高李严律师行的争议解决合伙人赵君宜律师最近受邀接受《星岛日报》的采访,讲述香港企业和员工在最新新冠肺炎疫情下所面临的日常营运挑战,并分享了她在处理关闭业务或清盘方面的丰富经验。期望为受疫情所困的人士提供更多解决方案。
按此阅读更多: https://bit.ly/3qOAhxR

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高李严律师行的争议解决合伙人赵君宜律师最近受邀接受《星岛日报》的采访,讲述香港企业和员工在最新新冠肺炎疫情下所面临的日常营运挑战,并分享了她在处理关闭业务或清盘方面的丰富经验。期望为受疫情所困的人士提供更多解决方案。
按此阅读更多: https://bit.ly/3qOAhxR
“Layering” is an inseparable part of money laundering in a typical cyber fraud case. The process involves fraudster transferring the defrauded funds from one bank account to various bank accounts, often belonging to different account holders (or second layer recipients), which could even be in different countries. This is a common technique to “break down” the large defrauded funds so as to avoid alerting the bank when they are ultimately withdrawn. In the case of Hong Kong, the second layer account holders are usually shell companies or PRC residents. More often than not, either that they are knowingly involved in the fraudulent scheme, or that they have lent the accounts to a criminal gang without caring how their accounts are utilized for laundering related activities.
Victims in cyber fraud often find it tricky when they trace the lost sum onto these second layer recipients. Unlike the first layer recipient where the element of fraud is obvious, the second layer recipients may rely on the defence of “bona fide purchaser for value without notice” to suggest that they receive money only pursuant to a legitimate and genuine transaction thus denying any involvement of fraud (the “Bona Fide Defence”) [see Zief Incorporated v Tekchandani Ajai Mohan (t/a D’Ziner Collections (Hong Kong)) & Ors [2021] HKCFI 38, para 3]. These second layer recipients who rely on the Bona Fide Defence are sometimes called the “Equity Darling”. They are “Darling” in the sense that they would be freed from liabilities and could keep the received fund as clean money.
Having dealt extensively with email scams/cyber fraud, we have concluded three aspects which cause particular difficulties when dealing with these second layer recipients:-
We shall discuss each of these three aspects and how they could be tackled in turn.
Bank statements are critical to any tracing exercise because victims could only discover where the defrauded sum has been further dissipated and locate the fund by reading the transaction records of the fraudster. Banks however would not disclose victims with bank statements because of confidentiality policy unless the victims can provide a Court order compelling discovery. The Court, however, has to be satisfied that it is relevant and necessary for the requested documents to be disclosed. If the victim is merely asking the first layer recipient to personally compensate the money he wrongfully received, it might not be relevant and necessary to look at his other transactions with third parties. Without seeing the first layer’s account activities, without knowing the identity of the second layer recipients and without the relevant transaction information to prove the fund flow, victims’ tracing exercise onto the second layer recipients might come to an end abruptly.
It is therefore important to correctly structure the claim against the first layer recipient. Usually the problem would be cured if the claim is framed properly as a “proprietary” claim, as opposed to a “personal claim”. In a proprietary claim, the victim asserts proprietary rights in the specific funds defrauded. Since the ownership of such fund, irrespective how many subsequent transfers it has gone through and irrespective of who is currently holding the same, sticks with the victim, the victim has the basis to seek information about such fund. In recent years, it has become increasingly common for practitioners to frame the claim against the first layer recipient (and also the second layer recipients) as one of “proprietary restitutionary claim” which is actually a combination of an unjust enrichment claim with a constructive trust as a remedy [see Zhang Yan v ASA Bullion Ltd [2019] HKCFI 179, para 24]. A proprietary restitutionary claim will in practice be viewed by the Court as a proprietary claim for the purpose of injunction and disclosures.
