TECHTERYX LTD v. LEGACY TRUST COMPANY LTD AND OTHERS

HCA 161/2023 and HCA 1906/2023

(Heard together)

[2025] HKCFI 4023

HCA 161/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 161 OF 2023

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_______________________

AND

HCA 1906/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1906 OF 2023

_______________________

_______________________

(Heard Together)

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D E C I S I O N

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Brief Introduction and Background Facts

1.  TrueCoin LLC (“TrueCoin”) was the owner and creator of a platform through which it marketed a cryptocurrency (“TUSD”). Subscribers pay fiat currency in return for a newly minted TUSD digital token and are entitled to trade, use and redeem the token. The money collected from subscribers of tokens formed the reserves (“the Reserves”) which were marketed to be kept with and safeguarded by independent licensed financial institution in escrow in US dollar cash or equivalent assets in value at least equal to the total amount of outstanding tokens at any time. This was how TUSD was marketed as a “stable coin”.

2.  The Reserves were originally held by Legacy Trust Company Limited (“Legacy”) and since 2021 by First Digital Trust Limited (“FDT”), a licensed trust company. Both Legacy and FDT are companies incorporated in Hong Kong. Mr Vincent Chok (“Chok”) at all material times was a director in both Legacy and FDT.

3.  Legacy Trust engaged Crossbridge Capital Asia Pte. Ltd. (“Crossbridge”) as investment advisor pursuant to an Account Investment Management Mandate dated 31 March 2020. The key person at Crossbridge at the time was its CEO, Mr Yai Sukonthabhung (“Yai”).

4.  In around March 2020, Legacy and Crossbridge recommended TrueCoin to invest the Reserves into Aria Commodity Finance Fund (“Aria Fund”), incorporated in the Cayman Islands, as the investment fund. The voting shares of Aria Fund was held by Aria Capital Management Ltd which at all material times was exclusively controlled by Mr Matthew Brittain (“Brittain”).

5.  P acquired the business from TrueCoin on 2 December 2020 (“the Acquisition”) pursuant to two documents executed with TrueCoin: (1) the Strategic Alliance Agreement; and (2) the Master Services Agreement. However, TrueCoin continued serving and managing the TUSD platform for a fee.[1]

6.  During the course of the Acquisition, it was recommended to P that FDT should take over from Legacy. On 28 September 2020, FDT executed: (1) a Client Agreement (“Client Agreement”); and (2) Custody Services Agreement (“Custody Services Agreement”). Furthermore, on 13 January 2021, FDT entered into an Escrow Services Agreement (“ESA”) with P. These agreements provided inter alia that:

(1)  FDT is not acting as a financial or investment adviser to P and assumes no responsibility for the performance or outcome of any investment made by P on the basis of any advice provided nor takes any view on the efficacy or soundness of any investment decision made by P[2];

(2)  FDT’s role is a professional custodian[3]; and

(3)  FDT is authorised to refer P to a third party for the possible provision of service[4] and for FDT to appoint agents in connection with its performance of any services under the Custody Services Agreement[5].

7.  However, it is disputed whether those agreements acknowledged that FDT agreed to hold the Reserves as trustee and fiduciary of P which is P’s case[6]. On the other hand, FDT’s case is that whilst the Reserves are held to P’s order, it is not a trustee of the Reserves and the Reserves are not beneficially owned by P[7].

8.  It was also recommended to P that Finaport Pte. Ltd. (“Finaport”), a licensed investment manager, takes over from Crossbridge as investment advisor.

9.  On 18 March 2021, FDT appointed Finaport as the investment adviser with full discretionary authority to manage the Assets (defined as cash, securities and other assets which are under the custodial care of FDT) by a Discretionary Investment Management Agreement (“DIMA”)[8]. Under DIMA, Finaport was to make investment recommendations to FDT. It was not disputed that P had approved the appointment of Finaport and the terms of DIMA.

10.  Before the Acquisition, in around July 2020, Legacy had invested USD 97M in Aria Fund.

11.  By an Escrow and Properties Transfer Agreement dated 3 December 2020, TrueCoin and Legacy would transfer all assets standing in TrueCoin’s account at Legacy (“Escrow Assets”) to FDT[9].

12.  By a Joint Written Instruction dated 1 April 2021, TrueCoin and P instructed Legacy to transfer all Escrow Assets to FDT with effect on the same date.

13.  On around 14 March 2022, FDT and TrueCoin presented with P a resolution dated 8 March 2021 (FDT says it was a typo for 8 March 2022) whereby P was asked to authorize the investment of the Reserves according to an investment proposal that was annexed thereto (“the Board Resolution”). According to the investment proposal, Finaport was permitted to invest the Reserves in Aria Fund or “any other funds or structured products upon the recommendation of Finaport” and approved by P in writing. The Board Resolution was signed by a director of P.[10]

14.  From August 2022, P began demanding the redemption of the sums invested in Aria Fund but, save for USD 63.15M, the redemption request was not made.[11]

15.  In around late 2022, P via its solicitors started asking questions following the delays in the redemption. FDT provided some documents to P which revealed that by 6 transfers between 29 June 2021 to 15 March 2022, six remittances totalling USD 456M (“the 6 Remittances”) were transferred to a bank account held in the name of Aria Commodities DMCC (“Aria DMCC”), a Dubai entity, also owned by Brittain and/or his wife.

16.  The sole shareholder of Aria DMCC before August 2024 was Brittain’s wife. However, FDT points out that on P’s pleaded case, both Aria Fund and Aria DMCC are owned and controlled by Brittain[12]. It is also pleaded that Aria Fund and Aria DMCC are affiliate companies, part of the ARIA group of companies.[13]

17.  Essentially, P claims in HCA 161/2023 that there was a large-scale fraud against P, involving FDT, Finaport, Aria Fund, Aria DMCC, TrueCoin and one if its officer, Alex De Lorraine (“De Lorraine”).[14]

18.  However, FDT denies that it was involved in any fraud.[15] In particular, FDT relies on the fact that each of the 6 Remittances to Aria DMCC was authorised by De Lorraine before they were made[16] and in the Board Resolution it was inter alia resolved that Cindy Louie and De Lorraine were authorised on behalf of P to give instructions to FDT and any actions and instructions given by De Lorraine prior to the resolution were ratified, confirmed and approved etc.[17] There is also no dispute that the Board Resolution was signed by a director of P who is not alleged to be part of the fraud against P.

19.  On 28 February 2025, at an ex parte hearing before Justice Michael Black KC (“Justice Black KC”), P obtained inter alia the following orders from the Dubai International Financial Centre Court (“DIFC”) until the return date (“the 28 February 2025 Order”):

(1)  A proprietary injunction restraining Aria DMCC from disposing of, dealing with USD 456M transferred to it by Legacy and FDT and any traceable proceeds (“the Proprietary Injunction”);

(2)  A worldwide freezing order up to the same value covering its assets in or outside Dubai and any assets which Aria DMCC has power, directly or indirectly, to dispose or deal with as it were their own (“WFO”); and

(3)  Disclosure order directing Aria DMCC to disclose its assets worldwide that exceeds US$10,000, onward dealings of the 6 Remittances, current value and location of the sums received and their traceable proceeds from Legacy and FDT on affidavit together with the underlying documents.[18]

20.  On 18 March 2025, following an inter-partes hearing before Justice Black KC, the Proprietary Injunction and the WFO were continued with some variations (“the Varied Proprietary Injunction” and “the Varied WFO” respectively) to 14 May 2025 with a further return date on 12 May 2025[19].

21.  The orders made by Justice Black KC were again continued following the hearing on 12 May 2025 with a final return date on 21 July 2025: see “Reasons for the Order of H E Justice Michael Black KC Dated 16 May 2025 as Amended on 19 May 2025” (“May 2025 Reasons”)[20].

22.  P relies heavily on the evidence filed by Brittain in DIFC. In particular, according to the First Affidavit of Brittain (“Brittain 1^st”) filed on 14 March 2025 pursuant to the 28 February 2025 Order and to support Aria DMCC’s application to vary the orders made by Justice Black KC, it was stated inter alia that:

(1)  The 6 Remittances were made by FDT to Aria DMCC pursuant to a “trade finance facility”[21];

(2)  Only around December 2022, FDT discovered that the 6 Remittances were not recorded in Aria Fund and requested Aria DMCC to regularize the position. Various documents were executed mirroring those that should have been executed at the time of the 6 Remittances on the basis that each Remittance represented an investment in Aria Fund from the date it was made (“the Porting exercise”). Following the Porting exercise, the 6 Remittances were recorded as holdings in Aria Fund and Brittain believes the share register, maintained by the Fund Administrator, recording holdings in Aria Fund was adjusted accordingly[22]; and

(3)  Brittain sought to explain that the 6 Remittances were advanced to Aria DMCC and not to Aria Fund as it was FDT who requested the 6 Remittances to be made to Aria DMCC because FDT raised an issue with respect to the payment of sums to Glass Door Limited (“Glass Door”), said to be a related entity of FDT, which obtained introducers’ commission of around USD 15.5M in relation to investments made in Aria Fund and FDT complained that Aria Fund was taking too long to pay the commission[23].

23.  The Asset Disclosure List of Aria DMCC[24] provided to P on 16 March 2025 claimed that Aria Fund held investments including mining and coal resources companies in Tanzania and in Australia. P says that these are long-term illiquid assets whereas it was pitched to P that Aria Fund invested in short-term low risk assets.

24.  In Brittain’s 1^st, it was also mentioned that the assets of Aria Fund would be securitized in exchange for funds from third parties which could be used to meet P’s redemption requests (“the Securitization”).[25] P therefore urgently obtained on 14 April 2025 an ex parte injunction against Aria DMCC to prohibit the securitization proposal until the return date (“Securitization Injunction”)[26].

25.  As according to Brittain, Legacy and FDT were the only shareholders in Aria Fund, on 21 March 2025, P suggested to FDT to issue a statutory demand to wind-up Aria Fund in FDT’s name but had not done so.

26.  On 3 April 2025, P issued a statutory demand in the Cayman Islands against Aria Fund but this was met with an injunction restraining either P or FDT from petitioning to wind up.

27.  By Summons dated 6 May 2025[27] in HCA 161/2023 (“the Interim Receiver Summons”), P applies for the appointment of interim receivers over FDT’s rights, title and interest in the amount of USD 468M invested by FDT in Aria Fund. That application first came before DHCJ Gary CC Lam on 9 May 2025 who refused to give any relief but directed evidence to be filed and adjourned the Interim Receiver Summons for substantive argument[28].

28.  The following were filed in respect of the Interim Receiver Summons:

(1)  Fourth Affirmation of Li Jinmei (“Li 4^th”) on 16 May 2025 on behalf of P[29];

(2)  First Affirmation of Vincent Chok (“Chok 1^st”) on 11 June 2025 on behalf of FDT[30]; and

(3)  Fifth Affirmation of Li Jinmei (“Li 5^th”) on 8 July 2025 on behalf of P[31].

29.  By Summons dated 20 May 2025[32] in HCA 1906/2023 (“Proprietary Injunction and Joinder Summons”), P applied:

(1)  For leave to join Glass Door as the 6^th Defendant and leave to amend: (a) the Re-Amended Writ of Summons by adding Glass Door as a party and further amend the relief as per the draft annexed to the Summons; and (b) the Re-Amended Statement of Claim; and

(2)  A proprietary injunction against Legacy and Glass Door restraining the disposal of money transferred from Aria DMCC to two accounts in the name of Legacy held for the beneficial account of Glass Door in the total sum of USD 15.5M (“the “USD 15.5M”) from around July 2021 to around August 2022 or any traceable proceeds derived therefrom and ancillary disclosure orders.

30.  The Proprietary Injunction and Joinder Summons first came before me on 23 May 2025 and was adjourned to be heard together with Interim Receiver Summons with directions given for the filing of evidence[33].

31.  The following were filed in respect of the Proprietary Injunction and Joinder Summons:

(1)  Fifth Affirmation of Li Jinmei (“Li’s 5^th Aff”) on 22 May 2025 on behalf of P[34];

(2)  Affirmation of Tse Heung Ching Helen on 22 May 2025 on behalf of P[35];

(3)  First Affidavit of Grace Liu Ka Yue (“Liu’s Aff”) filed on 20 June 2025 on behalf of Legacy[36];

(4)  Affirmation of Yai Sukonthabhund (“Yai’s Aff”) on 4 July 2025 on behalf of Glassdoor[37]; and

(5)  Seventh Affirmation of Li Jinmei filed on 17 July 2025 on behalf of P[38].

32.  At the substantive hearing of the Interim Receiver Summons and the Proprietary Injunction and Joinder Summons:

(1)  Mr Li SC, leading Mr Ho and Mr Sik, appeared on behalf of P in both HCA 161/2023 and HCA 1906/2023;

(2)  Mr Parker SC, leading Mr Baker, appeared on behalf of FDT in HCA 161/2023 and Legacy in HCA 1906/2023; and

(3)  Ms Lok SC, leading Mr Kwan, appeared for Glass Door in HCA 1906/2023.

33.  Aria Fund and Aria DMCC wrote to seek to be excused from attending the hearing before me given that there were pending applications taken by them to contest the jurisdiction of the court over them. Their attendance was excused by me.

Applicable Principles

34.  The court has power to appoint interim receivers and managers under s.21L of the High Court Ordinance, Cap. 4 in all cases in which it appears to the Court to be just or convenient to do so.

