YU QUAN LI AND ANOTHER v. SUEN KIN WING

HCA 1671/2018

[2025] HKCFI 3204

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1671 OF 2018

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____________________

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JUDGMENT

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1.  This is the trial of the Plaintiffs’ claims against the Defendant for fraud and misappropriation of their money.

2.  I regret to say that the trial is a waste of costs and the court’s precious resources because, firstly, the Defendant had been convicted of criminal offences related to the matters complained of by the Plaintiffs, and for which purpose he had admitted to the facts set out in a “Summary of Facts for Plea”. Those admitted facts leave no room to doubt that he had defrauded the Plaintiffs of substantial sums of money.

3.  Secondly, in breach of the Order of this court the Defendant had failed to file a supplemental witness statement. Consequently, he is debarred from giving evidence at the trial.

4.  A copy of the Summary of Facts is attached to this Judgment as Annexure I. It can be seen from the admitted facts that the Plaintiffs, who were (and are) husband and wife, had a joint bank account maintained with UBS AG (“UBS” and “UBS Account”). The Defendant was the “Client Advisor” of the UBS Account.

5.  Following discussion between the 1^st Plaintiff and the Defendant in October 2016, and in order to exchange RMB for USD or HKD, between 22 November 2016 and 2 February 2018 and the Plaintiffs caused to be made 37 bank transfers of funds totalling RMB132,400,000 into various Mainland accounts designated by the Defendant. Thereafter, as discussed (and no doubt agreed between the 1^st Plaintiff and the Defendant), the Defendant arranged for the money to be remitted to Hong Kong (in USD or HKD) and deposited into a bank account held by his cousin, Ms Chi Xingxin (“Chi” and “Chi’s Account”). The money should then be transferred to the UBS Account as discussed (and agreed).

6.  In truth, there was no transfer from Chi’s Account to the UBS Account. In order to hide his tracks, the Defendant provided to the 1^st Plaintiff via WeChat messages photographic images showing “Application for Transfer” of amounts of USD or HKD (equivalent to the RMB transferred by the Plaintiffs) from Chi’s Account to the UBS Account, as well as bank statements of the USB Account showing that the monies were deposited into the UBS Account in good time. Both the Applications for Transfer and bank statements provided to the 1^st Plaintiff by the Defendant were fraudulent.

7.  The Defendant’s fraud was discovered after a change of the Client Advisor for the UBS Account, and he was arrested by the police following report of the matter by UBS.

8.  The Plaintiffs’ money has been kept by the Defendant and was apparently used by him to purchase a number of properties in the UK as well as 2 properties in the Mainland. He also owned 6 motor vehicles, 3 of which were exotic sports cars. Clearly, the Defendant was living beyond his means. It is more likely than not that his lavish lifestyle was financed with the Plaintiffs’ money.

9.  No money has been repaid to the Plaintiffs by the Defendant. To the contrary, a worldwide Mareva injunction against him granted by the court on 18 July 2018 was breached by the Defendant by (a) assigning his interests in 27 apartments in London to a BVI company on 27 July 2018; and (b) willfully and repeatedly failing to disclose his assets to the Plaintiffs. These breaches resulted in contempt proceedings against the Defendant. He was found guilty and sentenced to 6 months of imprisonment on each of the 2 counts of contempt to run concurrently (see Re Suen Kin Wing (Committal for Contempt) [2023] 5 HKLRD 98 and Yu Quan Li v Suen Kin Wing[2024] HKCFI 109).

10.  Arising out of these matters, the Defendant was charged with one count of fraud, one count of theft and two counts of dealing with property known or believed to represent proceeds of indictable offence. In HCCC 77/2021, after certain “plea bargaining”, the Defendant pleaded guilty to two counts of dealing with property known or believed to represent proceeds of indictable offences, and admitted the Summary of Facts (see HKSAR v Suen Kin-wing[2024] HKCFI 1805). On 21 June 2024, the Defendant was sentenced to a total of 10 years’ imprisonment.

11.  The facts admitted by the Defendant should be given full weight by this court (see Wong Tak Yue v Kung Kwok Wai (No 2) (1997-1998) 1 HKCFAR 55 at 69B-C).

12.  The Plaintiffs bring this action against the Defendant for recovery of the misappropriated sums relying on a number of causes of action, including the tort of deceit and unjust enrichment, or alternatively an account of profits or damages.

13.  The Defendant’s pleaded defence consists primarily of bare denials and non-admissions. His witness statement does not advance the matter any further. No positive case or real defence had been set out. Indeed, para 16 of the witness statement stated that: “However, in due course, I will make an application to court and if leave be granted, those information will be pertinent to my defence and I will provide a supplemental witness statement then”. It appears that “those information” was a reference to “certain sensitive information” which the Defendant was not at liberty to disclose without the leave of the court. These matters explain why the Defendant was directed to file a supplemental witness statement.

14.  Plainly, the facts admitted are sufficient to make out a case of fraud practised by the Defendant on the Plaintiffs. However, it must be said that the Plaintiffs’ case is also amply supported by a wealth of documentary evidence, which had been subjected to the meticulous analysis of Mr Wong, who appeared for the Plaintiffs with Ms Yip.

