LAI PAN HA v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD AND ANOTHER

DCMP 4520/2021

[2022] HKDC 416

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4520 OF 2021

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REASONS FOR JUDGMENT

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Introduction

1.  At the hearing on 25 April 2022, I granted the relief claimed in these proceedings, and indicated that I would provide the reasons later. This I now do.

2.  These proceedings were commenced by way of Originating Summons issued on 2 December 2021 for pre-action discovery. The Applicant is a victim of a telephone scam that took place between May and June 2020, resulting in her having had amounts totalling HK$1,999,700 transferred from her personal bank account, without her knowledge, to various accounts held with the Respondents by persons unknown to her.

3.  Mr Chen, appearing for the Applicant, has submitted copies of recent correspondence showing that the Respondents take a neutral stance in respect of the present application. The 1^st Respondent has indicated its intention not to attend the substantive hearing and that it will comply with any relevant order made, whereas the 2^nd Respondent has provided their comments through their solicitors on the draft order tendered for my consideration at the hearing, and similarly indicated that it does not wish to attend the substantive hearing. Both the 1^st and 2^nd Respondents were therefore excused from attendance at the hearing.

4.  In the circumstances, I allowed the Originating Summons to be heard and proceeded with in chambers, in accordance with Order 28 rule 3A of the Rules of the District Court (“RDC”).

The facts

5.  The facts pertaining to the present application are as follows. The Applicant is a married woman with two daughters, having arrived in Hong Kong from the mainland China in 1987 and residing here ever since. She is in employment and holds various bank accounts with the HSBC and Bank of China, some of which are held in joint names with her husband. Her two daughters have already come of age and are in employment, providing her with monthly maintenance. She also holds a certain amount of investment in the stock market.

6.  On 12 May 2020, the Applicant received a phone call, which happened to be a recorded voice message intimating to the Applicant that her telephone service would be terminated soon. She then followed the recorded instructions and found herself being diverted to a female speaking Putonghua, who claimed to be from the ‘Chinese Telecommunication Bureau’, indicating to the Applicant that her Home-Return Permit was illegally used to register a mobile phone number for conducting illegal activities. She then further diverted the Applicant to a male surnamed Li on the phone, who claimed himself to be from the ‘Eastern Beijing Police’. Li told her that her accounts have been used for money laundering. The Applicant was then requested to send over her bank account numbers and details of her Home-Return Permit. The Applicant complied, providing to Li her personal information, including her residential address, Hong Kong Identity Card number, credit card and other account details.

7.  Subsequently, Li contacted her again through telephone calls and messages on a number of occasions well into June 2020, when she would be consistently asked to deposit sums of money into one of her accounts. Meanwhile, she was also asked to apply for internet banking service for her accounts, and to provide Li with the relevant password to operate all her accounts held with the Bank of China. This the Applicant did.

8.  Eventually, when the Applicant told her family about what happened, they asked her to check her accounts. It was then discovered that from 13 May 2020 to 17 June 2020, a total of HK$1,999,700 had been transferred from one of her accounts held with the Bank of China on ten different occasions in various amounts without her knowledge. The funds were apparently transferred to different accounts held with the 1^st Respondent and the 2^nd Respondent.

The legal basis for the application

9.  In order to facilitate the commencement of an action for the recovery of the sum, the Applicant now applies for pre-action discovery of the documents and records held by the Respondents showing the names and addresses of the account holders who had received the money transferred from the Applicant’s bank account, and documents and records showing the details of further transfers of funds out from the initial recipient accounts since 19 May 2020.

10.  The Applicant has in the Originating Summons premised this application upon sections 47A and 47B of the District Court Ordinance, Cap.336.

11.  As I indicated to Mr Chen at the hearing, this may not be a case where sections 47A and 47B of the District Court Ordinance are applicable. Section 47A(1) states:-

“A person who appears to the Court to be likely to be a party to subsequent proceedings may apply to the Court for an order for discovery of documents against a person who is likely to be a party to the proceedings and who has in his possession, custody or power documents directly relevant to an issue arising out of the claim.”

