Luk Mei Suet Michelle v. Afsafari Services Co Ltd and Others

DCCJ 5593/2018

[2022] HKDC 191

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5593 OF 2018

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BETWEEN

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JUDGMENT

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Introduction

1.This is yet another case of cyber fraud or, to be more exact, catfishing. Madam Luk was defrauded by a person purporting to be her lover and she was deceived into transferring out of her pocket a total sum of USD729,900 and another sum of HK$989,250 over the course of 5 months in 2018 into the bank accounts of the three defendants in the present case. She brought this action to claim against the defendants for the said sums on a restitutionary basis.

2.Since the issue of the writ on 7 December 2018, there have been developments rendering Brilliant International Company Limited (“D3”) being presently the only party resisting the claim of Madam Luk.

3.First, on 9 April 2019, Madam Luk obtained a default judgment against Ejoin (HK) Group Company Limited (“D2”), the 2^nd defendant. Subsequently, on 19 December 2019, Madam Luk reached a settlement with Afsafari Services Company Limited (“D1”), the 1^st defendant, on a without prejudice basis.

4.Ms Tam, for Madam Luk, neatly set out the undisputed background facts in her written opening submissions. The parties have also filed an agreed chronology and dramatis personae. The following matters are derived from these documents.

Undisputed Background facts

5.Madam Luk is a permanent resident in Hong Kong. She is the holder of a bank account with HSBC (“P’s Bank A/C”).

6.D3 is a company incorporated in the Republic of Seychelles and it is the holder of a bank account with HSBC (“D3’s Bank A/C”). It operates a trading business in the supplying of bicycle parts to customers worldwide.

7.On 14 March 2018, Madam Luk transferred a sum of USD41,550 (“the Sum”) from P’s Bank A/C to D3’s Bank A/C. It is common ground that Madam Luk did not have any prior knowledge of, let alone relationship, personal or business, with D3 at all.

8.The background facts leading to the transfer of the Sum to D3’s Bank A/C can be outlined as follows.

9.On 21 February 2018, Madam Luk received a message on Facebook from a person named Robinson Lee Wong (“the Fraudster”). On the following day, Madam Luk added the Fraudster as her friend on Facebook and they started exchange of messages.

10.On 25 February 2018, the Fraudster sent Madam Luk a message by WhatsApp alleging that he wanted to send her a surprise gift by a courier.

11.On 28 February 2018, Madam Luk received a message purportedly from Demont Courier Service (“the Courier”). The Courier told Madam Luk that her parcel and consignment (“the Parcel”) had arrived and requested Madam Luk to pay a sum of HK$19,500 being the postage charge.

12.Before long, on the same day, the Courier sent another message to Madam Luk to request her to pay a further sum of HK$79,800 being the charge of a declaration certificate. Madam Luk did not hesitate to promise the Courier that she would pay such charges claiming the Fraudster to be her husband.

13.On 2 March 2018, the Courier sent a message to Madam Luk and asked for payment of HK$372,000 being the insurance fee of the Parcel (“the Insurance Fee”). Madam Luk agreed to pay by cheque.

14.On 5 March 2018, the Courier messaged to Madam Luk and asked her to pay the Insurance Fee to the bank account of D1. Madam Luk did so by a transfer of USD48,000 from P’s Bank A/C to the bank account of D1.

15.On 7 March 2018, the Courier in its message asked Madam Luk to pay a sum of USD 97,250 being the charge for a certificate of ownership of the Parcel.

16.On 8 March 2018, the Courier asked Madam Luk to pay another sum of USD 50,000.

17.On 9 March 2018, the Courier asked Madam Luk to pay the said sum of USD 50,000 into the bank account of D2. Madam Luk did so within the same day.

18.On 14 March 2018, the Courier first asked Madam Luk to produce her marriage certificate. Madam Luk replied that they were not married yet though they were planning to do so. Then the Courier asked Madam Luk to pay the Sum being the fee for preparation of an affidavit proving that both the Fraudster and Madam Luk were engaged and betrothed to each other.

