SEMGAS SUPPLY PTE LTD AND ANOTHER v. HONG KONG XIN CHUANG DECORATIVE MATERIAL CO LTD

DCCJ 6395/2019

[2023] HKDC 1823

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6395 OF 2019

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BETWEEN

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JUDGMENT

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A. Introduction

1.  This is a typical email fraud case.

2.  Ps allege that they were defrauded by a fraudulent email, whereby it paid USD117,277.50 into Bonusis (HK) Industrial Limited’s (the 1^st Defendant, D1) bank account on 25 April 2019.

3.  On the very next day, D1 transferred a nearly identical sum of USD117,300 to the 2^nd Defendant (D2).

4.  Ps make the following claims against the Defendants (Ds):

(a) a proprietary (constructive trust) claim; and

(b) a personal (unjust enrichment and unlawful means conspiracy) claim.

B. Default Judgment against D1 and D2’s Failure to Appear at Trial

5.  Ps took out the Writ on 26 November 2019.

6.  D1 did not make an appearance. Default judgment was entered on 6 August 2020 [A/5/61].

7.  D2 was represented until 8 May 2023, when its solicitors ceased to act. D2 failed to turn up at the Pre-Trial Review and the Trial. I was informed by Mr Sim, counsel for P, that:-

(a) the trial date was fixed on 6 May 2022 (ie when D2 was still represented);

(b) Ps had served D2 with all the relevant documents (including the trial bundles, indices and their opening submissions) to D2’s last known registered company address [Opening §9].

8.  Accordingly, I am satisfied that this is an appropriate case to proceed with trial in the absence of D2 pursuant to RDC O 35, r 1(2).

9.  Since D2 did not appear:-

(a) The witness statements adduced by D2 remain unsworn and do not constitute evidence of the case: RDC O 38, r 2A(6).

(b) I would, however, pay due regard to D2’s defence and the documents produced by D2 (no issue had been taken concerning their admissibility).

C. The Underlying Facts

P’s Case

10.  Ps’ case was that they were defrauded, as follows.

11.  P1 and P2 were fellow subsidiaries of Union Energy Corporation Pte Ltd (Union Energy) [C/31/278]; [C/32/282].

12.  P1 would sometimes make payments to P2’s business partners in certain business matters on behalf of P2 [B/7/70/§4].

13.  By way of emails between 17 April 2019 and 23 April 2019 between:-

(a) Ms Irene Lee (Lee Bee Hong) on behalf of P2; and

(b) Ms Ellen Chuang (Chuang Yu-Ju) on behalf of Je-well Functional Ingredient Technologies Co Ltd (Je-well) [C/12/138-149],

P2 placed an order for health supplements with Je-well in the total amount of USD117,227.50 [B/7/70/§6].

14.  Irene Lee subsequently asked Corrinne Tng of the Finance Department of Union Energy to arrange for payment [C/12/141-142].

15.  On 25 April 2019:

(a) Irene Lee received an email apparently from the same email address used by Ellen Chuang (but with a different display name of the sender). The email was purportedly signed by Ellen Chuang, saying that Je-well was having difficulties with their bank account and asking for payments to be made pursuant to new bank details (the 1^st Email) [C/12/137].

(b) Corinne Tng responded, confirming that this could be done, and asked for a revised pro-forma invoice with updated bank details [C/12/136].

(c) A further email purportedly from Ellen Chuang (again with the same email address but with a different display name of the sender) was sent (the 2^nd Email) [C/12/135]. A new pro-forma invoice with instructions for payment into an HSBC account owned by D1 with bank account number 053 367 223 838 (D1’s Bank Account) was attached [C/11/133].

(d) Based on the information provided, P1 remitted a payment of USD117,277.5 (the allegedly Defrauded Sum) into D1’s HSBC account [C/13/150].

