LI CHUNG HONG ERIC v. TUNG CHUN WAI AND OTHERS

HCA 768/2023

[2026] HKCFI 201

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 768 OF 2023

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D E C I S I O N

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Introduction

1.  The plaintiff (“P”) claims to be a victim of cyber fraud. By three summonses all dated 28 February 2025 (collectively “the Summonses”), P applies for summary judgment against each of the 7^th defendant (“D7”), the 8^th defendant (“D8”) and the 9^th defendant (“D9”), who were the second level recipients of the funds which P had been induced to pay by the fraud.

2.  D7 and D9 act in person and each of them has filed a short defence. D7 has not responded to P’s summons and filed no evidence in opposition thereto.

3.  D9 has filed a short affirmation dated 9 May 2025. He only asserts that he has reasons to refute P’s allegations and he requires a full trial so that he could have a fair chance to defend himself properly.

4.  D8 has been represented throughout. He has filed a defence and an affirmation in opposition.

5.  At the substantive hearing of the Summonses, Mr Marwah, together with Ms Cheung, appear for P. Ms Yue appears for D8. D9 appears in person and D7 is absent.

P’s pleaded case and evidence

6.  The underlying allegations of P’s claim are largely not contradicted by evidence adduced by D8 and can be summarised as follows.

7.  P is a resident in Hong Kong. P has two accounts with Standard Chartered Bank and one account with Citibank (Hong Kong) Limited.

8.  On 9 October 2022, an unknown person holding herself to be Fiona Hui (“Fiona”) claiming to be a recruiting consultant of a global professional IT consulting company approached P and introduced a purported website platform www.bidease-hk.com (“the Platform”) managed by Bidease HK to P.

9.  Fiona told P that the Platform provided a means for P to earn commissions conducting simple tasks to promote apps. P was interested.

10.  Subsequently, other fraudsters using different names including Aile and Lina contacted P and gave instructions to P on how to operate the Platform by his own account.

11.  I need not delve into the various complicated steps that P was required to take. It is sufficient to mention the specific instructions given by Lina that P should transfer funds to different bank accounts as requested by her. P was required to make such transfers before he could operate his account and earn commissions. Lina assured to P that all the funds so transferred would be refundable to him in due course.

12.  From 14 October 2022 to 19 October 2022, pursuant to the instructions of Lina, P remitted a total sum of HK$2,211,605.22 to each of the 1^st to 6^th defendants’ respective accounts. Lina represented to him that all these payments were required to unlock a set of app optimisation tasks assigned to him.

13.  Below is the table showing the details of the payments that P made:

	Transferee	Payments (HK$)	Date of payment	Transferee’s Bank Account
1.	The 1st defendant	5,000	14.10.2022	Hang Seng Bank (“HSB”)
2.		400,000	16.10.2022	HSB
3.	The 2nd defendant	5,000	14.10.2022	ZA Bank (“ZA”)
4.		4,200	14.10.2022	ZA
5.		5,000	14.10.2022	ZA
6.		5,000	14.10.2022	ZA
7.		30,000	14.10.2022	ZA
8.		90,000	14.10.2022	ZA
9.		145,000.10	17.10.2022	Faster Payment Service Platform (“FPS”)
10.	The 3rd defendant	188,000	14.10.2022	ZA
11.		200,000	14.10.2022	MOX Bank (“MOX”)
12.		47,800	14.10.2022	MOX
13.		3,000	14.10.2022	MOX
14.		400,000	15.10.2022	ZA
15.		84,071.44	15.10.2022	ZA
16.	The 4th defendant	39,533.68	16.10.2022	China CITIC Bank
17.		150,000	17.10.2022	Ping An OneConnect Bank (“PAOB”)
18.		400,000	18.10.2022	PAOB
19.		200,000	19.10.2022	FPS
20.		2,049.74	19.10.2022	PAOB
21.	The 5th defendant	350,000	17.10.2022	PAOB
22.	The 6th defendant	400,000	19.10.2022	ZA
Total transfer:-		3,153,654.96

14.  P did not have any business, commercial and/or other dealings with each of the 1^st to 6^th defendants. P avers that he consented to the foregoing transfer and deposits to each of the 1^st to 6^th defendants only in the mistaken belief of the fraudulent representation that such payments would entitle him to complete the purported app optimization tasks and/or that he would be able to withdraw his remittances and purported commission income generated from completion of these tasks.

