WILLWIN DEVELOPMENT (ASIA) COMPANY LTD v. WEI XING AND OTHERS

HCMP 2946/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2946 OF 2014

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J U D G M E N T
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Introduction

1. What was originally a 30 minute for directions for the applicant’s committal proceedings against the respondents for contempt eventually turned out to be a full day argument as to whether the committal proceedings should be adjourned/stayed pending the determination of the main civil action between the parties.

2. The applicant herein is the 1^st plaintiff (“P1”) in the main civil action HCA 797/2012 (“Main Action”).  Its director and 70% shareholder is one Wei Wen (“Wei Wen”).  The 1^st respondent (“Wei Xing”), the 2^nd respondent (“ESL”) and the 3^rd respondent (“Hu Ying”) are respectively the 1^st, 2^nd and 3^rd defendants in the Main Action (collectively referred to as “Ds”).

3. Counsel Ms Sara Tong appeared for P1 and Counsel Mr Tim Chi Hang Yu appeared for ESL and Hu Ying at the hearing before this court.  Wei Xing was not legally represented and appeared in person.

Background

4. Wei Wen and Wei Xing are two brothers, and Wei Xing holds and held at all material times the remaining 30% in P1.  Hu Ying is the wife of Wei Xing.  Wei Xing and Hu Ying were previously directors of P1.

5. It is P1’s case in the Main Action that, among other things, Wei Xing and Hu Ying had breached their fiduciary duties and duties of confidence in diverting business away from P1 to ESL, a company Hu Ying is and was at all material times the sole shareholder and director.

6. The business diverted included in particular business P1 had been conducting with Apple Inc, said to be P1’s client.

7. P1 applied for and obtained on 14 May 2012 an injunction order (“Injunction Order”) and an Anton Piller order (“Anton Piller Order”).  The Injunction Order was subsequently amended on 13 July 2012 (“Amended Injunction Order”).  The attempts of Ds to set aside such orders on 12 July 2012 were dismissed by the court.

8. The Injunction Order expressly prohibited Wei Xing and ESL from soliciting, entering into, performing, or continuing to perform any contract with clients of P1 for the sale/provision of auto test systems, test fixtures etc, and such clients of P1 included, inter alia, Apple Inc[1]. The Anton Piller Order expressly required Wei Xing and ESL to disclose various documents, including, inter alia, all price quotations, purchase orders, invoices, receipts and agreements incidental to ESL’s business and business correspondence and/or records of Wei Xing and ESL[2]. 

9. It was P1’s case that it subsequently discovered from documents disclosed by Apple Inc pursuant to an order for disclosure made by M Chan J on 23 May 2014 (“Apple Documents”) that serious breaches of the Injunction Order/Amended Injunction Order had been committed by Wei Xing and ESL, in that they had continued to conduct business with Apple Inc after the Injunction Order.

10. Further, it was P1’s case that from the documents disclosed by Apple Inc, Wei Xing and ESL had also breached the Anton Pillar Order in failing to disclose business correspondence, purchase orders, quotations and receipts concerning their business dealings with Apple Inc. 

11. According to P1, Hu Ying (being at all material times the wife of Wei Xing and the sole director and shareholder of ESL) had aided and abetted the aforesaid breaches. 

12. The trial of the Main Action commenced on 3.11.2014 and took place for 10 days (“Main Trial”).  The trial judge was M Chan J (“Trial Judge”).  The Main Trial was adjourned part heard on 14 November 2014 and  fixed for another 16 days, from 2 – 3 June 2015 for experts’ evidence, 24 August – 8 September 2015 for Ds’ evidence, and 3 – 4 November 2015 for closing submissions.

13. P1 made an ex parte application on 11 November 2014 for leave to issue committal proceedings against Ds, while Wei Wen was still giving oral evidence during the Main Trial.  The application was supported by the 9^th affirmation of P1’s solicitor Mr Kong and later by Wei Wen’s 16^th affirmation.  Leave was subsequently granted by the Trial Judge on 12 November 2014[3].

14. Pursuant to the leave granted, P1 issued the originating summons herein on 13 November 2014 (“Committal Proceedings”).

15. Prior to the first hearing of the originating summons, on 27 November 2014, P1 applied for leave to amend the originating summons and the statement as to contempt and such application was fixed before the Trial Judge together with the first hearing of the originating summons on 3 December 2014 (“1^st Hearing”). 

16. Wei Xing had filed 2 affirmations, his 1^st on 27 November 2014 and his 2^nd on 28 November 2014.  His 2^nd affirmation was filed in support of his application filed on same date to discharge the Amended Injunction Order. This application was also heard at the 1^st Hearing, which was dismissed by the Trial Judge then and there, as such application should have been made in the Main Action[4].

17. At the 1^st Hearing, the Trial Judge gave leave to P1 to amend its originating summons and other directions including service and filing of further affirmations, and a direction that the amended originating summons be fixed before another judge for a further directions hearing with 30 minutes reserved (“03.12.14 Order”)[5].

