LEXCOM INFORMATIONSSYSTEME GMBH v. HONGKONG JOYEE HOLDINGS CO., LTD AND ANOTHER

HCA 464/2021

[2021] HKCFI 3389

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 464 OF 2021

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D E C I S I O N

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1.  There are 2 applications before the court:

(1)  for the garnishee order nisi to be made absolute against D1 (“garnishee application”); and

(2)  the Summons dated 20 September 2021 for the Mareva injunction to be varied so as to enable payment out of money in the bank account of D1 held with the Hang Seng Bank to the plaintiff in settlement of the judgment debt (“variation application”).

Garnishee application

2.  The garnishee order nisi was adjourned on the last location due to non-compliance with Order 49, rule 3(1), as Hang Seng Bank (“the Bank”)  and D1 were served on the same day.

3.  Since the adjournment, the garnishee order nisi and the court order dated 18 October 2021 have been re-served on D1.  The court order was served on the Bank on the same day.  I am satisfied as to service. There being no opposition from D1, and the Bank being neutral, the garnishee order nisi is made absolute.

Variation application

4.  The Summons asks for variation of the injunction order dated 11 March 2021, as amended on 22 March 2021 and further amended on 26 March 2021, be varied to permit the Bank to:

(a)  Release and pay over to the plaintiff all sums up to the judgment sum of €1,183,210.64 from D1’s account with the Bank; and

(b)  Upon receipt of any new monies into D1’s account maintained with the Bank, release and pay over to the plaintiff all debts due or accruing from the Bank to D1, or so much thereof as may be sufficient to satisfy the unpaid balance of the judgment together with interest thereon.

5.  This court notes from the letters dated 21 September and 26 October 2021 from the Bank that the account has been frozen by a regulatory body.  Mr West, solicitor for the plaintiff, informed this court that the regulatory body was the Joint Finance and Intelligence Unit (“JFIU”)  of the Hong Kong Police Force.  The plaintiff had made a report to the police and upon receiving the report, the JFIU would have issued a “letter of no consent” to the Bank to freeze the funds.

6.  There is no proof as to which regulatory body has instructed the bank to freeze the bank account of D1.  The judiciary should not be seen to be interfering with the rights and duties of the regulatory body.

7.  Accordingly, with regard to paragraph 1(a)  of the Summons, the proper order to make would be:

“Subject to consent of the JFIU and/or any other regulatory body who had instructed the Bank to freeze D1’s bank account, [paragraph 1(a)  of Summons]”

8.  The plaintiff no longer pursues paragraph 4(b)  above.  That is a correct position to take as, in my view, the plaintiff is effectively asking for an order to lay its hands on the future funds coming into the bank account of D1 (“future funds order”)  but it is doubtful: (1)  whether the future funds would fall within the meaning of “a debt due or accruing due to the judgment debtor” under Order 49, rule 1; and (2)  whether the future funds would fall within the ambit of the plaintiff’s proprietary claim under the judgment.

9.  Accordingly, with regard to the Summons, I only grant an order in terms of paragraph 7 above. 

10.  As the plaintiff seeks no order as to costs, I make no order accordingly.

11.  I thank Mr West for his assistance.

Mr Mark Andrew West of Reed Smith Richards Bulter, for the Plaintiff

The 1^st Defendant was not represented and did not appear

HCA 464/2021

[2021] HKCFI 1756

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 464 OF 2021

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REASONS FOR DECISION

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1.  This is the application of Lexcom Informationssysteme GmbH (“the plaintiff”) against Hongkong Joyee Holdings Co Ltd (“D1”) for default judgment pursuant to Order 19, rule 7 of the Rules of the High Court (“RHC”). At the conclusion of the hearing, the default judgment was granted with written reasons to be handed down which I now do.

Background

2.  The plaintiff is a company incorporated in Germany that provides information technology services. It claims to be the victim of an email fraud which arose in the following circumstances.

3.  On 8 and 15 February 2021, persons unknown hacked into the email account of the plaintiff’s managing director Mr Lex and sent emails to an employee in the plaintiff’s accounting department with instructions given on 8 February 2021 to remit €487,055 from the plaintiff’s bank account maintained with Deutsche Bank AG to the account of Kiss Gepes Forgacs Kft maintained with K and H Bank ZRT in Hungary (“KGFK’s bank account”).

4.  On 15 February 2021 the same employee received instructions allegedly from Mr Lex to remit €780,582 to Busemi Design Kft’s account maintained with K and H Bank ZRT in Hungary (“BDK’s bank account”).

5.  On 9 February 2021, after the deduction of certain bank charges, €456,243 (“the 1^st Sum”) was transferred from KGFK’s account to D1’s bank account maintained with Hang Seng Bank Limited (“D1’s bank account”).

6.  On the same day, the sum of USD 196,996.10 (after deduction of bank charges) which was approximately €143,360.96 was transferred from D1’s bank account to the account of Thapa Gunja, trading as New Galaxy Enterprises (“D2”).

7.  On 16 February 2021, after the deduction of bank charges the sum of €769,644.04 (“the 2^nd Sum”) was transferred from BDK’s bank account to D1’s account. The 1^st Sum and the 2^nd Sum are collectively referred to as “the Sums”.

The plaintiff’s claim

8.  As the remittance instructions were never given by Mr Lex and the remittances were never authorised by the plaintiff, the plaintiff commenced this action to pursue a proprietary/tracing claim and recover the Sums misappropriated from its bank account as a result of the fraud.

9.  The plaintiff obtained an ex parte proprietary injunction against D1 and D2 (collectively “the defendants”) on 11 March 2021 (“the injunction order”) to restrain them from, inter alia, dealing with the Sums.  That order (as amended on 22 March 2021 and 26 March 2021) was continued by an order dated 9 April 2021 (“the continuation order”) until further order or conclusion of the trial in these proceedings. 

10.  The writ was served on D1 on 26 March 2021 and the statement of claim on 15 April 2021. D1 failed to acknowledge service or file its defence.

11.  The plaintiff served the summons for default judgment pursuant to RHC Order 19 rule 7 on 25 May 2021.

Disposition

12.  I am satisfied on the basis of the plaintiff’s pleadings that the plaintiff is a victim of an email fraud and is entitled to the Sums. I see no reason why a default judgment which, inter alia, includes declaratory relief, should not be made.

13.  A constructive trust arose by operation of law when the Sums was credited to D1’s account with the Bank. The court has a discretion rule to grant a declaration to that effect where it is necessary to do so: see 2021 HKCP at §15/16/2; Star Therapeutics Inc v Leabon Technology (HK) Ltd, [2021] HKCFI 1715. I consider that there is a genuine need for such a declaration to be made in the present case. 

14.  The court was informed at the hearing that the plaintiff’s claim against D2 in respect of the USD196,996.1 has been settled in the sum of USD105,000. The plaintiff is not pursuing D2 for the balance.

15.  As the plaintiff’s claim in this action is against the defendants on a joint and several basis, the default judgment sought must take into account the settlement reached with D2 and the total amount claimed against D1 revised to reflect the receipt of USD105,000.

16.  The injunction order is to continue until further order of the court. The summons dated 14 May 2021 scheduled to be heard before Master Phoebe Man on 21 June 2021 be vacated and the plaintiff be awarded the costs of the action including the costs of this application.

17.  A draft order should be submitted for approval in the usual way.