HYUNDAI MERCHANT MARINE (HONG KONG) LTD v. MA CHUN KIT AND OTHERS

HCA 619/2016

[2025] HKCFI 5084

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 619 OF 2016

____________

__________________

D E C I S I O N

__________________

1.  This application was originally fixed to be heard last week on 10th October 2025. It transpired that the 1st Defendant, who is currently incarcerated, had not received a copy of the summons by the time of the hearing. The application was adjourned to today to enable the 1st Defendant to be given notice of the summons and of today’s hearing. Having read the 18th Affidavit of Desmond Liaw Tai Niap of 16th October 2025, I am satisfied that the 1st Defendant has been given such notice.

2.  On 27th April 2022, DHCJ Winnie Tsui (as she then was) gave judgment for the Plaintiff against its former employee the 1st Defendant, who was found to have misappropriated over $387m from the Plaintiff (“the Judgment”).  The 1st Defendant was ordered to repay the misappropriated sum, together with compound interest, to the Plaintiff.  The Plaintiff was separately convicted of four counts of theft in December 2020 in relation to essentially the same transactions.

3.  In giving judgment, DHCJ Winnie Tsui also extended the Mareva injunction, originally granted by Anthony Chan J (as he then was) on 10th March 2016, for a period of twelve months post-judgment, to enable the Plaintiff to execute the Judgment.

4.  The post-judgment Mareva has since been extended:

4.1     for a period of twelve months, that is, until 26th April 2024, by order of DHCJ Jenkin Suen SC on 14th April 2023; and

4.2     for a further period of eighteen months, that is until 26th October 2025, by order of DHCJ KC Chan on 22nd March 2024.

5.  By summons of 29th September 2025, the Plaintiff now seeks to further extend the post-judgment Mareva for twenty-four months.

6.  The court has the power to extend the duration of a post‑judgment Mareva injunction.  However, the power should not be lightly exercised.  Absent any material change in circumstances, the court’s primary concern is whether the judgment creditor has been diligent in execution, and whether it is in the interests of justice to extend the injunction: Leader Screws Manufacturing Co Ltd v Huang Shun Kui[2021] HKCFI 2041 at [5] (Au-Yeung J).

7.  The Plaintiff’s evidence is that so far, only $24m-odd has been recovered, for example through garnishing bank accounts and selling properties; over $727m (comprising the Judgment sum and interest) remains outstanding.  However, the 1st Defendant has been obstructive and uncooperative (as demonstrated, for example, in his answers in an oral examination on 24th August 2023), making it more difficult for the Plaintiff to locate the 1st Defendant’s assets for the purpose of execution.

8.  The 17th Affidavit of Desmond Liaw Tai Niap (“Liaw 17th”) further sets out evidence suggesting that the 1st Defendant has been using his family members, girlfriend, and other associates to hold his assets out of reach of the Plaintiff.  Liaw 17th also refers to findings made in various judgments regarding the 1st Defendant’s dishonest and unscrupulous behaviour.

9.  Nevertheless, Liaw 17th has not provided much information as to what enforcement actions have been taken during the period of the previous extension of the post-judgment Mareva (27th April 2024 to 26th October 2025).  Four matters were referred to.

9.1     The 1st Defendant was orally examined on 24th August 2023.  He was uncooperative.  What follow-up actions have been taken or remain to be taken is unclear; Liaw 17th paragraph 39 simply says that further time is required to investigate.

9.2     Reference was made to “continuous efforts” to sell certain properties registered in the name of the 1st Defendant, and it was said that this has taken time due to various factors such as the state of the property market, and that the Plaintiff would need at least a year to sell the properties (Liaw 17th paragraph 40).  I note that there were seven such properties, identified by June 2022, and that two of the properties have been sold.  No details have been given as to what efforts have been made to sell the rest.  In any event, the Plaintiff has already obtained a charging order absolute against the property, and an order for possession and sale of the properties.  The continuation of the post-judgment Mareva is not needed to assist with the sale.

9.3     A garnishee order was obtained against the 1st Defendant’s sister Ma Fei Fei on 13th December 2024, pursuant to which Ma Fei Fei was to pay to the Plaintiff the debt of $648,800 and other debts owed by her to the 1st Defendant (Liaw 17th paragraph 41).  No payment has yet been forthcoming from Ma Fei Fei.  The Plaintiff then obtained a garnishee order to show cause against two banks at which it was believed that Ma Fei Fei had accounts (Liaw 17th paragraph 44), but the application to make the order absolute has been withdrawn as Ma Fei Fei does not have accounts with those banks.  The Plaintiff has not explained how a continuation of the post‑judgment Mareva would assist with recovery against Ma Fei Fei.

9.4     A judgment was obtained against the 1st Defendant’s girlfriend in the Intermediate Court of Macau in July 2025 for sums transferred from the 1st Defendant’s account to his girlfriend’s bank accounts; it is said that the sums were used to buy properties in Macau and Australia (Liaw 17th paragraphs 47 and 48).  The Plaintiff has not explained in the affidavit evidence how a continuation of the post-judgment Mareva against the 1st Defendant would assist with recovery against the 1st Defendant’s girlfriend out of the jurisdiction, particularly when the Plaintiff has already obtained an injunction against the 1st Defendant’s girlfriend in Macau.

10.  In other words, the evidence as to steps taken in executing the Judgment during the previous eighteen-month extension of the post‑judgment Mareva consists of no more than the evidence regarding the efforts to garnish debts owing from Ma Fei Fei and her bank accounts, the fact that judgment was given in Macau against the 1st Defendant’s girlfriend, and unparticularised statements that efforts to enforce the Judgment are continuing.

11.  Furthermore, the Plaintiff has not in the affidavit evidence given concrete details as to how the extension of the post-judgment Mareva would assist with following up any of the steps already taken, or steps planned to be taken, or otherwise to assist in locating the assets of the 1st Defendant.

12.  I accept that the 1st Defendant should still have substantial assets, given the amount stolen from the Plaintiff.  I also accept that the 1st Defendant’s obstructive stance means that it has been difficult for the Plaintiff to locate such assets so as to execute the Judgment against them, so that the Plaintiff should be given every opportunity to pursue the location and recovery exercise.  Nevertheless, the Plaintiff does need to demonstrate that it has been pursuing execution diligently, and that it would be in the interests of justice to continue the injunction.

13.  At the hearing today, Mr Liaw explained that the 1st Defendant’s girlfriend has a bank account in Hong Kong, so that the post‑judgment Mareva would operate in respect of this account pending the appeal in Macau; the Plaintiff would seek to enforce against this account after the conclusion of the appellate proceedings in Macau, which will take about a year.  Mr Liaw explained that some further steps will be taken to locate the 1st Defendant’s assets.  There is therefore some utility in continuing the injunction.

14.  In the circumstances, I am not prepared to give the twenty-four month extension sought.  I will extend the injunction for fifteen months.  The Plaintiff should proceed diligently with pursuing enforcement of the Judgment.  Should the Plaintiff require a further extension thereafter, it will need to produce evidence that it has been using these fifteen months to diligently pursue execution, and/or to show how any further extension would assist in such execution or would otherwise be in the interests of justice.

Mr Desmond Liaw, instructed by Minterellison LLP, for the Plaintiff

The 1^st Defendant was not represented and did not appear

HCA 619/2016

[2023] HKCFI 197

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 619 OF 2016

________________________

________________________

________________________

REASONS FOR DECISION
AND RULING ON COSTS

________________________

A. Introduction

1.  This is the summons of D1 (“Ma”)  taken out on 9 August 2022 to vary a post-judgment injunction order so as to release funds for his appeal to the Court of Appeal against a conviction in theft. 

2.  The injunction order was first made against him on 10 March 2016, with 6 subsequent variations until 26 August 2022 (“Injunction Order”).  The amount frozen thereunder is HK$654,223,293.24.  The Injunction Order provides, amongst others, that D1 was not prohibited from spending a one off sum of HK$100,000 on legal advice and representation.

3.  Specifically, on 27 April 2022 when final judgment in this case was handed down, DHCJ Winnie Tsui ordered that the Injunction Order do continue for 12 months post-judgment.

4.  Ma’s summons does not set out the precise variation sought.  However, judging from §8 of his affirmation filed on 16 August 2022 (“Supporting Affirmation”), Ma is seeking a withdrawal of HK$1.5 million out of the frozen assets in order to pay his contribution to the Director of Legal Aid (“DLA”)  towards the legal costs for his appeal against conviction in theft. 

5.  The application is opposed by the Plaintiff on the ground that the D1 has not shown himself to be in lack of other available assets to justify the variation. 

6.  After hearing the parties, I dismissed Ma’s Summons.  Here are my reasons. 

B.  Background

7.  D1 used to be employed by the Plaintiff as an accounts clerk and was promoted to Deputy General Manager of the Account Department before his employment was terminated. His last salary was HK$37,900.  During his employment between 2009 and 2016, he transferred a total of HK$387,655,303.70 from the Plaintiff’s bank accounts to his own.  He used the money for his own purposes and to lead a lavish life style.  The Plaintiff discovered the dishonest acts of D1 and confronted him on 29 February 2016, to which he confessed the embezzlement.  Ma was summarily dismissed on 4 March 2016.  On 10 March 2016, the Plaintiff applied for and obtained the Injunction Order. 

8.  Pending trial of this action, D1 had been found to be in breach of the Injunction Order in respect of 6 items of expenses amounting to more than HK$3 million.  He was sentenced to 4 months’ imprisonment: [2018] HKCFI 328, 9 February 2018,A Chan J, §26.

9.  In criminal proceedings in HCCC 20/2018, which arose out of the same acts of misappropriation, Ma was convicted on 16 December 2020 of 4 counts of theft and was sentenced to 15 years’ imprisonment.  He is currently serving his sentence at the Stanley Prison. 

10.  In delivering the sentence, the trial judge, Remedios J, described D1 as “a dishonest man” and his behaviour as “a wholly premeditated and calculating theft” and “an egregious example of selfishness and greed”.

11.  The present action was tried before DHCJ Winnie Tsui in August 2021.  D1 told the learned Deputy Judge on the first day of trial that he did not wish to participate in the trial.  After trial in his absence, DHCJ Winnie Tsui held that D1 had acted dishonestly and misappropriated a “colossal sum of money” over 260 transactions carried out between 2009 and 2016.  D1 was found liable for breach of fiduciary duties, breach of implied duty of fidelity, breach of confidence and conversion: [2022] HKCFI 1153, §§59-61.  He was ordered to pay damages of HK$387,655,303.70, plus compound interest of P + 1%, which have rolled to HK$657,282,052.90 by September 2022.