35.  The following applicable principles were not seriously disputed:

(1)  The power to appoint receivers is a discretionary power to be exercised flexibly on a similar basis to that of an interlocutory injunction, and the principles in American Cyanamid apply. The court has to assess and balance the following matters: (a) whether there is a serious question to be tried; (b) the alleged risks of dissipation of assets; (c) the current protective regime and its efficacy; and (d) the risk of damage to the defendants and the company if the appointment is made, and whether they can be adequately compensated by a cross-undertaking in damages;

(2)  The court will take into consideration factors such as whether there is jeopardy to assets, whether some form of interim protection is required to preserve the status quo, whether some other less invasive form of protection suffices and the balance of convenience;

(3)  The court should take whichever course which appears to carry “the lower risk of injustice if it should turn out that it is wrong”;

(4)  Appointment of interim receiver is a drastic remedy and the court has to consider the adverse consequences of receivership to the defendant and any third parties which may be affected. Where a company with an active trading business as opposed to an asset holding company is concerned, the appointment of receivers has more adverse effect;

(5)  A receiver will not be appointed if the appointment would be fruitless for example there is no property which can be reached in law or equity. However, a receiver may be appointed if there is a reasonable prospect that the appointment will assist in the enforcement of a judgment or award or there is a real prospect that the appointment will serve a useful purpose; and

(6)  If it would not be just and convenient to grant an injunction then a fortiori a receiver should not be appointed.

See e.g.: China Shanshui Investments Co Ltd v Zhang Caikui [2017] 5 HKLRD 240, §§6-9, 35 per Godfrey Lam J (as he then was); Vasily Trubnikov v Julimar Management Limited & Ors[2025] HKCFI 575, §§25-26 per Linda Chan J; Re Zealot & Co Ltd [2008] 1 HKLRD 386, §§34-35 per Kwan J (as she then was) and Dragon Success Enterprises Limited v Aeso Holdings Limited (unrep) HCMP 1647/2017, 4 September 2017, §§15-20 per Au-Yeung J; JSC BTA Bank v Mukhtar Kabulovich Ablyazov [2014] 5 HKC 209, §§24-25 per Zervos J (as he then was) and Steven Gee QC, Commercial Injunctions, §16-008.

36.  As for the applicable principles for the grant of proprietary injunction, these are well-established and were also not disputed. For the grant of a proprietary injunction, there are three requirements: (1) there is a serious issue to be tried on the merits; (2) that the balance of convenience lies in favour of the injunction; and (3) it is just and convenient to grant the injunction.

37.  The threshold of “serious issue to be tried” is not a very steep hurdle but if the opposing party seeks to show that there is no serious issue to be tried, the threshold is high as it would be necessary to demonstrate that the claim should be struck out. Furthermore, it is not necessary to show any risk of dissipation of assets although if such risk is demonstrated, it may be an additional factor in favour of the grant of injunction. Nor is it necessary to show that damages would not be an adequate remedy. However, it remains necessary to demonstrate that the balance of convenience favours the granting of the injunction, and that it would be just and convenient to do so. It would not be granted if a monetary award would be adequate remedy for the plaintiff. In particular, where the proprietary claim of the plaintiff is not to any specific real or personal property but to money, the plaintiff can be adequately compensated by a monetary award, unless there is evidence which calls into question the ability of the defendant to meet the award for damages, so that a proprietary injunction is not necessary or justified. See e.g.: Predicine Holdings Ltd v Bianchi (Hong Kong) Limited & Ors[2021] HKCFI 123, §§69-73 per Coleman J; Zhang Yan & Ors v ASA Bullion Limited[2019] HKCFI 179, §11 per Recorder Eugene Fung SC; and DBS Bank (Hong Kong) Limited v Tian Wen Quan (unrep), HCA 3228/2016, 12 October 2017, §§11-18 per Anthony Chan J.

Discussion

Re: Interim Receiver Summons

38.  As between P and FDT, it was not disputed that there is a serious issue to be tried on the merits. I take the view as there is a serious issue to be tried on P’s case that the 6 Remittances to Aria DMCC was pursuant to a fraud perpetrated on P, and it is not disputed that the 6 Remittances were not transferred to Aria Fund as discovered by FDT in December 2022[39], and given the documentation adduced in support of the Porting exercise into Aria Fund appears incomplete, internally inconsistent and questionable[40], plainly the USD 456M (and its traceable proceeds) requires protection pending the determination of the parties’ dispute at trial.

39.  However, the crucial question is whether the preservation of the status quo, bearing in mind the relief already granted and continued by Justice Black KC until further order, requires the appointment of receivers over FDT’s interest invested into Aria Fund.

40.  In P’s Skeleton Submissions, essentially, it was submitted that it is just and convenient to appoint a receiver for the following reasons:

(1)  It is necessary in view of the risk of dissipation of assets, in particular when Brittain, as controller of Aria Fund, has insisted on pursuing with the “securitization”;

(2)  Injunctive relief against Aria Fund is inadequate to protect P’s assets as Aria Fund is not subject to the proceedings in DIFC and the injunctions obtained there, and further, there is no evidence showing how assets are held by Aria Fund;

(3)  FDT’s proposal to assign its interest in Aria Fund to P does not work: (a) consent of Aria Fund for the assignment needs to be obtained and in view of the fact that Aria Fund had been using alleged know your client and anti-money laundering concerns to restrict redemption, it follows that it would not consent to the assignment; and (b) it is not clear what P would be assigned given the conflicting documents from FDT itself as to what its interest in Aria Fund is;

(4)  Appointment of a receiver would not cause monetary damage to FDT who has no interest in the Reserves which is held for the benefit of P and in turn for the TUSD token holders;

(5)  Any reputational injury would be self-inflicted as FDT could have consented to receivership. There would not be any effect on FDT’s general business or general reputation; and

(6)  P cannot rely on FDT to safeguard the purported investment in Aria Fund given cogent evidence that FDT participated in the fraud to misappropriate the Reserves, the Porting exercise, providing two sets of inconsistent subscription documents and dragging its feet in seeking redemption against Aria Fund.

41.  In respect of (1), I do not accept that with the Injunctions granted and continued by Justice Black KC that there is any need for interim relief by the appointment of a receiver to prevent any dissipation of the USD 456M or its traceable assets. A receiver should not be appointed where the existing protective regime is effective to protect P’s interest which I am of the view is plainly the case here.

42.  In the May 2025 Reasons[41], in relation to the Proprietary Injunction, it was clarified that Aria DMCC is also “restrained from causing, permitting or encouraging any third party presently with custody or control of the assets in any way disposing, dealing with or diminishing the value of the same. Thus, it may be said that [Aria] DMCC is restrained from causing, permitting or encouraging [Aria] Fund to dispose of, deal with or diminish the value of the assets. It appears that at least 80% of the assets are directly derived from the Six Remittances. … This is the proprietary injunction. In addition to the proprietary injunction, there is the Freezing Order. The Freezing Order is not limited to assets derived from the Six Remittances but extends to all of [Aria] DMCC’s assets up to the value of USD 456 million. [Aria] DMCC’s assets include assets whether or not they are in its own name and whether they are solely or jointly owned. [Aria] DMCC’s assets include any asset which it has the power, directly or indirectly, to dispose of or deal with as if it were its own. [Aria] DMCC is to be regarded as having such power if a third party holds or controls the assets in accordance with its direct or indirect instructions. Given the obscurity of the evidence concerning the ownership and control of the various trading entities, it is possible that [Aria] DMCC does have the power to control the assets.” As P’s pleaded case is that both Aria DMCC and Aria Fund are owned and controlled by Brittain, the Injunctions should cover the assets of Aria Fund.

43.  Furthermore, I am not satisfied that the appointment of receivers over FDT’s investment would prevent the securitization or other use of the assets by Aria Fund. The appointment of receivers does not have proprietary effect[42] and any receiver appointed over the interest held by FDT cannot be in a better position than FDT itself. On P’s own case, USD 456M was never invested into Aria Fund by FDT. In any event, it is simply not demonstrated how as an investor in Aria Fund, FDT would be able to dictate what Aria Fund does with its assets.

44.  In respect of (2), given the clarification by Justice Black KC as mentioned above, it is doubtful whether Aria Fund (or at least its assets) is not subject to the Injunctions ordered by Justice Black KC. Even if I am wrong and Aria Fund is not bound by the orders made in DIFC, I do not accept that P could not obtain injunctions to protect its interest in the Cayman Islands or elsewhere. On P’s own case of fraud, Aria Fund is and was never a genuine investment and the 6 Remittances were fraudulently transferred to Aria DMCC. As a victim of fraud, P should have a direct proprietary claim over the assets of Aria Fund and/or Aria DMCC in so far as the USD 456M or its traceable assets are held by them or under their control (as discussed in further details below at paragraph 58). Thus P should be able to directly (in its own shoes) seek injunctive relief against Aria Fund in the Cayman Islands or elsewhere even if Aria Fund is not subject to the Dubai proceedings. There is thus no utility to appoint receivers over FTP’s interest when it can itself take steps to protect or safeguard what it says are its assets.

45.  Whilst Mr Li submitted that there is no evidence showing how the traceable assets are held by Aria Fund (the only evidence lies in the Asset Disclosure List which was not supported by underlying documents) and that this somehow prevents P applying for injunctive relief in the Cayman Islands, this is contrary to P’s evidence that it is contemplating recourse against Aria Fund in the Cayman Islands and that there is likely still approximately USD 45.5M sitting within Aria Fund[43]. In any event, no legal opinion was adduced to suggest that P is not able to apply for relief against Aria Fund in the Cayman Islands and it was not suggested that this was why it did not and cannot make any application for an injunction there.

46.  In respect of (3), given that I take the view that the status quo is sufficiently preserved, and even if it is not, it can be preserved by P applying for injunctions rather than by the drastic appointment of a receiver, I do not have to consider whether FDT’s offer to assign its interest in Aria Fund to P is workable and would be less invasive/intrusive than the appointment of a receiver.

47.  In respect of (4) and (5), on the question of adverse effect on FDT, whilst I accept to some extent Mr Li’s submissions that any “stigma” attached to and any adverse effect of the appointment of a receiver which is only limited to FDT’s interest in the USD 456M invested into Aria Fund (and not all assets and undertakings of FDT) should not be overstated and be considered in its proper context, I also accept Mr Parker’s submissions that with the recent statements by Justin Sun that FDT is insolvent and the demonstrated drastic effect on the value of FDT’s stable coin[44], it is not fanciful to believe the appointment of a receiver may be perceived as indicating FDT is insolvent and give credence to what Justin Sun has been claiming in his social media posts. This would cause loss and damage to the goodwill and reputation of FDT which may not be readily quantifiable: see Dragon Success Enterprises Limited v AESO Holding Limited (unrep) HCMP 1647/2017, 4 September 2017, per Au-Yeung J at §§18-20 and Re Full Billion Shipping Ltd [2003] 2 HKLRD 674 per Chu J (as she then was) at §§48-50.

48.  In respect of (6), even if FDT cannot be relied upon by P to protect its interests in the USD 456M, as already mentioned, I take the view that P does not need to rely on FDT’s interest and can in its own right take action against Aria Fund in the Cayman Islands or elsewhere. Besides, if on P’s case the 6 Remittances were never invested into Aria Fund but were fraudulently transferred or dissipated to Aria DMCC, then FDT (and receivers appointed over FDT’s right) has no right or interest to claim that the USD 456M was invested into Aria Fund. There is no utility to appoint receivers where the supposed chose of action held by FDT does not exist.

49.  The appointment of receivers would also not realistically enable a winding-up petition against Aria Fund to be brought (in view of the injunction of the Grand Court of Cayman which considered, as a result of Article 156 of Aria Fund’s articles of association, P and FDT would not be permitted to present a winding up petition[45]). Besides, P’s case is that it is not precluded from winding up Aria Fund on just and equitable grounds[46]. It follows that the appointment of a receiver has no utility.

50.  Furthermore, I would accept Mr Parker’s submissions that it is not demonstrated that the appointment of a receiver would be able to “investigate” or assist the tracing exercise, over and above what FDT and Kroll (who had been instructed by P to prepare a report analyzing the documentation and information provided in the Dubai proceedings and has produced a 485-page report on 1 May 2025[47] ) has been and is able to do. Mr Parker also points to the fact that as a result of an Originating Motion for Inspectorship of Aria Fund in the Cayman Islands, Campbells LLP for Aria Fund shared a bundle of documents with P[48]. Moreover, disclosure orders were obtained in DIFC including further disclosure orders on 16 May 2025 requiring Aria DMCC to provide “unredacted copies of [its] bank statements in respect of all of its accounts with [the defendant banks] which show the onward dealings with the monies paid to it by [FDT and Legacy][49] although it seems that has not been complied with[50].

51.  In all, I am not satisfied that it is demonstrated how the status quo is better preserved pending trial by the appointment of receivers. Balancing all the relevant factors, and taking into account all the submissions made by counsel, taking the course which carries the lower risk of injustice if I was wrong, I am of the view that it is not just and convenient for a receiver to be appointed.

