Toyota Boshoku Europe N.V. v. Hong Kong Longshenyuan International Trade Ltd and Others

HCA 2091/2019 and HCA 452/2022
(Heard Together)

[2025] HKCFI 5959

HCA 2091/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2091 OF 2019

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AND

HCA 452/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 452 OF 2022

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________________________

(Heard Together)

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JUDGMENT

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Introduction and Background Facts

1.There are before me two Summonses both filed on 18 August 2025 by the Plaintiff (“P”) for judgment in default of defence pursuant to O.19, r.7 of the Rules of the High Court, Cap. 4A (“RHC”) against the 30^th Defendant (“D30”) and the 45^th Defendant (“D45”) in HCA 2091/2019 (“HCA 2091”) (“2091 Summons”) and against the 3^rd Defendant (“D3”) and 21^st Defendant (“D21”) in HCA 452 of 2022 (“HCA 452”) (“452 Summons”).

2.In HCA 2091, the action was commenced first by Writ of Summons issued on 12 November 2019.   According to the Statement of Claim filed on 10 March 2020 as amended on 11 December 2020 (“ASOC”):

(1)     P is a company incorporated in Belgium and is a wholly owned subsidiary and the headquarters for the Europe and Africa activities of Toyota Boshuku Corporation (“TBC”);

(2)     D30 and D45 are companies incorporated in Hong Kong;

(3)     On 14 August 2019, unknown fraudster(s) (“the Fraudster”) impersonated Mr Numa, TBC’s CEO and President, and called P and was given the mobile number of P’s General Manager of Finance, Mr Tanaka;

(4)     Mr Tanaka was told by the Fraudster that there was a strictly confidential acquisition being made and funds were needed.  Instructions would be provided by “Mr Weekes”, the lawyer purportedly handling the acquisition;

(5)     There was in fact no such secret acquisition but by the time the fraud was discovered, Mr Tanaka had caused P to make payments in the total sum of USD 26,659,000 and EUR 9,798,000 (“the Funds”) into the bank accounts of the 1^st to 6^th Defendants and Ample Easy Pte Ltd (“1^st Layer Recipients”) between 16 to 19 August 2019;

(6)     Between 20 and 21 August 2019, the Funds were further diverted from the bank accounts of the 1^st Layer Recipients into the bank accounts of the 2^nd layer recipients (“the 2^nd Layer Recipients”) including D30;

(7)     On around 20 August 2019, the Funds were further diverted from the bank accounts of the 2^nd Layer Recipients into the bank accounts of the 3^rd layer recipients (“the 3^rd Layer Recipients”) including D45; 

(8)     P claims against each of the defendants inter alia that they: (a) received the Funds and/or the proceeds thereof on constructive trust for and on behalf of P and is liable to account for the same to P; (b) have been unjustly enriched at the expense of P which it had not received any consideration from or by mistaken belief by the misrepresentation or deceit of the Fraudster and are liable to make restitution to P; (c) damages for loss and damage suffered by P as a result of the Fraud and diversion of the Fund; and (d) interests.

3.In HCA 452, the action was commenced by Writ of Summons first issued on 25 April 2022 and subsequently renewed.  In the Statement of Claim filed on 24 June 2022 (“SOC”), it is pleaded that each of the defendants received part of the Funds (the details as set out in Schedule 2 of SOC) on constructive trust for and on behalf of P.  Further or in the alternative, each of the defendants have been unjustly enriched at the expense of P as a result of mistake or as P did not receive any consideration for the payments.  It is further claimed that each of the defendant is liable to pay damages to P for the loss and damage suffered as a result of the Fraud and the diversion of the Funds and each of the defendants is liable for damages.  P further claims interest.

Service of process and non-appearance of the Defendants

4.In HCA 2091, the Re-Amended Writ of Summons and ASOC were served on D30 and D45 on 14 December 2020.  Whilst each has filed a Defence, on 27 March 2025, Master Dick Ho had ordered that unless they wrote to the court on or before 24 April 2025 to confirm that they still intend to defend P’s claims herein and to file in Court and exchange with P their witness statement as to facts, the respective defences of D30 and D45 be struck out without further order and P be at liberty to apply for judgment under O.19 of RHC.  Apparently, D30 and D45 have not done so and therefore their defences have been struck out.

