800 COLUMBIA PROJECT COMPANY, LLC v. XIANG YANG LOGISTICS LTD AND OTHERS

HCA 393/2020

[2020] HKCFI 1527

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 393 OF 2020

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BETWEEN

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J U D G M E N T

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Background

1.  This is an application by the Plaintiff against D2, D3 and D5 for default judgment.

2.  The Plaintiff is the victim of email fraud who has suffered loss in the total sum of US$5.697,724.42 (“the defrauded sums”).  Between 14 and 28 January 2020, due to hacking into the emails of key personnel of the Plaintiff and using bogus email addresses, fraudster(s) of unknown identity deceived the Plaintiff into cancelling 2 genuine remittance applications and redirecting the funds to the fraudsters.  The fraudsters submitted a total of 3 forged and unauthorized remittance applications to the Plaintiff’s bank and obtained payment of the defrauded sums.

3.  The defrauded sums were swiftly dissipated on the same day or the day following receipt to 2^nd and 3^rd layers recipients. D2, D3 and D5 were 3^rd layer recipients who had received part of the defrauded sums from the 2^nd layer. The amounts involved were:

Defendant	Date of  receipt	Amount
D2	23 January 2020	US$140,500
D3	22 January 2020	US$110,500
D5	22 & 29 January 2020	US$497,549

Those amounts were further dissipated to D6.

4.  On 16 March 2020, G Lam J granted a proprietary and Mareva injunction against the Defendants in the present action, which was continued on 24 April. 

5.  The writ and the statement of claim were filed on 31 March and 7 May 2020 respectively.  The Plaintiff based its claim in unjust enrichment, constructive trust and the torts of deceit and conspiracy.

6.  The Plaintiff now seeks default judgment for monetary reliefs only, ie liquidated sums received by D2, D3 and D5 and damages for conspiracy and/or deceit; and abandons the other reliefs for declarations and account and inquiries.

Legal principles for granting default judgment

7.  The writ and statement of claim contain claims not covered by Order 13, rules 1 to 4 and Order 19, rules 2 to 5 of the Rules of the High Court.  This application was thus taken out pursuant to Order 19, rule 7.

8.  Under Order 19, rule 7, on the hearing of an application for default judgment, the court “shall give such judgment as the plaintiff is entitled to on his statement of claim”.

9.  The court is required to scrutinize whether the matters pleaded in the statement of claim are sufficient to grant judgment sought to the plaintiff.

Service of proceedings

10.  I am satisfied from the affirmation of service of Ng Shu Hung that the writ of summons, the statement of claim, the present summons and supporting affirmations have been served on D2, D3 and D5 by leaving at their registered offices.  No acknowledgements of service have been served by them and they have not filed anything in defence.

Analyses of the statement of claim

11.  This was a plain case of fraud.  The Plaintiff never had any business dealings with the 3 layers of recipients and had not even heard of them prior to the events in this case.  The transfers to the fraudsters would not have occurred but for their fraudulent misrepresentation and/or forged applications to the bank. 

12.  All the corporate recipients were incorporated just a few months before the fraud occurred, with a small capital of $1.00, $2.00 or $10,000.  None of them appeared to have any genuine business which would have justified receipt or retention of the defrauded sums.  The Plaintiff has pleaded a particularized case of a fraudulent scheme under which, amongst others, D2, D3 and D5 had participated.

13.  I am satisfied that the Plaintiff is entitled to judgment on its statement of claim against D2, D3 and D5.

14.  As the defrauded sums were followed into the hands of D2, D3 and D5, a straight forward proprietary remedy has arisen.  I give judgment to the plaintiff in the amount received by each of D2, D3 and D5, with interest at prime rate at 1% from the date of receipt to the date of judgment and thereafter at judgment date until full payment.

15.  D2, D3 and D5 shall also pay damages in the sum of US$5,697,724.42 in respect of the tort of deceit and conspiracy.

16.  To aid in the enforcement of this judgment the injunction order shall continue as against D2, D3 and D5 until full payment of the judgment sum or until further order.

17.  On a nisi basis, the Plaintiff’s costs in these proceedings, including all costs reserved and costs of this summons are summarily assessed and allowed at $350,000.

18.  There shall be liberty to apply. 

19.  I thank counsel for her assistance.