DONALD SIDNEY DOBKIN v. HUNG WING FUNG

DCCJ 1733/2022

[2024] HKDC 1216

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1733 OF 2022

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DECISION

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1.  This is P’s application for summary judgment against D.

2.  P’s case is that he had fallen victim to internet fraud and defrauded into making various “investment” payments to various people as told.

3.  Of those payments, transfers of 2 sums of USD$200,000 and USD$275,350 were initiated by P to the account of a Miss Kan Ho Yan (“Kan”) on 10 and 14 December 2020 respectively.

4.  D, naturally, has no knowledge on these “upstream” matters and as indeed, P has obtained judgment against Kan, including a declaratory relief that the above monies belong to P as at the time of receipt, so as to enable further tracing down the line.

5.  It will be useful to first set out the fund-flow of these monies into D’s account before one comes to analysing the claims and defences herein.

6.  As the bank statement shows, the balance in Kan’s HSBC account (“Kan’s A/C”) on 11 December 2020 was HKD$80.44, ie. de minimus.

7.  For the sum of USD$200,000, as bank documents show, it was converted into HKD on 12 December 2020, together with another sum of USD$16,000. According to the exchange rate shown on the bank document, the total converted sum was HKD$1,668,209.93 and HKD$1,544,638.83 thereof was the USD$200,000 from P.

8.  There is no separate record of receipt of the USD$16,000 apart from the conversion at the same time with P’s USD$200,000. I shall take them as being credited to Kan’s A/C simultaneously.

9.  The abovesaid HKD total was credited to Kan’s A/C on 12 December 2020. There was another deposit into Kan’s A/C that day, of HKD$28,678.05, which was listed above the HKD$1,668,209.93 in the bank statement.

10.  On the same day, ie 12 December 2020, 2 withdrawals of HKD$100,000 and HKD$300,000 were made out of Kan’s A/C. These withdrawals were to people other than D.

11.  Applying First-In-First-Out (“FIFO”), and as P correctly submitted to the best advantage of P, the 2 withdrawals above should have been taken to have depleted the HKD$28,678.05 and the USD$16,000 (or HKD$123,571.11) first.

12.  As such, the balance as at 12 December 2020, ie HKD$1,296,968.42, should be “purely” P’s money.

13.  Thereafter and up to end of 15 December 2020, there was no receipt into Kan’s A/C and only 3 significant transfers: each of HKD$400,000 and all to D’s account. The other transfers were apparently administrative sums ranging from HKD$10 to HKD$40 each time.

14.  It is clear therefore the 3 transfers of HKD$400,000, totalling HKD$1,200,000, comprised solely of P’s money and had gone into D’s account.

15.  The balance standing as at the end of 15 December 2020 was HKD$96,841.42 and without question also wholly P’s money.

16.  Then on the records for 16 December 2020, in sequence, after 2 transfers in administrative sums, there was a transfer of HKD$1,000,000 to D’s account. This transfer was shown on further internal bank records to have been effected on 16 December 2020 at 11:32.

17.  This transfer would not have been possible as the previous day balance in Kan’s A/C was less than HKD$100,000; however, the statement in fact shows, out of sequence, 2 receipts of HKD$228,257.72 and HKD$2,122,593.39 on 15 December 2020.

18.  Out of these 2 receipts, the HKD$2,122,593.39 was shown on bank record to have come from P’s USD$275,350, out of which USD$274,500 was converted into HKD$2,122,593.39 on 15 December 2020 at 23:38.

19.  There is unfortunately no such detailed bank record of the time of the other receipt of HKD$228,257.72.

20.  That said, relying on the transaction reference numbers, which appear to be sequential according to time, the HKD$228,257.72 should be the earlier transaction as its reference number ends with “366” while that for the HKD$2,122,593.39 ends with “749”. I reckon this is a reliable deduction as similar reference numbers shown in the bank statement are all consistent in pattern, ie earlier transactions have smaller reference numbers and later ones bigger numbers.

21.  As such, the HKD$1,000,000 transferred to D’s account on 16 December 2020 comprised of (a) HKD$96,841.42 – HKD$15 – HKD$20; (b) HKD$228,257.72 and (c) HKD$674,935.86. Only (a) and (c) were P’s money, ie a total of HKD$771,742.28.

22.  Given the above, I conclude that P is able to trace a total of HKD$1,200,000 + HKD$771,742.28 = HKD$1,971,742.28 into D’s account.

23.  P’s claim, as confirmed by counsel, is a personal one against D for the sum found traceable into D’s account.

24.  This is perhaps compelled by circumstances: D’s account had been fully depleted and even closed before P took out the present action, hence there has since been nothing identifiable in D’s hands for P to seek any proprietary relief.

25.  P however does seek a declaration that such traceable sums belong to him as at the time of receipt, so as to enable him to, potentially, conduct further tracing down the line.

26.  D relies on the defence of change of position. Her factual case is that she had lent this account to a Madam Liu and given Madam Liu full internet banking access thereto. She therefore had no knowledge of whatever transactions that had taken place using the account and had not been enriched in any way as all the monies had been taken away by Madam Liu.

27.  Mr Ng for P makes 3 points against this defence. They are of 2 types: law and fact, and I shall deal with them in that order.

28.  Legally, P points out that D’s pleaded case has only gone so far to say that monies in D’s account had been depleted by Madam Liu, and as a matter of law that would not be enough to constitute a change of position defence.

29.  To that, Ms Chan for D relies on Credit One Finance Limited v Yeung Kwok Chi [2020] HKCFI 2450 to say that a “but-for” threshold is all that is required and in that case the Court did find the 2^nd defendant therein changed her position in a situation where she had no knowledge of P’s money being deposited into and taken out of her joint account with the 1^st defendant therein.

