ESSILOR MANUFACTURING (THAILAND) CO., LTD v. G. DOULATRAM AND SONS (HK) LTD AND OTHERS

HCA 392/2020

[2020] HKCFI 2357

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 392 OF 2020

_____________

_____________

___________________________________

REASONS FOR DECISION

___________________________________

1.  This is the application by Essilor Manufacturing (Thailand) Co Ltd (“the plaintiff”) for judgment in default of defence against Vgogo Co Ltd. (“D6”), pursuant to RHC Order 19, rule 7. At the conclusion of the hearing, judgment was entered for the plaintiff with reasons to be handed down on 7 September 2020.

Background facts

2.  The plaintiff is a company incorporated in Thailand. It is a subsidiary of the Essilor Group, a leading manufacturer of spectacle lenses.

3.  This action arises in respect of a fraud perpetrated against the plaintiff by its employees, (in particular, Ms Phetporee, the Finance and Accounting Manager,) and other unknown persons who appear to have acted in concert with Ms Phetporee (collectively, “the fraudsters”).

4.  D6 is one of 44 defendants to the action brought by the plaintiff on 27 March 2020.

5.  The plaintiff’s claim against D6 is set out in its statement of claim dated 4 May 2020:

(1) The plaintiff is the holder of a US dollar bank account with JP Morgan Chase Bank NA in New York (“the JPM Account”).

(2) Between 15 October and 11 December 2019, Ms Phetporee effected 87 fraudulent transfers (“First Layer Transfers”) of in total in excess of US $135 millionfrom the JPM Account into bank accounts in Singapore held by fictitious vendors she had set up. Of that sum, approximately US $12 million was transferred by 5 of the fictitious vendors (“the First Layer Recipient(s)”) to the defendants in this action. 

(3) Drifa Pte Ltd (“Drifa”) was one of the First Layer Recipients holding a bank account with Oversea Chinese Banking Corp Ltd (“OCBC”) in Singapore and into which account an aggregate sum of US $20,300,000 (being part of the stolen funds) was transferred between 16 October 2019 and 11 December 2019.

(4) Some of the stolen funds were then transferred by the First Layer Recipients (including Drifa) out of the Singaporean accounts to bank accounts held in Hong Kong (“the Second Layer Transfers”) of the defendants in this action (“Second Layer Recipients”). D6 is a Second Layer Recipient.

(5) Transfers of US $250,000 each were made from Drifa’s bank account in Singapore to the HK bank account of D6 on 8 November 2019 and 9 December 2019 respectively.

(6) The plaintiff never authorised any of the First and/or Second Layer Transfers and does not know and never had any business, commercial or other dealings with any of the First and/or Second Layer Recipients.

(7) The plaintiff claims against D6 are for unjust enrichment and in constructive trust arising as a result of fraud.

(8) The relief sought are the following:

(a) declaratory relief to the effect that

(i) the plaintiff is the owner of and has a proprietary interest over the 2 sums of US $250,000 each transferred to D6;

(ii) the plaintiff is entitled to trace the said sums; and

(iii) D6 holds the said sums on constructive trust for the plaintiff; and

(b) an order for payment of the said sums to the plaintiff, accounts and enquiries, costs and interest.

Procedural history

6.  On 27 March 2020, Madam Justice Wong granted an ex parte proprietary injunction over the plaintiff’s money which was paid into the defendants’ accounts and an ex parte Mareva injunction over the assets of the defendants in Hong Kong.

7.  The injunctions were continued by DHCJ Whitehead SC on 24 April 2020, pending the substantive hearing of the plaintiff’s continuation summonses which, in the case of D6, is fixed for hearing on 11 September 2020.

8.  The writ of summons was served on D6 on 27 March 2020. Solicitors for D6 filed a notice to act on 9 April 2020 and an acknowledgement of service on 22 April 2020.

9.  The statement of claim was served on 4 May 2020.

10.  On 6 July 2020, the solicitors for D6 filed a consent summons. Master Anthony HK Chan made an order in terms on 7 July 2020. The order made which was an “unless order” imposed a deadline of 31 July 2020 for D6 to file (a) its defence and counterclaim; and (b) its evidence in opposition to the continuation of the injunction, failing which D6 would be debarred from filing the same and the plaintiff at liberty to apply for judgment to be entered against D6 with costs.

