TSANG TSE TO v. SUN BON INTERNATIONAL LOGISTIC LTD AND ANOTHER

HCA 2047/2020

[2023] HKCFI 740

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2047 OF 2020

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DECISION

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A.  Introduction

1.  By summons of 29 April 2021 (the “Summons”), the plaintiff (“P”) seeks inter alia final judgment against the 1^st and2^nd defendants (“D1” & “D2”, and collectively “Ds”).  Having heard parties, Master Kenneth Lee by Order dated 19 July 2022 (the “Master Order”) granted Ds unconditional leave to defend.  This is P’s appeal against that Order.

2.  Mr Lincoln Cheung and Mr Kin Lau appeared for P.  Mr Lawrence Cheung appeared for D1.  D2 appeared in person.

B.  The relevant affirmations

3.  In support of his application P has filed 4 affirmations (“P Aff 1” to “P Aff 4”).  He also relies on one affirmation by his solicitor Mr Michael Kan (“Kan” and “Kan Aff”).

4.  In opposition, there are the 1^st and 4^th affirmations of Mr Cheung Man Kwai (“Cheung”, “Cheung Aff 1” and “Cheung Aff 4”) on D1’s behalf, and 2 affirmations by D2 (“D2 Aff 1” and “D2 Aff 2”).

C.  Parties’ cases

5.  P’s case is that he is the victim of an investment fraud. Between 20 August and 17 September 2020, he was persuaded by fraudsters into transferring (1) 9 sums in the total amount of HK$11,380,000 (the “D1 Sums”) into an account in the name of D1 held with the Bank of China (“D1 A/c”), and (2) separately 6 sums in the total amount of HK$2,030,000 (the “D2 Sums”, and together with the D1 Sums, the “Transfers” or the “Transferred Sums” ) into 2 accounts in the name of D2 held with Dah Sing Bank and Standard Chartered Bank (“D2 DSB A/c” and “D2 SCB A/c”, and collectively together with the D1 A/c, the “3 Accounts”).

6.  It is not P’s case that Ds were involved in the alleged fraud the fraudsters perpetrated on him (which I will refer to as the “Alleged Fraud”, so as to differentiate and separate the Alleged Fraud from the subsequent receipt by Ds of the Transferred Sums).  Nor has any allegation of dishonesty been made against Ds[1]. Whilst P has in his Amended Statement of Claim (“ASOC”) pleaded a number of causes of action against Ds, P has confined his application for final judgment to the personal claims against Ds on the basis of unjust enrichment[2].

7.  As we shall see, despite the nature of P’s claim against Ds, P’s case in relation to the Alleged Fraud remains important.  In those regards, he pleads in §§5 to 19 of the ASOC as follows:

(a)  §5-6 – In about 12 August 2020, he met through a social media app “Grindr” a fraudster.  The fraudster claimed himself to be Chan Chak Man (“Chan”). Chan befriended with P.  He portrayed himself as a successful business and investor.  He said that he had made successful investments through a mobile app called “聚星寶” (the “App”), and had earned thereby stable return.  Chan invited P to download the App.  P did so and opened the “App Account”;

(b)  §§7-10 – After that, certain what P described as purported customer service officers (“Purported CS Officer”) designated to P the 3 Accounts and instructed him to make deposits into them, which P did and effected inter alia the Transfers;

(c)  §11 – Chan persistently and proactively communicated with P and prompted him to increase the balance of the App Account.  Chan even offered to contribute HK$5,000,000 to the App Account once its balance reached HK$15,000,000;

(d)  §12 – On about 19 September 2020, P could not effect withdrawal of the entire balance from the App Account.  He was told by the Purported CS Officer that as a result of P’s breach of the App’s rules, the App Account had been frozen, and that unless he deposited a sum equivalent to HK$4,608,632 within 5 days into the D1 A/c to unfreeze it, the balance in the App Account would be reduced to nil;

(e)  §§13-14 – Despite requests, the Purported CS Officer had failed and refused to provide particulars of the alleged breach to P.  When asked, Chan did not inquire into the reasons for the freeze, but prompted P to make the further deposit in order to unfreeze the App Account;

