IP PUI LAM ARTHUR AND ANOTHER v. ALAN CHUNG WAH TANG AND ANOTHER

HCMP 450/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 450 OF 2016

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J U D G M E N T

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INTRODUCTION

Introduction

1.  This is the plaintiff trustees’ (the “Trustees”) application by originating summons dated 26 February 2016 to cite the Defendants for contempt of court for wilfully and intentionally disobeying this court’s order dated 18 March 2015 (the “Order”) made in HCB 3819/2011 (the “bankruptcy proceedings”).  These proceedings have been commenced pursuant to the court’s leave granted on 15 February 2016. On 18 February 2016, this court granted retrospective leave to dispense with personal service of the Order on each of the Defendants (“Tang” and “Wong”).    

Background

2.  The Trustees are the joint and several trustees in bankruptcy of Ho Yuk Wah David (the “Bankrupt”), a solicitor whose name is not unfamiliar in these courts. 

3.  The Defendants were partners of an accounting firm known as JBPB & Co (“JBPB”).  JBPB was formerly known as Grant Thornton.  On 30 September 2011, the Defendants were appointed as joint and several liquidators of CWT Textile Supplies Company Limited (in creditors’ voluntary liquidation) (“CWT”).  Shortly after that JBPB collapsed.  The partnership had a split into two camps consisting of the Defendants (the “minority partners”) and Paul Chow in one camp and the other nine partners (the “majority partners”) in another.  The Defendants and the majority partners became engaged in partnership dispute litigation in HCA 1691/2011. 

4.  CWT had been in litigation with its former auditors.  The dispute was eventually settled, resulting in a substantial settlement payment to the joint and several liquidators of CWT.  A significant part of the settlement sum was then paid to Topmark Asia Ltd (“Topmark Asia”) and Sun Ascent International Ltd (“Sun Ascent”), pursuant to a consultancy agreement and funding agreement. 

5.  As a result of their investigation into the financial affairs of the Bankrupt, the Trustees formed the belief that the Bankrupt had been operating a complex scheme using nominees and about 30 offshore companies, including Topmark Asia and Sun Ascent, to conceal his assets and to divert significant amount of funds out of reach of his creditors. 

6.  By an inter partes summons dated 27 June 2013, the Trustees sought third party disclosure against CWT and JBPB, pursuant to section 29 of the Bankruptcy Ordinance of certain documents.  On 5 November 2013, Deputy High Court Judge Le Pichon ordered the Defendants as joint and several liquidators of CWT to produce documents relating to three payments by CWT to Topmark Asia and Sun Ascent to the Trustees (the “R1’s Order”); and also ordered JBPB by consent to produce supporting documents relating to twelve payments made to JBPB by DH China Consulting Limited (“DH China”), Grand Asia Capital Services Limited (“Grand Asia”), Asia-Pac Infrastructure Development Limited (“APIDL”), and Topmark Asia (collectively, the “Bankrupt’s nominee companies”) and a cashier order of Standard Chartered Bank (HK) Ltd (the “R2’s Order”).  The Defendants, however, denied JBPB’s solicitors, Messrs Chiu, Szeto & Cheng Solicitors & Notaries (“CSC”), had authority to enter into the R2’s Order by consent on their behalf as minority partners and refused to comply with that order. 

7.  To regularize the situation, on 7 February 2014 the Trustees applied by inter partes summons for orders that the Defendants in their two different capacities do comply with the R1’s Order and R2’s Order (the “disclosure application”).  The application was heard before this court.  When resisting that application, the Defendants appeared in two different capacities, as joint and several liquidators of CWT and as minority partners of JBPB.

8.  In my decision delivered on 18 March 2015 (the “Decision”), I granted the Order.  Paragraphs 3 and 4 of the Order which apply to the Defendants in their capacity as minority partners of JBPB provide as follows:

“3.  [The Defendants as partners of [JBPB] do within 21 days from the date hereof produce the documents set out in the Schedule to the Inter-partes Summons dated 27 June 2013 in respect of the 2^nd Respondent (“2^nd Schedule”);

4.  if any of the documents set out in the 2^nd Schedule had never been or is no longer in his/her custody and/or power, [The Defendants as partners of JBPB] do within 21 days from the date hereof file an affidavit/affirmation stating in respect of each document whether it had been in his/her custody and/or power, and if it had been, when it was last in his/her custody and/or power and the reason it is now no longer in his/her custody and/or power.”

The 2^nd Schedule was identified in the Order as “the Schedule to the Inter-partes Summons dated 27 June 2013”, but was not actually annexed to the Order itself. Paragraph 2 of that Schedule specified four categories of supporting documents relating to twelve payments.  It reads:

“In respect of [the minority partners of JBPB], copies of the supporting documents of the following payments made to [JBPB], including but not limited to, agreement(s) pursuant to which the following payments were made, correspondence(s) in relation to the following payments, minutes of meeting(s)/written resolution(s) of creditors/committee of inspection/court order(s) approving the following payments, invoice(s) and receipt(s) for the following payments:-

(a list of twelve payments from the Bankrupt’s nominee companies, and a cashier order of Standard Chartered Bank (HK) Ltd)”

The first three categories of documents are non-accounting documents.  The last category, i.e. invoices and receipts are accounting documents, but does not include cashier orders.

9.  The time for providing disclosure expired on 8 April 2015.  The Defendants did not produce any of the documents set out in the 2^nd Schedule to the Trustees.  On that day, they sent a letter to the Trustees’ solicitors attaching correspondences between them and CSC.  Five months later, they filed Tang’s 4^th Affirmation in purported compliance with paragraph 4 of the Order.  On 26 February 2016, the Trustees commenced committal proceedings against the Defendants.

HCA 1691/2011 and the intervention by Shinewing

10.  On a separate front, the Defendants as plaintiffs sued the majority partners in HCA 1691/2011 for breach of their partnership agreement.  On 19 January 2016, Chow J handed down judgment substantially in favour of the majority partners and made a costs order nisi that the Defendants shall pay 80% of the majority partners’ costs.  The Defendants appealed but their appeal was dismissed by the Court of Appeal on 25 August 2016.  Some of the fact findings in that action are relevant to these contempt proceedings.  They are set out below.

11.  JBPB had two offices, one in Sunning Plaza in Causeway Bay and another one in Central.  The insolvency and restructuring department headed by the Defendants and the administration and finance department (“AFD”) of JBPB operated in Sunning Plaza office while the other ten partners operated in the office in Central.  When JBPB collapsed towards the end of 2010, the partners entered into some termination arrangements and executed a termination deed dated 16 November 2010.  Under that deed, JBPB was to be closed down with effect from 31 December 2010; the Defendants and Paul Chow, were allowed to join Shinewing (HK) CPA Limited (“Shinewing”) and to transfer the business, assets and staff of the restructuring, insolvency and investigations division and corporate finance division of JBPB to Shinewing.  In HCA 1691/2011, there was no issue about this transfer.  There was no dispute that the Defendants had joined Shinewing and the transfer effected.  Hence, reference to Shinewing since 2011 includes reference to the Defendants.

12.  To wind down its business, JBPB engaged Shinewing to, inter alia, maintain the books and records of JBPB and update the general and sub-ledgers/accounts for payments made to creditors and funds received from debtors.  In view of the termination deed and Shinewing’s engagement, Shinewing must have taken over the books and staff of the restructuring, insolvency and investigations division and corporate finance division of JBPB and the books and records of the AFD in Sunning Plaza office.  Thus practically, Shinewing took over everything in Sunning Plaza office, except the staff of the AFD.  However, Shinewing’s engagement ended in dispute in May or June 2011 and was unilaterally terminated by the majority partners.  The majority partners alleged Shinewing of having taken away JBPB’s computer hardware, the AFD server, the books and records and refused to return them.  The Defendants denied and accused the majority partners of not providing them the password to the computer system.  

13.  In that action, the above dispute was resolved in favour of the majority partners.  Contrary to their position before trial, the Defendants did not dispute that they had possession of the computer hardware, including the AFD server containing the Practice Management System (“PMS”).  It is the finding of Chow J that when the majority partners sought to repossess the computer, they found that IT system had broken down, which they suspected was caused by Shinewing.  Whatever was the cause does not matter.  The majority partners offered to have their personnel to fix the problem on the condition that they be given control of the computer system or a complete copy of the information contained in the system.  The Defendants disagreed. While this particular issue was about whether the majority partners had failed or refused to provide the Defendants full and unrestricted access to the computer system and data by not giving them the password, it was the finding of Chow J that besides having been provided with the password, the Defendants had also removed the computer hardware and the AFD server in which the PMS was stored.    In paragraphs 173 to 175 of his judgment, Chow J wrote: 

“ISSUE 5 OF AGREED LIST OF ISSUES: HAVE DS FAILED AND/OR REFUSED TO PROVIDE PS WITH FULL AND UNRESTRICTED ACCESS TO THE COMPUTER SYSTEMS AND DATA WITHIN THE PARTNERSHIP’S IT SYSTEMS?

173. The 7^th defendant was the partner designated to be responsible for all IT-related matters of the Partnership. It is the plaintiffs’ case that the 7^th defendant had possession, or was in control, of the “administrative password” of the Partnership’s IT systems, including the accounting and banking systems, personnel data, marketing data, email system and the time-recording and billing software developed with the resources of the Partnership known as “Practice Management System” (“PMS”). The plaintiffs’ complaint is that only the defendants, but not the plaintiffs, have full access to all emails within the Partnership’s email system and the source code and database of the PMS, and that the copy of the PMS provided by the 7^th defendant to the plaintiffs is defective and incomplete in that part of the source code and part of the database are missing. The plaintiffs also complain that, despite repeated demands, the defendants have failed or refused to provide to the plaintiffs full and unrestricted access to all computer systems and data within the Partnership’s IT systems.

174. It is not in dispute that the plaintiffs had, as a matter of fact, possession of the computer hardware, including the servers, containing the PMS at the Sunning Plaza premises. The crux of their complaint relates to the failure or refusal of the 7^th defendant to provide the administrative password. When this matter was put to the 7^th defendant in cross examination, he explained that in fact he had provided the administrative password to the 1^st plaintiff and the administrative password had never been changed. Apparently, around May/June 2011, after the Partnership terminated the services of Shinewing (who were originally retained to manage the litigations with third parties and wind down the business of JBPB), the Partnership attempted to take back possession of the computers but found that the Partnership’s IT system had broken down which the 7^th defendant suspected was damaged by the 1^st plaintiff (or his staff). For this reason, the defendants (including the 7^th defendant) also did not have full access to the email system or the PMS. The 7^th defendant offered to provide his IT personnel to fix the problem but insisted that once the system had been fixed, either he should get back control of the system or should be allowed to obtain a complete copy of the information contained in the system. However, no agreement could eventually be reached.

