COMPAGNIE FINANCIèRE MèDITERRANèE COFIMED S.A. v. BANK OF CHINA (HONG KONG) LTD AND ANOTHER

HCMP 2192/2020

[2021] HKCFI 2572

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2192 OF 2020

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REASONS FOR DECISION

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Introduction

1.  The plaintiff (“P”) is the victim of an email fraud and was defrauded of a total sum of USD 299,500 upon receipt of 2 emails respectively sent by the fraudster on 4 June 2019 and 6 June 2019 for transfer of funds.  The funds were then remitted by P to an account held in the name of Linwei Fashion Co., Limited (“Company”) at the 1^st Respondent (“Bank”).  Upon discovery of the fraud, P made a report to the Hong Kong Police.

2.  On 21 July 2020, P’s solicitors were informed by the Hong Kong Police that a no consent letter was issued to the Bank in August 2019 (under the Organized and Serious Crime Ordinance Cap 455) on the basis that the monies standing in the Company’s account at the Bank (“Company Account”) were proceeds of crime.

3.  Upon conducting a search in the Companies Registry, it was discovered that the Company had already been dissolved by deregistration on 24 July 2020.

4.  On 26 November 2020, P issued the present originating summons under sections 52(1)(e) and 52(5) of the Trustee Ordinance for the following orders:

“1.   a declaration that whole balance in the sum of US$150,000.00 or thereabout (“Sum”) now standing in the bank account No. XXX-XXX-X-XXXX371 held by Linwei Fashion Co., Limited with the 1^st Respondent and all interests accrued thereon since 6^th June 2019 are funds held by the 1^st Respondent on constructive trust for the Plaintiff; and

2.   an order against the 1^st Respondent for the immediate release and transfer of the Sum to the Plaintiff; and”

5.  The Bank indicated in its acknowledgment of service filed on 28 December 2020 that it was unable to take any position at that time.  The 2^nd Respondent the Registrar of Companies (“Registrar”) indicated in his acknowledgment of service filed on 30 December 2020 that the Registrar intended to contest the originating summons.

6.  Thereafter, Ms Wong Kar Wing, Winnie, of the Companies Registry, filed an affidavit herein on 17 February 2021 to oppose P’s originating summons.  According to Ms Wong, the Company was incorporated on 20 December 2018 as a private company limited by shares and a Mr Rong Wanglin was reported as the sole founder member and first director.  On or around 14 February 2020, the Companies Registry received an application from Mr Rong for deregistration of the Company.  As no objection to the deregistration was received within 3 months after the publication of a Gazette notice, the Company was then deregistered and dissolved on 24 July 2020.

7.  Ms Wong stated that, on or around 27 August 2020, P’s solicitors wrote to the Registrar applying on behalf of P for a disclaimer of the Sum in the Company Account on the ground that the Sum was P’s property and that the Company and the Bank had only received the Sum as a constructive/resulting trustee for P (“Disclaimer”).

8.  Ms Wong referred to sections 752 and 753 of the Companies Ordinance, Cap 622 which provide as follows:

“752. Dissolved company’s property vested in Government

(1) If a company is dissolved under this Part or section 226A, 227, 239 or 248 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32), every property and right vested in or held on trust for the company immediately before the dissolution is vested in the Government as bona vacantia.

(2) ……

(3) If any property or right is vested in the Government under subsection (1), the property or right remains subject to the liabilities imposed on the property or right by law and does not have the benefit of any exemption that it might otherwise have as a property or right vested in the Government.

(4) Despite subsection (3), the Government is only required to satisfy those liabilities out of the property or right to the extent that it is properly available to satisfy those liabilities.

(5) In this section—

(a) a reference to a property or right vested in or held on trust for a company includes a leasehold property but excludes a property or right held by the company on trust for any other person; and…..

753.  Disclaimer of dissolved company’s property

(1)  If any property or right, other than immovable property situate in Hong Kong, is vested in the Government under section 752(1), the Registrar may, on his or her own initiative or on written application by a person interested in the property or right, disclaim the Government’s title to the property or right by a notice of disclaimer….”

9.  Ms Wong pointed out that in response to P’s solicitors’ letter of 27 August 2020 applying for the Disclaimer, the Registrar had stated that pursuant to section 752(5)(a), a property or right held by the Company on trust for any other person was not bona vacantia.  P’s solicitors then wrote on 16 September 2020 to indicate that in light of the Registrar’s reply that the money in the Company Account was not bona vacantia, they would withdraw the application for the Disclaimer against the Registrar. On 24 September 2020, the Registrar replied to say that on the basis of P’s claim that the money in the Company Account did not belong to the Company but belonged to P, then it appeared that no bona vacantia was involved, but if the money belonged to the Company, then it would be vested in the Government as bona vacantia.  Ms Wong further pointed out that there was no evidence produced by P on the actual amount of balance standing in the Company Account at the time and there was no evidence on the movement of funds from June 2019 produced by P.

