Amidas Hong Kong Ltd v. Che Si Ltd

HCA 1406/2024 &
HCMP 2754/2024
(Heard Together)

[2025] HKCFI 1128

HCA 1406/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1406 OF 2024

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AND

HCMP 2754/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2754 OF 2024

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____________

(Heard Together)

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J U D G M E N T

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A.  INTRODUCTION

1.There are 2 sets of proceedings heard together before me – a Summons (“HCA Summons”) in HCA 1406/2024 (“HC Action”) and an originating summons in HCMP 2754/2024 (“the HCMP Proceedings”). The Plaintiff is the victim of internet fraud. The account holder of the fraudster’s designated bank account is the common defendant (“the Defendant”) in both sets of proceedings. Dah Sing Bank (“the Bank”) is a defendant in the HCMP Proceedings who holds funds in the Defendant’s account. In sum, the present applications by the Plaintiff are for:

(1)  Default judgment against the Defendant for monetary relief and proprietary declaration in the HC Action;

(2)  Account and tracing inquiry against the Defendant in the HC Action;

(3)  A vesting order against the Defendant and the Bank in the HCMP Proceedings;

(4)  An order in the HC Action appointing someone to execute documents to effect the transfer of money in the Defendant’s account at the Bank to the Plaintiff (“the Execution Order”);

(5)  Two garnishee orders nisi, one for a judgment personal in nature in the HC Action and the other proprietary in nature in the HCMP Proceedings; and

(6)  Consequential variation of an injunction order in the HC Action.

2.Items (2) to (4) in paragraph 1 are normally sought after a judgment is granted. However, the Plaintiff has “rolled them up” in this application for default judgment with a view to gain time and hence facilitate the quick recovery of money by a victim of fraud.

3.In addition, with the best of intentions, Mr Ernest Ng (together with Mr Fergus Tam), counsel for the Plaintiff, seek to clarify the conflicting positions taken by different judges in those items. While a monetary judgment and a vesting order may not significantly differ in this case, their independent grant may produce different results. For example, a garnishee order nisi on a personal claim may be useful to a monetary judgment but there may be competing claims over funds under the judgment debtor’s name. On the other hand, a vesting order may include interest accrued in the judgment debtor’s account whereas a personal monetary judgment would not.

4.Counsel rightly acknowledge that any decision made by this Court is not binding on other judges of the Court of First Instance. Conflict in authorities can only be settled by the Court of Appeal. However, I agree with counsel that engagement of the questions raised above, and the correct approach, may well have implications for future cases with more complicated facts.

B.  BACKGROUND

5.Internet fraudsters impersonated various personnel of the Plaintiff’s supplier (“TriTech”) and issued a series of fraudulent emails to the Plaintiff.

6.On 7 March 2024, Ms Chu (Finance and Human Resources Manager) of the Plaintiff received an email from the fraudsters masquerading as Li Lok of TriTech with a notice printed on the letterhead of TriTech dated 6 March 2024. The email was sent from the email address of [email protected] originating from the domain of “ttdtist.com”, which was not the genuine domain of TriTech (“ttdist.com”).

7.The Plaintiff was deceived into transferring HK$5,186,160 (“the Sum”) from their bank account at HSBC to the Defendant’s bank account at the Bank (“Defendant’s Account”). The Sum represented 80% of the total purchase price payable by the Plaintiff to TriTech under a purchase order.

8.On 8 March 2024, at around 1228 hours, Mr Au Yeung David of the Plaintiff caused the transfer of the Sum to the Defendant’s Account through online banking.

9.On the same day, Mr Au Yeung David was informed by HSBC that the Plaintiff might have fallen victim to a fraud. He then instructed Ms Chu to contact TriTech to confirm if TriTech has changed the bank account for receiving payment. Ms Chu was told by Nelson Tse of TriTech that (i) TriTech had not changed its designated account for receiving payment and (ii) Vicky Lai (accounting staff) was on leave on 8 March 2024 and believed that the fraudsters may have hacked into the email system of TriTech and defrauded the Plaintiff.

10.On 17 July 2024, the HC Action was commenced. A proprietary and Mareva injunction was granted on 26 July 2024 (“the Injunction Order”).

11.The Defendant, a company incorporated in Hong Kong, had not responded to any document that was served, nor had it filed any acknowledgement of service.

12.Subsequent to the Bank’s disclosure of documents, the statement of claim (“SOC”) was filed on 8 October 2024.

13.On 24 December 2024, the Plaintiff’s solicitors served a notice of intention to enter judgment. On the same date, the Plaintiff commenced the HCMP Proceedings for a vesting order.

14.On 21 January 2025, the Plaintiff took out the HCA Summons for default judgment, account and tracing inquiry, variation of the Injunction Order and an Execution Order.

15.On the same day, the Plaintiff made an ex parte application for, amongst others, a garnishee order nisi in respect of the Plaintiff’s personal claim and that it be adjourned to be heard immediately after the HCA Summons and to be heard together with the HCMP Proceedings.

16.On 28 January 2025 and 4 February 2025, respectively, the application for garnishee order nisi and the HCA Summons were ordered to be heard together with the HCMP Proceedings.

17.On 24 February 2024, the Plaintiff extended its application for garnishee order nisi to cover the Plaintiff’s proprietary claim.

C.  DEFAULT JUDGMENT

C1.  Legal principles for grant of default judgment

18.The power to enter default judgment is discretionary. Under Order 19 rule 7, the court is required to scrutinize whether the matters pleaded in the statement of claim entitle the plaintiff to the judgment sought. The court’s decision is based on pleaded facts, rather than on evidence: Minebea Cambodia Co Ltd v Zhao Jin Fang [2022] HKCFI 3325, §28, Recorder William Wong SC.

19.As to declaratory relief, it is not the normal practice of the court to grant a declaration without going to trial. This is, however, only a rule of practice, rather than a rule of law, and gives way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled. In a number of cases involving email fraud, declaratory relief has been granted on the basis that there was a genuine need for such relief to secure the plaintiff’s proprietary as opposed to merely personal claim, particularly given that the defendant may have other creditors: Minebea Cambodia, §29.

C2.  The claim in unjust enrichment

20.The plaintiff has to show that the defendant was enriched at the expense of the plaintiff, that the enrichment was unjust and no defence is applicable: Shanghai Tongji Science and Technology Industrial Co Ltd v Casil Cleaning Ltd (2004) 7 HKCFAR 79, §67.

21.The Defendant was enriched by the Sum at the expense of the Plaintiff. The unjust element was the Plaintiff’s mistake. The Plaintiff would not have made the transfer but for the mistake of fact caused by the fraud. The Defendant is not entitled to retain the Sum. The Defendant has not put forth any defence at all. The pleaded case of the Plaintiff shows a case of unjust enrichment, which entitle the Plaintiff to money judgment. It is a personal judgment.

