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DCCJ 4700/2019
[2020] HKDC 566
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 4700 OF 2019
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BETWEEN
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CRP/PE MUNROE STREET OWNER, LLC |
Plaintiff |
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and
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JUNWEI CONSULTING TRADE |
1st Defendant |
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CO., LIMITED |
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(竣威諮詢貿易有限公司) |
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SAN JIN YUAN TRADING LIMITED |
2nd Defendant |
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(三晉源貿易有限公司) |
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| Before: |
Master Maurice Lam in Chambers (Open to public) |
| Date of Hearing: |
10 July 2020 |
| Date of Decision: |
17 July 2020 |
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DECISION
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Introduction
1. The plaintiff, a victim of email fraud, applied for a summary judgment to be entered against the 2nd defendant, the second layer recipient of the proceeds. In the present application, instead of raising any positive defence, the 2nd defendant sought to challenge the plaintiff’s claim on the grounds that (a) there were problems in tracing the proceeds of the fund from the first layer recipient into its hands, and (b) the plaintiff’s pleadings were incomplete and inadequate to sustain a case for unjust enrichment.
The plaintiff’s case
2. The plaintiff’s case is simple. It was averred in the Statement of Claim that the 2nd defendant was unjustly enriched by the receipt of the sum of USD 150,560[1], which was traceable from the sum of USD 960,428[2] paid by the plaintiff to a bank account held by a company called No 1 Trade Limited (hereinafter “No 1 Trade”)[3]. It was stated that the plaintiff had at no time had any business or other bona fide dealing with No 1 Trade[4], and that No 1 Trade had no legal right to retain the money[5].
3. In the supporting affirmation, Mr Procopio of the plaintiff deposed the following factual background. The plaintiff is a limited company incorporated in Delaware, USA, and engages in the business of real estate development[6]. In a project, the plaintiff owed an advisory firm commission in the sum of USD 960,428. On 29 March 2019, Mr Procopio received emails from persons purportedly to be the executive vice president and deal coordinator of the advisory firm giving wiring instructions to the plaintiff[7]. According to the wiring instructions, the plaintiff was requested to transfer the commission into a bank account held by No 1 Trade[8]. According to Mr Procopio, he had no reason at that time to suspect the wiring instructions were not genuine. He therefore caused the plaintiff to transfer the sum of money in accordance with the details contained in the instructions. A wire request was submitted on 2 April 2019[9].
4. It was discovered on the next day that the said wiring instructions were false as they did not contain the correct information of the advisory firm, but contained instead details of a third party, namely No 1 Trade. Mr Procopio stated in the affirmation that the transfer was a mistake[10].
5. Subsequently, the plaintiff filed a report to the Hong Kong Police. On 20 August 2019, the Hong Kong Police informed the plaintiff’s solicitors that parts of the fund transferred to No 1 Trade was further transferred to a bank account held by the 2nd defendant[11]. The Hong Kong Police gave further details in their letter dated 26 November 2019[12]. It was stated in that letter that the fund of USD 960,428 transferred by the plaintiff into No 1 Trade’s bank account on 4 April 2019 was further transferred to different bank accounts on the same day (ie 4 April 2019). Particularly, it was stated that a sum of USD 150,560 was transferred into a bank account under the name of the 2nd defendant. The plaintiff commenced the present proceedings against the 2nd defendant to recover the said sum of money.
The defence of the 2nd defendant
6. In its defence, while admitting that it had no business dealings with the plaintiff[13], the 2nd defendant denied that it was unjustly enriched at the expense of the plaintiff. It was specifically averred that it did not receive any amount of money in the sum of USD 150,560 from No 1 Trade’s bank account to its bank account on 4 April 2019[14].
7. In its affirmation in opposition, it was deposed that the 2nd defendant is a trading company importing frozen meats from overseas to the Mainland China[15]. Essentially, it was the 2nd defendant’s case that the sum of USD 150,560 (which was deposited into its bank account on 8 April 2019) was parts of the funds transferred by its underground broker in the mainland China for foreign exchange transactions[16].