15.  For instance, with one exception each of the transfer of funds in the Mainland caused by the Plaintiffs can be traced to the instructions given by the Defendant via WeChat messages. Further, the transfers of funds made by the Plaintiffs in the Mainland were followed by deposits made to Chi’s Account in USD or HKD. It appears that the exercise was carried out with the service of money exchange company / companies in Hong Kong engaged by the Defendant. Instead of forwarding the money deposited to Chi’s Account to the UBS Account, the Defendant created fraudulent Applications of Transfer and bank statements to create a false picture that he had carried out what was agreed with the 1^st Plaintiff to cover his tracks.

16.  Furthermore, when the Defendant was confronted by the 1^st Plaintiff about his wrongdoings, he admitted during a recorded WeChat phone conversation that he had used HK$130 million of the Plaintiffs’ money to purchase stocks (about HK$40 million), real properties in London (about HK$50 million) and to make investments (about HK$40 million). He apologised for what he did. It should also be said that at the time of his arrest the Defendant was found to be in possession of the ATM card for Chi’s Account. He clearly was in control of that account.

17.  In short, the Plaintiffs’ case against the Defendant is overwhelming.

18.  In his final submissions, the Defendant said that the Plaintiffs had made use of him to launder money and to evade foreign exchange control in the Mainland. He recalled reading a newspaper report that the 1^st Plaintiff was running a prostitution ring in Nanjing. He was arrested in 2019 and should be serving a prison term in the Mainland, which explained why he was unable to attend the trial. The 1^st Plaintiff’s illicit activities were referred to by Mr Justice Johnny Chan in the Defendant’s criminal proceedings.

19.  I agree with Mr Wong that in the absence of any pleaded defence based on illegality, it is not a matter relevant for this court’s consideration unless the evidence before it shows that the matter is ex facie illegal (see Igal Dafni v CMA CGM SA [2013] 2 HKLRD 73, [31]-[34]). Whilst the matter concerning the exchange of the Plaintiffs’ funds in RMB into USD or HKD raises suspicion over breach of Mainland foreign exchange control, I cannot say that it is ex facie illegal, especially when there is no expert evidence on Mainland law on this issue.

20.  Further, in light of the recent Court of Appeal decision in Wong Chi Hung v Lo Wing Pun [2005] 2 HKLRD 882, there is certainly scope for argument whether what the Defendant had failed to do, namely, payment in Hong Kong of USD or HKD into the UBS Account would have been illegal (see [27]-[32] (obiter)).

21.  As regards the alleged illegal activities of the 1^st Plaintiff, I also agree with Mr Wong that the view take by Johnny Chan J that the 1^st Plaintiff’s money was “very likely originated from organised, illegal prostitution[1]” is not admissible before this court, which is under a duty to make its own independent findings of fact (see Capital Century Textile Co Ltd v Li Dianxiao[2018] HKCFI 729, [23], [26]-[28]).

22.  Finally, according to Wong Chi Hung, breach of Mainland laws on money exchanges would not bar the Plaintiffs’ claim based on unjust enrichment (see summary in headnote (2)-(4)).

23.  For these reasons, I uphold the Plaintiffs’ claims based on tort of deceit and unjust enrichment against the Defendant (it is unnecessary to consider the remainder of the causes of action), and the Plaintiffs are entitled to judgment against the Defendant.

24.  In respect of the judgment sum, although the Plaintiffs are claiming HK$130 million[2], it appears from para 8 of the Summary of Facts and paras 40 and 44 of the Plaintiffs’ opening submissions that the Defendant had misappropriated approximately HK$125 million of the Plaintiffs’ money. Accordingly, I find that that is the sum of money belonging to the Plaintiffs which has been misappropriated by the Defendant.

25.  However, the Plaintiffs accept that they should account for the settlement sum of HK$6 million which they had received from UBS in relation to these matters and to prevent double recovery. The balance is HK$119 million. I give judgment to the Plaintiffs against the Defendant in the sum of HK$119,000,000.

26.  As for interest, I accept the Plaintiffs’ submission that they are entitled to interest on the full HK$125,000,000 for the period from 2 February 2018 (date of last transfer of funds in the Mainland) until 5 June 2024 at the rate of 1% over prime rates.

27.  For the period from 6 June 2024 (date of settlement with UBS) to date of judgment, to reflect the Plaintiffs’ receipt of the sum of HK$6,000,000, pre-judgment interest should be awarded on the sum of HK$119,000,000 at the rate of 1% over prime rates.

28.  The Plaintiffs are also entitled to post-judgment interest on the sum of HK$119,000,000 at judgment rates, from the date of judgment until payment in full.

29.  I make an interest award in favour of the Plaintiffs against the Defendant accordingly.

30.  I shall decide on costs after hearing the parties.

31.  I am grateful to counsel for their assistance.

Mr Howard Wong and Ms Regina Yip, instructed by Hui Doe & Sum Law Firm LLP, for 1^st and 2^nd Plaintiffs

The defendant appeared in person

HCA 1671/2018

[2022] HKCFI 2358

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1671 OF 2018

________________________

________________________

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REASONS FOR DECISION

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1.  The defendant has been subject to a worldwide mareva injunction obtained by the plaintiff since July 2018. At the end of the hearing of his application to discharge the injunction, this court dismissed the application with costs summarily assessed against him. Below are my reasons.