It turns out that where the claimant’s claim is proprietary in nature, the Court will also readily grant a bankers’ book order which is a kind of discovery order made directly against the bank. By this order, the bank can then be compelled to produce the documents relating to the accounts of the first layer recipient. Through the discovery of the documents provided by the bank, one can then also obtain a “big picture” as to how the funds have been channeled away systematically and swiftly to the second layer recipients.
Once the identity the second layer recipients and the corresponding fund flows are known, there is then enough basis to launch legal claims against the second layer recipients.
Likewise, it is necessary to frame the claims against the second layer recipients as proprietary claims such that (1) a proprietary injunction (which points to the specific funds transferred to a second layer recipient), on top of a Mareva injunction (which covers the general assets of a second layer recipient), can be obtained against the second layer recipients; and (2) due to the proprietary nature of the claim, the Court can be asked to grant the necessary orders to assist further tracing of the funds.
As said, it is common nowadays to frame the claim against the second layer recipients as proprietary restitutionary claim. Such a claim has the following benefits:-
Where a second layer recipient raises the Bona Fide Defence in a cyber fraud case, this would often be taken by the Court with a grain a salt. Still, there were cases where a defendant has successfully raised such a defence.
It may be thought that if a second layer recipient receives funds from a third party (i.e. not the contractual counterparty of the alleged transaction), this would deprive him of a Bona Fide Defence at all. However, this is not the case because third party payment is not something prohibited by the law in the first place. Similarly, the law does not impose a general duty on the recipient of funds to make enquiry about the provenance of the funds unless the recipient is under a statutory duty to do.
On the other hand, it has recently been suggested that the risk of money laundering and cyber fraud arising from payment out of a totally unknown bank account is conspicuous and one cannot simply ignore such a risk (Luk Mei Suet Michelle v Afsafari Services Co Ltd & Ors [2022] HKDC 191, para 91). Therefore, this would suggest that a second layer recipient cannot be acting bona fide where he is deliberately ignorant in suspicious circumstances.
Other than challenging the bona fides of the second layer recipient, recent cases successfully defeating a Bona Fide Defence mostly involve challenging the existence of the alleged transaction. Sometimes, the claimant may even go further to challenge the second layer recipient having a real legitimate business at all. However, these are serious allegations which involve a careful analysis of the evidence.
Where the transaction alleged by the second layer recipient involves an underground banking transaction, the consensus is that the illegality of such transaction would prevent the second layer recipient from raising the Bona Fide Defence at all, since in law he cannot be regarded as having provided consideration. It is notable that in Hong Kong, there is no capital or remittance control and thus the use of underground remittance dealers is not illegal within the jurisdiction per se. The breach of remittance control is therefore concerning illegality under foreign law only. The victim would have to file foreign law expert evidence to assist the Hong Kong Court in establishing illegality.
Claiming against the second layer recipients is not an easy task. It is therefore advisable that the victims seek instant assistance from experienced litigators to handle the civil claim. On the Discovery Issue and the Preservation Issue, quick action is the key. On the Merits Issue, the defendant’s case has to be studied carefully to decide the right strategy, with an eye to be kept on the latest legal developments. However, experience has told us that, where all the things are done correctly, there is still a high chance to recover a large part of the defrauded funds.
In the midst of COVID-19, where everything seems to be delayed and rescheduled, one may be under the illusion that pursuing a legal action to recover damages could wait. However, it should be borne in mind that Hong Kong has limitation period on bringing civil actions. If these are not adhered to, one may potentially face the grave consequences of an action being time-barred, such that all the rights and recourse against the wrongdoer could vanish.
In Hong Kong, the limitation of civil actions is governed by the Limitation Ordinance (Cap. 347) (“LO”). It is important for one to observe the limitation period for different types of action.
In the case of a simple contract, the limitation period is 6 years from the date of accrual of the cause of action (s4 LO). For the recovery of outstanding rent, the limitation period is also 6 years from the date on which the rent became due (s18 LO).
