PURPLE SURGICAL UK LTD v. WIN BILLION INVESTMENT GROUP LTD AND OTHERS

HCA 1600/2020

[2024] HKCFI 1643

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1600 OF 2020

BETWEEN

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JUDGMENT

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Introduction

1.  In this action, Purple Surgical UK Limited (“Purple Surgical”) claims to recover part of USD 27 million (“the Earnest Money”) paid for its purchase of 5 million pieces of “3M 9332+” surgical masks (“the Masks”) from Win Billion Investment Group Limited (“Win Billion”) pursuant to a sale and purchase agreement (“the SPA”) during the Covid-19 pandemic in late May 2020. Eventually, each of the defendants received certain portions of the Earnest Money.

2.  Not a single mask was supplied to Purple Surgical at the end. None of the defendants attended the trial to claim innocence except Mr Wu.

3.  The claim of Purple Surgical against the defendants is essentially restitutionary in nature though a contractual claim is included as an alternative. The primary case of Purple Surgical against Mr Wu is deceit and fraudulent representation.

4.  In a nutshell, Mr Wu insists that Win Billion has made a genuine effort to source the Masks to complete the transaction and it was Purple Surgical which terminated the SPA prematurely. Win Billion was at liberty to use the Earnest Money for its own purposes and Mr Wu characterises the present dispute as a contractual matter only. Mr Wu believes he cannot be personally liable no matter even if Win Billion breached the SPA.

5.  At the very outset, Win Billion, Mr Wu and Smart Up Incubator Limited (“Smart Up”) were represented by Messrs. Henry Yu & Associates and a joint defence dated 17 December 2020 was filed on their behalf. Messrs. Henry Yu & Associates ceased to act for these defendants by an order dated 21 April 2023 and Win Billion and Smart Up have had no legal representation since then. They have not applied for leave to be represented by their directors either. They were absent at the trial despite the attendance of Mr Wu, their common director.

6.  As regards Strongjet (Asia) Supply Chain Company Limited (“Strongjet”), it was separately represented and it paid into court a sum of USD6,525,000 being the amount Purple Surgical claims against it by consent on or about 29 October 2020. Eventually, on 14 October 2022, Purple Surgical obtained default judgment against Strongjet.

7.  The upshot is that Purple Surgical and Mr Wu turn out to be the only participating adversaries at the trial hearing. Despite the absence of Win Billion and Smart Up, this court should determine whether the claim of Purple Surgical against each of these absentees is borne out by evidence.

8.  At the trial, Purple Surgical was represented by Ms Lam SC and Mr Luxton whereas Mr Wu was represented by Mr Zhu. Mr Sharpe, Chief Executive Officer of Purple Surgical, was the sole witness of Purple Surgical and Mr Wu alone testified for himself.

9.  The bulk of the factual evidence of Purple Surgical in support of its claim is not in dispute. The limelight is on the defence case of Mr Wu, who was skilfully and thoroughly cross-examined by Ms Lam for 4 days.

Background facts

10.  By way of introduction, I shall first give some details about the parties and key characters.

11.  Purple Surgical is a company incorporated in England and Wales and is the leading manufacturer of laparoscopic instruments and devices. One of its major customers is National Health Service (“NHS”) within the Department of Health and Social Care (“DHSC”) of the United Kingdom. The Masks were sourced by Purple Surgical to be delivered to NHS pursuant to a written contract between Purple Surgical and DHSC (“the Masks Contract”).

12.  Win Billion is a company incorporated in the British Virgin Islands. Mr Wu is the sole shareholder and director of Win Billion. Win Billion has no employee other than Mr Wu.

13.  Mr Wu is a Hong Kong permanent resident. He was born and bred in Hong Kong and in 2004 he graduated from Hong Kong University with a degree in Computer Science.

14.  Strongjet is a locally incorporated company and is a wholly- owned subsidiary of a company incorporated in Mainland China known as Shenzhen Strongjet Supply Chain Co., Ltd.

15.  Smart Up is another locally incorporated company and Mr Wu is its sole shareholder and director. Smart Up, as alleged by Mr Wu, specializes in supporting and funding entrepreneurs, in particular, start-up business. Win Billion and Smart Up apparently entered into a written agreement entitled “Intermediary Service Agreement” dated 19 May 2020 whereby Smart Up agreed to provide intermediary services to Win Billion for its surgical masks business in return of a remuneration of USD300,000.

Transactions between Purple Surgical and Win Billion

16.  The whole story was started by the Masks Contract created on or about 28 April 2020. By the agreement, DHSC agreed Purple Surgical to purchase 5 million units of “3M Aura 9332+” masks to be delivered prior to 30 June 2020. It needs no reminder that there had been a frantic search for surgical masks since the outbreak of the COVID-19 pandemic.

17.  3M is a multinational company based in the United States and is a well-known medical equipment supplier. Its surgical masks were in huge demand and 3M only trades with its official distributors, agents and some private resellers and brokers.

18.  Purple Surgical first turned to Mr Kohler of Currency UK which is a foreign exchange trading company and has a long-standing business relationship with Purple Surgical. Mr Kohler in turn introduced Mr Cline who is associated with Abraham & Sons Engineering PVT Ltd (“ASE”) in Israel to Purple Surgical. Subsequently, through the introduction of ASE via some intermediaries, Purple Surgical came to know Mr Wu and Win Billion. On or around 19 May 2020, Mr Sharpe received a draft of the SPA through ASE.

19.  Mr Sharpe agreed to the terms and Purple Surgical and Win Billion entered into the SPA. Mr Wu executed the SPA on behalf of Win Billion. The material terms of the SPA (pleaded by Purple Surgical and admitted by the defence in the pleadings) are as follows:

(1) Purple Surgical agreed to purchase and Win Billion agreed to sell 5,000,000 units of the Masks at the unit price of USD5.4 per piece and the total purchase price was USD27,000,000 (“the Purchase Price”);

(2) The origin of the Masks was the United States of America;

(3) Win Billion was required to deliver the Masks on a CIF basis, to Birmingham International Airport, United Kingdom;

(4) Purple Surgical was required to transfer the Purchase Price to an agreed escrow account within 48 hours after both parties execute the SPA;

(5) The parties were required to sign an escrow agreement after the signing of the SPA;

(6) Upon receipt of the Purchase Price into the designated escrow account, the escrow agent was required to release 35% of the total goods value USD9,450,000 (“the 1^st Payment”) to a bank account designated by Win Billion;

(7) The bank account designated by Win Billion was account numbered 081-915-654-8 (“UOB Account”) with United Overseas Bank Limited (“UOB”);

(8) After receipt of the 1^st Payment into the UOB Account, Win Billion shall start preparing the production procedure by placing orders with 3M factory. Win Billion should get ready for SGS inspection for the Masks and shall then process ordering to 3M distributor, and to disclose the 3M distributor’s name and qualification documents for this batch of products to Purple Surgical within 5 working days after receiving the 1^st Payment;

(9) Purple Surgical was entitled to request to arrange SGS at his own source and expenses with prior notice to Win Billion. Further, Win Billion may provide video according to Purple Surgical’s request and code;

(10) Once the SGS report is passed satisfactory and video verified, escrow shall release the further payment to the UOB Account, being 65% of the Purchase Price, i.e. USD17,550,000 (“the 2^nd Payment”) within 24 hours;

(11) Once the 2^nd Payment is received into the designated account of Win Billion, Win Billion would prepare the shipping arrangements and pack the Masks for air freight to the destination port;

(12) The “lead time” for supply of the Masks was 7-10 working days after Win Billion receives the 1^st Payment; and

(13) Win Billion guarantees that the Masks to be supplied were authentic and in conformity with the quality, specifications and quantity specified in the SPA.

20.  Win Billion was the account holder of the UOB Account and Mr Wu was the sole approved signatory of the UOB Account pursuant to a resolution of Win Billion dated 24 July 2018.

Escrow Agreement and Jody Wong

21.  Jody Wong (“Jody”) was a lawyer practising at the San Francisco Bar in the United States. Jody provided escrow agent services for Win Billion.

