TRENDS TRADE HONG KONG LTD v. ARTUR SHEVCHENKO

HCMP 194/2019

[2019] HKCFI 2936

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 194 OF 2019

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J U D G M E N T

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Introduction

1.  With leave granted by Wilson Chan J on 1 February 2019, and by originating summons dated 13 February 2019, the plaintiff seeks an order that the defendant be committed to prison for his contempt of court in neglecting or failing to obey the Order of DHCJ William Wong SC dated 28 September 2018 (“Order”) made in HCA 2259/2018 (“Action”), and that the defendant pay the costs of the application.

2.  As the Order on its face identifies, it was made on the inter partes application of the plaintiff, and after hearing from counsel for the plaintiff and counsel for the defendant.  However, it is common ground that the defendant himself was not present in court at the time the Order was made.  The material part of the Order was in the following terms, in that it ordered that:

“The Defendant do deliver up to the Plaintiff’s solicitors by 1pm on Wednesday, 3^rd October 2018 all that property belonging to the Plaintiff and wrongfully removed from the Plaintiff’s premises by the Defendant, including but not limited to the Plaintiff’s databases of customers, suppliers, trading partners and logistical partners; contracts made between the Plaintiff and official distributors of goods in which the Plaintiff trades, contracts of employment, confidentiality and non-disclosure agreements made between the Plaintiff and its employees, personal data of the Plaintiff’s employees, access codes required to maintain the Plaintiff’s domain name and website, records of the Plaintiff’s email accounts, passwords and access codes to the Plaintiff’s computers and accounts maintained by the Plaintiff for effecting settlement of financial transactions.”

3.  The Order, when first made, was not endorsed with a penal notice.  The defendant’s then solicitors accepted service of the Order on his behalf.  A penal notice was only endorsed, by consent, on 21 November 2018.  The Order, with the penal notice endorsed, was personally served on the defendant on 23 November 2018.

4.  The originating summons repeats the grounds in the Statement made under RHC Order 52 rule 2 in respect of which leave was granted, as to how the defendant allegedly failed to comply with the Order.  The factual averments are set out in 14 numbered sub-paragraphs.  Mr John Brewer, Counsel for the plaintiff, submits that none of those 14 grounds have been contested, and where the defendant has not condescended to provide an affirmation to explain what has become of such of the items of the plaintiff’s property identified as remain undelivered, this is a clear and straightforward case of the defendant’s contempt, by reason of his failure to comply with the terms of a clear and unambiguous order that he deliver up property of the plaintiff.

5.  Mr James Wood, Counsel for the defendant, submits that the application for committal should be dismissed on the basis that: (1) the plaintiff failed to endorse a penal notice on the Order before the time for compliance, and that the defendant was not otherwise aware of the potential penal consequences of non-compliance with the Order; (2) the Order lacks clarity and is ambiguous; and (3) the Statement does not contain all the factual elements which, if proved, are sufficient to established the alleged contempt.  As an additional point, Mr Wood asserts that contempt proceedings are intended to be a last resort, whereas the plaintiff has decided to use these proceedings as a first, rather than a last, resort.

Underlying Action and the Order

6.  Whilst the papers for the particular application in these proceedings HCMP 194/2019 contained some of the papers in the underlying action HCA 2259/2018, both Mr Brewer and Mr Wood indicated their consent for me to review any other documents on the file of the underlying action.

7.  The action was commenced by writ dated 26 September 2018.  Though subsequently amended, as originally drawn the plaintiff claimed against the defendant (1) delivery up of all that property belonging to the plaintiff and wrongfully removed from the plaintiff’s premises (with the remainder of the words as were subsequently taken into the Order: see above); and (2) a declaration that the defendant holds all sums misappropriated in respect of transactions undertaken between the plaintiff and entities in or with which the defendant is interested or closely connected and during the period in which the defendant held office as a director of the plaintiff, that the defendant holds such sums on trust for the plaintiff and is liable to account to the plaintiff for the same and an order that the defendant do pay such sums to the plaintiff.

