KWOK LAI SHEUNG v. MORE INSURANCE BROKER COMPANY LTD AND OTHERS

DCCJ 5984/2024 & DCCJ 5985/2024

[2025] HKDC 2105

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5984 OF 2024

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BETWEEN

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IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5985 OF 2024

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BETWEEN

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DECISION

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Introduction

1.  The plaintiff in DCCJ 5984/2024 (“the 1^st plaintiff”) and the plaintiff in DCCJ 5985/2024 (“the 2^nd plaintiff”) are brother and sister both are over 60 years of age.

2.  The 3^rd defendant in both actions is a senior sales manager of the 1^st defendant and secretary for the 2^nd defendant. She was also a director of the 2^nd defendant up to April 2022.

3.  The 4^th defendant in both actions is the 2^nd defendant’s shareholder and director.

4.  On 25 October 2024, Her Honour Judge G Chow granted ex parte injunction orders against the 2^nd, 3^rd and 4^th defendants from dissipating and/or disposing their assets in Hong Kong not exceeding $2,641,114.05 and $142,224 respectively in favour of the 1^st and 2^nd plaintiffs. The learned Judge also granted disclosure orders against the 2^nd, 3^rd and 4^th defendants.

5.  On 28 October 2024, the two plaintiffs took out summonses (“the summonses”) for the continuation of the injunction orders until trial or further order, which were adjourned for substantive argument before this Court.

Legal principles

6.  The legal principles on Mareva injunction are uncontroversial.

7.  For the grant of a domestic Mareva injunction, the plaintiff must show:

(1) that he has a good arguable case on a substantive claim over which the court has jurisdiction;

(2) that there are assets within the jurisdiction;

(3) that the balance of convenience is in favour of grant;

(4) that there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, which would render the plaintiff’s judgment of no effect; and

(5) the plaintiff must comply with a strict duty of full and frank disclosure.

See Hong Kong Civil Procedure 2025 Vol 1 at 29/1/65.

The plaintiffs’ case

8.  The 1^st plaintiff’s daughter, Kwok Chin Yu (“Miss Kwok”) joined the 1^st defendant as a wealth management consultant in December 2022. The 1^st defendant is a Hong Kong insurance and financial broker. The 2^nd defendant is a Hong Kong company.

9.  Miss Kwok was instructed by the 3^rd defendant to persuade her clients including the 1^st and 2^nd plaintiffs to join an investment scheme managed by the 2^nd defendant. The 3^rd defendant made representations to Miss Kwok and instructed her to communicate the same to the 1^st and 2^nd plaintiffs, including:

(a) the 2^nd defendant managed a private investment fund and is linked to the 1^st defendant (both of which were subsidiaries of a US listed company, MSB, with the stock code “MSBM”);

(b) the investment term was 1 year, with full withdrawal guaranteed thereafter; and

(c) the investment would be held through a trust structure, with Alpadis Trust (HK) Limited (“Alpadis”), a renowned global trust company, as the trustee.

(collectively “the representations”)

10.  Subsequently, the 1^st, 2^nd and 3^rd defendants provided Miss Kwok with forms and documents purportedly to set up Alpadis trusts, namely, trust applications, KYC forms, declarations, terms of business, investment directions and consent forms (collectively “the alleged Alpadis documents”).

11.  Upon the directions of the 1^st, 2^nd and 3^rd defendants, the 1^st and 2^nd plaintiffs executed and returned the alleged Alpadis documents to the 1^st defendant for processing and paid the 2^nd defendant a total of HK$3.2 million (“the investment money”).

12.  In February 2024, pursuant to the 1-year full withdrawal guaranteed, the 1^st plaintiff asked the 3^rd defendant to withdraw money but was told that the 2^nd defendant could not repay the money prior to an upcoming IPO of Many Many.

13.  On 10 September 2024, the 1^st and 2^nd plaintiffs issued a demand letter to the 2^nd defendant for the return of the investment money.

14.  On 4 October 2024, inquiries were made to Alpadis who confirmed that it had no involvement in the alleged investment scheme and it did not authorise the use of any of the alleged Alpadis documents.

15.  Further, MSB’s published reports stated that neither the 1^st nor the 2^nd defendants was MSB’s subsidiary.

The defendants’ case

In respect of the 1^st plaintiff

16.  Miss Kwok signed a Technical Representative’s Agreement with the 1^st defendant on 10 January 2023 to become an independent contractor of the 1^st defendant selling its products for commission.

