to rebut it. However, in any case, the 1st defendant’s pleaded case is that he was not in good financial standing since early 1999. But his financial straits did not end there. The re-re-amended defence further pleaded “from 1999 through to 2000, the 1st defendant’s businesses continued to deteriorate and by early 2000, the 1st defendant was again in need of cash” (para. 8(18). This led to the borrowing of the two loans in April 2000 above-mentioned. 86.Though the 2nd defendant said that he had various businesses in real estate, trading in bedding and accessories, restaurants and organizing gambling junkets and had an office with 5 to 6 staff, there was however not a page of document or a tax return or an account produced to support these allegations or to show the turnover or profit and loss of these alleged businesses. His restaurant business had flopped. The number of staff in his office had been reduced from 5 to 6 to 2. 87.On the casino junket, there is no evidence of the amount of profit, if any, that the 1st defendant had earned save the allegation by the 2nd defendant that he was to pocket the discount given by the casino on the purchase of special chips for gambling by his clients. There is in fact no evidence to support the allegation that he was organizing casino junkets for clients except the bare assertion of the 2nd defendant. He might have been to various casinos with Xu, Hui and Yu and have channeled funds for them to and from the casinos and the two Wongs, but in doing that, he was merely assisting them in laundering their ill-gotten gains rather than carrying out a business of gambling junkets. The 2nd defendant alleged she had on repeated occasions transferred huge sums of money on his behalf to his junket clients, but she was unable to give any particulars of these clients save the nickname of one Ah Chung. This is incredible and casts grave doubt on the allegation of junket business. All in all, I do not believe that he was running any casino junket business. I find that he was merely laundering money for the Xu, Yu and Hui and in doing so, he was assisted by the 2nd defendant. 88.By reason of the above, it is thus clear that the 1st defendant did not have millions of dollars to gamble. I do not accept that he had been earning substantial sums from his businesses. He was not well of at all. I also do not think that Xu, Yu or Ever Joint would have lend him the HK$90,183,300 for him to gamble. The evidence suggests that it was Xu who gambled on high stakes, not him. I therefore hold that in channeling the HK$90,183,300 to STDM and his so-called junket partners, he was merely laundering the money for Xu, Yu, Hui and Ever Joint. I take the same view regarding his transfer of the HK$1.5 million from Hui to Xu in March 2001. He is thus liable to compensate the plaintiff HK$91,683,300 (equal to HK$90,183,300 + HK$1.5 million) on the ground of knowing assistance. 89.Regarding the HK$75 million (including the HK$3 million allegedly repaid for Ching for Ming), I would accept that there could be on a balance of probability an innocent explanation for the transfer of the HK$50 million to him on 27 of December. These two sums were transferred back from the same recipient bank accounts of the 1st defendant to Xu right on the next day. Such movement of funds does not appear to have been for achieving any sinister or illegal purpose. 90.Apart from these HK$50 million, I will not deduct the rest of the alleged repayments from his liability for knowing receipt. The reason being that he had the use of these funds. The mere fact of repayment should not have extinguished his liability as it was not repayment to the plaintiff. If accessories should be liable for knowing assistance without receiving the money, I do not see why receipts should not be liable for knowing receipt simply because he has, after using the money for his purposes, repaid it to the wrongdoer who is guilty of the misappropriation or breach of trust. Thus for the HK$349.77 million transferred to him, there should be deducted HK$4 million received in 1994, HK$91,683,300 for knowing assistance and HK$50 million for having been transferred back immediately and not treated as wrongful. He should thus be liable to compensate the plaintiff HK$204,086,700 for knowing receipt. I also note that of this sum, his counsel only tried to explained that he had repaid HK$25 million (as part of the HK$75 million referred to above), nothing has been said on his receipt or the whereabouts of the remaining HK$179,086,700. I therefore give judgment against the 1st defendant for HK$204,086,700 and further order him to account for the profits he made out of the use of this sum. 91.Regarding the HK$4 million he borrowed in 1994, though I am not satisfied that he knew that such money came form the plaintiff and have not found him liable to compensate the plaintiff on the grounds of knowing receipt or knowing assistance, I have nevertheless found that such money belonged to the plaintiff. Since he was not a bona fide purchaser for value has for this sum and has not put up any defence of change of position as in Lipkin Gorman v. Karpnale [1991] AC 548, he is still liable to return the same to the plaintiff. I therefore make a further order that he should repay this HK$4 million to the plaintiff.
