HOPTAI SHARKFINS CO LTD v. PRODUCTOS PESQUEROS GALLEGOS, SL

HCA 1283/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1283 OF 2012

______________________

BETWEEN
	HOPTAI SHARKFINS COMPANY LIMITED	Plaintiff
and
	PRODUCTOS PESQUEROS GALLEGOS, SL	Defendant

______________________

Before: Deputy High Court Judge Mayo in Court

Dates of Hearing: 14‑17 and 21 October 2014

Date of Judgment: 3 November 2014

________________________

J U D G M E N T

________________________

 

Introduction

1.  The plaintiff is suing the defendant for breach of a contract entered into on or about 10 April 2012.

2.  The plaintiff conducts a business as a retailer of fish products.

3.  Ms Lui Tan Ha (Ms Lui) is the managing director of the company.  Her husband Mr Joseph Au Yeung (Joseph) is the general manager of the company and was at the material time the person responsible for representing the interests of the plaintiff in relation to the subject matter of this litigation.  He was the principle witness giving evidence for the plaintiff.

4.  The other witness giving evidence for the plaintiff was Ms Cindy Ho Pui Yee (Cindy).  She was and is a member of the accounts staff of the company.

5.  Ms Lui adopted her affirmation and witness statements and was not subjected to cross examination.

6.  The defendant is a Spanish company which exports fish products including sharks fins.

7.  The contract in question was for the sale and purchase of a quantity of sharks fins.

8.  The person who was responsible in the defendant company for dealing with this matter was Ms Carolina Ramiro Sendin (Carolina).  She was and is the Export Sales Executive of the defendant.  She was the only witness giving evidence for the defendant at the trial.

9.  The material terms of the contract are:

“(a) The defendant shall sell to the plaintiff a total of 16,000 kg of frozen blue sharkfin (in sizes B2, B3, B4 and BA) for €164,000.

(b) Payment shall be made by bank transfer. 20% down payment and 80% balance upon copy of full set of documents sent to email: [email protected] (Clause 10).

(c) The details of the defendant’s bank account at Banco Popular (the “Banco Popular Account”) were set out in Clause 11.

(d) The defendant shall provide to the plaintiff a full set of original clean on board ocean bills of lading, a packing list, a signed commercial invoice, a certificate of origin and a health certificate (clause 14).”

10.  It is common ground that the parties initially communicated with each other by exchanging emails.  The plaintiff’s official email address is and was [email protected] (Hoptai address) and the defendant was and is [email protected] (Propegal address).

11.  During the period from 14 May 2012 to 11 July 2012 some emails were exchanged between the parties.  Some of the emails which were purportedly exchanged between the parties adopted for the defendant were [email protected] (Hotmail address) and purportedly for the plaintiff [email protected] (Hoptia address).

12.  The defendant claims to have no knowledge concerning the Hotmail and Hoptia addresses and emails.

13.  Carolina surmised that some unknown computer hacker must have hacked into their computer system and conducted an exchange of correspondence with the plaintiffs which purported to give alternative contract payment instructions to the plaintiff the end result of which was for the plaintiff to deposit the balance of the purchase price into an account in Singapore in the name of a Third Party.

14.  The defendant then contended that the plaintiff’s failure to comply with the payments requirements laid down in the contract gave rise to a breach of contract on the part of the plaintiff.

15.  This constituted the claim being pursued by the defendants in the defence and counterclaim.

16.  It is the plaintiff’s case that there is no evidence that anyone hacked into the defendant’s computer system.

17.  They contended when all of the evidence is considered as a whole that it must have been Carolina who opened the Hotmail address website and the Hoptia address website and then manufactured the correspondence which enabled them to obtain the balance of the purchase moneys in another account and support a claim against them for breach of contract.

18.  This being the case it is claimed that the plaintiff has indeed complied with the terms of the contract and have followed the amended instructions for payment. The failure of the defendant to deliver to the plaintiff the goods the subject of the contract constituted a breach of contract which is the subject matter of the statement of claim.

The plaintiff’s evidence

19.  The 1^st witness for the plaintiff was Joseph.

20.  There was an agreement between counsel that it was not necessary to call Ms Lui as a witness and that Joseph could refer to the contents of her affirmation in support of the application which was made to the court for a Mareva injunction at the commencement of the action.  The basis of this agreement was that Ms Lui had obtained virtually all of the evidence contained in her affirmation from Joseph.

