DANA WELLS v. CHAN YANFENG

DCCJ 1304/2023

[2025] HKDC 1586

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1304 OF 2023

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BETWEEN

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DECISION

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A. INTRODUCTION

1.  This is an email fraud case.

2.  The plaintiff filed a summons dated 23 July 2025 pursuant to O 13 r 6 and O 19 r 7 of the Rules of the District Court (Cap 336H) for a default judgment due to the defendant’s failure to file a Notice of Intention to Defend and serve the Defence.

3.  The summons seeks, inter alia, a declaration that the defendant is liable to the plaintiff for the sum of USD 88,466 (or its Hong Kong Dollar equivalent) as a constructive trustee, and that the plaintiff is the beneficial owner of that sum (§1). It also seeks judgment for and payment of this amount (§2); leave to join The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) as a respondent for the purpose of giving effect to the vesting order described below (§6); a vesting order pursuant to sections 52(1)(e) and 52(5) of the Trustee Ordinance (Cap 29) (the “TO”) (§7); and an order directing HSBC to pay the sum in the defendant's bank account (account no. 174XXXXX888) maintained with HSBC (the “Account”) to satisfy the judgment sum awarded to the plaintiff under the vesting order (§8).

4.  On 29 March 2023, the plaintiff issued the Writ herein. The Writ was amended on 11 July 2023 and re-amended on 11 June 2025 pursuant to the Order of Deputy District Judge Val Chow dated 26 May 2025.

5.  On that occasion, the learned judge ordered that service of the Re-Amended Concurrent Writ of Summons, indorsed with the Statement of Claim, be effected by emailing the documents to the defendant’s email address: “CYF17819942189123@163.com”.

6.  I am satisfied that the Re-Amended Concurrent Writ of Summons indorsed with the Statement of Claim has been served, and that the defendant has defaulted in filing a Notice of Intention to Defend or the Defence, entitling the plaintiff to apply for default judgment pursuant to O 13 r 6 and O 19 r 7.

7.  The defendant was absent during the hearing on 1 September 2025. I am satisfied that the plaintiff’s summons was also served on the defendant at the aforementioned email address; therefore the defendant had notice of the hearing. I proceeded to deal with the plaintiff’s application in the defendant’s absence.

B. THE PLAINTIFF’S PLEADED CASE

8.  It is well-established that, in an application for default judgment under O 19, r 7, the court cannot consider any evidence but must render judgment based solely on the pleadings.

9.  The plaintiff has, at all material times, been and continues to be an individual residing in California, the United States of America.

10.  The defendant has, at all material times, been and continues to be an individual residing in Shenzhen, the People’s Republic of China.

11.  At approximately 10:15 am on 18 April 2022, the plaintiff received an email (the “Email”) from a fraudster, identified as “James D,” posing as a representative of the Norton Billing Department. This email falsely claimed that there was an agreement between the plaintiff and Norton for a subscription to Norton® Protection (Norton Lifelock Antivirus) (the “Programme”) and that the plaintiff had been allegedly charged USD 489.35 for the automatic renewal of the Programme.

12.  The plaintiff does not subscribe to the Programme or to other services provided by Norton; therefore, no such agreement as alleged in the Email exists.

13.  As a result, the plaintiff was surprised to receive the Email.

14.  Consequently, the plaintiff called the toll-free number +1 888 780 4774 (the “Number”) listed in the Email as Norton® Protection Fraud Detection Team to dispute the charge.

15.  When the plaintiff called the Number, a male fraudster, who identified himself as “Harry Williams” (“HW”), answered the call.

16.  The plaintiff informed HW that she was not a subscriber to Norton Services, questioned the Email, and disputed the alleged charge of USD 489.35.

17.  To induce the plaintiff to grant HW remote access to her computer and bank account, HW misrepresented that he would remove the purported Programme from her computer and refund the alleged charge of USD 489.35, when in reality, neither the Programme nor the charge existed.

