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Huobi Asia Ltd And Another v Chen Boliang And Another

Judgment Cited authorities 2 Cited in 2 Precedent Map Related
Vincent
Judgment Date29 October 2020
Neutral Citation[2020] HKCFI 2750
Year2020
Judgement NumberHCA415/2020
Subject MatterCivil Action
CourtCourt of First Instance (Hong Kong)
HCA415/2020 HUOBI ASIA LTD AND ANOTHER v. CHEN BOLIANG AND ANOTHER

HCA 415/2020

[2020] HKCFI 2750

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 415 OF 2020

________________________

BETWEEN
HUOBI ASIA LIMITED 1st Plaintiff
HUOBI GLOBAL LIMITED 2nd Plaintiff

and
CHEN BOLIANG (陳栢良) 1st Defendant
CHEN FENG (陳峰) 2nd Defendant

________________

Before: Deputy High Court Judge Le Pichon in Chambers
Date of Hearing: 9 October 2020
Date of Decision: 29 October 2020

______________

DECISION

______________

1. This is the adjourned hearing of part of a summons dated 1 June 2020 (“the Summons”) filed by Huobi Asia Limited (“the 1st plaintiff”) and Huobi Global Limited (“the 2nd plaintiff”) (collectively “the plaintiffs”) seeking a disclosure order in the context of a Mareva injunction against Chen Boliang (“the defendant”) and Chen Feng (“Mr Chen”).

Background facts

2. The defendant was a former senior manager of the 1st plaintiff.

3. Between 27 February and 14 March 2020, the defendant used a trading account with the 2nd plaintiff which he set up using his father[1]’s identity to trade in bitcoins/USDT against the corporate account of the 2nd plaintiff. The defendant made substantial profits of just over US$5 million (causing a corresponding loss to the 2nd plaintiff) of which US$4,999,995 (in the form of USDT) (“the USDT”) were transferred in various tranches to a bitcoin wallet where the profits crystallised (“1st bitcoin wallet”) at OKEX Bitcoin Exchange (“OKEX”) a digital assets exchange.

4. The unauthorised trading came to light in late March which caused the plaintiffs to carry out a tracing exercise. On 30 March 2020, the plaintiffs discovered that the 1st bitcoin wallet had been cleared out of which US$2,278,478.3 USDT had been transferred by 2 transfers to another bitcoin wallet (“the 2nd bitcoin wallet”) at Binance.com.

5. The 1st plaintiff’s legal counsel Ng Gilbert Man Him (“Mr Ng”) reported the matter to police on 1 April 2020.

6. The defendant was arrested on 11 May 2020 and charged the following day with an offence of “Obtaining Access to Computer with Criminal or Dishonest Intent” which is not an offence under the Theft Ordinance. He is on bail pending further police investigation.

Procedural chronology

7. On 17 April 2020, Coleman J granted an ex parte local Mareva injunction against the defendant (“the April injunction”) with an ancillary disclosure order covering his assets in Hong Kong (“the injunction order”). Prior to the return date, the defendant agreed to the continuation of the injunction order until trial or further order.

8. The defendant complied with disclosure on 29 April 2020, disclosing Hong Kong assets of just under HK $3 million.

9. By this Summons the plaintiffs applied for an order that (1) the injunction order be extended to cover the defendant’s assets outside Hong Kong (the worldwide injunction); (2) the defendant be required to disclose his assets outside Hong Kong pursuant to such injunction order in the form of the draft order attached to the summons.

10. There are 2 parts to §2 of the draft order relating to disclosure of information: (1) required the defendant to make ancillary disclosure of his assets worth HK $50,000 or more outside Hong Kong, including crypto currencies and/or all other forms of digital assets such as bitcoins and USDT; and (2) required the defendant to provide the following information (which is the subject of the present application):

“The Defendant must inform the Plaintiffs in writing the current whereabouts of what has become of the US$4,999,995 worth of USDT (or any other forms converted from USDT), which was transferred out of the trading account with the 2nd Plaintiff (in the name of 陳峰 (UID130289289) between 27 February 2020 and 16 March 2020.”

