CHU YUNG v. CHAN LOK HIM AND OTHERS

DCMP 2981/2024

[2024] HKDC 1344

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2981 OF 2024

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DECISION

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Introduction and Background Facts

1.  This is the hearing of an application by the Plaintiff (“P”) by way of Originating Summons (“the OS”) issued on 4 June 2024 for a declaration that the sum of HK$551,500 and all interest accrued thereon since 20 April 2022 (“the Sum”) in the bank account of the 2^nd Defendant (“D2”) held with the Respondent (“the Bank”) (D2’s Account”) are held on trust for P and an order that the Sum be forthwith released or returned to P.

2.  P’s case is set out in P’s Affirmation.  According to P:

(1)  In March 2022, she received a mobile phone message from a man who identified himself as “林建冬” (“Lam”) and that he worked as Head of Information Technology Department at a casino in Macau.  They became friends and continued to chat through mobile phone;

(2)  In April 2022, Lam through Whatsapp messages told her that he worked at the casino in Macau and had the authority at the IT platform to adjust the dividend rate of return on the online lucky draw ball games for each bet.  She could bet on “big” or “small” at the same time as they had the same official dividend rate of return. Through the adjustment of higher rates placed on her bet, she could earn some money by reaping the differences between the dividend rates.  Besides she could get rebate on the amount of money deposited into her casino account;

(3)  She followed Lam’s advice and deposited HK$3,000 into her casino account and placed a bet of HK$1,000 on the online ball game.  She won and got back HK$1,220 which was remitted to her bank account.  Then she deposited HK$60,976 (RMB50,000) into her casino account and placed bets on the ball game.  In return, she got back HK$80,488 together with the dividend and rebate;

(4)  Subsequently, between 20 to 22 April 2022, she made another 4 payments totaling HK$928,449 into her casino account with the details of the recipient accounts provided by the casino;

(5)  On 25 April 2022, when she wanted to withdraw all the monies previously deposited, she was informed that they could not be withdrawn unless she deposited more money into the casino account;

(6)  After discussion with her friend, she reckoned the casino account was a scam and she reported the matter to the police on 30 April 2022;

(7)  P’s solicitors were informed by the police that part of the monies she transferred has been frozen in D2’s Account and the balance stood at HK$511,500 as at April 2024; and

(8)  According to bank account statements disclosed to P’s solicitors pursuant to various court orders: (a) after P’s transfer of HK$243,902 on 20 April 2022 to the bank account to the 1^st Defendant held with the Bank of China (“D1’s Account”), after a series of transfer in and transfer out, two amounts of HK$121,500 and HK$100,000 were transferred to D2’s Account on the same day; and (b) after P’s transfer of HK$292,683 to D1’s Account on 21 April 2022, HK$290,000 was transferred immediately from D1’s Account to D2’s Account.

Service and non-appearance of the Defendants (“Ds”) and the Bank

3.  I am satisfied from the affirmations of service filed on behalf of P that the OS and Notice of Appointment To Hear Originating Summons have been properly served on Ds.

4.  By letter dated 30 July 2024, the Bank indicated that it takes a neutral stance and has asked to be excused from today’s hearing.  The Bank has been excused.

5.  In the circumstances, I take the view that it is expedient to proceed in the absence of Ds and the Bank under O 32, r 5 of Rules of the District Court, Cap 336H, (“RDC”) made applicable to originating summons by O 28, r 1 of RDC.

Applicable Principles

6.  Mr Fung, solicitors for P, invited me to summarily dispose of the OS pursuant to O 28, r 4 of RDC.

7.  It is well-established that the burden is on the plaintiff to justify its entitlement to judgment.  Once the plaintiff’s entitlement to summary judgment is demonstrated prima facie on the evidence, the burden is on the defendant to show that he has a defence on the claim.  If the defendant files no evidence or his evidence discloses no triable issue, the court may enter final judgment under O 28, r 4(1) of RDC.  See Wing Hang Bank Ltd v Liu Kam Ying [2002] 2 HKC 57, §§7 and 10; Bank of China (Hong Kong) Limited v Twin Profit Ltd [2010] 2 HKLRD 1065, §8; and Hong Kong Civil Procedure 2024, Vol 1, §28/4/2.

8.  However, as reminded by the Court of Appeal in Li Mingren v Questex Development Inc & Anor (Unrep) CACV 141/2014, 18 November 2015 at §13:

“The principles guiding the court in deciding whether to give summary judgment are well-known. All that the defendant needs to show is a triable issue. But before the court looks at the defence, one must look at the plaintiff’s case first. As Ribeiro JA (now Ribeiro PJ) held in Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262, 268:

‘The importance of there being doubts or suspicion as to the plaintiff’s case is that such doubts detract from the plaintiff’s right to summary judgment.  It is not to the point to dismiss them on the basis that they did not improve the quality of the defence and ‘raise it’ beyond the category of ‘shadowy’.  If possibly genuine weaknesses were exposed in the plaintiff’s case, this casts doubt on the plaintiff’s right to invoke the summary procedure in the first place’. (Emphasis added).”

