CHENG SHUK YING v. PROMMA DUTSANEE AND ANOTHER

DCCJ 1347/2019

[2022] HKDC 164

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1347 OF 2019

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REASONS FOR DECISION

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1.  On 11 February 2022, I heard an application for summary judgment taken out by the plaintiff (“P”) against the 3^rd defendant (“D3”) pursuant to Order 14 rule 1 of the Rules of the District Court, Cap 336H. At the conclusion of the hearing I dismissed the application for reasons to be handed down later. This I now do.

P’s claim

2.  P, a married woman, claims to be the victim of an online scam.  The defendants were recipients of monies that she paid at the request or instruction of certain fraudsters operating the scam.  Sadly, the modus operandi of the scam, as detailed below, is all too familiar.  Insofar as material to the present application, the following facts appear from the P’s affirmation filed in support of the application, namely, the 6^th Affirmation of Cheng Shuk Ying dated 13 May 2021. 

3.  On or about 1 September 2018 P was befriended by an individual by the name of “James Chung” via Facebook.  She and James Chung soon became friends and started to communicate via WhatsApp.  James Chung claimed that he was born in the USA and worked as a pilot.

4.  On or about 12 October 2018 James Chung informed P that he had purchased a number of valuable gifts (such as luxury brand handbags) and wished to send them to her.  She gave him her residential address in Hong Kong. 

5.  On 15 October, P was contacted by one “Ivy” who claimed to be working for a logistics company.  Ivy informed her that as the gifts were overweight, she must pay a fine of $17,100 to a bank account in the name of the 1^st defendant (“D1”) maintained with the Bank of China (Hong Kong) Ltd.  After being reassured by James Chung, P did as she was told.

6.  On 16 October, Ivy asked P to pay a further sum of $34,700 to “guarantee the safety” of the gifts as they were valuable.  The designated payee was D3 at her account maintained at HSBC no 163-287-728-833 (“the HSBC account”).  James Chung again reassured P of the need for payment.  On the same day, she duly transferred the amount from the HSBC account to D3’s account.

7.  Subsequently three similar requests were made by Ivy and James Chung, and each time P complied with the request without question.  As a result she transferred three further sums to the 2^nd, 4^th and 5^th defendants respectively. 

8.  On 19 October Ivy made yet another request for payment.  Only then did it dawn on P that she could have been the victim of a fraud.  After talking to her husband, P reported the matter to the police on the next day. 

9.  As pleaded in the Amended Statement of Claim, P now maintains against each of the defendants an action for money had and received and unjust enrichment.  On the undisputed facts of the case it is clear that P has a good cause of action based on mistake or failure of consideration.  Mr Michael Chai, counsel for D3, does not seriously argue the contrary.

D3’s defence

10.  In D3’s Defence dated 18 July 2019, the main defence relied upon is that of change of position.  The gist of it is that D3 paid away the money she received in good faith so that it is no longer equitable to require her to return the money.  To understand the defence, it is necessary to say a little more about the background to D3’s story.

11.  In her affirmation in opposition, D3 states that she is a 52-year old divorcee educated up to Form 5 level.  In 2018 D3 met a man who called himself Riccardo Codecasa (“Mr R”) on an online dating platform.  Mr R claimed that he was divorced.  He was an American engineer who had come to Hong Kong for work. Later he told her that he was going to visit Thailand for engineering matters. Communicating through WhatsApp, D3 fell in love with Mr R.  Mr R said he would like to live together with D3 in the near future.

12.  In around mid-August 2018, Mr R told D3 that he needed a permanent account to deal with funds in relation to a certain project.  In order to save banking fees and charges he asked D3 to “lend” her Hong Kong bank account to him.  So on 4 September 2018, D3 opened the HSBC account and upon Mr R’s request, sent the ATM card to him by post and informed him of the password required to operate the card.

13.  Initially D3 deposited $5,000 into the HSBC account and, upon issuance of the ATM card, D3 made a withdrawal of $3,000 in order to activate the card.  Since then, the HSBC account was controlled, operated and managed by Mr R save for two remittances and two withdrawals mentioned below.