(f)  §15 – “In the premises, the purpose(s) for which [P] made the Transfers never materialized, were not carried out and/or were fictitious”;

(g)  §16 – Since 25 September 2020, Chan has ceased all communications with P;

(h)  §17 – From 30 September 2020, P could no longer access the App and the App Account;

(i)  On the basis of those facts, fraud is at §18 pleaded and particularized. The particulars (18(1) to 18(7)) are to the following effects:

(i)      There was a conspiracy to perpetrate the Alleged Fraud (Particulars 18(1));

(ii)     The Transfers were induced by the following representations which were false and fraudulent:

(1)  Chan’s representations about him being a successful investor having made stable returns through the App (Particulars 18(2)(a));

(2)  The App and the investments done through it being genuine and not fictitious (Particulars 18(2)(b));

(3)  The Transferred Sums would be used for investment (Particulars 18(2)(c)); and

(4)  Chan would contribute HK$5,000,000 to the App Account (Particulars 18(2) (d));

(iii)    The Purported CS Officer provided instructions and details to P to make the Transfers (Particulars 18(3));

(iv)    Inability on P’s part to make withdrawal, and requests by the Purported CS Officer to deposit more to unfreeze the App Account (Particulars 18(4));

(v)     Ceasing of all communications (Particulars 18(5));

(vi)    The purported contribution by Chan of HK$5,000,000 being fictitious (Particulars 18(6));

(vii)   Particulars 18(7), that:

“The purported investments that the Fraudsters represented were available on or through the App were fictitious, were not available and did not in fact occur”;

(j)  §19 – The Transferred Sums were P’s property, and the Transfers were made by mistake as a result of the Alleged Fraud.

8.  D1 has filed its Defence (“Defence/D1”):

(a)  The Alleged Fraud is not admitted[3];

(b)  D1 avers that since about 16 April 2019, it has allowed a licensed money service operator called WT China HK Limited (“WT China”) to use the D1 A/c for its (WT China’s) business operation, and that D1 has exercised no control over that account or the monies therein.  The Customs and Excise Department (“C&ED”) has been notified of the use of that account by WT China;

(c)  In about August 2020, a person called Chiu Shing Yeung (“Chiu”) approached WT China.  He represented to WT China that he was an acquaintance and agent of P, and that P wanted to engage WT China for money exchange service on Hong Kong Dollar and Renminbi.  Chiu provided WT China with copies of identity documents of both himself (the “Chiu ID”) and P’s. D1 admits[4] that 9 sums in the total amount of HK$11,380,000 (with individual amounts and deposit dates same as the D1 Sums) were deposited into D1 A/c.  They were caused to be so deposited by Chiu.  Upon Chiu’s instructions, WT China had converted those funds into Renminbi and remitted them to the accounts and recipients designated by Chiu;

(d)  Cheung says[5] that WT China had no knowledge of the Alleged Fraud prior to the receipt and remittance of those sums;

(e)  D1 says as a result that it has not been enriched[6], or alternatively any enrichment was not unjust, for D1 received the D1 Sums in good faith in the ordinary course of dealings with WT China and Chiu[7], or that its position has changed by allowing WT China to convert and remit out the D1 Sums[8].

9.  D2 has also filed his Defence (“Defence/D2”).  He filed it in person.  He says that he has no knowledge of any the Alleged Fraud.  He says that he received the D2 Sums on behalf of a person called 毛佐治 (“Mo”), who he had known for 3 years, and who claimed himself to be P’s agent.  He says further that he had remitted HK$2,004,227 out of the D2 Sums out to accounts designated by Mo[9]. He has received no remuneration for doing those, and is himself a victim[10].

D.  Relevant legal principles on application for summary judgment

10.  There is no dispute between the parties on the applicable legal principles.  Any differences, understandably, are matters of emphasis.

