YAN YU YING v. LEUNG WING HEI

HCA 2295/2019

[2021] HKCFI 3160

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2295 OF 2019

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DECISION

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1.  This is the application by the plaintiff (“P”) for interim‑interim relief against the defendant (“D”), pending the hearing of P’s summons of 24 December 2019 (the “2019 Summons”).  The application is made ex parte on notice.  The application was taken out on 30 September 2021.  It was served on D on 4 October 2021.  The matter now comes before me as the Summons Judge.

2.  The dispute between the parties relates to 999.9900261 Bitcoins (the “Subject Bitcoins”).  P says that D has misappropriated them.  D’s case is that P transferred them to him in exchange for D’s The Public Coin (“TPC”) under a swap agreement reached between them in March 2018.  TPC is said to be another and a newer type of cryptocurrency.

3.  The interim‑interim relief sought is a proprietary/Mareva injunction to restrain D from dealing with the Subject Bitcoins and assets up to the value of HK$328,363,760, said to be the value of the Subject Bitcoins.

4.  Parties have previously come before the Court.  By the 2019 Summons, P is seeking in effect the same relief.  The 2019 Summons was before Lisa Wong J on 10 January 2020.  It was adjourned for substantive arguments, due to take place on 25 April 2022 with 2 days reserved.  When before Her Ladyship on that occasion, P made an application for interim‑interim relief.  It was refused.

5.  P now renews her application for interim‑interim relief.  She says that there have been changes of circumstances, as follows.

6.  As a result of the dispute between the parties, P contacted the Police in August 2018.

7.  D was arrested in September 2018.

8.  On 1 August 2019, the Police informed P that letters of no consent had been issued to a number of banks and companies, practically freezing the Subject Bitcoins and D’s assets.

9.  D was subsequently prosecuted for a number of offences (fraud and money laundering) which were said to have arisen out of the same set of facts that grounds the present proceedings.  The trial took place before Deputy District Judge Wong.  P was the 1^st prosecution witness.  After trial, D was acquitted.  The Court ruled that it could not on a beyond reasonable doubt basis accept P’s evidence.  The acquittal took place on 4 December 2020.

10.  One aspect of the evidence which the learned Deputy Judge took into account comprised certain messages between P and D on an instant messaging platform called Secret‑Message (“Sec‑M”).  They were adduced by D.  Those messages, if genuine, support D’s case based on the existence of the swap agreement between them.  The prosecution case was that they were forged.  The learned Deputy Judge ruled that on the evidence, the prosecution could not prove their forgery beyond reasonable doubt.  The learned Deputy Judge further accepted the defence submissions suggesting the contrary, including P’s acceptance that the email address of her Sec‑M account belonged to her, and the timing of the creation of that account.

11.  Subsequent to D’s acquittal, P started to put together expert evidence which she says shows that the Sec‑M communications could have been forged.  The evidence she has adduced takes the form of a PowerPoint presentation by NCL. The dates of demonstration were 23 and 25 June 2021.  She also seeks to rely on another report by NCL dated 17 May 2021.  One aspect of P’s evidence given during D’s criminal trial was commented by the learned Deputy Judge as being impossible.  She says, relying on this further report of NCL, that what she said is actually possible. 

12.  P submits that there have been material changes of circumstances in favour of revisiting her application for interim‑interim relief.  Prior to D’s acquittal, the Subject Bitcoins and D’s assets had practically been frozen by the number of no consent letters issued by the Police.  Those letters have since lapsed, following D’s acquittal.  There was also indication through what D’s lawyer said during a hearing on 3 February 2021 that D intended to use the Subject Bitcoins to fund his legal fees.

13.  As observed and explained by the Court of Appeal in China Shanshui Cement Group Limited v Zhang Caikui [2018] HKCA 409 at [13] per Lam VP, the grant of interim‑interim relief is meant to be an urgent temporary stop‑gap measure and the circumstances were such that the court has to do practical justice on the balance of fairness even though it may not have sufficient time to consider the matter fully.

14.  Mr Chang objects to the grant of any interim‑interim relief.  He relies on delay on P’s part in bringing the present application.  He submits that P on 3 February 2021 by the latest knew that the Police had returned the Subject Bitcoins to D.  One of the NCL reports is dated 17 May 2021. The PowerPoint was demonstrated in June 2021.  P could not demonstrate any “extreme urgency”.  Further, there is no risk of dissipation.  Had D intended to dissipate, he would have plenty of time to do so before his arrest, and after the lapsing of the no consent letters.

