TW RECOVERY LTD AND OTHERS v. BEST LEADER PRECIOUS METALS LTD AND OTHERS

CACV 369/2023, [2026] HKCA 361

On Appeal From [2023] HKCFI 2124

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 369 OF 2023

(ON APPEAL FROM HCA NO 102 OF 2023)

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J U D G M E N T

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Hon G Lam JA (giving the Judgment of the Court):

Introduction

1.  This is the judgment of the court in an appeal against an order of Cheng J discharging or refusing to continue Mareva injunctions previously granted against three of the defendants, namely, D8, D9 and D10. 

2.  The action was originally brought by two individuals, Ms Tsai Lee Ting and Mr Lee Ping Chen, whom we shall call “Tsai” and “Lee” and together the “original plaintiffs”, as a representative action on behalf of themselves and over 1,300 other persons, most of whom being Taiwan residents.  Their case is that all of them (whom we shall call the “Defrauded Investors”)  had been defrauded into paying funds to the corporate defendants, D1 to D7, as investments in what had later transpired to be fraudulent schemes or Ponzi schemes devised, promoted and operated by, among others, the three individual defendants, D8, D9 and D10. 

3.  On 20 January 2023, the original plaintiffs obtained ex parte proprietary injunctions against D1 to D7 and Mareva injunctions against D8, D9 and D10.  After an inter partes hearing before Cheng J, the judge gave her decision on 31 August 2023,[1] the effect of which was that the proprietary injunctions against D1, D4 and D5 continued, but the Mareva injunctions against D8, D9 and D10 came to an end.

4.  The original plaintiffs appealed to this court against the order ending the Mareva injunctions against D8, D9 and D10.  As explained below, a company, TW Recovery Ltd (“TWR”), has since been substituted as the 1^st plaintiff in the action and the sole appellant in this appeal.

5.  At the conclusion of the hearing of the appeal, we reserved our judgment, which we now give.

Background

6.  D8 was the sole shareholder of D1,[2] of which one Mr Sze Chong Hoi was sole director.  Mr Sze was also the sole shareholder and director of D2.  D10 was D8’s personal assistant.  D9 used to be an employee or agent of D1.  He was the sole shareholder and director of D3, D4 and D5.  D6 and D7 are companies incorporated in Hong Kong in 2020 and 2021 respectively.

7.  TWR’s case is that D1 to D6 as well as certain other companies were held out as part of a group founded by D8 and headquartered in Hong Kong, called the “Best Leader Financial Group” (“Financial Group”).  Two financial products, referred to as the “Margin Trading Product” and the “Wine Investment Product”, were marketed by or on the half of the Financial Group as investment products, but were in fact fraudulent products that did not exist or were offered as part of Ponzi schemes.  It is said that the schemes were devised by D8, D9 and D10, who attracted investors with the promises of high returns, and who used money received from later investors to pay purported returns to earlier investors.

8.  TWR says that starting from 2015, the Margin Trading Product was marketed to investors in Taiwan through a Taiwanese company with the same name as D5, namely, Best Leader Global Strategy Ltd (“BLGS Taiwan”).  It is said that D8 procured one Mr Hung Chieh to set up BLGS Taiwan, and that thereafter they made various fraudulent misrepresentations to investors about the product inducing them to invest in it.  Essentially the investors in the Margin Trading Product were told that the money they invested would be used as security with banks to enable certain other investors to actively engage in foreign exchange trading, that the money would be absolutely safe and that the investment period would be one to three years with different returns between approximately 9% and 12%.

9.  In around early 2018, Mr Hung ceased to be involved, and another Taiwanese company called “Best Rich Global Strategy Asset Management Consultancy Co Ltd” (“Best Rich”),[3] set up by two Taiwanese residents Chu Kai-Hsuan (“Chu”)  and his father, took over the marketing of the Margin Trading Product in Taiwan on behalf of the Financial Group.

10.  TWR says that in around 2017 or 2018, D8, D9 and D10 started to induce investors by fraudulent misrepresentations to invest in another product, namely, the Wine Investment Product.  It was represented to be a capital-protected investment in a trust called “Imperial RWITs” (Red Wine Investment Trust)  which would invest its assets in the wine industry.  The investment period ranged from one to five years with differing return rates between 9.5% and 17.5%.

11.  The Defrauded Investors were mostly based in Taiwan, with some based in Hong Kong and Mainland China.  Some of the Defrauded Investors invested in the Margin Trading Product; some in the Wine Investment Product; and some in both.

12.  In the case of the Margin Trading Product, each of the Defrauded Investors would sign one or more client agreements with a company in the Financial Group, and then remit funds to a bank account of one of D1 to D7.  Tsai made a total of 45 remittances to D2’s accounts between March 2018 to June 2022 totalling over US$4m, and Lee made a total of 55 remittances to accounts of D1 to D5 between March 2015 and May 2022 totalling over US$6m.

13.  In the case of the Wine Investment Product, each of the Defrauded Investors would submit an application form subscribing for units of the Wine Investment Product, and then remit funds to a bank account of one of D1 to D7.  It is said that Lee submitted 27 application forms starting from November 2020 and made various remittances to D2’s account, totalling about US$5m. 

14.  The total amount of the funds transferred by the Defrauded Investors to D1 to D7 through their respective bank accounts is said to be US$212,780,996.75.  On TWR’s case, over the course of the investment period, both Tsai and Lee received withdrawals of returns upon request, as did other Defrauded Investors. 

15.  In around May 2022, there were news reports that a Taiwanese company known as Best Rich Capital Holdings Co Ltd (“Best Rich Holdings”)[4] had been selling two Australian trusts in Taiwan since 2016 without authorisation, and that Chu and his father, being the persons-in-charge, had been arrested in Taiwan.  It was also reported that Chu was acquainted with the leader of the Financial Group, who had engaged Chu to market the Margin Trading Product and another product in Taiwan by setting up the Taiwanese company as a company purportedly related to the Financial Group.