16.  On 30 April 2019, Ellen Chuang of Je-well contacted Irene Lee concerning the payment of the pro-forma invoice [B/7/73/§§18-19]. It was at this point of time that the parties discovered that the 1^st and 2^nd Emails were not in fact sent by Ellen Chuang of Je-well; and in that sense, they are false emails.

17.  Reports were made to the police authorities in Hong Kong, Singapore and Taiwan. Hong Kong police reported on 17 September 2019 that:

“In relation to a report… [that] your company… was defrauded to wire a sum of USD$117,277.50… [to D1]… on 2019-04-25 in an email scam.

Upon investigation, it is found that USD$117,300 [(the D2 Sum)] was further disbursed to another HSBC account (A/C: 817 373 905 838) under beneficiary [D2] [(D2’s Bank Account)]… on the next day.”

18.  Ps’ case is supported by the witness statements of Irene Lee and Ellen Chuang and relevant documents (such as emails from the police). Both witnesses appeared before this Court to confirm their statements. I accept their evidence.

D2’s Case

19.  As noted above, D1 did not appear and had put forward no case.

20.  On the other hand, D2 did file a Defence. In gist, their case is that:-

(a) They did not know of anything pertaining to the fraud, and never participated or been involved in the same.

(b) The D2 Sum was received for bona fide purposes in the ordinary course of business.

D. Preliminary Point – Whether D2’s Factual Case is Sustainable

21.  Irrespective of the cause of action, the key point in this case is whether D2’s factual case that it received the D2 Sum for bona fide purposes in the ordinary course of business is sustainable.

Ds’ Case re Justification for Receipt of Payment

22.  In this regard, D2’s factual case shifted over time.

23.  D2’s 1^st Case – D2’s initial defence (filed on 21 May 2020 and amended on 20 January 2021) suggested that the D2 Sum was received by D2 under an agreement with a company named IOT-Innovative Oberflaehentechnologien GmbH (IOT) for the purchase of acrylic film processing machinery. D2’s 1^st Case runs as follows.

(a) On 22 March 2019, D2 entered into an agreement with IOT for the purchase of acrylic film processing machinery at a consideration price of EUR140,000 [A/3/42/§6.4 (deleted)].

(b) On 27 March 2019, D2 made a partial payment of EUR21,700 to IOT as part payment [A/3/41/§6.4(a) (deleted)].

(c) On 26 April 2019, Nie Kai Ming (Nie), the director of D2, approached a Ma Fei Cheung (Ma) on WeChat to convert a sum of RMB to USD (rather than EUR). D2 explained in its defence that it verily believed that it was more advantageous to first convert sums of money into USD and then convert into other foreign currencies [A/3/41/§6.5 (deleted)].

(d) On an unknown date, D2 remitted a sum of RMB799,986 into Ma’s bank account [A/3/41/§6.6 (deleted)].

(e) In return, Ma deposited USD117,300 into D2’s Bank Account [A/3/43/§6.7 (deleted)]. It would appear that D2 did not deny that the payment made by Ma was the D2 Sum [A/3/43/§6.8 (deleted)].

24.  D2’s 2^nd Case – D2 subsequently amended its defence again on 19 November 2021, and changed its case. D2’s 2^nd Case runs as follows:-

(a) D2 was an associate company of a company incorporated and registered in Mainland China, Guangdong Xinchuang New Materials Technology Co, Ltd (廣東欣創新材料科技有限公司), formerly named as Foshan Xinchuang Decorative Material Co Ltd (佛山市欣創裝飾材料有限公司) (Mainland Xinchuang). Nie was said to be the founder of both D2 and Mainland Xinchuang [A/3/37/§3.1-3.2].

(b) D2 claimed that it was Mainland Xhinchuang (via Nie) who contacted Ma with the view of converting RMB to USD for making payments to its foreign suppliers. All references to IOT were deleted in the Re-Amended Defence [A/3/39/§7.1].