21.  Joseph gave evidence that he was responsible for the day to day running of the plaintiff’s business.

22.  He said that he had read the affirmation of Mr Yeung Shu Lam Wilson dated 27 July 2012 which stated that the defendant had:

(1) never received the balance of the purchase price of the goods, ie €162,450 (HK$1,647,243);

(2) never used the Hotmail address to send email to the plaintiff;

(3) never instructed the plaintiff to change the receiving account to receive the remaining balance and that the email of the plaintiff had been interposed and hacked by others; and

(4) that the plaintiff’s emails had been intercepted and hacked by someone other than the defendant.

23.  Joseph expressed the view that these allegations by the defendant were false and incredible.

24.  In her affirmation Ms Lui affirmed that the contract earlier referred to was entered into on 10 April 2012.

25.  On 17 April a deposit of €32,800 was remitted to the defendant.

26.  On 31 May an email was received from Carolina using the Hotmail address informing them that a problem had arisen with the bank and that an alternative bank was to be used.

“(a) Beneficiary: XRF Investments Ltd

(b) Beneficiary address: Avlonos 1, Maria House, P.C 1075, Nicosia, Cyprus.

(c) Swift Code: HEBACY2N

(d) Account No.: 140-07-592571-01

(e) IBAN No.: CY84 0050 0140 0001 4007 5925 7101

(f) Bank name: Hellenic Bank Public Company Ltd

(g) Bank Address: International Business Centre, (140) 173 Athalassas Avenue, 4^th Floor, Strovolos, 2025 Nicosia Cyprus.”

This has been referred to as Account #1.

27.  On 4 June there was agreement over the telephone for the plaintiff to purchase a further 2,500 kgs of frozen blue shark fins.  This increased the total price to €195,250 (HK$1,979,835).

28.  During this telephone conversation with Carolina he asked her for an explanation for the change of the payment instructions to the XRF Investment account.  She replied that this had been done on the instructions of her boss Mr Juan Rojas. There had been problems with the bank normally used by the defendant.  She apologised for this and undertook that any additional charges involved with the change would be defrayed by the defendant.

29.  In a later telephone conversation after the further changes referred to herein she begged him for understanding with the problems being encountered by the defendant.

30.  On 6 June the goods were stuffed into a container and shipped to Hong Kong. The estimated time arrival of the goods was 8 July.

31.  On 18 June before remitting the balance of the purchase price the plaintiff received another email from Carolina on the Hotmail address instructing them to make payment to another Account #2:

“(a) Beneficiary: Capital World International Ltd.

(b) Swift Code: EFGBCY2N

(c) Account IBAN No.: CY80018000010000201100099811

(d) Bank name: Eurobank EFG Cyprus Ltd.

(e) Bank Address: 41 Arch. Makarios Avenue, Nicosia Cyprus.”

32.  The plaintiff paid into Account #2 €162,450.

33.  By an email dated 25 June using the Hotmail address Carolina advised Joseph that the #2 account had reached its limit and that the moneys would be returned to the plaintiff.

34.  On 3 July they received a refund of €162,359.49 with bank charges amounting to €90.51.

35.  On the same day Carolina by the Hotmail address requested the plaintiff to pay moneys to Account #3 in the name of Novic PTE (Novic).  The particulars are as follows:

(a) Beneficiary: Novic PTE Ltd.

(b) Swift Code: DBSSSGSG

(c) Account No.: 0048004161028

(d) Bank name: DBS Bank

(e) Bank Address: DBS Building Tower One Singapore

36.  Joseph then remitted the balance to Account #3 and asked Carolina to surrender the bill of lading through telex to the shipping company to enable the plaintiff to collect the goods.

37.  On July 3 Carolina informed Joseph that it was not possible to release the original bill of lading as the bank was keeping all the documents.  She assured Joseph that once the bank released the documents it would surrender and release the documents by express delivery.

38.  On 11 July Joseph said that he telephoned Carolina on her mobile telephone. She told him that the defendant had not yet received the balance of the purchase moneys.

39.  For the first time she told him that she had never used the Hotmail address and that she had never requested the plaintiff to remit the balance to Account #3.

