Crp/Pe Munroe Street Owner, Llc v. Junwei Consulting Trade Co., Ltd and Another
Read the full judgment text of DCCJ 4700/2019 on BabelCite. This District Court judgment was delivered on 22 January 2021.
1. On 13 March 2020, the plaintiff filed a summons and, as against the 2 nd defendant, applied:-
Cited by 3 cases · Cites 16 cases
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DCCJ 4700/2019 [2021] HKDC 71 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 4700 OF 2019 ------------------------- BETWEEN
------------------------- Coram: His Honour Judge H. Au-Yeung (Paper Disposal) Date of the 2nd Defendant’s Submissions: 10 December 2020 Date of the Plaintiff’s Submissions: 18 December 2020 Date of the 2nd Defendant’s Submissions in reply: 22 December 2020 Date of Decision: 22 January 2021 --------------------- DECISION -------------------- THE APPEAL 1.On 13 March 2020, the plaintiff filed a summons and, as against the 2nd defendant, applied:-
2.Upon hearing the parties, a Master granted summary judgment. Given such a decision, it was not necessary for the Master to deal with the interim payment application. 3.This is the 2nd defendant’s appeal against the learned Master’s decision made on 17 July 2020 whereby it was ordered that:-
THE PARTIES’ RESPECTIVE CASES 4.The plaintiff’s case against the 2nd defendant as pleaded in its Statement of Claim may be summarised as follows:-
5.In the supporting affirmation of Mr Michael Procopio (the Principal and Corporate Secretary of Procopio Enterprises Inc., the development manager of the plaintiff and the administrative member of the plaintiff) filed on 13 March 2020, it was further explained that:-
6.The 2nd defendant’s case may be summarised as follows:-
LEGAL PRINCIPLES Summary Judgment 7.The principles are trite and undisputed. 8.In Li Chuen Kwai v. Po Lam Construction Development Limited (HCA 2376/2013, unreported, 24 September 2014), it was held that:-
9.In Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822, 827, Cheung JA held that:-
10.Having said that, to raise a triable issue or arguable defence, the defendant cannot be sparing of the particulars of his defence, and then claim, as a result of his own parsimony in details. that there is an obscurity which must await trial for illumination.[3] Interim payment 11.In Delco Participation B V v Chiho Environmental Group Limited (formerly known as Chiho-Tiande Group Limited) & Another [2020] HKCFI 1643, in which the plaintiff therein also applied for summary judgment and alternatively interim payment, Coleman J had the following to say:-
Appeal against Master’s decision 12.In relation to an appeal brought against Master’s decision, it is well established that such an appeal is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judge will give the weight it deserves to the previous decision of the Master, but he is in no way bound by it. The judge in chambers is in no way fettered by the previous exercise of the Master’s decision. (Hong Kong Civil Procedure 2021, Volume 1, paragraph 58/1/2). Money had and received/unjust enrichment 13.In Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, the Court of Final Appeal had this to say about the common law cause of action of money had and received:-
THE 2ND DEFENDANT’S ARGUMENTS 14.Following the approach adopted by the Court of Final Appeal in Shanghai Tongji Science & Technology Industrial Co Ltd, the 2nd defendant has made submissions on the following 3 questions, and contended that it has demonstrated not only that the Statement of Claim is defective, but also that there are triable issues:-
15.I will deal with these questions in turn below. Whether the 2nd defendant had been enriched in the sum of USD150,560 on 4 April 2019? 16.First of all, it was submitted by Mr Chan SC for the 2nd defendant that the plaintiff did not plead that its transfer of USD960,248 was by mistake and it is open to the interpretation that the transfer was a gift. I will deal with the question on the necessity of pleading “mistake” expressly in the Statement of Claim below.[4] 17.It was then submitted by Mr Chan SC that there was no indication in the document to tell the 2nd defendant where exactly the amount of USD150,560 came from, and there was nothing to show that the 2nd defendant was aware that the money was transferred to its account from the No 1 Trade Account. 