QUESSGLOBAL (MALAYSIA) SDN. BHD. v. SEN XIN JU TECHNOLOGY TRADING LTD

DCCJ 1221/2020

[2020] HKDC 1091

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1221 OF 2020

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REASONS FOR JUDGMENT

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A.     INTRODUCTION

1.  This is yet another case concerning email fraud.  The plaintiff is the victim of the fraud.  The plaintiff’s case is that on 9 January 2020, it had mistakenly transferred a sum of USD50,000 to the defendant’s bank account with the Bank of China (Hong Kong) Limited (“BOC”), with account number 012-878-2-008807-0 (“the Subject Account”), as a result of the email fraud.

2.  The present action was commenced on 7 April 2020.  On the same day, the plaintiff applied for and obtained a Mareva Injunction against the defendant before HH Judge KC Chan.  The injunction was subsequently continued by the order of HH Judge Harold Leong on 17 April 2020.

3.  The Statement of Claim was subsequently filed on 28 August 2020.  The defendant has not filed any Acknowledgement of Service of the Writ of Summons or Defence.  In fact, the defendant has not taken part in the present action and has not responded to the letters issued by the plaintiff’s solicitors to date.

4.  By the Summons dated 28 October 2020 (“the Summons”), the plaintiff applied for the following:-

(a)  default judgment against the defendant pursuant to Order 19 Rule 7 of the Rules of the District Court (Cap 336H) (“the RDC”);

(b)  A vesting order pursuant to section 52 of the Trustee Ordinance (Cap 29) (“TO”); and

(c)  leave to join BOC as a respondent pursuant to Order 15 Rule 6(2)(b)(ii) of the RDC.

5.  The Summons was heard before me on 20 November 2020.  Mr Cheung, together with Mr Chan, appeared on behalf of the plaintiff. 

6.  In respect of the vesting order application, Mr Cheung and Mr Chan had fairly pointed out in their detailed written submissions that there are conflicting decisions on whether the court has jurisdiction to make a vesting order under section 52(1)(e) of the TO in a situation like the present case.  Mr Cheung and Mr Chan urged me to follow the decision of DHCJ Paul Lam SC in Wismettac Asian Foods, Inc v United Top Properties Ltd [2020] 3 HKLRD 732, whereby the learned Judge disagreed with the views expressed by Recorder Eugene Fung SC in 800 Columbia Project Co LLC v Chengfang Trade Ltd [2020] 3 HKLRD 674, and invited me to make a vesting order pursuant to section 52 of the TO.

7.  At the hearing, I pointed out to Mr Cheung that after reviewing the authorities, I had reservation on the court’s jurisdiction.  I had also provided counsel with a copy of the case of Tokic DOO v Hongkong Shui Fat Trading Ltd [2020] 4 HKLRD 189 (which was not cited to me in counsel’s submissions), in which DHCJ Douglas Lam SC echoed the views of Recorder Eugene Fung SC, and held that the court has no jurisdiction to make a vesting order in this type of situation.  I remarked that I may need counsel’s further assistance and persuasion if they wanted to pursue the vesting order.  I also invited Mr Cheung to take instructions and consider other alternatives, including garnishee proceedings and section 38A of the District Court Ordinance (Cap 336), as per the suggestion made by DHCJ Douglas Lam SC in Tokic DOO (at §§21-22).  A short adjournment was granted to allow the plaintiff to consider its position.

8.  After the adjournment, Mr Cheung indicated to me that the plaintiff had decided not to proceed with the vesting order application, and would opt for the section 38A procedure as suggested in Tokic DOO.  Accordingly, it is not necessary for me to express my views on the issue of section 52(1)(e) of the TO.  I proceeded to hear the default judgment application, and eventually granted default judgment against the defendant.  I now provide reasons for my ruling.

B.     SERVICE

9.  The plaintiff has confirmed that all the relevant documents, including in particular the Statement of Claim and the Summons, have been duly served on the defendant.  The plaintiff has also filed affirmations to show proper service of the documents on the defendant.  I am satisfied that the defendant ought to have notice of the hearing but decided not to appear.  In fact, as mentioned above, the defendant has not participated in or responded to the present action to date. 

10.  I was also informed by the plaintiff that BOC adopted a neutral stance in respect of the Summons.  BOC also sought indulgence to be excused from attending the hearing. 

