ZHOU YACAI v. STANDARD CHARTERED BANK (HONG KONG) LTD

HCMP 35/2022

[2022] HKCFI 355

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 35 OF 2022

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BETWEEN

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DECISION

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1.  This is the plaintiff’s application for a Norwich Pharmacal order for pre-action discovery against the defendant (“SCB”) in respect of disclosure relating to four bank accounts. SCB, having intimated that it adopts a neutral stance, was excused from attendance.

Background facts

2.  The plaintiff trades in gold and jewellery and in June 2020 established a company called Shenzhen Dali Jewellery Co Limited in Shenzhen to carry on that business. Cheung’s Gold Traders Limited (“CGTL”), a Hong Kong company, purchased gold bars from the plaintiff.

3.  Typically, the plaintiff would acquire gold bars that originated from Dubai. The shipment would be collected by his collecting agent from the logistics company that transported the gold bars to Hong Kong. The collecting agent would then deposit the gold bars with CGTL. At the same time, the plaintiff would engage a receiving agent to receive payments from CGTL and the receiving agent would deal with the money in accordance with the plaintiff’s instructions.

4.  On 6 September 2021, the plaintiff was introduced by a good friend (Zhang Wei) to a company called Yijieru Trading Company (“Y Co”) that could act as their receiving agent of money in an intended transaction with CGTL.

5.  When the plaintiff informed Zhang that he needed to be able to trust Y Co, he was told that Y Co had a share capital of HK $100 million which it did. The plaintiff required Y Co to enter into a written agency agreement drafted by the plaintiff confirming that it would act as the plaintiff’s receiving agent.

6.  The agency agreement was handed to Zhang for execution by Yijieru. It provided that the plaintiff would open an account in Y Co’s name with CGTL to enable payment to be received by it; that Y Co’s handling fee for the transaction would be 0.5% of the total transaction sum; and that Y Co guarantees that after receiving payment from CGTL, it would remit the same to an account designated by the plaintiff on the same day.

7.  The agency agreement, duly executed, was returned by Zhang on 15 September 2021 together with a photo of the Hong Kong identity card of Kao Kelvin Chun Yau (“Kao”), the sole director and shareholder of Yijieru.

8.  On 28 September 2021, the plaintiff through his company acquired 61 kg of gold bars from FSS Gold Trading Limited which were transported to Hong Kong by a logistics company. On the following day, his collecting agent Tsang Man Kit (“Tsang”) duly collected the shipment and delivered 41 kg to CGTL and the remaining 20 kg to other companies.

9.  CGTL issued a temporary receipt to Tsang and upon confirmation that Y Co would be the plaintiff’s receiving agent for that transaction, on 30 September 2021, CGTL issued a formal receipt that evidenced payment by CGTL to Y Co of US $2,292,713.38 (equivalent to HK$17.88 m) (“the Sum”) for the gold bars.

10.  When by 5 October 2021 the plaintiff still had not received the Sum from Y Co, further enquiry by Tsang on the plaintiff’s behalf with CGTL revealed that the Sum was transferred to Y Co’s account with SCB (“the Y Co account”) on 30 September 2021, making Y Co a 1^st tier recipient.

11.  On 5 October 2021, as the plaintiff was not then in Hong Kong, on his instructions, Tsang reported the misappropriation of the Sum by Y Co to the Hong Kong Police. The plaintiff eventually came to Hong Kong and on 23 December 2021 made his statement to the Hong Kong Police.

12.  In the interim, it transpires from information obtained by the plaintiff’s solicitors from the Hong Kong Police that

(a) the Y Co account was closed on 6 October 2021 and prior to that, the entire balance of HK $30 million (which included the Sum) was transferred to Kao’s personal bank account with SCB (“the Kao account”) making Kao a 2^nd tier recipient;

(b) before the closure of the Kao account, the entire balance of about HK $30 million was transferred to the bank account of RSB Limited (迅銀集團有限公司) also with SCB (“the RSB account) making RSB a 3^rd tier recipient;

(c) prior to the RSB account being frozen by the Police, a transfer was made from it to the bank account of RSB’s sole director and shareholder Wong Ming Shing (“Wong”) also with SCB (“the Wong account”) making Wong a 4^th tier recipient;

(d) the RSB account and the Wong account had remaining balances of HK $6.5 m and HK $3,3 m respectively when they were frozen by the Police. In the aggregate, they represent approximately 55% of the Sum that was misappropriated.

13.  Based on the above facts, it is clear that the plaintiff is entitled to a tracing claim in respect of the balance of the Sum that has been dissipated and transferred out of the accounts referred to above.

Norwich Pharmacal relief

14.  The court’s jurisdiction to grant Norwich Pharmacal relief is well-settled. The elements necessary to warrant such an order are to be found in the judgment of Ma J in A Co v B Co [2002] 3 HKLRD 111 at §13:

“(1) There must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place. And where fraud or similar serious allegations are made, the degree of proof must correspondingly be high …;

(2) It must also be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff. Where … the plaintiff is likely to make a tracing claim, there must be a serious possibility that the discovery sought must either allow the plaintiff to preserve what may well be his assets or realistically lead to the discovery of such assets …;

(3) The discovery sought must not be unduly wide. There is no entitlement to general discovery … It follows therefore that not only must any order be specific, it must also be restricted to those or those classes of documents that are necessary to enable the plaintiff to preserve or discover assets …”

15.  The order sought is limited to transactions of the Y Co, Kao, RSB and Wong accounts that took place between 30 September 2021 (the date the Sum was paid to Y Co) and 13 December 2021. That information will enable the plaintiff to trace disbursements that have been made out of those accounts during that period which make up part of the Sum.

16.  This is a case that plainly justifies the grant of Norwich Pharmacal relief. I will grant an order in terms of the originating summons incorporating the amendments requested by SCB.