For present purposes, §2(2) of the draft order will be referred to as “the disclosure order”.

11. A detailed account of events commencing 15 June 2020 culminating in the consent order of 19 June 2020 is necessary given the submissions made in the course of the hearing:

(1) On 15 June 2020, the 1st defendant’s solicitors, Chong & Partners LLP (“CP”) responded to a draft consent order submitted by the plaintiffs’ solicitors Deacons on 11 June 2020 to the effect that the defendant was willing to consent to the Summons subject to, inter alia, the removal of §2(2) of the draft order (ie the disclosure order) in its entirety, “by reference to [the defendant]’s privilege against self-incrimination (“PSI”)”.

(2) Deacons’ response later the same day addressed PSI mentioned in CP’s letter, stating that the defendant appeared to be labouring under a misconception that PSI might assist him in respect of the disclosure order and that as the plaintiff’s case is that “the Subject USDT … was trust properties held upon constructive trust” by the defendant, the exception against self-incrimination does not apply at all.

(3) As the then impending hearing on 19 June 2020 was only a 15-minute call over hearing, Deacons proposed that a consent order be entered in respect of the other parts of the draft order first, save and except that the disclosure order be adjourned for substantive arguments with 2 hours reserved which proposal was accepted.

(4) The consent summons was filed for approval on 17 June 2020. Later the same day Deacons and CP were asked by the Court by letter to explain how it was appropriate to amend the existing local Mareva injunction to become a worldwide one.

(5) There is a note on the court file made at 3:24 pm on 18 June 2020 recording a telephone conversation between the Judicial Clerk and Deacons intimating that the latter’s letter did not answer the point raised in the Court’s letter, that the Judge had certain comments and Deacons were asked to speak to CP about them.

(6) The plaintiffs lodged their skeleton argument at some point in the course of that afternoon.

(7) Ms Lareina J Chan (counsel for the defendant on that occasion and today) informed the Court that upon receipt of the plaintiffs’ skeleton sometime that afternoon, she filed a last-minute skeleton on an urgent basis in reply. The defendant’s skeleton bears a time stamp of 17:43 pm.

(8) Meanwhile, Deacons followed up their earlier call to the Court agreeing with the Judge’s comments conveyed to them and intimated that they would send a new amended draft order, and would be seeking leave to amend the injunction order[2].

(9) No hearing took place on 19 June 2020 as it was vacated at the last minute, Anthony Chan J having made the order by consent.

12. The order dated 19 June 2020 (1) varied the injunction order granted on 17 April 2020 and continued on 22 April 2020 as shown in red in the form attached to the 2nd consent summons[3], and (2) ordered that the disclosure order be adjourned for substantive arguments.

Whether the disclosure order should be made

13. Ms Bonnie YK Cheng (counsel for the plaintiffs at this hearing) was not involved at the time of the June events set out above. The plaintiffs were represented by their former counsel.

14. Ms Cheng’s initial submissions were directed at the issue of PSI when in fact there is no dispute between the parties as to the applicable principles which are set out in the Court of Appeal’s decision in Petroliam Nasional Berhad v George Tan Soon Gin [1989] 2 HKLR 109.

15. It would appear that CP’s reference to PSI in their letter of 15 June had been misread and/or misconstrued by Deacons who maintained that section 33 of the Theft Ordinance applies to the present proceedings[4]. If correct, it would mean that the exception to PSI would apply and the defendant would not be able to rely on PSI.

16. My understanding of CP’s reference to PSI was to flag its availability to the defendant notwithstanding the fact that the disclosure order deviated[5] from the standard form in PD 11.2 by omitting the standard proviso.

17. As the present case does not involve any contravention of section 33 of the Theft Ordinance[6], the defendant having been charged other offences, the standard proviso should have been included as part of the disclosure order[7].

18. PSI is not an issue in the present application as the disclosure order has not been made. The time for raising PSI is when the defendant provides his answers to that order if one is made. Rather, the present question is whether or not the disclosure order should be made.

19. Ms...

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