ANTHONY WONG v. JIAN XIAOFEI

HCA 1140/2019

[2022] HKCFI 2924

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1140 OF 2019

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REASONS FOR DECISION

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1.  This is the plaintiff’s application pursuant to RHC Order 19, rule 7 for default judgment against the defendant. At the conclusion of the hearing, the court ordered that judgment in default of defence to be entered in favour of the plaintiff. It was further directed that the draft order be submitted for approval.

Background

2.  The plaintiff’s claim concerns a futures trading account (“the futures account”) held in a Hong Kong-based international brokerage firm registered in the name of his nephew, the defendant.

3.  As shown in his statement of claim (“SOC”):

(a)  the plaintiff, a successful Singaporean businessman, is the paternal uncle of the defendant;

(b)  he agreed with the defendant that the latter would open and operate a futures account and in return, the plaintiff would cover all expenses incurred by the defendant and would provide him with a monthly allowance;

(c)  accordingly, the defendant opened the futures account in his sole name with HGNH International Futures Company Limited (“the brokerage”) and traded in that account between August 2016 and May 2017;

(d)  all funds injected into the account belonged to the plaintiff who also gave instructions for its trades;

(e)  on 27 May 2019, unbeknownst to the plaintiff and without his consent or authority, the defendant instructed the brokerage to liquidate the funds and securities held in the futures account then valued at USD 1.13 million; and

(f)  the brokerage (which was aware of the arrangement between the plaintiff and the defendant) deferred processing the unauthorised instructions.

4.  The plaintiff’s case is that the defendant held the funds and securities in the futures account on trust for the plaintiff who is its sole beneficial owner and on that basis, seeks a declaration that the defendant holds all assets derived from the funds and securities sourced from the futures account on trust for the plaintiff; an order that the assets in the futures account be transferred to the plaintiff; an injunction restraining the defendant from dealing with the futures account and all necessary and consequential relief.

5.  Based on a draft writ of summons which was filed the following day, the plaintiff obtained a proprietary injunction on 24 June 2019 prohibiting the defendant from removing from Hong Kong or in any way disposing of or dealing with assets held in the futures account (“the 2019 injunction order”). Leave was granted to the plaintiff to issue a concurrent writ of summons against the defendant (who had returned to the Mainland) for its service out of the jurisdiction.

6.  The generally endorsed writ of summons was issued on 25 June 2019 and the concurrent writ was issued for service out of the jurisdiction on 17 July 2019. Service on the defendant was effected through a request made via the High Court to the Mainland judicial authorities. A letter from the Jiangsu Higher People’s Court confirmed that service was effected on the defendant on 12 November 2019.

7.  The SOC was filed on 11 June 2020. It was served by the plaintiff’s solicitors sending the same by prepaid registered post to the defendant on the same day.

8.  The 2019 injunction order lapsed on 31 January 2020 and the plaintiff applied for a fresh proprietary injunction similar in terms to the 2019 injunction order.

9.  On 5 February 2020, Toh J granted the order sought (“the current injunction order”). Since that date, it has been continued at each of the 4 adjourned hearings.

This application

10.  The plaintiff seeks an order pursuant to O. 19, r. 7 that judgment be entered in default of defence for the relief as prayed in the SOC.

11.  The procedural history shows that the defendant who resides in the PRC has been duly served but he has not made any response to the plaintiff’s injunction applications and has not appeared on any of the return dates in respect of the current injunction order.

12.  In those circumstances, on the plaintiff’s pleaded case, the plaintiff is entitled to succeed on his summons for judgment in default.

13.  As regards the items of relief sought in the SOC, Mr Leo Wong, counsel for the plaintiff, invited attention to various matters which are considered under the headings below.

(a) Retrospective leave for service of the SOC

14.  While leave was granted by the court for service of the concurrent writ on the defendant out of the jurisdiction, and the generally indorsed writ was duly served on the defendant as appears from §6 above, the SOC was filed on 11 June 2020 and served in the ordinary way by prepaid registered post which has not been returned.

15.  A statement of claim indorsed on the writ is part of the writ on which it is endorsed. The indorsement on a generally indorsed writ is a statement of a cause of action in a somewhat attenuated form: see 2022 HKCP at §6/2/3. When the SOC is subsequently served, it is not entirely clear whether separate leave for service out of the jurisdiction is required or whether it should be treated as part of the writ itself.

16.  This question does not appear to be specifically addressed in the annotation referred to above. While RHC O. 11, r. 9 (4) expressly applies to summonses, notices and orders, it would not seem to apply to a statement of claim to be served out following service out of a generally endorsed writ: see 2022 HKCP §11/9/11.

17.  Should leave to serve out be required, it can be granted retrospectively: see Daniel Isaac Henri Mimoun & Ors v Dragon Concept HK Limited & Ors [2020] HKCFI 2535 at §2, where, in similar circumstances, for the avoidance of doubt, retrospective leave to serve the SOC out of the jurisdiction was granted.

18.  In the present case, I consider it appropriate that retrospective leave be granted for service out of the jurisdiction and such retrospective leave is granted.

(b) Service of the summons

19.  Mr Wong referred to China Ludao Technology Co Ltd and Another v Perfect Century Group Limited [2021] HKCFI 3855, a default judgment case brought by the plaintiffs against the defendant, a BVI entity. In that case, the plaintiffs served the summons for default judgment on the defendant at its registered office in the BVI out of an abundance of caution since the summons did not have to be served on a defendant who has not acknowledged service: see RHC O.65, r. 9. The plaintiffs sought and were granted retrospective leave for service of the summons and all other or further documents on the defendant out of the jurisdiction.

20.  As there is no element of doubt that arises in relation to the operation of RHC O.65, r. 9, it is wholly unnecessary for retrospective leave to be granted. Accordingly, I agree with the plaintiff that no such retrospective leave is necessary.

(c) Declaratory relief

21.  There is little prospect that the defendant would return to Hong Kong to comply with any transfer order made by the court. It is equally clear that for its own protection the brokerage would not effect a transfer of the assets without a declaration of the plaintiff’s beneficial ownership of the futures account.

22.  While it is a rule of practice that a declaration would not normally be granted when giving judgment without trial, that rule will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled: see Lam Shing Shou v Lam Hon Man, unrep., HCA 361/2001, 15 January 2002; and 2022 HKCP at §19/07/14.

23.  I have no doubt that the present case is such a case and I have no difficulty in granting the declaration sought.

(d) Section 25A of the High Court Ordinance, Cap 4

24.  In the event the defendant neglects or refuses to comply with the transfer order in relation to the futures account, I agree that an application may be made for an order under section 25A of Cap 4 for all necessary documents to be executed by a person nominated by the court.