22.  On or about 21 May 2020, Purple Surgical and Win Billion entered into an escrow agreement dated 21 May 2020 (“the Escrow Agreement”) pursuant to the SPA. It was signed by Mr Sharpe on behalf of Purple Surgical, Mr Wu on behalf of Win Billion and Jody.

23.  In the recital of the Escrow Agreement, it was expressly stated that Purple Surgical and Win Billion had appointed Jody to hold the Earnest Money in accordance with the terms of the Escrow Agreement. The Escrow Agreement contained the following essential terms:

(1) Jody was to act as stakeholder only;

(2) Jody was not to release or disburse the Earnest Money, except that:

(i) Jody was required to send the 1^st Payment and the 2^nd Payment in accordance with the terms of the SPA; and

(ii) Jody was required to pay out professional fees upon disbursement of funds.

(3) The instructions for payment must be consistent and written instructions from both Purple Surgical and Win Billion (“Joint Instruction Requirement”);

(4) Purple Surgical was required to transfer the Earnest Money/Purchase Price to an agreed escrow account within 48 hours after both parties execute the SPA;

(5) In the event that there was a dispute between Purple Surgical and Win Billion and Purple Surgical terminated the SPA, Jody had the right to tender the Earnest Money to a court of competent jurisdiction in an interpleader action; and

(6) The Earnest Money was to be paid into the Trust Account of Jody, being account number 090-000639 at the Bank of the West in San Francisco, the United State of America (“Escrow Account”).

24.  To all intents and purposes, it was a genuine commercial transaction involving an enormous sum of money. Purple Surgical, Win Billion and Jody were bound by serious legal agreements whereby their respective positions are safeguarded.

25.  On 22 May 2020, Purple Surgical transferred the Earnest Money from its Barclays Bank account into the Escrow Account. Purple Surgical has completed its payment obligation under the SPA in accordance with the Escrow Agreement. To its frustration, Purple Surgical soon found out that it was the only party which honoured the two agreements.

26.  By a letter dated 31 July 2020, Stephenson Harwood (“SH”), current solicitors for Purple Surgical, gave its notice of termination of the SPA on account of its non-delivery of the Masks constituting repudiation of the SPA. SH further demanded that the 1^st Payment be refunded to Purple Surgical and a written confirmation be given by Win Billion to Jody about the termination of the SPA and the return of the balance of the Earnest Money in the Escrow Account to Purple Surgical.

27.  Win Billion did not give any response to these demands at all.

28.  SH had no idea as to what had happened to the Earnest Money and neither Jody nor Mr Wu was forthcoming. Immediately before and after the commencement of these proceedings on 18 September 2020, Purple Surgical obtained an ex parte order of DHCJ Man SC dated 18 September 2020 containing a Mareva injunction against all the defendants to this action, together with ancillary disclosure orders by the order of Mr Justice Wilson Chan dated 25 September 2020. Purple Surgical, Mr Wu and Smart Up opposed the continuation of the Mareva injunction at an inter partes hearing before Mr Recorder Houghton SC.

29.  By his Judgment dated 24 February 2021, Mr Recorder Houghton SC ordered that the injunction orders be continued. The learned Recorder opined that Purple Surgical was entitled to Mareva relief and a proprietary injunction against Mr Wu and Smart Up in respect of the proceeds of the 1^st Payment on the basis that these represent proceeds of monies paid pursuant to a fraud instigated prior to those monies being paid by Purple Surgical.

30.  In addition, as elaborated below, Purple Surgical commenced a legal action in the United States of America against Jody, Win Billion and Mr Wu (“the US Action”) in August 2020. As a result of the disclosure orders ancillary to the Mareva injunction, and the three Norwich Pharmacal orders subsequently obtained by Purple Surgical together with the further discovery in the US Action[1], Purple Surgical has been able to trace the transfers of the Earnest Money out of the Escrow Account and from Win Billion’s bank accounts. All these transfers are well documented and no issues about any of them was raised at the trial.

31.  Ms Lam has provided me with a fund flow diagram showing all the transfers. Mr Zhu has confirmed the accuracy of the fund flow diagram. A copy of the fund flow diagram is annexed to this Judgment and its content is self-explanatory.

32.  Basically, there were four layers of payments and I shall focus on the first three layers for the present purposes.

33.  After receipt of the Earnest Money, Jody released the 1^st Payment to Win Billion on 2 June 2020 pursuant to the SPA. This turns out to be the only legitimate and duly authorised transfer in accordance with the SPA and the Escrow Agreement.

34.  In spite of the lack of authorisation of Purple Surgical, on the instruction of Win Billion, unbeknownst to Purple Surgical, Jody made the following transfers of funds out of the Escrow Account.

35.  On 29 May 2020, Jody transferred USD 2 million to Homesum, USD4,990,000 to Strongjet and USD500,000 to Skyin Development LLC.

36.  On 2 June 2020, Jody transferred to Sepideh Madahian a sum of USD360,000. On 4 June 2020, he transferred to Paulo Alexandre Salvador Leitao a sum of USD500,000.

37.  Lastly, on 9 June 2020, Jody transferred to Win Billion a sum of USD 3 million.

38.  All these transfers were procured by Win Billion purportedly through one Mr Tony Xie (“Tony”), whom Mr Wu alleges to be his business partner. On diver dates, Tony emailed to Jody to make requests for transfers to designated recipients with their account details. Jody, without any instruction or confirmation of Purple Surgical and in breach of the Joint Instruction Requirement, made such transfers pursuant to the requests of Tony.

39.  Upon receipt of the total sum of USD12,450,000 out of the Earnest Money, Win Billion made the payments out of its UOB Account. These payments are set out in the table below (taken from Ms Lam’s Opening Submissions):

No	Date	Description	Withdrawals (USD)	Deposits (USD)
1	2 June 2020	Receipt of the 1st Payment from the Escrow Account		$9,449,988.54
2	3 June 2020	Transfer to Mr Wu	$413,650.47
3	4 June 2020	Transfer to Smart Up	$100,000.00
4	4 June 2020	Transfer to Strongjet	$6,525,023.27
5	5 June 2020	Transfer to 3M Georgia LLC	$247,545.25
6	10 June 2020	Receipt of Earnest Money from the Escrow Account		$2,999,988.54
7	11 June 2020	Receipt of funds		$9,496.54
8	11 June 2020	Transfer to Phase Scientific International Ltd ("Phase Scientific")	$1,000,000.00
9	11 June 2020	Transfer to Mr Wu	$1,000,000.00
10	12 June 2020	Transfer to Mr Wu	$775,694.89
11	15 June 2020	Transfer to Phase Scientific	$1,000,000.00
12	16 June 2020	Return of funds from 3M Georgia LLC		$247,471.04
13	23 June 2020	Transfer to Mr Wu	$452,488.69
14	26 June 2020	Transfer to Mr Wu	$129,265.77
15	30 June 2020	Transfer to Advanced Fabrics Factory Company	$66,000.00
16	2 July 2020	Transfer to Mr Wu	$517,129.93
17	3 July 2020	Transfer to Mr Wu	$478,361.99

40.  All these transfer activities are evidenced by the bank statements of the UOB Account and are not disputed.

41.  Mr Wu personally received a total sum of USD3,766,591.74 in his two bank accounts. One is with the Bank of China and the other one is with OCBC.

Purple Surgical’s partial recovery of the Earnest Money

42.  Mr Sharpe in his supplemental witness statement gave an account of Purple Surgical’s partial recovery of the Earnest Money since the termination of the SPA. His evidence is uncontroversial and not challenged.

43.  First, upon a joint application of Purple Surgical and Strongjet, Master Hui made an order dated 17 November 2021 that the sum of USD4,989,981.60 together with any interest accruing thereon being held in court be paid out to Purple Surgical. Pursuant to this order, on 9 December 2021, Purple Surgical received a cheque of a total sum of USD4,991,967.39 inclusive of interest from the court.

