WONG YUK YU v. ZH HONG KONG TRADING CO, LTD

DCMP 3575/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 3575 OF 2016

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REASONS FOR DECISION

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1.  This is yet another case where unfortunately the plaintiff fell victim to a fraudulent scheme.  The total sum deceived was quite considerable - in the amount of US$4,144,112.33.  The plaintiff commenced these proceedings to recover what was left in one of the bank accounts into which she had transferred two sums as asked by the fraudster.

2.  In the hearing on 9 January 2017, I gave judgment to the plaintiff granting the following orders:-

(1)   A declaration that the sum of HK$343,046.24 together with all the interest accrued thereon, now held in bank account no 369-225370-883 in Hang Seng Bank (“the Fund”), subject to a hold imposed by that bank to the order of the Hong Kong Police Force, is held on trust for the plaintiff;

(2)   The Fund be forthwith released and returned to the plaintiff; and

(3)   costs of and incidental to this application be to the plaintiff, summarily assessed at HK$29,848.

3.  Reasons therefor are to be given later.  This I now do.

Hearing proceeded in the absence of the defendant

4.  The hearing before me on 9 January 2017 was the first hearing of this Originating Summons.  The defendant was absent.  The defendant has not filed its acknowledgment of service within time, or at all.

5.  Order 28 rule 1 of the Rules of the District Court provides that Order 32 rule 5 shall apply to originating summons. Order 32 rule 5(1) empowers the court to proceed in the absence of a party if, having regard to the nature of the application, it thinks it expedient so to do.  Under Order 32 rule 5(2), before so proceeding the court may require to be satisfied that the summons, or as the case may be, notice of the time appointed for the resumed hearing was duly served on the absent party.

6.  Under Order 28 rule 6, in the hearing of an application for an order affecting a party who has failed to acknowledge service of the originating summons, the court may require to be satisfied in such manner as it thinks fit that the party has so failed.

7.  Having considered the affirmation of service of Wu Kar Keung Edmond, I am satisfied that the Originating Summons herein together with the supporting affirmation of the plaintiff filed on 29 November 2016 with exhibits thereto were duly served on 30 November 2016 to the defendant by leaving them at the address of the registered office of the defendant, which was also the defendant’s business address as stated in its Business Registration search.  These documents were thus duly served to the defendant about a month and nine days prior to this hearing.

8.  On the Originating Summons, which was in the expedited form (Form 10), the date and time of this hearing as well as the relief sought were clearly set out.

9.  I am thus satisfied that the notice of this hearing has been duly served to the defendant, who has had adequate notice thereof, but who did not file the acknowledgement of service, or appear in this hearing to contest or participate in these proceedings.

10.  There is one other matter I need to go into before proceeding.

11.  Order 7 rule 2(1) provides that every originating summons (other than an ex parte summons) shall be in Form 8 in Appendix A (the general form), or if so authorized or required, in Form 10 in Appendix A (the expedited form).  Practice Direction 5.8 paragraph 1 reiterates that Form 8 will usually be appropriate and further directs that Form 10 and Form 11 (ex-parte form) are to be used only when they are authorized or required by the Rules or any statutory provision.

12.  Whether Form 8 or Form 10 is to be used is not a matter of mere technicality.  The procedure and time frame for fixing time for attendance of the parties before the court in respect of an originating summons in Form 8 and that in Form 10 are different, as respectively provided for by Order 28 rule 2(1) and Order 28 rule 2(2). Broadly speaking, the procedure under Form 8 gives more time and opportunity to the defendant to respond.

13.  Mr Cheung, appearing for the plaintiff, confirmed in the hearing that the use of Form 10 in the present proceedings was not authorized or required by any Rule or statutory provision. While the plaintiff’s eagerness to expedite was understandable, Form 8, and not Form 10, should have been used.

14.  However, in view of the adequacy of notice of the hearing date and time, and the relief sought as explained above, and the facts in this case as set out below, I am satisfied that I should proceed to hear the matter pursuant to Order 2 rule 1(3) without the need to give further directions.

The plaintiff’s case

15.  The plaintiff, a married woman, operated a vegetable wholesale store in the Western District together with her husband.  On 8 April 2015, she received a fax from one “Barrister Humberto Zaragosa Soza” of “Sauslink International” of Spain, in which Humberto represented himself to be an attorney/auditor working for a client having the last name “Wong” who has deceased and who has left an inheritance in the form of investment deposits worth US$13,300,000 awaiting to be claimed, and Humberto invited the plaintiff to “collaborate” with him to obtain the same.

