GENERAL ALUMINA JAMAICA LTD AND ANOTHERS v. HUI HAO HONG KONG LTD AND ANOTHER

DCCJ 2827/2020

[2021] HKDC 29

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2827 OF 2020

________________________

________________________

________________________

REASONS FOR DECISION

________________________

Introduction

1.  This is the application of the 1^st and 2^nd plaintiffs by way of Summons (the “Summons”) filed on 30 July 2020 for default judgment against the 1^st and 2^nd defendants pursuant to Order 19 Rule 7 of the Rules of District Court (“RDC”).

2.  The Writ of Summons (the “Writ”) hereof was issued by the 1^st and 2^nd plaintiffs against the 1^st and 2^nd defendants on 11 June 2020.  The plaintiffs filed their Statement of Claim on 30 June 2020.  Neither the 1^st defendant nor the 2^nd defendant filed the Notice of Intention to Defend within the time prescribed.  The plaintiffs took out the Summons on 30 July 2020.  Thereafter, the 2^nd defendant, through its solicitors, filed an Acknowledgement of Service indicating its intention to contest the proceedings.  Up to the date of this hearing, no defence had been filed by the 1^st and/or the 2^nd defendants.

3.  The 1^st defendant did not appear in the hearing before me. The 2^nd defendant was represented by Mr Lok who indicated that his firm had no instruction from the 2^nd defendant in relation to the Summons.

The Claim

4.  The 1^st plaintiff is a company incorporated under the laws of St Lucia.  It is and was at all material times beneficially owned and controlled by Noble Group Holdings Limited (“Noble”), a commodity trading company incorporated under the laws of Bermuda and headquartered in Hong Kong.

5.  The 2^nd plaintiff is a company incorporated under the laws of Jamaica.  It is and was at all material times beneficially owned and controlled by the Government of Jamaica.

6.  The 1^st and 2^nd plaintiffs have been the respective 55% stakeholder and 45% stakeholder of an unincorporated joint venture known as JAMALCO (“JAMALCO”) since 2014.

7.  On 13 April 2020, Mr Andrew Williams (“Mr Williams”), the Chief Financial Officer of JAMALCO, received an email from JAMALCO’s internal legal advisor to pay an invoice raised by Linklaters LLP in the sum of GBP 231,496.96.  Shortly thereafter, an individual purporting to be the same legal advisor emailed Mr Williams with revised payment instructions, requesting that payment instead be directed to a “wholly-owned active subsidiary account” of Linklaters LLP, namely a bank account in the name of the 1^st defendant.

8.  Believing the said revised payment instructions to be real, payment denominated in US dollars in the sum of USD 292,565.86 (the “Funds”), being the USD equivalent of the requested GBP sum, was arranged to be transferred from JAMALCO’s bank account to the 1^st defendant’s bank account with the Standard Chartered Bank in Hong Kong (“D1’s Account”) on 15 April 2020.

9.  On 24 April 2020, Mr Williams contacted JAMALCO’s internal legal advisor directly and discovered that Mr Williams had been deceived and that the internal legal advisor had not sent any email instructing Mr Williams to transfer the Fundss from JAMALCO’s account to D1’s Account.

10.  The 1^st plaintiff reported the deception to the Hong Kong Police Force on 28 April 2020.  On 28 May 2020, the 1^st plaintiff was informed by the Police that they had been able to trace the Funds from D1’s Account into the bank account of the 2^nd defendant with Standard Chartered Bank in Hong Kong (“D2’s Account”).

11.  Both the 1^st and 2^nd defendants are company incorporated under the laws of Hong Kong.

12.  It is the plaintiffs’ case that the plaintiffs would not have transferred, and had no reason to transfer, the Funds to the 1^st defendant except for the aforesaid deception perpetrated upon them.  The plaintiffs did not authorise the further transfer of the Funds from the 1^st defendant to the 2^nd defendant.

13.  The plaintiffs therefore commenced the present action against the defendants for a proprietary claim over the sum of USD 292,565.86 standing in D1’s Account and/or D2’s Account as it represents the traceable proceeds of the Funds. Further or alternatively, the defendants have been unjustly enriched by the receipt of the Funds at the expense of the plaintiffs.  The plaintiffs claim for, inter alia, the return of the Funds with interest and a declaration that the defendants hold the Funds, together with interest thereon on constructive trust for the plaintiffs.

14.  Having considered all the information before me and the submissions from Mr Diebschlag for the plaintiffs, I gave judgment in favour of the plaintiffs. I reserved my reasons, which I now give.

Service of the Writ, the Summons and relating documents

15.  The Writ, the Statement of Claim and the Summons were served on the defendants by leaving at their respective registered offices.

16.  The plaintiffs served the defendants the notice of intention to enter judgment pursuant to Order 19 Rule 8A of the RDC on 25 August 2020.

17.  At the first hearing of the Summons on 31 August 2020, neither the 1^st defendant nor the 2^nd defendant attended.  The solicitors for the 2^nd defendant were contacted and claimed that they were not informed of the hearing.  The Summons was adjourned to 30 November 2020.

