DBS BANK (HONG KONG) LTD v. TIAN WEN QUAN

HCA 3228/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3228 OF 2016

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D E C I S I O N

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1.  By a decision of this court dated 12 October 2017 (Decision), it was held that there was no serious issue to be tried in respect of the Bank’s[1] proprietary claims and the Payment was released to Tian.

2.  This is the Bank’s application for leave to appeal against the Decision and a stay of execution pending appeal.

3.  There are 3 issues raised in the draft Notice of Appeal, namely:

(1) an issue of law whether, in light of the illegality of the Transaction under Mainland law, Tian could rely on change of position to defeat the Bank’s proprietary claim based on money had and received or the case of Lipkin Gorman (see para 31 of the Decision);

(2) an issue of mixed fact and law whether Tian had acquired unconscionable knowledge, which was relevant to the Banks’s cause of action based on knowing receipt, after the receipt of the Sum when he became aware of the Order;

(3) an issue of fact whether the court should have accepted the evidence of the Transaction, which was also relevant to the cause of action of knowing receipt.

4.  I shall deal with these issues in the reverse order.  With respect, the factual challenge is unrealistic.  The arguments advanced by the Bank are more appropriate for a criminal case where the prosecution is put to prove each element of an offence beyond all reasonable doubt.  There is no sensible reason to doubt that the evidence before the court was compelling and reasonably well supported by contemporaneous documents (Decision, para 19).

5.  The argument that Tian had subsequently acquired unconscionable knowledge was not advanced at the hearing on 6 September 2017 (Hearing).  However, it is common ground that this is not, in truth, an additional point.  The reason is that if there was change of position on which Tian could rely to defeat the Bank’s proprietary claim, that change had already taken place before the Order was served on him.  Hence, the argument does not assist the Bank if there was change of position. 

6.  The Bank contends that, if there was no change of position, then Tian had acquired unconscionable knowledge when he received a copy of the Order, and such knowledge was sufficient to ground the cause of action of knowing receipt.  The wrinkle with this argument is that such a cause of action did not exist at the time when the Order was granted.  I am unable to see that the Bank can resurrect its case on knowing receipt with this argument.

7.  The point of law that Tian was not entitled to rely on change of position to defeat the Lipkin Gorman proprietary claim due to illegality was also one not taken at the Hearing.  However, this is a pure point of law.  The Court of Appeal may be more inclined to allow such a point to be raised: see Cathay Pacific Airways Flight Attendants Union v Director-General of Civil Aviation [2007] 2 HKC 393, §45(1) to (3).  See also para 32 of the Decision.

8.  The Bank’s arguments here, advanced by Mr Tang on its behalf, rely heavily on Barros Mattos Junior v General Securities & Finance Ltd [2005] 1 WLR 247, where Laddie J held that if the change of position was wrongful, the court would not allow the recipient of stolen funds to rely on it.  In that case the change of position was the exchange of the stolen money into local currency in breach of Nigerian law. 

9.  Mr Lam, appearing for Tian, contends that Barros Mattos was wrongly decided.  He referred to, inter alia, O’Neil v Gale [2013] EWHC 644 (Ch), at §§66 to 68, where Deputy Judge Donaldson QC expressed the view that there was a serious argument on the correctness of a fundamental proposition to the Barros Mattos decision.

10.  This court has been provided with submissions of very high quality by both Mr Tang and Mr Lam.  For the present purpose, I am content to say that the threshold of serious issue to be tried is not a high one[2], and I am unable to come the view that Barros Mattos is clearly wrong. It must therefore follow that there is a reasonably arguable appeal (based on grounds 1 and 2 only of the draft Notice of Appeal), and leave is granted accordingly.

11.  It would be appropriate to grant also a stay of execution in light of paras 16 to 18 of the Decision.  As for the costs of this application, I see no reason to disagree with para 4 of the Bank’s Summons filed on 26 October 2017.

12.  A draft order based on paras 1, 2 and 4 of the said Summons should be submitted by the Bank for approval.