(c) Having agreed with Nie that the exchange rate should be 1 to 6.82, Ma, acting in accordance with directions of Nie, transferred a sum of USD117,300 (ie, the D2 Sum) to D2’s account on 26 April 2019 [A/3/39/§§7, 7.2].

(d) It is then asserted that “[t]he [D2] Sum was received by the 2^nd Defendant bona fide in its ordinary course of business for and on behalf of its associate company, the Mainland Xinchuang, in respect of a foreign exchange transaction” [A/3/39/§7]. In gist, it is D2’s case that, after receiving USD117,300, Mainland Xinchuang arranged to pay the RMB equivalent of RMB799,986 to Ma.

(e) On the same day, D2 apparently paid the D2 Sum back to Mainland Xinchuang [A/3/40/§9].

Submissions by Ps’ Counsel

25.  Counsel for Ps submitted that D2’s case ought not be believed, on the following main bases:-

(a) First, it is too much of a coincidence that after D1 received the defrauded sum, D2 received an almost equivalent amount on the next day.

(b) Second, D2’s Re-amended Defence is radically inconsistent with its initial defence, casting great doubts as to D2’s credibility.

Analysis

26.  As noted above, D2 has not appeared at Trial and tendered no witnesses. D2’s case is therefore only based on D2’s pleadings and documentary evidence.

27.  Having reviewed such, I am not satisfied that D2 had proven its case (ie, D2’s 2^nd Case) on the balance of probabilities.

28.  My reasons are as follows.

29.  First, there is a distinct lack of evidence to support D2’s 2^nd Case, ie, that there existed a foreign exchange transaction between Mainland Xinchuang and Ma.

30.  D2 has failed to adduce relevant documents which would have assisted its case; nor had it proffered any explanation for not producing them. The issue can be tested this way. Assuming D2’s case were true, at the very least, communications between Ma and Nie concerning the foreign exchange transaction (eg, emails or WeChat messages) should exist. In this regard, it should be noted that, in D2’s initial Defence, it was pleaded that Nie contacted Ma via WeChat for the alleged foreign exchange transaction [A/3/42/§6.5]. Yet, none was produced in the present case.

31.  Instead, the documentary evidence of note which had been adduced by D2 amounts to the following:

(a) a fuzzy screenshot of what appears to be a bank transfer record, which shows that USD 117,300 was remitted to D2’s Bank Account on 26 April 2019 [C/51/359];

(b) a heavily redacted bank account statement of D2’s Bank Account for April 2019, which shows D2’s receipt of USD117,300 on April 2019 from D1, and the withdrawal on the same day of USD473,000 (recipient unknown) [C/52/360];

(c) a payment slip dated 26 Apr 2019 from a Ye Cui Hua (葉翠華) to Ma of RMB 799,986 [C/54/289];

(d) a written notice dated 3 June 2021 purportedly issued by Mainland Xinchuang confirming that it received USD473,000 on 26 April 2019 from an HSBC account of D2, and asserting that the remittance belongs to Mainland Xinchuang as part of its regular capital turnover [C/53/361].

32.  However, such documents are woefully incomplete:-

(a) The fuzzy screenshot does not show that the payor is Ma. Instead, it is presumably a screenshot of D1’s internet banking account. At best, it proves that USD117,300 was paid from D1’s Bank Account to D2’s Bank Account on 26 April 2019 – which is corroborated by the redacted bank statement of D2’s Bank Account.

(b) As to the 2^nd leg of the purported exchange transaction, ie, payment of RMB 799,986 back to Ma, all we have is the payment slip from Ye Cui Hua to Ma, but with no witness evidence, there is no explanation as to how Ye is related to Mainland Xinchuang or D2.

(c) Equally perplexing is the 3^rd leg, ie, the supposed return of USD117,300 to Mainland Xinchuang.

(i) First, there is no payment out record of USD117,300, but only of the larger amount of USD473,000. No explanation had been put forward to explain how these two sums interact with each other.