11.  I have considered the various paragraphs from Hong Kong Civil Procedure 2023 cited to me (which include §§14/4/1, 14/4/4, 14/4/9, 14/4/9A and 14/4/9B.  I have also considered the authorities cited to me, which include Li Chuen Kwai v Po Lam Construction Development Ltd (HCA 2376/2013, 24 September 2014), §§11-14 and Schindler Lifts (Hong Kong) Ltd v Ocean Joy Investments Ltd [2003] 1 HKC 438, §10 (by Mr Lincoln Cheung), and Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225, 228E (by Mr Lawrence Cheung).  I in particular bear in mind the approach which Mr Lincoln Cheung has reminded this Court, as summarized at Hong Kong Civil Procedure 2023 §14/4/1, that:

“The machinery of O.14 works on the basis that if the plaintiff’s application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed. In every summons under O.14 , the first considerations are (1) whether the case comes within the Order …; and (2) whether the plaintiff has satisfied the preliminary requirements for proceeding under O.14 …; if, however, these considerations are satisfied, the plaintiff will prima facie be entitled to judgment (provided, of course, that he has raised a prima facie sustainable case in the first place … The burden, as it were, then shifts to the defendant to satisfy the court why judgment should not be given against him.”

On the other hand, I also note and remind myself, as summarized at Hong Kong Civil Procedure 2023 §14/4/9B, that:

“Where there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessments of the respective chances of success of the parties or the relative strengths of their good or bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend …”

12.  I apply them.

13.  There is one additional and specific point to be noted:

(a)  The Summons predated the removal by the High Court (Amendment) Rule 2021 (which came into operation on 1 December 2021) of the fraud exception previously contained in Order 14 rule 1(2)(b);

(b)  However, as held by the Court of Appeal in R Stahl Inc v AJ Development Ltd (No 3) [2021] 6 HKC 162 (§§12-27), which facts bear some resemblance to the present one, where the allegations of fraud in the statement of claim were made against the fraudster but not the recipient defendant (against whom the plaintiff was seeking restitution for unjust enrichment), the plaintiff’s application for summary judgment was not excluded by the fraud exception;

(c)  I accept Mr Lincoln Cheung’s submission that P’s present applications are not excluded by the fraud exception.   

E.  P’s application against D1

14.  P’s application for final judgments again D1 and D2 may be considered separately.  I consider the one against D1 first.

E.1.   Parties’ stances

15.  In essence, Mr Lincoln Cheung’s submissions are that:

(a)  On the evidence, and in the absence of any positive case by D1 disputing the Alleged Fraud, P has proven at least on a prima facie basis that the Alleged Fraud had been perpetrated on P which caused him to transfer out the Transferred Sums;

(b)  There is no dispute that D1 received the D1 Sums;

(c)  D1 has failed to show any bona fide defence:

(i)   because of illegality on the part of WT China, in terms of:

(1)  its failure to conduct due diligence as required by the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (“AMLO”); and

(2)  the illegal use of third party’s account by WT China in its money exchange business;

(ii)  For those same reasons, D1 did not act in good faith, in the sense that it has failed to act in a commercially acceptable way, so that it would be inequitable, unconscionable or unjust to allow D1 to deny restitution to P;

(iii) In any event, D1 has failed to produce sufficient evidence of a causative link between its receipt of the D1 Sums and its change of position “of such quality that would entitle it to resist summary judgment application or to raise bona fide defence of change of position”[11].

16.  In gist and in effects, Mr Lawrence Cheung submits that triable issues have been shown as to:

(a)  the existence or otherwise of the Alleged Fraud and consequently whether there has been unjust enrichment to D1;

(b)  the issue of illegality; and

(c)  D1’s change of position and the causative link concerned.

E.2.   The Alleged Fraud

17.  The crux of the question is whether there are triable issues in relation to the existence of the Alleged Fraud as pleaded in the ASOC.

18.  Before any consideration is to be given to the defence of bona fide purchaser for value without notice or change of position[12], and hence before any liability for restitution arises, a number of questions will first have to be considered and answered.  Those questions, as explained by Ribeiro PJ in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd(2004) 7 HKCFAR 79 at §67 are:

“(a) Was the defendant enriched?

(b) Was the enrichment at the plaintiff’s expense?

(c) Was the enrichment unjust?

(d) Are any of the defences applicable?”

19.  The existence or otherwise of the Alleged Fraud is relevant to all of the first three questions.

20.  The fact that Ds have not pleaded any positive case countering the Alleged Fraud does not absolve P from proving the same.

