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Chan Lap Kit T/a Ngan Fung Exchange Co Also T/a Reliable Rmb Remittance Co And Another v Yushun Technology Ltd

Judgment Cited authorities 9 Cited in Precedent Map Related
Vincent
CourtCourt of Appeal (Hong Kong)
Judgment Date01 December 2017
Citation[2018] 1 HKLRD 192
Judgement NumberCACV182/2017
Subject MatterCivil Appeal
CAMP11/2017 CHAN LAP KIT t/a NGAN FUNG EXCHANGE CO also t/a RELIABLE RMB REMITTANCE CO AND ANOTHER v. YUSHUN TECHNOLOGY LTD

CAMP 11/2017 AND CACV 182/2017
CAMP 11/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 11 OF 2017

(ON AN INTENDED APPEAL FROM DCCJ NO 130 OF 2016)

________________________

BETWEEN
CHAN LAP KIT trading as
NGAN FUNG EXCHANGE COMPANY
also trading as RELIABLE RMB REMITTANCE CO
 1st Plaintiff
CHAN KIU MEI CANDY trading as
NGAN FUNG EXCHANGE COMPANY
 2nd Plaintiff
and
YUSHUN TECHNOLOGY LIMITED
（裕順科技有限公司）		 Defendant
and
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
 Garnishee
and
BR. C.A.T. INTERNATONAL CO. LTD. Intervener

________________________

AND

CACV 182/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 182 OF 2017

(ON APPEAL FROM DCCJ NO 130 OF 2016)

________________________

CHAN LAP KIT trading as
NGAN FUNG EXCHANGE COMPANY
also trading as
RELIABLE RMB REMITTANCE CO		 1st Plaintiff
CHAN KIU MEI CANDY trading as
NGAN FUNG EXCHANGE COMPANY
 2nd Plaintiff
and
YUSHUN TECHNOLOGY LIMITED
（裕順科技有限公司）
 Defendant
and
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
 Garnishee
and
BR. C.A.T. INTERNATONAL CO. LTD. Intervener

________________________

(Heard together)


Before: Hon Lam VP, Kwan JA and Poon JA

Dates of Written Submissions: 9, 24 August 2017 and 15 November 2017

Date of Judgment: 1 December 2017

________________________

J U D G M E N T

________________________


Hon Kwan JA (giving the judgment of the Court):

1. CAMP 11/2017 is the plaintiffs’ application for leave to appeal from the decision of Deputy District Judge Simon Ho on 24 January 2017 (“the Decision”). The Decision was made in respect of a summons issued by BR CAT International Co Ltd (“the Intervener”) to join in and oppose the plaintiffs’ application to make absolute a garnishee order nisi against the garnishee bank HSBC, with which the defendant maintained an integrated bank account (“the Account”). The judge exercised his power under Order 49 rule 6(2) of the Rules of the District Court to determine summarily the Intervener’s proprietary claim over the credit balances in the Account. He dismissed the plaintiffs’ application to make absolute the garnishee order nisi.

2. On the plaintiffs’ application for leave to appeal against the Decision, the judge gave a decision on 26 July 2017 (“the Leave Decision”), in which he granted leave to appeal only in respect of §1(3) of the grounds in the draft notice of appeal, and refused leave in respect of the other grounds in §§1(1), (2), (4), (5) and (6), 2 and 3.

3. The plaintiffs duly issued a notice of appeal on 2 August 2017 to pursue the single ground for which leave to appeal was granted by the judge. This is CACV 182/2017.

4. By a summons issued in CAMP 11/2017 on 9 August 2017, the plaintiffs renewed their application for leave to appeal before the Court of Appeal in respect of the grounds in §§1(1), (2), (4), (5) and (6) and 2 in the draft notice of appeal[1].

5. Having considered the papers, we decided to exercise the power under Order 59 rule 2A(5)(a) of the Rules of the High Court to determine this application without a hearing on the basis of the written materials before us.

6. On 1 November 2017, we invited the parties to make further submissions in writing that in the event we refuse leave to appeal in CAMP11/2017, whether the Court of Appeal can and should strike out the appeal in CACV 182/2017.

7. The principles for granting leave to appeal are well established. Under section 63A(2) of the District Court Ordinance, Cap 336, leave shall not be granted unless the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice that the appeal should be heard. Reasonable prospect involves the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable” (SMSE v KL [2009] 4 HKLRD 125 at §17).