C3.  The claim for declaratory relief

22.A thief or fraudulent recipient holds stolen property on constructive trust for the true owner: RPB SA v Xinwangyi Trade Ltd [2022] HKCFI 2541, §12(1), DHCJ Jonathan Chang SC. The victims of a fraud may assert a proprietary restitutionary claim to the extent that their funds can be traced and identified as representing recognizable assets of the recipient.

23.In this case, the SOC shows that the Defendant is a fraudulent first tier and only recipient who holds the Sum on constructive trust for the Plaintiff. The Defendant did not have any dealings with the Plaintiff. The Defendant turned a blind eye to the fact that the transfer of the Sum had no commercial reason or justification and the Defendant had no reason to receive and no entitlement to the Sum. Therefore, the Plaintiff retains an equitable interest in the Sum and any of its traceable proceeds in the Defendant’s Account.

24.There is a genuine need for declaratory relief where the Sum is traceable to funds in the Defendant’s Account with interests accrued. It would avoid litigation with competing plaintiffs who only have a personal claim.

25.The Defendant’s Account had an opening balance of HK$644.11 before deposit of the Sum. I make a declaration that the Sum in the Defendant’s Account belong to the Plaintiff and that the same is held by the Defendant on constructive trust.

26.To avoid infringing the rule against double recovery, the Plaintiff has, properly, given an undertaking to the Court not to recover more than the higher of the monetary judgments for unjust enrichment and proprietary restitution. I accept the undertaking.

D.  ACCOUNT AND TRACING INQUIRY

27.This application is made under Order 43, rule 3. The usual procedure is for the court to order an account and inquiry. The court will then direct the defendant to (a) file and serve an account in respect of the sum in question, the defendant’s dealings with it and the profits or interests made as a result of the receipt of the sum by the defendant with all necessary vouchers and supporting documentation; and (b) verify the account by affidavit. The plaintiff can give a notice of objection. At an inquiry, evidence is generally given by affidavit with cross-examination if necessary, though pleadings may be ordered in complicated cases. See Wong Kam Wing v Cheng Pui Lun, DCCJ 3878/2002, 9 June 2004, §§11 and 12, HH Judge Muttrie; Clare Hollingworth v Thomas Edward Juson, HCA 249/2006, 16 October 2006, Chu J (as she then was) §§3, 15.

28.The prayer for relief in the SOC in this case asks for an account and tracing inquiry in respect of what has become of and the whereabouts of the Sum received by the Defendant into whatever traceable monies, properties or assets together with such interest and/or profits which has or shall have been earned thereon (“Traced Properties”).

29.The Plaintiff asks for a “rolled up” order such that the Court should do the account and tracing inquiry immediately at or after the grant of the default judgment. According to the SOC, prior to the transfer of the Sum, the HKD component of the balance of the Defendant’s Account (“HKD Component”) had a balance of HK$644.11. After deposit of the Sum, the balance rose to HK$5,186,789.11. There was only one withdrawal of HK$15.00 which was not pleaded in the SOC, but it was implicit in the balance before and after deposit of the Sum. Interest on the HKD Component then started to accrue on a monthly basis from 28 March 2024. As of 31 July 2024 (date of service of the Injunction Order on the Bank), interest has accrued in the total amount of HK$18,613.04, making a total balance of HK$5,205,402.15.

30.It is, of course, usual for an account to be given after judgment by a defendant first before there is an inquiry. However, in this case, the Defendant has not responded at any stage. The Plaintiff has obtained a proprietary injunction on 26 July 2024. The SOC (filed apparently after the Plaintiff has obtained disclosure from the Bank) has in fact pleaded the Plaintiff’s tracing of the Sum as per the preceding paragraph.

31.In this case involving only one Sum, one recipient, one bank account and proper pleading of the tracing, I see no reason why the Court cannot roll up the account and inquiry as part of the application for default judgment, without even the need to rely on any affirmation.

32.However, it is important to bear in mind that it is not necessarily the case that any remaining balance in the defendant’s account is subject to a constructive trust. This will be the case if and only if the remaining balance represents the money received from the victim or its traceable proceeds. See Wismettac Asian Foods Inc v United Top Properties Ltd [2020] 3 HKLRD 732, §50, DHCJ Paul Lam SC.

33.In this case, there is accrued interest in the Defendant’s Account. Although the SOC has not set out the actual apportionment and the prayer for relief does not spell out the actual amount sought after the account and inquiry, the apportionment is only a matter of arithmetic. It is not costs and time effective to adjourn this case further. I therefore accede to the request for a rolled up account and inquiry.

34.Applying the first in first out principle in Pacific Rainbow International Inc v Shenzhen Woverline Tech Ltd [2023] 4 HKC 322, §18(2), the HK$15 should be treated as paid out of the HK$644.11. The sum of HK$629.11 belongs to the Defendant.

35.The denominator for apportionment is HK$5,186,789.11 (ie HK$5,186,160 + HK$629.11). I hold that accrued interest of HK$2.26 (ie HK$629.11 ÷ HK$5,186,789.11 x HK$18,613.04) belongs to the Defendant and the rest (HK$18,613.04 – HK$2.26) to the Plaintiff. Any further interest accrued on the HKD Component (and bank charges, if any) from and since 1 August 2024 shall be similarly apportioned with 0.01% payable to the Defendant and the rest to the Plaintiff until the Sum with accrued interest are paid out to the Plaintiff.

E.  VESTING ORDER

E1.  The statutory provision

36.Section 52 of the Trustee Ordinance, Cap 29 (“TO”) provides that:

“(e) where stock or a thing in action is vested in a trustee whether by way of mortgage or otherwise and it appears to the court to be expedient,

the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint:

[…]

(5) The court may make declarations and give directions concerning the manner in which the right to transfer any stock or thing in action vested under the provisions of this Ordinance is to be exercised.”

(underlines added)

37.Under section 2 of TO, the expression “trust” and “trustee” extends to implied and constructive trust.

E2.  Conflicting authorities on the grant or refusal of vesting orders

38.There are conflicting authorities regarding the proper construction of section 52(1)(e) of TO and availability of vesting orders as a relief in similar email fraud cases.

39.The major cases in this field, in chronological order, are

(1)  800 Columbia Project Co LLC v Chengfang Trade Ltd [2020] 3 HKLRD 674 (Recorder Eugene Fung SC),

(2)  Wismettac Asian Foods Inc v United Top Properties Ltd [2020] 3 HKLRD 732 (DHCJ Paul Lam SC),

(3)  Concrete Waterproofing Manufacturing Pty Ltd v Changxuan Co Ltd [2020] 4 HKLRD 166 (HHJ Phoebe Man), and

(4)  Tokic DOO v Hongkong Shui Fat Trading Ltd [2020] 4 HKLRD 189 (DHCJ Douglas Lam SC).

The first 2 cases have been extensively discussed in the latter 2. Wismettac and Concrete Waterproofing support the grant of a vesting order whereas 800 Columbia and Tokic do not.