44.  By the default judgment entered by Mr Recorder William Wong SC dated 14 October 2022, Purple Surgical is entitled to recover from Strongjet the principal sum of USD6,525,000 together with interest thereon at different rates for different periods until payment. Eventually, a payment of the sum of USD6,595,992.89 (inclusive of interest) out of court was made to Purple Surgical in satisfaction of the default judgment.

45.  Further recovery from Strongjet was made by way of several garnishee applications. A total sum of USD344,829.61 was recovered.

46.  On the other hand, Phase Scientific commenced an interpleader action under HCMP 200/2022 in respect of the total amount of USD 2 million received from Mr Wong out of the Escrow Account. Both SH on behalf of Purple Surgical and Win Billion Investment Holdings Limited which was incorporated in the Cayman Islands (“Win Billion Cayman Islands”) asked Phase Scientific for the return of the said sum.

47.  On 29 June 2022, Phase Scientific paid USD1,999,996.12 (i.e. the USD 2 million minus bank charges) into court pursuant to the order of Master Matthew Leung dated 14 June 2022 pending the determination of the issue as to the entitlement of the said sum as between Purple Surgical and Win Billion Cayman Islands.

48.  Subsequently, Win Billion Cayman Islands defaulted in filing its defence to the claim of Purple Surgical in the interpleader proceedings. Purple Surgical obtained judgment as a result and Master J Wong ordered that a sum of USD1,999,996.12 inclusive of interest of USD31,329 be paid out of court to Purple Surgical less USD42,696 being the assessed costs of Phase Scientific.

49.  On the other hand, one Ms Leung Yuk Yee on diver dates received a total amount of HK$2,700,522 from Mr Wu and one Ms Wu Wong Lai Fong on diver dates received a sum of HK$1,195,000 from Mr Wu. On 22 September 2023, Purple Surgical commenced a High Court action under HCA 1530/2023 against both Ms Leung and Ms Wu to recover the money they had received from Mr Wu.

50.  On 12 December 2023, Purple Surgical and Ms Leung reached a settlement agreement. Ms Leung paid Purple Surgical HK$620,000 as full and final settlement of her liabilities to Purple Surgical arising from her receipt of a portion of the Earnest Money.

51.  Now I should examine the dealings between Purple Surgical and Jody. Before the termination of the SPA, Purple Surgical became suspicious about Jody. On 17 July 2020, SH made a written request to Jody for documentary proof of the balance in the Escrow Account.

52.  On 20 July 2020, Jody emailed to SH and said that the balance of the Earnest Money (after the 1^st Payment) remained to be in the Escrow Account but he was in Florida and had no access to the Escrow Account. Jody, thus, was able to provide any documentary proof.

53.  As narrated above, the reply of Jody cannot be truthful.

54.  SH further sent letters to Jody on 4 and 11 August 2020 to press for documentary proof of the balance in the Escrow Account but Jody did not reply to these letters.

55.  Feeling increasingly suspicious, Purple Surgical instructed Sheppard Mullin, its legal representatives in the United States, to deal with Jody. On 17 August 2020, Sheppard Mullin contacted Jody by phone and again Jody maintained that he was still out of town and could not have access to the bank information of the Escrow Account in California. Jody assured Sheppard Mullin that the 2^nd Payment remained in the Escrow Account. However, Sheppard Mullin’s subsequent request for a written confirmation was simply ignored by Jody.

56.  Purple Surgical through Sheppard Mullin started the US Action against Win Billion and Mr Wu in the Superior Court of the State of California for the County of San Francisco on 25 August 2020. Jody was later joined as a defendant.

57.  By the US Action, Purple Surgical managed to freeze the Escrow Account and obtain some information of the Escrow Account. The Bank of the West disclosed to Purple Surgical that the balance in the Escrow Account was only USD1,110,996.96. This showed that Jody had previously given false information to Purple Surgical, to say the least.

58.  In November 2020, the California Court granted Purple Surgical’s application for disclosure of all the records relating to the Escrow Account by the Bank of the West despite the opposition of Win Billion.

59.  On 16 February 2022, Purple Surgical reached a settlement agreement with Jody and his insurers. The settlement agreement was approved by the California Court on 15 April 2022. Upon payment of USD3,925,000 by Jody to Purple Surgical in accordance with the terms of their settlement agreement on 20 May 2022, the US Action as against Jody was dismissed.

60.  Ms Lam has helpfully provided this court with the following table giving a summary of all the recoveries and the remaining loss of the Earnest Money:

DESCRIPTION	PRINCIPAL	INTEREST
Purple Surgical's Earnest Money	USD27,000,000
Less recoveries of the Earnest Money:
The sum recovered from Strongjet on 9 December 2021 pursuant to the Order of Master Hui dated 17 November 2021	(USD4,989,981)	(USD1,985)
The sum recovered from Strongjet on 11 November 2022 pursuant to default judgment/Order of Recorder William Wong SC dated 14 October 2022, together with interest payments: Garnishee application (HSBC) Garnishee application (HSBC - 2nd) Garnishee application (Industrial Bank) Garnishee application (Bank of China)	(USD6,525,000)	(USD70,992) (USD340,019) (USD108) (USD2,862) (USD1,838)
The sum recovered from Phase Scientific in HCMP 200/2022 on 9 February 2023	(USD1,957,300)	(USD31,329)
The sum recovered from Ms Kimberly Leung on 12 December 2023 in settlement of Purple Surgical’s claims against Ms Kimberley Leung in HCA 1530/2023	(USD79,487) Sum of HK$620,000 at exchange rate of USD1 = HK$7.80
The sum recovered from Jody's insurer on 20 May 2022 in settlement of Purple Surgical’s claim against Jody in the US Action	(USD3,925,000)
Total recoveries	(USD17,476,768)	(USD449,127)
Purple Surgical’s outstanding claims for Earnest Money	USD9,523,232

61.  Based on the foregoing facts, Purple Surgical makes its claims against Win Billion and Mr Wu based on the following causes of action: (1) breach of trust, (2) breach of fiduciary duty, (3) deceit and fraudulent misrepresentation; (4) dishonest assistance; (5) knowing receipt; (6) unjust enrichment; and (7) conspiracy.

62.  As against Win Billion, Purple Surgical has an additional cause of action, namely, breach of contract.

63.  As against Smart Up, Purple Surgical’s claim is based on (1) conspiracy, (2) dishonest assistance, (3) knowing receipt; and (4) unjust enrichment.

64.  I should first focus on Purple Surgical’s claim of deceit and fraudulent misrepresentation against Win Billion and Mr Wu and the conspiracy claim against Smart Up and them. Ms Lam confirms that the primary contention of Purple Surgical is that there was a conspiracy among Win Billion, Mr Wu and Smart Up toinjure Purple Surgical by fraud.

Purple Surgical’s pleaded case of deceit and fraudulent misrepresentation and its claim based on conspiracy to injure

65.  In gist, Purple Surgical’s pleaded case of deceit and fraudulent misrepresentation against Win Billion and Mr Wu can be summarised as follows.

66.  Win Billion and Mr Wu induced Purple Surgical to pay the Earnest Money/Purchase Price to the Earnest Account by preparation of the SPA and the Escrow Agreement and the representation (“the Representation”) that Win Billion had a genuine intention to perform its obligations under the SPA and the Escrow Agreement (in particular the Joint Instruction Requirement), the prime duty being the supply of the Masks originating from 3M to Purple Surgical.

67.  Purple Surgical claims to have been induced by the Representation and acted on the Representation to enter into the SPA and the Escrow Agreement and thereafter paid the Earnest Money into the Escrow Account.