17.  On 11 January 2023, the 1^st plaintiff drew a cheque for HK$3,092,550 in favour of the 2^nd defendant and executed documents authorising the investment.

18.  The 1^st plaintiff executed, among others, a declaration of trust making Miss Kwok the beneficial owner of the said HK$3,092,550 and had the rights to the interest and repayment of that sum.

19.  On 16 January 2023, Miss Kwok told the 3^rd defendant over WhatsApp that the 1^st plaintiff decided to invest in the 2^nd defendant on the same day.

20.  Miss Kwok deposited the 1^st plaintiff’s cheque into the 2^nd defendant’s account and received monthly interest payments from the said HK$3,092,550 until June 2024.

21.  From 22 February 2024 onwards, Miss Kwok asked if she could withdraw the 1^st plaintiff’s investment from the 2^nd defendant.

22.  On 18 March 2024, Miss Kwok asked the 3^rd defendant if she could withdraw the 1^st plaintiff’s investment urgently. The 3^rd defendant told Miss Kwok that she could ask the 2^nd defendant to find other ways to pay the 1^st plaintiff.

23.  As the 2^nd defendant was unable to raise funds to pay the 1^st plaintiff the sum of HK$3,092,550 in one go, it was agreed between the 1^st plaintiff and the 2^nd defendant that the 2^nd defendant would pay the 1^st plaintiff 1% of the HK$3,092,550 per month until full payment. In return, the 1^st plaintiff would not commence proceedings against the 2^nd defendant (“the settlement agreement”).

24.  The 2^nd defendant started paying Miss Kwok HK$30,925 per month from June 2024 onwards.

25.  The payments ceased in September 2024 due to the plaintiffs’ pre-action letters dated 5 August and 10 September 2024 respectively.

In respect of the 2^nd plaintiff

26.  On 2 May 2023, the 2^nd plaintiff drew a cheque for the sum of HK$160,000 in favour of the 2^nd defendant.

27.  After the cheque was deposited on 11 May 2023, the 2^nd plaintiff started receiving monthly interest payments from the said HK$160,000.

28.  The 2^nd defendant continued to make monthly interest payments until September 2024 for reason stated in paragraph 25 above.

Good arguable case

29.  I bear in mind that at the interlocutory stage, the court only has to be satisfied that there is a good arguable case in the sense of a case which is “more than barely capable of serious argument. And yet not necessarily one which the judge believes to have a better than 50% chance of success”. There is also no requirement that the plaintiff has to show that she has a “much better” case or argument than the defendant. In other words, the presence of even a good arguable defence does not necessarily negate a good arguable case: see Target Insurance Co Ltd (Managers appointed under Section 35(2)(b) of the Insurance Ordinance (Cap 41)) v Ng Yu and others [2025] HKCA 150 at para 50.

30.  The plaintiffs relied on 3 causes of action, namely, deceit, constructive trust and conspiracy.

Deceit

31.  The following are the elements of fraud or deceit:

(a) there must be a representation of fact made by words or conduct;

(b) the representation must be made with knowledge that it is or may be false. It must be wilfully false, or at least made in the absence of any genuine belief that it is true;

(c) the representation must be made with the intention that it should be acted upon by the claimant, or by a class of persons which includes the claimant, in the manner which resulted in damage to him;

(d) it must be proved that the claimant has acted upon the false statement; and

(e) it must be proved that the claimant suffered damage by so doing.

See Haifa International Finance Co Ltd v Concord Strategic Investments Ltd [2009] 4 HKLRD 29 at para 15.

32.  Mr Cristian Tsang, counsel for the defendants, submitted that the plaintiffs have no good arguable case on deceit against the 1^st, 2^nd and 3^rd defendants.

33.  First, Mr Tsang submitted that the 3^rd defendant had never made the representations to Miss Kwok and had no reason to do so in January 2023 because she had ceased to be the 2^nd defendant’s director since 17 April 2022 and Miss Kwok never worked for the 2^nd defendant. Mr Tsang commented that the plaintiffs’ case is vague, unsubstantiated by documents and involves hearsay.

34.  Secondly, the plaintiffs have not shown Miss Kwok relayed the representations to them. No particulars or evidence were given in the 1^st plaintiff’s nor in Miss Kwok’s affirmations.

35.  Thirdly, even if the representations were made to the plaintiffs, the plaintiffs’ case on inducement is vague in that it is unclear if the plaintiffs were induced to sign the alleged Alpadis documents or to issue cheques to the 2^nd defendant.