16.  In around August 2022, some of the Defrauded Investors found that they were unable to make withdrawals in respect of their investments.

17.  On around 6 September 2022, some of the Defrauded Investors received a notice from “Best Leader Markets Pty Ltd” which stated that the recent delay in remittances to the clients was primarily caused by anti-money-laundering verification procedures applied by international banks against finance-related institutions and that the company would make remittances to clients as usual except that the procedures would be slightly delayed.

18.  In October 2022, Chu made a confession to the Taiwanese authorities that he had violated securities laws.  According to the confession and news reports, Chu incorporated Best Rich with his father as the person-in-charge, and Best Rich had entered into a distribution agreement with D2 to act as its distribution agent in Taiwan (including for the Margin Trading Product), arranging for Taiwanese investors to sign client agreements and remit funds to accounts designated by D8, D9 and D10.

19.  In around November 2022, there were news reports in Taiwan that around 4,000 victims had been defrauded into investing in the Margin Trading Product.

20.  Also in November 2022, Imperial Company Pty Ltd, an Australian company that was supposedly the investment manager or trustee for the Wine Investment Product, filed for voluntary deregistration in Australia.  A little earlier, at the end of October 2022, the business registration for the Imperial RWITs with the Australian authorities was cancelled.

21.  On around 9 December 2022, the Financial Group issued a declaration on its website stating that the Financial Group and its affiliated company Best Leader Markets Pty Ltd had never received funds from Taiwanese investors, and that neither the Financial Group nor D8 had participated in any business operation of Best Rich Holdings.

22.  The Defrauded Investors had formed a “self-help group” to share resources and information in order to pursue legal remedies for the recovery of their money. On 20 January 2023, Tsai and Lee, the original plaintiffs, commenced the action below by writ of summons as a representative action on behalf of the Defrauded Investors.  On the same day, they obtained ex parte from Lok J: (1) proprietary injunctions against D1 to D7, restraining each of them from dealing with or disposing of specified sums received from the Defrauded Investors and credited to D1 to D7’s respective bank accounts; and (2) Mareva injunctions against D8 to D10,[5] restraining each of them from dealing with or disposing of their assets up to the value of US$212,780,996.75.

23.  On the return date of 3 February 2023, attended by the original plaintiffs and D1, D8 and D10, with the other defendants being absent, the injunctions against D2 to D7 and D9 were continued by S T Poon J until trial or further order, and the injunctions against D1, D8 and D10 were continued until the hearing of the original plaintiffs’ application to continue them, which was adjourned for substantive argument.  On 12 May 2023, D4, D5 and D9 took out a summons to discharge the injunctions granted against them.

24.  On 11 April 2023, the original plaintiffs filed a statement of claim, seeking (as summarised by the judge):

(1)  rescission of the investment agreements signed with members of the Financial Group in respect of the Margin Trading Product and the Wine Investment Product, and a declaration that D1 to D7 still hold the Defrauded Investors’ assets or their traceable proceeds on constructive and/or resulting trust for the Defrauded Investors and an order for payment of the same;

(2)  against D2 and other members of the Financial Group who received the investment funds of the Defrauded Investors, restitution of the amounts paid by the Defrauded Investors under the mistaken belief that the Margin Trading Product and the Wine Investment Product were genuine and in fact existed;

(3)  against D1 to D7, equitable compensation for dishonestly assisting in D8, D9 and D10’s breaches of trust, by receiving the Defrauded Investors’ remittances into their accounts and making payments out from their accounts;

(4)  against D8 to D10, damages for fraudulent misrepresentation, causing the Defrauded Investors to enter into investment agreements in respect of the Margin Trading Product and the Wine Investment Product;

(5)  against all of the Defendants, damages for conspiracy to defraud the Defrauded Investors.

25.  On 23 June 2023, D1 and D8 filed a joint defence and D10 filed her defence.  On 27 June 2023, D4, D5 and D9 filed their joint defence.  These defendants do not deny that there was a massive fraud and that many of the Defrauded Investors were tricked into parting with their money, but say that they had nothing to do with it.  At the risk of over-simplification, the position taken by the defendants is broadly this.

(1)  D8 accepts he is the founder of the Best Leader Financial Group and that D1 and D2, but not D3 to D6, were within this group. He says he did not procure BLGS Taiwan to be set up and did not know about and was not involved in the marketing of the Margin Trading Product and Wine Investment Product through BLGS Taiwan or Best Rich.  D1 and D8 deny having received any funds from the Defrauded Investors.  They say that if such funds were received, they were received for the purpose of the precious metal trades between D1 and D9’s companies without any knowledge of any impropriety.

(2)  D9 says he agreed to set up D3, D4 and D5 and open their bank accounts at the request of Chu and Lee as trading vehicles to conduct gold trading through margin accounts opened with D1.  D9 was entrusted with the authority to manage the funds in these trading vehicles that Chu and Lee had pooled together, in return for a monthly salary and a bonus of 1% of the profit from the gold trading.  D9 denies taking part in the marketing of the Margin Trading Product and Wine Investment Product.  He says he was simply an employee of Chu and Lee for gold trading and did not know about their source of funds.

(3)  D10 says she was an employee of D1 and the personal assistant of D8, focusing on internal administrative and accounting matters.  She did not participate in the design, management or promotion of any of the financial products or investment funds relating to D1.  She was unaware of any matter implicating D1 in the offer of fraudulent investment products.