8.  Also on 26 September 2018, the plaintiff took out an inter partes summons, returnable before the Court at 10am on 28 September 2018, by which the plaintiff sought orders the essence of which were: (1) to restrain the defendant from carrying on the plaintiff’s business as trader in desktop, laptop and tablet computers, mobile phones and other electronic business and consumer goods, whether in the name of the plaintiff, under the name of Strong Will HK Limited (“Strong Will”) or any other entity in which or with which the defendant is interested; (2) to restrain the defendant from soliciting customers, suppliers, trading partners and logistical partners who were during 2018 accustomed to dealing with the plaintiff; (3) to restrain the defendant from soliciting persons who were during 2018 employed by the plaintiff; and (4) to require the defendant to deliver up the plaintiff’s property (in terms in accordance with the writ).

9.  In support of the application, Mr Dundon of Dundons, solicitors for the plaintiff, filed an affidavit exhibiting the final draft of an unsigned 1^st affirmation of Rajesh Damodhar Bojwani.  This affirmation was subsequently made and filed on 2 October 2018 (as was required by paragraph 2 of the Order). 

10.  In his affirmation, Mr Bojwani explained the background to the plaintiff, and its business in trading what is known as “Classic IT”, and the involvement of the defendant as a 30% shareholder and as manager of the plaintiff’s day-to-day business.  He also identified how the dispute arose between the plaintiff and the defendant in and after August 2018, upon the defendant simply informing that he wished to leave the plaintiff.

11.  Mr Bojwani referred to a meeting with the plaintiff on 20 September 2018, and a letter subsequently written by the plaintiff’s solicitors demanding delivery up of the plaintiff’s books and records and other property.  That letter, dated 20 September 2018, exhibited to the affirmation, lists the books and records said to be included amongst those required to be produced, as vital for the plaintiff to carry on its operations, and specifically identified those materials had been removed from the plaintiff’s offices.  The list included, amongst other things, references to customer databases and contact details, other customer details, original and copy contracts signed with distributors, original and copy employment contracts with the plaintiff’s employees, confidentiality and non-disclosure agreements signed by previous employees, the human resources files for previous employees, access codes for access to computers, domain name and website, email records and email account history, and passwords and access codes for the plaintiff’s systems and programs including accounting programs.  As the letter said, it appeared that the entirety of the plaintiff’s infrastructure had been removed, and when confronted at the meeting with a demand to return the property, the defendant apparently said “I will think about it”.

12.  The affirmation also refers to contact between the defendant and the plaintiff’s solicitors about some delivery up of the books and records.  Reference is also made to the use of mobile phones in respect of the trading activities of the plaintiff, being one of the primary tools for holding and storing data such as contact information of customers and suppliers, together with much of the negotiation and conclusion of trades.

13.  In further support of the application was filed the 1^st affirmation of Sasikumar Andichamy, who says he visited the plaintiff’s offices on the evening of 18 September 2018, met the defendant there, was shown some (mainly) accounting files, and was told by the defendant that the plaintiff should not expect any help with trading, because the defendant was not going to hand over the plaintiff’s customer and supplier database.

14.  Solicitors (“C&C”) came on the record for the defendant by filing a notice to act dated 27 September 2018.

15.  At the hearing on 28 September 2018, the Order was made.  As is identified above, the Order essentially granted the order sought by paragraph 4 of the summons, and it adjourned the other three paragraphs of the summons sine die with liberty to restore.  The Order was made after the Deputy Judge had the benefit of submissions from Counsel for both the plaintiff and the defendant, each of whom had filed skeleton arguments.  The deadline of 1pm on 3 October 2018 appears to have been set by the Deputy Judge because he did not accept it would take longer than that for the defendant to be able to produce and deliver up the plaintiff’s property.  The defendant had not filed any evidence identifying why any longer period, such as the 7-day period apparently suggested by the defendant’s counsel, was reasonable or appropriate.

16.  Though, as I have indicated, the defendant was not personally in court at the time that the Order is made, I think the making of the Order must realistically have been reported to the defendant by C&C, the solicitors instructed by him.  Later the same day, Dundons asked C&C to make arrangement for personal service of the Order on the defendant, but also on the same day C&C wrote back to say that C&C had instructions from the defendant to accept service of the Order, and that it was unnecessary to serve the Order personally on the defendant.

17.  Shortly before the expiry of the deadline set in the Order, C&C wrote a letter by reference to that Order.  Plainly, the letter was in purported compliance with the Order.

