JG8 LLC v. QUWU TRADING LTD AND ANOTHER

HCA 754/2022

[2023] HKCFI 645

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 754 OF 2022

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D E C I S I O N

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1.  This is the plaintiff’s application by summons filed on 24 November 2022 (“Summons”) for judgment in default of defence against the 1^st defendant.

2.  The plaintiff is a company incorporated in Delaware in the United States of America. It commenced this action by writ issued on 22 June 2022 to recover a sum of US$951,850 (“Sum”) transferred to the 1^st defendant’s bank account maintained with the Bank of Communications (Hong Kong) Limited (account no. 382-537104278601) (“Account”) on 2 June 2022. The plaintiff claimed that it was deceived into making the transfer by emails on 1 June 2022 sent from fraudsters impersonating as the plaintiff’s director and the chief financial officer and chief operations officer of the plaintiff’s related company through their hacked email accounts. The plaintiff’s case is that it never had any business dealings with the 1^st defendant, and the Sum was transferred to the Account as a result of fraud.

3.  The 3^rd and 4^th defendants are two second-layer recipients of the defrauded Sum. The 3^rd defendant is defending the claim and the plaintiff’s summary judgment application against it is pending. The 4^th defendant has settled the claim with the plaintiff and repaid the sum of HK$195,884 (being the part of the defrauded Sum transferred to it from the 1^st defendant) (“D4 Sum”) to the plaintiff.

4.  I am satisfied that the plaintiff has duly served the writ, the Statement of Claim and the Summons on the 1^st defendant by leaving them at the 1^st defendant’s registered office stated in its Annual Return. The 1^st defendant has not acknowledged service of the writ nor has it filed any Defence. The plaintiff is therefore entitled to enter judgment against the 1^st defendant. Credit must be given to the D4 Sum which the plaintiff has recovered from the 4^th defendant.

5.  The plaintiff seeks both personal and proprietary remedies against the 1^st defendant. I am satisfied that the personal claims based on unjust enrichment (the unjust factor being mistake) and unlawful means conspiracy are sound in law and established on the pleaded facts against the 1^st defendant. The proprietary claim based on constructive trust over the Sum is also established on the pleaded facts. In circumstances where the 1^st defendant (1) received the Sum pursuant to a fraud, (2) had no business with the plaintiff justifying its receipt of the Sum, and (3) almost completely dissipated the Sum out of the Account within 2 business days from receipt, the compelling inference is that the 1^st defendant is part of the fraud committed on the plaintiff and hence a fraudulent recipient, and for such reason holds the Sum (and any of its traceable proceeds) on constructive trust for the plaintiff. Justice requires the Court to grant a declaration to such effect even without a trial to enable the plaintiff to pursue proprietary remedy against the 1^st defendant and other recipients of any part of the traceable proceeds of the Sum.

6.  The Mareva/proprietary injunction against the 1^st defendant granted by Deputy High Court Judge Douglas Lam SC on 22 June 2022 (as continued by the Deputy Judge on 30 June 2022) should be continued to ensure effective and meaningful enforcement of the judgment entered against the 1^st defendant. There could be no conceivable prejudice to the 1^st defendant which decided not to defend the claim. Subject to varying the ceiling of the Mareva injunction and the amount under the proprietary injunction to reflect the D4 Sum recovered from the 4^th defendant, I will continue the injunction until further Order of the Court. In the event that the plaintiff requires the injunction to be varied or lifted to enable it to recover any part of the Sum from the 1^st defendant’s assets, it could make a separate application to the Court.

7.  For the above reasons, I make an order in terms of the draft Order and Judgment appended to Mr Chiu’s skeleton argument subject to the amendments discussed with Mr Chiu at the hearing.