CRP/PE MUNROE STREET OWNER, LLC v. JUNWEI CONSULTING TRADE CO., LTD AND ANOTHER

DCCJ 4700/2019

[2021] HKDC 71

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4700 OF 2019

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BETWEEN

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DECISION

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THE APPEAL

1.  On 13 March 2020, the plaintiff filed a summons and, as against the 2^nd defendant, applied:-

(1) for summary judgment pursuant to Order 14 of the Rules of the District Court (“RDC”);

(2) alternatively, for an order under Order 29 rule 10, 11(1) and/or 12 of the RDC for interim payment.

2.  Upon hearing the parties, a Master granted summary judgment.  Given such a decision, it was not necessary for the Master to deal with the interim payment application. 

3.  This is the 2^nd defendant’s appeal against the learned Master’s decision made on 17 July 2020 whereby it was ordered that:-

(1) There be a judgment that the 2^nd defendant do pay the plaintiff the sum of USD150,560, or its Hong Kong dollar equivalent at the date of payment, with interest at half of the judgment rate from 8 April 2019 until the date hereof and thereafter at the judgment rate until payment; and

(2) The 2^nd defendant shall pay the plaintiff the costs of this action (including the present application) to be taxed if not agreed, with certificate for counsel.

THE PARTIES’ RESPECTIVE CASES

4.  The plaintiff’s case against the 2^nd defendant as pleaded in its Statement of Claim may be summarised as follows:-

(1) On 4 April 2019, No 1 Trade Limited (“No 1 Trade”) received from the plaintiff a sum of USD960,248[1] through an account held by No 1 Trade with Bank of Communications (Hong Kong) Limited (“No 1 Trade Account”).

(2) On 4 April 2019, the 2^nd defendant was enriched by receiving from the No 1 Trade Account an amount of USD150,560 which was traceable to the funds paid by the plaintiff to No 1 Trade.

(3) The plaintiff had never had any business or other dealings with the 2^nd defendant nor with No 1 Trade.  No 1 Trade had no right to the funds paid to it by the plaintiff.

(4) The receipt by No.1 Trade of the funds paid to it by the plaintiff was unjust and at the expense of the plaintiff.

(5) Accordingly, the enrichment of the 2^nd defendant was also unjust and at the expense of the plaintiff indirectly.

(6) The plaintiff therefore claims against the 2^nd defendant for the payment of USD150,560 as money had and received.

5.  In the supporting affirmation of Mr Michael Procopio (the Principal and Corporate Secretary of Procopio Enterprises Inc., the development manager of the plaintiff and the administrative member of the plaintiff) filed on 13 March 2020, it was further explained that:-

(1) Procopio Enterprises Inc., as the development manager of the plaintiff, had engaged Colliers International New England LLC (“Colliers”) on a debt and equity placement for a real estate project in the USA owned by the plaintiff.  The commission payable by the plaintiff to Colliers in relation thereto was in the total amount of USD960,428.

(2) On 29 March 2019, Mr Procopio emailed Mr Black, Executive Vice President of Colliers to arrange for the payment of the said commission.  On the same day, Mr Black replied that Ms Ferraro, Deal Coordinator of Colliers, could assist with the wiring instructions. 

(3) On 1 April 2019, Mr Procopio received two emails from Mr Black and from Ms Ferraro.  Neither email was copied to the other individual or anyone else.  Both emails included an attachment printed on what appeared to be Colliers’ letterhead, headed “WIRING INSTRUCTIONS”, and which included the particulars of the No 1 Trade Account.

(4) Having no reason to suspect that the wiring instructions were not genuine, the plaintiff submitted an international wire request to its bank, and requested to wire a sum of USD960,428 from the plaintiff’s account to the No 1 Trade Account. The transfer was effected “in error”[2] (“the Mistaken Transfer”).

(5) It was subsequently discovered that the wiring instructions were in fact false as they did not contain Colliers’ own bank account details but the details of a fraudulent third party.  A report was therefore made to the Hong Kong Police, which then confirmed that the Mistaken Transfer had been made, and that the funds forming part of the Mistaken Transfer were later transferred out of the No 1 Trade Account into different bank accounts including the 2^nd defendant’s bank account with Bank of Communications in Hong Kong (“D2’s HK Account”) on the same day as the date of the Mistaken Transfer (4 April 2019).

6.  The 2^nd defendant’s case may be summarised as follows:-

(1) The 2^nd defendant was established by its director Mr Lin Shengxiong in 2007.  Its business involved purchasing frozen food and seafood from overseas and reselling them to buyers in the Mainland.

(2) For the purpose of receiving sale proceeds, the 2^nd defendant had opened a bank account in the Mainland under the name of Mr Lin’s mother-in-law (“the Mainland Bank Account”).

