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

Judgment Date24 January 2017
Year2017
Judgement NumberDCCJ130/2016
Subject MatterCivil Action
CourtDistrict Court (Hong Kong)
DCCJ130/2016 CHAN LAP KIT t/a NGAN FUNG EXCHANGE CO also t/a RELIABLE RMB REMITTANCE CO AND ANOTHER v. YUSHUN TECHNOLOGY LTD

DCCJ 130/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION 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

-------------------------

Before: Deputy District Judge Simon Ho in Chambers (Open to public)
Date of Hearing: 19 September 2016
Date of Decision: 24 January 2017

-----------------------

DECISION

----------------------

Introduction

1. This is the substantive hearing of the plaintiffs’ garnishee order nisi to show cause against HSBC (“the garnishee bank”) with which the defendant has maintained an integrated bank account (A/C# 817-731904-838) (“the Account”). There were two credit balances of HK$504,224.21 and USD6.87 in the Account (“the debt in question”) at the time of service of the garnishee order nisi. Neither the defendant nor the garnishee bank sent any representative to attend the hearing.

2. Apart from the plaintiff’s present application, there is also before this court a summons taken out by BR CAT International Co Ltd (“the Intervener”) whereby it seeks to be joined as a party to these proceedings (“the Intervener’s Summons”) for the purpose of opposing the garnishee order nisi to be made absolute. The Intervener also made substantive argument as supported by affidavit evidence for such objection. In gist, it is the Intervener’s case that it has proprietary claim over the debt in question because the defendant holds the same as constructive trustee for it by reason of a default judgment granted to it against the defendant under HCA 1023 of 2014 (“HCA 1023”). This hearing is also the hearing of the Intervener’s claim pursuant to Order 49 rule 6(2) of the Rules of District Court (“RDC”) whereby this court is conferred with the power to summarily determine the questions at issue between the contesting claimants for the debt in question.

The procedural history

3. On 11 January 2016, the plaintiffs issued the Writ to recover a sum of HK$440,810.26 from the defendant basing on the cause of action of money had and received. The defendant did not enter into appearance to defend. On 23 February 2016, the plaintiffs entered default judgment against the defendant in this action (“the default judgment”) for the amount of HK$440,810.26 with interest and costs, and damages to be assessed.

4. On 15 March 2016, Master Yip granted a garnishee order nisi in favour of the plaintiffs against the garnishee bank in respect of the debts due by the garnishee bank to the defendant (which cover the aforesaid credit balances standing in the Account) to be attached to answer the judgment sum and the interest accrued thereon as per the judgment[1] (“the garnishee order nisi”).

5. On 30 March 2016, when the garnishee order nisi was served upon the garnishee bank, the defendant’s bank account(s) maintained with the garnishee bank was subject to a Mareva injunction (“the Injunction”) obtained by the Intervener against the defendant in HCA 1023 who are correspondingly the plaintiff and the 9th defendant in that action.

6. On 10 May 2016, with leave granted by Mr Justice Chung under HCA 1023, the Intervener obtained default judgment[2] against the 9th defendant (i.e. the defendant here) with the restitution and/or an order to pay to the plaintiff (i.e. the Intervener here) in the sum of US$880,131 (or its Hong Kong dollar equivalent) together with some other incidental reliefs including an account and tracing enquiry as per para.8.1 of that judgment (“HCA 1023 judgment”). Under para. 8.3 of the judgment, Mr Justice Chung also ordered the Injunction be varied to such extent to allow any sums payable under His Lordship’s Order be allowed to be paid out of the relevant bank accounts (including the Account) to the plaintiff in HCA 1023 (ie the Intervener here). Though, Mr Ernest Ng, counsel representing the Intervener, confirmed with this court that no tracing enquiry has been made in that action, and therefore no sum has yet been ordered to be paid out of the Account pursuant to Mr Justice Chung’s order.