18. The amended originating summons (“Amended OS”) and the amended statement as to contempt (“Amended O52 Statement”) were subsequently filed on 29 December 2014, and the 2^nd directions hearing was fixed before this court on 28 January 2015 (“2^nd Hearing”). 

19. Under the 03.12.14 Order, Ds were given leave to file and serve affirmation evidence in opposition to the Amended OS and the Amended O52 Statement within 28 days thereof.  Wei Xing did not file any further affirmation evidence after his 1^st affirmation, and his 2^nd affirmation.  No affirmation was filed by ESL or Hu Ying.  P1’s solicitor Mr Kong filed a 2^nd affirmation, exhibiting a copy of Wei Wen’s draft 2^nd affirmation in reply to Wei Xing’s 1^st affirmation.

20. Hence, so far as the Committal Proceedings were concerned, all affirmations had been filed, save for the proper filing of Wei Wen’s 2^nd affirmation.

21. Two days before the 2^nd Hearing, ESL and Hu Ying issued a summons and applied for the hearing of the Amended OS to be adjourned and the present proceedings be stayed generally pending the determination and disposal of HCA 797/2012 or until further order (“Stay Summons”).  The Stay Summons was supported by an affirmation of Hu Ying.

22. Mr Kong had filed his 3^rd affirmation exhibiting Wei Wen’s 3^rd affirmation in opposition to Hu Ying’s affirmation.

23. At the 2^nd Hearing, Mr Yu had initially sought an adjournment of the Stay Summons on the ground that ESL and/or Hu Ying wanted to file affirmation evidence in reply to Mr Kong’s 3^rd affirmation/Wei Wen’s 3^rd affirmation.  This was opposed by Ms Tong.  Upon Ms Tong indicating that she was prepared to make submissions on the Stay Summons without relying on Mr Kong’s 3^rd affirmation/Wei Wen’s 3^rd affirmation, Mr Yu decided not to insist on an adjournment of the Stay Summons.

24. In fact, Mr Yu had orally applied for a stay of the Committal Proceedings at the 1^st Hearing.  Ms Tong informed the court that the Trial Judge made it clear that she did not think that there was any justifiable reason to stay/adjourn the present proceedings and that in any event, such an application had to be properly made.  Ms Tong complained that notwithstanding what was said by the Trial Judge, ESL and Hu Ying only took out the Stay Summons very late, almost  7 ½  weeks after the 1^st Hearing, an shortly before the 2^nd Hearing.

25. Mr Yu did not agree that the Trial Judge had expressed any views on his oral stay application. 

26. Neither side had applied for a transcript of the 1^st Hearing.  I note, however, that on the Trial Judge’s brief notes of the 1^st Hearing, there were the words “Don’t think it’s necessary to wait until the main action (HCA 797/2012) finished, but fail to see why these proceedings have to be heard before me”. 

27. Anyway, neither Counsel saw any need for the Stay Summons to be referred back to the Trial Judge and was content for this court to deal with the application.

Legal Principles

28. As submitted by Ms Tong, the court has inherent powers and jurisdiction to enforce its own orders, which jurisdiction is separate from any criminal or civil proceedings.  It has been said bythe English Court of Appeal in Szczepanski v Szczepanski [1985] FLR 468  that contempt proceedings must be dealt with swiftly and decisively where an application made to adjourn contempt proceedings pending conclusion of criminal proceedings arising from the same facts was dismissed[6] (emphasis added).

29. Ms Tong also referred to H v C (Contempt and Criminal Proceedings) [1993] 1 FCR 1, where the English Court of Appeal held that it was important that contempt proceedings were dealt with swiftly and decisively and that such proceedings were quite separate from any criminal proceedings arising from the same facts, but the court had a discretion to decline to proceed with contempt proceedings if there was a real risk of serious prejudice which might lead to an injustice[7] (emphasis added).

30. The same principles were applied by the Court of Appeal in Keeber v Keeber [1996] 1 FCR 199 (CA) in rejecting the application to adjourn committal proceedings pending a criminal trial.

31. In M v M (Contempt: Committal) [1997] 3 FCR 288, the Court of Appeal similarly dismissed an application to stay/adjourn contempt proceedings (for a breach of undertaking) on the basis that there were ongoing criminal proceedings involving the same facts.  It was held that itwas an overriding principle that orders of the court should be obeyed and it was particularly important that where orders were made for the protection of a party, that party should be assured of effective protection.  Further, breaches of orders should be dealt with swiftly and decisively[8].”

32. In M v M,  Lord Bingham of Cornhill CJ has summarized the  following principles from various authorities including Szczepandski, H v C, and Keeber[9]:

(i)   There is no absolute rule that civil proceedings (including contempt proceedings) should not proceed when criminal proceedings are pending;

(ii)   There is a general rule that contempt proceedings should be deal with “swiftly and decisively”;

(iii)   The test as to whether or not contempt proceedings should proceed in advance of criminal proceedings is whether there is a real risk of serious prejudice leading to injustice if the contempt proceedings go ahead.