15.  On 17 October 2022, out of the sum of HK$150,000 paid into the 4^th defendant’s account with PAOB, a sum of HK$150,000 was transferred to D7’s bank account.

16.  On 18 October 2022, out of the sum of HK$400,000 paid into the 4^th defendant’s PAOB account, a sum of HK$160,000 was transferred to D7’s bank account.

17.  On 18 October 2022, out of the sum of HK$400,000 paid into the 4^th defendant’s PAOB account, a sum of HK$160,000 and another sum of HK$80,000 were transferred to D8’s bank account within 3 minutes.

18.  On 19 October 2022, out of the sum of HK$400,000 paid into the 6^th defendant’s bank account, a sum of HK$120,000 and another sum of HK$69,400 were transferred to the bank account of D9 within 13 minutes.

19.  P had no knowledge of, let alone authorising or approving, these transfers from the 4^th defendant’s PAOB account and the 6^th defendant’s ZA account to D7, D8 and D9.

20.  P found out that it was a scam and he could never earn any commission from the Platform which is a sham. He has received nothing from his account.

21.  Based on these factual allegations, which none of D7, D8 and D9 has adduced any rebuttal evidence, P makes the following pleas.

22.  First, P pleads that each of D7, D8 and D9 was unjustly enriched at his expense as a result of the foregoing unauthorised transfers to their respective accounts.

23.  Further, P makes a plea of estoppel against each of D7, D8 and D9 and avers that it is unconscionable for them to deny that P is entitled to the respective sums they have received from D4 or D6.

24.  Lastly, P relies on constructive and/or resulting trust and maintains that each of D7, D8 and D9 holds the said sum(s) transferred to them from D4 or D6 as his trustees.

The respective pleaded cases and evidence of D7, D8 and D9

D7

25.  In her handwritten defence dated 5 October 2024, D7 accepts that she received the two sums from the 4^th defendant on 17 and 18 October 2022 but she asserts that these sums represented the sales proceeds of her USDTs on a platform known as BYBIT.

26.  D7’s affirmation does not provide any evidence to support her allegations in her defence. She was absent at the hearing and lodged no written submission.

D8

27.  The pleaded case of D8 can be outlined as follows.

28.  D8 did not know the 4^th defendant personally and knew nothing about him.

29.  USDT, also known as Tether, is a cryptocurrency and a stablecoin. D8 traded in USDTs through a public trading platform known as BYBIT. BYBIT enabled trades of over a thousand types of crypto-currencies including USDT.

30.  From 1 October to 27 October 2022, D8 traded 91 times in USDTs on BYBIT including both purchases and sales to other registered users on BYBIT.

31.  When placing his USDTs for sale on BYBIT, D8 had no control over the outcome of their sales, the identity and user number of the ultimate purchaser until the transaction was completed.

32.  On 18 October 2022, D8 placed his USDTs for sale at a unit selling price of HK$7.92 and the 4^th defendant with BYBIT user number 3578mPi2oa acquired a total of 37,878.787878 units of USDTs from 3 separate purchases at a unit price of HK$7.92.

33.  As a result of these sales, D8 received payments in the respective sums of HK$160,000 and HK$80,000 from the bank account of the 4^th defendant on 18 October 2022. The former sum represented the sales proceed for his 20,202.020202 units and the latter sum represented the sales proceed for his 10,101.010101 units.

34.  D8 had no knowledge that these funds received from the 4^th defendant actually originated from P.

35.  D8 contends that he is a bona fide purchaser for value without notice and/or has changed his position in good faith by reason of the sale of his USDTs.

36.  I have closely examined the evidence of D8 by way of his affirmation and the exhibits thereto.

37.  In his affirmation, D8 explains his financial background. He is an I.T. manager with a decent monthly salary. He is married with no children.

