張月清 v. TSUI YIU HEI

HCMP 2998/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2998 OF 2014

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JUDGMENT

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1.  This is an application of Madam Cheung, the plaintiff herein, for an order of committal against Mr Tsui due to his alleged breaches of the order made by DHCJ Leung on 7 June 2013 (“the Order”). Leave to commence these proceedings was granted by this court on 11 November 2014.

2.  Paragraph 1 of the Order is relevant to this application and is in the following terms:

“The Defendant (whether in their own capacity or via their agents, servants, representatives or otherwise) be restrained from howsoever (whether in his own account or on behalf of or in connection with any person, firm or company):

(1)   Holding himself out as or making any representation to the effect that he is a shareholder or director of Wise Line Limited (慧豐有限公司)(“the Company”), including but not limited to reference to or reliance on the record of the Companies’ Registry;

(2)   Exercising or purporting to exercise any power as a shareholder or director of the Company, including but not limited to making any reference to or reliance on the notification of increase of capital (ref: 23200798031); return of allotment of shares (ref: 23200798030); and special resolution (ref: 23200790029) filed with the Companies’ Registry;

(3)   Managing controlling, participating or being involved in the affairs of the Company and dealing with the Company’s assets including but not limited to:

(a)   Exercising or purporting to exercise any powers on behalf of the Company to cause any change of the legal representative of the Company’s PRC subsidiary (祥豐(清遠)實業有限公司)(“the PRC Subsidiary”);

(b)   Managing, controlling, participating in or dealing with the affairs of the PRC Subsidiary whether through the legal representative of the PRC Subsidiary or otherwise;

(4)   Filing any further notice or return with the Companies Registry vis-à-vis the Company without leave of the Court;

3.  In this Judgment, this court shall adopt the abbreviations used in the Order.

4.  Briefly stated, the background facts are as follows. Mr Tsui was the sole shareholder of the Company. He executed a deed of share mortgage in favour of Madam Cheung dated 7 December 2012 whereby he mortgaged all his shares in the Company to secure the loan extended by Madam Cheung to four borrowers including one Mr Chan Kam Chuen (“KC Chan”) and one Madam Wong Lai Mui (“Madam Wong”). In the wake of the default of repayment by the four borrowers, Madam Cheung sought to enforce the share mortgage by way of an High Court action under HCMP 40/2013 commenced by her originating summons dated 4 January 2013.

5.  For completeness, after trial of Madam Cheung’s originating summons, DHCJ Leung on 10 February 2015 granted a declaration to the effect that Madam Cheung is entitled to sell Mr Tsui’s shares in the Company and apply the sale proceeds thereof to discharge the indebtedness of Mr Tsui to Madam Cheung.  

6.  The Order was made as a result of Madam Cheung’s application for an interim injunction. It is not in dispute that the Order was in full force when the alleged breaches took place. Nor is there any issue about the validity of the service of the Order on Mr Tsui, the clarity of its terms and Mr Tsui’s knowledge thereof.

Relevant legal principles

7.  The relevant legal principles are neatly summarised by Au Yeung J in Bruno Arboit v Koo Siu Ying & Anor, unreported, HCMP 2749/2012, 8.3.2016 at §§108-118:

“(a) A court order must be complied with strictly in accordance with its terms.

(b) The burden is on the plaintiff to prove a defendant’s contempt beyond reasonable doubt.

(c) The defendant does not have to prove anything affirmatively; at most, there is an evidential burden on him. If there is a hypothesis which might reasonably be consistent with the defendant’s innocence then he is entitled to be acquitted.

(d) It is necessary to (i) construe the court’s order to ascertain its meaning and operation; (ii) determine whether the defendant has in fact complied with the order; and (iii) consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

8.  With these principles in mind, I turn to each of the allegations of Madam Cheung and assess its validity.

Madam Cheung’s complaints

9.  The first complaint is that Mr Tsui in his personal capacity and also acting purportedly for and on behalf of the PRC Subsidiary on 5 November 2013 made an application to a PRC court (“the PRC Application”) to seek its approval to allow him and the PRC Subsidiary to set aside and/or withdraw from a consent judgment entered after a mediation ordered or approved by a court under a document entitled “(2013) 穗荔法民一初字第420 號民事調解書” to which all Madam Cheung, Mr Tsui and the PRC Subsidiary were parties (“the Mediation Document”). This Madam Cheung contends is a breach of paragraph 1(3) of the Order.

10.  A PRC lawyer known as Mr Wen represented both Mr Tsui and the PRC Subsidiary at the hearing of the PRC Application. Mr Wen produced a written authorisation to the PRC court (“the Authorisation Document”). In the Authorisation Document, it was stated that Mr Tsui was the legal representative of the PRC Subsidiary. This Madam Cheung says is a breach of paragraphs 1(2) and (3) of the Order. 

