A v. P company AND OTHERS

HCMP 289/2018

[2018] HKCFI 907

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 289 OF 2018

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J U D G M E N T

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INTRODUCTION

1.  By an Originating Summons (expedited form) of 7 March 2018, the plaintiff (“AFZ”) seeks Norwich Pharmacal [1]discovery and ancillary relief against three banks: the Bank of China (Hong Kong) Ltd (“BOC”), the Industrial and Commercial Bank of China (Asia) Ltd (“ICBC”), and China Construction Bank (Asia) Corporation Ltd (“CCB”).

2.  AFZ says that it has been defrauded by a person or persons who posed as AFZ’s Chief Executive Officer, sent emails to a secretary of AFZ attaching invoices purporting to be from various companies, and thereby persuaded the secretary to arrange for AFZ’s funds to be transferred to various accounts held with BOC, ICBC and/or CCB, apparently in the names of the aforesaid companies.

3.  AFZ seeks details relating to the holders of these accounts and information which will enable it to trace the funds which it transferred into these accounts, including details of payments made out of the accounts.

APPLICABLE PRINCIPLES

4.  A Norwich Pharmacal order is not a usual order. It is not lightly granted in the absence of powerful factors:

(1)  It is made against an innocent party whose only involvement is to have become mixed up in the tortious or wrongful activities of others.

(2)  The wrongdoing exists only on the part of a person or persons against whom no relief may be sought at the stage of the application and against whom there is probably insufficient evidence to found an action.

(3)  There will usually be a legal relationship between the innocent person against whom a discovery order is sought and the allegedwrongdoer, and the relationship may involve strict duties to be observed on the innocent party’s part.  Any discovery to be made will involve a breach of confidentiality and may expose the innocent party to civil liability and possibly even criminal liability.

(4)  The court must accordingly balance the competing interests of the victim of the alleged wrongdoing and an innocent party caught up in the wrongdoing.

See A Co v B Co [2002] 3 HKLRD 111 at [12], per Ma J (as he then was).

5.  Given the extraordinary nature of the relief, in order for a Norwich Pharmacal order to be made:

(1)  there must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place, the degree of proof required being commensurate with the seriousness of the allegations;

(2)  it must be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff.  Where the plaintiff is likely to make a tracing claim, there must be a serious possibility that the discovery sought will allow the plaintiff to preserve what may well be his assets or realistically lead to the discovery of such assets;

(3)  the discovery sought must not be unduly wide; there is no entitlement to general discovery.  The order must be specific, and be restricted to those documents or classes of documents that are necessary to enable the plaintiff to preserve or discover assets; and

(4)  the plaintiff must have exhausted other proper and reasonable avenues for obtaining the information sought.

See A Co v B Co at [13]; Danone Asia Pte Ltd v SB Chow & Co [2009] 1 HKLRD 470.

APPLICATION OF THE PRINCIPLES IN THE PRESENT CASE

Cogent and compelling evidence of wrongdoing

6.  I am satisfied that AFZ has put forward cogent and compelling evidence that it has been the victim of wrongdoing.  It has produced copies of the emails which were sent to the secretary purporting to be have been sent by AFZ’s CEO, requesting that transfers of funds be made.  The email address used by the wrongdoer was very similar to the CEO’s actual email address, which presumably contributed to the fact that the deception was not detected for some time.

7.  AFZ has produced copies of the bank payment advices showing that transfers were indeed made as requested in the emails.  AFZ says that it did not in fact have any knowledge of or business relationship with the companies to which the transfers of funds were made.  AFZ made transfers to six different accounts, one held with BOC, four with ICBC, and one with CCB.  The six accounts were held in the names of six different companies.

Substantial and worthwhile benefits for the plaintiff

8.  AFZ has carried out searches at the Companies Registry and discovered that there are Hong Kong companies bearing the names of each of the six account holders (although it is as yet unknown, at least in respect of four of them, whether these are the actual account holders).  AFZ was informed by the police that there were funds left in the bank accounts of two of the companies.  AFZ commenced proceedings against those two companies, obtained default judgment and thereafter recovered a part of the funds transferred to the two companies’ bank accounts held with BOC and CCB, pursuant to garnishee orders against BOC and CCB.

9.  Whilst AFZ has information relating to the six companies, it was informed by the police that most of the funds originally transferred to the companies’ accounts were transferred onwards to other accounts, and the identities of those transferees are unknown to AFZ.

10.  AFZ has said that it intends to trace the whereabouts of the remaining funds.  I am satisfied that in order to do so, it will need to obtain the information set out in paragraphs 1 to 6 of the Originating Summons.

11.  As to whether AFZ has demonstrated that the discovery sought gives rise to a serious possibility that it will allow AFZ to preserve what may well be its assets or realistically lead to the discovery of such assets, I have considered the fact that the Originating Summons was issued only after some eight months after the occurrence and discovery of the fraud in late June 2017.  However, the delay is not so long as to suggest that the information sought will not assist in preservation or discovery of the remaining missing funds.

Other avenues for obtaining the information sought

12.  The evidence of AFZ is that after Mr Purrunsing, the Vice President and Chief Finance Officer of AFZ, reported the matter to the police, he was informed that the police was in the process of obtaining the bank statements for the six accounts from the banks, and AFZ had hoped to gain access to the statements in that way.  However, AFZ has not in fact been able to obtain the bank statements in this way.

13.  Given the duty of confidentiality which the banks owe to their customers, AFZ would not have other proper or reasonable means to obtain the information sought.

Scope of the discovery sought

14.  I am satisfied that the scope of the order sought is not unduly wide and is limited to those documents or classes of documents that are necessary to enable AFZ to preserve or discover assets.

ANCILLARY RELIEF

15.  AFZ also seeks a “gagging order” to restrain the banks from revealing the existence of these proceedings to the suspected wrongdoers.  Such orders are also exceptional remedies: see A v B, supra, at [40].

16.  In the present case, given the circumstances in which the transfers of funds were made to the six companies, there are grounds to believe that should they or associated wrongdoers become aware that they are being pursued, they may take steps to frustrate any claim that may be made against them.  It is therefore appropriate to make a gagging order.

17.  For similar reasons, it is appropriate to order that as regards future hearings, the proceedings should be referred to by action number and by anonymising the names of the parties; and that the Court file should not be made available for searching by third parties without the leave of the Court.

THE BANKS’ POSITION; ORDERS

18.  Prior to the hearing, ICBC consented to the order sought by AFZ and an order was made in terms of the consent summons filed by AFZ and ICBC.

19.  BOC has indicated that it takes a neutral stance in respect of AFZ’s application.  CCB has indicated that it will not contest AFZ’s application.  In the light of the matters above, I made an order at the hearing in terms of the draft provided by AFZ’s solicitors at the hearing, as amended.