175. The 1^st plaintiff’s evidence on this issue was generally vague and non-specific. On the other hand, the 7^th defendant’s evidence on this issue, which I prefer, is straight forward and clear. I consider that the plaintiffs have failed to substantiate their complaint under this issue.”

(My emphasis underlined.  The 1^st plaintiff and the 7^th defendant are respectively Tang and Patrick Rozario.)

14.  While it may be argued that Chow J had not unequivocally found that the Defendants had subsequently removed the computer hardware and AFD server when they vacated the Sunning Plaza office, it is implicit from the above quoted passage of his judgment that they had.  First, it was common ground that the Defendants had possession of those items. Second, the Defendants had such de facto and physical possession that the majority partners had to make an attempt, which failed, to repossess the computer and server.  Third, the majority partners had to plead to repair the system and to be allowed to get back its control or, if not, be given a copy of the information contained therein.  If the Defendants had not taken away the computer hardware and the AFD server, there was no need for the majority partners to offer such a compromise; and the Defendants could not have been in any position to reject their offer.  I am satisfied beyond reasonable doubt that the Defendants had taken possession of the computer hardware and the AFD server which were fully functional, then removed them from Sunning Plaza office and refused to return them to the majority partners.  Though possession of the DML was not an issue in that action, as the PMS was stored in the AFD, so must the DML, as alleged by the majority partners.

An overall view of these contempt proceedings

15.  The Defendants were the joint and several liquidators of CWT and partners of JBPB solely in charge of liquidation and restructuring division of JBPB and responsible for the liquidation of CWT.  Tang did not dispute evidence of JBPB’s managing partner, Jonathan Leong, that the Defendants were the only partners who had conduct of the accounting affairs of the Bankrupt and APIDL.  He also did not dispute the hearsay evidence of Jeff Li, a confessed nominee of the Bankrupt, accountant of APIDL and director and signatory of the Bankrupt’s nominee companies (the payments by these companies were the subject matter of disclosure under the Order), that a partner of JBPB introduced distress assets (such as CWT) to the Bankrupt.  Obviously, the Defendants were the only partners in JBPB who had conduct of the accounting affairs of the Bankrupt and his nominee companies.  Prima facie, the Defendants were able to produce the documents or provide the information sought.  They, Tang in particular, are the most appropriate persons against whom to seek disclosure.

16.  In respect of the R1’s Order, the Defendants were ordered as the joint and several liquidators of CWT to produce supporting documents relating to three payments made by CWT.  They complied.  In respect of the R2’s Order, they were ordered as minority partners of JBPB to provide documents, including four categories of supporting documents relating to twelve payments handled by JBPB.  They did not dispute that the documents existed. They admitted that they had the case files but claimed that one particular category of documents, namely the cashier orders were kept in the majority partners’ godown.  They produced no documents as required by paragraph 3 of the Order; and filed no affirmation to answer precise questions explaining what happened to the documents as required by paragraph 4 of the Order.  They only filed a late affirmation, i.e. Tang’s 4^th Affirmation, asserting that they had a partnership dispute with the majority partners and the majority partners were uncooperative and imposed unreasonable conditions for their access to the documents.  In essence, the Defendants’ case is that they have no documents to produce under paragraph 3 of the Order; paragraph 4 of the Order is not triggered; and even it is, Tang’s 4^th Affirmation is sufficient compliance with paragraph 4 of the Order.

The grounds of opposition

17.  Mr Siu, counsel for the Defendants, advanced ten grounds of opposition to the application.  These are:

(1)  ambiguous order;

(2)  defective statement in support of the application for leave to commence contempt proceedings;

(3)  no good service of the Order;

(4)  no proof of existence of documents;

(5)  no possession or custody: position of majority shareholders;

(6)  no possession or custody: position of Paul Chow;

(7)  paragraph 4 of the Order not triggered;

(8)  sufficient compliance Tang’s 4^th Affirmation;

(9)  no requisite state of mind; and

(10) availability of alternative aids.

18.  These grounds of objections are technical and involve, at least in part, a misunderstanding by counsel for the Defendants of the nature and purpose of the disclosure application under the bankruptcy proceedings and those in the committal proceedings; and his confusion about the burden of proof in these two sets of proceedings.  Instead of addressing these grounds one by one, I shall adopt a systematic approach by dealing with the proper construction of the Order; what the Trustees have to prove; and the burden of proof to reach the conclusion.  I shall deal with these ten grounds of opposition while addressing the above issues.  But, before embarking on the above exercise, I shall first set out some applicable legal principles and the differences in nature between the disclosure application and the committal proceedings.

THE RELEVANT LEGAL PRINCIPLES

The nature and purpose of the disclosure application and the test governing the making the disclosure order

19.  In paragraphs 11 to 16 of my Decision, I discussed the legal principles applicable to the making of a disclosure order under section 29 of the Bankruptcy Ordinance.  Basically, I adopted the principles applicable to application for disclosure order under section 221 of the Companies Ordinance as stated by Lord Millett NPJ in the decision of the Court of Final Appeal in Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd[1]. These principles were summarised in paragraph 17.  In gist, section 29 confers general, wide, unlimited and discretionary power on the court to order a respondent to provide information and documents.  To invoke the court’s exercise of this discretion, the trustee bears the burden of proving (i) that provision of information or documents is reasonably required to enable the trustee in bankruptcy to carry out his functions; and (ii) that the trustee has proved a prima facie case that the respondent is able to provide such information or documents.  Lord Millett NPJ did not mention about the second requirement.  It was introduced by me to meet one particular condition specified in section 29(1) of the Bankruptcy Ordinance which is relevant in the present case, i.e. that the discretion to make a disclosure order may be exercised against a “person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property”. 

20.  It is important to note that the existence of the documents sought to be disclosed and the respondent’s possession, custody and power over the documents are not requirements which the trustee has to prove before the order will be granted. These requirements were not incorporated in the Order.  In my Decision, I have not explained why proof of existence of the documents was not necessary because the application proceeded on the basis that the documents existed.  I have briefly touched on the issue of possession, custody and power.  Now that these issues are raised by the Defendants, I shall deal with them more fully here.

21.  The purpose of section 29(1) of the Bankruptcy Ordinance is to enable the trustee in bankruptcy to carry out his functions. One of those functions is to discover facts and documents relating to potential claims by the trustee against third parties or to enable him to report to the authorities any irregularities in the bankrupt’s affairs with a view to take action against those responsible, including the bankrupt, and to recover assets available for distribution to the general pool of creditors.  The trustee is a total stranger to the affairs of the bankrupt.  He has no idea what documents the bankrupt or the third party against whom disclosure is sought has.  It is the respondent who knows, not the trustee.  In the majority of circumstances under which such applications are made, the trustee has no idea about the existence of specific documents.  To require the trustee to prove the documents exist before a disclosure order may be made would render the section nugatory. Having regard to the purpose of section 29(1) and the nature of this type of application, I am of the view that proof of existence of the documents sought to be disclosed is unnecessary.  It is therefore permissible to seek and to make orders in the widest possible terms, for class documents and whether such documents exist.  If the person subject to the order wishes to be excused from production on the ground that the documents do not exist, he has to bear the legal burden of proof.  It is not enough to prove that they may not exist or probably do not exist. 

22.  I am able to draw support for the above proposition from Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd.  In that case, Lord Millett NPJ approved the making of an order by Robert Walker J in Joint Liquidators of Sasea Finance Ltd v. KPMG[2] requiring production of a class of documents, even though it was recognised that there would “probably [be] no documents” and the order was made in case “any such documents should turn up”.  His Lordship also approved the making of an order by Kwan J (as she then was) in Re New China Hong Kong Group Ltd knowing that some of the documents whose production was sought had been destroyed.  His Lordship said[3]:

“61. In my opinion this is the right approach. It is for the respondent to satisfy the court that the documents do not exist. It is not enough that they may not exist, or even that they probably do not exist.”

These are cases under section 221 of the Companies Ordinance or the equivalent English provisions.  As section 29 of the Bankruptcy Ordinance serves a similar purpose as section 221 of the Companies Ordinance, there is no reason why the same approach should not be adopted here.

23.  I also did not make it a term of the Order that the Defendants shall only produce those documents which are in their possession, custody and power.  That is a formula usually used in discovery under Order 24 of the Rules of the High Court for obtaining evidence in an action under litigation. In a disclosure application under section 29(1) of the Bankruptcy Ordinance or section 221 of the Companies Ordinance, the trustee is entitled to seek an order in the widest term possible, including documents which may not exist.  I do not see any need or reason to narrow it down.  I understand that this requirement has been incorporated in most disclosure orders.  I respectfully take a different view.  However, although the Defendants’ possession, custody and power over the documents is not a term of the Order, I accept that one may not be guilty of contempt for failing to produce documents which one does not have possession, custody or power.  To prove contempt, this element must be proved if the defence of lack of possession, custody and power is raised.

24.  While I went into some lengths in my Decision dealing with possession, custody and power in my Decision before making the Order, the purpose was to decide whether the Defendants were able to provide the information or documents and whether it was the majority partners or the Defendants who were in the better position to make disclosure.  I made it clear in paragraph 66, that I was not conducting a mini-trial on affidavit evidence as regards this issue.  As the existence of the documents was not in dispute, in the absence of an acceptable explanation, those documents could be in the possession and custody of nobody else but the partners of JBPB.  Both the majority partners and the Defendants asserted that the documents were in the possession and custody of the opposite party.  In paragraphs 62 to 67, I analysed the majority partners’ and Tang’s evidence and concluded that Tang was not credible and rejected his bald assertion of lack of knowledge of the whereabouts of the documents.  In their capacity as the only partners of JBPB who handled the accounting affairs of the Bankrupt and his nominee companies, prima facie, they were able to produce the documents or provide the information and were the most appropriate partners to give disclosure.  That provided a sufficient basis for making the Order.  

The nature and purpose of contempt proceedings

25.  The purpose of the law of contempt is to prevent interference with the due administration of justice: Attorney General v Times Newspaper Ltd[4].  It is not to enforce the earlier order of the court, though usually the threat of such proceedings may have that effect.  The proof that is required to establish contempt may not necessary be the same as that required when seeking the earlier order.  The legal principles on civil contempt were well-established by the Court of Final Appeal in Kao, Lee & Yip v Koo Hoi Yan[5]. These principles have been usefully summarized in the recent case of Bruno Arboit v Koo Siu Ying[6]. These are:

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

(2)  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.

(3)  It is necessary to (a) construe the court’s order to ascertain its meaning and operation; (b) determine whether the defendant has in fact failed to comply with the order; and (c) consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

(4)  An order should be construed strictly because the court is concerned with an order which has a potentially draconian effect on the commercial and economic freedom of an individual.

(5)  What must be ascertained is the meaning which the document would convey to a reasonable person having all the background which would reasonably have been available at the time the order was made.  This includes the purpose for which the order was made.

