DONALD SIDNEY DOBKIN v. HUAANDA (H.K.) LTD AND OTHERS

HCA 1107/2021

[2022] HKCFI 3032

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1107 OF 2021

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BETWEEN

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DECISION

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1.  This is the application of Donald Sidney Dobkin (“the plaintiff”) by summons dated 17 February 2022 for summary judgment against Kan Ho Yan (“the 3^rd defendant”) in respect of 3 sums of money, namely US$200,000 (“the 1^st Sum”), US$275,350 (“the 2^nd Sum”) and US $170,000 (“the 3^rd Sum”) transferred to the account of the 3^rd defendant with HSBC (“the HSBC account”) on 10 December 2020, 14 December 2020 and 16 December 2020 respectively.

Background facts

2.  The plaintiff is the victim of a cyber-fraud committed in the following circumstances:

(a) the plaintiff who is a practising attorney in the US met Sherry Chen and Li Hongjuan (collectively “the fraudsters”) on an online dating platform in November 2020;

(b) the fraudsters lured the plaintiff into investing in foreign exchange with them;

(c) the plaintiff was misled into opening investment accounts with 2 alleged “trading companies” known as RS Finance Global Trade Limited and Furion Global Capital Limited (collectively “the trading companies”) using a trading platform application called “Meta Trader 5” and liaising with an allegedly independent customer service said to be responsible for handling deposits and withdrawals;

(d) the plaintiff was further lured into making payments to “invest” into the trading companies;

(e) the plaintiff made transfers totalling US$2.6 million to accounts held at various banks in Hong Kong;

(f) the 1^st, 2^nd and 3^rd Sums (collectively “the Sums”) (which formed part of the US$2.6 million) were transferred on the dates set out in §1 above into the HSBC account;

(g) since about 3 January 2021, upon the plaintiff making a withdrawal request, the relevant trading company would manipulate the account balance such that it became negative, thus effectively denying withdrawals; and

(h) in about mid-February 2021, the plaintiff’s former solicitors advised him that he has been a subject of cyber fraud, whereupon the plaintiff conducted online research which showed that the trading companies were very likely to be scam companies for FX trading.

This application

3.  The plaintiff seeks summary judgment against the 3^rd defendant as a 1^st layer recipient of the Sums. The 3^rd defendant who appears in person has filed a defence. The 3^rd defendant explained that she is facing criminal proceedings and that is why she has not filed anything in opposition.

4.  The defence the 3^rd defendant filed may be summarised as follows:

(a) in about April 2020, the 3^rd defendant was herself the victim of an investment fraud when she was cheated by one Chan King (“Mr Chan”) to invest RMB200,000 which incident she reported to the police;

(b) in mid-January 2021, the 3^rd defendant was told by Mr Chan that he would return part of the money and that HK$20,000 had already been remitted into her HSBC account;

(c) the 3^rd defendant checked her balance and withdrew that amount from an automated teller machine;

(d) in early February 2021, Mr Chan told her that all the monies had been deposited into the HSBC account but when she tried to transfer the same to another bank account, she realised that her account had been frozen;

(e) she does not know the fraudsters;

(f) she did not know that during December 2020 and January 2021 her HSBC account had received large sums of money; and

(g) she never uses her HSBC account for effecting transfers.

Absence of any affidavit in opposition

5.  Mr Ernest Ng, counsel for the plaintiff, in his written submissions made some preliminary observations arising from the fact that the 3^rd defendant has not filed any affidavit. The Court of Appeal held in Time Rich 08 Limited v DBE (HK) Ltd & Others [2018] HKCA 404 at §5.2 that the court’s approach when considering whether there are triable issues is not to take the defence on its face value but to test it against the evidence disclosed in the affidavit.

6.  Although an affidavit is not a pre-requisite in resisting summary judgment, in the absence of evidence (normally disclosed in the affidavit in opposition), the allegations made in the defence are but bare allegations and, as such, require critical scrutiny.

