JAGDIP KAUR SADHU SINGH v. I LIVE LTD

DCCJ 3222/2017

[2018] HKDC 152

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3222 OF 2017

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DECISION

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1.  This is the plaintiff’s application for default judgment against the defendant on the ground that the defendant has failed to file and serve a defence to the plaintiff’s claim. Having considered the evidence as to service adduced by the plaintiff, I am satisfied that the documents in these proceedings have been duly served on the defendant.

2.  The defendant in fact has not given any notice of intention to defend.  However, since the plaintiff is seeking, inter alia, declaratory reliefs against the defendant, it is correct for the plaintiff to proceed as if the defendant had given notice of intention to defend[1].

3.  The plaintiff has filed an affirmation made by her on 2 November 2017 in support of this application. This is unnecessary and in fact not permitted.  It is trite that in an application for a default judgment, only the matters pleaded in the statement of claim would be considered and no evidence on merits is admissible[2].

The plaintiff’s pleaded case

4.  The plaintiff’s case as pleaded in the statement of claim is as follows:-

(a) The plaintiff is a Singapore permanent resident.

(b) “Touch Trades” is purportedly a company incorporated in UK providing financial service via an online platform.

(c) The defendant is a company incorporated in Hong Kong with an account in HSBC (“the HSBC account”).

(d) On 4 November 2016, the plaintiff received a phone call from a staff member of Touch Trades and was persuaded to open a trading account with Touch Trades (“the trading account”).  The plaintiff deposited USD5,000 into the trading account as an initial deposit.

(e) Subsequently, the plaintiff was introduced to Eli Larson and Ray Davis, being the account manager and the CEO of Touch Trades respectively.  The plaintiff was persuaded by them and made further deposits into the trading account by paying money to the HSBC account through wire transfer.  From 8 November 2016 to 10 November 2016, the plaintiff has transferred 6 sums to the HSBC account, the total of which is USD 130,101 (“the investment fund”).

(f) The plaintiff intended that the investment fund would be held by Touch Trades for her benefit and would be managed by Eli Larson for the sake of investment.

(g) The investment fund was not shown in the record of the trading account.  In late November 2016, the plaintiff decided to terminate her engagement with Touch Trades.  In early December 2016, she requested Eli Larson and Ray Davis to arrange for return of the investment fund to her, and they had no objection to the plaintiff’s request and asked the plaintiff to wait.

(h) On 13 February 2017, Eli Larson told the plaintiff that Touch Trades had reached an agreement with HSBC HK. Eli Larson told the plaintiff that in order to get back the investment fund, she would need to pay USD25,000 to cover the legal costs incurred by HSBC HK. Eli Larson asked the plaintiff to pay the USD25,000 by depositing the sum into a HSBC HK account held by one ZINZIP SP.ZOO Limited.  The correspondence address of that company was later found to be non-existent.  The plaintiff made a report to the police.  Later, on 27 March 2017, the police informed the plaintiff that there was only USD26,295.22 remaining in the HSBC account. According to the police, the HSBC account has now been frozen.

(i) Neither Touch Trades nor the defendant has returned the investment fund or any part thereof to the plaintiff.

(j) The plaintiff has never intended to pass the beneficial interest in the investment fund to the defendant and the defendant is holding the same on resulting trust for the plaintiff.  By failing to return the investment fund to the plaintiff, the defendant is in breach of the trust.

(k) Further or in the alternative, Touch Trades, after receiving the investment fund through its agent, namely the defendant, shall hold the same on express trust for the plaintiff and shall only apply the same for investment purposes.  By failing to return the investment fund to the plaintiff and transferring the same out from the HSBC account for purposes unrelated to investment, Touch Trades is in breach of the trust.  By transferring the fund out from the HSBC account with knowledge of the said express trust, the defendant as Touch Trades’ agent is equally liable to the plaintiff as a constructive trustee.

5.  In this application, the plaintiff applies for default judgment for the following reliefs claimed in in the statement of claim:-

(a) a declaration that the defendant holds the investment fund on resulting trust for the plaintiff and is in breach of the trust;

(b) further or in the alternative, a declaration that Touch Trades holds the investment fund on express trust for the plaintiff, and the defendant as Touch Trades’ agent and with knowledge of the said express trust, by transferring the investment fund out from the HSBC account, is liable to the plaintiff as constructive trustee;

(c) an order that the defendant do return the part of the investment fund now in the HSBC account to the plaintiff; and

(d) all necessary accounts and inquiries.

