PRISCILLA DIANA VINCENT TELLIS v. WCR TRADING LTD AND OTHERS

DCCJ 1013/2024

[2024] HKDC 739

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1013 OF 2024

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DECISION

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Introduction

1.  This is an application by the Plaintiff (“P”) by Summons filed on 2 April 2024 (“Summons”) for disclosure orders under s 21 of the Evidence Ordinance, Cap 8 or Norwich Pharmacal relief against the 1^st Respondent (“R1”), 2^nd Respondent (“R2”) and 3^rd Respondent (“R3”) (collectively, “Rs”). Rs are all banks. The application is supported by an Affidavit of P filed on the same day.

2.  Draft orders, which have taken into account the comments received from the respective Rs, have been submitted to me for consideration.

3.  In the correspondence between P’s solicitors and Rs, Rs have indicated inter alia that they take a neutral position to P’s application (save as to their comments, if any, on the proposed terms of the order) and have asked to be excused from today’s hearing. Accordingly, Rs did not appear at today’s hearing.

Background Facts

4.  P is a citizen of the United States. She claims that she is a victim of an online romance scam pursuant to which, between 30 October 2023 to 2 January 2024, she was deceived into making a series of payments via bank transfers in the total sum of USD 137,029.00 into various accounts in Hong Kong maintained with Rs.

5.  On 7 October 2023, P met an individual purporting to be one Elias Fischer, a Caucasian male (“the Fraudster”), on an online dating App. They later continued to exchange messages on Telegram and began what P thought to be a romantic relationship.

6.  The Fraudster urged P to start investing in cryptocurrencies, claiming to have much experience and success himself. Persuaded by the Fraudster, P did test the waters by injecting USD3,000.00 into Coinbase, a legitimate and prominent cryptocurrency platform.

7.  She was then urged by the Fraudster to make investments through an online trading platform through an App which later transpired was a fake imitation of Coinbase (“the Fake App”).

8.  P, believing the Fake app to be authentic, communicated with the online service within the Fake App and transferred various sums as per the payment instructions provided by the online service from P’s bank account to various accounts maintained with Rs believing them to be her investments:

(1)  On 30 October 2023, a sum of USD10,000.00 was transferred by P to the 1^st Defendant’s bank account maintained with R1;

(2)  On 6 November 2023, a sum of USD20,000.00 was transferred by P to the 1^st Defendant’s bank account maintained with R1;

(3)  On 6 December 2023, a sum of USD30,000.00 was transferred by P to the 2^nd Defendant’s bank account maintained with R2.

9.  By 14 December 2013, P was led to believe from the “wallet” within the Fake App that the balance of her investment amounted to USD547,022.98. However, when she wished to sell and realize her crypto assets she received a series of messages from the online service claiming that in order for her to withdraw her investment she would have to make a prepayment of 20% of her investment earnings (amounting to USD77,029.00) as tax.

10.  As a result, on 18 December 2023, as instructed, P transferred from her bank account a sum of USD20,000.00 to the 3^rd Defendant’s bank account maintained with R3. Furthermore, on 2 January 2024 she transferred from her bank account a sum of USD57,029.00 to the 4^th Defendant’s account maintained with R2.

11.  It was only when, despite having paid the “taxes”, she was told by the online service that she would have to further pay a “high-risk security deposit” (being 30% of the amount withdrawn to complete the withdrawal of her investment for purported money-laundering reasons) that P realized she had fallen victim to an online scam.

12.  She then made a report to the Federal Bureau of Investigation of the United States (“FBI”) on 5 January 2024 and to the Hong Kong police (“the Police”) on 18 January 2024.

13.  P has commenced proceedings against the 1^st to 4^th Defendants by writ dated 22 February 2024. Her claims against them are based on monies had and received, unjust enrichment, constructive trust and equity. According to P, she never had any dealings with any of the Defendants. Mr Hoi, solicitors for P, informed me at today’s hearing that default judgement has been obtained against all the Defendants on 25 March 2024.

14.  By the Summons, P now seeks disclosure of information against Rs in order to facilitate her tracing and recovery of her monies. She believes that Rs would have information which will enable P to establish who owns and operates the various bank accounts into which P had transferred her monies and if and to the extent which the monies have been onward transferred, to which bank and whose benefit they have been transferred to.

