PRIOR SECURITIES LTD v. HANG SENG BANK LTD AND OTHERS

HCMP 476/2022

[2022] HKCFI 1604

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 476 OF 2022

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J U D G M E N T

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INTRODUCTION

1.  This is the hearing of the Plaintiff’s (“P”) application by way of Originating Summons dated 25 April 2022 (“OS”) for disclosure by the defendant banks (“Banks”) of various banker’s records in relation to accounts maintained with specified 3^rd level recipients of P’s stolen monies (“3^rd Level Recipients”).

2.  On 27 and 28 April 2022, the Banks were each served with the OS, the supporting Affirmation of Huang Jun (a director of P) and the draft Orders.

3.  The present application is made under the Court’s inherent jurisdiction to grant a Norwich Pharmacal Order.

4.  P has received various written responses from all Banks except the 9^th Defendant (“D9”), as summarised in §3 of P’s Skeleton Submissions.  In short, the Banks which have responded are either neutral or do not object to the application, although some of them have minor comments on timing of provision of documents and costs.  I further understand from Mr Sin, solicitors for P, that D9 had given a call to P’s solicitors on 25 May 2022, indicating that it will not contest the application and will not lodge any written response.

Brief Background

5.  The salient facts of this application are set out in the Affirmation of Huang Jin, a director of P. In short, P is the victim of an employee-initiated fraud, during which its former accounting staff accessed P’s bank accounts without authority and stole a total sum of HK$31M on 8 November 2021 by transferring the same to 10 different accounts (“1^st Level Accounts”) held with 5 banks (“1^st Level Banks”).

6.  On 22 and 25 November 2021, P obtained 2 disclosure orders in HCMP 1845/2021 against the 1^st Level Banks.  The bank documents obtained reveal that the stolen monies were all dissipated and onward paid from the 1^st Level Accounts to various accounts on 8 November 2021 (“2^nd Level Accounts”) held with various banks (“2^nd Level Banks”).

7.  On 22 February 2022, P obtained disclosure orders in HCMP 101/2022 against the 2^nd Level Banks.  The bank documents obtained reveal that the stolen monies were all dissipated and onward paid from the 2^nd Level Accounts to various accounts on 8 November 2021 (“3^rd Level Accounts”) held with the Banks.  It is P’s case that the bank documents further show that there was no mixing of funds from third parties and that P retains proprietary rights on all monies traced to the 3^rd Level Recipients.

8.  Against such background, P makes the present application to seek disclosure against the Banks with which the 3^rd Level Accounts are held.

Discussion

9.  It is well-established that the Court has equitable jurisdiction to order discovery under the principle laid down in Norwich Pharmacal Co & Others [1974] AC 1333.  The relevant principles are set out by Ma J (as he then was) in A Co v B Co [2002] 3 HKLRD 111 at §13: -

“13. Given these characteristics as I have outlined, such orders are therefore not lightly made as I have said. In my view, it is essential for the court to bear the following in mind before a Norwich Pharmacal order is made: -

(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 In re. H (Minors) [1996] AC 563, at 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. Where, as in the present case, the plaintiff is likely to make a tracing claim, there must be a serious possibility that the discovery sought must either allow the plaintiff to preserve what may well be his assets or realistically lead to the discovery of such assets: see Arab Monetary Fund v. Hashim (No.5) [1992] 2 All ER 911, at 916D-E, 918J-919A.

(3) The discovery sought must not be unduly wide. There is no entitlement to general discovery (by general discovery is meant discovery in the Peruvian Guano sense): see Arab Monetary Fund at 918D-E, 919H. It follows therefore that not only must any order be specific, it must also be restricted to those or those classes of documents that are necessary to enable the plaintiff to preserve or discover assets. This is not to say that discovery orders cannot be wide; what is important is that the discovery, whether wide or narrow, is necessary.”

10.  On the first requirement, I am satisfied that P has adduced cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place.  Further, I note that (i) the Hong Kong Police has confirmed to P that its former accounting staff has been arrested, (ii) P has successfully obtained disclosure orders in respect of the 1^st and 2^nd Level Accounts, and (iii) the evidence adduced demonstrate that monies were channelled through these accounts in turn into the 3^rd Level Accounts.

11.  On the second requirement, whilst the whereabouts of the monies in the 3^rd Level Accounts remain unknown (prior to disclosure), I am satisfied that P is likely to make a tracing claim and there must be a serious possibility that the discovery sought must either allow P to preserve what may well be its assets or realistically lead to the discovery of such assets.

12.  On the third requirement, I am also satisfied that the discovery sought is not unduly wide.  Under §1 of the OS, P asks for an order for the Banks to notify P’s solicitors of the current balance of the 3^rd Level Accounts.  Under §2 of the OS, P asks for an order for the Banks to disclose to P (i) all bank statements for the 3^rd Level Accounts from 8 November 2021 (the date of theft) to the date of provision of disclosure and (ii) the accounting documents and mandates for change of address (if any) of the 3^rd Level Accounts.  §3 of the OS further provides for P’s right to identify specific transactions from the bank statements and to make written request for further disclosure.  These orders are necessary and appropriate, and rightly confined to the relevant period and/or relevant class of information.

13.  In §4 of the OS, P further seeks leave to use the documents and records disclosed in support of such further actions, whether civil or criminal, and whether in Hong Kong or elsewhere as may be necessary to facilitate its tracing and recovery of the sums belonging to P which have been transferred to the 3^rd Level Accounts.  I am satisfied that, given the strong case of fraud, the implied undertaking not to use documents other than for the purpose of present proceedings should be relaxed: see e.g. Unicredit Bank Austria AG v Dragon Wise Trading Ltd [2013] 2 HKLRD 169.

Disposal

14.  For all these reasons, I am prepared to grant the orders sought in the OS. 

15.  In respect of timing, P submits that the time required by some of the Banks (28 days or more) are unnecessary and unacceptably long given that P’s requests are not voluminous or complicated, and the proposed orders also cater for extension of time by agreement in writing between P and the Banks.  I also take note that the Banks have had notice of the present application since 27 or 28 April 2022.  As such, I agree with P to make an order in terms of the timing as provided in the draft Orders.

16.  As to costs, the draft Orders have already included the usual costs order on an indemnity basis to indemnity the Banks’ costs for the application and compliance of the Orders.

17.  I also take note of the 4^th Defendant’s (“D4”) voluntary disclosure of an account held in the name of Hu Lihua as the 4^th level recipient.  Whilst I am prepared to make disclosure order against the bank account of such 4^th level recipient, I think it would be more proper for P to amend the OS (specifically Schedule 1) to reflect that.  I am prepared to grant such order upon P’s undertaking to amend the OS to such effect within 3 workings days.  For the avoidance of doubt, I also grant leave for such amendment, and an order that service of the Amended OS be dispensed with (to minimize costs, and on the basis that the amendment only concerns D4 which would have notice of the coverage of the additional account in the Order to be served on it).

18.  It remains for me to thank Mr Sin, solicitors for P, for his submissions and assistance rendered to the court.