8. We will only set out those of the matters in the Decision by way of background that are necessary for a proper understanding of the ground of appeal for which leave was granted by the judge and our disposition of the leave application.

The Decision

9. The Account maintained by the defendant with HSBC is a dual currency business integrated account. It has a single bank account number and is internally divided into a USD sub-account, an HKD savings sub-account and an HKD current sub-account (the two HKD sub-accounts are collectively referred to as “the HKD sub-account”). There is no evidence of any prior agreement between HSBC and the defendant allowing any overdraft to be made under the HKD current sub-account[2]. And, at all times, the Account was not overdrawn, whether the USD sub‑account was considered alone, or with the HKD sub-account[3].

10. On 23 February 2016, the plaintiffs obtained a default judgment against the defendant for money had and received in the sum of HK$440,810.26. They then obtained a garnishee order nisi against HSBC in respect of the debts due by HSBC to the defendant, which covered the credit balances in the Account.

11. The Intervener is the victim of a cyber-fraud involving an unknown fraudster hacking into its email account to authorise payment out to accounts which the Intervener never intended to pay. On 28 April 2014, US$880,131 of the proceeds of fraud was transferred through an intermediate account to the USD sub-account of the Account. In a separate action brought by the Intervener proceedings against a number of entities and individuals, including the defendant, a Mareva injunction was granted in November 2014 to restrain disposal of the funds in the Account and on 10 May 2016, the Intervener obtained a default judgment against the defendant for US$880,131 and other reliefs, including an account and tracing enquiry and a declaration that in respect of the monies received by the defendant, the defendant held so much of the traceable monies with interest and/or profits as the court may assess and/or determine as belonging to the Intervener on constructive trust for the Intervener.

12. The question before the judge was whether he should exercise his discretion to make absolute the garnishee order nisi. If there was no reasonable ground why this should not be done, the order nisi should be made absolute. He posed two further questions. First, whether the Intervener[4] has any proprietary interest in respect of the US$880,131 paid into the Account. Second, if yes, whether the credit balances in the Account can be traced into by the rules of tracing as originated from the US$880,131. If both questions can be answered in the affirmative, this would amount to a reasonable ground to refuse to make absolute the order nisi.

13. The judge held that the first question should be answered in the affirmative. This is based on the default judgment obtained by the Intervener against the defendant in the separate action. It is implicit in the reliefs granted in that action that the Intervener has proprietary interest in the fund of US$880,131 as received by the defendant when it was deposited into the Account. The plaintiffs do not seek to challenge this finding on appeal.

14. The judge also rejected the plaintiffs’ contention that based on mistake and unjust enrichment, they could assert a proprietary interest in the sum of HK$440,810.26 which they had paid into the Account. There is no challenge about this as well.

15. A number of arguments were advanced by Mr Martin Ho for the plaintiffs why the Interveners cannot trace into the value of what was owed by HSBC to the defendant as the account holder of the Account, all of which were rejected by the judge. For present purpose, we need be concerned with only one of the arguments.

16. When the garnishee order nisi was served on HSBC on 30 March 2016, there was a credit balance of US$6.87 in the USD sub‑account and another credit balance of HK$504,224.21 in the HKD sub‑account[5]. If the funds in the USD sub-account and the HKD sub‑account are regarded as a single unified debt for tracing purposes, the Intervener would be able to trace into and assert its proprietary claim not only over the credit balance in US dollars but also the credit balance in HK dollars. Mr Ho contended that the funds in the USD sub-account and the HKD sub-account should be regarded as segregated, so the Intervener’s claim to the value of what was owed by HSBC to the defendant would be confined to the US$6.87 remaining in the USD sub-account.

17. The judge rejected his argument. Crucially, the judge made these findings of fact in §39 of the Decision regarding the nature of the Account on the undisputed evidence:

“By taking a fair and overall view of the nature and operation of the Account on the evidence before me, I agree with Mr Ng’s submission that the HKD sub-account and USD sub-account should be viewed together as one single bank account for the purpose of this tracing exercise. Among other things, it is observed that the Account is a dual currency business integrated account to facilitate the bank’s customer to carry out its banking transaction in different currencies conveniently within one single account. The relationship between the defendant and the garnishee bank is defined by a single contractual relationship, and there is an average total relationship balance within the Account for each month as shown in every monthly bank statement. Any payment in and out of the Account, whether in HKD or USD, would be transacted via its single...

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