5.I am satisfied from the affirmations of service filed on behalf of P that 2091 Summons has been served on D30 and D45 by leaving it at their registered office on 19 August 2025.  I am satisfied that that amounts to proper service on them under s.827 of the Companies Ordinance, Cap. 622.

6.As for HCA 452, while D3 filed its defence on 26 August 2022, on 18 November 2024, it filed an Amended Acknowledgment of Service stating that it does not intend to defend the proceedings. 

7.I am also satisfied from the affirmations of service filed on behalf of P that 452 Summons has been served on D3 by leaving it at its registered address on 19 August 2025.  As for D21, I am satisfied from the affirmation of service that it has been served the Concurrent Amended Writ and SOC in compliance with the substituted service order granted by Master Rita So which was not set aside by Au-Yeung J in [2024] HKCFI 352.

8.As for service of the 452 Summons, I am also satisfied that under O.65, r.9 of RHC where any document is not required to be served personally and at the time when service is to be effected that person is in default as to acknowledgment of service, that document does not have to be served on that person unless the court otherwise directs or any rules otherwise provides.  Service of the 452 Summons on D21 is not required where it did not file an acknowledgment of service and I would also not so require.

9.Given that I am satisfied that the relevant Summonses were properly served on D30 and D45 in HCA 2091 and D3 and D21 in HCA 452, I am of the view that it is expedient to proceed with the hearing of the Summonses under O.32, r.5 of RHC notwithstanding their absence at today’s hearing.

10.Mr Brown and Mr Yau, counsel, appeared for P.

Applicable principles

11.The applicable principles for default judgment under O.19, r.7 of RHC are well-settled.  The power to grant judgment under O.19, r.7 is discretionary.  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 made on the basis of pleaded facts, rather than on evidence.  This is because where no defence is filed, the court will assume that the Statement of Claim has been impliedly admitted.  See Hong Kong Civil Procedure 2025, Vol.1, §§19/2/1, 19/7/11 and 19/7/14. 

12.Moreover, the principle that a declaration will not be granted when giving judgment in default of defence is a rule of practice and not of law, and will give way to the paramount duty of the court to do fullest justice to the plaintiff to which he is entitled.  However, the declaratory reliefs to be granted should not be in terms wider than what the plaintiffs are entitled to and what is necessary to do justice to them: see ibid, §§19/7/14 and 19/7/20. 

13.The courts have previously granted declarations in case where the plaintiff is a victim of fraud to assist the plaintiff in his proprietary claim for the money defrauded and has held that this will do fullest justice to the plaintiff to which he is entitled not least because this will prevent other creditors from competing with the plaintiff for the money claimed against the defendants: see Terence John Stott v Larks Trading Limited & Ors [2019] HKCFI 1317 per DHCJ Allan Leung at §15 applied in IQ Solutions Inc v WKJ Limited [2024] HKCFI 559 per DHCJ Le Pichon at §12.

14.However, even on what might appear to be a straightforward application, the Court does not act as a “rubber-stamp” merely because of the uncontested nature of the application.  In each case, it is necessary to consider whether the declaratory relief is properly made out on the pleading, and whether it is appropriate in the overall exercise of discretion for such relief to be granted without a trial: see Cheung Sai Lon v Cheung Sai Ha & Anor [2020] HKCFI 2551 at §32 per Coleman J.

Analysis and Disposition

Re: HCA 2091

15.In Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, the Court of Final Appeal approved a useful framework for approaching claims for restitution based on the principles of unjust enrichment as involving asking 4 questions: (1) was the defendant enriched? (2) was the enrichment at the plaintiff’s expense? (3) was the enrichment unjust? and (4) are any of the defences applicable?