33. The 3 cases Szczepanski, M v M, Keeber concerned breach of  non-molestation injunction orders/undertakings by a husband against his wife, such orders/undertakings having been obtained in matrimonial proceedings, and criminal proceedings were then pending due to the husband’s breach.  In H v C, the applicant had obtained a non-molestation order against the respondent who had breached that order, and there were pending criminal proceedings.

34. Mr Yu submitted that the above cases could be distinguished from the present case in that in those cases, the contempt proceedings were at about the same time or prior to the criminal proceedings, whereas in the present case, the Main Action is a civil action, and also the Committal Proceedings were issued during the Main Trial, and the Main Trial had been adjourned part-heard.

35. During the 1^st Hearing, H v C was in fact on Mr Yu’s own list of authorities and he himself was relying on that case when he was trying to seek a stay/adjournment of the Committal Proceedings at the time.

36. However, I would accept that the facts of those 4 cases above were somewhat different from the present case.  The contempt proceedings in each of those cases was issued to protect the applicant against the defendant pending the defendant’s criminal trial.  Having said this, there is, in my view, no reason why the general principles as summarised by Lord Bingham should not be applicable in considering whether contempt proceedings should proceed when there are other civil proceedings pending instead of criminal proceedings.

37. At the hearing before this court, Mr Yu had relied on a more recent Court of Appeal decision in England JSC BTA Bank and Anatoly Ereshchenko [2012] EWHC 1891 (Ch).  The appeal arose in the course of a major process of litigation by which the bank was seeking to recover losses suffered by it as a result of a large scale fraud committed on it by a Mr Ablyazov, its former Chairmen, and others.  The fraud investments of the bank were misappropriated through off shore companies with assistance of an English company of which Mr Ereshchenko was a director.  As a result of a disclosure order in an application for Norwich Pharmacal type of relief, Mr Ereshchenko made two witness statements and two affidavits.  The bank issued application to commit Mr Ereshchenko to prison for contempt of court, based on the basis that he had given false and dishonest evidence in his witness statements and affidavits.

38. The bank’s committal application was dismissed and the bank appealed, which was also dismissed.  There were 3 Lord Justices sitting in the Court of Appeal and Lord Justice Lloyd gave the leading judgment to which the others agreed.  Lord Justice Beatson then made additional observations about the problems of an application to commit which was heard, as in that case, before the trial of the substantive dispute between the parties where (as would be common) there was an overlap between the issues relevant to the application and those which would arise in the substantive dispute, and that in the case before him, the judge below had stated that a number of the substantive claims were the same as those relied on in the application to commit[10].

39. Beatson LJ then went on to say :

“71. Where proceedings for criminal contempt are instituted by the person who has also brought substantive proceedings against the defendant, it is important for the applicant and for the court to keep in mind (see Malgar Ltd v RE Leach (Engineering) Ltd [1999] EWHC 843(Ch), [2000] FSR 393) that the allegation is of a public wrong, and its primary purpose should not be to vindicate on a private right…

72.   This case also shows that where the course of action chosen is an application to commit for criminal contempt, there is a risk of using valuable and scarce court time on satellite litigation: see Daltel v Makki [2005] EWHC 749(ch) per David Richards J.  The hearings before the judge and this court occupied a total of ten days, with additional time needed for the preparation of the judgments.  The issue before the judge at the hearing was not fully resolved at that stage because of the state of the evidence put before the court by the applicant and the judge’s belief that the position might appear different after the trial.  It was in part for such reasons that, in  Malgar Ltd v RE Leach (Engineering) Ltd , the Vice-Chancellor indicated that while committal before trial might be appropriate in a very clear case, it might be better, in many cases, for the application to take place after the trial when the evidential position would be clearer.  Malgar’s case illustrates the need for caution even at the outset, and the importance of the public control provided by the requirement that the court give permission for the institution of such proceedings.”

40. The third Lord Justice  Elias LJ  then said for reasons given by Beatson LJ, he also considered that where the party initiating contempt proceedings had also brought substantive proceedings against the same defendant, it should only be in exceptional cases that the court should allow the contempt action to be heard ahead of the trial, and that it was particularly so where, as in that case, the resolution of the contempt charged depended upon a consideration of evidence which could be more appropriately assessed in the light of full disclosure at trial[11] (emphasis added).

