ALAN CHUNG WAH TANG AND ANOTHER v. LEE SIU FONG AND ANOTHER

HCMP 1106/2021

[2022] HKCFI 3683

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1106 OF 2021

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.  The Plaintiffs, Mr Alan Tang and Ms Anita Hou (“the Trustees”), are the joint and several trustees in bankruptcy of the property of Siegfried Lee (“the Bankrupt”). By an originating summons filed on 6th August 2021 (“the OS”), the Trustees seek an order of committal against the Defendants, Lee Siu Fong (“Fong”) and Leelalertsuphakun Wanee (“Wanee”), the sisters of the Bankrupt.

2.  In HCB 345/2001, pursuant to a summons of 15th May 2017 (“the s.29 Summons”) the Trustees obtained an order on 21st September 2017 against the Defendants that (inter alia) they attend the court to be examined on oath and to produce documents (“the s.29 Order”).

3.  The Trustees contend that Fong and Wanee have breached the s.29 Order. On 28th July 2021, the Trustees obtained leave to commence proceedings for committal against the Defendants.

B. THE BACKGROUND

4.  The relevant background is set out in the judgments of G Lam J (as he then was) of 21st September 2017. One ordered that there be a private examination of the Bankrupt’s brother and his son. The other ordered that there be a private examination of the Defendants (“s.29 Judgment”). The key aspects for present purposes are as follows.

B1. The Bankrupt and SFCH

5.  The Bankrupt was the founder, Chairman, CEO and largest single shareholder of Siu Fung Ceramics Holdings Limited (“SFCH”), a company whose shares were listed in Hong Kong in the 1990s.

6.  Petitions to wind up SFCH and several other companies in the group (“the Group”) were presented in March 1999, and winding up orders were made on 9th May 2000. Claims of creditors admitted for the Group totalled approximately $8,436m. No dividend has been paid to the creditors of SFCH. Aggregate dividends paid to the creditors of some of the companies in the Group are less than 1% of their admitted claims.

7.  On 18th January 2001, a bankruptcy petition was presented against the Bankrupt for a debt of $322m based on a guarantee. He was adjudged bankrupt on 8th May 2001. Proofs of debt filed in the bankruptcy amount to some $458m.

8.  Soon after the adjudication the Bankrupt submitted a statement of affairs stating assets of $265 only. Between 2001 and 2004 he submitted three annual statements reporting zero income and zero expenditure. Nothing has been contributed by the Bankrupt to the bankruptcy estate. Not a single cent of dividend has been paid to the creditors.

9.  In 2004, the Insider Dealing Tribunal found that the Bankrupt had used the securities accounts of three persons to sell 16.94 million shares in SFCH in June 1996 and also counselled or procured his wife to sell 80 million shares in SFCH in July 1996 when he had price‑sensitive information adverse to the Group, thereby avoiding losses of $69.87 million. The proceeds of sale were deposited by his wife into his bank account. The Tribunal imposed an order for (inter alia) disqualification of the Bankrupt from management of any company for a maximum period of 5 years. In making these orders, the Tribunal stated that there were reasons to believe that the Bankrupt was not totally without assets, and that there was evidence that he had feathered a nest offshore to avoid his creditors in Hong Kong.

10.  The Bankrupt was regarded as having been discharged from bankruptcy in May 2005. However, this did not in law end his duties to assist the Trustees[1] in their functions which continued notwithstanding the discharge. Eventually, G Lam J granted an order for private examination against him on 28th September 2016.

B2. The s.29 Order

11.  The Trustees subsequently applied pursuant to s.29 of the Bankruptcy Ordinance (Cap.6) (“the BO”) for an order for examination of the Defendants. This (the s.29 Order) was granted by G Lam J on 21st September 2017 for the reasons as set out in the s.29 Judgment of the same date.

12.  The Trustees sought to examine the Defendants in relation to four areas of investigation: (1) the Bankrupt’s 75% holding in Siu Fung Pharmaceutical Holdings Limited (“SFPH”); (2) the interest in Siu Fung Ceramics (Beijing) Sanitary Ware Co Ltd (“BSW”); (3) living expenses of the Bankrupt, and (4) (in relation to Fong) the Bankrupt’s undisclosed nominee accounts.

13.  For the purpose of the present proceedings, it is the first, second and fourth of these areas that are relevant. The background in relation to the various transactions, matters and companies which relate to these three areas was summarised, without controversy, in the Trustees’ skeleton as follows.

“15. As to the Bankrupt’s 75% holding in SFPH:-

(1) SFPH was a private company through which the Bankrupt had carried on pharmaceutical business since around 1994. SFPH substituted SFCH as the foreign partner (with a 70% interest) in a joint venture called Hefei Siu-Fung USTC Pharmaceutical Company Ltd (“Zhaoke”) without paying any consideration in 1994.

(2) The Bankrupt was the sole shareholder and director of SFPH until June 1994 when new shares were allotted. There was also a share transfer in February 1996, as a result of which the Bankrupt held 2,400,000 shares (75%), and the Brother held 800,000 shares (25%).

(3) In May 1997, the Bankrupt’s and the Brother’s shareholdings were diluted by half when 3,200,000 shares were allotted to a company owned by Fong and Wanee, Lee’s Machinery Ltd (“LML”).

(4) In December 1997, the Bankrupt transferred 800,000 shares at HK$1 to the Brother. Then in March 1998, the Bankrupt transferred his remaining 1,600,000 shares at HK$1 to a company owned by his ex-wife, Triumph Leader Ltd (“TIL”), hence disposing of all his shares in SFPH.

