NTT DEVICES AMERICA, INC (formerly known as NTT ELECTRONICS AMERICA, INC) v. QDE TRADE CO LTD AND OTHERS

HCA 1287/2023

[2024] HKCFI 453

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1287 OF 2023

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REASONS FOR DECISION

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1.  This was the hearing, by way of return date, of the Plaintiff’s summons taken out on 24 January 2024 to continue the Mareva/proprietary injunction which it obtained ex-parte on 22 January 2024 as against the 15^th to 34^th Defendants (“the Injunction Order”).

2.  In the course of the hearing and having heard Mr Ng, I ordered, among others, that the En Masse Substituted Service Order (defined below) made ex-parte on the same occasion on 22 January 2024 be set aside, and that the summons as concerning the Remaining Defendants (defined below) be adjourned to 23 February 2024 before the Summons Judge by way of a 2^nd return date and the Injunction Order be continued as against them until then.

3.  I am now providing the written reasons as I said I would. As there are a large number of Defendants, I will refer to them by abbreviations.

4.  This is yet another fraud case. According to the Plaintiff, it was defrauded into making 4 payments in late July 2023 in the total sum of US$5,476,204. The said 4 payments were all made to D1’s bank account held with DBS Bank.

5.  Upon the bankers books disclosures given pursuant to a number of orders, it was discovered that

a.  D2 to D11 and D13 were 2^nd layer recipients having received from D1’s said bank account sums ranging from HK$16,750,000 to HK$50,000;

b.  D12, D14 to D30 are 3^rd layer recipients to whom D2, D7, D10, D11 and D13 have dissipated part of the defrauded sum, ranging from about HK$5.2 million to HK$89,000; and

c.  D31 to D34 are 4^th layer recipients having received sums ranging from about HK$180,000 to HK$320,000.

6.  As information was made available to the Plaintiff incrementally by disclosures given at different times, the Plaintiff has obtained altogether 4 Mareva/proprietary injunctions from the Court between August 2023 to January 2024. The Injunction Order was the last in time.

7.  This Reasons for Decision concerns 14 Defendants, namely, D15, D21 to D29, D31 to D34 (“the Remaining Defendants”) who were absent at the hearing, the continuation of the Injunction Order as against the legally represented Defendants (D16, D17, D18, D19 and D30) having been sorted out and dealt with, as had the continuation as against D20, who was absent today, but the due service of the relevant documents on whom was satisfactorily shown.

8.  In respect of the Remaining Defendants, the Plaintiff on 22 January 2024 sought and obtained ex-parte before the Judge an order for substituted service en masse, that service on the respective 8 banks “shall be deemed good and sufficient service” on the corresponding Defendants who maintained an account with them, as follows :

a.  Bank of China – D15 and D21;

b.  Airstar Bank – D21 and D24;

c.  Standard Chartered Bank – D22;

d.  Hang Seng Bank – D23;

e.  Livi Bank – D24, D25, D27, D32, D33 and D34;

f.  Ant Bank – D26 and D31

g.  ZA Bank – D28; and

h.  Fusion Bank – D29

(“the En Masse Substituted Service Order”).

9.  Pursuant to the En Masse Substituted Service Order, the 8 banks were so served a few days prior to the hearing, namely, between 26^th to 29^th January 2024.

10.  At the hearing, I was informed by Mr Ng, counsel for the Plaintiff, that Ant Bank wrote to the Plaintiff’s solicitors, and Fusion Bank indicated over a phone call, essentially that they were under no obligation to serve the court documents to the corresponding Defendants and that the En Masse Substituted Service Order did not specifically order them to serve or pass on the documents to the corresponding Defendants. The Plaintiff’s solicitors responded to the 2 banks insisting that the banks were under a duty to do so. Nothing was yet heard from the other 6 banks (“the Other 6 Banks”).

11.  Mr Ng then on behalf of the Plaintiff asked me, essentially,

a.  to accept that due service has been effected on the corresponding Defendants in relation to the Other 6 Banks as these banks have not protested; or if I considered that the Other 6 Banks had only been so served very recently and they therefore might not have sufficient time to respond, to adjourn to another return date such that if by then the Other 6 Banks have not protested, service be deemed good; and/or

b.  to vary the En Masse Substituted Service Order by additionally and specifically ordering all 8 banks or the 2 protesting banks to serve the documents to the corresponding Defendants.