11.  Accordingly, I proceeded to hear the Summons in the absence of the defendant and BOC.

C.     THE EMAIL FRAUD

12.  The plaintiff’s pleaded case can be summarized as follows:-

(a)  The plaintiff is a limited company in Malaysia.

(b)  The defendant is a limited company incorporated on 9 April 2019 under the laws of Hong Kong.

(c)  The defendant has maintained the Subject Account with the BOC.

(d)  The plaintiff has never had any prior relationship, whether business or otherwise, with the defendant.

(e)  On 9 January 2020, Ms Koglia Wani (also known as Indra) (“Indra”), the financial executive and office manager of the plaintiff, received emails from Mr Muhan Krishnan (“Muhan”), the country manager, vice president of Malaysia, Indonesia and Thailand of the plaintiff, requesting inter alia, for the transfer of USD50,000 to the Subject Account. 

(f)  Under the mistaken belief that the emails were genuinely sent by Muhan, Indra sent instructions and caused a sum of USD50,000 to be transferred to the Subject Account.

(g)  The amount of USD49,991.13 (less of bank charges) (“the Received Sum”) was received in the Subject Account on 10 January 2020.

(h)  Subsequently, it was discovered that Muhan’s email account had been hacked and intercepted, and the emails above were not sent by Muhan. 

(i)  The plaintiff attempted to cancel the transfer but in vain.

(j)  On 17 July 2020, the plaintiff, through its solicitors, demanded the defendant to transfer back the sum from the Subject Account to the plaintiff’s account.  The defendant has not responded to the demand.

D.     THE DEFAULT JUDGMENT APPLICATION

RELEVANT LEGAL PRINCIPLES

13.  It is trite law that in considering whether to grant judgment in default, the court cannot receive any evidence but must give judgment according to the facts and matters pleaded in the pleadings alone.

14.  It is also trite law that the principle that a declaration will not be granted when giving judgment without trial is a rule of practice and not of law, and such principle will give way to the paramount duty of the court to do the fullest justice of the plaintiff to which he is entitled.

15.  In Guaranty Bank and Trust Company v Zzzik Inc Limited HCA 1139/2016, 18 July 2016, DHCJ Cooney SC stated as follows (at §27):-

“27. Regarding the claim based on unjust enrichment, money paid under a mistake of fact is prima facie recoverable provided that the payer did not intend the payee to have the money in any event, the money was not paid for good consideration and the payee has not in good faith changed his position: Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd & anor [1980] QB 677…”

16.  When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient so that the property is recoverable and traceable in equity:- Wismettac Asian Foods Inc v United Top Properties Ltd [2020] 3 HKLRD 732, at §15 (per DHCJ Paul Lam SC).

17.  Even if the recipient was not a party to the fraud, if his state of knowledge is such as to make it unconscionable for him to retain the money, the defrauded claimant has a tracing remedy.  The knowledge does not have to be acquired at the time of receipt, it can be acquired subsequently while the money is in the recipient’s hands:- Guaranty Bank and Trust Company v Zzzik Inc Limited, supra, at §§32-33.

THE PRESENT CASE

18.  Based on the facts pleaded in the Statement of Claim as summarized above, I am satisfied that the plaintiff is entitled to the judgment.  I am also satisfied that there is a genuine need for the declarations sought to affirm that the plaintiff has a proprietary interest in the Received Sum in the Subject Account.  Such declaratory reliefs would enable the plaintiff to pursue proprietary remedies against the defendant.

19.  Accordingly, I am prepared to depart from the rule of practice not to grant declaratory reliefs in default judgment.

20.  In the premises, I granted default judgment in terms of Paragraph 1 of the Summons, subject to the revisions and comments made in the hearing.  To further facilitate the plaintiff in recovering the Received Sum from the defendant, I also made an order under section 38A of the District Court Ordinance (Cap 336) in the event that the defendant fails to comply with the payment order, as suggested by Mr Cheung.

E.     OTHER MATTERS

21.  As the plaintiff indicated that it no longer wished to pursue the vesting order application, I made no order in respect of that part of the Summons.  Mr Cheung had also correctly accepted that the joinder application was no longer necessary as a result.  Accordingly, I also made no order in respect of the joinder application, save that the costs of BOC should be borne by the plaintiff (which is agreed by the plaintiff).  Costs of the action should be to the plaintiff, and I had summarily assessed the same at the hearing.

22.  Lastly, I thank counsel for their assistance.