(5) As a result of some subsequent transfers and allotment, by December 2001 there were 18,400,000 shares in SFPH held in the following manner:-

(i) Huby Technology Limited (“HTL”, owned by Fong and Wanee): 15,200,000 shares.

(ii) Dynamic Achieve Investments Limited (“DAIL”, owned by Fong and Wanee): 800,000 shares.

(iii) High Knowledge Investments Limited (owned by the Brother’s wife): 1,600,000 shares.

(iv) Techfarm Investment Limited (“Techfarm”): 800,000 shares

(6) In February 2002, the above four companies entered into a share exchange agreement with another entity, under which those 4 companies transferred all their shares in SFPH in return for shares in Lee’s Pharmaceutical Holdings Limited (“LPHL”) (1 SFPH share for 10 LPHL shares). SFPH became a wholly-owned subsidiary of LPHL, and the 4 companies became shareholders of LPHL.

(7) LPHL’s shares were listed on the GEM board on 15 July 2002. The listing was transferred to the Main Board in 2010. In other words, a pharmaceutical business which was held as to 75% by the Bankrupt as at 1996 became the business of LPHL in which the Bankrupt had ostensibly no interest, and all that Bankrupt had obtained in return was HK$2. On the other hand, LPHL is listed in the Main Board.

16. As to the interest in BSW:-

(1) BSW was one of the largest joint ventures within the Siu Fung group and has since 1993 owned a factory on a piece of land of 150,000m² in Beijing. As at 1995, SFCH held a 36% interest in BSW.

(2) In July 2001:-

(i) Kingbridge Investment Ltd (“KBI”) acquired a 36% shareholding in BSW from the liquidators of SFCH for HK$17 million (it already owned a 20% interest before this acquisition). KBI was transferred to be owned by Lion Legend Holdings Ltd (“LLH”), which was owned by Capital Ocean Enterprises Ltd (“COEL”, as to 68%) and World Cheer Enterprise Ltd (“WCEL”, as to 32%).

(ii) Asset Reward Enterprises Ltd (“ARE”), a wholly-owned subsidiary of LLH, acquired a 70% stake in Beijing DBS Co Ltd (“Dubois Beijing”) for HK$2 million.

(3) The Bankrupt stated that the interests in BSW was sold to the Brother. However, the total consideration of HK$19 million appeared to come from a former employee of the Bankrupt and a BVI company said to be owned by the Son.

(4) The Bankrupt continued to be a director and legal person’s representative of BSW to date. Further, in May 2012, there was a public announcement to the effect that the 36% interests in BSW was actually controlled by the Son, not the Brother.

(5) Over the years, BSW has become associated with and formed part of the Roy Ceramics group in Germany (“ROY”). In 2015, ROY was listed in Germany. Its prospectus stated that BSW was effectively owned by the Son. Following the listing of ROY, the Bankrupt was appointed CEO and Chairman of ROY.

(6) The Brother said that part of the consideration paid to acquire Dubois Beijing was contributed by Fong and Wanee (who adopted this statement). The Brother also said he transferred COEL to the Son at the suggestion of Fong and Wanee.

17. As to the Bankrupt’s undisclosed nominee account:-

(1) A former employee of the Bankrupt (Mr. Daniel Chan) had revealed that at least HK$25 million belonging to the Bankrupt paid to him and his mother had been squirreled away in 1996 to a nominee account held with BNP Singapore (account no JN 519). Mr. Chan was authorised by the Bankrupt to give instructions to the account.

(2) The HK$25 million was then used to purchase shares in SFCH. In August 1996, 7.5 million SFCH shares (worth about HK$9 million) were transferred from account JN 519 to another nominee account no JN 302. On 6 September 1996, following a sale of 10.6 million SFCH shares in account JN 519, a sum of HK$11 million out of the proceeds of sale was transferred from account JN 519 to a Hong Kong bank account of Fong.

(3) As for the HK$11 million paid from account JN 519 to Fong, an action has been brought by the Trustees (HCA 779/2013). By way of defence, Fong said that the money was in turn transferred by her to NHD Systems (Asia) Ltd (“NHDA”), a company over which the Bankrupt had interest and control prior to its winding up and at the material time held a 70% interest in Dubois Beijing.”

14.  The Trustees say that the fifteen companies referred to in Schedule 3 to the s.29 Summons, as referred to in the s.29 Order, were involved in the aforesaid transactions and matters.

B3. The application for stay of execution of, and appeal against, the s.29 Order

15.  The Defendants filed a notice of appeal on 19th October 2017 against the s.29 Order. However, they failed to procure that their appeal be set down for appeal until 15th October 2019. They only applied for a stay of execution of the s.29 Order pending appeal on 23rd October 2019.

16.  By a decision of 13th January 2020 [2020] HKCFI 176, G Lam J dismissed the application for a stay of execution. In the decision, G Lam J observed that the Defendants had been in default of paragraphs 2 and 4 of the s.29 Order, that there had been inordinate delay in the Defendants’ prosecution of their appeal and applying for a stay of execution.

17.  On 24th January 2020, the Defendants renewed their application for a stay pending appeal. This was dismissed by the Court of Appeal on 15th June 2020, at the same time as the Defendants’ appeal itself was dismissed.

