LAW LAI LAN v. TAMANG HESHNA

HCMP 2260/2018 and
HCMP 2261/2018
(Heard Together)

[2019] HKCFI 2245

HCMP 2260/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2260 OF 2018

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2261 OF 2018

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(Heard Together)

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REASONS FOR JUDGMENT

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1.  These contempt proceedings stemmed from the underlying dispute between the applicant as the plaintiff and Tamang Prem Chandr (“Tamang”) as the defendant in HCA 3194/2016. Tamang Heshna, the respondent in HCMP 2260/2018, is the daughter of Tamang (“the Daughter”). Ghising Chhegu Maya, the respondent in HCMP 2261/2018, is the wife of Tamang (“the Wife”). Like Tamang, the Wife and the Daughter have been made subject to mareva injunction and disclosure order in HCA 3194/2016. I found that the Wife and the Daughter were in contempt of the disclosure order, which, I accept, has been purged during the adjournments of these proceedings. At the end, I imposed the penalty of fine on them for the contempt. I gave brief reasons when sentencing. As indicated, I now give my reasons in detail.

Background

2.  The dispute between the applicant and Tamang has led to various litigations, including HCA 2310/2016, which was against Himali Engineering Construction Limited (“Himali”) of which Tamang was at the material times its sole shareholder and director, and HCA 3194/2016 which was against Tamang personally.

3.  In 2310/2016, the applicant obtained a mareva injunction and ancillary disclosure order against Himali in September 2017.  Pursuant to the disclosure order, Tamang, as the director, had to verify the information disclosed.  Tamang failed to do so, and the applicant commenced committal proceedings against Tamang (HCMP 2402/2017).  Contempt was found, and Tamang was eventually sentenced to 12 months’ imprisonment.  Details of those proceedings were set out in the judgment of DHCJ To dated 5 March 2018.

4.  In HCA 3194/2016, the applicant obtained default judgment against Tamang in May 2017, whereby Tamang was ordered to pay the applicant a sum of HK$3,500,000 with interest and costs.  In October 2017, the applicant obtained a worldwide mareva injunction against Tamang for the judgment sum with an ancillary disclosure order in respect of his assets.

5.  On 13 November 2017, the applicant obtained an ex parte worldwide mareva injunction with ancillary disclosure order against the Wife and the Daughter, as non-parties to HCA 3194/2016, for the amount of the judgment sum mentioned above.  Such orders were continued inter partes on 24 November 2017.

6.  Pursuant to the disclosure order, the Wife and the Daughter had to inform the applicant at once of all their assets of an individual value of HK$10,000 or more, whether in or outside Hong Kong, whether in their names or not, and whether solely or jointly owned, giving the value, location and details of all such assets.  The information disclosed had to be confirmed by affidavits served on the applicant’s solicitors by 4pm on the 5th working day upon service of the orders on them.

7.  On the ground of the default of the Wife and the Daughter in complying with the disclosure order in HCA 3194/2016, the applicant applied for leave to commence committal proceedings.  I gave leave, and hence these proceedings, HCMP 2260/2018 against the Daughter and HCMP 2261/2018 against the Wife.

Contempt

8.  In view of the evidence, there could be no dispute that the mareva injunction with the ancillary disclosure order has been duly served on the Wife and the Daughter.  Equally clear is the fact that the Wife and the Daughter had defaulted in complying with the disclosure order.  The fact that the Wife and the Daughter for the first time filed their respective affirmations making disclosure of their assets (referred to below as their 1st affirmations respectively) on the day before the first hearing of these proceedings on 20 June 2019 reinforced the fact.  The contempt was beyond reasonable doubt. Counsel then appearing for the Wife and the Daughter at the first hearing fairly acknowledged that.

Purging the contempt

9.  By her 1^st affirmation, the Daughter explained that she is a full time student at the Hong Kong Baptist University, reading a Higher Diploma course. She works part-time at a restaurant for 2 to 3 days a week and earns a daily wage of HK$360.  She is paid in cash.  She has no other property.  Her sole bank account has a credit balance of HK$2,000, and has been frozen since the mareva injunction in November 2017.  She is a director of an engineering construction company, but she does not run the business or earn any salary from that.  The Wife is also a director of that company.  She believes the shares of the company are worth nothing, since it has ceased operating upon the operating director’s resignation after his receipt of a letter from the applicant’s solicitors.  Likewise, she has no connection whatsoever with Himali or its business.

