ORION ENGINEERED CARBONS GMBH v. GAN YUQI (ALSO KNOWN AS GAN YU QI) AND OTHERS

HCA 322/2025

[2025] HKCFI 2992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 322 OF 2025

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REASONS FOR DECISION

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A.  INTRODUCTION

1.  By summons of 20th February 2025 (“the Summons”), the Plaintiff sought the continuation of the proprietary and Mareva injunctions granted on an ex parte basis on 18th February 2025 against the 68th Defendant.

2.  I dismissed the application at the hearing of 4th July 2025 with costs to the 68th Defendant, summarily assessed.  I now give my reasons for so doing.

B.  THE BACKGROUND

3.  The Plaintiff was deceived into transferring funds in the total value of about $400,000,000 to various recipients in July and August 2024.  The 68th Defendant is a third-tier recipient of $300,000 (“the Sum”) of these funds.  The Sum was transferred to his Bank of China (“BOC”) account from one Fan Xiang on 9th August 2024.

4.  On 18th February 2025, Alex Lee J granted, on an ex parte basis, a proprietary injunction in respect of the $300,000 transferred to the 68th Defendant’s BOC account, and a top-up Mareva injunction (“the Injunctions”) (and similar relief in relation to various other second‑tier and third-tier recipients).  On 28th February 2025, the Plaintiff’s application to continue the Injunctions was adjourned by DHCJ Alan Kwong to 16th May 2025, with the Injunctions continuing in the meantime.  Counsel for the 68th Defendant appeared at the hearing before me on 16th May 2025 and the matter was adjourned to 4th July 2025 for substantive argument, with the filing of evidence in the meantime.

5.  The 68th Defendant’s evidence was that that he is a professional investor and a licensed individual with the Securities and Futures Commission for regulated activities, including asset management, and advising on and dealing in securities and futures contracts.  He said that he had had about eight years of experience in cryptocurrency trading. He registered a user account with the Binance online platform and had been conducting person-to-person trades on the platform since 2021, about eight to ten times a week.  He received the Sum during one such trade, in exchange for cryptocurrency in the amount of 37,878.78 USDT.  He said he had nothing to do with the fraud practised on the Plaintiff.

C.  THE PROPRIETARY INJUNCTION

6.  The relevant legal principles for the obtaining of a proprietary injunction were set out in Zhang Yan v ASA Bullion Ltd [2019] HKCFI 179 at [11] (Mr Recorder Eugene Fung SC):

(1)  Where a plaintiff asserts title to property or seeks to trace property which belongs to him, the Court has jurisdiction to grant a proprietary injunction restraining the disposal of that property: see A v C [1981] 1 QB 956 at 958D-959D (Robert Goff J).

(2)  For the grant of a proprietary injunction, there are three elements which the plaintiff has to demonstrate, following the American Cyanamid approach: (a) that there is a serious issue to be tried on the merits; (b) that the balance of convenience is in favour of granting an injunction and (c) that it is just and convenient to grant the injunction.  It is not necessary to show any risk of dissipation of assets.  See eg Madoff Securities International Ltd v Raven [2012] 2 All ER (Comm) 634 at §§127‑128 (Flaux J).

(3)  A proprietary injunction must relate to a specific asset held by or under the control of the defendant, or its traceable proceeds, in respect of which a proprietary claim is raised by the plaintiff: see 任俊國 v Chin Choi Ming (unreported, HCA 2017/2017, 6 November 2017) §20 (Chow J).

(4)  In order to justify the grant of a proprietary injunction, the plaintiff should ordinarily adduce some reasonable evidence of the existence of the specific asset (or its traceable proceeds) and that the same is being held by or under the control of the defendant.  Where the asset forming the subject matter of the proprietary claim has been dissipated and can no longer be traced, a proprietary injunction cannot ordinarily be granted.  See 任俊國 v Chin Choi Ming (above) §§21-22 (Chow J).

