Great Rock Asset Management Llc t/a Capitol Seniors Housing v. Yulong International (HK) Ltd

HCA 402/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 402 of 2016

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J U D G M E N T

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Background

1.Great Rock has been the subject of an e-mail fraud.  As a result of e-mails sent to it, on 19 January 2016, it was persuaded to transfer the sum of US$106,560 to the bank account of Yulong with HSBC.  The e-mails were fraudulent, and Yulong had no legal entitlement to receive that sum from Great Rock.

2.On 17 February 2016, Great Rock applied for and obtained Mareva relief against Yulong, and a disclosure order against HSBC.  Now, Great Rock seeks judgement in that sum, and a declaration that it has a proprietary interest in the sum of US$106,541.67 standing to the credit of Yulong's HSBC USD sub-account.  Yulong does not appear today.

3.The evidence from the bank statements received pursuant to the disclosure order, reveals that on 1 January 2016, a sum of €100,868.05 was deposited to the account’s EUR sub‑account.  On the same day two sums, €60,000 and €40,800 were withdrawn from the sub-account.  On 19 January 2016 a further €60 were withdrawn, leaving a balance in the EUR sub-account in the sum of €8.05.  On that same day, US$64.87 was deposited to the account’s USD sub‑account.

4.On 20 January 2016, (Hong Kong time, being 19 January 2016, US time), following the fraudulent e‑mails, the sum of US$106,541.67 was deposited by Great Rock, to the account’s USD sub‑account.  That was the sum fraudulently obtained by Yulong.  That sum represented the sum of US$106,560 less administrative and handling charges.  After taking into account the deposit of US$64.87 that had been deposited the previous day (Hong Kong Time), the USD sub‑account stood at US$106,821.10.  That sum has been frozen in the account by orders of this court.

5.Even if Yulong were not itself the perpetrator of the fraud, it has knowledge of the fraud because the injunction order, the statement of claim, the summons for the judgment and the supporting affidavit have been served on Yulong.  Notwithstanding that, Yulong has made no effort at all to restore the funds to Great Rock.

6.Of the sum standing in the USD sub‑account, US$106,541.67 is demonstrably the actual funds fraudulently obtained from Great Rock.  In those circumstances, it is clear that Great Rock has a proprietary claim on the funds standing to the account to that amount.

7.In March 2006 Great Rock became aware of claims being advanced against Yulong by another company, Circinus and Atlas Maritime Ltd (“Atlas”).  If Great Rock merely obtains judgment against Yulong, and does not obtain a declaration of proprietary interest in the funds, it will have to stand alongside other creditors of Yulong in making recovery.  If a declaration is made that Great Rock has a proprietary claim on the funds, Atlas will not pursue those funds.

8.The usual rule is that it is not the normal practice of the court to make a declaration without a trial, but that is not an inflexible rule: see Lau Wai Kuen v Wong Shau Kwong [2004] 4 HKC 528.  Where a plaintiff has a genuine need for declaratory relief which could be properly had granted by the court based on the merits of the case, a declaration may be made without a trial.

9.This is plainly a case where Great Rock has a genuine need for a declaration.  The declaration will enable it to recover the sum fraudulently obtained with the exception of a modest amount of handling fees.  It will be able to pursue Yulong, should it wish for costs and any other losses suffered.  If Yulong should go into liquidation, Great Rock must stand alongside any other unsecured creditors in respect of any amounts still due to it.

10.I am accordingly satisfied that this is a proper case for judgement against Yulong in the sum of US$106,560.  There will be a declaration that the sum of US$106,541.67 standing to the credit of Yulong’s USD sub‑account of HSBC is the property of Great Rock, and held on trust by Yulong for Great Rock.  There will be an order that that sum must be paid by HSBC to Great Rock.  Leave is reserve to apply in respect of any other orders that might be required to effect recovery.

11.Great Rock will have its costs on a party and party basis.

Mr David Chen, instructed by Mayer Brown JSM, for the plaintiff

The defendant was not represented and did not appear