CHAN TING TING v. GUO GEORGE AND OTHERS

DCCJ 4406/2020

[2024] HKDC 1031

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4406 OF 2020

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JUDGMENT

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Introduction

1.  By summons filed on 19 February 2024 (“Summons”), the Plaintiff applies for final judgment in default of defence pursuant to Order 19 rule 7 of the Rules of the District Court (Cap 336H, sub leg) (“RDC”) against, inter alia, the 6^th Defendant.

2.  This Judgment is concerned with the Plaintiff’s application against the 6^th Defendant only.

3.  By the Summons, the Plaintiff seeks against the 6^th Defendant:-

(1)  damages to be assessed (paragraph 2.1 thereof);

(2)  a declaration that the Plaintiff is the owner of and proprietary interest over the sum of HK$96,878 received by the 6^th Defendant (paragraph 2.2 thereof);

(3)  a declaration that the 6^th Defendant holds the sum of HK$96,878 received and its traceable proceeds as constructive trustee for the Plaintiff (paragraph 2.3 thereof);

(4)  an order that the 6^th Defendant do deliver up or transfer the sum of HK$96,878 and any interest accrued thereon as money had and received (paragraph 2.4 thereof);

(5)  a declaration that the Plaintiff is entitled to trace and recover the Defrauded Sum[1] and/or any part thereof received by the 6^th Defendant (paragraph 2.5 thereof);

(6)  an order that the 6^th Defendant do account for HK$96,878 and/or any part thereof, together with any profit therefrom (paragraph 2.6 thereof);

(7)  payment of interest pursuant to section 49 of the District Court Ordinance (Cap 336) (“DCO”) at such rate and for such period as the Court finds fit (paragraph 2.7 thereof); and

(8)  the Plaintiff’s costs in this action, including all costs reserved and the costs of this application, be payable to the Plaintiff by the 6^th Defendant on summary assessment (paragraph 4 thereof).

The Pleaded Claim in respect of the 6^th Defendant

4.  The Plaintiff is the holder of an HSBC bank account (“P’s HSBC Account”), and the 6^th Defendant is the holder of another bank account (“D6’s Account”).

5.  On 26 March 2020, the Plaintiff received a telephone call from an unknown individual claiming to be a staff member of the Hong Kong Immigration Department, and the latter then transferred the telephone call to a person called 趙紅期 (“Zhao”). Zhao claimed to be a security official of the Shanghai Public Security Bureau, and alleged that the Plaintiff was suspected to have sold an identity card in her name to another person. Zhao also represented that the Plaintiff was involved in a suspicious transaction with the Industrial and Commercial Bank of China.

6.  Zhao and his alleged superior 張德利 repeatedly stated that they possessed evidence against the Plaintiff and that she might go to jail. The Plaintiff was worried and so she provided Zhao with her personal information including mobile phone number and residential address. During a telephone call that night, the Plaintiff disclosed to Zhao further personal information including her date of birth, identity card number, the assets in her bank accounts, job background, interests and family background.

7.  On 27 March 2020, the Plaintiff made an application for activating internet banking services for P’s HSBC Account.

8.  Between 7 April 2020 and 17 April 2020, the Plaintiff transferred a total of HK$2,969,651.56 by 5 transactions from her bank account held with Hang Seng Bank to P’s HSBC Account.

9.  Unknown to and unauthorised by the Plaintiff at the time, a total amount of HK$3,030,000 (“the Defrauded Sum”) was transferred out of P’s HSBC Account by 6 transactions. On 24 April 2020, the Plaintiff discovered the fraud when she updated the passbook of P’s HSBC Account.

10.  Upon the Plaintiff’s inquiry, Zhao told the Plaintiff that he would take some measures to obscure her account information, and the money would be returned to her eventually. However, the Plaintiff’s suspicion grew when she saw the P’s HSBC Account was almost empty and there were no deposits back into the account except for the ones made by the Plaintiff.

11.  On 25 April 2020, the Plaintiff informed the HSBC about her situation. The bank staff member then provided her with information about the sums which were made to the First Level Accounts and the holders of such accounts (“First Level Recipients”).

12.  On 5 May 2020, the Plaintiff applied for and obtained ex parte proprietary and Mareva injunctions against the First Level Recipients and a disclosure order against the Bank of China (“BOC”) in HCA 727/2020.