7.  The learned Recorder further analysed the propositions in (3) and (4) above in Welly Grace Ltd and another v Well Zone Trading Ltd [2023] HKCFI 3082 at [19] to [30].  The following principles are relevant for present purposes:

7.1  The function of a proprietary injunction is to preserve the property in the defendant’s hands which is said to belong to the plaintiff.  Where a plaintiff can no longer identify the property in question or its traceable substitute, it follows that there is nothing for the proprietary injunction to preserve.

7.2  In the context of obtaining a proprietary injunction, the plaintiff needs to demonstrate a serious issue to be tried in relation to his proprietary claim, which would involve not only a consideration of the merits of the claim being brought by the plaintiff, but also an examination of the tracing exercise pursuant to which the asset in question has been identified.  As far as the tracing exercise is concerned, the plaintiff should adduce reasonable evidence to show a serious issue to be tried that the asset or its traceable substitute is being held by or under the control of the defendant.  As to what would constitute reasonable evidence to show “the existence of the specific asset or its traceable proceeds and that the same are still being held by or under the control of the defendant”, that must naturally depend on the facts and circumstances of each case, including but not limited to the stage of the proceedings, the information available to the plaintiff at the time when the proprietary injunction is sought, and any materials with sufficient cogency from the defendant.

7.3  The plaintiff would at least need to show a prima facie case that the specific asset or its traceable substitute is still being held by the defendant.  The mere fact that a defendant has received property from a plaintiff, and has not adduced evidence as to whether he retains the property or its traceable proceeds, does not necessarily support an inference that the defendant does retain such property.

8.  In the present case, the Plaintiff obtained discovery of the bank statements of the 68th Defendant’s BOC account which showed that the account was closed some three months after receipt of the Sum.

9.  The 68th Defendant’s evidence was that he initially tried to transfer the Sum to his Citibank account, but was unsuccessful as he had reached his daily transfer limit.  Subsequently, he used the Sum for his everyday purposes, including cryptocurrency trades, and payment of Justin Chan, a colleague.  He said that he closed his BOC account in December 2024 as he had not used it for a while.

10.  Mr Sik Chee Ching, counsel for the 68th Defendant, submitted that although the BOC account statements appeared to have been available to the Plaintiff since February 2025 (and the Plaintiff did not deny this), there was no attempt to plead or identify the relevant traceable property or proceeds which were said to be subject to the Plaintiff’s claim, and that it was insufficient for the Plaintiff to simply say that it sought an injunction over “traceable proceeds” of the Sum, whatever those might be.  There was therefore nothing over which the proprietary injunction could operate.

11.  Mr Ernest Ng, counsel for the Plaintiff submitted that he only needed to show that there was a serious issue to be tried that the Sum or its traceable proceeds were still in the control of the 68th Defendant.

12.  Whilst I agreed that this is all that the Plaintiff needed to have shown at this stage, I did not agree that this had been done.

12.1  Insofar as the original Sum itself is concerned, that was clearly no longer in the 68th Defendant’s BOC account and could not be under the 68th Defendant’s control in that form.

12.2  Insofar as the Plaintiff was saying that part of the Sum still remained under the control of the 68th Defendant, it had not attempted to identify (whether through application of tracing rules or otherwise) which part or how much of the Sum was under such control and therefore could be subject to the proprietary injunction.

12.3  The 68th Defendant’s evidence was that he had already used the Sum for his everyday purposes, having received it many months before the Injunctions took effect.

13.  Furthermore, as Mr Sik submitted, the Injunctions were obtained some six months after the 68th Defendant received and used the Sum.  Since then, a further five months had passed.  In all likelihood, the proceeds of the Sum would already have been mixed with other funds, or channeled into other property, and it would be very difficult, if not impossible, to identify whether any “traceable proceeds” remained in the hands of the 68th Defendant, so that he would not be in a position to know which, if any, of his property was subject to the proprietary injunction.  It would be impossible to comply with the injunction, and the 68th Defendant would be at risk of being in breach of the injunction without even knowing it.

