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Toyota Boshoku Europe N.v. v Kingsville (Hk) Enterprises Ltd And Others

Judgment Cited authorities 3 Cited in Precedent Map Related
Vincent
Judgment Date24 August 2023
Neutral Citation[2023] HKCFI 2056
Subject MatterCivil Action
Judgement NumberHCA452/2022
HCA452A/2022 TOYOTA BOSHOKU EUROPE N.V. v. KINGSVILLE (HK) ENTERPRISES LTD AND OTHERS

HCA 452/2022

[2023] HKCFI 2056

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 452 OF 2022

______________

BETWEEN
TOYOTA BOSHOKU EUROPE N.V. Plaintiff
and
KINGSVILLE (HK) ENTERPRISES LIMITED 1st Defendant
HONGKONG CINODA INDUSTRIAL LIMITED 2nd Defendant
YIELD POINT TRADING LIMITED 3rd Defendant
TE I (INTERNATIONAL) BUSINESS CONSULTING SERVICE LIMITED 4th Defendant
HUI QI CO., LIMITED 5th Defendant
FHUH CO., LIMITED 6th Defendant
EVERLIGHT STAR TECHNOLOGY CO., LIMITED 7th Defendant
HONG KONG SHUN YUEN IMPORT AND EXPORT LIMITED 8th Defendant
INGOT COMMUNICATIONS LIMITED 9th Defendant
SUN WANDE DEVELOPMENT CO., LIMITED 10th Defendant
XM TRADE COMPANY LIMITED 11th Defendant
YL TRADING INTERNATIONAL LIMITED 12th Defendant
ORIENTAL PARTNERS LIMITED 13th Defendant
WA TING (HK) DEVELOPMENT COMPANY LIMITED 14th Defendant
CRUX MATTER HOLDING INCORPORATED 15th Defendant
ZY TRADING CO., LIMITED 16th Defendant
XU XIAOJIAN 17th Defendant
WONG CHUN LEUNG 18th Defendant
XIN HONGJUN 19th Defendant
NA YI 20th Defendant
LIU SHURONG 21st Defendant
LI SEN 22nd Defendant
CHEN SU HUA 23rd Defendant

______________

Before: Deputy High Court Judge Kenneth Wong in Chambers
Date of Hearing: 24 May 2023
Date of Decision: 24 August 2023

____________________

DECISION

____________________

A. Introduction

1. This is the substantive hearing of the Plaintiff’s summons dated 26 May 2022 (the “Summons”) for continuation of the proprietary and Mareva injunctions (respectively the “Proprietary Injunction” and the “Mareva Injunction” and collectively the “Injunctions”) granted ex parte by Deputy High Court Judge Jenkin Suen SC on 25 May 2022 against the 7th Defendant (“D7”). In the Summons, the Plaintiff (“P”) also asks for an ancillary disclosure order and a banker’s disclosure order pursuant to section 21 of the Evidence Ordinance.

2. D7 accepts[1] that for the Proprietary Injunction, P has a serious issue to be tried as to its proprietary claim, and that for the Mareva Injunction, P has a good arguable case over its claim for restitution based on unjust enrichment.

3. D7 raised 3 issues which require determination by this Court:

(1) Whether the Proprietary Injunction shall be limited to the lowest intermediate balance of D7’s account, namely HK$10,318.25 as of 18 May 2021[2].

(2) Whether P has failed to show that D7 has any real risk of dissipation of assets, so that the Mareva Injunction ought to be discharged[3].

(3) If the Mareva Injunction is to continue, whether the limit of the frozen assets should be reduced to avoid giving P “over-security”[4].

4. For the ancillary disclosure order, D7 accepts that it should rise and fall together with the Injunctions[5].

5. For the banker’s disclosure order, without prejudice to its other submissions, D7 has no objection to this application[6].

B. Background Facts

6. As mentioned above, this hearing concerns D7 only. I adopt the description of this action by Deputy High Court Judge Le Pichon in her Reasons for Decision, [2023] HKCFI 1393, dated 22 May 2023 for the substantive hearing of the ex parte injunction order against the 8th Defendant in the same action (the “D8 Decision”), as follows:

“2. The Plaintiff is the victim of a large-scale fraud in which approximately HK$500 million was paid to various companies as a result of unknown individual(s) impersonating the CEO and President of the Plaintiff's parent company, and causing the Plaintiff's general manager of finance to believe that the funds were required for a secret and urgent acquisition.

3. The Plaintiff has already obtained interlocutory proprietary and Mareva injunctions against 48 defendants in HCA 2091/2019 (“HCA 2091”) comprising “1st layer”, “2nd layer" and “3rd layer” recipients of the Plaintiff’s funds (collectively referred to as “ADs” and individually as “ADX”).

4. The Defendants in this action (“the Defendants”) are the “next layer recipients” of the Plaintiff's funds from ADs identified from the banking documents obtained in HCA 2091.”

