The Uplifted Threshold of Application for Summary Judgement in Fraud Case

November 2022

The cyber world today inevitably leads to fraud cases from websites, apps and emails. A typical case is that the fraudster creates a sham transaction that captures the victim’s fund to a third party’s bank account. The Police’s investigation only results in a Letter of No-Consent to the bank for releasing the fund. The victim’s civil action lies on the usual application for an injunction to prohibit the recipient of the fund to take the money out of the bank account and a disclosure order to the bank to disclose the flow layer of the fund.

Following that injunctive relief and for the ultimate purpose of getting back the fund, it has been customary for the victim to obtain an Order 14 judgement upon the statement of claim that there is no defence to unjust enrichment as the transaction by which the recipient receives the fund is simply illegal and further that the defence of change of position is not available due to illegality. Nor can the recipient be considered to have provided value or acted in good faith if the transaction by which the fund being transferred is illegal. The line of authorities of DBS Bank (Hong Kong) Limited v Pang Jing (2020) 4 HKC 395 and Barros Mattos Junior v General Securities Finance Limited (2005) 1 WLR 247 has provided comfort to the practitioners to effectively shorten the prolonged proceedings to obtain judgment for the victim.

The uncertainty arises from the case of Solyda SRL v Wu Ge And Another (2021) HKCFI 1825 in which DHCJ Le Pichon dismissed the summary judgment application and took the view that the issue of whether foreign illegalities would preclude reliance on a change of position defence involved conflicting authorities and it could not be decided in a summary manner. In Lesnina H Doo v Wave Shipping Trade Co. Ltd. (2022) HKCFI 1070, DJ Dawes SC also queried the absolute approach towards the illegality issue under Barros Mattos Junior and Pang Jing and opined that such approach was at variance with authorities that suggested a due sense of proportionality needed on question relating to illegality. The gravity of the criminal conduct against the impact of allowing the defence might be relevant and there should be a balancing exercise.

Given Solyda SRL and Lesnina H Doo and the similar authorities like R. Stahl Inc. v A J Development Limited (2021) 6 HKC and Tokic, D.O.O. v Others (2022) HKCFI 217, the plea of unjust enrichment by the victim due to illegality in the summary judgement application must face an uplifted threshold. Only the clearest case can warrant the summary judgement. The victim must require much time than before to obtain judgement for release of the fund and justice may be delayed if the action unfortunately goes to trial.