WISMETTAC ASIAN FOODS, INC. v. UNITED TOP PROPERTIES LTD AND OTHERS

HCA 252/2020 & 2315/2019

[2020] HKCFI 1504

HCA 252/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 252 OF 2020

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HCA 2315/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2315 OF 2019

______________

______________

(Heard together)

____________________

DECISION

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A. INTRODUCTION

1.  In these two actions, the plaintiff, Wismettac Asian Food, Inc (“the Plaintiff”) claims to be the victim of an email fraud. It applies for (a) default judgments against some of the defendants on the ground that they have failed to file any defence; (b) vesting orders in relation to the remaining balances in those defendants’ bank accounts, and orders joining the banks as respondents for such purpose; and (c) continuation of the mareva injunctions against those defendants.

2.  What may be of general interest is that there are apparently conflicting authorities on whether vesting orders can be made in these circumstances.  This is an important issue that I shall consider in this judgment.

B.  THE PLAINTIFF’S PLEADED CASE

3.  The Plaintiff is a company incorporated in California, USA.  It is wholly owned by Nishimoto Co Ltd (“the Parent Company”), which is the head of a group of subsidiary companies engaged in the export, import and distribution of Asian food worldwide.  The Plaintiff is engaged in the export, import and distribution of Asian food products in the USA.

B1.    HCA 2315/2019

4.  The Plaintiff maintained and maintains a bank account at Wells Fargo Bank, NA (“Wells Fargo”) (account no. 4121456545) (“the Plaintiff’s Bank Account”).

5.  At the material time, Mr Darly Gormley, the Chief Executive Officer of the Plaintiff (“Mr Gormley”), has and had been the registered holder and user of the email account with the address daryl.gormley@wismettacusa.com (“Mr Gormley’s Email Address”).  He uses and used this email address to communicate with other people, including Mr Robert Susaki, the Chairman of the Parent Company (“Mr Susaki”) in relation to general business operations and affairs.

6.  The Plaintiff claims that it became the victim of an email fraud in the following circumstances:

(a)  On the morning of 3 December 2019, an imposter posing as Mr Susaki (“the First Imposter”) emailed Mr Gormley at Mr Gormley’s Email Address using an email account which appeared to the recipient to be from “Robert Susaki Robert_susaki@wisemettac.com” (“the first Imposter’s Email Address”).

(b)  The email message requested Mr Gormley’s assistance in a “confidential acquisition” and informed Mr Gormley that one Mr David Hirschman, an attorney in London, was supposed to contact him with more details.

(c)  On the same day, the First Imposter emailed Mr Gormley again stating that the acquisition was of a company in Asia and the deal was to be concluded from the plaintiff in the USA for confidentiality purposes (“the Fake Acquisition”).  The First Imposter further stated that a law firm in London, Greenberg Traurig, was representing the Plaintiff in the acquisition and instructed Mr Gormley to work with Greenberg Traurig’s partner, David Hirschman.

(d)  An imposter posing as one Mr David Hirschman (“the Second Imposter”) then emailed Mr Gormley at Mr Gormley’s Email Address on the same day using the email address d.hirschman@greenberytlwas,com (“the Second Imposter’s Email Address”) regarding the Fake Acquisition.  The signature of the Second Imposter’s Email Address displayed the name of the law firm, the real logo thereof and its contact details.

(e)  In the afternoon on that day, Mr Gormley spoke to the Second Imposter over the phone, after which the Second Imposter emailed to Mr Gormley requesting for the Plaintiff’s banking information.  Mr Gormley then emailed the Plaintiff’s banking information to the Second Imposter’s Email Address.  After that, the First Imposter emailed Mr Gormley stating that the Second Imposter would email Mr Gormley “the beneficiary details for the deposit payment” for the Fake Acquisition and said “Please proceed accordingly.”

(f)  The same afternoon, the Second Imposter emailed to Mr Gormley’s Email Address the first fake payment request instructing the plaintiff to wire US$2,550,000.00 as per the fake wiring instructions to the first defendant (namely, ZL Trade Limited (“ZL”))’s account at the Standard Chartered Bank, Hong Kong (“the ZL’s Bank Account”).

(g) Mr Gormley, without knowing that the First Imposter and the Second Imposter were not Mr Susaki and Mr David Hirschman, and pursuant to the first fake payment request, instructed Mr Tom Kawaguchi, the Chief Financial Officer of the Plaintiff to wire a sum of US$2,550,000.00 (the “First Sum”) to ZL’s Bank Account.  Mr Kawaguchi complied and arranged the First Sum to be wired from the Plaintiff’s Bank Account to ZL’s Bank Account on 3 December 2019.  Due to Wells Fargo’s wire cut‑off time, the payment of the Frist Sum was set to process on 4 December 2019.

(h)  On the morning of 4 December 2019, Mr Kawaguchi informed Mr Gormley that the wire transfer of the First Sum to ZL’s Bank Account was completed, and Mr Gormley informed the Second Imposter of the same.

(i)  On the morning of 5 December 2019, the Second Imposter emailed to Mr Gormley informing him that there would be several payments to send and that the Plaintiff was required to make payments to one of the purported shareholders of the Fake Acquisition that day.  That same morning, the Second Imposter emailed to Mr Gormley’s Email Address the second fake payment request instructing the Plaintiff to wire US$950,000.00 as per the fake wiring instructions to the 2^nd defendant (namely, Jin Hongsheng Trading Co Ltd (“JH”))’s account at the Bank of China, Hong Kong (“JH’s Bank Account”).

(j)  That same morning, Mr Gormley, again without knowing that the First Imposter and the Second Imposter were not Mr Susaki and Mr David Hirschman, instructed Mr Kawaguchi to wire a sum of US$950,000.00 (“the Second Sum”) to JH’s Bank Account, who complied and accordingly arranged for the Second Sum to be wired to JH’s Bank Account.  The wire transfer of the Second Sum was completed in the afternoon on 5 December 2019.

(k)  On the morning of 6 December 2019, the First Imposter emailed to Mr Gormley directing him to work with the Second Imposter to make further payments to other purported shareholders involved in the Fake Acquisition.  Later that morning, the Second Imposter emailed Mr Gormley with the third and fourth fake payment requests, with the third payment request instructing the Plaintiff to wire US$3,945,000.00 to ZL’s Bank Acccount and the fourth payment request instructing the plaintiff to wire US$2,850,000.00 to JH’s Bank Account.

(l)  Mr Gormley, still without knowing that the First Imposter and the Second Imposter were not Mr Susaki and Mr David Hirschman, instructed Mr Kawaguchi to wire a sum of US$3,945,000.00 (“the Third Sum”) to ZL’s Bank Account and to wire a sum of US$2,850,000.00 (“the Fourth Sum”) to JH’s Bank Account.  Again, Mr Kawaguchi complied and arranged for the Third Sum to be wired to ZL’s Bank Account and the Fourth Sum to be wired to JH’s Bank Account.  These two wire transfers were completed in the afternoon on 6 December 2019.

7.  The Plaintiff pleads that it discovered the fraud in the following circumstances, and took immediate remedial steps as well as carried out investigations as follows:

(a)  On 6 December 2019, Mr Atsuhiko Kimura, the Chief Financial Officer of the Parent Company (“Mr Kimura”) exchanged emails with Mr Gormley regarding the Fake Acquisition following an email from Mr Gormley to Mr Susaki regarding the same.  Mr Susaki informed Mr Kimura that he was not aware of the Fake Acquisition, or any of the wire transfers of the First, Second, Third or Fourth Sum.  This was how the fraud was discovered.

(b)  On 7 and 8 December 2019, the Plaintiff informed Well Fargo, as well as Standard Chartered Bank (Hong Kong) Limited (“SCB”) and Bank of China (Hong Kong) Limited (“BOC”), of the fraud.  It also filed a police report with, inter alia, the Hong Kong Police Force. The Plaintiff also initialed a recall of all four wire transfers with Wells Fargo.

(c)  On 9 December 2019, the Plaintiff was informed by Wells Fargo that the recalls for the transfers of the First and Second Sums were ineffective, but the recall for the transfer of the Third Sum was effective and the Fourth Sum could not be confirmed.  The Third Sum was returned to the Plaintiff’s Bank Account.

(d)  Also on 9 December 2019, the Hong Kong Police informed the Plaintiff that the First Sum had been transferred out of SCB to a secondary account on the same day the money came in but they did not have any information from BOC yet.

(e)  On 10 December 2019, the Hong Kong Police informed the plaintiff that the Second Sum had been transferred to another BOC account in Hong Kong; and that both ZL’s Bank Account and JH’s Bank Account did not have any balance inside.

(f)  On 11 December 2019, the Hong Kong Police informed the Plaintiff’s lawyers in Hong Kong that JH’s Bank Account was frozen, but based on their preliminary enquiries, there was no money left.

(g)  On 16 December 2019, the Plaintiff obtained proprietary and mareva injunctions against ZL and JH (which were continued on 20 December 2019).

(h)  On 20 December 2019, the Plaintiff also obtained a Norwich Pharmacal order against SCB requiring SCB to disclose the bank statements of ZL’s Bank Account.  The bank statements showed that, on 6 December 2019, the First Sum wired into ZL’s Bank Account had been transferred or paid out to four different accounts belonging to the third, fourth, fifth and sixth defendants in that action in the respective sums of US$350,000, US$600,000, US$1,350,000 and US$240,000.

(i)  Also on 20 December 2019, the Plaintiff obtained another Norwich Pharmacal order against BOC requiring BOC to disclose the bank statements of JH’s Bank Account.  The bank statements showed that, on 6 December 2019, part of the Second Sum wired into JH’s Bank Account (ie US$99,992.96) had been transferred or paid out to the 7^th defendant in that case.

