The Toronto Dominion Bank v. Johnny Mondesir

HCA 2577/2017

[2022] HKCFI 504

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2577 OF 2017

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Before: Mr Recorder William Wong SC in Chambers

Date of Hearing:  30 December 2021

Date of Decision:  28 April 2022

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DECISION

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INTRODUCTION

1.There are three applications before this Court, namely:

(1)  The Defendant’s appeal against the Order of Master S. H. Lee dated 10 August 2020 which dismissed the Defendant’s Summons dated 9 October 2019 (the “Set Aside Summons”) to set aside the Final Judgment entered against him on 11 January 2019 (the “Judgment”).  (See the Defendant’s Notice of Appeal dated 21 August 2020.) 

(2)  The Defendant’s application by his Summons dated 6 August 2021 (the “New Evidence Summons”), pursuant to which he seeks to file and serve a 6^th Affidavit (“Mondesir 6^th”) in support of his appeal; and

(3)  The Defendant’s application by his Summons dated 8 December 2021 (the “Adjournment Summons”), whereby the Defendant seeks an adjournment of the hearing of the appeal and the New Evidence Summons pending determination of the Defendant’s application for leave to appeal (and if leave is granted, D’s appeal) in CACC 59/2020.

MATERAL FACTS

2.On its face, this is an usual case of email fraud perpetrated by unknown part(ies) resulting in the sum of CAD 827,276.28 (the “Sum”) being transferred from Agriteam Canada Consulting Limited’s (“Agriteam”) bank account held with the Plaintiff bank to the Defendant’s bank account held with the Hongkong Shanghai Banking Corporation Limited (“the Defendant’s Bank Account”).

3.On 27 July 2016, Agriteam’s President, Mr Robert Francis, received an email purportedly from the Plaintiff. As it turned out, the email was not in fact from an email address of the Plaintiff or in fact sent by the Plaintiff (the “Fraudulent Email”).

4.The Fraudulent Email was forwarded to Ms Geeta Tucker (“Ms Tucker”)(being the Chief Financial Officer of Agriteam). Ms Tucker reviewed the email and opened the attachment thereto as well as clicked on the link contained in the email. The link directed her to a website which was similar to the Plaintiff’s web business banking page (but which was in fact not such website). Ms Tucker was directed to, and did, input her username and password at such website. After her log-in attempts were unsuccessful, she became suspicious about potential fraud.

5.By email at 9:51 a.m. on 27 July 2016, Ms Tucker emailed Mr Amir Kabani (a relationship manager of the Plaintiff). It was then discovered that the Fraudulent Email was indeed fraudulent. Such information was notified to Ms Tucker by email at 9:54 a.m. on the same day. This was confirmed by Mr Mike Gee (the Manager of Cash Management of the Plaintiff).

6.It was later discovered that on 27 July 2016, there were purported instructions from Agriteam to transfer the Sum to the Defendant’s Bank Account, which had been done without the instructions of Agriteam.

7.On 3 August 2016, Agriteam reported the matter to both the police in Canada and in Hong Kong.

8.On 29 August 2016, the Plaintiff reimbursed Agriteam for the whole loss of the Sum. Hence, Agriteam suffered no loss. This is the most important distinguishing feature of the case. This Court has not been informed and it is not covered in the Plaintiff’s evidence as to why the Plaintiff reimbursed Agriteam. This fact raises a very interesting question of law which will be addressed below.

PROCEDURAL HISTORY

9.The Writ of Summons (endorsed with the Statement of Claim) was filed on 21 December 2017. By the 1^st Affirmation of Lau On Tik Andy (“Lau 1^st”), the Plaintiff applied to issue a concurrent writ of summons and to serve the same out of jurisdiction on the Defendant in Canada.

10.In the Statement of Claim, the Plaintiff (not Agriteam) pleaded, inter alia, that:

“7. On 3 August, Agriteam’s accounts payable administrator discovered a discrepancy of CAD827,276.28 (the “Sum”) in its accounts in which the Sum was transferred to the Defendant’s Bank Account. Agriteam made enquiries with the Plaintiff and it was discovered that the funds were transferred without the instructions of Agriteam.

8. It was discovered that on 27 July 2016, that there were purported instructions from Agriteam to transfer the Sum to the Defendant’s Bank Account. According to the purported instructions, the transfer of the Sum to the Defendant’s Bank Account was made on or around 27 July 2017.

9. Upon the Plaintiff’s subsequent investigation, it was discovered that Agriteam did not provide any instructions for the transfer to the Defendant and the instructions for the transfer of the Sum to the Defendant’s Bank Account was part of a fraud perpetrated on Agriteam and the Plaintiff.

10. On or about 3 August 2016, Agriteam’s CFO filed a report with the Calgary Police Department in Canada in relation to the fraud. Agriteam’s CFO had also contacted the Hong Kong Police on 3 August 2016.

11. On or about 29 August 2016, the Plaintiff reimbursed Agriteam for the whole of the Sum. In light of this, the Defendant is now indebted to the Plaintiff for the Sum.

The Defendant’s failure to return the Sum

12. In fact, Agriteam and the Plaintiff did not at any time authorise the payment of the Sum to the Defendant. Furthermore, Agriteam and the Plaintiff did not have any business dealings with the Defendant and the Defendant is not entitled to the Sum.

13. The Plaintiff avers that the Sum transferred to the Defendant’s account was made:-

(1)   Under mistake, namely that the Plaintiff believed that there were instructions from Agriteam to transfer the Sum to the Defendant. But for this mistake, the Sum would not have been transferred to the Defendant’s Bank Account.

(2)   In the absence of consideration[,] [t]he Defendant has not provided any consideration for the transfer of the Sum

14. As stated in paragraph 11 above, the Plaintiff has wholly reimbursed Agriteam for its loss. In the premises, the Defendant at all material times holds the Sum received from Agriteam together with any profit thereon as constructive trustee for the benefit of the Plaintiff on a proprietary basis, and the funds remain the Plaintiff’s funds in the Defendant’s hands.” (Emphasis added.)

