URBAN ROUGE LTD v. VICTORY GAINER LTD

DCCJ1478/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1478 OF 2014

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DECISION

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The application

1.  This is an application taken out by the defendant by way of a Summons dated 12 June 2014 to strike out the Statement of Claim of the plaintiff for failure to disclose a reasonable cause of action under Order 18 rule 19 (1) of the Rules of the District Court Cap 336.

The applicable principles

2.  The relevant principles governing the exercise of the court’s summary power to strike out a pleading are well established.  A good summary of those principles can be found in the case of CY Foundation Group Ltd v Best Max Holdings Ltd, HCA 787/2011 unreported judgment dated 3 June 2013 by the learned Recorder Lisa Wong SC.

3.  In that judgment at paragraph 2, the learned recorder summarized the applicable principles about striking out a pleading as follows:-

“(1) First, this being an application under rule 19(1) only, no evidence is admissible under rule 19(2). The court will simply assume the facts as pleaded in the statement of claim to be proved and determine, on that basis, whether the pleading discloses a reasonable cause of action.

(2) Second, the question for the Court is whether the allegations as pleaded in the statement of claim disclose some cause of action or raises some question that ought to be tried. It is not concerned with an assessment of the strength or weakness of the case. The mere fact that the case is weak, and not likely to succeed, is no ground for striking it out. The Court would only strike out when it is possible, and not just improbable, for the case to succeed.

(3) Third, where a pleading is defective only for want of particulars to which the other side is entitled, particulars (and not an order to strike out the pleading) should have been sought under Order 18, rule 12. The Court can properly refuse to strike out even a pleading seriously lacking in particularity if the defect is not the result of a blatant disregard of Court orders and can be remedied.

(4) Fourth, where a statement of claim does not disclose the cause of action relied upon but there is reason to believe that the case can be improved by amendment, the Court may give an opportunity to amend, even though the formulation of the amendment is not before the Court.”

The background

4.  The plaintiff took out a writ attached with the Statement of Claim on 17 April 2014. 

5.  After setting out the parties’ background and that the plaintiff had some prior dealing with one supplier Topfield VN (“the Supplier”) in Vietnam. The plaintiff sets out its case as follows:-

“3. On the 24^th July 2013, the Plaintiff received an email from the Supplier asking the Plaintiff to make payment for an invoice issued previously by the Supplier with the invoice number INAL 13014 and dated the 19^th March 2013 (“the Invoice”).  In the same email, the Supplier further asked the Plaintiff to make to an alternative bank account with the following bank account details:

Name of beneficiary:	Victory Gainer Limited
Address:	164-166 Hennessy Road, Hennessy Plaza Wanchai, Hong Kong
Account Number:	0275330201188
Bank:	Bank of Communications Co. Ltd
	(Hong Kong Branch) (“BOC”)
Bank address:	563 Nathan Road, Mongkok, Kowloon Hong Kong
Swift code:	COMMHKHHXXX

4. As a result of the instructions in the email, the Plaintiff did make payment by instructing Citibank HK (“Citibank”) to debit the Plaintiff’s bank account numbered 1185157 for the sum of US$39,852.56 to the Defendant for value date on the 26^th July 2013 to settle the invoice.

5. However, the Plaintiff was informed by the Supplier on the 6^th August 2014 that it was found that the email account of the Supplier was hacked.  The Supplier also found that a fraudulent email was sent to the Plaintiff for payment which was the email the Plaintiff received on the 24^th July 2013.

6. The Plaintiff therefore alerted Citibank in an attempt to stop the transfer but was informed that the transfer had been made.  Citibank received confirmation from BOC that the Defendant refused to return the fund and the fund was withdrawn from the Defendant’s bank account.

7. The Plaintiff therefore filed a formal report to the Hong Kong Police and the said account of the Defendant was subsequently frozen pending further investigation by the Hong Kong Police as a case of fraud.”

The defendant’s arguments

8.   The defendant submits that the statement of claim in its present form does not disclose a reasonable cause of action of either fraud or unjust enrichment.

