BANCO DEL AUSTRO, SA v. REGAL PROSPER TRADING LTD AND OTHERS

HCA 477/2015

ACTION NO 477 OF 2015

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REASONS FOR DECISION
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1.  The plaintiff’s action arises out of an alleged cyber‑fraud involving all defendants committed by the principal defendants in January 2015.

2.  This Ecuadorean bank has a number of accounts with various banks in the United States of America.  From these accounts 13 unauthorised, fraudulent transfers were made, 12 from its account with the Wells Fargo Bank.  A total of US$9,235,201.25 was thereby transferred to the bank accounts of four companies — the first four defendants — in Hong Kong.  The banks concerned are HSBC and the Hang Seng Bank.  These defendants are known as the “First Layer Recipients”.  That means simply that they were the initial recipients of the total sum defrauded, in varying sums.

3.  The fraudulent transfers were achieved by the criminals “hacking” into the plaintiff’s access to the SWIFT payment process by a remote system.  Although it is not necessary to set out the fraudulent scheme in detail it can be summarised by explaining that the “hacker” was able to reactivate, cancel or reject transmissions and alter the amounts, the beneficiaries and the destinations of the transactions.

4.  The unauthorised transfers were discovered upon audit in mid‑January 2015.  Fraud alerts were issued to the two United States banks (Citibank being the other) requesting freezing of the accounts.

5.  Seven of the unauthorised transfers were made to three accounts held at HSBC by the 1^st, 2^nd and 4^th defendants.  Five transfers were made to the 1^st defendant’s account, one to that of the 2^nd defendant and one to that of the 4^th defendant.  One transfer was made to a Hang Seng Bank account in the name of the 3^rd defendant. That with which I have to concern myself is the sum of US$1,968,230.25 made to the HSBC account of the 4^th defendant and what became of that sum.  It happened to be the largest single transfer of these eight.  It was made on 21 January 2015.

6.  These fraudulent transfers were made the subject of Crime Reports to the Ecuadorian and Hong Kong Police Force.

7.  All four of the defendant companies concerned have registered addresses in Hong Kong.  They all appear to be otherwise inactive corporate vehicles controlled by citizens of the People’s Republic of China.

8.  On 5 March 2015 the plaintiff obtained a Mareva injunction and preservation order against the first four defendants.  This of course included a disclosure order and a Norwich Pharmacal order against the two Hong Kong banks requiring provision of the accounts of the four defendants at the respective bank showing all payments in and out of the accounts from 1 January 2015 to date.

9.  In relation to the 4^th defendant its registered office did not match the address provided for the fraudulent SWIFT transaction.  The registered office was that of its company secretary.  The company did not appear to carry on business at its address.

10.  In March 2015 the plaintiff reached an agreement with the 3^rd defendant whereby, inter alia, it did not proceed with its claim against that defendant or against any of those defendants who were the beneficiaries of any transfers from the 3^rd defendant’s account with the Hang Seng Bank (the sum involved being US$95,731.18).

11.  On 27 May 2015 the plaintiff applied for an ex parte Mareva injunction and preservation order, and disclosure provisions against a further 19 defendants relating to transfers from the accounts of the first four defendants (in effect, the 1^st, 2^nd and 4^th defendants) to accounts of those additional defendants, ie the 5^th to 23^rd defendants. The 17^th defendant dropped out of the picture in June 2015 upon payment of its relevant liability of US$70,000.

12.  I made the orders concerned.  At this hearing before me the plaintiff seeks to continue the orders I made as continued by DHCJ Madam Marlene Ng on 19 June 2015.  I am concerned only with the 20^th defendant.

13.  The plaintiff’s case against that defendant, a jewellery business of some kind, is based firmly and I can say at this stage, realistically upon the transfer from the 4^th defendant’s bank account to the 20^th defendant’s bank account at HSBC of the sum of US$219,794 on 21 January 2015.  The 20^th defendant raised an unsustainable argument based on the recorded date of the transfer. It is necessary to look at the bank statements to see the simple situation.