Legal Principles
8. The legal principles for entering a summary judgment are well-established and beyond dispute. It is not necessary for me to recite them here. In the present application, Mr Bosco Cheng, counsel for the 2nd defendant, referred me to the following passage made by Cheung JA[17]:-
“It is well-established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence. However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case. This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence. This requirement is further recognised in the procedural rules which mandate the plaintiff to state his belief in the verifying affidavit that there is no defence to the claim. This requirement must be kept in proper perspective when assessment is made of the strength of the application, otherwise there is a danger that the attention will be focused solely on what the defendant has said without consideration at the same time of the basic premise of the plaintiff’s claim or its inherent strength and weakness.”
9. Accordingly, Mr Cheng asked this Court to scrutinize the inherent strength and weakness of the plaintiff’s claim.
10. Mr Cheng also submitted that, in the consideration of entering a summary judgment, the Court must be satisfied that the Statement of Claim was good and complete, and any defect of substance could defeat an application for summary judgment[18]. Furthermore, insofar as a claim for unjust enrichment is concerned, the plaintiff should not make a generalized claim. Finally, Mr Cheng submitted that “absence of basis” could not constitute an “unjust factor” and could not be a ground for restitution[19].
Parties’ submissions
11. As appeared in the Skeleton Submissions for the 2nd defendant, the 2nd defendant resists the present application by contending that the plaintiff fails to establish a prima facie sustainable case. Two following two objections were raised on behalf of the 2nd defendant:-
(1) The plaintiff pleaded that the 2nd defendant received the sum of USD 150,560 on 4 April 2019. However, according the bank statement of the 2nd defendant[20], there was no deposit of the said sum of money on that date. Instead, the record showed that there was a deposit of the said sum of money on 8 April 2019. Hence, it is a triable issue as to whether the money in the 2nd defendant’s bank account was derived from the sum of USD 960,428 transferred by the plaintiff to the No 1 Trade’s bank account. I will call this the “Tracing Objection”; and
(2) The plaintiff’s pleadings failed to plead any unjust factor in the Statement of Claim. As a result, the plaintiff’s pleadings were incomplete and inadequate. It was further argued that the plaintiff could not relied on “fraud” or “mistake” as unjust factor. In the former case, the plaintiff would not be entitled to a summary judgment because of the “fraud exception”. In the latter, it was submitted that there were grounds to believe that there existed a doubt that the account details contained in the wiring instructions did not belong to the advisory firm and that the plaintiff had assumed the risk of transferring the fund without making any inquiry. I will call this the “Pleadings Objection”.
12. In light of the 2nd defendant’s stance, it is not necessary for me to deal with the defence of “bona fide receipt for value without notice” as anticipated by Mr Brian Lee, counsel for the plaintiff, in his skeleton submissions[21].
Discussion
13. First of all, although the plaintiff did not explicitly plead in the Statement of Claim, I cannot see any reason why I cannot assess the strength and weakness of the plaintiff’s case with reference to the supporting affirmation. In light of Mr Procopio’s affirmation, I am prepared to proceed on the basis that the plaintiff is a victim of email fraud. Prima facie, victims of fraud have a claim in money had and received/unjust enrichment and may assert a proprietary claim against the recipients insofar as the fraudulently obtained funds are traceable into their hands, unless the recipients can establish the defence of bona fide purchaser of value without notice or change in position in good faith[22].
14. The “Tracing Objection” as advanced by the 2nd defendant rests solely on the discrepancy between the date of transfer and the date of receipt of the money. Apparently, the plaintiff’s pleadings were based on the information given by the Hong Kong Police, where it was stated that there was a transfer of USD 150,560 from the bank account of No 1 Trade to the 2nd defendant’s bank account on 4 April 2019. The 2nd defendant’s bank statement showed that there was a deposit of the same amount on 8 April 2019. Mr Cheng submitted that it would be a triable issue as to whether the money deposited into the 2nd defendant’s bank account was parts of the fund transferred from the plaintiff to No 1 Trade. With respect, I am unable to see any triable issue here. To take the case to its highest, it may be contended that it was a pure coincidence that there was deposit to the 2nd defendant’s bank account on 8 April 2019, where the amount was exactly the same as that was stated in the letter of the Hong Kong Police. However, in my view, it is too much of a coincidence that can constitute a bona fide defence to resist an application for summary judgment. There is no scintilla of doubt in my mind that the sum of USD 150,560 in the 2nd defendant’s bank account was derived from the fund transferred by the plaintiff to No 1 Trade.