40.In 800 Columbia, Recorder Eugene Fung SC granted the monetary and declaratory reliefs in default of defence, but was not satisfied that the court’s jurisdiction under section 52(1)(e) of TO was engaged upon the making of a declaration that a defendant held certain sums of money in a bank account on constructive trust for a plaintiff. His reasons are:

(1)  The statutory provisions envisage certain circumstances where the legal estate or interest should be conveyed or transferred but the person who should convey or transfer is not in a position to do so. In cases of this kind, the court makes an order whereby the property is vested in such person or persons as the court directs, without any other conveyance, transfer or assignment (§16(4));

(2)  It appears that provisions in TO envisage a vesting order to be made upon a change in the trusteeship (§16(5));

(3)  The language in section 52(1) contemplates an appointment of trustee(s) by the court. Section 52(1) provides that where one of the five conditions in sub-paragraphs (a) to (e) is satisfied, the court may make an order vesting certain right “in any such person as the court may appoint”. The court may appoint a trustee under section 37 or 42, or under its inherent jurisdiction. However, where a person becomes a constructive trustee pursuant to a declaration made by the court, it cannot be said that he or she has been “appointed” by the court to be a trustee for the purpose of section 52 (§§16(6)-16(7));

(4)  There are two kinds of constructive trust. The first kind comprises persons who have lawfully assumed fiduciary obligations in relation to trust property, but without a formal appointment. They are true trustees, and if the assets are not applied in accordance with the trust, equity will enforce the obligations that they have assumed by virtue of their status exactly as if they had been appointed by deed. The second kind comprises persons who never assumed and never intended to assume the status of a trustee, but have exposed themselves to equitable remedies by virtue of their participation in the unlawful misappropriation of trust assets. They may be required by equity to account as if they were trustees or fiduciaries, although they are not. See Williams v Central Bank of Nigeria [2014] AC 1189 at §9, Lord Sumption JSC. In either case, it is incorrect to describe a constructive trustee as having been “appointed” as a trustee by the court (§16(8)); and

(5)  The condition in section 52(1)(e) may be satisfied when “a thing in action is vested in a trustee whether by way of mortgage or otherwise”. However, before the giving of default judgments on declaratory reliefs, the defendants were the absolute owner of the right to call upon the bank for repayment of the credit balance in the bank account. After the giving of the default judgment, the legal title in such right continues to be held by the defendants, but the equitable title would have been diverted from the defendants who would hold the same on trust for the plaintiff. It is not apt to say that the right to call for repayment from the bank has been vested in the defendants by virtue of the giving of the default judgments (§16(9)).

41.In Wismettac, DHCJ Paul Lam SC granted a vesting order.

(1)  He agreed with Recorder Eugene Fung SC in that it would be wrong in substance and also a misuse of language to say that, by declaring that the fraudster and the subsequent recipient held the victim’s money and its traceable proceeds on constructive trust, the court had “appointed” them as trustees. In these circumstances, section 52(1)(a) cannot be invoked (§36);

(2)  However, that was not the end of the matter. It was necessary to consider the other cases mentioned in section 52(1), which did not require or involve the appointment of a new trustee (§36);

(3)  Section 52(1)(e) may be invoked if two conditions were satisfied (a) a thing in action was vested in a trustee whether by way of mortgage or otherwise, and (b) it appeared to the court to be expedient (§40);

(4)  As to condition (a), DHCJ Paul Lam SC had no difficulty in finding that the credit balance in a bank account was a debt which was a “chose in action”. He found that the real question was whether such debt “[was] vested by way of mortgage or otherwise” because of the order made by the court as a result of the default judgment application (§41);

(5)  Relying on section 2 of TO (§42) and Orwin v Attorney General [1998] 2 BCLC 693, the word “trustee” in section 52(1)(e) would extend to a constructive trustee unless the context otherwise requires (§§43 and 44);

(6)  The phrase “or otherwise” in section 52(1)(e) was extremely broad. DHCJ Paul Lam SC took the view that there was no reason why, in that context, the word “otherwise” should not mean “any other way”. It was capable of including vesting by way of operation of law, including the trust imposed as a result of which the legal title of the victim’s money or its traceable proceeds was vested in the fraudster or subsequent recipient, but the victim held the beneficial interest therein (§43);

(7)  As to condition (b), DHCJ Paul Lam SC took the view that in cases involving email frauds, this condition could be easily satisfied. As the defendant would invariably fail to appear and could not be located, it would be virtually impossible to procure the defendant to transfer the remaining balance in the bank account to the victim without the court’s assistance (§45); and

(8)  Under section 52(1), the court’s power to make any order vesting the right to sue for or recover the thing in action in any such person as the court may appoint is wide enough to include a beneficiary of a constructive trust (§46).

42.In Concrete Waterproofing, HHJ Phoebe Man expressed a view, obiter (§34):

(1)  The divergence between Wismettac and 800 Columbia is a choice between (a) whether one should interpret section 52 independently and read section 52(1)(a)-(e) disjunctively, which suggests where a thing in action is vested in a trustee (including implied trustee or constructive trustee), the court may make an order vesting the right to recover a thing in action in any person the court may appoint; or (b) whether one should consider what sections 45 to 55 of TO envisage, and Recorder Eugene Fung SC seems to be of the opinion that these provisions envisage a vesting order to be made upon a change in the trusteeship, rather than upon the court making a declaration that a defendant holds certain sums of money in a bank account on a constructive trust for a plaintiff, or a person becoming a constructive trustee by the operation of law (§22);

(2)  The approach in Wismettac seems to follow the literal rule of statutory interpretation, whereas the approach taken in 800 Columbia seems to take the purposive approach (§23);

(3)  Ultimately, one needs to decide whether one should read these underlined words into section 52(1)(e) such that it reads, “where, stock or a thing in action is vested in a trustee upon a change in trustee where by way of mortgage or otherwise and it appears to the court to be expedient; the court may make an order vesting the right to transfer or call for a transfer of stock or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person being the new trustee as the court may appoint…”(§24); and

(4)  Her Honour preferred Wismettac over 800 Columbia for the following reasons:

(a)  The nature of the constructive trust imposed upon a fraudster defendant is a bare trust. The beneficiary has the absolute right to call for the transfer of the funds in the defendant’s account. When one takes into account this absolute right of the beneficiary and section 57(1) of TO, it lends support to the argument that section 52(1)(e) covers the situation where a constructive trust is imposed on a fraudster defendant the instant it induced the plaintiff to transfer the sum by fraudulent means (§§30-31). (I pause to note that this is starkly in contrast to the reasoning of Recorder Fung SC cited in paragraph 40(5) above.)

(b)  Other statutes, e.g. sections 33(3) and 66(3) of the Probate and Administration Ordinance, Cap. 10, show that where it is intended that a vesting order can only be made to a newly expressly appointed trustee, or specifically to a beneficiary, it is expressly provided in the statute. In contrast, there is no such dichotomy contemplated in TO, and section 57 expressly allows a beneficiary to apply for an order under it (§32).