10.  By her 1^st affirmation, the Wife explained that she works part time as a cleaner at a shopping mall and a massage centre as well as a helper on a restaurant.  Her total monthly income is HK$15,000.  She has no other property.  Her three bank accounts have a total balance of about HK$18,000. She has a safety deposit box with Tamang in their joint names, and the jewellery items inside, valued at HK$250,000, belong to her.  She has an insurance policy taken out by her for the benefit of her younger daughter.  She has taken a loan from the bank for HK$372,000, of which one third has been repaid.  She has to make monthly repayment in the sum of HK$6,000.

11.  Once the contempt was found, these affirmations only manage to serve the purpose of purging the contempt.  For that purpose, they were deficient.  Amongst others, they failed to disclose in accordance with the precise terms of the disclosure orders.  They did not literally confirm if they have any asset apart from those disclosed.  I gave them 14 days to file their further affirmations for the purpose of purging the contempt and mitigation, and adjourned the matter to 17 July 2019.

12.  The Wife and the Daughter filed their further affirmations on 5 July 2019. Both explained that they had nothing to do with the business of Tamang or his dispute.  Their explanation for their inaction upon the service of the mareva injunction and disclosure order on them perhaps may not sound impressive. Nevertheless, they accepted responsibility for their naivety and ignorance as well as failure to seek legal advice timely.

13.  In terms of further disclosure, the Wife and the Daughter regrettably merely repeated what were stated in their 1^st affirmations.  What annoyed me was that this affirmation of the Wife contained a paragraph which was still in a draft form as prepared by her solicitors.  This was sloppy and quite unexpected particularly in proceedings as serious as these.

14.  I gave the Wife and the Daughter their last chance to file further affirmations within 14 days for purging the contempt, and adjourned the hearing to 16 August 2019.

15.  The Wife and the Daughter filed their further affirmations on 30 July 2019. The Daughter explained that request for the statements of her bank account since November 2017 had been made, but the bank was yet to provide them. However, she confirmed that she has been unable to deal with her bank account since the mareva injunction in November 2017.  There was also no other asset held in her name or others for her at any time then and thereafter.  As to the company in which she is on record the shareholder, she reiterated her understanding as deposed to previously.

16.  By her further affirmation, the Wife disclosed that she owns some land in Nepal, which she bought at HK$50,000 in her own name back in 1999.  It is barren.  She has no idea how much it is worth now, but doubt if it is substantially more than before.  She has a bank account in Nepal, and the statements produced show only some tax and interest related transactions and none conducted by the account holder since November 2017.

17.  The Wife produced the statements in respect of two of her three bank accounts in Hong Kong since November 2017, whilst those in respect of the other bank account were yet to be provided by the bank.  In any event, she has been unable to deal with any of those accounts since the mareva injunction in November 2017.

18.  As to the company in which the Daughter is the shareholder, the Wife produced some company search documents, and explained that it was Tamang who has handled all the matters and paperwork in relation to that company.  They did not even realise the filing of the Daughter’s resignation as a director in April 2019. The dispute in which Tamang and his companies were involved, according to her, has put strain on their marital relationship.

19.  On the day of the hearing on 16 August, the Wife also filed a further affirmation without leave.  The purpose was to produce the pending statements of her bank account in Hong Kong since November 2017 mentioned above, which she had just managed to receive from the bank.  She also produced the insurance policy taken out for the benefit of her younger daughter mentioned above.  She also confirmed that she has been unable to access to her safe deposit box since the mareva injunction in November 2017.

20.  On behalf of the applicant, it was argued that the Wife and Daughter had yet to disclose any asset held by the company of which the Daughter is the shareholder mentioned above.  However, the documents show that the shares in that company were transferred to the Daughter in 2017 when she just reached 18 years old. The fact that she is the shareholder must be viewed together with her deposition as to her connection, or actually the lack of it, with the company and her father’s business, before one can conclude whether she is indeed in a position to disclose evidence of assets of the company.  I am not impressed that she is withholding what she is in a position to disclose in this respect.

21.  It was also argued on behalf of the applicant that the court should not lightly find the explanation of the Wife or the Daughter to be credible.  However, as in any given case, the court forms its view on the basis of the evidence before it. The applicant is not prevented from adducing contrary evidence at any stage to show that the Wife or the Daughter perjured.  For the time being, I do not see such evidence.