12.  It is estimated that the value of D1’s assets is about HK$55.85 million.  The Plaintiff has only recovered about HK$2 million of the judgment debt from garnishee orders absolute and another HK$500,000 from D1’s bail money pursuant to Recorder William Wong SC’s order: decision dated 23 December 2022 in the present action.  There are also charging orders over properties in the name of D1, but the properties are yet to be sold. 

C.  Legal Principles for Variation of Injunction

13.  Where a post-judgment injunction has been granted, the burden is on the party seeking variation to justify it.  Since the creditor has already detained judgment, the creditor’s interest is one of the factors for the Court to consider. 

14.  The court will apply the same principle when considering whether or not to grant a Mareva injunction, and ask whether it is just and convenient to allow the variation.  As the purpose of Mareva relief is to prevent unjustifiable disposal, the court would bear in mind that the assets belong to the defendant and that the injunction is not intended to provide the plaintiff with security for his claim or to create an untouchable pot which will be available to satisfy an eventual judgment: Alltogether Land Co Ltd v China Create Capital Limited[2022] HKCFI 2726, §23, Linda Chan J.

15.  Generally, the applicant for variation should make full and frank disclosure, by sufficient evidence, that (a)  he does not have other assets available to meet those expenses; and (b)  the purpose of the application is not an attempt to dissipate the assets to frustrate the plaintiff’s enforcement of a judgment.  In considering (a), the Court is not limited to the funds to which the defendant has a strict legal right if there are reasonable grounds for believing that the defendant can obtain money elsewhere.  The court must seek to balance the risk of deliberate dissipation of frozen assets by the defendant against the abuse of the freezing order to pressure the defendant illegitimately.  See Hong Kong Civil Procedure 2023, Volume 1, §29/1/79. 

D.  Application of the legal principles

16.  D1 has produced the Offer of a Legal Aid Certificate from the DLA that determined a maximum contribution fee of $15,882,685 as costs of the criminal appeal proceedings. The contribution that D1 has to pay upon acceptance of the offer is $1,472,550.  There is a valid purpose for his application to vary the injunction.

17.  However, D1 has not, by his Supporting Affirmation or affirmation filed on 10 October 2022, made full and frank disclosure as to whether he has other assets available to meet the legal fees.

18.  Firstly, in §3 of his Supporting Affirmation, he claimed that he had not used or diminished the value of the frozen assets and that the assets have appreciated in value by 2022.  However, he has not adduced evidence to contradict the estimated value of HK$55.85 million put forth by the Plaintiff. 

19.  Secondly, in his oral submission, D1 claims that all his assets have been frozen by the Mareva injunction and, being in jail, he has no other available assets.

20.  As the past comments in various judgments show, D1 has been found to be a dishonest person in the context of criminal and civil proceedings.  The Court is entitled to hold a healthy skepticism towards D1’s assertions.

21.  I agree with Ms Ng, counsel for the Plaintiff, that it is impossible for the Plaintiff to know if the Defendant has disclosed all his assets.  Full and frank disclosure of D1 is thus of utmost importance in the present application.  D1 has made applications in the past for variation of an injunction to release funds for this action and the criminal proceedings, and has been informed of the legal principles applicable: [2019] HKCFI 1057, §§18 and 19, Au-Yeung J. 

22.  In Au-Yeung J’s case, D1 has disclosed his “means” in terms of eg borrowings from others and loans owed by “friends”.  The Court rejected his case (at §§27-32)  but D1 has not provided further evidence to address the Court’s comments.  In the present application, he has not even made an assertion that he no longer has such means.

23.  Thirdly, D1 claims in §9 of his Supporting Affirmation that the Plaintiff unreasonably dismissed him and owed him retirement fund or long service pay of about HK$2 million.  D1 reserves his right to claim against the Plaintiff. 

24.  In my view, given the conviction and the final judgment of DHCJ Winnie Tsui, D1’s claim in the previous paragraph is simply shameless.  Even if the Plaintiff still owes him $2 million, it is still far short of the judgment sum that he has to pay.  

25.  In the premises I am not satisfied that D1 has made full and frank disclosure that he does not have other assets available to meet his legal costs for the appeal.  

26.  In any case, the assets owned by D1 are far below the judgment sum due to the Plaintiff. Balancing the potential prejudice to each party if a variation is not granted, this Court is of the view that it is not just and convenient for D1 to obtain release of funds for his appeal, which would deprive the Plaintiff of the fruits of their judgment.  For the foregoing reasons, I dismiss Ma’s summons.

27.  On a nisi basis, costs should follow the event and be to the Plaintiff.  As the Plaintiff’s solicitors have failed to lodge a costs statement together with counsel’s submissions, I reduce the costs in sections C and D to mark the Court’s disapproval of their failure to follow such a basic rule of practice.  Costs are summarily assessed at $80,000.  The Plaintiff’s solicitors shall inform this Court in writing within 7 days as to whether they would give an undertaking not to recover (or, if already received, to repay to the Plaintiff)  the difference between this amount and the total amount on the costs statement.    

28.  I thank Ms Ng for her assistance. 

Ms Jacquelyn Ng, instructed by MinterEllison LLP, for the Plaintiff

The 1^st Defendant appeared in person

HCA 619/2016

[2022] HKCFI 3798

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 619 OF 2016

_________________

BETWEEN

_________________

_______________

DECISION

_______________

INTRODUCTION

1.  This is the adjourned hearing of the Plaintiff’s summons dated 21 June 2022 (the “Summons”) for payment out of a sum of HK$500,000, which was deposited by the Defendant as bail money in HCCC 20/2018.

2.  The Defendant appears in person.

MATERIAL FACTS

3.  On 27 April 2022, Deputy High Court Judge Winnie Tsui handed down judgment in favour of the Plaintiff (the “Judgment”). The learned Deputy High Court Judge found that the Defendant had acted dishonestly and had misappropriated a “colossal sum of money” over 262 transactions carried out between 2009 and 2016. The Defendant was found liable for breach of fiduciary duties, breach of the implied duty of fidelity, breach of confidence and conversion. He was ordered to pay damages to the Plaintiff in the amount of HK$387,655,303.70 with interest and costs (the “Judgment Sum”). (See Judgment, §§52, 58-61, 64, 69).

4.  The Judgment Sum remains largely unpaid. The Plaintiff took out various applications and has obtained 11 garnishee orders absolute by 25 October 2022. Ms Ng for the Plaintiff informed this Court that the Plaintiff has so far recovered only about HK$2 million.

5.  The Defendant was also prosecuted in HCCC 20/2018 for four counts of theft based on the 260 of those 262 transactions (the “Criminal Proceedings”). As part of the Defendants bail conditions in the Criminal Proceedings, he had paid HK$500,000 into the High Court (the “Bail Money”).

6.  Following the Defendant’s conviction, Messrs. MinterEllison was informed by the Police that the Bail Money remained with the High Court.

7.  On 18 January 2021, following the Defendant’s conviction in the criminal proceedings and pursuant to the direction of Madam Justice Remedios, Messrs. MinterEllison served the Re-re-re-Amended Injunction Order herein (the “Injunction Order”) on the High Court Accounts Office, with the result that the Bail Money has not been released to the Defendant or anyone else.

APPLICABLE LEGAL PRINCIPLES

8.  The Plaintiff applies for the release of the Bail Money pursuant to Order 49, rule 9(1) of the Rules of High Court, Cap 4A.

9.  This is a manner of equitable execution, with the Court making the type of order that the old Courts of Chancery would to lend assistance to a judgment creditor so that he may obtain the fruits of his judgment. See Hong Kong Civil Procedure 2023, §49/9/1 and London County Council v Monks [1959] Ch 239, at 243-244 per Danckwerts J.

10.  Order 49 rule 9(4) of the Rules of High Court, Cap 4A provides that upon such an application, the Court “may make such order with respect to the money in court as it thinks just” (emphasis added).

11.  The Court of Appeal held in YBL v LWC (No 2) [2017] 2 HKLRD 783, at §29 that bail money that is due to be returned to a judgment debtor constitutes “money … standing to the credit of [the judgment debtor in court]” for the purposes of Order 49 rule 9(1) of the Rules of High Court, Cap 4A. A judgment creditor is therefore entitled to apply for an order under Order 49 rule 9(1) of the Rules of High Court for release of such bail money in satisfaction or partial satisfaction of what is owed to him. (See also: Kot See For v Chan Leong Hang (No 2) [2021] 5 HKC 679, at §5 per Lisa Wong J.)

12.  In relation to the exercise of this power on an application under Order 49 rule 9(1) of the Rules of High Court, the Court of Appeal further held in YBL v LWC, (supra) at §26 that,

“… the disposal of bail money is not to be fettered by constraints imposed by whatever arrangement between the person putting forward the cash bail and his financier (except perhaps in the context of a dispute between these two persons). The court does not hold the money on trust for any person and the person on bail only has a chose in action to seek the return of the bail money.”

See also: ibid, at §28; and Kot See For, (supra) at §8.

13.  Specifically, the aforesaid chose in action is subject to the Court’s legitimate power to dispose of the bail money otherwise than by returning it to the same person who answered bail. Such power was expressly held to include the Court’s power to order payment to judgment creditors pursuant to Order 49 rule 9(1) of the Rules of High Court (See YBL v LWC, (supra) at §28.)

ANALYSIS

14.  I am of the view an order should be made in terms of the Summons in view of (i) the substantial time and costs incurred by the Plaintiff to date in prosecuting its claims and now in trying to enforce the Judgment; (ii) the added difficulties posed by the Defendant’s dishonesty and contempt of court in continuing to dissipate his ill-gotten gains whilst an injunction was in place; and that (iii) to date the Judgment Sum remains substantially unsatisfied.

15.  The Defendant advanced 4 grounds of opposition. I am of the view that all of them are unmeritorious.

16.  First, the Defendant submits that he is entitled to the return of the Bail Money, as the purpose of putting up cash bail had been spent. However, the Defendant only has a chose in action to seek the return of the Bail Money, which is subject to the Court exercising its power, inter alia, to make any payment out pursuant to Order 49 rule 9(1) of the Rules of High Court, Cap.4A. The Defendant’s entitlement does not prevent the Court from exercising its powers to make a payment out to the Plaintiff pursuant to Order 49 rule 9(1) of the Rules of High Court.