18.  Whilst expressly making no admission as to any claim, allegations or liability on behalf of the defendant, including but not limited to having wrongfully removed property from the plaintiff’s premises, the letter identified that C&C was instructed to send various material in the defendant’s possession.  Three annexes were provided with the letter: Annex 1, which comprised databases of customers, suppliers and trading partners and logistical partners; Annex 2, which comprised resignation letters of the plaintiff’s employees; and Annex 3, which comprised access codes for the plaintiff’s domain name and website, passwords and access codes to the plaintiff’s computers and email accounts and computer systems and programs.

19.  The information provided in Annex 1 and Annex 2 was also provided in digital format by way of a memory stick. Further, C&C stated that it was instructed that for the contract made between the plaintiff and its official distributors, the plaintiff had only entered contracts with two companies (which were named); there have not been any confidentiality and non-disclosure agreements made between the plaintiff and its employees; and certain documents and records were kept in the plaintiff’s office premises, being contracts made between the plaintiff and the two named official distributors, employment contracts and MPF records, identification documents records and leave records of the employees; and accounts records maintained by the plaintiff for effecting settlement of financial transactions.

20.  On the same day, 3 October 2018, Dundons wrote to C&C pointing out that the materials provided clearly failed to deliver up all property as required by the Order, and therefore the defendant was in breach of the Order.  The letter identified that, amongst the list of property belonging to the plaintiff which the defendant had failed to deliver up, were a mobile phone with SIM card and a photocopy machine.  Almost at once, C&C faxed back a letter denying all the allegations, but promising a more detailed reply by noon the following day.

21.  Instead what happened was that on 5 October 2018, new solicitors for the defendant (“TdW”) wrote to Dundons.  The letter referred to the memory stick and suggested that, as the defendant had not heard to the contrary, the plaintiff was taken to be satisfied that the defendant had complied with “that aspect of the Order”.  As to “other items the subject of the Order”, TdW referred to the photocopier and arrangements for it to be moved, certain miscellaneous items listed in schedule which was said to comprise “all remaining items in our client’s position” (emphasis in original), and explanation relating to the inability to deliver up certain computers and phones.  The schedule was a list of various items which would be delivered on 8 October 2018, and included things such as a fridge, microwave, CCTV system with eight cameras, two printers, computers and mobile phones, a watercooler, WIFI routers, scanner, office chairs, chest of drawers and coffee machine. 

22.  That schedule seems to me to make good the plaintiff’s assertion that the defendant had in effect denuded the plaintiff’s office of the various property by which the plaintiff carried on its business. It also seems to me to make clear that (a) there was no difficulty in understanding that those items fell within the terms of the Order, and (b) the Order had not been complied with, as those items had not been delivered up by the deadline on 3 October 2018 (nor had there been any suggestion in the C&C’s letter of that date that further property was to be delivered up, but more time was needed).

23.  By letter, also of 5 October 2018, Dundons disabused TdW of any understanding that the plaintiff was satisfied that the provision of the memory stick provided appropriate compliance with the Order. Whilst it was stated that the plaintiff was reviewing the schedule or inventory list, Dundons pointed out a number of other items which “at the very least” ought not to have been removed and/or transferred and which ought to be returned to the plaintiff.  A reminder was also provided that the source from which the data was downloaded to the memory stick provided on 3 October 2018 should also be delivered up, and no copies should be retained, and that should be confirmed.

24.  Correspondence continued between Dundons and TdW, and a general pattern emerged.  I do not think it necessary for present purposes to recite the entirety of it, though reference can be made to some of the letters.  The thrust of the correspondence was that: (a) Dundons continued to assert a failure to comply with the Order, and complained of the piecemeal approach to compliance; whilst (b) TdW continued to argue that the problem arose from piecemeal requests for property instead of the plaintiff providing a list of items to be returned.

25.  However, as Dundons pointed out, the defendant had previously been in charge of the plaintiff’s operations at its premises, and he must have known what property belonging to the plaintiff that he had removed and retained.  Therefore, the protestations that he might somehow not know what he should return seem to me to ring somewhat hollow.

