CHAN WAI LUNG v. LEE SHU YEN AND ANOTHER

HCA 736/2022

[2025] HKCFI 2406

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 736 OF 2022

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J U D G M E N T

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1.  The plaintiff Chan Wai Lung (“P”)  filed the following summonses which are before the Court:

(i)  a summons dated 17 April 2025 seeking default judgment against Lee Shu Yen (“D1”)  and Novo Digital Company Limited (“D2”)  (collectively, the “Defendants”)  (the “Judgment Summons”); and

(ii)  a summons dated 14 May 2025 seeking a disclosure order against 3^rd parties (the “Disclosure Summons”).

2.  The relevant background is set out in my Reasons for Decision dated 30 September 2024 (“Reasons”)  to which reference should be made.

The Judgment Summons

3.  On 26 September 2024, upon hearing the Defendants’ summons filed on 22 December 2023 (the “Defendants’ Discharge Summons”)  I ordered, inter alia, that the Defendants pay:

(1)  the sum of HK $5,441,115.77 into Court within 14 days of the Order;

(2)  the Defendants within 14 days of the Order

(a)  do instruct and require Citibank (Hong Kong)  Limited to transfer the sum of HK $121,022.61 out from D1’s bank account into Court by way of cheque or cashier order; and

(b)  do instruct and require DBS Bank (Hong Kong)  Limited to transfer the sum of HK $1,203,795.22 out from D2’s bank account into Court by way of cheque or cashier order; and

(3)  upon full payment of the sum $6,765,933.60 into Court, the undertaking given by the Defendants in Schedule 1 to the Order dated 24 June 2022 be discharged

(the “September 2024 Order”).

4.  As the Defendants failed to comply the September 2024 Order as also an order dated 25 November 2024 awarding costs of the Defendant’s Discharge Summons, on 7 March 2025, I made an “unless order” that the Defendants comply with the previous orders (the “Unless Order”).

5.  The Defendants have failed to comply with the Unless Order. They are debarred from defending these proceedings and their Defence dated 7 December 2022 is struck out. In the circumstances, P is entitled to obtain judgment in default of defence: 2025 Hong Kong Civil Procedure at §19/7/3.

6.  I am satisfied on the evidence that the Defendants have been duly served with a sealed copy of the Judgment Summons and a copy of the 2^nd affirmation of Su Ying Yu dated 16 April 2025.

7.  The Defendants are absent and clearly have no intention of contesting these proceedings. There is no reason why this Court should not deal with the Judgment Summons substantively at this hearing.

8.  P’s statement of claim pleads a case of fraud and conspiracy against the Defendants:

(i)  P is a console game distributor and publisher trading under the name of Game Source Entertainment (“GSE”).

(ii)  D1 (who worked for GSE)  introduced a business contact, Sold Out Sales & Marketing Ltd (“Sold Out”), to GSE. D2 is a company wholly controlled and managed by D1.

(iii)  In reliance on and induced by fraudulent representations made by D1, GSE entered into a sub-licensing arrangement with D2 whereby D2 would sub-licence to GSE publishing rights it had allegedly obtained from Sold Out.

(iv)  Between 23 December 2019 and 30 March 2021, GSE paid D2 minimum guarantee fees and royalties (under the arrangement described in (iii)  above)  totalling US $2,518,288 (the “Defrauded Sum”).

(v)  That apart, D1 grossly underreported sales and deceived Sold Out into believing that no royalty was due. In fact substantial royalties should have been paid to Sold Out  and for which GSE remained contractually liable.

(vi)  This resulted in GSE suffering loss in having to pay outstanding royalties in the sum of US $1,759,200 to Sold Out when it had already paid D2 previously.

9.  Based on his pleaded case, P has demonstrated that he has the following causes of action against the Defendants:

(i)  The Defendants conspired to defraud P with intent to injure, causing P to suffer loss and in respect of which P seeks damages for deceit and/or unlawful means conspiracy[1].

(ii)  D2 holds the Defrauded Sum on constructive trust for P, it being the fraudulent recipient of the same and/or it would be unconscionable for D2 to retain the same[2].

(iii)  D2 was unjustly enriched at P’s expense by the amount of US $1,759,288.