Background

2.  The claim in this action is for fraud of the defendant against the plaintiff.  Briefly, the defendant is a former associate director of UBS AG (“UBS”).  In October 2014, the plaintiffs opened an account at UBS for the purposes of investment (the “UBS Account”).  The defendant was the client advisor of the UBS Account.  Acting on the defendant’s advice, the plaintiffs regularly remitted amounts in RMB into the UBS Account for investment purposes (the “Investment Funds”)

3.  According to the plaintiff, the defendant represented to the plaintiffs that since investments through the UBS Account must be made in Hong Kong or US dollars, the RMB would first be subject to a foreign currency exchange process running through UBS, but he could arrange to effectively short-circuit the process by first transferring the funds to another account.  That, the plaintiffs say, provided the window for the defendant to intercept the Investment Funds and channel the same for his own use.  Upon discovery of that, report was filed and the defendant was arrested by the police on 12 June 2018.  That eventually led to the criminal charges which he now faces.

4.  On 18 July 2018, the plaintiffs applied for and obtained a worldwide mareva injunction freezing the defendant’s assets up to the value of HK$130,000,000, which was varied and continued by this court on 27 July 2018 (“the Injunction”).  Ancillary to the Injunction was the usual disclosure order in respect of the defendant’s assets.

5.  By summons filed on 8 July 2022, the defendant applied to “解除”, ie to discharge the Injunction.  In support, he filed his affirmation of the same date whereby he stated his request for discharge of the Injunction to enable him to pay the contribution towards the costs of his criminal proceedings pursuant to the offer of legal aid.  A copy of the relevant certificate of offer of legal aid was exhibited. These were all that the defendant put forward for the purpose of his application.

6.  Within a week, the plaintiffs’ solicitors came up with their affirmation in opposition filed on the day before the hearing in response to the scanty content of the defendant’s affirmation in support. Notwithstanding this court’s explanation, the defendant confirmed that he would not seek leave to file an affirmation in reply, and that he would proceed on the basis of the materials before the court.  So he did.

Discussion

7.  The defendant’s application is devoid of merits.

8.  As an application to discharge the Injunction, which has been in place since July 2018, the defendant in support stated no more than his reason for the application.  Reason for the application is not justification for the requested discharge.  No ground whatsoever was put forward.  Nothing was said either by way of affirmation evidence or submission in respect of any of the factors that the plaintiffs succeeded in establishing back in 2018 to entitle them to the Injunction in the first place.

9.  The defendant did not say that the Injunction was impeachable from the outset.  The fact was that no application for discharge has been taken out by now, notwithstanding that the defendant has engaged full legal team including Senior Counsel in other applications such as his application for stay of proceedings in 2019[1].  Nor did the defendant suggest that the Injunction ought to be discharged because of change of circumstances since 2018.

10.  According to the plaintiffs, the circumstances since grant of the Injunction until now could only demonstrate that the Injunction should hardly be relaxed, let alone discharged.  Essentially, the plaintiffs tendered evidence of alleged repeated breach of the Injunction and non-compliance with the ancillary disclosure order on the part of the defendant.  With previous leave of this court, the plaintiffs have actually commenced committal proceedings against the defendant (HCMP 633/2019)  which are still ongoing.

11.  Opting not to file any affirmation in reply, the defendant was taken not to contradict the above affirmation evidence of the plaintiffs at least in respect of the sequence of events since the Injunction until the present.

12.  The defendant failed to put forward, and to discharge his burden of substantiating, any justification for the requested discharge of the Injunction.

13.  Insofar as the defendant was seeking to vary instead of discharging the Injunction, his reference to the financial need arising out of the payment of contribution towards legal aid for defending his criminal proceedings remains merely his reason.

14.  The defendant’s right to defend against the criminal charges against him is noted.  Yet even so, it is trite that the defendant has the burden to show by sufficient evidence that he does not have other asset to meet the payment and the purpose of the requested relaxation of the injunction is not an attempt to dissipate the assets to frustrate the enforcement of any judgment that the plaintiff may obtain against him eventually: see XY, LLC v Jesse Zhu[2018] HKCFI 1485 (at §§20-22).

15.  In the present case, the defendant did not even begin to discharge his burden.  As mentioned, the defendant has been legally represented by full legal team at one stage.  He provided no explanation and evidence in respect of his financial situation since then.  Coupled with the un-contradicted affirmation evidence from the plaintiffs, an account of the entire assets of the defendant and its development since the grant of the Injunction was not before this court.  There was no way this court could gauge any assertion by the defendant of lack of asset now to meet his ends, however desperate he might project his situation to be.

16.  The circumstances pointed out above by the plaintiffs in relation to the quality of the defendant’s compliance with the Injunction and the ancillary disclosure order discussed above also added a real concern, if not skepticism, about the risk of dissipation of the assets of the defendant.  That simply worked against the defendant in the consideration for the present purpose.

Conclusion

17.  Hence the dismissal of the defendant’s application with costs, which this court summarily assessed at HK$98,000 and ordered the same to be paid within 14 days.