26.  The original plaintiffs’ application to continue the injunctions against D1, D8 and D10 and the application by D4, D5 and D9 to discharge the injunctions against them came before Cheng J for hearing on 29 June 2023.  On 31 August 2023, Cheng J handed down her decision (“Decision”).[6]

The judge’s Decision

27.  There was little dispute in the evidence filed that the investment schemes were fraudulent.  The contesting defendants’ argument before the judge was that if there was a fraudulent scheme, they were not involved in it, though the judge noted that this was “not at the forefront” of their submissions.[7] The judge concluded that on the evidence there was “clearly a good arguable case” that the Defrauded Investors were victims of a fraudulent scheme and that the contesting defendants were involved in it.[8]

28.  Rejecting the contesting defendants’ argument that the action was not properly brought by Tsai and Lee as a representative action, the judge held that there was at least a good arguable case that the proceedings were properly constituted as a representative action.[9] 

29.  Further, the judge noted that there was no dispute D8, D9 and D10 had assets within the jurisdiction, and held that the original plaintiffs had shown a solid basis for concluding there was a real risk of dissipation of assets.[10]

30.  The judge however considered that the original plaintiffs had not established a good arguable case in relation to the quantum of their claim for the purpose of the Mareva injunctions against D8, D9 and D10. She noted that most if not all of the Defrauded Investors had received payments of interest or returns on their investments, and made withdrawals of their funds upon request, and that about 400 of them had received commissions for their participation in the scheme.  She considered that the Defrauded Investors should have been able to provide a much more accurate picture of their losses than was placed before the court.  She concluded there was no evidence at all to form the basis by which an appropriate ceiling for the Mareva injunctions could be assessed.[11]

31.  As to the defendants’ complaints that the original plaintiffs had failed to disclose various matters at the ex parte stage, the judge rejected them except the “double actionability” point.  There was no dispute that the original plaintiffs did not address the double actionability rule.  The judge considered that this point could not be dismissed as a defence without substance, and that this was an additional reason for holding against the original plaintiffs on the Mareva injunctions against D8, D9 and D10.[12]

32.  As regards the proprietary injunctions against D1, D4 and D5, the judge held that there was a serious issue to be tried in respect of the original plaintiffs’ claim that these defendants had received the Defrauded Investors’ funds pursuant to a fraudulent scheme and were holding such assets or their traceable proceeds on trust for them.[13]  The judge noted that these injunctions are based on a restitutionary claim rather than a claim in tort, so that the double actionability rule does not apply.[14]

33.  In the result, the judge declined to continue the Mareva injunctions against D8 and D10, and discharged the Mareva injunction against D9.  She continued the proprietary injunction against D1 and declined to discharge the proprietary injunctions against D4 and D5.  She ordered the original plaintiffs to pay the costs of D8, D9 and D10, and ordered D1, D4 and D5 to pay the original plaintiffs’ costs.

Proceedings after the Decision

34.  The original plaintiffs sought leave to appeal against Cheng J’s order terminating the Mareva injunctions against D8, D9 and D10.  D1, D4 and D5 did not seek to appeal.  By a decision handed down on 8 November 2023,[15] the judge granted the original plaintiffs leave to appeal, on the basis that the proposed grounds of appeal were reasonably arguable.  She also granted a stay with the result that the Mareva injunctions against D8, D9 and D10 were reinstated and have continued pending this appeal.

35.  Both the action and the appeal have since been re-constituted.  TWR, a special purpose vehicle, was incorporated in Hong Kong in September 2023, to which many of the Defrauded Investors previously represented in the action assigned their rights relating to the Margin Trading Product and the Wine Investment Product (“Assigning Defrauded Investors”). Six investors not previously covered by the action also assigned their rights to TWR.  An affirmation filed in this appeal in October 2024 stated that Defrauded Investors who collectively held 1,113 investment accounts had assigned their rights to TWR, acquiring in return a proportionate beneficial interest in TWR.  An order was made in the action in May 2024 for TWR to be substituted for the two original plaintiffs as 1^st plaintiff, with the original plaintiffs re-joined in the action as the 2^nd and 3^rd plaintiffs for the purpose of costs.  A similar order was made in the appeal in January 2025.

36.  On 29 May 2024, TWR filed a re-amended statement of claim, with the financial details relating to the Assigning Defrauded Investors set out in an annexure called “Schedule C”, to which we shall refer below.

37.  Between June and September 2024, D8, D9 and D10 filed their re-amended defences respectively.

The contentions in this appeal

38.  The grounds of appeal advanced with leave of the judge may be summarised into 2 main grounds as follows:

(1)  It is not a precondition to the grant of Mareva relief that the plaintiff has to show a good arguable case in support of a claim for a certain or approximate sum.  For the maximum amount of a Mareva injunction, the proper approach is to look at the matter qualitatively, apply a broad-brush approach, and identify a quantum that is not fanciful and justifies the injunction.  The figure of US$212.8m was not arbitrary but based on the total amount of funds invested (excluding reinvested returns), being the best computation the original plaintiffs could produce in the urgency of the ex parte stage. The action includes a claim for damages for conspiracy which are at large. Having found a good arguable case on liability for fraud and a solid basis for concluding there was a real risk of liability, the judge erred in bringing the Mareva injunctions to an end without considering whether to re-grant them in a lower amount.  There was adequate evidence before the judge for her to assess an appropriate maximum amount.

(2)  The double actionability rule is not engaged in the present case.  The substance of the fraud and conspiracy committed by D8, D9 and D10 arose in Hong Kong as the Financial Group was headquartered in Hong Kong, and was represented and managed by D8, D9 and D10 who were resident in Hong Kong; the Distribution Agreement was signed in Hong Kong; the contracts with the Defrauded Investors were sent to Hong Kong and signed by D9 in Hong Kong; the Defrauded Investors’ funds were remitted to bank accounts in Hong Kong and subsequently withdrawn or transferred out by the defendants from Hong Kong.  The action includes claims for restitution against D8, D9 and D10 to which the double actionability rule does not apply.  The double actionability rule had never been raised until the hearing before the judge.  None of the defendants had pleaded it as a defence or referred to it in their affirmations.  Even if there was material non-disclosure, the judge erred in failing to consider re-granting the Mareva injunctions given in particular that the non-disclosure was not intentional but innocent.