B4. The affirmations and documents produced by the Defendants

18.  On 4th September 2020, Wanee and Fong each filed an affirmation in HCB 345/2001 (“Wanee 2020” and “Fong 2020”; collectively “the 2000 Affirmations”), and produced (through their solicitors) six categories of documents, which they say complied with paragraphs 2 and 4 of the s.29 Order. The six categories were:

18.1 the audited statements of account of SFPH for the year ended 31st December 1997;

18.2 the balance sheet of SFPH as at 31st December 1998;

18.3 the audited statement of accounts of SFPH for the year ended 31st December 1999;

18.4 evidence of LML’s repayment of SFPH’s loan of $3,434,371.29 owed to HSBC;

18.5 HTL’s audited statements of account from 1999 to 2010; and

18.6 extracts of the listing prospectus of Lee’s Pharmaceutical (HK) Limited, formerly known as SFPH.

19.  On 7th January 2022, Wanee and Fong each filed an affirmation in these proceedings (“Wanee 1st” and “Fong 1st”; collectively “Defendants 1st”), producing further documents:

19.1 in relation to HTL (“the HTL Documents”):

19.1.1 Business Registration Certificate dated 13th July 2021;

19.1.2 Certificate of Incumbency dated 13th July 2021, 31st July 2018 and 12th January 2015;

19.1.3 Statement of Accounts with Citibank dated 5th January 2021; and

19.1.4 Audited statement of accounts from 2011 to 2018;

19.2. in relation to Zhaoke:

19.2.1 Business Registration Certificate dated 4th June 1994;

19.2.2 Business Licence dated 26th August 2021;

19.2.3 Articles of Association dated 20th December 1998; and

19.2.4 Articles of Association;

19.3. in relation to LML (“the LML Documents”):

19.3.1 Certificate of Incorporation dated 17th December 1991;

19.3.2 Return of First Directors and Secretary dated 8th January 1992 and four letters of acceptance of appointment dated 28th January 1992;

19.3.3 Notice of Change of Directors or Secretary or in their Particulars dated 11th February 1993, 16th March 1993 and 23rd February 1996; and

19.3.4 Audited statement of accounts for years 2014 to 2019.”

20.  On 8th June 2022, Wanee and Fong each filed a further affirmation in these proceedings (“Wanee 2nd” and “Fong 2nd”; collectively “Defendants 2nd”) in reply to the Affirmation of Tang Chung Wah (“Tang 1st”), and producing over 1,500 pages of further corporate documents:

20.1 relating to HTL, retrieved through HTL’s BVI agent or in the Defendants’ possession (“Further HTL Documents”), including the Certificate of Incorporation dated 23rd November 1999 and the Memorandum and Articles of Association;

20.2 relating to Zhaoke, retrieved from the relevant PRC authority or from the warehouse of the Zhaoke factories;

20.3 relating to DAIL, retrieved through DAIL’s BVI agent or in the Defendants’ possession (“DAIL Documents”), including the Certificate of Incorporation dated 10th May 2000, the Memorandum and Articles of Association, the Register or Directors, and the Register of Members;

20.4 relating to LML, retrieved from the Companies Registry (“Further LML Documents”), including the Memorandum and Articles of Assocication dated 17th December 1991.

C. THE APPLICABLE PRINCIPLES

C1. General principles relating to contempt

21.  The objective of proceedings for contempt is the maintenance of the court’s authority. There is an element of public policy in punishing civil contempt, since the administration of justice would be undermined if the order of any court of law could be disregarded with impunity: Kao, Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830 at [42].

22.  There are therefore many examples of the imposition of a penalty for a contempt that has already been committed, even if there is no threat of repetition, in order to uphold the authority of the court and for the sake of the proper administration of justice. See Sino Wood Investment Ltd v Wong Kam Yin [2004] 2 HKLRD 324 at [50].

23.  Whilst a motion for committal is a means of putting pressure on the contemnor to obey a court order, it is also a means of imposing any penalty thought proper in respect of the contempt that has already been committed: Re Grantham Wholesale Fruit Vegetable and Potato Merchants Ltd [1972] 1 WLR 559 at 565F.

24.  The principles as to the approach to be taken by the court in assessing whether contempt has been established were set out in Kao, Lee & Yip.

24.1 Although the better view is that civil contempt is not a criminal offence, the punitive aspect of civil contempt proceedings has “caused the courts to treat those in peril in such proceedings in a like manner to those in peril in criminal proceedings” (Cobra Golf Inc v Rata [1998] Ch 109 at 129, 155). The penalty to which a person who fails or neglects to obey an order of the court is exposed imports many of the procedural safeguards which are characteristic of proceedings for a criminal offence. Thus an allegation of civil contempt must be proved strictly (at [6]). Strict proof of guilt, that is, beyond reasonable doubt, is required (at [30]).

24.2 Where the alleged contempt is a failure to comply with court orders, the proper approach should be (at [21]):

24.2.1 first, to construe the order so as to ascertain its meaning and operation;

24.2.2 then, to determine whether there has been compliance with the order as so construed; and

24.2.3 finally, to consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

25.  In the context of an alleged failure to produce documents in compliance with a court order, the burden is on the plaintiff to show, beyond reasonable doubt, that:

25.1 the documents have been identified with sufficient clarity and specificity;

25.2 the documents were in existence at the time of the order;

25.3 they were within the custody or power of the defendants at the time of the order;

25.4 the defendants intended not to produce them.

See Ip Pui Lam Arthur & anor v Alan Chung Wah Tang & anor, unreported, CACV 214/2016, 16th February 2017, at [4.2], [6.4], [6.5], Bruno Arboit v Koo Siu Ying & anor, unreported, HCMP 2749/2012, 8th March 2016, at [114], [130].

C2. Construction of court order

26.  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. 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. See Bruno Arboit at [112]; Martin John Coward v Phaestos Limited [2021] EWHC 9 at [50] to [51].

27.  The court will not enforce an order in contempt proceedings when it is ambiguous or unclear in a material respect. Any ambiguity in the terms of the order must be resolved in favour of the alleged contemnor. See Bruno Arboit at [113].