40.  Joseph asked her to confirm this by email but there was no reply from her.

41.  On 18 July he again telephoned Carolina who informed him that the defendant had still not received the money as #3 Account had not released the money to them.

42.  In addition to this Carolina said that as the defendant was experiencing some financial difficulties they might sell the goods to a Third Party.  Joseph asked her to confirm this by email but she never did so.

43.  So far as all of the conversations Joseph had had with Carolina he was absolutely certain that these conversations had in fact been with her and that both he and Carolina had fully understood the contents of the conversations.

44.  The conversations had been undertaken in the English language which both he and Carolina spoke fluently.

45.  Joseph had for four years been employed by the United States Consulate in Hong Kong and it was inconceivable that he would have been able to remain in employment with the consulate if his knowledge of English was not up to a high standard.

46.  Joseph testified that he did not send the Hoptia address emails being:

(1) email dated 15 June 2012 at 13:31 hrs;

(2) email dated 19 June 2012 at 9:46 hrs; and

(3) email dated 25 June 2012 at 7:45 hrs.

47.  He also testified that he never received the email dated 13 July 2012 at 13:24 hrs.

48.  Nor did he receive the police report dated 12 July 2012.

49.  Joseph did however state that he had made a report of the matter to the Hong Kong Police and also caused a complaint to be made to the Singapore Authorities.

50.  Following the realisation that Novic had received the balance of the purchase moneys Joseph made inquiries concerning the company.  He made a company search and also obtained the email address of one of the directors of the company Mr Slavisa Grozdanovic. He managed to communicate with Mr Grozdanovic who said that he thought the moneys had been received on the understanding that they were payment of goods by a Spanish client called Deco Inv Ltd which had a relationship with the defendant who would arrange for payment for and on behalf of Deco.

51.  Joseph’s attempts to obtain documentary evidence of this were unavailing and he was unable to make further contact with Mr Grozdanovic.

52.  The plaintiff obtained a Mareva injunction restricting the defendant from dissipating its assets.

53.  Then in view of the falling market in sharks fin products and the expense of storing the goods a joint application was made by the parties to sell the goods to MNSI and for the proceeds of sale to be paid into court.

54.  Joseph was subjected to a lengthy and searching cross examination and was not seriously shaken in any of his evidence.

55.  The next witness to give evidence was Cindy.

56.  She has been in the plaintiff’s employment since 2011.  Her duties include managing accounts and other documentation.

57.  On 31 May 2012 she arranged for the remittance of €162,450 to be paid to XRF Investments Ltd #Account No 1.  She completed the application form on 16 June.  Before the instruction was executed on 18 June she was instructed to remit the said balance to Capital World International Ltd #Account No 2 and she did this.

58.  On 25 June she was informed that the moneys in #Account No 2 were to be refunded to the plaintiff and she was then instructed to remit the balance to Novic #Account No 3.  The amount remitted was reduced by €90.51 which sum represented additional banking charges defrayed as a consequence of the change of instructions.

59.  On 6 July at 15:56 Cindy called Carolina at the defendant’s office and informed her that Hanjin Shipping Co Ltd, the Shipping Company involved in this transaction, had not received the telex release from the defendant.  She requested Carolina to send the original shipping documents to the plaintiff as soon as possible.

60.  Carolina informed her that she was still awaiting confirmation from the bank that they had received the purchase moneys and that the plaintiff would receive the documents on Monday 9 July.  This was confirmed by Carolina by email at 17:08 hrs on the same day.

61.  Joseph instructed her on 10 July to resend the remittance receipt by email to Carolina.  Concurrently with this she telephoned Carolina at the defendant’s official telephone number.

62.  She told Carolina that the plaintiff had already remitted the balance of the purchase price to Novic as instructed by the defendant.

63.  She then requested Carolina to deliver to the plaintiff the original documents and telex a release so that the goods could be obtained from the shipping company.

64.  Carolina informed her that the defendant’s bank had not received the money and that the documents were still in the possession of the defendant’s bank.

65.  She further said that once the money was received the documents would be delivered to the plaintiff.

66.  On the same day Carolina sent a fax to her confirming receipt of Cindy’s fax notifying the payment of the balance to Novic.