18.As far as the source of such a fund is concerned, the plaintiff had produced a letter from the Hong Kong Police Force (“HKPF”) dated 26 November 2019 in which HKPF stated that, upon investigation, it was confirmed that the amount of USD150,560 was transferred to D2’s HK Account on 4 April 2019 from the No 1 Trade Account. I do not accept the 2nd defendant’s criticism that the plaintiff had failed to identify “the source of information of the police officer”[5]. In my view, it is adequate for the plaintiff to identify the HKPF as the source of information and belief, when the plaintiff had produced the HKPF’s letter in support. 19.Mr Chan SC then made the point that there was no allegation in the Statement of Claim nor in the supporting affirmation that No 1 Trade was the agent of either the plaintiff or the 2nd defendant, nor was there any allegation that there was no basis for No 1 Trade to transfer the amount to the 2nd defendant. 20.On the plea of agency relationship between No 1 Trade and the plaintiff or the 2nd defendant, I cannot agree that this plea is required. 21.In relation to the challenge that there was no allegation that there was no basis for No 1 Trade to transfer the amount to the 2nd defendant, I am afraid there is simply no need to do so, because “absence of basis” is not the relevant test. In Big Island Construction (HK) Limited v Wu Yi Development Company Limited & Another (2015) 18 HKCFAR 364, the suggestion of adopting “absence of basis” as the test was rejected by the Court of Final Appeal:-
22.Mr Chan SC further submitted that whereas it was pleaded in the Statement of Claim that the 2nd defendant had received a sum of USD150,560 on 4 April 2019, as a matter of fact it did not do so, even though it was accepted by the 2nd defendant that a sum of exactly the same amount was deposited into D2’s HK Account on 8 April 2019, which was the first working day following 4 April 2019. It was submitted that “the mere coincidence on the figures does not show that they were the same sum of money”[6]. 23.In paragraph 6 of the Statement of Claim[7], it was pleaded that:-
24.Mr Lee for the plaintiff could not dispute that the 2nd defendant, as a matter of fact, did not receive the sum of USD150,560 on 4 April 2019, because it is evident from the 2nd defendant’s bank statement that there was indeed no receipt of such a sum of money on 4 April 2019 as alleged. The relevant entry was dated 8 April 2019 instead. However, he submitted that it does not matter, because “the timing of enrichment is not part of the cause of action”.[8] He had further given various reasons to explain why there was a discrepancy of one working day between the date of transfer and the date of record in the 2nd defendant’s bank statement[9]. 25.Despite Mr Lee’s forceful arguments, I am afraid the court is bound to consider the plaintiff’s pleaded case and its pleaded case only. As set out above, the Statement of Claim pleaded firmly that the 2nd defendant’s receipt of the sum of USD150,560 was on 4 April 2019. No matter how sound Mr Lee’s argument is on why the date of transfer was different from the date of receipt, he could not alter the fact that the plaintiff’s case, as pleaded, was that the 2nd defendant’s receipt of the same was on 4 April 2019 but not any other date. The court and the plaintiff are bound by this pleaded case, and the plaintiff cannot “expand” this pleaded case by way of affirmation evidence. 26.I am of the view that the plaintiff’s application for summary judgment can be disposed of on this ground alone. 27.Despite my conclusion above, for the sake of completeness, I shall proceed to consider the other 2 questions below. Assuming that the 2nd defendant had been enriched in the sum of USD150,560 on 4 April 2019, was it at the expense of the plaintiff? 28.The 2nd defendant argued that even if it had been enriched, such enrichment was not “at the expense of the plaintiff”. The “more precise criteria” laid down by the United Kingdom Supreme Court in Investment Trust Companies v Revenue and Customs Commissioners [2018] AC 275 were relied on. 29.It was further said that, in this regard, the following facts are highly relevant:-
30.In addition, the 2nd defendant relied on the case of Takahashi v Cheng Zhen Shu (2011) 14 HKCFAR 558 and submitted that the mere fact that a defendant had received money which originally came from the plaintiff but was passed to the defendant by a 3rd party does not give rise to a cause of action in unjust enrichment even though as between the plaintiff and the defendant the defendant has no right to receive any money from the plaintiff. The fact that as between the plaintiff and the 3rd party who passed the money to the defendant, the plaintiff has a right of recovery of the money on the ground of unjust enrichment, would make no difference. It was further said that the CFA’s decision is also authority to support the proposition that where the recipient of the enrichment has furnished good consideration for the enrichment, in the absence of any fraud, this would be a complete defence to the claim. 