92.The plaintiff’s case against the 2nd defendant is on the sum of HK$7.6 million received by her from the 1st defendant between January and February 2000 and the HK$3 million and CAD250,000 (or CAD249,990) she received from him on 16 October 2001. Regarding the HK$7.6 million, clear evidence has been adduced to link up HK$6.8 million with 2 sums of HK$25 million transferred from Ever Joint to the 1st defendant. Regarding the balance of HK$800,000, the plaintiff has traced it to a cheque of HK$1.5 million but did not say that this cheque had anything to do with the plaintiff’s funds or their derivative, I would therefore assume that this cheque had nothing to do with the funds of the plaintiff. Of the HK$7.6 million, I would only consider the remaining HK$6.8 million. 93.I have already analyzed the financial situation of the 1st defendant and concluded that he was not well off at all. No documentary evidence has been produced by him to show that the CAD249,990 and HK$3 million had come from a legitimate source of sources. Appendix 3 shows that Ever Joint had in 2000 and 2001 transferred to him nearly HK$300 million. I do not believe that he had obtained CAD249,990 and HK$3 million legitimately and transferred them to the 2nd defendant on 16 October 2001 when he was absconding from the territory as a fugitive. I find that these moneys are part of the moneys transferred by Ever Joint to him and they are or can be traced to the plaintiff’s money. He was desperate on 16 October 2001 and was trying to launder and conceal such money with the assistance of the 2nd defendant. Regarding the HK$6.8 million, it in fact came from the plaintiff’s money through Ever Joint. 94.Since the 2nd defendant was not a bona fide purchaser for value without notice in respect of these moneys, the plaintiff has a proprietary claim over them to the extent that they are still in her possession. This is so regardless of whether she has rendered any knowing assistance for the transfer of these sums or was guilty of knowing receipt of them. The available evidence, which is undisputed, shows that she is still in possession of CAD249,990. I therefore declare that this sum belongs to the plaintiff and order the 2nd defendant to hand over this sum together with interest accrued to the plaintiff. 95.Regarding the remaining HK$6.8 million and HK$3 million, I have to consider whether they are knowing receipts or the 2nd defendant had rendered knowing assistance in relation to their movements. She was the girlfriend, cohabitant and personal assistant of the 1st defendant. On the basis of my analysis of the 1st defendant’s financial position, she knew or ought to have known that he had not legitimately amassed millions of dollars. The sums transferred by him to her were huge in the light of his financial position. She came from a modest background, had not achieved a high level of education, had not been in any occupation that would allow her to earn a substantial income and had been wholly relying on the support by the 1st defendant since sometime in 1999, but she had deposits in various financial institutions of no less than HK$10 million. These moneys obvious should have come from the 1st defendant. For the CAD249,990 and HK$3 million, she received them when the 1st defendant was absconding. She also received from Yu US$199,990 and CAD1,002,688.11 on 15 October 2001 when Yu was also on the run. On 22 October 2001, she returned to Hong Kong to assist the 1st defendant to launder and dissipate the plaintiff’s moneys. She also knew that Xu, Yu and Hui had been the plaintiff’s employees. She had been to Las Vegas with them on a private jet provided by a casino in 2000 and early 2001 and witnessed their lavish style. By reason of all these, the plaintiff submits that she knew that the moneys in question came from the misappropriation of the plaintiff’s funds by Xu, Yu and Hui and she should thus be liable for knowing receipt/knowing assistance. 96.The plaintiff also relies on extracts of the verdict of His Honour Judge Wright as follows:
97.The 2nd defendant has tried to explain her behaviour and activities. In her re-re-amended defence, she referred to the substantial sums transferred to her by the 1st defendant as for their personal and other expenses which included the maintenance for the 1st defendant’s ex-wife and children, the mortgage payments for the 1st defendant’s home in Richmond, Vancouver and the down-payment for a new home that they intended to purchase in Vancouver. She further pleaded that the substantial deposits including the HK$7.6 million deposited in early 2001 were not unusual or suspicious as they were to provide for her personal and other expenses referred to above. Only the HK$800,000 she withdrew on 22 October 2001 were for payment to the 1st defendant’s client Ah Chung. However, her pleaded case obviously cannot stand if one looks at her bank statement. These sums were withdrawn not in small sums but in huge sums which did not appear to be for personal or household expenses. She therefore explained in her evidence in chief that she had been acting as the assistant of the 1st defendant in receiving money from his gambling junket clients and paying them back as instructed by him. This was the reason for her disbursements of three sums of HK$500,000, HK$4,245,300 and HK$2,978,800 out of the HK$7.6 million, the sum of HK$600,000 (as part of the HK$800,000 paid to Ah Chung) and the sum of HK$1 million out of the HK$2.4 million. However, save the nickname Ah Chung, she was unable to provide any particulars of these other clients. Not a single page of document has been produced to prove her many receipts and disbursements. This is most surprising and unbelievable. 