TUNG KIN LEUNG v. YAN CHUN CHING AND ANOTHER

DCCJ 5851/2021

[2022] HKDC 872

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5851 OF 2021

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BETWEEN

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DECISION

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Introduction

1.  Before me is the plaintiff’s summons for judgment, declaratory relief and other ancillary orders under Order 13 rule 6 and Order 19 rule 7 of the Rules of the District Court and s 38A of the District Court Ordinance.

2.  At the hearing on 8 August 2022, I made an order in terms of the summons. Here are my reasons.

Legal principles

3.  In an application under Order 19 rule 7, the court cannot receive any evidence in cases hereunder, but must give judgment according to the pleadings alone: see Hong Kong Civil Procedure 2022 Vol 1 at 19/7/11.

4.  It is not the practice of the court to make a declaration of right in default of defence, or on admissions or by consent but where such relief is to be granted without trial or evidence, the right course for the court is not to make a declaration but to state on what footing the relief is to be granted: see Hong Kong Civil Procedure 2022 Vol 1 at 19/7/14.

5.  The declaratory reliefs to be granted should not be in terms wider than what the plaintiffs are entitled to and what is necessary to do justice to them: see Hong Kong Civil Procedure 2022 Vol 1 at 19/7/20.

Service

6.  The writ of summons was served on the 1^st and 2^nd defendants on 22 April 2022 by insertion into the letterbox of their usual and last known address.

7.  The present summons was served on the 1^st and 2^nd defendants on 28 June 2022 by leaving the same at the entrance of their usual and last known address.

8.  I am satisfied that the 1^st and 2^nd defendants have had due notice of the present proceedings and summons but have chosen not to take any action nor to appear.

The plaintiff’s pleaded case

9.  In or about June 2020, the plaintiff was acquainted to the 1^st defendant at a fishing activity in Sam Mun Tsai. The 1^st defendant represented to the plaintiff that he is a professional investor in Malaysia and that his ongoing investment plan to start a restaurant in Kuala Lumpur in Malaysia will be a sure win (“the investment plan”).

10.  Induced by representation of the 1^st and 2^nd defendants, they entered into an oral agreement in late June 2020 (“the 1^st oral agreement”) that the plaintiff would deposit HK$240,000 into the 1^st defendant’s account within July 2020 pursuant to the investment plan.

11.  The plaintiff deposited HK$240,000 into the 1^st defendant’s bank account No 831-545447-883 with the Hong Kong and Shanghai Banking Corporation (“the HSBC account”) on 29 July 2020 (“the 1^st transfer”).

12.  In or about January 2021, the 1^st defendant further represented to the plaintiff that he was able to apply for a investment immigration scheme on behalf of the plaintiff of which the 2^nd defendant concurred and reaffirmed.

13.  In late January 2021, the plaintiff and the 1^st and 2^nd defendants entered into another oral agreement (“the 2^nd oral agreement”) that:

(a) the plaintiff would transfer HK$20,000 to the 1^st defendant within February 2021 for the 1^st defendant to register a company in Malaysia under the name of the plaintiff;

(b) the plaintiff would transfer HK$500,000 to the 1^st defendant within April 2021 for the 1^st defendant to open a bank account in a Malaysian bank so as to act as a proof of capital for registering a company in Malaysia; and

(c) the 1^st defendant would also inject HK$500,000 to the said Malaysian bank account so as to satisfy the requirement of the Malaysian authority for foreigners to register a company in Malaysia.

14.  In reliance of the representations made by the 1^st and 2^nd defendants and pursuant to the 2^nd oral agreement, the plaintiff deposited HK$20,000 into the 1^st defendant’s HSBC account on 25 February 2021 (“the 2^nd transfer”) and further deposited HK$500,000 into the HSBC account on 16 April 2021 (“the 3^rd transfer”).

15.  Accordingly, the plaintiff had transferred a total of HK$760,000 into the HSBC account.

16.  The plaintiff says that the representations of the 1^st and 2^nd defendants were false. The 1^st, 2^nd and 3^rd transfers of money were the result of fraud perpetrated on the plaintiff and/or the plaintiff’s mistake that the 1^st and 2^nd defendants’ representations were true.

Money judgment

17.  The facts pleaded in the statement of claim are not controverted, I accept them at its face value.

18.  I am satisfied that the plaintiff is entitled to judgment against the 1^st and 2^nd defendants for the sum of $760,000 together with interest at half judgment rate from the date of writ of summons (ie 24 December 2021) to the date of judgment and thereafter at judgment rate to the date of payment.

Declaratory relief

19.  As the plaintiff was induced by the false representations of the 1^st and 2^nd defendants to transfer the money to the HSBC account, equity imposes a constructive trust on the fraudulent recipient so that the money is recoverable and traceable in equity: see Guaranty Bank and Trust Company v Zzzik Inc Ltd, HCA 1139/2016, 18/7/2016, unreported, at paras 36 to 38 and Wismettac Asian Foods Inc v United Top Properties Ltd [2020] 3 HLRD 732 at para 15.

20.  Even if the recipient was not a party to the fraud, if his state of knowledge is such as to make it unconscionable for him to retain the money, the defrauded claimant has a tracing remedy. The knowledge does not have to be acquired at the time of receipt, it can be acquired subsequently while the money is in the recipient’s hands: see Guaranty Bank and Trust Company (supra) at paras 32 to 33.

21.  Accordingly, I am satisfied that the plaintiff is entitled to a declaration that the money remaining in the HSBC account is held on constructive trust for the plaintiff.

Enforcement of order

22.  To facilitate the enforcement of the order, the plaintiff is applying for an order in line with the route adopted in Tokic DOO v Hongkong Shui Fat Trading Ltd & Ors [2020] 5 HKC 154 by invoking s25A of the High Court Ordinance (equivalent to s38A of the District Court Ordinance) should the 1^st defendant fail to respond or comply with the order of the court.

23.  Such type of order was made in Quessglobal (Malaysia) Sdn. Bhd. v Sen Xin Ju Technology Trading Ltd [2020] HKDC 1091.

24.  I would likewise make an order in terms of paragraph 4 of the summons.

25.  For that purpose, the plaintiff is applying to join HSBC as a respondent in this action.

26.  HSBC has by a letter to the plaintiff’s solicitors dated 5 August 2022 indicated that they are maintaining a neutral position.

27.  I would therefore make an order in terms of paragraph 2 of the summons.

Costs

28.  The plaintiff is entitled to the costs of this action including this application with certificate for counsel against the 1^st and 2^nd defendants, to be taxed if not agreed.