Re: Proprietary Injunction and Joinder Summons

52.  P asserts a proprietary claim over the USD 15.5M allegedly received by Glass Door from Aria DMCC which on its case formed part of the traceable proceeds of the 6 Remittances (i.e. the USD 456M). The USD 15.5M is on P’s case illicit kick-backs that would benefit FDT, Chok and Yai in the misappropriation/diversion of the Reserves to Aria DMCC. P does not accept Glass Door’s case that they were introducer’s commissions. Alternatively, P claims that Glass Door received the USD 15.5M as knowing recipient or it dishonestly assisted in the breach of fiduciary duty of FDT, Legacy (through Chok) and Finaport (through Yai) in directing Aria DMCC to pay the USD 15.5M to Glass Door.[51]

53.  On the other hand, Glass Door’s evidence, in opposing P’s application for proprietary injunction and ancillary relief, can be summarized as follows:

(1)  Yai is the sole member and alternative director of Glass Door[52];

(2)  He has never been employed by Legacy nor FDT but has been FDT’s consultant[53];

(3)  The actual sums paid to Glass Door by Aria DMCC was USD 11.6M odd and not USD 15.5M as claimed by Brittain[54];

(4)  The payments represented “introducer fees” paid by Aria DMCC to Glass Door for services rendered by Yai in introducing investors to Aria Fund and were authorized by: (a) the DIMA; (b) the Fund’s May 2020 Private Placement Memorandum; and (c) an Introduction Services Agreement dated 11 March 2020 between Glass Door and Aria Fund[55];

(5)  Glass Door had introduced Legacy to Aria Fund in March 2020 and following that introduction, Legacy and later FDT invested in the Aria Fund[56];

(6)  The 15 invoices of Glass Door in connection with FDT’s investments were paid by Aria DMCC (being entities within the same group as the Aria Fund) to Glass Door’s custody account with Legacy[57]; and

(7)  Fees paid to Glass Door were transferred to Legacy’s custody account to be held for its benefit.[58]

54.  Ms Lok submitted that P has no proprietary rights over the USD 15.5M and this alone is fatal to the application for proprietary injunction against Glass Door. She heavily relied upon what was represented in:

(1)  Clause 5 of Escrow Services Agreement between Legacy and TrueCoin dated 27 June 2019: “[Legacy] shall hold and manage the Escrow Amount as a fiduciary for the benefit of [TrueCoin]. For the avoidance of doubt, [TrueCoin] shall have no proprietary rights in the Escrow Amount and shall hold the Escrow Amount exclusively for the benefit of the Holders”[59];

(2)  Clause 6 of the ESA: “Escrow Amount: FDT shall hold and manage the Escrow Amount as a fiduciary for the benefit of [P] or its agents or designees. For the avoidance of doubt, [P] shall have no proprietary rights in the Escrow Amount and shall hold the Escrow Amount exclusively for the benefit of the Holders.”[60]; and

(3)  Notes 2 and 3 of the TrueUSD Holdings Report published on 25 June 2025: “The USD denominated collateral held in accounts are the total balance in account held by [P] at a Hong Kong depository institution and Bahamian depository institutions for the benefit of the TrueUSD token holders… [P] and the agents are not entitled to any funds at any time and no amounts deposited into the accounts shall become the property of [P], the agents, or any other entity, or be subject to any debts, liens or encumbrances of any kind of [P], the agents or any entity.”[61]

55.  On the other hand, Mr Li also submitted a number of other contractual clauses demonstrate that the Reserves held in the escrow account were held for P beneficially as fiduciary, custodian and escrow agents for P. He relied on the following:

(1)  Clause 4.1 of Client Agreement: “… as between [P] and FDT, [P] shall be deemed to be and is transacting solely as principal…”[62];

(2)  The definition of “Property” under the Custody Services Agreement as “all or any part of any Securities, Digital Asset, Cash, or any other property that have been delivered to FDT to be held by FDT on [P]’s behalf”[63];

(3)  Clauses 4.1 and 4.2 of the Custody Services Agreement whereby FDT appointed by [P] to set up records of account for the deposit of Property (defined as “Custody Account”) that FDT may receive from P[64];

(4)  Clause 6.1 of Custody Services Agreement: “FDT shall on its records identify each Custody Account in the name of [P] or such other name as [P] may reasonably designate. Custody Account is to be designated to show that the Property belongs to [P] and is segregated from FDT’s own assets and those of the other clients of FDT”[65];

(5)  Clause 6.2 of Custody Services Agreement which provides FDT must segregate assets so that the Property shall not become available to insolvency administrators or creditors of FDT and FDT shall identify the Property on its records in a manner to show they belong to P or its customers[66];

(6)  Clause 13.1 of Custody Services Agreement which provides: “FDT shall perform its obligation with due skill, care and diligence as determined in accordance with the standards and practices of a professional custodian for hire in the markets or jurisdiction in which FDT performs services under this Agreement and maintains Property for [P][67];

(7)  Clause 14 of Custody Services Agreement which provides P agrees that it shall be solely responsible as principal for all obligations to FDT and agrees that its clients will have no direct rights against FDT and FDT shall have no liability to P’s underlying customers[68];

(8)  Clause 1 of ESA which provides in case of inconsistency, the Client Agreement and Custody Services Agreement prevails[69];

(9)  Clause 3(a) of ESA which provides during escrow period FDT will act as agent of P for the receipt of Funds purchaser of tokens and upon receipt of Funds, FDT will hold Funds as fiduciary of P to the order of P[70];

(10)  Clause 4(f) of ESA which provides upon a Triggering Event, a resulting trust shall be deemed to have arisen in favour of holders of tokens[71];

(11)  Clause 6 of ESA[72] (see above at paragraph 54(2)); and

(12)  Clause 12 of ESA which provides that FDT only acts as escrow agent and is not involved with the business decision or activities of P or any holders of token[73].

56.  Mr Li submitted that the most natural reading of the above clauses is that FDT holds the Reserves on trust for P who in turns holds the Reserves on a sub-trust for the TUSD token holders. I am clearly of the view there is a serious issue raised whether on the proper construction of these agreements, P held any beneficial interest in Reserves that were transferred to FDT.

57.  Besides, from the above contractual clauses, it is reasonably arguable that there was a fiduciary relationship between P and FDT such as to give rise to a constructive trust: see 廈門新景地集團有限公司 v Eton Properties Limited & Ors (2020) 23 HKCFAR 348 per Lord Sumption NPJ at §174.

58.  Furthermore, another viable route to P’s proprietary interest is based on constructive trust. It is well-established that when property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient, so that the money is recoverable and traceable in equity: see Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 716C-D; Mesirow Financial Administrative Cooperation v Best Link Industrial Co Limited (unrep) HCMP 1846/2015, 25 January 2016 per Recorder Lisa Wong SC (as she then was) at §33; Guaranty Bank and Trust Company v Zzzik Inc Limited (unrep) HCA 1139/2016, 18 July 2016, per DHCJ Cooney SC at §28; and Pacific Rainbow International v Shenzhen Wolverine Tech Ltd & Ors[2023] HKCFI 1292, per Au-Yeung J at §§18(1) and 34. Such constructive trusts provides proprietary relief: see Pacific Rainbow International at §34 and Zief Incorporated v Tekchandani Ajai Mohan [2021] 3 HKC 69 per Recorder Eugene Fung SC at §48.

59.  Given that I have held that there is a serious issue to be tried on P’s case that the USD 456M was fraudulently transferred to Aria DMCC, if there is a serious issue to be tried that the USD 15.5M was remitted out of the USD 456M (or its traceable proceedings) to Glass Door and that has been retained by Glass Door, that is sufficient to demonstrate P has a proprietary claim over the USD 15.5M.

60.  However, in Li’s 5^th Aff, it was accepted by P that:

(1)  From Brittain’s evidence, the 8 invoices issued by Glass Door to Aria DMCC from July 2021 to August 2022 (“the Glass Door Invoices”)[74] added up to only USD 8,489,506.66 and did not add up to USD 15.5M[75]; and

(2)  P is not able to corroborate any of the referral fees described in the Glass Door Invoices with the disclosed bank statements of Aria DMCC provided by Brittain[76].

61.  Furthermore, according to Legacy, the total sum standing to the credit of Glass Door’s account with Legacy is less than USD 20,000[77].

62.  As explained by Recorder Eugene Fung SC in Welly Grace Limited & Ors v Keung Yee Man & Ors[2023] HKCFI 3082, the function of a proprietary injunction is to preserve the property in the defendant’s hands which is said to belong to the plaintiff. Specifically, in the context of obtaining a proprietary injunction, the plaintiff needs to demonstrate a serious issue to be tried in relation to his proprietary claim, which would involve not only a consideration of the merits of the claim brought by the plaintiff, but also an examination of the tracing exercise pursuant to which the asset in question has been identified. As far as the tracing exercise is concerned, the plaintiff should adduce reasonable evidence to show a serious issue to be tried that the asset or its traceable substitute is being held by or under the control of the defendant (see §§24-30).

63.  Firstly, I am of the view that there is no reasonable evidence to show there is a serious issue to be tried that the USD 15.5M was remitted to Legacy’s accounts apart from the bare assertion of Brittain which is not supported any reasonable documentary proof. P admits that the Glass Door Invoices do not add up to USD 15.5M and in any event the invoices cannot be corroborated with Aria DMCC’s bank statements. Glass Door has only admitted to receiving USD 11.6M odd. Mr Li acknowledged that the evidence at the moment was incomplete.

64.  Secondly, even if I was wrong, there is a lack of reasonable evidence that what remains in Glass Door’s account with Legacy (less than USD 20,000 according to Legacy) or accounts held by Legacy is derived from the USD 456M or its traceable proceeds. Whilst Mr Li submitted that Legacy has failed to produce a single bank document how Glass Door’s commissions had been applied and has not said the commissions do not remain in Legacy’s bank accounts, with respect, that seems to reverse the onus of proof. It is for P to demonstrate by reasonable evidence that there is a serious issue to be tried that Legacy is holding the traceable proceeds of the USD 456M and the amount that is being held by Legacy. See Orion Engineered Carbons GMBH v Gan Yuqi & Ors[2025] HKCFI 2992per Cheng J at §12.2. As explained by Recorder Eugene Fung SC in Milestone Electric, Inc v Meihoukang Trading Co Limited[2020] HKCFI 2542 at §§14-15, to obtain proprietary relief in relation to assets transferred to a defendant or assets derived from it, the plaintiff must established the assets claim can be identified by the tracing process as representing the original trust property.

65.  Furthermore, I accept Ms Lok’s submission that the alternative claims of knowing receipt and dishonest assistance do not sound in proprietary remedy: see Sinclair Investment Holdings S.A. v Versailles Trade Finance Limited [2007] EWHC 915 (Ch), §§109-135 and DBS Bank (Hong Kong) v Tian Wen Quan (unrep) HCA 3228/2016, 12 October 2017 at §30 per Anthony Chan J.

66.  I would therefore dismiss the application for proprietary injunction against Glass Door.

67.  As for the injunction against Legacy, given that I have taken the view there is no reasonable evidence adduced to demonstrate a serious issue to be tried that what sums held by Legacy in its bank accounts are the traceable proceeds of the USD 456M, there is also no basis for seeking a proprietary injunction against Legacy.

68.  Even if I was wrong, in the present case it is clearly not just and convenient to grant the injunction against Legacy. I accept Mr Parker’s submissions that restraining USD 15.5M or its traceable in the ANZ and ICBC accounts of Legacy will cause prejudice to Legacy given that they are “omnibus accounts” that holds balances of hundreds of its other clients and it would be disruptive to Legacy’s business operations.[78]

69.  Lastly, in any event, proprietary injunctions should not be granted against Glass Door and Legacy, as any proprietary claim of P is clearly not to any specific real or personal property but to money, for which P can be adequately compensated by a monetary award, unless there is evidence which calls into question the ability of Legacy to meet the award for damages, a proprietary injunction is not necessary.

70.  As no proprietary injunction should be granted, it follows I would not make any orders for ancillary disclosure against Glass Door and Legacy.

71.  As for P’s application for leave to join Glass Door as a party and re-amend the Statement of Claim in HCA 1906/2023, although I am of the view that there is no serious issue to be tried in respect of P’s proprietary claim to USD 15.5M, P also relies on claims based on knowing receipt and dishonest assist in breach of trust[79].

72.  For an action for knowing receipt, the following must be pleaded:

(1)  That there has been a disposal of the plaintiff’s assets in breach of trust or fiduciary duty;

(2)  The defendant has beneficially received assets which are traceable as representing the plaintiff’s own assets; and

(3)  The defendant has knowledge that the assets he received are traceable to a breach of fiduciary duty or breach of trust.

See: Bullen & Leake & Jacobs’ Hong Kong Precedents of Pleadings, 3^rd Edn, §25-07.

73.  As for an action for dishonest assistance, the following must be pleaded:

(1)  That there has been a disposal of the plaintiff’s assets in breach of trust or fiduciary duty;

(2)  In which the defendant has assisted or which he has procured;

(3)  The defendant has acted dishonestly; and

(4)  Resulting in loss to the plaintiff.

See: ibid, §25-09.

74.  I have already held that there is no serious issue to be tried that the USD 15.5M was received by Glass Door and was the traceable proceeds of the USD 456M. This is fatal to a claim in knowing receipt where receipt is the gist of the action: see Novoship (UK) Ltd v Mikhaylyuk & Ors [2015] QB 499 (CA) 528 at §89.

75.  Furthermore, whilst there is a one liner that Glass Door “received the Secret Payments as a knowing recipient or dishonestly assisted the aforementioned breach of fiduciary duty, and is liable to account for the Secret Payments as constructive trustee and/or for equitable compensation”[80] , I am of the view that there is no sufficient plea of the facts or particulars of: (1) the knowledge of Glass Door that the USD 15.5M paid by FDT to Aria DMCC was in breach of fiduciary duties; and (2) Glass Door acted dishonestly. More objectionable is the lack of particulars of the plea of dishonest assistance of Glass Door: see Hong Kong Civil Procedure 2025, Vol.1, §18/12/12 and Kwong Yi Ling v Lau Kwun Leung & Ors[2021] HKCFI 2303 at §24 per Linda Chan J.