11.  Further, it was alleged that during the hearing of the PRC Application, Mr Wen represented to the PRC court that Mr Tsui was the sole shareholder of the Company in unequivocal terms (“the Representation”). This Madam Cheung says is a breach of paragraph 1(1) of the Order.

12.  The final complaint arises from her legal proceedings commenced in early 2014 against the PRC Subsidiary in a PRC court (“the PRC Action”) and it related to a mortgage agreement dated 3 November 2012 entered into between the PRC Subsidiary and her.

13.  Mr Tsui is alleged to have breached paragraph 1(3) of the Order by (1) instructing Mr Wen to represent the PRC Subsidiary and (2) attending the hearing of the PRC Action throughout on 5 September 2014 and from time to time gave oral instructions to Mr Wen.

14.  The case of Madam Cheung is supported by the Affirmation of Chen Jinsong (“Mr Chen”) only. Madam Cheung instructed Mr Chen, a PRC lawyer to have the conduct of both the PRC Application and the PRC Action on her behalf. Mr Chen took part in both the hearing of the PRC Application on 5 November 2013 and the hearing of the PRC Action on 5 September 2014.He exhibited to his affirmation an extract from the transcript of the former hearing (“the Transcript”), which was signed by Mr Wen to acknowledge its accuracies. 

15.  Mr Chen further exhibited a written judgment of the PRC court dated 18 December 2014 disposing of the PRC Application in favour of Madam Cheung (“the PRC Judgment”).

Mr Tsui’s position

16.  Pursuant to an order of this court, Mr Tsui, acting in person, filed an affirmation dated 28 July 2016 in opposition to the present application. First, in respect of the PRC Application, he says that prior to the Order, the legal representative of the PRC Subsidiary Mr Yu instructed Mr Wen to make the PRC Application together with him and some other persons.

17.  At the hearing of the PRC Application, Mr Wen merely explained to the court that Mr Tsui was the sole shareholder of the Company by way of an introduction of the background facts in respect of the Mediation Document and the PRC Application.

18.  On the other hand, he maintained that he never claimed to be the legal representative of the PRC Subsidiary at the hearing. Only the mainlanders can be the legal representatives of PRC companies and the business licence of the PRC Subsidiary clearly stated that Mr Yu (and not he) was the legal representative.

19.  As regards the PRC Action, Mr Wen represented the PRC Subsidiary on the instruction of Mr Yu, who himself did not attend the hearing on 5 September 2014. Mr Tsui attended the hearing merely as a spectator and he was late. He was seated behind Mr Wen about 7 to 8 metres away. He denied having given any instructions to Mr Wen during the hearing as alleged.

20.  Mr Tsui thus denies any breach of the Order on his part. It is noteworthy that Madam Cheung did not see fit to file any evidence in reply despite leave granted to her to do so.

21.  I pause to point out two things. First, I do not find it necessary to go into any detail of the PRC Application and the PRC Action. I omit the names of the authorities and the many reference numbers, which in my view are irrelevant. In addition, there is no cross-examination of the deponents on their affirmation for the purpose of this application.

Analysis

22.  Mr Tsui was one of the defendants along side with the PRC Subsidiary in the Mediation Document. They were then jointly represented by one Mr Wu, a PRC lawyer.

23.  The Transcript and the PRC Judgment show that Mr Wen represented both Mr Tsui and the PRC Subsidiary in the PRC Application. Mr Wen made it clear to the PRC court that Mr Yu was the legal representative of the PRC Subsidiary.

24.  On the other hand, as can be seen in the PRC Judgment, the attention of the PRC court was clearly drawn to the Order by Mr Chen. It was submitted on behalf of Madam Cheung at the hearing that Mr Tsui had no standing at all to make the PRC Application on behalf of the PRC Subsidiary.

25.  Mr Tsui acted in his personal capacity in the PRC Application. He was a party to the Mediation Document and of course he had the locus in the PRC Application. Madam Cheung adduces no evidence to contradict Mr Tsui’s evidence that Mr Yu and not he himself instructed Mr Wen to make the PRC Application on behalf of the PRC Subsidiary before the Order was made. In the circumstances, I cannot accept the allegation that Mr Tsui acted for and on behalf of the PRC Subsidiary            made the PRC Application on 5 November 2013.

26.  Likewise, I am not convinced that Mr Tsui authorised, engaged and/or procured Mr Wen to represent the PRC Subsidiary to attend the hearing of the PRC Application.