18.  The background of the defendant does not convince this court that he is unable to adequately understand English. Nevertheless, the hearing was conducted in Punti for his benefit.  If requested, interpreter assistance will be arranged for him for the handing down of these reasons.

Mr Tommy Cheung, instructed by Addleshaw Goddard (Hong Kong)  LLP, for the 1^st and 2^nd plaintiffs

The defendant appeared in person

HCA1671/2018 & HCA2975/2018

[2022] HKCFI1364

HCA1671/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1671 OF 2018

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and

HCA2975/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2975 OF 2018

_____________

_____________

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DECISION

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A.INTRODUCTION

1.  This is the hearing of two summonses taken out by UBS AG (“UBS”) in HCA1671/2018 (“HCA1671”) and HCA2975/2018 (“HCA2975”) respectively for the two actions to be tried together. In respect of these two actions:

(a)  in HCA1671, Yu Quanli and Lou Xiaojie (“Mr and Mrs Yu”) are the plaintiffs and Suen Kin Wing (“Suen”) is the defendant; and

(b)  in HCA2975, Mr and Mrs Yu are the plaintiffs whereas UBS is the defendant.

2.  UBS’s primary position is that the two actions should be tried together before the same judge; or alternatively (which is not its preferred option), HCA2975 be tried immediately after HCA1671 before the same judge. Mr and Mrs Yu oppose UBS’s summonses, but they have no objection that HCA2975 may be tried after HCA1671, and that the evidence of HCA1671 (insofar as relevant) to stand as evidence in HCA2975.  Suen is acting in person. He was absent at the hearing of UBS’s summonses and had indicated that he takes a neutral stance.

B.  THE APPLICABLE PRINCIPLES

3.  UBS’s summonses concern how the Court’s case management discretionary power under Order 4, rule 9(1), Rules of the High Court, should be exercised in this particular case. The said rule provides that:

“Where two or more causes or matters are pending, then, if it appears to the Court—

(a) that some common question of law or fact arises in both or all of them, or

(b) that the rights to relief claimed therein are in respect of or arise out of the same transaction or series of transactions, or

(c) that for some other reason it is desirable to make an order under this rule,

the Court may order those causes or matters to be consolidated on such terms as it thinks just or may order them to be tried at the same time, or one immediately after another, or may order any of them to be stayed until after the determination of any other of them.”

4.  The principles which guide the Court in exercising its power under the said rule have been set out extensively in Komal Patel and others v Chris Au and others, HCA183/2014, 2063/2015 (14 January 2016, unreported), §§13-17; Chan Shing Lam v Winscore International Ltd[2021] HKCFI 3563, §12; China Health Group Ltd (formerly China Healthcare Holdings Ltd) & others v Li Zhong Yuan and others[2021] HKCFI 3806, §§11-14. The Court has a wide and unfettered discretion; there is no hard and fast rule how the discretion should be exercised but it should take a practical and common sense approach. It is important to bear in mind that the main objectives of the rule are to save time and costs, and to avoid the risk of inconsistent findings when there is an overlapping of issues. Ultimately, the power should be exercised to achieve the overall objective of ensuring the efficient and just resolution of disputes.

C.  THE TWO ACTIONS: WHAT THEY ARE ABOUT AND THEIR PROGRESS

5.  Mr and Mrs Yu are the joint owners of the account number 373750 at UBS (“the Account”). The Account was and is a wealth management account opened for their investment purposes. At the material time, Suen was an associate director of UBS and was assigned as the account manager of the Account.

6.  In HCA1671, Mr and Mrs Yu claim that Suen had misappropriated a total sum of about HK$118,000,000 (“the Misappropriated Sum”) pursuant to a fraudulent scheme (“the Fraudulent Scheme”). In short, they allege that Suen induced them by various misrepresentations to deposit funds in RMB into an HSBC account for onward transfer to the Account; in fact, Suen was in control of the HSBC account and the Misappropriated Sum had not been transferred to the Account and had been taken by Suen instead. They rely on the following causes of action: breach of fiduciary duties, breach of contractual duties, the tort of deceit, and restitution for unjust enrichment. Suen denies the allegations made against him.

7.  In HCA2975, Mr and Mrs Yu refer to the same Fraudulent Scheme. They claim that UBS is liable for the Misappropriated Sum on the basis of vicarious liability for deceit, primary liability for breach of contract and negligence, and/or vicarious liability breach of trust. UBS denies the claims made against it on various grounds.

8.  Although Mr and Mrs Yu are the plaintiffs in both actions, the defendants in those two actions are different. UBS is not a defendant in HCA1671 whereas Suen is not a defendant in HCA 2975.

9.  Factual witness statements have been filed and served in both actions. Mr and Mrs Yu will give factual evidence in both actions. In HCA1671, only Suen will give factual evidence for himself. In HCA2975, three former or current employees of UBS will give factual evidence.

10.  No expert evidence will be adduced in HCA1671. On the other hand, PRC law experts will give expert evidence in HCA2975. They have filed and exchanged their individual reports on 26 April 2022; and they need to file their joint report by 12 July 2022. In HCA2975, the Court has also directed that any further interlocutory application shall be made before 15 September 2022.

