HWANG JOON SANG AND ANOTHER v. GOLDEN ELECTRONICS INC. AND OTHERS

HCA 1529/2019

[2020] HKCFI 1084

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1529 OF 2019

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REASONS FOR DECISION

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A. Introduction

1.  This Decision is principally in relation to a relatively novel mode of ordinary service under RHC Order 65 rule 5(1)(d), using a data room to which the person served is given access by being sent a previously Court-approved letter providing a link to the data room, and by separate communication an access code to the data room.

2.  At the hearing on 5 June 2020, I made an order giving leave to the plaintiffs to serve certain future court documents on various defendants in that way.  These are my Reasons for so doing.

3.  In this Decision, I shall refer to the individual numbered plaintiffs and defendants as, for example, “P1” and “D10”. None of the defendants have ever actively participated in the proceedings.

B.     Brief Background

4.  For present purposes, only a brief description of the nature of the action and its procedural history is necessary.

5.  The plaintiffs assert proprietary claims over the funds in bank accounts held by the defendants.  The particular relief claimed includes declarations as to the defendants holding the funds on constructive trust, and as to liability to account and orders for payment of sums due on taking of the account.

6.  The plaintiffs’ proprietary claims are alleged to arise in the following way.  P1 and D6 are former lovers.  D6 was engaged by P1 as an assistant in the plaintiffs’ business in electronics trading from its commencement around 2008.  P1 is a Korean national who does not speak Chinese, and D6’s role included liaison with Chinese language counterparties and managing the financial and administrative aspects of the business.

7.  D1-D5 were set up at the suggestion of D6, to whom P1 entrusted such matters.  D6 does not have beneficial ownership in D1-D5, nor to any funds which are or were held by those companies.  In mid-2019, D6 absconded whilst retaining control over D1-D5.  It is alleged that from at least June 2016, there were unauthorised transfers between D1-D5 and D7-D27.  The plaintiffs have no knowledge of D7-D27, and no business with them.  The transfers were unauthorised, and D7-D27 must have known that those transfers were unauthorised as being outside any normal or proper business purpose.

8.  D25 is the sole director and shareholder of D11, and there were unusual transactions between D25 and D11 of substantial amounts.  D19 is a shareholder of D17, and there were unusual transactions between D19 and D17.  D28 is the sole director and a shareholder of D17, and there were also unusual transactions between D28 and D17, the latter of which conducted transfers on some occasions only shortly after it received monies from D1 and D2.  D28 must know that those transactions were not bona fide.

9.  In the circumstances, the plaintiffs assert that D7-D28 must have known that they were not entitled to the transferred funds, and that it is unconscionable for them to retain the funds.

10.  The action was commenced by writ dated 21 August 2019, and originally against only D1-D6.  In earlier applications, beginning in August 2019, interim injunction orders were granted against D1-D6, which have been continued until trial or further order.  Bankers books disclosure was also obtained, which identified the transactions involving D7-D28.

11.  On 27 February 2020, I granted leave to amend the writ to join D7-D28 as defendants, and I granted an interim injunction restraining the various funds over which the proprietary claim is made held in the hands of D7-D28 (except D9 and D18).  I also granted leave for service out of the jurisdiction on those defendants outside of the jurisdiction, mostly in Taiwan.

12.  The action has been discontinued against D8, and no continuation of any order was sought against D8.  Therefore, on 5 June 2020, the plaintiffs sought the continuation of the interim injunction against D7, D10, D11, D13, D14, D15, D17, D19, D20, D21, D22, D23, D24, D25, D26, D27 and D28.

13.  On the materials provided, I was satisfied that it was appropriate to continue the interim injunction against those defendants, except D25 (where the plaintiffs accept that D25 has not yet been effectively served).

14.  D7 is a company incorporated in Anguilla, where it was served.  No further consideration need be given to D7 in this Decision.

C.     Service in Taiwan

15.  A firm of attorneys-at-law was engaged by the plaintiffs, through their Hong Kong solicitors, to effect service of documents on D10, D11, D13, D14, D15, D17, D19, D20, D21, D22, D23, D24, D25, D26, D27 and D28 in Taiwan.