26.  For example, on 12 October 2018, Dundons wrote and suggested there could be no argument that the defendant’s initial efforts to deliver up amounted to little more than a token effort to comply with the terms of the Order, as was plain from the list of items attached to TdW’s letter dated 5 October 2018.  It was argued that the defendant remained in breach of the Order, and that no confirmation had been given that copies of the plaintiff’s data had not been taken or retained.  Warning was given that the plaintiff intended to seek leave to endorse a penal notice on the Order, so that if the defendant persisted in his breach application could be made to treat that conduct as contempt to be punished accordingly.

27.  On 15 October 2018, TdW argued that the correspondence from Dundons failed to make clear which items remained unreturned, and said that all vague accusations could be avoided if the plaintiff simply provided the defendant a list of items it claimed to be outstanding.  The same letter asserted on instructions that the documents previously delivered in hardcopy memory stick on 3 October 2018 constituted all records in the defendant’s possession, and that no copies of the records of the company had been taken or retained by the defendant.

28.  One of the matters pursued on behalf of the plaintiff was the master administrator password and/or the access codes for its account with QuickBooks.  The defendant provided the login details by TdW’s letter of 19 October 2018 (apparently faxed to Dundons at 10.52am).  However, it seems clear from evidence subsequently provided that on a number of occasions after the defendant resigned as a director and left the plaintiff and before the login details were provided to the plaintiff, somebody logged in to the plaintiff’s QuickBooks account with the defendant’s username.  The last login times were on the very morning before TdW wrote the letter of 19 October 2018.  It seems to me that the clear inference to be drawn is that it was the defendant, or at least someone acting under his instructions, who logged in. Indeed, this would also seem to be consistent with the fact that on 19 September 2018, the day immediately before the defendant resigned, someone used the plaintiff’s QuickBooks account to delete a number of invoices previously issued by the plaintiff in 2017 and 2018, amounting to about US$6.6 million.

29.  It is also clear that there have been inconsistent explanations provided by the defendant in his solicitors’ correspondence as to what has happened to various computer or mobile phone equipment, which the defendant has not delivered up by reason, he says, that those items were stolen or otherwise disposed of.  There is also a mismatch between those explanations, and the timing of the alleged loss of the equipment, and the asset schedule to the plaintiff’s accounts which identify much of the equipment as still comprising an asset of the plaintiff as at 31 December 2017, after the dates when the defendant now asserts that they were lost.

30.  The last relevant correspondence seems to be TdW’s letter of 5 November 2018, in which it was stated that the defendant had come across a further item of property belonging to the plaintiff, being the relevant login details for certain ERP software.  Those login details were provided.  If nothing else, this letter identifies an understanding of the extent of the property belonging to the plaintiff, which ought to be – or ought to have been – delivered up to the plaintiff.  No further property belonging to the plaintiff was apparently delivered up after that date.

31.  I think the correspondence as a whole identifies that the defendant has taken, at best, a relaxed attitude to delivering up to the plaintiff property which he must have known belonged to it.  Against the evidence as to quite how much of the property, being office fittings, equipment, hardware and software was removed, it is difficult to avoid the conclusion that the defendant’s aim was to usurp the plaintiff’s business, and in practical terms to prevent the plaintiff from conducting its business, whilst he conducted that business under a new venture, probably Strong Will.  I also think the correspondence identifies that the defendant has engaged in a “catch me if you can” approach, which does him little credit.

The Contempt Application

32.  Being dissatisfied with what it believed to be the extent of the defendant’s non-compliance with the Order, the plaintiff wished to pursue contempt proceedings.  For that purpose, it recognised the need to obtain the endorsement of a penal notice.  Ultimately, after some originally unhelpful correspondence, the penal notice was endorsed by consent on 21 November 2018, and the Order as endorsed was re-served on 23 November 2018.

33.  The plaintiff asserts that non-compliance with the terms of the Order have continued.  In the context of the legal arguments, it may be relevant to draw a distinction between (a) the period up to 23 November 2018 when the Order had been made but no penal notice was endorsed, and (b) the period after 23 November 2018 following endorsement of the penal notice and re-service on the defendant.

34.  Once the penal notice was endorsed, these contempt proceedings were commenced.  Leave was obtained on the basis of the Statement and the documents exhibited to it, which were verified by an affidavit from Mr Dundon.  As indicated above, the originating summons relies on the same factual basis as was set out in the Statement.