43.In Tokic, DHCJ Douglas Lam SC refused to grant vesting orders and adopted the reasoning of Recorder Fung SC:

(1)  As the learned Recorder points out, there are 2 types of constructive trust. The distinction is now settled in both Hong Kong and the UK and is often alluded to in cases concerning limitation periods. In Hong Kong, section 2(1) of the Limitation Ordinance, Cap 347 (“LO”) defines the meaning of trust and trustee as having the same meaning respectively in TO. Hence, the references to trust and trustee in section 20 of LO, which is concerned with limitation of actions in respect of trust property, are to be construed accordingly (§11);

(2)  The defendants in Tokic (as were those in Wismettac) were no more than recipients of proceeds of fraud and not “true” trustees, constructive or otherwise. They never assumed or intended to assume the status of a trustee. Although their exposure to equitable remedies arose not from the unlawful misapplication of trust assets but from knowing receipt or retention of proceeds of fraud, this makes little difference (§14);

(3)  The fact remains that the defendants are merely required by equity to account as if they were trustees or fiduciaries, although they are not. It is purely remedial. Like the dishonest assister or knowing recipient of trust assets in breach of trust, their sole obligation of any practical significance is to restore the assets immediately to the plaintiff (§14);

(4)  The English Trustee Act 1925 and, by the same token, TO which modelled on the former, were never intended to apply and can have no application to persons in this category (§15);

(5)  The extension of trustees to constructive trustees in section 2 of TO is confined to true constructive trustees or de facto trustees. Despite the wide import of the phrase “or otherwise” in section 52(1)(e), it cannot have the effect of expanding the meaning of “trustee” or “constructive trustee” beyond the scope of TO to include persons other than true trustees (§16);

(6)  The fact that the court has declared that the wrongdoer is to account for certain stock or choses in action (in that case, the right to call for repayment from the bank) as if he were a trustee does not vest the same in the wrongdoer as trustee or recast what is a remedial formula into an institutional trust to which TO can apply (§16);

(7)  Orwin, that DHCJ Paul Lam SC relied on which held that vesting order could be made “… where an implied or constructive trust is established”, begs the question of what kind of constructive trust was being referred to (§17); and

(8)  The situation may well be different in cases concerning misappropriations or other breaches of trust by defendants who are true trustees or in a position analogous to true trustees, such as company directors (§18).

44.Mr Ng, in his very comprehensive skeleton submissions, has provided appendices of list of cases showing that Wismettac has been applied in later cases, or that a vesting order has been made without explicit reference to Wismettac, despite contrary authorities such as Tokic. Mr Ng points out that there is thus far no reported decision where the court has refused a vesting order in reliance of Tokic over Wismettac.

E3.  Meaning of “trustee” in the context of the Limitation Ordinance

45.The 2 types of constructive trust that DHCJ Douglas Lam SC refers to in Tokic are what Millett LJ (as he then was) pronounced as the classic division between “institutional” and “remedial” constructive trusts, or “category 1” and “category 2” constructive trusts: Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400.

46.Category 1 covers defendants who though not expressly appointed as trustee, have assumed the duties of a trustee by a lawful transaction which was independent of and preceded the breach of trust and is not impeached by the plaintiff. Category 2 covers those cases where the trust obligation arises as a direct consequence of the unlawful transaction which is impeached by the plaintiff. (pp.408j – 409a)

47.His Lordship went on to observe that:

“The importance of the distinction between the two categories of constructive trust lies in the application of the statutes of limitation. Before 1890 constructive trusts of the first kind were treated in the same way as express trusts and were often confusingly described as such; claims against the trustee were not barred by the passage of time. Constructive trusts of the second kind however were treated differently. They were not in reality trusts at all, but merely a remedial mechanism by which equity gave relief for fraud. The Court of Chancery, which applied the statutes of limitation by analogy, was not misled by its own terminology; it gave effect to the reality of the situation by applying the statute to the fraud which gave rise to the defendant’s liability …” (pp.409j – 410a)

48.In discussing whether the distinction between the two categories of constructive trust had been abrogated by the Limitation Act 1939 and by the Limitation Act 1984, his Lordship noted that there were formidable arguments in favour of the negative view. Notably:

“If the 1939 Act was intended to abrogate the former distinction between the two kinds of constructive trust, it is difficult to see how it achieved its object. It can hardly have done so merely by adopting the definitions of ‘trust’ and ‘trustee’ in the Trustee Act 1925, since these are not materially different from those in the 1888 Act. If anything the use of the definitions in the 1925 Act points in the opposite direction, for that Act is concerned exclusively with the powers and duties of trustees properly so called. It is not concerned with persons whose trusteeship is merely a formula for giving restitutionary relief. Such persons have no trust powers or duties; they cannot invest, sell or deal with the trust property; they cannot retire or appoint new trustees; they have no trust property in their possession or under their control, since they became accountable as constructive trustees only by parting with the trust property. They are in reality neither trustees nor fiduciaries, but merely wrongdoers.” (underlines added) (p.412d - g)

49.The same distinction between 2 categories of trustees exists in Hong Kong: Hui Chun Ping v Hui Kau Mo [2024] 2 HKLRD 178, §45, Kwan VP:

“45. Different considerations apply on questions of limitation depending on whether the case is a category 1 trust or category 2 trust. A category 1 trust arising from the breach of a pre-existing duty is, or is treated by analogy as, an action by a beneficiary for breach of trust falling within section 20(1). Hence, there is no limitation period for the cases falling within section 20(1)(a) or (b), but there is a six-year limitation period for cases falling within section 20(2).”

50.After rejecting the argument raised by the appellant that a fiduciary who holds an authorised gain on trust for his principal should be treated as holding that gain as a trustee within section 20(1) of LO, Kwan VP held that:

“82. Section 2(1) of the Limitation Ordinance provides that ‘trust’ and ‘trustee’ have ‘the same meanings respectively as in the Trustee Ordinance’. Just like the English statutes, the definition provision in the Limitation Ordinance is to be determined by reference to the definition in the Trustee Ordinance, which is also modelled on the English Act. The Trustee Ordinance is concerned with the administration of true trusts, unlike the situation of a constructive trustee required to account in the exercise of equity’s remedial jurisdiction whose sole obligation of any practical significance is to restore the assets immediately. His possession is at all times wrongful and adverse to the rights of the claimant, nor does he have the powers and duties of a trustee with regard to investment and management. Most of the provisions in the Trustee Ordinance do not apply to him appropriately. He does not come within a “trustee” as provided in section 20(1) of the Limitation Ordinance which is determined by reference to the Trustee Ordinance. The meaning and language of “trustee” in the Trustee Ordinance do not extend to constructive trustees whose liability to account arose from the misapplication itself.” (underlines added)

51.On the appellant’s further appeal to the Court of Final Appeal, (2024) 27 HKCFAR 634, §35, Lord Hoffmann NPJ reviewed a series of authorities including Paragon Finance and Williams v Central Bank of Nigeria [2014] AC 1189, and affirmed the Court of Appeal’s decision.