12.  It is not suggested that the Respondents, being the banks, are likely to be made parties to the intended proceedings for the recovery of the funds transferred out of the Applicant’s bank accounts. Apparently, the intended claim will be one invoking the equitable jurisdiction of the court, targeted at persons who are or have been in receipt of funds that represent the proceeds of the transactions that originated from the initial transfers from the Applicant’s bank account. The present application is part of the tracing process to identify the potential parties to a claim - see, eg The Joint and Several Trustees of the property of Karson Oten Fan, Karno (in bankruptcy) v Kong Suk Chun & Others, HCMP 1101 of 2011, 29 November 2011, where Recorder Shieh, SC, when dealing with the point as to whether the court has jurisdiction to grant a discovery order in a proprietary claim as opposed to a “tracing claim”, said at paragraph 12:-

“12. I fail to see the difference between a case: (i) where the Plaintiff makes a proprietary claim against the initial recipient/primary wrongdoer; and (ii) where he makes a claim against a subsequent recipient or an innocent recipient following a process of tracing. As Lord Millett famously said in the leading case of Foskett v McKeown cited by Ms Yiu…[2001] 1 AC 102 at 128D-E:

“Tracing is neither a claim nor a remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them and justifies his claim that the proceeds can properly be regarded as representing his property. Tracing is also distinct from claiming. It identifies the traceable proceeds of the claimant’s property. It enables the claimant to substitute the traceable proceeds for the original asset as the subject matter of his claim, but it does not affect or establish his claim.””

13.  There is hitherto no indication, at least for the purposes of this application, that any of the Respondents will likely be made defendants in the intended proceedings.

14.  As for section 47B, it applies to situations where a claim is already made. A party may apply to the court for an order for discovery against a person who is not a party to the proceedings and who is likely to have or have had in his possession, custody or power documents relevant to an issue arising out of the claim. The present application is clearly not made in such a situation – see Chan Yim Wah Wallace v New World First Ferry Services Ltd, HCPI 820 of 2013, 8 May 2015 where Bharwaney J, referring to the corresponding provision for proceedings in the High Court, has stated at paragraph 23 that:-

“In my judgment, applications under s.42 and O.24 r.7A(2) can only be brought when proceedings have already commenced. The statute cannot be construed otherwise. A similar argument, in reliance on English Civil Procedure Rule 31.17, which is the equivalent of O.24 r.7A giving effect to s.42, was rejected by Mann J. in Various Claimants v News Group Newspapers Ltd.[1]”

15.  In the Applicant’s written submissions, she further sought to rely on the equitable jurisdiction of the court to order discovery by a non-party under the principle laid down in Norwich Pharmacal Co & Others [1974] AC 1333. Whilst this basis has not been specified in the Originating Summons, I proceeded to deal with the application on this premise given that the nature of the application remains the same (ie being one for pre-action discovery), and given the Respondents have been well informed of both the nature of the application as well as the specific orders sought. To do so is also in alignment with the underlying objectives set out in Order 1A of the RDC.

16.  There is no doubt the court has jurisdiction to hear and determine an application for discovery by a non-party under the Norwich Pharmacal principle. As Ma J (as he then was) said in A Co v B Co [2002] 3 HKLRD 111 at paragraphs 10-12:-

“10. Where innocent parties are caught up or have become involved in the tortious or wrongful activities of others and thus facilitating the perpetration (or continuation) of such activities, justice may require (and therefore the court may order) that such innocent persons come under a duty to assist the victim of the tort or wrongful activities, by the provision of full information even though such innocent persons cannot be shown to incur any personal liability at that stage. The foundation of the court's jurisdiction here is its equitable jurisdiction. The court's ability to make such orders was confirmed by the House of Lord's decision in Norwich Pharmacal : see in particular the speech of Lord Reid at 173F-175E. The principles and approach established by that decision have consistently been applied in Hong Kong.

11. The jurisdiction is a wide one. It is not restricted, as was at one time thought, to the disclosure of the names of wrongdoers only. In particular, where a plaintiff wishes to investigate the passage of monies in and out of bank accounts in aid of a tracing claim, discovery can be ordered of a bank's books and documents: see Bankers Trust Company v. Shapira [1980] 1 WLR 1274, at 1281F-1282F.

12. Though founded ultimately on notions of justice, nevertheless, it is important to emphasize the extraordinary nature of this relief because it is not a usual order and is not one that a court would lightly grant in the absence of powerful factors…”

17.  His Lordship then went on to state the factors to be borne in mind when considering whether to grant a Norwich Pharmacal order:-

“13. Given these characteristics as I have outlined, such orders are therefore not lightly made as I have said. In my view, it is essential for the court to bear the following in mind before a Norwich Pharmacal order is made:-

(1) There must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place. And where fraud or similar serious allegations are made, the degree of proof must correspondingly be high: see In re. H (Minors) [1996] AC 563, at 586C-H. All the more so when the alleged wrongdoer is not and will not likely be before the court.

(2) It must also be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff. Where, as in the present case, the plaintiff is likely to make a tracing claim, there must be a serious possibility that the discovery sought must either allow the plaintiff to preserve what may well be his assets or realistically lead to the discovery of such assets: see Arab Monetary Fund v. Hashim (No.5) [1992] 2 All ER 911, at 916D-E, 918J-919A.