15.  With respect, none of those objections takes into account the proprietary nature of P’s claim.  As explained by Flaux J in Madoff Securities International Ltd & Anor v Raven & Ors [2012] 2 All ER (Comm) 634, at §§127‑128, that:

“ 127. MSIL seeks a proprietary injunction against the Kohn defendants.It is essentially common ground that there are three elements which the claimant has to demonstrate for the grant of a proprietary injunction, following the approach prescribed by American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504, [1975] AC 396: (1) that the claimant has shown that there is a serious issue to be tried on the merits; (2) that the balance of convenience is in favour of granting an injunction and (3) that it is just and convenient to grant the injunction.

128. In other words, both the basis for a proprietary injunction and the circumstances in which it will be granted are different from the case of a freezing injunction: see Polly Peck International plc v Nadir (No 2) [1992] 4 All ER 769 at 787 per Lord Donaldson of Lymington MR.  In particular, unlike in the case of a freezing injunction, it is not necessary to show any risk of dissipation of assets and, even if there has been delay in making an application which might lead to refusal of a freezing injunction, a proprietary injunction may nonetheless be granted: see Cherney v Neuman[2009] EWHC 1743 (Ch) at [101]–[102] per Judge Waksman QC sitting as a Judge of the High Court.”

16.  Mr Chang submits that P has not established any extreme urgency for interim‑interim relief.  I remind myself that the test remains one of balance of fairness, as explained and propounded by the Court of Appeal.

17.  On the evidence before me, P has established serious issue to be tried. Whilst it is not necessary to show risk of dissipation, the lapsing of the no consent letters substantially increase any risk of dissipation, so that the matter warrants revisiting.  D has indeed expressed an intention on his part in using them to fund his legal expenses at the least.

18.  In any event, as observed by the Court of Appeal in Convoy Collateral Ltd v Cho Kwai Chee & Others [2020] 6 HKC 81, delay per se would not necessarily bar relief, and the ultimate question is still whether the plaintiff could show a real risk of dissipation despite delay.

19.  On the issue of delay, Mr Chang submits further that P was aware of the Sec‑M messages when the Police interviewed her further in respect of the Sec‑M messages.  The technical sides of the matter are complicated.  It is in my view unrealistic to expect P to compile the expert evidence as she now has before D’s acquittal, and before she had obtained the transcript of the criminal proceedings.   

20.  The value of the Subject Bitcoins is high.  D has indicated difficulty in footing his legal expenses for senior counsel without the Subject Bitcoins. The clear inference is that without the Subject Bitcoins, he would not be able to satisfy any judgment which P may obtain against him.  The duration of any interim‑interim relief is not going to be long.  It is a stop‑gap measure between now and the hearing and disposition of the 2019 Summons.  Balance of convenience in my view is in favour of the grant.

21.  This is clearly not the opportunity to go into the details of the expert evidence.  But upon my views as explained above, and applying the test of balance of fairness, I conclude that this is an appropriate case for interim‑interim relief to be granted.

22.  However, even though interim‑interim relief may be appropriate, it is still necessary to consider whether it is on the balance of fairness appropriate to grant both the proprietary injunction restraining dealing of the Subject Bitcoins and the Mareva injunction, or just the former.  In my view, the balance of fairness lies in the grant of the proprietary part of the injunction only, so that the subject matter of the dispute is preserved.  I will therefore grant the application to that extent.  I refuse otherwise any interim‑interim relief for a Mareva injunction.

23.  In terms of the scope of the proprietary injunction and the disclosure obligations thereunder, I accept Mr Chang’s submission that this is a stop‑gap measure.  I accept also his submissions that disclosure at this stage as part of the stop‑gap measure of historical transactions may give rise to difficulties so as to potentially render the exercise oppressive.  This is particularly so given the history of the matter, the time that has lapsed since D first got the Subject Bitcoins, and the time since the lapsing of the no consent letters.  I will therefore confine the scope of the order and the disclosure obligations to those Subject Bitcoins that remain in the possession custody and control of D.

24.  It goes without saying that any observation I made above are provisional in nature.

25.  I will hear parties further on the precise terms of the order and costs.