(3) The 2^nd defendant would use part of the sale proceeds received via the Mainland Bank Account to pay off purchase price of goods owed to overseas sellers.  As those overseas sellers would not accept payment in RMB, the 2^nd defendant was required to exchange RMB for foreign currencies, with the assistance of a foreign currencies service provider.  The normal practice of the 2^nd defendant was to transfer monies from the Mainland Bank Account to the designated bank account of the said service provider, which would then in turn transfer the foreign currencies exchanged to D2’s HK Account.

(4) On 31 December 2018, the 2^nd defendant placed order with an Irish supplier for frozen beef in the total sum of Euro 5.62 million.  In the period between 8 March 2019 and 8 April 2019, 2 purchasers known as “柯總” and “海洋” had placed various orders with the 2^nd defendant for the said frozen beef, and had made various payments by depositing the same into the Mainland Bank Account. 

(5) Mr Lin requested his service provider to exchange RMB into USD on around 2 April 2019.  On around 3 April 2019 and 8 April 2019, he made a total of 13 transfers from the Mainland Bank Account to the service provider’s designated account in the total sum of RMB6,205,000.

(6) The service provider then exchanged USD798,571.56 for the 2^nd defendant, and the said sum was deposited into D2’s HK Account in different tranches. 

(7) D2’s HK Account had not received any amount of money in the sum of USD150,560 on 4 April 2019 as alleged. 

(8) D2’s HK Account did receive a sum of USD150,560 on 8 April 2019, but it was part of the foreign currencies which the 2^nd defendant exchanged through the said service provider.

(9) The 2^nd defendant had not been unjustly enriched at the expense of the plaintiff.

(10) The 2^nd defendant had provided valuable consideration for the various sums of monies in USD received via the D2’s HK Account.

LEGAL PRINCIPLES

Summary Judgment

7.  The principles are trite and undisputed.

8.  In Li Chuen Kwai v. Po Lam Construction Development Limited (HCA 2376/2013, unreported, 24 September 2014), it was held that:-

“11. As far as the plaintiff’s claim is concerned:

(1) An application for summary judgment must be supported by an affidavit verifying the facts on which the claim is based [Order 14, rule 2(1), Rules of the High Court].

(2) The Statement of Claim must be good and complete in itself; any defect or omission in the Statement of Claim cannot be corrected or supplemented by the plaintiff’s affidavit. If the defect is one of substance, the application for summary judgment will be dismissed [see: Hong Kong Civil Procedure 2014 at Practice Note 14/1/5].

(3) This means that an Order 14 application has to proceed on the case as pleaded, and it is those facts (as pleaded) which have to be verified on affidavit.

(4) Where the assertions in the plaintiff’s affirmation constitute a material deviation from the plaintiff’s pleaded case, the plaintiff will have failed to verify his claim as pleaded, and summary judgment should not be granted [Lin Jan v Long Xiaobo, HCA 1516/2012 (Judgment dated 4/09/2013)].

(5) Equally, summary judgment will not be granted where the plaintiff’s affidavit evidence is materially different from and inherently inconsistent with his/her case in the Statement of Claim [see: Sin Yuk Hung v Sin Tung San, HCA 474/2013 (Judgment dated 18/12/2013)].

12. As far as the defendant’s defence is concerned:

(1) The defendant shoulders the burden to satisfy the court that he has a real or bona fide defence (ie that there are triable issues), or that there ought for some reason to be a trial of the plaintiff’s claim.

(2) However, a complete defence need not be shown. The defence set up need only show that there is a triable issue or question or that for some other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law and no possibility of a real defence on the question of fact.

(3) Although the mere assertion in an affidavit does not, ipso facto, provide leave to defend, the court will not embark upon a mini-trial of the action on paper and leave to defend will be granted unless the defence raised is so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that the defence is a sham.

(4) The test is not whether the defendant’s assertions are to be believed, rather it is whether those assertions are believable, ie capable of being believed. If so, the defendant must have leave to defend.

(5) Whether the defendant’s assertions are believable is a question that should be answered not by taking those assertions in isolation bur rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute.”

9.  In Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822, 827, Cheung JA held that:-

“14. It is well-established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence. However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case. This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence. This requirement is further recognised in the procedural rules which mandate the plaintiff to state his belief in the verifying affidavit that there is no defence to the claim. This requirement must be kept in proper perspective when assessment is made of the strength of the application, otherwise there is a danger that the attention will be focused solely on what the defendant has said without consideration at the same time of the basic premise of the plaintiff’s claim or its inherent strength and weakness…” (Emphasis added)

10.  Having said that, to raise a triable issue or arguable defence, the defendant cannot be sparing of the particulars of his defence, and then claim, as a result of his own parsimony in details. that there is an obscurity which must await trial for illumination.^[3]

Interim payment

11.  In Delco Participation B V v Chiho Environmental Group Limited (formerly known as Chiho-Tiande Group Limited) & Another [2020] HKCFI 1643, in which the plaintiff therein also applied for summary judgment and alternatively interim payment, Coleman J had the following to say:-

“31. As to an application for interim payment under Order 29 rule 10, whether to order interim payment is an exercise of the court’s discretion. There is some overlap with the test for granting conditional leave to defend, namely whether the defences and/or counterclaims raised can be said to be shadowy. But, essentially, the burden is on the plaintiff to show on the balance of probabilities that it would, and not merely that it is likely to, succeed at trial. The standard of proof required is high.