19.Madam Luk agreed to pay the Sum. The Courier gave the details of D3’s Bank A/C to Madam Luk for her payment of the Sum. Then, Madam Luk effected a transfer of the Sum from P’s Bank A/C to D3’s Bank A/C (“the Transfer”). The Sum was the only amount which Madam Luk paid to D3’s Bank A/C, which she now wants to recover from D3.

20.Subsequently, Madam Luk continued to make payments pursuant to the further demands of the Courier until 3 July 2018. The Fraudster told her by text messages that the Parcel contained gold bars and a diamond ring. In the end, Madam Luk did not receive anything from the Fraudster via the Courier or otherwise.

21.At long last, Madam Luk came to her senses on 10 July 2018. She attended Ngau Tau Kok police station to make a report on this fraud case.

22.On 23 July 2018, Madam Luk commenced third-party discovery proceedings under HCMP1110/2018 (“the High Court Action”) against those banks to which she had transferred monies as a result of the fraud to find out the identities and information of the relevant account holders. She succeeded in obtaining a Norwich Pharmacal and Bankers Trust order (“the NP Order”) on 24 July 2018 in the High Court Action.

23.According to the information disclosed by HSBC pursuant to the NP Order, D3 had substantial amount credit balance in its accounts. On 13 June 2019, by a consent order, an injunction was imposed on D3 prohibiting it from, among other matters, removing or withdrawing from D3’s Bank A/C up to USD41,550 (“the Injunction”) up to the determination of the action or upon further order. The Injunction remains in force up to the present moment.

24.Briefly stated, the defence of D3 is that it has nothing to do with the Fraudster whatsoever and it knew nothing about the matters between the Fraudster and Madam Luk including the Parcel. The Sum merely represented the payment of the balance of the purchase price by one of its customers, namely Malaika Investment Limited (“Malaika”) with whom it had made an agreement (“the Agreement”) to supply 452 cartons of bicycle repair kits (“the Products”) at a total price of USD62,224 (“the Agreed Price”) in the ordinary course of its business.

25.D3 further claims that upon the receipt of the Sum, D3 arranged the shipment of the Products to Malaika on 2 April 2018. Thus, D3 relies on its bona fide change of its position to defeat the restitutionary claim of Madam Luk.

Parties’ respective pleaded cases

Madam Luk’s pleaded case

26.Madam Luk pleads the foregoing undisputed factual circumstances leading to the Transfer and relies on knowing receipt, unjust enrichment, money had and received, fraudulent representations through the Courier and conspiracy to injure with unlawful means as her causes of action for restitution and/or equitable compensation and related declaratory and injunctive relief.

27.Madam Luk further claims a sum of HK$2,500 as the share of D3 regarding her legal costs incurred in the High Court Action.

D3’s pleaded case

28.In the first place, D3 denies any knowledge of Madam Luk and the Fraudster. It also denies any connection with the Fraudster or his employees, agents and/or servants.

29.Then, D3 pleads a simple defence case of change of position as follows. It alleges that it maintained and operated business in supplying bicycle parts to various customers over the world including Malaika, a Nigerian company. D3 has been dealing with Malaika since around 2013.

30.On or around 4 January 2018, Malaika expressed its intention to place an order with D3 for the supply of the Products (“the Order”) and thus deposited a sum of USD19,981.67 (after the deduction of a sum of USD18.33 as handling charges by respective banks) (“the Deposit”) into D3’s Bank A/C as an upfront payment for the Order.

31.After certain negotiations, Malaika and D3 entered into the Agreement. The Agreement is evidenced by a pro forma invoice numbered PI-Y180100017R1 and contained the following terms.

32.First, the Products would be delivered to Malaika by D3 by sea freight in or about mid-April 2018. Second, Malaika was required to settle the amount due under the Agreement before the shipment in April.

33.On or around 14 March 2018, Malaika further deposited with D3 the Sum for the settlement of the balance due under the Agreement. Upon confirmation of the receipt of such a payment, D3 arranged the shipment of the Products to Malaika on 2 April 2018.

