Nikkei America, Inc and Another v. Aulic Industry Ltd and Others
Read the full judgment text of HCA 145/2020 on BabelCite. This High Court CFI judgment was delivered on 26 July 2021.
1. The 1 st and 2 nd Plaintiffs (“ the Plaintiffs ”) are wire fraud victims. After a series of mistaken payments totalling some USD29.8 million, they obtained final judgment for repayment against the non-appearing Defendants, including the 34 th Defendant, on 24 July 2020 (“ the Final Judgment ”).
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HCA 145/2020 [2021] HKCFI 2032 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 145 OF 2020 ________________________ BETWEEN
_______________________ Before: Deputy High Court Judge Abraham Chan SC in Chambers (by Paper Disposal) Date of Hearing: 26 February 2021 Date of Submissions of the Intended Intervener: 5 March 2021 Date of Submissions of the 1st and 2nd Plaintiffs: 12 March 2021 Date of Submissions of the 7th Garnishee: 12 March 2021 Date of Reply Submissions of the Intended Intervener: 16 March 2021 Date of Decision: 26 July 2021 _________________ D E C I S I O N _________________ A. INTRODUCTION 1.The 1st and 2nd Plaintiffs (“the Plaintiffs”) are wire fraud victims. After a series of mistaken payments totalling some USD29.8 million, they obtained final judgment for repayment against the non-appearing Defendants, including the 34th Defendant, on 24 July 2020 (“the Final Judgment”). 2.By its summons of 2 February 2021 (“the Intervention Summons”), the Intended Intervener primarily seeks to set aside a garnishee order absolute obtained on 2 November 2020 by the Plaintiffs against the 34th Defendant based on the Final Judgment (“the Plaintiffs’ Absolute GO”). 3.The Plaintiffs and the Intended Intervener have each in fact obtained judgments and garnishee orders against the 34th Defendant. But the Plaintiffs have essentially been ahead of the Intended Intervener at every stage, and have already obtained payment from the garnishee bank. 4.The Intended Intervener’s essential position is that the Final Judgment is “invalid” and that they are entitled to have it set aside, and with it the Plaintiffs’ Absolute GO. 5.At the initial hearing on 26 February 2021, I directed that the Intended Intervener’s application proceed by paper disposal. 6.I now have the following written submissions to hand:
7.Having considered all the materials before me, I find that the Intended Intervener has no proper basis for challenging the Plaintiffs’ Absolute GO, and that its application falls to be dismissed. 8.In what follows, I will briefly elaborate on the factual and procedural background (Section B) before setting out the main reasons for my decision (Section C). B. BACKGROUND 9.The background facts are essentially uncontested. The following summary is largely adapted from the submissions of Mr Nicholas Hunsworth, Solicitor Advocate for the Plaintiffs. (1) The Plaintiffs’ Claims against the 34th Defendant 10.In September 2019, the Plaintiffs fell victim to a wire fraud and made a series of mistaken payments totalling over USD29.8 million (“the Mistaken Payments”) to five bank accounts in Hong Kong (“1st Layer Accounts”) as a result of the fraud. 11.After the fraud was discovered, the Plaintiffs obtained a Mareva injunction against the holders of the 1st Layer Accounts (“1st Layer Recipients”) and commenced HCA 1914/2019 in October 2019 against the 1st Layer Recipients to recover the Mistaken Payments. 12.The Plaintiffs also obtained a banker’s book order in HCA 1914/2019 (“1st Layer Disclosure Order”) against the banks of the 1st Layer Recipients. Pursuant to the 1st Layer Disclosure Order, the Plaintiffs obtained the records (“Bank Records”) of deposits into and withdrawals from the 1st Layer Accounts from when the relevant Mistaken Payments were made. 13.The Bank Records revealed that most of the Mistaken Payments were transferred from the 1st Layer Accounts to dozens of other bank accounts (“2nd Layer Accounts”) almost immediately after they were deposited into the 1st Layer Accounts. 14.The Defendants are holders of some of the 2nd Layer Accounts. In January 2020, the Plaintiffs obtained a Mareva injunction against the Defendants and commenced these proceedings to recover the traceable proceeds of the Mistaken Payments. 