Email Fraud Litigation in Hong Kong
Email Fraud litigation cases is not rare in the Hong Kong Courts. As a law firm focusing on cross-border legal matters, we have handled different kinds of fraud cases, such as financial fraud, trading fraud and other kinds of fraud cases including email fraud cases. Benefiting from the convenient financial and trading environment in Hong Kong, as its by-product, there are various kinds of scams prevalent. In this article, I will introduce email scams and how to handle such cases by civil litigation.
Email Hack and Fraud: How it Happens?
This kind of scams use a Hong Kong company’s bank account as the recipient account for the scam proceeds. The fraudsters firstly use different ways (including computer virus) to obtain the email account and password of the parties legitimately dealing in international trading, and then will stay dormant and scrutinize the email content of both parties. When the buyer wants to pay the seller, the fraudster will control and intercept both parties’ email correspondence, impersonate as the seller and request the buyer to pay the proceeds into a Hong Kong company’s account (e.g. saying this is a supplier’s bank account and request the buyer pay directly to the supplier, this in fact is a Hong Kong company’s account set up by the fraudster). The buyer is completely unaware of the scam, because the instruction email comes out from the seller’s usual email, and as parties in international trade are from two different countries and often only rely on emails to communicate.
After the sum is deposited into the fraudster’s Hong Kong company’s account (Account A), it will soon be transferred to Account B and Account C in Hong Kong through cyberbanking, then the fraudster will make ways to transfer them offshore (e.g. Mainland China).
How to Handle the Email Fraud Case to Recove the Loss
After discovering the scam, the victim should immediately do the following:-
1) contact the bank where the fraudster’s recipient account is held at and inform them the payment has been made as result of a scam;
2) report the case to the Hong Kong Police Force, request to freeze the fraudster’s Hong Kong account as soon as possible;
3) if the Police doesn’t freeze the account, then victim should consider to immediately engage a solicitor to apply for pre-action injunction to freeze the recipient account involved; and
4) initiate civil litigation in Hong Kong Courts, request the company who holds the recipient account to refund the proceeds. If there are balances left in the recipient bank accounts after they are frozen, the possibility of getting back the funds is relatively high.
Regarding freezing of the recipient bank account, after the client engaging us, we can assist the client to report the case to the Hong Kong Police, and represent to attend the Police Office to take witness statement if the client cannot come to Hong Kong. As freezing of the recipient account by the Police usual takes time, an alternative method to freeze the recipient bank account is that we can represent the client to apply for an urgent freezing order and serve the order on the bank, which is usually much faster.
In Hong Kong, the Police’s power and duty is to investigate criminal acts, and the Police has no power and no obligation to directy pay the victim’s fraud back to the victim from the recipient’s bank account. If the victim wants to recover its loss, the only way is to engage a Hong Kong lawyer to initiate a civil litigation.
In this regard, we can represent the victim to take civil litigation against the recipient account holder for refund of the funds paid to the recipient account. If the defendant does not come to defend the case, the Plainiff can apply for default judgment in short time. After obtaining the judgment, the Plaintiff need further apply to the court for a guarnishee order which will order the bank to pay the frauded fund back to the plaintiff from the recipient account directly.
Claim and Defence in Email Fraud Case: the Usual Ground
In many email fraud litigation cases, the defendent recipient account holder does not come to defend. In some cases, the defendant does come to defend. A usual defense raised by the defendant is that they are also victim, and someone (say X) signed a trade agreement with their company (Company A), and during the performance of the contract X wires them a sum of money more than the contract price, and then request them to wire the surplus sum to X’s supplier, B and C. Company A believes X’s statement completely, and pay most of the fund received from the victim to B and C. B and C may also come to the Court and provide evidence to proof that they indeed have a trade
agreement with a foreign company, and receive the proceeds according to the trade agreement (proceeds transferred from Company A).
Essentially, the plainiff (victim)’s claim is uausally based on his proprietary interest over the fund paid to the recipient account. The burden of proof is easy to establish. As the fund is paid by the plaintiff to the recipeint’s bank account, this itself establishes the plaintiff’s claim of proprietary interest so long as the fund in the recipient bank account represent the plaintiff’s payment.
The Defendant, in order to successfully defend the case, must prove it is a bona fide purchaser for value without notice of the fraud. That means, the defendant need prove that as a matter of fact it does not participate in or be involved in the fraud, that it has paid valuable price as consideration to receive fund, that it has not noticed the fraud nor there is any reasonable ground that it should have noticed the fraud.
Settlement – An Alternative way of dispute resolution
In many cases where the defendant come to defend, the parties finally reach settlement agreement to end the litigation, especiall where the amount of dispute is reletively small and cannot justify the substantial legal costs to be paid by the parties to maintain a litigation. From a reasonable commercial prospective, sometimes it is a viable way to end the litigation. If the client intend to settle the case with its litigation opponent, we can assist the client in settlement negotiation.
For any issue regarding email fraud case, you are welcome to consult our lawyer of litigation team by email to [email protected]
(Author: Mr. Bob Yan, principal solicitor of our firm)