LEI CHEN CHUN v. HEUNG FUNG LIN AND ANOTHER

DCCJ 5884/2019

[2019] HKDC 1612

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5884 OF 2019

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DECISION

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Introduction

1.  Before me this morning is the plaintiff’s application for Norwich Pharmacal relief against a non-party, Shanghai Commercial Bank Limited.

The plaintiff’s case

2.  This action arises out of a provisional sale and purchase agreement entered on 17 July 2019 in respect of the property at House Number 98 of Cypress Drive, The Green, No 338 Fan Kam Road, New Territories.  The plaintiff was the vendor and the 1^st defendant the purchaser.  The purchase price was $15,850,000.

3.  It is the plaintiff’s case that the provisional agreement provided for an initial deposit of $500,000 to be paid by the 1^st defendant upon its signing.  The initial deposit was settled by the 1^st defendant by way of a cheque in that sum drawn in favour of the solicitors then acting for the plaintiff in that transaction.  The 1^st defendant was however not the drawer of the cheque.  The 2^nd defendant was the drawer and the cheque was drawn on his account held at Shanghai Commercial Bank Limited.

4.  The plaintiff subsequently learnt from the estate agent that the 2^nd defendant is the 1^st defendant’s boyfriend.

5.  On 19 July 2019, the plaintiff’s solicitors were informed that the cheque had been dishonoured due to insufficient funds.  On about the same day, the plaintiff was informed by his estate agent that the 1^st defendant had decided not to proceed with the purchase.

6.  The provisional agreement contained the standard term that should the purchaser fail to complete the transaction, the deposit shall be forfeited and the vendor shall be entitled to sell the property as he thinks fit.

7.  By letter dated 20 August 2019 addressed to the 1^st defendant, the plaintiff’s solicitors stated that the dishonoured cheque amounted to a repudiatory breach of the provisional agreement on the 1^st defendant’s part and that the plaintiff accepted the repudiation, thereby terminating the provisional agreement.  The 1^st defendant was demanded to make a payment of $500,000.  By another letter of the same date addressed to the 2^nd defendant, the plaintiff’s solicitors demanded the latter to pay $500,000 to the plaintiff in respect of the dishonoured cheque.

8.  Both letters were sent to the address stated in the provisional agreement as the 1^st defendant’s address.  This is because the plaintiff has no knowledge of the 2^nd defendant’s address.

9.  Neither defendant has replied as of today.

10.  The plaintiff commenced the present action against the 1^st and 2^nd defendants by writ on 30 October 2019.

11.  The cause of action against the 1^st and 2^nd defendants are breach of contract and dishonoured cheque respectively.  The claim is for $500,000, for which the plaintiff says the defendants are liable jointly and severally.

12.  As regards his claim against the 2^nd defendant, the plaintiff now faces the difficulty in serving the writ on him, since his address is unknown.  It is for that reason that the plaintiff takes out the present application against the bank.

13.  The plaintiff asks for the following discovery order in paras 1 and 2 of his summons filed on 30 October 2019:-

“1.  Shanghai Commercial Bank do disclose the following documents to the Plaintiff within 14 days of the Order to be made herein:-

(a)  The account opening documents in respect of the 2^nd Defendant’s bank account no. [omitted] held with Shanghai Commercial Bank (“the Bank Account”);

(b)  Address proof provided by the 2^nd Defendant and documents showing the 2^nd Defendant’s address(es); and

(c)  Bank statements in respect of the Bank Account since 17^th July 2019;

2.  Information other than the name and address(es) of the 2^nd Defendant on the aforesaid documents be redacted;”

The bank’s position

14.  The bank, through its solicitors, wrote to the plaintiff stating that it is up to the plaintiff to satisfy the court that a disclosure order ought to be made. At the same time, it proposed a number of amendments to narrow the scope of the proposed discovery.

15.  The bank’s solicitors asked for their attendance at the hearing be excused.

Legal principles

16.  The legal principles governing Norwich Pharmacal relief are authoritatively stated by Ma J (as he then was) in A Co v B Co [2002] 3 HKLRD 111.  It is essential to bear in mind the following matters (para 13):-

“(1)  There must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place. And where fraud or similar serious allegations are made, the degree of proof must correspondingly be high: see Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 at p.586C-H. All the more so when the alleged wrongdoer is not and will not likely be before the court.