22.  All considered, I consider that the contempt on the part of the Wife and the Daughter respectively has been purged.

Sentencing

23.  I borrow the following summary of the principles on sentencing set out in DHCJ To’s judgment in the committal proceedings commenced by the applicant against Tamang, i.e., HCMP 2402/2017 (5 March 2018):

“40. The starting point for consideration of sentencing this type of offence is that the court’s orders are made to be obeyed. Civil contempt of court order is a serious matter. The principles applicable to sentencing this type of offences have been usefully summarized by Au-Yeung J in Bruno Arboit as Sole Liquidator of Highfit Development Company Limited and Koo Siu Ying and Another as follows:

(1) A prime consideration of the court in sentencing contempt is to signal the importance of demonstrating to the litigants that the orders of the court are to be obeyed.

(2) The object of the sentence is both to punish the conduct in defiance of the court’s order and to serve a coercive function by holding out the threat of future punishment as a means of securing the protection which the order was primarily there to do: Crystal Mews Ltd v Metterick and Re Barrell Enterprises. The court has to strike a balance between the two objectives.

(3) Imprisonment should be regarded as a sanction of the last resort. Any custodial term should be as short as possible and consistent with the circumstances of the case: Willwin Development (Asia) Co Ltd v Wei Xing; CMA CGM v Ng Chip Choi Maurice.

(4) The court has an absolute discretion to suspend a sentence of imprisonment for such period and on such terms as it deems fit: CMA CGM v Ng Chip Choi Maurice.

(5) The court will have to consider all the circumstances of the contempt, including the nature of the order and extent of the breach; whether the contempt was contumacious or unintentional; the reasons, motives and state of mind of the contemnor; and whether the contemnor appreciates the seriousness of the deliberate breach.

(6) The court will have to consider aggravating and mitigating factors, including whether any prejudice is suffered by the plaintiff; whether the prejudice is capable of being remedied; whether the contemnor has cooperated and purged the contempt; and the personal circumstances of the contemnor.

41. Of all the factors listed above, the two most important ones are whether the contemnor has purged the contempt and whether the plaintiff has suffered any prejudice which is irremediable.  If the contempt has been purged, the coercive function of the sentence has been spent.  What remains to be addressed is punishment for the disobedience.  Purging the contempt may even affect the sentencing option. While each sentence depends on its facts and circumstances, references may still be drawn from sentences passed the court in similar cases.  If the contempt has not been purged and was the result of wilful and contumelious conduct, the starting point is term of immediate imprisonment. The term depends on the prejudice suffered by the applicant as a direct result of the breach of the order and whether such prejudice is irremediable.  In theory, the court has jurisdiction to impose an unspecified term of imprisonment until the contemnor purges the contempt.  Such a sentence is a very draconian one and would only be imposed for the most recalcitrant contemnor and in the worst type of cases where unless the order is complied with the applicant would suffer or continue to suffer more irremediable and serious injury or damage.”

24.  Further, the court may order the contemnor to pay the costs of the proceedings, usually on an indemnity basis.  Such an award is part of the punishment which the court should take into account in considering a fine, all as part of a global penalty: see Lau Yee Ching v Wong Tak Kwong, CACV 385/2005.

25.  The Wife and the Daughter deposed that the episode stemmed from the dispute that Tamang and his business had got into.  They attributed their paying no heed to the disclosure order to their ignorance and subjective belief that the matter had to do with Tamang and his dispute, with which neither of them had actual connection.  The explanation may not sound impressive, particularly after the episode of Tamang being committed to prison for his contempt in 2018.  Much may also be said about the attempt on the part of the Wife and the Daughter to purge the contempt, which did not materialize until after repeated chances were given to them.  However, to be fair, part of that, in my view, is attributable to the legal assistance that they have received.  I refer to how their affirmations were prepared mentioned above.  All the circumstances considered, I would not conclude that the contempt of the Wife and the Daughter was calculated or that their attempt to purge the contempt was less than genuine.

26.  The personal circumstances of the Wife and Daughter mentioned above are considered.  The former has effectively been the breadwinner of the family since the imprisonment of Tamang and even after his release.  She has to work several part-time jobs to meet the ends.  The Daughter works part-time while studying. In the circumstances of this case, it is inevitable that the Wife and the Daughter should bear the costs of these proceedings on an indemnity basis, which will be a burden.  All the circumstances taken into account, I consider that a fine on both of them should suffice as penalty for their contempt.

27.  Hence my imposing a fine in the sum of HK$10,000 and HK$2,000 on the Wife and the Daughter respectively to be paid within 21 days.  They were ordered to pay the applicant’s costs of these proceedings to be taxed on an indemnity basis, if not agreed.

HCMP 2260/2018:

Mr C F How, of How & Co, for the Applicant

HCMP 2261/2018: