DBS BANK (HONG KONG) LTD v. HAPPY GRACE INTERNATIONAL DEVELOPMENT LTD

HCA 59/2017

[2019] HKCFI 2864

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 59 OF 2017

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D E C I S I O N

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1.  By an Order 14 summons taken out on 24 June 2019, the plaintiff (“P”) seeks final judgment against the defendant (“D”) for the amount claimed in the statement of claim, ie USD230,000 (or its HKD equivalent) together with interest and costs.

2.  P claims that it is a victim of an identity fraud by which an impostor procured P to transfer USD12.6m to the account of H2H Trading Co Ltd (“H2H”). H2H then caused tranches to be transferred to various second-level recipients, including D.

3.  D’s pleaded defences are (a) bona fide purchaser for value and (b) change of position. Both defences hinge on the allegation that the funds in question were received by D pursuant to a money exchange contract made with an underground banking operator. P argues that even if D can prove those facts, D is precluded from relying on the 2 defences since its use of underground banking involved illegality under Mainland Chinese law.

4.  D was legally represented in these proceedings until 20 November 2019. On that date, D’s former solicitors obtained leave from the court to cease to act for D. All the papers in this Order 14 application have been duly served on D.

5.  D has not filed any evidence in opposition to the Order 14 application. That being the case, the facts as shown in P’s evidence should be taken as undisputed facts, which are as follows:

(1)  H2H is a company incorporated in Hong Kong with nominal share capital. Liu Qinghui, a Mainland Chinese resident, was its sole shareholder and director at the material time.

(2)  H2H was a shell company with no apparent business other than serving as a vehicle for an unlicensed underground money exchange agency.

(3)  H2H held an account at HSBC (“H2H Account”).

(4)  D is a company incorporated in Hong Kong with nominal issued capital of HKD1 and holds an account at HSBC (“D’s Account”).

(5)  Cai Jungfeng (“Cai”) is a Mainland Chinese resident. He opened an account with P’s Tuen Mun branch (“DBS Account”).

(6)  On 7 October 2016, a man who fraudulently identified himself as Cai (“Impostor”) visited the Cheung Sha Wan Plaza branch of P (“CSW Branch”). Having passed the identity checks, he checked the balance of the DBS Account. On 11 October 2016, the Impostor visited the CSW Branch and changed the phone number on record. On the next day he called to make an appointment with P in the morning of 13 October 2016.

(7)  At 9:30 am on 13 October 2016, the Imposter arrived at the CSW Branch and instructed P to break 3 time deposits held in the DBS Account (totaling USD19,665,426.06) and to remit USD6.3m to the H2H Account.

(8)  At 1:11pm on 13 October 2016, in the mistaken belief that the instructions had been given by Cai, P remitted USD6.3m to the H2H Account.

(9)  Later in the afternoon of 13 October 2016, the Impostor signed a further instruction to remit another USD6.3m to the H2H Account. Again acting in the mistaken belief that the instruction had been given by Cai, at 11:51 am on 14 October 2016, P remitted a second tranche of USD6.3m to H2H Account.

(10)  On 14 October 2016, P discovered the fraud. After meeting with the Cai in the morning of 15 October 2016, who had been in Mainland China at the times the Impostor met with P’s staff and gave instructions, P and Cai reported the fraud to the police.

(11)  Pursuant to a Norwich Pharmacal order obtained by P against HSBC on 26 October 2016, P received bank statements of the H2H Account which showed that:

(a)  All of the USD12.6m remitted into the H2H Account on 13-14 October 2016 was dispersed by H2H into 67 different accounts on 13-14 October 2016.

(b)  The second tranche of USD6.3m was transferred to the H2H Account at 11:51am on 14 October 2016.

(c)  D’s Account was one of those 67 accounts, which received USD230,000 from the H2H Account at 1:31pm on 14 October 2016.

(12)  The USD230,000 remitted to D’s Account came from the 2^nd tranche of USD6.3m remitted by P to the H2H Account.

6.  P does not allege that D, or indeed any of the second-level recipients, were directly involved in the fraud practised on it. P is relying on unjust enrichment as a cause of action against D, which does not require any allegation of fraud[1]. That being the case, the fraud exception in Order 14 which bars summary judgment is not triggered[2]. In this Order 14 application, P is pursuing a personal claim for the value of the fund received by D, ie USD230,000, on the basis of unjust enrichment.

7.  The principles concerning applications under Order 14 have been succinctly summarized by DHCJ Wilson Chan (as he then was) in Li Chuen Kwai v Po Lam Construction Development Ltd[3]. Having read the statement of claim and the evidence filed by P in support of the Order 14 application, I am satisfied that P has made out a case for summary judgment.

8.  The elements of unjust enrichment are as follows[4]:

(1)  was the defendant enriched;

(2)  was the enrichment at the plaintiff’s expense;

(3)  was the enrichment unjust; and

(4)  are any of the defences applicable.

9.  “At the plaintiff’s expense” would be shown if the benefit obtained by the defendant is an asset which is traceable to the plaintiff’s asset[5]. Mistake of fact is a well-established unjust factor[6].

10.  Plainly, (1) D was enriched by the sum of US$230,000; (2) this was at the expense of P since those are traceable proceeds of the 2^nd tranche of stolen funds which were P’s monies; and (3) the 2^nd tranche was transferred by P under a mistake as to identity.

11.  D has not filed any evidence to support its pleaded defences. There is no evidence, let alone believable evidence, showing that the USD230,000 were received by D under a money exchange contract made with an underground banking operator. The allegation is a mere allegation without a shred of evidence in support thereof. That being the case, I have no need to consider whether the alleged use of underground banking by D involves illegality under Mainland Chinese law. In my judgment, D has not put forward any real or bona fide defence. No triable issue has been shown.

12.  I give final judgment to P. There be an order that D do pay USD230,000 (or its HKD equivalent), together with pre-judgment interest at 1% p.a. over the HSBC best lending rate from 14 October 2016[7] to the date of this judgment, and at the judgment rate until full payment.

13.  Costs should follow the event. I order that costs of this action, including costs of this Order 14 application, be paid by D to P. Those costs be summarily assessed at HK$280,000.

14.  I thank counsel for the assistance rendered to the court.