(6)  The Court will not enforce an order which is ambiguous or unclear in a material respect.  Any ambiguity in the term of the order must be resolved in favour of the alleged contemnor.

(7)  Where it is said that the contemnor has failed to produce documents as ordered, it is crucial to determine that he did have the documents in his possession, custody or power at the time of the order.  A presumption that a state of things proved to exist at a certain date must be taken, in the absence of contrary evidence, to have continued to exist, will not be sufficient.

(8)  Proving that the defendant has lied is not sufficient.  There must be some further evidence to incriminate him than just lies.  Once some evidence is given, his lies can be thrown into the scale against him.

(9)  It has to be proved that the failure to comply with the court order was contempt.  A defendant cannot be regarded as in contempt just because he did not have the means to comply with the order.

Construction of the Order, elements of the contempt and burden of proof

26.  The usual principles of construction of documents apply to construction of a court order.  An order has to be construed against the factual matrix.  In the present case, the factual matrix includes the following.  The Trustees are total strangers to the affairs of the Bankrupt. They have no idea what documents are in existence and who has possession, custody and power over them.  What they know or have actually proved is a prima facie case that the Defendants are able to produce the documents or provide information as to their whereabouts.  The purpose in making the Order is to enable the Trustees to carry out their functions.  There is an important public interest in ensuring that the Trustees should obtain the documents or information needed to enable them to collect the Bankrupt’s assets for the benefit of the pool of creditors; to understand the Bankrupt’s affairs; the reasons for his insolvency; and to report to the authorities to enable them to take appropriate action against any party, including the Bankrupt, for any impropriety associated with the bankruptcy. 

27.  Having regard to the purpose of the Order, one has to adopt a holistic approach of construction.  Each paragraph is to be construed consistently with the other paragraphs and not in isolation.  The Order must be construed bearing in mind the purpose of enabling the Trustees to obtain documents or information of their whereabouts to enable them to carry out their functions.  It is important to note that paragraph 3 of the Order requires production of documents which, prima facie, the Defendants are able to produce, not that they have possession, custody or control of the documents.  But if the Defendants can prove, prima facie, that the documents had never been or are no longer in their custody or power, they will be excused from production, but are required under paragraph 4 to provide information as to their whereabouts.  This is the intended effect of the Order.  This is how the two paragraphs could be construed consistently with one and other. 

28.  What the Trustees have to prove depends on the terms of the Order.  The Defendants were ordered to produce documents in respect of which it has been proved prima facie that they were able to produce or to provide information as to their whereabouts; and not because the documents were in their possession, custody or power.  Hence. existence of the documents and possession, custody and power over them are not ingredients of the offence of contempt.  To prove breach of paragraph 3, what the Trustees have to do is simply to prove that the Defendants have not produced the documents.  They do not have to prove that the documents exited or are in the possession, custody and power of the Defendants because these are not ingredients of the offence of contempt for breach of this particular Order.  This may sound astonishing and inconsistent with Re Bramblevale Ltd[7] and probably most of the local authorities quoted by Mr Siu.  This is because the orders concerned in those authorities were to produce documents in the defendants’ possession, custody or power.  That said, I accept that one cannot be guilty of failing to produce that which does not exist or is not in his possession, custody or power.  These are valid defences but not ingredients of the offence of contempt.  But as I shall demonstrate, there is no real difference, if the Defendants plead as their defence that the documents do not exist or they that do not have possession, custody or power over the documents.  The net effect is just a shifting of the evidential burden.

29.  The burden of proof operates in this way.  Once the Trustees proved that the Defendants have not produced the documents, if the Defendants want to excuse themselves from production under paragraph 3 of the Order, they have to show prima facie that the documents do not exist or had never been or are no longer in their possession custody or power.  As the legal burden is always on the prosecution, i.e. the Trustees, the Defendants only have to bear the evidential burden of proof.  If they cannot even discharge the evidential burden, they are in breach of paragraph 3.

30.  If the Defendants succeed in discharging the evidential burden of proof that the documents do not exist, the Trustees would have to assume the legal burden of proving that in fact they do.  This may appear to be contrary to Lord Millett’s proposition in Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd.  But in fact it is not.  What Lord Millett NPJ said applies to applications for disclosure orders and not to the proving contempt for breach of that order.  In an application for disclosure order, the trustees need not prove that the documents exist.  The burden is on the respondent to prove that it does not if he wants to resist the application.  But to prove contempt for breach of that order, it is invariably the prosecution’s duty to prove the offence beyond reasonable doubt. If the Defendants succeed in discharging the evidential burden of proof that the documents do not exist, the Trustees would have to assume the legal burden of proving that the documents in fact exist.

31.  Similarly, if the Defendants succeed in discharging the evidential burden of proving that the documents are not in their possession, custody or power, it would be up to the Trustees to decide whether to accept that position.  If the Trustees do not, they will have to negative the Defendants’ evidence or defence and to assume the legal burden of proving possession, custody and power; and hence establish proof of breach of paragraph 3.

32.  Alternatively, if the Trustees have not or have not successfully challenged the Defendants’ evidential burden of proof, the Defendants are released from the burden of producing documents but shall provide the information as required by paragraph 4 of the Order.  If the Defendants wish to be excused from providing the information, they have to discharge the evidential burden of proving that they genuinely do not have information to provide.  Although the burden is an evidential one, as lack of knowledge is something exclusively known to the Defendants, the standard of proof is quite high.  It requires cogent evidence.  Bald assertion of lack of knowledge without corroborating evidence is usually not enough.  If the Defendants succeed in discharging the evidential burden, the Trustees have to assume the legal burden of proving knowledge to negative the defence.  This may be proved by inference, for example, that the Defendants were last known to have custody of the documents.

33.  In the light of the above discussion, to prove contempt for breach of paragraph 3 of the Order, the Trustees bear the legal burden of proving:

(1)  the Defendants’ failure to produce the documents;

(2)  such failure is committed with the necessary mens rea; and

(3)  if the Defendants succeed in discharging the evidential burden of proving that the documents did not exist or had never been or are no longer in their custody or power, that the documents do exist or that Defendants indeed have possession, custody and power over the documents, as appropriate.

There is no dispute that the Defendants have not produced any documents but have raised the defence that the documents did not exist or had never been or are no longer in their custody or power.  Thus, the Trustees’ burden is to prove (2) and (3).

34.  Breach of paragraph 4 stands on a different footing.  Paragraph 4 is a relief from the onerous burden under paragraph 3. It applies to documents which had either never been or is no longer in the possession, custody and power of the Defendants.  These facts are exclusively known to the Defendants who rely on proving these facts to be relieved of the onerous burden under paragraph 3.  They are not ingredients of the offence of contempt, but are conditions of partial exemption from liability.  The legal burden of proof is on the party asserting these facts and who relies on proving these facts in order to succeed.  Thus, the legal burden is on the Defendants. However, paragraph 4 only operates only if the Defendants have succeeded in discharging their evidential burden of proving that the documents had never been or are no longer in their possession, custody or power and the Trustees either have not or have not successfully challenged that evidence.  Thus, by successfully discharging the evidential burden in those circumstances, the Defendant would also have discharged the legal burden of proof.

35.  Thus, to prove contempt for breach of paragraph 4 of the Order, the Trustees bear the legal burden of proving:

(1)  the Defendants’ failure to provide the information; 

(2)  such failure is committed with the necessary mens rea; and

(3)  if the Defendants succeed in discharging the evidential burden of proving that they genuinely have no information to give, that in fact they have. 

Paragraph 4 is only triggered if the Defendants have discharged the evidential burden of proving that the documents are not in their possession, custody or power and the Trustees have not or have not successfully challenged their evidential burden.  In that case, the Defendants must have also discharged their legal burden of proof.  This is a condition of partial exemption from the more onerous liability under paragraph 3.  Looked at in this way, the ridiculous position that the Trustees have to prove that the documents are in the possession, custody and power of the Defendants for the purpose of paragraph 3 and that they are not for the purpose of paragraph 4 as advanced by Mr Siu will never arise.  The reality must be that the documents are either in the possession, custody and power of the Defendants or that they are not.

TECHNICAL OBJECTIONS

Ambiguous Order – the law

36.  Relying on Ellerman Lines Ltd v Read[8], Mr Siu submits that a court order should be drawn up in clear terms making it clear what the court is ordering to be done.  It should not require the person to whom it is addressed to cross-refer to other materials in order to ascertain his precise obligation.  Quoting from Arlidge, Eady & Smith on Contempt[9], Mr Siu submits that there is no scope for reading implied terms into an injunction. He places particular reliance on the following dicta of Lord Upjohn in Rudkin-Jones v The Trustee of the Property of the Bankrupt[10] in which his Lordship held that a person is entitled to look only within the four walls of the order, and not beyond, to find out what he is enjoined from doing:

“It cannot be too clearly understood – and I hope that this will be brought to the attention of the Registrar responsible for drawing up these orders – that a person is entitled to look and look only at the order to see what it is that he is enjoined from doing. He looks at that order and finds out from the four walls of it and from no other document exactly what it is that he must not do.”

(Mr Siu’s emphasis underlined)

37.  In reply, Mr Chen, counsel for the Trustees, refers me to Crystalmews Ltd (In liquidation) v Metterick and others[11] in which Collins J (as he then was and now NPJ of the Hong Kong Court of Final Appeal) rejected counsel’s argument based on Rudkin-Jones and Ellerman Lines.  In Crystalmews, the provisional liquidator obtained an ex parte injunction order against the defendant restraining her from doing certain things until the return date or further order.  That first freezing order was continued at an inter partes hearing until trial or further order.  In the committal proceedings against the defendant for breach of the inter partes order, one of the points taken by the defendant was that it was not sufficient to have referred in the inter partes order to another order, i.e. the ex parte order.  In rejecting counsel’s argument based on Rudkin-Jones and Ellerman Lines, Collins J said[12]:

“[46] I was referred to authorities (especially Attorney-General v Harris [2001] 3 FCR 193, [2001] 2 FLR 895, paras 288-295; Rudkin-Jones v Trustee of the Property of the Bankrupt (1965) 109 Sol Jo 334; Ellerman Lines Ltd v Read [1928] 2 KB 144, 157-158, 97 LJKB 366, 17 Asp MLC 421) which criticise the practice of making orders by reference to earlier orders. I rejected this argument at the outset of this hearing because the effect of the two orders was that the order of the court as varied on 6 March 2006, continued in full force and there was nothing relevant in the point that (as often happens) a fresh freezing order was not made on 6 March 2006, in circumstances where Mr Metterick was represented at the hearing and either consented, or at any rate did not object. The cases cited were cases where it would have been difficult for the person affected by the order to have known what the effect of the orders would have been. This is not such a case.”