11.  HCA1671 is ready to be set down for trial. On the other hand, in HCA2975, there will be a CMC on 28 November 2022.

D.  ANALYSIS

12.  Mr and Mrs Yu oppose UBS’s summonses on two grounds: first, the overlapping issues in the actions are not substantial; second, having the two actions tried together would result in gross delay to the progress of HCA1671.

13.  As to the first ground, they point out that the two actions concern different causes of action and issues to be tried. As the defendants in the two actions are different, it is not surprising that the causes of action are different. I also agree that different issues are involved. That said, it is clear that the two actions involve common questions of fact i.e. whether Mr and Mrs Yu were victims of the Fraudulent Scheme and had suffered loss of the Misappropriated Sum as a result as pleaded. These identical factual issues must be resolved first before the Court can consider the legal consequences and the legal liabilities of Suen and UBS.

14.  Mr and Mrs Yu highlight the fact that, apparently, UBS merely puts them to strict proof on those factual issues and has not pleaded any positive case. At the same time, Suen’s case is, in substance, a bare denial. Be that as it may, they are still lives issues that the Court needs to resolve in both actions: Mr and Mrs Yu will have to discharge their burden of proof in proving the relevant facts, and UBS will be entitled to test their evidence.

15.  It seems that Mr and Mrs Yu have accepted previously that there are common issues in the two actions, and that they should be tried together. In §D2 of the Plaintiffs’ Timetabling Questionnaire in HCA2975 dated 27 October 2020, they stated that they “will take out a summons and make an application for the 2 proceedings (HCA1671/2018 and HCA2975/2018) to be tried together after parties attempt the 1^st mediation”. In §14 of the “Summary of the brief factual background and the issue(s) to be tried” attached to the same document, they stated that:

“the central issues to be tried are as below:-

(i)  Whether the Defendant’s Employee failed to transfer the HKD or USD equivalent of the Investment Funds in the sum of the Misappropriated Sum into the UBS Account and/or otherwise misappropriated the said Misappropriated Sum.

(ii)  Whether the Defendant’s Employee made the Funds Transfer Account Misrepresentation, Transaction Slips Misrepresentation and the Forged Bank Statements Misrepresentations fraudulently.

...

(vii)  Alternatively, whether the Defendant’s Employee acted in breach of a Quistclose trust…”

It does not matter why Mr and Mrs Yu have changed their mind (which is not entirely clear to me).

16.  In view of the common questions of fact, which are fundamental to both actions, it is undesirable to try the two actions separately (i.e. by hearing HCA1671 first) even by the same judge:

(a)  The Court hearing HCA2975 will not be bound by the factual findings made by the Court in HCA1671 irrespective of whether the two actions are to be heard by the same judge. It is difficult to assess the degree of risk that there will be inconsistent findings. One should perhaps note that, in HCA1671, Mr and Mrs Yu will be cross examined by Suen, who is acting in person, whereas, in HCA2975, they will be cross examined by a team of skillful and experienced lawyers. I bear in mind that, if Suen is convicted of criminal offences in the criminal trial to be held in November 2022, the conviction and the relevant facts will be admissible in the civil trials of these two actions, which will likely reduce the chance of inconsistent findings. However, I have no information about the criminal proceedings and it is unclear what the outcome thereof will be.  Even if the risk of inconsistent findings is low as submitted by Mr and Mrs Yu, this is a real risk that cannot be ignored.

(b)  Mr and Mrs Yu’s suggestion of ordering the evidence in HCA1671 to stand as evidence in HCA2975 would and should simply mean that the evidence in HCA1671 shall be admissible in HCA2975. But the point is, even if that be the case, UBS cannot and will not be bound by the findings made in HCA1671 when it is not a party thereto and has not taken part in the trial thereof.

(c)  It is undesirable to ask Mr and Mrs Yu to give evidence (and be cross examined) twice on the same matters in two different trials when there may be a substantial time gap between the two, even if they do not mind. This will also waste time and costs.

(d)  As a matter of practical common sense, it appears to be preferable to resolve all issues arising out of the Fraudulent Scheme in one go.

17.  Turning to Mr and Mrs Yu’s second ground of opposition, they claim that trying the two actions together will delay HCA1671 and is tantamount to a de facto stay thereof; and they will suffer irremediable prejudice as a result. They state that the trial is bound to be lengthened considerably if the two actions are tried together. They also claim that there is a real likelihood of further delay in HCA2975 given UBS’s delay in various procedural steps (such as filing its defence, disclosing its list of documents, etc.) in the past.

18.  I appreciate that HCA1671 is now ready to be set down for trial but HCA2975 is not; and hence, to allow UBS’s summonses will inevitably delay the trial of HCA1671. I also appreciate the concerns raised by Mr and Mrs Yu. However:

(a)  The delay should not be significant. In HCA2975, there will be a CMC on 28 November 2022. Provided that the parties comply with the directions already given by the Court on various matters, HCA2975 should be ready to be set down for trial by then. The only outstanding matters in HCA2975 seem to be the filing of a joint expert report and seeking counsel’s advice on the whole matter. It will be open to Mr and Mrs Yu to take steps to ensure that UBS will comply with the directions on those outstanding matters on time. Mr and Mrs Yu have no intention to take out any further interlocutory application in HCA2975. They, however, fear that UBS might apply to amend the pleadings, or seek further discovery, etc., upon seeing the papers in HCA1671.  Such fear seems speculative. Mr and Mrs Yu will give the same evidence and rely on the same documents in both actions. Suen has not disclosed any document in his list of documents. It appears to be unlikely that UBS will need to amend its pleadings or seek further discovery after seeing the papers in HCA1671. In any event, assuming that UBS takes out any such interlocutory application, they will not be allowed as a matter of course. As the matter stands, it seems to me that, in practice, the setting down of the trial of HCA1671 will likely to be delayed by about 6-7 months only (i.e. the period from today to late November 2022).

