YU QUAN LI AND ANOTHER v. SUEN KIN WING

HCA 1671/2018

[2019] HKCFI 2541

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1671 OF 2018

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J U D G M E N T

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Introduction

1.  This is the defendant’s application by Summons dated 29 September 2018 (“Summons”) for an order that all proceedings herein be stayed until the final conclusion of the related criminal proceedings against the defendant or until further order of this court (“Stay Application”).

2.  In short, the defendant is a former associate director of UBS AG (“UBS”) and the plaintiffs had an account with UBS.  It is the plaintiffs’ case that the defendant fraudulently misappropriated HK$130,000,000 odd from the plaintiffs by operating a fraudulent scheme as follows.   

3.  The plaintiffs opened an account at UBS on 30 October 2014 for the purposes of investment (the “UBS Account”).  The defendant was the account manager of the plaintiffs’ UBS Account.  Since then: –

(1)  The defendant provided investment advice to the plaintiffs on a frequent basis, including advising on investment decisions, and means of remittance of funds into the UBS Account to enhance investment performance;

(2)  Further, the plaintiffs and the defendant developed a closer relationship over the years due to their frequent contacts by the telephone, email and instant messaging.  The defendant also met with the 1^st plaintiff in person, and had visited the plaintiffs in Nanjing China;

(3)  In early 2018, the defendant became the plaintiffs’ neighbour. 

4.  The plaintiffs regularly remitted amounts in renminbi into the UBS Account for investment purposes (the “Investment Funds”).  However, since investments through the UBS Account must be made in HKD or USD, the renminbi would first be subject to a foreign currency exchange process running through UBS.

5.  This provided the opportunity for the defendant to perpetrate a three-part fraudulent scheme (“Fraudulent Scheme”): –

(1)  First, the defendant created forged statements for the UBS Account for the plaintiffs since the end of 2015 to avoid and prevent the plaintiffs from discovering the real account balance of the UBS Account and hence the defendant’s Fraudulent Scheme.

(2)  Second, from November 2016 onwards, the defendant caused the plaintiffs to transfer the Investment Funds into an HSBC account (the “HSBC Account”) instead of the UBS Account, for the following purported reasons: –

(a)  The defendant suggested that this would short-circuit the lengthy currency exchange process through UBS. 

(b)  According to the defendant, the HSBC Account is under the name of the defendant’s cousin Chi, who can transfer funds free of the foreign currency controls due to her alleged businesses in the PRC. 

(c)  Therefore, the defendant represented that upon his receipt of deposits into the HSBC Account, he would transfer an equivalent amount in HKD or USD into the UBS Account. 

(d)  In fact, it appears that the HSBC Account is under the sole beneficial control of the defendant.  The defendant appears to be the sole signatory to the HSBC Account.

(3)  Third, to conceal his fraud, the defendant sent purported transaction slips (“Purported Transaction Slips”) to the plaintiffs after each purported transfer from the HSBC Account to the UBS Account, to give the impression that the transfers had in fact been made.  In fact, these Purported Transaction Slips were only application forms for bank transfers, which do not evidence any transactions made. 

6.  Contrary to his representations, the defendant intercepted the Investment Funds and stole the misappropriated sums for his own use. 

7.  The defendant was arrested by the Hong Kong Police on 12 June 2018 and was released on bail as of 11 July 2018.

Key Legal Principles

8.  When the constitutionally guaranteed right against self-incrimination in criminal proceedings is sought to be exercised in the context of an application for stay of a civil action, a balancing exercise is called for.  In Jefferson v Bhetcha [1979] 1 WLR 898, Megaw LJ held (at pp 904H-905D): –

“... the court which is competent to control the proceedings in the civil action, whether it be a master, a judge, or this court, would have a discretion, under section 41 of the Supreme Court of Judicature (Consolidation) Act 1925 , to stay the proceedings, if it appeared to the court that justice — the balancing of justice between the parties — so required, having regard to the concurrent criminal proceedings, and taking into account the principle, which applies in the criminal proceeding itself, of what is sometimes referred to as the “right of silence” and the reason why that right, under the law as it stands, is a right of a defendant in criminal proceedings. But in the civil court it would be a matter of discretion, and not of right. There is ... no principle of law that a plaintiff in a civil action is to be debarred from pursuing that action in accordance with the normal rules for the conduct of civil actions merely because so to do would, or might, result in the defendant, if he wished to defend the action, having to disclose, by an affidavit under Order 14, or in the pleading of his defence, or by way of discovery or otherwise, what his defence is or may be, in whole or in part, with the result that he might be giving an indication of what his defence was likely to be in the contemporaneous criminal proceedings. The protection which is at present given to one facing a criminal charge — the so-called “right of silence” — does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings.

... while each case must be judged on its own facts, the burden is on the defendant in the civil action to show that it is just and convenient that the plaintiff's ordinary rights of having his claim processed and heard and decided should be interfered with.