38.  He invested in cryptocurrencies including USDT using BYBIT and Binance which is another world famous cryptocurrency trading platform.

39.  D8 went on to elaborate how he converted his Hong Kong dollars in his Wing Lung Bank account to US dollars to purchase USDTs with his account with Binance and he would transfer the USDT purchased to his account with BYBIT for further trading. All the sales proceeds would go to his account with LIVI Bank which is destined for his cryptocurrency trading.

40.  On 17 October 2022, D8 bought US$63,621.33 to purchase USDT with his Binance account. He bought 63616.8584 USDTs and transferred 63615.9802 of them to his BYBIT account. He set the selling price at a unit price of HK$7.92.

41.  On the following day, four purchase orders were received. Three of them came from the 4^th defendant. Eventually, D8 completed two transactions with the 4^th defendant and received the two sums in his LIVI Bank account.

42.  In late October 2022 or November 2022, D8 discovered that a sum of HK$240,000 in his LIVI Bank account was frozen and he was advised by the staff of the bank to contact the police. He did so and was told by the police that his account was frozen due to a fraud investigation. D8 confirms that he has never been charged thus far and he has not taken any part in further investigation since January 2024.

43.  D8 gave some further information about BYBIT. It is a reputable trading platform of cryptocurrency worldwide and it was available in Hong Kong until April 2024. It withdrew its application for a cryptocurrency trading licence.

44.  All these allegations of D8 are well-supported by documentary evidence. The sale transactions between D8 and the 4^th defendants are clearly shown by contemporaneous documents including the transaction confirmations and the confirmation emails sent by BYBIT to D8.

D9

45.  In his defence, D9 claims to be the sole beneficial owner of the two sums deposited to his account and denies that P has any beneficial interests in the two sums.

46.  D9 explains that the two sums were the sales proceeds that he earned from the sale of his USDTs on BYBIT. He knew that the purchaser was the 6^th defendant.

47.  D9 contends that he has all along sold cryptocurrencies through BYBIT and he found nothing unusual with the two sale transactions with the 6^th defendant.

48.  D9 categorically denies any knowledge about the 4^th defendant and the fraud alleged by P.

49.  In his affirmation, D9 merely asserts that he has solid evidence to resist P’s claim and he insists on his right to a fair trial. He maintains that summary judgment should be entered against him and he intends to defend himself at the trial. There is little evidential value in this affirmation.

Applicable legal principles

50.  The applicable principles relating to summary judgment applications are well-established and it is only necessary to state the following for the purpose of these applications.

51.  Summary judgment can be granted only in clear cases. Where the plaintiff raises a plausible and prima facie sustainable case, the burden is on the defendant to satisfy the court that there is a triable issue and show that he has a real and bona fide defence. The defendant’s affidavit must condescend upon particulars to discharge his onus. Mere assertion in his affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real and bona fide defence, i.e. his evidence is reasonably capable of belief.

52.  The defence relies on the doctrine of a bona fide purchaser for value without notice and change of position to resist the restitutionary claim of P.

53.  Mr Marwah refers to CS Credit Limited v Marspan Limited and Anor. [2021] HKCFI 3707 in which Madam Recorder Eva Sit SC explained the defence of a bona fide purchaser for value without notice. It comprises 4 basic elements which have to be proved by the defendant: (1) bona fides; (2) purchase of a legal estate; (3) for value; and (4) absence of notice.

54.  For the first element, in Arrow ECS Norway AS v M Yang Trading Ltd [2018] 5 HKC 317, Anderson Chow J (as he then was) said this in the context of the defence of change of position (at §36),

“… It has been said that “bad faith” is capable of “embracing a failure to act in a commercially acceptable way and sharp practice of a kind that falls short of outright dishonesty as well as dishonesty itself.””

55.  For the 4^th element, Gibson J in Baden v Société Générale pour Faouriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509, cited by DHCJ Marlene Ng (as she then was) in Tam Ying Man v Leung Ka Chun and Ors. (unreported, HCA 2166/2011, 31.8.2016) identified the following 5 types of knowledge. The defendant will be considered as having notice if he:

(1)  has actual notice;

(2)  wilfully shuts his eyes to the obvious;

(3)  wilfully and recklessly fails to make such inquiries as would be made by an honest and reasonable man;

(4)  has knowledge of facts which would cause a reasonable person to appreciate that the transaction is improper; or

(5)  has knowledge of facts which would cause a reasonable person to make inquires or seek advice which would reveal the probability of impropriety.

