EUROPIUM WORLD (UK) LTD v. D'G BIOCARE GROUP HONG KONG LTD

DCMP 1456/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1456 OF 2014

----------------------

----------------------

--------------------

DECISION

--------------------

1. This is an application by way of Originating Summons for a declaration that a sum of US$66,860.00 (“the Sum”) along with all interest accrued being transferred from the Plaintiff to the bank account of the defendant with the Hongkong and Shanghai Banking Corporation Limited (“the Defendant’s HSBC account”) are funds held on trust for the Plaintiff and that the same should forthwith be returned by HSBC to the Plaintiff.

2. At the hearing, Mr Fung, solicitor for the Plaintiff, submits a draft order and applies to amend the Schedule attached to the Notice of Appointment to hear Originating Summons in which the amount be amended to US$24,206.73 as this was the amount remaining in the Defendant’s HSBC account when it was frozen by the Hong Kong Police Force. 

3. The Defendant has not filed any Acknowledgement of Service and is absent.  Having considered the affirmations of service filed by the Plaintiff, I am satisfied that the Defendant has been given sufficient notice of this hearing and I will proceed in the absence of the Defendant.

Procedural matter

4. Generally speaking, a declaration cannot be obtained by default (See Order 15 rule 16, Rules of District Court and the commentary to O 15 r 16, para 15/16/2, Hong Kong Civil Procedure 2014, Vol 1).

5. However, according to authorities, the court can proceed to deal with an originating summons in the first hearing in the absence of the defendant “… if having regard to the nature of the application, it thinks it expedient to do so” (Wong Kum Chi v Lee Tit Ying [2003] 1 HKLRD 594 at 598). Further, under Order 28 rule 3 of the Rules of District Court, originating summons can be dealt with at the first hearing “… if the facts are sufficiently clear and liability is established” (Titan Limited v Deng Zhishun, unrep HCMP 4804/1999).

6. With these principles in mind, I conclude that this court can proceed to consider the application of the Plaintiff in the absence of the Defendant in the first hearing of this Originating Summons.

The Plaintiff’s case

7. The Plaintiff’s case is set out in the Affirmation of Dharmesh Bhayani filed on 17 July 2014 who is the director of the Plaintiff.  The background of the case is as followed.

8. The Plaintiff is a private limited company registered in England and Wales and is carrying out business of trading household products.  Its business therefore involved regularly purchasing goods from manufacturers in China.  The usual method of payment is to transfer money to the bank accounts designated by the manufacturers.

9. On 25 June 2013, the Plaintiff received an email sent by one of its suppliers, China Jingxin Household Article Limited (“Jingxin Household”).  It was stated in the email that due to some auditing problem, payment could not be made to its usual bank account.  It was requested that for the time being, any payment due to Jingxin Household should be paid into the Defendant’s HSBC account in Hong Kong.  The Plaintiff wrote an email to Jingxin Household to confirm the position and received an email from Jingxin Household that the contents of the first email were true.

10. On 1 July 2013, the Plaintiff made a payment to Jingxin Household by transferring the Sum from its company account at Lloyds TSB Bank to the Defendant’s HSBC account.

11. On 5 July 2013, the Plaintiff received notification from Jingxin Household that its email system had been hacked and compromised.  The emails received by the Plaintiff were sent by someone else and Jingxin Household never requested the Plaintiff to make the payment to the Defendant’s HSBC account.

12. Having realized that it was made a victim of a fraud, the Plaintiff made a report to the Hong Kong Police on 18 August 2013.  As a result, the Defendant’s HSBC account was frozen.  At the time when the account was frozen, there was only HK$3,126.79 and US$24,206.73 remaining in the Defendant’s HSBC account.

Discussion

13. Base on the evidence of the Plaintiff which is not subject to any challenge, I am satisfied that the Plaintiff was made a subject to a fraud. The Plaintiff was deceived by fraudulent emails to transfer the Sum to the Defendant’s HSBC account.

14. As the money was obtained by the Defendant by fraud, a constructive trust is imposed on the Defendant and the money is recoverable and can be traced: Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 followed by Michael Chen Kang Huang v Peter Lit Ma, HCA 218/2005.

15. In the circumstances, I am satisfied that the Plaintiff is entitled to a declaration that the Defendant is the constructive trustee of the Sum.  The Sum should therefore be returned to the Plaintiff.  However, as part of the Sum had been withdrawn and cannot be traced at the moment, the Plaintiff is entitled to have what is left in the Defendant’s HSBC account.

Order

16. I therefore make an order in the following terms:-

(1) a declaration that the funds, more particularly described in the Schedule (as amended) attached to the Notice of Appointment to hear Originating Summons filed on 17 July 2014 (“the Funds”), being funds subject to a hold imposed by Hongkong and Shanghai Banking Corporation Limited to the order of the Hong Kong Police Force, are funds held on trust for the Plaintiff;

(2) the Funds be forthwith released and returned to the Plaintiff; and

(3) costs of and incidental to this application be to the Plaintiff, summarily assessed at HK$20,600.00.