LI WEI HONG v. PANG GUEI HUA AND OTHERS

HCA 494/2018

[2018] HKCFI 894

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 494 OF 2018

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DECISION

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1.  There are two applications before the court. By a summons of 28 March 2018, the plaintiff applies for a Mareva injunction against the 1^st to 3^rd defendants. She applies for a banker’s record order against Bank of China. The 2^nd defendant has been represented. The Bank of China has sent a letter to the court to the effect that it is neutral on the application.

2.  The facts are that the plaintiff, who lives in Vancouver, Canada, was persuaded by someone called Chen Sen to pay CAD 500,000 into what was said to be an investment scheme.  She never met him but he gained her trust apparently through a prolonged exchange via WeChat.  The money was paid and the supposed Mr Chen disappeared.  There is no investment scheme and the plaintiff now finds herself in the position of trying to get her money back.

3.  The money was transferred in two payments of CAD 250,000 on 21 and 25 September 2017 to an account of the 1^st defendant with Bank of China in Hong Kong.  Chen had apparently told the plaintiff that the 1^st defendant worked for the investment company.  The police later told the plaintiff, or her representatives, that the money had gone from that account to an account of the 2^nd defendant with a further small sum to the 3^rd defendant, all accounts being with the Bank of China in Hong Kong.

4.  The 1^st and 3^rd defendants have played no part in these proceedings.  However, the 2^nd defendant became active at a relatively early stage.  Solicitors for the 2^nd defendant provided the plaintiff’s solicitors with a letter they wrote to the police dated 20 February 2018.  This was to the effect that the 2^nd defendant allowed a licensed money service operator called W T China (HK) Limited to use her account as what was described as a “feeder account”.  The letter explains that another body called Wah Tai Foreign Exchange, which, despite the name similarity, I was told was unrelated to W T China, made five deposits into the 2^nd defendant’s account from 22 to 27 September 2017.  These were as follows:

(1)   On 22 September 2017, HK$653,180;

(2)   On 25 September 2017, HK$20,000;

(3)   On 25 September 2017, HK$350,000;

(4)   On 26 September 2017, HK$1 million;

(5)   On 27 September 2017, HK$575,000.

The total amount is HK$2,598,180.  These are plainly identified in the letter as being relevant to the fraud.  I was told by counsel for the 2^nd defendant that the police were the source of the identification.

5.  Further information has been forthcoming from the 2^nd defendant though counsel for the plaintiff says that the 2^nd defendant has been very slow to reveal the position.  On 4 April 2018, that is to say two days ago, there was further evidence produced by or on behalf of the 2^nd defendant.  Among other things, this explains that she was employed as a cleaner by W T China (HK) Limited in June 2017.  She says she provided her three bank accounts with Bank of China to be used for W T China’s business.  The 2^nd defendant’s case is that this was a proper use of the accounts, the relevant account having been registered with the Customs and Excise Department.

6.  After these matters came to light, Bank of China, according to a letter of 7 February 2018, effectively froze the accounts, albeit on a temporary basis. It appears that there is still a balance of HK$2,598,180 in one account, in other words an amount equal to the five deposits that I mentioned earlier.

7.  The plaintiff says that it wishes to consider material as to the operation of this account before deciding whether to proceed with its application for a Mareva injunction.  It asks the court to make an order under section 21 of the Evidence Ordinance today.  It says that it cannot say for certain that this money is part of the CAD 500,000 of which the plaintiff was defrauded but that there is an arguable case that it is and that that is sufficient for present purposes.

8.  It is submitted on behalf of the 2^nd defendant, effectively of course on behalf of W T China, that the court should deal with the matter today and effectively dismiss both applications.  It is said that the whole basis of the plaintiff’s claim has failed because the money did not come into the 2^nd defendant’s account from the 1^st defendant’s account, but from a different account altogether.  It says that the 2^nd defendant has provided a full explanation together with documentary evidence of the source of the five transactions in the 2^nd defendant’s account between 22 and 27 September 2017.

9.  In the light of the documentary evidence, it is clear beyond doubt, it is submitted, that the plaintiff has not proved on the balance of probabilities that the account will contain material germane to an issue to be tried between the parties.  It is not open to the plaintiff to embark on a wholesale search of all bank records, remittance documents and account opening forms in the hopes of turning up something to her advantage. This is particularly so, it is submitted, where the information voluntarily provided by the 2^nd defendant shows that there was no direct onward transfer of funds from the 1^st defendant to the 2^nd defendant.