C3. Compliance with court order

28.  In the context of non-compliance with a court order, it is not a defence for the alleged contemnor to say that he “did his best” (Kao, Lee & Yip at [26]). On the other hand, impossibility of performance is a defence (at [48], [56]; see also Bruno Arboit at [116]).

C4. State of mind

29.  It is sufficient to prove that the defendant’s conduct was intentional and that he knew of all the facts which made it a breach of the order. It is not necessary to prove that he appreciated that it did breach the order, or even that he had read the order. Liability for civil contempt does not depend on contumacious intent (Kao, Lee & Yip at [45], [46]; Arlidge, Eady & Smith on Contempt, 5th ed., at [12-95]).

30.  It is not necessary to prove an intention to disobey the order or otherwise interfere with or impede the due administration of justice (Kao, Lee & Yip at [50]).

31.  Only conduct that was casual or accidental and unintentional would be excluded from civil contempt (Kao, Lee & Yip at [43], [44], [53]).

32.  It is immaterial that the breach was committed in reliance on a third party’s advice, even legal advice (Kao, Lee & Yip at [53]).

D. THE FIRST GROUND

33.  The first ground relied on by the Trustees relates to paragraph 2 of the s.29 Order. They say that paragraph 2 required the Defendants to produce all corporate documents relating to the fifteen companies listed in Schedule 3 to the s.29 Summons.

34.  The Defendants disagree with the Trustees’ construction of paragraph 2 of the s.29 Order. They say that paragraph 2 only required the Defendants to produce all corporate documents of the fifteen companies insofar as they related to the companies’ involvement in the matters set out in Schedules 1 and 2 to the s.29 Summons, as opposed to the carte blanche disclosure of all corporate documents relating to those companies.

35.  However, the Trustees say that even on the Defendants’ construction of paragraph 2 of the s.29 Order, the Defendants are in breach of it. The Defendants object to the Trustees taking this argument.

36.  The Defendants say that in any event, any breach of paragraph 2 of the s.29 Order is only technical, minor and academic.

D1. The proper construction of paragraph 2 of the s.29 Order

37.  Paragraphs 1 to 4 of the s.29 Order provided as follows.

“1. The 1st and 2nd Respondents do attend the court to be examined on oath … and … the Trustees be at liberty to examine the Respondents under Section 29 of the Bankruptcy Ordinance (Cap 6) concerning the Bankrupt, his dealings or property and any other relevant matters including but not limited to the matters and transactions set out in Schedule 1 and Schedule 2 attached to the [s.29 Summons] for each of the 1st and 2nd Respondents respectively and the questions therein with supporting documents within 21 days of the making of this Order subject to the qualifications elaborated in paragraphs 7, 17 and 26 of the Judgement of the Hon Mr. Justice G. Lam dated 21 September 2017 including that the private examination of the 1st and 2nd Respondents should not be extended to the following transactions:

(1) the origin of the general funding of Lee’s Machinery Ltd

(2) the transfer of 1.6 million shares by Triumph Leader Ltd to Dynamic Achieve Investments Ltd in July 2000;

2. The 1st and 2nd Respondents do produce all ledgers and books of account, statutory records, minutes, invoices, bank statements, cheque stubs, vouchers, contracts, statements of account (including audited and management accounts), correspondence, emails, faxes, books, papers, files and documents of every kind (in hard copy and/or magnetic and/or electronic media format), in any manner, in their custody or power directly or indirectly through their husbands, siblings, family members, and/or associates relating to the dealings, property, fund flows, matters and transactions and each of the companies or corporate entities (as listed in Schedule 3) involved as set out in Schedule 1 and Schedule 2 attached to the Summons for each of the 1st and 2nd Respondents respectively within 21 days of the making of this Order; [emphasis added]

3. If, in the event that the Respondents cannot provide answers to any of the questions in Schedules 1 and 2, each of them do file, within 21 days of making of this Order, an affirmation (affidavit) to state, for each of the questions, the reasons why answers cannot be provided by them;

4. If, in the event that the Respondents cannot provide documents specifically requested in Schedules 1 and 2, or documents to support their answers and explanations to questions therein, or documents as set out in paragraph 2 above, each of them do file, within 21 days of the making of this Order, an affirmation (affidavit) to state, for each of the documents, whether they have ever been in the possession, custody or control of, and when and under what circumstances they have now become unavailable to be produced by, the Respondents directly or indirectly through their husbands, siblings, family members, and/or associates;

…”

38.  Schedule 1 to the s.29 Summons had set out a list of questions for Fong “to be answered (with supporting documentation as appropriate) and other specific documents to be provided”. There were questions of a general nature (such as “Have you ever provided financial support to the Bankrupt since his bankruptcy? Please state in monetary terms the total amount of financial support you have provided to him”) and also questions focusing on a particular property or transaction (such as “What were the sources of funds for you to purchase a residential property located at [address] in November 2004?”).

39.  Schedule 2 to the s.29 Summons had similarly set out a list of questions for Wanee.

40.  Schedule 3 to the s.29 Summons was subtitled “List of Companies and Abbreviation used”. It then set out, in a table format, a list of the abbreviations (in the first column), the company denoted by each abbreviation (second column), and the place of incorporation of the company (third column).

41.  In my view, paragraph 2 of the s.29 Order does not require the Defendants to produce every corporate document for each of the fifteen companies listed in Schedule 3 to the s.29 Summons.