7. D7 is a “4th layer recipient”. It received traceable proprietary funds totalling US$311,833.00 on 20 August 2019.

8. D7’s upper layer recipients of P’s traceable proprietary funds are[7]:

(a) AD5, who received a total of US$8,163,000.00 from P, rendering it a “1st layer” recipient;

(b) AD24, who received payments from AD5 totalling US$1,145,656.00 and became a “2nd layer” recipient;

(c) AD47, who received payment of US$200,000.00 from AD24 of P’s traceable proprietary funds – a “3rd layer” recipient; and

(d) AD48, who (i) as a “3rd layer” recipient, received two payments totalling US$450,001.00 from AD24 and (ii) as a “4th layer” recipient, received a sum of US$199,999.08 from AD47.

9. D7 received one payment of US$311,833.00 of P’s traceable proprietary funds from AD48 on 20 August 2019.

10. US$311,833.00 is hence the subject matter of the Proprietary Injunction[8] and the Mareva Injunction[9].

C. Procedural History

11. On 22 November 2019, the interlocutory proprietary and Mareva injunctions were made against AD48, on inter partes basis but in its absence, in reliance on information provided by the Hong Kong police.

12. On 24 May 2021, AD48 issued a summons seeking discharge of the injunctions, on the basis that there is no serious issue to be tried and/or the P has no good arguable case.

13. On 20 January 2022, the substantive hearing of AD48’s summons took place before Madam Justice Au-Yeung.

14. On 22 April 2022, Madam Justice B. Chu granted ex parte injunctions against all the Defendants in this action, with the exception of the 3rd Defendant and D7, insofar as they received funds from AD48. P’s Counsel informed this Court that this was because AD48 has applied for discharge of the injunctions against it and the decision was still pending at that time; and Her Ladyship indicated that it would be appropriate for P to make a further injunction application after the decision if AD48 was unsuccessful in discharging the injunctions.

15. On 6 May 2022, Madam Justice Au-Yeung handed down the Decision (Toyota Boshoku Europe N.V. v Hong Kong Kia Jia Trading Limited [2022] HKCFI 1328, the “AD48 Decision”) dismissing AD48’s application for discharge with costs.

16. On 25 May 2022, consequent to the dismissal of AD48’s application, P applied ex parte for a proprietary injunction together with a “top up” Mareva injunction against D7. Deputy High Court Judge Jenkin Suen SC was satisfied that there would be secrecy concern not to tip off D7 (hence justifying ex parte application), and that an ex parte proprietary and top up Mareva injunction should be granted in favour of P against D7 until the return day[10]. Accordingly, the learned deputy judge granted the Injunctions.

17. D7 attended the hearing at the return day on 2 June 2022 and indicated its opposition to the Summons. Madam Justice Cheng adjourned the Summons and continued the Injunctions in the interim. This is the adjourned hearing of the Summons.

18. I shall deal with the 3 specific issues raised by D7 as set out in paragraph 3 above in turn below.

D. Proprietary Injunction - Lowest Intermediate Balance

19. D7 contends that P’s proprietary claim against funds in D7’s bank account is limited to its lowest intermediate balance of HK$10,318.25[11].

20. Mr Toby Brown (“Mr Brown”) (Mr Jeremy Yau with him), Counsel for P, argues that the “lowest intermediate balance” rule has no application here as alleged[12]. They submitted that this rule is a rule that applied to D7’s upper layer recipient’s bank account (i.e. AD48’s account) but not D7’s own bank account[13], and it determines how much of P’s proprietary funds can be traced out of AD48’s account to D7.

21. Mr Tasman Tam (“Mr Tam”), Counsel for D7 relied on The Maitri Trust v Hong Fei Sheng (HK) Trading Co Ltd and Others [2020] HKCFI 2764[14]. However, Maitri Trust did not explain the rationale and modus operandi of the said “lowest intermediate balance” rule[15].

22. Snell’s Equity, 34th edition, paragraph 30-057, explained the operation of the rule during the tracing process very well, as follows:

“ … Where, however, the trustee deposits money into the account after he has been proved by the rules above to have drawn against the claimant’s money, there is no presumption that he intends the deposit to replace the claimant’s money. The claimant is therefore limited to asserting a claim against the account for the lowest balance that his money has fallen to between the date of the deposit of his money and the subsequent deposit of the trustee’s own money. This result is consistent with the general presumptions operating in cases of mixture. Since the subsequent deposit of the trustee’s money does not originate in the mixed fund, the trustee can easily displace the evidential presumption that it is attributable to the claimant.” (emphasis in bold)

23. In the present case, after (a) P’s traceable proprietary moneys were deposited into D7’s bank account and mixed with D7’s own money originally in the account, (b) money was then withdrawn from the account[16] and (c) further money was deposited into the account, P is still entitled to claim against the account, but the claim will be limited to the lowest balance that P’s money has fallen to between the date of the deposit of his traceable proprietary money and the subsequent deposit of D7’s own money (unless there is evidence showing that D7’s subsequent deposit is not its own money...

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