11.The Plaintiff obtained leave by the Order dated 16 December 2017 to serve out on the Defendant at “205-312 Cumberland St, Ottawa Canada or elsewhere in Canada within which service is to be effected”.

12.It is important to note that the Plaintiff applied for leave to service out of the jurisdiction on the Defendant in Canada, relying on Order 11, Rule 1(1)(p) of the Rules of the High Court, Cap.4A (“Rule 1(1)(p) Gateway”), i.e., for a claim “for money had and received or for an account or other relief against the defendant as constructive trustee.”

13.The Plaintiff’s process server in Canada, Mr Carlyle Murray (“Mr Murray”), effected service on the Defendant’s address at 19 Eva Road, No. 908, Etobicoke, Ontario, Canada (the “Ontario Address”) by leaving, inter alia, the Concurrent Writ of Summons there on 9 September 2018, after discovering that the Defendant no longer lived at the Ottawa address mentioned in the Order dated 16 December 2017. He also sent the documents to the Defendant by regular mail to the Ontario Address on 9 September 2018.

14.Not surprisingly, no Notice of Intention to Defend was filed by the Defendant. Accordingly, on 11 February 2019, the Judgment was entered into against the Defendant for, inter alia, the Sum.

15.Subsequently, the Plaintiff applied for and obtained various garnishee orders against The Hongkong and Shanghai Banking Corporation Limited and Industrial and Commercial Bank of China (Asia) Limited.

16.By the Set Aside Summons, the Defendant applied to set aside the Judgment and for a stay of the same in the interim.

17.Master S H Lee dismissed the Set Aside Summons. The Defendant appeals against the decision of Master S H Lee.

18.In August 2021, the Defendant issued the New Evidence Summons.

19.After the Plaintiff filed the 2^nd Affidavit of Douglas Treilhard (“Treilhard 2^nd”) and the draft Affirmation of V Elsie Plytas (“Plytas 1^st”)in opposition to the New Evidence Summons, D then issued his Adjournment Summons (supported by the Affirmation of Chin Ka Kit (“Chin 1^st”) and the Defendant’s 7^th Affidavit (“Mondesir 7^th’) and sought to adjourn the hearing before this Court on 30 December 2021, allegedly because the Plaintiff sought to rely on certain aspects of the related criminal case against the Defendant in DCCC 434/2019 and CACC 59/2020.

THE DEFENDANT’S CRIMINAL CASE

20.In April 2019, the Defendant was arrested upon his arrival in Hong Kong. He was subsequently charged with two charges under sections 25(1) and (3) of the Organised and Serious Crimes Ordinance (Cap. 455) (“ORSO”).

21.The Defendant pleaded not guilty when the case came on trial before HHJ C P Pang. The learned judge considered the relevant evidence (including the Defendant’s evidence) and found the Defendant guilty. The Defendant was sentenced to 4.5 years’ imprisonment.

22.The Defendant subsequently applied for leave to appeal before a single judge of the Court of Appeal in CACC 59/2020. A hearing before M Poon JA took place on 3 August 2021. The learned judge dismissed the Defendant’s application for leave.

23.On 13 August 2021, the Defendant issued a Notice of Renewal of Application after Refusal by the Single Judge. The Defendant was subsequently directed to file his Perfected Grounds of Appeal and written submissions on or before 2 May 2022.

ADJOURNMENT SUMMONS

24.Logically, the Adjournment Summons should be dealt with first.

25.Mr Wong for the Defendant submitted that the disposal of CACC 59/2020 would have a material impact on the determination of this case. In particular, this Court’s assessment of the Defendant’s credibility would inevitably be affected by whether or not the conviction is overturned on appeal. It is therefore convenient to deal with all matters after the determination of CACC 59/2020.

26.Although this is the Defendant’s appeal, I am of the view that it is not proper to adjourn the substantive determination of this appeal pending the outcome of the Defendant’s criminal appeal.

 Applicable Legal Principles

27.In Burberry Ltd & Anor v Polo Santa Roberta Ltd & Ors[2011] 3 HKC 466, DHCJ Au-Yeung (as she then was) explained the circumstances where the Court might grant a stay of civil proceedings pending the resolution of criminal proceedings. It was held, inter alia, that:

(1)  Where there is an overlap between a civil action and pending criminal proceedings, there is no general rule that the former should be stayed pending the outcome of the latter. The Court has a discretion to stay the civil proceedings if it appears that justice so required, having regard to the concurrent criminal proceedings, and taking into account the principle of what is sometimes referred to as the “right of silence”, being a right of a defendant in criminal proceedings (§24, referring to China Sciences Conservational Power Ltd v Chat Tat Chee(unrep., HCA 870/2009, 5 August 2010) at §24).

(2)  The burden is on the defendant to show that it is “just and convenient” that the plaintiff’s ordinary rights of having his claim processed and heard and decided should be interfered with (§26).

(3)  Relevant factors might include whether the criminal proceedings were likely to be heard in a very short time, such that it was “fair and sensible to postpone the hearing of the civil action”, and whether there might be some “real – not merely notional – danger that the disclosure of the defence in the civil action would or might, lead to a potential miscarriage of justice in the criminal proceedings…” (§27).

28.In deciding whether to grant a stay under the Court’s inherent jurisdiction:

(1)  Where an action is commenced as of right, the Court should “only grant a stay when there are ‘very good reasons’ and in ‘rare and compelling circumstances’”. The stay must not cause injustice to the plaintiff, and the defendant has to show that continuing the proceedings would be unjust to him. The ultimate question is what would serve the ends of justice: see Poon Ka Man Jason v Cheng Wai To & Ors[2018] HKCFI 771 at §37 (per Au-Yeung J).

(2)  Exercise of discretion would involve balancing between (i) possible wastage of the Court’s time and resources, and parties’ time and costs (if there is no stay); and (ii) possible delay of proceedings for a short period of time (if there is a stay): Poon Ka Man Jason(supra) at §38.