14.  I therefore agreed that the proprietary injunction should be discharged.

D.  THE MAREVA INJUNCTION

15.  The proper approach in assessing risk of dissipation was considered in Convoy Collateral Limited v Cho Kwai Chee [2020] 6 HKC 81 at [35] to [54] (Lam VP).  The following principles are relevant for present purposes.

15.1  A plaintiff must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets.  In this context dissipation means putting the assets out of reach of a judgment whether by concealment or transfer.

15.2  There must be a solid basis for concluding that there is a real risk of dissipation.  Mere inference or generalised assertion is not sufficient.

15.3  The risk of dissipation must be established separately against each defendant.

15.4  It is not enough to establish a sufficient risk of dissipation merely to establish a good arguable case that the defendant has been guilty of dishonesty; it is necessary to see whether the dishonesty in question points to the conclusion that assets may be dissipated.

15.5  What must be threatened is unjustified dissipation.  The purpose of a Mareva is not to provide the plaintiff with security; it is to restrain a defendant from evading justice by disposing of, or concealing, assets otherwise than in the normal course of business in a way which will have the effect of making it judgment proof.  Similarly, it is not intended to constrain an individual defendant from conducting his personal affairs and the way he has always conducted them, providing of course that such conduct is legitimate.

15.6  There are cases where a good arguable case on the underlying substantive claims might be regarded as supporting a case of real risk of dissipation.

15.7  A solid basis to support an inference of a risk of dissipation is to be contrasted with unsupported or bare statements of fear which carry little weight.

15.8  Each case is fact-specific, and relevant factors must be looked at cumulatively and holistically.

16.  Mr Sik submitted that the Plaintiff failed to establish a real risk of dissipation against the 68th Defendant.  Looking at the matter holistically in the light of the materials available to the court, I agreed.

16.1  The mere fact that the Plaintiff’s claim concerned email fraud and that there had been actual dissipation by first-tier and second-tier recipients did not mean that there was therefore a “very real risk of dissipation”^[1] by the third-tier recipients.  The Plaintiff did not point to anything that implicated the 68th Defendant in the fraud.  The court cannot infer dishonesty from facts which are consistent with honesty.  See Peconic Industrial Development Ltd & anor v Yu Ka Hong Paul & anor [2006] 4 HKC 406 at [33] (Cheung JA), citing Three Rivers District Council & others v Bank of England (No 3) [2003] 2 AC 1 at [184] to [186].

16.2  The Plaintiff relied on the fact that the Hong Kong Police had received suspicious transaction reports, or had issued letters of no consent, in respect of a number of accounts.^[2]  However, it was also the Plaintiff’s case that they did not relate to the 68th Defendant.

16.3  The fact that the Plaintiff did not know the 68th Defendant, and had not heard of the dealings between any of the defendants, did not mean that the 68th Defendant was implicated in the fraud.  As the Plaintiff accepted,^[3] it had no knowledge of the dealings between the second-tier and third-tier recipients.  Therefore, it could not be said that the 68th Defendant did not have good reason to receive the Sum from Fan Xiang.

16.4  It was said that the third-tier recipients did not have any internet presence (if an individual) or connections to Hong Kong (if a company).^[4]  In fact, the 68th Defendant is a licensed representative with the Securities and Futures Commission.  Mr Sik submitted that this information was readily available online, and the Plaintiff’s sweeping assertion (made across the board in respect of over eighty third-tier receipients) raised the question of whether any research had actually been conducted in respect of the 68th Defendant.  Furthermore, it was said that the 68th Defendant’s status as a licensee tended to suggest that he is considered to be a fit and proper person for the holding of such a licence, and was suggestive of integrity, rather than the other way round.