27.  As regards the Authorisation Document, it is not produced as evidence in this application and I do not have the sight of this document. According to the Transcript, in the Authorisation Document, Mr Tsui was stated to be the legal representative of the PRC Subsidiary. I do not know whether the Authorisation Document was disclosed to the PRC court before or after the date of the Order. In response to the enquiries of the PRC court at the hearing, nevertheless, Mr Wen made it clear that Mr Yu and not Mr Tsui was the actual legal representative.

28.  In the premises, I do not understand that on the evidence how it can be proved beyond reasonable doubt by reasons of the terms of the Authorisation Document that, in breach of the Order, Mr Tsui exercised or procured to exercise any power as a shareholder or director of the Company. Nor can it be proved up to the requisite standard that Mr Tsui did manage, control, participate or being involved in the affairs of the Company and deal with the assets of the Company in that he exercised or purported to exercise any power on behalf of the Company to cause any change of the legal representative of the PRC Subsidiary or managed, controlled, participated in or dealt with the affairs of the PRC Subsidiary whether through the legal representative of the PRC Subsidiary or otherwise.   

29.  On the other hand, I am not persuaded that the Representation was made by Mr Wen on behalf of Mr Tsui in breach of the Order. It is imperative to understand the Representation in its proper context. The PRC court asked Mr Wen a string of questions in the PRC Application to grasp an understanding of the same. In the beginning, the PRC court wanted to find out the role that each of the parties to the Mediation Document played. Mr Wen merely explained to the PRC court that Mr Tsui was the sole shareholder of the PRC Subsidiary when the matters referred to in the Mediation Document transpired. As shown in the PRC Judgment, the PRC court was aware of the terms of the Order. It should be clear to the PRC court that Mr Tsui was no longer the sole shareholder of the PRC Subsidiary. I can accept the evidence of Mr Tsui and reject the allegation that Mr Wen ever represented to the PRC court that Mr Tsui remained to be the sole shareholder of the PRC Subsidiary at the time of the hearing.  I do not accept that Mr Tsui held out to be the shareholder of the Company. This complaint is not made out.

30.  Now I turn to the hearing of the PRC Action on 5 September 2014.  Madam Cheung has adduced no evidence to prove that Mr Tsui instructed or engaged Mr Wen to represent the PRC Subsidiary in the PRC Action save the bare assertion of Mr Chen. However, Mr Chen says nothing about how he came to know the alleged instruction and/or engagement and gives no details about the same.

31.  Mr Tsui’s evidence that Mr Yu in his capacity of the legal representative of the PRC Subsidiary instructed Mr Wen to act for the PRC Subsidiary is not contradicted. I am inclined to accept the uncontradicted evidence of Mr Tsui that it was Mr Yu and not he who instructed or engaged Mr Wen to represent the PRC Subsidiary.

32.  I have read the documents relating to the PRC Action. In the written claim of Madam Cheung, it was explained that her claim against the PRC Subsidiary arose from another loan agreement between KC Chan and Madam Wong on the one hand as borrowers and Madam Cheung on the other as lender. The PRC Subsidiary provided a guarantee and created a mortgage over its landed properties in favour of Madam Cheung to secure the indebtedness of the two borrowers, who were friends of Mr Tsui. The PRC Action was brought by Madam Cheung to seek the court’s confirmation its priority over other creditors of the PRC Subsidiary in respect of the mortgaged properties. Against this background, Mr Tsui was understandably interested in the PRC Action even in his personal capacity and his presence at the hearing alone cannot be proof of his participation in the PRC Action.

33.  I also view the assertion of Mr Chen in respect of the alleged oral instructions of Mr Tsui given to Mr Wen throughout the hearing of the PRC Action with circumspection. He does not give any particulars of the alleged oral instructions and this court has no idea as to what exactly the alleged exchange between Mr Wen and Mr Tsui was, even assuming they did talk to each other. His evidence simply lacks cogency and is certainly not enough to come up to proof to the requisite standard. This is particularly so given Madam Cheung’s failure to give any reply or adduce rebuttal evidence in response to the denial of Mr Tsui in his affirmation.

34.  In the premises, I am unable to accept the allegation that Mr Tsui participated in or dealt with the affairs of the PRC Subsidiary in relation to the PRC Action.

Conclusion

35.  For the reasons given above, I find none of the alleged contempt in the Statement to be proved beyond reasonable doubt. I am not convinced that Mr Tsui is ever guilty of contempt. 

36.  Accordingly, I dismiss the application and costs should follow the event. I make an order nisi that Madam Cheung do pay Mr Tsui his costs of and occasioned by this application, to be taxed if not agreed.

37.  Mr Tsui will be advised that interpretation of this Judgment can be arranged for him if he so requires.

38.  Lastly I thank Ms Lai for her submissions marked by clarity and fairness.