CHAN TING TING v. ZHANG QINGRUN AND OTHERS

HCA 727/2020

[2023] HKCFI 1010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 727 OF 2020

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REASONS FOR JUDGMENT

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INTRODUCTION

1.  At the hearing on 4 April 2023, I granted an order substantially in terms of the reliefs sought by the plaintiff in her Summons dated 8 November 2022 (the “Summons”), by entering judgment in favour of the plaintiff against the 1^st and 4^th defendants.  Here are my reasons.

PROCEDURAL BACKGROUND

2.  By the Summons, the plaintiff initially sought judgment in default of Acknowledgement of Service against the 1^st and 4^th defendants, pursuant to Order 13 Rule 6 of the Rules of High Court (Cap. 4A)  (“RHC”).  The Summons was served on the 1^st and 4^th defendants by pre-paid post.  The matter came before Recorder William Wong SC on 15 December 2022, during which the court raised its concern regarding service of the Summons on the 1^st and 4^th defendants.  Following such hearing, the plaintiff served the Statement of Claim (which was filed on 3 July 2020)  on the 1^st and 4^th defendants by way of pre-paid post on 21 December 2022.  Thereafter, no Defence was filed by the 1^st and 4^th defendants.

3.  In this hearing, the plaintiff sought an order to proceed with the Summons as if it was made under Order 19 rule 7 of the RHC.  As explained by Mr So for the plaintiff, this is because under Order 13 Rule 6 of the RHC, the court cannot enter judgment of a claim for declaration, and yet the plaintiff need such declaratory relief for the purpose of tracing her funds.  For such purpose, Mr So prayed in aid Order 2 Rule 1 of the RHC and further submitted that there is no conceivable prejudice to the 1^st and 4^th defendants, relying on Biostime International Investment Ltd v France Heson Paper (Hong Kong)  Co Ltd [2015] 2 HKLRD 658, para. 6.  I agree and would treat the Summons as made under Order 19 Rule 7 of the RHC accordingly.

PLAINTIFF’S CASE

4.  The relevant facts in support of the plaintiff’s case have been detailed in the plaintiff’s affirmation, and summarized in the plaintiff’s submissions, which I adopt herein.

5.  In a nutshell, the present proceedings arose from an “alleged telephone fraud”.  The plaintiff is the victim of the fraud.  The 1^st and 4^th defendants are the first layer recipients of the money and remained uncontactable in the address provided. Without going into all the details, I would outline the salient facts below.

6.  The plaintiff is a retiree and the holder of a bank account with HSBC (“P’s HSBC Account”).  The 1^st and 4^th defendants are the holders of two bank accounts with the Bank of China (“BoC”)  respectively (“D1’s Account” and “D4’s Account”).

7.  On 26 March 2020, the Plaintiff received a telephone call from an unknown individual claiming to be a staff of the Hong Kong Immigration Department (“Alleged Staff”).  The Alleged Staff represented to the plaintiff that she was prohibited from leaving Hong Kong, and transferred the telephone call to another person professing to be one Zhao Hongqi (“Zhao”), who claimed to be a security official of the Shanghai Public Security Bureau.  For reasons unknown to the plaintiff, Zhao was able to recite the plaintiff’s Home Return Permit number in full.  Zhao represented to the plaintiff that she was suspected to have sold an identity card to another person, and that the plaintiff was involved in a suspicious transaction with the Industrial and Commercial Bank of China (“ICBC”).

8.  Zhao then transferred the telephone call to a person professing to be called Zhang Deli (“Zhang”)  who claimed to be the superior of Zhao. Zhang warned the plaintiff to cooperate with them and requested the plaintiff to disclose her residential address.  The plaintiff did so accordingly.

9.  Later on the same day, the plaintiff received a telephone call from Zhao, telling her that documents had been sent to her residence and instructing her to collect the documents.  In a place near the Plaintiff’s residence, she received 3 documents which bore her name and purported to be official documents for a case in China (the “Forged Documents”). The Forged Documents were proved to be fake by the Hong Kong Police subsequently. 