36.  Fourthly, the 1^st, 2^nd and 3^rd defendants could not have made the representations to induce the plaintiffs to sign the alleged Alpadis documents as they did not give those documents to the plaintiffs to sign. Miss Kwok did not say she got the documents from the defendants.

37.  Fifthly, the signing of those documents would not cause loss to the plaintiffs as they did not create contractual liability or cause loss to the plaintiffs.

38.  Sixthly, the 1^st, 2^nd and 3^rd defendants could not have made the representations to induce the plaintiffs to issue the cheques to the 2^nd defendant because the representations stated that the funds would be held by Alpadis, not the 2^nd defendant.

39.  Lastly, the 2^nd plaintiff suffered no loss as her cheque was drawn from Lai Pik Kwan’s account.

40.  Although the 3^rd defendant was a director of the 2^nd defendant up to April 2022, she remained to be the secretary of the company. It is not disputed that she was the senior sales manager of the 1^st defendant at the material time. She is closely connected to both the 1^st and 2^nd defendants. The selling of the 2^nd defendant’s financial products is conducive to the business of the 1^st defendant. There is every reason for the 1^st defendant to promote the 2^nd defendant’s investment scheme. Viewed in this light, to say that the 3^rd defendant would not have made the representations to Miss Kwok because she had already ceased to be the 2^nd defendant’s director is, with respect, superficial and in any event inconclusive.

41.  The 1^st plaintiff does not know English and relied on his daughter in understanding the alleged Alpadis documents. For the fact that the 1^st defendant did sign on the alleged Alpadis documents, the logical inference is that Miss Kwok did introduce to him an investment scheme which is related to Alpadis. For the fact that the investment money was paid by cashier order and cheque drawn in favour of the 2^nd defendant, the logical inferences are that the 1^st and 2^nd plaintiffs acted upon the representations made by Miss Kwok and the investment scheme was managed by the 2^nd defendant.

42.  It is indisputable that both plaintiffs suffered loss. It matters not that the 2^nd plaintiff’s payment was made by someone else’s cheque.

43.  I am satisfied that the plaintiffs have established a good arguable case of deceit.

Constructive trust (against the 2^nd defendant)

44.  Linda Chan J in RPB SA (a company incorporated in accordance with the laws of Argentina) v Healthy Food Ltd and others [2021] HKCFI 1153 at para 16 has the following to say:

“In general, victims of a fraud have a good arguable case against the recipient of funds of constructive trust. They may assert a proprietary claim to the extent that their funds can be traced and identified as representing recognisable assets of the recipient. The plaintiff only needs to show that the recipient has received or retained property in which the plaintiff has proprietary interest (Virgo, The Principles of the Law of Restitution (3^rd ed, 2016), pp 567-9).”

45.  As rightly pointed out by Mr Tsang, the plaintiffs’ case on constructive trust depends on their case on deceit succeeding.

Unlawful means conspiracy

46.  Recorder Manzoni SC in Societe Generale, Singapore Branch v Inter-Pacific Group Pte Ltd and others [2020] HKCFI 1508 at para 36 set out the elements for a claim of unlawful means conspiracy:

(a) that there was an agreement, or combination by which the parties shared a common intention, between the conspirators (hence inevitably including the relevant defendant) to injure the plaintiff;

(b) that the agreement was to take an unlawful action or to do an unlawful act;

(c) the unlawful act(s) caused loss to the plaintiff; and

(d) the conspirators intended to cause loss to the plaintiff.

47.  Mr Tsang submitted that there was no unlawful means. Further, there is nothing to suggest that the 2^nd defendant wanted to steal the investments from the plaintiffs. The 2^nd defendant put the investments into JPEX, which has been under criminal investigation since September 2023 whereby its trading account with JPEX is frozen. There was a settlement agreement between the 2^nd defendant and the 1^st plaintiff whereby the 2^nd defendant would pay the 1^st plaintiff 1% of his initial investment per month until full repayment. The 1^st plaintiff would not commence proceedings against the 2^nd defendant. Before the plaintiffs issued the pre-action letter on 5 August 2024, the 2^nd plaintiff never asked to withdraw her investment.

48.  Given the inter-relationship of the 3^rd and 4^th defendants with the 1^st and 2^nd defendants as stated in paragraphs 2 and 3 above and that Miss Kwok was working for the 1^st defendant in the selling of financial products, coupled with the falsity of the alleged Alpadis documents, I am satisfied that the plaintiffs have established a good arguable case of unlawful means conspiracy.