17.  Secondly, Defendant asserts that he had put together the Bail Money from loans that he obtained from unspecified friends and relatives. Hence he claims that the Bail Money does not belong to him. That is incorrect. Once he borrowed the money, the money belonged to him. He owes a debt vis-à-vis his friends and relatives. Courts have consistently explained that arrangements between the judgment debtor who put up the cash bail and his creditors who put him in funds to do so, will not fetter the Court’s power to dispose of the bail money.

18.  Thirdly, Defendant submits that the Bail Money should not be released pending his appeal against his conviction. It is to be noted that the Bail Money was part of the Defendant’s conditions of bail, which bail was revoked subsequently. The purpose of the Bail Money being spent, it was open to the Defendant to collect it.

19.  Indeed, the Defendant’s representative did try to collect it on 12 January 2021 and would have succeeded had it not been for the service of the Injunction Order on the High Court Accounts Office on 18 January 2021. The Plaintiff, as judgment creditor, is entitled to enforce the Judgment Sum against any money or assets which were to be released or made available to the Defendant.

20.  Fourthly, the Defendant argues that the Plaintiff is sufficiently protected by the Injunction Order. This is a bad point. The Injunction Order preserves the status quo. The Judgment being entered in the Plaintiff’s favour, the Plaintiff is entitled to execution, and not just a preservation of sufficient and/or relevant funds out of which the Judgment might be satisfied in the future.

21.  The Defendant’s fourth contention also ignores the purpose of Order 49 rule 9(1) of the High Court, Cap 4A which is a manifestation of the Court’s equitable jurisdiction to aid execution so that a judgment creditor may obtain the fruits of his judgment.

DISPOSITION

22.  For all the reasons stated above, I make an order in terms of the Summons.

23.  The Plaintiff is also entitled to costs of this application, to be taxed if not agreed, on a party to party basis, against the Defendant.

24.  Finally, I thank Ms Ng for the Plaintiff for her helpful assistance.

Ms Jacquelyn Ng, instructed by MinterEllison LLP, for the plaintiff

The 1^st defendant was not represented and was present.

HCA 619/2016

[2022] HKCFI 1153

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 619 OF 2016

________________________

________________________

________________________

J U D G M E N T

________________________

Introduction

1.  This is the trial of the plaintiff’s action against the 1^st defendant, Mr Ma Chun Kit (“Ma”).

2.  The plaintiff is a Hong Kong incorporated company and a subsidiary of Hyundai Merchant Marine Company Limited (“Hyundai Korea”).  Hyundai Korea is a public listed company in Korea, carrying on the business of cargo and logistics services worldwide.  The plaintiff is responsible for effecting payment of bills and invoices for Hyundai Korea in respect of its business in the South China region. 

3.  Ma was an employee of the plaintiff from 1992 to 2016.  He joined as an accounts clerk and was gradually promoted over the years.  In April 2011, he became the Deputy General Manager of the Account Department. He remained in that post until he was summarily dismissed on 4 March 2016.  At that time, his monthly salary was $37,900.

4.  It is the plaintiff’s case that between 2009 and 2016, Ma had transferred a total sum of $387,655,303.70 (“the Sum”)  from the plaintiff’s bank accounts to his own bank accounts.  This involved 262 transactions. The transfers were made without the plaintiff’s authority.  Ma made use of the transferred money for his own use and benefit.  The dates, the amounts and the bank accounts involved in the 262 transactions are set out in Schedule 1 of the re-amended statement of claim. 

5.  In its pleading, the plaintiff claims against Ma for the restitution of the Sum on the basis of unjust enrichment. Alternatively, it claims damages and/or equitable compensation for conversion, breach of confidence, breach of implied duty of fidelity, and breach of fiduciary duties.  It seeks a further alternative of an account of profits in respect of the Sum, at its option. 

6.  In his closing submissions, Mr Jonathan Wong, appearing with Ms Jacquelyn Ng for the plaintiff, confirmed that the plaintiff would seek equitable compensation from Ma with compound interest, and would not ask for an account of profits.

7.  In the re-amended statement of claim, the plaintiff avers that Ma had on multiple occasions transferred parts of the Sum to the 2^nd, 3^rd and 4^th defendants, who are, respectively, his girlfriend, father and step-mother.  The plaintiff claims against the three defendants on the basis of restitution, knowing receipt and/or dishonest assistance. 

8.  The action against the 2^nd defendant was discontinued earlier on in these proceedings.  The 3^rd defendant passed away in July 2016.  Shortly before the trial, the action against the 4^th defendant was dismissed by consent.  The present trial only concerns Ma.

9.  Separately, after a 36-day trial, Ma was convicted of four counts of theft in HCCC 20/2018 in December 2020.  The four counts concerned the same transactions which form the subject-matter of this action, save for two transactions.  He was sentenced to a total term of 15 years’ imprisonment.

10.  The two transactions for which Ma was not charged were the first two in time, namely the transfer of $325,000 on 8 April 2009 and $375,000 on 15 April 2009.  I shall refer to them as “the first two transactions” and the others “the 260 transactions” below.  The sums allegedly misappropriated under these two heads are $700,000 and $386,955,303.70, respectively. When proving its case on the latter, the plaintiff prays in aid Ma’s criminal conviction pursuant to section 62 of the Evidence Ordinance, Cap 8.

11.  In this action, Ma was initially legally represented.  Since 29 December 2020, he acted in person.  He was brought up to court on the first day of trial on my order.  He confirmed that he did not wish to participate in the trial.  He was then taken back into custody.  The trial therefore proceeded in his absence.

12.  The plaintiff called five witnesses:

(1)  Ms Tsang Chor Yue (“Tsang”).  Tsang was an employee of the plaintiff from April 1997 and until she resigned in January 2018.  She worked in the Accounts Payable section, which was one of the three sections of the Account Department.  The Accounts Payable section was responsible for making payments to third party vendors and suppliers of the plaintiff.  Tsang reported directly to Ma.  A Ms Ling Ka Man (“Ling”)  reported to Tsang.

(2)  Mr Jung Yeonkook (“Jung”).  Jung was the General Manager of the Administration Department of the plaintiff from March 2007 to May 2011.  In that position, he was responsible for directing and supervising the general administration of the plaintiff, including the Account Department.  Ma reported directly to Jung when he was promoted to the position of Deputy General Manager of the department in April 2011.  Jung was succeeded by Mr Moon Tea Sung (“Moon”).

(3)  Mr Park Sungchul (“SC Park”).  SC Park succeeded Moon as the General Manager of the Administration Department of the plaintiff in March 2015.  He remained in that position until September 2017.  It was he who first discovered inexplicable discrepancies in the ledger and accounting information of the plaintiff in around October 2015.  This prompted him to further investigate and eventually led to the discovery of Ma’s alleged misappropriations of the plaintiff’s funds.

(4)  Mr Kim Byungsoo (“BS Kim”).  BS Kim was sent to the Hong Kong office in February 2016 to investigate the matter with SC Park. At that time, he was the manager of the Cost Innovation Team of Hyundai Korea, based in Korea.

(5)  Mr Park Byungwoo (“BW Park”).  He is an in-house lawyer of Hyundai Korea.  He was involved in the investigation of the alleged misappropriation of funds by Ma since around June 2016.  By that time, the 262 transactions had been discovered.

13.  Save for Tsang, the plaintiff’s witnesses are all located in Korea.  With the leave of the court, the four overseas witnesses gave oral evidence remotely via video-conferencing at the trial.  As Ma did not participate in the trial, there was no cross-examination of the witnesses.

14.  To complete the dramatis personae, I should also introduce the Managing Directors of the plaintiff who feature in its case.  The Managing Director was the person-in-charge of the plaintiff and was responsible for the overall supervision and direction over its affairs.  The General Manager reported directly to the Managing Director.  In chronological order, they were (the year in bracket denoting when the position was taken up):

(1)  Kim Ji Taek (February 2009);

(2)  Sohn Hyunjoo (January 2012);

(3)  Kim Kyung Tae (January 2013); and

(4)  Kim Kyunghoon (“KH Kim”)  (October 2014 to March 2017).

15.  The plaintiff has produced extensive documentary evidence in support of its case.  In addition to the bundles of pleadings and witness statements, there are 59 bundles of documents. 

16.  They comprise, among other things, bank statements showing the 262 transactions from the plaintiff’s bank accounts to Ma’s bank accounts, the authorisation records generated by the bank for the 260 transactions showing the apparent identity of the persons approving the transfers on the bank’s online payment platform.

17.  In addition to the primary documents, BW Park has compiled a table summarising the authorisation levels and the persons apparently authorising the online payments in the 260 transactions.

18.  As mentioned above, the plaintiff relies on the criminal conviction of Ma in respect of the 260 transactions.  It prays in aid section 62(2)(b)  of the Evidence Ordinance to adduce as evidence the documents filed in HCCC 20/2018, including the Indictments, the 1^st Admitted Facts, the 2^nd Admitted Facts, the trial judge’s summing-up and the sentence.  

19.  Lastly, also in the evidence are transcripts of two meetings in February and March 2016 in which the plaintiff says that Ma confessed to his misappropriation of funds.

Procedural history

20.  The plaintiff commenced the action on 10 March 2016.  On the same day, it obtained a mareva injunction against Ma on an ex parte basis.  The injunction included an ancillary order compelling him to disclose his assets.  The injunction has since been varied and continued until trial or further order of the court and the frozen sum revised to the Sum.

21.  Contempt proceedings were brought against Ma in May 2017 for breach of the injunction.  After trial, in February 2018, he was found to have dissipated his assets in breach of the injunction.  He was found to have made use of his credit cards and spent substantial sums on personal services like massage parlours and night club to maintain his extraordinary lavish lifestyle.  He also made purchases of consumer goods and services for himself to maintain the high standard of living which he was accustomed to: [2018] HKCFI 176 at paras 51, 58, 59, 61, 64, 67 and 70. 

22.  Ma filed an amended defence in November 2017, when he was still legally represented.  He pleaded that an “Agreed Arrangement” existed and pursuant to it, the Sum was transferred to him with the knowledge and authorisation of the plaintiff.  It was a device set up to overcome foreign exchange controls in mainland China so as to facilitate the plaintiff making payments to its service providers there.  In the premises, he should not be liable to the plaintiff in respect of the Sum.

23.  The plaintiff denies that the Agreed Arrangement existed.

24.  On 30 April 2018, Master Ho made an unless order directing Ma to exchange witness statements.  Ma failed to do so by the deadline.  He was therefore debarred from adducing witness evidence at trial.  Furthermore, Ma elected not to attend the trial.  The upshot of all these is that there is no evidence before the court proving the Agreed Arrangement at all.

25.  At the conclusion of the trial, Mr Wong applied for the continuation of the mareva injunction for 12 months in the event that judgment is entered against Ma.

The plaintiff’s case

26.  It is first necessary to understand how the plaintiff settles payments to its third party service providers in the ordinary course of business.  It involves, first, the plaintiff obtaining funds from Hyundai Korea and, second, the plaintiff making the payments to the service providers via its bank’s online banking system.  Tsang, Jung and SC Park gave evidence in this respect.

27.  The plaintiff makes use of the “Systems, Applications and Products in Data Processing” system (“the SAP System”).  It is a group-wide computer system for accounting, procurement and asset management.  

28.  The operation department would receive the bill from the service provider.  Its staff would input details of the bill into the SAP System, including the invoice date, the due date and the amount.  The staff in the Accounts Payable section would then verify the entries in the SAP System against the hard copy invoice to ensure accuracy.  After that, the Accounts Payable staff (either Tsang or Ling)  would submit the payment request to Hyundai Korea.

29.  Hyundai Korea would remit the money to the plaintiff’s bank account with HSBC in Hong Kong. 

30.  The Accounts Payable staff would settle the bill and make payment to the service provider using the funds via HSBC’s online payment platform.  The process would go through three tiers of online authorisation. The individual assigned to each tier would log on to the online platform by using his own user identification number and his own online banking token, which would generate a one-time password for logging on.

(1)  At the first level, either Tsang or Ling would log on to the online system to create a payment instruction.  A hard copy payment order would be printed out.

(2)  At the second level, the manager of the Accounts Payable section, ie Ma, would approve the instruction online.

(3)  Finally, the Managing Director or General Manager would log on to give final approval to the instruction.

(4)  A hard copy payment advice would be printed out and filed for record.

31.  In addition to his role in the three-tiered authorisation as described above, Ma was also one of three “system administrators” responsible for applying for and setting up online banking tokens for the plaintiff.  The other two “system administrators” would be the General Manager and the Managing Director.  Any two “system administrators” together would be able to alter and reduce the levels of authorisations required to effect transfers via the online platform.

32.  According to the investigation of the plaintiff, Ma adopted the following modus operandi to misappropriate the plaintiff’s funds in the payment process.

33.  Ma took advantage of the plaintiff’s practice that not all invoices would be settled on time.  Many of the service providers were willing to indulge the plaintiff by giving long grace periods for outstanding invoices because of the volume of its orders. 

34.  From time to time, Ma would give instructions to the staff in the Accounts Payable section to request remittances from Hyundai Korea for a selection of the outstanding invoices.  However, when the funds were received, only part of them would actually be used to settle some of the selected invoices.  Ma would direct the remainder of the funds to be transferred to his personal bank accounts.  The payment requests would then go through the authorisations on the bank’s online payment platform.  Hard copy payment instructions would only be generated for remittances genuinely applied towards outstanding invoices.  No hard copy records would be produced for transfers made to Ma.

35.  It is Tsang’s evidence that transfers to Ma’s bank accounts happened frequently. 

36.  As an illustration, she referred to a table setting out the invoices issued by Hong Kong International Terminals Limited (“HIT”), one of the major vendors in Hong Kong, and for which payment requests had been made to Hyundai Korea on 12 November 2014.  The total amount was $7,535,624.50.  The invoices were dated between 3 and 11 September 2014.

37.  The record printed out from the SAP System shows that Hyundai Korea made the remittance of the requested amount and the plaintiff received the money on 13 November 2014.  According to Tsang, Ma made a manual marking against the figure of $1,438,544 appearing on that page.  The figure represented one of the four tranches, which together made up the total remittance.  That marking indicated that the sum should be transferred to Ma’s bank accounts whereas the remainder sum of $6,097,080.50 would be paid to HIT.  The sum of $1,438,544 was transferred to Ma’s bank account on 13 November 2014, as shown in the payment advice issued by the bank.  As for the remainder sum, the internal records show that it was in fact not used to settle the September invoices.  Instead, they were used to settle some older outstanding invoices dated April 2014.

38.  Tsang explained that in general she had found Ma’s requests suspicious.  She had enquired with him about them a few times over the years.  But Ma told her that the monies transferred to his bank accounts would eventually be transferred back to Hyundai Korea, the arrangement was in fact requested by Hyundai Korea, and there was no need to inform the General Manager or the Managing Director about the arrangement. 

39.  On one occasion, Tsang asked Ma on the plaintiff’s internal messaging system whether Moon and the Managing Director knew about the arrangement.  Ma replied that Moon knew and asked Tsang not to worry and the payments were all “normal payments”.  A copy of the text messages is produced.  The date of the messages is not known.

40.  As to how Ma managed to effect the online transfers to his bank accounts, the plaintiff’s case is this.  Ma had wrongfully made use of online banking tokens of the General Managers and the Managing Directors to authorise the payments to himself.  He had no authority to do so. He had also at times abused his right as “system administrator” to re-configure the standard three-tier authorisation adopted by the plaintiff and alter it to require only one level of authorisation to approve the payment instructions. 

41.  In support of the above, the plaintiff has produced in the evidence a full list of the authorisations granted for the 260 transactions.  The list is generated by the bank. The table shows the apparent identity of the individuals who logged on to the online system to authorise the payment in respect of each transaction.  Separately, BW Park has compiled a table summarising the information.   I shall refer to the two tables as “the authorisation records”.

42.  It is the plaintiff’s case that Ma applied for and controlled multiple online tokens belonging to the General Managers and the Managing Directors and used them to authorise payments to himself.  This was done without the authority of the plaintiff.

(1)  The authorisation records show that Jung had authorised payments to Ma on dates when he was absent from the office.  Before he took leave, he had given his token to Ma.  Upon his return, he retrieved the token from Ma but did not cross-check whether any transactions had been approved using his token in his absence.

(2)  Kim Ji Taek was the Managing Director from February 2009 to December 2011.  The authorisation records show that he had given authorisation for payments in 2012, after he had already left.  The 2012 payments could not have been authorised by him.  When a search was conducted in March 2016, a banking token bearing Kim Ji Taek’s name was found inside Ma’s drawer.

(3)  Likewise, Sohn Hyunjoo left the plaintiff’s office in January 2013. However, according to the authorisation records, he approved payments to Ma between January 2013 and March 2015.  These payments could not have been authorised by him.

(4)  A large number of transfers were authorised by KH Kim according to the authorisation records.  During the subsequent meeting when the plaintiff confronted Ma about the transfers, he handed up two banking tokens bearing KH Kim’s name.

(5)  Lastly, according to the authorisation records, there are three transfers which were authorised by Moon in February 2015.  A banking token bearing his name was later found in Ma’s drawer during a search conducted in March 2016. 

43.  The discovery of Ma’s misappropriations came about as follows.

44.  After SC Park became the General Manager, he started to review the ledgers and accounting records of the plaintiff and Hyundai Korea.  In around October 2015, he discovered that there were huge discrepancies in the ledger between HIT and Hyundai Korea.  He started to make enquiries with HIT and conducted an investigation.  He requested assistance from Hyundai Korea and BS Kim was sent to the Hong Kong office to help with the investigation.

45.  Eventually, the misappropriations by Ma were uncovered.  A number of meetings were held with Ma in which he made confessions about the misappropriations.

(1)  On 29 February 2016, SC Park questioned Ma.  Ma confessed that he had embezzled money from the plaintiff.  He said he would be able to repay the money on the condition that the plaintiff would not report the incident to the police.  He would need one to two years to fully repay the money as he needed time to dispose of his properties in mainland China and Australia.

(2)  On the same day, SC Park, BS Kim and KH Kim met with Ma again.  An audio recording was taken.  The transcript is produced in the evidence.  Ma revealed that he had been embezzling money from the plaintiff since around 2010 or 2011 and he had used the funds to purchase real properties in Hong Kong, mainland China and Australia.

(3)  On 2 March 2016, SC Park met with Ma again.  Ma confessed that he had been using the online banking tokens belonging to the General Manager and the Managing Director to authorise the payments online.  He also admitted that he had re-configured the authorisation level so that only one level of authorisation using the General Manager or the Managing Director’s token would be required to effect the transfer, after the payment instruction was created online.  He said that he had applied for and was managing multiple online banking tokens.

(4)  This was followed by a further meeting on the same day between SC Park, BS Kim, KH Kim and Ma.  An audio recording of that meeting was taken.  The transcript is in the evidence.  He made various offers to compensate the plaintiff for the misappropriated funds.  He also handed over three online banking tokens, two of which were labelled “KH Kim”.

46.  Ma was summarily dismissed on 4 March 2016.  The matter was reported to the police on the same day.

47.  In this action, the plaintiff further relies on Ma’s conviction in the criminal proceedings in support of its case.  The plaintiff contends that the conviction is highly relevant in that the criminal conviction relates to the 260 transactions in the present action.  The evidence in the criminal case also showed the modus operandi of Ma, ie he had dishonestly made use of the online banking tokens issued to others to bypass the normal three-tier authorisation adopted by the plaintiff.  The evidence also showed that once the funds were transferred to Ma, he dealt with them as if he were the owner and spent them for his and others’ benefit.  The evidence also included the four confessions made by Ma to the plaintiff.

48.  Mr Wong placed reliance on what D’Almada Remedios J, the trial judge, said when she sentenced Ma:

“The jury have found you guilty after trial of four offences of theft. Their verdict to you no doubt would not have been unexpected. This was and is an extremely serious breach of trust by you in stealing a colossal sum of $386,955,303.70 from your employer Hyundai Hong Kong over a period of about seven years between 20 April 2009 to 18 February 2016 by transferring the amounts of money in 260 transactions on the Internet banking online system using security tokens in the name of the Korean managers or managing directors without their knowledge.

… As system administrator, you were the one who received the tokens and were the one in charge of obtaining tokens from HSBC. You were able to create and obtain tokens issued to managing directors. Some general managers had even given you their own tokens and passwords to use whilst they were away on business trips and on holidays.

These tokens were used by you to steal the money. You used tokens which you were not authorised to use or obtain, and you transferred money to yourself without their knowledge or authorisation, and in doing so, sometimes changed the authorisation levels.

Although the company had a three-tier system using the tokens authorisation payment to vendor, they thought it safe, that is, you were the second approver not being able to make payments and only the Korean general managers were able to authorise the payment to vendors. This system was simply exploited by you. You were very much in charge of the accounting section dealing with payment to vendors. …

Once the money was deposited into your personal accounts, you almost immediately transferred the money to your other bank accounts or to pay your credit-card expenses to the tune of over $200 million. The credit card showed huge spending of money at casinos in Macau, buying luxury goods. You bought properties in Hong Kong.

