Anne Fan and Another v. Ling Yachao

DCMP 2494/2024

[2025] HKDC 1925

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2494 OF 2024

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BETWEEN

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REASONS FOR DECISION

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Background

1.By the plaintiffs’ originating summons dated 9 May 2024 (“the OS”), pursuant to O.28, r.4 of the Rules of the District Court (Cap 336H) they sought summary disposal of this action and relief in the form of, inter alia, declarations, US$75,000 and costs.

2.I granted an order in terms of a draft that was provided to this court by Mr Jason Fee, counsel for the plaintiffs, that was further considered and amended on the day of the hearing which is repeated at the end of this written decision.

3.The plaintiffs’ case was that they were deceived by the 1^st defendant into wrongfully transferring funds into the 1^st defendant’s bank account with the 2^nd defendant.

4.The 1^st defendant has not appeared at this hearing and this court confirms that the OS was properly and successfully served on the 1^st defendant in Mainland China on 20 March 2025 and thereafter without the 1^st defendant filing an acknowledgement of service.

5.Mr Fee submitted that the plaintiffs have discontinued the OS against the 2^nd defendant by way of consent summons filed on 29 July 2025, which was then made an order by this court on 1 August 2025 approving of the discontinuance with agreed costs and the notice of discontinuance reconfirmed the same on 4 August 2025.

6.Mr Fee submitted that the plaintiffs had discontinued the proceedings against the 2^nd defendant and no longer pursued the vesting orders against them since this is in alignment with the recent judgments of Amidas Hong Kong Ltd v Che Si Ltd [2025] 3 HKC 977 at §§36, 43-44, 52, 65, 94 and 96(4) per Au-Yeung J (“Amidas”) and Orion Engineered Carbons GMBH v Universal All Ltd [2025] HKCFI 2370 at §§17, 19 and 25-26 per K Yeung J (“Orion”) where the plaintiffs intend to later apply for a garnishee order after judgment is granted against the 1^st defendant.

The plaintiffs’ case

7.The evidence before this court was relatively uncontroversial that for all intents and purposes was found via the first affirmation of the first plaintiff (“the wife”, “Madam Fan”) dated 26 April 2024 (“the 1^st Affirmation of Madam Fan”).

8.The plaintiffs are husband (the second plaintiff, “the husband”, “Mr Fan”) and wife respectively that were the victims of cyberfraud. Madam Fan holds several bank accounts with JP Morgan Chase Bank (“US Chase Bank”) that includes 2 checking accounts (particularly accounts ending with numbers 1120 and 9820 i.e. “1120 Account” and “9820 Account” respectively), a savings account ending with numbers 8295 (“8295 Account”), and the plaintiffs’ joint checking account ending with numbers 6544 (“6544 Account”).

9.Madam Fan received a series of calls on 27 April 2023 from fraudsters impersonating officials from the Los Angeles County Sheriff’s Department (“LASD”) and the Federal Bureau of Investigation (“FBI”). The said fraudsters convinced Madam Fan that she was a victim of identity theft and instructed her to consolidate all of the funds from her US Chase Bank into one of her checking accounts.

10.Madam Fan accordingly transferred funds from her other US Chase Bank accounts into the 1120 Account that same day and this was confirmed by a bank statement dated 11 May 2023 showing the aforesaid transfer details and a total balance of US$75,857.31 in the said account on 27 April 2023. Thereafter and still on the same day, Madam Fan followed the fraudsters’ instructions and visited a US Chase Bank and initiated an international wire transfer of US$75,000 (“the Fraudulent Sum”) from the 1120 Account into the designated account held by the 1^st defendant with the 2^nd defendant (“the Fraudster’s Account”).

11.After the Fraudulent Sum was transferred to the Fraudster’s Account, Madam Fan realized that she had fallen victim to cyberfraud and reported the matter to the US Chase Bank, the FBI and the Hong Kong Police Force (“HK Police”). The HK Police subsequently froze the Fraudster’s Account on a date no later than 10 July 2023 and the 1^st defendant was verbally informed that the Fraudster’s Account had a credit balance of HK$586,500 which roughly equated to US$75,000 as at 23 June 2023.

12.A Norwich Pharmacal order was granted by the court against the 2^nd defendant on 19 December 2023 (“the Norwich Pharmacal Order”) and the 2^nd defendant disclosed the banking records of the Fraudster’s Account which showed a negligible balance of US$0.75 prior to the aforementioned transfer of the Fraudulent Sum and no other deposits were made to the Fraudster’s Account thereafter. The Fraudster’s Account remains frozen.

Substantive relief sought

13.Paragraph 6 hereinabove is repeated and the plaintiffs did not apply for a garnishee order before this court on the date of the hearing but were and are free to apply for a garnishee order absolute afterwards as per Orion (ibid) at §§25-26.