12.  I declined to adopt any of the above courses.

13.  Under O65 r4, substituted service may be ordered where “it appears to the Court that it is impracticable for any reason to serve that document in the manner prescribed on that person”, the application need to be supported by an affirmation stating the facts on which the application is founded, and the substituted service “is effected by taking such steps … to bring the document to the notice of the person to be served”.

14.  Upon such application, the Court must consider whether the proposed mode of substituted service would be effective, and it must be shown that thereby the document is likely to reach or to come to the knowledge of the person to be served (Hong Kong Civil Procedure 2024 §65/4/4). It goes without saying that such effectiveness need to be considered and likelihood to be shown in respect of each individual person to be served if the application applies for substituted service to be effected on a number of such persons.

15.  In the supporting affirmation filed on behalf of the Plaintiff, all that was said in support of the application for the En Masse Substituted Service Order was merely that the Plaintiff did not know, or did not have any dealings with, any of D15 to D34, or any of their agents, employees or associates[1].

16.  There were thus no facts deposed to concerning any efforts that had been made, or could be made in due course, to effect service through the prescribed means, and that they were impracticable. As importantly, no factual basis was deposed to showing that service on the 8 banks would likely bring the documents to the notice or knowledge of the corresponding Defendants.

17.  Materially, the comprehensive bankers books disclosures sought and obtained on the same occasion in respect of D15 to D34’s bank accounts included disclosures of records or information that, upon their later provision, would in all likelihood reveal the address (and other contact information) of D15 to D34. Indeed and typically, one of the purposes of such bankers books disclosures is to obtain such information of the potential defendant(s) for the very purpose of effecting due service.

18.  Unfortunately, the lack of such factual basis and the fact that the addresses and contact information of D15 to D34 would likely be revealed by the forthcoming disclosures were not drawn to the attention of the Judge for his consideration during the ex-parte application, whether in the supporting affirmation, the written submissions placed before the Judge[2], or in the oral hearing (as confirmed by Mr Ng who also appeared for the Plaintiff on that occasion)[3].

19.  Moreover, once the Injunction Order was obtained and served on the banks, even though service of the Injunction Order has not yet been effected on the Remaining Defendants, their corresponding bank accounts would be immediately frozen. Practically, there is no exigent reason to think it “impracticable” to effect service to the Remaining Defendants in due course by the prescribed means after the information is obtained upon disclosure.

20.  In my view, the application for the En Masse Substituted Service Order was unsupported and unjustified.

21.  More importantly for present purposes, and for reasons that follow, I found myself unable to be satisfied that the mere service of the documents on the 8 banks (without also ordering them to take positive steps to bring to the notice of, or forward the same to, the corresponding Defendants) would likely have brought, not to say would actually have brought, the documents to the notice of the corresponding Defendants.

22.  The Plaintiff submitted, as it has insisted with the 2 protesting banks, that there existed an obligation under the general law on the part of banks to assist in effecting the service or notifying the customer against whom such a substituted service order was made.

23.  The very recent judgment of Toyota Boshoku Europe N.V. v Kingsville (HK) Enterprises Limited and Others (HCA 452/2022, 26 January 2024, Q Au-Yeung J), which was properly drawn to my attention by Mr Ng, is relevant. The judgment, however, was not available at the ex-parte hearing as it was handed down days after.

24.  In that case, the plaintiff fell victim to a large scale fraud involving about HK$500 million. A substituted service order similar to the En Masse Substituted Service Order was obtained from a Master. While not disturbing that order as the bank in that case had already, as the learned Judge noted, helpfully forwarded the documents, the learned Judge without difficulty refused the plaintiff’s application to grant the same substituted service order going forward.

25.  Pertinently, the learned Judge readily agreed with the views and stance of the bank, that :

a.  the bank was not the agent of the defendant customer;

b.  it had no instruction or authority from the defendant customer to accept service on his behalf; and

c.  accepting service of court documents was not any part of the usual service provided by the bank to its customers.

26.  Such aspects of bank-customer relationship militate against the existence of such an obligation.

27.  It also seems to me that these aspects of the bank-customer relationship are not peculiar to the particular bank in Toyota Boshoku Europe N.V., but are part of the general make-up of the usual relationship between a bank and its customers. Of course, there may well be particular instances where the relationship of certain customer and the bank is special or different, which may merit a different consideration, whether in respect of the existence of the said obligation, or in the context of an application for substituted service to that customer through that bank. However, and as said, before me there was no evidence suggesting that such was the case here.