Mr Chen therefore submits that it is permissible to look at documents outside the order in issue to ascertain what the person affected by the order has to do or is enjoined from doing.

38.  Mr Siu seeks to distinguish Crystalmews fromRudkin-Jones as a case in which the earlier order continued in full force under the fresh order.  I am unable to find any substance in that distinction.  In my view, the real distinction between Crystalmews andRudkin-Jones and the other authorities relied on by Mr Siu is, as Collins J pointed out, the difficulties for the person affected by the order to have known what the effect of the orders would have been.  That, I think, is the proper test. 

39.  On the face, that test is inconsistent with Lord Upjohn’s dictum in the English Court of Appeal in Rudkin-Jones that the person affected by the order need only look within the four walls of the order to find out what his obligations are.  I think that dictum has to be understood in the peculiar context of that case.  In that case, a farm house was purchased in the name of wife in May 1961 whose husband was adjudicated bankrupt a year later.  An undertaking was given by the wife’s solicitors not to part with the title deeds or the proceeds of sale of the farm house.  After the undertaking ran out in May 1963, the wife sold the farm house and received £5,990 and 19s which she paid into her bank account.  She also had about £6,000 in £5 notes in a linen bag in her wardrobe.  Then the trustee in bankruptcy issued a motion seeking a declaration that the conveyance to the wife in 1961 was void under the Bankruptcy Act 1914.  On 26 July 1963, the judge granted an injunction on amended term restraining the wife from, inter alia, disposing of the proceeds of sale of the farm house.  Though the injunction was granted in those amended terms, no formal alteration to the notice of motion was made until the 7 October 1963 when the order was drawn up.   And when the order was finally drawn up, it was drawn up in the following terms:

“It is ordered that an injunction be granted in the terms of Notice of Motion for Injunction as amended over the 11^th October 1963”.

Since the date of the injunction, various sums were withdrawn from the wife’s bank account and the linen bag.  On 18 October 1963, the wife submitted to judgment and paid about £1,694 into court representing the then balance in her bank account, and the husband handed in the linen bag containing £1,788 which was what was left in the bag.  The county court judge committed both of them in prison.  It was obvious in that case the husband and wife were faced with at least three versions of notice of motion: the original notice of motion, an amended version orally amended on 26 July 1963, a formally amended notice of 7 October 1963 and possibly yet another formally amended notice dated 11 October 1963 as referred to in the formal order.  They were faced with two different versions of an order: an oral one made on 26 July 1963 restraining the wife from dealing with the proceeds of sale of the farm house and a formally drawn up written order referring to the terms in a notice of motion amended on 11 October 1963.  Worst still, the formally drawn up order must have been served on the wife after at least 11 October 1963, which was two and half months after the injunction order was orally made.  By then, substantial sums had been drawn from the wife’s bank account and the linen bag.

40.  It was in those very peculiar factual circumstances that Lord Upjohn criticised the leisurely fashion in which the case was handled by the trustee in bankruptcy and the county court judge.  He said:

“I do want to protest as strongly as I can at the granting of injunctions in that form. It means then that the person against whom the injunction is granted on 26^th July has to look at another document in order to see what it is that he is enjoined from doing; and indeed in this case when he looks at that document he will find that it is not amended to shew the time, scope and ambit of the injunction until the 7^th October. (followed by the passage referred to by Mr Siu as quoted in paragraph 36 above.)”

There was indeed no way that the defendants affected by the injunction could know or would have known what they were enjoined from doing without looking at the notice amended on 11 October 1963. At the time of making of the oral order on 26 July 1963, they could only look at the original notice.  The notice as amended on 11 October 1963 was not in existence.  By the time they were able to look at the amended notice, they must have committed the breach already.  It was in that context that Lord Upjohn protested strongly at the granting of injunction in that form and conveyed to the Registrar his wish that a person enjoined by an order is “entitled to look and look only at the order to see what it is that he is enjoined from doing”.  If the reference to the notice was unambiguous and the notice was in existence, the person affected by it would have no difficulties knowing what he is enjoined from doing or finding out the effect of the order as would the defendant in Crystalmews.  Such an order would have passed Lord Upjohn’s test.  The reference to the notice, if it was clear and in existence, would be within the four walls of the order.  What his Lordship said about finding out “from the four walls” of the order and “from no other document” was just figurative and not intended to be followed to the letter.  It was not followed in Crystalmews. 

41.  In my view, in practical terms, the tests under Rudkin-Jones and Crystalmews are the same.  An order does not cease to be clear or unambiguous merely because it refers to another document, whether attached to the order or not.  The real test is whether the person affected by the order would, with his knowledge of the background circumstances, by a fair reading of the order know what he is required to do or enjoined from doing or appreciate its full effect.   Putting it another way, is it difficult for the person affected by the order to know or appreciate the effect of the order?  That is a question of fact depending on the circumstances of each case.  That question is not to be answered mechanically by asking whether the order is self contained so that it is unnecessary to look at other documents not annexed to the order to understand its terms.  The law cannot be as mechanical as that.

Ambiguous Order – the facts

42.  Mr Siu argues that paragraph 3 the Order (see paragraph 8 above) is ambiguous.  It requires the Defendants to produce documents set out in the Schedule to the inter partes summons dated 27 June 2013 in respect of JBPB which is identified therein as the “2^nd Schedule”.  But the 2^nd Schedule was not attached to the Order.  It is not clear which were that inter partes summons and that “2^nd Schedule”.  He argues that it cannot be impliedly assumed that the inter partes summons mentioned in the Order refers to the summons dated 27 June 2013 in the bankruptcy proceedings.  He submits that it is impossible for anyone, including the Defendants, to know what documents are required to be produced. 

43.  In view of the test set out above, the fact that the 2^nd Schedule was not attached to the Order may not necessarily be fatal.  The question is whether the Defendants, with their knowledge of the background circumstances, would by a fair reading of the Order know what they are required to do. The Defendants are intelligent and experienced accountants.  They had the conduct of the disclosure application personally, and had been served the inter partes summons dated 27 June 2013 and the order of Deputy High Court Judge Le Pichon.  The 2^nd Schedule is defined in the Order as the Schedule to the inter partes summons dated 27 June 2013.  Applying the test above, I think it cannot be reasonably argued that the Defendants could not know or would not have known what documents they were required to produce and what information they were required to give.  I think it is frivolous and fault finding to argue that it could not be assumed that that summons mentioned in the Order is the inter partes summons dated 27 June 2013 in the disclosure application. The Order was made pursuant to an application made by that summons in the disclosure application, which the Defendants had conduct of personally.  Why would the order be made pursuant to a summons issued in other proceedings? 

44.  Next, Mr Siu refers to paragraph 3 of the inter partes summons dated 7 February 2014 under which the Trustees applied for and were granted the Order against the Defendants.  The application was made in the following terms:

“[The Defendants] do comply with the Order of Deputy Judge Le Pichon dated 5 November 2013 against [JBPB] by producing the documents set out in the Schedule attached thereto (“2^nd Schedule”)”. 

Mr Siu argues that the Trustees added to the confusion because in the summons they sought an order that the Defendants comply with the order of Deputy High Court Judge Le Pichon and nothing was mentioned about the 2^nd Schedule or the Schedule; but when the Order was drawn up, it referred to the “2^nd Schedule” which was identified as the “Schedule to the inter partes summons dated 27 June 2013”.  Mr Siu submits that the definition of “2^nd Schedule” in the inter partes summons dated 7 February 2014 is a different one from the “2^nd Schedule” referred to in the Order. 

45.  I agree that the way the summons was drafted has left something to be desired.  But given the circumstances, why it was drafted in that way was entirely understandable.  It arose from the Defendants disputing that they were bound by the order of Deputy High Corut Judge Le Pichon.  Given the circumstances, the Defendants have no problem in knowing what was ordered by Deputy High Court Judge Le Pichon and of understanding what was sought under the summons.  

46.  Furthermore, the real question is not whether the Order made is identical with the terms of the order sought in the summons (though in effect they are). The real question is whether what is provided in the Order is ambiguous.  The Order referred to the Schedule to the inter partes summons dated 27 June 2013 which it identified as the “2^nd Schedule”.  Though that summons has not been inserted in the hearing bundle, there is no dispute that that summons had been issued.  There is also no dispute about the terms of that summons and the terms of the Schedule attached to that summons.  That Schedule as the court file shows is identical to the Schedule attached to Order of Deputy High Court Judge Le Pichon dated 5 November 2013 which is also identified as the “2^nd Schedule”.  As a matter of law, the fact that it is necessary to refer to documents outside the order does not as such render the order ambiguous.  On an objective view, by reference to the summons dated 27 June 2013 and the Order of Deputy High Court Judge Le Pichon dated 5 November 2013, there could be no difficulty for the Defendants in their position in understanding the effect of the Order.  

47.  The above arguments are highly technical.  The really crucial question is a very simple one, i.e. whether on the fact, the Defendants knew the effect of the Order.  The Defendants never said they did not understand the effect of the Order.  Indeed, Tang impressed me that the Defendants knew the effect of the Order.  They were the only partners of JBPB who handled the accounting affairs of the Bankrupt and his nominee companies.  They denied the authority of the solicitors instructed by the majority partners, which resulted in the fresh application for disclosure being made against them.  They represented themselves and had the conduct of the disclosure application in which the Order was made.  They had been served the originating summons and the 2^nd Schedule.  They clearly knew what documents were required to be produced and what information was required to be given.  Never had they claimed that the 2^nd Schedule was ambiguous or that they did not know what the payments specified in the 2^nd Schedule were or that such documents never existed.  What they consistently claimed was that the documents were in the possession and custody of the majority partners.

48.  In his 4^th Affirmation filed on his and Wong’s behalf as minority partners of JBPB in purported compliance with paragraph 4 of the Order, Tang correctly identified the twelve payments made to JBPB specified in paragraph 2 of the 2^nd Schedule, notwithstanding the fact that the 2^nd Schedule was not attached to the Order.

49.  In his affirmation filed in these contempt proceedings, Tang never complained that he did not know what documents he and Wong were required to produce under the Order or the 2^nd Schedule or that those documents never existed.  In paragraph 16 of the affirmation, he quoted paragraph 2 of the 2^nd Schedule and correctly listed out the twelve payments specified therein. He must have had a copy of the 2^nd Schedule. His only answer is that those documents were not in his custody, possession and power but were in the majority partners’.

50.  Simply put, the Defendants had never complained that they did not know or had difficulty knowing what they were required to do under the Order.  As such, how can they now turn around and argue that the Order is ambiguous.  This is clearly their afterthought which has no truth in it or a concocted defence raised by their counsel which is at odds with their own evidence.  Applying the test which I have set out in paragraph 41, I find that the Order is unambiguous and the Defendants knew exactly what they were required to do under the Order.