32. Where unconditional leave to defend is granted, it is at least unlikely that the plaintiff will be able to satisfy the burden of proof required to make an order for interim payment.  But that may depend in each case on the nature of the claim and the defence put forward.”

Appeal against Master’s decision

12.  In relation to an appeal brought against Master’s decision, it is well established that such an appeal is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time.  The judge will give the weight it deserves to the previous decision of the Master, but he is in no way bound by it.  The judge in chambers is in no way fettered by the previous exercise of the Master’s decision. (Hong Kong Civil Procedure 2021, Volume 1, paragraph 58/1/2).

Money had and received/unjust enrichment

13.  In Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, the Court of Final Appeal had this to say about the common law cause of action of money had and received:-

“66. The common law cause of action asserted by the plaintiff for money had and received where consideration has totally failed is now generally regarded as a species of claim for restitution based upon principles of unjust enrichment: see eg, Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 at 61-64; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 255-257; Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 375; cf Gummow J's views in Roxborough v Rothmans of Pall Mall (2001-2002) 208 CLR 516 at 543 et seq, discussed in Birks, ‘Failure of consideration and its place on the map’ (2002) 2 OUCLJ 1; and in Beatson and Virgo, ‘Contract, unjust enrichment and unconscionability’ (2002) 118 LQR 352.

67. A useful framework for approaching such claims which was adopted by both parties involves asking four questions:

(a) Was the defendant enriched?

(b) Was the enrichment at the plaintiff's expense?

(c) Was the enrichment unjust?

(d) Are any of the defences applicable?

68. This approach was evolved and is generally accepted in academic writings: see eg, Birks, An Introduction to the Law of Restitution, (1989 Rev Ed) Ch 1; Burrows, The Law of Restitution, (2002), p 15; Goff and Jones, The Law of Restitution, 6th Ed, §1-016; and Hedley and Halliwell, The Law of Restitution, (2002), §1-16; Virgo, The Principles of the Law of Restitution (1999) p 9. It has received substantial judicial support and will be adopted in this judgment: see eg, Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 559 and 578; Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd (1994) 182 CLR 51 at 75; Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221, at 227 and 234; and Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 408.”

THE 2^ND DEFENDANT’S ARGUMENTS

14.  Following the approach adopted by the Court of Final Appeal in Shanghai Tongji Science & Technology Industrial Co Ltd, the 2^nd defendant has made submissions on the following 3 questions, and contended that it has demonstrated not only that the Statement of Claim is defective, but also that there are triable issues:-

(1) Whether the 2^nd defendant had been enriched in the sum of USD150,560 on 4 April 2019? 

(2) Assuming that the 2^nd defendant had been enriched in the sum of USD150,560 on 4 April 2019, was it at the expense of the plaintiff?

(3) Assuming that the 2^nd defendant had been enriched at the expense of the plaintiff, what is the unjust factor?

15.  I will deal with these questions in turn below.

Whether the 2^nd defendant had been enriched in the sum of USD150,560 on 4 April 2019?

16.  First of all, it was submitted by Mr Chan SC for the 2^nd defendant that the plaintiff did not plead that its transfer of USD960,248 was by mistake and it is open to the interpretation that the transfer was a gift.  I will deal with the question on the necessity of pleading “mistake” expressly in the Statement of Claim below.[4] 

17.  It was then submitted by Mr Chan SC that there was no indication in the document to tell the 2^nd defendant where exactly the amount of USD150,560 came from, and there was nothing to show that the 2^nd defendant was aware that the money was transferred to its account from the No 1 Trade Account. 

18.  As far as the source of such a fund is concerned, the plaintiff had produced a letter from the Hong Kong Police Force (“HKPF”) dated 26 November 2019 in which HKPF stated that, upon investigation, it was confirmed that the amount of USD150,560 was transferred to D2’s HK Account on 4 April 2019 from the No 1 Trade Account.  I do not accept the 2^nd defendant’s criticism that the plaintiff had failed to identify “the source of information of the police officer”[5].  In my view, it is adequate for the plaintiff to identify the HKPF as the source of information and belief, when the plaintiff had produced the HKPF’s letter in support.

19.  Mr Chan SC then made the point that there was no allegation in the Statement of Claim nor in the supporting affirmation that No 1 Trade was the agent of either the plaintiff or the 2^nd defendant, nor was there any allegation that there was no basis for No 1 Trade to transfer the amount to the 2^nd defendant. 

