WONG TO YICK WOOD LOCK OINTMENT LTD v. BROOKLYE LTD AND ANOTHER

HCMP 1496/2019

[2020] HKCFI 3155

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1496 OF 2019

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D E C I S I O N

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1.  These are proceedings by way of Originating Summons to seek leave to issue a writ of sequestration against the 1st defendant, Brooklye Limited, and to commit the 2nd defendant, Yip Chi-wai (“Yip”), to prison for their breaches of a judgment entered by consent on 14 November 2017 (“Judgment”).

2.  The terms of the Judgment breached are set out in paragraph 5 of the Originating Summons comprising failure to comply with various disclosure orders; in gist, failure to comply with mandatory injunctions.  The particulars of breach by the 1st defendant and Yip, who is and was at all material times the sole director of the 1st defendant, are set out in paragraphs 10 to 16 of the Originating Summons. 

Events Leading to the Present Application

3.  On 11 April 2017, the plaintiff issued a writ against the 1st defendant for trademark infringement and passing off for dealing in “金牌道益活絡油” and “黃道老人活絡油”.  The 1st defendant’s solicitors at that time, Ivan Tang & Co (“ITC”), filed an acknowledgement of service on 1 June 2017, indicating no contest to the plaintiff’s claims.  Accordingly, a summons to enter judgment was issued on 7 July 2017. 

4.  On 9 November 2017, ITC signed the consent summons to enter the Judgment.  The Judgment endorsed with penal notices was served personally on the 1st defendant and Yip at the office of ITC on 22 March 2018 by appointment. 

5.  As at 16 November 2018, the 1st defendant had failed to comply with paragraphs 3 to 5 of the Judgment.  Solicitors for the plaintiff, William Fan & Co (“WF”), reminded the 1st defendant to comply.  Out of goodwill, WF gave the 1st defendant more time to comply with the Judgment.  ITC and the 1st defendant failed to reply at all and chose to ignore the letter.  Despite the 1st defendant’s non-compliance, the plaintiff decided not to wait anymore and issued a summons for an account of profits on 30 May 2019. 

6.  ITC on 12 June 2019 alleged delay on the part of the plaintiff in issuing the summons for an account of profits and declared their intention to apply to dismiss the summons. 

7.  On 16 August 2019, the plaintiff issued an application for leave to commence committal proceedings against the 1st defendant and Yip.

8.  The directions hearing for the account-of-profits summons was heard before Master Queenie Lau on 6 September 2019.  The learned master ruled against the 1st defendant.  It is pertinent to note paragraph 1 of the order of Master Queenie Lau provided:

“Despite the defendant’s non‑compliance with the Judgment of Deputy High Court Judge Kent Yee... The Plaintiff be at liberty to proceed with an account of profits...”

9.  On 11 September 2019, Lok J granted the application for leave to issue committal proceedings against the 1st defendant and Yip. 

Events Subsequent to the Grant of Leave

10.  At the directions hearing on 11 November 2019, this court made an order for substituted service of the committal papers on Yip.  This was due to the fact that Yip had cancelled and postponed appointments made with ITC three times and finally on 6 November 2019, ITC stated they did not have instructions to act for the 1st defendant and Yip in these proceedings, and yet they were still acting for the 1st defendant in the matter relating to the taking of account of profits.  I agree that Yip was clearly evading service. 

11.  On 7 November 2019, Yip signed and filed an Application for Deregistration of Private Company or Company Limited by Guarantee (Form NDR1) for the 1st defendant (“Application for Deregistration”). 

12.  On 26 November 2019, WF wrote to the Registrar of Companies opposing the 1st defendant’s deregistration and requested the Registrar to investigate into the matter.  On page 3 of the Application for Deregistration, Yip made confirmations as conditions for deregistration. These conditions and the warning against making false confirmations are set out very clearly in bold.  The conditions include:  The 1st defendant is not a party to any legal proceedings and has no outstanding liabilities.  Yip’s confirmation that these conditions were met was clearly false. 

13.  In spite of having ample opportunities to comply with the Judgment, the 1st defendant and Yip have still not complied with the Judgment and their contempt is continuing.  Yip was able to file and sign the Application for Deregistration in November 2019 and made a false declaration in the process but as of this date, he is still refusing to comply with the Judgment.  Their conduct can only be described as contumelious. 

14.  Penal Notices have been endorsed on the Judgment served on the 1st defendant and Yip.  In the premises, the provisions of service under Order 45, rule 7 of the Rules of the High Court have been met. Indeed, it can be seen that Yip’s acknowledged receipt of the Judgment appeared right under the penal notice. 

15.  Under Order 45 of the Rules of the High Court, no moral blame or necessarily knowledge need to be shown on the part of the director served with the Judgment.  It is sufficient to show that the Judgment was made against the company and served upon him.  Then it is the director’s personal obligation to ensure that the Judgment is complied with (see Nicholas Pappadis & Chan Shing Sheung, Barry [1989] 2 HKLR 511 at 519 G-H). Although no moral blame, knowledge or wilfulness needs be shown of the director, it is, however, necessary to first show that the officer was fully aware of the terms of the order with which the company must comply; second, that he had knowledge at the time when he could use his position as an officer to secure compliance; and third, that he was aware that if he did not so use his position, steps could be taken against him personally to enforce compliance (see Excel Noble Development v Wah Nam Group Limited [2001] 4 HKC 148 at 157 B-G). 

16.  By reason of the matters stated above, I am satisfied beyond reasonable doubt that the 1st defendant had proper notice of the Judgment but wilfully failed to comply with the same.  The 1st defendant is therefore in contempt of court.  Further, by reason of the matters aforesaid, I am also satisfied beyond reasonable doubt that the 2nd defendant was fully aware of the terms of the Judgment with which the 1st defendant must comply, that the 2nd defendant had that knowledge at the time when he could use his position as the sole director to ensure compliance, and that the 2nd defendant was aware if he did not so use his position, steps may be taken against him personally to enforce Judgment.  Accordingly, the 2nd defendant is also in contempt of court. 

(Discussion re arrest warrant and sentence)

17.  This is my ruling on the sentence.  I agree with the plaintiff that there are aggravating features in the present case.  The 1st and 2nd defendants have been given many opportunities to purge their contempt but have failed to do so.  There is no difficulty in making an affirmation and yet they have chosen not to for reasons best known to them.  To compound matters further are the legal manoeuvres Yip has orchestrated, including cancelling and postponing appointments of service three times, evading service, filing the application to deregister the 1st defendant and making false declarations in the process, and at the same time stringing out the request for account of profits.  I agree that this is a bad case of contempt. 

18.  The 1st and 2nd defendants have chosen not to appear today or to proffer any explanation for their breaches which, on their face, could only have been deliberate and contumelious.  There has been no attempt by the 1st defendant or the 2nd defendant to purge the contempt. 

19.  In all the circumstances of this case, I make an order against the 1st defendant and the 2nd defendant as follows:

     (1)     leave be granted to the plaintiff to issue a writ of sequestration against the 1st defendant;

     (2)     for the said contempt, the 2nd defendant do stand committed to prison for a period of 6 months from the date of his arrest;

     (3)     the 1st and 2nd defendants shall, joint and severally, pay to the plaintiff the costs of and occasioned by this application, to be taxed if not agreed on an indemnity basis; and

     (4)     there be liberty to apply. 

20.  I also order that a warrant for committal be issued in terms of the draft lodged with the court.