8.  The Plaintiff’s causes of action against ZL and JH are as follows:

(a)  ZL and JH held the First, Second and Fourth Sums, or their traceable proceeds on constructive trust for the Plaintiff. The transfers were induced by deceit and fraudulent misrepresentations.  ZL and JH received them knowingly, unconscionably and dishonestly.  It is unconscionable for them to assert any beneficial interest over those sums, in particular when they had no business dealings with the Plaintiff and there was no legitimate reason for them to receive those sums.  In breach of the constructive trust, they transferred those sums out shortly upon receipt of the same.  Hence, they are accountable to the plaintiff for those sums and/or are liable to pay equitable compensation.

(b)  Further or alternatively, the Plaintiff claims against ZL for the First Sum, and JH for the Second and Fourth Sums, on the basis of unjust enrichment for mistake and/or total failure of consideration.

B2.    HCA 252/2020

9.  This action concerns the Second Sum involved in HCA 2315/2019.

10.  The Plaintiff claims that, after the Second Sum was wired to JH’s Bank Account on 6 December 2019, part of the sum had been further transferred or paid out to a number of secondary recipients with accounts also at BOC, including that:

(a)  US$150,000 was transferred to the 2^nd defendant, Yong Ho Hing Co Ltd (“YHH”);

(b)  US$150,001 was transferred to the 3^rd defendant, XT Import and Expert Limited (“XTIE”); and

(c)  US$57,000 was transferred to the 4^th defendant, Hongkong Group Co Ltd (“HKG”).

11.  Similarly, the Plaintiff claims that YHH, XTIE and HKC are liable as constructive trustees.  Alternatively, they have been unjustly enriched at the expense of the Plaintiff.

C.  THE APPLICATIONS FOR DEFAULT JUDGMENT

12.  The Plaintiff’s applications for default judgments were issued against ZL and JH in HCA 2315/2019, and YHH, XTIE and HKG in HCA 252/2020 (collectively “the Defendants”); but not the other defendants in those two actions.

13.  I am satisfied that proper service of legal documents in these proceedings have been effected on the Defendants.  It is clear that they have not filed any defence.

14.  It is trite that, in considering whether default judgment should be given pursuant to Order 19, rule 7 of the Rules of the High Court (“RHC”) (Cap 4), the court should consider the pleadings only and cannot receive any evidence; the costs of any affidavits/affirmations in support of the claim will be disallowed. In addition, when the judgment sought involves a declaration, the court retains the discretion to decide whether to grant such relief or not.  See Hong Kong Civil Procedure 2020, vol 1, §19/7/11 at p 527.

15.  It is well established that, 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.  I am satisfied that, on the facts as pleaded in the statements of claim in these two actions, the Plaintiff is entitled to the monetary relief.  I am also satisfied that there is a genuine need for the declarations sought ie that the Defendants hold the First, Second or Third Sums (wherever applicable) or their traceable proceeds on trust for the Plaintiff.  The purpose of the declaratory relief is to affirm that the Plaintiff has a proprietary interest in those sums or their traceable proceeds.  This would enable the plaintiff to pursue proprietary remedies, in addition to personal remedies, against the Defendants.

16.  Accordingly, pursuant to §1 of the two summonses, I shall grant default judgments in these two actions against the Defendants in terms of the draft final judgments attached to the Plaintiff’s summonses save that a minor amendment is made regarding the description of the interest as I indicated at the hearing.  As the final orders already include orders that the Defendants shall paid the costs of the actions (which must include the costs of the present application for default judgments) on an indemnity basis to be taxed if not agreed, it is unnecessary to make a separate costs order for the default judgment applications (ie §8 of the summons in HCA 2315/2019 and §9 of the summons in HCA 252/2020).  I only need to add that, in HCA 252/2020, the relevant Defendants shall also pay the costs of the application for the Norwich Pharmacal order in HCMP 154/2020 on the same basis to be taxed if not agreed.

D.  THE APPLICATIONS FOR VESTING ORDERS

17.  In §§2-5 of the summons in HCA 2315/2019 and §§2-6 of the summons in HCA252/2020, the Plaintiff applies for vesting orders of the balances in the bank accounts of the Defendants kept at the SCB and BOC; and also orders joining the two banks as respondents in these proceedings.

18.  As mentioned, there are conflicting authorities whether vesting orders can, or should, be made in these circumstances.  I am grateful to Mr Chiu (appearing for the Plaintiff)’s helpful oral submissions and his supplemental written submissions.  As the Defendants are unrepresented, and due to the importance of the issue, I have also conducted my own legal research.

19.  To put the issue in context, I shall begin by stating what usually happens in this sort of email fraud cases:

(a)  Upon discovery of the fraud, based on information provided by its own bank, the victim would be able to identify the bank account to which its money has been transferred.

(b)  The victim would immediately apply for a mareva injunction to freeze such bank account, and a Norwich Pharmacal order requiring the bank to disclose the identity of the holder of the bank account and bank records showing the movement of the funds in the account after receipt of the victim’s money.

(c)  If the bank records disclosed show that the victim’s money has been transferred to the bank account of a third party, the victim would likewise apply for a mareva injunction to freeze the bank account of that third party, and a Norwich Pharmcal order requiring the bank to disclose relevant information about that third party.

(d)  In some, but not all, cases, and if the victim is lucky, by the time the relevant bank accounts have been frozen, there would still be some credit balances in those accounts.

(e)  The fraudsters and the subsequent recipient of the victim’s money (if any) would, in most cases, not appear in legal proceedings commenced by the victim against them.  The victim would then apply for default judgments against them.

(f)  In the summons applying for default judgment, the victim would, very often, include an application for a vesting order regarding the balance in the bank account of the wrongdoer, and an order joining the bank as a respondent.

20.  The legal basis of the application for the vesting order is s.52 of the Trustee Ordinance (“TO”), Cap 29 which provides that:

“Vesting orders as to stock and thing in action

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

(a) where the court appoints or has appointed a trustee, or where a trustee has been appointed out of court under any statutory or express power;

(b) where a trustee entitled, whether by way of mortgage or otherwise, alone or jointly with another person to stock or to a thing in action —

(i) is under disability; or

(ii) is out of the jurisdiction of the court; or

(iii) cannot be found, or, being a corporation, has been dissolved; or

(iv) neglects or refuses to transfer stock or receive the dividends or income thereof, or to sue for or recover a thing in action, according to the direction of the person absolutely entitled thereto for 28 days next after a request in writing has been made to him by the person so entitled; or

(v) neglects or refuses to transfer stock or receive the dividends or income thereof, or to sue for or recover a thing in action for 28 days next after an order of the court for that purpose has been served on him;

(c) where it is uncertain whether a trustee entitled alone or jointly with another person to stock or to a thing in action is alive or dead;

(d) where stock is standing in the name of a deceased person whose personal representative is under disability;

(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,

the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint:

Provided that —

(i) where the order is consequential on the appointment of a trustee, the right shall be vested in the persons who, on the appointment, are the trustees; and

(ii) where the person whose right is dealt with by the order was entitled jointly with another person, the right shall be vested in that last-mentioned person either alone or jointly with any other person whom the court may appoint.

(2) In all cases where a vesting order can be made under this section, the court may, if it is more convenient, appoint some proper person to make or join in making the transfer:

Provided that the person appointed to make or join in making a transfer of stock shall be some proper officer of the bank, or the company or society whose stock is to be transferred.

(3) The person in whom the right to transfer or call for the transfer of any stock is vested by an order of the court under this Ordinance may transfer the stock to himself or any other person, according to the order, and all companies, banks and societies shall obey every order under this section according to its tenor.

(4) After notice in writing of an order under this section it shall not be lawful for any company, bank or society to transfer any stock to which the order relates or to pay any dividends thereon except in accordance with the order.

(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.

(6) The provisions of this Ordinance as to vesting orders shall apply to shares in ships registered under the enactments relating to merchant shipping as if they were stock.

[cf.1925 c.19 s.51 U.K.]”

D1.  A review of the authorities

21.  In Guaranty Bank and Trust Company v ZZZIK Inc Limited, HCA 1139/2016 (18 July 2016, unreported), Deputy High Court Judge Cooney SC held that:

“39. Turning to the vesting order, pursuant to s52(1)(e) of the Trustee Ordinance, an order would vest the right to sue for and recover the funds, as a thing in action, in the plaintiff. The court may make a vesting order as to trust property where it is impossible or difficult to deal with the property without such an order: Halsbury’s Laws of England (5th ed, 2013), Vol 98, para 309.

40. Section 52(2) of the Trustee Ordinance, concerning transfer, refers only to stock and not to a thing in action. Pursuant to s52(5), the court may make declarations and give directions concerning the manner in which the right to transfer the thing in action vested under the provisions of the Ordinance is to be exercised. I shall proceed under s52(5).

41. It would be difficult, if not impossible, to deal with the property, given that the defendant has not appeared in these proceedings, it has not taken action to pay the funds to the plaintiff and it has given instructions to its secretarial service not to accept service. I consider that there is no realistic prospect that the defendant would be willing to transfer the funds to the plaintiff.

42. The plaintiff has included HSBC as a respondent to the summons so that HSBC can join in making the transfer to the plaintiff.  As I noted above, by letter, dated 14 June 2016, HSBC confirmed that it would agree to be bound by the court’s order made in terms of the summons and, by letter dated 28 June 2016, indicated that it was appropriate to direct the order to HSBC itself.  I shall make the vesting order sought, with appropriate amendments.”

