HONG KONG Law and Practice Contributed by: George Lamplough, Edward Beeley, Vanessa Cheng and Curtis Pak, Holman Fenwick Willan
General Characteristics of Fraud Claims The individual heads of claim that apply depend on the underlying facts. Common causes of action that victims rely on include: • fraudulent misrepresentation; • deceit and fraudulent inducement; • dishonest assistance (accessory liability); • knowing receipt; • constructive trust – arises when the recipient holds funds that they know have been paid to them by mistake or in breach of trust; and • restitution on the grounds of unjust enrichment – where the unjust enrichment consists of a pecuni - ary benefit, the claim is known as an action for money had and received. The first five claims all involve some manner of knowl - edge or dishonesty on the part of the defendant. The last claim does not necessarily require the plaintiff to prove dishonesty or knowledge of the fraud on the part of the recipient. If plaintiffs can prove they have a proprietary claim, then, subject to any equitable defences the defendants might have, their claim may succeed without having to prove that the defendant had knowledge of the original fraud. Defendants regularly argue by way of defence that: • they have changed their position in reliance on receipt of the plaintiff’s funds; and/or • they are bona fide purchasers for value (ie, they paid fair value for an asset acquired with the funds) without notice of the fraud. Other claims include breach of fiduciary duty and breach of the duties of good faith and fidelity, which may apply if the wrongdoer owes a duty to the victim but fails to act in the victim’s best interests. Conspir - acy claims can be brought against those who make agreements with fraudsters with intent to injure the plaintiff. The most common relief sought for fraud is damages or restitution. Other remedies may also be sought, including injunctive or declaratory relief or an account of profits, which enables a plaintiff to recover any prof -
its made by a defendant who has utilised the pro - ceeds of the fraud. 1.2 Causes of Action After Receipt of a Bribe Against the Corrupt Agent – Breach of Fiduciary Duty In this context, an “agent” includes any person employed by or acting for another. The “principal” is the person who has granted an agent power to act on their behalf. There is not necessarily a requirement for a pre-existing legal, contractual or fiduciary obligation. In Attorney General of Hong Kong v Reid [1994] 1 AC 324, the defendant abused his public office by receiv - ing bribes in exchange for preventing criminal prose - cutions. The Privy Council (on appeal from Hong Kong) held that where fiduciaries receive bribes in breach of their fiduciary duties, the law regards the fiduciaries as constructive trustees who hold the bribes on trust for the benefit of their principals. The principal can therefore recover the bribe, as well as any property acquired with it, or any profits made through its use. The Hong Kong courts followed Reid in Secretary for Justice v Hon Kam Wing & Others [2003] 1 HKLRD 524, where the courts held that equity regards the bribe as a legitimate payment intended for the prin - cipal. The payment must be paid over to the princi - pal immediately upon receipt, and equity imposes a constructive trust over the funds or property paid as a bribe for the benefit of the principal. A principal or employer can also sue corrupt agents or employees for breach of their employment or service contracts. Criminal Sanctions The primary anti-corruption legislation in Hong Kong is the Prevention of Bribery Ordinance (Cap 201) (POBO), which is enforced by the Independent Com - mission Against Corruption (ICAC). The POBO pro - hibits the offer and acceptance of bribes in both the public and private sectors and establishes a series of criminal offences for corrupt conduct.
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