PT. ADHYAWARNA BUMI PELANGI v. YB (HK) TRADING CO LTD

HCA 774/2018

[2018] HKCFI 1863

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 774 OF 2018

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D E C I S I O N

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The application

1.  This is an application by the plaintiff for (1) default judgment against the defendant, pursuant to Order 13, rule 6 and Order 19, rule 7 of the Rules of High Court; (2) a vesting order pursuant to section 52(1)(e) of the Trustee Ordinance in respect of the Sum (as defined below) and all interest accrued thereon; (3) leave to join the Bank of China (Hong Kong) Limited (“BOC”) as a respondent for the purpose of giving effect to the vesting order; and (4) an order directing BOC to pay over all sums under the vesting order.

Outline of the pleaded facts

2.  The plaintiff’s pleaded case is that it has fallen prey to an email fraud.

3.  The plaintiff is an Indonesian trading company.  It engages in the trading of “Marathon” brand of embroidery thread.  It has a business supplier of embroidery thread by the name of Dong-IL Corporation (“Dong-IL”). 

4.  The defendant is a company incorporated in Hong Kong.  It held a bank account with the BOC (“D’s BOC A/C”).  The plaintiff has no business dealing with it.

5.  Between about 22 September 2017 and 13 October 2017, Mr Soesanto, a director of the plaintiff, received a number of emails from someone impersonating a staff member of Dong-IL.  The plaintiff was told under various pretexts that payment for certain goods that it had previously ordered from Dong-IL should be made into D’s BOC A/C.  Unbeknownst to Mr Soesanto at that time, it was an elaborate scam.  On 13 October 2017, he procured the plaintiff to transfer into D’s BOC A/C a sum of US$120,446.40 (the “Sum”).  The scam was subsequently discovered.  The plaintiff has suffered loss in that amount.  BOC was notified in time for the transfer out of the Sum to be blocked.  The matter has further been reported to the Hong Kong police. 

Writ, Statement of Claim, and their service

6.  A generally indorsed Writ of Summons was issued against the defendant on 6 April 2018.  The plaintiff seeks inter alia a declaration that the Sum and all interest accrued thereon were held by the defendant on trust for the plaintiff.

7.  The plaintiff on the same day took out an ex parte application for, and subsequently on 13 April 2018 obtained, a Mareva injunction against the defendant and an Order for discovery of banker’s record against BOC pursuant to section 21 of the Evidence Ordinance, Cap 8.

8.  I have read the affirmation of Lo Kin Leung of 23 April 2018.  I am satisfied that the Writ has been properly and validly served upon the defendant at its latest registered office.

9.  On 21 May 2018, the plaintiff filed its Statement of Claim.  The facts (as summarized above) are fully pleaded therein.  In addition to the declaratory relief mentioned above, the plaintiff seeks, further or in the alternative, a vesting order pursuant to sections 52(1)(e) and 52(5) of the Trustee Ordinance, Cap 29.

10.  I have read the affirmation of Lam Kwai Lung of 20 June 2018.  I am satisfied that the Statement of Claim has been properly and validly served upon the defendant at its latest registered office.

11.  No acknowledgement of service or defence has been filed by the defendant.

Application for default judgment and the hearing

12.  On 22 June 2018, the plaintiff took out the present summons (the “Summons”).  I have read the 2^ndaffirmation of Lam Kwai Lung of 25 July 2018.  Based on its contents, I am satisfied that service of the Summons has been properly and validly effected on the defendant.

13.  Despite the service, the defendant was absent during the hearing of the Summons on 31 July 2018.  Pursuant to Order 32, rule 5(1), the court may proceed in the defendant’s absence if “having regard to the nature of the application, it thinks it expedient to do so”. 

14.  This application is for judgment in default of acknowledgement of service and defence.  It belongs to the type of applications which, given their nature, are more often than not proceeded with in the absence of the defendant.  In the present case, I also deem it expedient to do so.

Approach for granting default judgment

15.  As the Writ and the Statement of Claim contain claims not mentioned in Order 13, rules 1 to 4 and Order 19, rules 2 to 5, the present application is governed by Order 19, rule 7(1).  Under that rule:

“ … the plaintiff may, after the expiration of the period fixed by or under these rules for service of the defence, apply to the Court for judgment, and on the hearing of the application the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim.”

16.  In the present case, when considering what judgment the plaintiff appears entitled to, the court has to take into account the fact that a declaration is being sought.  In Order 19, rule 7(1), although the words “the Court shall” are used, “the rule is not mandatory but discretionary, and the court retains its discretionary power whether to give judgment…” — see Hong Kong Civil Procedure 2018, Volume 1, paragraph 19/7/13.  It is further stated at paragraph 15/16/2 that:

“ The power to make binding declaration of right is a discretionarypower….A declaration can only be made after proper argumentand cannot be made merely on admissions by the parties whether in pleadings or otherwise … nor in default of compliance with rules of court.”

Similarly, it is stated at paragraph 19/7/20 that “It is not the normal practice of the court to make a declaration without a trial, particularly where the declaration is that the defendant in default of defence has acted fraudulently”(which is the case here).

17.  On the other hand, as has been explained at paragraph 15/16/2 of Hong Kong Civil Procedure 2018, Volume 1:

“ …the rule of the court that a declaration will not be granted whengiving judgment by consent or in default without a trial is a rule of practice and not of law and will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled;” (See also to the same effect paragraph 19/7/20.)

Declaratory relief was hence granted by Lam J (as he then was) in Lai Wai Kuen v Wong Shau Kwong [2004] 4 HKC 528 where he was satisfied that the plaintiff had a genuine need for the same, and that the court could properly grant it on the merits of the case (paragraph 6).  In 巨展皮具香港有限公司 v 上海兄弟海運有限公司 [2018] HKCFI 53 which case involved an email fraud, I did the same.  I have also been referred to Sultana Distribution Services Inc v Hongkong Fuheng Technology Co Limited [2018] HKCFI 1480 where Deputy Judge Alexander Stock SC adopted the same approach (and see the other cases cited by the learned Deputy Judge at footnote 2 of his Judgment).

Disposal

18.  I have considered the contents of the Statement of Claim.  The pleaded facts clearly support the plaintiff’s case that it is the victim of an elaborate email fraud, and that it has suffered loss in the amount of the Sum.  It appears entitled to relief based on its proprietary interest in the Sum.  I bear in mind the fact that declaratory relief is being sought.  I need to bear in mind the rules of practice set out above and decide how I should exercise my discretion.  I take into account the fact that fraud is pleaded and deemed established.  I take further into account the fact that nothing is known about the defendant, including whether it has any other creditors.  The plaintiff has a genuine need for the declaratory relief sought, so as to avert any need for it to race against other creditors.  Fairness justifies it.  I note further that BOC is neutral to the application.  In all the circumstances, I am satisfied that the facts of the present case are such that I should exercise my discretion in favour of granting the declaratory relief and the vesting order sought.

Conclusion

19.  For the above reasons, I order that judgment in terms of the Summons be entered against the defendant, together with costs of the action and this application.  I grant further the Order as per the Summons and the draft order that has been placed before me.  In so far as the costs of BOC is concerned, I order that costs summarily assessed at HK$5,800 be borne by the plaintiff.