Ronald Keith Mauzey v. Chun Zheng Ltd and Another

DCCJ 4332/2024

[2024] HKDC 1324

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4332 OF 2024

————————

BETWEEN

————————

————————

DECISION

————————

Introduction and Background Facts

1.I have before me two Summonses both filed on 2 August 2024 by the Plaintiff (“P”) for:

(1) An application to continue the Order of Deputy District Judge Joseph Vaughan (“the Learned Judge”) dated 2 August 2024 until further order (“Continuation Summons”); and

(2) An application for disclosure of information and documents against Chong Hing Bank Limited (“CHB”) and OCBC Bank (Hong Kong) Limited (“OCBC”) pursuant to s 21 of the Evidence Ordinance, Cap 8 (“EO”) and under the court’s jurisdiction to grant Norwich Pharmacal relief (“Disclosure Summons”).

2.P claims to be a victim of a fraud. He allegedly was induced by a fraudster to transfer US$300,685 (“the Sum”) together with a wiring fee of US$54.95 from P’s account held at the Bank of Oklahoma in the United States of America to the designated bank account (number 255-80-0550440 of the 1^st Defendant (“D1”) maintained with CHB (D1’s Account”) on 19 January 2024.

3.Upon realizing that he had been scammed, he reported the matter to the Hong Kong Police (“the Police”) on 23 January 2024. According to P, on 24 April 2024, the Police informed P’s solicitors that D1’s Account has been frozen. On 2 May 2024, the Police further informed that HK$1,000,000 of the 2^nd layer account of the 2^nd Defendant (“D2”) held with OCBC (“D2’s Account”) was frozen which was transferred from D1’s Account.

4.Subsequently, the Police provided to P’s solicitors bank statements of D1’s Account and D2’s Account. From those it appears that:

(1) On 22 January 2024, the Sum was paid into D1’s Account after deduction of bank charges which was then converted into Hong Kong dollars and transferred to D1’s Hong Kong dollars saving account number 225-20-6140522 maintained with CHB; and

(2) On 22 January 2024, D1 transferred HK$1,000,000 into D2’s Account.

5.An ex parte application for proprietary and Mareva injunctions was first made by P on 31 July 2024 and was adjourned by me to 2 August 2024 to be heard by the Summons Judge.

6.On 2 August 2024, the Learned Judge granted (up to and including today’s hearing) the following: (1) Mareva injunctions against D1 and D2 restraining the removal, disposing or dealing with its assets up to the value of US$300,685 (or its HKD equivalent) and HK$1,000,000 respectively; (2) proprietary injunctions against D1 and D2 over the sums of US$300,685 in D1’s Account and HK$1,000,000 in D2’s Account respectively; and (3) disclosure of assets to P’s solicitors of its assets by D1 and D2.

Disclosure Summons

7.P now seeks an order for disclosure of information and documents in respect of the account held in the names of D1 and D2 held with CHB and OCBC respectively from 19 January 2024 to the date of order.

8.Both CHB and OCBC were served the Disclosure Summons.

9.By letter dated 6 August 2024, CHB indicated that it will not attend today’s hearing and seek to be excused.

10.No response has been received from OCBC but I am satisfied that it has been served the Disclosure Summons and notice of today’s hearing given.

Applicable principles

11.The applicable principles governing an order under s 21 of EO are well-established. Although it has been said that a s 21 order is justified where the plaintiff seeks to trace funds which in equity belong to him and of which there was strong evidence that he has been fraudulently deprived, there are 3 limits:

(1) Firstly, the plaintiff must demonstrate a real prospect that the information may lead to the location or preservation of assets to which he is making a proprietary claim;

(2) Secondly, the documents sought to be disclosed must be identified with some specificity as would be expected of a subpoena; and

(3) Thirdly, the court needs to balance the potential advantage against the detriment to the person against whom the order is sought, not merely in terms of costs but by way of invasion of privacy and requiring breach of obligations of confidence to others.

See CTO (HK) Ltd v Li Man Chiu & Others [2002] 2 HKLRD 875, §§12-13.

12.The applicable principles for Norwich Pharmacal relief are also well-settled. It is not a usual order and will not be lightly granted in the absence of powerful factors:

(1) It is made against an innocent party whose only involvement is to become mixed up in the tortious or wrongful activities of others;

(2) The wrongdoing exists only on the part of a person or persons against whom no relief may be sought at the stage of the application and against whom there is probably insufficient evidence to found an action;

(3) There will usually be a legal relationship between the innocent person against whom a discovery order is sought and the alleged wrongdoer, and the relationship may involve strict duties to be observed on the innocent party’s part. Any discovery to be made will involve a breach of confidentiality and may expose the innocent party to civil liability and possibly even criminal liability; and

(4) The court must accordingly balance the competing interests of the victim of the alleged wrongdoing and an innocent party caught up in the wrongdoing.

See A Co v B Co [2002] 3 HKLRD 111 at §12 per Ma J (as he then was).

13.In A Co v B Co at §13, the main requirements for Norwich Pharmacal relief were set out:

(1) There must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place (where fraud or similar serious allegations are made, the degree of proof must correspondingly be high);

(2) It must be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff, and where a tracing claim is likely to be made there must a serious possibility that the discovery sought will either allow the plaintiff to preserve what may well be his assets or realistically lead to the discovery of such assets; and

(3) The discovery sought must not be unduly wide, so an order must be specific and also restricted to those documents or those classes of documents that are necessary to enable the plaintiff to preserve or discover assets.

Analysis and Orders

14.Applying the above legal principles to the facts of the present case, I am satisfied whether the jurisdictional basis is under s 21 of EO or Norwich Pharmacal, the orders sought should be granted.

15.There is before me cogent and compelling evidence that P has been defrauded to transfer the Sum to D1’s Account and that HK$1,000,000 traceable to the Sum has been transferred by D1 to D2’s Account.

16.The information sought by P are highly germane to the identity and contact details of D1 and D2 and the issue of fund flow. Disclosure of such information would likely reap substantial and worthwhile benefit to enable P to preserve, trace and/or recover monies which he has made a proprietary claim against D1 and D2 in this action as well as enable P to serve court documents on them and other wrongdoer(s).

17.The discovery sought is specifically defined and not unduly wide. I have also taken into account the lack of objection by the banks who have not suggested any difficulty in complying with the orders sought.

18.Having balanced the competing interests of the victim and the innocent party (the banks) caught up in the wrongdoing, and mindful that the power to order disclosure should be exercised with great caution, I would make an order in terms of orders sought in the Disclosure Summons.

Continuation Summons

19.As indicated at today’s hearing to Mr Cheung, Counsel for P, I am not prepared to continue the proprietary injunction and ancillary disclosure order against D1.

20.It is well-established that where asset forming the subject matter of proprietary claim has been dissipated such that it could no longer be traced, no proprietary claim can be made and, it follows, no proprietary injunction can be granted. It also follows the ancillary disclosure orders should not be made. See 任俊國 v Chin Choi Ming, HCA 2017/2017 (unrep), 6 November 2017, per Chow J (as he then was), §§20-21:

“20. A proprietary injunction, by definition, is an injunction which relates to a specific asset held by or under the control of the defendant, or its traceable proceeds, in respect of which a proprietary claim is raised by the plaintiff. In order to justify the grant of a proprietary injunction, the plaintiff ought, ordinarily, to adduce some reasonable evidence of the existence of the specific asset or its traceable proceeds and that the same are still being held by or under the control of the defendant. The distinction between a Mareva injunction and a proprietary injunction was discussed by To J in Falcon Private Bank Ltd v Borry Bernard Edouard Charles Limited, HCA 1934/2011 (9 July 2012), at paragraph 78, as follows:-

‘A Mareva injunction is designed to protect the claimant against the dissipation of assets against which he might otherwise execute judgment whether immediately or in the future: see Gee’s Commercial Injunctions, 5^th edition at paragraphs 3.029 and 5.009. So long as the claimant has a claim against the defendant and that the defendant has assets which may be used to satisfy judgment, a claimant may apply for a Mareva injunction to restrain the defendant from dissipating his assets. A claimant’s right to a proprietary injunction is different. It is issued to preserve assets which a claimant has a proprietary claim so that they can be turned over to the claimant if he is successful in the action. A proprietary injunction is easier to obtain and not subject to the usual liberties inserted into Mareva relief and there is no need to prove risk of dissipation. It is a better relief than Mareva injunction, provided that the property has not been dissipated’ [emphasis added].

21. Where the asset forming the subject matter of the proprietary claim has been dissipated such that it could no longer be traced, no proprietary claim can be made and, it follows, no proprietary injunction can be granted. In the present case, there is no evidence to show that there is currently any asset in the hands of Mr Chin which could form the subject matter of a proprietary claim by Mr Yam. It would, in my view, be an improper use of the court’s jurisdiction, under the guise of an application for an ex parte proprietary injunction, to ask the court to make an “ancillary” disclosure order to enable Mr Yam to find out the whereabouts of the proceeds of sale of the Vehicle and/or the Licence, or whether any part of the proceeds of sale is still in the hands of Mr Chin. To make such disclosure order would effectively be permitting a fishing expedition by Mr Yam in the absence of Mr Chin. I also note that there is no claim for tracing in Mr Yam’s writ against Mr Chin in this action.”

21.See also Zhang Yan & ors v ASA Bullion Limited [2019] HKCFI 179, §§11, 13-16 and 24(2).

22.In the present case, there is no evidence that the Sum is being held by D1. On the contrary, the bank statements from the Police show that there since 15 March 2024 the balance in D1’s Account (both HKD and USD) is zero.

23.I am therefore not satisfied (on the present state of evidence) that there is a serious issue to be tried that the Sum is being held or under the control of D1.

24.Besides, equity does not act in vain. A court does not usually order injunctions where time has elapsed and an injunction would in effect be locking the stable door after the horse has bolted: see Hsin Chong Construction (Asia) Ltd v Henble Ltd [2005] 3 HKC 27, §29.

25.Accordingly, I will not continue the proprietary injunction and ancillary disclosure order against D1.

26.Save as aforesaid, I will order the continuation of the Order of the Learned Judge (as amended by me) until further order of the court.

27.I further order the costs of the Continuation Summons be in the cause.

Mr Keith Cheung instructed by Robertsons, for the Plaintiff

The 1^st Defendant was not represented and did not appear

The 2^nd Defendant was not represented and did not appear

Chong Hing Bank Limited, was not represented and did not appear

OCBC Bank (Hong Kong) Limited, was not represented and did not appear