... one factor to be taken into account, and it may well be a very important factor, is whether there is a real danger of the causing of injustice in the criminal proceedings. There may be cases — no doubt there are — where that discretion should be exercised. In my view it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors. By way of example, a relevant factor telling in favour of a defendant might well be the fact that the civil action, or some step in it, would be likely to obtain such publicity as might sensibly be expected to reach, and to influence, persons who would or might be jurors in criminal proceedings. It may be that, if the criminal proceedings were likely to be heard in a very short time ... it would be fair and sensible to postpone the hearing of the civil action. It might be that it could be shown, or inferred, that there was some real — not merely notional — danger that the disclosure of the defence in the civil action would, or might, lead to a potential miscarriage of justice in the criminal proceedings, by, for example, enabling prosecution witnesses to prepare a fabrication of evidence or by leading to interference with witnesses or in some other way.” (Emphasis supplied)

9.  In Petroliam Nasional Berhad & Ors v Tan Soon-gin (aka George Tan) [1990] 1 HKLR 4, Cons Acting CJ applied the approach in Jefferson and rejected the appeal from the judgment of the court below staying the civil proceedings.  He observed (at 7F-9G):

“It is common ground that the subject matter of the criminal charges and the civil claims is the same. It is further common ground that the principles upon which the discretion to stay the civil claims, which the Court in that circumstance undoubtedly possesses, until the criminal charges have been heard are to be exercised are to be found in the judgment of Megaw L.J. in Jefferson Ltd v. Bhetcha (1979) 1 W.L.R. 898.

...

The right to reserve one's defence up to the last minute, that is until the prosecution has completed its evidence, except perhaps so far as it may be necessary to put matters in cross-examination, is such a basic fundamental of the criminal process that we think it cannot be so lightly dismissed... it is always a matter for some consideration, the precise weight to be determined by the individual judge in all the circumstances as he sees them. ...” (Emphasis supplied)

Discussion

10.  For the purpose of considering the defendant’s application, I shall assume that (as appears to be the case) there is a significant overlap between the subject matter of this action and that of the criminal proceedings against the defendant.

11.  The defendant submits that it is just and convenient that the civil proceedings be stayed until the conclusion of the related criminal proceedings.  The defendant says that the prejudice is more than obvious.  Viewed against the background that the facts relied on in this civil claim are essentially the same as those in the criminal proceedings, the defendant submits the following are highly material: –

(1)  The defendant would lose his constitutional right to remain silent.

(2)  The plaintiffs, who will be key witnesses in the criminal proceedings, will, in effect, obtain a road-map to the defendant’s intended cross-examination of them. 

(a)  This is particularly galling when the plaintiffs themselves have a large financial interest involved in the matter.

(b)  This is not a case where the criminal offence may be proved by some independent witnesses.  In the present case, the prosecution case will literally collapse if the plaintiffs are found to be incredible. 

(c)  The plaintiffs’ credibility can only be tested in cross-examination in the criminal proceedings, and it is of paramount importance to ensure that the defendant’s ability to effectively cross-examine the plaintiff is not impaired. 

12.  Whilst the defendant’s right to remain silent cannot be lightly dismissed, and is always a matter for “some consideration”, the precise weight is to be determined by the individual judge in all the circumstances he sees them (see: paragraph 9 above).

13.  In this regard, I agree with the plaintiffs’ submission that there is in the present case no real danger of the causing of injustice in the criminal proceedings, in particular, there is no real risk that the plaintiffs would tailor their evidence in the criminal proceedings if the defendant’s defence is disclosed in this action: –

(1)  As stated in A v SFC[2015] 1 HKLRD 47, it is “wrong to start from a premise that ...the Prosecution may act unfairly, that the trial judge may fail to ensure a fair trial for [the defendant] ... Of course, there is always the possibility, but the possibility does not amount to a real risk of prejudice.  Instead, the starting premise must be that all those carrying out their functions will do so properly.”: at paragraph 88 per Patrick Li J.

(2)  Further, since the application for the Mareva Injunction, both plaintiffs have filed extensive affidavit evidence substantiating their claims.  The plaintiffs’ case has also been pleaded with extensive particularity in the Statement of Claim, which has been verified by both plaintiffs’ statements of truth.  It is most unlikely that any substantive changes could be made to their case. 

(3)  Insofar as new materials may lead to new developments, it is difficult to conceive of any prejudice that the defendant may suffer, given that the essential bank records regarding the HSBC Account and other HSBC accounts in the defendant’s name had already been received by the Hong Kong Police and have also been ordered to be delivered to the plaintiffs for inspection. 

(4)  The defendant’s argument fails to do justice to the Prosecution’s independent investigatory efforts and wholly overlooks the fact that the plaintiffs have asserted a clear and consistent case throughout these civil proceedings.

(5)  It follows that, if the plaintiffs cannot realistically “tailor” their evidence without putting their credibility into doubt, whether or not the plaintiffs can guess the defendant’s intended cross-examination of them is neither here nor there. 

Conclusion

14.  For the reasons set out above, the defendant has not shown that it would be just or convenient to interfere with the plaintiffs’ right of having their claim processed and heard and decided, in the way in which the stay which he seeks would interfere with that right. 

15.  That being so, I dismiss the defendant’s Summons.

16.  I order that the costs of the application be paid by the defendant to the plaintiffs, such costs are to be taxed if not agreed with a certificate for 2 counsel.

17.  The above order as to costs is nisi and shall become absolute in the absence of any application within 21 days to vary the same.

18.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.