30.  The “but-for” threshold applied therein seemed to be that of simply “but for the receipt of the enrichment, defendant’s position would not have changed”, and this wide interpretation of causation can be established by “where it can be established that the defendant no longer retains the specific benefit which was received from the plaintiff” (see §67 thereof).

31.  The CA in a later decision did not doubt the correctness of “but-for” being the threshold: Kaefer AG v Winfield Marine Services Co Ltd [2022] HKCA 807, a case cited by Mr Ng. There the CA held that the defendant could not have passed the “but-for” threshold as the “change” (supply of marine fuel) took place before receipt of money and the defendant’s professed ignorance of payer identity meant that it could not have anticipated a change of position either (see §46).

32.  What I can gather from the authorities is that as a matter of law, a person who has no knowledge of receipt of property and retains no benefit of it whatsoever may have a defence in change of position, the relinquishment of the property or the change needs only have a “but-for” linkage with the receipt of the property. In the case of transactions in or through the defendant’s bank account, the “but-for” threshold could be established by the mere deposits and withdrawals/depletion but of course the withdrawals and depletion must be of no benefit at all to the defendant.

33.  That brings the analysis to what is critical: whether factually such a scenario can be established. This is Mr Ng’s second type of attack: evidential insufficiency.

34.  While I accept that it might not be surprising that there was no documentary record of any sort of the alleged lending of D’s account to Madam Liu, I do find the following contents of D’s affirmation (or the lack thereof) surprising :-

34.1  D stated that she came to know Madam Liu in 1998 but apart from both of them coming from the same part in the Mainland and that they met regularly with their families since Madam Liu came to Hong Kong, there is very little by way of D’s actual knowledge of what Madam Liu did or her business; there is but one single sentence saying that Madam Liu was a successful business woman;

34.2  Despite saying that Madam Liu and herself are related “by marriage”, D did not go on to give any particulars of the same;

34.3  The lending of account to Madam Liu therefore was set against this extremely carefree context, presumably, one would have thought, because D knew and trusted Madam Liu so well;

34.4  After stating that the account was cleared out and closed in 2021 with the money given to Madam Liu, there is nothing about further contact with Madam Liu whatsoever thereafter – this is in itself already peculiar, given the regular contact they allegedly have maintained after Madam Liu came to Hong Kong;

34.5  More importantly, after the present action was taken out by P in 2022, there is still nothing about D even trying to contact Madam Liu – this is to me unfathomable as on D’s case Madam Liu would be the author of all D’s trouble and specifically being sued for over HKD$2m that she supposedly did not benefit from at all but all for Madam Liu’s use and benefit;

34.6  On the point above, and indeed overall, one would have expected some sort of communication or attempt thereof such as text messages being produced;

34.7  In gist, Madam Liu, if she had indeed existed, been so known, been so trusted and involved as alleged, ought not have left no trace of herself and practically “disappeared” from D’s life altogether after the account was closed, not to mention D not even trying to get hold of such a person who put her into this entire predicament.

35.  In short, while D’s change of position defence could at least arguably work as a matter of law, evidentially I am afraid it does not go beyond being “shadowy” on the materials put before me. Indeed, I nearly almost gave summary judgment to P.

36.  For the above reasons I shall give leave to D to defend but on condition that she pays the sum I find traceable, ie HKD$1,971,742.28, into court.

37.  Upon raising the possibility of a conditional leave at the hearing, Ms Chan asked for 3 months to make the payment and Mr Ng said no more than 28 days.

38.  From what I can gather and as submitted by Ms Chan, D is of limited means, hence I will allow her more time to raise the said sum. I will give her 56 days from the date of this decision to make the payment into court.

39.  Lastly, as to P’s request for a declaration of ownership of the traceable sum paid into D’s account, I do see a potential utility in it enabling P to further trace P’s money down the line and Ms Chan did not seriously dispute that (in any event D could not resist it given her case).

40.  As indeed, it was a similar declaration made in P’s claim against Kan that allowed him to further trace his monies into D’s account. I will therefore make such a declaration, on summary judgment basis.

41.  To conclude, I make the following orders on P’s application:-

41.1  D be given leave to defend the present action, on condition that she pays the sum of HKD$1,971,742.28 into court within 56 days of the date of this decision;

41.2  If D fails to make the above payment into court within time, judgment herein be entered against D in the following terms:-

(a)  D do pay P the sum of HKD$800,000 together with interest thereon since 14 December 2020 at HSBC prime rate plus 1% until the date of this Judgment and at judgment rate thereafter until full payment;

(b)  D do pay P the sum of HKD$400,000 together with interest thereon since 15 December 2020 at HSBC prime rate plus 1% until the date of this Judgment and at judgment rate thereafter until full payment;

(c)  D do pay P the sum of HKD$771,742.28 together with interest thereon since 16 December 2020 at HSBC prime rate plus 1% until the date of this Judgment and at judgment rate thereafter until full payment;

(d)  Costs of the action, including the costs of this application, be paid by D to P, with certificate for counsel, to be taxed if not agreed;

41.3  If D makes the above payment into court within time, costs of this application, with certificate for counsel, be in the cause;

41.4  There be a declaration that the sums of HK$400,000, HK$400,000 (both paid on 14 December 2020), HK$400,000 (paid on 15 December 2020) and HKD$771,742.28 (paid on 16 December 2020) paid into D’s account maintained with the DBS Bank (HK) Limited (Account No 001199188) from Kan Ho Yan belong to P (as his property) as at the time of receipt.