A US$2.1m fraud recovery case is a timely reminder to check the legitimacy of agreements and documents.
06/09/2024
DEINES-POLLAN SERVICES LLC (the “Plaintiff”) paid some US$8.3 million for the shipping of fertilisers from a Russian supplier, of which around US$2.1 million was transferred in three payments to the bank account of a Hong Kong-registered company (the second defendant, “D2”).
It was then discovered that
- The agreement was fraudulent and
- That transportation documents had been forged; hence, the shipments never arrived.
DEINES-POLLAN SERVICES LLC
- Immediately reported the deception to the police.
- Commenced legal action against D2 and successfully applied for an interim injunction to restrain D2 from removing the funds from Hong Kong.
- Applied for summary judgment under O.14 of the Rules of the High Court to recover the funds and obtain a declaration that the funds were held in trust for the Plaintiff.
D2 resisted this application and attempted to
- Rely on the bona fide (ie genuine) purchaser defence,
- Claiming that the funds had come from a payment agent in Mainland China due to business conducted with a Filipino customer.
However, Deputy High Court Judge Phoebe Man, in her judgment (https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=162297&currpage=T ), reinforces a crucial legal principle
- For the reliance on the bona fide defence:
- The normal rule of nemo dat (ie no one can give what they do not have) applies
- And there is no scope for relying on the bona fide purchaser defence
- When he or she is direct recipient of the enrichment from the Plaintiff (who has good title) under this specific set of facts, even if D2’s beliefs were credible.
The judge further stated that D2’s claim was unbelievable and lacked good faith even if the defence was applicable. Consequently, she ordered D2 to repay the US$2.1 million with interest and awarded costs to our client.
Source
https://www.boasecohencollins.com/news/bcc-wins-us2-1m-fraud-recovery-case/
https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=162297&currpage=T
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