E4.  Application of the legal principles to the facts

52.Mr Ng invites me to adopt the reasoning in Wismettac and Concrete Waterproofing. His submissions could be broadly summarised as follows:

(1)  While it is accepted that the constructive trust in the present case is a “category 2” trust, that is not the end of the matter. As between the “trustee” (Defendant) and the beneficiary (Plaintiff), it is a bare trust, and the beneficiary has the absolute right to call for the transfer of funds in the Defendant’s Account whether generally or specifically under section 57(1) of TO;

(2)  On the face of the provision, section 52(1)(e) of TO is neither concerned with “powers and duties of trustees properly so called”, but rather the process of vesting by all possible ways, nor concerned with protection given to a particular trustee for wrongs committed by way of limitation period. Such construction does not run counter to the series of decisions concerning LO;

(3)  Decisions concerning LO revolve around the context of limitation only. They do not deal with the meaning and scope of “trustee” within section 52(1)(e) of TO and vesting orders generally;

(4)  Pertinently, Kwan VP has been cautious to have limited her judgment in Hui Chun Ping only to discussion for the purpose of limitation. Neither the Court of Final Appeal nor the Court of Appeal have given an all encompassing definition of trustee for the purpose of all the provisions of TO. It is one thing to say that a “category 2” constructive trust is outside the scope of section 20 of LO. It is another to say that for the purpose of section 52 of TO, “category 2” constructive trust is excluded, bearing in mind the absence of any legislative materials to that effect; and

(5)  There is in principle no issue for the word “trustee” to refer to both “category 1” and “category 2” constructive trustees under section 52 of TO and at the same time refer to only “category 1” constructive trustee for the purpose of LO. They concern a vastly different set of statutes based on different legislative policies.

53.With respect to Mr Ng, I find the reasoning in 800 Columbia and Tokic on the issue of vesting orders to be more compelling. While Paragon Finance and Hui Chun Ping concern the application of LO, I cannot see why the discussions therein on the purposes, objectives and definitions of TO would not be applicable generally to a case like the present.

54.It is generally reasonable to assume that language has been used consistently by the legislature so that the same phrase when used in different places in a statute will bear the same meaning on each occasion, all the more so where the phrase has been expressly defined: R (Good Law Project) v Electoral Commission [2019] 1 All ER 365, §33, Leggatt LJ.

55.The term “trustee” has been expressly defined by section 2 of TO. The same meaning is applicable to the term trustee under LO by virtue of section 2(1) of LO. To give that term a different meaning for section 52 of TO as suggested by Mr Ng would only give rise to confusion.

56.For these reasons, I find that section 52(1)(e) is not engaged in fraud cases, like the present one, involving remedial or “category 2” constructive trustees. I decline to grant a vesting order.

E5.  Vesting order against the Bank

57.I have considered the HCMP Proceedings in substance in case I am wrong on the law as to section 52(1)(e) of TO.

58.The OS seeks a stand-alone vesting order against the Bank but not the Defendant. The Bank takes a neutral stance subject to the Plaintiff’s undertaking to bear all its costs and expenses on indemnity basis.

59.The application is, without disrespect, wrong as a matter of law. The Bank is not a trustee under section 52(1)(e) of TO, be it category 1 or 2. As against the Defendant, the Bank is a debtor and the Defendant is a creditor. As against the Plaintiff, there is not even an allegation by the Plaintiff that the Bank has become a trustee of any kind as a result of receipt of the Sum. The bases of the application, according to the affirmation of Au-Yeung David in the HCMP Proceedings, are that the Defendant failed to defend, and the Plaintiff intends to take out an application for default judgment against the Defendant in the HC Action. It would be impossible or difficult to procure the Defendant to transfer any sum to the Plaintiff without the Court’s assistance. The rest of the affirmation virtually repeats the facts in the SOC and other affirmations filed in the HC Action.

60.The HCMP Proceedings illustrates the anomaly in seeking a vesting order as a stand-alone relief. The Plaintiff would not need to be appointed “to sue for or recover the thing in action” because the Plaintiff is already suing in the HC Action. The Defendant should not be “vexed twice”. If the Bank were to be a party to the HC Action, it would have to incur unnecessary costs in perusing papers related to the HC Action.

E6.  Expediency

61.Mr Ng submits that the Court will not lose sight of the policy to give protection and speedy recovery to victims of fraud, and that as the plaintiff is beneficially entitled to the money, it is more expedient and just to vest the debt directly in the plaintiff, rather than requiring it to resort to a more time-consuming and tortuous route of obtaining a garnishee order for achieving the same outcome. He submits that this approach accords with the underlying objective of our civil procedure rules of ensuring that a case is dealt with as expeditiously as is reasonably practicable.

62.Without disrespect, expediency cannot give statue a meaning that it does not bear. Moreover, if, as was suggested by Mr Ng during his oral submission, the application for a vesting order has to be adjourned to be heard with the account and inquiry, what time and costs could be saved?

63.Further, contrary to Mr Ng’s submissions, it is actually more costly to apply for a vesting order than to apply for a garnishee order. A separate OS and supporting affirmations have to be filed. The bank is a necessary party to the vesting order (see Wismettac at §52). Costs of the bank will have to be borne by the Plaintiff, as it is unlikely that the fraudulent defendant would appear and shoulder the costs.

64.In being denied a vesting order, the Plaintiff would not be left without a remedy.

(1)  The Plaintiff could, as in this case, disclose all its tracing and seek an order for payment of the traced sum in the rolled-up application for default judgment;

(2)  The Plaintiff can apply for a garnishee order nisi, which would not only cover the Sum held on trust but also their costs; and

(3)  As is the practice before a Master (and usually adopted by a Judge as well), the benchmark costs in the High Court for garnishee order absolute are $5,200 (on party-and-party basis), $6,500 (for indemnity basis), and $7,800 (for solicitor-client basis). A garnishee bank usually asks for $100 costs (if no affidavit used) or $300 (if an affidavit is used) as fixed by the Second Schedule, Part III, para 2 of Order 62. I am sure such costs are much lower than when a garnishee bank is made a defendant to an OS for a vesting order.

65.For the reasons given in this Section, I am of the view that the term “trustee” in section 52(1)(e) does not cover a defendant in email fraud who has been declared a remedial or category 2 constructive trustee holding victim’s monies. A vesting order against the Bank as a stand-alone order is not viable. Even if it is, it is not expedient to grant one.

F.  EXECUTION ORDER

66.The Plaintiff invokes section 25A of HCO and seeks the following orders:

“1.3 The Defendant do within 7 days from the date of service of the sealed order execute such documents as may reasonably be required to instruct Dah Sing Bank, Limited, to transfer to the Plaintiff the Traced Properties [ie the balance in the HKD Component of the Defendant’s Account less HK$629.11] (including but not limited to a cashier’s order drawn from the Defendant’s bank account with [the Defendant’s Account] payable to the Plaintiff).

…

3. In the event the Defendant fails to execute such documents within 7 days from the service of the sealed judgment on him that Chick Tsz Kwan of Gallant, the Plaintiff’s solicitor, be nominated and authorized to execute such documents to effect the said transfer as if such documents were executed by the Defendant.”