Applicable Principles

15.  The applicable principles relating to applications for Norwich Pharmacal relief are well-settled. It is not a usual order and will not be lightly granted in the absence of powerful factors:

(1)  It is made against an innocent party whose only involvement is to become mixed up in the tortious or wrongful activities of others;

(2)  The wrongdoing exists only on the part of a person or persons against whom no relief may be sought at the stage of the application and against whom there is probably insufficient evidence to found an action;

(3)  There will usually be a legal relationship between the innocent person against whom a discovery order is sought and the alleged wrongdoer, and the relationship may involve strict duties to be observed on the innocent party’s part. Any discovery to be made will involve a breach of confidentiality and may expose the innocent party to civil liability and possibly even criminal liability; and

(4)  The court must accordingly balance the competing interests of the victim of the alleged wrongdoing and an innocent party caught up in the wrongdoing.

See A Co v B Co [2002] 3 HKLRD 111 at §12 per Ma J (as he then was).

16.  The 3 requirements for the grant of such orders are:

(1)  There must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place (where fraud or similar serious allegations are made, the degree of proof must correspondingly be high);

(2)  It must also be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff, and where a tracing claim is likely to be made, there must be a serious possibility that the discovery sought will either allow the plaintiff to preserve what may well be his assets or realistically lead to the discovery of such assets; and

(3)  The discovery sought must not be unduly wide; any order must be specific and also restricted to those documents or those classes of documents that are necessary to enable the plaintiff to preserve or discover assets.

See ibid, §13.

17.  The applicable principles governing an order under s 21 of EO are also well-established. Although it has been said that a s 21 order is justified where the plaintiff seeks to trace funds which in equity belong to him and of which there was strong evidence that he has been fraudulently deprived, there are 3 limits:

(1)  The plaintiff must demonstrate a real prospect that the information may lead to the location or preservation of assets to which he is making a proprietary claim;

(2)  The documents sought to be disclosed must be identified with some specificity as would be expected of a subpoena; and

(3)  The court needs to balance the potential advantage against the detriment to the person against whom the order is sought, not merely in terms of costs but by way of invasion of privacy and requiring breach of obligations of confidence to others.

See CTO (HK) Ltd v Li Man Chiu & Others [2002] 2 HKLRD 875, §§12-13.

Analysis

18.  Applying the above principles to the facts of this case, I am satisfied, whether the jurisdictional basis is under s 21 of EO or Norwich Pharmacal, that an order in terms of the draft orders (as amended by me) should be granted.

19.  First, I am satisfied from the evidence before me (namely the transfer records, screenshots and reports made by P to the FBI and Police) that there is cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place. P was defrauded to believe that monies transferred to the Defendants’ accounts would be returned to her together with her investment returns.

20.  Second, P seeks disclosure of documents from Rs relating to: (1) the current balance in the Defendants’ accounts maintained with Rs; (2) all account opening documents for those accounts; (3) all document and information relating to person or persons authorized to operate those accounts including but not limited to records showing the identities of such person or persons; and (4) bank account statements for the period from the date of transfer of P’s monies into those accounts to the date of court order. I am satisfied that the orders sought will very likely reap substantial and worthwhile benefit for P as it will enable her to obtain the identity of the account holder, including those authorized to operate the account, their addresses, and other information for her to bring legal proceedings against any wrongdoers or recipients of P’s monies. P have also sought disclosure of documents relating to specific transactions as P shall identify from the bank statements to be provided by Rs. This would enable P to trace the whereabouts of the transferred monies and reveal the identity of any second layer recipient(s) so as to facilitate the taking of legal proceedings for the preservation and/or recovery of P’s monies.

21.  Third, having reviewed the draft Orders, I am satisfied that the discovery sought is specific and not unduly wide. The documents sought are limited to documents necessary to enable P to preserve or discover assets. No objection was taken by Rs on the scope of the disclosure sought. The comments received from Rs (relating to timing for compliance and costs) have all been taken into account in the draft Orders.

22.  Having balanced the competing interest of the victim and the innocent parties (the banks) caught up in the wrongdoing, and mindful that the power to order disclosure should be exercised with great caution, I would make an order in terms of the draft Orders submitted to me as amended by me.

23.  As for costs, the usual order is for P to pay the bank the costs of and occasioned by the application, which includes the costs and expenses incurred by the bank in complying with the court’s order, on an indemnity basis, to be taxed if not agreed.

24.  Whilst R1 in correspondence with P’s solicitors had requested that there be summary assessment of R1’s costs of and occasioned by this application (including the costs of compliance with any order to be made by this court), I will not do so because no Statement of Costs had been provided by R1. The usual costs order is made.

Disposition

25.  Accordingly, I now make an order in terms of the draft Orders as amended by me.