FERRARI NORTH AMERICA, INC v. CHANGHON INTERNATIONAL ENERGY CO., LTD AND OTHERS

HCA 852/2017

[2018] HKCFI [1603]

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.852 OF 2017

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DECISION

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Application

1.  Before the court is the plaintiff’s application by summons dated 10 January 2018 (“Summons”) against the 3^rd defendant, supported by the 2^nd affidavit of David Michael Wertheim sworn on 3 January 2018, for summary judgment for the sum of US$3,300,002 and for a declaration that the 3^rd defendant holds the 12 tranches of funds transferred from the 1^st defendant’s account numbered 41510591947 (“D1’s Account”) at Standard Chartered Bank (Hong Kong) Limited (“SCB”) to the 3^rd defendant’s account numbered 933060840883 (“D3’s Account”) with Hang Seng Bank Limited (“HSB”) between 30 March and 3 April 2017, as set out in paragraph 4 below, on trust for the plaintiff.

Plaintiff’s claim against 3^rd defendant

2.  It is the plaintiff’s claim that it has been a victim of fraud, whereby an unknown person (or persons) impersonating the chief executive officer of the plaintiff’s parent company, Ferrari S.p.A., induced the plaintiff’s chief executive officer to authorise payment of 3 sums totalling US$6,700,000 into D1’s Account as part of a bogus transaction to buy shares in a listed company on behalf of the plaintiff’s parent company as follows:

	Date of Transfer to D1’s Account	Amount Transferred (US$)
1	29.3.2017	958,000
2	31.3.2017	1,942,000
3	1.4.2017	3,800,000

3.  Prior to the issue of the Summons, Mr Justice Lok had, on 30 October 2017, entered judgment in default of notice of intention to defend against the 1^st defendant for (1) a declaration that the 1^st defendant holds the said sum of US$6,700,000 which belongs to the plaintiff on trust for the plaintiff and (2) the payment of US$6,700,000 by the 1^st defendant to the plaintiff with interest at 8% per annum from 1 April 2017 to 30 October 2017 and thereafter at judgment rate until payment.

4.  US$3,300,002 of the said sum of US$6,700,000 had been transferred from D1’s Account to D3’s Account without the plaintiff’s consent or knowledge as follows:

	Date of Transfer from D1’s Account to D3’s Account	Amount Transferred (US$)
1	30.3.2017	180,000
2	30.3.2017	200,000
3	30.3.2017	120,000
4	31.3.2017	300,000
5	31.3.2017	250,000
6	31.3.2017	250,001
7	3.4.2017	300,000
8	3.4.2017	350,000
9	3.4.2017	400,000
10	3.4.2017	350,001
11	3.4.2017	400,000
12	3.4.2017	200,000
		3,300,002

5.  The plaintiff had never had any dealing with the 3^rd defendant that would justify the payment of the plaintiff’s monies to the 3^rd defendant.

6.  For the sake of completeness, part of the said sum of US$3,300,002 had in turn been transferred from D3’s Account to the 11^th to 14^th defendants’ bank accounts without the plaintiff’s consent or knowledge.  The plaintiff had never had any dealing with any of the 11^th to 14^th defendants that would justify the payment of the plaintiff’s monies to them.

7.  I have, on 3 April 2018, entered judgments in default of notice of intention to defend against the 11^th to 14^th defendants for (1) declarations that they hold the following respective sums which belong to the plaintiff on trust for the plaintiff and (2) the payment of such sums by them to the plaintiff with interest at 8% per annum from the respective dates of receipt to 3 April 2018 and thereafter at judgment rate until payment:

Defendant	Total sum for which judgment is entered
11th defendant	US$500,000
12th defendant	US$774,142
13th defendant	HK7,381,681 + US$531,690
14th defendant	US$197,416.36

D3’s defence

8.  Prior to the issue of the Summons, the 3^rd defendant had, on 22 September 2017, filed and served a defence, which it subsequently amended on 13December 2017. 

9.  Save for the admissions that it is a company incorporated in Hong Kong and that it is the holder of D3’s Account, the 3^rd defendant’s defence contains only non-admissions and denials, without advancing any positive averment.

Plaintiff’s entitlement to summary judgment

10.  Despite the express notice to the 3^rd defendant indorsed on the Summons that it should send to the plaintiff’s solicitors a copy of any affidavit intended to be used by the 3^rd defendant not less than 3 days before the first hearing of the Summons on 5 February 2018, the 3^rd defendant has so far not filed or served any affidavit in opposition to the Summons. 