21.  In cases for examples of email impersonation fraud, the proof of the underlying fraud may be relatively straightforward.  The fraud in Arrow ECS Norway As v M Yang Trading Ltd & Ors [2018] 5 HKC 317 which triggered the obligation to effect restitution is one of those types.

22.  There is however some background to the Alleged Fraud in the present case.  I have set out P’s pleaded case above. 

23.  In P Aff 1, P says that when he downloaded the App, he had no prior knowledge and understanding of how the investments through it worked.  He followed Chan and the Purported CS Officer’s instructions, and that because of the trust he had in Chan, he considered the App to be genuine.  He further said that it was under the continued and manipulative persuasion by Chan and the Purported CS Officer that the made the Transfers. 

24.  In terms of the particulars of the Alleged Fraud, P has not in his affirmations add any to what have been pleaded in the ASOC.

25.  During the relevant period, P communicated with Chan and the Purported CS Officer via instant messaging apps Line and WhatsApp.  P has produced records of some of those messages (the “Chat Records”). 

26.  I point out the obvious, that those Chat Records are contemporaneous to the Alleged Fraud, and are of good evidential value for the purpose of considering parties’ factual cases.

27.  Mr Lawrence Cheung submits that various aspects of P’s case are not supported by any documentary evidence, and are mostly contradicted by the Chat Records.

28.  I am of the view that the following aspects of the evidence before this Court are material:

(a)  The cornerstone of P’s case is that the App and the investments traded through it were fictitious (the “Fictitious Allegations”);

(b)  There is however no direct evidence to those effects;

(c)  On the other hand, P’s chats with Chan on 17 and 18 August 2020 suggest that he was able to and had indeed done some online research on the App, and had himself commented that it was quite speculative[13]. Those chats took place before any of the Transfers were made;

(d)  Further, according to the Chat Records, it is apparent that after downloading the App, P had in fact carried out investments through the App[14], and had apparently made some profits, which he attributed to Chan’s help[15];

(e)  Whether in the ASOC or in the bodies of his affirmations, P has not provided any facts or particulars as to the nature of those investments, nor even his understanding of the same;

(f)  As can be seen from the ASOC, the Fictitious Allegations are in turn based significantly on the allegation that representations from Chan (him being a successful investor having made stable returns through the App being false, and the circular plea that the App and investments were genuine when they were not) were false;

(g)  But there is again no direct evidence on the falsity of those representations;

(h)  As can be seen again from the ASOC, the Fictitious Allegations are also based partly on P’s inability to make withdrawal from the App Account, the freezing of the App Account, and the requests for further funds to unfreeze the same;   

(i)  P says that particulars for the alleged breach of the App rules had not been provided to him;

(j)  But as pointed out and submitted by Mr Lawrence Cheung, according to the Chat Records between P and the Purported CS Officer[16], a reason was given, namely suspected money laundering;

(k)  At this stage, one may not jump to any conclusion as to the validity of that reason.  As Mr Lawrence Cheung has submitted, the App rules have not been produced;

(l)  I note, as submitted by Mr Laurence Cheung, that P has not, whether in the ASOC or in the main body of his affirmations, revealed the fact that that reason had in fact been provided to him;

(m)           There is further no direct evidence that the purported contribution by Chan of HK$5,000,000 was fictitious.  The contribution apparently appeared on the App[17];

(n)  There are also concerns about P’s evidence as recited in §23 above, and his allegations that he was induced by Chan’s and the Purported CS Officer’s “continued and manipulative persuasion”.  According to the Chat Records, P in fact studied economics and finance in the University of Hong Kong[18]. He had experience doing investments[19], spent many hours a day analyzing economics news, analysis, data and reports[20], had endeavoured to have data or “reasoning back up” for every investment consideration[21], and had lost more than 1 million before[22]. I repeat that P himself had commented that the App was speculative;

(o)  There are in my view unexplained and disturbing features of P’s claim that he, being an educated person in economics and finance with experience in investing who had conducted research on the App would have been induced merely by chats with a stranger whom he first knew only less than 10 days ago into parting with upwards of HK$10,000,000.   

