In a recent case Toyota Boshoku Europe N V v Kingsville (HK) Enterprises Ltd [2024] HKCFI 352, the Hon Au-Yeung J was faced with a situation where the Plaintiff, a victim of a large scale fraud, struggled to effect service of court documents on the 21st Defendant (“D21”) whose address was in the Mainland and the victim was unable to serve the documents through the PRC judicial authorities. Although the Plaintiff was able to obtain a substituted service order from a Master for certain court documents to be served on D21’s bank, Standard Chartered Bank (“SCB”), the Judge declined to make an order that further documents be served on D21 by sending them to SCB following the bank’s protests.

Background

The Plaintiff paid approximately HKD500 million to various companies as a result of unknown fraudsters impersonating the CEO and President of the Plaintiff’s parent company. The Plaintiff’s funds were paid out to several layers of recipients, including D21 who had an address in the Mainland.

The Plaintiff was unsuccessful in effecting service of the Writ and interim injunction order on D21 through judicial authorities in the Mainland, as D21 did not reside at the address provided by the Plaintiff. The Plaintiff then obtained a substituted service order (“Substituted Service Order”) from a Master for serving the Writ and other court documents on D21 by sending those documents in electronic form contained in a USB flash drive and a CD together with the Substituted Service Order to SCB.

The Application for Service Order

Pursuant to the Substituted Service Order, the Plaintiff served the court documents on SCB, which had forwarded the same to the correspondence address of D21 in SCB’s records. However, SCB wrote to the Plaintiff’s solicitors and made it clear that it was not the agent of D21 and did not have instructions or authority to accept service on behalf of D21 and that it would not accept further service of documents against any defendant in the action going forward. As a result of SCB’s objections, the Plaintiff sought a service order (“Service Order”) to facilitate service so that the Plaintiff could apply for default judgment and other relief against D21.

In its application, the Plaintiff submitted to the Court that it is not uncommon that substituted service is ordered by way of sending documents to a third party and SCB was not actually ordered to accept service on behalf of D21 or to further effect service on D21. Also, service of documents via SCB was the best way to bring the documents to the attention of D21 because of the banker/client relationship where the bank would normally be expected to have ways of contacting its customers. The Plaintiff said that the order was sought as a practical solution to enable these proceedings to progress against D21 and to do justice between the parties where the ordinary rules of service would prevent the Plaintiff from recovering the defrauded funds from D21.

Decision

In light of SCB’s objections, the Court agreed that the bank should not be troubled again. The Court also rejected the Plaintiff’s submission that SCB had no obligation to serve the documents on the Defendant, because the basis for seeking substituted service was that the mode of service ordered would bring the documents to the notice of the defendant and therefore the Plaintiff must have reasonably expected that SCB would take steps to inform D21 of the receipt of the documents. The Court expressed concerns that if the Plaintiff’s proposed mode of service became prevalent, it would create unforeseen duties and costs on banks outside their ordinary duties to their customers.

Further, the Court also questioned whether effecting service on D21, who had an address outside Hong Kong, by serving SCB in Hong Kong could be regarded as proper service out of jurisdiction. In this regard, the Court pointed out that the Plaintiff failed to adduce evidence to satisfy the Court in Hong Kong and a Higher People’s Court in the Mainland that the proposed substituted service was appropriate in all the circumstances. The Court stressed that it remained the duty of the Plaintiff to consider the appropriate steps to seek out D21 and/or to properly apply for an order for substituted service in Mainland China.

The Court therefore rejected the Plaintiff’s application for the Service Order. However, in the absence of any challenge from the bank, the Court did not set aside the initial Substituted Service Order.

Key Takeaways

• In the case of a foreign defendant, although there is case authority for the grant of an order for substituted service on a defendant’s solicitors (who remained the solicitors on record for the defendant in another action) in Hong Kong even if the solicitors had not been authorised to accept service (Deutsche Bank AG v Zhang Hong Li [2016] 3 HKLRD 303), there is no authority on effecting substituted through a defendant’s bankers. The present case shows that, without clear evidence, a defendant’s banks would not normally be treated as agents of the defendant for service of court documents in Hong Kong and the Court is reluctant to impose a duty on banks to accept service on behalf of their clients.
• The Hong Kong Courts have also made it clear that where a Plaintiff fails to serve court documents on a Defendant in the Mainland through judicial authorities and as a result is required to seek an order for substituted service, the Plaintiff has a duty to adduce suitable evidence to satisfy the court in Hong Kong and a Higher People’s Court in the Mainland that the alternative method is appropriate in all the circumstances. In this regard, it is expected that expert evidence on PRC legal advice would be required to convince the Hong Kong Courts that the proposed method of substituted service complies with Mainland law for effecting service in the Mainland.