39.  D9 and D10 have each filed a respondent’s notice, raising the following contentions:

(1)  D9 contends that the judge should have held that there was material non-disclosure by the original plaintiffs in respect of matters relating to the part played by them and certain other Defrauded Investors in the scheme.

(2)  D10 contends that there was no good arguable case shown that she was guilty of any fraud or dishonesty such that the risk of dissipation on her part could be inferred.

(3)  D9 and D10 have both raised again in their respondent’s notices the argument that the action was not properly constituted as a representative action.  But in light of the substitution of TWR as plaintiff, D9 has accepted the issue is academic except in relation to the costs below, and D10 has not advanced any submissions on the point.

40.  We shall deal with the points arising in the following order: (1) the monetary limit of the Mareva injunctions; (2)  non-disclosure in relation to the double actionability rule; (3) good arguable case against D10; (4) non-disclosure in relation to the original plaintiffs’ and other Defrauded Investors’ roles; and (5) representative action.

Monetary limit of the Mareva injunctions

41.  The relevant principles are not in real dispute. Mareva injunctions are usually set by reference to a maximum amount, and the standard form of the Mareva injunction expressly permits the defendant to dispose of or deal with assets held above that amount, so long as the total unencumbered value of his assets still in Hong Kong remains above that figure.  A plaintiff is required to show a good arguable case not only on liability but also on quantum in order to justify freezing the defendant’s assets up to the specified financial limit. 

42.  In Ming Hsieh v Xu Zhe & others (CACV 189/2015, 28 September 2016), the plaintiff claimed that he had been defrauded by the defendants into paying out US$54m (or RMB 350m)  for shares in a company, and obtained at first instance a Mareva injunction against the defendants for that amount in aid of foreign proceedings brought by the plaintiff in the United States against them.  On appeal, the defendants pointed out that the plaintiff had entered into agreements with a third party related to the defendants to convert the shares he acquired into a debt owed by the third party, and had received gold, jewellery and stock in trade with a book value in excess of RMB 790m as security for that debt.  Barma JA, giving the reasons of this court[16] for allowing the defendants’ appeal, stated at §11:

“ It is necessary to bear in mind that in considering whether or not a good arguable case for the granting of the injunction applied for has been made out, it is necessary to consider both liability and quantum. Even if it can be shown to the necessary standard that the plaintiff is likely to make out its case on liability, it remains necessary to consider what the plaintiff is able to establish as to the likely level of damages to be awarded, as the injunction to be granted will be limited in its monetary extent by the latter issue.”

Since the plaintiff there had failed to provide any evidential basis for suggesting that the value of the security he had was other than their book value, he failed to justify the injunction for the amount sought or in any lower amount.

43.  In Universal Entertainment Corp v Okada [2020] HKCA 995, the plaintiffs developed a casino and resort complex in the Philippines.  The approved budget was US$2.43 billion but the costs incurred and paid exceeded it by US$620m.  The plaintiffs sued the defendant, a former director, for breaches of his duty of care in relation to the significant overspending on the project.  Their application for a Mareva injunction up to the limit of US$620m was refused by Coleman J at first instance, and their application for leave to appeal was rejected by both the judge and this court.[17]  Lam VP, giving the judgment of this court, said that whilst the court has power to grant a Mareva injunction without a specified financial limit, such an order will only be made in rare and wholly exceptional circumstances.  His Lordship went on to state:

“ 22. … As the Judge pointed out, a Mareva injunction constitutes serious interference with the right of a person to use or dispose of his property. It behoves a plaintiff seeking such draconian relief to put forward its case with care and demonstrate to the court that interference of the defendant’s property right by a Mareva injunction is proportionate. In most cases where the claims were of limited value, such exercise must involve the justification of the monetary ceiling for the injunction.

23. In other words, the duty of an applicant seeking Mareva injunction includes the proper formulation of his claim for such injunction and the justification of the monetary limit set out in the draft order. …

…

  25.  We are also in agreement with the judge’s reasoning at [79] of the Judgment that a good arguable claim requires good evidence to prove breach, causation and damages.  The lack of proper formulation and evidence on damages means that there is no material before the court to lead to the conclusion that the alleged breach will sufficiently arguably have caused any particular damage sounding in any particular amount of damages.  For such reason, the failure in this regard carries with it the lack of proper basis to impose an order as draconian as a Mareva injunction restraining a defendant from dealing with all or a part of his assets in Hong Kong.”

On the facts of that case, Coleman J was not satisfied that there was a good arguable case that US$620m represented the damages recoverable by the plaintiffs.  This court did not see any error in the view taken by the judge and further said that the inadequacy in the plaintiffs’ case on loss cast doubt on whether it had established a good arguable case on liability.[18]

44.  At the same time, it needs to be borne in mind that what is involved is an exercise of the court’s discretionary power to grant interim protection, not a final adjudication of the parties’ rights and liabilities.  The object is to form a view on the extent of interim protection appropriate at that early stage of the action, not to assess the damages payable at the end. The court does not need to aim for exactitude and is entitled to take a broad and practical view appropriate to the circumstances of the case.  Thus, in Agritrade Resources Ltd v Sahoo [2022] HKCA 280 at §37, Cheung JA, giving the decision of this court[19] refusing leave to appeal against a Mareva injunction, quoted with approval the following passage from the judgment of the judge below (DHCJ To):

“ This issue is a question of fact which is to be determined qualitatively and not quantitatively. Taken to the extreme, Ms Cheung’s submission would mean that a plaintiff would fail if its proof is just short of a dollar. That cannot be right. At the ex parte stage, because of the need for urgency, the applicant has to proceed even though the evidence may be inchoate. Any order made by the court is provisional and subject to review at the inter parte stage. Taking the very quantitative approach as Ms Cheung suggests under such pressing circumstances could not work. In my view, an arguable case on quantum is shown, if a quantum which is not fanciful and which justifies the injunction is proved. If the quantum claimed is shown to be excessive at the inter parte stage, it may be reduced. If the defendant restrained suffers loss in the interim period, the plaintiff is liable to make good the loss under its undertaking for damages.”