56.  For the defence of change of position, Coleman J in Predicine Holdings Ltd v Bianchi (Hong Kong) Limited [2021] HKCFI 123 gave the following analysis.

“98. The defence would also be negated if either (a) the defendant fails on a requirement of showing good faith, for the defendant must be an “innocent” defendant, or (b) he fails the ‘but for’ test of establishing that the claimed change in position is causally linked to the enrichment.

99. The degree of bad faith or fault needed to disqualify a defendant from the defence of change of position has been said not to be limited to dishonesty itself, but to be capable of embracing a failure to act in a commercially acceptable way, and sharp practice of the kind that falls short of outright dishonesty: see Niru Battery Manufacturing Co v Milestone Trading Ltd (No. 1) [2002] EWHC 1425 at §135 (later affirmed at [2003] EWCA Civ 1446).

100. The necessary link between the claimed change in position and the enrichment arises from the fact that the defence, in essence, gives rise to a balancing exercise. The defence is established when (a) the injustice arising from calling upon an innocent defendant who has so changed his position to repay or to repay in full outweighs (b) the injustice of denying the plaintiff restitution.”

Discussion

57.  I should first deal with P’s application for summary judgment against D8. Ms Yue accepts that in this application, it is incumbent on D8 to show that he has a real and reasonable defence of a bona fide purchaser of value without notice and change of position.

58.  D8 is able to adduce undisputed documentary evidence to prove that he was a genuine trader of cryptocurrencies trading USDTs with BYBIT. He has shown satisfactorily how he acquired the USDTs to be sold to the 4^th defendant subsequently. The two sale transactions appear to be real and were well-documented. There is no allegation that the sale transactions were bogus. The two sums represented the purchase price of the USDTs which were sold to the 4^th defendant. Mr Marwah does not really cast significant doubt on the evidence of D8.

59.  The thrust of the attack of Mr Marwah on the defence case is that D8 should not have traded his USDTs with BYBIT, which did not carry out any due diligence, know-your-client and/or anti money laundering procedures to ensure that the source of the purchase price was safe and not the proceeds of crime or other money laundering activities. He submits that D8 wilfully turned a blind eye to the inherent risks of trading with BYBIT.

60.  Mr Marwah submits that BYBIT was never a licenced and regulated entity for cryptocurrency trading. He points out that all dealings of virtual assets (“VA”) including their trading are now regulated by Part 5B of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Cap. 615 (“the Ordinance”) and VA service providers must be licenced. He submits that BYBIT was never regulated or compliant with Hong Kong safeguards.

61.  At the hearing, Mr Marwah accepts that the Ordinance only came into existence after D8 used BYBIT to trade his USDTs. There was no licensing system in place and it was perfectly legal for BYBIT to provide cryptocurrency trading service at the material time. It is not fair to say that BYBIT was unlicensed at the material time. Further, the decision of BYBIT not to proceed with its application for a licence in 2024 is really neither here nor there.

62.  Despite the vigilant effort of Mr Marwah, I am of the view that D8 has shown a real and genuine defence of a bona fide purchaser without notice and change of position.

63.  It is hardly a clear case that D8 acted in bad faith by failing to act in a commercially acceptable way on the evidence.

64.  Mr Marwah first submits that once D8 was informed of the identity of the prospective purchasers of his USDTs, he should have conducted due diligence and checked the source of his funds for the transactions. This suggestion is unrealistic.

65.  Mr Marwah then submits that given the high value nature of the transactions, for the purpose of the sales of his USDTs, D8 should have entrusted another provider which would conduct due diligence to confirm the legitimacy of the source of the purchase monies. This suggestion is equally unrealistic. There is no evidence that such a provider existed on the market the material time.