There was of course a lack of supervision. Understandably, they placed 100 per cent trust in you, as Mr Park said, in dealing with banking matters.  This was purely a calculated and simple theft. You abused the trust the company placed in you for almost seven years.  The fact that you were able to get away with it for so long is part of a reflection of the degree of trust that was placed in you.  You took advantage of this lack of supervision and the trust they placed in you.  This was, in my view, a wholly premeditated, calculating theft by a dishonest man that you are.”

49.  Mr Wong submitted that Ma’s conviction is relevant and the court should accord significant weight to it in the present action.

50.  As to Ma’s pleaded case on the Agreed Agreement, the plaintiff denies that it existed.  The plaintiff has an established way of settling invoices issued by vendors or suppliers in mainland China.  It did not involve remitting money through Ma in any way. 

Evaluation of the evidence

51.  In this action, the burden is on the plaintiff to make out the case that Ma had misappropriated the Sum belonging to the plaintiff in the 262 transactions without the authority or consent of the plaintiff. 

52.  It is indisputable that the 262 transactions took place between 2009 and 2016, and sums of money amounting in total to the Sum were transferred from the plaintiff’s bank accounts to Ma’s personal bank accounts. 

53.  It is the plaintiff’s case that the funds should have been used to settle outstanding invoices of the service providers. Instead, Ma misappropriated the funds for his own use.

54.  In respect of the first two transactions, the documentary evidence comprised the plaintiff’s bank statements showing the transfers.  In respect of the 260 transactions, the documentary evidence comprised not only the bank statements, but also the authorisation records and other documents. 

55.  The plaintiff’s witnesses testified to how Ma had abused his access to, and administrative rights, in respect of the plaintiff’s online banking platform, retained and misused the online banking tokens belonging to other officers of the plaintiff to authorise the transfers of the plaintiff’s funds to his personal bank accounts.

56.  The plaintiff’s case against Ma is inherently plausible, fully supported by the extensive contemporaneous documents, and hence credible.  Ma has made no attempt in these proceedings to adduce evidence to contradict its case.  Furthermore, in respect of the 260 transactions, the court should accept the criminal conviction of Ma in HCCC 20/2018 as proof that he had stolen the sum of $386,955,303.70 from the plaintiff in those transactions.

57.  For the above reasons, I accept the plaintiff’s factual case in full.

Rulings

58.  While an employment relationship does not automatically import fiduciary relations, a senior employee or manager, depending on his role and function, can be held to owe fiduciary duties to the employer when carrying out those duties.  Where an employee is entrusted with the company’s money and diverts it for his own benefit, he would likely be in breach of the fiduciary relations: Leader Screws Manufacturing Company Limited v Huang Shunkui[2021] HKCFI 141, paras 46 to 49.

59.  On the facts as found, Ma was entrusted with the task of settling the vendors’ invoices and had a significant role to play in the operation of the plaintiff’s bank accounts.  I hold that he owed fiduciary duties to the plaintiff in the authorisation process and he was in breach of such fiduciary duties. 

60.  Ma was also in breach of his implied duty of fidelity by misappropriating the assets of the plaintiff.

61.  Furthermore, on the facts as found, Ma had converted the online banking tokens to his own use in breach of confidence.  By making use of the tokens to effect the 262 transactions and transfer the Sum to himself, he committed the tort of conversion.

62.  In closing submissions, the plaintiff confirmed that it would elect to seek equitable compensation equal to the Sum from Ma for his breach of fiduciary duties, instead of seeking an account of profits.  It also seeks compound interest at the rate of 1% above prime rate, with monthly resets, accruing from the date of transfer in respect of each of the 262 transactions: Tam Po Kei v Tam Bo Kin (No 2) [2011] 2 HKLRD 272, para 7.

63.  Compound interest may be appropriate where (1)  the breaches of fiduciary duties are by way of fraud or misconduct, (2)  the breaches benefit the defaulting fiduciary personally, or (3)  the fiduciary has misappropriated funds.  The court assumes that the misappropriated funds would have been used by the fiduciary to earn profits and, instead of ordering an account of those profits, orders him to pay compound interest on the sums extracted: see, eg, Leader Screws at paras 62 to 63.

64.  In the present case, Ma acted dishonestly and misappropriated a colossal sum of money from the plaintiff over a long period of time, when the plaintiff at all times placed complete trust in him in handling its bank accounts.  I am satisfied that it is an appropriate case to award compound interest.

Post-judgment injunction

65.  I am also satisfied that the mareva injunction which is currently in place should be extended for a period of 12 months, as sought by the plaintiff at the closing stage. 

66.  It is plain that Ma acted dishonestly in misappropriating the plaintiff’s funds in the 262 transactions.  Worse still, while the injunction was in place, he was in breach of it by dissipating his assets, as found in the contempt proceedings: see para 21 above.  All these show that there continues to be a real risk of dissipation if Ma is not restrained from dealing with his assets up to the value of the Sum.

67.  I accept that the 12-month period asked for by the plaintiff is reasonable.  As Mr Wong submitted, Ma’s properties include real properties.  It is reasonably expected that the execution process will take some time.

68.  Lastly, I should record that subsequent to the trial, Ma wrote to the court a number of times, asking for the mareva injunction to be varied for the frozen sum to be reduced so as to allow him to pursue his appeal against the criminal conviction.  The court has informed Ma that his application for variation by letter on an ex parte basis would not be entertained.  He was asked to take out an inter partes summons and, where appropriate, file a supporting affidavit if he wished to pursue the variation application.  To date, he has not taken out any summons to vary the injunction.

Conclusion

69.  For the above reasons, I order that judgment be entered in favour of the plaintiff against Ma for the Sum.  There be compound interest at the rate of 1% above prime rate, with monthly resets, accruing, in respect of each transaction, on the transferred sum from the date of the transaction and up to the date of judgment.  After that, simple interest accrues on the Sum at judgment rate until payment.

70.  I further order that the mareva injunction be continued for 12 months from the date of the handing down of this judgment or further order of the court.

71.  I make an order nisi that the plaintiff do have costs of the action, including the costs of the extension of the injunction and any costs reserved, to be taxed if not agreed, with certificate for two counsel. 

Mr Jonathan Wong and Ms Jacquelyn Ng, instructed by MinterEllison LLP, for the plaintiff

The 1^st defendant was not represented and was absent at the trial

HCA 619/2016

[2019] HKCFI 1057

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 619 OF 2016

____________

____________

____________________

D E C I S I O N

____________________

1.  This is a summons by D1 (“Ma”) to vary the Mareva injunction order so as to release funds for:

(1)   His legal costs in this action; and

(2)   Paying contribution to the Director of Legal Aid (“DLA”) for his criminal trial in a related matter.

Background

2.  The brief background to this case can be found in A Chan J’s judgment in HCMP 1115/2017 dated 1 February 2018 at §§4-13.  I respectfully extract the salient facts below.

3.  Ma used to work for the plaintiff, (“Hyundai Marine”).  He first joined the company in 1992 as an Accounts Clerk. He was promoted gradually and became its Deputy General Manager (Accounting) until he was summarily dismissed on 4 March 2016. At that time, he was earning a monthly salary of HK$37,900.

4.  It is the case of Hyundai Marine that, for 7 years between 2009 and 2016, by 262 transactions, Ma caused a total sum equivalent to HK$387,655,303.70 (“the Sum”) to be wrongfully transferred from his employer’s accounts to his own.  Hyundai Marine asserts, amongst others, a proprietary claim over the Sum.

5.  In Ma’s Amended Defence, it was pleaded that the money which made up the Sum was transferred with the knowledge, consent and authorization of Hyundai Marine pursuant to an “Agreed Arrangement” devised to overcome foreign exchange control of the Mainland. Such Arrangement was required due to the need of Hyundai Marine to make payments to service providers in the Mainland.

6.  Hyundai Marine says that the Agreed Arrangement was entirely a fiction created by Ma.

7.  The matter was reported to the police by Hyundai Marine.  Ma is now facing prosecution in the Court of First Instance on 2 counts of theft. The subject matter is essentially the same as in the present civil action. 

8.  On 10 March 2016, upon Hyundai Marine’s ex parte application, the court granted an injunction in this action restraining Ma from disposing of his assets. The order was subsequently varied several times to its current version dated 6 October 2017. It is a worldwide Mareva injunction which freezes the bank accounts of Ma and his landed properties up to the value of HK$387,655,303.70.  The order includes the usual ancillary disclosure order; and makes provisions for monetary exceptions in respect of, amongst others, Ma’s legal costs up to HK$100,000. 

9.  The total assets which Ma has disclosed pursuant to the Mareva injunction order amounted to about HK$53.3 million. One could immediately note the contrast with the modest salary which he used to receive.

10.  Ma’s girlfriend and his parents had subsequently been joined in this action on the basis that a total sum of about HK$25.76 million wrongfully taken from Hyundai Marine was transferred by Ma to them.

11.  The action against the girlfriend and Ma’s father had been discontinued. Ma’s step-mother remains as D4.

12.  On 1 February 2018, Ma was found guilty of contempt of court in HCMP 1115/2017 in breaching the Mareva injunction by disposing of assets in the amount of over HK$3 million.  On 9 February 2018, he was sentenced to imprisonment for 4 months.

Previous application for variation of the Mareva injunction

13.  Ma did not apply to discharge or vary the Mareva injunction order until 27 December 2017 when he took out a summons to vary the provision for his legal costs from HK$100,000 to HK$800,000 (“the First Summons”). The First Summons has never been set down for argument.

Present application for variation of the Mareva injunction

14.  The criminal case was originally fixed for trial to commence in October 2018 with 22 days reserved.  At the pre-trial review before Remedios J in August 2018, the trial was vacated for Ma to seek legal representation and Ma’s bail was revoked.  He has since remained in custody.  No trial date has yet been fixed but it is expected to be towards the end of 2019.

15.  After yet another mention hearing before Remedios J, Ma finally applied for legal aid.  DLA granted legal aid provided that Ma made contribution in the sum of HK$2,989,000 (“the Contribution”).

16.  Ma thus took out the present (second) summons on 17 January 2019 for variation of the Mareva injunction order so as to release the same amount of HK$800,000 for the Contribution and this civil action.  He claimed to have borrowed some money from his sister to resume his legal representation to a limited extent.  He claimed that part of the frozen assets included proceeds of his gambling over the years.  The balance in all bank accounts frozen under the Mareva injunction order amounts to HK$1,600,000.  Ma suggested that one or more car parks may have to be sold.