22.  In International Automotive Components Group s.r.o. v Xuke Trading Ltd [2017] 3 HKC 137 at 142E-143C, §§20-22, I expressed serious reservations whether s.52 of the TO may be invoked to compel a bank to release funds in a bank account in similar circumstances.  I said at §22:

“Section 52(1)(e) refers to the vesting of the right to ‘sue for or recover the thing in action’. As the balance in a bank account represents a debt owed by the bank to the account holder, it may be regarded as a thing in action. Hence, the right to sue for or recover such a debt may be described as a right to sue for or recover a thing in action. However, in the present context, the plaintiff does not merely want to have the right to claim the debt payable by HSBC (represented by the Remaining Sum) to be vested in its name. Quite simply, it wants to have the Remaining Sum back …”

However, in that case, it was unnecessary for me to come to a conclusive view on that issue because the bank had not been joined as a party; and the plaintiff had not in fact applied for a vesting order.

23.  In 2018, Deputy High Court Judge Keith Yeung SC (as he then was) granted vesting orders without detailed discussions in similar circumstances in two cases: PT. Adhyawarna Bumi Pelangi v YB(HK) Trading Co Ltd [2018] HKCFI 1863 and Barclays Butera Inc v Tianzbang Trading Co Ltd [2018] HKCFI 2258.

24.  In Primeway International Ltd v Yi He (HK) Trading Co Ltd [2018] 2 HKLRD 1416, Deputy District Court Judge Vincent Lung refused to make an order requiring the bank to release the funds in the account.  In that case, the bank was not joined as a party and there was no evidence that the bank was previously notified of the proceedings or the hearing; and there was also no indication from the bank that it would adopt a neutral position or that it would abide by the order of the court.  He held that:

“33. Procedural difficulties aside, there is a more fundamental objection. There is no evidence before me as to what transactions had taken place within D’s Account. There might be deposits and withdrawals both before and after the Funds were deposited by the 1^st plaintiff; and it is plausible that those funds were subject to other trusts or rights of third parties (eg they represented monies obtained by similar frauds). If it should happen that part of the ‘mixed’ funds were then withdrawn or dissipated, the usual tracing rules would dictate the beneficial title to the remaining monies. The Bank itself may also be entitled to a set‑off against the Funds (eg the defendant maintains a separate account with the Bank that is in overdraft).

34. If I were to make an order as sought by the plaintiffs to compel the Bank to transfer the Funds back to the 1st plaintiff, it would in effect give priority to the 1st plaintiff over the credit balance within D’s Account (or part thereof up to an amount equivalent to the Funds), possibly to the detriment of third parties who might have an equal or even better title to the same.  It would in my judgment be wrong in principle to do so without giving them an opportunity to be heard; at the very least the Bank ought to be heard because it will have knowledge as to transactions that had taken place within D’s Account (if any).”

25.  In 2019, H H Judge Andrew Li granted vesting orders in similar circumstances in the following cases: Prescient Corporation v Dunse Trading Ltd [2019] HKDC 735, and CXC Global Japan Kabushiki Kaisha v Kadima International Ltd and another [2019] HKDC 1659.  In the first case, he held that:

“28. Another relief sought by the plaintiff is a vesting order under s 52(l )(e) and s 52(5) of the Trustee Ordinance, Cap 29.

29. S 52(1)(e) and s 52(5) provide:-

‘(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,

the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint:

Provided that —

(i) where the order is consequential on the appointment of a trustee, the right shall be vested in the persons who, on the appointment, are the trustees; and

(ii) where the person whose right is dealt with by the order was entitled jointly with another person, the right shall be vested in that last-mentioned person either alone or jointly with any other person whom the court may appoint.

(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.’

30. The Sum in the present case is a thing in action. It is vested in the defendant by way of constructive trust, as submitted by the plaintiff above.

31. The court may make a vesting order as to trust property where it is difficult, if not impossible, to deal with the sum without a vesting order (Halsbury's Laws of England (5^th ed, 2013) Vol 98, para 309). Given the defendant has not responded to the claim and/or the summons and also has not taken action to repay the plaintiff the Sum, I consider that there is no realistic prospect that the defendant would be willing to transfer the Sum to the plaintiff.

32. As such, it would be expedient for the court to make an order vesting the right to transfer in an appointee of the court, which in this case, would be HSB.

33. There have been precedents where vesting order is sought and granted in a case of a fraud in Hong Kong: See PT Adhyawarna Bumi Pelangi v YB (HK) Trading Co, Limited, supra; Guaranty Bank and Trust Company v Zzzik Inc Ltd, supra.

34. Although in International Automotive Components Group s r o v Xuke Trading Limited & Anor, HCMP 546/2017, unrep, (19 April 2017; Deputy High Court Judge Paul Lam, SC) at §22, the court had reservation as to whether vesting order could compel a bank to return the trust property to a plaintiff because that only vests the right to recover the trust property, I consider that a bank is vested with such right. What follows must be that the bank should return the trust property to the beneficiary. I find this is a right to recover trust property for the beneficiary. Thus, in addition to the vesting order, I made an order directing HSB to pay over the Sum under the vesting order to the plaintiff.

35. In order to give effect to the vesting order sought, I also consider that it was necessary for the plaintiff to join HSB as 1st respondent (rather than a third party) in this case.  Hence, I had made such an order.”

26.  In 2018 and 2019, Deputy High Court Judge Leung granted vesting orders in similar circumstances in The Henri Stern Watch Agency Inc v HK Huasheng Technology Co Ltd & another, HCA 1060/2018 (3 August 2018, unreported), Comtel Solutions Pte Ltd v Yi Li Trade (HK) Co Ltd [2019] HKCFI 2407, and SBM Bank (Mauritius) Ltd v Warner Trading Ltd and others [2019] HKCFI 2956:

(a)  In the first case, he held that:

“6. As far as the application for an order under section 52 of the Trustee Ordinance is concerned, subsection (1)(e) of that ordinance provides that:

‘Where the 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, the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint.’

Subsection (5) provides that:

‘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.’

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. The authorities referred to in paragraph 29 of the plaintiff’s skeleton submissions refer.

8. In the circumstances of this case, I accept that it would be unrealistic, if not impossible, for the plaintiff to expect that the plaintiff would be able to obtain the return of the properties without an order of the court.  And it is also understandable that two respondents would need the protection of a court order if they are to release the trust property to the plaintiff.  The two respondent banks have been served with these proceedings.  Both of them have indicated in writing their neutral stance in respect of the plaintiff’s application, and as I understand today, it was in fact through correspondence between the plaintiff and the bankers that led to the finalisation of the terms of the orders that the plaintiff is seeking.”

(b)  In the second case, he held that:

“10. The application for vesting order in respect of the money in the account of the defendant with the Bank was taken out pursuant to section 52 of the TO. Subsection (1)(e) provides that where the 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, the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint. Subsection (5) provides that the court may 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. 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. This has been applied in context similar to the present case: see Guaranty Bank and Trust Company (above); The Henri Stern Watch Agency Inc (above). As mentioned, there is no real likelihood that the defendant will respond to any request to transfer the money now standing in its account with the Bank. For the purpose of the remedy sought under the TO, the Bank should be joined as a respondent. By letters dated 13 August and 19 September 2019, the Bank indicated that it holds a neutral position to the application and sought to be excused from this hearing.

11. All matters considered, I am satisfied that the vesting order sought should be granted.”

(c)  In the third case, he held that:

“15. The vesting order is sought in connection with the claim for the release and transfer of the money mentioned above. Section 52(1)(e) of the TO provides that where the 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, the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint. Subsection (5) provides that the court may grant declaration or give direction 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.

16. 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. This includes where an order for the transfer of the money, even if granted in favour of the plaintiff, will receive no response from the defendant. In such circumstances, the court may consider granting a vesting order in respect of such money standing to the credit of the defendant. See Comtel Solutions PTE Ltd; Tai Ching Ling (above).

17. The circumstances of the present case fall into the category mentioned above.

18. For the purpose of the vesting order being sought that would bind the banks with which the defendants held their accounts holding the plaintiff’s money, the banks should be joined as respondents. Hence this part of the plaintiff’s application.

19. Correspondence between the plaintiff’s solicitors and the various banks since November 2019 are produced. All of them indicated neutral stance to the application. Amongst them, Heng Sang Bank (‘HSB’) pointed out that the current balances in the accounts of the first five defendants respectively with the bank differ from and actually less than the amounts pleaded by the plaintiff. The inference could well be that there have been transactions in these accounts since the injection of the funds said to have originated from the plaintiff. It would be for the plaintiff to establish that such current balances are indeed attributable to the plaintiff as the source of the money over which it asserts a proprietary claim and should be covered by a vesting order compelling the bank to transfer the same to the plaintiff. As to that, Counsel for the plaintiff acknowledged the observation of HSB and its inability at this stage to say for sure, when it is yet to be equipped with all the necessary transaction information about these bank accounts.

20. Notwithstanding the above observation, counsel for the plaintiff suggested that the vesting order may still be made, as its terms are so framed that either the balances in these bank accounts or any part thereof shall be transferred by HSB. The exact amounts, if at all, to be transferred could in due course be ascertained and, if necessary, further application to the court may be made in exercise of the general liberty also provided in the then proposed order. Counsel also suggested the alternative of adjourning this part of the application concerning the first five defendants’ accounts with HSB sine dine, so that further liaison may be made with the bank to sort out the uncertainty before any disposal by consent or application to restore. The latter of these two suggestions, in my judgment, is preferable. Hence the edited draft order to reflect that as submitted this morning.

21. I am satisfied that the joinder of the various banks should be granted, and do grant them.  I further make the vesting order in respect of the accounts of the 6^th and the 7^th defendants held with their respective banks.  The application for the vesting order in respect of the first five defendants and their accounts held with HSB is adjourned sine dine with liberty to restore.  I accordingly grant the order in terms of the edited draft to that effect.”

27.  In Minimax GmbH & Co KG (Singapore branch) v Gopom Products Ltd and another [2019] HKDC 760, H H Judge Winnie Tsui granted a vesting order and held that:

“Legal basis for the 2nd defendant to return the money directly to the plaintiff

21. The remaining question is whether I should also grant the relief sought in para 13(3), which effect is to compel the 2^nd defendant to forthwith return the sum to the plaintiff. The court can only make such an order if it is supported by a proper legal basis.