(b)  Mr and Mrs Yu believe that, the trial of HCA1671 should only take 2-3 days, and if it is set down for trial now, it is likely that the trial may take place at the end of this year. On the other hand, even if HCA2975 can be set down for trial in November 2022, it is likely that the trial can only take place in late 2023 or even some time in 2024. Assuming that their estimates are accurate, there will be a delay of about one year. While I would not say one year is a short period of time, this is not a case where trial dates for one of the actions have already been fixed, and no reasonable estimate can be made as to when the other action may be tried.

(c)  The time for trying the two actions together will be longer than trying HCA2975 only. However, it is likely that the total length of the two trials (if held separately) will be more than the length of trying both actions together at the same time. Although there will be some delay in HCA1671, overall speaking, some time and, hence, costs can likely be saved by trying the two actions together.

(d)  There is no suggestion that the delay to be caused by trying the two actions together would result in any real or serious difficulties on the part of Mr and Mrs Yu to recall the material facts and give evidence accordingly. In any event, they have already made witness statements with the assistance of documentary evidence.

(e)  A mareva injunction has been granted against Suen. Such injunction will continue to safeguard Mr and Mrs Yu’s position pending the trial of HCA1671 irrespective of when it will be held. I am aware the Suen has apparently committed a contempt of court by failing to comply with a disclosure order about his assets. However, there is no evidence that, if Mr and Mrs Yu can succeed in their claim against Suen sooner, there will indeed be a better and higher chance that that they can enforce the judgment against Suen more effectively.

(f)  Assuming that Mr and Mrs Yu succeed in the two actions, they should in principle be entitled to claim interests on the amount that the Court finds Suen and/or UBS liable; and the amount of interests will correspond to the length of the legal proceedings.

19.  For the above reasons, notwithstanding the objections raised by Mr and Mrs Yu, and after considering and balancing all relevant factors as submitted by the parties, I have come to the conclusion that I should exercise my discretion to order the two actions to be tried together by the same judge.

E.  CONCLUSION AND ORDER

20.  As stated in Hong Kong Civil Procedure 2022, vol., 1, §4/9/7 at p. 80:

“If two actions are to be tried together or one after another before the same judge, they remain to be two separate actions, which should include directions that the evidence of these two actions are to be mutually admissible or on the order of trial of any consequential directions. Inappropriate directions will not save costs and time for the trial. Quite the contrary, the proceedings will be unduly lengthened and time and costs will be wasted.”

21.  In the circumstances, it appears that, at least, further directions along the following line should be given:

(a)  the evidence of the two actions shall be mutually admissible;

(b)  the plaintiffs in the two actions (i.e. Mr and Mrs Yu) shall give evidence once at the trial for both actions, to be followed by Suen in HCA1671, and then witnesses for UBS in HCA2975;

(c)  the plaintiffs in the two actions shall open and close their case in both actions at the same time whereas Suen and UBS shall open and close their respective case in the action in which they are the defendant in the usual way.

I shall, however, give the parties the chance to agree on a set of further directions.

22.  For the above reasons, I shall make an order in the following terms:

(a)  HCA1671 and HCA2975 be tried together before the same judge;

(b)  The plaintiffs in both actions (i.e. Mr and Mrs Yu) shall give the defendant in HCA1671 (i.e. Suen) full access to the pleadings, court orders, disclosed documents and witness statements in HCA2975 within 14 days hereof;

(c)  The plaintiffs in both actions (i.e. Mr and Mrs Yu) shall give the defendant in HCA2975 (i.e. UBS) full access to the pleadings, court orders, disclosed documents and witness statements in HCA 1671 within 14 days hereof;

(d)  The parties shall submit an agreed set of further directions to give effect to the order made under paragraph (a) above within 14 days thereafter; in the absence of agreement, each party shall submit its own proposed further directions and the Court shall decide on the further directions on paper;

(e)  A case management conference in HCA1671 shall be fixed at the same time as the case management conference for HCA2975 scheduled for 10:30am on 28 November 2022;

(f)  Liberty to apply.

23.  As to costs, UBS is the successful party. That said, I bear in mind the nature of the application; the fact that both parties have apparently taken different views on the matter at different stages; and that the grounds of objection raised by Mr and Mrs Yu cannot be said to be unreasonable. As a matter of discretion, I take the view that it is fair and proper to order that the costs of UBS’s summonses (including any cost reserved) shall be in the cause of the two actions (with a certificate for one counsel). I shall make a costs order nisi accordingly. Any party who intends to apply to vary the order shall submit a written submission (not more than 3 pages) within 14 days hereof; and the other party shall submit a written submission in reply (not more than 3 pages) within 14 days thereafter; and I shall then deal with the application on paper.