15. The essential point raised by Mr Cheng is that there is an evidential gap on the dates between the transfer and the deposit. However, if necessary, I believe the Court may take a judicial notice that a wiring transfer might take a couple of days (even between bank accounts in the same bank) before the fund will eventually deposit into the recipient’s account. Hence, even if there is evidential gap in this case, the gap may be closed by way of a judicial notice.
16. Furthermore, Mr Lee made the point during the oral hearing that, if it was the case that the money in the 2nd defendant’s bank account was not derived from the fund transferred from the plaintiff to No 1 Trade, it would be easy for the 2nd defendant to adduce evidence to show that. No such evidence was adduced. I agree that the Court may draw an adverse inference in this lack of evidence.
17. This brings us to the “Pleading Objection” as raised by Mr Cheng, who argued that, in order to resolve the discrepancy of dates, it was necessary for the plaintiff to amend the Statement of Claim. I do not agree. In my view, the main issue rests on the meaning of “date of receipt” – whether it should be deemed to be the date of transfer or the date of deposit. One of the relevant factors may be the time when the transfer becomes irreversible. But, in the present context, I am satisfied that this issue is a mere academic one and does not merit to be determined at trial, let alone an amendment to the pleadings.
18. The main argument in the “Pleading Objection” is that the plaintiff’s Statement of Claim was incomplete and inadequate because it failed to particularize the “unjust factor”. I think Mr Cheng’s argument would have stronger force if his client is the first layer recipient of the fund. However, in this case, the 2nd defendant is the second layer recipient, and claimed no involvement of the dealing between the plaintiff and the first layer recipient (in this case, No 1 Trade). In such circumstances, there will not be any live issue as to whether or not the first layer recipient had the right or entitlement to the fund transferred to it. In my view, any defence based on speculation to the contrary is nothing but moonshine.
19. In the present case, having considered the Statement of Claim as a whole, I am satisfied that the plaintiff has established a claim against the 2nd defendant in that the 2nd defendant received the sum of USD 150,560 without proper authority from its lawful owner (ie the plaintiff), and that the 2nd defendant had no legitimate reason to receive it.
20. Mr Cheng’s criticism concerning the “unjust factor” based on fraud can be dealt with briefly. It has been well established that the fraud exception is not engaged if no allegation of fraud is made against the defendant[23]. In the present case, Mr Lee has been careful to confirm that there was no allegation of fraud against the 2nd defendant.
21. As regards mistake as an “unjust factor”, Mr Cheng submitted that the mistake was tainted by doubt because the plaintiff did not explain why it did not pay the commission in accordance with the agreement. As Mr Lee pointed out, this submission was incorrect, as the documents showed that the closing date was on 3 April 2019[24], which was a date before the transfer to No 1 Trade.
22. The second point was that the plaintiff should have noticed the irregularity in the account name of the wiring instructions, which was not of the advisory firm, but of No 1 Trade. And the emails sent by the imposter were not copied to other individuals in the project. However, this submission directly contradicts what was deposed by Mr Procopio, where he said that he had no reason to suspect the truthfulness of the wiring instructions. To put his submission at its highest, what Mr Cheng could say was that Mr Procopio was negligent in the circumstance. But negligence is not a bar to restitution by mistake[25].
23. For these reasons, I reject the 2nd defendant’s contention that the plaintiff failed to establish a prima facie sustainable case.
24. Since I cannot see any question or issue in dispute that ought to be tried, I am satisfied that the 2nd defendant has no defence to the plaintiff’s claim in this action. I would grant that a judgment be entered against the 2nd defendant as requested.
25. Mr Lee also confirmed that the plaintiff would not insist on the declaratory relief as stated in the prayer of the Statement of Claim, as well as item 1(C) of the summons.
26. Both Mr Lee and Mr Cheng agreed that, if I am minded to enter a summary judgment, there should be a pre-judgment interests from 8 April 2019 at half of the judgment rate. I order accordingly.