(3)  The Court must bear in mind the underlying objectives, namely, to increase cost-effectiveness of court proceedings, to ensure that a case is dealt with as expeditiously as is reasonably practicable, and to promote reasonable proportion and procedural economy in the conduct of proceedings as set out in Order 1A, rule 1 of the RHC. (See Poon Ka Man Jason(supra) at §39).

(4)  The Court does not order a temporary stay without any purpose, as it would be wrong in principle to do so: Fok Chun Yue Benjamin v Fok Chun Wan Ian [2015] 2 HKLRD 212 at §60 (per Lam VP (as he then was)).

Analysis

29.Ms So for the Plaintiff submitted that although the Adjournment Summons ostensibly asks for an adjournment, from the relief sought at §1 thereof, the Defendant in effect seeks a stay of the present civil proceedings (and not just an adjournment as such).

30.First, I agree that the criminal proceedings has no real bearing on the relevant issues to be determined by this Court, namely, (i) whether the Court has the jurisdiction to grant the order for service out of jurisdiction, (ii) if so, whether there was proper service on the Defendant; and (iii) whether the Defendant has a defence to the civil claim with “real prospects of success”.

31.The first and second issues are evidently unrelated to the criminal proceedings. The first issue is a pure question of law. The second issue is a question of fact which is not related to the criminal proceedings.

32.As to the third issue:

(1)  It is well-established that factual findings and conclusions of another judge, in separate proceedings, are not admissible as evidence of facts so found: Secretary of State for Trade & Industry v Bairstow [2004] Ch 1 at §27 (per Sir Andrew Morritt VC). A conviction is only proof that another Court considered a defendant guilty of a certain offence; “on the trial of the issue in the civil court, the opinion of the criminal court is equally irrelevant”. (See Hollington v Hewthorn & Co Ltd[1943] KB 587, 594-595)

(2)  At the end of the day, it is for the Defendant to adduce evidence before this Court to persuade this Court he has a defence with reasonable prospect of success. The Defendant could adduce whatever evidence he sees fit before this Court and this Court will determine the issues it has to decide according to the relevant civil standard of proof.

(3)  There is thus no justification for these proceedings to await the disposal of CACC 59/2020, because whatever happens there cannot have any material impact on the determination of the present case. Whether the Defendant makes out a meritorious defence in this action depends on the evidence he adduces, and this Court’s ruling will not be based on any findings about evidence or credibility in the criminal court.

33.The crux of the Defendant’s argument for adjournment appears to be that the Plaintiff had refused to undertake “not to rely on the Reasons for Verdict and the Reasons for Judgment in the present appeal”.

34.On this issue, I agree with Ms So for the Plaintiff that a conviction of itself still amounts to proof that the criminal court came to the conclusion that the defendant was guilty (See Bairstow(supra) at §17 (citing Hollington).

35.What the Plaintiff has done in the present case, in response to the Defendant’s own reliance on evidence he gave in the criminal proceedings, is only to refer to the fact that such evidence was disbelieved, without more. The citation and reference to comments in the Reasons for Verdict and the Reasons for Judgment only set out as a matter of fact the relevant judges’ opinions.

36.Ms So has made clear to this Court that the Plaintiff does not seek to rely on such comments as evidence, or as factual findings. Hence, I do not see how the Defendant can be said to be handicapped or prejudiced from advancing his defence in the present civil case without the benefit of a pending decision in the Court of Appeal in relation to the criminal case. Ms So for the Plaintiff is definitely right that the case the Defendant has to meet herein (being one based on unjust enrichment) is evidently different from the charges based on ORSO, and the evidential threshold which the Defendant has to meet is entirely different in the criminal and civil context.

37.For the above reasons, I am of the view that there is no purpose or “good reason” (let alone “very good reasons”) for a stay to be imposed. It is also noted that this is not a case where the Defendant risks having to disclose his defence, given that he has already revealed his case in the criminal proceedings. The considerations mentioned in Burberry(supra) are therefore not present.

38.Finally, I also bear mind that the Court of Appeal’s decision may not be the end of the Defendant's appeal process. In other words, it is unclear as to how long this appeal should be adjourned for determination. This is not satisfactory. Accordingly, this Court dismisses the Adjournment Summons with costs to the Plaintiff, on a party to party basis, to be taxed if not agreed. It is only right that this Court determines the substantive merits of the appeal.

NEW EVIDENCE SUMMONS

39.The Plaintiff submitted that the Ladd v Marshall requirements are not satisfied. See Hong Kong Civil Procedure 2022 at §58/1/3.  

40.First, Ms So for the Plaintiff submitted that Mondesir 6^th is evidence which could have been obtained with reasonable diligence for the hearing below before Master SH Lee.

41.The affidavit (insofar as it deals with the appeal, and not just the underlying background and the Defendant’s alleged difficulties with seeking legal representation, which are not relevant to his appeal) essentially deals with three aspects: (i) the fact he travels internationally for work frequently; (ii) the fact he did not live at the Ontario Address as at the date of service (but instead lived in Gatineaux, Quebec); and (iii) an explanation as to why the Ontario Address was linked to the Defendant.

None of these aspects involves matters which would have been difficult for the Defendant to have dealt with in his earlier evidence. It was not as though he put forward new documentary evidence to prove his residence. Those relevant documents had already been exhibited to his earlier Affidavits. All he has done in Mondesir 6^th is to depose to more detailed facts. He could easily have done this in his earlier evidence. In other words, the evidence could have been prepared with reasonable diligence for the hearing below.

42.Secondly, Mondesir 6^th is also unlikely to have any real effect on the Court’s consideration of the appeal. As explained below, the evidence does not undermine the Plaintiff’s case on service. At its highest, the Defendant has only established that he lives in Gatineaux, Quebec. However, that is not enough to demonstrate that service at the Ontario Address (which the Defendant himself admitted to using as an address for business purposes) is irregular, especially in the face of Treilhard 2^nd which confirms the Canadian law position.

43.Hence, the second condition about “important influence on the result of the case” is also not satisfied.

