MASTERWORK GROUP CO LTD v. RIECKERMANN INTERNATIONAL LTD AND OTHERS

HCA 904/2021

[2023] HKCFI 3266

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 904 OF 2021

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DECISION

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1.  This is the plaintiff’s application by summons of 7 November 2023 (the “Summons”) for default judgment against the defendants pursuant to O.19 r.7, and for continuation of injunctions against them post-judgment.

2.  The plaintiff (“P”) is a listed company in the Mainland.  The 3^rd defendant (“D3”) used to be one of its senior employees.  The 1^st and 2^nd defendants (“D1” and “D2”) are companies under D3’s control.  According to the plaintiff’s Statement of Claim filed on 13 April 2023, between 2013 and 2021, D3, whilst under P’s employ, in the course of his dealings or purported dealings with P’s customers, and through the use of D1, D2 and forged documents, misappropriated P’s properties and diverted them into accounts under their control.  The fraud included misrepresenting to P that D1 was an intermediary of one of P’s customers for payments, pocketing portions of contract prices paid by customers, and deceiving P into consenting to the delivery of accessories to certain of its business counterparts free of charge when D3 in fact caused those counterparts to make payments to D2.

3.  The total amount of funds so misappropriated or diverted is USD 1,568,348.14[1] and EUR 247,388.40.

4.  P’s causes of action include conspiracy to injure, fraudulent misrepresentation, constructive trust, unjust enrichment and breach of fiduciary duties.

5.  D3 has been arrested in the Mainland for the alleged dealings, and has been held in custody.  The criminal process he is facing is on-going.

6.  I am satisfied that the process and all necessary documents have been validly served upon D1 and D2 at their registered offices, and D3 in the Mainland through judicial authorities.  None of them has filed any acknowledgement of service.  I record that whilst the Summons has not been served upon D3, that is not necessary given his failure to file any acknowledgement of service – see O.65 r.9.

7.  P is seeking both monetary judgment and other forms of relief, including declarations, against the defendants, as set out in the draft final judgment annexed to the Summons.

8.  I have considered the contents of the Statement of Claim.  I have considered the authorities cited by Mr Jeff Chan, counsel for P.  P appears on the Statement of Claim to be entitled to the draft judgment.  I note that whilst it is not the practice of the courts to grant declaratory relief on default, that is only a rule of practice.  On the facts of this case, I am satisfied that there is a genuine need as a matter of justice for P to safeguard by the declarations being sought its proprietary rights in the sums involved.  I grant those other forms of relief despite this being an application for judgment in default.  I make an order in terms of §1 of the Summons and grant P judgment in terms of the draft attached.

9.  P has previously obtained and had continued 2 injunctions against the defendants to restrain dissipation of assets.  There remains clear risk of dissipation despite this Judgment.  I order the 2 injunctions to be continued for 8 months from the date hereof so that P can take steps to enforce this Judgment.  I make an order in terms of §2 of the Summons.  For avoidance of doubt, should the need subsists, and upon proper application being made, P is at liberty to make further application for further continuation of those injunctions.  

10.  I order that the defendants shall bear the costs of this action, including all costs reserved, on a joint and several basis, to be taxed if not agreed.  Given the facts that the costs cover the entire action, the number of hearings involved (12 in total), and the amount claimed (upwards of HK$7.8m), my view is that it is more appropriate to order taxation.