GRUPO ARBULU S L v. LIKEWO (HK) LTD

HCA 147/2018

[2019] HKCFI 2896

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 147 OF 2018

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J U D G M E N T

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1.  This is the plaintiff’s application to continue the Mareva injunction granted by the Deputy High Court Judge Leung on 1 February 2019, restraining the defendant from disposing of or diminishing the value of the defendant’s Hang Seng bank account number 788-490621-883 up to the value of HK$2 million.

2.  The plaintiff is the victim of an alleged email fraud pursuant to which it was induced to transfer €2,329,994 to a PRC account which sum it says was then further transferred and dissipated via various entities/nominees including the defendant.

3.  It is alleged that between 4 to 7 April 2017, when the plaintiff’s chief executive officer and managing director Mr Arbulu was on leave, fraudsters gained access to his email account and by impersonating him induced the plaintiff’s accountant into transferring the sum in question to the PRC account.  Following a series of discovery and tracing exercises the plaintiff discovered that funds were dispersed from the PRC account as follows:

(1)  Guan Yi received €482,690 on 6 April 2017 and then transferred €352,408 to Hong Kong Wyensh on 7 to 8 April and €50,335 to the defendant on 10 April. The defendant then transferred €50,321 to Ruogu Tang on 11 April.

(2)  Ning Yuan received €1,846,929 between the 7 and 11 April 2017 and also received €352,407 from Hong Kong Wyensh on 10 April and then transferred €2,172,926.50 to Koyer Med on 10 to 11 April.

4.  To date the plaintiff has recovered approximately €2,006,038.67 resulting in a net loss of approximately €324,000.

5.  It is the plaintiff’s case that it has shown a good arguable case against the defendant for dishonest assistance, amongst other claims, in relation to this sum and that there is a clear risk of dissipation in the event the injunction is discharged.

6.  The plaintiff submits that Mr Yan Bingfeng, the defendant’s sole director and bank signatory, sought to justify the receipt and subsequent transfer out of the funds in question by the defendant as being part of a legitimate transaction which in the plaintiff’s submission is highly suspect and demonstrably fictitious.  Mr Yan’s evidence to this effect is clearly pleaded in the Statement of Claim at paragraph 28 under the heading: “E. Defendant’s Alleged Reasons for its Receipt of part of the Proceeds of Crime” and it is noteworthy that in its defence the defendant says simply that the substance of this explanation is not admitted and that nobody had any authority to take any steps on behalf of the defendant notwithstanding it is submitted that Mr Yan was its sole director at the time he made the statements.

7.  The plaintiff says that Guan Yi from whom the defendant received the sum in question, the defendant itself and the other key recipients of the misappropriated funds were interconnected persons who participated in and or assisted in the disposition of the proceeds of the fraud.  The evidence for this, on which the plaintiff relies, is the use of various common addresses and registered offices and in some cases the use of the same company secretary.  Indeed it is the plaintiff’s submission that the evidence gives rise to a likelihood that a number of the persons involved are alter egos of the principal fraudster.

8.  On this basis the plaintiff says that there is a real risk of dissipation and removal of the assets from the jurisdiction and points in this respect to the fact that all of those alleged to be involved are Mainland Chinese nationals.

9.  Furthermore the plaintiff points not only to the lack of any plausible pleading or evidence of any underlying transaction justifying the transfer of the sum in question to the defendant but, in addition to the fact that the defendant’s 2017 annual report contains a qualified auditors’ opinion stating that the auditors were unable to verify the accuracy of the defendant’s cash and bank balances and to the arrest of Mr Yan, who it was also submitted, is the principal shareholder of the defendant, on suspicion of money laundering in respect of the handling of the sum received by the defendant and then transferred away.

10.  The plaintiff submits that the pleadings and evidence make out a good arguable case for dishonest assistance and in its submissions it went further and claimed that the defendant was also party to a conspiracy to defraud and said that it would seek to amend the Statement of Claim to make this plea.  Whilst not currently pleaded the plaintiff submitted that, as in the case of Zimmer Sweden AB v KPN Hong Kong Limited and Anor (unreported, HCA 2264/2013, 2 May 2014), the essential facts are present and the evidence before the court to justify a plea to this effect.  Ms Liao for the plaintiff cited the judgment of Deputy High Court Judge Kent Yee in that case where allowing the continuation of a Mareva injunction and dismissing the application to strike out the claim he had this to say at paragraph 86:

“ I think it is a red herring to examine on the inadequacies of the pleading. This court is required to consider whether the plaintiff is entitled to interlocutory relief on the evidence. This court has to consider the totality of the evidence and not just the pleading to decide or not whether the plaintiff can meet the threshold. Of course if the matters pleaded materially differ from those disclosed in the evidence, normally the reliability of the plaintiff’s evidence would be called into question. But this is not the case here.”