13.  As revealed by the information disclosed by BOC pursuant to the disclosure order, between 16 April 2020 and 23 April 2020, the Defrauded Sum was further transferred from the First Level Accounts to Second Level Accounts held by the 1^st to 9^th Defendants (collectively “the Second Level Recipients”), and in particular on 19 April 2020 a sum of HK$96,878 (“the Sum”) was transferred to D6’s Account (in the name of The Art Centre of Root & Stone of China being the trading name of the 6^th Defendant).

14.  The 6^th Defendant has not returned the Sum to the Plaintiff.

15.  The Plaintiff had no knowledge of, did not consent to and did not authorise the transfers to the Second Level Accounts. The Plaintiff had no previous dealing with any of the Second Level Recipients including the 6^th Defendant and had no reason to pay substantial sums to any of them.

16.  On 30 July 2020, the Plaintiff obtained ex parte proprietary and Mareva injunctions (“Injunction Order”) against the 1^st to 7^th Defendants up to the amounts received in the Second Level Accounts.

17.  The Plaintiff pleads that the 6^th Defendant was unjustly enriched in the Sum at her expense. Such enrichment was unjust because (a) the 6^th Defendant’s enrichment was caused by the fraud perpetuated against the Plaintiff, (b) the Plaintiff did not know or have any bona fide business dealings with the 6^th Defendant, (c) the Plaintiff did not intend to make payment or a gift to any of the First Level Recipients or the 6^th Defendant, and (d) the 6^th Defendant had no rights to the sums transferred to him. The Plaintiff claims for restitution of the Sum or equivalent to the Sum transferred to the 6^th Defendant.

18.  Moreover, the Plaintiff pleads that the 6^th Defendant is liable for the Sum received as money had and received.

19.  Further, the Plaintiff pleads that she is entitled to trace into and claim equitable title to the proceeds of the Defrauded Sum or any part thereof paid into and retained in D6’s Account, and that the 6^th Defendant held and holds the Sum or any part thereof on constructive trust for the Plaintiff, and is liable to account for the same as constructive trustee.

20.  The Plaintiff claims, against the 6^th Defendant:-

(1)  damages and/or equitable compensation arising from the transfer of the Sum to the 6^th Defendant;

(2)  a declaration that the Plaintiff is the owner of and has proprietary interest over the Sum received by the 6^th Defendant;

(3)  a declaration that the 6^th Defendant holds the Sum received and its traceable proceeds as constructive trustee for the Plaintiff;

(4)  delivery up or transfer of the Sum and any interest accrued thereon as money had and received, alternatively in restitution on the basis that the 6^th Defendant has been unjustly enriched at the Plaintiff’s expense;

(5)  all necessary accounts and inquiries to enable the Plaintiff to trace and recover the Defrauded Sum and/or any part thereof received by the 6^th Defendant;

(6)  an order that the 6^th Defendant to pay to the Plaintiff all sums found to be due to her on the taking of such accounts;

(7)  interest in equity or pursuant to section 49 of DCO;

(8)  costs; and

(9)  further and/or other relief as the Court sees fit.

Procedure

21.  On 24 August 2020, the Writ of Summons was issued. On 25 August 2020, the Plaintiff served, inter alia, the Writ of Summons on the 6^th Defendant by:-

(1)  leaving the same at an address in Wong Chuk Hang (“Wong Chuk Hang Address”) being the usual and last known address of The Art Centre of Root & Stone of China of the 6^th Defendant, and inserting the same into the letter box of the Wong Chuk Hang Address; and

(2)  leaving the same at an address in Tin Wan, Aberdeen (“Tin Wan Address”), being the usual and last known address of the 6^th Defendant, and inserting the same into the letter box of the Tin Wan Address.

22.  On 10 September 2020, the 6^th Defendant, acting in person, filed his Acknowledgment of Service of the Writ of Summons, indicating his intention to defend the claim against him and providing the Tin Wan Address for service.

23.  On 12 December 2020, the Statement of Claim was filed. On 16 December 2020, the Statement of Claim was served on the 6^th Defendant by ordinary post at both the Tin Wan Address and the Wong Chuk Hang Address.