Issues

34.The parties have agreed in writing on the four main issues in dispute which are as follows:

1. Whether D3 was unjustly enriched by the deposit of the Sum into D3’s Bank A/C;

2. Whether D3 can establish the defence of bona fide change of position in respect of the Sum, in particular:

(a) Whether there existed a legitimate commercial transaction in early 2018 between D3 and Malaika in relation to the deposit of the Sum;

(b) Whether D3 had grounds for believing that the deposit of the Sum may have been made unjustly, and if so whether D3 acted in good faith by making reasonable inquiries of the payer of the deposit of the Sum, viz, Madam Luk;

(c) Whether D3 had acted in a commercially acceptable way in the circumstances, including taking reasonable precautions to prevent its alleged change of position; and

(d) Whether D3’s position is so changed, that it will suffer an injustice if called upon to repay the Sum to Madam Luk, such that the injustice of requiring D3 to repay outweighs the injustice of denying her restitution.

3. Whether Madam Luk is entitled to claim restitution of the Sum or any part thereof; and

4. Whether Madam Luk is entitled to claim legal costs for the High Court Action, and if so, the quantum of the amount.

35.As can be seen in the agreed issues, despite the inclusion of other pleas in her pleaded case, Madam Luk only bases her claim on unjust enrichment. Ms Tam confirms that this is the position of Madam Luk.

Relevant legal principles

36.The legal principles relating to unjust enrichment and change of position are of clear relevance. Ms Tam in her written submissions helpfully refers to a number of authorities on these two topics. Those authorities are well known and the legal principles expounded therein are well settled. Mr Cheng, for D3, does not argue against their materiality and applicability. I shall recite some of them below.

37.In Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, Ribeiro PJ set out the following four questions for the determination of a claim in unjust enrichment:

(1) Was the defendant enriched?

(2) Was the enrichment at the plaintiff’s expense?

(3) Was the enrichment unjust?

(4) Are there any of the defences applicable?

38.For the purpose of determining whether a benefit would constitute enrichment, the credit of one’s bank account is treated as an incontrovertible benefit because it is similar to a receipt of money: see Credit One Finance Limited v Yeung Kwok Chi and Ors. [2020] HKCFI 2450 per Mr Recorder Eugene Fung SC at §46 citing A Burrows, A Restatement of the English Law of Unjust Enrichment (2012) pp.41-42.

39.The defendant’s enrichment is unjust if it is caused by a mistake of fact or law made by the plaintiff. It is prima facie unjust for a recipient of money to retain the payment when, if the payer had known the true state of affairs, he would not have paid: see Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349 per Lord Hoffmann at p.399 C-D.

40.In Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, the House of Lord recognized “change of position” as a general defence to all restitutionary claims. After a review of the authorities, Lord Goff explained the defence in the following terms at p.579F:

“… where an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution. If the plaintiff pays money to the defendant under a mistake of fact, and the defendant then, acting in good faith, pays the money or part of it to charity, it is unjust to require the defendant to make restitution to the extent that he has so changed his position.”

41.Lord Goff found it necessary to sound a note of caution about this defence:

“I wish to stress however that the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable that he should be called upon to repay because the expenditure might in any event have been incurred by him in the ordinary course of things. I fear that the mistaken assumption that mere expenditure of money may be regarded as amounting to a change of position for present purposes has led in the past to opposition by some to recognition of a defence which in fact is likely to be available only on comparatively rare occasions.”

(My emphasis)

42.A fair balance has to be struck between the plaintiff’s interest in restitution and the defendant’s interest in making spending decisions freely without fear that a claim in unjust enrichment might later invalidate the assumptions that he makes about the means at his disposal: Goff & Jones: the Law of Unjust Enrichment, 9^th ed., §1-09.

43.In Niru Battery Manufacturing Co and Anor. v Milestone Trading Ltd and Others [2004] QB 985, Clarke LJ cited with approval the following dicta of Moore-Bick J, the trial judge regarding change of position in good faith[1]:

"I do not think that it is desirable to attempt to define the limits of good faith; it is a broad concept, the definition of which, in so far as it is capable of definition at all, will have to be worked out through the cases. In my view it is capable of embracing a failure to act in a commercially acceptable way and sharp practice of a kind that falls short of outright dishonesty as well as dishonesty itself. The factors which will determine whether it is inequitable to allow the claimant to obtain restitution in a case of mistaken payment will vary from case to case, but where the payee has voluntarily parted with the money much is likely to depend on the circumstances in which he did so and the extent of his knowledge about how the payment came to be made. Where he knows that the payment he has received was made by mistake, the position is quite straightforward: he must return it. This applies as much to a banker who receives a payment for the account of his customer as to any other person: see, for example, the comment of Lord Mersey in Kerrison v Glyn Mills Currie & Co (1912) 81 LJKB 465 , 472. Greater difficulty may arise, however, in cases where the payee has grounds for believing that the payment may have been made by mistake, but cannot be sure. In such cases good faith may well dictate that an inquiry be made of the payer. The nature and extent of the inquiry called for will, of course, depend on the circumstances of the case, but I do not think that a person who has, or thinks he has, good reason to believe that the payment was made by mistake will often be found to have acted in good faith if he pays the money away without first making inquiries of the person from whom he received it." (§35)

"The need to make inquiries of Bank Sepah is not a matter to be viewed in terms of a duty owed by one banker to another; it is a matter to be viewed in terms of a duty of good faith which a person who has received a payment that he has good reason to think was made under a mistake owes to the person who made it. If under those circumstances the payee fails to make inquiry of the payer before disposing of the money he can properly be described as failing to act in good faith because he acts in the knowledge that he may be infringing the rights of another despite having the means of avoiding that consequence." (§38)

(My emphasis)

44.A defendant who parts with goods must prove their value in order to make out the defence: see Goff & Jones §27-26, also National Westminster Bank Plc v Somer International (UK) Ltd [2002] Q.B. 1286.

45.With these principles in mind, I now embark on my analysis of the evidence adduced by the parties.

Analysis

46.The agreed issues actually are in line with the established principles and provide a methodical approach to the determination of the present dispute.

47.Madam Luk testified for herself and she had no other witness. Her evidence was not really challenged by way of cross-examination. In fact, she appeared to be a truthful witness. Her evidence is supported by documentary evidence.

48.I have read all the text messages exchanged among Madam Luk, the Fraudster and the Courier during the material period. The foregoing background facts were indeed borne out by such undisputed documentary evidence. I may not appreciate the irresistibility of the sweet talks of the Fraudster but they plainly worked on Madam Luk. The Fraudster managed to win the trust and affection of Madam Luk within a few days. Madam Luk genuinely believed that the Fraudster had sent her the Parcel. She was all ready and prepared to comply with those financial demands of the Courier with a view to the receipt of the Parcel.

49.I accept her evidence in full and I believe that the Fraudster deceived her and that the demands of the Courier were not genuine. Madam Luk was deceived into making the Transfer.

50.D3 received the Sum in D3’s Bank A/C as a result. There is no doubt that D3 was enriched at the expense of Madam Luk.

51.D3’s enrichment must be unjust in that the Transfer was caused by a mistake of fact on the part of Madam Luk. Madam Luk was a victim of fraud and she clearly would not have made the Transfer if she had known that she would never receive the Parcel or anything from the Courier.

52.I have no hesitation in holding that D3 was unjustly enriched at the expense of Madam Luk.

53.Thus, the remaining issue is whether D3 could establish its defence of change of position. In an attempt to establish the defence, Madam Chen who claims to be a consultant of D3 is the only witness of D3. At trial, she was in Taiwan and she testified through video-link. She made a short witness statement to give an account of the transaction between Malaika and D3 involving the Agreement. She also exhibited to her witness statement a few documents purportedly evidencing the transaction.

54.Madam Chen’s evidence can be summarized as follows. Malaika and D3 started their business relationship in 2013. From 29 December 2017 to 5 January 2018, Milk who was the representative of Malaika exchanged WhatsApp messages with Madam Chen for the purpose of the Order. On 10 January 2018, D3 allegedly sent an email to Milk (“the 10 January Email”) enclosing a proforma invoice and asked Milk to sign the same.

55.Malaika purportedly paid the Deposit on 4 January 2018, as evidenced by the bank statement of D3. The parties signed a proforma invoice dated 10 January 2018 revised on 16 January 2018 (“the Invoice”) and it purportedly evidenced the Agreement concerning the sale of the Products at the Agreed Price.