In the case where monies are secured by a mortgage or “other charge on property”, the limitation period is 12 years from the date of the accrual of the cause of action for the recovery of the “principal sum of money” (s19(1) LO). On the other hand, for the recovery of “arrears of interest” in respect of any sum of money secured by “a mortgage or other charge on property”, the limitation period is only 6 years from the date on which interest became due (s19(5) LO).
In our day-to-day commercial setting, there are a lot of contracts which are secured by charge on shares, or other properties. These share charges are also often registered in the Companies Registry in order to ensure their validity and priority. An interesting issue then arises as to whether these contracts, which are secured by share charges, can be regarded as secured by “other charge on property”, such that an innocent party can enjoy the limitation period of 12 years rather than 6 years (as in simple contract)?
Whilst there is no direct case law on this point, it appears that an innocent party may sometimes be able to enjoy the benefit of 12 years limitation period, for recovering the “principal sum of money” under the contract. In the equivalent UK provision, in a case concerning mortgage gold bonds, it is held that limitation period to recover the outstanding principal is 12 years[1].
In relation to any recovery for debt or other liquidated pecuniary claim, if there is acknowledgement or payment from the debtor, the right of accrual of action is deferred to the said acknowledgement or the last payment (s23(3) LO). Such acknowledgment, however, must be in writing and signed by the person making the acknowledgment (s24(1) LO).
For an action regarding tort of negligence (other than personal injuries), the limitation period is 6 years from the date of accrual of the action (s4(1) LO).
However, if damage caused is latent (I.e. not easily discoverable), such that the Plaintiff does not know of negligence until a later date when damage begins to surface, the limitation period is either six years from the date of accrual of the action, or three years from the date of knowledge acquired to bring an action for damages, whichever later (s31(4)). As held in the HK Court of Final Appeal in the case Kensland[2], a cause of a cause of action in tort accrues when the damage which results from the tortuous conduct is “real, as distinct from minimal or negligible and is actual, as opposed to purely contingent”[3].
For the recovery of trust property or a claim for any breach of trust by a beneficiary, the limitation period is generally 6 years from the date of the accrual of cause of action (s20(2) LO). However, in the situation where the breach of trust is committed fraudulently, there is no limited period to bring an action (s20(1) LO).
For all actions for damages for negligence, nuisance or breach of duty in respect of personal injuries, the time limit for the Plaintiff to bring an action is 3 years from the date on which the cause of action accrued, or the date of the Plaintiff’s knowledge (if later) (s27(1) LO).
However, in the case when the Plaintiff is suffering from disabilities, it is provided that the period of limitation is extended to 6 years from the date when the person cease to be under a disability or died, whichever event first occurred (s22(1) LO). As regards the definition of “disability”, whilst a person shall be deemed to be under a disability whilst he/she is an infant or of unsound mind (s22(3) LO), it has also been held that a liberal approach should be taken to cover cases where a person cannot manage his own affairs.
Apart from the limited exceptions provided for the specific cause of action as stated above, there are three general exceptions accorded to the Plaintiff, which are:-
(1) The action is based upon the fraud of the Defendant;
(2) Any fact relevant to the Plaintiff’s right of action has been deliberately concealed from Plaintiff by the Defendant; or
(3) The action is for relief from the consequences of a mistake,
The limitation period shall not begin to run until the Plaintiff, has discovered or can with reasonable diligence have discovered, the fraud, concealment or mistake committed (s26(1) LO).
It must be noted, however, the above general extension does not apply to recover any property from a purchaser for value without notice of the said concealment, fraud and mistake (s26(4); s26(5) LO).
In light of severe consequences of one’s claim being time-barred, in the event the time limit is imminent, it is always advisable, and indeed rather common, for the Plaintiff to file a Writ within the time limit to protect its position. Such a Writ is used primarily to prevent the Plaintiff’s claim from being time-barred, so such a Writ is commonly termed “protective writ”.
Once a “protective writ” has been filed with the Court, the Plaintiff is regarded as having brought an action in law, and will thus not be deprived of time limitation.