29.  Mr Lawrence Cheung submits[23] that “purported losses by P could have been the result of an investment that went sour (since P himself claimed to be well versed in financial investments …, it is extremely doubtful he would be vulnerable to the alleged inducement by Chan into making investments), or merely a dispute arose from the falling out of his close personal, if not intimate, relationship with Chan.”  This is not a mini trial on affirmations.  I cannot and ought not reach any final view on that issue.  But the discussion and consideration above lead me to the conclusion that D1 has discharged its onus with reference to the evidence before this Court that there are triable issues in respect of P’s case on the Alleged Fraud, hence whether P indeed effected the Transfers by mistake, and hence whether D1 is obliged to effect restitution.  On the evidence, and borrowing the following words from Hong Kong Civil Procedure 2023 §14/4/1, “To deny [the defendant] his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice.”

30.  In his written Note of Reply[24], Mr Lincoln Cheung cites §15 from Tang Yuan Yi (湯元儀) v Tokyo International Investment Limited [2021] 2 HKLRD 623, that:

“It is established law that money paid under a mistake of fact is prima facie recoverable based on unjust enrichment.”

But the citing of that passage begs the question as to whether it has been established that money had been paid under a mistake.

31.  For the above reasons alone, the appeal against the part of the Master Order granting D1 unconditional leave must be dismissed.

E.3.   Illegality

E.3.a The relevant law

32.  This issue of illegality arises as part of the fourth question listed out by Ribeiro PJ in Shanghai Tongi – “Are any of the defences applicable?”

33.  A defendant to a restitution claim has two potential defences: bona fide purchaser for value without notice (the “Bona Fide Purchaser Defence”), and change of position (the “Change of Position Defence”).

34.  The Change of Position Defence has specifically been raised by D1.  D1’s plea that it received the D1 Sums in good faith in the ordinary course of dealing with WT China and Chiu is in effect similar in nature to the Bona Fide Purchaser Defence.

35.  The issue of illegality goes to whether D1 can rely on those two defences.  As explained by Lord Goff in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 579 to 580:

“… where an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution. If the plaintiff pays money to the defendant under a mistake of fact, and the defendant then, acting in good faith, pays the money or part of it to charity, it is unjust to require the defendant to make restitution to the extent that he has so changed his position. Likewise, on facts such as those in the present case, if a thief steals my money and pays it to a third party who gives it away to charity, that third party should have a good defence to an action for money had and received. In other words, bona fide change of position should of itself be a good defence in such cases as these ...

…

            I am most anxious that, in recognising this defence to actions of restitution, nothing should be said at this stage to inhibit the development of the defence on a case by case basis, in the usual way.  It is, of course, plain that the defence is not open to one who has changed his position in bad faith, as where the defendant has paid away the money with knowledge of the facts entitling the plaintiff to restitution; and it is commonly accepted that the defence should not be open to a wrongdoer.  These are matters which can, in due course, be considered in depth in cases where they arise for consideration …”

36.  As to what constitutes “illegality” in the context under discussion, Laddie J in Barros Mattos Junior v MacDaniels Ltd [2005] 1 WLR 247 observed (at §43 in particular), and applied by Chow J (as he then was) in Arrow ECS at §§24-24 and 26-30, that the approach of Lord Goff in Tinsley v Milligan [1994] 1 AC 340 applies, and that:

“There is no room for the exercise of any discretion by the court in favour of one party or the other. If the recipient's actions of changing position are treated here as illegal, the court cannot take them into account. The recipient cannot put up a tainted claim to retention against the victim's untainted claim for restitution.”

37.  When considering those defences, Clarke LJ observed in Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985 at §149 that the essential question is whether it would be inequitable or unconscionable, and thus unjust, to allow the recipient of money paid under a mistake of fact to deny restitution to the payer.  Whether the recipient has acted otherwise than in good faith will be dependent upon the circumstances, so that it is not possible to lay down absolute principles, though 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 may be so regarded.  His Lordship agreed to the following proposition, that:

“The factors which will determine whether it is inequitable to allow the claimant to obtain restitution in a case of mistaken payment will vary from case to case, but where the payee has voluntarily parted with the money much is likely to depend on the circumstances in which he did so and the extent of his knowledge about how the payment came to be made.”