17.  Hyundai Marine disputed the amount of cash balance and said it was only HK$500,000.  Its grounds in opposition are that: (a) there is no breakdown as to the $800,000 legal costs; (b) Ma has failed to vouch that he has no alternative sources of funding; (c) Ma has failed to particularize the source of money for his gambling; and (d) Releasing funds would create greater injustice to Hyundai Marine than to Ma.

Legal principles

18.  In dealing with a defendant’s application to release assets subject to a Mareva injunction for legal expenses, a distinction has to be drawn between a situation where the plaintiff has made a proprietary claim over the assets and a non-proprietary claim.  In respect of a proprietary claim, the court will adopt a more stringent test since it would be clearly unsatisfactory for the defendant to be granted recourse to the plaintiff’s assets for the purpose of defending himself against the plaintiff’s claim to those assets. 

19.  The court will adopt a two-stage test:

(a)   The defendant has to demonstrate with full and frank evidence that there are no other available assets that can be used to pay his legal expenses.  If he fails at this hurdle, then the application will be dismissed.

(b)   If the defendant succeeds in demonstrating the lack of other available assets, the court must balance the potential injustice to the plaintiff of releasing the assets against the potential injustice to the defendant of depriving him of legal assistance to advance what may ultimately be a successful defence. The process is a “careful and anxious judgment”, and the court is entitled to look at all relevant circumstances, and in particular, to weigh the relative strengths of the plaintiff’s proprietary claim to the assets and the defendant’s defence to that claim.

See a recent statement of principle in Hong Kong Life Insurance Limited v Fung Siu Cheung Michael & ors (unreported, HCA 1164/2012, 21 February 2014) at §§32-33, B Chu J, following Wharf Ltd v Lau Yuen How [2010] 1 HKLRD 783, §13, Au J (as he then was).

20.  Further, the defendant has to condescend upon particulars for the purpose of demonstrating that he has an arguable case for denying that the assets belong to the plaintiff: Classroom Investments Inc v HK Wanshitaiping Investment and Management Ltd & ors, unreported, HCMP 577/2016, 10 June 2016, §24, M Chan J.

Whether Ma has demonstrated that he has no other available assets

21.  Being in custody since February 2018, Ma no longer has an income. He claims to have no other assets under $50,000 or over (Ma-7^th)[1]. In 2016/17, he had borrowed $2,500,000 from a Mr Mak, who had mortgaged his own flat to make a loan to Ma.  Mr Mak is no longer able to lend Ma any further money.  Ma has to borrow from his sister to fund his legal representation for the present application.  He did vouch that he has no other financial sources in Ma-10^th.

22.  Mr Wong, counsel for Hyundai Marine, draws to the court’s attention the following things:

(a)   The First Summons was not pursued;

(b)   Ma admittedly pursued a lavish lifestyle; and

(c)   Ma’s unsuccessful recovery of debts from his friends was unbelievable.

23.  With regard to point 22(a), the request for release of HK$800,000 for legal costs was first sought by letter dated 18 July 2017 to the Hyundai Marine’s former solicitor (RSRB) before the First Summons was taken out.  Ma’s solicitors requested for the spending limit for 3 civil cases to be increased to HK $700,000 excluding any future legal costs/fees.  This request was repeated in the 2^nd letter in December 2017 to RSRB. In fact, Ma himself stated at §31 of Ma-10^th that the “amount outstanding for my solicitors for the civil cases as of December 2017 is about HK$800,000.00.”

24.  The First Summons was never set down for substantive argument despite directions granted by the court.  Ma explained that it was due to his lack of legal representation. 

25.  This explanation was hard to accept because Ma had borrowed HK$2,500,000 from a Mr Mak for his legal fees in 2016/2017, of which HK$1,500,000 was spent on legal fees including those for the criminal proceedings (§31, Ma-10^th filed on 14 May 2018). This was another HK$300,000 from what was known as the CTB May Accounts which he had spent on legal costs (§91 of Ma-5^th filed in HCMP 1115/2017 on 31 July 2017), being three times as much permitted under the Mareva injunction order.  He had all along been represented until 13 July 2018, for 7 months after he filed the First Summons.  As pointed out by Mr Wong, there was no breakdown of the alleged legal costs and there was not even an assertion by Ma that his previous solicitors sought to exercise a lien on his papers for unpaid fees. 

26.  It was only in Ma-10^th that Ma changed his case to explain that he had spent lot more legal costs after filing of the First Summons on discovery, the contempt proceedings and a separate mortgagee action.  Even so, he still maintained that he had incurred total legal costs of HK$2,300,000 up to December 2017 and the outstanding amount for civil cases was HK$800,000. 

27.  Whilst I accept that HK$100,000 is seriously inadequate for meeting 3 civil claims, for past legal costs incurred up to December 2017, Ma plainly had other available sources of money and he should not be allowed to withdraw from the frozen assets.

28.  For legal costs beyond 2017, he has not explained, eg how has been able to remain represented up to July 2018.  He has not mentioned how much his sister has lent him for the present legal representation or how he dealt with the balance of $1,000,000 borrowed from Mr Mak.

29.  With regard to point 22(b), the lavish lifestyle was described in the judgment of A Chan J in the contempt proceedings, §§51 & 58.  That lifestyle was past irrelevant conduct.  What was relevant, in my view, was that Ma has not given a clear statement of the fund flows, at least in respect of the money that flowed in and out of the CTB May Accounts.

30.  With regard to point 22(c), Ma admitted having friends owe him HK$622,966.08 + HK$75,223.75.  Those debts, when recovered, would have been sufficient to meet the amount sought under the First Summons.  In respect of HK$622,966.08, Ma claimed that his friends were reluctant to repay him as they believed it might cause them trouble in view of Ma’s imprisonment for contempt of court.  In respect of HK$75,223.75, he claimed that his friends were unable to give him a certain date for repayment.

31.  Ma never gave particulars of these friends.  However, practically, with his present condition in custody, it is not realistic to expect him to have access to such funds because they would be subject to the Mareva injunction order as well.

32.  Points (a) and (b) lead to the conclusion that Ma has not made full and frank disclosure of his lack of available means and that is sufficient to dismiss this summons.

Arguable case for denying that the assets belong to the Plaintiff

33.  If I am wrong, I deal with this requirement of showing an arguable case before I weigh the relative justice between the parties.

34.  It sounds strange that, being a sizeable company, the Plaintiff appeared not to have a system of monitoring bank withdrawals by Ma over a period of 7 years in respect of over HK$300 million. 

35.  Ma has filed a set of arguable defence. However, as pointed out by Mr Wong, save for a general averment that sums transferred from the Plaintiff to his bank accounts were forwarded to service providers of the Plaintiff, Ma has not pleaded where each sum had gone.  Nor has he produced any document that could remotely support his general averment.   He has also failed to file witness statements despite the unless order made by Master Ho on 30 April 2018.  Ma is now debarred from adducing any evidence at the trial.  His defence thus appears quite hollow.

36.  The failures regarding pleading, discovery or filing of witness statements occurred at a time when Ma was represented.  He has never asserted any privilege against self-incrimination.  He only now makes a bare assertion that further discovery might prejudice his criminal trial.

37.  Further in his affirmations, Ma claims that part of the money in his bank accounts were from his gambling.  His bank statements revealed a pattern of receiving deposits from casinos in Macao.  He claimed to have received about HK$6.84 million deposits in the Hang Seng Bank account between 2013 and 2015 from gambling; and HK$20.22 million in Bank of China between 2012 and 2016. However, his assertion of making an astronomical income of HK$1,000,000 on average per week from gambling was not supported by documents, save for 3 cheques from MGM in the total sum of HK$7,300,000 in 2013.

38.  Be that as it may, about HK$27 million gambling income was small compared to the HK$387 million allegedly misappropriated. 

39.  All in all, I am not satisfied that Ma has condescended upon particulars to demonstrate that he has an arguable case for denying that the frozen assets belong to Hyundai Marine.

Balancing potential injustice to Hyundai Marine and Ma respectively

40.  If the facts for the 2 counts of theft are similar to those in the present action, I consider that lack of legal representation would prejudice Ma’s ability of defending the charges against him. Findings against Ma in the criminal trial would in turn affect his defence in the present action.

41.  Moreover, when one looks at the situation practically, it is undeniable that Ma has been in custody since February 2018 till now.  He has no income at all and can hardly deploy assets whilst in custody. 

42.  Mr Wong makes 3 points:

(a)   That dismissal of this application would not leave Ma without legal representation in the criminal trial because he would be treated as not having disposal capital and DLA would grant him legal aid;

(b)   Ma has intention to dissipate assets.  He should not be permitted to release the frozen assets whilst “keeping his powder dry” in respect of debts owed to him; and

(c)   There is evidence that the car parks were purchased with Hyundai Marine’s money.

43.  With regard to point (a), I do not think DLA has taken any firm position as Mr Wong submits.  DLA is at liberty to re-assess the position after the handing down of this decision and consider eg whether Ma is employed at the time of the application and whether or not he has made full and frank disclosure of his assets.  I place little weight on point (a).

44.  With regard to point (b), whilst Ma has not given a clear statement of the flow of funds that had passed through his hands after the Mareva injunction order was made, I repeat paragraph 41 above.

45.  With regard to point (c), this is a weighty factor.  The HK$53.3 million worth of assets disclosed by Ma were mostly landed properties.  The Plaintiff has, in §§30-44 of Churng-6^th, purported to correlate (by documents) the sums misappropriated from the Plaintiff with the 5 car parks which Ma had purchased between 2012 and 2015.  Ma has not begun to rebut this.  He should not be allowed to sell the car parks to fund his own criminal trial.

46.  Weighing the matters under this section, releasing assets for Ma to pay his legal costs will cause greater injustice to Hyundai Marine than to Ma.

Conclusion

47.  In summary, Ma has failed to meet the two-stage test for variation of the Mareva injunction order; and failed to show an arguable case for denying the Plaintiff’s interest in the frozen assets.  I therefore dismiss this summons.  Mr Chow does not dispute that this conclusion means that the First Summons should also be dismissed and I so order.

48.  Costs should follow the event and be to the Plaintiff.  I make an order nisi that Ma should pay costs of $250,000 in respect of both summonses for variation.

49.  I thank counsel for their assistance.

HCA 619/2016

[2018] HKCFI 2477

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 619 OF 2016

________________________

_______________________

____________________

D E C I S I O N

____________________

1.  There are 2 specific discovery applications before the court. One by the Plaintiff (Hyundai Marine) against the 1^st Defendant (Ma) and one by Ma against Hyundai Marine.