67.  Also in this fax Carolina suggested to her that she should contact Novic by swift code to obtain confirmation that they had remitted the money to the plaintiff. She also advised her to liaise with the bank to stop the payment to #Account No 3.

68.  Later in the day Cindy telephoned Carolina and asked her to communicate by Swift with Novic as she had been unable to obtain the swift code.  Cindy told Carolina that she, Carolina, had been the party who had brought Novic into the transaction.

69.  On 12 July she attended at the Bank of China in an attempt to obtain a refund of the moneys which had been remitted.  Her efforts were unavailing as she was advised by the staff that the DBS Bank in Singapore was unable to get the money back.

70.  She said she had read the affirmation of Yeung Shu Lam Wilson, solicitor for the defendant dated 27 July 2012 and the exhibits ‘WY‑1” and “WY‑2”, and that she had not sent the following emails to the defendant.

(1) Email dated 6 July 2012 at 7:45hrs in the 2^nd last page of exhibit “WY‑1”. In the above email purportedly sent by me to the defendant, it mentioned the contract price was €162,450.  This was wrong.  The actual balance for the contract price was €162,359.49.

(2) Email dated 10 July 2012 at 13:46hrs in the last page of exhibit “WY‑1”.

71.  She continued that she did not receive the following emails from the defendant.

(1) email dated 27 June 2012 at 11:27hrs in exhibit “WY‑1”;

(2) email dated 10 July 2012 at 16:32hrs in exhibit “WY‑1”; and

(3) email dated 13 July 2012 at 13:05hrs and 13:24hrs in exhibit “WY‑2”.

72.  It appears that the content of email dated 3 July 2012 at 10:45hrs in exhibit “WY‑1” sent by her to Carolina of the defendant had been altered.

(1) The sentence “We shall remit the total balance to you on Friday so you will receive on Monday, kindly release the BL document by telex surrender.” was added by the defendant in his exhibit, there was no such sentence in our exhibit.  She had not informed the defendant in this email that the plaintiff would remit the balance to the defendant on Friday ie 6 July 2012 since the plaintiff had already followed the defendant’s instruction to remit the balance of the contract price into Account #3, ie Novic PTE Ltd on 3 July 2012 (Tuesday).

(2) In addition, in this particular email drafted by her to the defendant, she also mentioned “Enclosed please find TT copy of the remittance, kindly release the BL document by telex surrender.”, which indicated that the plaintiff had already remitted the balance to the defendant.  However, it appears that this line was deleted by the defendant.  The altered email seemed to have shown that the plaintiff would remit the balance until 6 July 2012 (Friday) and this was not true.

73.  A table showing the alterations is as follows:

“	Exhibit “WY‑1” revealed by the defendant	Plaintiff’s email records
	3 July 2012 at 10:45hrs (plaintiff to defendant) (p27 “WY‑1) “We shall remit the total balance to you on Friday so you will receive on Monday, kindly release the BL document by telex surrender. [added by the defendant] Besides send the original of Health Certificate, Certificate of Origin, Packing List and the Invoice by DHL as soon as you receive the payment confirmation.”	3 July 2012 at 15:57hrs (exhibit “CHPY‑9”) (plaintiff to defendant) “Enclosed please find TT copy of the remittance, kindly release the BL document by telex surrender. [this line is not shown in the email in exhibit “WY‑1”] Besides send the original of Health Certificate, Certificate of Origin, Packing List and the Invoice by DHL as soon as possible.”	”

74.  In conclusion Cindy said the defendant’s evidence that it had not received the balance of the contract price was completely untrue and incredible.

75.  Mr Chow cross examined Cindy at some length.

76.  One of the critical points upon which she was cross examined was the timing on 6 July of her telephone conversation with Carolina.  Cindy insisted that this conversation had proceeded the receipt of the email referred to in her evidence.

77.  The significance of this was that the email contained almost exactly the same details as had been referred to in the conversation that is indicating that either Carolina had been the author of the email or that the alleged hacker of the computer system had also hacked the telephone line.  To say the least of it the inference that the telephone line must have been hacked was highly improbable.  Cindy stood by her evidence and did not accept Mr Chow’s insistence that she had confused the times.

78.  In general terms Cindy was an impressive witness who was not shaken by a fairly vigorous cross examination.

The defence evidence

79.  Carolina gave evidence that she was at the time of the transaction in question the Export Sales Executive of the defendant.  She remains in this post at the present time.

