WISMETTAC ASIAN FOODS, INC. v. UNITED TOP PROPERTIES LTD AND OTHERS

HCA 252/2020

[2020] HKCFI 2839

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 252 OF 2020

____________

____________

_________________

D E C I S I O N

_________________

1.  Wismettac Asian Foods Inc(“Wismettac”) is the victim of a cyber fraud whereby it was induced to transfer, inter alia, a sum of US$950,000 to the bank account of a company called Jin Hongsheng Trading Co Ltd (“JH”) at Bank of China Hong Kong (“BOC”) on 6 December 2019. There were 3 further transfers from Wismettac induced by the same fraud (with one successfully recalled) but they are not relevant for present purposes.

2.  Wismettac brought an action in Hong Kong, HCA 2315/2019, against, among others, JH as the 2^nd defendant.  Wismettac says that after the money was transferred to JH’s BOC account, part of it was further transferred out to a number of “second‑tier” recipients with accounts at BOC, including a sum of US$57,000 transferred to a company called Kongkong Group Co Ltd (“KKG”) on 6 December 2019.  Wismettac accordingly brought a further action, HCA 252/2020, against the second‑tier recipients, including KKG as the 4^th defendant in that action.

3.  On 10 July 2020, without any opposition, Wismettac successfully obtained from Deputy Judge Paul Lam SC default judgment against, among others, KKG in HCA 252/2020, pursuant to RHC Order 19 rule 7, as well as declaratory reliefs and vesting orders in favour of Wismettac in relation to, among others, the credit balance in KKG’s account: see Wismettac Asian Foods Inc v United Top Properties Ltd [2020] HKCFI 1504.

4.  The Yerrid Law Firm (“Yerrid”), a law firm of Florida, United States, whose application is before me this morning, also claims to be the victim of a cyber fraud whereby it was deceived into paying approximately US$2.57 million into a bank account maintained by one Qiansbaizi Trading Ltd in Hong Kong in October 2019.  From there, it is said, a sum of US$255,220 was transferred on 4 November 2019 to a bank account at BOC of another company called Wen Jinli (HK) Trade Co Ltd, out of which a sum of US$250,000 was transferred on the same date to KKG’s account at BOC.  Yerrid duly brought proceedings in Hong Kong, HCA 1208/2020, and obtained Mareva injunctions in July 2020 against various entities, including KKG as the 2^nd defendant in that action.  It obtained final judgment against KKG on 31 August 2020 for US$250,000 together with interest, and a garnishee order to show cause on 9 September 2020 in respect of the credit balance in its BOC account.  The hearing as to whether to make that order absolute has yet to take place.

5.  Yerrid now seeks to intervene in Wismettac’s action in HCA 252/2020 for the purpose of applying to set aside the declarations and vesting orders in Wismettac’s favour relating to the remaining balance in KKG’s BOC account.  Yerrid says that the bank statements show that on 6 December 2019, after the deposit of the sum of US$57,000 into the account, there were 3 withdrawals (as well as 3 smaller deposits), resulting in an intermediate balance of only US$114.41 at the end of that day. The current balance found in the account, resulting from subsequent deposits, is not shown to have been sourced from Wismettac’s money.  Yerrid argues, therefore, that Wismettac has no proprietary claim to the current balance and the vesting order should not have been made.

6.  Mr Chiu submits that Yerrid has only obtained a personal monetary judgment against KKG (having abandoned its proprietary claims) and has therefore nothing more than a financial or commercial interest in respect of KKG’s credit balance in the bank.  As such, Yerrid has no standing to intervene or to seek to impugn the vesting order.  I do not agree.  Yerrid has obtained a garnishee order nisi which gives it an equitable charge over the chose in action: Premier Fashion Wears Ltd & another v Chow Cheuk‑man & another [1994] 1 HKLR 377; Richly Bright International Ltd v De Monsa Investments Ltd (CACV 247/2012, 11 July 2013), §16.  That gives it a legal interest in the matter sufficient, it seems to me, for the purpose of joinder.

7.  The reality of the matter is that Wismettac and Yerrid both appear to be innocent victims of fraud whose money has at one stage or another ended up in KKG’s bank account.  There is some money there now but apparently not enough to repay both of them.  Yerrid has pointed out a matter which seems to me prima facie relevant to whether the vesting order in favour of Wismettac should have been made.  Mr Chiu submits that although the US dollar balance in KKG’s account dropped to an intermediate balance of US$114.41 only on 6 December 2019, the Euro balance in the account had remained at approximately €50,000 since 5 December 2019 onwards.  Treating the US dollar balance and the Euro balance in the account as one and the same fund, Mr Chiu submits that his client may still make a proprietary claim to the remaining funds in the account.  This seems to me to be a matter that requires some argument.  I cannot see how it can be just to shut out Yerrid from this contest.  It may be noted that Wismettac has itself sought to intervene in Yerrid’s action for the purpose of opposing the application to make absolute the garnishee order. 

8.  For these reasons I have allowed Yerrid’s application to intervene and given directions for its attempt to set aside the vesting order to be heard together with Wismettac’s opposition to the making of the garnishee order absolute.[1] It seems to me now, with a fuller picture before the court, that this contest should preferably take place before the hearing of BOC’s interpleader summons in HCMP 1512/2020 (with Wismettac and Yerrid being named as the 2 rival claimants), though I make no determination to that effect as the bank is not before the court this morning.

(Submissions on costs)

9.  Wismettac should pay half of the costs of the hearing (to be summarily assessed on paper); the other half and the costs of Yerrid’s summons and affidavit shall be in the cause of its application to set aside the vesting order.