HCA 1671/2018

[2019] HKCFI 2541

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1671 OF 2018

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J U D G M E N T

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Introduction

1.  This is the defendant’s application by Summons dated 29 September 2018 (“Summons”) for an order that all proceedings herein be stayed until the final conclusion of the related criminal proceedings against the defendant or until further order of this court (“Stay Application”).

2.  In short, the defendant is a former associate director of UBS AG (“UBS”) and the plaintiffs had an account with UBS.  It is the plaintiffs’ case that the defendant fraudulently misappropriated HK$130,000,000 odd from the plaintiffs by operating a fraudulent scheme as follows.   

3.  The plaintiffs opened an account at UBS on 30 October 2014 for the purposes of investment (the “UBS Account”).  The defendant was the account manager of the plaintiffs’ UBS Account.  Since then: –

(1)  The defendant provided investment advice to the plaintiffs on a frequent basis, including advising on investment decisions, and means of remittance of funds into the UBS Account to enhance investment performance;

(2)  Further, the plaintiffs and the defendant developed a closer relationship over the years due to their frequent contacts by the telephone, email and instant messaging.  The defendant also met with the 1^st plaintiff in person, and had visited the plaintiffs in Nanjing China;

(3)  In early 2018, the defendant became the plaintiffs’ neighbour. 

4.  The plaintiffs regularly remitted amounts in renminbi into the UBS Account for investment purposes (the “Investment Funds”).  However, since investments through the UBS Account must be made in HKD or USD, the renminbi would first be subject to a foreign currency exchange process running through UBS.

5.  This provided the opportunity for the defendant to perpetrate a three-part fraudulent scheme (“Fraudulent Scheme”): –

(1)  First, the defendant created forged statements for the UBS Account for the plaintiffs since the end of 2015 to avoid and prevent the plaintiffs from discovering the real account balance of the UBS Account and hence the defendant’s Fraudulent Scheme.

(2)  Second, from November 2016 onwards, the defendant caused the plaintiffs to transfer the Investment Funds into an HSBC account (the “HSBC Account”) instead of the UBS Account, for the following purported reasons: –

(a)  The defendant suggested that this would short-circuit the lengthy currency exchange process through UBS. 

(b)  According to the defendant, the HSBC Account is under the name of the defendant’s cousin Chi, who can transfer funds free of the foreign currency controls due to her alleged businesses in the PRC. 

(c)  Therefore, the defendant represented that upon his receipt of deposits into the HSBC Account, he would transfer an equivalent amount in HKD or USD into the UBS Account. 

(d)  In fact, it appears that the HSBC Account is under the sole beneficial control of the defendant.  The defendant appears to be the sole signatory to the HSBC Account.

(3)  Third, to conceal his fraud, the defendant sent purported transaction slips (“Purported Transaction Slips”) to the plaintiffs after each purported transfer from the HSBC Account to the UBS Account, to give the impression that the transfers had in fact been made.  In fact, these Purported Transaction Slips were only application forms for bank transfers, which do not evidence any transactions made. 

6.  Contrary to his representations, the defendant intercepted the Investment Funds and stole the misappropriated sums for his own use. 

7.  The defendant was arrested by the Hong Kong Police on 12 June 2018 and was released on bail as of 11 July 2018.

Key Legal Principles

8.  When the constitutionally guaranteed right against self-incrimination in criminal proceedings is sought to be exercised in the context of an application for stay of a civil action, a balancing exercise is called for.  In Jefferson v Bhetcha [1979] 1 WLR 898, Megaw LJ held (at pp 904H-905D): –

“... the court which is competent to control the proceedings in the civil action, whether it be a master, a judge, or this court, would have a discretion, under section 41 of the Supreme Court of Judicature (Consolidation) Act 1925 , to stay the proceedings, if it appeared to the court that justice — the balancing of justice between the parties — so required, having regard to the concurrent criminal proceedings, and taking into account the principle, which applies in the criminal proceeding itself, of what is sometimes referred to as the “right of silence” and the reason why that right, under the law as it stands, is a right of a defendant in criminal proceedings. But in the civil court it would be a matter of discretion, and not of right. There is ... no principle of law that a plaintiff in a civil action is to be debarred from pursuing that action in accordance with the normal rules for the conduct of civil actions merely because so to do would, or might, result in the defendant, if he wished to defend the action, having to disclose, by an affidavit under Order 14, or in the pleading of his defence, or by way of discovery or otherwise, what his defence is or may be, in whole or in part, with the result that he might be giving an indication of what his defence was likely to be in the contemporaneous criminal proceedings. The protection which is at present given to one facing a criminal charge — the so-called “right of silence” — does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings.

... while each case must be judged on its own facts, the burden is on the defendant in the civil action to show that it is just and convenient that the plaintiff's ordinary rights of having his claim processed and heard and decided should be interfered with.