35.  In opposition to this application, the Defendant has filed an affidavit of his solicitor Troy Joshua Greig.  The affidavit essentially sets out a commentary consistent with the line taken on behalf of the defendant in the TdW correspondence, and identifies what is said to be a fatal point relating to the failure to have included a penal notice on the original Order, which contained a deadline long expired by the time any penal notice was eventually endorsed.  The affidavit also suggests that the evidence with the Statement contains facts which do not support the plaintiff’s application, and which makes it “apparent that [the defendant] complied with the Order to the best of his ability in the circumstances by the deadline”.  As I have already said, I do not think that is a fair or accurate conclusion. Nevertheless, it seemed to me, and Mr Brewer and Mr Wood agreed, that there was no point in any cross-examination of Mr Greig, as he would simply point out what were his instructions.  As was his right, the defendant did not file any affidavit or affirmation himself.

36.  Mr Bojwani filed an affirmation in reply to the affidavit of Mr Greig.  Amongst the points made by him were that the plaintiff is pursuing further discovery, including of employment contracts and non-disclosure agreements which should have been delivered up.

Pursuit of Further Discovery

37.  In fact, a further better list and specific discovery have now been sought formally by the plaintiff by its summons dated 13 August 2019 in the underlying proceedings, supported by the 5^th affirmation of Mr Dundon.  The defendant has very recently filed an affidavit to oppose that application.  In respect of a number of documents or classes of documents, he has stated that they are not in his possession, custody or power.  Unless there is a clear basis for interfering with that statement, it is likely to be taken to be conclusive until trial of the underlying action. Similarly, if any order for specific discovery is made, that order would be answered by an affidavit, which would also likely be taken to be conclusive until trial of the underlying action.

38.  I do not think it is realistically open to me in the current proceedings, to proceed on the basis that the discovery application will necessarily succeed (or succeed to any particular extent), and/or that the affidavit already made by the defendant (or parts of it) can be ignored or rejected, unless there is clear evidence on which I can do so properly within these committal proceedings.

Applicable Principles – Contempt Proceedings

39.  It is trite that the rules and conduct for contempt proceedings are addressed in Order 52.  There are also relevant provisions to be found in Order 45, which provides for enforcement of court orders in respect of which contempt is alleged, including as to personal service and endorsement of penal notices.

40.  Civil contempt is in the nature of public law proceedings.  Therefore, the proceedings transcend whatever private disputes the litigants may have among themselves.  The Court has a substantial interest in seeing that its orders are obeyed.  The power to commit for contempt is recognised as the prevention of interference with the due administration of justice.

41.  The burden of proving contempt is on the plaintiff, and the defendant’s contempt must be proved beyond reasonable doubt.  The defendant does not have to prove anything affirmatively; at most, there is an evidential burden.  Proving that the defendant has lied is not sufficient.  There must be some further evidence to incriminate him than just lies.

42.  On the contempt application, there is a three-stage test.  First, it is necessary to construe the Court’s order, to ascertain its meaning and operation.  Second, it is necessary to determine whether the defendant has in fact complied with the order.  Third, it is necessary to consider whether any failure to comply was accompanied by the state of mind required to establish punishable contempt.

43.  Where it is said that the alleged contemnor has failed to produce documents as ordered, it is crucial to determine that the person did have the documents in his possession, custody or power at the time of the order.

44.  The Court will not enforce an order in contempt proceedings when the order is ambiguous or unclear in a material respect.  The person affected by the order must know with complete precision what he is required to do or abstain from doing.

45.  It might also be added that contempt proceedings should be pursued only as a matter of last resort.  There may be cases where it is necessary and appropriate that the court should exercise its power in the punishment of contempt to achieve compliance with its order, but there are other cases where lesser options should be explored before resorting to the draconian power of committal.  In a case where the alleged contemnor can demonstrate he has been making genuine and serious efforts to comply with the order, and that non-compliance by a certain deadline is due to circumstances beyond his control, it would be rare that the court will deem it appropriate to consider the option of committal.