42.  First, as a matter of language and syntax, the words “as set out in Schedule 1 and Schedule 2 attached to the Summons” must qualify the preceding “the dealings, property, fund flows, matters and transactions and each of the companies or corporate entities (as listed in Schedule 3) involved”. Had the intention been to exclude the latter phrase from the qualification, the order would have been phrased differently, for example by placing the reference to Schedules 1 and 2 before the reference to the companies listed in Schedule 3.

43.  In this regard, I disagree with the Trustees’ submission[2] that paragraph 2 “says that those companies listed in Schedule 3 are involved in the matters set out in Schedule 1 or Schedule 2”. The wording is not that the companies “are” involved; rather, it refers to “the companies…involved”.

44.  The Trustees also say that the Defendants’ construction would render paragraph 2 of s.29 Order redundant, since paragraph 1 already requires the Defendants to provide answers to the matters in Schedules 1 and 2 with supporting documents; it would make no sense for paragraph 2 to require production of the same documents. However, it seems to me that paragraph 1 of the s.29 Order asks the Defendants to provide their answers to the matters in the schedules, together with documents in support of such answers,[3] whereas paragraph 2 asks for the production of a broader category of documents, namely, documents which relate to the matters in the schedules – which might or might not support the answers given under paragraph 1.

45.  Second, the construction of paragraph 2 of the s.29 Order should take into consideration the wording of the schedules.

45.1 I note that Schedules 1 and 2 request the production of a number of corporate documents which would, on the Trustees’ construction, have been requested under Schedule 3 anyway. For example, paragraph 17 of Schedule 1 requests all minutes and statutory records of LML since its incorporation. This would be an otiose request if the Defendants were in any event supposed to produce all corporate documents relating to LML pursuant to Schedule 3.

45.2 Schedule 3 appears to be a list of abbreviations. Unlike Schedules 1 and 2, it does not contain any questions relating to the areas of investigation pursued by the Trustees. In other words, it does not in itself raise any issues for examination, or suggest that there should be production of documents, and one must go back to the wording of the s.29 Order itself.

46.  Third, it does not seem to me that the s.29 Order was made for the purpose of requiring the Defendants to disclose all corporate documents relating to the companies in Schedule 3 of the s.29 Summons without regard to whether they touch upon the matters in Schedules 1 and 2.

46.1 The Trustees applied to examine the Defendants in relation to four areas of investigation, and not generally. G Lam J specifically noted that he was not giving carte blanche to the Trustees to put any question to the examinees, nor was it a wholesale endorsement of the questions in Schedules 1 and 2. In fact, certain areas of proposed investigation were expressly disallowed. (See s.29 Judgment paragraphs 3, 7, 17, 26.) This would suggest that any documents to be produced should be limited to those relevant to the areas of proposed investigation (and which had not been disallowed).

46.2 In this regard:

46.2.1 the Trustees say that the s.29 Order was made because there were suspicions relating to all fifteen companies identified in Schedule 3. However, the s.29 Judgment does not suggest this as a basis for the making of the s.29 Order. Furthermore, whilst the companies identified in Schedule 3 might potentially be involved in the transactions mentioned in Schedule 1 and 2, as reflected in the Trustees’ description of the factual background reproduced above, it does not follow that the order was for the Defendants to produce all corporate documents of the companies without regard to whether such documents touch on the issues raised by Schedules 1 and 2;

46.2.2 the Trustees also say that they need to be provided with all documents under paragraph 2 of the s.29 Order in order to be able to ask the questions under paragraph 1 of the s.29 Order (that is, the questions in Schedules 1 and 2).[4] However, it does not follow that paragraph 2 should be construed as requiring the production of all corporate documents relating to the fifteen companies in Schedule 3, whether or not they relate to the matters in Schedules 1 and 2. On the contrary, so long as all corporate documents of the companies which relate to the matters in Schedules 1 and 2 are produced, the Trustees ought to be able to proceed with examining the Defendants in relation to Schedules 1 and 2;

46.2.3 the Trustees say that an order made under s.29 BO confers a “fishing licence” to discover facts and documents for the benefit of creditors, citing Re Lee Siu Fung Siegfried [2017] 1 HKLRD 1155 at [31] to [34]. However, it seems to me that whilst the ambit of the court’s discretion in making an order under s.29 BO may be wide, what I am concerned with in the present case is to construe the order that has actually been made. Section 29 cannot serve to enlarge the scope of the order.

46.3 The s.29 Judgment addresses the four areas sought to be investigated, but does not separately address the relevance of the fifteen companies or their corporate documents.

47.  I am therefore of the view that the proper construction of paragraph 2 of the s.29 Order does not require the Defendants to produce all corporate documents relating to the fifteen companies listed in Schedule 3 without regard to whether they relate to the matters in Schedules 1 and 2.

48.  In any event, even if I am wrong about that, paragraph 2 is at least open to two competing interpretations. These being contempt proceedings, the ambiguity should be resolved in favour of the Defendants such that they will not be held to be in contempt of paragraph 2 of the s.29 Order on its broader construction.

D2. Whether breach of paragraph 2 of the s.29 Order on the Defendants’ construction

49.  The Trustees say that even on the Defendants’ construction of paragraph 2 of the s.29 Order, the Defendants are in breach of it, in having indisputably failed to provide a number of documents relating to LML, HTL and DAIL on time.[5]

D2.1 Preliminary objection

50.  The Defendants say that it is not open to the Trustees to argue this point, as it was not the original complaint raised.[6] Reliance was placed on Tiong King Sing v Sam Boon Peng Yee [2017] 1 HKC 182 at [7.2] for the proposition that fairness requires that a person cited for contempt to be informed at the outset what he is being accused of. It is said that it is prejudicial and blatantly abusive for the Trustees to raise arguments which go outside the four corners of the OS.

