Introduction

For victims of telephone and email frauds, they often face the difficulties of being unable to identify, let alone commencing legal proceedings against, the fraudsters. As bound by confidentiality duties, banks would not disclose to those victims in private regarding information of those bank accounts even if they are suspected of being involved in fraudulent schemes. As a first step, victims should commence actions and apply to the Court for discovery pursuant to section 21 of the Evidence Ordinance (Cap. 8) (the “EO”). In Aisan Corporation of America & anor v Unknown Bank Account Holder(s) with DBS Bank (Hong Kong) Ltd & Ors [2023] 2 HKC 556, the Court of First Instance allowed the application for disclosing documents showing the bank balance of certain relating accounts, identities of persons authorized to operate those accounts, and their updated correspondence addresses and contact details. With such information, the victims would be in a much better position to pursue legal actions against fraudsters.

The fraud

The plaintiffs (the “Plaintiffs”) were victims of a telephone and email fraud which resulted in US$6 million being transferred out of the Plaintiffs’ accounts first to two first-tier bank accounts, and according to information given by the police and bankers’ records obtained on in another court action, the Plaintiffs discovered that the funds were further transferred to some second-tier bank accounts in Hong Kong which belonged to the 1^st, 2^nd and 3^rd Defendants maintained with the DBS Bank (Hong Kong) Limited (“DBS”), Standard Chartered Bank (Hong Kong) Limited and The Hongkong and Shanghai Banking Corporation Limited respectively (collectively, the “Banks”).

The Plaintiffs not just had no idea of the contact details of the Defendants, worse still, the identity of the 1^st Defendant was even concealed. The Plaintiffs initially thought that the account holder was a company incorporated in Mainland China and so such corporation was named as the 1^st Defendant initially with an address obtained from online company search. It was only until the DBS, having obtained a copy of the writ, informed the Plaintiffs that it did not have a client in such name and it was likely that the name was adopted by the real account holder as a reference name under DBS’s virtual bank account function.

The disclosure application

It is against such background, the Plaintiff applied to the Court by an ex parte Summons for bank disclosure. As the Plaintiffs did not have the contact details of the Defendants, the Summons could not be served on them but only the Banks were notified.

The Banks did not appear in the hearing and remained neutral. They had correspondence exchanges with the Plaintiffs over the terms of the discovery but had largely no dispute over the terms of disclosure sought.

The law

Under section 21 of the EO,

1.       On the application of any party to any proceedings, the court or a judge may order that such party be at liberty to inspect and take copies of any entries in a banker’s record for any of the purposes of such proceedings.

 

2.       An order under this section may be made either with or without summoning the bank or any other party, and shall be served on the bank 3 clear days before the same is to be obeyed, unless the court or judge otherwise directs.

 

In allowing the application, the Court noted that service of the Summons on the account holders is not a statutory requirement under section 21 of the EO. Although it is fairer to serve an application under section 21 upon or otherwise give notice to the account holder, this is not always possible. The Court has power to make an order ex parte without the attendance of the Defendants.

To succeed with the application, the Plaintiffs must show that there is a probability that the account will contain materials germane to an issue to be tried between the parties, i.e. the accounts are relevant.

Despite the Court has discretion to allow such an application, it must be exercised with great caution. The Court recognized that privacy of the Defendants and the bank/customer confidence with the relevant bank have to be respected. Therefore, the Court would only allow the application when it is clearly established that the account is really that of the party to the proceedings or that the party is so closely connected with it that it would be evidence against him.

The Court’s decision

The Court considered the following factors and allowed the application:-

1.       It is not a statutory requirement for service of the Summons on the Defendants;

 

2.       The underlying claims made by the Plaintiff was proprietary in nature;

 

3.       The scale of the fraud was big;

 

4.       The information/records sought were clearly germane to the issues in the case and helped to identify the person involved and trace the misappropriated funds; and

 

5.       The accounts and holders were closely connected with the fraud and may be used as evidence against the Defendants.

 

Although allowing the application, the Court opined that the scope of disclosure sought was too wide. In particular, the Court was of the view that it is not appropriate to grant the Plaintiffs discovery as against “any other accounts” of the 2^nd and 3^rd Defendants and the Court refused to give liberty for the Plaintiffs to seek further disclosure regarding specific transactions as shown on the disclosed bank statements. The Court commented that it was not appropriate to leave further discovery in the hands of the Plaintiffs or the banks without any supervision by the Court which would risk compromising the duty of confidence between banker/customer further than was necessary. Instead, the Plaintiffs should make similar application to the Court for any further disclosure.

Accordingly, the Court allowed disclosure of records showing bank balance of those accounts concerned, identities of persons authorized to operate those accounts, their updated correspondence addresses and contact details, bank statements of the Defendants, records relating to the opening of those accounts, and documents identifying all sums transferred out of the Defendants’ accounts and identifying for each transaction the name and bank account details of the transferee.

The Court has further granted leave for the Plaintiffs to use the documents or information obtained in support of further actions, whether civil or criminal, whether in Hong Kong or elsewhere, as may be necessary to facilitate the Plaintiffs’ tracing of the Funds.

Takeaways

Undoubtedly, the privacy of bank account holders and banker/customer confidentiality ought to be safeguard, but the Court also recognized that the law should facilitate discovery of the present kind in aid of a victim of cybercrime who comes to the Hong Kong Courts for lawful redress against the true culprits on the other. Nonetheless even if the Court is sympathetic with victims on one hand, the Court will exercise its discretion with great caution to ensure no more than necessary is disclosed upon conducting a balancing exercise.

 

For enquiries, please feel free to contact us at:

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2023