GTRPET SMF, LLC. v. GLOBAL WAY LOGISTICS LTD

DCMP 482/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 482 OF 2012

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BETWEEN

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DECISION

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1.  This is an application by way of Originating Summons for a declaration from this court that a sum of USD 39,570 (“Sum”) transferred from the Plaintiff into a bank account of the Defendant with the Standard Chartered Bank (“SCB Account”) on 14 June 2011 together with interest thereon accrued since 14 June 2011 in the SCB Account are funds held on trust for the Plaintiff, and that the Funds be released and returned by the Standard Chartered Bank to the Plaintiff.

2.  At the end of the hearing, Mr Fung acting for the Plaintiff refers me to the draft order attached to the Notice of Appointment to hear Originating Summons. He applies to make a slight amendment to the schedule in the draft order (if the court is minded to so grant an order in terms of the draft order) in that the definition of the “Funds” in the draft order  be amended to include the amount of USD 39,570 and interest thereon accrued on the amount since “the amount was” deposited into the SCB Account (instead of “since 14 June 2011”) to cater for the time difference between the USA (where the Sum was transmitted by wire transfer) and Hong Kong (where the Sum was received)

The Plaintiff’s Case

3.  The Plaintiff’s case is set out in the Affirmation of Ajmal Khan, the president of the Plaintiff, filed on 17 February 2012. The main facts deposed therein are set out in the following.

4.  The Plaintiff is an American company in Connecticut, the USA.  In the past few years, it has been importing machines and equipment from a PRC company called Taizhou Waton Import & Export Company of Zhejiang, the PRC (“Taizhou Waton”).

5.  The usual mode of communication between the two companies is by way of emails. The email address of Taizhou Waton is yalimachine2010@yahoo.com (“Usual Email Address”).  Payment is usually made by the Plaintiff by wire transfer into various bank accounts designated by Taizhou Waton, though the more often used bank account of Taizhou Waton is the one with China Merchants Bank.

6.  Mr Nigel Zhu (“Nigel”) of Taizhou Waton is the usual contact person for Taizhou Waton.

7.  On 31 May 2011, the Plaintiff received an email purportedly from Nigel of Taizhou Waton through an email of yalimachnie@yahoo.com  (“Forged Email Address”).  The email revealed that the sender “Nigel” told the Plaintiff that Taizhou Waton’s bank account with China Merchants Bank was “going through auditing and it will not be able to received finds from now”.  He thus requested the Plaintiff to pay the Sym, being the alleged balance of an invoice dated 31 July 2012, by wire transfer to a bank account with the HSBC. A copy of invoice (which turned out to be a forged one) was attached to the email.

8.  No money was paid by the Plaintiff into the aforesaid HSBC bank account.

9.  Then on 14 June 2011, the Plaintiff received another email from the Forged Email Address also purportedly to be sent by “Nigel” for Taizhou Waton. A revised version of the invoice dated 31 July 2012 referred to in the para 7 above was attached to this email. The Plaintiff was directed to make payment of the Sum into the SCB Account.

10.  Accordingly, the Plaintiff paid the Sum into the SCB Account from its business cheque account with the Citibank in Connecticut, the USA on the same day. The relevant wire transfer advice was attached in the supporting affirmation.

11.  On 15 June 2011, when the Plaintiff attempted to check with the true “Nigel” of Taizhou Waton if payment of the Sum was received, the Plaintiff then came to realize that it was a subject to a scam of the Defendant.

12.  A report was thus made to the Hong Kong Police by Taizhou Waton and the Plaintiff respectively.

13.  The Hong Kong Police investigated into the matter and was able to freeze the SCB Account. They show no objection to the release of the Sum from the Standard Chartered Bank to the Plaintiff provided an Order to this effect is granted by the court.  

14.  The Standard Chartered Bank, upon enquiry from the Plaintiff, simply referred the Plaintiff back to the Hong Kong Police.

Analysis

15.  Today is the first hearing of the Originating Summons.

16.  According to the two affirmations of service filed by the Plaintiff’s solicitors on the Plaintiff’s behalf, the Originating Summons, the supporting affirmation and a Notice of Appointment to hear Originating Summons have been duly served on the Defendant (a company limited registered in Hong Kong). From these documents, I am satisfied that service of these proceedings on the Defendant is sufficient and good.