56.The terms of payment stated in the Invoice were 30% of the Agreed Price to be paid in advance and then the balance of 70% to be paid before shipment. Upon being informed that the shipment could be made in mid-March 2018 by email dated 13 March 2018, Malaika caused the Transfer of the Sum to D3 on 14 March 2018. The Sum was USD1,069 short of 70% of the Agreed Price (“the Shortfall”) and the Shortfall would be carried forward to the next placement. Given the long established relationship with Malaika, D3 was happy to accept the Sum despite the Shortfall.

57.Malaika sent D3 a letter dated 14 March 2018 (“the 14/3 Letter”) to ask for confirmation of its receipt of the Sum. I shall come back to this letter later in this judgment.

58.Eventually, D3 shipped the Products to Malaika on 2 April 2018 and the shipment is evidenced by a bill of lading of the same date (“the BL”).

59.D3 continues to trade with Malaika and accept its payments made in a similar manner even after the commencement of these proceedings.

60.Madam Chen in her cross-examination explained that as far as she knew, there were foreign currency control policies in Nigeria and indeed in many other countries in Africa and thus its African customers normally make payments to D3 via third parties. 40% to 50% of the business of D3 involves African customers. D3 has never been concerned about the identity of such third parties so long as it receives payments for its goods.

61.Madam Chen also unexpectedly mentioned under cross-examination “the 419 fraud”. An explanation of “the 419 fraud” can be found in Commerzbank Aktiengesellschaft v IMB Morgan Plc and Others [2004] EWHC 2771 (Ch) and it is named after section 419 of the Nigerian Criminal Code, Chapter 77, Laws of the Federation of Nigeria 1990. Mr Cheng set out the provision in his closing submissions which reads,

“Any person who by any false pretence, and with intent to defraud, obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen, is guilty of a felony and is liable to imprisonment for three years.”

62.Overall speaking, the defence case is unimpressive. In the first place, as can be seen in the relevant documentary evidence, Madam Chen was not personally involved in the purported transaction with Malaika. Only Amy Chien and Christina Lin transacted with Milk on behalf of D3. I do not know what role Madam Chen actually played in this matter. She was a consultant. There is no explanation for the failure of Amy Chien and Christina Lin to testify for D3.

63.More importantly, there is no reason why D3 has not asked Malaika to do anything to support its defence. Malaika purportedly paid D3 the Sum to settle the balance of the Agreed Price and it has become the bone of contention. D3 now finds itself in this litigation facing the risk of paying back the Sum to Madam Luk. Of course D3 should be aware of the costs consequences if its defence is rejected.

64.At the very least, D3 should ask Malaika for a full account of how it caused Madam Luk to pay D3 the Sum purportedly on its behalf. There is no evidence that D3 has ever made such a demand let alone an outright confrontation with Malaika.

65.Alarmingly, D3, in complete disregard of the present litigation, continues to transaction business with Malaika and allegedly Malaika continues to make payments to D3 through some third parties unknown to D3. This sounds surreal and incredible to me.

66.Given such an inseparable business relationship between D3 and Malaika, there is no reason why D3 has not made any attempt to call Milk or other staff of Malaika to testify on its behalf. These people, even if residing overseas, could testify through video-link just as Madam Chen did. Malaika has done nothing whatsoever to assist D3 in its defence. I can only infer that the assistance of Malaika cannot be helpful to the defence case.

67.I am unable to accept the defence evidence regarding the actual relationship between Malaika and D3. Whilst the pleaded case is that they started trading with each other since 2013, Madam Chen in her witness statement stated that it would not be helpful if she gave any details of such dealings.

68.Madam Chen in cross-examination said that in fact D3 only received an email from Malaika in 2013 asking for a quotation and they only started actual trading in 2016. This is contrary to what she said in her witness statement where Malaika was alleged to have occasionally placed orders with D3 regularly since 2013.

69.There is not a shred of documentary evidence to show any of their prior dealings. If the business relationship between D3 and Malaika prior to the Agreement was genuine, there is no reason why D3 did not produce a single commercial document to substantiate its allegations.

70.Madam Chen’s explanation for the failure to adduce such evidence is that she forgot to do so. This is wholly unacceptable. It is not really a matter as to whether she could remember to do so or not. Throughout D3 has been legally represented. D3 could not be unaware of the necessity of such evidence.