... one factor to be taken into account, and it may well be a very important factor, is whether there is a real danger of the causing of injustice in the criminal proceedings. There may be cases — no doubt there are — where that discretion should be exercised. In my view it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors. By way of example, a relevant factor telling in favour of a defendant might well be the fact that the civil action, or some step in it, would be likely to obtain such publicity as might sensibly be expected to reach, and to influence, persons who would or might be jurors in criminal proceedings. It may be that, if the criminal proceedings were likely to be heard in a very short time ... it would be fair and sensible to postpone the hearing of the civil action. It might be that it could be shown, or inferred, that there was some real — not merely notional — danger that the disclosure of the defence in the civil action would, or might, lead to a potential miscarriage of justice in the criminal proceedings, by, for example, enabling prosecution witnesses to prepare a fabrication of evidence or by leading to interference with witnesses or in some other way.” (Emphasis supplied)

9.  In Petroliam Nasional Berhad & Ors v Tan Soon-gin (aka George Tan) [1990] 1 HKLR 4, Cons Acting CJ applied the approach in Jefferson and rejected the appeal from the judgment of the court below staying the civil proceedings.  He observed (at 7F-9G):

“It is common ground that the subject matter of the criminal charges and the civil claims is the same. It is further common ground that the principles upon which the discretion to stay the civil claims, which the Court in that circumstance undoubtedly possesses, until the criminal charges have been heard are to be exercised are to be found in the judgment of Megaw L.J. in Jefferson Ltd v. Bhetcha (1979) 1 W.L.R. 898.

...

The right to reserve one's defence up to the last minute, that is until the prosecution has completed its evidence, except perhaps so far as it may be necessary to put matters in cross-examination, is such a basic fundamental of the criminal process that we think it cannot be so lightly dismissed... it is always a matter for some consideration, the precise weight to be determined by the individual judge in all the circumstances as he sees them. ...” (Emphasis supplied)

Discussion

10.  For the purpose of considering the defendant’s application, I shall assume that (as appears to be the case) there is a significant overlap between the subject matter of this action and that of the criminal proceedings against the defendant.

11.  The defendant submits that it is just and convenient that the civil proceedings be stayed until the conclusion of the related criminal proceedings.  The defendant says that the prejudice is more than obvious.  Viewed against the background that the facts relied on in this civil claim are essentially the same as those in the criminal proceedings, the defendant submits the following are highly material: –

(1)  The defendant would lose his constitutional right to remain silent.

(2)  The plaintiffs, who will be key witnesses in the criminal proceedings, will, in effect, obtain a road-map to the defendant’s intended cross-examination of them. 

(a)  This is particularly galling when the plaintiffs themselves have a large financial interest involved in the matter.

(b)  This is not a case where the criminal offence may be proved by some independent witnesses.  In the present case, the prosecution case will literally collapse if the plaintiffs are found to be incredible. 

(c)  The plaintiffs’ credibility can only be tested in cross-examination in the criminal proceedings, and it is of paramount importance to ensure that the defendant’s ability to effectively cross-examine the plaintiff is not impaired. 

12.  Whilst the defendant’s right to remain silent cannot be lightly dismissed, and is always a matter for “some consideration”, the precise weight is to be determined by the individual judge in all the circumstances he sees them (see: paragraph 9 above).

13.  In this regard, I agree with the plaintiffs’ submission that there is in the present case no real danger of the causing of injustice in the criminal proceedings, in particular, there is no real risk that the plaintiffs would tailor their evidence in the criminal proceedings if the defendant’s defence is disclosed in this action: –

(1)  As stated in A v SFC[2015] 1 HKLRD 47, it is “wrong to start from a premise that ...the Prosecution may act unfairly, that the trial judge may fail to ensure a fair trial for [the defendant] ... Of course, there is always the possibility, but the possibility does not amount to a real risk of prejudice.  Instead, the starting premise must be that all those carrying out their functions will do so properly.”: at paragraph 88 per Patrick Li J.

(2)  Further, since the application for the Mareva Injunction, both plaintiffs have filed extensive affidavit evidence substantiating their claims.  The plaintiffs’ case has also been pleaded with extensive particularity in the Statement of Claim, which has been verified by both plaintiffs’ statements of truth.  It is most unlikely that any substantive changes could be made to their case. 

(3)  Insofar as new materials may lead to new developments, it is difficult to conceive of any prejudice that the defendant may suffer, given that the essential bank records regarding the HSBC Account and other HSBC accounts in the defendant’s name had already been received by the Hong Kong Police and have also been ordered to be delivered to the plaintiffs for inspection. 

(4)  The defendant’s argument fails to do justice to the Prosecution’s independent investigatory efforts and wholly overlooks the fact that the plaintiffs have asserted a clear and consistent case throughout these civil proceedings.

(5)  It follows that, if the plaintiffs cannot realistically “tailor” their evidence without putting their credibility into doubt, whether or not the plaintiffs can guess the defendant’s intended cross-examination of them is neither here nor there. 

Conclusion

14.  For the reasons set out above, the defendant has not shown that it would be just or convenient to interfere with the plaintiffs’ right of having their claim processed and heard and decided, in the way in which the stay which he seeks would interfere with that right. 

15.  That being so, I dismiss the defendant’s Summons.

16.  I order that the costs of the application be paid by the defendant to the plaintiffs, such costs are to be taxed if not agreed with a certificate for 2 counsel.

17.  The above order as to costs is nisi and shall become absolute in the absence of any application within 21 days to vary the same.

18.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.