HONG KONG Law and Practice Contributed by: George Lamplough, Edward Beeley, Vanessa Cheng and Curtis Pak, Holman Fenwick Willan
that they received the funds pursuant to a legitimate business transaction or through an underground cur - rency exchange. Recipients often seek to rely on the equitable defences mentioned previously (change of position or bona fide purchaser for value) to defeat a proprietary claim. The Hong Kong courts have ruled that defendant recipients may not invoke these defences where they use underground banking to circumvent the foreign exchange laws of Mainland China ( DBS Bank (Hong Kong) Ltd v Pan Jing [2020] HKCFI 268 (in which Holman Fenwick Willan acted for the successful bank); Taihei Dengyo Kaisha Ltd v Zhao Yizhe [2024] HKDC 222). However, some recent cases suggest that the use of underground banking does not automatically render the transaction unenforceable. Rather, the courts may consider the severity of the illegality on a case-by- case basis, having regard to a range of factors. The courts have held that the question of whether illegality bars the defences of bona fide purchase and min - isterial receipt should not be summarily determined ( The Yerrid Law firm v Qianshaizi Trading Limited and Another [2023] HKCA 788). It is not uncommon for victims to encounter an evi - dential lacuna, which prevents them from directly linking payments received by first-level recipients to funds received by second- or third-level recipients. In appropriate circumstances, the courts may draw adverse inferences from the failure by defendants to produce documents and/or witnesses, which they can reasonably be expected to produce, in relation to the victim’s tracing exercise ( ANZ Commodity Trading Pty Ltd v Excellence Raise Overseas Limited and Others [2023] HKCFI 179 – in which Holman Fenwick Willan Professionals engaged to carry out services such as maintaining accounts, conducting audits or calculat - ing tax liabilities may unwittingly facilitate a fraud. They may find themselves exposed to tortious claims such as negligence and breach of professional standards. However, in identity fraud cases, the Court of Appeal has recently held that solicitors would not normally acted for the successful bank). Professional Service Providers
guarantee the identity of the signer, or provide the lender with what would amount to an insurance policy against the risk of fraud ( Gain Global Corporation Ltd v Fongs (A Firm) [2025] HKCA 586). 1.4 Limitation Periods In general, the limitation period in Hong Kong for causes of action in both tort and contract (except contracts under seal) is six years from the date on which the cause of action accrued (Section 4 Limita - tion Ordinance (Cap 347) (LO)). Where fraud, mistake or deliberate concealment has occurred, the limitation period does not begin until the fraud, mistake or concealment is discovered or could have been discovered with reasonable diligence (Section 26 (1) LO). However, it is still important to act quickly when fraud is discovered. Hong Kong law prevents a victim of fraud from recovering property, enforcing a charge or setting aside a transaction affecting such property where an innocent third party purchased the property for valuable consideration (Section 26 (4) LO). At the opposite end of the spectrum, there is no limi - tation period for a beneficiary to bring an action in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy, or to recover trust property or proceeds from the trustee (Section 20 LO). However, the Court of Final Appeal has recently clarified that “constructive trustees” whose trustee - ship arose solely as a result of their wrongful con - duct (for example, making a secret and unauthorised profit) would fall outside of the scope of Section 20 (1) LO ( Hui Chun Ping v Hui Kau Mo [2024] HKCFA 32). However, the equitable doctrine of laches (lack of diligence in making a legal claim) may apply and bar such claims. 1.5 Proprietary Claims Against Property To recover property that has passed from hand to hand, victims must first identify and locate the prop - erty and prove that it belongs to them. Victims may be able to trace their funds into the property and thus claim a proprietary interest.
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