A Writ need not be served immediately and can be served within 12 months after the date of its issuance[4]. Effectively, this gives the Plaintiff another 12 months to collate necessary evidence and to precisely formulate its claim before formally serving the Writ to the Defendant, such that all filing dates will start running.
Should you need any assistance on the advice regarding limitation of your potential claim, please feel free to contact us.
Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.
[1] Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] Ch 146
[2] [2008] 11 HKCFAR 237
[3] [2008] HKCFA 13 para 51
[4] O.6 r. 8
千万当心: 保护你挚爱的家人
希望订立一份遗嘱让你现在努力经营的一切送给你最爱的人? 却担心聘用律师草拟遗嘱的费用太高吗?
高李严律师行为你解决这个问题。
即日起至四月底,你只需捐赠港币2,900元给予「伸手助人协会」,本行的遗产规划律师将为你免费准备一份简单的遗嘱。
伸手助人协会是一间获香港政府认可并致力为有需要的长者提供服务的慈善机构。尤其在这个艰辛的日子里,为一众深受新冠肺炎疫情影响的长者提供急切援助。透过「遗善草拟计划」所筹集的善款将全数捐赠给伸手助人协会,以协助旗下各服务单位提供足够应援物资给长者。本行的遗产规划律师将免除任何行政费用,以「零」费用为你免费准备一份简单的遗嘱,以确保你的意愿得以落实。
如果一份简单的遗嘱未能符合你的需求,本行也乐意为你量身定做,但费用需视乎你的资产和个人入息是否符合有关条件。
因意识到很多香港人误以为订立遗嘱没有确切的需要,高李严律师行于2011年首次展开遗嘱草拟计划。更糟糕的是,大众普遍误解了遗产税在2006年的废除,相等于遗产将会由他们的至亲自动继承。
我们衷心希望透过「遗善草拟计划」让本来却步聘用律师的人,也可确保他们的家人将来受到保障。
此项计划将于2022年4月30日截止。
如果你已拥有一份由专业人士草拟的遗嘱,但希望略尽绵力,透过慈善捐款协助一班弱势社群 – 无论金额多少,我们及伸手助人协会将非常感激。
伸手助人协会
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Cryptocurrency is still in a very nascent stage, and the lack of regulation and promise of unsustainably high returns make it the perfect target for fraudsters. In 2021 crypto scammers took a record of 14 billion USD, making crypto scams the biggest digital finance scams.[1]
Hong Kong is drifting towards becoming fertile ground for crypto scammers due to the general popularity of digital assets here and Hong Kong’s ad hoc approach to regulating them. For the past several years, while the Securities and Futures Commission (SFC) attempted to regulate virtual asset platforms and warned of cryptocurrency risks, not much has been done to protect crypto owners in Hong Kong.
With cryptocurrency in Hong Kong on the rise, here are some common issues we encounter in our legal practice:
Copycat trading websites and apps are flourishing. Unfortunately, they look very similar to the legitimate ones, and some fake websites even appear high in Google search, so it is hard to perceive the danger.
Investors can “buy” cryptocurrency through these fake websites and apps and even see their deposited funds growing on fake charts. Trying to be convincing, these platforms even allow to withdraw a small amount of money to earn trust. However, while attempting to withdraw all, investors will then discover that their money has already vanished.
We have been dealing recently with rising cases of so-called “romance scams” that follow the same formula: an attractive Chinese/Asian woman slides into the victim’s dating application, WhatsApp or another direct messaging app, starts a conversation on different topics, creates trust and then gives tips on crypto investing, recommending a crypto trading platform with the biggest return ever. The platform is almost always fake. A number of such cases has been reported in Hong Kong involving the currency OEN and platforms Bitfex.pro and Bitfex.vip.[2]
The best practice when encountering a too good to be true crypto scheme is to be skeptical and do proper due diligence.