76.  The proposed claims based on knowing receipt and dishonest assistance are liable to be struck out.

77.  In the circumstances, I am not satisfied that there is a bona fide claim by P against Glass Door and a proper question to be tried between P and Glass Door such that joinder is necessary, just and convenient for the resolution between them as well as P and the Defendants in HCA 1906/2023.

78.  I would therefore refuse leave to join Glass Door as a new party and the amendments as per the Draft RASOC.

Disposition and Orders

79.  Accordingly, I dismiss both the Interim Receiver Summons and the Proprietary Injunction and Joinder Summons.

80.  Costs should follow the event. I make a costs order nisi that:

(1)  P should pay to FDT the costs of the Interim Receivers Summons, with certificate for two counsel, to be summarily assessed, if not agreed;

(2)  P should pay Legacy’s costs and Glass Door’s costs of the Proprietary Injunction and Joinder Summons, with certificate for two counsel, to be summarily assessed, if not agreed;

(3)  The above costs order nisi shall become absolute in the absence of any application to vary within 14 days from the handing down of this decision; and

(4)  If there is no application to vary the above cost order nisi, FDT, Legacy and Glass Door should lodge and serve their respective Statement of Costs within 14 days from the handing down of this decision and P should lodge and serve its objections within 7 days thereafter. There shall be summary assessment of costs on paper.

81.  Lastly, it remains for me to thank all counsel for their helpful assistance.

Mr Laurence Li SC leading Mr Martin Ho and Mr Sik Chee Ching, instructed by Messrs Loeb & Loeb, for the Plaintiff (in both cases)

Mr Tim Parker SC leading Mr Josh Baker, instructed by Messrs Mayer Brown Hong Kong LLP, for the 1^st Defendant (in both cases)

Ms Frances Lok SC leading Mr Kwan Ping Kan, instructed by Messrs Hogan Lovells for the Intended 6^th Defendant (in HCA 1906/2023)

Messrs Gall for the 3^rd Defendant (in both cases) and the 4^th Defendant (in HCA 161/2023), attendance excused

HCA 1906/2023

[2025] HKCFI 2056

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1906 OF 2023

_____________

_____________

______________

D E C I S I O N

______________

1.  On 30 September 2024, the 5^th Defendant applied by summons for stay of this action commenced by the Plaintiff against him. The application was heard on 17 January 2025, and at the conclusion of the hearing, this Court granted the stay, with reasons to be handed down. The Court indicated at the same time that costs would be dealt with when the reasons for the decision are handed down.

2.  On 24 February 2025, the Reasons for Decision were handed down, with the order (at paragraph 51) that “the costs of the application are to be paid by the Plaintiff to the 5^th Defendant, on indemnity basis, with Certificate for 2 counsel” (“24/2 Costs Order”).

3.  On 10 March 2025, the 5^th Defendant issued a summons to vary the 24/2 Costs Order, to provide for the 5^th Defendant’s “costs of this action, including costs of and occasioned by the 5^th Defendant’s Summons filed on 30 September 2024, be paid by the Plaintiff to the 5^th Defendant forthwith, on an indemnity basis, with Certificate for 2 Counsel, to be taxed if not agreed” (“Variation”).

4.  The Variation application is opposed by the Plaintiff, on the ground that the 24/2 Costs Order is a final costs order absolute, which can only be challenged by appeal, but not by the application for Variation, citing Hong Kong Civil Procedure 2025 para 42/5B/1 and Kung Kwok Wai David v Commissioner of Estate Duty [2022] 1 HKLRD 965.

5.  As for the Variation for costs to be paid “forthwith”, the Plaintiff argued that this can only be dealt with by amendment under the slip rule, as provided for in Order 20 rule 11 RHC, by proving that it was the manifest intention of the Court on 17 January 2025 to order that the 5^th Defendant’s costs were to be paid forthwith, and that it was a mistake of not making such express provision in the 24/2 Costs Order.

6.  In the skeleton submissions dated 7 April 2025 filed for the 5^th Defendant in support of the Variation summons, counsel referred to Chan Sung Kei t/a Chan Shun Kei Construction Works v Hong Kong Construction (Hong Kong) Ltd, HCCT 2/2011 21 August 2014, where this Court referred to an order as to costs made in a written decision handed down with reasons, as being by its nature an order nisi under Order 42 rule 5B. On 15 April 2025, those acting for the 5^th Defendant wrote to draw the attention of the Court to Ghazi Faidi v Qantex Capital Markets Limited & Ors[2025] HKCA 342, a decision of the Court of Appeal which was handed down on 10 April 2025. In Ghazi Faidi, the Court of Appeal explained that Chan Sung Kei should be read in the context of the facts of the case itself, when the costs order was made without the parties having been heard on costs, and when the Court had made it clear at the end of the hearing that an application for variation could be made in relation to the costs order on grounds being shown. The Court of Appeal reiterated the correct position, as stated in Kung Kwok Wai David v Commissioner of Estate Duty, to be that a costs order is prima facie an order absolute, and may only be challenged by way of an appeal, unless exceptions to the general position apply, as where the court indicates expressly or by necessary implication at the time of the making of the order that it is provisional only.

7.  In the present case, it was clear that at the conclusion of the hearing on 17 January 2025, the Court had not heard submissions on costs from the Plaintiff, when it was indicated that the order of costs would be dealt with in the reasons to be handed down. In all fairness, the costs order contained in paragraph 51 of the Reasons for Decision can only be regarded as an order nisi, subject to variation which can be made by either party, with detailed submissions on costs, in light of the reasons given.

8.  I am therefore prepared to entertain the application for Variation, and on the submissions filed, to vary the 24/2 Costs Order to provide for the costs of the action, including the costs of and occasioned by the summons for stay, to be paid by the Plaintiff to the 5^th Defendant forthwith, on indemnity basis, with Certificate for 2 Counsel, to be taxed if not agreed. This is because the action has now been stayed, and the costs of the action should be provided for, and there is no reason to delay taxation.

9.  The costs of the Variation application are also to be paid by the Plaintiff to the 5^th Defendant forthwith, to be taxed if not agreed.

The plaintiff was represented by Loeb & Loeb LLP

Ms Natalie So, instructed by Reynolds Porter Chamberlain, for the 5^th defendant

HCA 1906/2023

[2025] HKCFI 787

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1906 OF 2023

_____________

BETWEEN

_____________

________________________

REASONS FOR DECISION

________________________

Background

1.  The parties do not dispute the legal principles which relate to the determination of the issues now before the Court.

2.  Under section 20 of the Arbitration Ordinance (“Ordinance”), the Court shall, ie it is bound to, stay an action before it and refer the parties to arbitration, if the matter in the action is the subject of an arbitration agreement – unless the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed. The questions for the Court are as summarized in Polytec Overseas Ltd v Grand Dragon International Holdings Co Ltd [2017] 3 HKLRD 258. Of the four questions identified in Polytec, those which are in dispute in this case are: (i) Is there an arbitration agreement between the parties? and (iv) Is the dispute or difference between the parties within the ambit of the arbitration agreement?

3.  Although the 5^th Defendant which is applying for the stay under section 20 (“Section 20 Stay”) relies also on the further or alternative ground to set aside the order for leave to serve the Writ out of the jurisdiction (as granted by the Master on 29 February 2024 (“Service Out Order”)), on the ground of material non-disclosure and/or the ground that none of the Order 11 rule 1(1) gateways apply, or that Hong Kong is not the appropriate forum for the resolution of the Plaintiff’s claim against the 5^th Defendant, it is only if I find that the Section 20 Stay should not be granted that these further grounds fall for consideration.

The parties and their agreements

4.  The Plaintiff is a company incorporated under the laws of the BVI.

5.  The 4^th Defendant is a Delaware company, which is in the business of developing various digital currency products including “stablecoins”, a type of digital currency developed to be fully redeemable one-to-one in applicable fiat and fiat currency equivalents. One such stablecoin is marketed as the “TrueUSD (“TUSD”) tokens” (“Tokens”).

6.  The 4^th Defendant created and maintained a website through which the Tokens were marketed. A person interested in subscribing for the Tokens would create an account on and via the TUSD website. The person would then place an order for a quantity of Tokens via the account and send the equivalent amount in US dollar fiat currency to an account stated to be with an independent licensed bank, deposit-taking institution or a licensed trust company (“Reserves”). The 4^th Defendant would then cause Tokens to be “minted” and sent to the person placing the order. A holder of the Tokens could trade or lend the Tokens, or use them to pay any third party who would accept the Tokens. A holder could also redeem the Tokens via the 4^th Defendant’s TUSD website, whereupon an equivalent amount in US dollar fiat currency would be sent to the holder.

7.  As the Plaintiff highlighted, the central tenet of the 4^th Defendant’s business, and as marketed by it, is that it had sufficient Reserves in cash and cash equivalent assets to back one-to-one all of the outstanding Tokens. It was held out that there were sufficient Reserves maintained by independent licensed banks, deposit-taking institutions or trust companies, in cash or equivalent liquid and principal-protected assets, so that holders can be assured that the Tokens they hold would not be irredeemable, or become worthless.

8.  The 5^th Defendant was at the material times an officer, director, and the Director of Finance and Head of Finance and Business Operations of the 4^th Defendant.

9.  On 2 December 2020, the Plaintiff and the 4^th Defendant entered into the Strategic Alliance Agreement (“SAA”) and the Master Services Agreement (“MSA”), whereby the Plaintiff purchased from the 4^th Defendant various assets relating to the TUSD Token business carried on by the 4^th Defendant (“Business”). This purchase is referred to as the “Acquisition”. The Acquisition under the SAA included the rights, title and interest in the Reserves, and all of the 4^th Defendant’s claims and causes of action against third parties relating to such assets. The purchase price was US $28 million, with the right to receive additional incentive and revenue payments.

10.  Under the MSA, the 4^th Defendant agreed to provide various service to the Plaintiff in order to facilitate the carrying on of the Business. Such services included banking relationship services, customer onboarding and support services, product management services and other transition services, for which the Plaintiff was required to pay fees within 30 days of receipt of the relevant invoice from the 4^th Defendant. It was highlighted that such services were of significant value to the Plaintiff, which was merely a shell company without real employees and thus required third parties such as the 4^th Defendant to help in the operation of the Business, and to liaise with the relevant third-party service providers.

11.  Each of the SAA and the MSA contained arbitration agreements in broad terms, providing that:

“Any dispute, controversy or claim arising out of, relating to, or having any connection with (the agreement) … shall be finally settled by binding arbitration in Singapore through the Singapore International Arbitration Centre …”

12.  It is not disputed by the parties that the arbitration agreements are governed by Delaware law.

13.  In the course of the 4^th Defendant’s operation of the Business, it had entered into an Escrow Services Agreement (“Escrow Agreement”) with the 1^st Defendant, which is a public company incorporated in Hong Kong and engaged in business as a trustee company. Under the Escrow Agreement, the 1^st Defendant was engaged to hold Reserves of US dollars, or their equivalents, for the benefit of holders of the Tokens, and against which the Tokens were to be redeemed.

14.  As escrow agent, the 1^st Defendant in March 2020 had entered into an Account Investment Management Mandate (“Mandate”) with the 2^nd Defendant, which is a Singaporean company engaged in the business of investment and advisory services, and duly licensed by the Monetary Authority of Singapore to conduct a discretionary fund management business. Under the Mandate, the 2^nd Defendant was appointed as the investment manager to manage assets in a custody account held by the 1^st Defendant.

15.  At the same time as the Acquisition, the Reserves which were under the management of the 1^st Defendant were transferred by the 1^st Defendant to its affiliate (“FDT”) pursuant to an Escrow and Properties Transfer Agreement. FDT is a public company incorporated in Hong Kong which is engaged in business as a trustee company. Following such transfer, the Plaintiff agreed to appoint FDT to hold the Reserves, and a Singapore company Finaport Pte Limited (“Finaport”) to provide investment management services in respect of the Reserves.

16.  The Plaintiff also agreed to appoint the 5^th Defendant as its “authorized person”, to give instructions and directions to the operation team of the 4^th Defendant, and on the Plaintiff’s behalf to communicate with the investment and fiduciary partners of the Business. By resolutions dated 8 March 2021 (“March Resolutions”), the 5^th Defendant was appointed as an authorized person of the Plaintiff, to give instructions on the Plaintiff’s behalf to FDT in respect of the Reserves held by FDT, and in respect of the investment of such Reserves held.

17.  On the Plaintiff’s case, it transpired that Reserves which were to be held by the 1^st Defendant under the Escrow Agreement were invested in the 3^rd Defendant, purportedly pursuant to investment advice obtained from FDT and Finaport. According to the Plaintiff, the 3^rd Defendant is a speculative and risky offshore commodity fund investing in trade finance and other related financing ventures. A sum of US $456 million (“Transfer”) was remitted to a bank account held by a company in Dubai, managed and controlled by the CEO of the 3^rd Defendant. According to the Plaintiff, the Transfer was authorized and ratified by the 5^th Defendant in his capacity as the authorized representative of the Plaintiff, without the knowledge, approval or authorization of the Plaintiff, and was pursuant to subscription forms completed by the 5^th Defendant acting purportedly on behalf of the Plaintiff. The Transfer was made by 6 remittances, between June 2021 and March 2022 (“Remittances”).

18.  Disputes arose when the 3^rd Defendant defaulted on the Plaintiff’s redemptions of investment sums and the Plaintiff discovered the loss of the Reserves purportedly invested in the 3^rd Defendant. The 4^th Defendant claims on its part that the Plaintiff failed to perform its payment obligations owed to the 4^th Defendant under the SAA and the MSA, and on 17 November 2023, the 4^th Defendant commenced arbitration against the Plaintiff for the outstanding payments under the SAA and the MSA. There were two concurrent SIAC arbitrations brought pursuant to the arbitration agreements (“Arbitrations”).