10.  Induced by and in reliance upon the representations made by the Alleged Staff, Zhao, Zhang and the Forged Documents, the plaintiff mistakenly believed that she was under the investigation for a case in China and that she had to cooperate in conducting the purported investigation.

11.  As a result, the plaintiff disclosed her personal information, including her bank account details, to Zhao upon his request on 26 March 2020. She also made an application to activate the internet banking services for P’s HSBC Account on 27 March 2020 upon Zhao’s request.

12.  On or around 7 April 2020, the plaintiff informed Zhao over the telephone that she had received the password for activating the internet banking services for P’s HSBC Account.  Subsequently, Zhao created a chat group on “WhatsApp” and instructed the Plaintiff to transfer all the money from her bank account with Hang Seng Bank (“P’s HS Account”)  and her bank account with DBS Bank (“P’s DBS Account”)  to P’s HSBC Account. 

13.  Acting in reliance of the aforesaid representations, the plaintiff transferred a total amount of HK$2,969,651.56 from P’s HS Account to P’s HSBC Account in five transactions on 7 April 2020, 16 April 2020 and 17 April 2020.  She also wrote a cheque for HK$942,214.32 from P’s DBS Account and deposited the said cheque into P’s HSBC Account on 24 April 2020.

14.  Unknown to and unauthorized by the plaintiff at the time, a total amount of HK$3,030,000 was transferred out of P’s HSBC Account in 6 transactions. Among the monies transferred out of P’s HSBC Account, a total sum of HK$1,400,000 was transferred to D1’s Account on 16 April 2020 and a sum of HK$770,000 was transferred to D4’s Account on 17 April 2020.

15.  The plaintiff discovered the fraud when she went to update the passbook of P’s HSBC Account on 24 April 2020.  The matter was later reported to the Hong Kong Police.

16.  The 1^st and 4^th defendants have not returned to the plaintiff those sums of monies ever since they were so transferred.

17.  In these circumstances, the plaintiff issued the Writ of Summons in these proceedings on 20 May 2020.  

SERVICE OF DOCUMENTS

18.  As mentioned above, during the hearing on 15 December 2022, Recorder William Wong SC raised his concern regarding service of the Summons to the 1^st and the 4^th defendants.  As accepted by the plaintiff, the Summons was served by way of pre-paid post, rather than being served personally on the 1^st and 4^th defendants.

19.  In addition, the plaintiff has now asked the court to treat the Summons as an application made under Order 19 rule 7 of the RHC and hence the service of the Statement of Claim is also in issue. Again, as accepted by the plaintiff, the Statement of Claim was served by way of pre-paid post, rather than being served personally on the 1^st and 4^th defendants.

20.  Mr So for the plaintiff contended that on the facts of the present case, service of the Summons and the Statement of Claim on the 1^st and 4^th defendants is not strictly required, and in any event service was effected by pre-paid post out of prudence.

21.  Insofar as the factual circumstances are concerned, as stated in the Writ of Summons dated 20 May 2020, the address of the 1^st Defendant is “中國廣東省汕尾市城區紅草鎮夏村新一巷10號”, whereas the 4^th Defendant’s address is “中國廣東省汕頭市潮南區隴田鎮興隴強勝祠前三街7號102房” and “中國廣東省深圳市福田區濱河大道北泰然八路泰然大厦5C03”. 

22.  With leave granted by Master Hui dated 17 July 2020, the plaintiff issued the Concurrent Writ of Summons on 23 July 2020 for service out of jurisdiction.

23.  Pursuant to the Order by Master D To on 21 February 2022, service of the Concurrent Writ of Summons on the 1^st and 4^th defendants was dispensed with.  As I understand from Mr So, such Order was made because the 1^st and the 4^th defendants have no proper address for service.

24.  The 1^st and 4^th defendants did not file any Acknowledgement of Service.

25.  On 8 November 2022, the Plaintiff issued the Summons seeking for Default Judgement to be entered against the 1^st and 4^th defendants.  The Summons was served on the 1^st and 4^th defendants to the aforementioned addresses by pre-paid post on the same day.  Subsequently, the Statement of Claim was also served on the 1^st and 4^th defendants to the aforementioned addresses by pre-paid post on 21 December 2022.