11.  On 21 July 2020, the plaintiff obtained default judgment against Drifa in the High Court of the Republic of Singapore including declarations that

(1)    the plaintiff is the owner of and, accordingly, has a proprietary interest over the sum of US$20,300,000 transferred from the JPM Account into Drifa’s bank account held with OCBC;

(2) the plaintiff is entitled to trace the said sum and recover the same; and

(3) Drifa holds the said sum on constructive trust for the plaintiff.     

12.  D6 has not filed its defence and counterclaim nor any evidence in opposition to the continuation of the injunction.

13.  On 14 August 2020, the plaintiff’s summons for judgment pursuant to Order 19, rule 7 and its notice of intention to enter judgment in default of defence pursuant to Order 19, rule 8A were served on D6’s solicitors.

14.  On the same day, D6’s solicitors advised by letter that they have no further instructions to act for D6 in this action.

This application

15.  The plaintiff’s case against D6 is that it is the recipient of an aggregate sum of US $500,000 through the perpetration of the fraud. Details of the fraud and the tracing exercise undertaken by the plaintiff’s solicitors are set out in the 1st affirmation of Doris L’Henoret Ep Marcellesi dated 1 April 2020.

16.  The evidence shows that D6 received 2 payments of US $250,000[1] on 8 November 2019 and 9 December 2019 respectively from the account held by Drifa with OCBC. Those payments were made by OCBC into D6’s bank account held with the Bank of China (Hong Kong) Limited (“BOC”).

17.  It is plain from the procedural history that despite having had legal representation since 9 April 2020, D6 has chosen not to file any defence nor any affirmation in opposition to the present application. Its solicitors who are still on the record are in attendance but have no further instructions to act for D6.

18.  In the circumstances, having regard to the plaintiff’s pleaded case, I saw no reason why the court should not exercise its discretion under Order 19, rule 7 in the plaintiff’s favour.

19.  In addition to an order for payment of the aggregate sum of US $500,000 to the plaintiff, accounts and enquiries, interests and costs, declaratory relief[2] sought by the plaintiff was also granted.

20.  The power to enter judgment under Order 19, rule 7 is discretionary. While it is not the normal practice of the court to make a declaration without a trial, it is a rule of practice which may be departed from when the plaintiff shows a genuine need for the declaratory relief and justice would not be done if such relief were denied: see HKCP 2020 at 19/7/20; Lai Wai Kuen v Wong Shau Kwong [2004] 4 HKC 528, §6.

21.  That approach was adopted in Mesirow Financial Administrative Corporation v Best Link Industrial Co Ltd, unreported, HCMP 1846/2015, 25 January 2016, a case involving email fraud and most recently in the Decision dated 3 September 2020 of DHCJ Rachel Lam SC in this action, granting default judgments against 8 other defendants.

22.  In those cases, declaratory relief was granted to secure the plaintiff’s proprietary (as distinct from a merely personal) claim since an order for payment, without more, would only put the plaintiff in the position of an unsecured judgment creditor.

23.  As the plaintiff is asserting proprietary claims and remedies in respect of any transfers from D6’s bank account of the plaintiff’s funds to third layer recipients or into substitute assets, there is clearly a genuine need for declaratory relief in order to earmark the funds received by D6 as the plaintiff’s property.

Order

24.  Accordingly, an orderin terms of the plaintiff’s summons was made and the hearing of the summons to continue the injunction fixed for 11 September 2020 vacated.  

25.  The plaintiff sought costs of the default summons against D6 as well as a 1/44th share of the costs of the action, such costs to be summarily assessed. The court was referred to the costs order made in the Decision dated 3 September 2020.

26.  Having perused the statement of costs, the aggregate costs of the default judgment summons including a 1/44th share of the costs of the action were summarily assessed at $150,000. The difference is accounted for by the fact that in the present case the costs of the default judgment is borne by D6 alone rather than being shared by a number of defendants.