LEXCOM INFORMATIONSSYSTEME GMBH v. HONGKONG JOYEE HOLDINGS CO., LTD AND ANOTHER

HCA 464/2021

[2021] HKCFI 1756

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 464 OF 2021

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REASONS FOR DECISION

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1.  This is the application of Lexcom Informationssysteme GmbH (“the plaintiff”) against Hongkong Joyee Holdings Co Ltd (“D1”) for default judgment pursuant to Order 19, rule 7 of the Rules of the High Court (“RHC”). At the conclusion of the hearing, the default judgment was granted with written reasons to be handed down which I now do.

Background

2.  The plaintiff is a company incorporated in Germany that provides information technology services. It claims to be the victim of an email fraud which arose in the following circumstances.

3.  On 8 and 15 February 2021, persons unknown hacked into the email account of the plaintiff’s managing director Mr Lex and sent emails to an employee in the plaintiff’s accounting department with instructions given on 8 February 2021 to remit €487,055 from the plaintiff’s bank account maintained with Deutsche Bank AG to the account of Kiss Gepes Forgacs Kft maintained with K and H Bank ZRT in Hungary (“KGFK’s bank account”).

4.  On 15 February 2021 the same employee received instructions allegedly from Mr Lex to remit €780,582 to Busemi Design Kft’s account maintained with K and H Bank ZRT in Hungary (“BDK’s bank account”).

5.  On 9 February 2021, after the deduction of certain bank charges, €456,243 (“the 1^st Sum”) was transferred from KGFK’s account to D1’s bank account maintained with Hang Seng Bank Limited (“D1’s bank account”).

6.  On the same day, the sum of USD 196,996.10 (after deduction of bank charges) which was approximately €143,360.96 was transferred from D1’s bank account to the account of Thapa Gunja, trading as New Galaxy Enterprises (“D2”).

7.  On 16 February 2021, after the deduction of bank charges the sum of €769,644.04 (“the 2^nd Sum”) was transferred from BDK’s bank account to D1’s account. The 1^st Sum and the 2^nd Sum are collectively referred to as “the Sums”.

The plaintiff’s claim

8.  As the remittance instructions were never given by Mr Lex and the remittances were never authorised by the plaintiff, the plaintiff commenced this action to pursue a proprietary/tracing claim and recover the Sums misappropriated from its bank account as a result of the fraud.

9.  The plaintiff obtained an ex parte proprietary injunction against D1 and D2 (collectively “the defendants”) on 11 March 2021 (“the injunction order”) to restrain them from, inter alia, dealing with the Sums.  That order (as amended on 22 March 2021 and 26 March 2021) was continued by an order dated 9 April 2021 (“the continuation order”) until further order or conclusion of the trial in these proceedings. 

10.  The writ was served on D1 on 26 March 2021 and the statement of claim on 15 April 2021. D1 failed to acknowledge service or file its defence.

11.  The plaintiff served the summons for default judgment pursuant to RHC Order 19 rule 7 on 25 May 2021.

Disposition

12.  I am satisfied on the basis of the plaintiff’s pleadings that the plaintiff is a victim of an email fraud and is entitled to the Sums. I see no reason why a default judgment which, inter alia, includes declaratory relief, should not be made.

13.  A constructive trust arose by operation of law when the Sums was credited to D1’s account with the Bank. The court has a discretion rule to grant a declaration to that effect where it is necessary to do so: see 2021 HKCP at §15/16/2; Star Therapeutics Inc v Leabon Technology (HK) Ltd, [2021] HKCFI 1715. I consider that there is a genuine need for such a declaration to be made in the present case. 

14.  The court was informed at the hearing that the plaintiff’s claim against D2 in respect of the USD196,996.1 has been settled in the sum of USD105,000. The plaintiff is not pursuing D2 for the balance.

15.  As the plaintiff’s claim in this action is against the defendants on a joint and several basis, the default judgment sought must take into account the settlement reached with D2 and the total amount claimed against D1 revised to reflect the receipt of USD105,000.

16.  The injunction order is to continue until further order of the court. The summons dated 14 May 2021 scheduled to be heard before Master Phoebe Man on 21 June 2021 be vacated and the plaintiff be awarded the costs of the action including the costs of this application.

17.  A draft order should be submitted for approval in the usual way.