6.  In §13 of the statement of claim, the plaintiff expressly reserves the right to plead further or alternative cause(s) of action, including but not limited to fraud.  In other words, in the statement of claim now before the court, fraud has not yet been pleaded.

7.  In §14 of the statement of claim, the plaintiff pleads:-

“Where the claim of the Plaintiff exceeds the jurisdictional limit of the District Court, the Plaintiff will relinquish that part of her claim.”

8.  Based upon the plaintiff’s pleaded case now before the court, I am not minded to give judgment to the plaintiff.

No relief against non-party

9.  The plaintiff is seeking, inter alia, a declaration against Touch Trades.  Touch Trades is not a party in these proceedings[3]. There is no evidence showing that notice of these proceedings has been given to Touch Trades.  Obviously, in these circumstances, the court cannot make any order against Touch Trades.

Not suitable to grant reliefs by way of default judgment

10.  It is well established that fraud must be pleaded distinctly and with the utmost particularity[4].  At the moment, there is no allegation of fraud in the statement of claim.  The plaintiff is not alleging any company or any person has acted fraudulently in her pleaded case.

11.  In the absence of any fraud, the dispute between the plaintiff and Touch Trades would be a contractual dispute, and the resolution of the same would depend upon the terms of the agreement between them.  Those terms have not been set out in the statement of claim. 

12.  I further notice that in the plaintiff’s pleaded case, the only wrongful act on the defendant’s part is that defendant allowing the investment fund to be transferred out from the HSBC account for purposes unrelated to investment.  However, the plaintiff has not spelt out the particulars of the allegation of “for purposes unrelated to investment”.  The plaintiff has not pleaded that the investment fund withdrawn from the HSBC account has been used for what purposes, and why these purposes are unrelated to investment.

13.  In these circumstances, I am of the view that it would not be appropriate to grant reliefs to the plaintiff by a default judgment.  The court has to see evidence and to consider whether the plaintiff can prove her case against the defendant[5].

Jurisdiction problem

14.  There is a further problem in the plaintiff’s case, ie the plaintiff’s claim may not be within the jurisdiction of this court.

15.  Contrary to Practice Direction 27 para 4, in the statement of claim, the plaintiff has failed to set out why her claim is within the jurisdiction of this court and which section(s) of ss 32-39 of the District Court Ordinance (“DCO”) is/are applicable.  If the defect is only a matter of formality and not a matter of substance, I may consider to grant judgment to the plaintiff if everything else is in order.  However, the problem here is a matter of substance, as probably none of the aforesaid sections is applicable.

16.  Since the plaintiff is claiming for declaratory reliefs that a trust in relation to the investment fund subsists, DCO ss 32-36 and 38 are not relevant.  The plaintiff’s claim is a claim mentioned in DCO s 37(2).  However, in order to be within the ambit of s 37(2), the value of the entire trust must not exceed HKD1,000,000 where the proceedings do not involve or relate to land.  The key factor is the value of the entire trust, not the amount targeted by the claimant in the proceedings[6].

17.  These proceedings do not involve or relate to any interest in land.  According to the plaintiff’s pleaded case, the total of the investment fund is USD130,101, which is equivalent to about HKD1,014,800. The plaintiff is seeking a declaration the defendant is holding the investment fund on trust for the plaintiff.  According to the plaintiff’s case, the total of the trust money exceeds HKD1,000,000.  That being the case, the plaintiff’s claim is not within the jurisdiction of this court.

18.  I am aware of the fact that the plaintiff has pleaded in §14 of the statement of claim that she will relinquish any part of her claim which exceeds the jurisdiction of this court.  Obviously, the plaintiff is trying to derive assistance from DCO s 34(1), which provides:-

“The Court has jurisdiction to hear and determine an action that is in excess of the Court’s monetary jurisdiction limit on the plaintiff abandoning the amount of the plaintiff’s claim in excess and the action is one in which the Court otherwise has jurisdiction.” (Emphasis added)

19.  However, in my view, DCO s 34(1) concerns monetary claims.  In this case, the plaintiff is not claiming for any monetary amount but claiming for a declaration that a trust in relation to the investment money subsists.  I doubt whether there is any room for the operation of DCO s  34(1) in these circumstances.  Further, reading the statement of claim as a whole, the plaintiff is clearly and unequivocally claiming that a trust in respect of the entire investment fund, and not in respect of any smaller amount, subsists.  By adopting this stance, the plaintiff would not be able to derive any assistance from DCO s 34(1) in any event.

Disposition

20.  For the reasons above, the plaintiff’s application ought to be dismissed.  I dismiss the application with no order as to costs.

21.  I thank counsel for the assistance provided.