22. In this regard, I follow the decisions made in a recent spate of email or online fraud cases in Hong Kong including, eg, Guaranty Bank and Trust Company v Zzzik Inc Ltd HCA 1139/2016, 18 July 2016; Halliburton BV v Sheng Yi (HK) Trade Co., Ltd HCA 1627/2016, 24 January 2017; AXHT Company Ltd v Soe Kin Fai HCMP 1223/2017, 11 September 2017; PT Adhyawarna Bumi Pelangi v YB (HK) Trading Co., Ltd [2018] HKCFI 1863; The Henri Stern Watch Agency Inc v HK Huasheng Technology Develop Co, Ltd [2018] HKCFI 1972; and, Prescient Corporation v Dunse Trading Ltd [2019] HKDC 735. In those cases, vesting orders were made under section 52 of the Trustee Ordinance and consequent upon the vesting, the banks were ordered to return the moneys directly to the victims.

23. Section 52 of the Trustee Ordinance empowers the court to make a vesting order concerning stock and thing in action. Of relevance to this action are the following provisions:-

‘52. 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,

the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint:

Provided that – [not relevant]

…

(2) In all cases where a vesting order can be made under this section, the court may, if it is more convenient, appoint some proper person to make or join in making the transfer:

Provided that the person appointed to make or join in making a transfer of stock shall be some proper officer of the bank, or the company or society whose stock is to be transferred.

…

(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.

…’

24. Section 2 provides that the terms ‘trust’ and ‘trustee’ as used in the Ordinance extend to implied and constructive trusts.

25. And, lastly, section 57 provides as follows:-

‘57. Persons entitled to apply for orders

(1) An order under this Ordinance for the appointment of a new trustee or concerning any interest in land, stock, or thing in action subject to a trust, may be made on the application of any person beneficially interested in the land, stock, or thing in action, whether under disability or not, or on the application of any person duly appointed trustee thereof.’

26. I have already ruled that the plaintiff is beneficially entitled to the sum in the Account and the 1st defendant holds that sum on trust for it. However, as a matter of legal analysis, the 1^st defendant does not hold the money itself on trust. What it holds instead is the right to call upon the bank to repay the sum.

27. Generally speaking, when a customer pays money into his account, the bank obtains title to the money, in law and equity, and assumes a contractual liability to repay an equivalent amount to the customer. At any given time, the bank is liable to repay its customer on demand the amount of the credit balance on the account, subject to any right of set off. In other words, at the time of deposit, the customer’s title to the money is replaced by a cause of action exercisable against the bank for repayment of the money upon demand, ie a debt: Paget’s Law of Banking (15^th ed) at paras 22.50 and 28.23.

28. Here, as regards the sum now sitting in the Account, as the 1^st defendant is the 2^nd defendant’s customer, the right to demand the 2^nd defendant to repay the money vests in the 1^st defendant. Pursuant to my ruling, the 1st defendant should exercise that right to instruct the 2^nd defendant to pay the sum to the plaintiff.

29. Now, obviously, given that the 1st defendant is part of the fraudulent scheme and that it has been absent all along in these proceedings, it would be wholly unrealistic to expect it to do so. The next question is therefore this. In light of the court’s declaration to the effect that the plaintiff is beneficially entitled to the money in the Account, can the 2^nd defendant proceed to release the money to the plaintiff in the absence of consent from the 1^st defendant, without incurring any risk of being sued later by the 1^st defendant, its customer, for the same amount?

30. I think it is clear that the declaration is not sufficient to absolve the bank of such potential risk.

31. As a matter of general banking law, the bank is under a duty to obey the customer’s mandate. Where it acts and makes payment outside the mandate, it cannot debit the customer’s account and the debt which it owes to the latter remains subsisting. Such duty is a fundamental aspect of the contractual relationship between the bank and its customer: Paget’s at paras 22.51, 23.1 and 23.2.

32. In a situation where the customer holds the account on trust, ordinarily, the bank is a third party to the trust and its contractual relationship rests with its customer, and not the beneficiaries: Paget’s at para 28.23. As such, the bank should generally act according to the customer’s mandate and should not deviate from it even when the beneficiaries so demand.

33. Hence, from the bank’s perspective, notwithstanding the court’s declaration, it remains to be the case that the 2^nd defendant cannot proceed to release the money to the plaintiff without running the potential risk of being claimed by the 1^st defendant subsequently.

34. So the situation comes down to this. Although the money in the Account is in effect the plaintiff’s, it cannot realistically expect the 1^st defendant to pay it back. Yet even though the 2^nd defendant, the bank, is neutral on the payment out, it may not do so owing to the contractual constraint imposed by its relationship with the 1st defendant. These are the difficulties standing in the way of the plaintiff now trying to re‑claim the money stolen from it.

35. In the circumstances, I am satisfied that a vesting order should be made under Section 52(1)(e). It would be expedient to vest the 1^st defendant’s cause of action to claim the money from the 2^nd defendant in the plaintiff. Upon such vesting, the plaintiff is legally entitled to demand the 2^nd defendant to release the money in the Account; and upon such release, the debt owed by the 2^nd defendant on the Account would be discharged.

36. It is clear that by virtue of sections 2 and 57, the plaintiff, as the beneficiary under the constructive trust, is entitled to apply under section 52(1)(e) to have the debt owed by the bank, which is a thing in action, vested in itself.

37. The court may make a vesting order as to trust property where it is difficult, if not impossible, to deal with the sum without a vesting order: Halsbury’s Laws of England (5^th ed, 2019) Vol 98, para 308. A vesting order is clearly appropriate here to resolve the difficulties faced by the plaintiff. As a fraud victim, the plaintiff should be able to claim back its money expeditiously.

38. I would therefore make a vesting order accordingly.

39. The plaintiff now asks for the money to be released by the 2^nd defendant. The right to make such demand now being vested in the plaintiff, I grant the relief in para 13(3) above, subject to the removal of the reference to interest.

The alternative of garnishee proceedings

40. It has been suggested that a victim in the position of the plaintiff may resort to the garnishee proceedings under Order 49 for recouping the stolen money: see, eg, International Automotive Components Group SRO v Xuke Trading Ltd [2017] 3 HKC 137 at para 35. It is no doubt a viable option for the plaintiff. The garnishee proceedings are one of the enforcement mechanisms generally available to a judgment creditor who knows of the whereabouts of the assets of the judgment debtor.

41. But, here, the plaintiff has successfully made out a proprietary claim over the sum in the Account. In that sense, it has a ‘better’ right than an ordinary judgment creditor. To require the plaintiff to now go down the route of garnishee proceedings, more costs would be incurred and the recovery of the money would be further delayed. The plaintiff is beneficially entitled to the money and it is simply more expedient and just to vest the debt directly in the plaintiff, rather than requiring it to resort to the more time-consuming and tortuous route of obtaining a garnishee order for achieving the same outcome.

42. This approach would accord more with the spirit of one of the underlying objectives of our civil procedural rules, namely to ensure that a case is dealt with as expeditiously as is reasonably practicable: Order 1A, rule 1(b).

43. I should add that in International Automotive, the judge expressed ‘serious reservations whether s 52 of the TO may be invoked to compel a bank to release funds in a bank account in these circumstances’ (at para 22). That remark was obiter as the point did not arise for consideration in that case. There, the bank was not joined as a party and hence did not have the opportunity to make any representation on an order which would affect its rights and obligations. This is not the case here.

44.  In any event, for the above reasons, I am of the view that a vesting order ought to be made in the present case such that the plaintiff is in a position to demand payment of the money in the Account directly and immediately.”

28.  In Tai Ching-Ling v Cai Guo Chuan and another [2019] HKCFI 2251, Marlene Ng J held that:

“18. Turning to P’s application for a vesting order, section 52 of the Trustee Ordinance Cap 29 provides as follows:

‘(1) In 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,

The court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint ...

...

(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.

...’

19. The court may make a vesting order as to trust property where it is impossible or difficult to deal with the property without such an order.[3] Since D’s last known address was outside the Hong Kong jurisdiction, and he had not (a) taken any steps to transfer the Sum to P and/or (b) acknowledged service or appeared in the present proceedings, it would be difficult if not impossible to deal with the property in question, ie the Sum. Further, BOC (given its banker-customer relationship with D) understandably required the protection of a court order to deal with or release the Sum from the Account. I hold there was sufficient basis for grant of a vesting order, and note that vesting orders had been granted in other cases in similar circumstances.[4]

20. To give effect to such vesting order, it is appropriate to grant P’s application to join BOC as a respondent in the present action. Ms Pang informed the court that P would not seek the reliefs in paragraph 10(c) or 10(d) above if the court were mind to grant a vesting order in her favour.

21. By a letter dated 21 August 2019 by its solicitors, BOC indicated it would adopt a neutral stance to the Summons, and if so ordered by the court it would comply with the proposed vesting order.”

29.  In Cardone Industries Inc v Haonigen Trade Co Ltd and another [2020] HKDC 70, Deputy District Judge YW Hew held that, he would follow the reasoning of H H Judge Winnie Tsui in Minimax GmbH & Co KG (Singapore branch) v Gopom Products Ltd and another; however, the request for a vesting orders that the bank transferred amounts in the account to the plaintiff gave rise to the following issue:

“CAPACITY AND STATUS OF BOCHK IN THE PROCEEDINGS

21. As I have mentioned, BOCHK had been named as a ‘respondent’ to (and served with) the Default Judgment Summons. Yet there was no order, and in the Default Judgment Summons no application, that BOCHK be added to the proceedings in any capacity, whether it be as a defendant, respondent, or third‑party.