(3) The discovery sought must not be unduly wide. There is no entitlement to general discovery (by general discovery is meant discovery in the Peruvian Guano sense) : see Arab Monetary Fund at 918D-E, 919H. It follows therefore that not only must any order be specific, it must also be restricted to those or those classes of documents that are necessary to enable the plaintiff to preserve or discover assets. This is not to say that discovery orders cannot be wide; what is important is that the discovery, whether wide or narrow, is necessary.”

18.  The above considerations set out by Ma J in A Co v B Co have been extensively adopted, and have recently been referred to in Zhou Yacai v Standard Chartered Bank (Hong Kong) Limited [2022] HKCFI 355; HCMP 35 of 2022, 27 January 2022, Deputy High Court Judge Le Pichon, Leung Yiu Ting v MTR Corporation Limited [[2020] HKCFI 460; HCMP 1441 of 2019, 18 March 2020, Chow J, and Chan Shu Moon v Director of Buildings, DCMP 2408 of 2016, 13 February 2017, HH Judge MK Liu.

Analysis

19.  The Applicant submitted that although the 1^st and 2^nd Respondents are also innocent parties caught up in this matter, without disclosure of the names and addresses of the account holders of the respective accounts concerned, the Applicant would be left with no recourse against the wrongdoers. I would add that since this is a tracing exercise, there is also a possibility that the funds might have gone in and out of the accounts of innocent persons as well, but the details of the various transfers would not readily come to the surface without an order for discovery. The primary objective of this exercise is to unveil the flow of funds, so that the Applicant may then identify the potential parties to her intended claim. In other words, the discovery sought is necessary for the Applicant to institute the intended court proceedings.

20.  On the other hand, there is at least a duty of confidentiality on the part of the Respondents towards their clients. In this regard the Applicant’s solicitors have offered at the hearing to undertake not to use the information and documents discovered for any purpose other than those of the intended proceedings.

21.  There seems to be no dispute that the information or documents sought are in the possession, custody or power of the Respondents insofar as the same relate to the accounts held with the respective banks. The scope of the discovery order is also limited to the classes of documents or information sought, pertaining to records of a defined period of time.

22.  Of course, if discovery is ordered, the Respondents would be put to the trouble of having to retrieve the relevant records and documents. This will take time and costs will be incurred.

23.  On the evidence, the Applicant has been subjected to serious criminal as well as tortious acts, leading to her loss of a significant amount of money. Although the Respondents are innocent parties caught up in the matter, and will be put to the trouble of effecting compliance if an order is made, the justice of the case would, in my view, require that the Respondents come under a duty to assist the Applicant, being the victim of the serious criminal or tortious acts committed against her as revealed in the evidence.

24.  Having considered the above factors, I am of the view that the balance tilts in favour of the Applicant and this is an appropriate case to grant Norwich Pharmacal relief.

Orders

25.  Upon the undertaking of the Applicant’s solicitors not to use the information and documents discovered for any purpose other than those of the intended proceedings, I granted the orders sought, to the effect that (i) each of the Respondents do serve on the Applicant the documents and records showing the names and addresses of the account holders of the accounts identified in the draft Order submitted to the court within 28 days from the date of the orders, and that (ii) the Respondents do serve on the Applicant the documents and records showing details of the flow of funds from the said accounts to all external accounts during the period from 19 May 2020 to the date of the orders made.

26.  I also granted liberty to apply, for the purposes of the carrying out of the orders made.

Costs

27.  Mr Chen has cited the case of Chan Shu Moon v Director of Buildings[2] where HH Judge MK Liu stated that in a Norwich Pharmacal application, the general rule is that costs are paid by the party seeking discovery, referring to the English Court of Appeal case of Totalise plc v The Motley Fool Ltd [2002] 1 WLR 1233. In short, the Applicant does not dispute the general rule as to costs.

28.  However, the 2^nd Respondent through their solicitors have by correspondence further referred the Applicant to the case of Edward Arthur Banner v Great Union Electronic Technology Limited, HCA 514 of 2013, 12 April 2013 where Deputy High Court Judge Marlene Ng (as she then was) made an order for costs (including the costs of compliance with the orders made) on an indemnity basis in favour of a bank against which a disclosure order was made for the discovery of certain bank records.

29.  Mr Chen has fairly placed the relevant correspondence with the 2^nd Respondent’s solicitors before the court. He indicated at the hearing the Applicant does not dispute that the costs of these proceedings should be dealt with on the above basis. In the circumstances of this case, this appears to me to be the fair order to be made.

30.  I therefore ordered that the costs and expenses of and occasioned by each of the Respondents in this application, including the costs of complying with the orders, be borne by the Applicant on an indemnity basis, to be summarily assessed if not agreed.

31.  As the Applicant is on Legal Aid, I also ordered that the Applicant’s own costs be taxed in accordance with the Legal Aid Regulations.