HU YANGZHAO v. WONG WING SHAN AND OTHERS

DCCJ 448/2022

[2022] HKDC 646

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 448 OF 2022

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BETWEEN

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REASONS FOR DECISION

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1.  This is the plaintiff’s application for final judgment to be entered against the 6^th defendant in default of defence under Order 19 rule 7 of the Rules of the District Court (Cap 336H).

2.  I allowed the application upon hearing the plaintiff’s submissions. These are my reasons.

The Plaintiff’s pleaded case

3.  In gist, the plaintiff says that he fell prey to a telephone fraud.

4.  Full particulars of the fraud have been pleaded in the Statement of Claim. For present purposes I only need to state the key facts as follows:-

(1) The plaintiff received a telephone call on or around 15 August 2020 from an unknown male who introduced himself as Mr Lu and claimed to be a Mainland police officer. Mr Lu told the plaintiff that the plaintiff was involved in a multi-national money laundering case and asked the plaintiff to provide his personal details for investigation, including his residential address and particulars of his bank accounts at the Bank of China (Hong Kong) Ltd (“BOCHK”);

(2) The plaintiff genuinely believed that Mr Lu was from the Mainland Police and provided all the details that Mr Lu requested. Mr Lu then introduced further individuals to the plaintiff as his colleagues in the purported investigation team;

(3) On 18 August 2020, an unknown female who introduced herself as Madam Lai met the plaintiff at his residential address. She also claimed to be a Mainland police officer. She requested the plaintiff to provide his debit card and the online banking passwords of his accounts at BOCHK with which he complied. The plaintiff was also directed to place all his money into his BOCHK account for investigation purpose. Again the plaintiff complied;

(4) The plaintiff later suspected that he was defrauded and reported the matter to the police. He also realized that basically of the money in his BOCHK account was transferred out without his authority or consent;

(5) Specifically in relation to the 6^th defendant, it is pleaded that on 21 August 2020, HK$400,000 was transferred out from the plaintiff’s account to an account held by one “Wong Yuk Tong”, out of which HK$399,436 was transferred to another account held by one “Cheung Yim Ching” on the same day, and out of which HK$348,000 was transferred to an account held by the 6^th defendant. The 6^th defendant then transferred US$57,761.50 (equivalent to HK$448,592.92), of which the aforesaid HK$348,000 forms part, through other accounts eventually to his account at Citibank (Hong Kong) Ltd (no: 41194152) (“Citibank” and the “Citibank Account” respectively);

(6) The plaintiff therefore claims against the 6^th defendant for the remedies that are common to this type of fraud claim, namely a declaration that the 6^th defendant holds the subject sum of HK$348,000 on a constructive trust and/or for payment / restitution of that sum.

Legal Principles

5.  The legal principles are well known. Under Order 19 rule 7 of the Rules of the District Court (which is identical to Order 19 rule 7 of the Rules of the High Court), judgment in default of defence may be granted based on the facts pleaded in the statement of claim only but the Court cannot receive any evidence: Wismettac Asian Foods, Inc v United Top Properties Ltd [2020] 3 HKLRD 732 at §14.

6.  It is well established that when property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient so that the property is recoverable and traceable in equity: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 716C-D; Mesirow Financial Administrative Corporation v Best Link Industrial Co Ltd (unreported, HCMP 1846/2015, 25 January 2016).

7.  The rule that the court will not make a declaration in default without a trial is a rule of practice and not of law. The paramount duty of the court is to do justice depending on the circumstances of the case. The practice will thus give way where there is a genuine need for declaratory relief: Mesirow at §35. See also White Book 2022 §19/7/4.

8.  There are numerous instances when the Court of First Instance and the District Court have declared, in the absence of the defendant, the existence of a constructive trust over funds procured or obtained by fraud: see for example Mesirow at §36 and the cases cited therein.

Analysis

9.  According to the affirmation of service, the Writ and other related Court documents were served on the 6^th defendant by insertion into the letterbox of his last-known address (which the bank disclosed to the plaintiff as a result of other proceedings). I am satisfied that there was due and proper service of the Writ and other documents on the 6^th defendant.

10.  It is also clear that the 6^th defendant has defaulted in filing a defence.

11.  I am satisfied that on the plaintiff’s pleaded case, he is entitled to a money judgment in the sum of HK$348,000. I am also satisfied that there is a genuine need for the declaration sought, namely the 6^th defendant holds the subject sum in the Citibank Account on a constructive trust for the plaintiff. The purpose of the declaratory relief is to affirm that the plaintiff has a proprietary interest in the sum or the traceable proceeds.

12.  At the hearing, the plaintiff also asked for an order that the 6^th defendant shall execute such documents as may be reasonably necessary to instruct Citibank to transfer HK$348,000 (and any interest accrued) to the plaintiff, and that in default, the plaintiff’s solicitors be nominated and authorised to execute such documents to effect the transfer as if such documents were executed by the 6^th defendant, pursuant to s 38A of the District Court Ordinance (Cap 336). Reliance is placed on Tokic DOO v Hongkong Shui Fat Trading Ltd [2020] 4 HKLRD 189 at §21; Quessglobal (Malaysia) Sdn Bhd v Sen Xin Ju Technology Trading Ltd [2020] HKDC 1091 at §§7, 20. After hearing submissions from the plaintiff’s counsel Mr Patrick Chiu, I also gave such an order at the hearing.

13.  There is no reason why costs should not follow the event. I therefore ordered that costs of the action including this application be paid by the 6^th defendant to the plaintiff with certificate for counsel. Directions were given for such costs to be summarily assessed on paper.