18.  Subsequently, HW provided a link and requested the plaintiff to click on it and log into her bank account.

19.  Mistakenly believing that the Programme had been installed on her computer and that USD 489.35 had been charged to her, and relying on HW’s misrepresentation, the plaintiff clicked the link and logged into her bank account, granting HW remote access to both her computer and bank account.

20.  Pretending to refund the alleged charge of USD 489.35, HW instructed the plaintiff to enter the amount of USD 89.00 into a dialogue box that popped up. He then added zeros to this amount, causing it to appear as USD 89,000 in the plaintiff’s checking account, leading the plaintiff to mistakenly believe that USD 89,000 had been disposed into her account when, in fact, no money had been transferred by HW.

21.  Mistakenly believing that HW had deposited the sum of USD 89,000 into her checking account, and at HW’s request, the plaintiff went to her bank to arrange a remittance transfer of funds to HW.

22.  HW requested the plaintiff to remit the funds to the Account.

23.  The plaintiff then remitted the sum of USD 88,466, which was her own funds from her checking account. After deducting bank charges of USD 10, the sum of USD 88,456 was received by the defendant into the Account.

24.  In making this remittance to the Account, the plaintiff also incurred a bank transfer fee of USD 45.00.

25.  As a result of granting remote access to her computer (the “Computer”) to the fraudsters, the plaintiff could no longer use her computer, as it has been hacked. The Computer, purchased by the plaintiff in approximately 2011 for around USD 1,800, is included in the plaintiff’s claim against the fraudsters.

26.  The plaintiff reported the fraud to the Long Beach Police Department in California, the Federal Bureau of Investigations, and the Hong Kong Police.

C. THE PLAINTIFF’S ENTITLEMENT TO THE ORDERS SOUGHT IN §§ 1-5 AND 9-10 OF THE SUMMONS

27.  I have considered the contents of the Statement of Claim. The facts and matters pleaded therein clearly support the plaintiff’s case that she was the victim of email fraud, which resulted in her transferring the sum of USD 88,466 to the Account.

28.  I am satisfied that the facts and matters pleaded in the Statement of Claim also clearly support the plaintiff’ case that the defendant was enriched at the plaintiff’s expense, that this enrichment was unjust, and that there are no other defences available: Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFRA 79, at [67] per Ribeiro PJ. Therefore, the defendant must return the sum of US 88,466 to the plaintiff.

29.  It is well-established that “when property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity”: Westdeutsche Bank v Islington London Borought Council [1996] AC 669, at 716C-D per Lord Brown-Wilkinson; Mesirow Financial Administrative Corp v Best Link Industrial Co Ltd, HCMP 1846/2015 (25 January 2016), at [33] per Recorder Lisa Wong SC (as she then was); Shoikhet v Chen Guoqiang [2022] 3 HKLRD 238, at [21] per HH Judge KC Chan. Therefore, the defendant held the sum of USD 88,466, or any part thereof, in the Account as a constructive trustee for the plaintiff.

30.  Regarding the declaratory relief, it is not the normal practice of the court to make a declaration without a trial, particularly where the declaration is that the defendant in default of defence has acted fraudulently. However, this is only a rule of practice which should not be followed when the plaintiff had a genuine need for the declaratory relief and justice would not be done if such relief were denied: Hong Kong Civil Procedure 2025, Vol. 1, §19/7/20. I am satisfied that the present case is such that I ought to exercise my discretion to grant the declaration sought.

D. DECLINING TO MAKE A VESTING ORDER

31.  §§6-8 of the plaintiff’s summons raises the question of whether a vesting order should be made under section 52(1)(e) of the TO.

32.  Section 52(1) of TO provides: -

(1) In any of the following cases, namely –

(a) …

(b) …

(c) …

(d) …

(e) Where … or a thing in action is vested in a trustee whether by way of mortgage or otherwise and it appears to the court to be expedient,

the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income therefore, or to recover the thing in action, in any such person as the court may appoint.

