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Fraudulent sale of medical products during the Covid pandemic

In Purple Surgical UK Ltd v Win Billion Investment Group Ltd [2024] HKCFI 1643, the High Court of Hong Kong held that the seller had engaged in fraud with respect to a US$27 million contract for the sale of medical products during the Covid pandemic. Nick Luxton led by Rachel Lam SC, and instructed by Stephenson Harwood, acted for the plaintiff buyer, who obtained judgment against the seller and its sole director based in Hong Kong.

In April 2020 (during the early stages of the Covid pandemic), the plaintiff entered into a contract with the UK government to supply surgical masks. The plaintiff was introduced to Win Billion Investment Group Ltd, the first defendant, which was operated by Wu Yun Fai, the second defendant. In order to perform the contract with the UK Government, the plaintiff agreed to purchase the masks from Win Billion.

Under the terms of its contract with Win Billion, the plaintiff paid US$27 million to a lawyer based in the United States, purportedly acting as an escrow agent. However, the masks were not supplied, and the transferred funds were not returned.

The plaintiff obtained freezing orders against Win Billion, Mr Wu and certain other recipients of the funds. Further, the plaintiff obtained a number of disclosure orders, which established that the funds had been transferred to third parties, without the plaintiff’s consent and without manufacturing or paying for the masks. Subsequently, the plaintiff was able to recover over US$17 million from certain recipients of the funds in Hong Kong, and the escrow agent in the United States.

In the High Court action, the plaintiff claimed against Win Billion and Mr Wu for the balance of the funds that the plaintiff had transferred under the sale contract. The defendants argued that they had attempted to supply the masks, but had been unable to do so, and that the plaintiff had terminated the contract prematurely. Win Billion said that it had:

  • entered into a supply contract with a South Korean company, but the company was described as a lamp and lightbulb business;
  • paid a deposit to a company in Georgia, Eastern Europe, even though the masks were to be manufactured in the United States, and the deposit was returned;
  • paid substantial funds to a middle-man in China, who was not identified;
  • paid millions of US dollars in dividends to Mr Wu, even though the masks were not supplied.

Deputy High Court Judge Kent Yee held that it was a case of serious and complex fraud. As the sole director and controlling mind of Win Billion, Mr Wu knowingly procured Win Billion to engage in such misconduct. There was substantial evidence that Win Billion had misrepresented its intentions to perform its obligations under the sale contract. The learned judge rejected the defendants’ remarkable explanations.

A copy of the judgment is available here:

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