YING FU (H.K.) INDUSTRIAL LTD v. HEFAN TRADE LTD

HCA 324/2020

[2021] HKCFI 399

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 324 OF 2020

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D E C I S I O N

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1.  The Plaintiff is the victim of an email fraud. It applies for default judgment against the Defendant.

2.  The Plaintiff had an associated company in Mainland China known as Dongguan Ying Fu Lighting Decoration Co Ltd (“Yingfu Dongguan”).  The fraudster set up a fake email account of a person impersonating a Ms Wang of Yingfu Dongguan.  Mistakenly thinking that she was acting on the instructions of Ms Wang, a Ms Luk of the Plaintiff was lured by the fraudster into transferring US$500,000 (“the Sum”) to the Defendant’s account held with the Bank of China (Hong Kong) Limited (“BOC”) numbered 012‑581-2-011791-4 (“the Account”) on 22 October 2019.  The fraud was discovered on the same day.

3.  The Plaintiff issued the writ on 16 March 2020 against the Defendant, which was subsequently amended.

4.  On 25 November 2020, the amended writ and statement of claim were served on the Defendant by leaving at its registered office.

5.  The Defendant has not acknowledged service nor filed any defence.

6.  By the present summons filed on 21 January 2021, the Plaintiff seeks default judgment for various reliefs including money judgment, account and inquiry to trace what has become of the Sum, and declarations that the Sum, the remaining balance in the Account and/or the traced assets are held by the Defendant on constructive trust for the Plaintiff.

7.  The summons was served on the Defendant by leaving at its registered office on 10 February 2021.

8.  I am satisfied that the Defendant has been properly served and that the Court can proceed to consider the summons for default judgment in the Defendant’s absence.

9.  This application is taken out pursuant to Order 19, rule 7 of the Rules of the High Court after the time for filing of the defence has expired.  On the hearing of the application, the Court shall give such judgment as the plaintiff appears entitled to on its statement of claim and not on affirmation evidence.

10.  It is not the normal practice of the court to grant a declaration without going to trial.  This is, however, only a rule of practice, rather than a rule of law, and gives way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled.  In a number of cases involving email fraud, declaratory relief has been granted on the basis that there is a genuine need for such relief to secure the plaintiff’s proprietary as opposed to merely personal claim, particularly given that the defendant may have other creditors: Sultana Distribution Services Inc v Hongkong Fuheng Technology Co Ltd, [2018] HKCFI 1480, §8, DHCJ A Stock SC.

11.  On the pleaded facts, the Plaintiff had transferred the Sum to the Account apparently under mistake.  The Defendant had no entitlement to receive or retain the Sum and was unjustly enriched.  The Plaintiff is plainly entitled to seek restitution and hence money judgment from the Defendant.

12.  Further, the Plaintiff asserts a proprietary interest in the Sum (and any traceable assets).  The Plaintiff has obtained a bankers’ trust order against BOC.  The documents supplied by BOC disclosed that after the Plaintiff had transferred the Sum to the Account, there had been no further transaction in the Account.  BOC confirmed that the remaining balance of the Account as of 12 November 2020 was US$500,014.07.  It is plain that the remaining balance there belongs entirely to the Plaintiff. 

13.  The Plaintiff has made out a case that the Defendant holds the Sum and/or any remaining balance on constructive trust for the Plaintiff.

14.  There is a genuine need to give the declaratory reliefs in order to secure the plaintiff’s proprietary, as opposed to merely personal, claim.  The Plaintiff is also entitled to trace the Sum.

15.  I therefore order that judgment be entered against the Defendant as follows:

(1)  There be restitution in the sum of US$500,000.00;

(2)  There be an account and tracing inquiry in respect of what has become of and the whereabouts of the Sum as paid into the Defendant’s bank account number 012-581-2-011791-4 held with The Bank of China (Hong Kong) Limited and whatever traceable monies, properties or assets together with such interest and/or profits which has or shall have been earned thereon;

(3)  There be a declaration that:

(a)  The Sum as paid into the Account belongs to the Plaintiff and that the same is held by the Defendant on constructive trust and is accountable by the Defendant as constructive trustee for the Plaintiff; and/or

(b)  The remaining balance in the Account in the sum of US$500,014.07 belongs to the Plaintiff and that the same is held by the Defendant on constructive trust and is accountable by the Defendant as the constructive trustee for the Plaintiff; and/or

(c)  So much of the traced assets as the Court may assess and/or determine belong to the Plaintiff and that the same is held by the Defendant on constructive trust and accountable by the Defendant as the constructive trustee for the Plaintiff;

(4)  The Defendant do pay or transfer the remaining balance in the Account and/or traced assets to the Plaintiff;

(5)  There be an order for payment by the Defendant to the Plaintiff of all monies found to be due to the Plaintiff upon the taking of accounts and making of inquiries including interest thereon;

(6)  Further or alternatively, equitable compensation and/or damages to be determined/assessed; and

(7)  Interest on the sum of US$500,000 at judgment rate from 22 October 2019 to the date of judgment and thereafter at judgment rate until payment.

16.  On a nisi basis, the Plaintiff is entitled to costs of this action, including this summons and the application for the banker’s trust order.  However, the costs of preparing the affirmation in support of the present summons are disallowed as the Court should not consider evidence.  Overall, costs are summarily assessed and allowed at HK$160,000.

17.  I thank Ms Tse for his assistance.