Defective statement in support of the application for leave to commence committal proceedings

51.  Mr Siu refers to Incorporated Owners of United Building v Ng Yuk Ming[13] and Harmsworth v Harmsworth[14] and argues that paragraphs 4(iv)(a) and 4(iv)(b) of the statement in support of the application for leave to commence committal proceedings is defective in that the 2^nd Schedule was not attached to the statement or the supporting affirmation. The Defendants have to look beyond the statement and the supporting affirmation to see what breaches are being alleged. 

52.  Order 52 Rule 2 of the Rules of the High Court stipulates the requirement that an application for leave to issue committal proceedings must be supported by a statement setting out, inter alia, the grounds on which committal is sought.  The purpose of the statement is to provide the person sought to be committed with enough information to enable him to meet the charge: see Secretary for Justice v Choy Bing Wing[15].  The test as to the sufficiency of the notice of application to commit was considered by the English Court of Appeal in Chiltern District Council v Keane[16]. Donaldson MR held that the test is: whether it gives the person alleged to be in contempt enough information to enable him to meet the charge.  Every notice of application to commit must be looked at against its own background.  That test applies equally to the statement.

53.  That test was adopted in Harmsworth v Harmsworth relied on by Mr Siu.  In that case, after adopting the test in Chiltern District Council v Keane, Nicholls LJ said[17]:

“So the test is, does the notice give the person alleged to be in contempt enough information to enable him to meet the charge? In satisfying this test it is clear that in a suitable case if lengthy particulars are needed, they may be included in a schedule or other addendum either at the foot of the notice or attached to the notice so as to form part of the notice rather than being set out in the body of the notice itself. But a reference in the notice to a wholly separate document for particulars that ought to be in the notice seems to me to be a quite different matter. I do not see how such a reference can cure what otherwise would be a deficiency in the notice. As I read the Rules and as I understand the decision in Chiltern District Council v. Keane, the Rules require that the notice itself must contain certain basic information. That information is required to be available to the respondent to the application from within the four corners of the notice itself. ...”

(Mr Siu’s emphasis added)

Then, Nicholls LJ dealt with how the test is to be applied as follows:

“I turn to consider whether, on this footing, the test which I have mentioned is satisfied in this case. In applying that test the contents of the notice are to be read fairly and sensibly as they would be read by a reasonable person in the position of the alleged contemnor to whom the notice is addressed. Would such a person, having regard to the background against which the committal application is launched, be in any doubt as to the substance of the breaches alleged?”

54.  In applying the test, the contents of the statement have to be read fairly and sensibly as they would be read by a reasonable person in the position of the Defendants with their knowledge of the factual matrix.  Sub-paragraph 4(iv) of the statement reads:

“(a)  The Parties have wholly failed to produce the documents set out in the 2^nd Schedule without lawful excuse; and/or

(b)  The Parties have wholly failed to state in respect of each document set out in the 2^nd Schedule, whether it had been in his/her custody and/or power, and if it had been, when it was last in his/her custody and/or power and the reason it is now no longer in his/her custody and/or power, without lawful excuse.”

55.  I repeat and adopt my observations about the Defendants’ background and their personal knowledge of the disclosure application.  Reading sub-paragraph 4(iv) as I would as a sensible and fair minded reader with the knowledge of the factual matrix, I have no difficulties knowing what charges were made against the Defendants.  That sub-paragraph is in plain language.  It alleges the Defendants of having failed to produce any or all of the documents specified in the 2^nd Schedule and/or to give an account of their whereabouts.  Nothing could be simpler.  For reasons as I have explained earlier, the Defendants had received all the relevant documents, summonses and schedule attached thereto, and the orders.  They are intelligent accountants who are well experienced in these sorts of proceedings.  They had conduct of the disclosure application in which the Order was made.  They know what the “2^nd Schedule” means.  On the fact, they never claimed to have difficulties identifying which document was the “2^nd Schedule”.  They correctly identified the twelve payments specified in the 2^nd Schedule in relation to which disclosure was sought.  They know what the documents were required to be disclosed and that was why they were in a position to argue that they had no possession, custody or power over the documents specified in the 2^nd Schedule.  They clearly know the case they had to meet.  Mr Siu’s argument that it is necessary to refer to another document or to go beyond the four corners of the statement is, with respect, artificial and unreal. 

No good service of the Order

56.  Mr Siu acknowledges that the court has discretion to dispense with service of the Order on the Defendants and has so dispensed with its service.  The service was dispensed with because the Defendants must have notice of the Order made against them.  However, Mr Siu argues that such service is nevertheless not good service because the Order itself does not contain the 2^nd Schedule, without which the Defendants would not know what they have been ordered to do.  On the fact, the Defendants never complained that they did not know what they were ordered to do.  They suffered no prejudice from the fact that the 2^nd Schedule had not been annexed to the Order, the service of which was dispensed with anyway. 

57.  As a fall back, Mr Chen submits that if personal service of the 2^nd Schedule was necessary, the court may dispense with such service as it would not give rise to any prejudice to the Defendants who knew what documents were required to be produced.   In my view, there is no merit in Mr Siu’s argument about defective service when service of the Order itself has been dispensed with altogether and the Defendants knew the effect of the Order.  Though I have discretion to dispense with service of the 2^nd Schedule, I do not find it necessary to exercise it. 

BREACH OF PARAGRAPH 3 OF THE ORDER

Existence of the documents

58.  Mr Siu objects to the application on the ground that there is no evidence that the documents set out in the 2^nd Schedule existed.  He argues that even the Trustees were not sure what documents were in existence at the time of the making of the Order and were seeking information which they did not know if it existed.  As the defence has been raised, the Trustees have to bear the legal burden of proving that the documents in fact exist.  On the facts, existence of the documents was never disputed and the disclosure application proceeded on the basis that the documents existed.  The evidence in support of its existence is overwhelming, but there is not a scintilla of evidence in support of their non-existence.  

59.  First, at the hearing of the disclosure application, the Defendants, albeit as joint and several liquidators of CWT (i.e. the 1^st Respondent), did not dispute the existence of these supporting documents and the application proceeded on the basis that the documents existed.  This is recorded in paragraph 28 of my Decision as follows:

“28. Secondly, the documents sought are reasonably expected to be in the possession, custody or control of the 1^st Respondents as the joint and several liquidators of CWT. The 1^st Respondents never disputed their existence and even consented to the R1’s Order to be made. I am satisfied that the Trustees have made out a prima facie case that the documents existed and are in the possession, custody or control of the 1^st Respondents.”

There is no appeal against that Decision.  There is nothing to cast doubt on the existence of the documents.

60.  Second, in paragraph 4 of Tang’s 3^rd Affirmation filed in contesting the disclosure application, Tang referred to the summons dated 27 June 2013, to which the 2^nd Schedule was attached (This confirms my earlier finding that he had received that summons and a copy of the 2^nd Schedule).  In paragraph 15, he averred that the documents specified in the 2^nd Schedule existed and were in the possession and custody of the majority partners and gave examples.  He said:

“The Trustees, via the 2013 Summons, sought from [Grant Thornton] documents in support of 12 payments made to Grant Thornton. These payments were made between March 2006 and November 2010. All supporting documents (e.g. accounting vouchers, bank pay-in slips etc.) for these receipts of Grant Thornton were kept and maintained by the Administration Department of Grant Thornton at the time. [Wong] and I never had and do not have supporting documents of Grant Thornton in relation to these payments.”

(My emphasis underlined)

61.  The Defendants were partners of JBPB.  Tang, in particular, had been involved in the accounting affairs of the Bankrupt and his nominee companies, notably APIDL.  JBPB, formerly known as Grant Thornton, was a reputable accounting firm.  The background facts relating to Grant Thornton were outlined by Chow J in HCA 1691/2011.  It was a highly sophisticated and reputable international accounting firm.  The same level of sophistication must have been maintained by JBPB.  All payments received in the ordinary course of business of such an accounting firm must have been received pursuant to written documents.  These documents are reasonably expected to have been maintained by an accounting firm of that standing.  Examples were identified by Chow J in his judgment.  In their capacity as partners of JBPB handling the accounting affairs of the Bankrupt and his nominee companies, the Defendants are in the best position to know if such documents existed.  If any of these documents existed, they are the best persons to tell where they were kept and to procure their production.  If the documents never existed, they are also the best persons to confirm their non-existence.  Tang expressly said that “all supporting documents” existed and were kept and maintained by the administrative department, i.e. the AFD.  He correctly identified the twelve payments specified in the 2^nd Schedule and gave examples of those documents. He never retracted from those assertions.  Those documents must exist at the time of the making of the Order.  

62.  Third, in Tang’s 4^th Affirmation filed in purported compliance with the Order, he did not dispute the existence of those documents.  He only repeated his assertion that they were kept by the majority partners to which he had no access.  He knows which document is the 2^nd Schedule and what documents are required to be produced.

63.  Fourth, at the hearing of the disclosure application, Tang opposed vigorously.  Most extraordinarily, he assumed the position of the Bankrupt in challenging the Trustees’ case that Topmark Asia, Sun Ascent and the other companies allegedly involved in fund transfers with the Bankrupt were companies belonging to the Bankrupt; in disputing that the documents were reasonably required to enable the Trustees to carry out their functions; and in arguing about their relevancy.  He raised all possible arguments as if the Bankrupt were standing in his shoes.  But he never for once disputed the existence of these documents.  He only asserted that they were kept by the majority partners and the Defendants had no possession, custody and power.  If to their knowledge the documents never existed, the first thing they would have done at that hearing would have been to object to the Order being made on the ground that there were no such documents.  What else could and would have been simpler and more forceful than to inform the court that the Defendants were the handling partner and to their knowledge those documents never existed or had been destroyed?  They never did.

64.  Fifth, after the making of the Order, Tang corresponded with the majority partners on the basis that these documents did exist.  In Tang’s email dated 28 March 2015 to Jonathan Leong, ten days after the date of the Order, he asserted that the AFD under Jonathan Leong’s control had kept the ledgers and vouchers of Grant Thornton. This is another confirmation from Tang that the documents existed.

65.  Relying on Bruno Arboit, Mr Siu argues the fact that certain accounting documents should exist or ought to have been kept does not necessarily amount to proof beyond reasonable doubt that they existed.  This is just beside the point.  The Trustees’ case is not only that these documents should exist, but that Tang has said under affirmation that they existed and acted on the basis that they did exist.  

66.  Mr Siu also argues that where a defendant gives information upon request it is unlikely for the court to find him guilty of breach of an order for giving of information where that document had not been identified with sufficient particularity.  These are conclusions of the court reached on its factual circumstances.  They have no bearing in the present case where I have found the documents were identified with sufficient particularity and it is Tang’s own evidence that such documents existed.

67.  For the above reasons, there is ample evidence in support of the existence of the documents and the Trustees have discharged the legal burden of showing that the documents exist.  This defence must be dismissed. 

