REGULATORY ENFORCEMENT NEWSLETTER - ISSUE 1
A quarterly roundup of regulatory issues
These officers had an inescapable personal liability to
comply with Part XIVA and their, in particular the
NED’s, ignorance and incompetence was no excuse.
Chan and Lai deliberately flouted the disclosure regime.
They knew a disclosure was needed but chose not to,
concealing the Auditor’s resignation from Mayer’s
board. The MMT found them to be unquestionably unfit
to be a director of a listed company. They were both
disqualified for 20 months.
Chan and Lai were each fined HK$1.5 million for their
breaches. Mayer and the other officers were fined
HK$900,000 (the maximum fine is HK$8 million).
Mayer and the NED pleaded they were in dire financial
circumstances. The MMT dismissed this as a bare
assertion. The MMT stated if a party wanted to raise
their financial resources as a ground for a lower fine,
full and frank disclosure of his financial position was
needed. Neither Mayer nor the NED had done so.
Mayer and the officers were also ordered to pay costs.
While Mayer had admitted liability for breaching Part
XIVA at the MMT hearing, it was held to be much too
late to be a factor.
The MMT decided to recommend that Chan be
disciplined by the HKICPA. It was stated accountants
had an important role in the listing regime and are
relied on by the public for their expertise in audit and
compliance. Chan’s conduct was stated to be appalling
in ignoring the Stock Exchange’s and Mayer’s solicitor’s
Hong Kong Courts change
their practice to do the
’ for victims of
In an earlier litigation bulletin (a copy of
which is availablehere )
, we advised clients
what to do if they had been defrauded. This
article explains how Hong Kong’s courts are
also doing their part to help victims out.
Sadly, there are all too many cases these days where
crimes committed abroad see the proceeds transferred
to Hong Kong bank accounts. No doubt, with Hong
Kong being a reputable financial centre, an instruction
to remit money here does not raise any alarm with the
victim. Typically, the proceeds will only be in the
jurisdiction for a short period of time before being
moved off shore and lost.
We are frequently instructed to help trace, restrain and
recover victim’s money and have recently acted
following crimes committed in America, England,
Ireland, Nigeria, Mali, Singapore, Sweden and
Switzerland. The most common type of fraud entails a
fake or hacked email being sent to the victim with
bogus payment instructions.
Once a payment is made, time is then very much of the
essence. It is a race to locate the funds and restrain
them before they disappear. It is then necessary to
quickly obtain a judgment and enforce it. The victim,
even if pursuing a proprietary or ownership claim, faces
many risks. One of which is that other creditors may
make a claim against the owner of the bank account.
This can then deny the victim any recovery (because
other creditors have already taken everything): this is
the particular issue which the Hong Kong Courts have
tried to resolve.
Declaration of trust
In our experience, the owner of the bank account which
the funds were remitted to is often a recently
incorporated private company with its director and
shareholder offshore. When sued they usually do not
make an appearance to contest the claim. Until a recent
sequence of High Court judgments (including DHCJ
Cooney SC’s judgment in Guaranty and Trust Company
v ZZZIK Inc Limited & Anor, HCA 1139/2016) the
absence of the owner of the bank account has caused
With no-one defending the claim there is no trial and
without, the court was reluctant to grant declaratory
relief. Victims would seek declarations that the funds in
the Hong Kong bank account were held on trust for
them. The point would not be determined in default
proceedings instead, the victim would obtain a
monetary judgment on default and would only become
an unsecured judgment creditor with no prior or specific
rights over the funds in the bank account.
Making a declaration in the absence of the
In the ZZZIK Inc case, DHCJ Cooney SC stated ‘it is not
the normal practice of the court to make a declaration