9.   In gist, although the word “fraud” does appear in the Statement of Claim, it does not spell out (a) whether the fraud was alleged as against the defendant and (b) whether enough particulars of the alleged fraud was pleaded. The defendant refers to the well established principles set out in para 18/12/16 of the HK Civil Procedure 2014 Vol 1 to support of its application that “an allegation of fraud must be pleaded distinctly and with utmost particularity …...  And it is not allowable to leave fraud to be inferred from the facts ……”

10.   As regards unjust enrichment, whether (a) there was enrichment to the defendant in particular (i) whether mere keeping of money is enrichment; (ii) whether dishonesty can be inferred (iii) whether enrichment can be inferred from the facts and (b) if so whether there was unjust factor in the enrichment.  The defendant refers to the CFA case of Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 in support of its present application.

The plaintiff’s arguments

11.   At the hearing, the plaintiff argues that it is immaterial whether the plaintiff is suing the defendant for “unjust enrichment” or “fraud” so long as the plaintiff has an arguable case shown by reference to the material facts stated in the Statement of Claim.

12.   The plaintiff further submits that a mistaken payment may in principle be recovered, whether the mistake was of fact or law, citing Halsbury’s law of Hong Kong, vol 18 (2^nd ed), Contract at p 897.

13.   In its submission, the plaintiff argues that since the plaintiff has provided all material facts in the Statement of Claim to show that a payment was made by the plaintiff to the defendant by mistake, the plaintiff has shown a reasonable cause of action to recover the sum from the defendant.  The plaintiff asks the court to dismiss the strike out application instigated by the defendant.

My decision

14.   Notwithstanding the fact that I may have sympathy over the financial loss suffered by the plaintiff in the incident as pleaded, I am afraid in the present circumstances the defendant has made out its complaints.

15.   The pleadings were poorly drafted.  Although the plaintiff has put down the so-called alleged material facts therein, there are no express pleadings about any cause(s) of action against the defendant.  Why the plaintiff is entitled to sue and/or in what aspects the defendant has done something wrong or anything unlawful!

16.   There is no allegation in the pleadings that the defendant is one of the fraudsters involved in the incident and if so alleged, then there should be particulars pleaded to that effect.

17.   There is no allegation in the pleadings about unjust enrichment in the Statement of Claim.

18.   There is no allegation in the pleadings about the defendant had and received funds to the use of the plaintiff for no consideration in the Statement of Claim.

19.   There is no allegation in the pleadings about mistaken payment in the pleadings as well (which was only raised in the course of submission at today’s hearing), which in my view like unjust enrichment claim or money had and received claim, is quite obvious.

20.   Any cause(s) of action should be expressly spelt out in the Statement of Claim and with material facts pleaded in support.  The problem here in this case is that the court (as well as the defendant) does not know what cause(s) of action the plaintiff is pursuing against the defendant even though some material facts as background have been pleaded.

21.   However, I disagree with the defendant’s submission that the Statement of Claim in its current form cannot be saved by way of amendment, thus a striking out order is justified.  Quite the contrary, should some careful thoughts been given to the drafting, the Statement of Claim can be easily remedied.  As said earlier, there should be particulars in the pleadings about what cause(s) of action are now taken by the plaintiff against the defendant. Why the plaintiff is entitled to sue and/or in what aspects the defendant has done something wrong or anything unlawful or why the defendant is not entitled to keep the funds so deposited in its bank account.

22.   The present case falls into the fourth category as stated in the judgment of the learned recorder in the case of HCA 787/2011 CY Foundation Group Ltd v Best Max Holdings Ltd (supra).  Hence I am of the view that amendment should be ordered rather than striking out and that the defendant be allowed to serve the defence 28 days after the plaintiff has served the defendant the Amended Statement of Claim.

23.   For the above reasons, I order:-

(1)   that the plaintiff be given leave to amend the Statement of Claim within 21 days from today hereof and file and serve the same;

(2)   that the defendant be given leave to serve its defence within 28 days thereafter;

(3)   the plaintiff should pay the defendant’s costs of and occasioned by the defendant’s summons dated 12 June 2014 including the costs of today’s hearing to be taxed if not agreed in any event with certificate for counsel.