71.In the circumstances, I believe that Madam Chen was far from frank about the actual relationship between D3 and Malaika. I shall examine the evidence relating to the Agreement and the transaction with circumspection.

72.Milk started texting with Amy on 29 December 2017 showing her interest in purchasing certain solution and cold patch from D3. As I understand, such solution and cold patch were for the repair of bicycle tires and later the former became the Products specified in the Invoice.

73.Then, on 4 January 2018, D3 purportedly sent to Malaika an email about the Order. The email would be revealing but it has not been disclosed. On the same day, D3 received the Deposit in D3’s Bank A/C.

74.Curiously enough, D3 only sent Malaika a proforma invoice (“the Superseded Invoice”), subsequently revised to be the Invoice, on 10 January 2018 under a covering email. In the email, Christina advised that the costs were adjusted upwards a bit due to the increased costs of the material. In the Superseded Invoice, the total amount payable by Malaika was USD62,676.00.

75.The Deposit was still more than the 30% of this increased price. I have no idea how Malaika came up with the amount of the Deposit and paid the same almost a week prior to the receipt of the Superseded Invoice.

76.I agree with Ms Tam that the Deposit was suspicious indeed. D3 produced a copy of a document entitled “Funds Transfer Request Authorization” issued by the Bank of America in New York (“the TT Document”). In the TT Document, it was recorded that an amount of USD20,000 was wired from the account of Arlene Brown in the US to D3. It is remarkable that the specified purpose of payment was for family support. This cries out for an explanation but D3 simply could not care less. D3 did not make any enquiries with the transferor, namely, Arlene Brown to confirm his consent to the transfer of the Deposit.

77.Now I turn to the two important documents for the purported shipment of the Products to Malaika. One is the Form M. It can be found in the Bundle of Documents. Madam Chen does not cover this document in her witness statement.

78.The Form M was mentioned in an email issued by Amy to Milk dated 16 March 2018. There, Amy asked Milk to arrange a Form M quickly as D3 needed it to book a SONCAP certificate. SONCAP stands for Standards Organization Nigeria Conformity Assessment Programme. A SONCAP certificate is a requisite document for goods to be imported into Nigeria.

79.The Form M was apparently provided by Malaika specifically for the shipment of the Products. It was issued by Central Bank of Nigeria. Ms Tam made a forensic effort on the Form M and points out the following suspicious features in her cross-examination of Madam Chen. First, the end of validity date was printed to be 6/5/2017. The printed date of the applicant’s endorsement of the Form M was 06/11/2017. The applicant was Malaika. However, both above and below the printed date, there was a handwritten signature with a date of 20/3/2018. There was no stamp near the signature though apparently it was required.

80.Furthermore, the information appearing in the Form M differed significantly from the purported transaction pursuant to the Agreement. Ms Tam in her closing submissions helpfully set out the differences (“the Differences”) in a tabular form as follows:

	Information listed at Proforma Invoice and Revised Proforma Invoice	Information listed at Form M
Proforma Invoice number	Y180100017 Y180100017R1 (revised number)	Y170700022R1
Proforma invoice date	10 January 2018 16 January 2018 (revised date)	20 October 2017
Description of goods	“ “DIAMOND” BRAND RUBBER SOLUTION”	“BICYCLE REPAIR KIT COLD PATCH BRAND: THUMBS UP
Quantity	452CTN	10,000 CT
Price	USD52,376,000 USD61,924,000 (revised price)	USD 40,000 (FOB Value)

81.Madam Chen could hardly give any proper explanation for all these matters. She alleged that some Forms M could be used more than once and the periods of their validity vary. I cannot accept her assertions, which apparently defeat the purpose of a Form M.

82.Malaika must be in the best position to explain the Differences in the Form M. Amy must have handled this document. Their failure to proffer any explanation speaks volume.

83.The next document is the BL. The BL referred to the Form M for the details of the goods shipped. Due to the Differences, the BL could not possibly cover the Products under the Agreement.

84.Madam Luk seriously challenges the authenticity of the BL. Her solicitors have conducted an online search on the system of the company which issued the BL and found nothing about the BL.