(2)  It must also be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff. …

(3)  The discovery sought must not be unduly wide.  There is no entitlement to general discovery (by general discovery is meant discovery in the Compagnie Financière et Commerciale du Pacifique v Peruvian Guano Co (1882-83) LR 11 QBD 55 sense) … This is not to say the discovery orders cannot be wide; what is important is that the discovery, whether wide or narrow, is necessary.”

17.  Norwich Pharmacal order is a common relief granted by the courts in recent years, in the wake of the proliferation of telephone or online fraud scams practised in Hong Kong and abroad and involving bank accounts maintained in Hong Kong.  The victims would usually have no other means to find out the true identity of the fraudsters and where their defrauded money has gone, save the banks into which they transferred their moneys following the fraudsters’ instructions.

18.  Notwithstanding that it is a commonly sought relief, it is vital to bear in mind the extraordinary nature of the Norwich Pharmacal jurisdiction.  Ma J said in A Co v B Co, at para 12:-

“Though founded ultimately on notions of justice, nevertheless, it is important to emphasise the extraordinary nature of this relief because it is not a usual order and is not one that a court would lightly grant in the absence of powerful factors.”

19.  See also a recent reminder by Lisa Wong J in Citibank N.A. v The Hongkong and Shanghai Banking Corporation Ltd and Hand Seng Bank Ltd [2018] HKCFI 1102, para 8.

20.  It is an extraordinary relief for a number of reasons.  First, it is an order against an innocent party whose only involvement is to become mixed up in an alleged wrongful activity of another.  Second, the information is sought in respect of a person (the alleged wrongdoer) who is not before the court and not in a position to answer the allegation of wrongdoing.  Third, where information regarding a bank account is sought, there is a potential case of breach of confidentiality.  Ultimately, it is a balancing exercise.  The court should exercise its discretion in such a way which accords most with our notion and sense of justice: A Co v B Co at para 12. 

21.  The competing interests will include the interest of the victim to pursue his case to seek redress, the interest of the innocent party and, I would also suggest, the interest of the alleged wrongdoer in not having his private information released without his consent.

Discussion

22.  I am satisfied that a discovery order ought to be made in the present case to compel the bank to disclose the 2^nd defendant’s address to the plaintiff.

23.  The following matters are material considerations in the balancing exercise.

24.  First, the plaintiff has put forward strong and compelling evidence in support of his cause of action against the 2^nd defendant.  Exhibited to his affirmation are copies of the cheque in favour of the plaintiff’s then solicitors and the bank advice slip informing the accountholder of the dishonour.  The cause of action is thus strongly made out.  The cheque being a bill of exchange, it is all that is required for the plaintiff to prove from his side.

25.  Secondly, I need to decide if it amounts to a “serious” wrongful activity.  There is no definition for what is serious and what is not.  And it is not possible or practicable to do so.  It must depend on the circumstances of each case which may include, eg, the specific nature of the cause of action, the type and extent of loss suffered by the victim etc.  In any event, it is not a binary question.  The degree of seriousness is clearly a factor that weighs in the scale of balance. The more serious the wrongdoing, the more grievance one would feel if the victim is left without any redress for the wrong done to him solely because he does not have the requisite information to pursue the claim.  It would be a greater affront to our sense of justice if a serious wrongdoing goes “unpunished” than when it is a less serious one.

26.  Fraud or wrongful conduct involving dishonesty clearly is at the more serious end of the spectrum.

27.  However, Norwich Pharmacal orders are not confined to fraud cases.  See, eg, the Citibank case which concerned recovery of money transferred by mistake.  Norwich Pharmacal itself (reported at [1974] AC 133) concerned an infringement of patent.  In this regard, I note however that the principle explained in that judgment (at 175B) does not carry the requirement that the wrongdoing needs to be “serious”.

28.  The introduction of the notion of “seriousness” in A Co v B Co would appear to indicate that it is not that any tortious or wrongful activity would invoke the Norwich Pharmacal jurisdiction.  One must be satisfied that a serious tortious or wrongful activity is involved before the jurisdiction is engaged.  However, as discussed just now, the issue of whether it is sufficiently serious must be determined by reference to all the circumstances of the case.