80.  She confirmed that the defendant had never received the balance of the purchase price payable under the contract.

81.  She said that the owner of the defendant was Mrs Maria Josefa Juncal Souto (Mrs Souto).  Juan Rojas was her husband and he acted as a consultant to the defendant.

82.  Mrs Souto as the owner of the defendant was the only person who had authority to agree to any amendment to a contract which had been entered into by the defendant.

83.  Carolina said she had no authority to ask the plaintiff to make payment of the goods to a Third Party particularly if the party carried on business outside Spain.  She had not done so.

84.  Novic had no relationship with the defendant and she had never asked the plaintiff to make payment to it.

85.  Carolina then went on to speculate that during the period from 14 May 2012 to 11 July 2012 the emails of both the defendant and the plaintiff had been intercepted or hacked.

86.  She made the discovery of this on 11 July 2012 when she was attempting to send an email to the plaintiff.

87.  She gave evidence that it has always been the practice of the defendant to use the Propegal address website when communicating on business matters.

88.  She received an email on 14 May 2012 from the Hoptai address from the plaintiff.  She attempted to reply to this with her Blackberry smart cell phone.  However her reply email automatically went to the Hoptia address which is very similar to the Hoptai address.

89.  She did not realise this at that time.  She only realised this on 11 July 2012.

90.  She assumed that what had transpired was that some independent third party had intercepted or hacked the defendant’s and the plaintiff’s websites.  The consequence of this was that her emails to the plaintiff went to Hoptia which was presumably in the control of the “hacker” and would not have been received by the plaintiff.

91.  The “hacker” opened a Hotmail website where they could communicate with the plaintiff who would be under the mistaken impression that they were receiving emails from the defendant.

92.  In theory this is all very possible.  However no expert evidence was adduced to support this theory.

93.  The significance of all of this is that to a large extent reliance has to be placed on evidence given by Joseph and Cindy for the plaintiff’s and Carolina for the defendant.

94.  However all of these witnesses were able to call in aid contemporaneous telephone conversations in support of the evidence they were giving.  There was also the evidence of the various emails which were exchanged and it was possible to compare the contents of both the allegedly spurious emails and the genuine ones with what was claimed to have been said on the telephone.

95.  I found that the evidence allegedly given in respect of the telephone conversations was of the greatest assistance to me in determining where the truth of this matter lay.

96.  Carolina then went back to May 2012 and the steps she took to perform the contract for and on behalf of the defendant.

97.  She prepared the documentation required for the export of the sharks fins to the plaintiff.  As the plaintiff was an established and trusted customer she agreed to payment of the balance of the purchase price to be by telephonic transfer.  There was no real risk involved as the goods would only be released against payment of the balance of the purchase price.

98.  Carolina agreed that she had had telephone conversations with Joseph on 4 June, 6 June and 29 June.  She insisted that at no time was there ever any discussions concerning any alterations of the mode of payment for the goods.

99.  There had also been a telephone conversation with Joseph on 3 July when he asked her if there were going to be any changes in the payment instructions.  She had said no.  He had chased her for the bill of lading and she had advised him that delivery of the bill of lading would only be effected against payment of the goods.  She denied that there had been any discussion about changes in the payment instructions.

100.  Following this there was a call from Joseph when he was in the USA on a business trip and he said that he thought that at the time she would have received the purchase moneys.  He had also said that the defendant would be responsible for additional banking charges.  At that time it was still her impression that payment would be made to their Banco Popular Account.

101.  It is not easy to imagine why Joseph in the USA would have called Carolina who was in Spain had it not been the case of his being concerned account the changing of payment instructions.

102.  Carolina accepted that she had had two telephone conversations with Cindy.

103.  The first on 10 July was an important one.  She had told her that she had remitted the purchase price into #Account no 3 with Novic and that she, Carolina, should collect the money from them.

104.  She claimed that her suspicions had not been aroused by this as she was not concerned who the money was paid to so long as she eventually received it.

105.  The second conversation with Cindy had taken place on 11 July.  In this conversation she had told Cindy that she should contact Novic to ascertain the swift code as it was the plaintiff who was using Novic for the payments.

106.  Carolina denied that during the discussions with Cindy that there had been any discussion concerning the accounts for payment of the balance of the purchase price having been changed.