31.In my view, the first matter which the court has to consider is whether the 2nd defendant has raised any triable issue on its provision of valuable consideration for the sum of USD150,560. It may be recalled that it was alleged by the 2nd defendant that the sum was received as part of a foreign currency exchange transaction. 32.Pausing here, I should note that I do not understand why Mr Lee alleged that the 2nd defendant had abandoned its “bona fide purchaser” defence, as it was clearly relied on in the 2nd defendant’s written submissions. 33.Insofar as it is the plaintiff’s argument that such a defence was not pleaded in the 2nd defendant’s Defence, such an argument must be rejected because a defendant facing a summary judgment application may show cause against the plaintiff’s application “by affidavit or otherwise”[10]. The 2nd defendant, unlike the plaintiff, is not restricted to its pleaded case in resisting the application for summary judgment. In Tso Yuk Yin v Wan Wai Hung [2018] HKCFI 2798, it was held by M Ng DHCJ (as she then was) that:-
34.Coming back to the 2nd defendant’s “bona fide purchaser” defence, Mr Lin explained in paragraph 13 of his affirmation as follows:-
35.While the above table shows that the 2nd defendant had received a total of USD1,150,265.54 in the period between 3 April 2019 and 9 April 2019 in D2’s HK Account, it is Mr Lin’s evidence that during that period, only USD798,571.56 was received as the foreign currency exchanged. The 2nd defendant had fully received the said sum of USD798,571.56 by 4 April 2019[11]. In other words, the 2nd defendant’s explanation on its receipt of USD cannot cover the deposits recorded on 8 April 2019, including the deposit of USD150,560. 36.That being the case, I am of the view that despite the 2nd defendant’s allegation that the amount of USD150,560 was part of the funds received pursuant to the foreign currency exchange transaction, such an allegation is unsupported by the 2nd defendant’s own evidence. I therefore do not accept that the 2nd defendant has raised any arguable defence by way of its case on foreign currency exchange. 37.With the above conclusion, it remains for me to consider whether, in the circumstances of the present case, the 2nd defendant’s enrichment was “at the expense of the plaintiff”. 38.Great emphasis had been placed by the 2nd defendant on the indirect transfer of funds between the plaintiff and itself. It was said that there was no sufficiently close causal connection between the plaintiff’s loss and the 2nd defendant’s gain. 39.With respect, this argument is rejected. 40.Given the fact that the transfer between the plaintiff and No 1 Trade on one hand and the transfer between No 1 Trade and the 2nd defendant are closely related in time (only one working day apart) and amount, and that no credible reason had been put forward in relation to the transfer from No 1 Trade to the 2nd defendant, I am of the view that the situation is equivalent to a direct payment. As Lord Reed JSC pointed out in Investment Trust Companies (supra), “there have also been cases…in which a set of co-ordinated transactions has been treated as forming a single scheme or transaction for the purpose of the ‘at the expense of’ inquiry, on the basis that to consider each individual transaction separately would be unrealistic”[12]. I am of the view that the present case should be treated in the same way. 41.Since there is no evidence that the 2nd defendant had furnished good consideration for its enrichment of USD150,560, the case of Takahashi can offer no assistance herein at all. 42.It is therefore my conclusion that the 2nd defendant has failed to raise any arguable defence in relation to the question on “at the expense of the plaintiff”. Assuming that the 2nd defendant had been enriched at the expense of the plaintiff, what is the unjust factor? 43.The 2nd defendant raised two issues on “unjust factor”:-
44.For the sake of convenience, I will deal with the second issue first, under which it was submitted by the 2nd defendant that since the plaintiff’s mistake had been tainted by doubt, such a mistake would be defeated and not operative. 45.With greatest respect, this argument is rejected, for it is the evidence of Mr Procopio that he had no reason at the material time to suspect that the wiring instructions were not genuine. 46.The 2nd defendant had put forward a number of grounds and asserted that, because of various features of the facts, Mr Procopio should have taken various steps in verifying such wiring instructions. In my view, these allegations are beside the point, for we are not considering whether Mr Procopio was negligent at the material time. 47.I now come back to the first issue: whether “mistake” has to be pleaded in the Statement of Claim. 48.In my view, it has to be pleaded. 49.As pointed out by Mr Chan SC, the learned author of Goff & Jones, The Law of Unjust Enrichment (9th edition, 2016), stated in paragraph 1-26 thereof as follows:-