18.  At the resumed hearing on 30 November 2020 before me, the 1^st defendant did not appear and the solicitors for the 2^nd defendant had no instruction from the 2^nd defendant in relation to the Summons.

19.  Having considered all the affirmations of service filed by the plaintiffs, I was satisfied that the Writ, Statement of Claim, the Summons, the Notice of intention to enter judgment had been properly served on the defendants.  I therefore allowed the hearing of the Summons to be proceeded with in the absence of the 1^st defendant pursuant to Order 32 Rule 5 of the RDC.

Default Judgment and declaratory relief

20.  It is well established that the court’s power to grant default judgment under Order 19 Rule 7 is discretionary.

21.  In considering an application for default judgment, the court cannot receive any evidence but must give judgment according to the pleadings alone: Paragraph 19/7/11 of the Hong Kong Civil Procedure 2021 Vol.1 (“HKCP”).

22.  In the circumstances where no defence is filed, the court will assume that the Statement of Claim has been impliedly admitted: Paragraph 19/2/1 of HKCP.

23.  It is not the normal practice of the court to grant a declaration without going to trial.  However, this is only a rule of practice and not a rule of law, but rather one which will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled: Paragraph 19/7/14 of HKCP.  Where declaratory relief is sought, the court will scrutinize the application for default judgment carefully and does not hastily grant the relief sought: Paragraph 19/7/20 of HKCP.

24.  The plaintiffs’ proprietary claim was based on constructive trust and unjust enrichment.

25.  In the case of Guaranty Bank and Trust Company v Zizzik Inc Ltd, HCA 1139/2016, 18 July 2016, Deputy High Court Judge Nicholas Cooney SC, in dealing with a case of email fraud, summarised the legal principle for a proprietary constructive trust claim as follows:-

(i)  When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient, so that the money is recoverable and traceable in equity [28].

(ii)  Even if the recipient is not a party to the fraud, if his state of knowledge is such as to make it unconscionable for him to retain the money, the defrauded claimant has a tracing remedy [32].

(iii)  Knowledge does not have to be acquired at the time of receipt, it can be acquired subsequently while the money is in the recipient’s hands [33].

26.  As for unjust enrichment, money paid under a mistake of fact is prima facie recoverable provided that the payer did not intend the payee to have the money in any event, the money was not paid for good consideration and the payee has not in good faith changed his position: Barclays Bank Limited v WJ Simms Son & Cooke (Southern) Ltd v anor [1980] QB 677 and Guaranty Bank and Trust Company v Zzzik Inc Limited, supra [27].

27.  I found on the facts pleaded in the Statement of Claim that the plaintiffs transferred the Funds into the 1^st Defendant’s Account and further to the 2^nd Defendant’s Account as a result of a scheme of fraud perpetrated against them.  The plaintiffs were the victims of the email fraud. There were no dealings between the plaintiffs and/or the 1^st and/or the 2^nd defendants.  There was no legitimate reason put forward by the Defendants to receive the Funds.  The proprietary constructive trust claim was established.

28.  The Funds were paid by the plaintiff to the 1^st Defendant’s Account in the mistaken belief that the instructions were given by JAMALCO’s legal adviser.  The 1^st defendant and thereafter the 2^nd defendant had been enriched at the expense of the plaintiff.  The enrichment was unjust. The unjust enrichment claim was also established.

29.  On whether it was appropriate to grant declaratory relief sought, I refer to Recorder Lisa K Y Wong SC’s judgment in Mesirow Financial Administrative Corporation v Best Link Industrial Co., Limited, HCMP 1846/2016, 25 January 2016 [38] quoted by Her Honour Judge Winnie Tsui in Domtonia International Co Ltd v Tianma Communication Limited, DCCJ 290/2019, [2019] HKDC 415, 22 March 2019 [14] which I agreed:-

“38. The right asserted by the Plaintiff was one of title to property. The Funds were in equity the Plaintiff’s money. A mere order against the Defendant for the return of, without more, would have put the Plaintiff in the position of an unsecured judgment creditor of the Defendant. Such an order would not per se have given the Plaintiff any prior or specific right over the Funds. Very little was known about the Defendant. In particular, it was not known if the Defendant had any other creditors and, if so, whether it had sufficient assets (other than the Funds in the Account standing to its name) to satisfy its debts and liabilities to those other creditors. It would have been grossly unfair and potentially prejudicial to the Plaintiff if it had had to race against other creditors of the Defendant for the Funds in execution of a monetary judgment. A declaration by the Court that the Funds were held on trust for the Plaintiff was necessary to earmark the Funds as the Plaintiff’s property and put the same out of the reach of other creditors of the Defendant.”

30.  For the reason above, I exercised my discretion in favour of the plaintiff.

Conclusion

31.  In the premises, by reason of the aforesaid, I made an order in terms of the draft order as amended upon Mr Diebschlag’s confirmation of not proceeding with the relief of an account of profits, an order for deliver up such sum as may be found due upon taking of the account and equitable compensation from the defendants.  I also ordered the 1^st and 2^nd defendants to pay the plaintiff’s costs of this action and this application, summarily assessed in the sum of HK$99,991.00.