44.The Plaintiff submitted there is simply no reason to exceptionally relax the requirements of Ladd v Marshall to avoid the risk of injustice being done. The facts that the Defendant is not legally represented or was in custody in Hong Kong do not somehow allow him to put forward his case in a piecemeal fashion. The Defendant had filed various Affidavits while in custody and put forward (the only) documentary evidence even before his solicitors came on the record. It is clear he was entirely capable of defending the present case even then.

45.Having said that, for convenience, however, the Plaintiff is also agreeable to have the Court consider Mondesir 6^th de bene esse.

46.I am of the view that Mondesir 6^th should be admitted as the primary rationale for late filing of evidence is to ascertain first whether the evidence to be adduced is relevant and thus helpful in achieving overall justice in the case and secondly, to see if the admission of such evidence will cause prejudice to the party which has to deal with the new evidence.

47.In the present case, there is no suggestion of any prejudice on the part of the Plaintiff if the new evidence were to be relied upon. In fact, the Plaintiff’s position is that the new evidence is not relevant. On the other hand, Mondesir 6^th covers evidence in relation to service which is only within the knowledge of the Defendant and there is nothing useful the Plaintiff could have responded to.

48.Further, the Plaintiff sensibly agreed that the Court can consider Mondesir 6^th de bene esse.

49.In the circumstances, I will formally admit Mondesir 6^th but with costs of the application to the Plaintiff, on a party to party basis, to be taxed if not agreed.

SUBSTANTIVE MERITS

50.Mr Wong for the Defendant submitted that the appeal should be allowed on four independent grounds:

(1)  The Hong Kong Court had no jurisdiction over the matter under Rule 1(1)(p) Gateway. The unjust enrichment pleaded by the Plaintiff was at the expense of Agriteam, not the Plaintiff. Furthermore, the Defendant is not liable to the Plaintiff as a constructive trustee as he never took the Plaintiff’s property or its traceable proceeds.

(2)  The parties and Agriteam are in Canada and Hong Kong is not the natural forum. This fact as well as the lack of a viable cause of action were not drawn to the Court’s attention at the ex parte stage and leave to serve out should not have been granted at all.

(3)  As a matter of fact, the Concurrent Writ of Summons was not properly served on the Defendant and the Judgment was entered into irregularly.

(4)  The Defendant has a meritorious defence with a real prospect of success in respect of the Plaintiff’s claim as the only correct Plaintiff on the facts pleaded is Agriteam not the Plaintiff.

Jurisdiction

51.This Court deals with the issue of jurisdiction first as if there is no jurisdiction to serve out, that will be the end of the matter and the Judgment should be set aside. The issue of whether the Court had jurisdiction under Order 11, Rule 1(1), which was fundamental to the proceedings, was one to which the Court should have regard in an Order 13, Rule 9 application irrespective of the existence of a defence on the merits. In Choi Chung Bun Vincent v Australia China Holdings Ltd [2011] 3 HKLRD 622, McWalters J (as he then was) at §47 said:

“Because in the first stage the determination of the issue of whether the court has jurisdiction is fundamental to the proceedings, I am of the view that it is an issue to which the court should have regard in an O.13, r.9 application irrespective of the existence of a defence on merits. That the court may be acting unlawfully and as a consequence wrongly bringing a defendant into its extended jurisdictional grasp and compelling him to be subject to its authority is something that cannot be ignored.”

52.The threshold for deciding whether the Court had jurisdiction under Order 11, Rule 1(1) is the reasonable prospect of success test. This is a mixed fact and law issue where the Court assesses the merits of the legal argument on the basis of the facts of the plaintiff as presented to the Master who granted leave to serve out. If the challenge to jurisdiction is adjudicated upon in this way, then it becomes irrelevant whether it has the effect of causing the default judgment to be regarded as one that was irregularly entered. (See Choi Chung Bun Vincent v Australia China Holdings Ltd (supra) at §§48-49). Once the challenge passes this test, then the judgment should be set aside with a direction to the defendant to apply to set aside the leave to serve out within a time frame specified by the Court.

53.Decisions on applications for leave to serve out involve a two-stage process. The first stage involves a decision that the plaintiff has established to the threshold of a good arguable case that he has a cause of action within Order 11, Rule 1(1). This gives the Hong Kong Court jurisdiction and leads to the second stage which is a consideration of whether the Hong Kong Court should exercise that jurisdiction. This second stage requires a consideration of whether there is a serious issue to be tried between the parties and whether Hong Kong is the appropriate venue to try that issue. This second stage decision is discretionary in nature.

54.An applicant for leave must show that its case falls clearly within one or other of the sub-paragraphs of Rule 1(1) which the applicant identifies and invokes. These are referred to as the “gateways”. There is a need for a strict approach for Order 11 applications. In Kayden Ltd v Securities and Futures Commission (2010) 13 HKCFAR 696 at §§36-38, Ribeiro PJ said:

“36. The need for a strict approach is dictated by at least three related considerations. First, it is grounded on the recognition of the need for special care given the extraordinary nature of the long-arm jurisdiction asserted under O.11. As Lord Mustill pointed out, it involves seeking to compel a foreign defendant to submit to adjudication by the court or suffer judgment and execution in default.

37. Secondly, as indicated in the passage from Parker v Schuller cited above, the court acts on the faith of the plaintiff’s representations made to it ex parte when granting leave for service of process abroad. Given the extraordinary nature of the jurisdiction which the court would thereby be asserting, it insists on special care on the plaintiff’s part and full disclosure of the basis upon which that jurisdiction is involved.

38. Thirdly, as Neill LJ pointed out in Excess Insurance Co Ltd v Astra SA Insurance and Reinsurance Co:

…it is not only the court which must be apprised of the cause of action alleged. The defendant must know the basis of the claim which he has to meet so that, if so advised, he can challenge the order which asserts the court’s jurisdiction over him.”

55.Order 11, Rule 1(1)(p) of the Rules of High Court, Cap.4 provides that:

“Provided that the writ is not a writ to which paragraph (2) of this rule applies, service of a writ out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ –

….

