SAHARA INVESTMENT GROUP PRIVATE LTD v. LIU ZHIJIA AND OTHERS

HCCL 9/2016
[2018] HKCFI 16

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 9 OF 2016

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J U D G M E N T

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1.  This is the Plaintiff’s action against the 1^st and 2^nd Defendants (respectively, Liu and YYL) arising from an internet fraud as a result of which a sum of US$4.5 million (Sum) was transferred to one Luck Team International (HK) Ltd (LT), an entity unknown to the Plaintiff at the time, instead of the rightful recipient.

2.  The Sum was paid into the bank account of LT on 7 April 2016.  By way of a number of transfers which took place on 8 and 11 April 2016, more than US$2.8 million of the Sum left LT’s account and went into the accounts of the 2^nd to the 8^th Defendants.  However, the writ in this action has not been served on the 3^rd to 8^th Defendants and this trial does not concern them. 

3.  In total, US$1.3 million of the Sum had gone into the account of YYL, and from which most of that sum was further disbursed.  At the material times, Liu, a person living in the Mainland, was the sole director and shareholder of LT.  Liu is the brother of the sole director and shareholder of YYL, Ms Liu Ting (Ms Liu), who resided in the same address as her brother.

4.  Neither Liu nor YYL has appeared in this trial.  It is therefore a matter of the Plaintiff proving its case against them and for which purpose the Plaintiff has called 2 witnesses, Mr Oleg Sizov and Ms Tay Chor Yong. 

5.  The evidence of the fraud is not in doubt.  It is reasonably clear from the evidence that Ms Tay, the personal assistant to Mr Sizov, a director and sole shareholder of the Plaintiff, was tricked by an email from a fraudster into transferring the Sum to the account of LT instead of the recipient designated by Mr Sizov.

6.  On his own admission by way of a Letter of Disclosure dated 25 July 2016, Liu has in his hands cash of about RMB1,855,601 which is traceable to the Sum.  However, the Plaintiff seeks to claim from Liu the entirety of the Sum on the basis that he had participated in the fraud knowingly.  In this regard, the Plaintiff relies heavily on the fact that Liu has failed to appear at this trial, and invited the court to draw adverse inference against him (see Chan Sung Lai v Chan Sung Lim Paul [2015] 4 HKLRD 268, §51). 

7.  I have to say that I struggle with the proposition that an inference can be drawn that Liu had taken part in the fraud merely by virtue of the fact that his company had received the Sum, dissipated with a large part of it[1] and failed to appear at this trial to advance any explanation for having done so.  The court has to bear in mind the seriousness of the allegation and look for cogent evidence to substantiate it. 

8.  However, there is an additional element which, in my view, assists the Plaintiff in making out its case against Liu, namely, he had provided insistent explanations on how he and his company became involved with the Plaintiff’s money. 

9.  On 4 May 2016, Liu told the Plaintiff’s solicitor that he had lent LT’s bank account to be used by a client for the receipt of the Sum, which was subsequently disbursed in accordance with the instructions of that client. For that transaction, Liu was paid a commission by the client.  On the next day, Liu sent to the solicitor information of that client, a man by the name of Hong Ruijiong (Hong)[2]. Based on this explanation, a Statement of Claim was filed by the Plaintiff alleging, inter alia, that Liu and Hong took part in a fraudulent and dishonest scheme.

10.  Liu changed his explanation in his Defence.  He alleged that, through LT, he was operating a money exchange business and the Sum was received in the course of such business, and that he, LT and YYL were all victims of the fraud practised by Hong and other unknown people. 

11.  Plainly, the explanations cannot both be true.  The fact that Liu had advanced a false explanation is consistent with the suggestion that he had participated in the fraud against the Plaintiff, and I so infer. 

12.  As for YYL, by its Defence the fact the Sum was paid as a result of a mistake has been admitted.  Prime facie, it is liable to make restitution of the US$1.3 million which does not belong to it.  Given the lack of appearance of YYL, there is no evidence to make out any defence to the Plaintiff’s claim over that sum.  I should add that there is nothing in the documentary evidence before the court which is sufficient for that purpose. 

13.  In respect of the Plaintiff’s claim of fraud against YYL, I do not believe that it is adequately made out.  The money was received by Ms Liu’s company from her brother’s company.  Without more, I am unable to draw the inference that her company was also a party to the fraud.  The evidence of the sibling relationship suggests that one might have acted as a favour to the other without any culpable knowledge.

14.  Fortunately, the Plaintiff has recovered a sum of US$2,205,776.25 from LT under a default judgment in HCCL 7/2016.  In addition, a sum of HK$731.62 has been recovered from one of the onward recipients under another judgment in HCCL 10/2016.  There is thus an unrecovered balance of US$2,294,123.75[3].

15.  In the premises, I give judgment in favour of the Plaintiff against Liu and YYL in the respective sums of US$2,294,123.75 and US$1.3 million with interest to run from 7 April 2016 to this day at US dollar prime rate plus 1% and thereafter at judgment rate until payment.  The costs of and occasioned by this action, including all costs reserved, be paid by Liu and YYL, to be taxed if not agreed. 

16.  Finally, for the purpose of aiding the enforcement of this judgment, it is appropriate to extend the Mareva Injunction granted by Mr Justice Lok on 4 May 2016 against Liu and YYL and continued by Madam Justice B Chu on 13 May 2016 until satisfaction of the judgment herein or further order, and I so order.