Penal Notice

46.  It is a necessary condition for the enforcement of an order under Order 45 rule 5 by way of committal that the copy of the order served under the rules should have the requisite penal notice prominently endorsed thereon.  Penal notices will be strictly construed, and a deficient penal notice may deprive a person of the right to proceed with committal proceedings, or result in the contempt application being dismissed. Though there is power to dispense with the need for a penal notice, that will occur in only rare or exceptional circumstances.  The point is that the person the subject of the order ought in most circumstances to be made aware – whether in writing or orally – of the consequences of breaching any order, before any committal proceedings might be brought: see, for example, Citybase Property Management Limited v Kam Kyun Tak (No 1) [2003] 2 HKC 98 at §14(2), per Ma J (as he then was).

47.  The power to dispense with the requirement for a penal notice should only be exercised if the court is satisfied beyond reasonable doubt that the defendant knew of the terms of the order, and was well aware of the consequences of disobedience, and was aware of the grounds relied on as a breach with sufficient particularity to be able to answer the charge.

48.  Endorsement of a penal notice on an order does not have any retrospective effect.

49.  In his submissions, Mr Brewer has relied on a note in the Hong Kong Civil Procedure at 52/2/9 which states:

“Where the order alleged to have been breached is not endorsed with a penal notice, and the alleged contemnor is not otherwise aware of the consequences of a breach of order, the court can still make a finding of contempt and to make appropriate orders in enforcement, and to award indemnity costs, but it should not impose any punishment.”

50.  That note was apparently made on the authority of the decision in Regina (JM) v Croydon London Borough Council [2010] 1 WLR 1658, a decision of Collins J (as he then was), and the note also references Secretary for Justice v Yuen Oi Yee Lisa (unreported, HCMP 2390/2008, 25 October 2010, Chu J); and Dr Q v Health Committee of Medical Council of Hong Kong (No 2) [2014] 2 HKLRD 57.  But, as the note goes on to say:

“Thus, a penal notice is not required before Government secretaries or civil servants in their official capacities can be found to have committed a contempt of court, as the purpose of contempt proceedings in such cases is not to punish.”

51.  In my view, that latter note is descriptive of the true ratio in the cases referenced.  First, it can be expected that government officers, civil servants and similar public servants acting in their official capacities would know the potential consequences of breaching a court order.  Secondly, contempt proceedings against a government department or a minister in an official capacity would not be either personal or punitive. However, that does not mean that a finding of contempt against the government department or minister would be pointless, as the very fact of making such a finding would vindicate the requirements of justice, and permit an order for costs to underline the significance of a contempt.

52.  This is why, in the Croydon case, Collins J reached his conclusion (at §12) as follows:

“Accordingly, I do not think that a penal notice is necessary in orders made against a public body. A failure to comply with an order can be dealt with by an application to the court for a finding of contempt and, if necessary, a further mandatory order which may contain an indication of what might happen should there be any further failure to comply. Adverse findings coupled with what would probably be an order to pay indemnity costs should suffice since it is to be expected that a public body would not deliberately flout an order of the court.”

53.  Similarly, in the Dr Q case, Au-Yeung J followed the decision in the Croydon case, stating (at §54) (emphasis in original):

“It has been held that a penal notice is not required where the party alleged to be in contempt is the government or a public body and only a finding of contempt is sought, but is required if punishment for contempt is sought.”

54.  Therefore, as a matter of authority, as well as principle, it seems to me that it is misconceived to suggest that the approach extends to cases where the party alleged to be in contempt is not the government or a public body or a public official acting in an official capacity.  The distinction which might be made between an ability to make a finding of contempt, and the ability to punish so as to enforce the order, is a distinction appropriate only when the party alleged to be in contempt is a government or public body or a public official acting in an official capacity. Where otherwise no penal notice has been endorsed on the order and the requirement for a penal notice has not been waived, a party cannot bring contempt proceedings merely to obtain a finding of contempt, without imposition of a punishment.

Analysis

55.  Where in this case the defendant instructed his former solicitors to accept service of the Order, and to state that personal service was unnecessary, I do not think the defendant can properly take any point that he was not personally served with the original Order as made.  He was, of course, personally served with the Order amended to include the endorsement of the penal notice.

