Tektro Technology Corporation v. Xunjieda Trading Co. Ltd
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DCCJ 2636/2026 [2026] HKDC 1808 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2636 OF 2026 ------------------------------
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--------------------------- DECISION --------------------------- Introduction 1.By a summons filed on 1 September 2026, the plaintiff applies for:
2.The Combined Summons was in fact preceded by two summonses, both of which have been withdrawn with no order as to costs in circumstances to be detailed below:
The plaintiff’s case 3.The pleaded case of the plaintiff, a manufacturer of sporting goods in Taiwan, is that it was a victim of fraud. 4.On 29 April 2026, fraudster(s) impersonated the chairman of the plaintiff, namely Mr Tsai Szu-fang (“Tsai”), and deceived an accountant employed by the plaintiff, namely Ms Chen Yu Yi (“Chen”), into transferring US$300,000 from the plaintiff's account with Mega International Commercial Bank Co., Ltd (“Mega Bank”) in Taiwan to an account in the name of the defendant, a Hong Kong company, with China Construction Bank (Asia) Corporation Limited (“CCB Account”) in the following circumstances. 5.On the morning of 29 April 2026, a caller reached Chen through the plaintiff's switchboard. The caller alleged that he was discussing business with the chairman of Chen’s employer, and obtained the plaintiff's bank account details as well as Chen's contact information for LINE, an instant messaging application. Subsequently, an unknown user on LINE added Chen and a second user bearing the name of Tsai (“Impostor”) to a chat group. 6.The Impostor directed Chen to transfer US$300,000 (“Fund”) to the CCB Account, alleging that it was for payment of goods urgently needed. Chen first attempted to effect the requested transfer from First Commercial Bank, which declined the instruction because the supporting documents needed for a transaction over TWD500,000 were lacking. Chen then turned to Mega Bank, which complied with the request and effected the payment that afternoon. 7.In the evening, Chen called Tsai directly through LINE and noticed that his profile picture differed from that of the Impostor. Tsai confirmed that he had given no such instruction, hence the exposure of the fraud. Chen then notified Mega Bank and attempted to stop the transfer of the Fund but failed. 8.On 30 April 2026, the fraud was reported to the police in Taichung and to the Hong Kong Police Force. 9.The plaintiff has never had any dealings with the defendant, any companies of a similar name, or the defendant’s sole director and shareholder. But for the fraud, the plaintiff would not have made the transfer of the Fund. 10.The Hong Kong Police Force confirmed that, as at 9 July 2026, the Fund remained in the CCB Account, and a letter of no consent was issued to China Construction Bank (Asia) Corporation Limited (“CCB”) on 9 July 2026. Procedural History 11.On 22 May 2026 the plaintiff issued the writ, indorsed with the statement of claim, and served it on the defendant's registered address by insertion through the door crack. The plaintiff also took out an ex-parte injunction application. His Honour Judge E Lee granted a proprietary injunction against the Fund and a Mareva injunction for the same amount (“Ex-parte Injunction”). 12.On 28 May 2026, the plaintiff filed and served a notice of intention to enter judgment. 13.On 29 May 2026, on the return date, Deputy District Judge Lee Siu-him varied and continued the Ex-parte Injunction until judgment or further order, i.e. the Injunction. By necessary implication, the Injunction shall expire upon the occurrence of the earlier of the two contingent events. 14.The last day for filing the acknowledgement of service was 4 June 2026, and the last day for filing the defence was 2 July 2026. The defendant did neither. 15.Accordingly, the plaintiff filed and served the Original Judgment Summons on 3 July 2026. 16.On 14 August 2026, at the hearing of the Original Judgment Summons, the plaintiff sought an adjournment of the said summons in order to take out an application for a post-judgment proprietary and Mareva injunction, such that the protection under the Injunction would not be lost upon the grant of a default judgment. I allowed the application and adjourned the said summons to 31 August 2026. 17.On 17 August 2026, the plaintiff took out the Original Injunction Summons returnable before me on 31 August 2026, and also amended the statement of claim without leave of the Court and served the same on the defendant on the same day. 18.On 31 August 2026, the plaintiff sought a further adjournment of both the Original Judgment Summons and the Original Injunction Summons because the time for the defendant to file the defence had been extended upon the service of the amended statement of claim, and such time would expire only upon the close of business on the same day. I again allowed the application and adjourned the said summonses to 11 September 2026. 19.On 1 September 2026, the plaintiff took out the Combined Summons. 20.On 11 September 2026, the plaintiff applied for leave to withdraw the Original Judgment Summons (which became premature upon the service of the amended statement of claim) and the Original Injunction Summons with no order as to costs. I allowed the said application. 21.As a result, only the Combined Summons remains for decision. Default judgment 22.By the Combined Summons, the plaintiff applies for default judgment against the defendant with the following reliefs:
23.Order 13 rule 6 of the Rules provides that, for a writ indorsed with a claim not covered by Order 13 rules 1 to 4 (which is the case for the plaintiff’s claim), if any defendant fails to give notice of intention to defend, the plaintiff may, upon filing of an affidavit proving due service of the writ and statement of claim on him, proceed with the action as if that defendant had given notice of intention to defend. 24.Order 19 rule 7 of the Rules provides for the Court’s jurisdiction to enter default judgment upon the defendant’s failure to file a defence to a claim which is not covered by Order 19 rules 2 to 5 (which is the case for the plaintiff’s claim). The Court’s power is discretionary, only to be exercised upon being satisfied that the matters pleaded in the statement of claim alone (i.e. not any evidence) entitle the plaintiff to the judgment sought: see Amidas Hong Kong Limited v Che Si Limited [2025] HKCFI 1128, at [18]. 25.As to declaratory relief, it is a rule of practice, as opposed to a rule of law, that the Court normally does not grant such relief without going to trial. However, such practice 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: see Amidas, at [19]. (i) Service 26.I am satisfied that the plaintiff has duly served the writ, the statement of claim, the notice of intention to enter judgment, the amended statement of claim and the Combined Summons on the defendant by leaving them at the defendant’s registered office. (ii) Entitlement to judgment 27.Based on the pleaded facts, I am satisfied that the plaintiff has pleaded a complete cause of action for fraud and unjust enrichment based on the unjust factor of mistake. 28.Insofar as personal remedies are concerned, I am satisfied that the plaintiff has made out a case of equitable compensation as well as restitution of the Fund. 29.I am also satisfied that the plaintiff is entitled to the proprietary reliefs, including the declaration that the defendant held or holds the Fund on constructive trust (“category 2”) for the plaintiff because of the fraud, and an order that the defendant shall return the Fund to the plaintiff, except for the Proposed Execution Order. 30.Mr. Ribeiro of the plaintiff’s solicitors submits rather candidly that the Proposed Execution Order is not expected to be performed by the defendant given its silence, inaction and its apparent linkage to the fraud. He submits that the Proposed Execution Order is to lay the foundation for a future application under section 38A of the District Court Ordinance, Cap 336 (“Ordinance”) for an order to appoint a person to execute the relevant documents on behalf of the defendant. The intention of the plaintiff is to avoid an application for a garnishee order which usually takes substantial time. The plaintiff further submits that if CCB raises any issue with the instructions executed through an order under section 38A of the Ordinance, the plaintiff will apply for a garnishee order. 31.The application for the Proposed Execution Order is refused for the following reasons. 32.As DHCJ Jonathan Chang SC held in Kuo Benjamin Yung Hsiang v Xu Meiyi [2022] 5 HKLRD 111, at [12] – [18], whilst the defendant of a claim for fraud is holding the proceeds of fraud and their traceable proceeds that may still remain in the defendant’s hands on trust for the plaintiff and is liable to pay the same to the plaintiff, this could not be translated into an obligation of the defendant to specifically execute bank documents to effect any transfer out of the subject account. It is insufficient for the plaintiff to assert that an order that the defendant do pay the subject proceeds to the plaintiff would necessitate the defendant’s execution of payment/transfer documents or to endorse a negotiable instrument to effect the transfer. 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 document for the purpose of transfer out of any sums to the plaintiff. 33.Hon Au-Yeung J in Amidas Hong Kong Ltd v Che Si Ltd [2025] HKCFI 1128, at [76] – [78], expressly agreed with Kuo Benjamin. The learned Judge further pointed out, at [79], that, in that case, the plaintiff had failed to identify what documents the defendant should be ordered to execute to effect the transfer, and the bank should not be left to dictate what documents the plaintiff should execute without checks and balances from the Court. I respectfully agree with the learned Judges in those two cases. 34.Mr Ribeiro relies on [29] – [30] of Concrete Waterproofing Manufacturing Pty Ltd v Changxuan Co Ltd [2020] 4 HKLRD 166 and [14] of Tokic DOO v Hongkong Shui Fat Trading Ltd [2020] 4 HKLRD 189 to argue that the defendant is a bare trustee under the law and the beneficiary has the absolute right to call for the transfer of the funds in the defendant’s account. I am of the view that those authorities do not lend support to his argument. 35.First, the cited parts of those decisions did not concern any mandatory injunction to direct the defendant to execute documents or section 38A of the Ordinance (or its equivalent, section 25A of the High Court Ordinance, Cap 4). Instead, those cited parts of the judgments concerned the applicability of the vesting order under section 52(1)(e) of the Trustee Ordinance, Cap 29 (“TO”), which empowers a beneficiary to recover a thing in action on behalf of the trustee. Second, the Court in Concrete Waterproofing Manufacturing Pty Ltd made it clear that the discussion of the vesting order was merely obiter as the application for a vesting order was rejected given the lack of proof that the proceeds of fraud remained in the subject bank account. On the other hand, the Court in Tokic rejected the applicability of a vesting order to “category 2” constructive trust. Concrete Waterproofing Manufacturing Pty Ltd and Tokic, as well as other relevant authorities, were thoroughly analyzed in [36] – [56] of Amidas. Hon Au-Yeung J found the authorities against the grant of a vesting order in favour of a victim/beneficiary under “category 2” constructive trust to be more compelling than those authorities in favour of it. Again, I respectfully agree with the learned Judge’s analysis. 