L.J. SMITH, INC. v. CHANCELLOR PRECIOUS METALS (VU) LTD AND ANOTHER

HCA 1767/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1767 OF 2014

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D E C I S I O N

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1.  In August 2014, the plaintiff, an American Company, was through fraudulent and therefore criminal manipulation of e‑mail contact, induced to pay sums totaling US$280,199.80 intended for its customer, into a bank account held at the HSBC Bank in Hong Kong in the name of a company identical to that of the 1^st defendant.

2.  The plaintiff obtained a Mareva injunction against the named defendant company and the 2^nd defendant.

3.  The 2^nd defendant is the admitted controller/director/principal shareholder of two companies of exactly the same name, incorporated by him — one in Hong Kong, on 14 November 2013 and the other in Vanuatu in December 2011.  Both bear the same bracketed part of their name as “(VU)” even though only one was incorporated in Vanuatu.  As I said before, this is calculated to mislead or confuse, perhaps deliberately so. 

4.  The bank account concerned, number 499‑746626‑838 opened on 16 January 2012, was made the subject of the injunction.  The company search against the name or information from another source had revealed an address in Hong Kong – viz 20, Queen’s Road, Central.  On the face of it the plaintiff had sued the correct company.  However, it appeared that in May 2014 the 2^nd defendant applied to deregister the Hong Kong company he says “as a business decision”, but had already incorporated a company of exactly the same name in Vanuatu.  He further states that the original “1^st defendant [in this action] is not the right party to be sued since it is [no longer] the holder at the HSBC of that account” and added, has no account at the HSBC.  It was obviously necessary for the Vanuatu company to be substituted for the Hong Kong company as the 1^st defendant, as the 2^nd defendant had in effect agreed.  This was done.  However, the documents disclosed by the bank, reveals that the account is held by the Vanuatu registered company and was opened by the 2^nd defendant as the sole signatory. They also show the company as stated to have a Head Office in Hong Kong and a Business Address at Room 2014, 21^st Floor, Infinitus Plaza, 199 Des Voeux Road Central, Hong Kong.  In fact both companies may have been operating the same account.

5.  This is also the company’s Business Address stated on its Certificate of Incumbency dated 5 April 2013.  It is stated thereon that the 2^nd defendant is its director. 

6.  Although the Vanuatu company is not registered in Hong Kong, its stated Head Office and place of business in Hong Kong means that under section 803(5)(a) service can be effected on it within the jurisdiction by sending the process or notice to, or leaving it at the place of business.  Therefore there is no need for the plaintiff to apply for, or for the court to consider, service out of the jurisdiction under Order 11, rule 1.

7.  I do not propose to repeat all the matters set out in my short judgment (6 pages) which I delivered when I dismissed the defendants’ appeal on 20 November 2014, printed copies of which were supplied a few days thereafter.

8.  Suffice it to say that the 2^nd defendant affirmed that, in respect of the money fraudulently transferred to the HSBC account, he “has no direct interest in it” and “I am willing and able to pay or transfer the sum into court or to dispose of the same in such manner as the court may direct.” He has done nothing to put this into effect.  All this was known to the defendants’ lawyers well before this appeal which is entirely without merit.

9.  Since the defendants’ argument in the course of the hearing of the appeal from the Master which I rejected, there was in the skeleton submissions for the purpose of this hearing for leave to appeal, an attempt to advance it in a fashion which simply demonstrates the fallacy behind it.

10.  In essence the defendants say that the court should ignore its compliance with section 803(5)(a) of the Companies Ordinance by contending that the statement as to place of business and its Head Office should be regarded as of no relevance because there is no evidence of business dealings.  This is nonsense.  The need to comply with section 803(5)(a) is to ensure that a foreign company which is not registered in Hong Kong but seeks certain facilities for business purposes eg banking, can be served with proper process or notice.  

11.  The defendants cannot be heard to say that they have registered or recorded a place of business in Hong Kong only in order to circumvent the need to register a foreign company in Hong Kong, and, in the same breath state that it was only a contrivance to that end and that it does not hold itself out as actually having business in Hong Kong.  That would be a clear deception.

12.  In fact it is quite clear that the 2^nd defendant was operating the company bank account at the HSBC because payments were being made out of the HKD account to recipients which included at least one Hong Kong company, and out of the USD account to dispose of the money fraudulently received by it.  In his affirmation he stated that these recipients were all clients or business associates.  Thus there was clearly business activity.

13.  The numbers of the HKD account cheques are not consecutive indicating that at least four other cheques were used between the first and the last of these three.

14.  My attention has been directed to a number of judgments which are wholly irrelevant to the factual matrix with which I am concerned.

15.  On 8 December 2014, the defendants lodged a further affirmation by the 2^nd defendant which purports to exhibit documents supporting its fanciful, almost spurious argument.  The contents of the affirmation itself are at least questionable and in some respects incorrect.  The documents exhibited to it are highly dubious, suspiciously “emerging from the woodwork” at the 11^th hour.  If these documents are genuine, why do they arrive at this late stage and in this form?

16.  The form purporting to be a change of address on an HSBC form, is undated, and not signed by the bank.  The other two documents could have been prepared and signed at any time.  I decline to allow the affirmation to be filed but “de bene esse” I allowed comment upon it.  They do not change the position at all.

17.  There is no legitimate argument available to the defendants.  I referred in my judgment to Mr George Chu’s argument to the effect that the Certificate of Incumbency may be out of date.  I do not understand how that could possibly affect the matter.  There is no evidence from the defendants to challenge the position. There are only admissions which make the plaintiff’s case unanswerable.  There is no reasonable prospect of success.  I can see no other reason why leave to appeal should be granted.  The application is therefore refused with costs which I assess summarily at HK$60,000 inclusive, payable forthwith.