29.  Here, the reasons why the cheque bounced are not known.  There is no need to speculate into them. The more important point is to remember that a cheque is treated as cash.  As Lord Denning MR said in Fielding and Platt Ltd v Najjar [1969] 1 WLR 357, at 361A-B:-

“We have repeatedly said in this court that a bill of exchange or a promissory note is to be treated as cash. It is to be honoured unless there is some good reason to the contrary.”

30.  Failure to honour a cheque is not a trivial matter.  The cheque was for $500,000.  It cannot be said to be an insubstantial or trivial sum.

31.  In my view, the alleged wrongdoing committed by the 2^nd defendant is of a sufficient degree of seriousness which is capable of invoking the Norwich Pharmacal relief.

32.  Thirdly, it is sufficiently demonstrated on the evidence that without the disclosure by the bank, the plaintiff is unlikely to be able to serve the present proceedings on the 2^nd defendant.  The latter and the 1^st defendant have so far not responded to the plaintiff’s demands.  Thus the order sought will reap real benefit to the plaintiff.

33.  Fourthly, it may be argued that the plaintiff may at any time pursue against the 1^st defendant for the same sum of $500,000.  The cause of action against her is also a straightforward one for deposit or liquidated damages.  So, it may be contended that this is not a case where the plaintiff will have no recourse whatsoever in respect of his loss, if he cannot pursue against the 2^nd defendant.

34.  I consider that the availability of the alternative claim against the 1^st defendant is a relevant factor.  In practical terms, it would slightly relieve our sense of injustice if the discovery is not granted, because we know that the plaintiff can at least proceed against the 1^st defendant, who after all is the purchaser named in the provisional agreement.

35.  That said, the financial conditions of the 1^st and 2^nd defendants are not known.  If the plaintiff succeeds in entering judgment against the 1^st defendant, it may be an empty judgment (or it may not).  But I think the more relevant and proper question to ask is this.  Why should the plaintiff be deprived of the opportunity to pursue what is on its face a strong and proper case against the 2^nd defendant?  As we shall see, on the whole, there is no good reason for that.

36.  Fifthly, the bank’s position must be considered.  It is an innocent party that gets mixed up in a wrongful act of the 2^nd defendant as alleged.  In the present case, the bank’s extent of “mixing up” is to a lesser extent than in cases where defrauded moneys go through its accounts.  Nevertheless, it is not a mere spectator or someone who just happens to have some documents in his possession. A discovery order would normally not be made in such cases – see Norwich Pharmacal at 174C-F.  It is through the cheque facility which the bank provides to the 2^nd defendant that the alleged wrongdoing was perpetrated.  This provides the juridical basis on which a discovery order is legitimately made against the bank.

37.  Sixthly, it must be recognised that the granting of an order is effectively an intrusion into the 2^nd defendant’s right to keep his personal information private.

38.  Such information was given by him to the bank in confidence.  The order requires the bank to release the information to a third party without the 2^nd defendant’s consent. That is a factor that should go into the balancing exercise.  Is that intrusion justified?  Here, the relevant circumstances are that he drew a cheque which bounced two days later.  A letter was sent to him at the address of the 1^st defendant, allegedly his girlfriend, demanding him to honour the cheque.  There was no response from him.

39.  By drawing the cheque, the 2^nd defendant took it on him to honour it.  He failed to do so. That prompted the plaintiff’s need to pursue him.  It seems that the intrusion into the 2^nd defendant’s private information is justifiably outweighed, provided that the disclosure is confined strictly to what is necessary to enable the plaintiff to pursue his claim, and no more. 

40.  It must be remembered that a Norwich Pharmacal order is not to be made lightly.  In this case, given the nature of the cause of action, the strong and compelling evidence in support and the injustice which the plaintiff will suffer if he is unable to pursue the claim against the 2^nd defendant, taking the matter as a whole, the balance, in my view, comes down in favour of a discovery order.  Its scope, however, ought to be limited solely to the address of the 2^nd defendant, as known to the bank: see Citibank at paras 7 to 11.

Order

41.  I order that the bank do within 14 days from service of today’s order disclose to the plaintiff the address of the 2^nd defendant last known to it according to the documents and records which are in its possession.  There be liberty to apply.

42.  The bank do have costs of and occasioned by this application, to be taxed if not agreed.  All reasonable costs and expenses incurred in complying with this order be recoverable from the plaintiff.

43.  As between the plaintiff and the 1^st and 2^nd defendants, the issue of the plaintiff’s costs of and occasioned by this application, including the bank’s costs, be reserved.