7.  The court was referred to Chinakong Manufactory Limited v Uniden Hong Kong Limited [1993] 1 HKLR 28 at §18-23 and Cheung Tai Hong Holdings (Technology) Limited v Cheng Yuk Kuen HCA 3166/2001, unrep, 6 March 2002. In the latter case, Kwan J (as she then was) stated (at §13) that

“it is established practice that the defendant is required to file an affidavit before the court can be satisfied he has raised a triable issue, unless it is an unusual situation that he is able to raise a triable issue with reference to the plaintiff’s pleading and affirmation alone, without any need to put in evidence to substantiate any of his allegations.”

8.  In the Chinakong case, after referring to Cons V-P’s observations Murjani v Bank of India [1990] HKLR 586 at 597 that unlike criminal proceedings there is a positive burden placed upon the defendant who has to show that such an issue or question does arise and which is normally done by affidavit, Kaplan J remarked that

“the reference to assertions in affidavits not providing, ipso facto, leave to defend is significant because the position must be a fortiori in the case of a defence and counterclaim only.”

9.  The plaintiff made the point that in the nature of an email fraud case, where it is incumbent on the defendant to establish his defence, the absence of any affidavit in opposition renders it well-nigh impossible for the court to form any view on the merits of any proposed defence.

The plaintiff’s claims

10.  As a victim fraud, the plaintiff may assert a proprietary claim to the extent that his funds can be traced and identified as representing recognisable assets of the recipient.

11.  The Sums are shown to have been transferred out of the plaintiff’s account with Charles Schwab into the HSBC account in the amounts and on the dates earlier mentioned. That is corroborated by the entries shown in the December 2020 statement for the HSBC account.

12.  The plaintiff seeks

(a) an order that judgment be entered in the plaintiff’s favour for payment by the 3^rd defendant of the Sums with interest from the date of their respective receipt until the date that judgment is entered and thereafter at judgment rate until full payment;

(b) a declaration that the Sums as paid into the HSBC account on the dates earlier specified belong to the plaintiff as at the time of receipt; and

(c) costs.

13.  As regards the declaratory relief sought, it is limited to a declaration that the plaintiff is the owner of the Sums upon the 3^rd defendant’s receipt of the same in the HSBC account.

14.  I agree that there is a genuine need for such relief: it would earmark the funds received by the 3^rd defendant as the plaintiff’s property. Orders of a similar nature have been granted by the court: see Essilor Manufacturing v G Doulatram and Sons and Others [2020] HKCFI 2357 at §5(8)(a)(i) and Edison Norge AS v BZZ Limited and Others [2021] HKCFI 135 at §10(a). It would enable the plaintiff to assert his proprietary interest over further transfers out from the HSBC account.

The defence

15.  This is not a case where the 3^rd defendant is seeking to raise a triable issue based on the plaintiff’s pleading and affidavit. The question whether a triable issue has been raised has to be viewed against the material before the court.

16.  Taking the allegation that the 3^rd defendant is herself a victim of fraud at face value, it is wholly irrelevant and raises no triable issue in the context of the plaintiff’s claims.

17.  Moreover, the 3^rd defendant’s admission that after she was told by Mr Chan of an alleged deposit of HK$20,000 in January 2021 into the HSBC account in partial reimbursement of the money she had allegedly invested, that she checked for the deposit before withdrawing that amount via ATM, is contradicted by the bank statement for January 2021. While there was an ATM withdrawal made on 21 January 2021 from the HSBC account, no corresponding deposit into that account of that amount made on or before 21 January is shown in the January 2021 bank statement.

18.  Further, by early January 2021, the 3^rd defendant would have received the bank statement for December 2020 which clearly shows the receipt of the Sums.

19.  No triable issue has been raised by the 3^rd defendant.

Conclusion

20.  I have no hesitation in entering judgment for the plaintiff in terms of the amended draft order submitted, and I so order.