2.  A brief background of this case can be found in a Judgment from this court dated 1 February 2018 ([2018] HKCFI 176) at paras 4 to 13. 

3.  The merits of Hyundai Marine’s application are clear and I shall deal with it succinctly.  The application concerns 4 categories of documents, namely, documents in relation to Ma’s investments in bonds and securities in the Mainland (Class 1); documents in relation to Ma’s investments in South China (Class 2); bank documents in respect of offshore accounts in Ma’s name, whether solely or jointly held (Class 3); and bank documents in respect of specified bank accounts in the name of 4 companies controlled by Ma (Class 4).  The documents requested for all 4 Classes are to cover the period from 2009 to date.

4.  Ma is in custody pending his trial in connection with the alleged theft from Hyundai Marine.  However, I am satisfied that he is aware of this hearing, and the relevant papers had been served on him on behalf of Hyundai Marine.  He is free to apply for a body order to enable himself to be present at this hearing (see Chin Kam Chiu v Bank of China (HK) Ltd, unrep, HCB 1043/06, 18 April 2008, per Poon J (as he then was) at §48 and the CA judgment, unrep, CACV 167/08, 9 October 2009, §8).  It appears that he has not done so at his own choice.  

5.  The request in respect of Classes 1 and 2 arose from 2 meetings between Ma and Hyundai Marine’s representatives in February and March 2016.  During such meetings, Ma said that part of the funds he got from Hydundai Marine was applied towards the purchase of certain investments in the Mainland and South China in the names of his friends.  The meetings were recorded and the transcripts of same are before the court.

6.  Classes 1 and 2 documents are plainly relevant going to, firstly, the heart of the issue whether the money Ma had taken from Hyundai Marine was the result of acts of misappropriation or, as he alleges, used to pay off Hyundai Marine’s creditors and to overcome exchange control in the course of doing so.  Secondly, the tracing of Hyundai Marine’s assets. 

7.  Further, the existence of these documents springs from what Ma had said in the meetings.  Furthermore, there is no reason to doubt that the documents are within the possession, custody or power of Ma.

8.  In support of the request for Class 3 documents, 6 offshore bank accounts of Ma have been identified by Hyundai Marine.  Given the huge sum of money allegedly misappropriated from Hyundai Marine by Ma and the comparatively tiny amount of assets disclosed by Ma, there is good reason for the former to endeavour to trace its assets.  There is some evidence indicating that Ma had used at least 1 of the identified offshore account to hide his assets.  Indeed, the inference from the evidence is that Ma has not come clean with where Hyundai Marine’s money has gone.  These documents will also show whether the money was used in the way alleged by Ma.

9.  As regards the Class 4 documents, the existence of the documents was revealed by Ma.  It has been shown that some of Hyundai Marine’s money was transferred to 3 of the accounts.  Like the other Classes of documents, they are clearly relevant.

10.  The evidence filed by Ma indicates his agreement to disclose the documents relating to the 6 identified offshore accounts, as well as the Class 4 documents.  I am satisfied that the legal requirements for the discovery of both the Class 3 and Class 4 documents have been satisfied.

11.  I am unable to see any real ground for resisting this application.  Subject to the curtailment of the proposed scope of the order as discussed in this hearing, I allow this application with costs incurred to date to Hyundai Marine.  An appropriate draft order should be provided to the court for approval.

12.  As regards Ma’s discovery application, he has failed to appear to prosecute the same.  It is dismissed with costs to Hyundai Marine.  Both costs orders are to be taxed and paid forthwith. 

HCA 619/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 619 OF 2016

_____________________

_____________________

_____________________

JUDGMENT

_____________________

The application

1.  By its summons dated 17 June 2016 which was filed on 20 June 2016 (“the summons”), the plaintiff (“P”) applies for summary judgment under Order 14, rule 1 of the Rules of the High Court (“RHC”) against the 1^st defendant (“D1”) for restitution of the sum of HK$387,655,303.70 or payment of the said sum on the ground of money had and received and/or unjust enrichment as well as the accounts, inquiries, orders and declaration as set out in the summons.

Background

2.  P is and was at all material times a company incorporated in Hong Kong carrying on the business of logistic services.  ‌Its parent company is Hyundai Merchant Marine Company Limited (“the parent company”), a public listed company incorporated in the Republic of Korea.

3.  At all material times, D1 was employed by P until he was summarily dismissed by P on 4 March 2016 for the reasons pleaded at para 8 of the amended statement of claim (“the ASC”).

4.  D1 first joined P as an accounts clerk in 1992.  ‌He was promoted gradually and by 2002 he was promoted to the post of deputy accounting manager.  He was further promoted to the posts of accounting manager in 2005 and deputy general manager in 2011.  ‌D1 was the deputy general managerof P until he was summarily dismissed on 4 March 2016 (para 2 ASC).

5.  In or around 2003, P entrusted D1 with duties and powers to operate online P’s bank accounts for the sole purpose of the business of P.  D1 was given, inter alia, the passwords and safety devices to operate P’s bank accounts online (para 4 ASC).

6.  The 2^nd defendant (“D2”) was and is the girlfriend and/or common law wife of D1.  The 3^rd defendant (“D3”) is the father of D1.  The 4^th defendant (“D4”) is the mother of D1 (para 2A ASC).

7.  Para 8 of the ASC pleads that on divers dates between 2009 to 2016 D1 had:

“(1) in breach of the said implied employment term of fidelity; and/or

(2) in breach of the said fiduciary duties; and/or

(3) in breach of confidence and converted the said safety device(s) to his own use; and/or

(4) without authority, knowledge, consent, cause and/or consideration,

unlawfully and/or wrongfully transferred online money of [P] from [P’s] Accounts a total sum of HK$387,655,303.70 to [D1’s] Accounts.  Full particulars of the aforesaid transfers in the total number of 262 transactions are shown in Schedule I as appended herewith.”

8.  By para 1 of the summons, P seeks to obtain summary judgmentagainst D1 for restitution of the said sum of HK$387,655,303.70 on the ground of money had and received and/or unjust enrichment.

Jurisdiction

9.  An application by a plaintiff for summary judgment is governed by Order 14, rule 1 of the RHC.

10.  By Order 14, rule 1(2) it is provided that:

“Subject to paragraph (3) this rule applies to every action begun by writ other than–

(a) ...,

(b)   an action which includes a claim by the plaintiff based on an allegation of fraud ...”

11.  In Pacific Electric Wire & Cable Co Ltd v Harmutty Ltd [2009] 3 HKLRD 94 the Court of Appeal (Rogers VP and Le Pichon JA) held that Order 14, rule 1(2)(b) excluded from summary judgment proceedings an actionwhere one claim included in the writ was based on an allegation of fraud.  ‌First, Order 14, rule 1(2)(b) applied to exclude summary judgment proceedings where one claim but not another was based on an allegation of fraud.  ‌Second, the rule was not confined to excluding actions in which there was a claim for damages for fraud; what was excluded was any action where there was a claim in respect of which the underlying allegations on which the claim was based constituted an allegation of fraud.

12.  As Rogers VP said at para 19:

“It is clear that if r.1(2)(b) applies there is no jurisdiction for the court to entertain an application for summary judgment.”

13.  I would also refer to what Rogers VP said at para 31:

“... although the claims made in the case may be framed in respect of constructive trust, resulting trust and money had and received, the claims in the action are based on allegations of fraud that includedeliberate dishonesty. ‌As is pointed out in Bullen & Leake & Jacob’sPrecedents of Pleadings (16th ed., 2008) Vol.2, p.841, an action in fraud will usually include one or more of a number of distinct causes of action amongst which are listed ‘money had and received’ and ‘constructive trusts: knowing receipt and dishonest assistance’. Furthermore, as Mr Whitehead SC, who appeared for Mr Hu, pointed out, in paras.18-07 and 18-08 of Clerk & Lindsell on Torts (19th ed., 2006) and the third supplement thereto, it is made quite clear that active non‑verbal conduct can amount to deceit. In this case, the allegations of the concealment of facts from the plaintiff when there was a duty to disclose, and the connivance at the preparation of false financial statements and accounts would be clear allegations of fraud.”

14.  Le Pichon JA agreed with the judgment of Rogers VP.

15.  In A‑1 Business Ltd v Chau Cham Wong Patrick [2009] 5 HKLRD 579 it was held by the Court of Appeal (Cheung and Yuen JJA) that the plaintiff’s claim was caught by the exclusion rule in Order 14, rule 1(2)(b).  The plaintiff brought an action against its directors for breach of fiduciary dutiesby the misappropriation of assets, including a transfer by the first defendant ofsums of money in sale proceeds from the plaintiff’s account to his own account (“the transfer”) to reduce his indebtedness in respect of a personal loan.  It was held that regarding the plaintiff’s claim, although a claim based on breach of fiduciary duty resulting in a duty to account might not necessarily involve dishonesty, each case depended on its own facts.  In that case, the plaintiff’sclaim based on misappropriation and its response to the defence that the transfer to the first defendant was for a legitimate purpose, involved allegations of dishonesty and fraudulent conduct by the defendants.

16.  As Cheung JA said at para 15:

“I agree with the Judge that the plaintiff’s claim based on misappropriationcannot be viewed in isolation and divorced from the plaintiff’s response to the defence that the transfer was for a legitimate purpose. In order to establish that the transfer was a misappropriation of the plaintiff’s assets, the plaintiff clearly has to address the defence and this clearly will involve an allegation of dishonesty on the part of the defendants. In substance, allegations of fraudulent conduct are involved in the plaintiff’s claim and this is caught by the exclusion rule.”

17.  Yuen JA agreed with the judgment of Cheung JA.

18.  In Zimmer Sweden AB v KPN Hong Kong Ltd [2016] 1 HKLRD 1016 the Court of Appeal (Lam VP, Yuen and Kwan JJA) held that the court should determine whether “the fraud exception” applied at the time when theapplication for summary judgment is heard.  ‌The court should not be restricted to a consideration of the statement of claim only, but should examine all relevant materials existing at the time of the hearing, including subsequent pleadings and affidavits (Yuen JA at para 18(1)).

19.  In dealing with the “narrow” meaning and the “wide / liberal” meaning of “the fraud exception” at paras 11.1 to 12.2 of her judgment, Yuen JA said at paras 12.1 and 12.2:

“The ‘wide/liberal’ meaning adopted by the Hong Kong courts

12.1. Unlike the Administration of Justice (Miscellaneous Provisions) Act of 1933 discussed above, in Hong Kong an allegation of fraud does notentitle a party to a trial by jury (see s.33A of the High Court Ordinance (Cap.4)). Accordingly, there was no need to apply a narrow meaning for the sake of consistency with the provision for civil trials by jury.

