POLSKIE LINIE LOTNICZE LOT SA v. EURO STAR HOLDING CO LTD

HCA 1063/2019

[2019] HKCFI 2371

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1063 OF 2019

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D E C I S I O N

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1.  Before me there are two matters:

 (a) the summons taken out by the 2^nd defendant (“D2”) on 1 August 2019 for an Order that the Judgment of 26 July 2019 entered against D2 in default of Acknowledgement of Service (the “Default Judgment”) be set aside; and

 (b) the hearing of the Garnishee Order to Show Cause dated 5 August 2019 (the “Garnishee Order Nisi”) which P has obtained on the strength of the Default Judgment against both Ds.  The Garnishee is the HSBC. 

The claim

2.  The plaintiff (“P”) is a state‑owned airline enterprise incorporated under the laws of Poland.

3.  P issued the Writ herein on 17 June 2019.  It contains a general indorsement.  At the same time, P also filed its Statement of Claim. 

4.  According to P’s Statement of Claim, it was the victim of an email/impersonation fraud.  We are not concerned with the details of the alleged fraud.  Suffice for me to give the following summary of P’s pleaded case:

 (a) On 27 October 2018, as a result of certain emails that P had earlier received, which emails P thought were from one of its business associates, P remitted funds in the sum of US$771,168.01 to an account which D1 held with the HSBC (“D1’s HSBC A/C”).  P has called this the “Primary Transfer”;

 (b) It was subsequently discovered that those emails were from fraudsters;

 (c) At §20, P pleads that in about October to December 2018, D1, out of the funds it had received as a result of the Primary Transfer, made 3 what P calls “Secondary Transfers” in the sums of at least US$9,766.76, at least HK$2,642.84 and at least US$28,850.05 (respectively “Alleged Secondary Transfer #1, #2 and #3”) to 2 different accounts held by D2 with the HSBC (respectively “Alleged D2 A/C#1 and #2”)and one other account of D1.  I record that P has pleaded the account numbers of those accounts, which I will not recite in full here;

 (d) At §21 of the Statement of Claim, P pleads that:

“ [P] has no present reason to believe that [D2] was involved in, or was aware of, the fraud on [P] described above. [P] expressly reserves the right to reconsider its position during the course of this Action and in the on‑going investigation carried out by the Hong Kong Police Force. [P’s] case against [D2] pleaded further below is without prejudice to this reservation of right.”

 (e) The prayer in the Statement of Claim contains 3 sections:

 (i) Section A is against D1 only.  It contains 9 paragraphs.  P seeks thereby the return of the entire sum under the Primary Transfer, and certain related equitable relief;

 (ii) Section B is against D2 only, and relates only to the Secondary Transfers.  P seeks thereby certain declaratory relief and a proprietary injunction in respect of the Secondary Transfers, and in §13 thereof:

“ An order for delivery up of such funds or assets received by [D2] via the Secondary Transfers.”

 (iii) Section C is against both Ds.  P seeks thereby only interest, costs, and further or other unspecified relief.

5.  I note that whilst P in the Statement of Claim seeks against D2 only relief relating to the Secondary Transfers, it draws in the general indorsement of the Writ no distinction between D1 and D2.  It seeks therein against both Ds the full repayment of the Primary Transfer, and related equitable relief against both in respect of that full sum.

The Default Judgment

6.  On 26 July 2019, neither of Ds having filed any Acknowledgment of Service, P obtained the Default Judgment.

7.  The Default Judgment is against both Ds.  It is for repayment of the full Primary Transfer of US$771,168.01 with interest.