22. The plaintiff had previously sought and obtained non‑party discovery against BOCHK by way of a previous summons in the action, in which BOCHK was named as a respondent. That would have been on a different basis as it is open to the court to make (as the learned Master did in this case) such an order against a ‘non-party’, pursuant to well-established procedures including ss 47B of the District Court Ordinance (Cap 336), and/or s 21 Evidence Ordinance (Cap 8).

23. In raising this issue, I also had in mind the obiter observations of Deputy High Court Judge Paul Lam SC at paragraph 22 of International Automotive Components Group SRO v Xuke Trading Ltd & anor [2017] 3 HKC 137 and similar concerns as expressed by Deputy District Judge Vincent Lung at paragraphs 31-32 of Primeway International Ltd v Yi He (HK) Trading Co Ltd [2018] 2 HKLRD 1416.

24. Nevertheless, after considering Mr Phillips’ submissions, it seemed clear that there was and is a practice which has originated in the High Court whereby even if a bank takes a neutral stance, it can and should be joined, on application by a plaintiff, as a respondent in proceedings to ensure that it can make a transfer to the plaintiff in circumstances where (as in this case) a constructive trust of the aforesaid nature is pleaded and established, a vesting order is sought under s 52(1)(e) Trustee Ordinance, and declarations/directions are sought in relation to the manner in which the right to transfer the chose in action is to be exercised under s 52(5) Trustee Ordinance. This is done to ensure that the bank can be notified of, is able to make submissions in relation to, and will be bound by, the orders sought: see Guaranty Bank and Trust Company v Zzik Inc Ltd HCA 1139/2016, unreported, Cooney SC DHCJ at paragraph 40; Skandinaviska Enskilda Banken SA v Hongkong Liling Trading Ltd & anor [2018] HKCFI 2676 per Recorder Manzoni SC at paragraphs 30-32; Prescient Corporation v Dunse Trading Ltd [2019] HKDC 735 per A Li DJ at paragraph 35; Tai Ching-Ling v Cai Guo Chuan; Bank of China (Hong Kong) Limited [2019] HKCFI 2251 per M Ng J at paragraph 20; Comtel Solutions v Yi Li Trade (HK) Co Ltd, Bank of Communications [2019] HKCFI 2407 per S Leung DHCJ at paragraph 10; SBM Bank (Mauritius) Ltd v Warner Trading Ltd & ors [2019] HKCFI 2956 per S Leung DHCJ at paragraph 18.

25. As the plaintiff only made such an application at the hearing, and as BOCHK had not unequivocally indicated its position in relation to the application, I directed that the plaintiff seek to notify BOCHK and the defendant of such application.  As events transpired, there was no opposition to the application and BOCHK asked for their attendance to be excused at the resumed hearing (which request I granted).  I hence made the order at paragraph 12(a) above to facilitate the order at paragraph 12(b)(iii) above.”

30.  Very recently, in 800 Columbia Project Company LLC v Chengfang Trade Ltd and others [2020] HKCFI 1293, Mr Recorder Eugene Fung SC declined to make any vesting order.  He held that:

“C. VESTING ORDERS

13. In addition to the default judgments, the plaintiff also sought the following orders from the Court (1) various vesting orders pursuant to section 52 of the Trustee Ordinance (Cap 29) that the defendants’ rights to sue for and recover various sums against the Bank be vested in the plaintiff, and the Bank to transfer the sums directly to the plaintiff (“the Vesting Orders”), (2) the Bank be joined as a respondent in the proceedings for the purposes of complying with the Vesting Orders, and (3) the various injunction orders be continued save that each of them is varied to the extent which allows the Bank to comply with the Vesting Orders.

14. Section 52(1) of the Trustee Ordinance provides:

“In any of the following cases, namely —

(a) where the court appoints or has appointed a trustee, or where a trustee has been appointed out of court under any statutory or express power;

(b) where a trustee entitled, whether by way of mortgage or otherwise, alone or jointly with another person to stock or to a thing in action —

(i) is under disability; or

(ii) is out of the jurisdiction of the court; or

(iii) cannot be found, or, being a corporation, has been dissolved; or

(iv) neglects or refuses to transfer stock or receive the dividends or income thereof, or to sue for or recover a thing in action, according to the direction of the person absolutely entitled thereto for 28 days next after a request in writing has been made to him by the person so entitled; or

(v) neglects or refuses to transfer stock or receive the dividends or income thereof, or to sue for or recover a thing in action for 28 days next after an order of the court for that purpose has been served on him;

(c) where it is uncertain whether a trustee entitled alone or jointly with another person to stock or to a thing in action is alive or dead;

(d) where stock is standing in the name of a deceased person whose personal representative is under disability;

(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,

the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint:

Provided that —

(i) where the order is consequential on the appointment of a trustee, the right shall be vested in the persons who, on the appointment, are the trustees; and

(ii) where the person whose right is dealt with by the order was entitled jointly with another person, the right shall be vested in that last-mentioned person either alone or jointly with any other person whom the court may appoint.”

15. On behalf of the plaintiff, Ms Ng submitted that (1) bank balances are choses in action and such choses in action are vested in the defendants as constructive trustees by operation of law, (2) it is impossible or difficult to deal with such choses in action without a vesting order because there is no real prospect that any of the defendants will voluntarily comply with any direction by the court to transfer the relevant funds held on constructive trust for the plaintiff, and (3) the court in these circumstances should grant an order vesting the right to recover the choses in action in the plaintiff under section 52(1)(e) of the Trustee Ordinance.  She relied a number of Hong Kong cases whereby vesting orders have been granted to the plaintiff in similar email or cyber fraud cases: namely Guaranty Bank and Trust Company v Zzzik Inc Ltd (unreported, HCA 1139/2016, 18 July 2016); Minimax Gmbh & Co KG (Singapore Branch) v Gopom Products Ltd & Another [2019] HKDC 760 (3 June 2019); Comtel Solutions Pte Ltd v Yi Li Trade (HK) Co Ltd & Another [2019] HKCFI 2047 (23 September 2019); Tai Ching Ling v Cai Guo Chuan [2019] HKCFI 2251 (11 September 2019).

16. Having carefully considered the matter, I am not satisfied that the court’s jurisdiction under section 52(1)(e) of the Trustee Ordinance is engaged upon the making of a declaration that a defendant holds certain sums of money in a bank account on a constructive trust for a plaintiff.

(1) Trust property is vested in the original trustees of a trust by virtue of the complete constitution of the trust at the outset.  When a trustee retires from the trust, or a new trustee is appointed, some means must be found to divest the retiring trustee of, or invest the new trustee with, the trust assets.  The mere fact of a valid retirement or appointment having taken place will confer a right on the new or continuing trustee to call for the trust assets to be vested in him.  But in the absence of statutory sanction, the trustee obtains neither equitable nor legal interest in the property merely by virtue of appointment.  Thus, steps must be taken to achieve it separately. See Underhill and Hayton: Law of Trusts and Trustees (19^th ed, 2016) §73.2.

(2) Where trust property is required to be vested in person(s) who as a result of a change in the trusteeship become the trustee(s), such vesting may be achieved by a vesting order made by the court, particularly when such vesting cannot be achieved by a vesting declaration under section 41 of the Trustee Ordinance.

(3) The jurisdiction of the court to make vesting or similar orders is codified in sections 45 to 55 of the Trustee Ordinance (which are equivalent to sections 44 to 53 and 55 of the UK Trustee Act 1925): see Lewin on Trusts (20^th ed, 2020) vol 1 §17-031.

(4) The statutory provisions envisage certain circumstances where the legal estate or interest should be conveyed or transferred but the person who should convey or transfer is not a position to do so.  For example, he may be of unsound mind, or he may refuse to convey, or a company may have been dissolved before executing a conveyance that should have been executed (see section 45 of the Trustee Ordinance).  In cases of this kind, the court makes an order whereby the property is vested in such person or persons as the court directs, without any other conveyance, transfer or assignment.

(5) In view of the above, it appears that the above-mentioned provisions in the Trustee Ordinance (including section 52) envisage a vesting order to be made upon a change in the trusteeship.

(6) Indeed, the language in section 52(1) contemplates an appointment of trustee(s) by the court.  Section 52(1) provides that where one of the five conditions in sub-paragraphs (a) to (e) is satisfied, the court may make an order vesting certain right “in any such person as the court may appoint”.  The provisos in section 52(1) place restrictions on persons in whose favour the vesting order may be made, and also relate to situations where there is an appointment of a trustee by the court.

(7) The court may appoint a trustee under section 37 or section 42 of the Trustee Ordinance, or under its inherent jurisdiction.  However, where a person becomes a constructive trustee pursuant to a declaration made by the court, I do not think he or she can be said to have been “appointed” by the court to be a trustee for the purpose of section 52 of the Trustee Ordinance. 

(8) There are two kinds of constructive trust.  The first kind comprises persons who have lawfully assumed fiduciary obligations in relation to trust property, but without a formal appointment.  They are true trustees, and if the assets are not applied in accordance with the trust, equity will enforce the obligations that they have assumed by virtue of their status exactly as if they had been appointed by deed.  The second kind comprises persons who never assumed and never intended to assume the status of a trustee, but have exposed themselves to equitable remedies by virtue of their participation in the unlawful misappropriation of trust assets.  They may be required by equity to account as if they were trustees or fiduciaries, although they are not.  See Williams v Central Bank of Nigeria [2014] AC 1189 at §9 (Lord Sumption JSC).  In either case, it is incorrect in my view to describe a constructive trustee as having been “appointed” as a trustee by the court.