26.  Based on the facts above, Mr So for the plaintiff submitted that personal service of the Summons and the Statement of Claim is not required.  I agree.

27.  To begin with, Order 65 rule 1 of the RHC provides that:

“(1)  Any document which by virtue of these rules is required to be served on any person need not be served personally unless the document is one which by an express provision of these rules or by order of the Court is required to be so served.

(2)  Paragraph (1)  shall not affect the power of the Court under any provision of these rules to dispense with the requirement for personal service.”

28.  As noted in Hong Kong Civil Procedure 2023, para 65/2/2, the learned author commented that, regarding documents of which personal service is required, it would be “(1)  any documents to be served on persons other than plaintiffs or other parties to the cause or matter who have acknowledged service of the writ or other originating process; (2)  orders, obedience to which may be enforced by committal or sequestration”.  The paragraph then set out a list of documents of which personal service is necessary.

29.  As submitted by Mr So, Summonses issued under Order 13 or Order 19 of the RHC do not fall under the list.  In any case, the Summons does not fall within the two categories as identified by the learned author. Therefore, I agree that the Summons is not required to be served personally.

30.  Order 65 rule 9 of the RHC further provides that:

“Where by virtue of these rules any document is required to be served on any person but it is not required to be served personally or in accordance with Order 10, rule 1(2), and at the time when service is to be effected that person is in default as to acknowledgment of service or has no address for service, the document need not be served on that person unless the Court otherwise directs or any of these rules otherwise provides.”

31.  In Camel Group Hongkong Investment Trading Co Ltd v Leading International Group (HK)  Ltd and others, HCA 3115/2016 (Unreported, 26 September 2018), the 2^nd defendant in that case was detained at a Detention Centre in China when the writ and the injunction was served.  He did not file any acknowledgement of service, and a default judgement was obtained against him.  The plaintiff then further made an application by summons for an order that the surplus subject to the charging order nisi held by the bank in question be transferred to the plaintiff.  Neither the charging order nisi nor the summons have been served on the 2^nd defendant.

32.  Against such circumstances, Deputy High Court Judge Le Pichon held that neither the charging order nisi nor the summons requires personal service. As she explained in paras. 6 to 11 of the judgment, given that the 2^nd Defendant is in default as to service and there is no court order requiring service, Order 65 rule 9 applies and therefore service is not required.

33.  In the present case, the 1^st and 4^th Defendant are in default of filing any Acknowledgement of Service, and there is no court order requiring service of the Summons and the Statement of Claim on the 1^st and 4^th defendants.  Moreover, the court has recognized that there is no address for service of the 1^st and 4^th defendants and thus dispensation of service of the Concurrent Writ of Summons was granted by the court.

34.  In the premises, Order 65 rule 9 of the RHC applies and service is not required.  Without prejudice to the foregoing, I note that the plaintiff has served the Summons and the Statement of Claim to the 1^st and the 4^th Defendants (by pre-paid post)  as an act of prudence in any case.

35.  Since no defence has been filed by the 1^st and 4^th defendants, the plaintiff is entitled to apply for default judgement pursuant to Order 19 rule 7 of the RHC.

BASIS FOR DEFAULT JUDGMENT

36.  The principles on applications for default judgment under Order 19 rule 7 of the RHC are well-settled.  As remarked by the Honourable Mr Justice Coleman in Cheung Sai Lon v Cheung Sai Ha [2020] HKCFI 2551 at para. 30:

“30. In such an application, the Court cannot receive any evidence, but must consider whether to give judgment according to the pleadings alone. The statement of claim must show a proper case for the order the applicant seeks to obtain, and the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim only, and only if the pleaded facts give rise to the relief sought.”

37.  Insofar as pleadings are concerned, the plaintiff’s Statement of Claim pursues a claim in unjust enrichment and also a claim of proprietary constructive trust, based on the premise that the plaintiff was a victim of fraud and the 1^st and 4^th defendants were unjustly enriched by mistaken payments emanating from the plaintiff’s bank account.