(p) the claim is brought for money had and received or for an account or other relief against the defendant as constructive trustee, and the defendant’s alleged liability arises out of facts committed, whether by him or otherwise, within the jurisdiction.” (Emphasis added.)

56.In order for the Plaintiff to bring its claim under Order 11, Rule 1(1)(p), the Plaintiff has to show that the claim is brought for money had and received against the Defendant or the Plaintiff seeks an account or other relief against the Defendant as a constructive trustee and that the Defendant’s alleged liability arose out of acts committed within the jurisdiction.

57.There are four questions to be considered in a claim of unjust enrichment, namely, (i) was the defendant enriched, (ii) was the enrichment at the plaintiff’s expense, (iii) was the enrichment unjust and (iv) are there any relevant defences.

58.In Investment Trust Companies v Revenue & Customs Comrs [2018] AC 275, Lord Reed JSC at §§39-43 and 50 said:

“39. First, it is important, when dealing with personal claims based on unjust enrichment, to bear in mind what was said by Lord Goff of Chieveley in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, 578, when rejecting a submission that, when dealing with a claim to restitution based on unjust enrichment, it was for the court to consider the question of injustice or unfairness on broad grounds, and that it should deny recovery if it thought that it would be unjust or unfair to hold the defendant liable:

‘The recovery of money in restitution is not, as a general rule, a matter of discretion for the court. A claim to recover money at common law is made as a matter of right; and even though the underlying principle of recovery is the principle of unjust enrichment, nevertheless, where recovery is denied, it is denied on the basis of legal principle.’

As Lord Steyn remarked in Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221, 227 unjust enrichment ranks next to contract and tort as part of the law of obligations. A claim based on unjust enrichment does not create a judicial licence to meet the perceived requirements of fairness on a case-by-case basis: legal rights arising from unjust enrichment should be determined by rules of law which are ascertained and consistently applied. Without going as far as Scrutton LJ, who in Hott v Markham [1923] 1 KB 504, 513 described the legacy of Moses v Macferlan (1760) 2 Burr 1005 as “a history of well-meaning sloppiness of thought”, McLachlin J rightly cautioned against the “tendency…to view action for unjust enrichment as a device for doing whatever may seem fair between the parties”: Peter v Beblow (1993) 1 SCR 980, 988.

40. Secondly, the adoption of the concept of unjust enrichment in the modern law, as a unifying principle underlying a number of different types of claim, does not provide the courts with a tabula rasa, entitling them to disregard or distinguish all authorities pre-dating the Lipkin Gorman case [1991] 2 AC 548. The point is illustrated by the judgment of Floyd LJ in the TFL case [2014] 1 WLR 2006, para 39, where the decision in Ruabon Steamship Co Ltd v London Assurance [1990] AC 6 was put to one side on the basis that “the House of Lords…was not looking at the case through the eyes of the modern law of unjust enrichment”. Although judicial reasoning based on modern theories of unjust enrichment is in some respects relatively novel, there are centuries’ worth of relevant authorities, whose value should not be underestimated. The wisdom of our predecessors is a valuable resource, and the doctrine of precedent continues to apply. The courts should not be reinvesting the wheel.

41. Thirdly, as the judge observed in the present case, in remarks with which Lord Clarke JSC expressed agreement in the Menelaou case [2016] AC 176, para 19, Lord Steyn’s four questions are no more than a structured approach to the analysis of unjust enrichment, by identifying the essential elements in broad terms. If they are not separately considered and answered, there is a risk that courts will resort to an unstructured approach driven by perceptions of fairness, with consequent uncertainty and unpredictability. At the same time, the questions are not themselves legal tests, but are signposts towards areas of inquiry involving a number of distinct legal requirements. In particular, the words “at the expense of” do not express a legal test; and a test cannot be derived by exegesis of those words, as if they were the words of a statute.

42. The structured approach provided by the four questions does not, therefore, dispense with the necessity for a careful legal analysis of individual cases. In carrying out that analysis, it is important to have at the forefront of one’s mind the purpose of the law of unjust enrichment. As was recognised in the Menellaou case, at para 23, it is designed to correct normatively defective transfers of value, usually by restoring the parties to their pre-transfer positions. It reflects an Aristotelian conception of justice as the restoration of a balance or equilibrium which has been disrupted. That is why restitution is usually the appropriate remedy.

43. The nature of the various legal requirements indicated by the “at the expense of” question follows from that principle of corrective justice. They are designed to ensure that there has been a transfer of value, of a kind which may have been normatively defective: that is to say, defective in a way which is recognised by the law of unjust enrichment (for example, because of a failure of the basis on which the benefit was conferred). The expression “transfer of value” is, however, also too general to serve as a legal test. More precisely, it means in the first place that the defendant has received a benefit from the claimant. But that is not in itself enough. The reversal of unjust enrichment, usually by a restitutionary remedy, is premised on the claimant’s also having suffered a loss through his provision of the benefit.

…

50. It has often been suggested that there is a general rule, possibly subject to exceptions, that the claimant must have directly provided a benefit to the defendant. The situations discussed in the two preceding paragraphs can be reconciled with such a rule, if it is understood as encompassing a number of situations which, for the purposes of the rule, the law treats as equivalent to a direct transfer, in the sense that there is no substantive or real difference. So understood, the suggested rule is helpful. It may nevertheless require refinement to accommodate other apparent exceptions, and it would be unwise at this stage of the law’s development to exclude the possibility of genuine exceptions, or to rule out other possible approaches.” (Emphasis added.)

59.The Defendant’s case, as Mr Wong submitted, is simply that the Plaintiff’s case as pleaded in the Statement of Claim is not a claim for “money had and received or for an account or other relief against the defendant as constructive trustee” under the Order 11, Rule 1(1)(p) Gateway. Hong Kong Courts thus have no jurisdiction over the Defendant.

60.Mr Wong for the Defendant submitted that any enrichment of the Defendant is at Agriteam’s, not the Plaintiff’s, expense. The defrauded funds were paid on or around 27 July 2016 by Agriteam, and the Plaintiff reimbursed Agriteam one month later on 29 August 2016. It was Agriteam which suffered a loss, not the Plaintiff; otherwise, there was no basis for the Plaintiff to reimburse Agriteam. The correct plaintiff for any claim in unjust enrichment would therefore be Agriteam, not the Plaintiff.

