JAGDIP KAUR SADHU SINGH v. I LIVE LTD

HCA 1553/2018

[2018] HKCFI 2830

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1553 OF 2018

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DECISION

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The application

1.  This is the plaintiff’s application for judgment against the defendant in default of acknowledgement of service and defence.

The plaintiff’s pleaded case

2.  According to the plaintiff’s Amended Statement of Claim refiled on 7 September 2018 (the amendments having been effected without leave pursuant to O.20 r.3), her claim goes like this:

(a) The plaintiff is a Singapore permanent resident;

(b) Touch Trades is a company incorporated in the UK which purportedly provided financial investment services via an online platform;

(c) The defendant is a Hong Kong company.  It holds a bank account with the HSBC (“D’s HSBC A/C”);

(d) On 4 November 2016, the plaintiff opened a trading account (the “trading account”) with Touch Trades on its website.  She deposited into that account US$5,000 by credit card;

(e) After that deposit, she was introduced to Eli Larson (“Larson”) and Ray Davis (“Davis”), allegedly an account manager and CEO respectively of Touch Trades;

(f) The plaintiff was “coaxed” to further deposit monies into the trading account.  She was instructed by Larson to do that by wire transfer into D’s HSBC A/C.  She was provided for that purpose defendant’s name and details of that account;

(g) Between 8 and 10 November 2016, the plaintiff deposited into D’s HSBC A/C 6 sums in the total amount of US$130,101 (the “investment fund”), intending all along that the funds would be managed by Larson for the sake of investment;

(h) The investment funds did not show up in her trading account.  Enquiries with Larson and Davis were met with excuses;

(i) In late November 2016, the plaintiff decided to terminate her engagement with Touch Trades.  In early December 2016, she requested Larson and Davis to arrange for the return of the investment fund.  They did not object, but kept stalling her. 

(j) The plaintiff then pleads that (at §8):

“Effectively, Touch Trades, through its Eli Larson and Ray Davis, agreed with the Plaintiff that the investment arrangement or agreement between them, which was the basis upon which the Plaintiff transferred the investment sum into [D’s HSBC A/C], shall come to an end”;

(k) The plaintiff subsequently became suspicious and on 16 February 2017 reported the matter to the Hong Kong Police.  She learnt from the Hong Kong Police on 27 March 2017 that there was only USD26,295.22 remaining in D’s HSBC A/C, and that according to the Police, that account had been frozen by the bank;

(l) The plaintiff has not been returned any of the investment fund;

(m) She pleads at §§11 and 11A that:

“11. In respect of the investment fund, the Plaintiff contends that:

(a) she has never intended to pass the beneficial interest in the investment fund to the Defendant;

(b) the Defendant shall, upon receipt, holds the same on resulting trust for her benefit;

(c) by wrongfully failing to return the investment fund to the Plaintiff, the Defendant is in breach of trust;

(d) subject to discovery and/or administration of interrogatories, the remaining balance of USD26,295.22 in [D’s HSBC A/C] represents part of the investment fund which beneficially belongs to the Plaintiff and shall be returned to her; and

(f) the Plaintiff is entitled to, on her election, trace and recover from the Defendant asset acquired directly or indirectly with the part of the investment that has been transferred out of [D’s HSBC A/C]; or alternatively, seek equitable compensation from the Defendant.

11A. Further or in the alternative, the investment arrangement or agreement between Touch Trades and the Plaintiff came to an end in early December 2016 the latest.  The basis of transfer of the investment sum has totally failed as a result.  The Defendant is unjustly enriched at the expense of the Plaintiff so long as it retains the investment sum.  The Defendant is liable to return that sum to the Plaintiff as money had and received.”

 (n) On that pleaded basis, the plaintiff seeks:

“(a) A declaration that the Defendant holds the investment fund on resulting trust for the benefit of the Plaintiff and is in breach of trust;

[There is no prayer (b)]

(c) An order directing the Defendant to return the part of the investment fund still in [D’s HSBC A/C] to the Plaintiff;

(d) All necessary accounts and inquiries to enable the Plaintiff to trace and recover the part of investment fund transferred out of [D’s HSBC A/C]; and an order directing the Defendant to deliver up or return that part of the investment fund or their traceable assets to the Plaintiff;

…

(fa) Further or alternatively, an order that the Defendant shall return to the Plaintiff the sum of USD130,101 forthwith as money had and received.”

The proceedings before the District Court

3.  The action was originally started before the District Court (DCCJ 3222/2017). The Writ was first issued from the Registry of the District Court on 14 July 2017.  By Summons filed on 13 November 2017, the plaintiff sought before the District Court judgment against the defendant in default of acknowledgement of service and defence.  That application came before His Honour Judge MK Liu on 6 February 2018.  It was dismissed.  The reasons are set out in the learned Judge’s Decision dated 6 February 2018. Some of the reasons (the jurisdictional reason in particular) ceased to be relevant after the transfer and the amendments that have been effected to the Statement of Claim.  One reason however remains relevant.  The learned Judge observed that no fraud had been pleaded.  That being the case, the dispute between the plaintiff and Touch Trades would have been a contractual one.  The plaintiff had however failed to plead the terms of the agreement.  On the evidence before him, the learned Judge was “of the view that it would not be appropriate to grant reliefs to the plaintiff by a default judgment.  The court has to see evidence and to consider whether the plaintiff can prove her case against the defendant.”

