DCCJ1036/2020
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DCCJ 1036/2020
C [2020] HKDC 472 C
D D
IN THE DISTRICT COURT OF THE
E HONG KONG SPECIAL ADMINISTRATIVE REGION E
CIVIL ACTION NO 1036 OF 2020
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BETWEEN
H H
ALMAR SALES CO. INC. Plaintiff
I and I
CHUANGYOU TRADING CO., LIMITED Defendant
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Before: Her Honour Judge Phoebe Man in Chambers (Open to Public)
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Date of Hearing: 26 June 2020
M Date of Judgment: 6 July 2020 M
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O JUDGMENT O
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P P
Q The plaintiff’s claim Q
1. The plaintiff is a private limited company incorporated in the
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state of New York, USA. The defendant is a private limited company
S incorporated in Hong Kong in April 2017. It is the plaintiff’s case that it S
fell victim to an email fraud and was induced into paying US$122,667.84
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into the defendant’s bank account no.000662340 (the “Defendant’s
C Account”) held with DBS Bank (Hong Kong) Limited (the “Bank”). C
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2. The plaintiff has no business dealings with the defendant, nor
E does the plaintiff know of the defendant’s sole director and shareholder, E
Ma Liguang. The defendant has no legitimate reason to receive or expect
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to receive any payment from the plaintiff.
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3. The plaintiff does business with a PRC supplier named
H Zhangzhou Best Clothing Co Ltd (“Zhangzhou Best Clothing”). H
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4. On 6 October 2019, the plaintiff received a genuine email
J from Zhangzhou Best Clothing (email address:
[email protected]) J
notifying the plaintiff of a change in its bank account details in relation to
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various outstanding invoices issued to the plaintiff for a total sum of
L US$303,119.76. L
M 5. The plaintiff verbally verified the authenticity of the said M
change in bank details with Zhangzhou Best Clothing, which was
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confirmed.
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6. On 10 October 2019, the plaintiff received another email
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purportedly from Zhangzhou Best Clothing notifying the plaintiff that the
Q last bank detail change applied to local to local transfer and new change of Q
bank account details were sent to the plaintiff. The email was sent from
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[email protected] (the “Fraudster’s Email Address”). The number “1”
S does not exist in Zhangzhou Best Clothing’s genuine email address of S
[email protected]. This was unfortunately not picked up by the plaintiff.
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After repeated demands sent from the Fraudster’s Email Address, the
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plaintiff transferred US$122,667.84 into the Defendant’s Account on 18
C October 2019. C
D 7. After the transfer, another email was sent from the Fraudster’s D
Email Address on 23 October 2019, notifying the plaintiff that the bank
E E
account details need to be changed yet again, and that the remaining
F balance of US$181,119.76 needed to be paid. This roused the suspicion of F
the plaintiff who carried out investigations with Zhangzhou Best Clothing
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who informed the plaintiff that they had fallen victim to a scam.
H H
8. The plaintiff had subsequently filed reports with the FBI as
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well as the Hong Kong Police. The Hong Kong Police had informed the
J plaintiff that US$58,000 had been frozen by them. J
K 9. By a Statement of Claim issued on 17 March 2020, the K
plaintiff seeks the following relief : -
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M (1) a declaration that the sum of US$122,667.84 is held by the M
defendant on trust for the plaintiff;
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O (2) an order that the sum of US$122,667.84 be returned to the O
plaintiff forthwith;
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Q (3) pending the enforcement and/or execution of the court’s orders Q
herein, an injunction restraining the defendant from dealing with
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the sum of US$122,667.84 in the Defendant’s Account;
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(4) further and if necessary, an order vesting the sum of
T US$122,667.84 with the plaintiff pursuant to s 52 of the Trustee T
Ordinance, Cap 29;
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(5) interest;
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(6) costs.
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Service E
F 10. In the present case, I am satisfied that the plaintiff has satisfied F
the service requirements, and has shown that the documents had come to
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the attention and knowledge of the defendant, but it had no intention of
H defending the present action for the following reasons: - H
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(1) On 17 March 2020, the plaintiff sent by registered post a
J letter (with documents enclosed) to the registered address of J
the defendant (as shown in the records of the Companies
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Registry in the 2019 Annual Return). The documents were
L delivered and not returned. Section 827 of the Companies L
Ordinance (Cap. 622) has been complied with.