16.5  It was said that the absence of evidence at the ex parte stage to support a credible defence reinforced the risk of dissipation.^[5]  However, as Mr Sik pointed out, at that stage, the 68th Defendant had not even been notified, so the lack of evidence to support his defence could hardly be said to have evidenced a risk of dissipation.  In any event, the 68th Defendant has now given his account of the circumstances in which he received the Sum.

16.6  In his skeleton for the inter partes hearing, Mr Ng submitted that the 68th Defendant failed to show a meritorious defence (of change of position or bona fide purchaser for value).  At this stage of the proceedings, I cannot of course reach any definitive view about the defence.  However, it seemed to me that the 68th Defendant has given an explanation, with supporting documents, to show that he did indeed receive the Sum in the course of a cryptocurrency trade.  It was said that the features of the transaction which should have alerted the 68th Defendant to impropriety, such as the fact that the trader used a third party account, a personal savings account, and that Binance was “questionable”, being an unlicensed and unregulated platform against which the Securities and Futures Commission has warned.  However, the fact that there may be regulatory concerns about Binance does not necessarily mean that all of its users must be acting in bad faith.

16.7  Mr Ng further submitted that the fact that the funds “have already been dissipated” shows a risk of dissipation. As Mr Sik pointed out, what the Plaintiff needed to show was that there is a risk of unjustified dissipation, and not simply that the 68th Defendant had dealt with the Sum.  Furthermore, the statements for the BOC account showed that there were movements into and out of the account for a while after the receipt of the Sum, and about $73,000 was left in the account until it was closed in December 2024.  It was not as if the amount was immediately transferred away and the account closed.

16.8  Mr Ng further submitted that the fact that the Sum was not transferred in accordance with the 68th Defendant’s original intention to transfer it to his Citibank account, even after he raised the transaction limits to enable him to do so, “raises suspicion”.  I cannot see why it should be suspicious for the 68th Defendant not to have transferred the amount out to his Citibank account.  To say that “this attempt could well be an exercise to complicate the transaction”^[6] was, with respect, an unsupported and bare statement of fear (cf. Convoy).

16.9  Mr Ng further submitted that the explanations provided by the 68th Defendant of having given money to Justin Chan and conducting another trade were bare assertions without support.  He also submitted that other assets or bank accounts of the 68th Defendant remain unknown.  However, unless an applicant has raised a prima facie case to support a freezing order, the respondent is not obliged to provide any explanation or answer any questions posed; nor can a purported failure to do so be held against the respondent.  It is only if the applicant has raised material from which a real risk of dissipation can be inferred that the respondent will be expected to provide an explanation.  Then, in appropriate circumstances, the lack of a satisfactory explanation may give rise to an adverse inference.  See China NPL Holdings Pte Ltd v Mo Haidan [2021] 1 HKLRD 344 at [83] (Lam VP), citing Holyoake v Candy [2018] Ch 297 at [51] (Gloster LJ).

16.10   Mr Sik submitted that there were various factors which tended to suggest that there was no real risk of dissipation as alleged.  The Sum was not of such a magnitude as would provide an incentive for the 68th Defendant to dissipate all his assets so as to avoid judgment; there was nothing to suggest that any of the other transactions disclosed in the statements of the BOC accounts were wrongful; there was nothing to contradict the 68th Defendant’s account that he carried on with his daily life as usual for the six months after receipt of the Sum before his accounts were frozen; the 68th Defendant left $73,000 of the $300,000 Sum in the account until it was closed months later, which would have been an easy target for enforcement action, so that this was an unlikely course of action for someone involved in the fraud.

17.  Taking all the factors into account cumulatively and holistically, I considered that the Plaintiff failed to establish a real risk of dissipation on the part of the 68th Defendant.

E.  CONCLUSION

18.  I therefore dismissed the Summons insofar as it related to the 68th Defendant, and ordered that the Injunctions against him be discharged.