17.  The Defendant has not filed any Acknowledgement of Service, nor does the Defendant appear before me today.

18.  Generally speaking, a declaration cannot be obtained by default (See Order 15 rule 16, Rules of District Court). But Mr Fung for the Plaintiff has rightly referred me to the case of Wong Kum Chi v Lee Tit Ying [2003] 1 HKLRD 594 in which Deputy Judge A Cheung (as he then was) held that a court can proceed to deal with the originating summons in the first hearing in the absence of a defendant. The learned Judge says the following in his Judgment:

“Moreover, as I said, the proceedings were commenced by way of originating summons; therefore, O.28 apply to this case. Order 28 r.1 provides, amongst other things, that O.32 r.5 shall apply in relation to originating summons as they apply in relation to other summonses. Order 32 r.5 provides that where any party to a summons fails to attend on the first or any resumed hearing thereof, the court may proceed in his absence if having regard to the nature of the application, and it thinks it expedient so to do.” (emphasis added)

19.  Under Order 28 rule 3 of the Rules of the District Court, matters of a originating summons can be dealt with at the first hearing if the facts are sufficiently clear and liability is established: See Titan Limited v Deng Zhishun, unrep., HCMP 4804/1999.

20.  Mr Fung also refers me to the case of Wing Hang Bank Limited v Liu Kam Ying & Others, HCMP 2519/2001 in which Ma J (as he then was) commented that the substantive hearing of an originating summons could also be heard in chambers. The learned Judge (as he then was) stated at para 7 this:

“While normally the substantive hearing of an originating summons should be in open court (see Hong Kong Civil Procedure 2002 at para.28/9/2), where, as in the present case, the plaintiff seeks a summary determination of the matter (akin to an application for summary judgment), the hearing can take place in chambers : see RHC, Order 28, rules 4(1), 9(1); International Bank of Asia Limited v. Kewpaisal Warranuch, unreported, 4 March 1999, HCMP1421/1998, Yuen J. The difference between an application for summary judgment under the originating summons procedure and an application for summary judgment under RHC, Order 14 is that the burden is not on the defendant in the case of the former: see International Bank of Asia Limited at pp.5S to 6A.” (emphasis added)

21.  Due to the matters aforesaid, there is no doubt that this court can proceed to consider the Plaintiff’s application in the absence of the Defendant in the first hearing of this Originating Summons.

22.  I have considered the Affirmation of Ajmal Khan. What was deposed by him is supported by documentary proof and there being no contrary evidence to challenge the same, I conclude that I have no reason to doubt and will accept the facts contained in the said affirmation.

23.  It is sufficiently clear that the Plaintiff was made a subject to a scam or fraud administered by the Defendant. When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient and the property is recoverable and traceable in equity: Westdeutsche Landesbank Girozentrade v Islington LBC [1996] AC 667 followed by Michael Chen Kang Huang v Peter Lit Ma, HCA 218/2005.

24.  On the other hand, the evidence shows that invoice (or its revised version) dated 31 July 2011 sent by the Defendant to the Plaintiff is a forged one. There is no doubt that the Defendant did not have the authority from Taizhou Waton to accept payment from the Plaintiff. The Sum was thus paid without consideration moving from the Defendant to the Plaintiff, and there was in fact no valid contract between the Plaintiff and the Defendant.

25.  In the circumstances, the Sum and the interest accrued thereon since the same was deposited into the SCB Account should be returned to the Plaintiff. It would be unfair and unjust to make the Plaintiff wait any longer or to leave the Plaintiff with no remedy at all.

Costs

26.  The Plaintiff asks for summary assessment of costs and submits to me a statement of costs for summary assessment. Mr Fung for the Plaintiff invites me to consider the nature of this case, being a fraud, in the summary assessment of costs.

27.  Given that this application is a rather simple one and it can be quite anticipated that the Defendant would be absent and would not file any evidence in opposition, I take that view that the cost now claimed by the Plaintiff is excessive. I will give a broad-brush approach and assess the costs in the sum of $27,000.

Conclusion

28.  So, my order is as follows:

(1) a declaration that a sum of USD 39,570 and any interest accrued thereon, more particularly described in the Schedule (as amended) attached to the Notice of Appointment to hear Originating Summons filed on 5 March 2012 (“Funds”), being funds subject to a hold imposed by the Standard Chartered Bank (Hong Kong) Limited to the order of the Hong Kong Police Force, are funds held on trust for the Plaintiff.

(2) The Funds be forthwith released and returned to the Plaintiff.

(3) The costs of and incidental to this application be to the Plaintiff and such be assessed by way of summary assessment in the sum of $27,000.