24.  On 4 August 2021, the Plaintiff filed a Notice of Intention to Enter Judgment pursuant to Order 19 rule 8A RDC, in that the Plaintiff gave notice to the 6^th Defendant that unless the latter filed his Defence on or before 11 August 2021, judgment shall be entered without further notice.

25.  The 6^th Defendant never filed any Defence.

26.  On 19 February 2024, the Plaintiff took out the Summons.

27.  On 20 February 2024, the Plaintiff served the Summons on the 6^th Defendant by sending the same by ordinary post in a sealed envelope duly pre-paid and properly addressed to the 6^th Defendant to the Wong Chuk Hang Address.

The Hearing

28.  At the hearing on 24 May 2024, the 6^th Defendant was absent. I asked Mr Max So, Counsel for the Plaintiff, whether the Summons had been served on the 6^th Defendant at the Tin Wan Address, which appeared to be the only address provided by the 6^th Defendant for service. The Plaintiff’s solicitors handed up a cover letter dated 20 February 2024 to show that the Summons was also served at the Tin Wan Address. I therefore directed the Plaintiff to file an affidavit of service to confirm service of the Summons at the Tin Wan Address.

29.  On 27 May 2024, the Plaintiff filed an affidavit of service, deposing that a copy of the Summons was served on the 6^th Defendant by sending the same by ordinary post in a sealed envelope duly pre-paid and properly addressed to the 6^th Defendant at an address at “Tim Wan Estate”. I accept that the Summons was properly served on the 6^th Defendant at the Tin Wan Address and the reference to “Tim Wan Estate” was a typographical error on the part of the Plaintiff’s solicitors.

Legal Principle on Application for Final Judgment in Default of Defence

30.  On an application for final judgment in default of defence pursuant to Order 19 rule 7 RDC, the court cannot receive any evidence but must give judgment according to the pleadings alone. The basis upon which final judgment can be obtained in default of defence is that of implied admission, ie the court will assume that the Statement of Claim has been impliedly admitted. See Hong Kong Civil Procedure 2024, Volume 1, rubric 19/2/1 and 19/7/11.

31.  Notwithstanding such a well-established principle, the Plaintiff’s supporting affirmation and exhibits for the Injunction Order were included in the hearing bundle of this application. The exhibits alone ran to over 500 pages and took up one lever-arch file. Mr So also made extensive references to the said affirmation and exhibits in his written submissions. At the hearing, I indicated that the affirmation and exhibits would not be considered. The Plaintiff’s departure from the said principle is reflected in the costs order below.

Proprietary Constructive Trust

32.  Mr So submitted that for a proprietary constructive trust claim, equity imposes a constructive trust on the fraudulent recipient when the property is obtained by fraud so that the money is recoverable and traceable in equity. The defrauded claimant would still have a tracing remedy even if the recipient was not a party to the fraud, as long as his state of knowledge is such as to make it unconscionable for him to retain the money, citing Guaranty Bank and Trust Co v Zzzik Inc Ltd HCA 1139/2016, unreported, 18 July 2016, paragraphs 28 to 33, and 800 Columbia Project Company LLC v Hong Kong Shenshilong Trade Ltd and Others HCA 153/2020, unreported, 24 June 2020, paragraph 12. Mr So further submitted that the 6^th Defendant holds the Sum on trust for the Plaintiff and the monies are recoverable and traceable in equity.

33.  At the hearing, I indicated to Mr So that the claim for proprietary constructive trust did not appear to be viable because there was no plea of the 6^th Defendant, a Second Level Recipient, being a fraudulent recipient or having the requisite fraudulent knowledge upon or after receipt of the Sum. I drew Mr So’s attention to the Court of First Instance’s decision of JSP International SRO v Alacrity Ltd & Others [2022] HKCFI 977, per Cheng J, paragraphs 25 to 33 in particular.

34.  Mr So then confirmed with the Court that the Plaintiff abandoned her claim of proprietary constructive trust against the 6^th Defendant, as well as those relief stated in paragraphs 2.2, 2.3, 2.5 and 2.6 of the Summons.

Unjust enrichment

35.  In the premises, the Plaintiff’s only claims against the 6^th Defendant are the personal claims of unjust enrichment and money had and received.