(ii) Second, even for the larger amount of USD473,000, the supposed payment out from D2 to Mainland Xinchuang is not properly supported by evidence.

33.  One does see from the redacted bank statement that USD473,000 is withdrawn from D2’s Bank Account. However, it does not show who the recipient is.

34.  One would have thought that proving such is a straightforward matter of producing the transfer record – be it the transfer out record from D2, or the transfer in record from Mainland Xinchuang. However, neither has been produced.

35.  Instead, all we have is the written notice purportedly from Mainland Xinchuang confirming its receipt of the said amount. The notice is unhelpful:-

(a) It is not dated contemporaneously. Instead, it post-dates the commencement of the present proceedings.

(b) It is self-serving – it originates from Mainland Xinchuang, not an independent 3^rd party.

36.  In the circumstances, the evidential chain is problematic, and the lack of corroborating documentary evidence (when such ought to exist) is startling.

37.  Second, the discrepancies between D2’s 1^st Case and 2^nd Case, which remains unexplained, are also startling. In particular:-

(a) D2’s 1^st Case did not mention the involvement of Mainland Xinchuang at all. The entity of Mainland Xinchuang was only first raised on 17 November 2021, 1.5 years after the initial Defence was filed. There was also no suggestion that D2 was holding the money on behalf of Mainland Xinchuang in the initial Defnece.

(b) This is in stark contrast to D2’s 2^nd Case.

(i) D2 now alleges that it had on the day of 26 April 2019 paid the sum of US$117,300 to Mainland Xinchuang [A/3/40/§9].

(ii) This is completely inconsistent with its 1^st Case, which suggests that payment in euros was made to IOT [A/3/43/§6.10 (deleted)].

38.  It is difficult to see how the inconsistency can be explained away (and in fact it had not been).

39.  All in all, I am not satisfied that D2 has proven its case (ie, D2’s 2^nd Case). It follows that any defences based on bona fide purchaser without notice and/or bona fide change of position must fail.

E. Analysis – Constructive Trust

40.  It remains to be decided whether or not Ps had made out the claims they had put forward.

41.  The first claim sought is proprietary ie, constructive trust. Ps seek to impose a constructive trust over the Defrauded Sum, ie, USD117,277.50 so far as it continues to be standing to the credit of D2’s Bank Account (the D2 Bank Account Sum).

42.  The parties have not produced the bank statements of D2’s Bank Account (save for the limited page mentioned in §31(b) above). The best information we have is information provided by the police dated 23 September 2019, ie, that there is around USD110,000 being frozen in D2’s Bank Account since August 2019 [C/18/222].

43.  The core legal principles concerning the imposition of constructive trust are trite (albeit much debate exists at its edges). Mr Sim has referred this Court to Credit One Finance Ltd v Leung Ying Lok [2020] HKCFI 2919; Guaranty Bank and Trust v Zzzik Inc (HCA 1139/2016, 18 July 2016); and ANZ Commodity Trading Pty Ltd v Excellence Raise Overseas Ltd [2023] HKCFI 179. In gist:-

(a) When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient and the property is recoverable and traceable in equity: Guaranty Bank, §§28-31.

(b) For recipients who are not a party to the fraud, if his state of knowledge is such as to make it unconscionable for him to retain the money, the defrauded claimant has a tracing remedy. Knowledge does not have to be acquired at the time of receipt, it can be acquired subsequently while the money is in the recipient's hands. A recipient may have knowledge of the fraud because of being served by court documents (eg, the statement of claim): Guaranty Bank, §§32-34.