20.  On the plea of agency relationship between No 1 Trade and the plaintiff or the 2^nd defendant, I cannot agree that this plea is required. 

21.  In relation to the challenge that there was no allegation that there was no basis for No 1 Trade to transfer the amount to the 2^nd defendant, I am afraid there is simply no need to do so, because “absence of basis” is not the relevant test.  In Big Island Construction (HK) Limited v Wu Yi Development Company Limited & Another (2015) 18 HKCFAR 364, the suggestion of adopting “absence of basis” as the test was rejected by the Court of Final Appeal:-

“69. Mr Yu submitted that we should follow the approach adopted by the Canadian Supreme in Garland v Consumers’ Gas Co (2004) 237 DLR (4^th) 385 and adopt ‘absence of basis’ as the test. With respect, as academic writings show the Canadian approach has its own complications.

70. Shanghai Tongji was followed and applied in Takahashi v Cheng Zhen Shu (2011) 14 HKCFAR 558.  Mr Yu submitted that in between these cases, in Cheong Shing Ltd v Yu Kwan (2008) 11 HKCFAR 594, this court adopted the “absence of basis” approach.  I cannot agree.  There was no reference to Shanghai Tongji or any discussion of “the absence of basis” approach in Cheong Shing.  The decision in Cheong Shing is explicable on the basis that the court was satisfied that there was a total failure of consideration, ‘a well-recognized category of unjust enrichment.’ ” (at paragraphs 69 – 70, per Tang PJ)

22.  Mr Chan SC further submitted that whereas it was pleaded in the Statement of Claim that the 2^nd defendant had received a sum of USD150,560 on 4 April 2019, as a matter of fact it did not do so, even though it was accepted by the 2^nd defendant that a sum of exactly the same amount was deposited into D2’s HK Account on 8 April 2019, which was the first working day following 4 April 2019.  It was submitted that “the mere coincidence on the figures does not show that they were the same sum of money”[6].

23.  In paragraph 6 of the Statement of Claim[7], it was pleaded that:-

“On 4 April 2019, the 1^st Defendant was enriched …and the 2^nd Defendant was enriched in the amount of USD150,560 (the ‘San Jin Yuan Payment’) .

Particulars

6.1 On 4 April 2019, the 1st Defendant received…

6.2 On the same day, the 2^nd Defendant received:

6.2.1 the San Jin Yuan Payment,

6.2.2 in account no….held in its name with [Bank of Communications (Hong Kong) Limited].

6.2.3 from the No 1 Trade Account.”

24.  Mr Lee for the plaintiff could not dispute that the 2^nd defendant, as a matter of fact, did not receive the sum of USD150,560 on 4 April 2019, because it is evident from the 2^nd defendant’s bank statement that there was indeed no receipt of such a sum of money on 4 April 2019 as alleged.   The relevant entry was dated 8 April 2019 instead.  However, he submitted that it does not matter, because “the timing of enrichment is not part of the cause of action”.[8]  He had further given various reasons to explain why there was a discrepancy of one working day between the date of transfer and the date of record in the 2^nd defendant’s bank statement[9]. 

25.  Despite Mr Lee’s forceful arguments, I am afraid the court is bound to consider the plaintiff’s pleaded case and its pleaded case only.  As set out above, the Statement of Claim pleaded firmly that the 2^nd defendant’s receipt of the sum of USD150,560 was on 4 April 2019.  No matter how sound Mr Lee’s argument is on why the date of transfer was different from the date of receipt, he could not alter the fact that the plaintiff’s case, as pleaded, was that the 2^nd defendant’s receipt of the same was on 4 April 2019 but not any other date.  The court and the plaintiff are bound by this pleaded case, and the plaintiff cannot “expand” this pleaded case by way of affirmation evidence.

26.  I am of the view that the plaintiff’s application for summary judgment can be disposed of on this ground alone.

27.  Despite my conclusion above, for the sake of completeness, I shall proceed to consider the other 2 questions below.

Assuming that the 2^nd defendant had been enriched in the sum of USD150,560 on 4 April 2019, was it at the expense of the plaintiff?

28.  The 2^nd defendant argued that even if it had been enriched, such enrichment was not “at the expense of the plaintiff”. The “more precise criteria” laid down by the United Kingdom Supreme Court in Investment Trust Companies v Revenue and Customs Commissioners [2018] AC 275 were relied on.

29.  It was further said that, in this regard, the following facts are highly relevant:-

(1) It was not a direct transfer between the plaintiff and the 2^nd defendant: the plaintiff transferred its monies to No 1 Trade, but not the 2^nd defendant.  So on the plaintiff’s case the person who received the unjust enrichment at the expense is No 1 Trade.

(2) The plaintiff’s claim is not based on fraud.  Mr Lee had confirmed before the learned Master that the plaintiff’s claim is not a proprietary claim and in any event there was no basis for any tracing claim pleaded in the Statement of Claim or set out in the supporting affirmation.