16.In JSP International S.R.O. v Alacrity Limited & Others [2022] HKCFI 977, §§20-21, Cheng J held:

“ [20]. It was recognized in Investment Trust Companies v Revenue & Customs Commissioners [2018] AC 275 at [46] to [50] that there may be situations in which, whilst the parties have not dealt directly with one another, or with one another’s property, the defendant has nevertheless received a benefit from the claimant, and the claimant has incurred a loss through the provision of that benefit. These are generally situations in which the difference from the direct provision of a benefit by the claimant to the defendant is more apparent than real. At [48], Lord Reed referred to various such situations, one of which he described as follows:

‘There are also situations where the defendant receives property from a third party into which that claimant can trace an interest. Since the property is, in law, the equivalent of the claimant’s property, the defendant is therefore treated as if he had received the claimant’s property.’

[21]. This being an application under O.19 r.7, I have considered whether the ASOC properly pleads a case that the Second Tier Defendants received the Sums from the First Tier Defendants, being funds originally transferred by the Plaintiff to the First Tier Defendants.  I am satisfied that this has been done.”

17.Applying the above approach to the present case, I am satisfied that P has pleaded in the ASOC monies belonging to P have been transferred to the 1^st Layer Recipient and from the accounts of the 1^st Layer Recipient to the accounts of the 2^nd Layer Recipients including D30 and from the accounts of the 2^nd Layer Recipients into the accounts of the 3^rd Layer Recipients including D45.  I am satisfied therefore D30 and D45 were thus enriched at the expense of P having received a benefit from P and P had incurred a loss through the provision of that benefit.  I am further satisfied that it has been pleaded that the defendants have been unjustly enriched.  As the Defences of D30 and D45 have been struck out, no defences are applicable. I am therefore satisfied that that restitution claim against D30 and D45 is properly pleaded and an order requiring the payment of the sums received by them together with interest at prime rate plus 1% and a declaration to that effect should be granted to do fullest justice to P.

18.However, I am not satisfied the proprietary claim of P is properly pleaded and P is entitled to the relief claimed.

19.Whilst equity imposes a constructive trust on the fraudulent recipient when the plaintiff’s property is obtained by fraud so that the property is recoverable and traceable in equity (see e.g.: Westdeutsche Landsbank Girozentrale v Islington London Borough Council [1996] AC 669 at 716C-D and Mesirow Financial Administrative Corporation v Best Link Industrial Co., Ltd (unrep) HCMP 1846/2015, 25 January 2016, per Recorder Lisa Wong SC (as she then was), §33), there is no plea in the ASOC that D30 and D45 are fraudulent recipients.  All that is pleaded is that the Sums or part thereof were transferred from P’s account to the accounts of the 1^st Layer Recipients, onward transferred to the accounts of 2^nd Layer Recipients and onward transferred to the accounts of the 3^rd Layer Recipients.

20.Furthermore, whilst in some cases the defrauded plaintiff would still have a tracing remedy even if the recipient is not a party to the fraud, as long as his state of knowledge is such as to make it unconscionable for him to retain the money and knowledge does not have to be acquired at the time of receipt but can be acquired subsequently while the money is in the recipients hands (see e.g. Guaranty Bank and Trust Company v Zzzik Inc Limited & Anor (unrep) HCA 1139/2016, 18 July 2016, per DHCJ Cooney SC §§32-34 applied in Zief Incorporated v Tekchandani Ajai Mohan [2021] 3 HKC 69 by Recorder Eugene Fung SC at §46), it is not pleaded that D30 and D45 has retained the money transferred to it and that it would be unconscionable for them to retain the Sum or parts thereof transferred to them.  Mere receipt of property is not sufficient without retention of the plaintiff’s funds or its traceable substitute by that defendant is not sufficient to found a claim for a declaration of constructive trust: see e.g. Milestone Electric Inc v Meihoukang Trading Co Limited [2020] HKCFI 2542, §§14-15 per Recorder Eugene Fung SC, and JSP International S.R.O., §§41 and 43.

21.For these reasons, I decline to make a declaration that the sums received by D30 and D45 were received and held for P at the time of receipt by them.