(9) The condition in section 52(1)(e) may be satisfied when “a thing in action is vested in a trustee whether by way of mortgage or otherwise”.  Ms Ng submitted that this condition is satisfied because the debts owing by the Bank to the defendants (ie choses in action) are vested in the defendants by virtue of my granting of the declarations.  In the present case, before I gave default judgments declaring that the various sums of money are held on a constructive trust by the defendants for the plaintiff, the defendants were the absolute owner of the money in the relevant bank accounts, or more accurately, the absolute owner of the right to call upon the Bank to repay the amount of the credit balance on the relevant bank accounts.  After the giving of default judgments, the legal title in the right to call for repayment would continue to be held by the defendants, but the equitable title in such a right would have been divested from the defendants who would hold the same on trust for the plaintiff.  I do not believe it is apt to say that the right to call for repayment from the Bank was vested in the defendants by virtue of my giving of the default judgments.

(10) At the hearing, Ms Ng submitted that I should take a liberal view of section 52 of the Trustee Ordinance to hold that it would be appropriate to grant the vesting orders.  In view of the above, I am not persuaded that section 52(1)(e) is properly engaged on the facts of these cases.  In coming to this conclusion, I respectfully decline to follow the various decisions cited to me by Ms Ng (as mentioned in paragraph 15 above) which granted vesting orders pursuant to section 52(1)(e).  It would appear that those decisions were arrived at without the benefit of having considered the matters highlighted above.

17. For the above reasons, I decline to make the Vesting Orders pursuant to section 52(1)(e) of the Trustee Ordinance as sought by the plaintiff.

18. For the sake of completeness, I should mention that the absence of Vesting Orders should not materially affect the plaintiff’s position to be paid.  As Ms Ng acknowledged at the hearing, it is open to the plaintiff to commence garnishee proceedings under RHC Order 49 to enforce the default judgments.’”

31.  Most recently, in Almar Sale Co Inc v Chuangyou Trading Co Ltd [2020] HKDC 472, the bank declined to be joined as a respondent whilst indicating that it would take a neutral stance. H H Judge Phobe Man in §§19-21 of her judgment referred to International Automotive Components Group sro and Primeway International Ltd, and took the view that the granting of a vesting order was inappropriate in the circumstances and the plaintiff ought to recover the money via garnishee proceedings.

32.  I cannot be sure whether my review of authorities is complete and exhaustive.  Nevertheless, I have decided to quote the relevant judgments extensively in order to understand why different judges have come to different conclusions.

D2.  My view on whether a vesting order can be made

33.  In my view, whether a vesting order can be made in these circumstances must depend on a proper construction of s.52 of the TO, in particular, s.52(1)(e).  The Plaintiff also seeks on rely on s.52(1)(b)(iv). It is essential to construe these statutory provisions properly because they prescribe the jurisdiction of the court.  As Mummery LJ held in Orwin v Attorney General [1998] 2 BCLC 693 at 699f:

“The jurisdiction of the court only exists, however, if the application falls within s 51. If, on the facts and law, it does not fall within that section there is no other more general jurisdiction which the court can exercise to make a vesting order.”

He said further at 702a-b:

“…First, although the court has a wide discretion under s 51 as to whether to make a vesting order, it only has jurisdiction to exercise that discretion in the specified cases…”

34.  S.52 of the TO is based on, and virtually identical to S.51 of the Trustee Act 1925.  As observed in Lewin on Trusts (20^th ed., 2020), vol. 1, §17-031, the jurisdiction of the court to make vesting and similar orders is codified in ss. 45 to 56 of the Trustee Act 1925.  For example, s.44 of the Trustee Act 1925, which is the same as s.45 of the TO, deals with vesting orders of land.  S.51 of the Trustee Act 1925, and s.52 of the TO, deals with “stock and thing in action”.

35.  One should begin with s.52(1) which provides that in the following cases as stipulated in sub‑sub‑sections (a) to (e), the court may exercise the power set out in that sub‑section.  It is critical that, in my view, the five different cases set out in those sub‑sub‑sections should be construed disjunctively.  In other words, so long as the facts of a particular case fall within any one of the five different cases, the court’s statutory power may be invoked.

36.  The first case, as stated in sub‑sub‑section (a) is, apparently the most common situation where the court appoints or has appointed a trustee, or where a trustee has been appointed out of court under any statutory or express power.  A vesting order is necessary and consequential to the appointment of a new trustee in many cases because, in law, upon appointment, the new trustee only acquires the right to call for the trust assets to be vested in him but he obtains neither equitable nor legal interest in the property.  In my recent judgment in Re Tam Kwong Cheung [2020] HKCFI 1387 at §§40-42, I exercised the court’s power under ss. 52(1)(a) and (5) to direct that the balance in a bank account be transferred to a new trust account to be opened by the new trustee appointed by the court.  In cases involving email frauds, the fraudster and the subsequent recipient of the victim’s money would, in law, become the constructive trustees of the money and its traceable proceeds.  However, it would be wrong in substance and also a misuse of language to say that, by declaring that the fraudster and the subsequent recipient hold the victim’s money and its traceable proceeds on constructive trust, the court has “appointed” them as trustees.  In this respect, I agree with §§16(7) and (8) of Mr Recorder Fung SC’s judgment in 800 Columbia Project Company LLC.  Hence, I take the view that s.52(1)(a) cannot be invoked in these circumstances.  This is not, however, the end of the matter.  It is necessary to consider the four other cases mentioned in s.52(1), which, I wish to stress, does not require or involve the appointment of a new trustee.

37.  S.52(1)(b) deals with five different scenarios in which the trustee is not ready, willing or able to deal with the legal interest in the trust property.  Sub‑sub‑sub sections (i) to (iii) cover cases where the trustee is under disability, out of the jurisdiction of the court, or cannot be found (or has been dissolved in case the trustee is a corporation).  Sub‑sub‑sub sections (iv) and (v) cover the situations where the trustee neglects or refuses to transfer the stock or receive the dividends or income thereof, or to sue for or recover a thing in action, for 28 days after a demand in writing made by the person absolutely entitled to the trust property, or after an order of court for that purpose has been served on him.  Mr Chiu runs an ingenuous argument that s.52(1)(b)(iv) is engaged in these circumstances: he submits that the writs of summons in these two actions were served on the Defendants more than 28 days ago.  I am unable to accept such argument.  In Re Knox’s Trusts [1895] 1 Ch 538, Kekewich J held at p. 541 that s.35 of the Trustee Act 1893 (the predecessor to s.51 of the Trustee Act 1925) created a new cause of action, and that such a statutory jurisdiction must be strictly construed; hence, an action could only be brought after the 28 days had expired.  He found that the petition was presented prematurely, but he allowed it to stand over.  And after the petition had been re-presented and served upon the expiry of the 28 day period, he made a vesting order accordingly.  The English Court of Appeal dismissed the appeal against his decision in [1895] 2 Ch 483.  It is untenable to argue that a writ of summons can be regarded as a request in writing to sue or for recover a thing in action within the meaning of this statutory provision.  The writ of summons is not a request made against the defendant to do any such thing at all.  It is a legal document commencing legal proceedings whereby the victim asks the court to order the defendant to, inter alia, return the victim’s money or its traceable proceeds to it.  The defendant is given notice of the legal proceedings, and the chance to contest the claim by filing an acknowledgement of service and a defence within the time fixed by rules of the court.  Accordingly, I take the view that s.52(1)(b) is not engaged in these circumstances.

38.  S.52(1)(c) deals with the situation where it is uncertain whether a trustee is alive or dead.  This is another scenario in which the trustee cannot be asked to deal with the legal interest in the trust property.  It is inapplicable to the present circumstances.

39.  S.52(1)(d) deals with the situation where stock is standing in the name of a deceased person whose personal representative is under disability.  It is inapplicable to the present circumstances.

40.  What is left is s.52(1)(e).  This is indeed the sub‑sub‑section used by the court in the precedents where vesting orders were granted.  It covers the situation “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”.  This statutory provision may be invoked if two conditions are satisfied:

(a)  First, a thing in action is vested in a trustee whether by way of mortgage or otherwise; and

(b)  Second, it appears to the court to be expedient.

41.  As to the first condition, the credit balance in a bank account represents a debt owed by the bank to the account holder.  Such debt is plainly a chose in action.  The real question is whether such debt “is vested by way or mortgage or otherwise” because of the order made by the court as a result of the default judgment application that the defendant in this sort of cases shall hold the victim’s money that it has received or its traceable proceeds on constructive trust.  In Prescient Corporation, H H Judge Andrew Li held in §30 that the sum in question was “vested in the defendant by way of constructive trust”.  However, it appears that Mr Recorder Fung SC was the only judge who had considered this issue in detail.  He came to a different conclusion which is indeed the main reason why he declined to follow other cases where vesting orders had been made.  In §16(9) of his judgment in 800 Columbia Project Company LL, he held (and I quote again) that:

“The condition in section 52(1)(e) may be satisfied when “a thing in action is vested in a trustee whether by way of mortgage or otherwise”. Ms Ng submitted that this condition is satisfied because the debts owing by the Bank to the defendants (ie choses in action) are vested in the defendants by virtue of my granting of the declarations.  In the present case, before I gave default judgments declaring that the various sums of money are held on a constructive trust by the defendants for the plaintiff, the defendants were the absolute owner of the money in the relevant bank accounts, or more accurately, the absolute owner of the right to call upon the Bank to repay the amount of the credit balance on the relevant bank accounts.  After the giving of default judgments, the legal title in the right to call for repayment would continue to be held by the defendants, but the equitable title in such a right would have been divested from the defendants who would hold the same on trust for the plaintiff.  I do not believe it is apt to say that the right to call for repayment from the Bank was vested in the defendants by virtue of my giving of the default judgments.”

42.  To construe the phrase “a thing in action is vested in a trustee whether by way of mortgage or otherwise”, it is essential to note an important point.  As to the meaning of the word “trustee”, s.2 of the TO provides that, unless the context otherwise requires, the expression “trust and trustee” extend to implied and constructive trusts. S.68(17) of the Trustee Act contains the same definition. In Orwin v Attorney General [1998] 2 BCLC 693 at 699e, commenting on the court’s jurisdiction to make a vesting order under s 51 of the Trustee Act 1925, Mummery LJ held that:

“In most cases this jurisdiction is invoked in the case of an express trust, but it is clear from the definition that, in cases where as a matter of fact and law an implied or constructive trust is established, a vesting order can be made.”