Provided that—

(i) where the order is consequential on the appointment of a trustee, the right shall be vested in the persons who, on the appointment, are the trustees; and

(ii) where the person whose right is dealt with by the order was entitled jointly with another person, the right shall be vested in that last-mentioned person either alone or jointly with any other person whom the court may appoint.”

33.  This Court is mindful of the conflicting decisions of the Court of First Instance regarding the applicability of section 51(1)(e) in cases involving email fraud.

34.  In Wismettac Asian Foods Inc v United Top Properties Ltd [2020] 3 HKLRD 732, DHCJ Paul Lam SC observed (at [43]) that the word “trustee” in section 52(1)(e) of the TO extends to a constructive trustee. He further noted (at [44]) that the proceeds of fraud are vested in the fraudster as a constructive trustee by operation of law, and thus fall within the category of “a thing in action is vested in a trustee by way of mortgage or otherwise.” Consequently, section 52(1)(e) is engaged. His Lordship made a vesting order, as it appeared expedient to do so. See also Concrete Waterproofing Manufacturing Pty Ltd v Changxuan Co Ltd [2020] 4 HKLRD 166, per HHJ Phoebe Man.

35.  Conversely, in 800 Columbia Project Co LLC v Chengfang Trade Ltd [2020] 3 HKLRD 674, Recorder Eugene Fung SC (as he then was) cited with approval (at [16(8)]) Lord Sumption JSC’s judgment in Williams v Central Bank of Nigeria [2014] AC 1189 at [9] and referred to the two kinds of constructive trust: -

“The first kind comprises persons who have lawfully assumed fiduciary obligations in relation to trust property, but without a formal appointment. They are true trustees, and if the assets are not applied in accordance with the trust, equity will enforce the obligations that they have assumed by virtue of their status exactly as if they had been appointed by deed. The second kind comprises persons who never assumed and never intended to assume the status of a trustee, but have exposed themselves to equitable remedies by virtue of their participation in the unlawful misappropriation of trust assets. They may be required by equity to account as it they were trustees or fiduciaries, although they are not … In either case, it is incorrect to describe a constructive trustee as having been ‘appointed’ by the court.” [Emphasis added.]

His Lordship held that section 52(1)(e) is not engaged in cases of internet fraud and declined to make a vesting order.

36.  In Tokic DOO v Hong Kong Shui Fat Trading Ltd [2020] 4 HKLRD 189, DHCJ Douglas Lam SC adopted the reasoning in 800 Columbia in preference to Wismettac (at [10]-[13]). His Lordship further observed that the distinction between the two types of constructive trustees is well settled in Hong Kong and the United Kingdom. He cited Williams from the United Kingdom and Peconic Industrial Development Ltd v Lau Kwok Fai (2009) 12 HKCFAR 139 as support for that distinction. Additionally, he remarked (at [16]) that: -

“The extension of trustees to constructive trustees in s.2 of the TO is thus confined to true constructive trustees or de facto trustees. The use of the phrase ‘or otherwise’ in s.52(1)(e) of the TO (which mirrors the wording in s.51(1)(v) of the 1925 Act), despite its wide import, cannot have the effect of expanding the meaning of ‘trustee’ or ‘constructive trustee’ beyond the scope of the TO to include persons other than true trustees. The fact that the Court has declared that the wrongdoer is to account for certain stock or choses in action (in the present case, the right to call for repayment from the bank) as if he were a trustee does not vest the same in the wrongdoer as trustee or recast what is a remedial formula into an institutional trust to which the TO can apply.” [Emphasis original.]

37.  These divergent approaches highlight the unsettled nature of the law in this area. In the absence of appellate guidance, this Court must procced with caution and clarity in its own analysis.