36.The reason for the inapplicability of a vesting order under section 52(1)(e) of the TO to “category 2” constructive trusts may also explain the impropriety of the Proposed Execution Order. “Category 2” constructive trusts are “not in reality trusts at all, but merely a remedial mechanism by which equity gave relief for fraud”: Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400, at pp.409j – 410a. This explains the lack of an obligation on the defendant to specifically execute bank documents as held in Kuo Benjamin and Amidas. In [29] – [30] of Concrete Waterproofing Manufacturing Pty Ltd, the learned Judge derived the principle that a beneficiary has an absolute right to call for the transfer of the trust property from Hotung v Ho Yuen Ki [2002] 3 HKLRD 641, which concerned a trust created by voluntary declarations rather than a “category 2” constructive trust arising from wrongful conduct. Paragon Finance was not referred to in the said obiter. Therefore, Concrete Waterproofing Manufacturing Pty Ltd does not support the plaintiff’s application for the Proposed Execution Order. 37.A vesting order is one of many mechanisms in law which empower (whether through a particular legal instrument or an order of the Court) a person to exercise the rights of another person (or his estate) against third parties. Other examples of such mechanisms include power of attorney, as well as appointments of executor, administrator, receiver, liquidator or trustee in bankruptcy, etc. I am not convinced that when a victim of fraud cannot resort to a vesting order for the property held under a “category 2” constructive trust, a mandatory injunction to execute bank documents in the form of the Proposed Execution Order, or subsequently section 38A of the Ordinance, could somehow operate as a practical fall-back to the same effect for the victim to recover the same property. 38.While the Court is undoubtedly sympathetic to the victims of fraud, reliefs shall be granted in accordance with established principles and in a disciplined manner because of the need to uphold the integrity of the law and to avoid any unintended adverse consequences against third parties. 39.Further, similar to Amidas, the plaintiff in the present case cannot identify one specific document that the defendant should and could practically execute. The plaintiff simply requests the execution of “all necessary documents and/or such negotiable instrument(s) as may reasonably be required (including but not limited to any cheque, cashier order, or debit authorization)“. A cashier order can only be issued by CCB and cannot be executed by the defendant (or anyone nominated by the Court). The cheque for the defendant’s account is undoubtedly in the defendant’s possession, and there is practically no prospect of anyone nominated by the Court executing the same if the defendant does not comply with the order to pay the plaintiff. The plaintiff cannot identify any other specific documents (as opposed to a general reference to “debit authorization”) to be executed by the defendant under the Proposed Execution Order. As the Court in Amidas pointed out at [79], performance of a mandatory injunction should not be dictated by the bank without checks and balances of the Court. 40.Finally, the plaintiff is not without redress as it can apply for a garnishee order. The plaintiff submits that if the Proposed Execution Order and subsequently an order under section 38A of the Ordinance are granted, and yet CCB takes issue with the validity of the instructions executed thereunder, the plaintiff will then apply for a garnishee order. This in fact militates against the grant of the Proposed Execution Order. The plaintiff’s stance as such has highlighted the problem arising from the fact that the plaintiff is uninformed about whether CCB will object to the proposed instruction, not least because CCB is not a party herein. The application process of a garnishee order, first an order nisi and then an order absolute after the garnishee is afforded an opportunity to raise objections, seeks to address exactly such a potential problem. Even on the question of time, obtaining the Proposed Execution Order and subsequently applying for an order under section 38A of the Ordinance may take as much time as making a proper application for a garnishee order. 41.As such, the Proposed Execution Order is rejected. 42.Finally, I will also order interest at the HSBC prime rate plus 1% from 29 April 2026 to the date of this judgment to compensate the plaintiff for its loss of the use of the Fund: Chow How Yeen Margaret v Wex Pharmaceuticals Inc [2018] 3 HKLRD 163 (CA), at [45] and [56]. I also order post-judgment interest on the Fund at the judgment rate. Continuation of the Injunction 43.Having considered all circumstances in the present case, in particular the fraud involved, I am satisfied that the risk of dissipation in the absence of the Injunction remains clear and that the Injunction should be continued post-judgment. However, as the authorities have repeatedly pointed out, such continuation should normally be of limited and specific duration to allow the plaintiff to take out any necessary execution process, without prejudice to any application in the future for further continuation should the circumstances justify it: see Spruce Australia Pty Ltd v New Senjia Trade Limited [2019] HKCFI 101, at [17] – [18]. 44.I will therefore order that the Injunction be continued for 9 months, i.e. until and including 2 July 2027. Disposition 45.I therefore order that:
Mr Sylvester John Ribeiro, of Ribeiro Hui, for the plaintiff The defendant was not represented and did not appear |
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