14.  The account of the 4^th defendant (Jiushun Group Co Limited) received the sum of US$1,968,230.25 on 21 January 2015.  It is clear from the account of Jiushun that when it received that deposit of US$1.968 million odd its credit balance was only US$23,646.28.  Accordingly, the transfer it made to the 20^th defendant could only have been made after that substantial deposit and that is how it is recorded in the 4^th defendant’s HSBC bank statement dated 29 January 2015.  The deposit and the subsequent transfer out of the US$219,794 were both made on 21 January 2015.

15.  The transfer is recorded on the 4^th defendant’s statement as being made to account number 636‑587461‑201.  This is the number of the 20^th defendant’s account at HSBC in Hong Kong.  It clearly shows the receipt of the transfer in question (US$219,794) on 21 January 2015 from Jiushun, the 4^th defendant.

16.  Put shortly, the 4^th defendant transferred the sum of US$219,794 to the 20^th defendant’s bank account on 21 January 2015 and the bank recorded it as received on that day.  So much is incontrovertible. Any query about timings recorded is irrelevant.

17.  That picture entitles the plaintiff to hold the position against the 20^th defendant but because lawyers on behalf of that defendant have raised a number of challenges against the plaintiff and/or its employees I will deal with them shortly because none merits detailed consideration.

The criticism of the plaintiff’s affidavit evidence

18.  Some of these are vague.  All are inconsequential and some so trivial as to constitute a “nit‑picking” approach.  All are aimed wide of the target it seems without effort to establish some real point.

19.  The bald assertion that the plaintiff has no affirmation evidence in reply to that of the 20^th defendant is simply untenable.  The crucial evidence is the documentary picture showing the journey of specified exact sums of money to accounts which are clearly identified and which cannot be contradicted.

The proposed 2^nd affirmation of Jain Ganmal, the 20^th defendant’s director

20.  I declined to allow this to be filed but have included it in the material considered on a “de bene esse” basis.  Most of it is concerned with arguments in the province of lawyers where relevant.  It is not appropriate content for such an affirmation.  It is difficult to sift any relevant material from it.  It appears to be critical of some contents of affirmations filed on behalf of the plaintiff.  It contains expressions of “righteous indignation”.  I regret to have to say that it is not worth the paper on which it is written.

The burden of proof in relation to “bona fide purchaser”

21.  Counsel for the defendant conceded that this argument could not be advanced.

Allegations of material non‑disclosure

22.  These border on the non‑sensical and have no substance.

23.  I decline to waste time dealing with the reactions or otherwise to Mr Jain Ganmal’s contact, with the police.  It is illogical to attribute such knowledge to the plaintiff’s deponents.  It is not material to the matter of disclosure.

24.  The date of incorporation in 1997 and its paid up capital were clearly identified in the table in para 14 of the 2^nd affirmation.  If I recall correctly Mr Tang, for the 20^th defendant, who made the incorrect contention on paper, resorted to an absurd fall back contention that the table was not big enough.  No further comment is necessary.

25.  The suggestion that the plaintiff’s agents failed to knock on the door of the 20^th defendant’s premises so as to acquaint themselves with the nature or extent of the business behind the door is unworthy of comment or even consideration.

The defence contention that the plaintiff’s case is weak

26.  Having heard Mr Tang and read his submission I cannot regard his contentions seriously.  There is no value or merit in any of the points he seeks to make.

27.  Most of the content of his paper submission is redolent of defence counsel’s speech to the jury in defence of a client being tried for receiving stolen goods.

28.  I need only say that the case which this defendant seeks to put forward by way of convoluted explanation for the sum of money in his company’s account is just not credible but I remind myself at this stage that I am not trying the action itself, only whether the plaintiff should be allowed to continue the injunction against the 20^th defendant.  His case at this juncture is unanswerable.

29.  I make the order accordingly and the 20^th defendant will pay the plaintiff’s costs of and occasioned by this action, to include the costs of the defendant’s application in relation to the 2^nd affirmation of Mr Jain Ganmal.