50.The learned author continued in paragraph 1-38:-
51.In Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (2015) 18 HKCFAR 364, Tang PJ quoted what Lord Hope explained in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 409B:-
52.Relying on the above, I am of the view that the “unjust factor” relied on by the plaintiff should be expressly pleaded in the Statement of Claim as part of the material facts. 53.Mr Lee argued, by relying on Comprehensive Auto Restoration Limited v Lee Seng Siew (HCA 960/2011, unreported, 15 June 2012), that even if “mistake” is a material fact, its omission from the Statement of Claim is not a defect “of substance”, because “there could not be any live issue between the plaintiff and the 2nd defendant on whether the plaintiff paid away the sum by mistake”[13]. 54.This argument is rejected because:-
55.In the present case, the plaintiff relies on “mistake” as the unjust factor. Hence, “mistake” should have been pleaded in the Statement of Claim. However, that was not done, and the circumstances of the “mistake” were only asserted in the plaintiff’s supporting affirmation. 56.The Statement of Claim is therefore defective. Proprietary claim 57.In this appeal, the plaintiff also seeks to rely on its proprietary claim as pleaded in paragraph (3) of the Prayer of its Statement of Claim. 58.The 2nd defendant argued that the plaintiff should not be allowed to rely on such a claim because it had abandoned this claim in the hearing before the learned Master. 59.I do not agree that the plaintiff is bound by the way it conducted its case before the learned Master. As aforesaid, an appeal under Order 58 from a Master to a Judge in chambers is an actual rehearing as if the matter came before the Judge for the first time. The matter is argued and considered afresh. What Kwan J (as her Ladyship then was) said in El Vince Limited v Wu Wen Sheng [2001] 3 HKLRD 445 should be borne in mind:-
60.However, while the plaintiff, despite its previous stance, should be allowed to argue on its having a proprietary claim against the 2nd defendant, I am of the view that this would not assist the plaintiff at the end of the day. 61.Firstly, I am of the view that it is simply not enough for the plaintiff to include its proprietary claim in the Prayer of its Statement of Claim without mentioning it in the body thereof, in the circumstances of the present case. 62.The Appeal Committee of the Court of Final Appeal has recently clarified in Lo Yuk Sui v Fubon Bank (Hong Kong) Limited formerly known as International Bank of Asia Limited (2020) 23 HKCFAR 138 that:-
63.In the present case, the plaintiff had divided its Statement of Claim into 2 sections. The first one bears the sub-heading “The Parties”. The second one bears the sub-heading “Unjust Enrichment”, under which the plaintiff pleaded:-
64.Nothing else had been pleaded thereafter, apart from the Prayer. 65.It is therefore clear that, in its Statement of Claim, the plaintiff had only put forward one claim, namely, unjust enrichment, but no other. Allowing the plaintiff to run its argument on the alleged proprietary claim, in my view, would take the 2nd defendant by surprise, as in the case of Mui So Bing (supra). This is so even if the plaintiff did make a proprietary claim under the Prayer of the Statement of Claim, because of how the plaintiff presented its case in the body of the Statement of Claim as set out above. 66.Secondly, I do not think, as the Statement of Claim and the evidence placed before the court now stand, the plaintiff has made out a valid proprietary claim against the 2nd defendant. 67.The learned author of Snell’s Equity (34th edition, 2020) stated the following in paragraph 30-053 thereof:-