51.  I do not consider the objection to be well-founded. It cannot be said that the allegation of failure to produce the documents relating to LML, HTL and DAIL had not been raised by the OS, since the documents which the Trustees said paragraph 2 of the s.29 Order required to be produced (all corporate documents of the fifteen Schedule 3 companies, and more) must have included the subset of the particular corporate documents identified in paragraph 50(4) of the Trustees’ skeleton. Nor are the Defendants saying that they have been deprived of an opportunity to respond to the allegation of non-production.

52.  The Defendants maintained their objection on the basis that the Trustees have not put forward an alternative case that the Defendants are in breach of paragraph 2 of the s.29 Order by failing to produce the documents relating to Schedules 1 and 2. However, I do not consider that it can be said that the Defendants were not informed from the outset of what they were accused of.

52.1 The “alternative case” on breach is simply a part of, and encompassed by, the Trustee’s case that paragraph 2 of the s.29 Order was breached: the Trustees say that all corporate documents of the fifteen companies listed in Schedule 3 should have been produced; the Defendants deny this and say that not all such documents needed to be disclosed, but only a subset of such documents – namely, those that relate to matters in Schedules 1 and 2. The Trustees are not accusing the Defendants of having failed to disclose anything which they did not originally accuse them of having failed to disclose.

52.2 It is not suggested that the Defendants have a defence to non-production under the “alternative case” which they have not had the opportunity of advancing because they only addressed the Trustees’ “primary case”. On the contrary, it is the Defendants’ argument that paragraph 2 of the s.29 Order should be construed as only requiring production of corporate documents of the fifteen companies listed in Schedule 3 insofar as they related to Schedules 1 and 2, and that they proceeded to comply, and have complied, with the order on this understanding. [7]

D2.2 Defendants in breach of paragraph 2 of s.29 Order

53.  The Trustees say[8] that even on the Defendants’ construction of paragraph 2 of the s.29 Order, the Defendants are in breach, in that:

53.1 they failed to produce all audited accounts of LML for all years prior to 2001 and from 2002 to 2010 as well as minutes and statutory records of LML since its incorporation, which were specifically required under items 16 and 17 of Schedule 1 (for Fong) and items 10 and 11 of Schedule 2 (for Wanee). Only auditors’ accounts for the years from 2014 to 2019, together with statutory returns filed with the Companies Registry, were eventually produced by Fong and Wanee in January and May 2022;

53.2 they failed to produce the statutory records of HTL since its incorporation, which were specifically required under item 26 of Schedule 1 and item 20 of Schedule 2, until January and May 2022;

53.3 they failed to produce all statutory records of DAIL since its incorporation, which were specifically required under item 32 of Schedule 1 and item 26 of Schedule 2, until May 2022.

54.  It is undeniable that the Defendants did indeed fail to produce the above documents within 21 days of the s.29 Order, and that instead, they only did so in either Defendants 1st of 7th January 2022 (as part of the LML Documents and the HTL Documents) or Defendants 2nd of 8th June 2022 (as part of the Further LML Documents, Further HTL Documents and DAIL Documents).

55.  I therefore find that the First Ground has been established to this extent, beyond reasonable doubt. Each of the Defendants is guilty of contempt in breaching paragraph 2 of the s.29 Order in failing to produce the documents in paragraph 53 above.

D3. Whether breach only “technical, minor and academic”

56.  The Defendants submit that any breach of paragraph 2 of the s.29 Order, and indeed even when taken together with any breaches of the other paragraphs of the order, would at most be “technical, minor and academic”, and no penalty should be imposed.[9]

57.  Further consideration of questions of the seriousness of the breach, purging and sanction should be left for consideration at the stage of determination of the proper penalty for contempt.

E. THE SECOND GROUND

58.  The second ground relied on by the Trustees relates to delay.

58.1 Paragraph 2 of the s.29 Order required the Defendants to produce documents within 21 days from the order, which would have been 12th October 2017.

58.2 Paragraph 4 of the s.29 Order provided that if the Defendants could not provide the documents sought, then they were to file an affirmation to state, for each of the documents, whether they had ever been in the possession, custody or control, and when and under what circumstances they had now become unavailable to be produced by the Defendants directly or indirectly through their husbands, siblings, family members, and/or associates, within 21 days from the order (again, 12th October 2017).

59.  The Trustees say that the Defendants are in breach since they did not even attempt to comply with the s.29 Order until some three years later, in September 2020, when they filed the 2020 Affirmations.

E1. Defendants in breach

60.  The Defendants do not deny the breach, but say that:

60.1 it is technical and academic, since the 2020 Affirmations were filed prior to the OS being issued;

60.2 they lacked the requisite state of mind;

60.3 they have tendered their apologies to the court for their delay in Defendants 1st of January 2022, so that any contempt has been purged.

61.  Mr Bernard Man SC, counsel for the Defendants, submitted that at most, there should be a heightened costs order, but not committal, which should be a sanction of last resort.

E2. Defendants’ state of mind

62.  As regards the issue of the Defendants’ state of mind, the Defendants say that:

62.1 there is no evidence to support the Trustees’ allegation that the Defendants were in clear and intentional breach of the s.29 Order by deliberately refusing to produce the documents sought;

62.2 they honestly believed that any lateness in filing the 2020 Affirmations was justified by their appeal and application for a stay of execution, and therefore they fell within the “unintentional” exclusion from civil contempt;

62.3 as the Trustees have chosen not to apply to cross examine the Defendants, they cannot establish the necessary state of mind.