22.Given that I am not satisfied based on the ASOC that P has properly pleaded a proprietary claim against D30 and D45, I would further continue only the Mareva injunction (i.e. not the proprietary injunction in paragraph 1) against D30 and D45 granted by DHCJ Abraham Chan SC dated 22 November 2019 for 12 months from today which should be sufficient time to enforce the judgment against them.  I would allow the requested exception that the order as continued by me expressly provides that it does not prohibit the banks from paying funds out of any injuncted accounts to P or its solicitors pursuant to any garnishee order absolute in favour of P.

Re: HCA 452

23.Mr Brown had submitted that although the defence filed by D3 has not been withdrawn, it must mean that D3 no longer relies upon it and has abandoned the Defence.  He submitted that it is as if D3 at the outset had filed the acknowledgment of service stating that it does not intend to contest these proceedings.

24.However, without withdrawing the Defence or it being struck out, the Defence remains filed.   

25.In Hong Kong Civil Procedure 2025, Vol.1, §19/7/1, it was stated that O.19, r.7 “applies and applies only, where the defendant or plaintiff being required to serve a defence either to a statement of claim or to a counterclaim makes default…”. 

26.See also ibid at §19/7/3:

“ Default of defence – Where the defendant has given notice of intention to defend but has made default of defence in a case within this rule, the plaintiff may apply by summons or motion for judgment. … Where the defence is struck out for non-compliance with an order, the defendant is in default, and the plaintiff is entitled at the same time to take such steps as the rules prescribe to obtain judgment in default of defence. Similarly, where the defendant withdraws his defence, the plaintiff is entitled to proceed by summons or motion for judgment under this rule.”

27.I am not satisfied without being referred to any authorities that judgment under O.19, r.7 can be granted against D3 “in default” of filing of any defence in the present circumstances.

28.As for D21, it has never entered an appearance nor filed a defence.  For the same reasons as given above in respect of D30 and D45 in HCA 2091, I am satisfied that the restitution claim against D21 is properly pleaded and an order requiring the payment of the sum received by D21 together with interest at prime rate plus 1% and a declaration to that effect should be granted to do fullest justice to P.  However, for the same reasons explained above, I am not satisfied the proprietary claim of P is properly pleaded in the SOC against D21 and thus P is not entitled to the relief sought in respect of the proprietary claim.

29.I would also only continue the Mareva injunction (and not the proprietary injunction in paragraph 1) of the ex parte Order of B Chu J, which was continued by orders of Cheng J on 29 April 2022, B Chu J on 8 July 2022, Lisa Wong J on 12 August 2022, Ng J on 16 December 2022, Recorder Maurellet SC on 28 April 2023, DHCJ Winnie Tsui (as she then was) on 25 August 2023 and Au-Yeung J on 26 January 2024, for a further 12 months from the date of today.  There should be an added exception that the order as continued by me does not prohibit the banks from paying funds out of any injuncted account to P or its solicitors pursuant to any garnishee order absolute in favour of P.

30.Whilst Mr Brown also submitted that I should make an order to dispense with service of documents in relation to any garnishee order application, there are no such applications made yet, so I do not see why I should make such orders today.  Besides, if service is not required pursuant to O.65, r.9 of RHC, as Mr Brown has submitted, then there is no necessity for me to make such an order.

Orders and Costs

31.According, I will make an order in terms of the draft orders to be re-submitted to me reflecting this Judgment within 3 days of today.

32.Costs of the 2091 Summons should be paid forthwith by D30 and D45, which has been summarily assessed by me, adopting a broadbrush approach, at HK$146,000.

33.P is to lodge its statement of costs in respect of its costs of the 452 Summons as against D21 within 3 days from today for summary assessment on paper which should then be paid forthwith by D21 to P.

Mr Toby Brown and Mr Jeremy Yau, instructed by Messrs C. P. Lin & Co., for the Plaintiff (in both cases)

The 30^th and 45^th Defendants (in HCA 2091/2019) were not represented and did not appear

The 3^rd and 21^st Defendants (in HCA 452/2022) were not represented and did not appear