98.She was also unable to give a convincing reason why the 1st defendant could not handle the receipts and disbursements by himself as he should know the particulars better. One of her excuses was that she had a passbook which could instantly reveal deposits from clients. But if the 1st defendant did not have such a passbook, he could have gone to the bank and opened an account that would provide such a passbook. Her another excuse was that the 1st defendant was not in town. However, there were at least two instances when the 1st defendant withdrew money from his account and passed the same to her. She also admitted that he was in Hong Kong on those occasions. There was no reason why she had to do it for him. At one time, she even hinted that the 1st defendant did not know how to remit funds at a bank. But she appeared to have withdrawn it quickly when being told to think about this seriously. I also repeat what she had said told the police in her cautioned statement after her arrest that she did not know why the 1st defendant had transferred to her the HK$600,000. 99.I also discuss her evidence in cross-examination on this point. She seemed to have forgotten about the part of her evidence in chief on the HK$1 million out of the HK$2.4 million. Instead of saying that she had paid it to one of his clients, she made another story and said she had paid it as part of a larger sum to a Hong Kong agent of one Mary of a casino in Richmond. But she could not recall how much she owed Mary and how was interest calculated. She said she just paid the sum that Mary told her on the phone for settlement of account and there would be a detailed settlement when they met. The sum of over HK$1 million was also allegedly handed over in a most incredible way somewhere in Mongkok. She did not know the man who was going to take her money and they just recognized each other by a simple mutual enquiry of the name of Mary and her English name. This way of handing over a huge sum in cash like a bag of pebbles is absolutely unbelievable. I do not believe her evidence of receiving and disbursing money for the 1st defendant from and to his clients. I do not believe that he had any gambling junket business as alleged by her and these are the reasons in addition to those I have given above for this finding. 100.She, in order to give an innocent explanation for the remittance by the 1st defendant to her of CAD249,990 on 16 October 2001, she said that it was for the purpose of paying the deposit for a house to be bought. But again she was unable to provide any particular of any house that she had inspected, the price range they had in mind or the expected amount of deposit. Her allegation is bare and the particulars are sparse. 101.She also tried to give an innocent explanation for her return to Hong Kong on 22 October 2001. She said her bank accounts with the Royal Bank of Canada were frozen and she needed money to pay the mortgage and expenses. But then she did not know when the mortgage payment was due and the staff of the Bank told her that the accounts would only be frozen for 2 days. I cannot see why in those circumstances she would have found it necessary to fly all the way back here to get the money for the mortgage and expense. 102.She has also said in evidence that she had not tampered with the two sums of two sums of CAD1,002,688.11 and US$199,990 remitted to her account by Yu 16 October 2001. However, when confronted with the bank statement, she had to admit that she had used CAD150,000 out of the CAD1,002,688.11 when she tried to withdraw CAD400,000 and pay the same to her sister and nieces. 103.Her story of she and the 3rd defendant were incommunicado with each other on their respective purposes of coming back to Hong Kong and that they had bumped into each other at a branch of the Hong Kong Bank are other instances of inept lies. I do not think her evidence is believable at all. I find that she came back with the 3rd defendant on 22 October 2001 to launder, dissipate and conceal the moneys transferred or handed to them by the 1st defendant when he was on the run. She knew very well that he was on the run and thus never enquired him on his whereabouts. 104.Mr. Chan has submitted that her lies are “罄竹難書”. I have difficulty in accepting that. This idiom came from “罄南山之竹，書罪未窮” which described the many heinous crimes of 隋煬帝. I think it is too serious to describe the 2nd defendant’s conduct as heinous crimes. However, if all her lies are inscribed on bamboo slips, they may indeed 汗牛充棟-that is to make the cows which carry them perspire and to fill up a house. 105.Of the sum of HK$6.8 million, she has only given bare assertions on how she had disposed of them as part of the HK$7.6 million. I do not believe her evidence and I am not satisfied that she had disbursed them or given part of it to the 1st defendant. I hold that she is liable to compensate the plaintiff this HK$6.8 million on the ground of knowing receipt. For the HK$3 million, she had transferred HK$1.5 million to the 1st defendant. I therefore hold her liable to compensate the plaintiff this HK$1.5 million on the ground of knowing receipt as well. I also order that she should account to the plaintiff the profits she made with the use of these funds. On the remaining HK$1.5 million, I hold that she is liable to compensate the plaintiff for her knowing assistance in channeling their movement.
