THE HENRI STERN WATCH AGENCY INC v.HK HUASHENG TECHNOLOGY DEVELOP CO, LTD AND ANOTHER

HCA 1060/2018

[2018] HKCFI 1972

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1060 OF 2018

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J U D G M E N T

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1.  In this case, the plaintiff is the victim of an email-hacking fraud whereby an unknown impersonator hacked the email account and issued fraudulent instructions whereby the plaintiff caused unauthorised payments to be made to the 1st and the 2nd defendants. The moneys eventually went into the accounts maintained with the respective bankers which are now joined as the 1st and the 2nd respondents.  

2.  The transfers of the money were made on 9, 10 and 12 April 2018.  The first two transfers were made and ended up in the account of the 1st defendant maintained with the 1st respondent while the last and the third one went to the account of the 2nd defendant maintained with the 2nd respondent banker.

3.  The writ in the present case has been duly served, and I am satisfied about that, and in default of acknowledgement of service as well as defence, the plaintiff applies for default judgment against the 1st and the 2nd defendants.  For the purpose of the application for default judgment, the court will not consider evidence.  However, in view of the nature of the claim as well as the fact that the plaintiff is also applying for an order under section 52 of the Trustee Ordinance, and for such purpose, evidence is admissible, the court will consider all the evidence instead of making any artificial distinction between the two applications.

4.  As far as the evidence shows, the documents that were disclosed by the respective bankers show that the money transferred out of the plaintiff went into the respective accounts of the defendants maintained with the two respondents, and taking into account the very minimal opening balance in the accounts as well as the movement of the money in and out of the account or the lack of it during the relevant period, I am satisfied that the balance now standing in the accounts of the 1st and 2nd defendants maintained with the two respondents were the money originated from the plaintiff.

5.  Equity imposes a constructive trust upon such fraudulent recipients, and the property is recoverable and traceable in equity.  The authorities set out in paragraph 26 of the plaintiff’s skeleton submissions refer.  And in the circumstances of this case, I am satisfied that a declaration to the effect as sought by the plaintiff will be necessary for the purpose of justice.

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.

9.  So considering all these, I will give an order in terms of the draft order submitted to court today.