COMTEL SOLUTIONS PTE LTD v. YI LI TRADE (HK) CO., LTD AND ANOTHER

HCA 1142/2019

[2019] HKCFI 2407

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1142 OF 2019

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JUDGMENT

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1.  The plaintiff claims as the victim of an email fraud, as a result of which it transferred money to the bank account of the defendant. It seeks judgment against the defendant for the return of the money and loss, and, for the purpose of a vesting order in respect of the money in the bank, joinder of the bank as a respondent.

Background

2.  The plaintiff is a Singaporean company.  On 20 February 2019, the financial controller of its sister company received an email requesting the plaintiff to transfer US$500,000 to the bank account in Hong Kong held by the parent company.  Later on the same day, another email, purporting to come from the financial controller of the group, arrived, requesting a change in the transfer of the money to the bank account of the defendant with the Bank of Communication (HK) Limited (“the Bank”).  The plaintiff acted accordingly on the following day.  Net of the transfer charge, an amount of US$499,957.44 was deposited into the account of the defendant with the Bank.

3.  The email from the group financial controller was proven to be a bogus one, made possible by hacking.  On 22 February 2019, the plaintiff attempted to cancel the transfer but in vain.  Report to the police in Singapore and Hong Kong was made immediately.  According to the Hong Kong Police, the account has since been frozen.  Letters from the plaintiff’s solicitors to the defendant demanding the return of the money have been unanswered.

4.  On 25 June 2019, the plaintiff commenced this action against the defendant for the recovery of the money on the ground that: (i) the same was had and received by the defendant to the plaintiff’s use; (ii) the defendant has converted the money belonging to the plaintiff; (iii) the defendant is liable as the recipient with knowledge, and thus a constructive trustee, of the money.  The plaintiff claims for the return of the money now traced into the defendant’s account and damages/equitable compensation for the loss of the money with interest (simply or compound).

5.  The defendant defaulted in entering appearance. Hence the present application.

Discussion

6.  On the basis of the affirmations of service, I am satisfied that the writ and documents in this application have been served at the registered and last known address of the defendant.

7.  In The Henri Stern Watch Agency Inc v HK Huasheng Technology Develop Co Ltd & Anor, HCA 1060/2018 (3 August 2018)[1], I said that whilst the court will normally consider if the pleaded case per se affords the plaintiff with the basis for the relief sought in a default judgment application, the nature of the claim and an application for a vesting order under section 52 of the Trustee Ordinance, Cap 29 (“TO”) at the same time well allow the court to consider all the evidence adduced in support of the applications.  In the present case, the evidence adduced establishes the movement of the money from the plaintiff, as a result of the email fraud, that ended up in the defendant’s account with the Bank.

8.  The principles regarding the cause of unjust enrichment and construction trust refer: see Guaranty Bank and Trust Company v Zzzik Inc Ltd, HCA 1139/2016 (18 July 2016) and others cited by counsel for the plaintiff[2].  A constructive trust is imposed on the defendant in respect of such money that belongs to the plaintiff in equity.

9.  It is not the practice of the court to grant declaratory relief without trial, but the court may do so if the fullest justice would be done to what the plaintiff is clearly entitled to.  The question is whether the plaintiff has a genuine need for such declaratory relief.  Circumstances similar to the present case were considered in previous decisions including Mesirow Financial Administrative Corporation v Best Link Industrial Co Limited, HCMP 1846/2015 (25 January 2016).  In the present case, the plaintiff put forward a proprietary claim to the money in the defendant’s account.  The defendant has not responded to the demands of the plaintiff or the claim in this action.  No information whatsoever about the defendant or its financial situation is known.  An order for the return of the money, without more, would not give the plaintiff the fullest justice to what it is entitled to, as that would put the plaintiff into the category of an unsecured creditor.  The declaratory relief sought in respect of the proprietary state of the money in the defendant’s account would serve to earmark the money, which is the plaintiff’s property in equity, and thus keeping it out of reach of the defendant’s general creditors.  I am satisfied that the declaration sought is necessary and should be granted.

10.  The application for vesting order in respect of the money in the account of the defendant with the Bank was taken out pursuant to section 52 of the TO.  Subsection (1)(e) provides that where the stock or a thing in action is vested in a trustee whether by way of mortgage or otherwise and it appears to the court to be expedient, the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint.  Subsection (5) provides that the court may declarations and give directions concerning the manner in which the right to transfer any stock or thing in action vested under the provisions of this ordinance is to be exercised.  The court will consider making a vesting order as to trust property where it is impossible or difficult to deal with the property without such an order.  This has been applied in context similar to the present case: see Guaranty Bank and Trust Company (above)[3]; The Henri Stern Watch Agency Inc (above)[4].  As mentioned, there is no real likelihood that the defendant will respond to any request to transfer the money now standing in its account with the Bank.  For the purpose of the remedy sought under the TO, the Bank should be joined as a respondent.  By letters dated 13 August and 19 September 2019, the Bank indicated that it holds a neutral position to the application and sought to be excused from this hearing.

11.  All matters considered, I am satisfied that the vesting order sought should be granted.

12.  The plaintiff also claims damages/equitable compensation for the loss of its money.  It maintains such claim for monetary judgment insofar as it does not manage to recover the money pursuant to the order to return and the vesting order, as well as interest.

Disposition

13.  I give the declaratory relief, the order to return and the vesting order in respect of the sum of US$499,957.44 (or its Hong Kong dollar equivalent) in terms of the summons.  I also give the monetary judgment which, for the avoidance of doubt, shall be enforced to the extent that any part of the sum is not recovered upon the execution of the order to return the money and the vesting order.  The monetary judgment shall carry interest, as requested, at HSBC prime rate plus 1%, from the date of the transfer of the money, ie, 21 February 2019, to full payment.  The plaintiff shall have the costs of this action including this application, as requested, to be taxed.