10.  Ms Euchine Ng, counsel for P, seeks final judgment against the Defendants for:

(i)  Damages in the sum of US $1,759,288 (the “Damages Sum”);

(ii)  Interest thereon at the rate of HK D prime rate +1% per annum from the date of the Writ (20 June 2022)  to the date of judgment and thereafter at the judge great until full payment.

11.  P also seeks a declaration that the sums transferred by P into D2’s bank account with DBS Bank (Hong Kong)  Limited on various dates[3], constituting the Defrauded Sum[4] are held by D2 the constructive trustee on trust for P.

12.  The Court may grant declaratory relief in default if the fullest justice of the case requires, such as when P has a genuine need for such relief. Without declaratory relief, P would be a mere unsecured creditor. As explained in the 800 Colombia Project case at § 12(6)[5], a proprietary remedy is likely to have certain advantages over a personal remedy.   

13.  In the present case, I have no hesitation in granting the declaratory relief sought.

14.  Having regard to the conduct of the Defendants and their contumelious disregard for Court Orders, indemnity costs are warranted. Accordingly, I make an order in terms of the draft Order submitted subject to the provision of indemnity costs in clause 3 thereof.

The Discovery Summons

15.  The “Undertaking” from which the Defendants sought to be discharged and which culminated in the September 2024 Order, is contained in Schedule 1 to the order made by Ng J on 24 June 2022.

16.  Schedule 1 sets out

(i)  “D1’s Assets” consisting of an HSBC account and a Citibank account;

(ii)  the assets of D1’s wife, Li Ki Ki (“Li’s Assets”)  being a Standard Chartered Bank (“SCB”)  account; and

(iii)  “D2’s Assets” being an account at DBS Bank.

The Hong Kong Police had issued Letters of No Consent (“LNCs”)  in respect of each of those Assets.

17.  D1 also undertook[6] that upon the lifting of Li’s LNC, D1 would procure Li to transfer all of Li’s Assets to D1’s HSBC account.

18.  On 19 July 2022, P’s solicitors enquired of the Defendants’ solicitors concerning their understanding of the lifting of the LNCs but received no reply.

19.  As appears from the Reasons[7], it was not until D1’s 2^nd affirmation of 16 July 2024 that he disclosed that HSBC advised him some 2 years earlier that his HSBC account would be closed with effect from the date stated in the appendix attached to the letter and sought instructions for its disposal. Li also received a letter from SCB advising that her SCB account would be closed with effect from an unknown date.

20.  D1 effectively withheld from P the date(s)  of the closure of the HSBC and SCB accounts and the destination of the account balances because the relevant exhibits containing that information were incomplete. In short, D1 wilfully withheld such information for approximately 2 years. It was in those circumstances that the September 2024 Order was made.

21.  Sealed copies of the Disclosure Summons as well as to copies of Chan’s 4^th affirmation dated 14 May 2025 have been duly served on HSBC, SCB and Li (the “Third Parties”).

22.  Both HSBC and SCB adopt a neutral stance P’s solicitors informed the Court by letter dated 2 June 2025 that HSBC and SCB both asked to be excused from attending the hearing. Li has not responded and is absent.

23.  The information the Disclosure Summons seeks include the following:

(i)  The disclosure seeks to ascertain the value and whereabouts of the account balances released by HSBC and SCB which are subject to the Undertaking and against which P will seek to enforce any judgment obtained.

(ii)  The disclosure is necessary to assist P to locate the Defendants’ assets and enforce any judgment obtained.  

(iii)  The scope of the disclosure is specifically limited to the release of the balances and what has become of them. As they were released less than 3 years ago, the Third Parties should still have the relevant documents and records in their possession, custody or power.

(iv)  Given §3 of the Undertaking[8], monies released from Li’s SCB account should properly be treated as D1’ monies.

(v)  The Defendants plainly do not intend to participate in these proceedings given their contemptuous disregard of Court orders to date.

24.  It is abundantly clear that P should be given every assistance to obtain the information sought which would assist him in tracking down the whereabouts of the HSBC and SCB account balances and to locate assets representing those balances.

25.  I note that the draft Order submitted incorporates the banks’ comments. Li is absent and has not made any representations. In the circumstances, I make an order in terms of the draft Order submitted.