19.  On 24 November 2023, two days after the 4^th Defendant wrote to seek the Plaintiff’s agreement to the consolidation of the Arbitrations and on the appointment of a sole arbitrator, the Plaintiff commenced these proceedings in Hong Kong (“HCA 1906”), initially against the 1^st Defendant only. The 2^nd and 3^rd Defendants were then joined in HCA 1906 on 2 January 2024, and by order of the Court made on 1 February 2024, the 4^th and 5^th Defendants were also joined as defendants. A re-amended Writ and an Amended Statement of Claim were filed on 6 February 2024.

20.  On 11 April 2024, the SIAC granted the consolidation of the Arbitrations, and on 17 April 2024, a sole arbitrator was appointed. The 4^th Defendant submitted its Statement of Claim in the Arbitrations on 18 October 2024. On 24 December 2024, the Plaintiff applied to stay the Arbitrations and to challenge the jurisdiction of the Tribunal.

21.  It was on 23 February 2024 that the Plaintiff applied for leave of the Court to serve HCA 1906 on the 2^nd to the 5^th Defendants out of the jurisdiction of Hong Kong. Leave was granted on 29 February 2024.

22.  On 17 April 2024, the 4^th Defendant made an application to the Singapore Court for an anti-suit injunction to restrain the Plaintiff from continuing to pursue its claims in HCA 1906 in Hong Kong. It also applied to the Hong Kong Court on 14 May 2024 to stay these proceedings in favor of arbitration in Singapore (“4^th Defendant’s Stay Application”).

23.  On 14 August 2024, the Singapore Court granted an injunction, to permanently restrain the Plaintiff from pursuing or continuing HCA 1906 against the 4^th Defendant (“Singapore ASI Order”), on the basis of the arbitration agreements contained in the SAA and the MSA. The Plaintiff filed notice of appeal against the Singapore ASI Order on 11 September 2024, which appeal is yet to be heard.

24.  Notwithstanding the Singapore ASI Order, the Plaintiff did not take steps to discontinue HCA 1906, but sought instead to adjourn the 4^th Defendant’s Stay Application. In view of the Singapore ASI Order, this Court dismissed the Plaintiff’s application for adjournment on 16 December 2024. The Plaintiff and the 4^th Defendant finally consented on 17 December 2024 to stay HCA 1906 against the 4^th Defendant.

25.  On 11 September 2024, the 5^th Defendant was provided with documents in support of the Plaintiff’s ex parte application for leave to join the 5^th Defendant in HCA 1906 and for service out of the proceedings on the 5^th Defendant. The 5^th Defendant issued his summons on 30 September 2024 to stay HCA 1906 against him (“5^th Defendant’s Stay Application”).

The Section 20 Stay

26.  The relevant issues for determination of the 5^th Defendant’s Stay Application are set out in paragraph 2 above. The merits of the parties’ claims in the Arbitration are not relevant to the Court’s consideration. The pertinent question in dispute is whether the matter in HCA 1906 is the subject of an arbitration agreement. In this context, the Plaintiff pointed out that it is wrong for the 5^th Defendant to contend that the Plaintiff’s claims made against him arise from his role and capacity as agent of the 4^th Defendant, in assisting the 4^th Defendant to enter into the SAA and the MSA with the Plaintiff. The Plaintiff highlights the fact firstly, that its causes of action against the 5^th Defendant in HCA 1906 are in respect of the 5^th Defendant’s breach of fiduciary duty and gross negligence as the authorized representative of the Plaintiff, and his fraudulent and alternatively innocent misrepresentation, personally as well as being joint tortfeasor of the 4^th Defendant; and secondly, that the 5^th Defendant is not a party to the arbitration agreements contained in the SAA and the MSA in respect of disputes arising thereunder.

27.  The parties do not however dispute that the arbitration agreements are governed by Delaware law. The parties’ experts are in agreement that the language of the relevant arbitration agreements is broad in scope and that hence, the court will defer to arbitration on issues which may touch on contractual rights or contractual performance (the case Parfi Holding AB v Mirror Image Internet, Inc 817 A2d 149, 155 being cited as authority). Pertinently, the experts agree that under Delaware law, the courts may allow non-signatories to invoke arbitration clauses in situations of agency and estoppel. They further agree that a contract clause which bars third-party beneficiaries does not prevent non-parties from invoking agency or estoppel to take advantage of an arbitration clause.

28.  As summarized by Counsel for the 5^th Defendant, the US law experts in this case agree on the following principles with regard to the doctrine of agency under Delaware law:

(1) As explained in the case of E I DuPont de Nemours & Co v Rhone Poulnec Fiber & Resin Intermediaries, SAS, 269 F3d 187, 199 (3d Cir 2010), “courts have bound a signatory to arbitrate with a non-signatory because of the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the non-signatory’s obligations and duties in the contract and the fact that claims were intimately founded and intertwined with the underlying contractual obligations”.

(2) The question turns on whether the claim(s) against the non-signatory “would be assertable had there been no contract”, viz whether such claims “implicate any of the rights and obligations provided for in the contract” and/or “depend on the existence of the contract”: see Parfi Case at 155-157. If so, such claims would be “independent of the agreement containing the arbitration provision”, in that they “could [have been] brought had the parties not signed [the contract containing the arbitration clause]”.

29.  The Delaware law experts also agree that the doctrine of equitable estoppel applies to allow a non-signatory to compel arbitration where a signatory to a contract containing an arbitration clause “raises allegations of substantially interdependent and concerted misconduct by both the non-signatory and one or more of the signatories to the contract”; or where the signatory’s claims “arise out of and relate directly to the written agreement”.

30.  The Plaintiff places emphasis on the fact that its claims were made against the 5^th Defendant on the basis of his breach of the duties owed to the Plaintiff as a result or by virtue of his being the Plaintiff’s authorized person as appointed by the March Resolutions, which resolutions were signed and dated much later than the SAA and the MSA. The Plaintiff maintains that its claims are independent of, and did not arise from the SAA and MSA between the Plaintiff and the 4^th Defendant. On that basis, the Plaintiff argued that its claims against the 5^th Defendant could have been brought even if the Plaintiff and the 4^th Defendant had not signed the SAA and MSA containing the arbitration clauses (the Plaintiff’s expert referring to and relying on Feeley v NHAOCG, LLC 62 A3d 649,656).

31.  Having considered in detail the claims made by the Plaintiff against the 5^th Defendant in these proceedings, my judgment is that they are intertwined with the 4^th Defendant’s obligations and duties arising from the MSA, and that the claims against the 5^th Defendant are inextricably related to and connected with the Plaintiff’s claims made against the 4^th Defendant. This is so even if the 5^th Defendant himself may also owe duties to the Plaintiff by virtue of his appointment under the March Resolutions. The fact that he is the Plaintiff’s authorized person does not alter the fact that the execution of his duties is also and at the same time related to and connected with the services and duties which the 4^th Defendant is bound under the MSA to carry out, through the 5^th Defendant, for the Plaintiff.

32.  Under the MSA, the 4^th Defendant was to provide a wide range of services to the Plaintiff for continuing and carrying on the Business acquired. These services include what was described in the MSA as “banking relationship services”, which specifically referred to services provided by the 4^th Defendant “in order to satisfactorily manage and maintain (the 4^th Defendant’s) banking relationships with financial institutions that provide services to the TUSD product”. The 4^th Defendant was required under Exhibit A-1 to the MSA to “manage and maintain relationships with trustee(s) of TUSD fiat deposits”, and “to manage and maintain the banking relationships with financial institutions that maintain or service any US dollar balances held in escrow accounts or otherwise maintained for the benefit of TUSD holders”. These obviously form an essential aspect of the carrying on of the Business, and some individual has to be appointed to carry out the designated services to be performed by the 4^th Defendant on the Plaintiff’s behalf: in giving instructions and liaising with third parties such as bankers, financial institutions, trustees and other service providers, particularly when the Plaintiff itself had no employees.

33.  It was to facilitate such giving of instructions, as part of the services required to be performed by the 4^th Defendant to the Plaintiff under the MSA, that the 5^th Defendant was individually appointed under the March Resolutions to act for the Plaintiff. The March Resolutions referred to the agreements between the Plaintiff and FDT (which held the Reserves), under which FDT (the trustee company) was to provide escrow and investment services to the Plaintiff, and to make investments for the Plaintiff. The 5^th Defendant was appointed under the March Resolutions, as the Authorized Person to give instructions to FDT on behalf of the Plaintiff, including instructions in respect of the investments (paragraph 3.1 of the March Resolutions). It was further resolved under the March Resolutions that any prior actions and instructions given by the 5^th Defendant on behalf of the Plaintiff to FDT in connection with the investments should be ratified and confirmed.

34.  I accept the submissions made for the 5^th Defendant, that the March Resolutions cannot be viewed in a vacuum, and that their genesis and purpose should be properly considered. On the facts of this case, I reject the contention that the March Resolutions and the authority conferred on the 5^th Defendant thereunder are totally independent of and entirely separate to the MSA and the SAA.

35.  On the 5^th Defendant’s evidence, his appointment under the March Resolutions was solely for the purpose of enabling him (as the Primary Relationship Manager of the 4^th Defendant vis-à-vis the Plaintiff) to give instructions to FDT in order to facilitate the 4^th Defendant’s performance of its duties under the MSA, to represent the Plaintiff as agreed, and for providing the banking relationship services defined in the MSA with the Plaintiff. According to the 5^th Defendant, there was no other purpose for the Plaintiff to appoint him as its Authorized Person, other than to discharge the 4^th Defendant’s obligations and services under the MSA, and to facilitate the orderly running of the Business.

36.  As Counsel for the 5^th Defendant pointed out, this is consistent with the Plaintiff’s own pleading of its claims against the 5^th Defendant, as set out in the Amended Statement of Claim. At paragraph 44R, the pleading reads:

“In addition to the matters pleaded in paragraph 44B above, prior to the Closing Date, the 4^th Defendant and 5^th Defendant proposed, for purposes of business continuity, that the 5^th Defendant be appointed as an "authorised person" of the Plaintiff to facilitate the orderly running of the Business, to give instructions and directions to the operations team of the 4^th Defendant and to communicate with the investment and fiduciary partners of the Business for all relevant purposes of the MSA (such partners including the 1^st Defendant and the 2^nd Defendant). In light of the experience of the 5^th Defendant, the Plaintiff agreed to this request and the 5^th Defendant was appointed as authorised representative of the Plaintiff; and all such actions were approved and ratified pursuant to a resolution of the Plaintiff dated as of 8^th March 2021 but prepared some 8 months after such date by FDT, the 4^th Defendant and the 5^th Defendant and presented to the Plaintiff for signing in or around November 2021.” (emphases added)

37.  The 5^th Defendant highlighted the fact that he was not appointed as the director or officer of the Plaintiff, nor was he conferred with any other authority from the Plaintiff, other than to communicate and pass on instructions and information from the Plaintiff to FDT, as part and parcel of the services provided by the 4^th Defendant under the MSA. The 5^th Defendant also referred to the email dated 22 November 2021 from FDT to the Plaintiff, in which it was stated:

“Our team have reached out to (the Plaintiff) with the aim of trying to receive direct instructions related to (the Plaintiff) Custody Account, however they have replied by requesting that all instructions to FDT to come through your firm. While previously Mr Can Sun and (the 5^th Defendant) were the previous points of contact for giving FDT’s accounts team the respective instruction, we would respectfully request your team’s assistance in liaising with (the Plaintiff) regarding delegating additional individuals the proper authorization to instruct FDT regarding their funds, investments and overall handling of the account.

We have prepared a draft resolution for your review confirming the instructions.” (emphasis added)

38.  The above email shows the purpose for which the March Resolutions were required, namely, to enable designated individuals (such as the 5^th Defendant) to have proper authorization to instruct FDT regarding the Plaintiff’s investments and overall handling of its account with FDT. This was the purpose for which the 4^th Defendant was appointed under the MSA, and precisely the obligation it assumed and was expected to carry out thereunder: to provide services in order to manage and maintain the 4^th Defendant’s relationships with trustees and financial institutions which maintain or service balances held in escrow accounts, or otherwise maintained for the benefit of the TUSD holders - all so as to continue, and for the purpose of, the Business acquired by the Plaintiff under the SAA.

39.  I am therefore satisfied that there is clearly a prima facie case, which is all that Hong Kong law requires, that under Delaware law, the Plaintiff’s claims made against the 5^th Defendant in HCA 1906 are “intimately founded and intertwined with” the 4^th Defendant’s underlying contractual obligations of the MSA, and that there is a close relationship between the 5^th Defendant (the non-signatory), and the 4^th Defendant and the Plaintiff as parties under the MSA, such that the Plaintiff is bound to arbitrate its claims against the 5^th Defendant.

40.  Applying the Parfi case, had the MSA and SAA not been made between the Plaintiff and the 4^th Defendant, the 5^th Defendant would not have been appointed as the Plaintiff’s Authorized Person, to carry out the services of instructing FDT regarding the Plaintiff’s investments, and the Plaintiff would have had no claims against the 5^th Defendant for either his alleged breach of duties, or alleged gross negligence, in carrying out such duties.