67.Section 25A of HCO provides as follows:

“Where the Court of First Instance has given or made a judgment or order directing a person to execute any conveyance, contract or other document, or to endorse any negotiable instrument, then, if that person –

(a) neglects or refuses to comply with the judgment or order; or

(b) cannot after reasonable inquiry be found,

the Court of First Instance may, on such terms and conditions, if any, as may be just, order that the conveyance, contract or other document shall be executed, or that the negotiable instrument shall be endorsed, by such person as the Court may nominate for that purpose.” (underline added)

68.The procedure under section 25A of HCO involves 2 stages in first proving 2 matters and then the court making an execution order: Pang Man Ming v Pang Wan Li Yan [2020] 4 HKLRD 864, Au-Yeung J:

“17. There are two matters that an applicant must prove to a judge:

(1) That there was a pre-existing judgment which directed a person (D) to execute any conveyance or other document; and

(2) That D neglected to comply or could not be found. This is usually after efforts have been made to request him to sign within a specified time or to find him.

The Judge [will] then make an order directing a person (eg the Registrar or the solicitor of the plaintiff) to sign the document(s).

18. The pre-existing judgment should usually be a final judgment. The proceedings under s.25A should, in principle, be inter partes even though D has all along been uncooperative. If it is a situation where D cannot be found, then a proper application should be made to the court for substituted service or, if appropriate, to dispense with service. There is generally no urgency that would justify handling of a s.25A application by a duty judge or on ex parte basis.

19. If the Registrar is the person nominated to execute the document(s), the applicant has to prove to the Registrar that (i) the pre-existing judgment requiring D to execute documents; and (ii) the Judge’s order made under s.25A, have been served on D before the request was made to the Registrar to execute the Judge’s order. The applicant also has to inform the Registrar of any response from D.”

69.Tokic involved a victim in a similar situation as the Plaintiff in the present case. DHCJ Douglas Lam SC, held that a vesting order was not available (§§20-22). He observed that, apart from garnishee proceedings, there was an additional route under section 25A of HCO that may provide “a more expedient remedy, especially in cases such as the present where the defendants are unlikely to respond or comply with any order of the Court”. He ordered the defendants to execute “such documents as may reasonably be required to instruct the banks in which the relevant bank accounts are held to transfer to the plaintiff the sums which [he had] declared to be held by them as constructive trustees, failing which the plaintiff be at liberty to apply for an order under s.25A of the HCO.”

70.Tokic was followed in Shoikhet v Chen Guoqiang [2022] 3 HKLRD 238, §§18, 25-28, HHJ KC Chan.

71.Tokic was not followed in Kuo Benjamin Yung Hsiang v Xu Meiyi [2022] 5 HKLRD 111. In Kuo Benjamin, the plaintiff sought and was granted (a) a declaration that the defendant held the defrauded sums or their traceable proceeds on trust for the plaintiff, (b) an order for payment of the defrauded sums to the plaintiff and (c) an order for account and inquiry. The plaintiff sought a further order that in the event that the defendant fails to pay the sums to the plaintiff, the plaintiff’s solicitors be nominated to execute such documents as may reasonably be required by HSBC to effect the transfer of the sums out of the defendant’s account pursuant to section 25A of HCO.

72.DHCJ Jonathan Chang SC declined to follow Tokic. He adopted a similar approach to Pang v Pang although that case was not referred to in his judgment. The learned Deputy Judge added that it was only upon the defendant neglecting or refusing to comply with the judgment or order (or that the defendant could not after reasonable inquiry be found) would the court be empowered to order that specific document or instrument be endorsed by such person as the court shall nominate (§11).

73.DHCJ Jonathan Chang SC further held that,

“12. In the present context, whilst the defendant was holding the Sums and their traceable proceeds that may still remain in the defendant’s hands on trust for the plaintiff and is liable to repay the same to the plaintiff, this could not be translated into (and the plaintiff has not pleaded that there is) an obligation of the defendant to specifically execute bank documents to effect any transfer out of the Account. It is insufficient for the plaintiff to assert that an order that the defendant do pay the Sums to the plaintiff ‘would necessitate’ the defendant’s execution of payment transfer documents or to endorse a negotiable instrument to effect the transfer.

13. Without such specific obligation on the part of the defendant in the first place, it logically follows that the Court has no legal basis to order, as part of the judgment, the defendant to execute any specific documents for the purposes of transfer out of any sums to the plaintiff. Absent a judgment or Court order directing the defendant to ‘execute any conveyance, contract or other document’, HCO s.25A would not be operative.

14. In Tokić D.O.O. at [21]–[22], DHCJ Douglas Lam SC appeared to assume that the defendant recipient was under an obligation to execute necessary documents to effect the transfer out of the balance in its bank account. There is however no logical or legal connection between (a) the defendant’s obligation to transfer assets it holds on trust to the plaintiff; and (b) the defendant’s obligation to execute specific documents to effect the transfer out of any sums to the plaintiff.

15. To illustrate the point, in the present case, the plaintiff has not conducted any tracing or analysis of the transactions and balance in the Account. The Sums may be mixed with pre-existing monies in the Account or may have already been transferred out of the Account. The funds sitting in the Accounts may also be subject to proprietary claims of other victims defrauded in a similar manner.

16. In a default judgment application (where only the pleadings will be considered), the Court is unable to decide whether any part of the monies remaining in the Account represent the Sums or their traceable proceeds.

17. If the Sums or their traceable proceeds no longer remain in the Account, there is plainly no basis let alone utility to order the defendant to execute bank documents to effect any transfer out of the Account. Nor should the Court make such an order on a contingent basis, ie in the event that the Sums or their traceable proceeds still remain in the Account.

18. All of the above point to the unworkability and lack of basis of the ‘more expedient remedy’ suggested (by obiter) in Tokić D.O.O. based on HCO s.25A. Even though the plaintiff is the victim of a fraud, the Court must adopt a principled and disciplined approach and act within permissible legal boundaries in deciding the appropriate orders to be made, especially in the absence of the defendant.”

74.In John Joseph Doran v Lb Shoe Co, Ltd & Ors [2023] HKCFI 847 at §§32-36, Fung J followed Kuo Benjamin instead of Tokic. The possibility of execution orders was also questioned as being “quite odd” and a rather convoluted way of enforcing the court order in Wismettac Asian Foods Inc v United Top Properties Ltd [2020] 3 HKLRD 732 at §60, DHCJ Paul Lam SC. However, because of the grant of the vesting order there, it was unnecessary for the learned Deputy Judge to express any conclusive view on this procedure (§§59-60).

75.I fully agree with DHCJ Jonathan Chang SC. The powers under section 25A of HCO are entirely statutory and thus the strict wording of the section must be followed.

76.Mr Ng seeks to distinguish Kuo Benjamin on the ground that that case did not in fact hold that an execution order cannot be granted as a matter of principle. It was refused because of the specific circumstances, in particular, pleadings and lack of tracing inquiry.