56.  However, in light of my view as to the requirement for a penal notice, I do not think any finding of contempt is open to be made in relation to the defendant’s conduct before the penal notice was actually endorsed on the Order and it was re-served on him.  That is not to say that I think the defendant complied with the requirements under the Order; the factual chronology as to how delivery up of the plaintiff’s property was provided, largely on the “catch me if you can” approach, says otherwise.  But I do not think that authority and principle permits me to make a finding of contempt, even without the imposition of a punishment, where no penal notice was endorsed on the Order.

57.  In the circumstances of this case, I also do not think it would be right to assume that someone other than the court or the plaintiff or the plaintiff’s solicitors made the defendant properly aware of the potential consequences of breaching the Order by failing to deliver up plaintiff’s property before the deadline set by the court.

58.  As to the period after 23 November 2018, the position would in theory be different.  First, I reject the submission made by Mr Wood (and previously by TdW) that once the deadline set in the Order had passed before the penal notice was endorsed, that somehow the penal notice would have no effect.  On the contrary, it seems to me that the purpose of endorsing the penal notice on the Order was to emphasise – and make the defendant aware of – the potential consequences of breaching or continuing to breach the Order.  The Order was designed to require the defendant to deliver up the Plaintiff’s property.  Whilst a deadline was set, it would be nonsensical to suggest that the requirement to deliver up the property somehow came to an end if that deadline was not met.

59.  Secondly, I also reject the submission made by Mr Wood (and previously by TdW) that the terms of the Order were somehow unclear or ambiguous on the face of the Order.  The numerous rounds of correspondence between solicitors was not the result of ambiguity or lack of clarity of the Order; rather, it was because of the stance taken by the defendant, as I have described above.  I do not accept that because the Order did not specify any hardware or physical property in the non-exhaustive list of things to be delivered up that the defendant would not have known that he must deliver up the plaintiff’s hardware and physical property.  The non-exhaustive nature of those things listed as property in the Order is perfectly plain from the words “including but not limited to”.  It beggars belief for the defendant to suggest that he might not have known that he had to deliver up to the plaintiff the plaintiff’s computers, photocopier, chairs, coffee machine and so forth.

60.  Nor do I accept the submission that ambiguity or uncertainty was introduced into the terms of the Order by the phrase “and wrongfully removed from the Plaintiff’s premises”.  As I read the Order, those words are part of the longer general description of what it is that the defendant was to deliver up, namely “all that property belonging to the Plaintiff and wrongfully removed from the Plaintiff’s premises by the Defendant”.  In any event, there has been no suggestion on behalf of the defendant as to any basis upon which he might have removed the plaintiff’s property from the plaintiff’s premises and retained it for his own use on a basis that was not “wrongful”.

61.  For similar reasons, save for one aspect, I also reject the submission that the Statement was lacking or in some way defective. Mr Wood is correct that the Statement might have said expressly things such as how the property that was not delivered up comes within the precise terms of the Order, or how each item of property that was delivered up after the 3 October 2018 deadline comes within the precise terms of the order. As a matter of good practice, I think the Statement might well have provided some further detail, where the points are only generally or inferentially made. But I also take into account the context that the plaintiff’s offices were operated and managed primarily by the defendant, so that he would know what property he removed.  Part of the context also included that the property removed included documentation which would have assisted other persons within the plaintiff to have collated a list or inventory of property.  In so saying, I have not lost sight of the fact that the burden is on the plaintiff, and the defendant does not have to prove anything.

62.  The criticism of the Statement with most force is that the Statement should have identified, in relation to the property which was not delivered up at all, the clear basis of the belief that such property was in the possession, custody or power of the defendant as at 3 October 2018.  Although that criticism again has to be viewed against the context I have outlined above, the criticism retains force because the correspondence exhibited to the Statement does not amount to actual evidence that, for example, particular documents or classes of documents were in fact in the defendant’s possession, custody or power at the time of the Order.

63.  It seems to me that the force in the criticism is also in effect made out by the fact that the plaintiff now pursues its further discovery application.  For that application, it has produced evidence in the form of affirmation from Mr Dundon as to why it says there is at least a sufficient prima facie case as to the existence, relevance and the defendant’s possession or custody of, or power over, the documents and classes of documents pursued.  But even that evidence does not invite a finding beyond reasonable doubt – as is, of course, an unnecessarily high burden for a specific discovery application – as to the defendant’s possession, custody or power, and hence failure previously to have delivered up.

