Vesting orders: back in vogue? Let’s hope so

Hong Kong court says it does have the power to assist cyber fraud victims under the Trustee Ordinance.

Cyber fraud scams, typically involving fraudsters using spoofing / phishing tactics to bring about unlawful receipt of monies, have, unfortunately, been a mainstay in Hong Kong in recent years.

As the fraudsters' nefarious schemes have become more sophisticated and difficult to detect until it is too late, those defrauded have sought the most straightforward and cost-efficient way to recover their funds.

The law should at least strive to match the sophistication and creativity of these schemes, in order to ensure that victims are not left having to incur unnecessary further delay and cost in recovering their funds.

Against this backdrop, a common practice has developed in Hong Kong whereby victims apply for default judgment and a declaration that the recipient of the stolen monies (often a shell company holding the monies in an intermediate bank account) is holding the funds as a constructive trustee on behalf of the victim.

The victim would, in parallel, in circumstances where they could trace or identify their funds, seek a vesting order directing the party holding the stolen monies (most often a bank) to pay the money back to the victim.

It is a straightforward remedy available under section 52(1)(e) of the Trustee Ordinance (Cap.29), which provides that:

"In any of the following cases, namely – (e) where stock or a thing in action is vested in a trustee whether by way of mortgage or otherwise and it appears to the court to be expedient – the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint:…"

The courts had previously granted vesting orders without much fanfare, but recently, the jurisdiction to do so has come into question, with a legal debate involving a number of conflicting first instance decisions centring around what the court is and is not allowed to do under the section 52(1)(e).

However, in a recently reported decision, Case v Profitling International Ltd [2021] 2 HKLRD 16, Deputy Judge Queenie Ng was in no doubt that the court did have the jurisdiction to make such an order despite other recent authorities suggesting otherwise.

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