41.  On the evidence, and on the pleadings, the allegations made against the 5^th Defendant arise out of and relate directly to the MSA and SSA, such there is a prima facie case that equitable estoppel applies under Delaware law to allow the 5^th Defendant to enforce the arbitration agreement, despite not being a signatory to the MSA and SSA. As the 5^th Defendant highlighted, the Delaware Court does not allow a valid arbitration clause to be defeated by “artful pleading” which seeks to avoid the effect of a mandatory arbitration agreement. I would add that this is also the general approach of the Hong Kong Court (see for example Linde GMBH and Another v Ruschemalliance LLC[2023] HKCFI 2409, paragraphs 75-77).

42.  With regard to the claims of misrepresentation which are made against the 5^th Defendant in HCA 1906, I agree with Counsel for the 5^th Defendant that the claims cannot be asserted in the absence of the SAA and MSA. The Sufficiency Representation pleaded at paragraph 7 of the Amended Statement of Claim is contained as an express representation and term under section 3.15 of the SAA. Again applying the test in Parfi, the Plaintiff’s claims of misrepresentation and the 5^th Defendant’s alleged for sole and/or joint liability with the 4^th Defendant for such misrepresentation cannot be said to be independent of the SAA and MSA. If the SAA and MSA had not been made between the Plaintiff and the 4^th Defendant, no claim of misrepresentation allegedly inducing the SAA and MSA, or as an express representation or warranty thereunder, could have been asserted by the Plaintiff against the 5^th Defendant. The allegations against the 4^th and 5^th Defendants are at least substantially interdependent, and there is a prima facie case that the doctrine of equitable estoppel applies to allow the 5^th Defendant to rely upon the arbitration clause in the SAA and MSA.

43.  In conclusion, I am satisfied that the Plaintiff’s claims against the 5^th Defendant as asserted in the Amended Statement of Claim in HCA 1906 arise out of, relate to or have connection with the SAA and MSA, to fall within the ambit of the arbitration clause of the agreements. There is no evidence to suggest that the arbitration agreements are invalid, inoperative or incapable of being performed. Under section 20 of the Ordinance, the Court is bound to stay the action to arbitration, and I so ordered at the conclusion of the hearing on 17 January 2025.

44.  By virtue of my finding, it is not necessary to deal with the questions of whether the Service Out Order should be set aside, for any of the reasons claimed by the 5^th Defendant.

Any breach of confidentiality?

45.  At the hearing, the Plaintiff claimed that in applying for the stay in these proceedings, the 5^th Defendant had relied on confidential matters and documents arising from/in the Arbitrations between the Plaintiff and the 4^th Defendant, and that the Court should disregard such matters and exhibits which constitute confidential communications, orders and steps taken in the Arbitrations.

46.  In response, the 5^th Defendant pointed out that the Plaintiff had never raised any objection when the 5^th Defendant’s evidence was first filed and served, and that the Plaintiff never applied for the allegedly confidential information to be expunged from the evidence.

47.  First and foremost, the 5^th Defendant claims that he is not a party to the Arbitrations, and is not bound by any obligation of confidentiality, but emphasized that even if he were, he is entitled under the relevant SIAC Rules to be exempted from the prohibition against a party’s disclosure of matters relating to the Arbitrations, for pursuing and enforcing his legal right to seek a stay of these proceedings and to set aside the Service Out Order - an exemption expressly provided for under paragraph 39.2 of the SIAC Rules.

48.  The 5^th Defendant further claims that much of the matters relating to the steps taken in the Arbitrations have been made open to the public when the judgment of the Singapore Court in the Singapore ASI Order was published, and any confidentiality has been lost.

49.  I accept the submissions made for the 5^th Defendant in relation to the permissible disclosure of confidential matters relating to the SIAC Arbitrations to pursue or enforce a legal right or claim, but in my judgment, when this Court considers the issues for determination in the present application, there is simply no need to refer to any confidential details of the Arbitrations, apart from the fact that they exist, and are continuing. No use of or reference has been made by this Court to any of the allegedly confidential matters claimed by the Plaintiff. The issue of any alleged breach by the 5^th Defendant of confidentiality is academic.

50.  No order is made on the 5^th Defendant’s Summons of 10 January 2025, as the evidence is not necessary.

Disposition

51.  The application for the Section 20 Stay was granted on 17 January 2025 for the above reasons, and the costs of the application are to be paid by the Plaintiff to the 5^th Defendant, on indemnity basis, with Certificate for 2 counsel.

Mr Laurence Li SC and Mr Sebastian Hughes, instructed by Loeb & Loeb LLP, for the plaintiff

Ms Sara Tong SC and Ms Natalie So, instructed by Reynolds Porter Chamberlain, for the 5^th defendant

HCA 1906/2023

[2025] HKCFI 665

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1906 OF 2023

____________

____________

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D E C I S I O N

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1.  Introduction

1.1  On 29 February 2024, Master Lai granted leave to the Plaintiff (“Techteryx”) to issue a Concurrent Re-Amended Writ of Summons (“Concurrent Re-Amended Writ”) out of the jurisdiction against the 2^nd to 5^th Defendants (“29/2/24 Order”). The Concurrent Re-Amended Writ, issued on 4 March 2024, was served on the 2^nd Defendant (“Crossbridge”) in Singapore on 15 March 2024.

1.2  By its summons dated 8 May 2024 (“Summons”), Crossbridge applies for[1]:

(1)  a declaration that the court has no jurisdiction or should not exercise any jurisdiction that it may have over Crossbridge in respect of the subject matter of the Techteryx’s claim, relief, and/or remedy sought in this action (“Declaratory Relief”) on grounds that: (a) Crossbridge is entitled to rely on the arbitration agreement contained in clause 7 of the Account Investment Management Mandate dated 1 April 2020 (“AIMM”) between the 1^st Defendant (“Legacy Trust”) and Crossbridge ("Arbitration Agreement") and (b) Techteryx has failed to comply with its duty of full and frank disclosure in the course of obtaining the 29/2/24 Order (Summons §1(a));

(2)  an order that the 29/2/24 Order be discharged, and consequentially an order that the service of the Concurrent Amended Writ be set aside (Summons §§2 and 3);

(3)  further or alternatively, an order that this action as between the Techteryx and Crossbridge be stayed in favour of arbitration administered by the Singapore International Arbitration Centre, in accordance with the Arbitration Agreement (Summons §4).

1.3  On 6 November 2024, Techteryx issued a summons (“New Evidence Summons”) for leave to file further evidence by way of the Affirmation of Terence Tai Cheung Wong (“Wong 1^st”). As indicated at the hearing, I will consider Wong 1^st on a de bene esse basis.

1.4  At the hearing, Techteryx was represented by Mr Sebastian Hughes and Crossbridge by Mr Norman Nip SC leading Mr Adrian Wong.

1.5  A prominent feature in the present case is that the Arbitration Agreement, as noted above, is one between Crossbridge and Legacy Trust, not Techteryx. A major disagreement between Mr Hughes and Mr Nip is whether Crossbridge is nevertheless entitled to on the Arbitration Agreement where, as here, the claims against Crossbridge are made by Techteryx, not Legacy Trust.

2.  Background

(i)  Techteryx’s case[2]

2.1  In this action, Techteryx alleges that a fraud has been perpetrated against it by each of the Defendants, whereby Techteryx was induced into purchasing the TrueUSD (“TUSD”) digital token business (“Business”) of the 4^th Defendant (“TrueCoin”) by certain representations, including the Sufficiency Representation as defined in section 3.15 of the Strategic Alliance Agreement dated 2 December 2020 between Techteryx and TrueCoin (“SAA”). The Sufficiency Representation provides:

“TrueCoin, as agent for the holders of TUSD, has established escrow accounts with third-party banks and licensed trust companies for the benefit of TUSD token holders (the “FBO Accounts”) that have maintained, at all times, sufficient (at least 1:1) U.S. dollar reserves for all TUSD. All such U.S. dollar reserves are held for the benefit of TUSD token holders free and clear of any Liens. For the avoidance of doubt, the U.S. dollar balance held in FBO Accounts for the benefit of TUSD token holders equals or exceeds, and has, at all times, equaled or exceeded, the number of TUSD.”

2.2  The Business may be described as follows:

(1)  TrueCoin created and maintained a website (“TrueUSD Website”), through which it marketed TrueUSD digital tokens (“Tokens”);

(2)  A person interested in subscribing for Tokens would create an account on and via the TrueUSD Website;

(3)  The person would then place an order for a quantity of Tokens via the account and send the equivalent amount in USD fiat currency to an account which TrueCoin stated to be with an “independent” licensed bank, deposit-taking institution or licensed trust company (“Reserves”);

(4)  TrueCoin would then cause Tokens to be “minted”, on the blockchain on which the Tokens exist, and send to the person the relevant quantity of Tokens;

(5)  A holder of Tokens could trade or lend the Tokens, or use them to pay any person who would accept the Tokens;

(6)  A holder could also redeem the Tokens via the TrueUSD Website, whereupon the Tokens would be “burnt” and the equivalent amount in USD fiat currency would be sent to the holder;

(7)  A central tenet of the Business, as is apparent from the Sufficiency Representation, was that it had sufficient Reserves in cash and cash equivalent assets to back one-to-one all of the outstanding Tokens and it was upon this basis that the Business was marketed.

2.3  It is Techteryx’s case that Reserves initially involving US$97 million (“Initial Investment Sum”) held by Legacy Trust were invested in the 3^rd Defendant (“Fund”) pursuant to advice provided by Crossbridge to both Legacy Trust and TrueCoin under the AIMM. The AIMM was signed by (1) Crossbridge’s director and CEO, Mr Yai Sukonthabhund (“Mr Yai”) and (2) Legacy Trust’s director and CEO, Mr Vincent Chok (“Mr Chok”).

2.4  At the time when Techteryx purchased the Business from TrueCoin in December 2020 (“Acquisition”), the Reserves under the management of Legacy Trust were transferred by Legacy Trust to its affiliate, First Digital Trust Ltd (“FDT”) pursuant to an Escrow and Properties Transfer Agreement (“EPTA”).

2.5  Following the Acquisition and the transfer of the Reserves under the EPTA, at the request of D1, Mr Chok, D2 and Mr Yai, P agreed to appoint (1) FDT to hold the Reserves; and (2) Finaport Pte Ltd, a private Singapore company and of which Mr Yai was a “partner” (“Finaport”), to provide investment management services in respect of the Reserves.

2.6  Subsequently, Reserves involving the additional sums of US$468 million (“Additional Investment Sum”) were purportedly invested in the Fund pursuant to investment advice obtained from FDT and Finaport. Of that amount, US$456 million was remitted not to the Fund, but to a bank account held by a company in Dubai managed and controlled by Mr Matthew William Brittain[3], but owned by his wife, Aria Commodities DMCC (“Aria DMCC”).

2.7  TrueCoin continued to manage the Business for Techrteryx following the Acquisition, pursuant to the Master Services Agreement (“MSA”) dated 2 December 2020, until its termination on 14 July 2023.

2.8  Techteryx became alerted to the alleged fraud and to the loss of the Reserves purportedly invested in Fund when the Fund defaulted on Techteryx redemptions of the Initial Investment Sums and the Additional Investment Sums.

(ii)  Procedural background

2.9  Techteryx has separately commenced HCA 161/2023 against FDT, Finaport, the Fund and Aria DMCC. Whilst the present action is primarily concerned with the Initial Investment Sum, HCA 161/2023 is principally concerned with the Additional Investment Sum.

2.10  On 24 November 2023, Techteryx commenced the present action against Legacy Trust. Thereafter:

(1)  On 2 January 2024, leave was granted to join Crossbridge and the Fund as defendants;

(2)  On 1 February 2024, leave was granted to join TrueCoin and the 5^th Defendant as defendants;

(3)  On 6 February 2024, the Re-Amended Writ and the Amended Statement on Claim (“ASOC”) were filed;

(4)  As stated earlier, the Concurrent Re-Amended Writ was issued on 4 March 2024.

2.11  As stated in the Concurrent Re-Amended Writ, Techteryx is suing on behalf of itself and Legacy Trust. As against Crossbrigde, ASOC §§35 and 36 make it plain that the claims made are “anchored” in a claim premised on a breach of the express and implied terms of the AIMM, with a further or alternative tortious claim based on a breach of duty of like content and to like effect as the contractual duties under the AIMM.

2.12  ASOC §§38-40 further plead the capacity in which Techteryx sues and make it plain that the loss and damage claimed is that suffered by Legacy Trust:

“[38] As a result of the matters aforesaid, the 1^st Defendant - as a fiduciary of the Escrow Amount - suffered loss and damage, being the difference in value between the present value of the Escrow Amount and the value which the Escrow Amount would have had if the 2^nd Defendant had not given grossly negligent investment advice.

[39] The Plaintiff makes this claim against the 2^nd Defendant as the beneficiary of the trust of which the 1^st Defendant was a trustee and whose assets have been lost or dissipated as a result of the 2^nd Defendant's acts and omissions.

[40] The Plaintiff does so for the benefit of the trust in circumstances where there has been an inexcusable failure by the 1^st Defendant to protect the trust property and/or the 1^st Defendant will not take action against the 2^nd Defendant, alternatively is unable to do so without placing itself in a position of conflict, because the acts and omissions which give rise to the 2^nd Defendant's liability would also demonstrate the liability of the 1^st Defendant to the Plaintiff.” (emphasis added)

3.  The agreed framework for the disposal of the Summons

3.1  There is no dispute that Techteryx did not specifically bring the existence of the Arbitration Agreement to the attention of Master Lai in its application for the 29/2/24 Order, on the basis that it is irrelevant: 3^rd Affirmation of Li Jinmei (“Li 3^rd”) §33. Techteryx says that the Arbitration Agreement is irrelevant “for the simple reason that [Techteryx] is not a party to (or an assignee or third-party beneficiary of) the Arbitration Agreement”.