41. Ms Tong, however, referred to another even more recent case JSC Bank of Moscow v Kekhman and others [2015] 1 All ER (Comm) 80.  In this case, the bank applied for permission to issue a writ of sequestration against the property of the first 3 defendants, and an order for committal against the 4^th defendant Mr Kekhman for alleged breaches of a worldwide freezing order.  As Mr Kekhman was a bankrupt at the time of the issue of the banks’ supplication for committal, the bank had applied for permission to commence proceedings in the Commercial Court against him and other defendants making allegations of fraud and conspiracy, but before this application was heard, Mr Kekhman had been discharged from bankruptcy and the bank’s application did not need to go ahead.  While the bank’s application to annul the order in bankruptcy remained outstanding, the hearing of the bank’s application for committal took place.  At the first day of the hearing, Mr Kekhman applied for an adjournment of the committal hearing until trial, if there be a trial, of Commercial Court proceedings which the bank had indicated it intended to bring against him. 

42. Hamblen J declined to grant the adjournment in the exercise of his discretion and his case management powers.

43. Hamblen J had in his judgment referred to an English Court of Appeal judgment in the case of JSC BTA Bank v Ablyazov [2011]EWCA Civ 1386, [2012] 2 All ER 575, [2012] 1 WLR 1988, which was a case in which the Commercial Court had ordered that there be a committal hearing in advance of the trial, and that decision by the trial judge was upheld by the Court of Appeal.  In fact, the earlier mentioned Ereshchenko case was related to the Ablyazov proceedings[12].

44. Neither Ms Tong nor Mr Yu had provided the court with a copy of the Ablyazov case although it would appear that the relevant passages of Gross LJ in the Ablyazov had already been quoted by Hamblen J in the Kekhman case.  Mr Ablyazov was alleged to have breached freezing orders.  Gross J had referred to the dangers of satellite litigation and of carving out issues ahead of the trial of the action and that such concerns plainly would require careful consideration generally, and that the case before him was no exception[13].  He then went on to say that:

“[41] Subject, however, to keeping this caution well in mind, whether allegations of contempt should be determined before, during or after the main trial must be very much a case management decision for the judge, on the facts of the individual case. Moreover, where the alleged contempt is said to relate to the breach of a freezing order, the public interest in ensuring the efficacy of such orders is likely to weigh heavily in the balance … (emphasis added)

[42] Accordingly, as it seems to me, overlap, of itself and without more, does not necessitate postponing the determination of a contempt application until after the trial. It is, instead, a factor to be taken into account, the weight to be given to it – and the pointer, if any, it gives to the decision to be taken – must depend on the facts of the individual case …

[47]   What remains is the need to weigh the advantages and disadvantages of proceeding with these allegations in advance of the respective trials.  This was pre-eminently a question for Teare J.  For the reasons already set out, there is certainly no rule of law as to the timetable to be adopted: the matter is one for the judge’s case management discretion.  The judge here plainly had well in mind the risk of overlap and of satellite litigation.  He was not, however, deterred.  In the judgment, he decided I principle that the potential overlap of issues between the contempt application and the trials did not require postponing the contempt application until after the trials … Ultimately, the decisive factor for the judge, as repeatedly emphasized in both the judgment … and the ruling (p 22) was the importance of making the freezing order effective[14].”

45. The above mentioned Ablyazov case prior to the Ereshchenko case.  Hamblen J had referred to the Ereshchenko case and had pointed out in Ereshchenko that the parties had agreed that the committal application be dealt with in advance of the trial, and the trial of the committal application then took place and had failed, and further the appeal was by the bank against its failed committal application.

46. It would appear from what Hamblen J had said that it was submitted on behalf of Mr Kekhman that the Ereshchenko case represented a development from the principles stated in the Ablyazov case, and that it would be only in exceptional cases that the court would allow a contempt action to be heard ahead of the trial.  Hamblen J had, however, commented that although Elias LJ did refer to exceptional cases, there was no suggestion in the Ereshchenko case that the approach of the Court of Appeal in Ablyazov case was in any way wrong. 

47. Hamblen J then went on to say that he did not accept Mr Kekhman’s allegation that the evidence showed that there had been cherry picking by the bank in relation to the information to be put before the court, nor did he accept that it had been shown that there was some improper collateral motive on the part of the bank in bringing and pursuing the committal application and that no allegation of bad faith was made against the Bank. 

48. Hamblen J was ultimately not persuaded that it would be in the interests of justice that the committal proceedings should be adjourned indefinitely as sought by Mr Kekhman.

49. As pointed out by Hamblen J, and also by Ms Tong, that in the Ereshchenko case, there was no objection by the parties to the committal application being pursued in advance of trial[15]. This was thus not an issue before the Court of Appeal.

50. Ms Tong thus submitted that the comments of Elias LJ were obiter.  Ms Tong further pointed out that in the Ereshchenko case, it was not an injunction order which was alleged to have been breached; whereas in the Ablyazov case, the breach related to a freezing order, as in the Kekhman case, and that Gross LJ in Ablyazov had said that ultimately the decisive factor for the judge was the importance of making the freezing order effective.