Grounds of opposition by the Intervener

7. At the hearing, Mr Ng also clarified with this court that the proper procedural ground for his client to oppose the plaintiffs’ present application should be pursuant to Order 49 rule 6 of the Rules of District Court (Cap 336H Sub Leg) (“the RDC”). Strictly speaking, it would be unnecessary to invoke Order 15 rule 6 for such purpose. This is also the view and stance as taken by Mr. Ho on his client’s behalf.[3]

8. Under Order 49 rule 6(1), when it comes to the court’s notice that some other person than the judgment debtor (ie the defendant here) claims to be entitled to the debt in question, such person may be ordered to attend the court and state the nature of his claim with particulars thereof. This court is satisfied that by way of Mr. Registrar’s Order made on 16 June 2016[4], the Court has ordered the Intervener to attend this Court to state the nature of its claim with particulars and granted leave to it to file and serve its supporting affidavits for such purpose.

9. Mr Chan Hiu Fung Nicholos, the handling solicitor of Messrs Squire Patton Boggs acting for the Intervener, have filed two affirmations setting out the background of their client’s case and nature of the Intervener’s interest in the debt in question. Mr. Chan Lap Kit also filed his affirmation on 14 July 2016 to oppose the Intervener’s Summons.

The approach in making or refusing to make absolute the order nisi

10. It was a matter within the discretion of the court whether or not to make absolute a garnishee order nisi. No general principles were laid down upon which the discretion fell to be exercised. The question was whether there was any reasonable ground why the order should not be made. If no such ground is made out, the order nisi should be made absolute. (see Rooke & Anor v HV Construction Services Ltd [1998] 2 HKLRD 319 (CA), per Godfrey JA at pp 322J-323B)

The Intervener’s case

11. It is not in dispute that the Intervener is a victim of some email fraud, whereby it was deceived by some fraudster to transmit funds of USD4,045,676 into bank accounts of two recipients[5] (“the 1st level of recipients”). On 28 April 2014, one of them in turn transferred the USD880,131 as received into the Account.

12. Basically, it is the Intervener’s case that against the aforesaid background the defendant being the recipient of the USD880,131 knew of the subject fraud when the fraud proceeds was deposited into the Account. In these circumstances, the Intervener had already had proprietary interests in the current total relationship balance (“the current TRB”) within the Account, ie also the debt in question as originated from the fraud proceeds, before the garnishee order nisi was served upon the garnishee bank.

The plaintiffs’ case

13. On the other hand, it is the plaintiffs’ case that they carried on business of foreign exchange and remittance services at all material times. On 30 April 2014, the plaintiffs arranged for a transfer of HK$1,465,337.26[6] into the Account. However, the plaintiffs subsequently received instructions to stop the transfer because they were notified that the Account had been suspended. The plaintiffs immediately proceeded to cancel the transfer but managed to do so to the extent of HK$1,024,527 only, leaving a net of HK$440,810.26 paid into the Account effectively.

14. The plaintiffs contend that on the very same day when the US$880,131 was deposited into the Account, five substantial withdrawals were made in the respective sums of 31,736, 337,000, 180,000, 70,527, and 264,747, all in US currency.

15. By the end of the banking day of 28 April 2014, there was only a mere USD1,105.06 left in the USD sub-account of the Account. There were further USD transactions in the Account on 29 April 2014 and 30 April 2014. By the end of the banking day of 30 April 2014, the USD balance was further reduced to USD6.86.

16. Mr Martin Ho, counsel representing the plaintiff, submits that firstly, since the garnishee order nisi predated the HCA 1023 judgment, the former should rank in priority to the latter. Secondly, there is in fact nothing in the Account for the Intervener to trace into because the fund of USD 880,131 have been ‘immediately’ withdrawn after it was deposited into the Account. According to Mr. Ho’s submission, this is just akin to tracing into an overdrawn account which is an impermissible course to take. It is common ground that the monies in the Account is a mixed fund for the purpose of tracing.

Whether the garnishee order nisi ranks in priority just because it predated the HCA 1023 judgment

17. Mr Ho is correct to point out that the service of garnishee order nisi would create an equitable charge over the debt in question due to the judgment debtor. (see Hong Kong Civil Procedure 2017, Vol 1, para.49/3/3) On the other hand, one should bear in mind that such service is also ‘to make the garnishee the custodier for the court of the whole fund attached’ pending the Court’s determination as to whether the order nisi should be made absolute. (see Lord Watson’s observation made in Rogers v Whiteley [1892] AC 118, at p 122 as applied by Hong Kong Court of Appeal in Astro Nusantara...

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