M M
N (2) On 12 May 2020, the plaintiff sent by registered post a letter N
to the defendant, again at its registered address, informing it
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of the plain tiff’s application for default judgment and
P today’s hearing. The documents were delivered and not P
returned. Section 827 of the Companies Ordinance (Cap. 622)
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has been complied with.
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(3) The address of the sole director and shareholder of the
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defendant (as shown in the records of the Companies
T Registry in the 2019 Annual Return) is 河南省鄧州市穰東 T
鎮 穰 西 居委 會穰 西 . Research indicates that this is an
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incomplete address as the resident committee (居委會) has
C a total of 5 village groups with 706 accounts and 2,960 C
people. This points to an intention to deliberately leave an
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incomplete/false address on the part of the sole director and
E shareholder of the defendant. E
F Legal principles F
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11. Having been satisfied as to service, I turn to the legal basis of
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the plaintiff’s application. H
I 12. The court has the power under Order 32 rule 5(1) to proceed I
at its first hearing or any resumed hearing in the absence of a party thereto
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if, having regard to the nature of the application, it thinks it expedient to
K do so. As noted above, I am satisfied that notice of the time appointed for K
this adjourned hearing was duly served on the defendant. I am also
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satisfied that in view of the nature of the present case, it is expedient to
M proceed with the plaintiff’s application. M
N N
13. The deadlines for the filing of acknowledgment of service,
O notice of intention to defend or defence have passed and no filing of any O
document has been made by the defendant, to indicate that it intends to
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defend the plaintiff’s claim. The plaintiff is therefore entitled under Order
Q 19 rule 7 to apply for judgment in default of defence being filed. Q
R 14. The plaintiff’s prima facie case has been borne out by the R
documentary evidence exhibited to his affirmation. I accept the plaintiff
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had been defrauded as alleged. Where property is obtained by fraud, equity
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imposes a constructive trust on the fraudulent recipient so that the property
C is recoverable and traceable in equity1 C
D 15. DHCJ Marlene Ng (as she then was) in Heitkamp & Thumann D
KG v Living Profit Trading Develop Limited and Ors 2 held that regarding
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a claim based on unjust enrichment, money paid under a mistake of fact is
F prima facie recoverable provided that (a) the payer did not intend the payee F
to have the money in any event, (b) the money was not paid for good
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consideration and (c) the payee has not in good faith changed his position.
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16. I am satisfied that the plaintiff has a genuine need for the
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declaratory relief that the defendant is liable to account to the plaintiff for
J the sum of US$122,667.84 together with interest; and that US$122,667.84 J
or any part thereof in the defendant’s Account was held by the defendant
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as constructive trustee for the plaintiff. The plaintiff is entitled to a
L proprietary claim to the US$122,667.84. Without the declaration of a L
constructive trust, the plaintiff may eventually lose out to other creditors of
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the defendant3.
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17. I am however not convinced that the plaintiff is entitled to an
O order pursuant to section 52(1)(e) of the Trustee Ordinance (Cap 29) O
vesting the defendant’s right to recover US$122,667.84 from the Bank to
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forthwith release and return the said US$122,667.84 to the plaintiff.
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18. The Bank was not a party to these proceedings and in its letter
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it had not indicated that “We understand … that a hearing for the captioned
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Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, per
Lord Browne-Wilkinson at 716C-D applied in Michael Chen Kang Huang and anor v Peter Lit Ma
[2009] 6 HKC 191
T 2 T
[2018] HKCFI 1006 at §86-97
3
Mesirow Financial Administrative Corporation v Best Link Industrial Co Ltd, unrep, HCMP
1846/2015, Recorder Lisa Wong SC (as she then was)
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proceedings is fixed on 26 June 2020 at 2:30 pm at the District Court and
C out Bank will not be named as a respondent. On such basis, we take a C
neutral stance in the Plaintiff’s application … to seek for default judgment.”
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This clearly indicated the Bank’s stance that it remains neutral, on the basis
E that it will not be joined as a respondent. If the plaintiff wishes to press on E
with joining the Bank as a respondent, the Bank will need to be present to
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make submissions thereon before the Court will grant such order.