44.  However, a pre-requisite for the imposition of a constructive trust is that the Court is satisfied that the credit standing in D2’s Bank Account represents the traceable proceeds of D2’s property (ie the Defrauded Sum):

(a) It is a fundamental maxim in trust law that there must be identifiable property for a trust to arise. As Lord Browne-Wilkinson held in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 at 709, “a trust can only arise where there is defined trust property: it is therefore not consistent with trust principles to say that a person is a trustee of property which cannot be defined”. Accordingly, for victims of fraud to assert a proprietary claim, they would only succeed to the extent that their funds can be traced and identified as representing recognizable assets of the recipient (ANZ (supra), §208 referring to Arrow ECS Norway AS v Sin Cheng Holding (Intl) Co Ltd (HCA 239/2016, 12 May 2016) at §13).

(b) Therefore, P must show that, by the usual rules of tracing, that the credit standing in favour of D2 in D2’s Bank Account represents the traceable proceeds of the Defrauded Sum. A particular relevant tracing rule in the present context is the lowest intermediate balance rule, which is explained by Lewin on Trust (20^th Edn) at §44-071:

“The Hallett rule does not operate to preserve the value representing the trust money paid into the account to an extent greater than the balance in the account when withdrawals are made by the trustee after the payment in of the trust money. Hence, if in the example in § 44-070 the trustee makes a third withdrawal of £4,000, the balance in the account will be reduced to £1,000, and that will be the limit of the amount which the beneficiary can claim. The trustee may subsequently pay in further money of his own, but that cannot be attributed to the trust money paid into the account, which has already been reduced to £1,000. And so the beneficiary’s claim is limited to such an amount as does not exceed the lowest balance in the account during the intervening period between the payment in of the trust money and the time when the disentanglement of the account falls to be made, that is to the lowest intermediate balance… The lowest intermediate balance rule will not be applied if it can clearly be shown that the trustee by making the subsequent payment into the account intended to reinstate the trust money previously taken out, but the trustee will not be taken as having made the subsequent payment in for that purpose merely from the fact that previously trust money has been taken out…” (emphasis added)

45.  Applying the above principles, the first issue, therefore, is whether or not D2 has received and retained the traceable proceeds of the Defrauded Sum. My findings are as follows.

46.  First, whilst no evidence concerning D1’s Bank Account had been adduced by parties, I am satisfied that D2 Sum is attributable to the Defrauded Sum. Given that the D2 Sum was almost identical in amount to the Defrauded Sum, the close proximity in time of the transfers, and the information provided by the police (see §17 above), it is more probable than not that the D2 Sum is attributable to the Defrauded Sum.

47.  However, I am not satisfied that there is sufficient evidence to show that the Defrauded Sum can be traced into the monies currently standing in D2’s Bank Account. Crucially, D2 has adduced a redacted bank statement which shows that on the same day the D2 Sum was deposited, D2 then withdrew a sum of USD473,000 [C/52/360]. The remaining balance on 27 April 2019 was merely USD150.38. Applying the lowest intermediate rule, Ps (to put their case at the highest) would only be entitled to seek a proprietary claim over the sums standing to the credit of D2’s Bank Account up to the sum of USD150.38.

48.  Moreover, I am not satisfied that Ps could even prove that the USD150.38 has not been dissipated. The bank statement adduced by D2 was issued on 30 April 2019. I have no information/evidence concerning the transactions of D2’s Bank Account in the period from May 2019 to August 2019 (ie, the month the account was frozen). Too much could have happened in between.

49.  Whilst I am aware of the difficulties faced by victims of fraud in gathering evidence, the onus remains on Ps to satisfy this Court, on the balance of probabilities, that the credits standing in D2’s Bank Account represent the traceable proceeds of the Defrauded Sum. In this regard, Ps, upon receiving the redacted bank statement, could have applied for discovery of bank statements of D2 (bearing in mind that D2 was represented until 8 May 2023). In the present state of evidence, I am not satisfied that there is proper evidential basis upon which this Court may infer that the credits standing in D2’s Bank Account represent the traceable proceeds of the Defrauded Sum.

50.  Ps’ claim for constructive trust therefore fails.

F. Analysis – Unjust Enrichment

51.  The second relief sought is personal ie, an unjust enrichment claim. Ps seek restitution for the sum of USD117,277.50.