The summons to set aside

8.  On 1 August 2019, D2 took out the Summons to set aside.

9.  D2 placed before the Court a draft affirmation of Bhagwanbhai Parsottambhai Tandel (“BPT”).  He accepts that the Writ has been served upon the registered address of D2.  He however says that as he is the only director of D2, and that he does not usually reside in Hong Kong but in India, that he was not in Hong Kong when the Writ was served upon D2, and he did not have knowledge of the Writ until early July.  He says that D2 only has one account with the HSBC.  He produces the statements of that account for the period between October 2018 and January 2019.  The number of that account corresponds with that of the Alleged D2 A/C#2.  But according to the statements, there was no deposit in the pleaded amount of US$2,642.84 having been made into that account.  There were only 4 deposits over that period, in the sums of US$29,500 (on 24 October 2018), US$10,000, US$9,000 and US$120 (all on 29 October 2018).  With reference to certain documents which he has produced, BPT says that only the sum of US$29,500 came from D1’s HSBC A/C.  He says it was for the sale and purchase of fish maws.

10.  I note that in relation to the Garnishee Order Nisi, Mr Tang Wan Pong of the HSBC has filed an affirmation.  He revealed that D2 only maintains 1 account with the HSBC (though he has not revealed the account number).

Discussion

11.  There is no dispute that the Writ and the Statement of Claim have been served upon the registered office of D2.  Under s 827 of the Companies Ordinance, that is good service, and there is no need to establish that the company had actual notice of the writ — see Hong Kong Civil Procedure 2019, §10/1/18.  The submissions in this regard to the contrary by Ms Pinky Nari, counsel for D2, is not supported by any authority, and has no merits.

12.  Despite the valid service of the Writ, I have decided, on merits, to set aside the entirety of the Default Judgment against D2.  The reasons are as follows:

 (a) I have summarized above P’s case against D2 as pleaded in its Statement of Claim.  I repeat in particular §21 thereof, and the fact that P seeks in the prayer against D2 relief only in respect of the Secondary Transfers;

 (b) Hence, and despite the contents of the general indorsement, P has in its Statement of Claim specifically confined its case against D2 to the Secondary Transfers, and has pleaded that it had as at the date of the Statement of Claim no reason to believe that D2 was involved in or was aware of the fraud;

 (c) In my view, the part of the Default Judgment in relation to the difference between the Primary Transfer and the Secondary Transfers has to be set aside;

 (d) That leaves the part of the Default Judgment in relation to the Secondary Transfers;

 (e) I have noted above that Mr Tang of the HSBC has stated that D2 only maintains with the HSBC one account.  That is consistent with what BPT has said in his draft affirmation, and inconsistent with P’s pleaded case;

 (f) BPT has produced the relevant statements of what he says to be the only account which D2 maintains with the HSBC.  The bank account number is the same as the Alleged D2 A/C#2.  The statements show that there were no deposits with amount which corresponded with that of the Alleged Secondary Transfer #2 (or indeed any of the 3 Secondary Transfers);

 (g) In the course of the hearing, Mr Robinson, solicitor for P, in fact accepted that what have been particularized under §20(b) of the Statement of Claim are erroneous.  That figure of US$2,642.84 was the amount which according to the police had been frozen in the account, but was not referable to any particular transfer;

 (h) In my view, and for the above reasons, D2 has demonstrated that it has a defence with a real prospect of success.

13.  I record that the points I raised in paragraph 12 above were not raised by Ms Nari in her two written submissions.  However, in the course of the hearing, I have raised those matters with Mr Robinson, who has been given opportunity to address me on them.

The Garnishee Order Nisi

14.  I have decided that the Default Judgment has to be set aside in so far as D2 is concerned.  That being the case, the Garnishee Order Nisi, in so far as the part of the attachment affecting D2 is concerned, should also be discharged, and I so order.

15.  For the avoidance of doubt, I state that none of the above, whether in relation to the Default Judgment or the Garnishee Order Nisi, affects the position of or P’s case against D1.  The Default Judgment against D1 remains valid.  And no cause otherwise having been shown, I order that the Garnishee Order Nisi, in so far as the part of the attachment affecting D1 is concerned, be made absolute.

16.  I will hear parties on direction on filing of pleadings and costs.