14.The substantive relief which was granted on the date of the hearing was for a money judgment for the sums unjustly enriching the 1^st defendant that were a result of the plaintiffs being deceived into transferring into the Fraudster’s Account and declarations that the sums remaining in the Fraudster's Account (including accrued interest) are held by the 1^st defendant on constructive trust for the plaintiffs.

Summary disposal of the OS

15.This court accepted that the 1^st defendant was duly served with the OS in Mainland China pursuant to the order of Master Ross Li dated 24 July 2024 in accordance with the Rules of the District Court (Cap.336H) (“RDC”) pursuant to O.11, r.5A for service out of the jurisdiction. The 1^st defendant failed to acknowledge service of the OS per RDC O.12, r.9 so the plaintiffs were not required to serve a notice of hearing on him under RDC O.28, r.3(5)(a), nor in any event has the 1^st Defendant filed any evidence in opposition under RDC O.28, r.1A(4).

16.This court has found that the plaintiffs’ entitlement to summary disposal (which is akin to summary judgment) of the OS has prima facie been demonstrated on the evidence of the 1^st Affirmation of Madam Fan. Notably, the burden had fallen on the 1^st defendant to demonstrate that he had a defence to the plaintiffs’ claim as per Hong Kong Civil Procedure 2025 (“HKCP”) volume 1 at §28/4/2.

17.Where a defendant has failed to acknowledge service of an originating summons, this court refers to the relevant principles summarised in Chan Ka Ho Abraham v Tung Yin Ling Cora [2023] HKCFI 1170 at §§27-30 as per DCHJ H Au-Yeung (as he then was). Furthermore, this court adopts the comprehensive approach laid down in Hung Wai Ching v Lee Lap Yan & Ors [2023] HKDC 1834 where at §§15-18 thereof DDJ YW Hew stated the conditions where the court may proceed with the hearing of an originating summons in situations such as the present and the considerations thereof. This court also refers to HKCP at §28/6/1.

18.This court agreed with Mr Fee that the circumstances and evidence demonstrated in this case as considered in the context of the various aforementioned authorities were such that it was appropriate to have summary disposal of the OS. For completeness sake, the plaintiffs satisfied this court that they were entitled to summary disposal of this case based on the 1^st Affirmation of Madam Fan.

Unjust enrichment and related calculations

19.Amidas (supra) at §20 held that in a claim for unjust enrichment the plaintiff needs to show that the defendant was enriched at the expense of the plaintiff, that the enrichment was unjust and that no defence is applicable, citing Shanghai Tongji Science and Technology Industrial Co Ltd v Casil Cleaning Ltd (2004) 7 HKCFAR 79, [2004] HKCU 380 at §67.

20.Mr Fee submitted that the 1^st defendant was enriched by the Fraudulent Sum at the expense of the plaintiffs (in proportions to be explained hereinbelow) through cyberfraud as aforementioned. Although the unjust element was due to the plaintiffs’ mistake per se, the Fraudulent Sum would not have been transferred but for the aforementioned wrongful cyberfraud acts of the 1^st defendant to which the 1^st defendant is not entitled to retain the Fraudulent Sum particularly where no defence has been put forth. In the circumstances, the plaintiffs’ case of unjust enrichment was one that entitled the plaintiffs to a money judgment as per Amidas at §21.

21.The Fraudulent Sum originated from accounts held solely by the 1^st plaintiff and jointly by the plaintiffs. Where money from the parties is mixed, gains and losses are shared pro-rata. As such, the transfers into and out of the 1120 Account, the “first in, first out” rule does not apply to entries on the same day as it is the end-of-day balance which counts, see: Goff & Jones on Unjust Enrichment (10^th ed, 2022) at §§7-56 to 7-57. In the premises, it was considered that the general approach will allow there to be an overall pro rata approach that may be applied where parts of the Fraudulent Sum in proportion to the total contributions made by each of the plaintiffs, see: Goff & Jones (ibid) at §7-58.

22.After having discussed with Mr Fee on the proportionate sums to be paid to each of the plaintiffs, this court held that the amounts were US$25,747.72 to the 1^st plaintiff (which arises from Madam Fan’s own accounts of the 8295, 9820 and part of the 1120 Accounts) and US$49,245.90[1] from the 6544 Account to both plaintiffs.

Matters of constructive trust and declaratory relief

23.In the circumstances of the present case, Mr Fee submits and this court agrees, that a constructive trust arises over property obtained by fraud and that victims of fraud, such as the plaintiffs, may assert a proprietary restitutionary claim in relation to their funds that can be traced and identified as their assets as per Amidas (ibid) at §22. A recipient, although not even a party to the fraud, holds the property on trust for the true owner if it would be unconscionable for them to retain it as per Amidas (ibid) at §23.