43.  Therefore, it seems clear that the word “trustee” in s 52(1)(e) would extend to a constructive trustee unless the context otherwise requires.  In considering whether the context requires the exclusion of constructive trustee, one must note that the statutory provision prescribe the mode of vesting in the following way ie “by way of mortgage or otherwise”.  The phrase “or otherwise” is extremely broad.  In general, it means “in any other way” (Packwood v Union-Castle Mail Steamship Co Ltd (1920) 20 TLR 59 at 60).  This is precisely what the Chinese version (which is equally authentic) says i.e. “其他方式”.  There is no reason why, in this context, the word “otherwise” should not be given its natural and ordinary meaning.  In particular, it seems to me that “otherwise”, meaning “any other way”, is capable of including vesting by way of operation of law.  In a constructive trust arising in this sort of cases, the trust is imposed by the operation of law as a result of which the legal title of the victim’s money or its traceable proceeds is vested in the fraudster or the subsequent recipient but the victim retains or holds the equitable or beneficial interest therein.  The principle is what Lord Browne-Wilkinson held in Westdeutsche Bank v Islington London Borough Council [1996] AC 669 at 716C-D:

“…when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity.”

In respect of constructive trust which is imposed by law, it is permissible to say that the legal title to the property is vested in the constructive trustee.  Mr Chiu drew my attention to Nanus Asia Co Inc v Standard Chartered Bank [1988] HKC 377 at 399E where Deputy High Court Judge Cruden held that:

“Where a constructive trust exists, the legal title to property vests in one person and the equitable title in another.”

The constructive trust comes into existence the moment the fraudster or the subsequent recipient receives the victim’s money or its traceable proceeds in their bank accounts by operation of law.  When the court grants a declaration in this respect upon the victim’s application for default judgment, it is merely affirming the legal position but is not creating any trust by such order.  As Lord Browne-Wilkinson held in Westdeutsche Bank v Islington London Borough Council at p 714G:

“Under an institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past.”

44.  For these reasons, I take the view that the context does not require excluding constructive trustee from the meaning of “trustee” in s.52(1)(e). In these circumstances, the current balance in the defendant’s bank account, insofar that it represents the victim’s money or its traceable proceeds, is vested in the defendant as a constructive trustee by operation of law.  Most importantly, I am satisfied that, looking at the matter in this way, it falls within the case of “a thing in action is vested in a trustee by way of mortgage or otherwise”.  In other words, the first condition in s52(1)(e) has been satisfied.  On this crucial point, with the greatest respect, I beg to differ with the conclusion of Mr Recorder Fung SC in 800 Columbia Project Company LLC.

45.  The second condition under s52(1)(e) is that “it appears in the court to be expedient” to make a vesting order. This is not a pure question of primary fact. It involves a judgment by the court as to whether the test of expediency is satisfied on the facts of the case. Nevertheless, in cases involving email frauds, this condition can be easily satisfied.  As pointed out in similar cases where the court granted vesting orders, as the defendant would invariably fail to appear and cannot be located, it would be virtually impossible to procure the defendant to transfer the remaining balance in the bank account to the victim without the court’s assistance.

46.  In this respect, it is pertinent to consider what vesting order the court may make. S.52(1) provides that the court may make an order vesting the right to sue for, or recover the thing in action in any such person as the court may appoint.  S.52(5) provides further that “The court may make declarations and give directions concerning the manner in which the right to transfer any … thing in action vested under the provisions of this Ordinance is to be exercised”.  In International Automotive Components Group sro, §22, I observed that, in this sort of cases, the victim does not merely want to have the right to claim the debt payable by the bank to be vested in its name; it wants to have the money back immediately.  In the past, it appears that the court would only vest the property in a new trustee to be appointed instead of the beneficiary directly.  In Re Holland (1881) 16 Ch D 672, a trustee became lunatic; the petitioner, who was the beneficiary, asked that the property be vested in himself.  Cotton LJ refused to do so and held at p 673:

“The Petitioner must have had some object in creating the trust, and he now seeks to put an end to it. The Court, in acting under the Trustee Acts, never administer trusts, but only appoints new trustee when requisite; and even if there is jurisdiction to make the order asked for, which I doubt, I do not feel disposed to exercise it. The petition must stand over, with liberty to amend it by making it ask for the appointment of a new trustee, and a vesting order; and when the order has been made appointing a new trustee, and vesting the estate in him, the Petitioner can take such steps as he may be advised to obtain a reconveyance, and put an end to the trust.”

However, more recently, the court is prepared to take a more liberal approach in appropriate circumstances. In Re G (ET) (a patient) and Re G (TJ) (a patient) [2007] EWHC 1861 (Ch), the trustees were a patient and an accountant who could not be found; the trust property was shares in a company.  The trust provided that, in the circumstances, which had happened, the shares should be held for two beneficiaries in equal shares.  One of the beneficiaries proposed that the court made an order under s.51 of the Trustee Act 1925 vesting one half of the shares in him and one half in the other beneficiary.  The other beneficiary proposed to appoint a new trustee and to leave it to the new trustee to administer and wind up the trust.  Morgan J held at §82 of his judgment that:

“the simpler course of vesting the shares in [the beneficiaries] severally is to be preferred. That avoids the need to appoint a new trustee. There is no demonstrated need for an investigation as to whether the trust includes other assets or whether any equalization is called for. Accordingly, I will make an appropriate vesting order to this effect.”

In Underhill and Hayton: Law Relating to Trusts and Trustees (19^th ed., 2016), §73.20 at p 1056, in the footnote relating to s.51(1) of the Trustee Act 1925, the author states that:

“Nowadays to save expense and circuitry of action, if there is a beneficiary who is absolutely entitled, the court will normally vest the property directly in such beneficiary rather than in trustee for him as was the old practice.”

S.52(1) of the TO indeed provides expressly that, upon satisfaction of the conditions mentioned above, the court may make an order vesting the right to sue for or recover the thing in action “in any such person as the court may appoint”. The phrase “in any such person as the court may appoint” is, prima facie, wide enough to include the beneficiary of a constructive trust. The court’s power in this respect is however subject to two provisos. The second proviso concerning joint property is irrelevant for the present purpose. The first proviso is that where the vesting order is consequential on the appointment of a trustee, the right shall be vested in the persons who, on the appointment, are the trustees. In the present context, the vesting order would not be consequential on the appointment of a trustee. It follows that the court is at liberty to vest the thing in action in the beneficiary. This proviso also reinforces my earlier view that s.52(1)(e) may be invoked in cases where no new trustee is appointed.

47.  To complete the picture, s.57(1) provides that:

“An order under this Ordinance …concerning any …thing in action subject to a trust, may be made on the application of any person beneficially interested in the …thing in action…”

This provision puts beyond doubt that, in the present context, the victim, being the person beneficially interested in the balance in the bank account, has the locus standi to apply for a vesting order.

48.  Having considered these authorities, I have decided to withdraw the reservation I expressed in International Automotive Components Group sro.  Under s.52(1), the court may make an order vesting the trust properly directly in the beneficiary, which would have the effect of putting an end to the trust.  In the present context, it would mean that, firstly, the court is entitled to order that the right to claim the remaining balance in the bank account be vested in the victim, who is the equitable or beneficial owner of the money. Secondly, having regard to the wide discretion given to the court under s.52(5), the court may then direct the bank to release the balance to the victim immediately.  In other words, the victim is enforcing the chose in action immediately once it is vested in it.

49.  All in all, I have come to the conclusion that, in these circumstances, the court has the power to make a vesting order in respect of the balance in the bank account held by the defendant as constructive trustee.

50.  It is, however, important to bear in mind that it is not necessarily the case that any remaining balance in the defendant’s account is subject to a constructive trust.  This will be the case if and only if the remaining balance represents the money received from the victim or its traceable proceeds.  In practice, it is possible that, after the fraudster, or the subsequent recipient, receives the victim’s money or its traceable proceeds, there are deposits and withdrawals before the remaining balance is frozen by an injunction; and it is also possible that, there are already pre-existing deposits in the relevant bank account which would be mixed with the money belonging to the victim (as pointed out by Deputy District Court Judge Vincent Lung in Primeway International Ltd v Yi He (HK) Trading Co Ltd at §34).  Deputy High Court Judge Leung was plainly right in holding in SBM Bank (Mauritius) Ltd v Warner Trading Ltd and others, §19 that:

“It would be for the plaintiff to establish that such current balances are indeed attributable to the plaintiff as the source of money over which it asserts a proprietary claim …”

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.

51.  It is also necessary to bear in mind that, in an application for a vesting order, as highlighted in some of the authorities, it is necessary to join the bank as a party. In respect of the chose in action in issue i.e. the debt represented by the credit balance in the account, the bank is the debtor. It is entitled to be heard, and it must be joined before an order can be made to direct it to release the money to the victim.

D3.  My view on the proper procedure to apply for a vesting order

52.  Having come to such conclusion, it becomes necessary to consider what the proper procedure to apply for such a vesting order is.  As just mentioned, there is no doubt that the bank is a necessary party to such vesting order.  In most similar cases, and the present case, the plaintiff would apply for a vesting order, together with an order joining the bank as a respondent, in the same summons seeking default judgment.  I take the view that it is wrong in principle and can be confusing in practice to make these applications in the same summons.

53.  First, an application for default judgment is an interlocutory application which should be kept simple and straightforward; as mentioned, no evidence is admissible.  In contrast, an application for a vesting order is a free-standing application, which requires the support of evidence.  It is not, by nature, an interlocutory application. 