10.  It was in light of the above that the Registrar had opposed P’s application.

11.  Subsequent thereto, P obtained an order on 15 April 2021 for the Bank to provide P with documents in relation to the Company Account.  The Bank had provided P with a transaction list for the period from 4 June 2019 to 15 April 2021 (“Transaction List”) which showed that there were only two payments deposited into the Company Account respectively on 5 June 2019 and 8 June 2019 which corresponded with the payments made by P.

12.  P was represented by Mr Charles Wong of Messrs Lo, Wong & Tsui at the hearing before this Court and Mr Francis Fung of Messrs Zhong Lun Law Firm LLP appeared for the Bank. 

13.  On 12 July 2021, the day before the hearing, Senior Government Counsel Ms Eva Sze of the Department of Justice sent a letter to the Court on behalf of the Registrar indicating that the Registrar would take a neutral stance in light of the agreement reached between P and the Registrar, and sought leave to be excused from the hearing.

Relevant Legal Principles

14.  The legal basis of the application for a vesting order is set out in s.52 of the Trustee Ordinance, which provides that:

“Vesting orders as to stock and thing in action

(1) In any of the following cases, namely—

............

(e) where stock or a thing in action is vested in a trustee whether by way of mortgage or otherwise and it appears to the court to be expedient,

………

(5) The court may make declarations and give directions concerning the manner in which the right to transfer any stock or thing in action vested under the provisions of this Ordinance is to be exercised.

15.  It has been held that section 52(1)(e) of the Trustee Ordinance is wide enough to accommodate the situation of a constructive trustee arising by operation of law, such as a proprietary claim by the victim of fraud to recover property that is traced into the hands of the trustee.  If it appears to the court to be expedient to do so, the court may make an order vesting in the victim of the fraud the right to recover the money that is traced into the account of the constructive trustee kept with the bank, which is a chose in action.  In enforcement, section 52(5) empowers the court to direct the bank to release the amount to the victim: Jensonn Power Systems Pte Ltd v Lishan Zhi Trading Co Ltd [2020] HKDC 629 at §§9, 11; Wismettac Asian Foods, Inc. v United Top Properties Ltd and Others [2020] HKCFI 1504 at §§40-49.

16.  As seen in The Henri Stern Watch Agency Inc v HK Huasheng Technology Develop Co, Ltd and Another [2018] HKCFI 1972 at §7, the court will consider making a vesting order as to trust property where it is impossible or difficult to deal with the property without such an order and may make declaration and to give direction concerning the manner in which the right to transfer the property vested under the provisions of the Trustee Ordinance is to be exercised.

17.  As further seen in Wismettac Asian Foods, Inc. v United Top Properties Ltd and Others [2020] HKCFI 1504 at §§50-51, a vesting order can only be made if it can be proved that the balance in the bank account in question indeed represents the victim’s money or its traceable proceeds and the bank has to be joined before an order can be made to direct it to release the money to the victim.

Discussion

18.  There were three issues before the court, namely:

(1)   whether the balance in the Company Account represented P’s money or its traceable proceeds;

(2)   whether it was appropriate to grant the declaration relief; and

(3)   whether a vesting order should be made against the Bank.

19.  As set out in Mr Wong’s affirmation and as set out earlier, the payment transactions in the Transaction List coincided with the two payments made by the P to the Company respectively.  Apart from the said payments made by the P, there were no other payments into the Company Account during that period as reflected in the Transaction List.

20.  Having considered the evidence, I accept what was submitted by Mr Wong, that the remaining balance now standing in the Company Account represented the money from P.

21.  In the present case, the Company was dissolved and therefore, it would not contest the P’s originating summons. The Registrar was made a party to the proceedings in light of s.752 of the Companies Ordinance but was no longer contesting the P’s Originating Summons.

22.  Without a vesting order against the Bank, the Sum would likely to be left in in the Company Account.  The Bank had taken a neutral stance in the matter.

23.  Having considered the evidence before the Court, I came to the view at the hearing that P was a victim of fraud and the Sum was P’s money which the Bank held on constructive trust for P.  I was prepared to grant the declaration as sought by P in the originating summons.

Order

24.  P and the Registrar had agreed to the following terms, namely:

(1)   P to bear the Registrar’s costs in these proceedings to be taxed of not agreed; and

(2)   P’s solicitors to undertake that   if the Court orders any sum standing in the Company Account to released and/or transferred to P, such sum shall be paid to P’s solicitors as stakeholder and shall not be released before the Registrar’s costs have been fully settled.

25.  At the hearing, at this Court’s query, the Bank indicated that it would also like such an undertaking as in (ii) above.  The Bank informed the Court that it often encountered difficulties in recovering its costs from foreign plaintiffs in proceedings of similar nature.  There was no opposition from P.  In my view, the undertaking was a reasonable undertaking to be sought by both the Registrar and the Bank, since P is a foreign company and so far as this Court could gather, it has no other assets in Hong Kong save the Sum in the Company Account.  

26.  In the above circumstances, this Court granted an order as sought and agreed by the parties.