A v. B

DCMP 1191/2023

[2023] HKDC 785

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 1191 OF 2023

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JUDGMENT

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Introduction

1.  This is the hearing of an Originating Summons dated 15 March 2023 (“the OS”). In the OS, the plaintiff (“P”) seeks a Norwich Pharmacal[1] order and other ancillary relief against the defendant bank (“D”). An Affidavit of Sit Mung Kwan (“Supporting Affidavit”) has been filed in support of the OS. However, I noted that in both the Supporting Affidavit and the Skeleton Submissions of P, it is only said that P seeks a Norwich Pharmacal order.

2.  At the beginning of today’s hearing, solicitors appearing for P, Mr Chan confirmed to me that they were seeking a Norwich Pharmacal order and other consequential orders including a “gagging order” which appears in paragraph 4 of the OS.

3.  D has been served the OS, the Supporting Affidavit and notice of today’s hearing was given but D did not appear. By a letter dated 27 April 2023 from D to P’s Solicitors (provided to me this morning before the hearing), D appears to have been sent a draft Consent Summons. Although D did not agree to sign the Consent Summons and stated that it will not agree to filing an affirmation (which I believe is reference to paragraph 2 of the OS requiring verification of due compliance with the disclosure order), D has stated that it takes a neutral position and will not attend today’s hearing.

4.  Mr Chan has confirmed in light of D’s position that they will not be seeking an order in terms of paragraph 2 of the OS and has submitted a draft Order for my consideration.

Background Facts

5.  The background facts that follow are based on matters deposed to by P’s Solicitors in the Supporting Affidavit. Although I accept the hearsay nature of what has been deposed to in the Supporting Affidavit, it does appear to me that the persons who have direct knowledge of the relevant facts should have been asked to depose to affidavits to avoid hearsay or multiple hearsay as much as possible. In this regard, see A Co v B Co [2002] 3 HKLRD 111, §29, per Ma J (as he then was).

6.  At today’s hearing, I drew attention to this passage to Mr Chan. As I pointed out, Mr Sahin Erat of P who handled the order of LCD and was the recipient of the forged emails would have been the more appropriate maker of the supporting affidavit. Mr Chan explained due to the pandemic and earthquake in Turkey, it was more convenient at the time for the affidavit to be made by the trainee solicitor of P’s Solicitors instead of by an officer of P. Although I do accept the explanation in the present case, I would still like to remind practitioners that in future applications for Norwich Pharmacal relief, even if no point is taken by the defendant or as in this case (as I believe it is often) the bank would remain neutral, the persons who have direct knowledge of the relevant facts should be asked to depose to affidavits.

7.  P was and is a company incorporated in Turkey. P had been dealing with a supplier OT-Startek Limited (“Startek”) based in Shenzhen. They communicated by email in relation to the supply by Starktek to P of an order of LCD since in or around October 2021.

8.  It is suspected that around November 2021, unknown person(s) (“Fraudsters”) had hacked into the email accounts of P and Startek. Essentially, the Fraudsters impersonated the contact persons of Startek and sent emails to P which enclosed Startek’s invoice with the correct bank information of Startek altered.

9.  As a result, not knowing the email was not sent by Startek and the invoice had been amended to provide details of a bank account not belonging to Startek, on 14 January 2022, P transferred the sum of USD80,000.00 (“the Sum”) from P’s account with Vakifbank to a bank account numbered 3355-0067-25678 with D (“the Bank Account”) (“the Transfer”). The beneficiary of the Bank Account was stated to be “Shenzhen MZX Tech Company”. P has produced a Swift message of　Vakifbank dated 14 January 2022 said to evidence the Transfer with references numbers given (“the Transaction”). Mr Chan has confirmed the details of the Transaction as given in the draft order are correct.

10.  Only on 21 January 2022, when Startek had not received any payment from P and upon respective checking of the email history between P and Startek that the fraud was discovered. It was only then noticed that the email addresses of various emails sent to P were from email addresses, although deceptively similar, which were not the email addresses of Startek’s staff. On the same day, P reported the fraud to its bank Vakifbank, which in turn sent a message to D to seek a refund of the Sum.

11.  P also reported the fraud to the police in Hong Kong and in Turkey.

12.  Since February 2022, P has continued to communicate with D in respect of the Transfer and in particular to enquire whether the beneficiary of the Transfer was “Shenzhen MZX Tech Company” (as there was no company bearing that name upon a search carried out on the Companies Registry by P). D has not been willing to provide the information sought from P.

13.  According to P’s Solicitors, P intends to file a claim against the perpetrator of the fraud to recover the Sum. It is submitted that the information sought about the identities, addresses and contact details of the recipient(s) in the Transaction and the money service provider master account linked with the Transaction is necessary for helping P to identify the potential defendant(s) of the intended claim. It is also submitted the bank statement(s) and record(s) of the bank balance would reveal the movement of money in and out of the Bank Account and would be helpful to trace for any potential claim in relation to the Transaction.

