Substantive element: the applicability of the TO 

In contrast, in Tokić, d.o.o. v. Hong Kong Shui Fat Trading Limited & Ors (unrep., HCA 381/2020, 4 August 2020), DHCJ Douglas Lam SC dismissed a vesting order application on the basis that the court had no jurisdiction to grant vesting orders in email fraud cases. In doing so, Mr Douglas Lam SC expressly stated that he differed on this issue from the above decision of Mr Paul Lam SC in Wismettac (and earlier judgments in the same vein) and held that the TO was simply not applicable to email fraud cases.⁵

The court’s jurisdiction to grant vesting orders is derived from section 52(1)(e) of the TO, which provides that where a thing in action is vested in a trustee and it appears to the court to be expedient, the court may grant an order vesting the right to transfer the thing in action in any person appointed by the court. Section 52(5) of the TO further provides that the court may make declarations and give directions as to the manner in which the right to transfer the thing in action is exercised.

Whilst judges in previous cases had assumed that section 52(1)(e) of the TO applied to the proceeds of an email fraud, Mr Lam SC took the view that the defendants (i.e., the fraudsters) were not “true” trustees, constructive or otherwise, as required under section 52(1)(e). Similar to dishonest assisters and knowing recipients, the defendants were merely required by equity to account (or to restore the assets immediately to the plaintiff) as if they were trustees or fiduciaries.⁶ In Mr Lam SC’s view, “true” trustees only referred to persons (such as company directors) who, albeit without a formal appointment, had lawfully assumed to act in the administration of the trusts, or whose fiduciary obligations were implied from the common intention inferred from the conduct of the parties.⁷

At the end of his decision, Mr Lam SC put forward an alternative remedy by ordering the defendants to, within seven days, execute the documents instructing the banks to transfer to the plaintiff the sums which he had declared to be held by them as constructive trustees, failing which the plaintiff would be at liberty to apply for an order under section 25A of the High Court Ordinance (HCO) for the court to nominate someone to execute the documents, which would have the same effect as if they had been executed by the person originally directed to execute them.⁸

Conclusion

Despite the somewhat conflicting decisions in Wismettac and Tokić, d.o.o. with regard to the applicability of vesting orders in email fraud cases, with the judicial spotlight having been turned on the novel shortcut through to vesting orders, the scope of this shortcut has been severely curtailed. It also remains to be seen whether Mr Douglas Lam SC’s suggested alternative remedy will be adopted by practitioners and the court in future cases and whether the banks will agree to release monies following the granting of an order made under section 25A of the HCO. Further complications may also arise in cases where the monies are caught by a Mareva injunction order, as the bank would not be able to release the monies without prior variation of the Mareva injunction order.

Be that as it may, claimants in hot pursuit of their misappropriated funds would be well advised to consider traditional (and procedurally regular) route of garnishee applications to ensure enforcement against monies in bank accounts, lest the favoured shortcut proves to be a road to perdition. Needless to say, however, fraud prevention is always better than the cure. 

1. [53] and [54].
2. [55].
3. [55] and [56].
4. [61].
5. [19].
6. [14].
7. [12] and [18].
8. [12] and [21].