106.I refer to my analysis of the financial standing of the 1st defendant and find that he would not have casually handed a cash cheque for HK$11 million of his own to the 3rd defendant. For the same reasons that I do not think I need repeat, I find this sum to be the plaintiff’s money or derivative therefrom which had been transferred to the 1st defendant through Ever Joint. 107.Since the 3rd defendant was not a bona fide purchaser for value without notice in respect of these moneys, the plaintiff has a proprietary claim over them to the extent that they are still in her possession. She has kept HK$2.8 million and CAD20,000 in her safe deposit boxes, HK$1.04 million in her Prestige account with the Hang Seng Bank, HK$10,000 in her Hang Seng account no. 339653, HK$5,449.40 in her Hong Kong Bank account and CAD10,503 and HK$10,250 with herself when she was arrested. Save the CAD503 which does not appear to have come from the HK$11 million, all these moneys together with all interests accrued should be returned to the plaintiff. I therefore declare that all these sums belong to the plaintiff and order the 3rd defendant to pay them to the plaintiff together with all interest accrued except CAD503. 108.Regarding the remaining HK$7.1 million, I have to consider whether they are knowing receipts or the 2nd defendant had rendered knowing assistance in relation to their movements. 109.The 3rd defendant tried to explain the circumstances of her receipt of the HK$11 million and her disbursement of the HK$7.1 million. 110.His Honour Judge Wright said in his verdict in relation to the 3rd defendant as follows:
111.The implausibility of her story does not end there. In the course of the three days from 22 to 25 October 2001, she went in and out of many banks, did many transactions and withdrawals and handed lumps of cash equivalent to HK7.1 million to this mysterious John but without a word of confirmation with the 1st defendant who originally handed this HK$11 million to her. 112.Incidentally, this John appeared at the most opportune time at the airport when the 2nd defendant was collecting her luggage elsewhere so that she did not even know that he had been there. It was important for the 3rd defendant to hide John away from the 2nd defendant in her story because the 2nd defendant had said in evidence that there was no one to pick them up at the airport and they took a taxi home. To keep John away is also useful for her story that the 2nd defendant did not know the purpose of her coming back here after returning to Canada for only a few days. If the 2nd defendant should have been aware of John at the airport in Hong Kong upon their arrival, she would have enquired and the 3rd defendant would have to tell her everything about the cheque for HK$11 million and that she had been told by the 1st defendant to come back to deal with this money per the words of John. However, these two defendants want this court to believe that they had come back for their respective purposes and neither knew the purpose of the other. Nevertheless, their stories are too incredible. 113.I do not think that the 3rd defendant would have kept her story about the HK$11 million from the 2nd defendant if the cheque had indeed been handed by the 1st defendant to her and received by her innocently. The 2nd and 3rd defendants had been living together for a few days and had flew back here in the same plane and sitting next to each other. How did they endure the 10 odd hours of flight if they did not chat with each other? If they did chat, it would have been impossible for them not to discuss their respective purposes of coming back, particularly when the 3rd defendant had only gone back to Canada for a few days. I would of course not overlook the contradiction between the evidence of the 3rd defendant and what she had said previously on affirmation. Previously, she said on affirmation that John had picked her and the 2nd defendant up at the airport. These two defendants chanced on each other at a branch of the Hong Kong Bank is again another surprising incident. 114.The truth of the matter is that she had been told by the 1st defendant to hide away the HK$11 million by deposing the cheque in a new bank account. She and the 2nd defendant had come back together on the instructions of the 1st defendant to launder, dissipate and conceal the moneys given by him to them and they knew what they were doing. I do not accept the 3rd defendant’s story that she had handed cash to John equivalent to HK$7.1 million. I find that she had hidden this sum somewhere or given it to someone to hold it on behalf of the 1st defendant and/or Xu, Yu and Hui. 115.If the 3rd defendant had indeed not asked the 1st defendant any question when she was asked to handle the HK$11 million dollar cheque or to come back here to conduct the many banking transactions between 22 and 25 October, I find that she did not ask any question because of her “blind eye” dishonesty as discussed in the Grupo Torras SA case. 116.In the premises, I hold that the 3rd defendant liable to the plaintiff for knowing receipt for HK$7.1 million. I further order her to account to the plaintiff the profits she made with the use of these funds. 117.I further order that interest at 1% above the prime lending rate charged by the Hong Kong Bank from time to time should accrue on all judgment sums that are awarded on the bases of knowing receipt and knowing assistance and the judgment sum of HK$4 million awarded against the 1st defendant to accrue from 16 October 2001 to the date of judgment. I also make an order nisi that the defendants do pay the plaintiff the costs of this action.
Warren Chan, Esq., S.C. and William Wong, Esq. instructed by Messrs Cheung, Tong & Rosa, for the Plaintiff Ng Man Sang Alan, Esq., instructed by Messrs George Tung, Jimmy Ng & Valent Tse, for the 1st, 2nd and 3rd Defendants Appendix 1 Transfers of money from the Plaintiff to Ever Joint Properties Ltd.
Appendix 2 Transfers of money from the Plaintiff to Ever Joint Properties Ltd. for the account of Xu Chaofan
Appendix 3 Transfers of money from許超凡Xu Chaofan (also known as Hui Yat Fai), 余振東Yu Zhendong, 許國俊Xu Guojun (also known as Hui Kit Shun) andEver Joint Properties Ltd. To the 1st defendant
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Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under HCA 5291/2001