64.  Where the further discovery application is now live, and will be determined by the court in due course, it may in any event be inappropriate for me to traverse the territory and make findings in advance of that proper determination.  But I have already made reference to the possible conclusive nature (until trial) of the defendant’s own affidavit material filed in the discovery application.  I do not think I am in a position to jump ahead of, or anticipate the exploration of evidence at, the trial and to make now the factual findings that would be necessary to support a finding of contempt.  In other words, I do not think materials currently before me in this application enable me to engage in that task.

65.  As an aside, I would mention that when the materials are considered in the context of interlocutory applications or at the trial, their relevance may be broader.  For example, the stance of the defendant may be relevant to credibility overall, which may have an impact on other evidence considered before the Court makes its overall conclusion on the issues in dispute.

66.  Hence, whilst I have accepted that in theory it might be possible to make a finding of contempt and to impose punishment in relation to any continuing breach of the Order after the endorsement of the penal notice and re-service on 23 November 2018, I am persuaded that these are not the circumstances in which it would be appropriate to do so.

67.  I suppose it might also be said that, at least in relation to the documents now pursued, there is an alternative method of seeking compliance with the defendant’s obligations, including his procedural obligations in the underlying litigation.  Therefore, it might be said that there is no need to have resort to contempt proceedings to seek to enforce those obligations.

Result

68.  In the circumstances, therefore, I dismiss the application for committal.

Costs

69.  Whilst the application has failed, essentially for the technical reasons I have identified, it might be thought against my findings that the defendant has brought this application on himself.  In the broad exercise of my discretion as to costs, and where it may not be appropriate to award costs in favour of the plaintiff, I would be reluctant to award costs in favour of the defendant.  I have considered, but do not at present think it would be correct, to reserve the costs either to the court hearing the further discovery application or that hearing the trial.  In the circumstances, I will make a costs order nisi that there be no order as to costs.

70.  The costs order nisi will become absolute after 14 days unless either party makes application for variation of it. Should either party wish to vary that costs order, the application should be made by letter to the Court (copied to the other party) supported with an explanation of the varied order sought.  The other party will then have 14 days to respond to the application, also by letter.  I will then deal with the matter on the papers.

Postscript

71.  On the materials I have, it seems at least likely on the balance of probabilities that the defendant was in clear breach of the requirements of the Order.  The breach is evident at least from the delay in the plaintiff’s property which was delivered up after the deadline set by the court, with no attempt at all to seek from the court any extension of time when within which to comply with the Order.

72.  There is also at least a seriously arguable case of continuing breach in the failure to provide documentation of the sort which any business would expect to have, and which has not been left with the plaintiff – an obvious inference being that it has been taken by the defendant, and not returned.  This is all against the other evidence from which it might be inferred that the defendant has engaged in a deliberate campaign to prevent the plaintiff from being able to conduct its own business in competition with the defendant’s new venture, and to prevent or hinder the ability to recover from that activity by the “catch me if you can” approach.  However, I say no more on those topics, as they are matters which may fall for determination in other circumstances.

73.  It may be helpful if some guidance is given in relation to the endorsement of penal orders, in circumstances where the order when first granted does not have such an endorsement.  I think a distinction might arise between cases of a prohibitory order, and cases of a mandatory order (where ordinarily a deadline for compliance with the mandatory requirement would be set).

74.  If the order is a prohibitory order, and a penal notice has subsequently been endorsed, then continued activity in contravention of the prohibition would seem readily to be caught in circumstances which would permit pursuit of contempt proceedings.

75.  However, the position might not be so straightforward with a mandatory order where a deadline for compliance has been set in the order.  Hence, particularly in the circumstances of a mandatory order, if a penal notice is to be endorsed after the time for original compliance set by that order, it would seem to me to be at least good practice for a further extended deadline to be set by the order with the penal notice endorsed on it.  I do not think that extension would have the effect of discharging any prior failure to comply, if any, and that point could be made express.  But the setting of a new deadline would make clear that the order must be complied with at least within the extended time, in circumstances where the endorsement of the penal notice would make the defendant clearly aware of the potential consequences of failing to comply, or continuing to fail to comply.