66.  It should be noted that there is no dispute that at the material time, cryptocurrency trading was commonplace and BYBIT was a renowned provider. I am unable to share the view that D8’s trade of his USDTs with BYBIT can be regarded as a failure to act in a commercially acceptable way and was a sharp practice. Of course, with hindsight, D8 should have been more careful and should have considered the risk of receiving monies from a dubious source out of the sale of his USDTs but I cannot conclude that he acted in bad faith in the absence of damaging evidence.

67.  Mr Marwah refers to the terms and conditions of BYBIT and submits that they do not include or refer to any form of user authentication other than that of user “biometric information”. He highlights the disclaimer of BYBIT that there would be no assurance that unauthorised access to or use of the platform.

68.  I fail to see any relevance of these terms. The problem here is not the identity of the user of the platform. It is about the source of his funds for his purchase of cryptocurrencies on the platform.

69.  Mr Marwah relies on a few matters which should fix D8 with constructive knowledge of the fraud. With such constructive knowledge, D8 should be disentitled to the defence of a bona fide purchaser without notice and change of position.

70.  These include his repeated complaint that D8 had no control over the identity of the purchasers, his constructive notice of BYBIT’s failure to conduct due diligence, the lack of registration or licence of BYBIT and the large amounts of monies involved in the transactions.

71.  I am unable to accept his submission. To say the least, there is a decent chance that no such knowledge would be found after trial.

72.  Nor am I able to accept the complaint that D8 has wilfully shut his eyes to the obvious or he should have made adequate enquiries before concluding the transactions. Purchasers of any commodities may pay with funds from illicit sources and the very nature of the sale transactions of cryptocurrencies may not allow a seller to make any enquiries at all.

73.  For completeness, I do not think Leung Lily v Fan Kwan Wang [2023] HKDC 1822 can assist P though it also involved a second level recipient of the money paid by the plaintiff as a result of a telephone scam. DDJ George Lam refused to accept the purported defence of a bona fide purchaser without notice where the defendant alleged that he had received the money out of an online sale transaction of his USDTs. Whether the defence can be established should be decided on its own facts and in that case, the learned deputy judge, after trial, found the defendant not telling the truth about the alleged transaction and he was not the actual owner of the USDTs at all. It was held that the defendant had not given any consideration or value for receiving the money. Obviously the facts are very different from that of the present case.

74.  All in all, nothing in the submissions of Mr Marwah can persuade me that it is a clear case that D8 should not be able to establish the two defences to defeat P’s claim. D8 must be entitled to prove his defence at trial.

75.  The situation of D9 is totally different. He has failed to file anything of evidential value to support his defence, which is not sufficiently particularised. D9 has not disclosed the quantity of USDTs he allegedly sold in the two alleged transactions. He produced no documentary evidence to show how he had acquired such USDTs with his funds and how much he had paid for them. He has merely made bare assertions in the defence.

76.  I am aware that D9 is not represented but the same rules apply to him. He has failed to discharge his onus to show his real and bona fide defence with credible affidavit evidence condescending upon particulars.

77.  In the circumstances, I conclude that I should accede to P’s application for summary judgment against D9.

78.  Regarding D7, she has not filed any evidence and has done nothing to resist the application. I have little hesitation to allow P’s application for summary judgment against her.

Conclusion and orders

79.  In light of the foregoing analysis and for the reasons given, I conclude that P’s respective summary judgment applications against D7 and D9 must succeed. Judgment should be entered against D7 and D9 accordingly.

80.  D8 should be given unconditional leave to defend and I so order. His defence is clear from the very outset and his affirmation together with the exhibits should have caused P to reconsider the merit of his application. I opine that his application simply falls outside the ambit of Order 14 and must be dismissed.

81.  Costs should follow the event. I order that P’s costs of his summons against D7 be paid by D7 and his summons against D9 be paid by D9, to be taxed if not agreed.

82.  I further order that D8’s costs of and occasioned by P’s summons against him be borne by P pursuant to Order 14, r.7, to be taxed if not agreed.

83.  All these costs orders are made on a nisi basis.

84.  Lastly, I thank Mr Marwah, Ms Cheung and Ms Yue for their succinct and helpful submissions.