54.  Second, the bank should be joined in the application for vesting order before the court considers whether such an order should be made.  However, according to the usual procedure adopted, the court is asked to make a vesting order at the same time when the bank is joined as a respondent.  This renders the joinder application artificial though, in practice, the bank would, in most cases, state its position after it has been served with the joinder application and before the hearing.

55.  I take the view that the proper procedure is to take out a separate application by way of an originating summons for a vesting order in these circumstances (see e.g. AXHT co Ltd v So Kin Fai and another, HCMP 1223/2017 (11 September 2017, unreported); Orwin v AG [1998] 2 BCLC 693).  Both the fraudster or the subsequent recipient, and the bank, should be named as the respondents.  The plaintiff shall adduce evidence proving that the current balance in the bank account represents the plaintiff’s money or its traceable proceeds, and that it has been held on constructive trust.  Apart from producing the relevant bank records, it should and would generally be sufficient to refer to the legal proceedings whereby the plaintiff claims against the defendant as constructive trustee.

56.  It is most probable that the defendant would not appear.  In such circumstances, the plaintiff may fix the originating summons for vesting order to be heard immediately after the application for default judgment with half an hour reserved for both matters at a 9:30am slot before a judge in chambers in open court.  Once the court grants default judgment, in particular, a declaration that the defendant holds the plaintiff’s money or its traceable proceeds on constructive trust, it would give rise to an issue estoppel and constitute res judicata binding on the defendant in the originating summons.  What is left will be for the plaintiff for show that the balance in the bank account indeed represents the plaintiff’s money or its traceable proceeds.  The bank, who is a co-defendant in the originating summons, will have the opportunity to state its position before the hearing.  Usually, it will take a neutral stance and abide by any order of the court. The court is generally empowered to proceed with an originating summons and make such order in favour of the plaintiff as the nature of the case may require at its hearing in the absence of a party thereto if the liability of the defendant to the plaintiff in respect of any claim made by the plaintiff is established (Order 28, rule 4(1), RHC; AXHT Co Ltd v Soe Kin Fai and another, §9). S.58 of the TO also provides expressly that:

“Where in an action the court is satisfied that diligent search has been made for the person who, in the character of trustee, is made a defendant in any action, to serve him with a process of the court, and that he cannot be found, the court may hear and determine the action and give judgment therein against that person in his character as a trustee as if he had been duly served, or had entered an appearance in the action, and had also appeared by his solicitor at the hearing, but without prejudice to any interest he many have in the matters in question in the action in any other character.”

D4.  Other remedies

57.  It is, strictly speaking, unnecessary to consider whether there is any alternative means by which the victim can recover the money remaining in the account of the fraudster or the subsequent recipient. However, in practice, it is desirable to do so. There are, and will remain, conflicting authorities on whether a vesting order can be made in these circumstances. It seems rather unlikely that the Court of Appeal will have the chance to determine the issue authoritatively. I suspect that my judgment in this case might have the unintended consequence of making the legal practitioners even more confused as to what to do. There is certainly a real and substantial likelihood that other judges would prefer the reasoning of Mr Recorder Fung SC, who is a renowned expert in this area of the law. To play safe, it seems sensible to achieve the same objective by a means which is clearly uncontroversial.

58.  It must be right that the victim can apply for a garnishee order under Order 49 in these circumstances (eg International Automotive Components Group sro, §§30-34; 800 Columbia Project Company LLC, §18). However, the legal basis for seeking such an order would be very different from that for seeking a vesting order.  In applying for a garnishee order, it would be sufficient for the plaintiff to show that it is a judgment creditor of the account holder. Nevertheless, it would be an equally effective means. As the victim is the beneficial owner of the money in the account, it is inconceivable that any third party can possibly claim any competing interest. The bank may ask for its costs, etc., but the bank would have made similar requests in an application for a vesting order in any event. I should point out that a garnishee order will be particularly useful, and indeed the only viable means, if the plaintiff is unable to show that the remaining balance of the bank account in question indeed represents its money or its traceable proceeds.  In practice, it appears that the main reason why many legal practitioners prefer to apply for a vesting order instead of a garnishee order is the belief that, for the latter option, it is likely that more costs would be incurred and the recovery of the money would be further delayed (Minimax GmbH Co KG, §41). I am not sure whether it is true that more costs would be incurred, in particular, if I am correct in taking the view that an application for vesting order shall be by way of a separate originating summons. It is true that it would take some time to seek a garnishee order after a default judgment has been obtained. However, the time taken should not be too long; and in these cases, the victim’s position in the meantime is invariably safeguarded by a mareva injunction. Legal practitioners should perhaps be reminded that, if the judge whom they appear before disagrees that a vesting order can or should be made on whatever grounds, their clients would probably then need to spend more costs, and there would be even more delay.

59.  At the hearing, Mr Chiu submitted that Order 45, rule 8, RHC, may also be invoked.  This rules provides that:

“If an order for mandamus, a mandatory order, an injunction or a judgment or order for the specific performance of a contract is not complied with, then, without prejudice to its power to punish the disobedient party for contempt, the Court may direct that the act required to be done may, so far as practicable, be done by the party by whom the order or judgment was obtained or some other person appointed by the court, at the cost of the disobedient party, and upon the act being done the expenses incurred may be ascertained in such manner as the Court may direct and execution may issue against the disobedient party for the amount so ascertained and for costs.”

60.  If I understand correctly, the Plaintiff’s argument is that the court has ordered the Defendants to return, deliver up, transfer and/or pay the balance in the bank accounts to the Plaintiff.  It is clear that the Defendants will not comply with this order.  A plaintiff who anticipates disobedience to an order may seek to have an order made under Order 45, rule 8 in anticipation if for no other reason than to save time and expense (Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd and others, HCA 2203/2005 (4 July 2008, unreported), §15).  This is a rather ingenuous argument, but I am not sure whether it is right.  Order 45, rule 8 should be read together with s.25A of the High Court Ordinance (see Hong Kong Civil Procedure 2020, vol 1, §45/8/1 at p 1008).  It is an enforcement procedure commonly used when a defendant is ordered to execute a document.  Upon the defendant’s failure to do so, the court may order the Registrar, or the plaintiff’s solicitors, or any other person as it sees fit to execute the document instead. I am aware that there are cases in which Order 45, rule 8, was invoked in circumstances which did not involve the mere execution of a document (eg Lau Kam Chuan v Li Jing, HCMP 2594/2002 (13 December 2004, unreported), §§25-26).  However, it seems to me quite odd, in the present context, to order somebody else in place of the defendant to transfer the money in the bank account to the plaintiff.  I suppose what the court might order is to authorize somebody else to give instructions to the bank to release the money to the plaintiff.  This, however, would be a rather convoluted way of enforcing the court order.  I am unaware of any precedent that such an order has been made under Order 45, rule 8 in similar circumstances. Nevertheless, because of the order that I am going to make in this case, it is unnecessary for me to express any conclusive view on the viability of this enforcement procedure.

D5.  The present case

61.  For reasons stated above, I am satisfied that the court has the jurisdiction to make a vesting order in these circumstances. In this case, the Plaintiff’s applications for vesting orders were made as a part of the summons for default judgments, instead of by separate originating summons.  Although I take the view that this is incorrect, having regard to the fact that the Plaintiff was simply following the usual practice which had been adopted and approved by the court in many precedents, I would regard the mistake as a procedural irregularity which I shall exercise my discretion to waive.  However, in the future, I would urge the legal practitioners to consider carefully the correct legal procedures to be adopted in similar circumstances.

62.  I have considered the affidavit evidence adduced by the Plaintiff concerning the movement of various sums in the bank accounts. I am satisfied on the evidence that the remaining balances in the Defendants’ accounts, which are the subject matter of the applications for vesting orders, represent the plaintiff’s monies or their traceable proceeds.

63.  Accordingly, I shall make an order in terms of §§2-4 and 6-7 of the summons in HCA 2315/2019, and §§2-6 and 8 of the summons in HCA 252/2020 subject to the following qualification.  By a letter dated 1 June 2020, SCB stated that it would adopt a neutral stance and abide by any court order.  On the other hand, by two letters both dated 26 June 2020, BOC, while stating that it would adopt a neutral stance, proposed minor amendments to §§4 and 7 of the proposed order in HCA 2315/2019 and §§6‑8 of the proposed order in HCA 252/2020.  The Plaintiff has not indicated any disagreement to the proposed amendments.  Hence, the final order should incorporate them.

E.   CONTINUATION OF THE MAREVA INJUNCTION

64.  In both actions, the Plaintiff has obtained mareva injunctions against the Defendant.  Regarding the injunction granted by Wilson Chan J on 16 December 2019, and continued by Linda Chan J on 20 December 2019, in HCA 2315/2019, the court has ordered that the injunction shall be “continued until trial or further order”.  Regarding the injunction granted by Wilson Chan J on 9 March 2020, and continued by Keith Yeung J on 3 April 2020 in HCA 252/2020, the court has ordered that the injunction “be continued … until further order or 3 months after the conclusion of the trial herein, whichever is the earlier.”

65.  I agree that the injunctions should be varied to enable the banks to release the balances in the said accounts to the plaintiff pursuant to the orders that I have made.  I also agree that the injunctions should be continued post-judgment for a reasonable period to safeguard the plaintiff’s position pending further enforcement actions.  I believe a reasonable period should be 6 months.  If necessary, the Plaintiff may seek a further extension.  Accordingly, I shall make an order in terms of §5 of the summons in HCA 2315/2019 and §7 in HCA 525/2020 save that the period of 6 months should be inserted.

F.   CONCLUSION AND ORDER

66.  For the above reasons, I am satisfied that default judgments should be granted, vesting orders (and the related orders joining the banks as respondents) could and should be made, and the mareva injunctions (as varied) should be continued for a fixed period.  Accordingly, I shall make orders in the manner as I stated above (which I will not repeat).