E.3.b. Alleged illegal use of third party’s account by WT China

38.  I have summarized above the alleged illegality which Mr Lincoln Cheung relies upon.

39.  I deal first with the alleged illegal use of third party’s account by WT China.  I find the following matters relevant and important:

(a)  As the authority for regulating the money service operators, the C&ED has published a set of Money Service Operators Licensing Guide (“MSO Licensing Guide”);

(b)  §11.1(ix) of the February 2020 version of the MSO Licensing Guide provides that (the “Bank Account Requirement”):

“Where bank account(s) is used for operation of the money service business, the bank account must be in the name of the licensee's company, the sole proprietor, partner, director or ultimate owner of the licensee.”

(c)  Mr Lincoln Cheung submits that there is no evidence that D1 is WT China’s sole proprietor, partner, director or ultimate owner of the licensee. The use of D1 A/c by WT China was therefore contrary to the Bank Account Requirement;

(d)  However, §11.1(ix) of the MSO Licensing Guide has not always been there. It was only added to the 2020 version of the MSO Licensing Guide in February 2020;

(e)  A licence for Operating Money Service was granted to WT China on 27 September 2018.  It was valid for 2 years;

(f)  At the time of the grant, the Bank Account Requirement had not been added to the MSO Licensing Guide;

(g)  In fact, according to Cheung Aff 1[25], supported by a Notice of Changes in Particulars dated 16 April 2019[26] (the “Notification”), the C&ED was informed of WT China’s use of D1 A/C for operating its money service;

(h)  WT China’s licence was renewed on 27 September 2020;

(i)  According to Cheung[27], C&ED has not imposed any sanction or taken any enforcement action against WT China given the Notification and despite amendment to the MSO Licensing Guide;

(j)  Mr Lincoln Cheung submits that there is no evidence showing that WT China or D1 had informed C&ED that D1 A/c was actually not a bank account in the name of WT China’s sole proprietor, partner, director or ultimate owner;

(k)  I cannot and ought not make any finding upon the state of knowledge of C&ED;

(l)  It is at this stage not clear whether the facts establish any breach of the Bank Account Requirement.  Even if there were any, it is in any event not clear at this stage what the consequence of such breach was;

(m)  I repeat the observations of Clarke LJ in Niru Battery Manufacturing as cited above.  Echoing those observations, I am of the view that the effects of the alleged infringement of the Bank Account Requirement upon the Change of Position Defence and Bona Fide Purchaser Defence are facts sensitive, which relevant facts this Court cannot and ought not resolve on affirmation;

(n)  I am of the view that triable issues have been raised in the above regards.

E.3.c. The alleged failure to conduct due diligence

40.  I next consider the alleged failure to conduct due diligence as required by AMLO.  I find the following matters relevant and important:

(a)  Schedule 2 of the AMLO (“AMLO Sch. 2”) set out the requirements relating to customer due diligence and record-keeping which have effect with respect to (inter alia) licensed money service operators;

(b)  The C&ED has also pursuant to s 7 of the AMLO issued Guidelines on Anti-Money Laundering and Counter-Financing of Terrorism (For Money Service Operators) (“AML Guidelines”);

(c)  P submits that WT China and/or D1 had:

(i)    failed to take step to verify Chiu’s authority to act on behalf of P, contrary to s 2(1)(d)(ii) of AMLO Sch. 2[28] and AML Guidelines §4.5[29];

(ii)   failed, given the fact that P was not physically present for identification, to further verify the customer’s identify in accordance with s 9 of AMLO Sch. 2[30] and AML Guidelines §4.10[31];

(iii)  failed to obtain the residential address information of a customer that is a natural person, contrary to AML Guidelines §4.3.5;

(iv)  failed, for each remittance transaction, to identify the originator or to record the originator’s address, contrary to s 13 of AMLO Sch. 2[32] and AML Guidelines Chapter 11[33];

(d)  Mr Lincoln Cheung relies heavily on Arrow ECS, and in particular the ruling by Chow J in respect of D10, D13 and D14 – see in particular §31(4) thereof, wherein Chow J observed that the licensed money service operator concerned:

“failed to comply with the raft of customer due diligence requirements imposed by paras 2, 3, 8, 9 and 13 of Schedule 2 to [AMLO]. I do not propose to set out the details of those requirements here because the breaches are not seriously disputed by Ms Lee. She has not advanced any submissions to contend that there was no breach of the relevant requirements.”