77.With respect, I do not agree with Mr Ng. The material deficiency, as referred to by DHCJ Jonathan Chang SC, was an obligation to execute documents and hence pleading of such an obligation, not the lack of tracing inquiry. By way of example, where the court orders a defendant to transfer a piece of land to the plaintiff, an obligation will arise in such a case for the defendant to execute an assignment to effect the transfer. However, an obligation to execute documents will not arise if the court merely grants a monetary judgment.

78.The present judgment will declare the Defendant to be holding the Sum on constructive trust for the Plaintiff. However, even if it is shown that all the funds in the Defendant’s Account belong to the Plaintiff, and that it is highly likely that the Defendant will not surface to transfer the Sum back to the Plaintiff, there is no pre-existing obligation on the Defendant to execute any document to transfer the Sum to the Plaintiff.

79.Further, the prayer in the SOC or HCA Summons has not even identified what documents the Defendant should be ordered to execute to effect the transfer. The Bank should not be left to dictate what documents the Plaintiff should execute without check and balance from the Court.

80.The Plaintiff will not be left without a remedy. It can seek a garnishee order which will have the effect of applying the funds in the Defendant’s Account to meet the judgment debt.

81.For the reasons given, I decline to grant the Execution Order.

G.  GARNISHEE ORDER NISI

82.The Plaintiff applies for a garnishee order nisi in respect of a personal claim or a proprietary claim, to be granted immediately after default judgment is granted.

83.Order 49, rules 1 and 2 of RHC provide as follows:

“(1) Where a person (in this Order referred to as the judgment creditor) has obtained a judgment or order for the payment by some other person (in this Order referred to as the judgment debtor) of a sum of money amounting in value to at least $1,000, not being a judgment or order for the payment of money into court, and any other person within the jurisdiction (in this Order referred to as the garnishee) is indebted to the judgment debtor, the Court may, subject to the provisions of this Order and of any written law, order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee, or so much thereof as is sufficient to satisfy that judgment or order and the costs of the garnishee proceedings.

(2) An order under this rule shall in the first instance be an order to show cause, specifying the time and place for further consideration of the matter, and in the meantime attaching such debt as is mentioned in paragraph (1), or so much thereof as may be specified in the order, to answer the judgment or order mentioned in that paragraph and the costs of the garnishee proceedings.”

2. An application for an order under rule 1 must be made ex parte supported by an affidavit—

(a) stating the name and the last known address of the judgment debtor,

(b) identifying the judgment or order to be enforced and stating the amount remaining unpaid under it at the time of the application,

…” (underlines added)

84.The court’s power to make a garnishee order is discretionary. An order nisi can be granted in respect of the debt owed by the garnishee, whether the judgment debtor holds the funds as an owner or trustee: United Kesvick Ltd v Tsang Wing Fai & Ors [2021] 2 HKC 399 at §§19-20; Bank of Communications Trustee Ltd v China Energy Reserve and Chemicals Group Overseas Co Ltd & Anor [2022] HKCFI 795 at §§62, 66; Deutsche Schachtbau-und Tiefbohr-Gesellschaft MBH v Shell International Petroleum Co Ltd (t/a Shell International Trading Co) [1990] 1 AC 295, at pp. 350D-351D.

85.The court may grant an order absolute in respect of funds in the judgment debtor’s account that do not belong to the judgment debtor but to the judgment creditor beneficially: International Automotive Components Group SRO v Xuke Trading Ltd & Anor [2017] 3 HKC 137, DHCJ Paul Lam SC, §§33-35.

86.As I observed in the case of United Kesvick Ltd v Tsang Wing Fai [2021] 2 HKC 399, §§27-29, regardless of whether the courts have granted a vesting order, the courts are in agreement that garnishee proceedings are viable for enforcement of judgments involving proprietary rights: Minimax Gmbh & Co Kg (Singapore Branch) v Gopom Products Ltd & Anor [2019] HKDC 760, §40; Wismettac; International Automotive Components; 800 Columbia, Tokic. Specifically, the defendants therein were held to be constructive trustees because of their wrongdoing.

87.Mr Ng has referred me to a series of authorities[1] as to when the court may decline to make absolute a garnishee order nisi when e.g. funds do not belong to the judgment debtor beneficially but to third parties who were not the judgment creditor. It is not necessary to refer to them as the issue does not arise here.

88.An application for a garnishee order nisi must be made ex parte by way of affidavit. Order 49, rule 2(b) requires the applicant to “[identify] the judgment or order to be enforced and [state] the amount remaining unpaid under it at the time of the application”. Mr Ng submits that, so long as when the court decides on the application (viz when an order nisi is made), there is a subsisting judgment or order in compliance with Order 49, rule 1(1), then the jurisdiction under Order 49, rule 1(1) is engaged.

89.Mr Ng refers to Chan Wing Ka v Dowell International Trading and Forwarding Ltd [2020] HKDC 1061, §§15-17, wherein Deputy District Judge George Lam held that there was no rule to prohibit the plaintiff from taking out an application for garnishee order at the same time as the application for a default judgment. The learned Deputy District Judge cited from Heilbronn, Booth, McCook: Enforcement of Judgments in Hong Kong (1998), at page 219:

“A judgment creditor may apply for [a garnishee] order nisi as soon as judgment is pronounced or the order made. By contrast to the requirements governing the issue of writs of execution, it is strictly unnecessary, (although it is no doubt desirable), that the judgment or order should first have been drawn up and sealed.”

90.With respect, Chan Wing Ka’s approach is wrong in principle as being against the express wording of Order 49 rules 1 and 2.

(1)  Order 49, rule 1 expressly provides that the court may, subject to the provisions of this Order and of any written law, order the garnishee to make payment to the judgment creditor. Rule 1 is subject to rule 2, which mandates an ex parte application for an order under rule 1 to be supported by an affidavit;

(2)  Rules 1 and 2 presuppose that a judgment has already been made at the time the application for a garnishee order nisi is made. That is why Order 49, rule 2 requires the supporting affidavit to identify “the judgment … to be enforced”, not “the judgment … to be made”; and

(3)  At the time a default judgment is considered by the court, no affidavit can be relied on. An affidavit in support of an application for a garnishee order nisi thus logically has to be filed after the default judgment is granted. A deponent cannot swear in advance that the default judgment will be granted on the anticipated date of hearing of the summons for default judgment, as it would not be a matter of “fact” that can be put into an affidavit, but only an expectation.

91.In the present case, the 2^nd and 3^rd affirmations of Hsia Ho Pan (“Hsia-2^nd and -3^rd”respectively) in support of the applications for garnishee orders in respect of the personal judgment and proprietary judgment respectively simply fail to meet the requirements of rule 2.