12.2.   As will be seen later, the courts in Hong Kong have adopted a wide or liberal meaning of the ‘fraud exception’.  In other words, if the action included a claim based on an allegation of fraudulent conduct, the courts have held that O.14 did not apply.  This is consistent with Nicholls LJ’s observation in Newton that ‘as a matter of first impression, [the fraud] exception seems apt to embrace cases where dishonesty is alleged against a defendant’, before he held that in England, the courts were bound by authorities to adopt a narrow meaning.”  

20.  And at para 18(6) Yuen JA said:

“... as to what is an allegation of fraud for the purpose of ‘the fraud exception’, this Court is bound by the judgment in Pacific Electric Wire to adopt the wide/liberal meaning. .... To conclude, ‘the fraud exception’ would be engaged where what is alleged is an intentional or reckless dishonest act (or omission) done with the purpose of deceiving.”

21.  Lam VP and Kwan JA agreed with the judgment of Yuen JA.

22.  As was held in Zimmer, Hong Kong courts have adopted a wide/‌liberal meaning of the fraud exception, namely it would be engaged where what was alleged was an intentional or reckless dishonest act (or omission) done with the purpose of deceiving.

23.  Mr Szeto, for P, submitted that by the summons P was seeking to obtain summary judgment for its claim under para 8(4) of the ASC and that there was no allegation of fraud.  Mr Szeto made it plain that P was not abandoning its other claims against D1 under para 8 of the ASC but that for the purposes of the application for summary judgment, P was only relying on the cause of action for money had and received under para 8(4) of the ASC.

24.  It is important to see what are the underlying allegations made by P in this action.

25.  The writ in this action was issued on 10 March 2016.  On the same day, on the ex parte application of P, supported by the 1^st affidavit of Park Sung Chul (“Park”), the general manager and a director of P, Anthony Chan J granted a Mareva injunction to P against D1 prohibiting the disposal of the assets of D1 up to the value of HK$322,345,743.00 which included monies in the bank accounts and the landed properties as set out in the order of Anthony Chan J. Orders were also made at the same time for disclosure of information by D1 and by his banks as set out in the order of Anthony Chan J.

26.  The evidence of Park in his 1^st affidavit is that in about late 2015, the parent company received complaints from one of its service providers, Hong Kong International Terminal Ltd, that there were apparent discrepanciesbetween their accounts and that some of the invoices were unsettled for years.  This led to a review of the account books of the parent company against thoseof the service provider as a result of which Park noticed that there was a hugediscrepancy on the amount of payables of the parent company and the amount of receivables of its service providers.  Park, however, was unable to find the reason for the discrepancies.

27.  This led to Mr B S Kim, the general manager of the parent company, and Park coming to Hong Kong to investigate the matter in February 2016.  On 29 February 2016 they discovered that some suspicious transactions were not supported by documents.  ‌They were shocked to discover that D1’s name was shown on the bank statements of P’s accounts as the recipient or beneficiary for a number of transactions.

28.  According to Park, he immediately summoned D1 and asked for an explanation at which time D1 confessed that he had been misappropriatingthe funds of P.  There was another meeting on the same day in Mr B S Kim’s hotel room when D1 again confessed that over the years he had beenmisappropriating P’s funds in the total sum of HK$76 million by transferring the same to his personal bank accounts.

29.  At the time of the 1^st affidavit, P had ascertained that during the period between September 2011 and February 2016 there were altogether 211 unauthorised/unlawful and wrongful transfers made by D1 from P’s bank account to D1’s bank accounts. Park in his 1^st affidavit said that the 211 unauthorised transfers amounted to a total sum of about HK$322,345,743.00.  He referred to the unauthorized transfers as the misappropriated funds (para 15).

30.  Park went on to explain the manner in which upon P receiving remittances from the parent company, D1 would select a specific bill/invoice and unlawfully transfer the exact amount to his own bank accounts whilst making a false entry in the computerized payment system of the parent company, its branches and group.

31.  P’s allegation is that D1 had covered up his unlawful acts over the years and that it was not until after Hong Kong International Terminal Ltd complained of outstanding invoices that P became aware of such matters.

32.  On 4 March 2016 a report was made to the police of the crime alleged to have been committed by D1.  D1 was arrested by the police on the same day.  He was subsequently charged with the offence of theft and is currently awaiting trial.

33.  When dealing with the question of a real risk of dissipation of assets and the urgency for the grant of the Mareva injunction, Park in his 1^st affidavit said at para 21:

“Misappropriation of funds by an employee is a serious crime. The conduct of [D1] has demonstrated a lack of probity, honesty and integrity over a long period of time with multiple acts of infringements. As disposed [sic] hereinabove, [D1] could have already dissipated part of the Misappropriated Funds by transferring the same to his girlfriend and friend(s). It is clear that [D1] had and has intention to dissipate the Misappropriated Funds beyond the trace.”

There can be no doubt that P is alleging fraudulent conduct and dishonesty on the part of D1 which led to D1 being charged with the offence of theft.

34.  On 18 March 2016 the ex parte order of Anthony Chan J was amended and continued until trial or further order by G Lam J as set out in the order of G Lam J. The amendments included increasing the value of assets restrained to HK$334,686,208.00 and included moneys in further bank accounts and further landed properties.

35.  On 26 August 2016 Deputy High Court Judge R Pang SC made an order re‑amending the Mareva injunction in the terms as set out therein.  The value of assets restrained was further increased to HK$387,655,303.70,being the sum claimed against D1 in the ASC, and included moneys in furtherbank accounts in Hong Kong and also out of the jurisdiction in Shenzhen and Macau.

36.  The summons is supported by the 3^rd affidavit of Park where he refers to and relies on his 1^st affidavit and 2^nd affidavits.  In his 6^th affidavit filed in reply to the 4^th affirmation of D1, Park also refers to and relies on his 4^th and 5^th affidavits.

37.  D1 in his 4^th affirmation made in opposition to the summons denies that the transfers he made to his bank accounts over the years in the total sum of over HK$380,000,000 were made by him as alleged at para 8(4) of the ASC “without authority, knowledge, consent, cause and/or consideration”.  He says that all the transfers were made with the knowledge and consent on thepart of his then superiors and were authorized.  He says that after the funds were transferred to his accounts, they were eventually applied by him to settlebills and invoices from the relevant business counterparts of the parent company or P in accordance with payment instructions from them (para 6).

38.  D1 has also denied that he made admissions to Park and Mr B S Kim of having misappropriated the funds of P.

39.  In his 6^th affidavit, filed in reply to D1’s 4^th affirmation, Park denied that the transfers made by D1 to his bank accounts were authorized.  It is clear from para 6 that P discovered, on an analysis of the bank statements of D1’s bank accounts supplied by the relevant banks, that the misappropriated funds had been primarily applied by D1 in the following manner:

(1)   As to 26.31% in the sum of HK$102,005,941.30, there were transfers to third parties whose identities are unknown to P;

(2)   As to 25.49% in the sum of HK$98,832,084.44, there were credit card purchases and investments; and

(3)   As to 15.63% in the sum of HK$60,609,534, there were purchases of landed properties.

40.  P’s case is that none of the recipients of the transfers made by the parent company to P over the years was a business counterpart of the parent company or P.

41.  Park said at para 6 of his 5^th affidavit:

“It is the case of [P] that [D1] had, on diver [sic] dates between 2009 to 2016, unlawfully and/or wrongfully transferred online money of [P] from [P’s] Accounts a total sum of HK$387,655,303.70 to [D1’s] Accounts by way of 262 transactions.”

42.  It seems to me that the underlying allegation made by P in this action is that D1 has stolen the misappropriated funds from P over the years.  That is clearly an allegation of fraudulent conduct and dishonesty on the part of D1.

43.  I would also observe that in this action P also claims, inter alia, restitution of the sum of HK$25,173,817.88 on the ground of money had and received and/or unjust enrichment against D2.

44.  In his 5^th affidavit at para 8 Park says that on a perusal of the statements of D1’s bank accounts with HSBC and Hang Seng Bank, P discovered that on divers dates from 2011 to 2016, D1 transferred part of the misappropriated funds to accounts held by D2 to D4 as particularized therein.

45.  At para 11 of his 5^th affidavit, Park says:

“There was never any legitimate purpose for [D2 to D4] to receive such sums. Given the frequency, intervals and/or amounts of the transfers involved, [D2 to D4] were clealey [sic] dishonest and had no litigitimate [sic] reason in receiving such sums. It is no doubt that the sums transferred by [D1] to [D2 to D4] by way of the Suspicious Transfers were part of the money unlawfully and/or wrongfully transferred to [D1’s] Accounts from [P’s] Accounts. ...”

46.  P also discovered that landed properties in Australia and Macau were purchased in the name of D2 as set out at paras 12 to 15 of Park’s 5^th affidavit.  As to the purchase of these properties in the name of D2, Park said that he verily believes that D2 has:

“... knowingly and dishonestly assisted [D1] to dissipate and/or laundering the misappropriated funds out of jurisdiction ....”

47.  It seems to me that in this action the claim against, inter alia, D2 is also based on an allegation of fraudulent conduct and dishonesty on her part         .  

48.  I would also refer to what is pleaded at para 11A of the ASC where it is alleged that on divers dates between 2011 and 2016, D1 had wrongfully and unlawfully transferred part of the said sum of HK$387,655,303.70 from D1’s bank accounts to the bank accounts of D2 to D4 on multiple occasions asparticularized therein whereby D2 to D4 had:

“... knowingly in receipt of and/or had dishonestly assisted in dealing with the said sum of part of the same.”

Particulars of the knowledge and/or the dishonesty of D2 to D4 are also provided at para 11A of the ASC.

49.  I am unable to accept Mr Szeto’s submissions.

50.  Mr Szeto also relied on Universal Capital Bank v Hongkong Heya Co Ltd [2016] 2 HKLRD 757 where Deputy Judge Burrell held that the fraud exception was not engaged.  That case is clearly distinguishable and provides no assistance to P.  There was no allegation of fraud or dishonesty against the defendant in that case.

51.  In my judgment, the fraud exception under Order 14, rule 1(2)(b) of the RHC applies and the court has no jurisdiction to grant P summary judgment as claimed in the summons.

52.  I dismiss the summons.

53.  I make an order nisi that P should pay D1 his costs of the summons,such costs to be taxed if not agreed.