(e)  Arrow ECS is factually different.  In the present case, as submitted by Mr Lawrence Cheung, WT China had done some due diligence. According to Cheung[34], Chiu had had an individual account with WT China since late 2019.  The account opening form[35] contained some personal particulars of Chiu.  Cheung says:

“8. In or about August 2020, [Chiu]approached WT China via WeChat. Chiu represented to WT China that he was an acquaintance and agent of P and acting for and on behalf of the same, who would want to engage WT China for money exchange service for Hong Kong Dollar and Renminbi …

9. Chiu then provided WT China with copies of the identity documents of both Chiu and [P], which were both valid and showed them both were Chinese nationals.  Background search had also been conducted on [P] by WT China, and no abnormal or irregular result was returned.  There are now produced and shown to me marked exhibits ‘CMK-4’ a copy of the Hong Kong Passport of Chiu and ‘CMK-5’a copy of the Hong Kong Passport of [P].”

(f)  I note what Kan has said in Kan Aff, that his firm in March 2021 provided a copy of the Chiu ID to the police, who (through “police officer Mr Wong of DIP5 Eastern District”) later in December 2021 orally informed them that the police had conclude the Chiu ID was forged;

(g)  Mr Lincoln during the hearing fairly informed this Court that P’s case does not focus upon the alleged forgery of the Chiu ID, as it was not obviously a forgery, and even the police had taken some time to work that out;

(h)  I note also §60 of Mr Lawrence Cheung’s written submissions, which sets out apparent compliance of certain provisions under §4.3 of the AML Guidelines;

(i)  I repeat again that this is and ought not to be a mini trial on affirmations.  On the facts of before me, I am of the view that:

(i)   triable issues as to what exact duties of due diligence have been breached (if any), and the nature of any such breaches; and

(ii)  in the light of the nature of any breach established, whether any illegality arising, or any lack of good faith reflected, has in law the effect of debarring D1 from relying of the Bona Fide Purchaser Defence and the Change of Position Defence.

E.3.d  Conclusion on Illegality

41.  For the reasons set out above, I am of the view that triable issues have also been raised in respect of the question of illegality.

F.  Causative link

42.  I have considered the table attached to Mr Lawrence Cheung’s written submissions.  Comparing the Transferred Sums with the outward remittances from D1 A/c, and given their time proximity and comparable amounts, I am of the view that triable issues have also been raised in those regards.

G.  Conclusion on P’s application against D1

43.  For the reasons set out above, I am of the view that triable issues as discussed above have been raise.  I dismiss P’s appeal in relation to his application against D1.

H.  P’s application against D2  

44.  I repeat my discussion in section E.2 above, which equally apply here.

45.  On that basis alone, unconditional leave to defence should be given.

46.  I record that I have also considered Mr Lincoln Cheung’s submissions that D2’s case is unbelievable.  He submits that there was no record of the conversation between D2 and Mo, and that there are inconsistent assertions between Defence/D2 and his affirmations.  However, on the facts before me, I am not satisfied that D2’s case is unbelievable.

47.  I am of the view that triable issues as discussed above have been raise.  I dismiss also P’s appeal in relation to his application against D2.

I.  Overall conclusion

48.  For the reasons set out above, I dismiss P’s appeal.

J.  Costs

49.  I make a costs order nisi that P shall bear the costs of this appeal, to be assessed summarily.  Any application for variation shall be made within 7 days from the date of this Decision by letter to this Court, upon receipt of which further directions will be given.  Unless the costs order nisi has been varied, and for the purpose of assessment, Ds are directed to file their Statements of Costs within 14 days from the date of this Decision, P to file his Statement of Objection 14 days upon receipt, and Ds to file their reply 7 days thereafter, with the view of the assessment being conducted on the papers.