24.The 1^st defendant is the immediate recipient of this cyberfraud and is to be regarded as holding the entirety of the Fraudulent Sum upon constructive trust in favour of the plaintiffs. The unchallenged evidence before me confirms that the plaintiffs had no prior commercial or other relationship with the 1^st defendant which renders the receipt of the Fraudulent Sum devoid of any legitimate basis or rationale. Again I note that there was no evidence filed by the 1^st defendant nor was there anything suggesting that the 1^st defendant was not complicit in the underlying deception by way of cyberfraud.

25.This court found that it would be unconscionable for the 1^st defendant to assert any beneficial entitlement to the Fraudulent Sum or to retain the Fraudulent Sum which is held by the 1^st defendant on constructive trust by the plaintiffs. This is particularly in light of the Fraudster’s Account being frozen by the HK Police, the 1^st defendant’s proper receipt of the OS and related documents as provided in these proceedings, and choosing not to defend the same in any way.

26.The circumstances warranted that declarations sought against the 1^st defendant should be granted and were made to do the fullest justice to the plaintiffs to which they are entitled since this was a case where cyberfraud was deployed and which a proprietary claim was asserted. Mr Fee submitted that the courts may grant declaratory relief in such circumstances to secure the plaintiff’s proprietary claim (as opposed to merely personal claim) to which this court agreed to grant, see: Scandinavian Medical Solutions A/S v Runzhi Trading Co Ltd [2024] HKDC 21 at §§6(4), 18-20, 21(2).

27.A further feature for the genuine need for declaratory relief arises in the present case since the Fraudulent Sum is traceable to funds in the Fraudster’s Account and this would also avoid potential litigation with other competing plaintiffs which may only have a personal claim as per Amidas (supra) at §24.

28.The Fraudster’s Account had an opening balance of US$0.75 before the deposit of the Fraudulent Sum and therefore the declaration made by this court was that the Fraudulent Sum in the Fraudster’s Account belonged to the plaintiffs and that the same was held by the 1^st defendant on constructive trust which was in line with Amidas (supra) at §25.

29.At the hearing and as per the order that was made, Mr Fee rightly submitted that the plaintiffs were and able to agree to undertake not to recover more than the higher of the monetary judgments for unjust enrichment and proprietary restitution to avoid infringing the rule against double recovery as per Amidas (supra) at §26.

30.Since the present case only involved the singular Fraudulent Sum, the singularly fraudulent party being the 1^st defendant, there being the singular Fraudster’s Account only and there being proper evidence on the tracing of the Fraudulent Sum, this court chose to roll up the account and inquiry as part of the summary disposal of the OS which was also suggested in Amidas (supra) at §§31, 33 and 96(2).

Conclusion

31.This court made the following order on the date of the hearing, namely:

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

(a)  An order that the 1^st Defendant do pay US$25,747.72 to the 1^st Plaintiff together with interest thereon since 28 April 2023 at the best lending rate of The Hongkong and Shanghai Banking Corporation Limited plus 1% per annum until the date of judgment and at judgment rate thereafter until full payment;

(b)  A declaration that US$25,747.72 together with 34.33% of the total interest accrued in the bank account of the 1^st Defendant with account no. 60150796935 held at the 2^nd Defendant (“D1’s Account”) since 28 April 2023 until payment shall belong to the 1^st Plaintiff and that the same is held by the 1^st Defendant on constructive trust and accountable by the 1^st Defendant as constructive trustee for the 1^st Plaintiff;

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

(a)  An order that the 1^st Defendant do pay US$49,245.90 to the Plaintiffs together with interest thereon since 28 April 2023 at the best lending rate of The Hongkong and Shanghai Banking Corporation Limited plus 1% per annum until the date of judgment and at judgment rate thereafter until full payment;

(b)  A declaration that US$49,245.90 together with 65.67% of the total interest accrued in D1’s Account since 28 April 2023 until payment shall belong to the Plaintiffs and that the same is held by the 1^st Defendant on constructive trust and accountable by the 1^st Defendant as constructive trustee for the Plaintiffs;

3.  Costs of and incidental to this action (including costs of this originating summons, costs of the application for the Norwich Pharmacal order dated 19 December 2023, and costs incurred by the 2^nd Defendant and borne by the Plaintiffs) be paid by the 1^st Defendant to the Plaintiffs, summarily assessed in the amount $164,305.

32.I thank Mr Fee for his able assistance.

Mr Jason Fee, instructed by S.Y. Wong & Co., for the 1^st & 2^nd plaintiffs

The 1^st defendant is acting in person and absent