52.  It is trite that a claim for unjust enrichment involves four issues: (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?

53.  First, on the basis that I have rejected D2’s factual case, I am satisfied on balance that, based on the fact of actual receipt, D2 was enriched by the receipt of D2 Sum.

54.  Second, on the “at the expense of” requirement, the law is set out authoritatively in Investment Trust Companies v Revenue & Customs Commissioners [2018] AC 275. As Lord Reed held, the “at the expense of” requirement can be satisfied even when the claimant and the defendant have not dealt directly with each other (at §47). Lord Reed gave the following examples:

“48. …Another situation is where, as in Relfo, an intervening transaction is found to be a sham (para 121). Since the sham is created precisely in order to conceal the connection between the claimant and the defendant, it is disregarded when deciding whether the latter was enriched at the former’s expense. So, in Relfo, Gloster and Floyd LJJ described the arrangements in question as being “equivalent to a direct payment” (paras 103 and 115). There have also been cases, discussed below, in which a set of co-ordinated transactions has been treated as forming a single scheme or transaction for the purpose of the “at the expense of” inquiry, on the basis that to consider each individual transaction separately would be unrealistic. There are also situations where the defendant receives property from a third party into which the claimant can trace an interest. Since the property is, in law, the equivalent of the claimant’s property, the defendant is therefore treated as if he had received the claimant’s property…”

55.  In the present case, Ps and D2 did not deal directly with each other. As such, Ps rely on (i) sham, (ii) coordinated transactions, and (iii) tracing to establish the “at the expense of” element [Ps’ Closing §14].

(a) Sham: I am not sure that this is a proper case of sham. Sham generally requires one to identify intervening transactions which could be disregarded. In the present case, there are no intervening transactions which could be disregarded: the only transactions are (i) the payment made by P1 procured by fraud to D1, and (ii) D1’s subsequent transfer to D2. Neither of them could be disregarded as they form the basis of the Ps’ claim.

(b) Co-ordinated Transactions: While the evidence is far from perfect, on balance, I am just about satisfied that the transfer of the Defrauded Sum from P1 to D1, and the transfer of the D2 Sum from D1 to D2, form a set of co-ordinated transactions. I reach this conclusion by taking into account inter alia the inherent improbability that the two sums would be separate and independent given the proximity in time, their nearly identical amount, and the information provided by the police (see §17 above). A relatively recent case where co-ordinated transactions had been used to deal with the “at the expense of” question is UPS Parcel Delivery Service Ltd v Huaqi Import & Export Co, Ltd [2022] HKCFI 2910 at §9. While in that case the evidence was stronger as there were more transactions showing a clearer pattern, the same considerations apply.

(c) Tracing: Based on my analysis at §46 above, I am also just about satisfied that the D2 Sum represents the traceable proceeds of the Defrauded Sum. Whilst I find that D2 may have subsequently dissipated the traceable proceeds, this does not affect D2’s liability in unjust enrichment. The liability in unjust enrichment arises immediately at the time of the receipt: Prudential Assurance Company Ltd v HMRC [2019] AC 929 at §69. Accordingly, the cause of action has already accrued when D2 received the D2 Sum and subsequent dissipations are irrelevant.

56.  Accordingly, I am satisfied that the payment of D2 Sum from D1 to D2 is “at the expense” of Ps.

57.  Given that both P1 and P2 are plaintiffs in the present case, it is arguably unnecessary for me to deal with whether the enrichment is at the expense of P1 or P2 (and counsel has not made that distinction in his submission).

