CAUDALIE SPAIN S.L. v. VS INTERNATIONAL TECHNOLOGY LTD AND ANOTHER

HCA 1719/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1719 OF 2012

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D E C I S I O N

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1.  This is the 1st defendant’s application to set aside a judgment entered in default of defence. The 1st defendant accepts that service of the writ of summons on it was regular.

2.  The plaintiff’s claim is that its general manager had been defrauded by unknown persons into instructing the plaintiff’s bank in Madrid, Spain, to remit two sums of €287,000 and €25,000 on 4 and 5 September 2012 respectively into the bank account of the 2nd defendant maintained with the Bank of Communications in the mainland.  The 2nd defendant then remitted €286,000 out of the €287,000 to the account of the 1st defendant maintained with the Hongkong Bank in Hong Kong.  The plaintiff therefore claims against the 1st and 2nd defendants for the two sums defrauded, totalling €312,000.

3.  The 1st defendant seeks to set aside the default judgment on the ground that the €286,000 it received from the 2nd defendant was part of the money paid to it by a company called Facelink Limited (“Facelink”) which is incorporated in Cyprus.  The 1st defendant produced an agreement it purportedly made with Facelink dated 25 July 2012.  The agreement was for mutual supply of telecommunications services and facilities to route international telecommunications traffic to various destinations around the world. 

4.  The 1st defendant also produced a purported invoice dated 3 September 2012 it issued to Facelink, seeking payment of €1,136,001.48 for the service it provided to Facelink from 1 August 2012 to 3 September 2012.  Facelink purportedly paid the invoice by two sums of €285,952.35 and €849,952.38, or a total of €1,135,904.73.  The 1st defendant received these two sums on 7 September 2012.  The difference between the invoiced sum and the two sums received is probably because of bank charges. 

5.  There is, however, a Certificate of Incorporation which has been authenticated by the Permanent Secretary of the Ministry of Justice and Public Order of Cyprus, showing that Facelink was only incorporated on 12 September 2012.  That was after the date of the agreement and the date of the invoice. 

6.  Facelink, however, issued a letter dated 2 March 2013 to the 1st defendant, confirming that it had made the agreement with the 1st defendant on 25 July 2012 and had paid the 1st defendant the sum of €1,136,001.48 as required in the invoice.  Facelink further said in the letter that it had used the intermediary service of the 2nd defendant to transfer the money to the 1st defendant.  It however did not produce any document showing its instruction to its banker to remit its own money to the 2nd defendant or any of its bank statements showing the withdrawal of money from its account for payment to the 2nd defendant.  It only provided some bank documents showing the remittance of the two sums from the 2nd defendant to the 1st defendant.

7.  It is the 1st defendant’s firm case that the €285,952.35 it received on 7 September 2012 was from Facelink’s own money and was not money channelled from the plaintiff.  However, a study of the bank documents exhibited by the plaintiff and the 1st defendant show that €287,000 was remitted from the plaintiff’s account with Banco Santander in Madrid on 4 September 2012 to the account of the 2nd defendant maintained with the Bank of Communications in Shanghai.  The 2nd defendant, in fact, received €286,946 on 5 September 2012.  Out of this €286,946, the 2nd defendant then remitted €286,001.80 to the 1st defendant on 5 September 2012.  The Bank of Communications charged €1.80 as commission and remitted €286,000 to the 1st defendant’s account at Hongkong Bank on 6 September 2012.  The 1st defendant received, on 7 September 2012, at its account with the Hongkong Bank, €285,952.35.  The difference of €47.65 should be bank charges.

8.  After going through these documents with care, counsel for the 1st defendant also accepted that this sum, plus bank charges, totalling €286,000 had indeed come from the plaintiff and not from Facelink. The €286,000 remitted to the 1st defendant therefore belonged to the plaintiff and did not come from Facelink.  It was therefore not payment by Facelink to the 1st defendant.

9.  If the 1st defendant is telling the truth, then Facelink has not yet paid it €286,000 for the services allegedly provided.  The 1st defendant can consider pursuing Facelink for this sum, but it must return the €285,952.35 to the plaintiff as it has no basis to receive the same from the plaintiff or to keep the same now.

10.  I therefore maintain the default judgment to the extent of €285,952.35 and grant leave for the 1st defendant to defend the remaining part of the claim at about €25,000.

11.  I also make a costs order nisi that the 1st defendant do pay the plaintiff the costs of this application.  I so order despite granting leave for the 1st defendant to defend the balance of the claim at about €25,000 as the grant of leave is not the result of the 1st defendant’s application and the 1st defendant has, in effect, lost its application. 

12.  I also make absolute the garnishee order nisi but for the smaller sum of €285,952.35.

13.  The plaintiff seeks to amend the statement of claim, the default judgment and the garnishee order by correcting the number of the 1st defendant’s bank account with the Hongkong Bank.  The justification for correcting the error is clear and I grant leave for the amendments.

14.  I also grant leave to the plaintiff to amend the endorsement of claim by reinserting the claim of restitution.  I make a costs order nisi that the plaintiff has to pay the costs of and occasioned by the amendments to the 1st and 2nd defendants, save that there be no order as to costs for the 2nd defendant’s attendance at this morning’s hearing.

15.  I also grant leave to the 1st defendant to file and serve the fourth affirmation of Mr Sabodash with costs be to the plaintiff. 

16.  I continue the Mareva injunction but only to the extent of €285,952.35.  The plaintiff is directed to apply for reduction of the ceiling in the Mareva injunction upon being credited of any sum by the garnishee or recovery from other sources of the 1st defendant.