16.  Affidavits of service have been filed identifying how service was effected, or attempted, on each defendant in Taiwan. As stated, the plaintiffs accept that service has not been effected on D25, and no further consideration need be given to D25 in this Decision.  D13 and D15 were served in a way where service was accepted and the documents were not returned, and no further consideration need be given to D13 and D15 in this Decision.

17.  However, the documents served on D10, D11, D14, D17, D19, D20, D21, D22, D23, D24, D26, D27 and D28 (“Thirteen Defendants”) were returned.  The circumstances of the return of those documents is unusual, but notwithstanding their return I was satisfied that service had been effected on the Thirteen Defendants.

18.  Each of the Thirteen Defendants was served with an individual package of documents, at various different addresses in Taiwan.

19.  Nevertheless, the documents which were returned to the plaintiffs’ solicitors were packed in five similarly wrapped boxes/parcels, which were all sent from Taiwan on 7 May 2020 and which were all delivered to the plaintiffs’ solicitors by courier/airmail together.  Photos of four of the five parcel’s airmail labels show they were numbered CC20788622, CC20788625, CC20788628, CC20788630.

20.  Upon inspection of the parcels, it was seen that all of the documents had been opened.  The documents in the parcels were apparently grouped together in an organised and orderly fashion, to affect what was in effect a “consolidated” return of 13 different packages.

21.  It would seem clear that the Thirteen Defendants must have had the documents in their possession at some point of time, and had a reasonable opportunity to read and inspect them, and I am satisfied that each of them is aware of the present proceedings against them in Hong Kong, and that their decision not to participate in the proceedings has been both voluntary and informed.

22.  But, it would also seem clear that the Thirteen Defendants are attempting to refuse or evade service of the documents.  They just did not do so very cleverly.

D.     Future Mode of Service

23.  RHC Order 65 rule 5(1)(d) provides that service of any document (not being a document which is originating process or is required to be served personally) may be effected “in such manner as the court may direct”.

24.  In this case, in light of the substantial (and growing) volume of papers and the particular behaviour of some of the defendants, and in order to save costs, time and resources, Mr Moses Park, Counsel for the plaintiffs, invited me to consider permitting service by access to a data room.

25.  In the modern era of communications, it has become relatively common for Courts to permit service to be affected by use of email.  I have also previously, in a small number other cases, permitted service using Facebook Messenger or WhatsApp Messenger, which are both private service channels which might be used either to send documents or to send a link to documents.  One of the virtues of using WhatsApp, for example, is that it usually shows the sender of the message when the message has been sent to the addressee, and when it has been read by the addressee.

26.  In this case, Mr Park submitted that I should go further.  He referred me to the English decision of HHJ Waksman QC (sitting as a Judge of the High Court) in CMOC Sales & Marketing Ltd v Persons Unknown and 30 others [2018] EWHC 2230 (Comm) at §191.  In that paragraph, the Judge identified that he had earlier approved a system of effecting service on the defendants which involved use of a data room.  He described it as “an innovative feature” of the litigation.

27.  The process comprised sending the relevant party by a previously approved Court method (for example, email or hardcopy) a link to a data room, and by separate email an access code to the data room.  If the code was used, it would enable the user to view all of the evidence adduced up to that point of time, together with all applications and court orders made.

28.  The process, however, required CMOC first to serve each defendant by another Court approved method, before it could serve by use of the data room.  However, for the ‘non-cause of action defendants’, such as the banks joined for the purposes of supplying information, CMOC was not required first to serve them by another Court approved method before it could serve by data room.

29.  I am satisfied that in an appropriate case a similar mode of service can clearly be justified in Hong Kong.

30.  RHC Order 1A rule 1 sets out the ‘underlying objectives’ of the rules.  They include: (a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court; (c) to promote a sense of reasonable proportion and procedural economy in the conduct of the proceedings; and (d) to ensure fairness between the parties.  By virtue of Order 1A rule 2, the Court is mandated to give effect to the underlying objectives of the rules when it exercises any of its powers (whether under its inherent jurisdiction or given to it by the rules or otherwise), or when it interprets any of the rules.

