DOMTONIA INTERNATIONAL CO LTD v. TIANMA COMMUNICATION LTD

DCCJ 290/2019

[2019] HKDC 415

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 290 OF 2019

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DECISION

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1.  Before me this morning is the plaintiff’s summons applying for default judgment under Order 19, rule 7 of the Rules of the District Court.

2.  The plaintiff claims that it is the victim of an email fraud perpetrated by the defendant.

Procedural history

3.  The writ, together with the statement of claim, were left at the registered address of the defendant in Kwun Tong on 17 January 2019.  They were therefore served on the defendant on the same date.  The deadline for the lodging of the acknowledgment of service fell on 30 January 2019.  No acknowledgment having been served, the deadline for the filing of the defence fell on 27 February 2019.  No defence was filed.  On 5 March 2019, the plaintiff took out the present summons.  Based on the above chronology, I am satisfied that procedure-wise the plaintiff’s application comes within the rules.

The plaintiff’s pleaded case

4.  The plaintiff is a company incorporated in Nigeria and is engaged in the trading of mobile phones.  It has a business relationship with a Hong Kong company called Tecno Mobile Limited.  Under their contract, the plaintiff acts as a distributor of Tecno Mobile’s products within Nigeria.

5.  On 10 September 2018, the plaintiff received an email from the email account myra.chen@tecnomobile.com (“the 1^st Email”).  The sender of the 1^st Email identified herself as “Myra Chen” and informed the plaintiff that Tecno Mobile’s bank account was closed due to government taxation policies and that details of Tecno Mobile’s new bank account would be later provided to the plaintiff.

6.  On 17 September 2018, the plaintiff received another email from the same email account (“the 2^nd Email”).  The 2^nd Email directed the plaintiff to make payment to a bank account no 642-046270-838 held with HSBC in Hong Kong.  This is an account of the defendant (“the defendant’s Account”).

7.  Upon receipt of the 2^nd Email, the plaintiff arranged for transfer of US$50,000 from the plaintiff’s bank account to the defendant’s Account.

8.  Upon reporting the transfer to Tecno Mobile on 19 September 2018, it was found out that the 1^st Email and the 2^nd Email were not sent by Tecno Mobile and therefore was a fraud.

9.  The plaintiff authorised Tecno Mobile to file a report of the fraud with the Hong Kong Police Force on its behalf on 19 October 2018.  The plaintiff was later informed by the police that they are still carrying out investigation in this matter, and that the money in the defendant’s Account has been withheld by HSBC upon the police’s request.

10.  Based on the above pleaded case, the plaintiff seeks (a) a declaration that the money transferred to the defendant’s Account be held by the defendant under a constructive trust for the plaintiff; (b) an order that the sum be returned to the plaintiff forthwith as money had and received by the defendant to the use of the plaintiff; and (c) an order that until execution of the above order or any further order of the court, the sum do remain in the defendant’s Account.

Discussion

11.  As a matter of principle, default judgment will only be given on a plaintiff’s claim provided that the pleaded facts give rise to the relief sought. This is because the basis for default judgments is that the facts as contained in the statement of claim were true and admitted by the defendant.  The court’s task is therefore to look to the pleaded facts alone and no other evidence will be admitted: see, eg, Lam Chi Fat v Liberty International Insurance [2002] 3 HKLRD 480 at paras 26-27 per Ma J; Hong Kong Civil Procedure 2019 at 19/7/11. 

12.  Here, I am satisfied that the plaintiff’s pleaded facts give rise to a valid claim of proprietary constructive trust against the defendant in respect of the sum of US$50,000 now sitting in the defendant’s Account.  When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient and the property is recoverable and traceable in equity.  See eg, Michael Chen Kang Huang v Peter Lit Ma HCA 218/2005, 7 September 2009, citing at para 56 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 667, at 716.  See also the application of the principle in recent email fraud cases: Mesirow Financial Administrative Corporation v Best Link Industrial Co Ltd HCMP 1846/2015, 25 January 2016 at paras 33-34; 巨展皮具香港有限公司 v 上海兄弟海運有限公司 [2018] HKCFI 53 at para 27; and Sultana Distribution Services Inc v Hong Kong Fuheng Technology Co Ltd [2018] HKCFI 1480 at para 10.

13.  The next question is whether the court should exercise its discretion to grant the declaratory relief now or should require the plaintiff to prove its case at trial.  It is not the normal practice of the court to grant a declaration without going to trial.  However, it is only a rule of practice and not a rule of law.  This rule of practice should not be followed when the plaintiff has a genuine need for the declaratory relief and justice would not be done if the relief were denied: Hong Kong Civil Procedure 2019 at 19/7/20.

14.  As in the recent email fraud cases, I am satisfied that the plaintiff has a genuine need for the relief now.  It has established a strong and obvious case for proprietary relief on the face of its pleading.  In Mesirow Financial Administrative Corporation, another email fraud case in which the victim sought declaratory relief by default judgment, Recorder Lisa K Y Wong SC explained why there was a genuine need to grant such relief.  That explanation applies with equal force in the present case and I quote below:-

“The right asserted by the Plaintiff was one of title to property. The Funds were in equity the Plaintiff’s money. A mere order against the Defendant for the return of the sum that it had deprived the Plaintiff of, without more, would have put the Plaintiff in the position of an unsecured judgment creditor of the Defendant. Such an order would not per se have given the Plaintiff any prior or specific right over the Funds. Very little was known about the Defendant. In particular, it was not known if the Defendant had any other creditors and, if so, whether it had sufficient assets (other than the Funds in the Account standing to its name) to satisfy its debts and liabilities to those other creditors. It would have been grossly unfair and potentially prejudicial to the Plaintiff if it had had to race against other creditors of the Defendant for the Funds in execution of a monetary judgment. A declaration by the Court that the Funds were held on trust for the Plaintiff was necessary to earmark the Funds as the Plaintiff’s property and put the same out of the reach of other creditors of the Defendant.” (at para 38)

15.  For the above reasons, I would exercise my discretion in favour of the plaintiff.

Conclusion

16.  I make an order in terms of paras 1 to 3 of the plaintiff’s summons.  I also order that the defendant do pay the plaintiff’s costs of this action and this application, summarily assessed in the sum of $30,000.