28.  I also respectfully agree with the learned Judge and share the same concern expressed in §15(3) in Toyota Boshoku Europe N.V. “… that such a mode of service imposed on banks, once becoming prevalent, may create unforeseen duties outside the duty of the bank to its customer and create costs on banks which are not covered by a substituted service order”.

29.  In Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181, a decision by the then UK House of Lords, the House unanimously held that the service of an asset freezing injunction on a bank did not create a duty of care owed by the bank to the party in whose favour the injunction was granted. The House reasoned that it would be productive of unjust and unreasonable results to recognize such a duty of care being owed by a bank. The case was applied locally in Grasberg Capital Asia Ltd v Bank of Communications Ltd [2017] 5 HKLRD 854, where the claim by the plaintiff, who has served a Mareva injunction on the defendant bank and was claiming a breach of duty by the bank, was struck out as disclosing no reasonable cause of action.

30.  In my view, therefore, this court was not to recognize any such asserted obligation on a bank unless it was well supported by authority. As the Plaintiff was unable to produce any, I therefore at the hearing did not accept that the bank was under an obligation to assist in effecting service ordered under the En Masse Substituted Service Order.

31.  As no such obligation existed, there was before me no basis to even assume that by merely serving on the 8 banks, the corresponding Defendants would likely be notified, or that the 8 banks would voluntarily take positive steps to notify the corresponding Defendants (regardless of whether they also chose to protest or not). Indeed and as said, the 2 protesting banks actually refused to take such steps.

32.  One further relevant consideration was this. Under the present terms of the En Masse Substituted Service Order, the Other 6 Banks were not obligated at all to respond (and the 2 protesting banks were not obligated to further respond), not to mention to file any form of affirmation evidence to let the Court or the Plaintiff know whether the banks have indeed notified the corresponding Defendants or forwarded the documents, or not. Mr Ng did not seek to dispute that the 8 banks were not under such an obligation. Thus, there would always be a lurking uncertainty under the mode of service provided by the En Masse Substituted Service Order, which is unsatisfactory.

33.  The lack of an obligation to respond also meant that the Plaintiff’s proposal to adjourn to a later date to see whether any of the Other 6 Banks would protest, and failing protest, effective service was to be deemed, was untenable, as failure to protest (or respond) should not and could not be taken as showing that the banks have voluntarily served or forwarded the documents or notified the corresponding Defendants. There was thus no utility in so adjourning, and I therefore declined such a course.

34.  Regarding the Plaintiff’s oral application to additionally order the banks to take positive steps to serve or forward the documents or notify the corresponding Defendants of them, in my view, the same considerations and care ought to apply as in dealing with a Norwich Pharmacal application for discovery from a bank. Namely, the Plaintiff is seeking the assistance of an innocent party caught up in the wrongful acts of others, which is a relief of extraordinary nature that a Court should not grant lightly in the absence of powerful factors, and which involves balancing the competing interests of the victim of the alleged wrongdoing and the caught-up innocent party (A Co v B Co [2002] 3 HKLRD 111, Ma J (as the former CJ then was) at §§10-12).

35.  Therefore and in my judgment, such an application for a bank to render positive assistance to help serve or forward documents to its customers should not, like the usual application for substituted service, be made ex-parte. It seemed to me only fair that an inter-partes summons be issued to the bank so that it would have an opportunity to be heard. I therefore refused the Plaintiff’s said oral application.

36.  In Toyota Boshoku Europe N.V., the learned Judge further dealt with various considerations in relation to service out of jurisdiction (which was the case for the particular defendant in that case) and queried whether the substituted service through the bank could be regarded as proper service out of jurisdiction, in that it might have the effect of circumventing the threshold requirement of O11 r1. That may very well be a valid consideration in the present case if upon receiving documents to be disclosed by the banks it is shown that some of the Remaining Defendants are residents outside Hong Kong.

37.  In the circumstances, it is disconcerting, if not also inconsistent, that the En Masse Substituted Service Order continued to be in place while I was unable to accept that thereby due service could or should be deemed as having been effected, and in light of all the considerations and reasons I express above, I came to the conclusion that the only appropriate course was to set aside the En Masse Substituted Service Order under O32 r6, so that the Plaintiff would effect due service on the Remaining Defendants through the prescribed means.

38.  I therefore made the said orders.