Applicable Principles for Norwich Pharmacal order

14.  It is now well-established that where innocent parties are caught up or have become involved in the tortious or wrongful activities of others, thus facilitating the perpetration (or continuation) of such activities, justice may require (and therefore the court may order) that such innocent parties come under a duty to assist the victim of the tort or wrongful activities. The jurisdiction is a wide one. It is not restricted to disclosure of the names of the wrong-doers but discovery can be ordered of a bank’s books and documents. See Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 133 at 173F-175E and A Co v B Co [2002] 3 HKLRD 111, §§10-11, per Ma J (as he then was).

15.  Nonetheless, the extraordinary nature of the Norwich Pharmacal relief must be borne in mind. It is not a usual order nor should it be lightly granted. The 3 essential considerations that must be borne in mind before such relief is granted have been set out ibid at §13:

(1)  There must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place. And where fraud or similar serious allegations are made, the degree of proof must correspondingly be high;

(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 must either 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. Not only must any order be specific, it must also be restricted to those or those classes of documents that are necessary to enable the plaintiff to preserve or discover assets. This is not to say that discovery orders cannot be wide; what is important is that the discovery, whether wide or narrow, is necessary.

16.  This approach has been applied consistently by our courts: see e.g. A v P company and Others [2018] HKCFI 907 at §§4-5, per Recorder Yvonne Cheng SC (as she then was) and A1 and Anor v R1 and Others [2021] HKCFI 650, §56, per Coleman J.

Analysis

17.  I am satisfied by the documentary evidence before me that there is cogent and compelling evidence to demonstrate a serious tortious or wrongful activities have taken place (where allegations of fraud or similar allegations are made, the degree of proof must correspondingly be high). P has produced the various emails and the invoice (purportedly issued by Startek but subsequently discovered to be altered and sent by Fraudsters) requesting the transfer of the Sum to the Bank Account (which did not belong to that of Startek), and the Swift messages evidencing the Transaction and the steps taken by and on behalf of P to recover the Sum which ought to have been transferred to Startek. D are not the wrongdoers but are involved in the wrongdoing of the Fraudsters.

18.  I am also satisfied that the order will very likely reap substantial and worthwhile benefit for P. Where in this case P is intending to bring a claim against the Fraudsters, the discovery sought against D will allow P to obtain information necessary to ascertain the identity and related information of the recipients of the Transfer. Where in this case P is likely to make a tracing claim, the discovery sought will allow P to preserve what may well be its assets or realistically lead to the discovery of such assets.

19.  Finally, I am also satisfied that the discovery is not unduly wide and the orders sought are specific, restricted to those or those classes of documents that are necessary to enable P to preserve or discover assets. The orders sought are limited to documents and records showing the name, addresses and contact details of the opener of, and persons authorized to operate, the accounts which received the Transfer, as well as bank statement(s) and records showing the receipt of the remittance and current balances in those accounts. As mentioned earlier, P has engaged in communication with D to seek the information concerning the recipient of the Transfer but has been unsuccessful.

“Gagging Order”

20.  As mentioned above, P also seeks a gagging order to restrain D from revealing the existence of these proceedings, the content of the order made by this court or to warn anyone that proceedings have or may be brought against him/her/it by P. No written submissions were made in relation to the seeking of a gagging order in P’s Skeleton Submissions. Even where a defendant does not appear or has made no objections to the reliefs sought, the court is not a mere rubber stamp and will have to be satisfied that the orders and consequential directions sought by a plaintiff was reasonable, non-prejudicial and proportionate. I therefore granted leave for Mr Chan to make further submissions to me at today’s hearing.

21.  I have drawn Mr Chan’s attention to A Co v B Co, §§37-38, 40-41, per Ma J (as he then was) that gagging orders are also exceptional remedies (they may entail a serious intrusion into what otherwise would be a party’s basic rights) and a strong case has to be made out that such an order should be made. A gagging order is granted where there are grounds to believe that once a wrongdoer is aware he has been pursued, steps may be taken by him to frustrate any claim that may be made against him or any investigations being carried out. See also more recently A1 and Anor v R1 and Others [2021] HKCFI 650, §§60-61, per Coleman J.

22.  Having heard further submissions, I am of the view that given the main purpose of the discovery order granted is to enable P to commence proceedings, if the wrongdoer(s) were forewarned that action was about to be taken or was being taken against them by P, this might cause them to take steps that may well be prejudicial to P. D has not appeared and no difficulties or prejudice to D has been brought to my attention by this order. However, I would limit the gagging order to 70 days of this order or until further order of the court (whichever is later).

Disposition

23.  For the above reasons, I am prepared to grant the orders sought in the draft order subject to some amendments which I have made in the course of today’s hearing.

24.  I would also make an order that the court file shall not be available for searching by third parties without the leave of the court and an anonymity order that this matter be referred to and identified in the Daily Cause List and in any Judgment or written rulings uploaded to the Judiciary website by its action number and not by reference to the names of the parties which may be referred to as “A” for P and as “B” for D.

25.  As confirmed by P’s Solicitors, no costs orders are sought for today’s hearing so I make no order as to costs of this application.