New cryptocurrencies offering is an unregulated way to raise funds. Investors expect huge returns from such ICOs and eagerly sign up paying for future coin with another cryptocurrency, usually Bitcoin or Ethereum (ETH), directly to the fundraiser’s e-wallet. However, the fact that anyone can launch an ICO without any regulatory control makes it extremely risky – many ICOs don’t manage to raise funds, while others don’t happen at all.
We encounter complaints against certain legitimate platforms that accept crypto assets, but then freeze the wallets on the grounds that the trader doesn’t comply with their AML/KYC procedures. This is a grey area – AML/KYC procedures usually should be cleared by the platform before acceptance of crypto funds. If the funds have already been deposited, and non-compliance with AML/KYC is stated as a reason for wallet freeze, it is our view that the entire transaction should be considered nullified, and crypto funds returned to their owner.
Given that the password is the only way to access your blockchain wallet, cryptocurrency investors now become invaluable and easy targets for criminals. In November 2021, Hong Kong Police rescued a 39-year-old cryptocurrency trader who supposed attending a USDT trade but in fact he was kidnapped by triad members for 7 days, and he was forced to disclose his passwords to his online banking account and cryptocurrency trading platforms, losing approximately 5 million USDT (approximately HK$39 million).[3]
It is strongly advised that other than face-to-face transactions, cryptocurrency investors should conduct transactions through trustworthy online platforms, or simply through law firms, to add a layer of protection.
Unfortunately, upon reviewing the Hong Kong Court decisions and judgments relating to cryptocurrency, it can be deduced that unless the identity of the scammers is known plus the fact that the funds can be located in Hong Kong (such as banks or trading platforms located in Hong Kong), it can be very difficult to seek relief from Hong Kong Courts or law enforcement agencies including the Police due to lack of jurisdiction. Crypto transactions are hard to dispute in comparison with classic finance litigations – crypto assets sent to another wallet address is not that easy to trace, even if we manage to trace, they may already be in another jurisdiction, and Hong Kong police may not be able to intervene. If you find yourself a victim of a crypto fraud, the best advice is to contact the local police immediately and try to freeze the scammer’s account to keep your assets within Hong Kong/your own country.
If you need more assistance with cryptocurrency-related legal issues, we recommend contacting us. OLN has dedicated lawyers who work with blockchain technology and can provide advice and help you will need for your investment and other arrangements.
[1]Crypto scammers took a record $14 billion in 2021: https://www.cnbc.com/2022/01/06/crypto-scammers-took-a-record-14-billion-in-2021-chainalysis.html Last access: 7 March 2022.
[2]Sexy fraudsters scam $546m from crypto punters: https://www.thestandard.com.hk/sections-news-print/232236/Sexy-fraudsters-scam-$546m-from-crypto-punters. Last access: 7 March 2022.
[3]Cryptocurrency trader in HK$30 million kidnap case escapes. https://www.thestandard.com.hk/breaking-news/section/4/182930/Cryptocurrency-trader-in-HK$30-million-kidnap-case-escapes Last access: 7 March 2022.
高李严律师行十分荣幸获香港社会服务联会认可为2021至2022年度「商界展关怀」公司, 以表扬本行在过去一年在关心社区、关怀员工和关爱环境方面的承诺。
高李严律师行非常重视企业社会责任,尤其作为香港领先的独立律师行,我们积极鼓励员工参与并支持社区项目。我们努力为我们经营业务的地区和社区带来积极改变,不论是通过公益、慈善工作还是环境保护项目。
这个嘉许属于一班曾无私地为本行企业社会责任项目,而付出私人时间和汗水的杰出员工!
「商界展关怀」计划由香港社会服务联会于2002年策动,旨在促进商界与社福界之间的策略性伙伴合作,共同推动企业社会责任,建设共融社会。此外,「商界展关怀」计划亦透过举办不同类型的跨界别交流活动,企业与社会服务机构彼此认识及加深了解。
「商界展关怀」奖项每年颁发一次,以表扬于企业社会责任方面表现突出的公司。
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