85.D3 produced the original copy of the BL at trial. I am unable to say with any certainty that it was a forgery. However, for the foregoing reasons, I am not convinced that the BL was for the alleged shipment of the Products pursuant to the Agreement.

86.If the alleged transaction was bona fide, D3 should have no difficulties in disclosing all the correspondences exchanged with Malaika and the commercial documents to prove its existence. It should be ready to explain these documents in an unequivocal manner. As the matter now stands, with all the inexplicable features identified and in light of the forceful submissions of Ms Tam, I am not satisfied that it was a genuine transaction on the evidence. My answer to the agreed issue as to whether there existed a legitimate commercial transaction between D3 and Malaika involving the Sum is in the negative.

87.This finding is sufficient to reject the purported defence of change of position on the ground that D3’s change of position, if any, could not be bona fide. I need not find any knowing involvement or participation of D3 in the fraud and indeed any dishonesty on the part of D3. Lack of good faith per se suffices to forfeit the defence of change of position.

88.Nonetheless, I proceed to consider whether the defence is available to D3 if I were wrong to find against the existence of the alleged transaction. My answer would still be in the negative for the following reasons.

89.Madam Chen told this court with surprising frankness that D3 did not really bother who the payees were when D3 received monies from them for the purpose of settling payments by its African customers. D3 knows very well that this kind of payment method is to get round the foreign currency control policies in those African countries.

90.Madam Chen further accepts that there could be risks that those payees may not be the intermediaries of the African customers and may not voluntarily make payments to D3 for them. However, she opines that there is nothing wrong for D3 to turn a blind eye to such a risk since it had never met with any problems before. She contends that the usual practice of D3 in dealing with African customers.

91.This court cannot accept this allegedly usual practice to be commercially acceptable. To begin with, it defeats the alleged foreign currency control policies in Nigeria. Further, the risk of money laundering and cyber fraud arising from payment out of a totally unknown bank account is conspicuous and one cannot simply ignore such a risk. I cannot approve this practice.

92.In the present case, the payment of the Agreed Price was first made by way of the Deposit. The TT Document clearly told D3 that the purpose of the remittance was for family support. D3 should be alarmed and it should make an inquiry of the transferor, i.e. Arlene Brown. His contact information including his telephone number was printed in the TT Document. D3 just did not do anything to find out whether the transferor intended to send it the Deposit.

93.In a similar vein, the Sum was transferred from Madam Luk, whom D3 knew nothing about. Remarkably, the 14/3 Letter contained this sentence at the end:

“Don’t pay any person my money that enter to your account”.

94.This request was extraordinary if the Sum truly represented the balance of the Agreed Price payable to D3. A customer normally has no reason to make such a request to his supplier. D3 should have doubts or suspicions about the true nature and the source of the Sum. Good faith dictates that D3 should make an inquiry of Madam Luk via her bank. D3 should also demand Malaika for an explanation for such an unusual request or even ask for proof of authorization of the purported transfer on its behalf. Had D3 cared to make an enquiry upon receipt of the Sum, it would have found out the fraud perpetrated on Madam Luk.

95.I note that Madam Chen under cross-examination explained that the 14/3 Letter was in fact sent to D3 by email after D3 told Malaika about the present claim of Madam Luk. I cannot accept her assertion.

96.By a notice dated 4 July 2019, Madam Luk indicated her non-admission of the authenticity of the 14/3 Letter. Notwithstanding the notice, Madam Chen merely made a brief reference to the same without giving any particulars of how D3 received it from Malaika. The purported email, which should show the date of the dispatch of the 14/3 Letter, was not disclosed.

97.It was not until cross-examination that Madam Chen gave the purported explanation. However, the contents of the 14/3 Letter are completely inconsistent with the alleged purpose. There is no reason why Malaika had to retrospectively inform D3 its payment of the Sum on the date of the document and ask for the confirmation of D3’s receipt of the Sum. There is no reason why Malaika needed to backdate the document, either. Madam Chen’s belated explanation does not make any sense.

