CINATIC TECHNOLOGY LTD v. HONGKONG AND SHANGHAI BANKING CORPORATION LTD

DCMP 722/2020

[2020] HKDC 278

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 722 OF 2020

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JUDGMENT

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1.  This is yet another case in which the plaintiff fell victim to email fraud.

2.  By an originating summons dated 13 March 2020, the plaintiff applied for a Norwich Pharmacal discovery order against the defendant bank.

3.  By letter dated 18 March 2020 to the plaintiff’s solicitors and requesting them therein to bring it to the attention of the court, the defendant confirmed that it would not contest the originating summons or attend its hearing, and that it would comply with any order the court might make and served on it but more time was required.

4.  In view of the lengthening of the General Adjournment Period due to public health consideration thereby adjourning the hearing originally scheduled, I consider it appropriate, and with the plaintiff’s agreement and lack of objection by the defendant, to deal with this matter on paper without an oral hearing.  This I now do.

Legal principles

5.  Before a Norwich Pharmacal order is made, the court must bear in mind the following principles stated by Ma J (as he then was) in A Co v B Co [2002] 3 HKLRD 111 (at para 13):-

“(1) There must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place. And where fraud or similar serious allegations are made, the degree of proof must correspondingly be high: see Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 at p.586C-H. All the more so when the alleged wrongdoer is not and will not likely be before the court.

(2) It must also be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff. …

(3) The discovery sought must not be unduly wide.  There is no entitlement to general discovery (by general discovery is meant discovery in the Compagnie Financière et Commerciale du Pacifique v Peruvian Guano Co (1882-83) LR 11 QBD 55 sense) … This is not to say the discovery orders cannot be wide; what is important is that the discovery, whether wide or narrow, is necessary.”

6.  I also bear in mind the observation made by the same learned judge in that case at paragraph 12:-

“Though founded ultimately on notions of justice, nevertheless, it is important to emphasize the extraordinary nature of this relief because it is not a usual order and is not one that a court would lightly grant in the absence of powerful factors.”

The plaintiff’s case and discussion

7.  The plaintiff’s originating summons is supported by the affirmation of Tong Yuen Yu (“Tong”), its Finance and Administrative Manager, filed on 13 March 2020.

8.  The plaintiff’s case is straight forward and simple, and can be succinctly set out, as follows.

9.  The plaintiff was (and still is) a trader and manufacturer of baby monitors.  It was supposed to be paying one Alford Industries Ltd (“Alford”) in early August 2019 US$210,029.62, being the price for certain quantities of components supplied by Alford.  On 25 July 2019, the plaintiff received an email purportedly from exactly the same email address of one Ms Shirley Siu of Alford with whom the plaintiff had been dealing through her usual email address shirley@alford.com.hk.  The email enclosed a purported letter from Alford informing and authorizing the plaintiff to make the payment of the said sum to Alford’s purported subsidiary, namely one Heykas Technology Co., Limited (“Heykas”), by paying into Heykas’ account no 165851296838 held with the defendant (“the Subject Bank Account”).

10.  Believing the said email was from Alford and the said letter genuine, the plaintiff on 5 August 2019 at about 5 pm transferred the said amount of US$210,029.62 (“the Payment”) to the Subject Bank Account. In the same evening, the plaintiff was informed by Alford that it has not received the Payment.  It was then discovered that the above purported email and authorization letter were in fact fraudulent and not from Alford. Immediately in the same evening, Tong on behalf of the plaintiff reported the matter to the police.

11.  On 8 November 2019, the plaintiff obtained a Mareva Injunction in DCCJ 5874/2019 against Heykas enjoining the disposal of its assets, including the money in the Subject Bank Account, up to the limit of the amount of the Payment.

12.  The plaintiff presently does not know what has happened to the Payment and how much, if any, of the same is now left in the Subject Bank Account.  It therefore cannot conduct a tracing exercise to locate the Payment or to pursue any party who might have received the Payment (or pert thereof) from Heykas unless the information and documents now sought are provided by the defendant.

13.  Having read the said affirmation of Tong and its exhibits, I am satisfied that there is cogent evidence to demonstrate that a fraud has been committed against the plaintiff.  Save my concern over one aspect of its ambit, the discovery order now sought, I am also satisfied, will reap substantial benefits for the plaintiff in enabling it to find out and, if need be, to begin tracing the whereabouts of the Payment.

Ambit of the order

14.  Paragraphs 1(a), 1(c) and 1(d) of the Originating Summons seek information in respect of the Subject Bank Account and documents relating to transactions therein from 5 August 2019 to date.  In my view, they are necessary, and their ambit is not unduly wide.

15.  Paragraph 1(b), however, seeks “details of all accounts held by [Heykas] with [the defendant] as at 5^th August 2019” (my emphasis).  In my view, the discovery so sought is clearly too wide.  After all, presently it is not yet known whether there was actually any transfer of the Payment (or part thereof) from the Subject Bank Account to any of Heykas’ other account(s) held with the defendant.  Even if there were, the plaintiff would only be entitled to seek discovery of such information relating to those recipient account(s) of Heykas, to enable the plaintiff to trace the fund.  In this regard, I bear very much in mind that a Norwich Pharmacal discovery order as against an innocent party, such as a bank, would mean, as Ma J (as he then was) said in A Co v B Co, that “[a]t the very least, a breach of confidentiality is involved”; and therefore should be kept to no wider than really necessary.

16.   I would decline to order discovery in the present terms of paragraph 1(b) of the Originating Summons, but would order discovery with a narrower ambit as set out below.

Disposal

17.  I make an order in terms of paragraphs 1(a), 1(c), 1(d), 2 and 3 of the Originating Summons, except

a.  The words “7 days” and “identifies” in Paragraph 1 be respectively replaced with “21 days” and “providing the following information and enclosing true copies of the following documents”;

b.  Paragraphs 1(c) and (d) be renamed as 1(b) and 1(c) respectively; and

c.  A new sub-paragraph 1(d) be added : “If any money has been transferred since 5^th August 2019 from the bank account mentioned in paragraph 1(a) above to any other bank account(s) of HEYKAS TECHNOLOGY CO., LIMITED held with the defendant, the same information and documents identified in paragraphs 1(a) to (c) above be so provided in respect of each of such account into which money has been so transferred;”.

18.  There will also be general liberty to apply.

19.  As for costs, the plaintiff asks that they be provided for but does not contend against the usual order.  I therefore make the usual costs order in Norwich Pharmacal applications - that the plaintiff do pay the defendant the costs of and occasioned by this application on indemnity basis and all reasonable costs and expenses incurred in complying with the discovery order, to be taxed if not agreed.