45.  The plaintiff’s need for protection against the risk of getting an empty judgment at the end has to be balanced against the injustice to the defendant from any unwarranted restriction on his freedom to deal with his assets as he pleases.  Whilst unrealistically precise figures or evidence are not essential, there must be a real basis informed by the circumstances of the case on which the amount of the Mareva injunction can be justified.  What is required and what will suffice will depend on the facts of the individual case, but, as Coleman J said in Universal Entertainment Corp v Okada [2020] HKCFI 1406 at §75, it is “not for the court arbitrarily to pluck some figure from the air”.

46.  In the present case, it is true that for the tort of deceit, damage was suffered and the cause of action was complete as soon as the Defrauded Investors were induced to pay out funds for what they thought was investment in the two products.  But any subsequent successful withdrawal of returns or dividends by them would amount to loss actually avoided, for which credit must be given.  Leaving aside who has the legal burden at trial to prove such refunds, there is no dispute that at the present stage, the original plaintiffs and now TWR have to show a good arguable case on the quantum of the claims for which the Mareva injunctions are sought.

47.  The original plaintiffs’ evidence below included spreadsheets setting out the details of the money remitted by the Defrauded Investors to the various bank accounts of the defendants.  The total amount came to approximately US$212.8m (excluding re-invested returns, cash deposits and deposits through Mainland nominees), which was adopted as the cap for the Mareva injunctions sought.  Since TWR can only pursue the claims assigned to it by the Assigning Defrauded Investors, it accepts that this figure has to be reduced to approximately US$172.9m.  However, neither figure took account of the returns withdrawn.  There is no reason why credit should not be given for amounts already recovered by the Defrauded Investors.  In our view the judge could not be faulted for declining to accept US$212.8m as the appropriate limit, and this court cannot simply substitute the adjusted figure of US$172.9m as the limit.

48.  Nor is this altered by Ms Sit’s submission, relying on Lonrho plc v Fayed (No. 5) [1993] 1 WLR 1489, 1494B, that damages for conspiracy, which is one of the causes of action relied upon, are at large, in the sense that they are not limited to a precise calculation of the amount of the actual pecuniary loss actually proved.  Even so, any damages awarded would still have to be compensatory, and no real basis has been advanced for suggesting that the damages eventually awarded would for this reason approximate to US$212.8m or US$172.9m despite the returns already obtained.

49.  On this appeal, TWR has put forward a further figure of approximately US$152.4m for the ceiling figure, said to be the total amount of remittances made by the Assigning Defrauded Investors (US$172.9m)  less the estimated total amount of returns withdrawn by them.  In support of this figure TWR has referred not only to the spreadsheets with the details of the investors’ remittances, but also to the affirmation evidence and the exhibit containing the underlying documents used to produce the spreadsheets. Those documents were contained in a USB which formed part of exhibit “TLT-1” to Tsai’s first affirmation below, comprising the contractual documentation, remittance records and investment statements issued by the defendants in respect of each Defrauded Investor.  Based on such evidence, counsel submit that an estimate can be made of the returns actually withdrawn by each Defrauded Investor.  This is done by calculating the returns based on the principal invested and the promised rates of return as set out in the affirmation evidence (and, in the case of the Margin Trading Product, also set out in the product brochure), and then subtracting therefrom (i) the re-invested returns (which were set out in the original spreadsheets)  and (ii) the returns or dividends remaining in the account as set out in available investment statements.  That exercise has been performed in relation to each Assigning Defrauded Investor, as set out in Schedule C to the re-amended statement of claim filed by TWR in May 2024.

50.  To this submission, the defendants have raised two main objections.  First, it is said that the point was not raised before the judge.  The original plaintiffs did not propose any alternative figure below.  If the point had been taken below, the defendants might have adduced evidence to show that, for example, the investors had in fact received more than the estimated amounts.

51.  It is true that the original plaintiffs did not seek to justify the Mareva injunctions by reference to a lower amount in this way below.  We also take the point that the judge could not have been expected to go through the materials herself to find out the amount by which the original plaintiffs’ suggested cap should be reduced.  But the evidence was there.  The context of the arguments is also relevant.  Whilst D8’s affirmation did contain a sentence, among 212 paragraphs, that if it was a Ponzi scheme as alleged, full particulars of any money received by the investors must be disclosed so as to calculate the amount that needs to be refunded to the victims, there was no suggestion that the maximum limit of the injunctions should be reduced.  D1 and D8’s skeleton argument below cited this court’s decision in Universal Entertainment Corp v Okada, but only to make the point that the returns withdrawn fractured the commonality of interest among the Defrauded Investors so that no monetary relief and no Mareva injunction could properly be granted on the basis of a representative action.  The argument that there was no good arguable case on quantum was only raised by D1 and D8’s counsel orally at the hearing. 