10.  It is also relevant, it is submitted, that the police have been conducting an ongoing investigation into the matter since around 15 October 2017, have not pressed any charges and have not obtained any restraining order from the court.  It is said that the police appear to have given wrong or misleading information to the plaintiff and all that the plaintiff can rely on are a few telephone calls where the police orally provided some information to the plaintiff and/or her solicitors in breach, it is said, of their duty of confidentiality.

11.  So far as the injunction application is concerned, it is submitted on behalf of the 2^nd defendant that the plaintiff’s approach suggests that the injunction sought is ancillary to the disclosure order rather than the disclosure order being ancillary to the injunction order.  In other words, the plaintiff is proceeding on the basis that if it succeeds in its disclosure application and has a chance to peruse the materials, then it will decide if it should pursue its injunction application at all.

12.  As to the law, both sides have referred me to a number of authorities including Akbank TAS v Mainford Limited [2018] HKCFI 363 (HCA 3264/2016, 22 February 2018) and Pacific King Shipping Holdings Pte Ltd v Huang Ziqiang [2015] 1 HKLRD 830, the latter being a decision of the Court of Appeal.  This decision draws the distinction between a proprietary and a non-proprietary claim.  In the present case, if the plaintiff can make her claim good, she will have a proprietary claim to the money as being her own money of which she has been defrauded.

13.  I now express my conclusions.  In the first place, I do not accept that the 2^nd defendant has provided a full explanation of the five transactions.  The important point to note is that they fall precisely within the time window during which the plaintiff transferred half a million Canadian dollars in two tranches to the 1^st defendant’s account.  The amount of the five payments are in Hong Kong dollars but total over 400,000 Canadian dollars.  In a fraud of this kind, it is quite likely that part of the proceeds will be diverted elsewhere, including, on the evidence, to the account of the 3^rd defendant, also with the Bank of China.

14.  The 2^nd defendant has in fact given only a partial explanation of these five transactions.  It has identified the payments, but the documents provided do not identify the party making the payments.  According to her evidence, it has “not been able to confirm with documentary evidence as to whether the Hong Kong dollar savings account number [number given] is in the name of Wah Tai or its agents and/or servants.  In any event, it is not the bank account of the 1^st defendant.”  It is certainly correct that it is not the bank account of the 1^st defendant.  However, the entire explanation given on behalf of the 2^nd defendant is that the source of the funds was in fact Wah Tai.  That point has not been established on documentary evidence or otherwise, nor indeed is there any evidence that W T China has taken steps to find out what the position is.  However that may be, the crucial evidence is missing, in other words where the money came from, and only the 2^nd defendant or W T China can do that but it has not done that.

15.  It is of course correctly submitted that it is for the plaintiff to establish its case and I fully accept that a fishing expedition is an inappropriate use of the section 21 procedure.  But, in addition to the evidence of the timing and in addition to the evidence of the amount, in reaching its decision, the court is also entitled, in my view, to take into account the fact that as the evidence produced just two days ago shows, the 2^nd defendant turns out to be a cleaner who has simply handed over her account for use by W T China for money transmission purposes.  I did have a concern that the order sought by the plaintiff was too wide since it seems that there have been hundreds of payments through the account over the relevant period.  On balance, however, I consider that the plaintiff has made out her case for the section 21 order.  As was pointed out on her behalf, if, to take an example, it could be shown that there was a connection to the account of the 1^st defendant, that may be very important in showing that this money does indeed belong, in proprietary terms, to the plaintiff.

16.  It was also said, and there appears to me to be force in this as well, that it would be very undesirable to have a situation in which the plaintiff, who possibly is of limited means and has certainly been the subject of a scam, would have to come back to court again and again.

17.  It was argued for the 2^nd defendant that the police could have obtained a restraining order.  That may be correct, but it does not mean that the plaintiff should not be entitled to pursue her own remedy—it may be the only way she will ever have any hope of recovering her money.

18.  I am satisfied therefore that the section 21 order should be made in the terms applied for, applying the authorities that I have mentioned earlier.

19.  As regards the Mareva injunction, I can see that there is some force in the 2^nd defendant’s point that the evidence could have been obtained before making the application.  As against that, the 2^nd defendant has only made information available over time and it is still incomplete in important particulars.

20.  I consider that the plaintiff should be entitled to adjourn her application in this respect as she requests.  I note that there is no evidence of any prejudice to the 2^nd defendant herself who effectively handed over the use of these bank accounts as I have explained.

21.  That is my decision.

(Discussion re costs)

22.  The costs will be in the cause save the costs of today, which I am going to order the 2^nd defendant to pay in any event.