107.  Cindy had then suggested that she would send her a fax copy of the bank transfer slip.  She did this and this was the first time that she realised that the purchase moneys had been transferred to Novic from DBS Bank in Singapore on 3 July.  She had then called Cindy who had informed her that the payment had been made on the defendant’s instructions.

108.  It was at this time that she looked into the situation and discovered that emails had been intercepted or “hacked”.

109.  She had then telephoned Joseph and informed him of her suspicions.  She told him that she had never sent emails using the Hotmail address.  This being the case it was obvious that a fraud had been perpetrated.

110.  On 13 July she received an email from Joseph informing her that a report had been made to the HK Police Department.  She informed Joseph that a like report had been made by the defendant to the Vigo Police Authority.

111.  On the same day Carolina proposed three solutions to the problem: (a) the plaintiff should pay the balance directly to the defendant (b) the defendant may sell the container to a different customer or (c) the container should be returned to Spain and the deposit be forfeited by the defendant. Joseph refused all of these proposals.

112.  Carolina then decided that as the goods belonged to the defendant, they should be sold to a Third Party.  In fact negotiations to that end had already been put in train and on 10 July a suitable contract was signed.  On account of the present action the purchase moneys had to be returned to the buyer.

113.  Carolina was subjected to a lengthy and skilful cross examination by Mr Lin who was representing the plaintiff.

114.  It has to be said that she did not present as a convincing witness.

115.  She was unable to advance any convincing explanation why Joseph would not have made any reference to the alterations in the payment instructions contained in the allegedly spurious emails he had received during the number of telephone conversations she admitted that they had had.

116.  Also it appeared that her evidence in relation to her telephone conversations with Cindy was most unsatisfactory.

117.  Carolina insisted that when she had been informed that the payment of the balance of the purchase price had been paid to Novic she had not been concerned.  This is hard to believe having regard to the context of the conversation being a discussion about the non payment of the moneys to the defendant at a time when the moneys should have been received.

118.  Other matters were also canvassed. 

119.  It was clearly my impression that Carolina was not a truthful or reliable witness.

Analysis of the evidence

120.  In his lengthy final submissions Mr Chow argued that a burden of evidence lay upon the plaintiff to prove that hacking of emails had not taken place.

121.  He contended that the defendant had no obligation to prove an alternative explanation namely that the emails originated from an unknown Third Party.

122.  I do not consider it to be a constructive exercise to single out a particular issue or argue that the sole criteria for determining the issue has to be based upon whom the burden of proof lies.

123.  Authority for this proposition can be found from paragraphs 82 and 83 on p1074 of the judgment of Yuen JA in FBC Construction Co Ltd and Lee Ben [2014] 2 HKLRD 1054:

“82. In my view, a trial judge who had read and heard so much evidence in the course of a 43‑day trial (including evidence of the Settlement Agreement admittedly signed on behalf of the plaintiff) simply cannot shut his eyes and ears to the evidence (even though he may have rejected parts) and adopt a blinkered approach to the plaintiff’s claim based only on the burden of proof.

83. I derive support for this view from the Court of Final Appeal decision in Lui Fai Yeung v Chui Kin Man (2012) 15 HKCFAR 803, where after discussing Seldon, Tang PJ held (at [16]) that the proper inference to draw depends on the circumstances of the particular case, and not on who has the burden of proof”

124.  I accept the validity of this approach.

125.  To my mind the crucial evidence in this trial related to the telephone conversations between Joseph and Cindy for the plaintiff and Carolina for the defendant.

126.  Joseph and Cindy were both excellent witnesses.  Most importantly it related in a coherent and logical way with the contents of the various emails and with the situations faced by the parties.

127.  On the other hand I was most unimpressed with Carolina as a witness.

128.  In the context of the evidence as a whole it made no sense whatever.

129.  Where there is a disparity between the evidence of either Joseph or Cindy or the evidence of Carolina I have no doubt that the plaintiff’s evidence is to be preferred to that of Carolina.

130.  I make a finding of fact that Carolina did send the Hotmail address emails and that being the case did on behalf of the defendant give the alternative payment instructions referred to in the evidence.

131.  I also make a finding of fact that I accept the evidence of Joseph and Cindy that the plaintiff did pay the balance of the purchase price of the goods to Novic on the instructions of Carolina.