31.  Further, by virtue of Order 1A rule 1(1), the Court is mandated to further the underlying objectives of the rules by actively managing cases.  By virtue of Order 1A rule 4(2)(k), active case management includes making use of technology.

32.  By virtue of Order 1B rule 1(1)(l), the Court may by order take any step or make any other order for the purpose of managing the case and furthering the underlying objectives set out in Order 1A.  That power is in addition to any powers given to the Court by any other rule or practice direction or by any other enactment or any powers it may otherwise have.

33.  The present case is one in some ways similar to the CMOC case.  There have already been numerous interlocutory applications, and a number of defendants have been added to those originally defendants to the proceedings.  Mr Park informed me that it was likely that an application would be made in the near future for joinder of further defendants, and for interim relief to be sought against those further defendants, as a result of information obtained from various banks with the benefit of previous orders.  Indeed, a number of orders have been obtained already requiring banks to supply information intended to permit tracing of the funds over which the plaintiffs claim their proprietary interest.

34.  Therefore, (a) there is already a substantial body of material in the form of affidavits, exhibits and previous court orders, and (b) there will likely be further documents to be added.  There is clearly significant expense, as well as the use of time and paper, in continued service of significant volumes of hardcopy materials, not least if that also involves employment of agents/lawyers overseas to effect that service.  The large number of defendants – and the potential addition of further defendants – exacerbates these points. In so far as orders are sought against banks, against whom there strictly lies no cause of action, it is unlikely that they would wish to be deluged with reams of paper only some of which might be relevant to their particular considerations.

35.  This seems to me to be precisely the sort of case, and precisely the sort of circumstances, in which the underlying objectives of case management which I have identified above point strongly towards the use of available technology, including by the effecting of service by data room.

36.  In some ways, the provision of the link to the data room might be regarded as akin to an envelope or package containing documents, and the access code or password to use on that link as akin to the method by which to open the envelope or package.  Clearly, the link and the access code together will provide ready access to the documentation in a form which many, if not most, would find more convenient than hardcopy.  It would do so in a way which is quick, efficient, and cost-effective – and also relatively secure.  On the matter which is the essence of effecting service, I am satisfied that this mode of service will bring the process and the relevant documents to the notice of the persons to be served.

37.  Nevertheless, of course it remains important and necessary to ensure that the proposed method of service on each occasion is or remains authorised by the Court.  It is also important that any first occasion of service on any defendant or third party should be affected by another Court approved method, before an alternative is mooted.

38.  As an aside, I recognise that this innovative mode of ordinary service might not be suitable in respect of some individuals. Though the point has not yet arisen and may not arise in this case, there may be occasion to consider whether, for some persons or classes of person, technology would be a bar or hurdle rather than an aid.  The fact that there may be no ‘one size fits all’ approach is fully catered for by the need for the parties and the court proactively to consider the appropriate mode of service in any particular case.

39.  In this case, there is also a distinction between those defendants for whom the plaintiffs have an email address and those for whom they do not have an email address.  The method of providing the link and the access code, so as to facilitate access to the data room, may therefore vary from party to party.

E.     Disposition

40.  As well as continuing the interim injunction against certain defendants, as regards service I made the following order:

Leave be given to the plaintiffs to serve future documents on D10, D11, D14, D17, D19, D20, D21, D22, D23, D24, D26, D27 and D28 by access to data room:

     (a)     the plaintiffs shall create an online data room containing all of the evidence thus far adduced, together with all applications and orders made in this action; and

     (b)     the plaintiff shall send to D10, D11, D14, D17, D19, D20, D21, D22, D23, D24, D26, D27 and D28 by post and/or by email (to those for whom the plaintiffs have an email address) a link to the data room, and by separate post and/or email an access code to the data room and instructions to access the data room.

41.  I was also shown, and I approved, a draft letter to be sent in accordance with that leave granted.  The draft letter gives clear, pictorial instructions as to how to operate the link with the use of the access code, so as to gain access to the documents in the data room.