15.As earlier noted, the Plaintiffs obtained the Final Judgment against all the non-appearing Defendants on 24 July 2020 – the majority of Defendants, the 34th Defendant included, having failed to acknowledge service of the Writ. 16.Upon the Plaintiffs abandoning their claims for declarations and proprietary relief, the Final Judgment is a monetary judgment for repayment of the respective sums received by the Defendants from the 1st Layer Accounts. 17.The Plaintiffs subsequently commenced garnishee proceedings under the present action (HCA 145/2020) (“the Plaintiffs’ Garnishee Proceedings”) to enforce the Final Judgment. In respect of the 34th Defendant:
(2) The Intended Intervener’s Claims against D34 18.The Intended Intervener, Shenzhen Sunlife Import & Export Co., Limited (深圳鑫鴻光進出口有限公司), says that it is in the business of renewable energy. Despite the similarities between the names of the Intended Intervener and the 34th Defendant (the latter’s English and Chinese names being, respectively, Sunlife Import & Export Co., Limited and (鑫鴻光進出口有限公司), the Intended Intervener says there are no links between the two companies. 19.The Intended Intervener alleges that on 7 October 2019, it placed an order for solar panels with the 34th Defendant. On 18 October 2019, it paid the purchase price for the solar panels in the sum of USD394,656.80 (“the Deposit”) into the 34th Defendant’s account with CITIC (“the Account”). 20.Following the apparent non-delivery of the solar panels, the Intended Intervener commenced HCA 302/2020 on 13 March 2020 and obtained a default monetary judgment against the 34th Defendant on 3 July 2020. 21.The Intended Intervener then commenced garnishee proceedings against CITIC in respect of the 34th Defendant to enforce its judgment. The Intended Intervener obtained a garnishee order nisi on 22 September 2020, and a garnishee order absolute (“2nd Absolute GO”) on 30 November 2020. 22.It is common ground that CITIC did not at any stage inform the Intended Intervener of the Plaintiffs’ GO Nisi. Nor did CITIC inform the Court in the present proceedings of the garnishee orders obtained by the Intended Intervener in HCA 302/2020. (3) The Intended Intervener’s Application and the State of Play 23.By the Intervention Summons, the Intended Intervener now seeks orders that:
24.The Plaintiffs submit that all the above orders should be refused with costs against the Intended Intervener. 25.On the basis that the dispute is between the Intended Intervener and the Plaintiffs, CITIC essentially takes a neutral stance at this stage, while emphasising that (in its submission) there is no requirement under the Rules of High Court that imposes any positive duty on a garnishee to inform the Court of a third party’s claim. C. REASONS FOR REFUSAL 26.The Intended Intervener’s application is in my view clearly unsustainable. (1) Judgment creditors and first-to-fruits 27.Both the Plaintiffs and the Intended Interveners are unsecured judgment creditors of the 34th Defendant. 28.Mr Hunsworth drew attention to the following general legal principles as applicable to competing judgment creditors:
29.For his part, Mr Toby Brown (appearing for the Intended Intervener) does not generally dispute the above principles, but submits that they “are not absolute rules and are subject to the applicable circumstances”. He adds that the application of these principles “presumes that the applicable process had been properly followed when the Court granted Ps’ garnishee order absolute and further presumes that Ps’ judgment is valid”. In short (Mr Brown says), the Plaintiffs’ reliance on the first-to-fruits principle is only “correct in respect of competing valid judgments” (his emphasis). 30.As seen below, however, there is simply no basis in the circumstances of this case for the Intended Interveners, as third parties, to seek to challenge to validity of the Final Judgment following the grant of the Plaintiffs’ Absolute GO. (2) No basis under Order 49, rule 6 31.Apart from the Intervention Summons’s marginal note reference to “inherent jurisdiction”, which has not been developed in submissions, the present application has been brought and maintained under Order 49, rule 6 of the Rules of High Court. 32.Order 49, rule 6 provides:
33.These provisions clearly envisage the bringing of any rival claim before a garnishee order absolute is made, with the validity of any such claim to be determined in accordance with the general procedure set out in Order 49, rule 5 for resolving disputes over whether a garnishee order ought to be made absolute. There is nothing under Order 49 that suggests any exception to the first-to-fruits principle noted above, or to the general position that where (as in this case) the Court has made an order absolute and moneys have been paid out pursuant to it, it becomes functus officio and has no further jurisdiction over the case: see for example Andayani v Chan Oi Ling [2000] 4 HKC 233 at 237C-E (Keith JA, citing Slesser LJ in Millensted v Grosvenor House (Park Lane) Ltd [1937] 1 KB 717 at 722). 34.The Intended Intervener’s Reply Submissions cites Employers’ Liability Assurance Corporation, Limited v Sedgwick, Collins and Company [1927] AC 95 for the proposition that “a garnishee can be set aside if the underlying judgment is in question”, quoting the following words of Lord Blanesburgh (at p 121):
35.As the quoted words themselves reflect, the House of Lords in that case was addressing the situation where an order absolute has yet been made, the question there being whether or not to grant a garnishee order absolute in the first place. So the case does not assist the Intended Intervener in the present situation, where the Plaintiff’s Absolute GO has already been granted. 36.In short, the Intended Intervener has failed to establish any proper basis for challenging the Final Judgment or for any of the other orders sought under the Intervention Summons. 37.In reaching this conclusion, I have taken into account the Intended Intervener’s contention that they should be permitted to challenge the Plaintiffs’ Absolute GO because (1) they were not notified by CITIC of the Plaintiffs’ GO nisi; and (2) they were therefore unable to make submissions to the court before the order absolute was granted. 38.Even assuming that the Intended Intervener’s factual account in this regard is true – and leaving to one side CITIC’s submission that it had no duty as garnishee to notify others (including the Court) of a third party claim – the Intended Intervener has entirely failed to demonstrate how its failure (for whatever reason) to challenge the Plaintiffs’ GO nisi under Order 49, rule 6 before the order absolute was made, entitles it to do so afterwards. The same fundamental problem remains: there is in my view no basis for invoking the Order 49, rule 6 mechanism once the order absolute is made. 39.I would briefly add that, even if there was jurisdiction to allow the Intervention Summons, I would decline to exercise my discretion in favour of such a course having regard to all the circumstances of the case, including the fact that CITIC has already made payment to the Plaintiffs pursuant to the Plaintiffs’ Absolute GO. I see no compelling reasons why the interests of finality and certainty should be overridden in this case. D. CONCLUSION AND COSTS 40.The Intervention Summons is dismissed with costs payable to the Plaintiffs. 41.Having regard to the Plaintiffs’ Statement of Costs, I summarily assess their costs in respect of the Intervention Summons at HK$120,000. 42.As for CITIC (the 7th Garnishee), bearing in mind its limited role in the present application, I summarily assess its costs at HK$45,000. 43.I am grateful to Mr Brown, Mr Hunsworth and Mr Wong for their capable assistance.
Mr Nicholas Hunsworth, Solicitor Advocate of Mayer Brown, for the 1st and 2nd plaintiffs The 34th defendant was not represented and did not appear Mr Stephen Wong Kwok Ki of Tsang, Chan & Wong, for the 7th Garnishee (Hearing) Messrs. Tsang, Chan & Wong, for the 7th Garnishee (Paper Disposal) Mr Toby Brown, instructed by Massie & Clement, for the Intended Intervener | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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