61.I have asked for the reasons upon which the Plaintiff reimbursed Agriteam but it is not disputed that there is no evidence on that very issue. Hence, Mr Wong for the Defendant submitted that on the facts, the Plaintiff made a voluntary payment with full knowledge of the alleged fraud. Hence, the Plaintiff does not have a cause of action on money had and received.

62.Further, the Plaintiff does not have any proprietary claim against the Defendant. Agriteam’s defrauded funds had parted with Agriteam on or around 27 July 2016. The Plaintiff cannot reimburse Agriteam on 29 August 2016 and then seek to trace backwards into money that had left Agriteam’s hands one month ago.

63.In Federal Republic of Brazil v Durant International Corpn and another [2016] AC 297, Lord Toulson at §17 said:

“…The doctrine of tracing involves rules by which to determine whether one form of property interest is properly to be regarded as substituted for another. It is therefore necessary to begin with the original property interest and study what has become of it. If it has ceased to exist, it cannot metamorphose into a later property interest. Ex nihilo nihil fit: nothing comes from nothing….”

64.Mr Wong’s point is that the Plaintiff cannot correctly maintain that its reimbursement can be traced into the funds in the Defendant’s account and thus assert a proprietary claim.

65.In response to Mr Wong’s submissions, Ms So for the Plaintiff submitted that even where there was indirect provision of benefit from a plaintiff to the defendant, nevertheless an unjust enrichment claim could be made out. These included, inter alia, “a set of co-ordinated transactions being treated as forming a single scheme or transaction for the purpose of the “at the expense of” enquiry””.

66.Upon proper analysis, I am not persuaded that it is correct on the facts of the present case. On the Plaintiff’s pleaded case, the act of reimbursement was to cover the loss of Agriteam but not to provide an indirect benefit to the Defendant. Further, it is hard to say that the act of reimbursement by the Plaintiff is part and parcel of a set of co-ordinated transactions being treated as forming a single scheme or transaction. When the Plaintiff made the reimbursement, it had had full knowledge of the fraud. The Plaintiff has adduced no evidence as to how its act of reimbursement is part of a single scheme or transaction.

67.Secondly, Ms So for the Plaintiff relied on the doctrine of subrogation (see Investment Trust Companies v Revenue & Customs Comrs [2018] AC 275 at §§61-66) to argue that in the cases of subrogation, even where there was an “absence of a direct payment” between a plaintiff and a defendant, the “reality of the transaction” was there was a “transfer of value” satisfying the “at the expense of” element.

68.On this point, I am of the view that Mr Wong for the Defendant is correct. First, the doctrine of subrogation is not triggered because the Plaintiff’s payment to Agriteam was made voluntarily, i.e., neither due to a mistake nor due to a legal liability (e.g. a contract of insurance). It is established law that a voluntary payment by an “unauthorized intervener” does not discharge the defendant’s liability or engage the doctrine of subrogation.

69.The learned authors of Subrogation: Law and Practice at §2.18 said:

“The rule has prevailed in English law that a defendant’s obligation to a creditor is not discharged if the creditor is paid by an authorized intervener acting voluntarily – ie by an intervener whose intention to pay is not vitiated in any way, and who does not pay pursuant to a legal liability.”

70.It is also true that the Plaintiff has not pleaded subrogation in its Statement of Claim. There is also no evidence of any assignment of cause of action from Agriteam to the Plaintiff upon the reimbursement. It is difficult to see how an act of voluntary payment without more can confer a cause of action upon the Plaintiff against the Defendant.

71.Thirdly, Ms So submitted that this Court should look at the matter globally. The net result of all the facts is that the Defendant obtains an illegal benefit and the Plaintiff, by reason of the reimbursement, suffers a corresponding loss. I am of the view that even though this Court has a duty to decide cases to achieve justice, this Court cannot adopt a sloppiness of thought in order to achieve that end. Even in the case of Menelaou v Bank of Cyprus Plc [2016] AC 176 at §27, the court still requires a sufficient causal link between the bank’s loss and the defendant’s enrichment.

72.Fourthly, Ms So relied on the case of Niru Battery Manufacturing Co v Milestone Trading Ltd (No.1) [2002] 2 All ER (Comm) 705 at §145 where Moore-Bick J (as he then was) said:

“Following this joinder of Bank Sepah the question of whether Niru was entitled to maintain a claim in restitution against CAI in its own right assumed less significance. However, it is necessary to deal with it briefly because it may be relevant to the contribution proceedings between SGS and CAI. In my view Niru can maintain a claim on two grounds. First, although Bank Sepah paid the money in performance of its own obligation under the letter of credit, it did so as agent for Niru to discharge its obligations under the contract of sale. Accordingly, Niru can recover the funds mistakenly paid on its behalf. Secondly, as I have already mentioned, by the time Bank Sepah remitted the funds to CAI it had reimbursed itself by debiting Niru’s account. It follows that the only claimant to have suffered a loss in this case is Niru and that Bank Sepah would be obliged to hold any money recovered from CAI in trust for Niru. In these circumstances I think that Niru itself is entitled to make a claim against CAI in restitution, although it might have been necessary for it to join Bank Sepah as an additional defendant if it had not otherwise been a party to the proceedings.” (Emphasis added.)

73.However, the above passage only confirms that Agriteam was entitled to make a claim against the Defendant in restitution. Mr Wong for the Defendant has no objection to such proposition. In fact, Mr Wong submitted that the cause of action rests with Agriteam and not the Plaintiff.

74.Ms So submitted that the Plaintiff reimbursed Agriteam before bringing the action itself, hence it is the only claimant to have suffered a loss in this case. I am not entirely persuaded that this is the correct analysis. Mr Wong is correct in submitting the “loss” suffered by the Plaintiff was caused by its act of voluntary reimbursement and not by any mistake and/or fraud because by the time of the reimbursement, the Plaintiff had had full knowledge of the alleged fraud and it cannot be said that the Plaintiff made the reimbursement as a result of any mistake. It comes back to the issue of a sufficient causal link. The Defendant’s enrichment is not at the expense of the Plaintiff, but Agriteam.