27. In the summons, the plaintiff also sought an interim payment to be made by the 2nd defendant in the amount as claimed. Given the aforesaid decision, I am not minded to grant an order for interim payment as requested.
Order
28. In respect of the plaintiff’s summons filed on 13 March 2020, I make the following orders:-
(1) There be a judgment that the 2nd defendant do pay the plaintiff the sum of USD 150,560, or its Hong Kong dollar equivalents at the date of payment, with interests at half of the judgment rate from 8 April 2019 until the date hereof and thereafter at the judgment rate until payment; and
(2) The 2nd defendant shall pay the plaintiff the costs of this action (including the present application) to be taxed if not agreed. There shall also be a certificate for counsel.
29. Lastly, I wish to express my gratitude to Mr Lee and Mr Cheng for their assistance rendered to me in this application.
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( Maurice Lam ) |
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Master, District Court |
Mr Brian Lee, instructed by Herbert Smith Freehills, for the plaintiff
Mr Bosco Cheng, instructed by K M Lai & Li, for the 2nd defendant
[1] See [6.2] of the Statement of Claim [HB1:2:30].
[2] The amount stated in the Statement of Claim was “USD 960,248”. Mr Brian Lee, counsel for the Plaintiff, confirmed at the oral hearing that it was a clerical error and the amount should be “USD 960,428” instead.
[3] See [7] of the Statement of Claim [HB1:2:30].
[4] See [5(c)] of the Statement of Claim [HB1:2:29-30].
[5] See [8] of the Statement of Claim [HB1:2:31].
[6] See [6] of the First Affirmation of Michael Procopio [HB1:6:48].
[7] See [7] of the First Affirmation of Michael Procopio [HB1:6:48].
[8] See [8] of the First Affirmation of Michael Procopio [HB1:6:49].
[9] See [10] of the First Affirmation of Michael Procopio [HB1:6:49].
[10] See [11] of the Statement of Claim [HB1:6:49].
[11] See [13] of the Statement of Claim [HB1:6:50], for the email from the Hong Kong Police dated 20 August 2019 see [HB1:8:81].
[12] See [HB1:8:92].
[13] See [3] of the Defence of the 2nd Defendant [HB1:3:36].
[14] See [6] of the Defence of the 2nd Defendant [HB1:3:36].
[15] See [4] of 林盛雄非宗教式誓章 [HB1:7:55].
[16] See [12] – [13] of 林盛雄非宗教式誓章 [HB1:7:59-60].
[17] Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822 at [14].
[18] Li Chuen Kwai v Po Lam Construction Development Ltd HCA 2376/2013, unreported, 24 September 2014, at [11(2)].
[19] Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (2015) 18 HKCFAR 364.
[20] See [HB1:11:127].
[21] See [35] – [43] of the Skeleton Submission for the Plaintiff.
[22] Leonard Koutsomihalis & anor v Aki Enterprises & anor, HCA 2509/2014, 16 June 2015, per Chow J at §22; Zimmer Sweden AB v KPN Hong Kong Limited & anor, HCA 2264/2013, 2 May 2014, per DHCJ Kent Yee at §§71, 89-94; Cheer Signal Development Limited v Wong Siu Fan & ors, HCA 780/2015, 27 April 2015, per Au-Yeung J at §22.
[23] See Zimmer Sweden AB v KPN Hong Kong Ltd [2016] 1 HKLRD 1016, applied in Laerdal Medical ltd v Hong Kong Haocheng International Trade Ltd, HCA 2193/2016, unreported, 21 June 2017 (affirmed on appeal in CACV 154/2017, unreported, 27 November 2017), Universal Capital Bank v Hongkong Heya Co Ltd [2016] 2 HKLRD 757, as well as Ferrari North America, Inc v Changhon International Energy Co Ltd & Ors [2018] HKCFI 1603.
[24] See the email from the Plaintiff to the advisory firm dated 29 March 2019 [HB1:8:72].
[25] See Kelly v Solari (1841) 9 M & R 54; 152 ER 24; Barclay Bank Ltd v WJ Simms [1980] QB 677; Cressman v Coys of Kensington (Sales) Ltd [2004] EWCA Civ 47, [2004] 1 WLR 2775.
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