Possession and custody of the documents

68.  As the Defendants have raised the defence that they do not have possession, custody or power over the documents, the Trustees have to assume the legal burden of proving that they have.  On my construction of the Order and analysis of the burden of proof, the first hurdle the Defendants have to overcome is to discharge the evidential burden of proving that the documents had never been or are no longer in their possession, custody and/or power before they may call on the Trustees to discharge their legal burden of proof.  I shall first deal with possession and custody of the documents. 

69.  Referring to following passage in Tang’s 3^rd Affirmation, Mr Siu argues that Tang has given positive evidence that Jonathan Leong and Patrick Rozario were in charge of the storage of books and records and that the Defendants were not aware of the existence of the Chai Wan godown until informed by CSC’s letter:

“Prior to the collapse of Grant Thornton in late 2010, and at the relevant time, Jonathan Leong was Managing Partner, Patrick Rozario was Chief Executive Officer (“CEO”) and Paul Chow was in charge of the accounting/finance function for the partnership. The administration function, including storage of books and records and IT (computer systems), was the responsibility of either the Managing Partner or the CEO.  Mrs Wong and I were never involved with any of these administration, accounting or finance functions of the partnership.  We have no idea of who kept what records of the partnership and where and how they were kept.  We never needed to know.”

He further submits that as the Trustees had not asked to cross-examine Tang, the evidence should be taken as unchallenged.

70.  That was the position prior to the collapse of Grant Thornton in late 2010 which has no relevance to the position in 2011 when the issue of possession and custody over the documents arose.  That position changed significantly in early 2011.  Upon the collapse of Grant Thornton, the AFD was closed down.  There is no dispute that Shinewing was engaged to maintain the accounts of JBPB and for that purpose was provided with JBPB’s books and records.  The position before 2011 is not in dispute and is irrelevant.  There was no need for the Trustees to cross-examine Tang.

71.  On the other hand, Jonathan Leong gave evidence that Shinewing had taken away the books and records and refused to return them when its services were terminated in May or June 2011.  It is therefore the Trustees’ assertion that the Defendants had possession and custody of the books and records.  The same was repeated in CSC’s letters in reply to Tang’s email and letter.  However, the Defendants did not respond to that allegation and did not call Jonathan Leong for cross-examination.  Mr Siu’s comment about failure to cross-examine the opponent hits the Defendants much harder than the Trustees.  In the light of the unchallenged evidence of Jonathan Leong, the Defendants have not even started to discharge their evidential burden of proof.

72.  Furthermore, it can be gleaned from Tang’s email to Jonathan Leong dated 28 March 2015 that the Defendants had the case files containing at least three of the four categories of documents.  In that email, Tang demanded the majority partners to produce accounting ledgers and vouchers to enable the Defendants to comply with the Order.  He wrote:

“... All these cashier’s orders were made payable to [Grant Thornton] and upon receipt by us, all were passed to the Admin. and Accounting Dept. for bank-in etc – just like any and all other receipts we collected in the name of [Grant Thornton]. Once these cashiers’ orders were handed over, we would never know when they were banked-in, how they would be recorded in the ledgers of [Grant Thornton] and how and who would then keep the relevant accounting vouchers etc insofar as [Grant Thornton] is concerned.

It is therefore misleading for you to say to the Court we have all the documents of [Grant Thornton]. We only have papers in our case files, which would NOT contain accounting ledgers and vouchers of [Grant Thornton] for these receipts.

In order for us to comply with the Order of Judge To, we ask that you produce to me from the warehouse of [Grant Thornton], or otherwise, all of these accounting ledger and vouchers of [Grant Thornton] pertaining to these receipts in the next 7 days.”

(My emphasis underlined.)

It should be noted that all that Tang asked to enable the Defendants to comply with the Order was production of accounting ledger and vouchers.  Those ledger and vouchers related only to one category of accounting documents. Tang kept silent about the other three categories of non-accounting documents.

73.  Tang did not dispute that the documents existed.  He must be taken to have accepted that all the four categories of documents existed.  He alleged that they were all in the books and accounting records kept by the majority partners in the godown.  Tang unequivocally admitted that the Defendants had the case files but kept silent as to what documents are contained in the case files.  Thus the books and accounting records kept by the majority partners and the case files kept by the Defendants are the only records where the documents sought to be disclosed would be found.  In this email, Tang did not request the majority partners to produce the other three categories of non-accounting documents and was not asserting that the majority partners had possession and custody of those three categories of documents.  One would not expect non-accounting documents to be kept in the books and accounting records.  By a process of elimination, the only reasonable inference that could be drawn from this email and all the circumstances is that the other three categories of documents are in the case files in the possession and custody of the Defendants.  Thus, at the highest, Tang has discharged the evidential burden of showing that the Defendants do not have possession and custody of one of the four categories of documents only, but failed in respect of proving the same for the other three categories of documents. 

74.  Next, Mr Siu relies on the following quotes from CSC’s letter dated 2 April 2015 in response to Tang’s email dated 28 March 2015 as evidence that even the majority partners were not sure what documents existed and, if they did, where they were kept:

“Some of the documents requested by the Trustees, such as cashier orders and remittance slips are probably among those records.”

“it may be necessary to look for the same amongst the Finance department documents kept in storage in a godown in Chai Wan through Santa Fe.”

With respect to Mr Siu, these quotes are quoted seriously out of context.  To put these quotes in their proper context and to give a feel of the dispute between the parties, that part of CSC’s letter is reproduced below with the two quotes highlighted in bold prints:

“The majority partners contend, as they have done all along, that you and [Wong] have taken the AFD records which were previously kept in the Sunning Plaza office, Causeway Bay, Hong Kong. You have not returned these books and records despite numerous requests from the majority partners to do so. Some of the documents requested by the Trustees, such as cashier orders and remittance slips are probably among those records. As such, the majority partners HEREBY REQUEST YOU AGAIN to return these books and records as they may be needed for other matters. The majority partners reiterate that they have no problem for you to make copies of these records for your own purposes. However you must return the original documents as soon as possible. It is incumbent upon you to go through these records and produce whatever relevant documents you can find to the Trustees.

To the extent the cashier orders, invoices and remittance advices are not among the records you took away, then it may be necessary to look for the same amongst the Finance department documents kept in storage in a godown in Chai Wan through Santa Fe.” 

The primary assertion of the majority partners in the letter is that the Defendants had taken away all the documents in the AFD as asserted by Jonathan Leong.  The documents in the AFD included all the four categories of documents, not just the accounting ledgers and vouchers.  It was in that context that CSC said that if there were any cashier orders, invoices and remittance advices which had not been taken away by the Defendants, then they might be stored in a godown in Chai Wan.  What the majority partners were not sure was whether there were any of the documents specified in the 2^nd Schedule which had been left behind by the Defendants.  What was said in that letter was not an acknowledgement that the majority partners had possession and custody of all the cashier orders, receipts and invoices etc.  Most certainly, there was no acknowledgement of possession of any of the other three categories of documents, which the majority partners always maintained were among the AFD records taken away by Shinewing.  These two quotes are far from being sufficient to discharge the Defendants’ evidential burden of proof. 

75.  Next, Mr Siu criticises the Trustees’ failure to adduce evidence from Paul Chow.  He argues that while all majority partners have made affirmations to explain their lack of knowledge about the documents sought, Paul Chow has not filed any.  He submits that in the light of the Trustees’ failure to adduced evidence as to whether Paul Chow knew about the documents sought and whether they are in Paul Chow’s possession, custody or power, it cannot be said beyond reasonable doubt that the Defendants’ contention that Paul Chow may have the documents is wrong. 

76.  With respect, that submission is based on a misunderstanding of the factual background.  Paul Chow moved to Shinewing together with the Defendants.  He testified for the Defendants in HCA 1691/2011.  He is in fact a member of the Defendants’ camp and a member of Shinewing.  Though the Defendants never said so, Paul Chow was in fact a minority partner and not a majority partner.  I have not identified him as a minority partner for the simple reason that he is not involved in these proceedings.  As it is the Trustees’ allegation that Shinewing had taken away the books and records of JBPB, it is for the Defendants to adduce evidence from Shinewing, whether by themselves or Paul Chow, to contradict the Trustees’ allegation.  In the circumstances, the Trustees have done what is necessary by obtaining an affirmation from each and every partner other than the two Defendants and Paul Chow.  I do not think any adverse inference could be drawn against the majority partners or the Trustees for not adducing any evidence from Paul Chow.  Mr Siu’s criticism about failure to adduce evidence from Paul Chow applies with greater force against the Defendants than against the Trustees.

77.  In conclusion, the Defendants have offered no evidence to contradict Jonathan Leong’s evidence that Shinewing had taken away the books and records of JBPB.  They admitted that they had the case files but kept silent as to what documents are contained in the case files.  The four categories of documents could be kept in nowhere but the case files in the Defendants’ possession or the books and records kept by the majority partners. By a process of elimination, the only reasonable inference that could be drawn from the evidence is that the other three categories of documents are in the case files in the possession and custody of the Defendants.  At the highest, Tang has discharged the evidential burden of proving that the Defendants do not have possession and custody of one of the four categories of documents only, but failed in respect of the other three categories of documents.  In the circumstances, the Trustees have sufficiently discharged their legal burden of proving that the three categories of non-accounting documents are in the possession and custody of the Defendants. In respect of that one category of accounting documents, the Defendants have to further discharge the evidential burden of proving that they do not have power over them.

Power over the category of accounting documents

78.  I now turn to examine the Defendants’ power over the category of accounting documents.  The Defendants’ excuse for not producing them is their lack of the DML and the unreasonable conditions imposed by the majority partners for accessing, inspecting and copying the documents, including the costs of full-time surveillance of their retrieval process, payment of all costs and a pre-paid deposit of $35,000.  Tang said that without the DML, the Defendants would have to physically open each of the 100 to 130 boxes in the godown to look for the documents. 

79.  The majority partners fully acknowledged the Defendants’ right to inspect the documents and take copies.  They were cooperative.  They were willing to allow the Defendants access to the boxes on certain conditions.  The documents are therefore clearly within the Defendants’ power to obtain.  The Defendants’ arguments only revolve around the issue of difficulties and costs of compliance.

80.  As the majority partners and the Defendants were in litigation, the caution they exercised was understandable.  The requirements for full time surveillance and to be paid the costs of surveillance and costs associated with their inspection cannot be said to be unreasonable.  If the Defendants consider the costs excessive, they could have liaised with the majority partners for a reduction.  If they were serious in complying with the Order, they could also have liaised with the Trustees for an indemnity or sought directions from the court.  But they took none of these steps. 