49.  The points raised by Mr Tsang are of course an arguable defence, which ought to be dealt with at the trial.

Real risk of dissipation

50.  Cheng J in浙江大通輕紡有限公司 v He Bin (何斌) [2022] HKCFI 1987 succinctly summarised the court’s approach in the assessment of risk of dissipation considered by the Court of Appeal in Convoy Collateral Ltd v Cho Kwai Chee & Others [2020] 6 HKC 81 as follows:

(a) The ultimate question is whether a claimant succeeds in showing, objectively, a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant;

(b) What must be threatened is unjustified dissipation; the purpose of a Mareva injunction is not to provide a claimant with security;

(c) In order to establish a sufficient risk of dissipation, it is not enough merely to establish a good arguable case that the defendant has been guilty of dishonesty; the question is whether such dishonesty points to the conclusion that assets may be dissipated. It is also necessary to take account of whether there appear to be properly arguable answers to the allegations of dishonesty;

(d) The assessment as to whether there is a real risk of dissipation involves an evaluative and predictive judgment. The evidential burden can be satisfied by drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk, including matters which point against such risk;

(e) The courts have been vigilant in scrutinising the allegations in a claim with care before drawing the inference of risk of dissipation;

(f) Dishonest or wrongful acts which are themselves not acts of dissipation may nevertheless be relevant to the issue of dissipation; and

(g) Evidence of dishonest and fraudulent conduct or other serious wrongdoing which form the basis of the claims, and which reflect adversely on the integrity of the defendant, may point powerfully towards an inference of such risk.

51.  Further, the burden is on the plaintiff to prove the risk of dissipation. The defendant does not bear any burden to disprove it.

52.  Mr Samuel Leung, counsel for the plaintiffs, submitted that the very nature of the purported investment scheme, being a sophisticated fraud orchestrated by the defendants, inherently suggests a propensity for dishonesty and a willingness to conceal assets. Mr Leung submitted that there is a solid basis for concluding that there is real risk of dissipation of assets on the part of the 2^nd, 3^rd and/or 4^th defendants.

53.  First, the defences of the 2^nd, 3^rd and 4^th defendants hinge upon the non-existence of the representations which is wholly incredible.

54.  Secondly, since the grant of the injunction orders, the 2^nd, 3^rd and 4^th defendants repeatedly failed to comply with the disclosure orders dated 25 October 2024 on the excuse of “out of Hong Kong” until 23 December 2024 by the 3^rd defendant and 21 January 2025 by the 2^nd and 4^th defendants.

55.  Thirdly, the 2^nd, 3^rd and 4^th defendants have still to accede to a pre-action request for the disclosure of documents relevant to the core issues of the present actions.

56.  Fourthly, the 2^nd defendant does not seem to have an active business in Hong Kong as it has not filed its latest annual returns.

57.  Mr Leung submitted that the above reflect a clear lack of commercial morality and respect for court orders on the part of the 2^nd, 3^rd and 4^th defendants.

58.  To my mind, the acts pinpointed by Mr Leung are common occurrences in most of the litigation cases. I do not regard them as a demonstration of the lack of commercial morality. In any event, conducts which may be regarded as being of low commercial morality is not necessarily relevant to risk of dissipation. It is necessary to examine whether the conduct or wrongdoings in question is itself indicative of, or relevant to, the risk of dissipation: see China Medical Technologies, Inc (in liquidation) and others v Samson Tsang Tak Yung and others [2022] HKCA 41 at para 38.

59.  I also note that the 2^nd defendant is saying that the investment money was put into JPEX, which is now under criminal investigation. The freezing of the trading account with JPEX has caused the 2^nd defendant’s inability to repay. And the matter was settled by the settlement agreement. These are all arguable answers to the allegation of dishonesty.

60.  As such, I am not persuaded that the plaintiffs have shown that there is a real risk of dissipation.

Balance of convenience

61.  For completeness, as the plaintiffs are willing to give an undertaking as to damages, had it not been for my ruling on the question of risk of dissipation is against the plaintiffs, the balance is in favour of the continuation of the injunction orders until trial.

Conclusion and order

62.  By reasons of the aforesaid, the summonses must be dismissed.

Costs

63.  I make a costs order nisi that the 1^st and 2^nd plaintiffs shall pay the defendants the costs of the summonses with certificate for counsel, to be taxed if not agreed.

64.  In the absence of any application for variation by summons within 14 days from the date of this decision, the costs order nisi shall become absolute.