(3) The plaintiff does not allege that the 2^nd defendant was an agent of No 1 Trade, nor that he was guilty of knowing receipt.

(4) The 2^nd defendant had provided valuable consideration for the money in the currency of USD transferred to D2’s HK Account.

30.  In addition, the 2^nd defendant relied on the case of Takahashi v Cheng Zhen Shu (2011) 14 HKCFAR 558 and submitted that the mere fact that a defendant had received money which originally came from the plaintiff but was passed to the defendant by a 3^rd party does not give rise to a cause of action in unjust enrichment even though as between the plaintiff and the defendant the defendant has no right to receive any money from the plaintiff.  The fact that as between the plaintiff and the 3^rd party who passed the money to the defendant, the plaintiff has a right of recovery of the money on the ground of unjust enrichment, would make no difference.  It was further said that the CFA’s decision is also authority to support the proposition that where the recipient of the enrichment has furnished good consideration for the enrichment, in the absence of any fraud, this would be a complete defence to the claim. 

31.  In my view, the first matter which the court has to consider is whether the 2^nd defendant has raised any triable issue on its provision of valuable consideration for the sum of USD150,560.  It may be recalled that it was alleged by the 2^nd defendant that the sum was received as part of a foreign currency exchange transaction.

32.  Pausing here, I should note that I do not understand why Mr Lee alleged that the 2^nd defendant had abandoned its “bona fide purchaser” defence, as it was clearly relied on in the 2^nd defendant’s written submissions. 

33.  Insofar as it is the plaintiff’s argument that such a defence was not pleaded in the 2^nd defendant’s Defence, such an argument must be rejected because a defendant facing a summary judgment application may show cause against the plaintiff’s application “by affidavit or otherwise”[10]. The 2^nd defendant, unlike the plaintiff, is not restricted to its pleaded case in resisting the application for summary judgment.  In Tso Yuk Yin v Wan Wai Hung [2018] HKCFI 2798, it was held by M Ng DHCJ (as she then was) that:-

“Mr Cheng accepted the limitation defence might not have been fully/sufficiently pleaded in response to P’s claim for return of the sum of $120,000.00, but he submitted it was arguable and triable and could be fully arrayed by future amendment of the Defence. I refer to my judgment in Ko Hong and Ko Chi Ching both trading as Wing Yick Chau Chong v Chow Hung Wai and Chow Hung Choi both trading as Man Hung Store, cited in my later judgment in AVC Property Development Company Limited v Joyful Grace Trading Limited & anor, and note that Order 14 rule 4(1) of the RHC provides that a defendant may show cause ‘by affidavit or otherwise to the satisfaction of the court’ and that a defendant is not necessarily bound by his pleaded defence in resisting a summary judgment application. If the affidavit in opposition raises triable issues or arguable defences, it may be open to the defendant to apply for amendment of the defence in due course especially if it is at an early stage of the proceedings…”

34.  Coming back to the 2^nd defendant’s “bona fide purchaser” defence, Mr Lin explained in paragraph 13 of his affirmation as follows:-

“根據該交通銀行戶口2019年4月份交易摘要，馬先生於2019年4月3日至9日期間協助第二被告人兌換了合共798,571.56美金，明細如下:-

	日期	金額(美金)
(1)	03.04.2019	28,000.00
(2)	03.04.2019	84,000.00
(3)	03.04.2019	148,257.00
(4)	03.04.2019	58,000.00
(5)	03.04.2019	99,993.58
(6)	03.04.2019	209,950.98
(7)	03.04.2019	50,000.00
(8)	04.04.2019	30,985.00
(9)	04.04.2019	30,985.00
(10)	04.04.2019	58,400.00
(11)	08.04.2019	150,560.00
(12)	08.04.2019	133,047.98
(13)	08.04.2019	26,786.00
(14)	08.04.2019	11,000.00
(15)	08.04.2019	30,300.00
		總數:       1,150,265.54	”

35.  While the above table shows that the 2^nd defendant had received a total of USD1,150,265.54 in the period between 3 April 2019 and 9 April 2019 in D2’s HK Account, it is Mr Lin’s evidence that during that period, only USD798,571.56 was received as the foreign currency exchanged.  The 2^nd defendant had fully received the said sum of USD798,571.56 by 4 April 2019[11].  In other words, the 2^nd defendant’s explanation on its receipt of USD cannot cover the deposits recorded on 8 April 2019, including the deposit of USD150,560. 

36.  That being the case, I am of the view that despite the 2^nd defendant’s allegation that the amount of USD150,560 was part of the funds received pursuant to the foreign currency exchange transaction, such an allegation is unsupported by the 2^nd defendant’s own evidence.  I therefore do not accept that the 2^nd defendant has raised any arguable defence by way of its case on foreign currency exchange.