51. In the present Committal Proceedings, the alleged contempt is said to relate to the continuing breach of the Injunction Order/Amended Injunction Order/Anton Piller Order, notwithstanding Ds’ efforts to discharge the orders had failed.  I am of the view that, similar to freezing orders, there is a public interest in ensuring the efficacy of such injunction orders and I propose to follow the approach of the English Court of Appeal in the Ablyazov case, as Hamblen J in the Kehkman case.

Grounds for the Stay Summons

52. D1 did not lodge any written submissions, but indicated at the 2^nd Hearing that he agreed with the submissions made on behalf of ESL and Hu Ying.  His oral submissions included that the Committal Proceedings should be stayed in order not to waste judicial time, and to avoid the Judiciary “being used as a tool against bad person/s or to avoid human tragedy” or submissions to that effect.

53. So far as ESL and Hu Ying were concerned, Hu Ying in her affirmation listed 5 grounds for seeking a stay of the Committal Proceedings, namely :

(i) Overlapping of issues with the Main Action;

(ii) A risk of inconsistent findings;

(iii) Inordinate delay;

(iv) No urgency and no prejudice suffered by P1;

(v) Lack of good faith on the part of P1 and abuse of process

Overlapping of issues and risk of inconsistent findings

54. My first observation is that the Trial Judge is the person who is most familiar with the issues of this case and it was the Trial Judge herself who gave leave for P1 to issue the Committal Proceedings, and such leave was granted about 8 days into the trial and while Wei Wen was giving oral evidence.  Notwithstanding the ongoing trial, the Trial Judge was obviously satisfied that leave should be given.

55. Secondly, Ds did not make any application to set aside the leave given, nor was any application made to strike out the Committal Proceedings after being served, although Wei Xing had issued a summons to discharge the Amended Injunction Order.

56. There was also no formal application to adjourn/stay the Committal Proceedings at the 1^st Hearing, notwithstanding the oral submissions from Mr Yu for adjournment/stay at the 1^st Hearing before the Trial Judge. 

57. As I have said earlier, according to the Trial Judge’s brief note of the 1^st Hearing, she did not think it necessary to wait until the main action to finish.  In any event, she proceeded to give directions for the conduct of the Committal Proceedings, including transferring the matter to another judge to be heard.  She allowed P1’s application to amend the originating summons and the O52 statement and dismissed Wei Xing’s application to discharge the Amended Injunction Order and/or Anton Pillar Order.

58. Mr Yu submitted that there was no decision made by the Trial Judge on the adjournment/stay.  I would accept that there was nothing in the 03.12.14 Order in relation to the oral application for adjournment/stay, and those Kazakstan/Russian bank cases were not placed before her.  It is, however, clear that notwithstanding Mr Yu’s then skeleton arguments and submissions, the Trial Judge nevertheless gave directions for further conduct of the Committal Proceedings.

59. In P1’s amended statement of claim, a list of P1’s clients was appended and marked “Annexure A” and number 1 on Annexure A was Apple Inc.  Ds in their respective defences had denied that the clients in Annexure A were P1’s and their case seemed to be some of the clients could be P2’s.  Mr Yu had also referred this court to the Lists of Issues filed by Wei Xing[16], and also by ESL and Hu Ying[17].

60. In relation to the Amended Injunction Order, in the Amended O52 Statement, among other things :

(i)   P1 identified and set out the occurrences showing alleged breaches by Wei Xing and ESL of paragraphs 1 and 2 of the Amended Injunction Order revealed by email correspondence during the period from end of August 2012 to September 2014, and from purchase orders and related documents from  May 2012 to September 2014 produced by Apple Inc[18]; 

(ii)   P1 alleged that Wei Xing had, through the use of the email accounts of wilson@caevolution.com and/or esl@caevolution.com and/or otherwise, performed and/or continued to perform various contracts for the Testing Business (as defined therein) to Apple  Inc, or caused ESL to enter various contracts for the Testing Business with Apple Inc[19];

(iii)   P1 alleged that ESL had via a series of email accounts bearing the domain name of “@caevolution.com”, or by way of various purchase orders, solicited and/or entered into various contracts for Test Business with Apple Inc.

61. As for the Anton Piller Order, in the Amended O52 Statement, it was stated, among other things, that notwithstanding the disclosure requirements contained in the Anton Piller Order, and from the documents produced by Apple Inc, Wei Xing and ESL had not disclosed or effected discovery of the documents listed in Schedule 2 of the Anton Piller Order.

62. P also stated in the Amended O52 Statement that Hu Ying was at all material times the sole director and shareholder of ESL and must have notice and knowledge of the two orders and, in short, she had aided and abetted the breaches of Wei Xing and ESL.

63. Mr Yu had submitted that there were “overlapping issues” in the Committal Proceedings and the Main Action, among which, in particular, were whether Apple Inc was a client of P1, and whether the domain name of “@caevolution.com” had at all material times been under ESL’s use, control and management, and whether ESL had at the material times possession, power, custody or control of the relevant Apple Documents.