63.  However, it is not necessary for the Trustees to go so far as to show that the Defendants intentionally breached the s.29 Order. It is sufficient to show that their conduct was intentional, and that they knew of the facts which made it a breach, but not that they knew that such facts actually constituted a breach. In my view, the undisputed evidence establishes this, without any need for cross-examination.

63.1 The Defendants do not suggest that they were unaware of the s.29 Order or its terms. On the contrary, they say that they thought they were justified in not filing the 2020 Affirmations whilst they sought to appeal against the s.29 Order, and whilst they applied for a stay of execution (although the application for a stay was not made until October 2019). They therefore knew of the requirement to produce documents but believed that they did not have to comply with it.

63.2 The Trustees’ solicitors sent letters of 3rd October 2019, 21st January 2020, and 13th February 2020 to the Defendants’ solicitors asking that the Defendants comply with the Order. It is not suggested that the Defendants were unaware of these.

63.3 On 13th January 2020, G Lam J handed down the decision in Re Lee Siu Fung Siegfried [2020] HKCFI 176 dismissing the Defendants’ application for a stay of execution, in which he observed at [2] and [23] that:

“2. The circumstances of this application are unusual in that although the order for examination was made on 21 September 2017 and a notice of appeal was served on 19 October 2017 (CACV 236/2017), the Sisters failed to procure that their appeal be set down for hearing and to take out an application for stay pending appeal until nearly two years later on 15 and 23 October 2019 respectively. Meanwhile, they have been in default of compliance with paragraph 2 of the order which requires the production of documents within 21 days of the date of the order and paragraph 4 of the order which requires an affidavit or affirmation to be made if they cannot provide the documents.

…

23. Although the appeal will be heard in April this year, there has already been, in my view, inordinate delay by the Sisters in prosecuting the appeal and having it fixed for hearing, and in issuing an application for stay. Meanwhile, they have ignored the order for production of documents and the making of an affirmation. I do not think that in these circumstances the imminence of the appeal is something that significantly weighs in their favour.”

It is not suggested that the Defendant was unaware of these observations that the Defendants had failed to comply with the s.29 Order.

63.4 The Defendants do not suggest that they were legally advised that they did not need to comply with the s.29 Order pending appeal or pending determination of their application for a stay of execution.

64.  I therefore find that the Second Ground is established beyond reasonable doubt. Each of the Defendants is guilty of contempt in breaching paragraph 2 of the s.29 Order in failing to provide any documents within 21 days, and paragraph 4 of the s.29 Order in failing to file an affirmation (in the event that they could not produce documents) within 21 days.

E3. Whether breach technical

65.  The Defendants argue that the breach was “technical and academic” as the 2020 Affirmations were filed prior to the OS being issued. However, this presupposes that the 2020 Affirmations amounted to full compliance with the s.29 Order. I do not agree that this was the case, for the reasons set out below in relation to the Third and Fourth Grounds.

66.  Any further consideration of questions of the seriousness of the breach, purging and sanction should be left for consideration at the stage of determination of the proper penalty for contempt.

F. THE THIRD GROUND

67.  The third ground relied on by the Trustees relates to the adequacy of the Defendants’ affirmations in addressing the requests for documents in the Schedules. The Trustees say that even though the Defendants filed their 2020 Affirmations in purported compliance with the s.29 Order, the Defendants failed to address (a) certain items in Schedules 1 and 2[10] (“the Missing Items”), and (b) their lack of production of documents required under Schedule 3. This is said to be a breach of paragraph 4 of the s.29 Order.

68.  In the light of my determination regarding the proper construction of paragraph 2 of the s.29 Order, there is no breach in relation to (b) (the complaint about the failure to address the lack of production of documents under Schedule 3).

69.  As to (a), the Defendants say that:

69.1 the Missing Items have (now) been addressed in Defendants 1st and Defendants 2nd;

69.2 the Defendants’ omission to address the Missing Items was merely accidental and unintentional;

69.3 any breach was merely technical and any omission has now been fully remedied.

70.  As the Trustees observe, the fact that the items were belatedly addressed in subsequent affirmations by the Defendants shows that they could have been addressed earlier, but they were not.

71.  The evidence relied on for the Defendants’ submission that the omission to address the Missing Items was accidental and unintentional is Wanee 1st paragraph 34.5 and Fong 1st paragraph 34.5, both of which state:

“I would like to sincerely apologise to this Honourable Court for the lateness in disclosing the documents referred to at sub-paragraph 34.2 above, which was due to oversight on my part.”

72.  This evidence on its face (even in the absence of challenge by cross-examination) is insufficient to put the Defendants’ conduct within the exemption of “casual or accidental and unintentional”. The 2020 Affirmations stated that they were made in compliance with the s.29 Order and assigned items in the Schedules to one of three categories: those for which the Defendants never had supporting documents, those for which the Defendants did have (but no longer had) supporting documents, and those which were specifically requested but which the Defendants never had. The Missing Items – which were not assigned to any category in the 2020 Affirmations – are numerous and are spread out across Schedules 1 and 2. There is no explanation (as opposed to a bare assertion) as to how the omission to address all of these Missing Items could have occurred by way of an oversight.

73.  I therefore find that the Third Ground is established beyond reasonable doubt. Each of the Defendants is guilty of contempt in breaching paragraph 4 of the s.29 Order in failing to address the Missing Items in the 2020 Affirmations.

74.  Again, I will leave questions of the seriousness (or “technicality”) of the breach for consideration at the stage of determination of the proper sanction for contempt.