37.  With the above conclusion, it remains for me to consider whether, in the circumstances of the present case, the 2^nd defendant’s enrichment was “at the expense of the plaintiff”. 

38.  Great emphasis had been placed by the 2^nd defendant on the indirect transfer of funds between the plaintiff and itself.  It was said that there was no sufficiently close causal connection between the plaintiff’s loss and the 2^nd defendant’s gain.

39.  With respect, this argument is rejected. 

40.  Given the fact that the transfer between the plaintiff and No 1 Trade on one hand and the transfer between No 1 Trade and the 2^nd defendant are closely related in time (only one working day apart) and amount, and that no credible reason had been put forward in relation to the transfer from No 1 Trade to the 2^nd defendant, I am of the view that the situation is equivalent to a direct payment.  As Lord Reed JSC pointed out in Investment Trust Companies (supra), “there have also been cases…in which a set of co-ordinated transactions has been treated as forming a single scheme or transaction for the purpose of the ‘at the expense of’ inquiry, on the basis that to consider each individual transaction separately would be unrealistic”[12]. I am of the view that the present case should be treated in the same way.

41.  Since there is no evidence that the 2^nd defendant had furnished good consideration for its enrichment of USD150,560, the case of Takahashi can offer no assistance herein at all.

42.  It is therefore my conclusion that the 2^nd defendant has failed to raise any arguable defence in relation to the question on “at the expense of the plaintiff”.

Assuming that the 2^nd defendant had been enriched at the expense of the plaintiff, what is the unjust factor?

43.  The 2^nd defendant raised two issues on “unjust factor”:-

(1) Whether “mistake” has to be pleaded in the Statement of Claim; and

(2) Whether the plaintiff’s mistake had been tainted by doubt.

44.  For the sake of convenience, I will deal with the second issue first, under which it was submitted by the 2^nd defendant that since the plaintiff’s mistake had been tainted by doubt, such a mistake would be defeated and not operative.

45.  With greatest respect, this argument is rejected, for it is the evidence of Mr Procopio that he had no reason at the material time to suspect that the wiring instructions were not genuine. 

46.  The 2^nd defendant had put forward a number of grounds and asserted that, because of various features of the facts, Mr Procopio should have taken various steps in verifying such wiring instructions.  In my view, these allegations are beside the point, for we are not considering whether Mr Procopio was negligent at the material time. 

47.  I now come back to the first issue: whether “mistake” has to be pleaded in the Statement of Claim. 

48.  In my view, it has to be pleaded. 

49.  As pointed out by Mr Chan SC, the learned author of Goff & Jones, The Law of Unjust Enrichment (9^th edition, 2016), stated in paragraph 1-26 thereof as follows:-

“A claimant must be able to point to a ground of recovery that is established by past authority, or at least is justifiable by a process of principled analogical reasoning from past authority. There is in English law ‘no general rule giving the plaintiff a right of recovery from a defendant who has been unjustly enriched at the plaintiff’s expense’, and the courts’ jurisdiction to order restitution on the ground of unjust enrichment is subject ‘to the binding authority of previous decisions’: they do not have ‘a discretionary power to order repayment whenever it seems…just and equitable to do so’. Claims in unjust enrichment must be pleaded by bringing them ‘within or close to some established category or factual recovery situation…’.

50.  The learned author continued in paragraph 1-38:-

“Consistently with what has been said in the previous part about the necessary ingredients of claims in unjust enrichment, it should be made clear in a statement of claim what facts are being relied upon to establish that the defendant was enriched, that his enrichment was gained at the claimant’s expenses, and that his enrichment is unjust. The courts have stressed in connection with this last requirement that it will not do for a claimant to plead a generalised claim in unjust enrichment, for the same reason that it will not do for a claimant to plead generalised claim in tort. Nor is it acceptable to assert that the circumstances make the defendant’s enrichment unfair in a broad sense, or in accordance with the claimant’s own idiosyncratic notions of unfairness: specific reasons anchored in the case law must be given to justify the assertion that the defendant’s enrichment is unjust.” (emphasis added)

51.  In Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (2015) 18 HKCFAR 364, Tang PJ quoted what Lord Hope explained in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 409B:-

“The approach of the common law is to look for an unjust factor, something which makes it unjust to allow the payee to retain the benefit…It is the mistake by the payer which, as in the case of failure of consideration and compulsion, renders the enrichment of the payee unjust. The common law accepts that the payee is enriched when the sum was not due to be paid to him, but it requires the payer to show that this was unjust.”

52.  Relying on the above, I am of the view that the “unjust factor” relied on by the plaintiff should be expressly pleaded in the Statement of Claim as part of the material facts. 