(1)  The 2 affirmations merely refer to the HCA Summons without identifying the judgment to be enforced (§§3). Phrases like “intended judgment debt”, “on the assumption” that the Court grants the proprietary judgment, “there will be an order that” are scattered throughout the 2 affirmations. They reflect only an expectation of a judgment that will be granted;

(2)  The 2 affirmations have to cater for a contingency by stating that the Plaintiff is entitled to enforce the judgment against the Defendant “if execution thereon is not stayed” (§§4);

(3)  The 2 affirmations have to cater for the contingency of the Court granting a money judgment and/or a proprietary judgment although the Plaintiff’s intention is to enforce both if granted and not stayed (§6 of Hsia-3^rd);

(4)  The facts set out in §8 of Hsia-3^rd (on apportionment of the balance in the Defendant’s Account) are facts that would need to be placed before the Court in an application for a vesting order or account and tracing exercise. Hsia-3^rd unnecessarily wastes costs in repeating evidence which could have been spared if the garnishee order nisi is applied for after the default judgment is granted; and

(5)  The 2 affirmations fail to meet rule 2(b) in that they do not state “the amount remaining unpaid under it [ie under the judgment to be enforced]” at the time of the application for a garnishee order nisi. The amount now remaining in the Defendant’s hands is just a chose in action arising from the fraud, but not an amount remaining unpaid under a judgment.

92.It is clear that until the date the default judgment is pronounced or handed down, Hsia could not depose to material facts required of rule 2 but only hypothetical facts.

93.In addition, without disrespect, I do not see how costs can be saved by drafting 2 affirmations and 2 draft garnishee orders nisi in anticipation of either a personal or proprietary judgment in similar cases.

94.Accordingly, for lack of legal bases or defective affirmation in support, I decline to adopt a rolled up hearing, without prejudice to a proper application for a garnishee order nisi being taken out after handing down of this judgment.

H.  VARIATION OF INJUNCTION

95.This application will be adjourned until the time when the Court makes a garnishee order absolute.

I.  CONCLUSION

96.To sum up:

(1)  It is appropriate to grant money judgment and declaratory judgment in this case.

(2)  It is possible to roll up an account and inquiry in an application for default judgment provided that the SOC clearly sets out the results of tracing and seeks the appropriate relief for payment of the traced sum.

(3)  It is not necessarily the case that any remaining balance in the defendant’s account is subject to a constructive trust, unless the remaining balance represents the money received from the victim or its traceable proceeds. There should be appropriate apportionment of any bank charges, accrued interest and interest to be accrued.

(4)  A vesting order under section 52(1)(e) of TO is not viable in a situation where the defendant in an email fraud is a remedial or category 2 constructive trustee. Even if it is viable, a stand-alone vesting order against the garnishee bank is wrong as a matter of law as the bank is not a trustee within the meaning of section 52(1)(e). It is also not expedient to have an application for vesting order when the plaintiff has the alternative of garnishee proceedings.

(5)  An execution order under section 25A of HCO is entirely statutory and thus the strict wording of the section must be followed. There are 2 stages as laid down in Pang v Pang (§68 above). There must be an obligation for the defendant to execute documents before the court would invoke its power under section 25A.

(6)  The court may grant a garnishee order absolute in respect of funds in the judgment debtor’s account that belongs to the judgment creditor. A rolled up hearing of an application for a garnishee order nisi with one for default judgment lacks legal basis. The supporting affidavit for a garnishee order nisi will not be able to satisfy Order 49, rule 2 of RHC.

97.For the reasons given, I make an order as follows:

(1)  Upon the Plaintiff’s undertaking that the Plaintiff will not obtain more than item (a) or (b) below, whichever is the higher, judgment be entered against the Defendant for:

(a)  An order that the Defendant do pay HK$5,186,160 to the Plaintiff together with interest thereon since 8 March 2024 at the best lending rate of The Hongkong and Shanghai Banking Corporation Limited plus 1% per annum until the date of this Judgment (the “Sum”) and at judgment rate thereafter until full payment;

(b)  A declaration that the Sum of HK$5,186,160 together with HK$18,610.78 being interest accrued up to 31 July 2024 in the HKD Component of the bank account of the Defendant held with the Bank (Account no.750632018105338), belong to the Plaintiff and that the same is held by the Defendant on constructive trust and accountable by the Defendant as constructive trustee for the Plaintiff.

(2)  That 99.99% of any further interest accrued on the HKD Component (and bank charges, if any) from and since 1 August 2024 shall belong to the Plaintiff until the amount in paragraph (1)(b) is paid to the Plaintiff.

(3)  The application for an order under section 25A of HCO for Chick Tsz Kwan of Gallant, the Plaintiff’s solicitors, to execute documents to effect transfers of funds in the Defendant’s Account on behalf of the Defendant is dismissed, without prejudice to the Plaintiff’s further application in due course.

(4)  The application for a garnishee order nisi (whether for a judgment that is personal or proprietary in nature) is dismissed, without prejudice to the Plaintiff’s further application in due course.

(5)  The HCMP Proceedings for a vesting order is dismissed.

(6)  The application for variation of the Injunction Order is adjourned with liberty to restore.

98.On costs, I have a few comments as to the Plaintiff’s entitlement:

(1)  The hourly rates of Mr Chick and Mr Hsia much exceed the usual rates for party-to-party costs.

(2)  The Plaintiff should be granted costs only for the application for default judgment but not the rolled-up applications for Execution Order, garnishee orders, or variation of injunction. Accordingly, the following costs shall be disallowed: part of the costs of the 2^nd affirmation of Au Yeung David (in respect of the application for an Execution Order and variation of the Injunction Order). The costs statement for the HC Action appears not to cover garnishee proceedings and I do summary assessment on that basis.

(3)  Cost of the HCMP Proceedings, including costs of the Bank on indemnity basis, are to be borne by the Plaintiff.

99.Subject to the preceding paragraph, on a nisi basis, costs of this action, including costs of this HCA Summons, costs of the application for injunction and disclosure order, and all related costs reserved, shall be paid by the Defendant to the Plaintiff. Such costs are summarily assessed at HK$350,000.

100.Finally, I wish to say that a judgment creditor can, of course, subject to the rule against double recovery, seek concurrent remedies in enforcement. The courts are also keen to assist victims of fraud to recover their monies as soon as possible and minimize the procedural steps and hence costs in doing so. However, carrying out the underlying objectives in Order 1A, rules (1)(a), (b), (c) and (f) of RHC is not a golden pass to override the express wording of statute. The words of DHCJ Jonathan Chang SC in Kuo Benjamin, §18 (cited in paragraph 73 above) are apt. This judgment may not settle the conflict in judicial decisions on the issues of execution orders, vesting orders, garnishee orders, and rolled up hearings. However, it is hoped that practitioners do balance the costs to be involved in achieving what they think is a (not much) faster result against the more established but less costly mode that follows the wording of statute.

101.I thank Mr Ernest Ng and Mr Fergus Tam for their thorough preparation and great assistance.

Mr Ernest Ng and Mr Fergus Tam, instructed by Gallant, for the Plaintiff in both cases

Defendant in HCA 1406/2024 and 1^st Defendant in HCMP 2754/2024 was absent

2^nd Defendant in HCMP 2754/2024 was excused from attendance