58.  That being said, my view is that enrichment is at the expense of P2, instead of P1. It should be borne in mind that it was Ps’ evidence that P1 made the payment to D1 on behalf of P2 [B/7/70/§4]; [B/7/72/§14]. It was also P2 who entered into the transaction with Je-well. Accordingly, P1 was acting as an agent on behalf of P2 in making the payment at the material time. As Lord Reed explained in ITC (Supra) at §48, a transaction made between the plaintiff and the agent, and between the agent and the defendant, is treated as a transaction directly between the plaintiff and the defendant. An agent may still bring a claim in unjust enrichment but it must account to the principal for his recovery: Goff and Jones on the Law of Unjust Enrichment (10^th Edn) at §6-52; Bowstead & Reynolds on Agency (22^nd Ed), §§9-099 – 9-100. In the present case, given that P1 is acting as an agent for P2, the payment is deemed to be made by P2 by virtue of the law of agency. As P2 is a co-plaintiff, there is no need to grant relief to P1 only to require it to hold on account of P2. Therefore, I consider that the D2 was enriched at the expense of P2, rather than P1.

59.  Third, turning to the question of unjust factor, I agree with Ps’ counsel that P made the payment under a mistake as to the identity of the person who sent the 1^st and 2^nd Emails.

60.  Fourth, I consider that D2 has not established any defence. In its Re-Amended Defence, D2 relied on the defence of bona fide change of position. I have already rejected D2’s case in this regard in Section D above.

61.  To conclude, I find that Ps have successfully proved their claim of unjust enrichment.

G. Analysis – Conspiracy to Defraud

62.  Finally, Ps also rely on the cause of action of unlawful means conspiracy between D1 and D2, the unlawful means being fraud.

63.  A summary of the legal principles on unlawful means conspiracy is set out by Ma CJHC (as he then was) in Pido v Compass Technology Co Ltd [2010] 2 HKLRD 537 at §17. The tort contains the following four elements:

(a) an agreement between two or more persons;

(b) an intention to injure the plaintiff;

(c) acts that were carried out pursuant to the agreement and the stated intention; and

(d) damage caused to the plaintiff.

64.  In its Amended Statement of Claim, Ps’ pleaded case on the agreement issue is that:

“… there was a combination and/or agreement (the “Conspiracy”) formed between the 1^st and 2^nd Defendants as well as the computer hacker, whereby the computer hacker and the 1^st and 2^nd Defendants conspired together to defraud and/or injure 1^st and/or 2^nd Plaintiffs by unlawful means or with intent, and under the said Conspiracy the role of the 1^st and 2^nd Defendants was to receive and deal with the Payment of USD117,277.50…” [A/2/27/§16]

65.  Counsel for Ps, Mr Sim, rightly point out that there is no direct evidence that D1 and D2 had an agreement/​combination to perpetrate fraud.

66.  However, counsel invites the Court to draw an adverse inference against D2 as a party facilitating the perpetration of the fraud, referring to Hypertec Systems Inc v Yifim Limited [2022] 1 HKLRD 1141 where the Court drew an adverse inference to find an unlawful means conspiracy in the absence of positive evidence implicating the defendants with the fraud.

67.  Having surveyed the evidence, I take the view that there are insufficient facts for me to infer the fraudulent conspiracy alleged. While D2’s change of case is disconcerting, the documentary evidence is not satisfactory, and D2’s abandonment of appearance at a late stage permits adverse inferences to be drawn, it is not clear to me that such is sufficient for me to infer the existence of a fraudulent conspiracy, especially given the seriousness of the charge and the concomitant requirement for cogent evidence.

H. Disposition

68.  Based on my analysis above, P2 succeeds on its claim for unjust enrichment. Ps fail in their constructive trust and unlawful means conspiracy claims.

69.  I therefore make the following orders:-

(a) D2 do pay the sum of USD117,277.50 to P2.

(b) Pre-judgment interest at the rate of prime + 1% per annum from 26 April 2019 until the date of the judgment, and thereafter at judgment rate until full payment.

(c) An order nisi that the costs of the action (including all reserved costs) be to Ps, with certificate for counsel.

70.  I thank Counsel for the helpful assistance rendered.