53.  Mr Lee argued, by relying on Comprehensive Auto Restoration Limited v Lee Seng Siew (HCA 960/2011, unreported, 15 June 2012), that even if “mistake” is a material fact, its omission from the Statement of Claim is not a defect “of substance”, because “there could not be any live issue between the plaintiff and the 2^nd defendant on whether the plaintiff paid away the sum by mistake”[13].

54.  This argument is rejected because:-

(1) I do not accept that there is no live issue between the plaintiff and the 2^nd defendant on whether the plaintiff made the payment to No 1 Trade by mistake.  While Mr Lee is right to say that it seems that the 2^nd defendant did not have any positive knowledge on whether the said payment was made under a mistake, there is nothing which stops the 2^nd defendant from pleading a non-admission and putting the plaintiff to strict proof.  The issue on “mistake” would still be a live one under such circumstances. 

(2) The situation in the case of Comprehensive Auto Restoration Limited is very different from that in the present case. In that case, the plaintiff’s claim was based on a debt.  While it was considered by the court that the statement of claim therein could have set out expressly other facts pertaining to the debt, it was held that those facts were not crucial to the claim, and even if they were material, their omission was not of substance because the defendant admitted such a debt in the defence filed.

55.  In the present case, the plaintiff relies on “mistake” as the unjust factor.  Hence, “mistake” should have been pleaded in the Statement of Claim.  However, that was not done, and the circumstances of the “mistake” were only asserted in the plaintiff’s supporting affirmation. 

56.  The Statement of Claim is therefore defective. 

Proprietary claim

57.  In this appeal, the plaintiff also seeks to rely on its proprietary claim as pleaded in paragraph (3) of the Prayer of its Statement of Claim.

58.  The 2^nd defendant argued that the plaintiff should not be allowed to rely on such a claim because it had abandoned this claim in the hearing before the learned Master.

59.  I do not agree that the plaintiff is bound by the way it conducted its case before the learned Master.  As aforesaid, an appeal under Order 58 from a Master to a Judge in chambers is an actual rehearing as if the matter came before the Judge for the first time.  The matter is argued and considered afresh.  What Kwan J (as her Ladyship then was) said in El Vince Limited v Wu Wen Sheng [2001] 3 HKLRD 445 should be borne in mind:-

“I am mindful of the fact that this is an appeal from the decision of a Master and such appeals are by way of rehearing and it is very common for new points to be taken in an appeal of this kind. A party to an interlocutory hearing before a Master is not entitled to rely on the other party’s conduct of the case as an implied representation that the case will be conducted in the same way on an appeal to the judge in chambers and that no new point will be taken (See Magec Aviation Limited v Fayair (Jersey) Company Limited, Lexis transcript, 25 March 1997).”[14]

60.  However, while the plaintiff, despite its previous stance, should be allowed to argue on its having a proprietary claim against the 2^nd defendant, I am of the view that this would not assist the plaintiff at the end of the day. 

61.  Firstly, I am of the view that it is simply not enough for the plaintiff to include its proprietary claim in the Prayer of its Statement of Claim without mentioning it in the body thereof, in the circumstances of the present case. 

62.  The Appeal Committee of the Court of Final Appeal has recently clarified in Lo Yuk Sui v Fubon Bank (Hong Kong) Limited formerly known as International Bank of Asia Limited (2020) 23 HKCFAR 138 that:-

(1) “there is no requirement in the Rules of the High Court for a party to plead the legal consequences of particular facts and the rules are permissive as to the raising of points of law in pleadings”[15];

(2) Yuen JA’s obiter dictum in Mui So Bing v Wan Chi Shing [2019] HKCA 1341 did not suggest a rigid requirement to plead legal consequences flowing from the pleaded facts; and

(3) The said dictum in Mui So Bing (supra) “is to be understood in the context of that particular case where the plaintiff had pleaded a specific legal consequence (resulting trust) and nothing else, so that when, on appeal, the plaintiff then sought to assert an alternative legal consequence (and therefore one inconsistent with the only consequence pleaded), it necessarily took the other side, and the court, by surprise”[16].

63.  In the present case, the plaintiff had divided its Statement of Claim into 2 sections.  The first one bears the sub-heading “The Parties”.  The second one bears the sub-heading “Unjust Enrichment”, under which the plaintiff pleaded:-

(1) Under paragraph 6: the 1^st and 2^nd defendants’ enrichment in the form of receipt of money from No 1 Trade’s Account;

(2) Under paragraph 7: the monies received by the defendants were traceable from the plaintiff’s payment to No 1 Trade;

(3) Under paragraph 8: No 1 Trade had no right to the funds paid to it by the plaintiff;

(4) Under paragraph 9: The receipt by No 1 Trade of the funds paid to it by the plaintiff was unjust and at the expense of the plaintiff;

(5) Under paragraph 10: The enrichment of the defendants was also indirectly unjust and at the expense of the plaintiff;

(6) Under paragraph 11: The plaintiff claims for the payments to the defendants as money had and received by the defendants to the use of the plaintiff.

