Effect of Illegality in Hong Kong is Still Absolute: Summary Judgment Granted In Favour of Fraud Victim

Wong Hok Yan has recently represented the successful Plaintiff in Ling Weixian v. Tsoi Ai Tong [2022] HKDC 967 seeking summary judgment in the Plaintiff’s favour in respect of her claims of unjust enrichment and constructive trust.


In allowing the Plaintiff’s application and granting summary judgment, Deputy District Judge Rebecca Lee remarked the absolute approach in Tinsley v. Milligan [1994] 1 AC 340 is still good law in Hong Kong and that the Court will bar any defence involving acts of illegality.  Acknowledging that the absolute approach in Tinsley is open for review in light of the UK’s decision in Patel v. Mirza [2017] AC 467, such review cannot be undertaken by a court of first instance.


The full text of the Judgment can be found here.

In Ling Weixian v. Tsoi Ai Tong [2022] HKDC 967, Deputy District Judge Rebecca Lee granted summary judgment in favour of the Plaintiff in respect of her claims of unjust enrichment and constructive trust.


2.  The Plaintiff became acquainted with a fraudster who claimed to be familiar with trading of cryptocurrencies and invited the Plaintiff to open an account at an online exchange platform to trade USDT.  Procured and induced by such representations, the Plaintiff opened an account and deposited some monies into a bank account held by the Defendant.  However, the fraud was revealed when the Plaintiff failed to withdraw her investments and reported to the police.


3.  It is the Plaintiff’s case that the Defendant, whom she did not know and had no previous dealings with, has been unjustly enriched by the deposit and is liable to repay and make restitution of the same.


4.  In defence, the Defendant alleged that she was a business partner of a licensed money service operator and has authorized it to use her personal bank account in conducting remittance business.  It is the Defendant’s case that they were in the course of legitimate business dealings and had no knowledge of the fraud, and that they are bona fide purchasers of the Plaintiff’s deposit by providing considerations by payment of sum RMB to various bank accounts in Mainland China.


5.  However, such business dealings indeed fall foul of various PRC regulations, namely, 中華人民共和國外匯管理條例結匯付匯管理規定 and個人外匯管理辦法.  The effect of such illegality is that the defendant would not be able to rely on the defence of bona fide purchaser and change of position defence: Tinsley v. Milligan [1994] 1 AC 340; Barros Mattos Junior v. General Securities & Finance Ltd [2005] 1 WLR 274 considered.


6.  The absolute approach of Tinsley was overruled in UK: Patel v. Mirza [2017] AC 467 which laid down a new test regarding illegality, and it was once argued that it follows that the effect of illegality is now triable: Lesnina H DOO v. Wave Shipping Trade Co Ltd & Ors [2022] 2 HKLRD 727; [2022] HKCFI 1070.


7.  In granting summary judgment in favour of the Defendant, Her Honour accepts the Plaintiff’s submissions that: —

    • acknowledging the absolute approach of Tinsley is open for review, such review cannot be undertaken by a court of first instance.  The absolute approach in Tinsley is in fact adopted by the Court of Final Appeal in Ryder Industries Ltd v. Chan Shui Woo (2015) 18 HKCFAR 546 and it remains the law in Hong Kong as of today: see also HKSAR v. Lau Kam Ying(2013) 16 HKCFAR 595 considered; Arrow ECS Norway AS v. M Yan Trading Ltd [2018] HKCFI 975 applied; Lesnina H DOO (supra) not followed; 
    • the unchallenged evidence is that the form of foreign currency remittance service as conducted by the money exchange provider (and the Defendant), as pleaded in the defence, is in breach of PRC law.  It follows that the bona fide purchaser defence and change of position defence will bound to fail;
    • in any event, the factual matrix of the defence is untenable.  There are a number of loopholes in the evidence relied upon by the defendant which the defendant should be in a position to fill up but has not done so: Tang Yuan Yi v. Tokyo International Investments Ltd [2020] HKCFI 1133 applied.
Wong Hok Yan represented the successful Plaintiff.

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