14.  Some time later, Mr R told D3 that his business project required him to go to Malaysia and to purchase materials there.  He also said they could get married after he returned to Hong Kong.

15.  D3 exhibits to her affirmation two bank statements in relation to the HSBC account dated 3 October and 30 October 2018 respectively as “TKW-1”.  The entries which are most relevant to the defence put forward are summarised in the table below.

Date	Transaction	Credit	Debit	Balance
15 Oct				478.94
16 Oct	Savings/ Time deposit	34,700.00		35,178.94
18 Oct	Cash deposit	57,800.00
	Charges		240.00
	Remittance		34,000.00
	Charges		280.00
	Remittance		57,000.00	1,458.94

16.  There is no dispute that the sum of $34,700 deposited into the HSBC account on 16 October represented money transferred by P at the request of Ivy and James Chung.  D3 claims that the deposit was made entirely without her knowledge or involvement.  Similarly, the deposit of $57,800 two days later, on 18 October, was made without involving her.

17.  In mid-October, Mr R told D3 that he had lost the ATM card and asked her to apply to cancel it.  On 18 October, Mr R asked D3 to remit $34,000 from the HSBC account to a bank account in Malaysia.  Later he further requested her to remit $57,000 to the same Malaysian bank account.  D3 believed that the remittances were related to Mr R’s project and duly complied with his requests.

18.  In late October, argument broke out between Mr R and D3.  This led D3 to close the HSBC account after withdrawing $1,400 as partial repayment of her own fund.  She took out the final balance of $2,879.06 when the account was closed.

Triable issues

19.  It is trite that in an application for summary judgment, the defendant must show a triable issue or some other reason for trial.  Where the defendant’s evidence is in dispute, the court need only decide whether it is believable, not whether it will be believed.  Moreover, the defendant must condescend on particulars and adduce credible evidence to substantiate his defence.

20.  In her skeleton submissions, Ms Lilian Ip attacked D3’s evidence in support of the change of position defence on two broad grounds.  First, she said that the whole story about D3 and Mr R’s online relationship was incredible.  Secondly, she argued that the change of position defence was not available because (a) there was no causal link between the receipt of $37,400 and the payment out and (b) D3 did not act in good faith. 

21.  Turning to the first ground, Ms Ip pointed out that there was no documentary evidence of the conversation between Mr R and D3.  She also commented that the bank statements show that far from giving Mr R total control over the HSBC account, D3 made several withdrawals from it for her own benefit.  In other words she did not merely act as a conduit for Mr R’s money transfers.

22.  I can dispose of this ground fairly briefly.  It is D3’s case that she communicated with Mr R entirely on WhatsApp.  Although she acted on Mr R’s instructions in making various remittances, she did not however suffer any financial loss as a result of her short-lived relationship with him.  In those circumstances, the lack of documentary evidence such as screen caps of the WhatsApp conversations is not altogether surprising.

23.  As noted above, D3 made a partial withdrawal of $3,000 from her initial deposit of $5,000.  As that was her own money, this does not disclose any inconsistency with her main story.  Likewise, on 14 September she withdrew $1,400 in order partly to recover her initial deposit.  It is true that upon the closing of the HSBC account in October 2018, D3 retained a small overall gain or profit of around $2,279.06.  But it is no part of P’s case that this was in some way a reward for acting as R3’s co-conspirator or is in any other way sinister.

Change of position

24.  I now turn to P’s main contention that D3 fails to demonstrate a triable issue on the change of position defence.  In this respect, D3 relies on the two remittances made by her out of the HSBC account of $34,000 and $57,000 on 18 October respectively.

25.  It is well settled that change of position is a defence to all claims for unjust enrichment.  The defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full: see Credit One Finance Ltd v Yeung Kwok Chi [2021] 1 HKC 589, at [62].

26.  As shown in the extract of the bank statements above, after the credit of $34,700 on 16^th October, the balance in the HSBC account stood at $35,178.94.  Two days later the balance swelled to $92,975.94 when another sum of $57,800 was received. 

27.  Referring to this sequence of entries, Ms Ip argued first, that there was no way that the first remittance of $34,000 could be causally or directly attributed to the $34,700, ie the sum deposited by P.  Not only was the first remittance mixed up with the second remittance, the size of the first remittance did not match precisely the amount claimed by P.

