ATLAS CORP v. LI XIONGHUA AND ANOTHER

DCCJ 2408/2024

[2024] HKDC 750

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2408 OF 2024

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DECISION

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Introduction and Background

1.  Plaintiff (“P”) claims to be a victim of fraud resulting in US$1,996,770.00 (“Defrauded Funds”) paid to the “first layer” recipient Da Na Si Trade Limited (“DNS”) to its accounts held with The Industrial and Commercial Bank of China (Asia) Limited (“ICBC”), the defendant to an action commenced in the High Court (HCA 520/2024).

2.  The Defendants (“Ds”) in this action are the “next layer” recipients who received part of the Defrauded Funds from DNS. According to the documents received by P pursuant to a disclosure order against ICBC, on 19 March 2024, part of the Defrauded Sums were transferred from DNS’s bank account held with ICBC to D1’s two bank accounts held with Hang Seng Bank Limited (“HSB”) and CMB Wing Lung Bank Limited (“CMB”) respectively, and D2’s bank account held with Standard Chartered Bank Hong Kong Limited (“SCB”).

3.  On 6 May 2024, I granted, on an ex parte basis, a proprietary injunction restraining each of D from dealing with such part of the Defrauded Funds received together with a “top up” Mareva injunction to restrain each of D from disposing of his/her assets up to the value of such funds (“the Injunctions”).

4.  The Injunctions were to remain in force up to and including the Return Date. Today is the Return Date.

5.  By Summons filed on 7 May 2024 (“P’s Summons”), P seeks:

(1)  The continuation of the Injunctions until a further return date of 12 July 2024; and

(2)  Disclosure orders pursuant to s 21 of the Evidence Ordinance, Cap 8 (“EO”) against HSB, CMB and SCB (collectively, “the Banks”).

6.  According to the affirmation of service filed on behalf of P, the Banks were served with P’s Summons on 7 May 2024.

7.  Save as to their comments on the timing for provision of the documents or information sought, the Banks have all indicated through correspondence that they were neutral to P’s application against them and that they would not attend today’s hearing.

8.  As for Ds, as they are unknown to P and their addresses for service are also unknown at the moment, the Injunctions, the Writ and P’s Summons, have not been served on them.

Disclosure orders pursuant to s 21 of EO

9.  The applicable principles governing an order under s 21 of EO are well-established. Although it has been said that a s 21 order is justified where the plaintiff seeks to trace funds which in equity belongs to him and of which there was strong evidence that he has been fraudulently deprived, there are 3 limits:

(1)  The plaintiff must demonstrate a real prospect that the information may lead to the location or preservation of assets to which he is making a proprietary claim;

(2)  The documents sought to be disclosed must be identified with some specificity as would be expected of a subpoena; and

(3)  The court needs to balance the potential advantage against the detriment to the person against whom the order is sought, not merely in terms of costs but by way of invasion of privacy and requiring breach of obligations of confidence to others.

See CTO (HK) Ltd v Li Man Chiu & Others [2002] 2 HKLRD 875, §§12-13.

10.  In the present case, having heard the submissions of Mr Yau, counsel for P, and having considered the evidence filed, I am satisfied that:

(1)  There is a real prospect that the information may lead to the location or preservation of assets to which P is making a proprietary claim. P seeks disclosure of documents relating to: (a) the balance in Ds’ accounts held with the respective Banks; (b) bank statements from 18 March 2024 to the date of order; (c) documents and information relating to the persons authorized to operate the accounts; (d) all cheques drawn on the account from and including 18 March 2024 to the date of order; (e) all credit and debit vouchers and/or other documentation relating to funds into and out of the accounts from 18 March 2024 to the date of order; and (f) documents evidencing instructions to withdraw or transfer funds or authorizing payments from the accounts. I am satisfied that the information sought are highly germane to the issues of the identity of the account holders and further recipients, and the issue of fund flow. The information obtained would facilitate the location and preservation of assets to which P has made a proprietary claim;

(2)  Having reviewed the draft orders submitted to me, I am satisfied that the documents sought have been identified specifically and the Banks have not indicated that they would have any difficulty to understand the scope of the request nor did they have any comments on the scope of the request save for the timing for provision of the documents (which is agreeable to P and has been reflected in the draft orders); and

(3)  Having balanced the potential advantages to P against the detriment against the Banks, I am satisfied that the order for disclosure is justified.

11.  I would therefore make an order in terms of the drafts submitted to me as amended by me (namely, the date should be 19 March 2024 and not 18 March 2024, as that was the date of transfer of part of the Defrauded Sums to Ds and the further Return Date).

Continuation of the Injunction

12.  Given that only after obtaining the information sought from the Banks, which might include the addresses of Ds, would P be able to effect service of the Injunctions on Ds and I am informed there may be a need to bring a service out application, I will order that the Injunctions will remain in force up to and including the further Return Date of Friday, 5 July 2024 (ie 8 weeks from today) unless before then it is varied or discharged by a further order of the court. The longer return date should not cause any prejudice to Ds who, if served earlier or learn of the Injunctions through other means, are at liberty to apply to Court at any time to vary or discharge the Injunctions.

Costs

13.  I also order that P’s costs of P’s Summons be reserved.