11.  In all of the circumstances the plaintiff submits the balance of convenience clearly lies in continuing the injunction, to hold the ring so to speak, given that the assets in question are within the jurisdiction.

12.  The defendant’s primary submission is that it received only the sum of €50,335 and so cannot be liable beyond that sum and therefore any continuing injunction over a larger sum is unjustified.  Furthermore it submits that the sum in question has now been passed to a third party and so there could be no greater liability on the defendant’s part than for this sum received and subsequently transferred away.  This however begs the important question of whether the plaintiff’s claims which I have summarised and which are pleaded, and which going forward may also include the proposed amendment to plead conspiracy to defraud, are well founded and it is no business of the court on this application to weigh the evidence for this beyond satisfying itself whether or not the plaintiff has made out a good arguable case.

13.  As to this it was the defendant’s submission that the plaintiff’s claims were unsustainable because the claim for dishonest assistance necessarily involved a finding of an antecedent breach of trust but that is a matter which can only be resolved at trial.

14.  The defendant also submits that like Mr Soler in Grupo Torras SA v Al-Sabah (1999) CLC 1469 he was only involved after the breach of trust complained of was complete, namely after the initial transfer to the PRC account, so that he should be exonerated but again, to the extent this is arguable, this also is a matter for trial.

15.  The defendant also points to the fact that the Commercial Crime Bureau had been the instigator of the injunction proceedings because of a fear on its part that it would not be able to justify the continuation of its letter of no consent to Hang Seng Bank preventing the defendant from withdrawing his funds from the named account.  It is suggested that because the police were concerned about the ability to maintain their freezing of funds pursuant to a letter of no consent that this is evidence of the inappropriateness of the injunction subsequently granted to the plaintiff but I cannot accept that submission since the police powers in this respect are statutory and subject to limitations and are there for entirely different purposes.

16.  Finally the defendant sought to raise a number of forensic points which again in my judgment can only be properly adjudicated at trial; for the present I am only concerned with the principles justifying or not the continuance of the existing injunction.  The defendant submitted for instance that the court would not be any wiser at trial because there was no further information which could come to light and as a result it is submitted nothing would change.  This was a submission I could not, without more, accept given that in the ordinary course there will be discovery and witness testimony at trial going to the questions in issue.

17.  I was taken to a number of cases by the defendant but on occasion I was referred to isolated sentences in long judgments out of context since the factual matrix here is very different from that in a number of those cases which were cited.

18.  The defendant submitted that there was insufficient particularity in the pleadings to justify the continuance of the injunction and that no additional evidence had been forthcoming to support the pleading in the Statement of Claim. I was referred to a number of authorities which establish the well-known proposition that fraud has to be particularised fully but I did not see the relevance of these submissions in a case such as this where a case has been made out on the pleadings for knowing receipt and dishonest assistance and/or assisting a breach of trust which causes of action one would expect, in the normal course, might well be developed as a result of the discovery process and witness testimony at trial.

19.  I note in this respect that it sits somewhat ill in the mouth of the defendant to say that nothing will change and to complain of a lack of particularisation when it has made no application to seek further and better particulars since the Statement of Claim was filed in January 2018, nearly two years ago, and similarly has failed to serve its list of documents some 10 months after the plaintiff submitted it had done so.

20.  I am satisfied on the facts pleaded and the plaintiff’s submissions that there is a good arguable case that by virtue of its receipt of the funds in question the defendant became a constructive trustee and that there are also sufficient grounds for me to conclude that there is a good arguable case on dishonest assistance even without the additional claim of conspiracy to defraud by unlawful means which is referred to in the plaintiff’s reply skeleton.

21.  I believe there is a risk of dissipation if the injunction is discharged, or limited to the funds actually received by the defendant and subsequently transferred away, such that the balance of convenience favours continuing the injunction until trial or further order and I would only note in this respect that the period to trial will be immeasurably shorter if both parties apply themselves equally assiduously to preparation for it.

22.  In the circumstance I make an order nisi for costs in the cause.