52.  In these circumstances, whilst the burden to show a good arguable case on quantum rested on the original plaintiffs, had the judge’s attention been drawn to all the evidence now relied upon, she would in all probability not have concluded that “there is no evidence at all to form the basis by which an appropriate ceiling for the Mareva can be assessed”[20] and terminated the Mareva injunctions altogether.  Instead, it seems to us she would have asked the original plaintiffs to set out the estimated withdrawn amounts to enable her to determine whether to continue the injunctions in a lower amount.  Since the judge did not have a complete view of the relevant evidence, albeit through no fault of her own, this court is entitled to intervene and exercise the discretion afresh.

53.  This brings us to the second main point taken by the defendants.  They criticise that Schedule C is not readily comprehensible and contains illogical entries; for example, in respect of a number of investors, the amount of re-invested returns or the amount of remaining returns exceeds the overall amount of returns credited to the investor, resulting in a negative figure for the amount of withdrawn returns.

54.  We acknowledge the force of the criticisms on those entries in Schedule C.  Clearly the withdrawn returns cannot amount to a negative figure.  There are therefore likely to be inaccuracies at least in relation to the criticised entries.  It may be that the returns actually credited to the investor were higher than the promised rates of return; or there may be other errors in the records or in their interpretation.  But overall, taking into account all the circumstances, we have come to view that TWR has provided an acceptable basis for showing a sufficient case on quantum for present purposes. 

55.  The manner of estimating the amounts of withdrawn returns is intelligible, as explained above.  It is not surprising that there were inaccuracies and imperfections given that the underlying information and data were collected from over 1,000 investors, many of them individuals residing in Taiwan, over a relatively short period of time before the ex parte application was made in Hong Kong in January 2023.

56.  We draw comfort from the fact that, for the purpose of the Mareva injunctions, TWR has not included any claim for interest on the remittances allegedly induced by fraud.  Given the substantial lapse of time, the entitlement to interest provides a significant buffer against any over-estimation of the Assigning Defrauded Investors’ claims.

57.  Taking a broad-brush approach, we accept the alternative figure of US$152.4m to be an appropriate ceiling figure, subject to the further adjustment mentioned below.

58.  There is evidence that about 400 of the Defrauded Investors received commissions by reason of their participation in the scheme.  It seems to us, however, that there is a good arguable case on the evidence (including Chu’s affirmation and the contemporaneous communications between Chu’s assistant, Ku, and one “Dera”, which D10 admits to be her English name)  that commission was paid at single-digit percentage rates, rather than “millions of US dollars” per month[21] which would yield an improbably large total amount in the context of the facts of this case.  In all the circumstances, it seems to us just to reduce the ceiling amount to US$150m to take account of the commissions received by some of the Defrauded Investors.

59.  We should mention that Ms Sit has also pointed out that there was direct evidence on the funds invested by Lee (approximately US$11m)  and the returns withdrawn by him (approximately US$3.1m, equivalent to 27.9% of the amount invested), in respect of both products.  Ms Sit submits that this proportion can be used as a proxy to discount the investments by the other Defrauded Investors and estimate their losses.  It is unnecessary for us to deal with this argument, save to observe that at the very least, Lee had clearly made out a good arguable case on losses amounting to US$7.9m.

60.  We also note that this is not a case where the relevant information is exclusively in the hands of TWR or the Assigning Defrauded Investors themselves; the defendants may well have readily retrievable information concerning the returns paid out.  This is something the court is entitled to take into account in weighing the balance of convenience.

Non-disclosure in relation to the double actionability rule

61.  We turn to the point that there was non-disclosure in relation to the double actionability rule.  The principles are well established.  The power to discharge an order obtained ex parte for material non-disclosure is necessary and salutary.  It protects the court’s own processes from being abused.  But in its application in a particular case the following considerations may be relevant.  First, the defendant is generally expected to give adequate notice of any complaint of non-disclosure so that the plaintiff has an opportunity to provide an explanation, where appropriate, in his evidence in reply.[22] Second, disclosure is not required of every conceivable matter but only those that are material in the sense that they should go into the ex parte judge’s “weighing operation”.  Thirdly, the principle is not mechanical; the court has a discretion whether to discharge the order for non-disclosure and, in exercising it, takes into account the relative importance of the matter with a sense of due proportionality.  Fourth, even if the ex parte order is to be discharged, the court retains a power to regrant it in an appropriate case.

62.  The defendants had not signalled in advance, in their affirmations or otherwise, any complaint of non-disclosure regarding the double actionability rule.  It was only raised in D1 & D8’s skeleton argument lodged two days before the hearing, though the original plaintiffs did not contend that the allegation should not be entertained at all.  Nevertheless, for the following reasons, we are satisfied that non-disclosure in relation to the double actionability rule is not a valid reason for terminating the Mareva injunctions against D8, D9 and D10.

63.  Ms Sit submits that the tort of conspiracy, which is one of the causes of action relied on by TWR, should on proper analysis be regarded as in substance committed in Hong Kong, applying the “substance” test established by cases such as Distillers Co (Biochemicals)  Ltd v Laura Anne Thompson [1971] AC 458 and Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391, and that the double actionability rule is therefore not engaged.  The defendants’ counsel dispute this.  We do not find it necessary to enter this debate. We are prepared to assume for present purposes that the double actionability rule is at least arguably applicable.

64.  Even so, the rule would only give rise to a potential defence, and therefore a duty to bring it to the attention of the ex parte judge, if there is some reason to believe that the wrongs complained of may not be actionable in Taiwan.  As Keith JA stated in New Asia Energy Ltd v Concorde Oil (Hong Kong)  Ltd [2000] 2 HKC 681, 686A-B, citing Gee, Mareva Injunctions and Anton Piller Relief (4^th ed), the plaintiff’s duty of disclosure extends to defences “which can reasonably be expected to be raised in due course by the defendant” and “which [cannot] be dismissed as without substance or importance”.  We are concerned here with deceit causing loss, for which, one can reasonably presume, all major legal systems including that of Taiwan afford a remedy.  There is no contrary suggestion from the defendants.  Nor have they alleged there is some specific aspect of Taiwanese law which would render the alleged fraud not civilly actionable and which the original plaintiffs failed to disclose.  In these circumstances we do not see that the point was relevant to the ex parte judge’s “weighing operation”: Citibank NA v Express Ship Management Services Ltd [1987] HKLR 1184, 1190. 