4.  On 6 June 2018, upon the plaintiff’s application, the action was transferred to the Court of First Instance.

The application before this Court

5.  By Summons filed 14 November 2018, the plaintiff seeks an Order that judgment in default of defence be entered in terms as set out in paragraph 2(n) above.

Service of documents

6.  I have read the various affirmations of service.  I am satisfied that the Writ issued from the Registry of the District Court, the Statement of Claim, the Amended Statement of Claim, and the present Summons have all been validly served upon the defendant at its registered address.

7.  The defendant remains absent for this application.

Order 19 rule 7

8.  This application is made pursuant to O.19 r.7.  According to paragraph (1) thereof, “on the hearing of the application the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim.”  However, as explained in paragraph 19/7/13 of Hong Kong Civil Procedure 2019, although paragraph (1) of the rule is expressed in mandatory terms, the rule is not mandatory but discretionary, and the court retains its discretionary power whether to give judgment.  In particular, any application for declaratory relief in default of pleadings is subject to the normal practice of the court not making a declaration without a trial – see paragraph 19/7/20 of Hong Kong Civil Procedure 2019 and the authorities cited therein.

Discussion

9.  I note and observe first of all that despite the amendment of the Statement of Claim after the transfer of the action to the Court of First Instance:

 (a)     Touch Trades remains not a defendant.  I-Live Limited is the sole defendant, which is the holder of D’s HSBC A/C into which the investment fund was deposited;

 (b)     Still no fraud has been expressly pleaded, despite what has been averred in paragraph 13 of the Amended Statement of Claim, that:

“The Plaintiff reserves the right to plead further or alternative cause(s) of action, including but not limited to fraud, and claim further corresponding relief(s) against the Defendant or against any additional party pending discovery and/or administration of interrogatories.”

10.  I have concern about the legal bases of the claim against the defendant based on trust or for return of the balance in D’s HSBC A/C:

 (a) Fraud and constructive trust?

(i) When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient so that the property is recoverable and traceable in equity: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, per Lord Browne-Wilkinson at 716C-D, applied by Sakhrani J in Michael Chen Kang Huang v Peter Lit Ma [2009] 6 HKC 191 at 199I-200C, and by Recorder Lisa Wong SC (as she then was) in Mesirow Financial Administrative Corporation v Best Link Industrial Co Limited HCMP 1846/2015, 25 January 2016, at paragraph 33;

(ii) However, no fraud has been pleaded.  So, no liability can be attached upon the defendant on this basis;

 (b) Resulting trust?

(i) I refer to paragraph 11 of the Amended Statement of Claim reproduced above;

(ii) Mr Sit submits that:

“The fact that P had no intention to benefit D in effecting the transfers is sufficient to give rise to a resulting trust upon D to hold the investment fund for the benefit of P…”

(iii) Even taking that to be so, there is still nothing which supports the averment at paragraph 11(d) of the Amended Statement of Claim that:

“subject to discovery and/or administration of interrogatories, the remaining balance of USD26,295.22 in [D’s HSBC A/C] represents part of the investment fund which beneficially belongs to the Plaintiff and shall be returned to her;

(iv) Indeed, as can be seen, even the pleader pleads that the averment at paragraph 11(d) are “subject to discovery and/or administration of interrogatories”.  There has however been no discovery.  There has not even been any attempt to seek information from HSBC pursuant to section 21 of the Evidence Ordinance for banking records relating to D’s HSBC A/C.  At the moment, there is nothing before the Court on fund flow or the genesis of that balance of USD26,295.22.  The question of timing should also be noted. The investment fund was deposited in D’s HSBC A/C in November 2016.  The plaintiff was informed by the police of that balance in March 2017.  Even assuming accuracy of the hearsay information, there had been a time gap of some 4 months;

 (c) Total failure of consideration, unjust enrichment and restitution?

(i) Again the pleaded case lacks specificity.  I assume in the plaintiff’s favour that Touch Trades may be liable to return the investment fund.  But the claim is not against Touch Trade.  The claim is against the defendant;

(ii) The defendant might have been a mere agent who received the investment fund on behalf of Touch Trades. In the absence of any fraud, does the fact that the consideration for the payment of the investment fund having subsequently failed (i.e. after receipt) results in any trust on the monies which it had received?  No authority has been placed before me in support of such a liability;

(iii) In any event, even assuming some sort of liability attaches upon the defendant on this basis, I see no sufficient basis to order return of the very balance in D’s HSBC A/C.  That balance may be liable to enforcement by Garnishee proceedings should the plaintiff be ultimately successful in her claim, but not an Order for direct payment at this stage;

 (d) Contractual?

As observed by the learned Judge in his Decision, the plaintiff had failed to plead the terms of the agreement.  The position remains the same despite the amendment.

Conclusion

11.  Having considered the pleadings and the submissions made before me, it does not appear to me that the plaintiff is entitled to the forms of relief sought in paragraphs (a), (c) and (d) of her Amended Statement of Claim.  That leaves paragraph (e) (reproduced and sought on a further and alternative basis as paragraph (d) of the present Summons).  That is purely monetary in nature. No leave is required.  I enter judgment in terms of that paragraph, with costs against the defendant.