9.  As for the grant of declarations, the rule of the court that a declaration will not be granted when giving judgment by consent or in default without a trial is a rule of practice and not of law, and will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled.  The Court will consider whether the declaratory relief is properly made out on the pleadings and whether it is appropriate in the overall exercise of discretion for such relief to be granted without trial.  The declaratory reliefs to be granted should not be in terms wider than what the plaintiffs are entitled to and what is necessary to do justice to them.  See Hong Kong Civil Procedure 2024, Vol 1, §§19/7/14 and 19/7/20.

Discussion

10.  Having considered P’s evidence which has not been challenged or disputed, I accept that P is a victim of fraud.  However, I do not consider that P’s claim in constructive trust against D2 is complete and made good.

11.  In Guaranty Bank and Trust Company v ZZZIK Inc Ltd (unrep) HCA 1139/2016, 18 July 2016, a case of email fraud, Deputy High Court Judge Cooney SC summarized, which I gratefully adopt, the applicable principles for proprietary constructive trust as follows:

(1)  When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient, so that money is recoverable and traceable in equity (§28);

(2)  Even if the recipient is not a party to the fraud, if his state of knowledge is such as to make it unconscionable for him to retain the money, the defrauded claimant has a tracing remedy (§32); and

(3)  Knowledge does not have to be acquired at the time of receipt, it can be acquired subsequently while the money is in the recipient’s hands (§33).

12.  The proposition in §28 of Guaranty Bank and Trust Company originated from a dictum of Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669.  As noted by the Court of Appeal in R Stahl Inc v AJ Development Ltd [2021] HKCA 1093 at §30, that dictum refers to “fraudulent recipient” and where the alleged recipient is not said to be fraudulent, the dictum cannot assist.

13.  At most, on the basis of P’s evidence before me, it may be said that the sums of money approximate in sum to the amounts transferred by P to D1’s Account were transferred out from D1’s Account to D2’s Account on the same day.  However, I do not consider these are sufficient plea or basis to suggest that D2 was involved in the fraud perpetrated against P.

14.  It is well-established that fraud or dishonesty must be distinctly alleged and must be sufficiently particularized.  It is not sufficiently particularized if the facts, matters and circumstances alleged are consistent with innocence: see Three Rivers District Council & ors v Bank of England (No 3) [2003] 2 AC 1 at §§184-186.

15.  I am of the view that fraud has not be distinctly alleged against D2 and in any event, the circumstances of the transfers from D1 to D2 may equally be consistent with D2 being an innocent recipient.

16.  As for the other basis upon which D2 may held to be a constructive trustee of the Sum under Guaranty Bank and Trust Company (§32), there is no evidence concerning the state of knowledge of D2 making it unconscionable for D2 to retain the funds.

17.  Moreover, in order to obtain proprietary relief over the Sum, it is necessary to establish that that Sum can be identified by the tracing process as representing the original trust property: see Milestone Electric, Inc v Meihoukang Trading Co Ltd [2020] HKCFI 2542 at §14 whereby Mr Recorder Eugene Fung SC referred to the case of Federal Republic of Brazil v Durant International Corpn [2016] AC 297 at §17 where Lord Toulson held:

“The doctrine of tracing involves rules by which to determine whether one form of property interest is properly to be regarded as substituted for another. It is therefore necessary to begin with the original property interest and study what has become of it. If it has ceased to exist, it cannot metamorphose into a later property interest. Ex nihilo nihil fit: nothing comes from nothing.”

18.  Having reviewed the bank statements, after the transfer of HK$243,902 to D1’s Account and prior to the transfer of HK$121,500 and HK$100,000 to D2’s Account, all but HK$170 remained in D1’s Account.  I cannot see how it can be said that the HK$121,500 and HK$100,000 represented P’s initial HK$243,902.

19.  Further, even assuming the sums HK$121,500, HK$100,000 and HK$290,000 into D2’s Account represented P’s initial transfer of HK$243,902 and HK$292,683, from the bank statements of D2’s Account, it can be seen that on 23 April 2022 there was only a balance of HK$1,500.  Accordingly, I cannot see how the Sum can be said to represent P’s monies.

20.  For all the above reasons, I am not satisfied that P’s claim against D2 on constructive trust is complete and good.  Where the statement of claim (or in the present case, the originating summons) is defective, the application for summary judgment will be dismissed.  See Hong Kong Civil Procedure 2024, Vol 1, §14/1/5.

21.  In any event, I would not grant the declaration sought as I am not satisfied that on the OS and evidence filed in support, P is entitled to the declaration.

22.  I would therefore dismiss the application for summary judgment with no order as to costs.