Conclusion

132.  Judgment is entered for the plaintiff.  They are entitled to repayment of the purchase price in the sum of €195,250 together with interest thereon from the dates of payments €32,800.00 from 17 April 2012 and €162,450.00 from 19 June 2012 made by the defendant at the rate of 1% over the HSBC best lending rate until the date of judgment and thereafter at the judgment rate until full payment by the defendant.  I also order that any moneys paid into court pursuant to the Mareva injunction are to be paid out to the plaintiff.

133.  The counterclaim is dismissed.

134.  I make an order nisi that the defendant must pay the plaintiff’s costs of the claim and the costs of defending the counterclaim.

	(Simon Mayo)
	Deputy High Court Judge

Mr Kenny CPLin, instructed by Myra Li & Co, for the plaintiff

Mr Val Chow, instructed by Wilson Yeung & Co, for the defendant

HCA 1283/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1283 OF 2012

____________

BETWEEN

	HOPTAI SHARKFINS COMPANY LIMITED	Plaintiff
and
	PRODUCTOS PESQUEROS GALLEGOS, S.L.	Defendant

____________

Before: Deputy High Court Judge Lok in Chambers

Date of Hearing: 17 August 2012

Date of Decision: 17 August 2012

_____________

D E C I S I O N

_____________

1.  There are 2 applications before me: one for the continuation of the ex parte Mareva injunction granted by Sakhrani DHCJ on 23 July 2012 and the other one for the discharge of the same injunction.

Background

2.  The present dispute arises out of a sale of goods contract.  The defendant is a company incorporated in Spain specialising in fresh and frozen fish marketing.

3.  By a contract made between the plaintiff and the defendant dated 10 April 2012, the defendant agreed to sell 164,000 kg of sharkfins (“the Goods”) to the plaintiff, which is a company incorporated in Hong Kong, at a price of €164,000.

4.  It is the plaintiff’s case that it had paid the full purchase price of the Goods to the defendant.  The Goods arrived in Hong Kong on or about 8 July 2012.  After the arrival of the Goods in Hong Kong, the defendant made an attempt to sell the Goods to a third party.  By reason of the alleged wrongful conduct on the part of the defendant, the plaintiff made an application for a Mareva injunction against the defendant to deal with assets up to the value of HK$1,979,835, in particular to deal with the Goods which are now stored in the Kwai Chung Container Terminal.

The discharge of the ex parte injunction

5.  In the ex parte application, the plaintiff informed the court that:

(i) it had paid the full purchase price to the defendant;

(ii) the defendant had told the plaintiff that it was in financial difficulty; and

(iii) the defendant attempted to sell the Goods to other buyer behind the plaintiff’s back. 

Based on these allegations, the court granted the ex parte injunction.

6.  However, the plaintiff has failed to inform the court of one material fact.  After the Goods arrived in Hong Kong on 8 July 2012, there was some contact between the plaintiff and the defendant and the defendant demanded the plaintiff for the payment of the balance of the purchase price of the Goods.  By that time, the plaintiff confirmed to the defendant that it had made full payment pursuant to the instruction given by the defendant in the email correspondence.  After carrying out some investigation and on 11 July 2012, one Ms Carolina Ramiro of the defendant informed one Mr Au Yeung Nim Ching of the plaintiff that the defendant had never used the email address in the email correspondence, ie [email protected]. In such case, the defendant suspected that the parties’ email accounts might have been hacked and the plaintiff had been making payment upon the instruction of the hackers and not the defendant.  On 12 July 2012, the plaintiff sent an email to the defendant acknowledging that the parties might be victims of a computer fraud.  On the same day, the defendant informed the plaintiff that it had reported the matter to the Spanish police.

7.  In my judgment, the plaintiff should have disclosed to the court in the ex parte application about such possible defence available to the defendant.  According to the submission of Mr Luk, counsel for the plaintiff, the defendant’s allegation about the computer crime is unbelievable and he has advanced a number of arguments with a view to discredit such allegation.  However, it is not for the plaintiff to decide whether the defendant’s allegation is believable or not.  In an ex parte application, the court will have to consider whether to grant an order without hearing the respondent.  In such circumstances, it is certainly an important duty of the applicant to draw the attention of the court to any possible defences available to the defendant.  After informing the court of such possible defences, the applicant can then persuade the court to accept that these defences are ones without merit.  Without telling the court of the possible defences available to the defendant, it is clear that the plaintiff has failed to make material disclosure, and as a result the ex parte injunction would have to be discharged.

