CONSTRUCTION FINANCIAL ADMINISTRATION SERVICES, LLC v. HK CANOPY TECHNOLOGY LTD

HCA 850/2018

[2018] HKCFI 958

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 850 OF 2018

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DECISION

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THE APPLICATION

1.  By an inter partes summons of 18 April 2018, the plaintiff applies for continuation of the Mareva injunction against the defendant granted at a hearing ex parte before D’Almada Remedios J on 17 April 2018.

THE BACKGROUND

2.  The plaintiff is a company incorporated in the United States of America, carrying on business in providing fiduciary services.  The affidavit of John Markley Fullmer, the President of the plaintiff, dated 17 April 2018, sets out the circumstances in which Mr Fullmer was tricked into transferring US$1,300,000 to the defendant’s account at Hang Seng Bank on 9 and 10 April 2018.  Mr Fullmer thought that he was dealing with the plaintiff’s business counterparty when in fact the email accounts of the latter had been hacked by a fraudster.  He was fraudulently induced into remitting a total of US$1,300,000 into the defendant’s account at Hang Seng Bank by two transfers on 9 and 10 April 2018.  Mr Fullmer has exhibited copies of the email correspondence with the fraudster, and the subsequent email correspondence with the plaintiff’s business counterparty whose email accounts were hacked, through which the fraud was discovered. 

3.  The plaintiff has in fact had no dealings with the defendant or its sole shareholder, sole director or company secretary.

4.  The fraud was discovered on 11 April 2018 and reported to the Hong Kong Police on the same day.

5.  The plaintiff has issued a writ on 18th April 2018 claiming to be the owner of the US$1,300,000 and seeking various items of relief against the defendant.

6.  At the ex parte hearing on 17 April 2018, the plaintiff also obtained an order that Hang Seng Bank provide bank records relating to the defendant’s account, pursuant to section 21 of the Evidence Ordinance.  The documents obtained pursuant to that order show that over 90% of the plaintiff’s US$1,300,000 had already been transferred out from the account on 10 and 11 April 2018, to various bank accounts held with mainland banks. 

SERVICE

7.  I am satisfied that as stated in the affirmation of Chung Ngai Wing of 24 April 2018, the following documents were duly served on the defendant at the address of its registered office in Hong Kong:

(1) the writ;

(2) the order for Mareva injunctive relief;

(3) the order for provision of bank records pursuant to section 21 of the Evidence Ordinance;

(4) the inter partes summons of 18 April 2018;

(5) the affidavit of John Markley Fullmer of 17 April 2018;

(6) the affirmation of Wong Ching Yin of 17 April 2018 (pursuant to which the (as then) unsworn affidavit of John Markely Fullmer was exhibited); and

(7) the plaintiff’s skeleton submissions and list of authorities for the ex parte hearing of 17 April 2018.

8.  The defendant has not appeared at the hearing today.

THE APPLICATION FOR CONTINUATION OF THE MAREVA INJUNCTION

9.  In an application for a Mareva injunction, a plaintiff must show that:

(1) he has a good arguable case on a substantive claim over which the court has jurisdiction;

(2) the defendant has assets within the jurisdiction;

(3) there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, which would render the plaintiff’s judgment of no effect; and

(4) the balance of convenience is in favour of granting the injunction.

Whether the plaintiff has good arguable case

10.  It is the plaintiff’s case, supported by documents, that it was tricked into remitting US$1,300,000 into the account of a company with which it has had no dealings.  The plaintiff claims that the funds are impressed with a constructive trust in the hands of the defendant.

11.  The plaintiff has a good arguable case against the defendant.

Whether the defendant has assets within the jurisdiction

12.  The documents obtained from Hang Seng Bank show that some US$127,000 remains in the defendant’s bank account.

13.  There are therefore assets in the jurisdiction.

Risk of dissipation

14.  The fact that the remission of the US$1,300,000 was procured by fraudulent means, and that most of the funds were transferred out of the defendant’s bank account (and indeed out of the jurisdiction) shortly after they were transferred into the account, demonstrates that there is a real risk of dissipation of assets if the injunction is not continued.

Balance of convenience

15.  Even if the Mareva injunction turns out to have been wrongly granted, the loss caused to the defendant ought to be capable of compensation by means of the plaintiff’s undertaking in damages.  On the other hand, if the injunction is not granted, the plaintiff may not be able to obtain any meaningful relief, given the fraudulent behaviour of the defendant.

ORDER

16.  I therefore grant an order in terms of the plaintiff’s summons of 18 April 2018.

17.  Lastly, I wish to thank Miss CY Wong of the plaintiff’s solicitors for the assistance given through her succinct and clear written submissions and preparation of the papers.