64. As mentioned earlier, Wei Xing had filed 2 affirmations in the Committal Proceedings, although his 2^nd affirmation was in fact in support of his summons to discharge the Amended Injunction Order/Anton Piller Order.  In his 1^st affirmation, he had denied that Apple Inc was the client of P1, and also he had denied using the email address wilson@caevolution.com in communicating with Apple Inc after the 15 May 2012 when the Injunction Order was first granted.

65. Firstly, as submitted out by Ms Tong, and which I accept, whether Apple Inc was a client of P1 is not an issue which needs to be determined in the Committal Proceedings.  Ds had failed to discharge the Injunction Order/Amended Injunction Order, and Apple Inc was on the list attached to that order.  There had been no appeal in respect of the discharge.  Wei Xing and ESL would thus continue to be under an obligation to comply with the Injunction Order/Amended Injunction Order and the Anton Piller Order, until further order.

66. Thus, based on what Wei Xing had said in his 1^st affirmation, the 2 main issues in relation to the alleged breach of the Injunction Order/Amended Injunction Order in the Committal Proceedings would be:

(i)   Whether Wei Xing and ESL had been communicating with Apple Inc through wilson@caevolution.com and/or els@casevolution.com after the Injunction Order;

(ii)   Whether Hu Ying had aided and abetted any alleged breach;

67. There was also the issue as to whether Wei Xing and ESL had breached the Anton Piller Order by, among others, failing to disclose those documents now produced by Apple Inc.  Ms Tong submitted that there was no evidence in Wei Xing’s witness statements in the Main Action in relation to the above 2 main issues.  Mr Yu also did not refer this court to any such evidence.

68. In light of what was said by Wei Xing in his 1^st affirmation, Ms Tong had submitted that any cross examination of Wei Xing in the Committal Proceedings would likely to be limited to the above 2 main issues, and that it would be unlikely that he would be cross-examined on the same issues twice.

69. Hu Ying had filed one affirmation, but it was to support her Stay Summons.  In her affirmation, she had raised certain factual issues including whether the domain name of “@caevolution.com” was at all material times under ESL’s use, control and management, and whether the purchase orders in the Apple Documents were issued to ESL, and she said these were overlapping issues with the Main Action.

70. The List of Issues in the Main Action, in so far as Hu Ying was concerned, included whether Hu Ying had owed any fiduciary duties and duty of fidelity to P1 after her resignation, whether she had solicited any of P1’s clients and/or diverted P1’s business to ESL, whether  she was in breach of any duty of confidence and whether she had misappropriated any of P1’s funds.

71. The List of Issues in the Main Action, in so far as ESL was concerned, was mainly whether ESL had rendered any dishonest assistance to Hu Ying. 

72. In the Committal Proceedings, the alleged breaches were directed towards Wei Xing and ESL and that Hu Ying was said to have aided and abetted both Wei Xing and ESL in their alleged breach. Ms Tong submitted the above issues in the List of Issues would not be issues in the Committal Proceedings, and that those factual issues raised by Hu Ying in her affirmation were thus not issues in the Main Action.

73. Further, Ms Tong submitted there was no evidence from ESL or Hu Ying as to the alleged breach set out  in paragraph 14B of the Amended O52 Statement in the Main Action. 

74. In any event, neither ESL nor Hu Ying had filed any affirmation in opposition to Wei Wen’s affirmation or otherwise in connection with the Committal Proceedings, and the deadline imposed by the Trial Judge at the 1^st Hearing had passed.  Ms Tong said ESL or Hu Ying would not be subject to any cross examination in the Committal Proceedings.

75. From Ds’ defence, one of the issues raised by them was whether P1 had any business/clients and whether the business/clients belonged to P2.  Other issues included whether Wei Xing and/or Hu Ying had been in breach of their fiduciary duties and duties of fidelity and confidence, if any, owed to P1 and/or P2, and whether they had diverted business from P1 or P2 and also whether they misappropriated funds of P1.

76. In the amended statement of claim, the particulars of the various wrongful acts of Wei Xing and Hu Ying in the diversion of P1’s business alleged by P1 were set out and such alleged wrongful acts had included Wei Xing and Hu Ying communicating, dealing and/or contracting with P1’s clients[20]. The Injunction Order specifically restrained Wei Xing and ESL from doing so until final judgment or further order.  It seems that the issue in the Committal Proceedings is simply whether they did or not communicate, deal and/or contract with Apple Inc. 

77. Having considered the pleadings and the List of Issues filed in the Main Action, I am not satisfied there will be any overlap of major issues, and in any event, I am not satisfied that there will be any inconsistency of findings on overlapped issues, even if any, bearing in mind that P1 the standard of proof in the Committal Proceedings is the criminal standard of “beyond reasonable doubt”. 