75.Having said all that, I am of the view, on proper analysis, it must not be forgotten that the relationship between a bank and its customer is that of creditor and debtor. The money in the present case was the Plaintiff’s money. It was transferred by the Plaintiff to the Defendant’s Hong Kong bank account through the international banking system as a result of a false or fake instruction which the Plaintiff mistakenly (as a result of the fraud) taken to be Agriteam’s real instructions.

76.In Foley v Hill (1848) 2 HLC 28, Lord Cottenham at 36 said:

“The money paid into the banker’s, is money known by the principal to be placed there for the purpose of being under the control of the bank; it is then the banker’s money; he is known to deal with it as his own; he makes what profit he can, which profit he retains to himself…” (Emphasis added).

See also Ellinger’s Modern Banking Law (5^th ed.) at pp.120-125

77.It is therefore well established that the banker-customer relationship is that of a debtor-creditor, and monies deposited by a customer with his bank becomes the bank’s money, with corresponding right of the bank to “use deposits for its own purposes” with an undertaking to “repay an amount equal to that deposited, with or without interest, either at call or at a fixed time”: Ellinger’s (supra) at p.120.

78.The point is also made by Lord Millett in Foskett v McKeown [2001] 1 AC 102, 127H-128C, where in the context of discussing tracing he explains that:

“…the account holder [with a bank] has no money at the bank. Money paid into a bank account belongs legally and beneficially to the bank and not to the account holder. The bank gives value for it, and it is accordingly not usually possible to make the money itself the subject of an adverse claim. Instead a claimant normally sues the account holder rather than the bank and lays claim to the proceeds of the money in his hands. These consist of the debt or part of the debt due to him from the bank. We speak of tracing money into and out of the account, but there is no money in the account. There is merely a single debt of an amount equal to the final balance standing to the credit of the account holder. No money passes from paying bank to receiving bank or through the clearing system…There is simply a series of debits and credits which are causally and transactionally linked…” (Emphasis added).

79.Upon making the transfer, normally, the Plaintiff would debit Agriteam’s bank account which will reflect a reduction or decrease in the value of the chose in action (i.e. a debt claim) that Agriteam would have against the Plaintiff.  However, the Plaintiff could form the view that as the instruction was fake, it could and should credit Agriteam’s account with the same amount that it had debited. In this sense, the Plaintiff is a direct victim of the fraud. It goes without saying and this Court can take judicial notice that there must be some written contractual terms between the Plaintiff and Agriteam, whether in the form of account opening forms or otherwise, to govern their contractual relationship. If pursuant to such contractual terms, the Plaintiff has an absolute right to debit Agriteam’s account, although the Plaintiff is also a victim, it has suffered no loss. Hence in the normal circumstances, banks are not claimants in email fraud cases. However, if under such contractual terms, the Plaintiff does not have such an absolute right to debit Agriteam’s account or even if it has such an absolute contractual right, it chose not to exercise the same, then it seems to me that the Plaintiff can maintain an independent claim against the Defendant as a direct victim. In other words, the Plaintiff’s loss (in not being able to debit Agriteam’s account, despite the payment out) is a direct result of the fraud. The Defendant’s enrichment is at the expense of the Plaintiff.

80.In other words, on 27 July 2016 when there were purported instructions from Agriteam to make the transfer from its account held with the Plaintiff to the Defendant’s bank account, what happened was that the Plaintiff (having received such purported instructions) debited Agriteam’s account (in the sense of reducing the amount payable by the Plaintiff to the Agriteam) and instructed HSBC (at which the Defendant held his account) to credit the Defendant’s bank account.

81.Hence, the enrichment of the Defendant was at the expense of the Plaintiff as it is the Plaintiff’s money which was transferred to HSBC. This is why the Plaintiff describes the process as it having transferred the sum to the Defendant’s bank account.

82.As such, the reimbursement from the Plaintiff to Agriteam can be understood as an adjustment of the account as between the Plaintiff and Agriteam, i.e., the reversal of the purported debit from Agriteam’s account held with the Plaintiff as the purported instructions did not actually come from Agriteam. With such reversal, the Plaintiff would thus be liable to repay to Agriteam the credit balance standing to its account prior to the mistaken transfer on 27 July 2016, despite its having actually transferred this amount to HSBC to the Defendant’s credit and therefore being out of pocket for the mistaken transfer.  

83.Indeed, the Plaintiff’s pleaded case at §13(1) of its Statement of Claim is that:

“The Plaintiff avers that the Sum transferred to the Defendant’s account was made:-

(1)               Under mistake, namely that the Plaintiff believed that there were instructions from Agriteam to transfer the Sum to the Defendant. But for this mistake, the Sum would not have been transferred to the Defendant’s Bank Account.” 

84.At paragraph 9 of the Statement of Claim, the Plaintiff also pleaded that:

“Upon the Plaintiff’s subsequent investigation, it was discovered that Agriteam did not provide any instructions for the transfer to the Defendant and the instructions for the transfer of the Sum to the Defendant’s Bank Account was part of a fraud perpetrated on Agriteam and the Plaintiff.” (Emphasis added.)

85.Additionally, as pleaded in paragraph 14 of the Statement of Claim, the transfer (having been impressed with a constructive trust) in fact belonged to the Plaintiff and remained its funds. In that sense, the Plaintiff is also a victim of the email fraud.

86.It is established law that the courts have consistently recognised that property obtained by fraud would be subject to a constructive trust, so the money is recoverable and traceable in equity.

87.For all the above reasons, I am of the view that the leave to serve out was correctly granted and the Rule 1(1)(p) Gateway is met. This Court does have the relevant jurisdiction over the Defendant.

FORUM AND DISCRETION

88.Mr Wong for the Defendant submitted that Agriteam, the Plaintiff, the Defendant are all based in Canada. The only link of the case to Hong Kong was the existence of the Defendant’s Hong Kong account, and even there the Defendant’s address as disclosed was in Canada. Other than the bank account, no other link to Hong Kong has been identified. Canada is the natural forum for the trial of this case.

89.On this issue, I am not persuaded by Mr Wong for the Defendant because other than his bank account in Hong Kong, the Defendant is now in Hong Kong albeit in jail after a full criminal trial which took place in Hong Kong. On the Defendant’s own evidence, he travels internationally for work very frequently and comes to Hong Kong about two to four times a month on average, with over 300 visits to Hong Kong from 2013 to 2018.

90.The Defendant had produced evidence during his criminal trial in Hong Kong and he is seeking to produce more evidence in Hong Kong for the purpose of his appeal.

91.Against such factual background and (i) the fact that receipt took place in Hong Kong in the Defendant’s bank account located here; and (ii) the Sum remains in the Defendant’s Hong Kong bank account to which this Court understands that enforcement proceedings is in progress, I am of the view that Hong Kong is an appropriate forum for the trial of this action.

FULL AND FRANK DISCLOSURE

92.Mr Wong submitted that the Plaintiff has failed to make full and frank disclosure before the Master in the sense that it should disclose to the Master that the proper plaintiff in the present case should be Agriteam and not the Plaintiff and that Canada is the natural and appropriate forum.

93.As a result of the analysis above, I do not think that the Plaintiff has failed to discharge its obligation to make full and frank disclosure.

94.Ms So for the Plaintiff is correct that:

(1)  In Lau 1^st and the Statement of Claim, it was made clear that inter alia Agriteam was the victim of the fraud, and that the Plaintiff had reimbursed Agriteam for the Sum and “in light of this” sought relief against the Defendant.

(2)  It had also been pleaded and explained that the Plaintiff and Agriteam were both based in Canada, and that the Defendant’s last known address was in Canada (which was the whole reason leave to serve out was required). The Court was well aware of these features when it granted leave to serve out.

SERVICE

95.As set out in Order 11, Rule 5(3)(a) of the Rules of High Court, Cap.4A, a writ which is to be served out of the jurisdiction “need not be served personally on the person required to be served so long as it is served on him in accordance with the law of the country or place in which service is effected” (Emphasis added).

96.The Plaintiff has produced Canadian law evidence, Treilhard 1^st, §7, that service at the Ontario Address by way of leaving the Writ with an adult member of the household is good and effective service by virtue of the laws of Canada. The Rules of Civil Procedure in Ontario provide that an originating process must be served personally or by an alternative to personal service – and Rule 16.03(5) of such rules then set out alternatives including (i) leaving a copy at the place of residence with anyone who appears to be an adult member of the same household; and (ii) on the same day mailing another copy of the document to the person at the place of residence. “Place of residence” is to be given a functional interpretation. If a person has several residences, all places qualify as residences.

97.However, the Defendant has not put forward contrary Canadian law evidence to refute the same, despite claiming in his 5^th Affidavit that his lawyers had been “closely liaising with my attorneys in Canada to arrange the preparation of the said Canadian legal opinion as a matter of urgency”, and that the opinion would be available in a month or so from mid-June 2021. Later, in Mondesir 6^th, he claims that “most of the Ontario lawyers [his Quebec attorney] knows are on vacation and the rest of them did not respond to her”, which was why he could not obtain Ontario legal advice.

98.The Plaintiff’s process server had identified such new address by a skip trace, and also confirmed the same by means of a telephone call to the Defendant. Mr Murray effected service on the Defendant on 9 September 2018 at the Ontario Address by (i) leaving the relevant documents at the same; and (ii) sending the relevant documents to the Defendant by regular email.

99.This Court has duly taken into account the Defendant’s new evidence. However, it only serves to confirm that the Ontario Address which is a residential address is confirmed in the Defendant’s driver’s record obtained from Ontario’s Ministry of Transportation. The new evidence from the Defendant essentially puts up further details about how he in fact lived at all material times in Quebec, and not at the Ontario Address. However, that does not mean that he did not put forward the Ontario Address as one of his residential address to which he can be reached.

100.At the end of the day, whether there has been proper service has to be determined according to Canadian law. In light of the Plaintiff’s evidence on this issue, it is hard for this Court to disbelieve the Plaintiff’s Canadian legal expert’s evidence when the Defendant has chosen not to adduce any contrary evidence to dispute the same.

101.In the circumstances, this Court accepts that the service is regular according to Canadian law and the judgment is, thus, a regular judgment.

REAL PROSPECT OF SUCCESS

102.In view of the analysis above, I am of the view that the Plaintiff has not shown a real prospect of success in defending the Plaintiff’s claim.

103.I note that the Defendant claims that the Sum represented “proceeds of [his] sale of land in Haiti”, and has “used it for [his] own purposes”. However, Mr Wong for the Defendant fairly accepted that the amount as stated in the contractual documents in relation the sale of his land in Haiti cannot sit well with the Sum.

104.In any event, I do not see how the Defendant can keep the Sum when the same was mistakenly transferred to his bank account in Hong Kong by reason of a fraudulent instruction.

105.As the Defendant has not put forward any defence with a real prospect of success, there is no reason for the Court to exercise its discretion to set aside the Judgment.

DISPOSITION

106.By reason of the above analysis, this Court makes the following orders:

(1)  The Appeal be dismissed;

(2)  The Adjournment Summons be dismissed;

(3)  The New Evidence Summons be allowed.

107.I also make a costs order nisi that the Plaintiff is entitled to costs of and occasions by the three applications to be paid forthwith by the Defendant, on a party to party basis, to be taxed if not agreed. The said costs order nisi will be made absolute unless the parties take out an application within 14 days from the day herein.

108.Finally, I like to thank Ms So for the Plaintiff and Mr Wong for the Defendant for their very helpful assistance to this Court.

Ms Natalie So, instructed by Deacons, for the Plaintiff

Mr Jasper Wong, instructed by Cedric & Co., for the Defendant