3.2  The Arbitration Agreement in the AIMM provides as follows:

“7. Governing Law and Jurisdiction

This Mandate shall be governed by and construed in accordance with the laws of Singapore.

Any dispute arising out of or in connection with this Mandate, including any question regarding its existence, validity, or termination, will be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the SIAC for the time being in force, which rules are deemed to be incorporated by reference in this clause. The seat of the arbitration is Singapore. The Tribunal will consist of one arbitrator to be appointed by the SIAC. The language of the arbitration shall be English.” (emphasis added)

3.3  Crossbridge and Techteryx have each adduced expert evidence on Singapore law on the issue of whether Techteryx is bound by the Arbitration Agreement. Crossbridge relies on the opinions of Ms Lauren Tang Hui Jing (“Ms Tang”) and Techteryx on the opinion of Mr Jonathan Choo (“Mr Choo”).

3.4  At the hearing, counsel agreed that the Summons should be determined by reference to the following issues:

(1)  Can Crossbridge rely on the Arbitration Agreement to stay the present proceedings in favour of arbitration in Singapore (“Stay Application”) pursuant to section 20 of the Arbitration Ordinance Cap 609 (“AO”);

(2)  Whilst the foregoing is the alternative relief sought in the Summons, a resolution of that issue would inform on whether the court should grant the primary relief, namely the Declaratory Relief, and consequentially an order discharging the 29/2/24 Order and the service of the Concurrent Re-Amended Writ.

4.  The Stay Application

4.1  Section 20(1) of the AO gives effect to Article 8 of the UNCITRAL Model Law. Article 8 of the Model Law provides as follows:

“(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.”

4.2  The principles governing a stay in favour of arbitration are well-established. As set out at Mice Engineering Ltd v Johnson Controls Hong Kong Limited [2022] HKCFI 2768 §§17-18 (and the further cases cited therein):

(1)  On a stay application under section 20 of the AO, the court would consider the following questions: (a) is there an arbitration agreement between the parties, (b) is the clause in question null and void, inoperative or incapable of being performed, (c) is there in reality a dispute or difference between the parties and (d) is the dispute or difference between the parties within the ambit of the arbitration agreement;

(2)  The onus is on the applicant for stay to demonstrate only that there is a prima facie case that the parties are bound by an arbitration clause, and unless the point is clear, the court should not attempt to resolve the issue and the matter should be stayed in favour of arbitration, as it is for the tribunal to decide first on its jurisdiction.

4.3  At the hearing, Mr Hughes confirmed that, of the 4 questions under consideration, he was prepared to proceed on the basis that there is a prima facie case that the 3^rd and 4^th questions should be answered in favour of Crossbridge. In particular, I record that Mr Hughes accepted that there is a prima facie case that the ambit of the Arbitration Agreement is wide enough to cover both the “anchor” contractual claim and the tortious claim made by Techteryx against Crossbridge.

4.4  In relation to the 1^st question, namely is there an arbitration agreement, the issue is whether the Arbitration Agreement arguably binds Techteryx. Mr Hughes asserts, without citing any authority in support, that the 1^st question should be determined on the basis of Hong Kong law. I am unable to accept the position advocated by Mr Hughes. Whether as a matter of (1) the law expressly chosen to apply to the Arbitration Agreement, (2) the law applicable to the AIMM, and (3) the seat of arbitration (Singapore), it seems to me quite plain that the 1^st question is one to be determined under Singapore law (although there is unlikely to be a substantive difference with Hong Kong law).

4.5  As regards the 2^nd question, Mr Hughes has confined Techteryx’s challenge to the contention that the Arbitration Agreement is null and void by reason of public policy.

5.  Whether Techteryx a party to the Arbitration Agreement

5.1  The question is, where, as here, Techteryx’s pleaded case is that it is suing (1) Crossbridge under the AIMM in its capacity as the beneficiary of the trust of which Legacy Trust was a trustee and (2) for loss and damage suffered by Legacy Trust, there is a prima facie case that Techteryx is bound by the Arbitration Agreement. The relevant question to ask is whether there is a prima facie or plainly arguable case that the Arbitration Agreement binds Techteryx, and the test is satisfied where the evidence in support of the contention is cogent and arguable, and not dubious or fanciful.

(i)  Crossbridge’s case

5.2  The general propositions advanced by Mr Nip are these: A beneficiary may be allowed to sue a third party in place of the trustee by way of a derivative action when the trustee commits a breach of trust or is involved in a conflict of interest and duty or in other exceptional circumstances: Hayim v Citibank NA [1987] AC 730 at 747C-D. If it had been Legacy Trust that had sued Crossbridge for breach of the AIMM directly, Legacy Trust would have been bound by the Arbitration Agreement (there being no suggestion that the agreement is unenforceable between them), and Techteryx cannot be in a better position. It is established that a person who becomes entitled to enforce a contractual obligation can do so only in accordance with its terms: The Yusuf Cepnioglu [2016] Bus LR 755 at §46 per Moore-Bick LJ.

5.3  As a matter of Singapore Law, it is Ms Tang’s opinion that:

(1)  Where a beneficiary could sue a third-party for damages on behalf of a trustee in a derivative claim, the beneficiary would be in a position no better than the trustee if it had carried out its duties in a proper manner;

(2)  A third-party who wishes to take the benefit of a contract is bound by the burden of any exclusive jurisdiction clause therein, citing Hai Jiang 1401 Pte Ltd v Singapore Technologies Marine Ltd [2020] SGHC 20 which considered Yusuf Cepnioglu;

(3)  Similarly, a person who becomes entitled to enforce an obligation which is subject to an arbitration clause must do so by arbitration according to the clause. This is so since “enforcement by arbitration alone is an incident of the obligation which the claimant seeks to enforce and because the defendant is therefore entitled to have any claim against him pursued by arbitration”: Yusuf Cepnioglu at §49, which was considered in Hai Jiang.

(ii)  Techteryx’s case

5.4  Conversely, Techteryx relies on the following propositions:

(1)  As a matter of Singapore law, it is established that non-parties to an arbitration agreement cannot participate in an arbitration conducted pursuant to that agreement: Jiang Haiying v Tan Lim Hui [2009] 3 SLR(R) 13 at §19;

(2)  The above privity rule, whilst strict, is not absolute. There are several situations where non-signatories may be considered a party to the arbitration agreement. Such situations may arise by way of incorporation of an arbitration agreement by reference, or an assumption of rights or liabilities to a contract with an arbitration clause (for example assignment, novation), or where the agreement was entered into by an agent. or the corporate veil-piercing on the basis of alter ego principle, or by the operation of the doctrine of estoppel: Jiang Haiying §23;

(3)  A third-party beneficiary exception to the privity rule has not yet been recognized in Singapore (outside of the Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed): Jiang Haiyang §§44-45.

5.5  In the present case, Techteryx is not a party of the AIMM and is not an assignee or subrogee of the rights of Legacy Trust under the AIMM. In any event:

(1)  Clause 2 of Schedule 1 of the AIMM expressly precludes assignment: “no assignment or transfer shall be made by the Client or Crossbridge of any of their rights or obligations under this Mandate without the prior written consent of the other”;

(2)  Clause 2 of Schedule 2 of the AIMM expressly precludes third-party rights: “Any Indemnified Person[4] shall have the right to enjoy the benefit of or to enforce any of the terms of this Mandate which purports to confer a benefit on them. Save for the Indemnified Persons, no provision in this Mandate should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act (Chapter 53B of Singapore) or otherwise, by any person who is not a party to this Mandate”.

5.6  Crossbridge has not been able to produce any authority which applies to the facts of the present case, namely where a party has no choice but to bring a derivative action on behalf of a trustee (Legacy Trust), as beneficiary of the trust funds (the Reserves), against a purported investment adviser (Crossbridge), in circumstances where, as pleaded, the trustee (Legacy Trust) cannot (and will not) itself take any action against (Crossbridge).

(iii)  Analysis

5.7  In my view, there is a prima facie case that Techteryx, subject to the further issue of whether the Arbitration Agreement should be rendered null and void by reason of public policy discussed below, is bound by the Arbitration Agreement in pursuing the present claims against Crossbridge. As this issue should be deferred to arbitral tribunal for determination, I will only set out my brief observations.

5.8  First, I do not believe Techteryx can derive much assistance from Jiang Haiyang, which is the case principally relied on by Mr Choo:

(1)  In that case, the defendants seeking a stay are not parties to the sale and purchase agreement (“SPA”) containing the relevant arbitration clause;

(2)  The submissions made by the defendants were inter alia (1) that claims alleged by the plaintiff against the defendants were intimately intertwined with the SPA such that the doctrine of equitable estoppel applied and (2) that the defendants were the intended beneficiaries under the SPA (§12);

(3)  The Court held that for the defendants’ application for a stay of proceedings to succeed, they would have to show that an exception to the privity rule was applicable such that the plaintiff should be made to arbitrate his disputes with them (§24);

(4)  The Court held that the claims alleged by the plaintiff against the defendants were not intertwined with the SPA such that the doctrine of equitable estoppel was applicable. In particular, the Court observed at §42:

“… Unlike the three aforementioned cases where the agreement containing the arbitration clause was heavily relied on and was the basis for the plaintiffs’ and/or defendants’ claims, the SPA, in the present case, had no relation to the claim by the plaintiff. Nor did the SPA need to be pleaded for the defendants to mount their defence that the Dehai Singapore shares were transferred to them in consideration for their help in relation to the proposed listing of Dehai Singapore. As such, the present dispute was not one that was so closely intertwined with the SPA such that the plaintiff was estopped from denying the defendants arbitration.” (emphasis added)

(5)  The Court further observed that a third-party beneficiary exception to the privity rule has not yet been recognized in Singapore. In any event, in the facts the Court did not regard the defendants as intended beneficiaries of the SPA (§§44-46).

5.9  It is therefore quite apparent that the issues dealt with in Jiang Haiyang are quite different from those of the present case. Jiang Haiyang is certainly not a case that deals with the present situation where Techteryx is suing on the AIMM. Indeed, whilst Mr Hughes has criticized, as set out at §5.6 above, that Crossbridge has not been able to produce any authority which is directly in support of its position on the present factual matrix, as he has acknowledged, neither has Techteryx been able to refer to any in support of its position.

5.10  In my view, it is arguable that the following propositions advocated by Ms Tang may be accepted by the arbitral tribunal, if pursued:

(1)  Techteryx’s claims as enumerated in the ASOC are in substance claims brought on behalf of Legacy Trust and to enforce a contract between Legacy Trust and Crossbridge. It arguably follows that in "stepping into the shoes" of Legacy Trust, Techteryx is bound to accept that its claims are subject to the Arbitration Agreement (Ms Tang’s first opinion §§29-33 and Ms Tang’s second opinion §9);

(2)  In the context of a beneficiary derivative claim, the beneficiary (Techteryx), can sue a third party (Crossbridge) for damages on behalf of a trustee (Legacy Trust), but the beneficiary would be in a position no better than the trustee if the trustee had carried out its duties in a proper manner.

5.11  It is pertinent to note that Mr Hughes in his submissions did not go further than arguing that the cases relied on by Ms Tang for the propositions are distinguishable on the facts. But it seems to me that the propositions advanced by Ms Tang are arguable as a matter of principle.

5.12  It must be reiterated that I am not required to finally determine the correctness of Ms Tang’s propositions. In my view, Crossbridge has established a prima facie case in relation to the 1^st question under consideration.

6.  Whether the Arbitration Agreement null and void

6.1  The propositions advanced by Mr Hughes are set out at his Skeleton Submissions §§43-44:

“[43] Part of Ds’ fraud against P was to fragment any claims which P would bring against Ds and to obstruct the finding of the true facts by putting in place divergent choice of law and dispute resolution clauses in the contractual documents.

[44] In addition to the extant pleadings of fraudulent misrepresentation against both D4 and D5 set out in ASOC §44N, D2 will aver in its further amended pleading to be filed herein – to include claims in respect of the overall fraud and conspiracy against each of the Ds, acting in concert, herein - that the clauses are unenforceable and should not be heeded as contrary to public interest, public policy, and the interest of justice; and specifically that any of the arbitration clauses Ds may seek to rely upon to circumvent the jurisdiction of this Court are null and void.”

6.2  The New Evidence Summons seeks to adduce evidence on the proposed fraud claim to be introduced by amendment. Wong 1^st seeks to adduce evidence on a complaint dated 24 September 2024 (“Complaint”) filed by the US Securities and Exchange Commission (“SEC”) in which various complaints were made against, inter alia, TrueCoin. TrueCoin had agreed to settle the charges by consenting to the entry of a final judgment.

6.3  It is pertinent to note that no allegation is specifically advanced in the Complaint by SEC against Crossbridge. Certainly, Crossbridge is not a defendant named in the Complaint.

6.4  It must be noted that in the Complaint, the relevant period is defined to be from November 2020 through at least April 2023 (“Relevant Period”), which postdates the execution of the AIMM. The Complaint, by way of background, refers to an “investment advisor” which is understood to be Crossbridge (Complaint Section II.A). There is specifically no allegation that Crossbridge was part of the Complaint. The allegations of materially false and misleading statements are set out at Complaint Section II.B. There is no allegation against Crossbridge and the earliest date referred to therein is 2 December 2020 (Complaint §57), also postdating the execution of the AIMM.

6.5  In my view, Techteryx’s argument that the Arbitration Agreement is null and void faces at least the following difficulties.