81.  Assuming in favour of the Defendants that some of these accounting documents were stored among the 130 boxes in the godown, the DML is required to facilitate locating the correct boxes to retrieve the documents.  The Defendants’ case is that the majority partners have a hard copy of the DML and refused to let them use it while they do not have a hard copy.  According to the majority partners, the DML is stored in the AFD server removed by Shinewing from Sunning Plaza office.  They denied they had a hard copy as there was no reason to keep one.  Tang denied having removed the AFD server.  He said that this dispute was one of the issues to be resolved in HCA 1691/2011.  Those disputes were resolved substantially in favour of the majority partners in that action.  In view of paragraphs 173 to 175 of Chow J’s judgment and my analysis in paragraphs 13 and 14 above, the Defendants must have, contrary to Tang’s denial in these proceedings, admitted at trial that they had taken away the computer hardware and the AFD server containing the PMS and DML.

82.  Furthermore, Patrick Rozario’s suggestion to repair the computer system on condition that its control be reverted to the majority partners or a copy of the information contained therein be given to them was an extremely reasonable compromise.  The computer hardware, the AFD server and the data stored therein belonged to JBPB, not Shinewing.  They were provided to Shinewing for the purpose of their engagement in updating the accounting records of JBPB.  Not only was the Defendants’ refusal Wednesbury unreasonable, they even took away the computer and the AFD server.  Their refusal suggests that they had the means to repair the system and retrieve the information therein, including the DML.

83.  The Defendants failed to discharge the evidential burden of showing that they do not have power over the documents and were under a duty to produce this category of accounting documents.  Probably, the Defendants have a copy of the DML or the means to retrieve one from the AFD server in their possession which will facilitate their search for the documents.  Even if their assertion that they did not have the DML is true, it was not an insurmountable obstacle.  To retrieve the documents without the DML may be more time consuming.  But it would still be within their power to obtain the documents.  The majority partners were cooperative and willing to allow them access and to take copies.  The conditions imposed by them were not unreasonable and prohibitive.  There is no evidence that the costs are unaffordable.  They could have liaised for a reduction of the costs, or sought an indemnity from the Trustees or direction of the court, but they did not.  Their argument that without the DML it would be difficult for them to produce the documents is only an excuse.  The difficulties alleged by the Defendants were unreal, if not self created.  They have made no genuine effort to retrieve the documents.  They just adopted a “couldn’t care less” attitude and were happy to find an excuse not to produce the documents.  What they lacked was the will to comply with the Order.  

State of mind

84.  Based on Tang’s letter to CSC dated 8 April 2015 and 24 August 2015 demanding a copy of the DML and access to the godown, Mr Siu argues that the Defendants have on the one hand actively sought the cooperation of the majority partners and on the other hand endeavoured to disclose what they know by filing Tang’s 4^th Affirmation.  He submits in the circumstances, it cannot be said that the Trustees have proved beyond reasonable doubt that the Defendants had the requisite state of mind to breach the Order. 

85.  Except in the case of an admission, state of mind is very often a matter of inference to be drawn from the surrounding circumstances.  The surrounding circumstances include, in an appropriate case, the degree of cooperation or resistance from third parties who would be able to assist in compliance with the Order, but more relevant is the background and conduct of the Defendants themselves.  The Defendants are experienced accountants and experts in insolvency and restructuring matters.  They have ample experience in liquidation.  They should be familiar with the legal principles applicable to discovery in company insolvency which are applicable to discovery in personal bankruptcy.  They are intelligent accountants.  Tang, in particular, was able to quote legal principles and advance legal arguments. Obviously, the Defendants well understand their obligation under the Order.

86.  As for Mr Siu’s argument that the majority partners have been uncooperative and offering resistance by imposing unreasonable conditions preventing the Defendants access to the documents, it must appreciated that there was a history of dispute between the Defendants and the majority partners.  Bearing in mind the then on-going litigation, the conditions imposed cannot be said to be unreasonable. Had the Defendants the intention to comply with the Order, they could have liaised for a reduction of the costs with the majority partners or sought an indemnity from the Trustees, or sought directions from court.  They did not. They just adopted a “couldn’t care less” attitude and did nothing.  They impressed me that they were keen to look for excuses not to comply than looking for means to comply.  The non-compliance was in my view deliberate.

87.  But most telling is Tang’s conduct and attitude in the whole matter.  He resisted disclosure from the start for no good reason.  Nine majority partners, who presumably were reasonable and equally competent accountants like the Defendants, saw no reason to resist the disclosure application and instructed solicitors to enter into a consent order.  Yet, the Defendants refused to be bound by the consent order and resisted which led to the fresh application being made and the Order granted. 

88.  Tang resisted the disclosure application on the basis that the nominee companies did not belong to the Bankrupt.  How was he in any position to argue that matter for the Bankrupt and why should he argue that in the disclosure application to obstruct the Trustees from performing their functions?  Next, he resisted on the basis that the information was not reasonably required to enable the Trustees to perform their function.  His grounds were all frivolous.  As Lord Millett NPJ said, great weight should be given to the views of the trustees.  How was he in any position to contest the views of the Trustees?Why should he take up such a position?  Then, in a last attempt to resist the disclosure application, he accused the Trustees of unprofessional conduct.  I could find no factual basis for such a serious accusation and no reason to adopt such a hostile attitude.  These conducts provoked me into making the unusual observation that I found the Bankrupt was standing in Tang’s shoes.

89.  Now that the Order has been made, Tang put up a smoke screen by saying that the Trustees have imposed difficult conditions of access in respect of one category of documents and therefore he cannot produce all the four categories of documents which he has no dispute that they exist. He has proffered no reason for not producing the other three categories of documents.  He just swept those documents under the carpet and avoided talking about them or giving explanation about them.  Besides, the difficulties he asserted were not insurmountable.  The Defendants were the only partners of JBPB who handled the accounting matters of the Bankrupt and his nominee companies.  They are the only partners who know where to look for those documents.  The Trustees have a public duty to serve.  There is no reason why the Defendants should obstruct the Trustees in carrying out their functions. From Tang’s conduct and attitude, the only inference I can draw is that he never intended to cooperate with the Trustees and never intended to produce any of the documents.  Wong stands by what Tang did and authorised him to make affirmations on her behalf.  Tang’s conduct and mental state must be attributed to her.

90.  For all these reasons, I am satisfied that the Defendants’ non-compliance with the Order was intentional and committed with the necessary mens rea.

Conclusion

91.  On the undisputed evidence, the Defendants were the only partners of JBPB who handled the accounting matters of the Bankrupt and his nominee companies.  On the Defendants’ own evidence, there were only two types of documentary records; the books and records kept in the 130 boxes in the majority partners’ godown and the case files in the Defendants’ own possession.  The Defendants pressed the majority partners for access to only one category of documents kept in the books and records in their godown and mentioned absolutely nothing about the other three categories of documents.  This must be because they knew the other three categories of documents were not in the possession and custody of the majority partners.  They also kept silent about what documents were kept in the case files in their possession.  Where else would the other three categories of documents, which admittedly existed, be kept, if not in the only other documentary records, i.e. the case files admittedly in the Defendants’ possession and which they kept silent about? 

92.  The Defendants did not produce any of the documents.  They denied that they have possession, custody or power over them.  I am satisfied that all the four categories of documents existed.  On the basis of undisputed evidence and the Defendants’ own evidence and by a process of elimination, I am able to draw as the only irresistible inference that the three categories of non-accounting documents were in the possession and custody of the Defendants.  At the highest, the Defendants have satisfied the evidential burden of proving that they did not have possession or custody of only one of the four categories of documents.  Even then, they have failed to discharge the evidential burden of proving that they did not have power to obtain that category of documents. 

93.  The Defendants’ explanation for their failure to produce the documents was the unreasonable conditions of access imposed by the majority partners.  As was held by Lord Millett NPJ in Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd[18], compliance with an Order is not oppressive merely because it is inconvenient to the party subject to it or causes him work or may make him vulnerable to future claim.  The conditions were not unreasonable, prohibitive or unaffordable.  I find that non-compliance was not due to impossibility, but due to a lack of will on their part.  They were just happy to excuse themselves from compliance by arguing that the conditions of access imposed by the majority partners were unreasonable.  That argument is applicable to the category of accounting documents only and not to the other three categories.  In respect of the other three categories, the Defendants gave absolutely no explanation for their non-compliance other than putting up a smoke screen as if the difficulties in producing the accounting documents all apply to production of the non-accounting documents.  They simply ignored the Order.  In the circumstances, I am satisfied beyond reasonable doubt that the Defendants breached paragraph 3 of the Order.  The inference that the breach was committed deliberately and intentionally is compelling. Accordingly, I find the Defendants liable for contempt of this court for their breach of paragraph 3 of the Order.  The Defendants are convicted on their own evidence.

PARAGRAPH 4 OF THE ORDER

Paragraph 4 of the Order not triggered

94.  As the Defendants were in breach of paragraph 3 of the Order, paragraph 4 of the Order is not triggered.

95.  It is also Mr Siu’s submission that paragraph 4 of the Order is not triggered, but for different reasons.  First, he argues that there are two pre-conditions before the Defendants are required to make an affirmation under paragraph 4 of the Order.  These are that the documents had never been in the Defendants’ custody and/or power or that the documents are no longer in the Defendants’ custody and/or power.  He further submits that to prove breach of paragraph 4 of the Order, the Trustees must first prove beyond reasonable doubt that either one of the pre-conditions has been met.  This, I respectfully disagree for reasons as given in paragraphs 31 to 33 above.  It is as to how this burden of proof operates that Mr Siu has gone astray.  Second, Mr Siu refers to paragraph 70 of my Decision in which I wrote that the Defendants “either have the documents in their possession and custody or have a power to obtain them from the majority partners.”  He argues that in light of such ruling, it cannot possibly be argued that any one of the pre-conditions has somehow been met beyond reasonable doubt.

96.  This issue has effectively been disposed of when I dealt with the question of burden of proof in paragraphs 31 to 33 above.  It is because of Mr Siu’s mis-construing the Order by reading paragraphs 3 and 4 in isolation that he confused himself with the burden of proof.  That in turn led him into making the ridiculous and conflicting submission that the Trustees have to discharge the legal burden of proving that the Defendants have possession, custody and power over the documents in proving breach of paragraph 3 and failing that to discharge the legal burden of proving that they have not when seeking to prove breach of paragraph 4. 

Compliance of paragraph 4 by Tang’s 4^th Affirmation

97.  Having come to the conclusion that paragraph 4 of the Order is not triggered, there is no need to consider Mr Siu’s submission that Tang’s 4^th Affirmation is sufficient compliance with paragraph 4 of the Order.  I shall, however, deal with that submission for completeness.

98.  Paragraphs 1 to 3 of Tang’s 4^th Affirmation are introductory.  Paragraph 4 concerns the Defendants’ compliance with paragraph 1 of the Order in their capacity as joint and several liquidators of CWT, which is irrelevant.