68.  Purple Surgical pleads that Win Billion and Mr Wu made the Representation fraudulently in that they knew that the Representation was false or were reckless, not caring whether it was true or false. It relies on the following particulars:

(1) At no stage did Win Billion and/or Mr Wu provide any independently verifiable evidence to Purple Surgical that Win Billion had procured any of the Masks;

(2) Win Billion and/or Mr Wu misrepresented to Purple Surgical that Win Billion had paid 3M for the Masks when they knew this was false;

(3) Win Billion and/or Mr Wu repeatedly delayed inspection of the Masks by Purple Surgical and delayed delivery of the Masks with ever-changing explanations;

(4) Win Billion and/or Mr Wu introduced Jody to Purple Surgical to act as the Escrow Agent. They then procured Jody to pay out of the Escrow Account the Earnest Money other than the 1^st Payment in breach of the Joint Instruction Requirement without the knowledge or approval of Purple Surgical; and

(5) Despite the non-delivery of any of the Masks, Win Billion has never repaid any of the 1^st Payment or the other traceable proceeds of the Earnest Money to Purple Surgical or procured Jody to repay any of the Earnest Money to Purple Surgical. Mr Wu and Smart Up have also failed to repay any of the sums they received that are traceable proceeds of the Earnest Money, but have used such sums for their own benefit.

69.  For the conspiracy claim made against Win Billion, Mr Wu and Smart Up, Purple Surgical pleads that they wrongfully and with intent to injure Purple Surgical by unlawful means conspired and combined together to defraud Purple Surgical. Purple Surgical relies on the same particulars and the following additional matters:

(1) Mr Wu being the sole director of Win Billion knew that Win Billion never had a genuine intention to perform its obligations under the SPA and Escrow Agreement;

(2) Tony and/or Mr Wu on behalf of Win Billion gave instructions to Jody to make payments out of the Escrow Account to Win Billion and Strongjet in breach of the Joint Instruction Requirement without the knowledge or approval of Purple Surgical;

(3) Mr Wu gave instructions on behalf of Win Billion for payment out from the UOB Account to, among other persons, Mr Wu, Strongjet and Smart Up; and

(4) Win Billion, Mr Wu and Smart Up were aware that Purple Surgical had paid the Earnest Money as a result of the fraudulent misrepresentations of Win Billion and/or Mr Wu.

Purported Defence to Purple Surgical’s claim in deceit and fraudulent misrepresentation and conspiracy claim

70.  In their Amended Defence dated 5 October 2021, Win Billion, Mr Wu and Smart Up deny Purple Surgical’s claim in deceit and fraudulent misrepresentation and its conspiracy claim. They aver that Win Billion and Mr Wu had a genuine intention to fulfil the obligations of Win Billion under the SPA.

71.  They even complain that Purple Surgical wrongfully terminated the SPA. It is asserted that under the SPA, time was not of the essence for the delivery of the Masks and Win Billion’s obligation was only to deliver the Masks within a reasonable time. They contend that the SPA was terminated prematurely.

72.  They plead the following account of what Win Billion had purportedly done to fulfil the SPA.

73.  First, by way of background, Mr Wu alleged one Wang Yin Ying (“Yin Ying”) who was a lawyer in the Mainland informed Jessica Qu and him that a party (Purple Surgical) was interested in purchasing the Masks on or around 17 May 2020. Jessica Qu was a colleague of Mr Wu and an executive director of Starlight International Capital Group Limited solely owned by Mr Wu.

74.  On the same day, a WeChat message group (“the WeChat Group”) was formed among Mr Wu, Yin Yang, Jessica Qu and other intermediaries to facilitate discussion concerning the intended sale of the Masks to Purple Surgical.

75.  On the other hand, before the entry of the SPA, in May 2020, Tony was referred to YG Tech Ltd (“YG Tech”), a South Korean company, purported to be a distributor of 3M products including the Masks by his business associate known as Mr Xu.

76.  At or around the same time, Win Billion contacted Utility Sugar Trading Ltd (“Utility Sugar”) which is a local company. There was a draft agreement between Utility Sugar and Win Billion dated 19 May 2020 whereby Utility Sugar represented that it could source the Masks from YG Tech.

77.  Win Billion was therefore convinced that YG Tech could supply the Masks to Win Billion for the purpose of the SPA. On 25 May 2020, Win Billion entered into a sale and purchase agreement with YG Tech (“YG Tech SPA”) whereby YG Tech agreed to sell to Win Billion the Masks at the price of USD 14.5 million with part of contract payment of USD247,500 (“the Contract Payment”).

78.  In the YG Tech SPA, it was expressly provided that all financial, commercial and other information connected with the agreement shall be considered confidential. It was further provided that the parties shall take all necessary and reasonable measures to prevent divulgence of the received information to any other parties and only under mutual agreement the parties shall be entitled to disclose the information to other parties where necessary.

79.  On 2 June 2020, YG Tech issued a proforma invoice bearing the “3M” logo and purportedly from 3M Co. Ltd in the United Kingdom to Win Billion for the Contract Payment (“the YG Tech Invoice”).

80.  On 5 June 2020, Win Billion remitted the Contract Payment from the UOB Account to 3M Georgia LLC in its bank account with the Bank of Georgia (“the 3M Remittance”).

81.  On or around 12 June 2020, YG Tech showed to Win Billion an email purportedly sent from 3M to Mr Yoo of YG Tech whereby 3M informed YG Tech that shipment in the UK would be delayed until further notice “due to a last minute cancellation of one key component for the product from the raw material supplier.”

82.  On 15 June 2020, YG Tech informed Win Billion that it would stop signing the contract and a new company, Dumb & Dumber Co. Ltd (“D & D”) would sign a new agreement with Win Billion for the supply of the Masks in its stead, which would be guaranteed by YG Tech.

83.  On 16 June 2020, the 3M Remittance was returned to Win Billion. It was stated in the written advice from UOB dated 11 June 2020 that the payment was returned due to “internal policy”.

84.  As a result, on the same day, Win Billion entered into a new sale and purchase agreement with D & D for the supply of the Masks at the price of USD 14.5 million (“the D & D SPA”).

85.  The terms of the D & D SPA are by and large identical to those of the YG Tech SPA.

86.  After the signing of the D & D SPA, Tony on behalf of Win Billion dealt with Erika Cheng (“Erika”) who was a representative of YG Tech to complete the transaction.

87.  On 17 June 2020, Erika provided an invoice for USD725,000 to Purple Surgical. Erika represented to Tony that D & D had provided an initial deposit of USD247,500 to 3M and further presented an invoice purportedly issued by 3M to D & D dated 16 June 2020 (“D & D 3M Inovice”).

88.  Moreover, Purple Surgical claims to have received the following emails (“the Emails”) purportedly sent by 3M to Mr Yoo providing updates of the delivery progress of the Masks:

(1) By an email dated 18 June 2020, Mr Yoo was informed that shipment will be ready on 25 June 2020 and delivery to the airport in Birmingham would take place before 30 June 2020.

(2) By an email dated 30 June 2020, Mr Yoo was informed that there were more delays to the shipment due to the fact that valves of the Masks provided by an alternative supplier did not pass quality control. The earliest possible delivery time would be around mid-July 2020.

(3) By an email dated 15 July 2020, Mr Yoo was informed that SGS inspection would be arranged and shipment would take place early the week after.

(4) By an email dated 27 July 2020, Mr Yoo was informed that in-house testing was still ongoing due to some testing equipment not being available, and further updates on the progress would be provided “these few days.”

89.  It is pleaded that Win Billion and Mr Wu had taken reasonable steps and acted in good faith to provide all available updates to Purple Surgical on the status of the Masks and the SPA based on the information provided by YG Tech and D & D. All the Emails and the 3M Remittance were provided to Purple Surgical albeit they were heavily redacted due to Win Billion’s confidentiality obligations under the YG Tech and D & D SPAs.

90.  It should be noted that all these documents are controversial.

91.  The defence goes on to say that despite the wrongful termination of the SPA by Purple Surgical, Win Billion continued to make efforts to source the Masks for Purple Surgical. First, on 7 August 2020, Purple Surgical advanced USD725,000 to D & D as deposit for the Masks after YG Tech/ D & D had represented to Tony that the Masks had been produced and delivered to Birmingham in late July 2020.