8.  In fact, Mr Luk very fairly agrees that such material fact should have been disclosed to the court in the ex parte hearing. By that time, he was not aware of such fact and so the same had not been disclosed to the court.  In such circumstances, Mr Luk is not seriously opposing the defendant’s application for the discharge of the Mareva injunction.  I therefore order the discharge of the Mareva injunction.

Re-grant of the injunction

9.  Mr Luk, however, asks the court to re-grant the injunction.  Since the defendant has no asset in Hong Kong, the plaintiff is not seeking for a general Mareva injunction against the defendant.  Instead, the plaintiff asks the court to restrain the defendant from dealing with the Goods now stored in the container terminal.

10.  In deciding whether to grant the interlocutory injunction, the court has to apply the well-known American Cyanamid principles.

11.  In this regard, I am satisfied that there is a serious question to be tried in present case.  According to the evidence at this stage, the plaintiff had made full payment to the defendant for the Goods pursuant to the purported instruction given by the defendant in the emails.  Mr Wong, counsel for the defendant, has advanced to the court a number of arguments as why the defendant could not have been a party to the suspected computer crime.  On the other hand, Mr Luk refers me to a number of factors as why he says that there was no computer fraud involved and it was simply a case of the defendant in failing to deliver the Goods to the plaintiff despite the payment of the purchase price.  In particular, the defendant admitted to the plaintiff that it was experiencing financial difficulty, and the defendant, without carrying out any further investigation about the allegation of the possible computer fraud, just proceeded to sell the Goods without notifying or informing the plaintiff.

12.  At this stage, it is not possible for the court to make a final determination on these matters.  However, based on the existing available facts, there is certainly circumstantial evidence to support the plaintiff’s allegation that there was no computer fraud involved, or that the defendant or the defendant’s staff or agent was involved in such computer crime.  If the plaintiff is able to persuade the trial judge to accept such inference, the property of the Goods has already passed to the plaintiff upon the payment of the full purchase price.  In such circumstances, I accept that there is a serious question to be tried.

13.  Secondly, I am of the view that the balance of convenience lies in favour of the granting of the injunction.  If the plaintiff succeeds at the trial, the property of the Goods has already passed to the plaintiff and it should be regarded as the owner of the Goods.  If the defendant is free to dispose of the Goods now, it would be very difficult for the plaintiff to recover the proceeds of the sale of the Goods from the defendant, which is a Spanish company with no asset in Hong Kong.  On the other hand, the defendant is not able to adduce any evidence as to why the preservation of the Goods would cause it any inconvenience or financial hardship.  Hence, the balance of convenience lies in favour of the plaintiff.

14.  Mr Wong has also referred me to the decision of Tyece Ltd v Max Concept Technology Ltd [2003] 3 HKC 116 and submits that the court would generally refuse to re-grant an injunction if the applicant has failed to make material disclosure to the court in the making of an ex parte order.  However, in deciding whether to re-grant an injunction, the court has to look at the merits of each individual case.  Here, it is clear that the plaintiff had made full payment for the purchase of the Goods pursuant to the instruction purportedly given by the defendant.  Whether the defendant did give such instruction, or whether the defendant’s staff or agent was in any way involved in the making of such fraudulent instruction, are matters which have to be properly investigated at the trial.  In such circumstances, it is only fair to grant an injunction to preserve the subject matter of the action.  I therefore so order.

15.  I understand that there would be substantial storage costs involved in preserving the Goods at the container terminal.  In such circumstances, it would only be sensible for the parties to sell the Goods and for the proceeds of sale be paid into court pending the determination of this case.  In such case, I leave it to the parties to explore such option and provide for liberty to the parties to apply to vary the terms of the injunction.

16.  I now listen to the parties’ submissions on the terms of the order and on the issue of costs.

	(David Lok)
	Deputy High Court Judge

Mr Victor Luk, instructed by Chin & Associates, for the plaintiff

Mr Charles Wong, instructed by Wilson Yeung & Co, for the Defendant