78. Even if there were to be some overlap in issues, as said by Gross LJ in the Ablyazov case, such overlap of itself and without more, does not necessitate postponing the determination of a contempt application until after the trial.  It is only a factor to be taken into account and the weight given to it must depend on the facts of the individual case.

Inordinate Delay

79. Mr Yu submitted that there had been inordinate delay as P1 took no action to enforce the two orders until after the commencement of the Main Trial.

80. Mr Yu pointed out that the Apple Documents were in fact received and considered by P1’s solicitors since mid June 2014, and P1 had applied twice to the court for leave to file a 3^rd witness statement in May 2014 and September 2014, which referred to and summarized the contents of the Apple Documents. 

81. Mr Yu had referred to 3 authorities on the issue of delay.

82. In Japan Capsule Computers (UK) Ltd v Sonic Games Sales [1988] Fleet Street Reports 256, the plaintiff had obtained an Anton Piller order, and the defendant had applied for the dismissal of the contempt motion on ground of want of prosecution and there was complaint of delay of about a year from the dates when the plaintiff became aware of the alleged contempt until the time when the plaintiff intimated the intention to restore the motion.  The application was dismissed and the defendant appealed, but the appeal was dismissed.

83. Mr Yu referred to the following passage:

“…There is a public interest in seeing that orders of the court are observed. To that end contemnors may have to be punished. There is also a public interest in ensuring that proceedings are conducted with reasonable dispatch so that evidence is not lost and a fair trial prevented. The court has to keep a reasonable balance between those considerations, which may sometimes conflict … In my view the overall position is that the court is concerned to secure that the administration of justice is both effective and fair[21].”

84. Mr Yu then referred the court to Taylor and Anor v Ribby Hall Leisure Ltd and Anor [1998] The Weekly Law Reports 400.  This was a case where the contempt proceedings was issued against the solicitor for the defendants in relation to his undertaking given about 7 years earlier in connection with a Mareva order.  The contempt proceedings were first threatened to be issued against the solicitor about 5 years earlier when the possible breach became known.  The contempt proceedings were struck out by the judge who concluded that there was an abuse of the process in bringing the motion: there had been long and inexcusable delay and there was a genuine risk of prejudice to the solicitor.  The plaintiff’s appeal was dismissed.

85. It was said per curiam that :

“(i) It is, in general, preferable to make submissions on delay, prejudice, potential injustice and other factors relevant to the court’s discretion in its contempt and supervisory powers at the substantive hearing rather than by a preliminary pre-emptive move to strike out which may be open to the objection that it increases the costs and delay that preliminary procedures are intended to avoid;

(ii) Contempt and supervisory proceedings should, in the absence of a good reasons, be initiated within a reasonable time of a party obtaining knowledge of a breach of a court order or undertaking or other misconduct[22]. ”

86. The last case on delay referred to this court by Mr Yu was a Canadian case Fraser and Morrison et al 2009 MBQB 185 Fraser Court of Queen’s Bench of Manitoba, which again emphasized the fundamental importance that not only that court orders be obeyed, but that in case of breach, parties who wished to complain about the breach should do so promptly and to seek such remedy as they could be entitled to on a timely basis[23]. The contempt application in this case was dismissed due to “egregious delay”, which was about 7½ years.

87. The discovery order against Apple Inc was only obtained by P1 on 23 May 2014.  There was no evidence that P1 had any evidence of any possible breach by Ds prior to its receipt of the Apple Documents.  The Apple Documents were produced in batches.  The first batch was on 16 June 2014 when Apple Inc produced a voluminous amount of 1,343 documents, comprising over 10,000 pages[24].  After that, the second batch produced by Apple Inc was on 24 October 2014 of another 59 documents comprising primarily of purchase orders issued to ESL[25], and as recent as 6 January 2015, Apple Inc provided to P1 a summary of Testing Business dealings said to be between ESL and Apple Inc[26] (“Summary of Project List”).

88. Having considered the volume of the 1^st batch of documents, and the time involved in going through those documents at the same time as preparing for the Main Trial, and also further documents being only disclosed on 24 October 2014, I am of the view that there had not been any inordinate delay on the part of P1 in issuing the Committal Proceedings.

No Urgency and No Prejudice to P1

89. Mr Yu submitted that unlike the Kehkman case, ESL and Hu Ying had applied for a stay at an early stage of the Committal Proceedings, as there was no trial date in these proceedings, and no properly sworn reply affirmation from Wei Wen had been filed yet.  Further, ESL and Hu Ying were not seeking an indefinite stay as in the Kehkman case, but only after determination/disposal of the Main Action. 

90. It was Mr Yu’s further submission that there had been no prejudice suffered by P1, or such prejudice or damage, if any, was not quantified.  Also, there would not be any costs consequence, as the application for stay was made at the 2^nd Hearing for directions. 