92.  However, on 11 September 2020, D & D informed Win Billion that the stocks of Masks originally reserved to Win Billion had been resold already and an additional deposit was required from Win Billion for a new order.

93.  Eventually, Mr Wu procured Sing Kong Supply Chain Management Company Limited (“Sing Kong”) to supply to it 850,220 units of the Masks for the purpose of the sale of the same to Purple Surgical. Inspection of the same by Bureau Veritas BIVAC Asian CRE (Shanghai) Inspection Co., Ltd was completed on 9 November 2020. Upon completion of such inspection, Win Billion agreed to purchase the units of Masks from Sing Kong in order for the same to be supplied to Purple Surgical. It is pleaded that the intention of Win Billion and Mr Wu has always been to supply the Masks to Purple Surgical pursuant to the SPA.

94.  By reason of their genuine intention to complete the transaction, there cannot be any conspiracy among Win Billion, Mr Wu and Smart Up to injure Purple Surgical.

Relevant legal principles

95.  Before examining and evaluating the material evidence, it is helpful to remind myself of the legal principles germane to these pleas of Purple Surgical.

96.  The tort of deceit consists of the following elements:

(1) A false representation by X to Y;

(2) the knowledge of X that the representation is false or the absence of belief in its truth, or the recklessness as to its truth;

(3) the intention of X that Y would rely on the representation;

(4) the reliance of Y on the representation; and

(5) Y’s acting to his detriment as a result of such reliance.

      See: Tort Law & Practice in Hong Kong (3^rd ed), §23.001

97.  What a person promises to do in future can be a representation of his present intention for future conduct. This comes within the ambit of an existing fact: see Edgington v Fitzmaurice (1885) 29 Ch D 459 at p.483.

98.  In Edgington, Bowen LJ said this at pp.481-482,

“In order to sustain his action he must first prove that there was a statement as to facts which was false; and secondly, that it was false to the knowledge of the Defendants, or that they made it not caring whether it was true or false. For it is immaterial whether they made the statement knowing it to be untrue, or recklessly, without caring whether it was true or not, because to make a statement recklessly for the purpose of influencing another person is dishonest.”

99.  Fraud is proved upon finding of deceit. When it is shown that a false representation has been made knowingly, or without belief in its truth or recklessly, careless whether it be true or false, a claim in fraud is established: Derry v Peek (1889) 14 App 337.

100.  A director attracts personal liability for his own fraud where he was effectively the mind of the company and where he made the fraudulent representation knowingly, even if the company itself is liable for the deceit: Contex Drouzhba Ltd v Wiseman [2008] BCC 301 at §14.

101.  In Pido v Compass Technology Co Ltd [2010] 2 HKLRD 537, §13-17, Ma CJHC (as he then was), after a review of the authorities including Lonrho Plc v Fayed [1992] 1 AC 448, set out the essential elements of a claim based on conspiracy: (i) there is an agreement between two or more persons; (ii) there is an intention to injure the plaintiff by unlawful means whether or not it is the predominant purpose; (iii) the acts were carried out pursuant to the agreement and the stated intention; and (iv) there is damage caused to the plaintiff as a result.

102.  In Apple Inc v Proview International Holdings Ltd, HCA739/2010 (unreported, 14 July 2011), Poon J (as he then was) said this at §32,

“A company, being a separate legal person, can conspire with its directors; and the knowledge of the company may be found in a director who has management or control for the transaction or act in question.”

Discussion

Comments on parties’ evidence generally

103.  Only Mr Sharpe and Mr Wu testified in the witness box. The evidence of Mr Sharpe was not subject to any meaningful challenges in cross-examination. His evidence was largely supported by contemporaneous documents. Mr Sharpe sounded confident in his answers and appeared to be forthcoming in his oral testimony. I am satisfied that he was a reliable and truthful witness and I have no difficulties in accepting his evidence in its entirety.

104.  In stark contrast, I can hardly have any confidence in the testimony of Mr Wu. For those matters of peripheral concern not covered by any evidence of Purple Surgical, Mr Wu was articulate and eloquent and he tended to give lengthy and detailed answers.

105.  However, Mr Wu was clearly evasive on important matters and was unable to answer pertinent questions. He did not hesitate to shirk responsibility by saying that Tony was the key figure acting on behalf of Win Billion in procuring the execution of the SPA and the performance of the same and it was Tony who dealt directly with the suppliers.

106.  Inconsistencies between Mr Wu’s oral evidence and his witness statements, his disposition in the US Action and indisputable contemporaneous documents abound. Mr Wu did not appear to be troubled by such inconsistencies when challenged cross-examination. He often replied that he had no further explanation and more often he blamed his former solicitors.

107.  Mr Wu was also unable to produce documents of obvious importance to prove the defence case. The authenticity of those documents he managed to provide was seriously, and quite righty, challenged. Mr Wu was never short of excuses and he often found his former solicitors a convenient scapegoat.

108.  I shall delve into his evidence below. At this juncture, I should make it clear that I am not prepared to accept any of Mr Wu’s evidence unless it is collaborated by credible contemporaneous documents.

Evidence before the entry of the SPA and the Escrow Agreement

109.  Before deciding on the bona fide of Win Billion in procuring the creation of the SPA and the Escrow Agreement, it is necessary to examine all the background facts about Mr Wu, Tony and Win Billion.

110.  Mr Wu first worked in the insurance industry after graduation from the university. He became the District Director of Prudential Hong Kong Limited. He quitted in 2010 and thereafter has engaged in various business ventures. He set up an insurance brokerage firm. In 2015, he set up a capital management company in Hong Kong known as Starlight. He has solid experience in the business world and should not be unfamiliar with handling commercial contracts.

111.  Purple Surgical was able to find out more about the personal financial situation of Mr Wu at the relevant time. Mr Wu actually had some legal actions to deal with and his hands should be quite full.

112.  First, on 14 November 2017, Manulife (International) Limited (“Manulife”) an action against Mr Wu under HCA 2605/2017 to claim for unpaid loans and advances during his employment in the amounts of HK$1,774,236.53 plus interest and costs. Judgment was entered against Mr Wu in or about March 2018.

113.  On 24 of September 2019, on the strength of the judgment debt, Manulife issued a bankruptcy petition under HCB 5819/2019 against Mr Wu. In the petition, it was alleged that Mr Wu only paid HK$450,000 toward the judgment debt leaving a balance of HK$1,526,537.00 unsatisfied to.

114.  On the other hand, one Choy Ka Man (“Choy”) issued a writ of summons in DCCJ 1886/2019 on 12 April 2019 against Mr Wu to claim for repayment of a personal loan of HK$400,000 advanced to him in 2017.

115.  Choy obtained judgment against Mr Wu on 3 July 2019. Mr Wu was only able to pay HK$120,000 in partial satisfaction of the judgment debt. In the subsequent enforcement action, Choy obtained a charging order dated 10 October 2019 against the residential property of Mr Wu. The charge was duly registered on 24 October 2019.

116.  To get rid of the bankruptcy petition and the charge against his residential property, Mr Wu took out a second legal charge over his residential property with Fortune Capital Strategy Limited (“Fortune Capital”) on 7 January 2020. Fortunate Capital apparently granted a credit facility of HK$3.83 million to Mr Wu.

117.  With this credit facility, Mr Wu managed to get Manulife to withdraw the bankruptcy petition on 13 January 2020 and to cause Choy to discharge the charge against his residential property on 23 January 2020.

118.  Mr Wu was only able to pay off the outstanding loan owed to Fortune Capital after the receipt of a portion of the Earnest Money.

119.  In cross-examination, after being asked about all these legal actions and financial liabilities, Mr Wu agreed with Ms Lam that he was in fact in dire financial straits at the time of the SPA.

120.  Win Billion did not fare better. It was incorporated in May 2018. Mr Wu accepted that there were not many profits from any business in the year of 2020.

121.  Mr Wu asserted that there had never been any accounts, audited or not, prepared for Purple Surgical. He explained that there were not many transactions and only a little profits, less than hundreds of thousands, had been made. Most of such deals were completed by Tony.

122.  Mr Wu said that in light of the Covid-19 pandemic in 2020, Win Billion started trading in medical equipment including non-woven fabrics and PPE products by the supply of such products through other third-party distributors and manufacturers.

123.  However, there is a complete lack of documents evidencing the alleged business activities.

124.  Win Billion holds accounts with two banks, namely, UOB and DBS Bank (Hong Kong) Limited (“the DBS Account”). It can be seen from the bank statements of the UOB Account that as at 31 May 2020, the credit balance of the account is about HK$350,000.

125.  Win Billion has not produced the bank statements showing the balance in the DBS Account prior to the entry of the SPA.

126.  I now turn to Tony. Little is known about his personal background. The pleaded case is that Tony was the business partner of Mr Wu and he acted on behalf of Win Billion. On the other hand, Mr Wu in his affirmation stated that Win Billion was mainly an investment vehicle for overseas business established by Tony and him.

127.  According to Mr Wu, Tony has high-level business connections with Chinese national corporations. He relied on Tony to assist Win Billion in sourcing sellers and/or distributors of medical equipment.

128.  Mr Sharpe did not have any communication with Tony. Mr Sharpe did not know that Tony was involved in the transaction.

129.  For Jody, Mr Wu made an obvious effort to distance himself from him. In the pleaded case, it is asserted that Jody was not a legal representative of Win Billion and/or Mr Wu. They had never represented to Purple Surgical that Jody acted on behalf of Win Billion and Mr Wu.

130.  In his evidence, Mr Wu claimed that Tony introduced Jody to Win Billion to act as the Escrow Agent under the SPA. However, Mr Wu denies that Jody acted for Win Billion. He claims that he had never spoken to him personally and he relied on Tony to communicate with Jody. It was Tony who gave instructions to Jody for making the payments out of the Escrow Account.

131.  In the messages of the WeChat Group generated on or about 17 May 2020, it can be seen that Mr Wu referred Jody as his lawyer and it was Mr Wu who suggested that payment should be made to the escrow account of “my lawyer”.

132.  On 22 May 2020, Mr Sharpe received an email from Jody. There, Jody referred Win Billion as his client.

133.  For completeness, Mr Wu called Ms Rosy Chan of SH on 7 July 2020 and told her that Jody, his lawyer, had advised him not to speak to the solicitors of Purple Surgical.

WIN BILLION a bona fide supplier?

134.  Returning to the crux of the dispute, I find Mr Wu to be an untrustworthy witness being very economical with the truth. It is plain and obvious to me that Mr Wu had no genuine intention whatsoever to cause Win Billion to perform the SPA and the Escrow Agreement when contracting with Purple Surgical for the following reasons.

135.  Firstly, it is inherently improbable that Win Billion and/or Mr Wu would delegate the task of fulfilling the SPA almost entirely to Tony and abstain from taking an active part in the transaction.

(1) Before the creation of the SPA, the financial condition of Mr Wu was poor. He was under serious stress in view of the legal actions against him and his home property was jeopardised.

(2) The SPA was the biggest deal in his trading career. It came at a time when he badly needed money. The resultant sizeable profits made out of the SPA must be a strong incentive for Mr Wu to work tirelessly to ensure that the profits would eventually go to his pocket so that he could break away from his financial plight.

(3) On the other hand, Mr Wu, a seasoned businessman with extensive experience in handling commercial contracts, should know very well that if Win Billion was unable to complete the transaction, there would be grave legal and financial consequences and Win Billion would be liable to cover the loss of Purple Surgical which could be very substantial.

(4) The Masks were rare commodities at that time when there was a huge demand of such products worldwide. Governments of many countries all over the world took an active part in sourcing surgical masks for their citizens to combat Covid-19. This is exactly the case here and the Masks were for the NHS. Mr Wu must be alive to the urgency of the need of the Masks too.

(5) Against this background, fulfilment of the contractual duties under the SPA was no mean feat and it should indeed be a daunting task for Win Billion. Neither Mr Wu nor Win Billion had ever dealt in medical products before. Nor is there any evidence that Tony had ever handled similar sales and had any business relationship with 3M himself. There is no basis of any trust and confidence of Mr Wu in Tony that he could single-handedly source the Masks under such severe time constraint. It is unbelievable that Mr Wu would simply give Tony a free hand to complete the transaction.

(6) Tony was not even in the WeChat Group meaning that he was not involved at the initial stage. There is no reason why Mr Wu would refrain from liaising with the purported suppliers himself and just let Tony step in and take over the entire task of performing the SPA.

136.   Secondly, there is no reason why Win Billion and Mr Wu did not enlist assistance from Tony by way of either testifying at trial for them or disclosing more relevant documents to support the defence case.

(1) In cross-examination, Mr Wu agreed with Ms Lam that Tony had caused Win Billion, Mr Wu and Smart Up substantial loss by causing unauthorised transfers out of the Escrow Account. When Mr Wu was asked whether he had ever contemplated suing Tony, he said, rather perplexingly, that his bank account was frozen.

(2) Mr Wu also said that he and Tony were still on speaking terms and Tony was still contactable. Mr Wu even claimed that Tony had a conference with him and his former solicitors and they discussed about preparation of a witness statement for this action. There is simply no reason why Mr Wu did not procure Tony to testify. Tony should be in the best position to explain what steps Win Billion had taken to perform the SPA with reference to all those documents produced by Win Billion. This would show that Win Billion was a bona fide supplier under the SPA and his evidence would be fundamental to the defence case.

(3) Furthermore, Win Billion only disclosed a few texted messages exchanged between Tony and Mr Wu. And the disclosure seemed very cautious and selective. There should be a large number of such materials and they must have very frequent communications during the currency of the SPA which represented the biggest business of their partnership. Their conversations would be very telling as to how they caused to Win Billion to perform the SPA.

(4) When asked about this inadequate disclosure, Mr Wu first claimed that he had lost his phone and thus he no longer had such messages. This is hardly acceptable. Even in the improbable event that there was no backup of such messages, he could simply ask Tony to send him back all such messages to support the defence case.

(5) And Mr Wu proffered another excuse. He was reminded that in his disposition made in the US Action, he claimed that he had given a vast amount of messages, WeChat messages and emails to his former solicitors. Mr Wu again blamed his former solicitors and claimed that due to their inexperience, they failed to disclose such documents in these proceedings. This is wholly unreasonable. Even his former solicitors for whatever reasons have failed to disclose such documents, his current solicitors no doubt should remedy the situation and seek to produce them to strengthen the defence case. This court suggested to Mr Wu that he might consider making an application albeit late to disclose such material documents and he did not do anything in this regard. His inaction is telling. He only made up excuses and he had no supportive documents to produce.

(6) Ms Lam submits that due to the failure to call Tony as a witness and/or to produce documents which relate to his exchanges with Mr Wu, coupled with a lack of any plausible explanation for such a failure, this court is fully entitled to and ought to draw adverse inferences against Mr Wu, see Tjang Siu Thu v Profield Construction Engineering Ltd [2015] 5 HKC 22, §33; Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340; and Telings International Hong Kong Ltd v John Ho (CACV 10/2010, 22 October 2010), §79.

(7) Her submission must be correct. I am satisfied that I could draw the inference that Tony, allegedly responsible for sourcing the Masks for the SPA, could not give any useful evidence of his purported performance of SPA on behalf of Win Billion. There is evidently no such evidence. Win Billion never made any genuine effort to supply the Masks to Purple Surgical.

137.   Thirdly, the evidence produced by the defence relating to the sourcing of the Masks is dubious and does not bear scrutiny.

(1) The SPA involved a mega business deal. Win Billion contracted with Purple Surgical to supply the Masks in huge quantity originating from 3M, a reputable international manufacturer for the use of a governmental medical institution in England. It is only reasonable to expect Win Billion would make an all-out effort and deal with credible suppliers to fulfil its obligations under the SPA. The evidence of its purported sourcing effort is, however, hopelessly inadequate and utterly incredible.

(2) Win Billion relied on YG Tech to supply the Masks. In the first place, even on its own case, the way Win Billion got rid of Utility Sugar and dealt with YG Tech directly for a bigger profit margin shows that the commercial morality of Win Billion was questionable.

(3) YG Tech is in itself suspect. In his email sent to Mr Sharpe on 13 June 2020, Mr Wu represented to Mr Sharpe that Win Billion had sourced the Masks through a Korean company called YG Tech which was an official 3M distributor in South Korea. He added that YG Tech was “our associated company”. Clearly, Mr Wu did not tell Mr Sharpe the truth. To start with, if the YG Tech SPA was signed on 25 May 2020, there is no reason why Mr Wu only disclosed the identity of YG Tech to Purple Surgical almost three weeks later. Moreover, Mr Wu had to accept that YG Tech was not in any way associated with Win Billion. The investigation carried out by Purple Surgical through SH reveals that YG Tech is merely a sole trader registered in its Certificate of Business Registration dated 16 March 2020 as a lamp and lightbulb business. When confronted with this finding, Mr Wu asserted that YG Tech had changed its business and now traded in medical products. I find it improbable that YG Tech could change its business into an entirely different area and thence become a 3M authorised distributor in South Korea 2 months later. This change of business should be reflected in its Certificate of Business Registration too. I cannot accept Mr Wu’s assertion.

(4) It follows that YG Tech could never be a supplier of the Masks. All the alleged subsequent communications between YG Tech and 3M including the Emails must be falsified documents. Mr Wu forwarded such communications to Mr Sharpe to make him believe that Win Billion was performing the SPA while dissipating the Earnest Money for his personal use.

(5) The whole story of Win Billion’s performance of the SPA is beyond belief. Given the analysis above, it is really not necessary to set out all other inexplicable and unbelievable features here. For completeness, I would only highlight the following matters.

(6) In the YG Tech SPA, YG Tech was required only to supply the Masks with the country of origin to be confirmed whilst under the SPA, the Masks must be manufactured in the United States. There was no certainty that the masks supplied by YG Tech would satisfy the contractual requirement of the Masks under the SPA.

(7) The unilateral switch from YG Tech to D & D as the purported supplier of Win Billion looked improbable in the business world. It was made on 15 June 2020 when Purple Surgical was already pressing hard for delivery. Mr Wu had confirmed that delivery would be on 17 June 2020. I do not understand why YG Tech said in its letter of the even date that it would stop signing the contract too. The YG Tech SPA had already been executed and the parties had signed thereon. Moreover, Win Billion and Mr Wu could not have accepted this arrangement. He should know that he was not shopping in a flea market where he might readily switch to another stall nearby to buy the same products.

(8) When pressed by Mr Sharpe for proof of Win Billion’s payment to the authorised 3M dealer on 30 June 2020, Mr Wu sent to Mr Sharpe a redacted transfer advice showing the 3M Remittance. Apparently there was a transfer of USD247,545.25 from the UOB Account to “3M Georgia LLC”.

(9) However, Mr Wu did not disclose to Mr Sharpe that the same payment had already been refunded to Win Billion on 16 June 2020. Mr Wu deliberately misled Mr Sharpe by withholding this information. He could not give any plausible explanation why he did so.

(10) Subsequently, it was found out that 3M Georgia LLC is only a company registered in Georgia, Eastern Europe and has nothing to do with 3M. Alarmingly, the photos of its business address showed that it is an automobile maintenance centre in Tbilisi, the capital of Georgia. Mr Wu could say nothing about this. It was clearly a scam.

(11) The redaction of such documents sent to Purple Surgical by Mr Wu was said to be necessary owing to the confidentiality provision in the YG Tech SPA. It, however, does not explain why even those documents purportedly originating from 3M including the D & D 3M Invoice and its written apology (“the 3M Apology”) in its email dated 12 June 2020 were redacted as well. Mr Wu sought to explain that in dealing with 3M, he found that certain information in a lot of contracts and invoices were redacted and he had once asked a 3M distributor in Vietnam why redaction was needed. The 3M distributor told him that the official information of 3M was too sensitive and 3M feared that the general public would contact it directly. I note that this explanation was not given to Mr Sharpe and was not included in any of his affirmations and witness statement. In any event, this does not make sense at all. There is no reason why such redactions should not be removed when the documents are being adduced as evidence to be used solely for litigation purpose. It is clear that Mr Wu merely made this up.

(12) In passing, I should point out that I could not believe that 3M made the written apology for the delay of making the shipment pursuant to the demand of Purple Surgical after such a demand was made less than 24 hours ago. 3M is not a small local business entity and it is unrealistic to expect that it would accept any liability in writing so readily. More importantly, there was no contractual relationship between 3M and Purple Surgical at all and 3M had no reason to make such an apology. Only Mr Wu knows the actual provenance of the 3M Apology.

(13) I have no idea why the falsified documents required redaction. The information in such documents was false anyway. Perhaps the fraudsters producing such documents believe that the redaction would make such documents appear to be genuine.

138.   Fourthly, the way that Mr Wu handled and/or dissipated the Earnest Money indicates that he had no intention to cause Win Billion to honour the SPA and the Escrow Agreement. I only need to give these examples.

(1) On 10 June 2020, Jody paid Win Billion out of the Escrow Account a sum of USD 3 million. Mr Wu was aware of the receipt of the USD 3 million. However, he claimed that he did not know that it came from the Escrow Account.

(2) Mr Wu’s purported ignorance must be rejected. Mr Wu explained that he had asked Tony to pay him some profits in advance so that he could make investments in some companies. He forgot that he himself was then in very poor financial condition and that Win Billion had had no significant business before the SPA. He claimed to believe that the said sum was gained from other transactions done by Tony and him. However, he could not identify any transactions which had been completed or near completion. This is inconceivable. Mr Wu must be interested to know which transaction other than the SPA would bring him such a huge profit. Mr Wu should have asked Tony about the details of the alleged transaction.

(3) Of course Mr Wu knew that the said sum came from the Escrow Account. There could be no other source. Mr Wu must be aware that it was against the Joint Instruction Requirement for Jody to pay the said sum to Win Billion. He must be alarmed and should refuse to accept the said sum if he was a decent businessman having a genuine intention to honour the SPA and the Escrow Agreement.

(4) Mr Wu was unable to disclose any communication with Tony and/or Jody in relation to the transfer of the said sum. Nor did he ask Jody to testify for him to give an account about the transfer apparently in breach of the Escrow Agreement so as to exonerate him. Such a failure could only point to the fact that Mr Wu was acting in concert with Jody in regard to this unauthorised transfer.

(5) Next, Mr Wu paid HK$1,000,000 to Polar Pay Ltd on 5 June 2020 and the sums totalling HK$2,000,000 to Easypasscorp Ltd on 4 June and 10 July 2020 respectively. Mr Wu cannot even produce the receipts of Polar Pay Ltd and Easypasscorp Ltd.

(6) Mr Wu now claimed that these payments were “tea money” payments made to some anonymous military leaders in the Mainland. This explanation is inconsistent with his earlier evidence given by way of his affirmation and his deposition in the US Action. In his 4^th Affirmation, Mr Wu said that the payments were for “business associate’s profit”. In his deposition in the US Action, Mr Wu stated that the payment to Polar Pay Ltd was for payment of expenses in Mainland China.

(7) Mr Wu explained that Tony had advised him that such tea money was required because the anonymous military leaders could procure the supply of the Masks for Win Billion. Such military leaders had to be anonymous because their activities were very sensitive.

(8) This explanation is simply absurd. I cannot understand and there is no credible evidence to show how such military leaders could be involved in the trade of 3M’s medical products. Mr Wu also forgot his earlier version as to how he came to know YG Tech. In his witness statement, he stated that YG Tech was introduced to Tony by Mr Xu. YG Tech contracted to supply the Masks to Win Billion as early as 25 May 2020. The anonymous military leaders played no part in the sourcing of the Masks at all.

(9) Mr Wu was quick to make a merger of these two different versions in the witness box. He explained that Mr Xu had actually been appointed by the military leader to assist him. I cannot accept his new story. He forgot that he had also stated that he came to know YG Tech when dealing with Utility Sugar and he was able to deal with YG Tech through Utility Sugar without the assistance of the military leaders.

(10) On 4 June 2020, Smart Up received USD100,000 from Win Billion and an additional total sum of HK$4,431,380 from Mr Wu. These payments were made for no discernible purpose. I reject Mr Wu’s explanation that Smart Up was entitled to these sums under a consultancy agreement dated 19 May 2020 regarding the supply of the Masks to Purple Surgical pursuant to the SPA for an intermediary remuneration of USD300,000.

(11) Ms. Lam submits that Smart Up could not serve as a consultant to Win Billion given the fact that Mr Wu is their common sole director and shareholder. More importantly, Win Billion had no intention whatsoever to look for a genuine supplier to fulfil the SPA at all and Smart Up could not provide any service of value to Win Billion. Mr Wu could not explain why Smart Up had received more than the stipulated reward under the purported consultancy agreement at the end. The purported consultancy agreement is merely a sham in my view. Smart Up is merely another business vehicle of Mr Wu to receive and dissipate the Earnest Money.

(12) On the other hand, from 3 June 2020 to 3 July 2020, Win Billion transferred a total sum of USD3,766,591.74 to Mr Wu. Mr Wu said that these sums were dividends paid to him as shareholder of Win Billion. In cross-examination, Mr Wu said he pinned all his hopes on the SPA and expected to make a large profit. Therefore, Win Billion saw fit to declare dividends. Ms Lam submits that this explanation is preposterous and I agree with her.

(13) Even on his own evidence, Win Billion was then nowhere near securing the Masks to be supplied to Purple Surgical within the lead time of 7 to 10 business days after the receipt of the 1^st Payment. As stated earlier, Mr Wu had confirmed to Purple Surgical in his email that delivery could be made on 20 June 2020. The 3M Remittance was returned without credible explanation. YG Tech decided to jump ship and let D & D took over the deal with Win Billion. D & D was only incorporated on 3 June 2020 in South Korea and it is hard to believe that it was already an authorised distributor of 3M. Mr Wu even told Purple Surgical that Win Billion intended to sue 3M for non-delivery of the Masks. Against this background, it is inexplicable how Mr Wu could still believe that Win Billion could complete the transaction in accordance with the SPA and was confident that Win Billion would be able to gain the profit under the SPA legitimately. Mr Wu could not believe that such dividends were declared in the circumstances.

(14) It can also be seen that after the receipt of the 1^st Payment, Win Billion did not reserve any part of the Earnest Money to purchase the Masks so as to supply the same to Purple Surgical. The 3M Remittance turned out to be a farce. There is no evidence that Win Billion has ever settled the D & D 3M Invoice. Mr Wu was quick to use such portions of the Earnest Money transferred to him for his personal use including paying off his outstanding debts owing to Fortune Capital in the sum of HK$158,693 on 3 June 2020 and HK$3,915,317.20 on 12 June 2020. Obviously, Mr Wu was just too happy with the 1^st Payment without making any genuine effort to use any portion of the same to fulfil the obligations of Win Billion under the SPA. There is no evidence of any such payment to buy a single mask.

(15) Lastly, Mr Wu’s reliance on Sing Kong to supply the Masks to Purple Surgical is misconceived. Mr Wu had the audacity to make the offer to supply the Masks through Sing Kong in November 2020, long after the termination of the SPA in July 2020.

(16) In fact, in early September 2020, the son of Mr Sharpe saw a post on LinkedIn by a broker in Chad, Africa offering to sell 5 million units of the Masks and such masks were currently in Hong Kong. Further investigation has revealed that Sing Kong was the ultimate supplier. Mr Wu being one of the directors of Sing Kong should know that such masks, if ever existed, should be supplied to Purple Surgical in September 2020 as a matter of urgency to remedy the breach of the SPA on the part of Win Billion and should not be offered to the general public. The offer of Sing Kong on LinkedIn is fishy indeed and appears to be another scam.

(17) There is also not a shred of evidence to support Mr Wu’s allegation that the Masks sourced from Sing Kong were still in the warehouse and were ready for delivery as at 7 September 2022, the date of his witness statement.

139.  For these reasons, I have no hesitation in rejecting the evidence of Mr Wu in its entirety except those supported by undisputed documentary evidence, which is very rare. I am not prepared to further analyse his evidence particularly those relating to the fourth layer of payment of the Earnest Money. He simply used the Earnest Money as if it were all his personal monies without any intention to purchase the Masks for Purple Surgical. Ms Lam in her closing submissions has literally left no stone unturned to expose the numerous lies that Mr Wu told throughout the 4 days in the witness box. Suffice it to say, I am in total agreement with her analysis.

140.  On the incontrovertible evidence adduced by Purple Surgical and in the absence of any credible evidence of the defence, I come to the conclusion that Win Billion through Mr Wu knowingly made the Representation to Purple Surgical that Win Billion intended to perform the SPA and the Escrow Agreement. Purple Surgical relied and act upon the Representations and paid the Earnest Money to the Escrow Account. The Representation was false and Purple Surgical has suffered financial loss in the sum of USD9,523,232.

141.  I conclude that the tort of deceit and fraudulent misrepresentation is established by compelling evidence. Mr Wu and Win Billion are inseparable in this matter. Mr Wu being the controlling mind of Win Billion knowingly procured and directed Win Billion to commit the tort. He must be personally liable together with Win Billion. I, therefore, hold that the tort was committed by both of them jointly and both of them are liable.

142.  As Lord Bingham said in HIH Casualty and General Insurance Ltd. v Chase Manhattan Bank [2003] 1 All ER (Comm) 349 at §15, fraud unravels all and once fraud is proved, it vitiates all judgments, contracts and or transactions whatsoever. Rescission is in order.

143.  As regards the claim based on conspiracy to injure by unlawful means, I am satisfied that Mr Wu, Win Billion and Smart Up agreed to work in cohort and conspired to deceive Purple Surgical into paying the Earnest Money pursuant to the SPA by the Representation. After receiving the 1^st Payment, knowingly in breach of the SPA and the Escrow Agreement, Mr Wu caused payments to be made out of the Escrow Account for their own use to the detriment of Purple Surgical. Purple Surgical has suffered financial loss as a result.

144.  In the premises, I hold that the conspiracy claim against Win Billion, Mr Wu and Smart Up is also made out on the evidence.

145.  All the other causes of action pleaded by Purple Surgical become academic in light of my foregoing conclusions. I do not find it necessary to deal with them any further.

Conclusion and costs

146.  For the reasons given, the claim of Purple Surgical against Win Billion, Mr Wu and Smart Up must succeed. Purple Surgical must be indemnified against all its loss caused by its entry to the SPA induced by fraud. I order that judgment be entered against Win Billion, Wu and Smart Up for the sum of USD9,523,231.40.

147.  I also order that all the injunction orders be continued until further order.

148.  This is a case of serious and complex fraud involving oversea participants. At least a Georgian business entity together with its account with a bank in Georgia and a lawyer in the United States other than Mr Wu and Win Billion were involved. Quite a few forged documents were produced. I do not believe that Mr Wu perpetrated the fraud on his own. He basically deflected all the blames to Tony and his former solicitors. Not being sarcastic or cynical, I cannot say with any certainty whether Tony is a real character or whether Tony is the real name. Mr Wu was determined not to tell the truth in his testimony and he just lied extensively and casually.

149.  In view of the gravity of the fraud and the egregious conduct of the defence, I make an order nisi that Purple Surgical’s costs of this action including all costs reserved be paid by Win Billion, Mr Wu and Smart Up, to be taxed if not agreed, on an indemnity basis, with a certificate for two counsel.

150.  Lastly, I thank Ms Lam, Mr Luxton and Mr Zhu for their able assistance in this matter.

Annex