38.  For a claim based on unjust enrichment, I accept Mr So’s submissions that money paid under a mistake of fact is prima facie recoverable, provided that the payer did not intend the payee to have the money in any event, the money was not for good consideration and the payee has not in good faith changed his position: Guaranty Bank and Trust Co. v Zzzik Inc Ltd, HCA 1139/2016 (Unreported, 18 July 2016), para. 27.

39.  In the present case, the plaintiff transferred a total amount of HK$2,969,651.56 from P’s HS Account to P’s HSBC Account.  Unknown to and unauthorized by the plaintiff, the sum of HK$1,400,000 and HK$770,000 were transferred out of P’s HSBC Account to D1’s Account and D4’s Account respectively. The transfers were never intended nor authorized by the plaintiff.  In fact, the monies were only transferred to P’s HSBC Account in the first place under the mistaken belief that the plaintiff was cooperating with the authorities and that such transfers were necessary for the investigation.

40.  Furthermore, the monies were not paid for any good consideration.  Nor was there any evidence that the 1^st and 4^th defendants have in good faith changed their position.  

41.  In the premises, the 1^st and 4^th defendants were unjustly enriched at the expense of the plaintiff.  I am therefore satisfied that the plaintiff is entitled to a monetary judgment against the 1^st and 4^th defendants on the basis of unjust enrichment.

42.  Separately, for a proprietary constructive trust claim, I accept Mr So’s submissions that equity imposes a constructive trust on the fraudulent recipient when the property is obtained by fraud so that the money is recoverable and traceable in equity.  The defrauded claimant would still have a tracing remedy even if the recipient was not a party to the fraud, as long as his state of knowledge is such as to make it unconscionable for him to retain the money: Guaranty Bank and Trust Co. v Zzzik Inc Ltd (Supra), paras. 28 – 33: 800 Columbia Project Company LLC v Hong Kong Shenshilong Trade Ltd and others, HCA 153/2020 (Unreported, 24 June 2020), para. 12.

43.  In my view, the evidence adduced by the plaintiff (as summarised above)  in the present case does supports its claim of being defrauded.  Among others, payments were made to the 1^st and 4^th defendants’ bank accounts directly from P’s HSBC Account right after the false representations made by the Alleged Staff, Zhao, Zhang and the Forged Documents.  It is to be inferred in the absence of evidence to the contrary that the 1^st and 4^th defendants did participate knowingly as the first-tier recipients of the funds.  Put differently, it would be naïve to suggest that the 1^st and 4^th defendants had nothing to do with the fraudulent transfers, when they were the direct recipients who prima facie enjoyed the fruits of the fraudulent transfers. 

44.  Further, I accept that it would be unconscionable for the 1^st and 4^th defendants to retain the monies transferred from P’s HSBC Account, considering that there was no legitimate reason for them to receive the monies as the plaintiff did not have any personal or commercial dealings with the 1^st and 4^th defendants.

45.  In any event, the monies transferred to the 1^st and 4^th defendants’ accounts would put any honest person on enquiry.  Nonetheless, despite the injunction order, the Statement of Claim, the Summons and the supporting affidavits having been served to the 1^st and 4^th defendants, they have neither paid nor made any attempt to pay the funds to the plaintiff, nor have they come forward to the court to provide any honest explanation for the transfers.

46.  As for declaratory relief, although it is not the normal practice for the Court to grant a declaration without going to a trial, it has been recognized by the Court that this is only a rule of practice rather than a rule of law.  A declaration could be granted by the court on the basis that there is a genuine need for such relief to proprietary claim and on the merits of the case: Guaranty Bank and Trust Co. v Zzzik Inc Ltd (supra), para. 38; Medic First Aid International Inc v Start Easy Developments Ltd, HCA 935/2019 (Unreported, 11 June 2020), paras. 15 – 16.  The position is neatly summarised by the Honourable Mr Justice Coleman in Cheung Sai Lon v Cheung Sai Ha (supra)  at paras. 31-34:

“31. However, the power to give such default judgment is discretionary. In the exercise of that discretion, it is to be recognized that it is not the normal practice of the Court to make a declaration without trial. This is not a legal or inflexible rule, but rather a rule of practice, which need not be followed when the plaintiff has a genuine need for declaratory relief and justice would not be done if such relief were denied.