65.  The original plaintiffs and TWR pleaded their claims without reference to Taiwan law, implicitly relying simply on Hong Kong law: Brownlie v FS Cairo (Nile Plaza)  LLC [2022] AC 995, §163; Iranians Offshore Engineering and Construction Co v Dean Investment Holdings SA [2019] 1 WLR 82, §11.  None of the defendants had in response raised any issue of double actionability in their pleadings filed shortly prior to the hearing before the judge.[23]  None of them had suggested that applying Taiwanese law would produce a different outcome.  Even if the applicability of Taiwanese law is pleaded, in the absence of contrary evidence, the court may well presume Taiwanese law is similar to Hong Kong law in relevant respects: Brownlie v FS Cairo (Nile Plaza)  LLC, §§119-125, 143-149.  We are told that the defences were included in the bundles placed before the judge but, unfortunately as it seems to us, not referred to on this point.  Had her Ladyship’s attention been drawn to this, she would not have concluded that “it cannot be said that the Relevant Defendants’ [reliance] on the double actionability rule can be dismissed as a defence without substance”.[24]  There was in fact no reliance on the rule as a defence.

66.  Furthermore, even if one concluded that the rule was material at the ex parte stage, it is necessary to bear in mind the need for proportionality in deciding what consequence should follow from its non-disclosure.  As Toulson J said in Crown Resources AG v Vinogradsky (15 June 2001), quoted with approval in Kazakhstan Kagazy plc v Arip [2014] 1 CLC 451 at §36, there are degrees of relevance and it is important to preserve a due sense of proportion.  In the present case the defendants had effectively conceded before the judge that the double actionability rule had no impact on whether there was a good arguable case on the merits.[25]  The rule was not relied upon by any defendant as a defence.  There was nothing to show that the non-disclosure was deliberate in the sense that the original plaintiffs thought the rule was material but chose not to raise it.  Because the complaint was raised at the eleventh hour, the court did not know whether the non-disclosure was due to the original plaintiffs’ ignorance of the rule or a bona fide judgment it was not applicable.  The judge did not apparently take these matters into consideration, perhaps because she treated non-disclosure only as an additional point that was not pivotal to her decision.

67.  For these reasons, we take the view that the non-disclosure in respect of the double actionability rule is not a reason for terminating the Mareva injunctions.

Non-disclosure of the part played by the original plaintiffs

68.  This point is only raised by D9, although Mr Kok also places some reliance on it on behalf of D10.[26]  It is said that the original plaintiffs failed to disclose certain facts about the part they themselves and some other Defrauded Investors played in the distribution of the financial products in Taiwan.  In particular, Lee, the second-named original plaintiff, was the sole shareholder and director of a company called “Yixin” which was a distributor or promoter of the two products in question.  Lee held himself out as a representative of Best Leader Markets Pty Ltd, and his wife was a representative of a “Best Leader” company in Taiwan.  Tsai, the first-named original plaintiff, was part of the sales team of Chu and received commissions for bringing in investors.  Over 400 Defrauded Investors were sales staff of Best Rich or Yixin and received commissions for promoting the products.

69.  The judge was fully aware of the facts and D9’s allegation that the original plaintiffs were involved in the fraudulent scheme.[27]  The original plaintiffs did not deny that they themselves and certain Defrauded Investors played a part in promoting the products and received commissions as a result, but, as the judge noted, it was hotly disputed that they knowingly participated in any fraud.[28] The judge also noted that there was no evidence to suggest that the original plaintiffs or indeed any of the other Defrauded Investors were aware they were taking part in a fraudulent scheme.[29]  She dismissed D9’s complaint of non-disclosure in essence because proof of non-disclosure depended on proof of disputed factual issues in the action, which should be more properly reserved for the trial itself: Kazakhstan Kagazy plc v Arip [2014] 1 CLC 451 at §36.[30]  Implicitly, she considered that in the absence of any complicit knowledge of the fraud, the mere fact that the original plaintiffs and certain other Defrauded Investors had played the role of sales agents was not sufficiently material to justify setting aside the injunctions for non-disclosure. 

70.  Before us, Mr James Man has essentially argued on behalf of D9 that the undisclosed facts are relevant to D9’s case that the original plaintiffs were “active participants” in the fraudulent scheme at all material times.  But in our view the judge was entitled to take the view that acting as sales agents did not imply participation in a fraudulent conspiracy.  We do not think any ground has been made out for interfering with the wide margin of discretion allowed to the judge in relation to matters of non-disclosure. 

Good arguable case against D10

71.  Mr Martin Kok submits on behalf of D10 that the judge should have held that there was no good arguable case that D10 was guilty of any fraud or dishonesty such that any risk of dissipation of assets could be inferred against her.

72.  There is no dispute that to found a Mareva injunction, there must be a solid basis for concluding that there was a real risk of dissipation in relation to each defendant sought to be enjoined: see Convoy Collateral Ltd v Cho Kwai Chee [2020] 6 HKC 81, §§35-38.  Based on D10’s argument below[31] and in this court, the question boils down to whether there is a good arguable case that D10 took part in the fraud.

73.  In her Decision, the judge highlighted two matters relating to D10.  First, there was an audio recording of D10 apparently explaining the structure of the Margin Trading Product at a “Q&A” session, and that D2 was a trustee and had appointed Best Rich as its sole distributor in Taiwan.  D10 claimed that the recording was inaudible, but a transcript was available.  D10 also claimed that she could not tell whether it was really her voice on the recording and challenged the authenticity of the recording.[32] It should be noted that Chu was apparently also present at the session but, according to D8, Chu was using the “Best Leader” name wrongfully and without authority.