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19. Further, I share Deputy High Court Judge Paul Lam SC’s
H concerns in the case of International Automotive Components Group sro v H
Xuke Trading Ltd & Anor4, on whether s 52 of the Trustee Ordinance may
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be invoked to compel a bank to release funds in a bank account in these
J circumstances: - J
“ I must say that I have serious reservations whether section 52 of the TO
K may be invoked to compel a bank to release funds in a bank account in these K
circumstances. Section 52 (1) (e) refers to the vesting of the right to “sue for
L or recover the thing in action”. As the balance in a bank account represents L
a debt owed by the bank to the account holder, it may be regarded as a thing
in action. Hence, the right to sue for or recover such a debt may be
M described as a right to sue for or recover a thing in action. However, in the M
present context, the plaintiff does not merely want to have the right to claim
the debt payable by HSBC (represented by the Remaining Sum) to be vested
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in its name. Quite simply, it wants to have the Remaining Sum back.
Further, as submitted by Mr D’Souza, unless the bank is joined as a party
O (which is unusual in these circumstances), the bank will be deprived of the O
right to make representations on whether a vesting order and consequential
directions should be made; and if so, the terms thereof.”
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20. Deputy District Judge Lung in Primeway International Ltd v
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Yi He (HK) Trading Co Ltd5 also observed that: - .
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“31. As explained in International Automotive, there are basically 3 ways
S to require the Bank to transfer the Funds to the 1st plaintiff, namely (i) a S
vesting order; (ii) notice to non-parties; and (iii) a garnishee order.
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T
[2017] 3 HKC 137
5
[2018] 2 HKLRD 1416
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32. The first 2 ways are irrelevant, because the Bank was not joined as a
C party to this action, and there is no evidence that the Bank was previously C
notified of these proceedings or the hearing. There is also no indication
from the Bank that it would adopt a neutral position and/or that it would
D abide by the order of this Court. D
E
33. As to the third way, it is sufficient to point out that there is no live E
application for a garnishee order before me and there are designated
procedures for such an application under O.49 RDC.
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34. Procedural difficulties aside, there is a more fundamental objection.
There is no evidence before me as to what transactions had taken place
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within D's Account. There might be deposits and withdrawals both before
and after the Funds were deposited by the 1st plaintiff; and it is plausible
H that those funds were subject to other trusts or rights of third parties (eg H
they represented monies obtained by similar frauds). If it should happen
that part of the "mixed" funds were then withdrawn or dissipated, the
I usual tracing rules would dictate the beneficial title to the remaining I
monies. The Bank itself may also be entitled to a set-off against the Funds
J (eg the defendant maintains a separate account with the Bank that is in J
overdraft).
K 35. If I were to make an order as sought by the plaintiffs to compel the K
Bank to transfer the Funds back to the 1st plaintiff, it would in effect give
priority to the 1st plaintiff over the credit balance within D's Account (or
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part thereof up to an amount equivalent to the Funds), possibly to the
detriment of third parties who might have an equal or even better title to
M the same. It would in my judgment be wrong in principle to do so without M
giving them an opportunity to be heard; at the very least the Bank ought
to be heard because it will have knowledge as to transactions that had
N taken place within D's Account (if any).” N
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21. I am thus of the view that the granting of a vesting order is
P inappropriate in the circumstances and the plaintiff ought to recover the P
US$30,000 via garnishee proceedings, following the procedure prescribed
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by Order 49 r 2.
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S Orders S
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22. In the premises, I make the following orders: -
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(1) a declaration that the defendant is liable to account to
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the plaintiff for the sum of US$122,667.84 together
D with interest. Interest to be calculated at HSBC prime D
rate + 1% from 18 October 2019 up to the date of
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judgment, thereafter at judgment rate.
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(2) a declaration that the US$122,667.84 or any part
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thereof in the defendant’s Account was held by the
H defendant as constructive trustee for the plaintiff. H
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(3) The defendant shall pay and return the said
J US$122,667.84 (together with interest accrued thereon) J
to the plaintiff forthwith.
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L (4) The defendant is to pay the plaintiff’s costs of these L
proceedings, to be taxed if not agreed
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N N
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P P
Q ( Phoebe Man ) Q
District Judge
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S
Mr Derek Hu, instructed by Messrs S.H. Chan & Co, for the plaintiff S
The defendant acting in person and did not appear
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