16.  Unfortunately, the plaintiff fell for it and contacted this Humberto initially by email and later through phone.

17.  In gist, by different pretexts, excuses and means of deception, this Humberto (together with other persons) deceived and hoaxed the plaintiff into making a total of 35 payments by wire transfers and other means to a number of persons and companies between 22 April 2015 to 12 May 2016 in the total sum of US$4,144,112.33.  Humberto along the way promised that a safe deposit box containing all the cash representing the inheritance would be shipped to Hong Kong and he would personally come to Hong Kong to collect the same and to give the plaintiff a handsome share.  Unsurprisingly, this promise never materialized.

18.  In June 2016, the plaintiff became aware that this was a scam through talking to her brother.  On 29 June 2016, the plaintiff reported the matter to the police.  The plaintiff’s police statement made on that date detailing the events and attached with all bank transfer and payment documents was exhibited to the plaintiff’s affirmation herein.

19.  The present proceedings concern the last 2 of the said 35 payments.  These two payments were made by the plaintiff into the defendant’s Hang Seng Bank account no 369-225370-883 (“the Account”) respectively on 11 and 12 May 2016 in the amounts of US$250,000 and US$89,000.  They were made as Humberto called the plaintiff in early May 2016 claiming that they need to pay “value added tax” and to pay another sum to “stop others from obtaining the inheritance”.

20.  After investigation, the police discovered that there still remained in the Account a balance of HK$343,046.24 (“the Fund”).  The Fund was put on hold by the police.  By letter dated 28 October 2016 to the plaintiff, the police informed the plaintiff that unless a civil claim was made by her, the police would apply to confiscate the same.  Hence, these proceedings were commenced.

21.  On 30 November 2016, both the Hang Seng Bank and the police have been served with copies of the plaintiff’s Originating Summons herein and the supporting affirmation of the plaintiff.  Both the bank and the police to date have not indicated that there is any potential claim on the Fund by any other claimant or complainant.

22.  The plaintiff also stressed the fact that the defendant was only incorporated on 2 March 2016 and that there were constant changes in its sole directorship as showing in all likelihood that the defendant was not a genuine trading vehicle, but a vessel to perpetrate the fraud.  The changes in its sole directorship were:-

(a)   One 馬福清 (Ma Fuqing) bearing the address of 中國甘肅省和政縣梁家寺鄉大何家村梁陳家西社十一號 was the defendant’s founder member and its first sole director.

(b)   Less than a month later on 15 March 2016, Ma Fuqing resigned as director and was replaced by one 吳勇 (Wu Yong) of 中國江蘇省海門市臨江鎮普明村二十六組十九號.

(c)   About a month later on 18 April 2016, Wu Yong resigned as director and was replaced by one Igor Kolomiiets (holder of a Ukraine passport) of 264 The Ridegway Street, Albans Hertfordshare, AL4 9XQ Ukraine.

(d)   About another month later on 25 May 2016, Igor Kolomiiets resigned as director and Wu Yong was again appointed as the defendant’s sole director.

Discussion

23.  On the unchallenged evidence of the plaintiff as substantiated by the contemporaneous documents produced, I am satisfied that the plaintiff was fraudulently deceived to make the two payments into the Account as above set out.

24.  When property is obtained by fraud, equity imposes a constructive trust so that the property is recoverable and traceable in equity: Westdeutsche Landesbank Girozentrale v Islinton London Borough Council [1996] AC 669, at 716 C-D, applied by Sakhrani J in Michael Chen Kang Huang v Peter Lit Ma [2009]6 HKC 191 and Recorder Lisa KY Wong SC in Mesirow Financial Administrative Corporation v Best Link Industrial Co, Limited HCMP 1846/2015.

25.  On the evidence, I am satisfied that the Fund was traceable in equity to the two payments made by the plaintiff into the Account on 11 and 12 May 2016.  The Fund is thus held on constructive trust for the plaintiff.  I am thus satisfied that liability is established and that I may, under Order 28 rule 4(1), make such order in favour of the plaintiff as the nature of the case may require.

26.  As a rule of practice, not of law, the court will not make a declaration by consent or in default without a trial.  This rule however is not inflexible and will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled (Hong Kong Civil procedure 2017, Volume 1, paragraph 15/16/2).  The practice will thus give way where the plaintiff has a genuine need for declaratory relief which the court can properly grant on the merits of the case: Lai Wai Kuen v Wong Shau Kwong [2004] 4 HKC 528, per Lam J (as he then was).

27.  On present facts, I am satisfied that there is a genuine need for declaratory relief that can be properly granted on the merits.  I have found above that the Fund was the plaintiff’s in equity.  If only a mere payment order is made without a declaration, the plaintiff’s right will be relegated to that of an unsecure creditor, with which comes the potential difficulty, uncertainty, time and expenses in recovering against the defendant, about whom very little is now known or can be found out. Granting a mere order for payment will not be doing the plaintiff the fullest justice to which she is entitled.

28.  I therefore granted the orders set out above.