64.  Nothing else had been pleaded thereafter, apart from the Prayer.

65.  It is therefore clear that, in its Statement of Claim, the plaintiff had only put forward one claim, namely, unjust enrichment, but no other.  Allowing the plaintiff to run its argument on the alleged proprietary claim, in my view, would take the 2^nd defendant by surprise, as in the case of Mui So Bing (supra).  This is so even if the plaintiff did make a proprietary claim under the Prayer of the Statement of Claim, because of how the plaintiff presented its case in the body of the Statement of Claim as set out above.

66.  Secondly, I do not think, as the Statement of Claim and the evidence placed before the court now stand, the plaintiff has made out a valid proprietary claim against the 2^nd defendant.

67.  The learned author of Snell’s Equity (34^th edition, 2020) stated the following in paragraph 30-053 thereof:-

“A claimant with a legal interest in the original asset is generally required to rely on the common law rules of following and tracing, and then to enforce any claim they may have by a common law remedy. The common law treated money as identifiable so long as it had not become mixed with other money. Accordingly, if the defendant paid the claimant’s money into a bank account which already contained money belonging to the defendant, the claimant could not trace his money into any withdrawal from the account…”

68.  As accepted by Mr Lee, to assert a proprietary claim, the plaintiff has to show that its proprietary interest in USD150,560 can be traced through the 1^st layer recipient (No 1 Trade) into the hands of the 2^nd defendant[17]. However, as demonstrated above, under the common law, this is only possible if there was no mixing of funds in the No 1 Trade Account.  No evidence had been produced on this matter at all.

69.  Furthermore, Mr Lee submitted that it was unconscionable and there was no reason for the 2^nd defendant to retain the sum of USD150,560 because the plaintiff paid out this sum by mistake.  In my view, this is a material fact which must be pleaded in the Statement of Claim in support of the alleged proprietary claim.  As aforesaid, it was not so pleaded.  

70.  As far as tracing in equity is concerned, the learned author of Snell’s Equity (34^th edition, 2020) stated the following in paragraph 30-054 thereof:-

“To rely on the equitable rules of identification the claimant must have some distinct equitable title to the original asset…On the orthodox view, therefore, it is not enough that the claimant has a legal and beneficial title to the original asset. In this situation, the claimant has no distinct equitable title to the asset and must instead rely on the common law rules of identification to found his claim.”

71.  In the Statement of Claim, the plaintiff had simply not pleaded any fact in support of any allegation of mistake and/or fraud.  Hence, there is nothing which supports the plaintiff’s case on its equitable title to the sum of money transferred away.

INTERIM PAYMENT

72.  As the plaintiff’s application for summary judgment should be dismissed by reason of its defective Statement of Claim, I will proceed to consider its alternative application for interim payment.

73.  Whether to order interim payment is a question of the court’s discretion, which must be exercised on the basis of the circumstances of the case before the court.

74.  In the present case, I am of the view that the court should exercise its discretion and order the 2^nd defendant to make interim payment, despite the court’s dismissal of the plaintiff’s summary judgment application.  This is because such dismissal is necessitated by reason only of the inadequacy of the Statement of Claim, but not because of the court’s satisfaction that there is any triable issue herein. 

75.  As accepted by Mr Chan SC, in the court’s consideration on interim payment, the strict requirement of the Statement of Claim is not applicable.  Hence, it is open to the court to consider the fact that the plaintiff’s defective Statement of Claim can be remedied without much difficulty.  The position is totally different from the case where there is a triable issue which can only be resolved by way of a trial.

76.  The 2^nd defendant pointed out repeatedly that the sum of USD150,560 has been frozen by the Bank of Communications (Hong Kong) Limited, and that there is no risk that the plaintiff will not be able to recover the said sum.  Be that as it may, I do not think the court should leave it to others to protect the plaintiff’s interest, especially when the court has not been assured that the monies shall remain to be freezed until the conclusion of this action.

ORDER

77.  By reasons of the aforesaid, I make the following orders:-

(1) The learned Master’s order dated 17 July 2020 be set aside;

(2) the plaintiff’s application for summary judgment made under paragraph 1 of its summons filed on 13 March 2020 be dismissed;

(3) the 2^nd defendant do pay the plaintiff within 28 days hereof the sum of USD150,560, or its Hong Kong Dollar equivalent at the date of payment, by way of interim payment.

COSTS

78.  The 2^nd defendant has been successful in its appeal against the summary judgment granted by the learned Master whereas the plaintiff, despite its failure to resist the 2^nd defendant’s appeal, has now obtained an order for interim payment. 

79.  I make a cost order nisi that the costs of and occasioned by this appeal and the summons filed on 13 March 2020 (including the costs of the hearing before the learned Master) shall be in the cause, with certificate for one counsel.  The above order nisi shall become absolute in the absence of application to vary within 14 days hereof.