6.6  First, as accepted by Mr Hughes, the Arbitration Agreement must be treated as a distinct agreement and can be void or voidable only on grounds which relate directly to the Arbitration Agreement. Quaestus Capital Pte Ltd v Everton Associates Ltd [2021] 4 HKC 605 (at §§39-43) observes as follows:

“[39] Mr Pao submits in response that it is well established that a jurisdiction clause is regarded as a separate agreement from the substantive agreement between the parties, and that unless specific attack is directed against the jurisdiction clause, it is not excluded from application to a dispute involving claims that the agreement as a whole is vitiated such as by fraud, mistake, illegality or the like.

[40] The parties have not made submissions on which law governs this question. It seems to me that again English law as the governing law of the contract should govern, but this is inconsequential as there appears to be no difference between English law and Hong Kong law in this regard. The general principles are not in dispute and they in my view support Mr Pao’s contention. In Fiona Trust, Lord Hoffmann said that an arbitration clause

“must be treated as a ‘distinct agreement’ and can be void or voidable only on grounds which relate directly to the arbitration agreement”

and that

“the arbitration agreement can be invalidated only on a ground which relates to the arbitration agreement and is not merely a consequence of the invalidity of the main agreement.”

Likewise Lord Hope said in that case:

“The doctrine of separability requires direct impeachment of the arbitration agreement before it can be set aside. This is an exacting test. The argument must be based on facts which are specific to the arbitration agreement. Allegations that are parasitical to a challenge to the validity to the main agreement will not do.”

[41] Similarly, in Deutsche Bank AG & others v Asia Pacific Broadband Wireless Communications Inc & another [2008] 2 CLC 520 at §24, it was said:

“It is only if the jurisdiction clause is itself under some specific attack that a question can arise whether it is right to invoke the jurisdiction clause. Examples of this might be fraud or duress alleged in relation specifically to the jurisdiction clause.”

[42] The courts in Hong Kong have applied the same principles: see Hiromi Okada v Tomohiro Okada & another [2018] HKCFI 2310 at §§38‑46 per Ng J; China National Geological & Mining (HK) Ltd v Tianjin Hopetone Co Ltd [2020] HKCFI 1338 at §§48-57 per DHCJ Le Pichon.

[43] Applying these principles, it seems to me that there is no specific attack on the jurisdiction clause in this case. The fraud alleged is directed against the entire Brokerage Agreement (and indeed against the Loan Agreement and the entire transaction). There is no suggestion that the plaintiff was not aware of the jurisdiction clause or was specifically misled into agreeing to give the English courts exclusive jurisdiction. There is nothing extraordinary about the jurisdiction clause itself, conferring as it does exclusive jurisdiction on the English courts in relation to a contract a party to which is an English company carrying on regulated business there. The plaintiff says that the fraud alleged is a fundamental one that suggests the entire Brokerage Agreement was itself a sham and an instrument of fraud. But this in my view does not take this case out of the general principles. The reason that, according to the plaintiff, the jurisdiction clause should not have effect is the fraud that led the plaintiff to enter into the Brokerage Agreement, with the consequence that the jurisdiction clause, which was agreed as part of that agreement, is also vitiated. Such an argument is one that, according to the authorities, the doctrine of separability precludes.” (emphasis added)

6.7  In Mr Hughes’ Skeleton Submissions, there is no articulation on what is the vitiating ground which relates directly to the Arbitration Agreement. Neither is there a proposed amended pleading placed before me. Conversely, on the available material:

(1)  The Relevant Period refers to in the Complaint postdates the date of the AIMM;

(2)  The settlement dates of the investments of the Initial Investment Fund pleaded at ASOC §24 also postdate the AIMM;

(3)  In so far as Mr Hughes relies on the allegation that part of the fraud was the fragmentation of claims, this is not supported by Techteryx’s evidence. The fragmentation of claims was advanced in the context of Techteryx position that Hong Kong is the centre of gravity of the present multi-party dispute: Li 3^rd §§26-32;

(4)  In this regard, whilst it is accepted that there are different jurisdiction clauses in the various agreements as set out at Li 3^rd §29, it appears that the jurisdiction clauses are invariably connected to one of the contracting parties and is not ex facie problematic. The suggestion that part of the fraud was the fragmentation of claims appears to me to be a rather far-fetched proposition.

6.8  Secondly, Mr Hughes has at one point submitted that the issue of whether the Arbitration Agreement is rendered null and void by reason of public policy should be finally determined by the Hong Kong court. He relies on the Canadian case of Uber Technologies Inc & Ors v Heller (AG of Ontario and others intervening) [2020] 5 LRD 348. In my view, Techteryx cannot derive any assistance from Uber. The Uber case in fact adopts a regime not unlike the position in Hong Kong:

“[31] The AA is silent on what principles courts should consider in exercising their discretion to determine the validity of an arbitration agreement under s. 7(2). But some criteria were set out in Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, and Seidel v. TELUS Communications Inc., [2011] 1 S.C.R. 531, which interpreted similar arbitration regimes in Quebec and British Columbia. In those decisions, this Court set out a framework for when a court should decide if an arbitrator has jurisdiction, instead of referring that question to the arbitrator out of respect for the competence-competence principle.

[32] Under the Dell framework, the degree to which courts are permitted to analyse the evidentiary record depends on the nature of the jurisdictional challenge. Where pure questions of law are in dispute, the court is free to resolve the issue of jurisdiction (para. 84). Where questions of fact alone are in dispute, the court must “normally” refer the case to arbitration (para. 85). Where questions of mixed fact and law are in dispute, the court must refer the case to arbitration unless the relevant factual questions require “only superficial consideration of the documentary evidence in the record (para. 85).”

[33] In setting out this framework, Dell adopted an approach to the exercise of discretion that was designed to be faithful to what the international arbitration literature calls the “prima facie” analysis test as regards questions of fact and questions of mixed fact and law (para. 83). Under this test, the court must “refer the parties to arbitration unless the arbitration agreement is manifestly tainted by a defect rendering it invalid or inapplicable” (para. 75). To be so manifestly tainted, the invalidity must be “incontestable”, such that no serious debate can arise about the validity (para. 76, quoting Éric Loquin, “Compétence arbitrale”, in Juris-classeur Procédure civile (loose-leaf), fasc. 1034, at No. 105). Rather than adopting these standards literally, Dell gave practical effect to what was set out in the arbitration literature by creating a test whereby a court refers all challenges of an arbitrator’s jurisdiction to the arbitrator unless they raise pure questions of law, or questions of mixed fact and law that require only superficial consideration of the evidence in the record (paras. 84-85).” (emphasis added)

6.9  However, the Supreme Court of Canada was of the view that the Dell framework may be departed from should an issue of accessibility arise:

“[38] The underlying assumption made in Dell is that if the court does not decide an issue, then the arbitrator will. As Dell says, the matter “must be resolved first by the arbitrator” (para. 84). Dell did not contemplate a scenario wherein the matter would never be resolved if the stay were granted. This raises obvious practical problems of access to justice that the Ontario legislature could not have intended when giving courts the power to refuse a stay.

[39] One way (among others) in which the validity of an arbitration agreement may not be determined is when an arbitration is fundamentally too costly or otherwise inaccessible. This could occur because the fees to begin arbitration are significant relative to the plaintiff’s claim or because the plaintiff cannot reasonably reach the physical location of the arbitration. Another example might be a foreign choice of law clause that circumvents mandatory local policy, such as a clause that would prevent an arbitrator from giving effect to the protections in Ontario employment law. In such situations, staying the action in favour of arbitration would be tantamount to denying relief for the claim. The arbitration agreement would, in effect, be insulated from meaningful challenge.

…

[47] Turning to the appeal before us, we would first observe that Mr. Heller has made a genuine challenge to the validity of the arbitration agreement. The clause is said to be void because it imposes prohibitive fees for initiating arbitration and these fees are embedded by reference in the fine print of a contract of adhesion. Second, there is a real prospect that if a stay is granted and the question of the validity of the Uber arbitration agreement is left to arbitration, then Mr. Heller’s genuine challenge may never be resolved. The fees impose a brick wall between Mr. Heller and the resolution of any of the claims he has levelled against Uber. An arbitrator cannot decide the merits of Mr. Heller’s contention without those — possibly unconscionable — fees first being paid. Ultimately, this would mean that the question of whether Mr. Heller is an employee may never be decided. The way to cut this Gordian Knot is for the court to decide the question of unconscionability.

[48] We would therefore resolve the arguments Mr. Heller has raised against the validity of Uber’s arbitration agreement rather than refer those arguments to arbitration in the Netherlands.” (emphasis added)

6.10  Mr Hughes has not cited any cases to show that the exception carved out in Uber premised on the issue of accessibility has been considered in Hong Kong. In any event, in the present case, given the apparent resources of Techteryx, there can be no issue of accessibility.

6.11  Thirdly, and as alluded to above, not only is there presently no precise formulation of any vitiating grounds which relate directly to the Arbitration Agreement, it has not been suggested by Mr Hughes that, even when formulated, it is compelling to the extent that it is, using the phrase at Uber §33, “incontestable”. It seems to me that the allegation to be introduced by the proposed amendment is the type of argument which Quaetus §43 has observed as being precluded by the authorities, namely the jurisdiction clause should not have effect by reason of the fraud that led the plaintiff to enter into an agreement, with the consequence that the jurisdiction clause, which was agreed as part of that agreement, is also vitiated. In the present case, as in the case of Quaestus, there is no suggestion that Legacy Trust was not aware of the Arbitration Agreement or was specifically misled into agreeing to refer disputes to an arbitral tribunal.

6.12  For the above reasons, I am also of the view that the 2^nd question under consideration, if pursued, should also be deferred to the arbitral tribunal.

7.  Disposition

7.1  It follows from the above analysis that I would have granted the Stay Application. This being the case, it follows that I should accede to the Declaratory Relief sought in the Summons and also the consequential orders setting aside the 29/2/24 Order and the service of the Concurrent Re-Amended Writ.

7.2  Whilst it is strictly unnecessary to consider whether Techteryx failed to give full and frank disclosure in the course of obtaining the 29/2/24 Order, for completeness, I am of the view that it did. As is trite, the issue of materiality is for the court and Techteryx cannot justify its non-disclosure of the Arbitration Agreement based on its own (as it turns out erroneous) assessment of relevance. However, I am prepared to proceed on the basis that the non-disclosure was only as a result of poor judgement, but in the light of my views on the Stay Application, there can be no issue of regrant.

8.  Conclusion

8.1  I therefore grant an order in terms of Summons §§1(a) and (c), 2 and 3, save that the words “has no jurisdiction or” in the first sentence of Summons §1(a) should be deleted. I also dismiss the New Evidence Summons, as Wong 1^st does not have an important effect on the outcome of the Summons.

8.2  I also grant an order nisi the costs of the present action, including the costs of and occasioned by the Summons and the New Evidence Summons, be paid by Techteryx to Crossbridge on an indemnity basis, to be taxed if not agreed with a certificate for 2 counsel. For avoidance of doubt, the higher basis is justified by the arbitration element, and not by reason of any views on material non-disclosure.

Mr Sebastian HUGHES, instructed by Messrs Loeb & Loeb LLP, for the Plaintiff

Mr Norman NIP, SC leading Mr Adrian TY WONG, instructed by Messrs Stephenson Harwood, for the 2^nd Defendant

HCA 1906/2023

[2024] HKCFI 3627

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1906 OF 2023

_____________

_____________

________________

D E C I S I O N

________________

1.  The Order of the Singapore Court of 14 August 2024 (“SP Order”) is to permanently restrain the Plaintiff in this action from continuing HCA 1906/2023, this action, against the 4^th Defendant named.

2.  The SP Order is in personam, made against and binding on the Plaintiff, unless it is set aside by the Singapore Court on its own, or by the SP Court of Appeal on appeal.

3.  On the face of the SP Order, the Plaintiff can only discontinue or seek the dismissal of the present action and any action or step taken by it other than to discontinue the action is a breach of the Order. Needless to say, an appeal against the Order does not per se operate as a stay of the Order. There is no evidence before me that Singapore law operates differently.

4.  The Plaintiff maintains that notwithstanding the SP Order, it is appropriate for it to seek an adjournment of the 4^th Defendant’s summons for stay of this action, pending appeal against the SP Order, or further order. The 4^th Defendant seeks the immediate dismissal of the Plaintiff’s application for adjournment and determination of its application for stay.

5.  This Court is the master of the proceedings before it, and can exercise its case management powers, irrespective of the position taken by the parties.

6.  On principles of comity, this Court cannot see why it should condone or assist the Plaintiff or any party to act in breach of a valid and binding order of any court, in the absence of any order for the stay of execution of the SP Order.

7.  Hence, I see no good reason to entertain or grant the Plaintiff’s summons to adjourn the 4^th Defendant’s application for a stay of the action, and which is fixed for hearing on 20 December 2024. It should comply with the SP Order and either discontinue the action, or consent to the 4^th Defendant’s application to stay the action to arbitration. If the Plaintiff really has grounds to resist the application for stay, and can show that it is entitled to contest it notwithstanding the SP Order, then it can establish this at the hearing fixed on 20 December 2024. It is not necessary to argue it today.

8.  The Plaintiff’s summons is accordingly dismissed, with costs to the 4^th Defendant, on indemnity basis, with Certificate for Counsel.

Mr Laurence Li SC and Mr Sebastian Hughes, instructed by Loeb & Loeb LLP, for the plaintiff

Mr Wing So, instructed by Reynolds Porter Chamberlain, for the 4^th defendant