74.  Secondly, the judge referred to a notice (referred to in §17 above)  which, the original plaintiffs said, was sent by D10 to some of the Defrauded Investors explaining that the reasons for delay in processing remittances to clients was due to tightened anti-money laundering procedures, which reasons had not been substantiated.  D10 denied sending the notice.[33]

75.  Mr Kok argues that these two matters are not enough to substantiate D10’s liability. But these two matters did not stand in isolation. There was other evidence on the role of D10, of which the judge no doubt took account.  The judge expressly referred to the conflicts between the original plaintiffs’ evidence and that of D10, and the table of evidence annexed to the original plaintiffs’ skeleton submissions.[34] The judge cannot be faulted for not setting out every piece of evidence.  On her own case, D10 was the personal assistant of D8.  She was given the duty to monitor bank transactions and control the payments out of the bank accounts, including withdrawals by clients, D1’s outgoings and office expenses, staff salaries and other expenses.  She had to prepare reports on daily bank transactions and liaise with the banks.  There was evidence that she was the account signatory for and operated the bank accounts of D3 and D4 which had directly received funds from the Defrauded Investors.  Her involvement in the banking aspect has to be seen against how the clients’ invested funds were supposed to be employed according to the representations made to them, i.e. as security for Forex trading.  There were emails between Ku (Chu’s assistant)  and an email account that, there was some evidence to suggest, belonged to D10.  There was also evidence of D10 dealing with clients on occasions, apart from the audio recording.

76.  Given the available evidence, we are not satisfied that the judge was plainly wrong, as D10 contends, in taking the view that there was a good arguable case on liability for fraud against D10.

Representative action

77.  On behalf of D9, Mr Man submits that the action was not properly constituted as a representative action because there was no claim for declaratory relief about the fakeness of the investment products and that since each Defrauded Investor’s claim for damages would require separate consideration based on the facts specific to that claim, they would have to join in the action when it came to that stage.  There were therefore no relevant claims for damages to support the Mareva injunctions. 

78.  Mr Man accepts that the question is academic because TWR has taken assignments from the Assigning Defrauded Investors and has been substituted as the 1^st plaintiff. Nevertheless, we are prepared to deal with it for the purposes of dealing with D9’s submission that the costs order below in favour of D9 should be maintained in any event because of this point.

79.  The judge held that the Defrauded Investors all had a common interest in the issue of whether the investment products were fake products and part of a fraudulent scheme, and that where there are common issues of fact and law, they can be decided on the representative basis with issues requiring individual and separate determination being dealt with at a subsequent stage of the proceedings. 

80.  As Cheung CJ and Lam PJ said in their joint judgment in Sir Elly Kadoorie & Sons Ltd (for and on behalf of itself, its current and former officers, employees and agents, including its legal representatives, Messrs Simmons & Simmons)  v Bradley [2026] HKCFA 2, at §119 (footnote omitted):

“ The flexible approach now adopted by the courts permits the bifurcation of different issues, allowing common questions of law or fact to be determined through a representative claim, while reserving individual or case-specific issues for resolution at a later stage in the proceedings. All of this may be managed through court directions.”

81.  We agree that there was clearly a good arguable case that the representative action was properly constituted on this basis.

82.  As to Mr Man’s argument that there were no claims for damages by the represented Defrauded Investors to be protected by the Mareva injunctions sought, Cheng J said (footnote omitted):[35]

“ … as explained above, there is no divergence of interests amongst the Defrauded Investors so as to render the representative action not properly constituted for present purposes. The claims for damages may, in due course, need to be assessed by reference to the individual facts and circumstances of each of the Defrauded Investors, but they do not need to satisfy the ‘common interest’ requirement in order for the proceedings to be properly constituted as a representative action. The Mareva injunctions are therefore being sought not only in respect of the claim for declaratory relief but in respect of the monetary claims against D8 (Chan), D9 (Tsang)  and D10 (Hung). Nor is the present case one of seeking purely declaratory relief without there being any cause of action to be protected. It therefore does not seem to me that the injunctions are objectionable on this basis.”

83.  On the basis that there was a properly constituted representative action on foot, the judgment in which would be binding upon those represented (see RHC Order 15 rule 12(3)), there is in our view no reason in principle or policy why Mareva relief could not be granted in relation to the monetary claims of not only the representative plaintiffs but also the representees.  Even if steps would need to be taken in future to have the Defrauded Investors formally joined into the action for the purpose of dealing with their claims for damages, there would be basis for granting Mareva relief now provided there was a good arguable case and sufficient apprehension of dissipation of assets.  Mareva injunctions can be granted even before an action is commenced.  The logical consequence of Mr Man’s argument is that to obtain Mareva relief, each of the over 1,300 Defrauded Investors would have to issue their writ or formally join into the action immediately and advance their claim for damages.  This seems to us to defeat the purpose of having the procedure of representative action in the present kind of case.  No authority has been cited to suggest that the wide jurisdiction of the court as prescribed in section 21L of the High Court Ordinance (Cap 4)  to issue injunctions is restricted in this way.  Accordingly we reject D9’s contention.

Conclusion and orders

84.  For the above reasons, we have come to the conclusion that the Mareva injunctions should be continued as against D8 and D10 and should not be discharged as against D9, except that the monetary limit specified in the injunctions should be reduced to US$150m.  The appeal will therefore be allowed, and orders will be made accordingly.

85.  We make an order nisi that D8, D9 and D10 do pay the original plaintiffs’ costs below and the original plaintiffs’ and TWR’s costs of the appeal and summons for leave to appeal, with a certificate for two counsel.