36.  In Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, the Court of Final Appeal (at paragraph 66 thereof) set out a useful framework for approaching a claim for restitution based upon principles of unjust enrichment by posing four questions:

(1)  Was the defendant enriched?

(2)  Was the enrichment at the plaintiff’s expense?

(3)  Was the enrichment unjust?

(4)  Are any of the defences applicable?

37.  I accept that the Plaintiff has pleaded a case of unjust enrichment. The 6^th Defendant was enriched by the Sum at the expense of the Plaintiff. The 6^th Defendant received the Sum because of the fraud perpetuated on the Plaintiff. The Plaintiff did not know the 6^th Defendant or have any bona fide business dealings with the 6^th Defendant, and did not intend to make any payment or gift to the 6^th Defendant. The 6^th Defendant must have known the receipt of the Sum, at least through the Injunction Order made against him. There is no suggestion that the 6^th Defendant has changed his position in good faith. The enrichment was therefore unjust. The 6^th Defendant did not file any Defence and so no defence to unjust enrichment is raised, and in any event there does not appear to be any applicable defence.

38.  In the circumstances, it is unnecessary for me to rule on the claim of money had and received. At the hearing, Mr So confirmed that the plea of “money had and received” in paragraph 30 and Prayer (16) of the Statement of Claim was just a species of claim for unjust enrichment but had no independent existence. In this connection, I repeat my view in Hongkong Windmode Sports Equipment Co, Limited v HK Haolong Industrial Limited [2024] HKDC 875 at paragraph 27, which was based on the observations of Recorder Eugene Fung SC in Zief Incorporated v Tekchandani Ajai Mohan (trading as D’Ziner Collections (Hong Kong)) and Others [2021] HKCFI 38. I say, obiter, that since the Plaintiff never anticipated any performance from the 6^th Defendant for the Sum, it does not seem appropriate to describe the 6^th Defendant’s enrichment here as money had and received with a total failure of consideration in the sense understood in Shanghai Tongji (supra).

Relief

39.  By reason of the plea of unjust enrichment, I grant an order for the payment of HK$96,878.

40.  The Plaintiff seeks pre-judgment interest pursuant to section 49 of DCO. In my judgment, the Plaintiff has sufficiently pleaded that she had no previous dealing with the 6^th Defendant and had no reason to pay substantial sums to him, and that the 6^th Defendant must have known about the receipt of the Sum, at least through the Injunction Order. This is an appropriate case to award pre-judgment interest in order to compensate the Plaintiff for being kept out of the Sum. The Plaintiff seeks pre-judgment interest at the usual rate of HSBC prime rate plus 1% from the date of writ herein, ie 24 August 2020, and I so order.

41.  I grant also post-judgment interest at judgment rate.

42.  In relation to costs, having regard to all relevant circumstances including the factual matrix pleaded and accepted by this Court, that the Plaintiff succeeds on the personal claim of unjust enrichment but abandoned the proprietary claim of constructive trust, and that the Plaintiff failed to comply with the legal principle regarding Order 19 rule 7 RDC application as stated above, I order that 70% of the Plaintiff’s costs of the action including all costs reserved and costs of this application be paid by the 6^th Defendant, with Certificate for Counsel.

43.  The Plaintiff submitted her Statement of Costs at the hearing. Notably, the Plaintiff has apportioned her costs for the application for Injunction Order and the issue of Writ of Summons, and sought one-ninth of such total costs against the 6^th Defendant, together with costs of this application. I summarily assess the Plaintiff’s costs at HK$41,790. For the avoidance of doubt, the assessed sum has taken into account that only 70% of the Plaintiff’s costs be paid by the 6^th Defendant.

Disposition

44.  For reasons set out above, I order:-

(1)  the 6^th Defendant do pay the Plaintiff the sum of HK$96,878.00 (“Judgment Sum”).

(2)  the 6^th Defendant do pay the Plaintiff pre-judgment interest on the Judgment Sum at HSBC prime rate plus 1% from 24 August 2020 until the date of this Judgment.

(3)  the 6^th Defendant do pay the Plaintiff post-judgment interest on the Judgment Sum at judgment rate until the date of payment.

(4)  70% of the Plaintiff’s costs of this action including all costs reserved and costs of this application be paid by the 6^th Defendant, with Certificate for Counsel, summarily assessed at HK$41,790.