32. Even on what might appear to be straightforward applications, the Court does not act as a ‘rubber-stamp’ merely because of the uncontested nature of the application. In each case, it is necessary to consider whether the declaratory relief is properly made out on the pleading, and whether it is appropriate in the overall exercise of discretion for such relief to be granted without a trial.

33. In the exercise of the discretion, the Court will consider all relevant factors, including whether the plaintiff has established a strong and obvious case for proprietary relief on the face of its pleading, and where the claim is proprietary, whether there would be any prejudice to the plaintiff’s property and rights. The importance of a claim to proprietary relief arises because of the distinction from a merely personal claim. An order for payment, without more, would only put a plaintiff in the position of an unsecured judgment creditor. But a declaration of a proprietary interest will secure that interest.

34. As to what constitutes a genuine need for relief in the context of an application for default judgment involving a claim upon CICT [i.e. common intention constructive trust] or resulting trust, Mr Deng has drawn my attention to two cases.

(1)  In Kan Kiu Chor v Fung Shu Fun (unreported, HCA 1902/2015, 6 April 2016, Recorder Cooney SC)  a declaration on a CICT was granted on the basis that: (a)  there was an acknowledgement of service; (b)  the defendant did not contest the summons; (c)  all the evidence in support of the plaintiff’s claim was in fact already before the Court and filed in previous affirmations; (d)  large numbers of documents evidencing the plaintiff’s financing of the purchase of the property had been provided; and (e)  there was a genuine need for declaratory relief and justice would not be done if relief was denied.

(2)  In Lung Ka Kuen v Chu Chun Yuk (unreported, HCA 2832/2015, 18 October 2016, DHCJ Marlene Ng)  the Kan case was distinguished on the basis that: (a) there was no acknowledgement of service; (b) the claim concerned interest in land that would affect other parties’ rights, and where in the particular case the first defendant was bankrupt and the second defendant was the official receiver, representing the interests of third-party creditors, and who expressed reservations as to the claim; (c) while the court is to look only at the pleadings, there was evidence already before the Court in the Kan case which indicated the strength of the case; and (d) the declaration sought went beyond the scope in any event, including future events.”

47.  In my view, the present case is closer to the circumstances of the Kan case, save that the 1^st and 4^th defendants did not file an Acknowledgment of Service and had not come forwarded to contest the Summons.  However, this seems rather unsurprising in the light of overwhelming evidence that money was paid to the 1^st and 4^th defendants in reliance of inter alia the Forged Documents which were proved to be fake by the Hong Kong Police.  Against such context, and in the absence of any evidence to the contrary (e.g. evidence that the 1^st and 4^th defendants paid good consideration for the receipt of the money), one would not naturally expect the 1^st and 4^th defendants to come forward.  This ought not operate as a bar to a default judgment for declaration.

48.  In the premises, based on the pleadings and having regard to all the evidence in support of the plaintiff’s claim which was already before the court, I am satisfied that the 1^st defendant holds the sum of HK$1,400,000 and the 4^th defendant holds the sum of HK$770,000 on a proprietary constructive trust for the plaintiff and the monies are recoverable and traceable in equity. 

49.  I am also satisfied that there is a genuine need for the declaration of a proprietary interest so as to facilitate the plaintiff’s tracing of her funds, and also to secure the plaintiff’s proprietary interest in the funds to minimise any need for the plaintiff to race against other unsecured creditors of the 1^st and 4^th defendants (if any).

DISPOSITION

50.  Accordingly, I have granted an order substantially in terms of the reliefs sought by the plaintiff in the Summons, by ordering a default judgment for both a monetary judgment and declaration of proprietary constructive trust against the 1^st and 4^th defendants. 

51.  Further, having considered the Statement of Costs provided by the plaintiff and taking a broad-brushed approach, I ordered the 1^st and 4^th defendants to pay the costs of these proceedings to the plaintiff, summarily assessed at the sum of HK$400,000.

52.  It remains for this Court to thank Mr So for the plaintiff for his submissions and assistance rendered to the court.