28.  In support of this Ms Ip relied on the dicta of Chow J in Arrow ECS Norway AS v M Yang Trading Ltd & ors [2018] 5 HKC 317 at [34], namely, that the defendant must prove the causal link between the receipt of the fund and the change of position of considerable quality by producing sufficient evidence.  On the other hand, authorities at the High Court level suggest that the appropriate test is the “but for” test, without the need to show that the defendant relied on the validity of the receipt: Credit One Finance, sup cit, at [70(3)]; Zier Incorporation v Tekchandani Ajai Mohan & ors [2021] 3 HKC 69, at [35].

29.  I reject P’s contention that no causal link was shown.  The submission overlooks the fact that D3 does not only rely on the first remittance of $34,000 but also the second remittance of $57,000.  After those remittances and the deduction of the attendant bank charges, the balance in the HSBC account dwindled from $92,975.94 to $1,458.94 at the end of the day on 18^th October. Hence, it is factually correct for D3 to say that “but for” the receipt of $34,700, she would not have made (and would not have been able to make - as she enjoyed no overdraft facility) the two remittances.

30.  Next, Ms Ip took issue with D3’s good faith.  This is because even if there was a valid change of position, it would not avail the defendant unless it was made in good faith.  In Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985 at [164], per Clarke LJ, the English Court of Appeal explained the concept of good faith in this context as follows:-

“I do not think that it is desirable to attempt to define the limits of good faith … In my view it is capable of embracing a failure to act in a commercially acceptable way and sharp practice of a kind that falls short of outright dishonesty as well as dishonesty itself… I do not think that a person who has, or thinks he has, good reason to believe that the payment was made by mistake will often be found to have acted in good faith if he pays the money away without first making inquiries of the person from whom he received it.”

31.  On the other hand Mr Chai correctly reminded me, by reference to Goff and Jones, “The Law of Unjust Enrichment”, 9^th ed, at para 27-41, that negligence is not enough to demonstrate the absence of good faith. See also Niru, sup cit, at [190].

32.  Applying these principles to the present case, Ms Ip submitted that by blindly allowing her bank account to be used by a stranger, D3 ran the risk of it being used in a money laundering scheme.  A reasonably prudent person in her position would have inquired Mr R as to the purpose and destination of the remittance before complying with his instruction. 

33.  In evaluating the strength of this argument, one has to bear in mind the context of the relationship between D3 and Mr R.  Far from pursuing a commercial relationship, they were, according to D3, engaged in online romance.  Mr R had given her what was, at least on the face of it, a credible cover story to explain the need for someone to act as his de facto banker.  It may be asked rhetorically: what inquiries could D3 have been expected to make?  Even if D3 had asked him about the origin and destination of the funds, I hardly think Mr R would have told a different tale.

34.  In the light of Mr R’s cover story, was there anything suspicious in the request for remittance?  In answer to this, Ms Ip pointed out that there was a change of pattern in the outgoing payments.  Prior to 16^th October, all the payments out of the HSBC account were made by Mr R using the ATM card in Malaysia.  Those payments took the form of small but frequent withdrawals. However, it is D3’s evidence that on 16 October Mr R reported the loss of the ATM card, which led to his request that D3 effect the necessary transfers by the means of overseas remittances.

35.  For these reasons I refute the submission that there is no triable issue on either a causal link or good faith which would go to support a change of position defence.

36.  For completeness I should mention that in her skeleton submission, Ms Ip appeared to suggest that D3’s change of position could have been tainted with illegality such as breaches of money-laundering legislation.  Neither in the pleadings nor in the grounding affirmation was there any averment or particulars of the suggested criminal conduct.  It would, in my view, be clearly unfair and impossible for the court to entertain this point. 

Conclusion

37.  In conclusion, I find that D3 has demonstrated a triable issue on her change of position defence. 

38.  Having heard counsel on the appropriate order to be made, I decided to dismiss the application rather than give D3 leave to defend.  This is because the defence was clearly disclosed to P well before she took out the summary judgment application.  It also follows from this that P should bear the costs of the application.