11.  The 3^rd defendant ceased to be represented in the end of February 2018.  Though notice of this adjourned substantive hearing of the Summons before me had previously been given by the court to the 3^rd defendant’s former solicitors, by a letter dated 10 April 2018 sent to the 3^rd defendant at its registered office, the plaintiff’s solicitors reminded the 3^rd defendant of this hearing and also enclosed a copy of the notice of hearing.  The 3^rd defendant, however, did not appear to make any submission on the Summons.

12.  I am satisfied that the averments upon which the claim against the 3^rd defendant is based are substantiated by the evidence adduced by the plaintiff.  The amended defence of the 3^rd defendant, consisting only of non-admissions and denials, has not raised any triable issue between the plaintiff and the 3^rd defendant.  The plaintiff should therefore have summary judgment against the 3^rd defendant.  A victim of fraud would prima facie have a claim in money had and received and may assert a proprietary claim against a recipient insofar as the fraudulently obtained funds are traceable into his hands, unless the recipient can establish that he is a bona fide purchaser for value without notice.  See, for example, Halliburton BV Merkezi Hollanda Ankara Merkez Turkiye Subesi v Sheng Yi (HK) Trade Co Ltd, HCA 1627/2016, unreported (24 January 2017), per Deputy High Court Judge Clooney SC at [80].  

13.  In concluding that the plaintiff is entitled to summary judgment against the 3^rd defendant, I have considered whether Order 14, rule 1(2)(b) of the Rules of the High Court (Cap 4A), which provides that summary judgment may not be given in “an action which includes a claim by the plaintiff based on an allegation of fraud”, applies to the plaintiff’s claim against the 3^rd defendant. 

14.  In Universal Capital Bank v Hongkong Heya Co Ltd [2016] 2 HKLRD 757, in rejecting the defendant’s opposition on the basis that the plaintiff’s application was caught by the “fraud” exception, Deputy High Court Judge Burrell said at [18(1)]:

“The underlying reason for the fraud exception is to prevent summary judgment in a case where serious allegations of dishonesty are made or implied against a party to the proceedings so that such a party may have an opportunity to answer the allegations, or put in a more familiar way, “have his day in court”.”

And then at [18(4)]:

“Whilst it is true that the Hong Kong courts have adopted a fairly wide and liberal interpretation of “fraud” when considering the application of Order 14, rule 1(2)(b), it should not be applied automatically merely because there are allegations of fraud or dishonesty in the bigger picture.  The question remains, does the underlying allegation of fraud (which does exist here) on which the claim is based (which it is not in this case) constitute an allegation of fraud against the defendant? … ” (emphasis added)

15.  I find the latter observation equally apt in this instance.  Although a fraud perpetrated by unknown fraudster(s) is the underlying reason why the plaintiff has suffered loss and commenced these proceedings, the plaintiff stresses that it does not have evidence, and is not suggesting, that the 3^rd defendant or those behind it were involved in such fraud.  The plaintiff has expressly confined its claim against the 3^rd defendant to restitution based on unjust enrichment, to be approached in accordance with the framework set out by the Court of Final Appeal in Shanghai Tongji Science & Technology Industrial Company Limited v Casil Clearing Limited (2004) 7 HKCFAR 79 at [67].  That is to say, all that the plaintiff has to say and prove is (1) that the 3^rd defendant was enriched by having funds belonging to the plaintiff transferred into its account without having provided any consideration therefor; (2) that such enrichment was at the expense of the plaintiff who did not intend the 3^rd defendant to have, and who had no reason to pay the 3^rd defendant, the funds; (3) that such enrichment was unjust as there was no legitimate reason for the 3^rd defendant to have received the funds; and (4) that the 3^rd defendant has not raised any defence that justifies it to keep the funds.  It is unnecessary for the plaintiff to, and it did not, assert that the 3^rd defendant received the funds in question fraudulently or dishonestly.  See paragraphs 33b, 35a, 37a, 40, 43, 44, 59c, 60c and 61c of the amended statement of claim.  See also paragraph 8 of the 2^nd affidavit of David Michael Wertheim.

Orders

16.  For these reasons, I make an order in terms of the draft judgment at pages 192-197 of the hearing bundle save that the words “when it is no longer necessary” in the second preamble should be replaced by “once the plaintiff has recovered the sum of US$3,300,002 (whether from from the 3^rd defendant or any of the 11^th to 14^th defendants)”.