99.  Paragraphs 5 to 10 are narrative which simply repeated the matters set out in Tang’s 3^rd Affirmation and produced various correspondences between the Defendants and the majority partners’ solicitors or the Trustees’ solicitors.  In essence, Tang asserted that the majority partners had possession and custody of the documents but the Defendants had not.  Those assertions had been considered and dismissed and I am satisfied that the Trustees have proved beyond reasonable doubt that the Defendants had possession, custody and power over the documents.

100.  In summary, the following is what the Defendants have done in purported compliance with paragraph 4 of the Order.  Just before the time for compliance expired, they wrote to the Trustees’ solicitors saying that they had no documents to produce under paragraph 3 of the Order and asked for time to resolve the dispute with the majority partners to enable them to comply with paragraph 4.  They engaged in dialogue with CSC about access to just one of the four categories of documents; but did nothing about compliance in respect of the other three categories of documents.  Then they filed Tang’s 4^th Affirmation in purported compliance with paragraph 4 of the Order.  That affirmation was filed five months out of time.  The Defendants were already in breach.

101.  Other than the books and accounting records now contained in the 130 boxes in the majority partners’ godown and the case files in the Defendants’ possession, the Defendants mentioned no other files or records in which the four categories of documents would be found.  As Tang was only seeking to retrieve the accounting documents from the books and accounting records kept by the majority partners, by implication the other three categories of non-accounting documents must be kept in the case files admittedly in the Defendants’ possession.  It is also reasonable to expect documents such as agreements, correspondences, resolutions and minutes, etc are to be kept in the case files rather than among the accounting records.

102.  Tang did not produce any of the four categories of documents but gave a global assertion in his 4^th Affirmation that they are in the godown kept by the majority partners and that he could not have access to them because of the costs involved and the absence of the DML.  He produced correspondences with CSC in support of his assertion.  But those correspondences only dealt with the accounting documents and did not deal with the other three categories of non-accounting documents.  His 4^th Affirmation only focussed on one category of documents and diverted the court’s attention away from the other three categories of documents. Specifically, he did not explain as the Defendants were required to explain by paragraph 4 of the Order:

(1)  whether any of the other three categories of documents mentioned in the 2^nd Schedule had been in their custody or power;

(2)  if they had been, when it was last in their custody or power; and

(3)  the reason why they are no longer in their custody or power.

Apart from being late, his 4^th Affirmation does not provide the information required by paragraph 4 of the Order.  In respect of the category of accounting documents, the explanation only amounted to evidence that those documents were within the Defendants’ power to produce and Tang has failed to produce them in breach of paragraph 3 of the Order. 

Compliance of paragraph 4 by Tang’s affirmation in these proceedings

103.  Tang filed an affirmation on behalf of the Defendants in opposition to the Trustees’ application for an order of committal. That affirmation essentially repeated Tang’s accusations against the Trustees and the majority partners.  Paragraphs 1 to 16 are introductory and background materials.  In paragraph 17, for example, Tang quoted extensively from his 3^rd Affirmation.  Those matters had been considered and rejected by this court when making the Order.  There was no appeal against my Decision in making the Order. 

104.  In paragraph 19, Tang stated his view that the Funding Agreement and the Consultancy Agreement “should have adequately explained to the [Trustees] the ligation funding arrangements, as well as the majority of fund flows between the Bankrupt and his business associates on the one hand and [themselves as liquidators of CWT and JBPB] on the other hand.”  This argument had also been dismissed by this court in paragraph 25 of my Decision. The Trustees knew about the twelve payments and the fund flows.  Obviously, what they wanted to find out is why these fund transfer took place and who authorised them, not whether they in fact took place.  This was the purpose for which the Order was sought.  The documents or information are to enable the Trustees to carry out their functions.  It is not for the Defendants to define what documents the Trustees need or to re-define the terms of the Order of the court.  The Defendants’ obligation was to produce documents or provide information to enable the Trustees to perform their functions.  Why did they not take a neutral position as the majority partners did?  Why should they obstruct the Trustees’ investigation as if the Bankrupt were standing in their shoes?

105.  Paragraphs 20 to 26 are narrative.  Tang complained against the Trustees’ solicitors for threatening to take out contempt proceedings during the course of the trial of HCA 1691/2011.  That does not in any way address the issue of their non-compliance with the Order.

106.  In paragraph 27, Tang complained against the Trustees for breach of their duty of full and frank disclosures in failing to disclose the correspondences between the Defendants and the majority partners between March and August 2015.  If the Defendants wish to rely on these correspondences, it is a matter for them.  Those correspondences were raised in Tang’s 4^th Affirmation filed in purported compliance with the Order.  They have been considered.  Their effect was to draw the court’s focus on the accounting documents and to divert the court’s attention away from the other three categories of documents.  They were far from compliance with the Order or explaining the difficulties in compliance.  There is no substance in this complaint of material non-disclosure.

107.  In paragraphs 28 to 37, Tang shifted the blame to the majority partners for not cooperating with them and for imposing unreasonable conditions for accessing the 130 boxes to enable them to locate and produce the documents. He denied having possession of a copy of the DML.  I have dealt with these matters above.  His assertion of not having possession of a copy of DML is probably half truth as he had possession of the computer and the AFD server containing the DML.  Anyway, the difficulties he complained of were not insurmountable and had no relevance insofar as compliance with paragraph 4 of the Order is concerned.

108.  In paragraphs 38 to 40, Tang insisted that in his view the Trustees have what they needed and asserted that the Trustees would not suffer any prejudice if not provided with the documents.  This issue had been decided by this court when making the Order.  It is not for him to decide what was reasonably required to enable the Trustees to carry out their functions or to re-define the Order of the court.

109.  In paragraphs 41 to 43, Tang complained about the hostile and oppressive actions of the Trustees which he says are unnecessary waste of costs and abuse of process of court.  I disagree.  These proceedings are made necessary as result of the Defendants’ refusal to comply with the court’s Order.  Even as of now, Tang has never been honest with this court.

110.  In the last paragraph Tang denied he had evaded service of the penal notice.  That is not a relevant issue in these proceedings.In conclusion, the matters raised in Tang’s affirmation in opposition have either been considered as unmeritorious or are irrelevant.His affirmation may not be considered as compliance with paragraph 4 of the Order.

Conclusion

111.  Paragraph 4 of the Order is not triggered.  Even if it is, neither Tang’s 4^th Affirmation filed in purported compliance of the Order nor his affirmation filed in the contempt proceedings provided the information required under paragraph 4 of the Order. 

ALTERNATIVES

112.  Relying on Re Wing Fai Construction Company Limited[19], Mr Siu submits that contempt proceedings should be brought only as a last resort when no alternative powers of the court could be invoked.  He argues that there are two alternatives available to the Trustees.

113.  First, Mr Siu argues that as noted in paragraph 71 of my Decision since the Defendants would possibly need the cooperation of the majority partners to produce the documents, it would have been more appropriate to enforce paragraph 2 of the order of Deputy High Court Judge Le Pichon dated 5 November 2013 against the majority partners.  I consider that submission laughable. Indeed, pursuant to that order, the majority partners produced some documents and filed an affirmation.  The Defendants were the only partners in JBPB who had handled the accounting affairs of the Bankrupt and his nominee companies. They were the only partners who had knowledge about the documents, whether they existed and where they were kept etc.  The majority partners had nothing to do with the accounting affairs of the Bankrupt and his nominee companies. It is only appropriate that the Defendants be ordered to produce the documents or provide the information and to seek the cooperation of the majority partners where necessary than the other way round.

114.  Second, Mr Siu argues that the Trustees should have resorted to section 29(2) of the Bankruptcy Ordinance and brought the Defendants before the court for examination.  I am surprised by this submission.  As was noted by Lord Millett NPJ in Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd[20], examination is a more oppressive measure than ordering production of documents.  

115.  In support of his proposition, Mr Siu refers to Bruno Arboit in which the plaintiff had interviews with the defendants before resorting to contempt proceedings.  In my view, there is no hard and fast rule that a plaintiff may only resort to committal proceedings after he had literarily exhausted all possible avenues.  If it is obvious that the other avenues will not work, to punish the defendant for interference with the due administration of justice is the last resort rather than a further attempt to enforce the disclosure order.  These Defendants are peculiar.  Instead of adopting what would reasonably be expected of a reasonable accountant, they resisted the disclosure application rigorously as if the Bankrupt was in their shoes.  They resisted for no conceivable reasons other than protecting the Bankrupt.  Tang adopted a hostile attitude towards the Trustees.  After the hearing of the disclosure application, he complained against them for unprofessional conduct.  He impressed me that the Defendants will not comply with any order of this court to produce documents unless the order was endorsed with a penal notice.  Now that the Order was made with a penal notice endorsed after a contested hearing in which they appeared, they still demonstrated a determined and obstinate refusal to comply.  Examination is likely to be another waste of time.

CONCLUSION

116.  For the above reasons, I find the Defendants liable for contempt for their breach of paragraph 3 of the Order of this court dated 18 March 2015 and order them to pay the costs of the Trustees on indemnity basis.  The hearing is adjourned to 10:00 am on 28 October 2016 for sentence.

117.  Hitherto, Wong relied on the affirmations filed by Tang and has not filed any of her own.  Should the Defendants anticipate any real risk of conflict of interest between themselves, they are advised to consider separate legal representation in the further proceedings.

118.  This is a bad case of contempt.  From the start, the Defendants resisted the Trustees’ disclosure application for no good reasons.  After the Order was made, they did nothing to comply with the Order other than to create excuses for non-compliance and to divert the court’s focus to some difficulties which were unreal.  The Bankrupt was reasonably suspected by the Trustees to have concealed considerable assets from his creditors.  The Trustees have a public duty to investigate into the affairs of the Bankrupt.  Public interest requires that the Trustees be allowed to carry out their functions as quickly and with the least expenses as possible.  In their position as the joint and several liquidators of CWT or of other companies in the course of their practice, they should be aware of this public interest and the trustee’s functions.  Yet, they obstinately obstructed the Trustees from carrying out their functions.  They put up some half-hearted excuse and ignored the Order of the court.  Their conduct amounted to aiding and abetting the Bankrupt in concealing the evidence.  Public interest requires that such conduct be punished with an immediate custodial sentence.  While I have yet to hear counsel on sentence, I think a starting point of six months would be the minimum.

119.  Having regard to the above and for the convenience of the Defendants, I admit the Defendants to bail pending sentence upon their depositing with the Registrar of the High Court cash in the amount of $300,000 each before 4:00 pm on 21 October 2016, in default of which a warrant for their arrest will be issued.

120.  The Defendants’ solicitors are reminded to bring this judgment to the notice of the Defendants and to inform them of the conditions for bail and the hearing on 28 October 2016.  They shall also warn the Defendants that a warrant for their arrest will be issued automatically upon their default in entering into bail or appearing in court for sentence.