98.Madam Chen’s mention of the 419 Fraud is perplexing. I do not understand why Madam Chen found it necessary to bring this up under cross-examination for the first time. It is unreasonable for Malaika to suggest to Madam Chen that D3 might have been caught by the 419 Fraud when it was informed of the claim of Madam Luk. Neither D3 nor Madam Luk is based in Nigeria, unlike Malaika. Madam Luk made her claim in Hong Kong properly and legal proceedings had been commenced against D3. It has nothing to do with the laws of Nigeria. D3 could not have been deceived by the 419 Fraud of Madam Luk.

99.If anything, D3 should appreciate the risks involved in dealing with Nigerian customers in light of the 419 Fraud and should not accept their monies in the absence of any knowledge of their real sources. D3’s continuation to trade with Malaika and accept its payments to be made in the same manner despite Madam Luk’s claim shows that D3’s business morality is very questionable.

100.To conclude, I am of the view that D3 had valid grounds to believe that the deposit of the Sum may have been made unjustly and D3 did not act in good faith by failing to make any inquiry of Madam Luk. D3 did not act in a commercially acceptable way by voluntarily taking obvious risks of receiving the Sum from an unknown source before it purportedly changed its position and shipped the Products to Malaika.

101.Whilst Madam Luk undoubtedly suffers injustice if she is denied restitution, I can see no injustice to compel D3 to repay the Sum to Madam Luk at all. D3 must have recourse against Malaika for the recovery of the Sum.

102.For completeness, I should point out that D3 did not begin to prove the actual value of the Products. D3 could not possibly defeat the restitutionary claim of Madam Luk in any event.

Recovery of Costs of the High Court Action

103.To obtain the NP Order, Madam Luk has incurred legal costs amounting to over HK$30,000. There is no challenge to this figure.

104.Since the NP Order covered 13 bank accounts belonging to different defendants, the sum of HK$2,500 was arrived at on a pro-rata basis. The legal basis of this claim can be found in Sanctuary Systems Ltd v Orient International Holdings Hong Kong Co Ltd [2015] 4 HKC 279 per Au Yeung J at §16.

105.Mr Cheng argues that D3 was not a wrongdoer and should not be liable for any share of the legal costs in the High Court Action.

106.There is no dispute that Madam Luk required the NP Order in order to obtain the necessary information to pursue her restitutionary claim against D3. D3 has unreasonably resisted her restitutionary claim and eventually this court finds against D3. Whether D3 could be said to be a “wrongdoer” is irrelevant. There is no reason why D3 should not bear his share of the legal costs. The amount of HK$2,500 is modest indeed and I would allow this claim in full.

Continuation of the Injunction

107.Ms Tam further asks for a continuation of the Injunction in aid of execution of judgment if granted.

108.Since I have found that Madam Luk is entitled to recover the Sum in D3’s Bank A/C by way of restitution, strictly speaking, she has a proprietary interest in the Sum now being frozen in D3’s Bank A/C. I have no difficulties in continuing the Injunction until the delivery of the Sum to Madam Luk. I would also agree to order a relaxation of the Injunction insofar as it is necessary to allow D3 to return the Sum to Madam Luk.

Conclusion and order

109.For the reasons given, Madam Luk’s claim in restitution must be allowed. The defence of change of position in good faith cannot be made out on the evidence of D3, both its documentary evidence and the evidence of Madam Chen. D3’s evidence was dubious and unreliable and the able presentation of Mr Cheng could not help the defence get off the ground.

110.I have gone through the prayer for relief and I am inclined to grant the two declarations and the injunction sought. The injunction is basically a continuation of the Injunction until payment of the Sum. I also allow the restitution of the Sum and the recovery of the legal costs incurred in the High Court Action in the sum of HK$2,500.

111.Costs should follow the event. D3 should pay costs of this action including any costs previously reserved to Madam Luk, to be taxed if not agreed, with certificate for counsel. This is an order nisi and in the event that there is no application by summons to vary the same within 14 days from the date hereof, it would become absolute.

112.Last but not least, I thank both Ms Tam and Mr Cheng for their thorough research and succinct submissions.

Ms. Isabel Tam Chun Yee, instructed by Ho, Tse, Wai & Partners for the plaintiff

Mr. Ken Cheng, instructed by Oliver C.M. Chan & Co., for the 3^rd defendant