CHAN CHI TONG t/a TONG LONG TRANSPORTATION CO v. METRO IMP AND EXP CO LTD

DCMP 2308/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2308 OF 2014

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REASONS FOR JUDGMENT

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A. The Judgment

1.  The plaintiff, a victim of email-hacking fraud, commenced this action by way of originating summons (“the Summons”).

2.  At the first hearing of the Summons on 3 October 2014, the plaintiff was represented by counsel, Mr Lam, but the defendant was absent, having earlier defaulted in acknowledging service of the Summons.

3.  At the hearing, I granted a declaratory judgment, making a declaration that a sum of HK$469,617 (“the said Sum”) along with any and all interest accrued thereon since its transfer on 19 March 2014 to the bank account of Metro Imp and Expo Co Limited (which name was amended with leave by inserting the word “and”) held at the Hong Kong and Shanghai Banking Corporation Limited (“HSBC”) is funds held on trust for the plaintiff.  I further awarded costs in favour of the plaintiff.

B.  Amended judgment

4.  Subsequent to the granting of the judgment, but before it was drawn up, it came to my attention that the name of the beneficiary account to which the plaintiff was instructed to transfer the said Sum was stated to be METRO IMP EXPO CO., LIMITED, which was slightly discrepant to the name of the defendant as described in the title of the action, as well as in the judgment that I granted at the first hearing.  Since the judgment had not been drawn up, I was not functus officio (Andayani v Chan Oi Ling [2000] 4 HKC 233 at 237C to D, per Keith JA).  Directions were then given for the holding of a second hearing requiring the plaintiff to clarify the said discrepancy and whether the defendant was in fact the account holder to which the said Sum had been paid.

5.  Before the second hearing on 24 October 2014, the solicitors for the defendant filed the 2^nd affirmation of Lam Rockey to which a number of documents including a letter from the police dated 21 October 2014 had been exhibited. In the said letter, the police confirmed that their investigations into “the company registration records, the bank statements and bank account opening mandate” revealed that the account holder of the account with HSBC, account number 652259086838 to which the said Sum was paid, was METRO IMP AND EXP CO. LIMITED (which is the name of the defendant). After having considered the company search conducted on the defendant and the further evidence (especially the said letter from the police), I was satisfied that the name of the defendant was the correct name of the account holder of the said HSBC account. Hence, I granted the plaintiff leave to further amend the Summons, and the judgment I granted in the first hearing was also accordingly amended in terms of the Summons as amended (“the Amended Summons”) that there be a declaration that the said Sum along with any and all interest accrued therein since its transfer on 19 March 2014 to the bank account, account number 652259086838, in the name of the defendant with the HSBC is funds held on trust for the plaintiff.  I declined to grant costs to the plaintiff in respect of the second hearing, and of the re-amendment.

6.  In these Reasons, references to the judgment (unless it is expressly stated) include the judgment I granted on the first hearing as well as the judgment as amended in the second hearing. These are my reasons for the judgment.

C.  Declaratory relief obtained by default

7.  The judgment that I granted was a declaratory relief, which is a relief that cannot generally be granted by default.  A court however is not prohibited from exercising its discretion in granting a declaratory relief if the merits on the case justify the grant of the relief (See O 15 r 16 of the Rules of the District Court (“RDC”) and para 15/16/2, Hong Kong Civil Procedure 2014, vol 1; Wong Kum Chi v Lee Tit Ying [2003] 1 HKLRD 594 at 597I-J and 598B-C ; and Europium World (UK) Limited v D’G Biocare Group Hong Kong Limited, DCMP1456 / 2014, 31 July 2014).

8.  The plaintiff in this case has set out in full all the reliefs sought in the Summons which is in Form No. 10, being the expedited form.  Thus, unlike an originating summons in other statutory forms, the notice of the hearing was also stated in the Summons.

9.  On the evidence, I was satisfied that the defendant had been properly served with the Summons  together with its supporting affirmations as well as the notice of the hearing of the 2^nd hearing and the  2^nd affirmation of Lam Rockey mentioned in para 5 above.  The defendant had failed to file any acknowledgment of service and attend the first hearing, as well as the second hearing.  I was satisfied that this court was empowered to proceed with the hearing of the Summons at the first hearing for I had found that the facts as will be discussed below “are sufficiently clear and liability is established” (See O 28 r 3, RDC; Titan Limited v Deng Zhishun, HCMP 4804 / 1999, 11 November 1999 at p3).

D.  Primary facts

10.  The plaintiff, Chan Chi Tong trading as the sole proprietor of a Hong Kong company called Tong Long Transportation Co, carried on the business of transportation and import of seafood.  One of the plaintiff’s regular seafood suppliers was an Indonesian company called UD Bali Minatama (“Minatama”).

11.  According to the affirmations filed in support of the Summons, since 2012, the two companies had conducted their businesses by way of email communications using their respective email accounts.  Payments for the goods had been made to Minatama’s designated account (“Minatama’s account”) with HSBC.

12.  The plaintiff became the subject of fraud on 17 March 2014 when it – unbeknown to the plaintiff that Minatama’s email account had been illegally hacked into and operated by the hacker without Minatama’s knowledge - received an email from Minatama’s email account deceivingly instructing the plaintiff to pay for a shipment of seafood by transferring the said Sum to - instead of Minatama’s account to which the plaintiff had made payments for the past deliveries - an account with HSBC held in the name of METRO IMP EXPO CO., LIMITED with the account number  stated to be 652259086838 (“the said Account”).

13.  Having been deceived into believing that the instruction for payment was from Minatama, the plaintiff on 19 March 2014 made an on-line transfer of the said Sum into the said Account with HSBC.  The fraud only came to light when Minatama telephoned the plaintiff on the same day after the said transfer had been made and inquired about the payment for a shipment of seafood.  Subsequent investigations revealed that Minatama’s business email had been accessed by a hacker from Thailand and Malaysia.

14.  A report was then immediately made to the police and HSBC also successfully froze the said Sum held in the said Account.

E.  Discussion

15.  On the evidence, including documentary evidence in the form of exhibits, I am satisfied that the said Sum held in the defendant’s account with HSBC was money obtained by fraud.  Equity imposes a constructive trust on a fraudulent recipient: the said Sum is thus recoverable and traceable in equity (see Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC667 at 716; followed by Michael Chen Kang Huang v Peter Lit Ma, HCA218/ 2005, 10 July 2009).  I was thus satisfied that liability was established against the defendant and the declaration to that effect is justified in the circumstances.

16.  For the above reasons, I granted the declaration in the form as per para 5 above (as per para 1 of the Amended Summons).

17.  For completeness I should also mention that the plaintiff had in para 2 of the Summons also included a prayer for relief for an order for the release of the said Sum by HSBC.  At the first hearing, I raised with counsel whether it was appropriate to order HSBC to return the said Sum to the plaintiff when HSBC had neither been made a party to nor been notified of these proceedings. In the event, Mr Lam asked for the abandonment of the said relief for he agreed with my observation that the declaratory judgment that I was to grant is a binding judgment sufficient in ascertaining and determining the right of the plaintiff to the said Sum.  Upon the abandonment of the prayer for the said relief, no order needed to be made in respect of para 2 of the Summons.