G. THE FOURTH GROUND

75.  The fourth ground relied on by the Trustees relates to the adequacy of the Defendants’ affirmations in accounting for documents no longer in their possession, custody or power. The Trustees say that in the 2020 Affirmations, the Defendants had stated that some documents were once in their possession, custody or power, and that they had been mislaid or disposed of, but the Defendants failed to identify these documents, specify when they became unavailable, and to specify the circumstances in which they had become unavailable. This is said to be a further breach of paragraph 4 of the s.29 Order.

76.  The Defendants say that:

76.1 they had in fact specified in the 2020 Affirmations when the documents had become unavailable and the circumstances in which they had become unavailable (but not that they had identified what these documents were);

76.2 in any event, they complied with the requirements in Defendants 1st and Defendants 2nd, by specifically identifying the documents and giving detailed accounts as to the time they had become unavailable and the circumstances in which they became unavailable;

76.3 any non-compliance was trivial as it had been remedied.

77.  The Defendants’ argument is that paragraph 4 of the s.29 Order only requires the Defendants to do a specific act but leaves it to them to determine the way in which the requirement is to be satisfied, citing Kao, Lee & Yip at [23]. However, it seems to me that Sir Gerard Brennan NPJ was seeking to draw a distinction between an ambiguous order and one which requires a party to do a specific act but which leaves it open as to the manner of compliance, rather than to lay down any rule as to how to determine the adequacy of such compliance.

78.  Paragraph 4 of the s.29 Order provides that

“If, in the event that the [Defendants] cannot provide documents specifically requested in Schedules 1 and 2, or documents to support their answers and explanations to questions therein, or documents as set out in paragraph 2 above, each of them do file, within 21 days of the making of this Order, an affirmation (affidavit) to state, for each of the documents, whether they have ever been in the possession, custody or control of, and when and under what circumstances they have now become unavailable to be produced by, the Respondents directly or indirectly through their husbands, siblings, family members, and/or associates”.

79.  All that the Defendants did to comply with this paragraph in their 2020 Affirmations was to state that:

“I depose that I had in my possession, custody or power the documents in support of my answers and explanations to the following items in [Schedule 1 or Schedule 2], but do not now have in my possession, custody or power of the same as they have been mislaid or disposed of after such a long time:- [various item numbers are then set out]”

80.  In my view, insofar as there were documents falling within paragraph 4, which the Defendants once had but which were no longer in the Defendants’ possession, custody or control, then the wording of paragraph 4 (“each of the documents”) required them to sufficiently identify the documents and then to state the time at which, and the circumstances in which, they became unavailable.

81.  I agree with the Trustees’ submission that it is not sufficient to make a statement which is so general that it does not enable the reader to tell what documents have been mislaid or disposed of. This does not amount to a proper explanation of what the circumstances were in which the documents became unavailable to be produced.

82.  In the Defendants’ subsequent affirmations (Defendants 1st and Defendants 2nd), the Defendants sought to provide more detail in relation to the documents which were said to no longer be in their possession, for example by identifying the nature of the documents lost in respect of each item in the Schedules concerned, and giving the reasons why such documents were no longer in the possession, custody or control of the Defendants.

83.  Mr Man submitted that it was absurd to expect the Defendants to be able to depose as to when or how they forgot what they forgot. I do not agree that this is what paragraph 4 of the s.29 Order required. Rather, paragraph 4 envisaged that there would be some identification of the documents in question by reference to the items or categories of documents sought, and an explanation in relation to each item or category the circumstances in which the documents had become unavailable. That this could be done is shown by Defendants 1st and Defendants 2nd.

84.  The Defendants’ further defence is that they honestly believed that the 2020 Affirmations had sufficiently answered paragraph 4 of the s.29 Order.[11] However, it is immaterial that a breach was committed in reliance on a third party’s advice, even if it is legal advice: as Kao, Lee & Yip at [53]. Mr Man relied on ZQA and ors v SCC and anor [2021] 3 HKC 458 at [5.18] to [5.20] to submit that reliance on legal advice may put the act into the category of “accidental” acts, being an honest mistake. However, the context of that case was “exceptional”, and not simply one of reliance on a solicitor’s advice that a certain course of conduct would not be a breach of a court order, (see [5.17], [5.21], [5.22]). It was one where the alleged contemnors had conscientiously inquired with their legal adviser, chased after him about progress and provided instructions; on the facts, the failure to comply with the order was attributable to the legal adviser. In the present case, there has been no disclosure of what the legal advice was which is said to have justified the Defendants taking the approach that they did, such that their failure to comply with paragraph 4 of the s.29 Order could be said to be an ‘honest mistake”.

85.  I therefore find that the Fourth Ground is established beyond reasonable doubt. Each of the Defendants is guilty of contempt in breaching paragraph 4 of the s.29 Order in failing to state, for each of the documents which could not be produced, whether they have ever been in the possession, custody or control of the Defendants, and when and under what circumstances they became unavailable to be produced.

H. MITIGATION, PENALTY

86.  Having found that the Defendants are guilty of contempt, the question of the proper penalty arises. For this purpose, I give the following directions which the Defendants’ solicitors must bring to their attention.

86.1 The OS is to be adjourned to a date (within the next four months) to be fixed, in consultation with counsel’s diaries, with 2 hours reserved, for the purposes of considering mitigation, sentencing and costs.

86.2 The Defendants have leave to file an affirmation in respect of mitigation, if any, within 21 days.

86.3 Each of Wanee and Fong must attend the hearing. Otherwise, a warrant may be issued for their arrest.

86.4 The Defendants are to lodge and serve skeleton submissions and authorities no later than 14 days before the hearing.

86.5 The Plaintiff is to lodge and serve skeleton submissions and authorities in response no later than 7 days before the hearing.