38.  Fortunately, in a recent decision, Amidas Hong Kong Ltd v Che Si Limited [2025] HKCFI 1128[1], Queeny Au-Yeung J undertook (at [45]-[56]) a thorough analysis of the statutory language and judicial precedent in light of conflicting authorities. She ultimately concluded that vesting orders under section 52(1)(e) are not available against constructive trustees in internet fraud cases. This clarification provides much-needed certainty in this area of the law: -

(1) Her Ladyship’s analysis began with an examination of the meaning of “trustee” under the Limitation Ordinance (Cap 347) (the “LO”), which turns on the distinction between two types of constructive trusts, as articulated by Millett LJ (as he then was) in Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400: “category 1” (institutional) and “category 2” (remedial).

(2) Category 1 encompasses defendants who, although not expressly appointed, have assumed trustee duties through a lawful transaction that is both independent of and antecedent to the breach of trust, and which is not impeached by the plaintiff. Category 2 includes cases where the trust obligation arises directly from the unlawful transaction that is impeached by the plaintiff.

(3) The distinction remains relevant in Hong Kong. In Hui Chun Ping v Hui Kau Mo [2024] 2 HKLRD 178, at [45], Kwan VP confirmed that only category 1 trustees fall within s 20(1) of the LO, which adopts the definition from the TO. Notably, Kwan VP observed (at [82]) that: -

“…The meaning and language of ‘trustee’ in the Trustee Ordinance do not extend to constructive trustees whose liability to account arose from the misapplication itself.”

The Court of Final Appeal in Hui Chun Ping v Hui Ka Mo (2024) 27 HKCFAR 634 affirmed the Court of Appeal’s decision, with Lord Hoffmann NPJ endorsing the distinction between “category 1 trustees” and “category 2 trustees” as articulated by Millett LJ in Paragon (at [21]).

(4) Her Ladyship found the reasoning in 800 Columbia and Tokic on the issue of vesting order to be more compelling. While Paragon Finance and Hui Chung Ping concern the application of the LO, she saw no reason why the discussions therein regarding the purposes, objectives and definitions of the TO should not apply to internet fraud cases.

(5) The term “trustee” has been expressly defined in section 2 of the TO. By virtue of section 2(1) of the LO, this definition also applies to the term “trustee” under the LO[2]. Assigning a different meaning to “trustee” for the purposes of section 52 of the TO would only give rise to confusion.

(6) Section 52(1)(e) is not engaged in fraud cases involving remedial or “category 2” constructive trustees. Accordingly, Her Ladyship declined to grant a vesting order.

39.  In Orion Engineered Carbons GMBH v Universal All Limited & Ors [2025] HKCFI 2370, K Yeung J shared Queeny Au-Yeung J’s view that the reasoning in 800 Columbia and Tokic on the issue of vesting orders is more compelling (at [19]). His Lordship agreed with Her Ladyship’s analysis in [53] – [56] of her Decision in Amidas.

40.  I find the reasoning in Amidas to be persuasive and highly instructive in resolving the present issue. Its analysis of the scope of section 52(1)(e) offers a clear and principled framework for understanding the limits of the court’s jurisdiction in cases involving constructive trusteeship arising from internet fraud. I also derive guidance from Orion, which reinforces the distinction between institutional and remedial constructive trustees. Together, these decisions provide valuable clarity on the proper approach to asset recovery in cases of internet fraud, and I respectfully follow them in the present case. Accordingly, I find that section 52(1)(e) is not engaged in the present case.

E. CONCLUSION

41.  In light of the above matters, I make an order in terms of §1, §2, §3 (bank charge of USD 45), §4 (purchase price of the Computer at USD 1,800), §5 (payment of the sum awarded to the plaintiff by the defendant), §9 (interest) and §10 (costs) of the plaintiff’s summons, but decline to make an order in terms of §6 (leave to join HSBC), §7 (vesting order) and §8 (an order directing HSBC to pay over the sum under the vesting order) of the plaintiff’s summons.

42.  Last but not least, I thank Mr Chow for the assistance he rendered to the Court.