68.As accepted by Mr Lee, to assert a proprietary claim, the plaintiff has to show that its proprietary interest in USD150,560 can be traced through the 1st layer recipient (No 1 Trade) into the hands of the 2nd defendant[17]. However, as demonstrated above, under the common law, this is only possible if there was no mixing of funds in the No 1 Trade Account. No evidence had been produced on this matter at all. 69.Furthermore, Mr Lee submitted that it was unconscionable and there was no reason for the 2nd defendant to retain the sum of USD150,560 because the plaintiff paid out this sum by mistake. In my view, this is a material fact which must be pleaded in the Statement of Claim in support of the alleged proprietary claim. As aforesaid, it was not so pleaded. 70.As far as tracing in equity is concerned, the learned author of Snell’s Equity (34th edition, 2020) stated the following in paragraph 30-054 thereof:-
71.In the Statement of Claim, the plaintiff had simply not pleaded any fact in support of any allegation of mistake and/or fraud. Hence, there is nothing which supports the plaintiff’s case on its equitable title to the sum of money transferred away. INTERIM PAYMENT 72.As the plaintiff’s application for summary judgment should be dismissed by reason of its defective Statement of Claim, I will proceed to consider its alternative application for interim payment. 73.Whether to order interim payment is a question of the court’s discretion, which must be exercised on the basis of the circumstances of the case before the court. 74.In the present case, I am of the view that the court should exercise its discretion and order the 2nd defendant to make interim payment, despite the court’s dismissal of the plaintiff’s summary judgment application. This is because such dismissal is necessitated by reason only of the inadequacy of the Statement of Claim, but not because of the court’s satisfaction that there is any triable issue herein. 75.As accepted by Mr Chan SC, in the court’s consideration on interim payment, the strict requirement of the Statement of Claim is not applicable. Hence, it is open to the court to consider the fact that the plaintiff’s defective Statement of Claim can be remedied without much difficulty. The position is totally different from the case where there is a triable issue which can only be resolved by way of a trial. 76.The 2nd defendant pointed out repeatedly that the sum of USD150,560 has been frozen by the Bank of Communications (Hong Kong) Limited, and that there is no risk that the plaintiff will not be able to recover the said sum. Be that as it may, I do not think the court should leave it to others to protect the plaintiff’s interest, especially when the court has not been assured that the monies shall remain to be freezed until the conclusion of this action. ORDER 77.By reasons of the aforesaid, I make the following orders:-
COSTS 78.The 2nd defendant has been successful in its appeal against the summary judgment granted by the learned Master whereas the plaintiff, despite its failure to resist the 2nd defendant’s appeal, has now obtained an order for interim payment. 79.I make a cost order nisi that the costs of and occasioned by this appeal and the summons filed on 13 March 2020 (including the costs of the hearing before the learned Master) shall be in the cause, with certificate for one counsel. The above order nisi shall become absolute in the absence of application to vary within 14 days hereof.
Mr Brian Lee, instructed by Messrs. Herbert Smith Freehills, for the plaintiff Mr Edward Chan SC and Mr Bosco Cheng, instructed by Messrs. K M Lai & Li, for the 2nd defendant [1] It seems that there was a typing mistake in the Statement of Claim, and the correct amount should be USD960,428 – see paragraph 5 hereof and the International Wire Request Form. [2] Paragraph 11 of Mr Procopio’s Affirmation [3] Sumikin Bussan International (HK) Ltd v. The Precast Piling & Engineering Co Ltd & Another (HCA3814/2001, unreported, 10 April 2002) at paragraph 39 [4] Under the 3rd question: “Assuming that the 2nd defendant had been enriched at the expense of the plaintiff, what is the unjust factor?” [5] Paragraph 11 of the 2nd defendant’s written submissions [6] Paragraph 14 of the 2nd defendant’s written submissions [7] The Statement of Claim was not drafted by Mr Lee [8] Paragraph 37(1) of the plaintiff’s written submissions [9] 5 April 2019 was a public holiday, whereas 6 April 2019 and 7 April 2019 were Saturday and Sunday respectively [10] Order 14 rule 4(1) of the RDC [11] 28,000.00 + 84,000.00 + 148,257.00 + 58,000.00 + 99,993.58 + 209,950.98 + 50,000.00 + 30,985.00 + 30,985.00 + 58,400.00 = 798,571.56 [12] [2018] AC 275 at paragraph 48. [13] Paragraph 39(4) and (5) of the plaintiff’s written submissions [14] Paragraph 10 of the Decision [15] Paragraph 9 of the Decision [16] Paragraph 10 of the Decision [17] Paragraph 23(2) of the plaintiff’s written submissions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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