91. Wei Wen had said in his 2^nd affirmation that he issued the Committal Proceedings to protect P1’s own interests and to facilitate due administration of justice in view of the breaches of orders by Ds and had instituted these proceedings as a remedy of last resort in aid of the execution of the two orders.

92. As pointed out by Ms Tong, it was the Trial Judge herself who gave leave for the Committal Proceedings to proceed.  At the moment, the Main Trial is unlikely to be completed until November this year, and the Trial Judge will need time to write her judgment.  Depending on whether there will be any appeal, the Main Action will not be determined or disposed of until well into next year.

93. Further, Ms Tong pointed out that the Apple Inc’s disclosure was not yet complete, and from the Summary of Project List produced recently, it can be seen that there were business dealings of ESL with Apple Inc up until 22 September 2014[27]. 

94. Having considered the above, in light of the alleged breaches having gone on continuously after the Injunction Order until quite recently, I am of the view that the Committal Proceedings ought to be dealt with swiftly and decisively and there will be prejudice to P1 if a stay were to be granted.

Lack of good faith and abuse of process

95. Hu Ying said the application for leave to issue the Committal Proceedings was made on the 6^th day of the Main Trial and that the timing and purpose were suspicious, and the manner in which the court documents were served on Wei Xing reflected P1’s ill-intention and lack of good faith.

96. Hu Ying had also said that the Main Action was more than a company dispute and that it was a long-standing, bitter and ugly dispute between two brothers who were at loggerheads, and that there had been many interlocutory applications in the Main Action. 

97. The fact that there had been a proliferation of interlocutory applications since May 2012 in the Main Action had been referred to and commented on not only by the Trial Judge in her Decision on Costs dated 30 September 2013, but also repeated by the Court of Appeal in a judgment dated 20 June 2014 concerning leave to appeal by Wei Wen against the Decision on Costs. 

98. I am well aware of what the Trial Judge had said in relation to the proliferation of interlocutory applications in the Main Action which were fought out with a degree of vengeance not conductive to the saving of unnecessary costs.  However, it was the Trial Judge, who was fully aware of the history of the dispute between the brothers and the numerous interlocutory applications, who had given leave for the Committal Proceedings to go ahead.  I am not satisfied that there was sufficient evidence that there was ill intention and lack of good faith on the part of P1 in issuing the Committal Proceedings.

Conclusion

99. I accept that the Committal Proceedings will be another satellite litigation as pointed out by Mr Yu.  The estimated length of hearing of the Committal Proceedings has been agreed to be 4 days.  It is not clear as to when the hearing is likely to be.  If any of Ds were to be found in contempt, there is a possibility that the contemnor may not be heard in the Main Trial, which may be brought to an earlier end.  There may of course be an appeal, and the Main Trial will then be further disrupted.  On the other hand, if the Committal Proceedings were to fail, then subject to the possibility of appeal, the Main Trial may or may not be disrupted.

100. Bearing in mind that the alleged contempt is said to be the breach of an injunction order and disclosure obligations in an Anton Piller order, there is the public interest in ensuring the efficacy of such orders.  As said by Gross LJ in the Ablyazov case, such public interest is likely to weigh heavily in the balancing exercise.  Notwithstanding that there may be a disruption to the Main Trial, and even if there were to be some overlap of factual issues, of which I have said I am not satisfied that there will be,  I have come to the conclusion that the balance should tilt in favour of public interest in ensuring the efficacy of such orders.  I am not satisfied that there will be a real risk of serious prejudice which might lead to an injustice if the Committal Proceedings were to proceed.

Order

101. In light of what I have said above, I order that the Stay Summons be dismissed. As the 2^nd and the 3^rd defendants have not succeeded with their Stay Summons, I see no reason why they should not pay the 1^st plaintiff’s costs of the Stay Summons in any event. This is an order nisi, which shall be made final after 14 days. 

102. The parties have accepted the terms of the draft directions attached as B to Mr Yu’s skeleton submissions, subject to those amendments made by the court at the 2^nd Hearing, should the Stay Summons be dismissed.

103. I will accordingly make an order in terms of those directions with costs in the cause.

104. Finally, I thank both Counsel for their assistance to the court.

[1] A:73-84

[2] Paras 3 and 4, A:96

[3] A:101-102

[4] A:111-113

[5] A:104-107

[6] Per Stephen Brown LJ at pg 469

[7] See holding

[8] See holding

[9] G – H, at pg 290

[10] See para 70

[11] See para 68

[12] See para [16], pg 85, Kekhman

[13] See para [14], pg 84, Kekhman

[14] See para [14], pgs 84-85, Kekhman

[15] See para 61

[16] C4:651

[17] C4:662

[18] A:45

[19] Para 14A(a), A:52

[20] See para 27(b), C3-498

[21] At pgs 260-261

[22] See Headnote

[23] At pg 7

[24] Para 17, B:12

[25] See para 14(b), A:45

[26] See para 15, C3:444

[27] C3:456