HIGH FASHION NEW MEDIA CORPORATION LTD (suing on behalf of itself and also in its capacity as the sole shareholder of LONGFORD INFORMATION AND TECHNOLOGY CO LTD) v. LEONG MA LI

CACV 341/2022, [2024] HKCA 1067

On appeal from [2022] HKCFI 2234

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 341 OF 2022

(ON APPEAL FROM HCMP NO 932 OF 2020)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  This is the defendant’s appeal against the judgment of Deputy High Court Judge H Au-Yeung on 26 July 2022 (“Judgment”)[1] in which he found the defendant, Leong Ma Li, guilty of contempt of court in failing to comply with an order for interlocutory injunction in HCA 1953/2014 made by Chow J on 5 December 2014 (“Injunction Order”). By the Injunction Order, the defendant was restrained from dealing with the capital bank account (“Capital Account”) of Longford Information and Technology Co Limited (“Longford”) except in accordance with a protocol (“Longford Account Protocol”).

2.  On 30 May 2024, the judge ordered that the defendant be committed to prison for four weeks and suspended the execution of the committal order pending the determination of this appeal on certain payment conditions[2].

3.  The defendant’s notice of appeal against the Judgment was amended twice, with the change of counsel on each occasion. Mr Bernard Man, SC[3]appeared for her in this appeal.

4.  In gist, Mr Man’s submissions on appeal attacked the lack of pleading in the amended originating summons or the amended statement pursuant to Order 52 rule 2(2) on a host of matters: that one Madam Tong (“Tong”) was the defendant’s agent; the relevant law of the PRC on the nature of legal representative chops or legal representatives generally; the actus reus for the contempt, namely, that the defendant had been “dealing with” the Capital Account, in what way or through whom; and the allegations regarding the defendant’s mental state. The Senior Counsel who appeared for the defendant at the trial did not take these pleading points.

5.  Mr Man argued that owing to the lack of pleading on these crucial matters, it was not open to the judge to find the defendant guilty of contempt on the basis that Tong was acting as her agent when Tong dealt with the Capital Account such that the defendant was vicariously liable. Because of the absence of the necessary plea, there was no evidence or fair inquiry into relevant matters. He also complained of unsustainable leaps of logic in other respects.

Background

6.  The relevant background may first be stated as follows[4].

(1) The underlying proceedings – HCA 1953/2014

7.  The present proceedings for contempt arose out of HCA 1953/2014 which was a derivative action brought by the plaintiff, High Fashion New Media Corporation Limited, against the defendant and Longford. The plaintiff is a joint venture company owned as to 65% by High Fashion Apparel Limited (“HFA”) and as to 35% by Hansen International Limited (“Hansen”). HFA is owned ultimately by Lam Foo Wah, Lam Gee Yu Will (“Will Lam”) and Lam Din Yu Well, who are of the same family. Hansen is indirectly wholly owned by the defendant. Longford is the wholly owned subsidiary of the plaintiff.

8.  The plaintiff, HFA and Hansen are all companies incorporated in Hong Kong. Longford is incorporated in the PRC. At the material time, Longford had four directors, being the three members of the Lam family and the defendant. The defendant was the chairman of the board of directors and the legal representative (法人代表) of Longford.

9.  HCA 1953/2014 concerned alleged breaches by the defendant of the Longford Account Protocol, which was to govern how the funds in the Capital Account maintained by Longford with ICBC in Shanghai should be dealt with. The terms of the Longford Account Protocol were as follows:

(a)  all transactions in the Capital Account for less than RMB 1 million would require (i) the joint signatures of the defendant and Angela Yau Oi Kwan[5] (“Yau”) and (ii) Longford’s finance chop; and

(b)  all transactions in the Capital Account exceeding RMB 1 million would require (i) the joint signatures of the defendant and Will Lam and (ii) Longford’s finance chop.

10.  In the context of operating a bank account in the PRC, when the parties referred to a signature of a person being required, it was understood to mean the application of the personal seal of that person[6].

11.  On 28 April 2014, the defendant made herself the sole signatory of the Capital Account, such that only her personal seal “个人簽章”(bearing the defendant’s name in Chinese “梁马利”) and Longford’s dedicated finance seal “财务专用章” (bearing the characters “上海梁富信息科技有限公司资本金财务专用章”) would be required to operate it[7]. According to the defendant, the seal bearing her name was her seal in the capacity as the legal representative of Longford and it belonged to Longford. The judge did not find this evidence significant but did not reject it[8]. We shall refer to this seal as “Leong Seal” and Longford’s dedicated finance seal as “Finance Seal”.

12.  It is in dispute whether this form of bank mandate was without the consent of or authorization by the other directors of Longford or the plaintiff.

(2) The Injunction Order

13.  On 18 September 2014, HFA made an urgent application (in HCMP 2336/2014), ex parte with notice to the defendant, seeking an interim injunction to restrain her from operating or dealing with the Capital Account except in accordance with the Longford Account Protocol. On 26 September 2014, Chow J made an order restraining the defendant from operating or dealing with the Capital Account except in accordance with the Longford Account Protocol “or any further arrangement as subsequently determined by a resolution of the board of directors of [the plaintiff]”, upon the undertaking of HFA to “pay all legitimate business expenses in the ordinary course of business as they fell due of [the plaintiff] and its subsidiaries (on behalf of [the plaintiff]) upon presentation of invoices or relevant documents” (“HFA Undertaking”).

14.  On 26 September 2014, a board resolution of Longford was passed resolving inter alia to adopt the Longford Account Protocol. On 3 October 2014, the plaintiff brought this derivative action in HCA 1953/2014 to seek an order that the defendant do act in accordance with the resolution and an injunction to restrain her from operating or dealing with the Capital Account except in accordance with the resolution. The plaintiff issued an inter partes summons in HCA 1953/2014 for an interlocutory injunction in terms similar to that in HCMP 2336/2014.

15.  The plaintiff’s summons was heard by Chow J and he granted the Injunction Order on 5 December 2014 against the defendant. The material parts of the Injunction Order provided as follows:

“[the defendant] be restrained by herself, her servants, her agents or on her own behalf or on the behalf of any other person, firm or company, whether as employee, officer, agent or otherwise howsoever dealing with the capital bank account which Longford maintained with ICBC Shanghai (account no […]), except in accordance with the following arrangement […]:

(i) For transactions involving less than RMB1,000,000, the signatures of [the defendant] and [Yau] must be obtained, in addition to the application of the Finance Chop of Longford; and

(ii) For transactions involving RMB1,000,000 or above, the signatures of [the defendant] and [Will Lam] must be obtained, in addition to the application of the Finance Chop of Longford.”

16.  The Injunction Order was granted on the HFA Undertaking as before.

(3) Previous contempt proceedings

17.  In 2016, the plaintiff brought proceedings for contempt against the defendant (HCMP 108/2016 and HCMP 1707/2016) alleging inter alia that she failed to comply with the Injunction Order. The plaintiff had discovered from the bank statements produced by the defendant that withdrawals were made in the Capital Account over some 13 months otherwise than in accordance with the arrangements specified in the Injunction Order. The payments from the Capital Account were of three kinds: (1) to the current account of Longford, some of the items in the amount of RMB 300,000 each were described as “備用金”[9] (category A); (2) between the Capital Account and the fixed deposit account of Longford (category B); and (3) payment to various third parties (category D). It was not in dispute that the defendant did not obtain the signatures of Will Lam or Yau (as appropriate) in respect of the transactions listed in categories A, B and D.

18.  The defendant’s explanation for not obtaining the signatures of Will Lam or Yau was that Longford had requested HFA to pay wages due to Longford’s employees pursuant to the HFA Undertaking, but HFA failed or refused to do so by putting forward excuses. Hence, Longford had no choice but to use its own funds in the Capital Account to settle its business expenses, by first transferring the funds to the current account and then making payments from the current account to third parties (category A payments), or by making payments to third party creditors directly from the Capital Account (category D payments). As for category B payments, they were largely automatic renewal of idle cash in the Capital Account placed on fixed deposit to earn interest and were not really transactions.

19.  The trial was heard by Chow J who gave judgment on 8 August 2017 (“Previous Contempt Judgment”). He rejected the defendant’s arguments that there was no breach or only a trivial or technical breach of the Injunction Order in respect of the transactions in categories A and D. He was satisfied beyond reasonable doubt that the defendant deliberately, intentionally and voluntarily acted in breach of the Injunction Order and therefore committed a contempt of court in respect of the transactions in A and D. He was not satisfied beyond reasonable doubt that there was any breach of the Injunction Order in respect of seven payments from the fixed deposit account to the Capital Account and considered the breaches were technical in respect of the six remaining payments from the Capital Account to the fixed deposit account for placing new deposits.

20.  Chow J made these pertinent findings and observations in §16 regarding the transactions in A and D:

“[The defendant] was at all material times the legal representative and chairman of the board of Longford, as well as the sole signatory of Longford’s bank accounts with ICBC Shanghai, including the Capital Account. As mentioned in paragraph 9 of the HCA 1953 Decision, it is common ground that when the parties refer to the signature of a person being required in the context of operating a bank account in the PRC, it is understood to mean the application of the personal seal of that person. Although it would appear, on the evidence, that it was Longford’s staff, instead of [the defendant], who applied [the defendant’s] seal (ie the legal representative chop) to the relevant bank instructions authorising the transfers of funds from the Capital Account, there is no dispute that Longford’s staff worked under [the defendant’s] instruction or direction generally, and that the relevant transfers could not have taken place without [the defendant’s] approval and consent. Further, the Injunction restrained [the defendant], whether ‘by herself, her servants or agents’, from dealing with the Capital Account except in accordance with the signing arrangement as specified in the Injunction. [The defendant] could and should have taken possession of her personal seal, or put in place an effective system to ensure that there was no dealing with the Capital Account except in accordance with the specified signing arrangement. In the circumstances, [the defendant] must be regarded as being legally responsible for the Part A and Part D transactions. This is not, I understand, seriously disputed by her. There is also no dispute that [the defendant] had knowledge of the existence and the terms of the Injunction. Prima facie, [the defendant] acted in breach of the Injunction in respect of the Part A and Part D transactions.”

21.  For the contempt of court committed by the defendant for acting in breach of the Injunction Order and in breach of an undertaking she gave to the court on 18 November 2015 to provide bank statements of Longford for inspection, Chow J fined the defendant in the respective sums of $400,000 and $150,000. She was ordered to pay costs to the plaintiff on an indemnity basis. He came to the conclusion that the defendant has “already learnt a very hard lesson” and was persuaded that it would be sufficient punishment to impose substantial fines to mark the seriousness of the breaches[10].

(4) Present contempt proceedings

22.  On 15 January 2019, pursuant to the judgments obtained by the plaintiff against Longford in the PRC in 2018, the plaintiff conducted an inspection on the financial documents of Longford. On 11 November 2019, upon further enquiry by the plaintiff’s solicitors, the defendant provided further bank documents concerning Longford’s bank accounts.

23.  Upon the inspection of documents in January 2019 and the further documents provided by the defendant in November 2019, the plaintiff sought leave from Deputy High Court Judge To and was granted leave on 19 June 2020 to bring the present contempt proceedings (HCMP 932/2020). It was alleged there were further breaches of the Injunction Order arising out of the further operation of the Capital Account in that the defendant, “either by her own conduct or that of her agents or both, have failed to observe and comply with the Longford Account Protocol”[11].

24.  On 23 July 2020, the new legal representative of Longford, Wong Siu Mui Julisa (“Wong”)[12], obtained copies of Longford’s bank statements from ICBC Shanghai. Upon the inspection of these further documents, the plaintiff obtained leave to amend the originating summons and the statement served pursuant to Order 52 rule 2(2) in October 2020 to add further transactions made through the Capital Account not in compliance with the Longford Account Protocol.

25.  There were a total of 51 transactions, being payments from the Capital Account between 29 April 2016 and 22 June 2020[13]. The total amount for all those transactions came up to RMB 64,708,895.34. It was not disputed that the Longford Account Protocol was not followed in respect of any of those transactions.

26.  The breaches were classified into four categories: (1) payments to Longford’s current account, which involved transfers under the description “備用金” (reserve fund), used to pay alleged expenses of Longford or to third parties (category A, 30 transactions in the total sum of RMB 7,492,916); (2) payments transferred to Longford’s fixed deposit account, some of which were not renewed upon maturity and had been released to Longford’s current account (category B, 7 transactions in the total sum of RMB 56 million); (3) transfers to third parties (category C, 7 transactions in the total sum of RMB 484,007); and (4) transfers to other accounts of Longford (category D, 7 transactions in the total sum of RMB 731,972.34).

27.  The amended originating summons sought an order that the defendant be committed to prison for her contempt of court “in refusing or failing to comply with the [Injunction Order] for grounds set forth in the [amended Order 52 statement].” The grounds upon which leave was granted as set out in the amended Order 52 statement were also set out in the originating summons. It was stated in §1.4 that the defendant was guilty of contempt of court in that:

“she, either by her own conduct or that of her agents or both, have failed to observe and comply with the Longford Account Protocol. Various transactions have been made through the … Capital Account without the knowledge of [Yau] or [Will Lam] since the grant of the Injunction Order. [The defendant] did not seek their approval/signatures before the transactions took place.”

28.  Under the particulars to that paragraph it was stated:

“(iv) … All of the transactions made through the … Capital Account were unauthorised, i.e. none of the signatures of [Yau] or [Will Lam] (as appropriate) had been obtained (‘the Unauthorised Transactions’).

…

(vii) [Yau] and [Will Lam] had not been informed about the Unauthorised Transactions by [the defendant], her agents or servants. No one ever sought their approval or requested their signatures before the Unauthorised Transactions took place. …

(viii) The purpose of imposing the Injunction Order was to preserve and prevent any misappropriation of the funds in the … Capital Account where there is a dispute between the Plaintiff and [the defendant] pending determination of this action, especially when [the defendant] was at the material times the legal representative of Longford (at least on the official record) and possesses all the items, such as Longford’s finance chop, to operate the Longford Accounts on her own.

(ix) The above evidence shows that the mechanism imposed by the Injunction Order has been rendered nugatory by [the defendant] …”

29.  The defendant made an affirmation on 11 January 2021 in opposition to the amended originating summons. One of the grounds of opposition she raised in §4 was that she had not, “since 23 October 2017, dealt with or authorised any one to deal with the … Capital Account”. She provided details for this assertion in the following paragraphs of her affirmation:

“14. In view of the [Previous Contempt Judgment], and the ongoing disputes between the two camps of shareholders which rendered it impossible for me to properly and meaningfully carry on my then role and duties, on 23 October 2017, I notified Longford’s accountant, 唐魯華 (‘Madam Tong’)[14], that I will cease to run the operation of Longford (see page 79 of exhibit ‘LML-1’). …

…

41. It appears from paragraph 1.4(viii) of the Amended OS that the basis of the Plaintiff’s present application is that I was ‘at least on the official record’ the legal representative of Longford and possessed the necessary items, such as Longford’s finance chop, to operate the … Capital Account.

42. However, since 23 October 2017, I gave formal notice to Madam Tong that with immediate effect, I shall no longer participate in the daily operation of Longford, although I would remain as a shareholder and its legal representative. I also explicitly requested Madam Tong to apply to the two shareholders for approval of Longford’s business expenses. Madam Tong replied on the same day that she would do so (see page 79 of exhibit ‘LML-1’).

43. Further, on 9 November 2017, I resigned as the Chairman of Longford and surrendered possession of Longford’s company chop. Since then, I no longer had possession of Longford’s finance chop, which was kept by Madam Tong.

44. Hence, for each of the transactions numbered 10 to 51 under paragraph l.4(v) of the Amended OS, I have not dealt with or authorised anyone to deal with the … Capital Account. Instead, I expressly gave instructions that going forward, Madam Tong should seek approval from the two shareholders, which would ensure that the letter or spirit of the Injunction Order is not breached. Madam Tong was not my servant or agent, but an employee of Longford.

45. Without prejudice to my understanding and belief that after my resignation as Chairman and surrendering possession of the relevant chops I am no longer responsible for the operation of the … Capital Account, if this understanding is wrong and my actions do not absolve me from a duty to positively cause Longford to comply with the Longford Account Protocol, I would stress that I was not consciously aware of this, nor did I voluntarily breach the Injunction Order. I verily believed that my actions would mean that the responsibility falls on others to obtain the approval of both HFA and Hansen, and my approval (when sought) only enables the funds in the … Capital Account to be dealt with if HFA also approves the transaction or expense. This does not breach the Injunction Order but removes me from the invidious position which the other camp sought to put me in.”

30.  The notice that the defendant referred to, exhibited at page 79 of exhibit “LML-1”, is an email she sent to Tong on 23 October 2017 (“2017 Email”) as follows (in English translation)[15]:

“As there is tremendous disagreement on management right between both shareholders of High Fashion New Media Corporation Limited, i.e. the parent company of Longford, both shareholders have taken out a series of actions in the High Court of Hong Kong to defend their rights, with the final outcome still pending. Since Longford, an enterprise in Mainland China, is a separate legal entity, in order to conserve the assets of the company, to protect the interests of the company and to uphold my personal reputation, I will no longer take part in Longford’s daily operations; however, as I am still the legal representative and a shareholder of the company, I will continue to protect the interests of the company in a reasonable and lawful manner. As regards Longford’s daily operating expenses, please apply to both shareholders periodically.”

31.  In response to the defendant’s case that she left relevant matters to Tong, the plaintiff emphasised in §32 of the 3^rd affirmation of Will Lam dated 8 February 2021 that the defendant made herself the sole signatory of the Capital Account such that it could only be operated by her personal seal and Longford’s dedicated finance chop, and no one was able to withdraw money from it without her notice or approval until around 23 July 2020. Thus, if Tong had ever operated the Capital Account as alleged by the defendant, “Tong must have acted on behalf of the Defendant, or with the Defendant’s knowledge and approval”. Will Lam further asserted in §39:

“… regardless of any arrangements the Defendant may or may not have put in place, she remained personally subject to the Injunction Order at all times. If Tong was in fact expressly authorized to use the financial chop and company chop provided to her by the Defendant, then it follows that the Defendant must be held liable vicariously for Tong’s use of the chops to dissipate funds in breach of the Injunction Order. The Defendant cannot simply deny knowledge or rely upon her own alleged wilful ignorance to wash her hands of Tong’s actions. I am advised and verily believe that the Injunction Order covers situations such as the Unauthorised Transactions, even if they were effected by Tong instead of the Defendant herself.”[16]

32.  The plaintiff also denied that Tong was an employee of Longford.

(5) The Judgment

33.  The amended originating summons was heard by the judge over six days in May and June 2022, with oral evidence given by the defendant. The defendant was found guilty of contempt of court in the Judgment handed down on 26 July 2022.

34.  One of her grounds of opposition was based on her instructions to Tong, and this was summarised by her counsel as follows:

“After the Previous Contempt Judgment, in order not to breach the Injunction Order again, [the defendant] ceased to participate in the daily operation of Longford. Instead, she gave clear instructions to [Tong], an employee of Longford, to apply to the two shareholders for approval of Longford’s business expenses before she operates the Capital Account. Tong was not [the defendant’s] servant or agent, but Longford’s employee. Even if Tong failed or neglected to obtain Yau or Will Lam’s signature before she operated the Capital Account, this was not intentionally caused or authorised by [the defendant], who could in the circumstances have had no intention to breach the Injunction Order again.”

35.  In relation to the agency issue, the judge found as follows:

(1)  Despite the plaintiff’s attempt to cast doubt on Tong’s status as Longford’s employee including the submission that neither Yau nor the Lams had been informed of Tong’s recruitment, it was not shown beyond reasonable doubt that Tong was not Longford’s employee. Accordingly the court would proceed on the basis that Tong was an employee (financial controller) of Longford at all material times[17].

(2)  The judge accepted that the defendant sent the 2017 Email to Tong but noted that it did not mention the Injunction Order at all or attach it or set out its terms in Chinese. The judge rejected the defendant’s evidence that she had informed Tong in a telephone conversation about the Longford Account Protocol (which was incorporated into the terms of the Injunction Order), concluding that it was made up by her under cross-examination[18].

(3)  The plaintiff could not prove beyond reasonable doubt that the defendant was participating in the daily operation of Longford after 23 October 2017 (the date of the 2017 Email), but the judge did not consider that this would affect the outcome on the question whether the defendant was in breach of the Injunction Order[19].

(4)  The judge noted several important facts which were undisputed, namely[20]:

(a)  The defendant was the legal representative of Longford up to 28 May 2020 (when she was replaced by Wong).

(b)  In order to withdraw money from the Capital Account, two seals had to be used, namely, the Finance Seal and the Leong Seal.

(c)  The defendant handed over both seals to Tong so that Tong could operate Longford.

(d)  Although the defendant had ceased to be the legal representative of Longford since 28 May 2020, there is no evidence to show that the bank mandate given by Longford to ICBC had been changed immediately.

(e)  Although Wong had replaced the defendant as the legal representative of Longford since 28 May 2020, she only took over control of Longford’s accounts on 23 July 2020.

(5)  Even if Tong was an employee of Longford, that did not make it impossible for her to be the defendant’s agent at the same time. The defendant handed the Leong Seal to Tong, which was essential for any withdrawal from the Capital Account. Hence when Tong used that seal in dealing with the Capital Account, she did it for the defendant, with her authority and under her instructions, and thus as the defendant’s agent, just as the staff’s use of that seal was attributed to the defendant in §16 of the Previous Contempt Judgment[21].

(6)  The defendant’s evidence that the Leong Seal was the legal representative’s seal and as such was Longford’s property to be kept at the company’s premises and not her personal asset to be carried around did not assist her. The affixation of such a seal is an indication that the transaction concerned is authorised by the legal representative. In other words, that seal must not be affixed without the legal representative’s authority[22].

(7)  The judge did not accept the defendant’s argument that the usual characteristics of agency are lacking, since (a) the application of the Leong Seal by Tong with authorisation from the defendant affected the defendant’s relationship with ICBC in that the bank accepted the withdrawal requests on the basis that the transactions were authorised by the defendant as legal representative; (b) Tong owed fiduciary duties to the defendant when she used the Leong Seal; and (c) the defendant had the ability to exercise control over Tong as to the usage of the Leong Seal[23].

36.  In relation to the transactions in category A, the judge rejected the defendant’s argument that having ceased to participate in the daily operations of Longford and instructed Tong to seek the approval of both shareholders for Longford’s expenses, she could not without more be taken to know that she would be in contempt if Tong did not comply with the defendant’s instruction. The judge noted there was no evidence that Tong knew about the requirements of the Injunction Order, and rejected the defendant’s evidence that she had reminded Tong to seek Yau’s approval. He concluded that the defendant could reasonably have foreseen the possibility of Tong failing to comply with the Injunction Order but had failed to take all reasonable steps to prevent it as she did not even inform Tong of the terms of the Injunction Order[24].

37.  Further, the judge pointed out that the modus operandi adopted in Longford, to the admitted knowledge of the defendant, was that when the balance in Longford’s current account was running low, funds would be transferred from the Capital Account to the current account, usually in the sum of RMB 300,000 under the description of “備用金” (reserve fund), which would then be used to pay for the expenses of Longford. The 2017 Email only instructed Tong to seek the shareholders’ approval relating to the general operating expenses. Under the adopted modus operandi, before seeking such approval, Tong would already have transferred funds from the Capital Account to the current account in anticipation of the expenses. In the circumstances, the defendant must be taken to have authorised Tong to deal with, and must have foreseen that reserve funds would be withdrawn from, the Capital Account in the absence of Yau’s or Will Lam’s signature. In other words, the Injunction Order would be breached even if Tong complied with the 2017 Email[25].

38.  Further, given the email correspondence between Yau and Tong in October and November 2017 in which Yau raised queries with regard to Longford’s expenses, the defendant failed to take the reasonable step of reminding Tong that she must not withdraw any sum below RMB 1 million from the Capital Account without Yau’s signed consent[26].

39.  For the transactions in category B, the judge noted there was no dispute that the defendant knew about Longford’s practice of placing idle cash in the Capital Account on fixed deposit. Thus the judge concluded that the defendant had authorised the category B transactions carried out by Tong and that in any event, the defendant could have foreseen Tong would carry out the category B transactions without Will Lam’s signature but did not take all reasonable steps to prevent it[27].

40.  In respect of categories C and D transactions, the judge said that as in the category A transactions, equally the defendant had not taken all reasonable steps to prevent Tong from acting in breach of the Injunction Order[28].

41.  Accordingly, the judge held that the transactions in all four categories constituted breaches of the Injunction Order on the part of the defendant[29]. After dealing with other arguments raised by the defendant, the judge concluded by finding her guilty of contempt of court[30].

This appeal

42.  The arguments advanced on appeal for the defendant by Mr Man may be summarised under five broad grounds[31]:

(1)  There is no plea in the amended Order 52 statement or the amended originating summons that Tong was acting as the defendant’s agent, nor any factual particulars or relevant PRC law for such a contention (Ground 1).

(2)  There is no basis for finding agency in any event (Ground 2):

(a)  Whether or not the fact that the defendant gave Tong the Leong Seal amounted to authorisation by the defendant to Tong to use it to operate the Capital Account requires an inquiry into the role and powers of the legal representative which are matters governed by PRC law as to which there was no plea or proof.

(b)  The judge was wrong to find that Tong owed fiduciary duties to the defendant when she used Leong Seal. This was not pleaded, not supported by any plea or proof of PRC law, and contrary to principles under Hong Kong law.

(c)  The judge was wrong to find that the defendant could exercise control over Tong in relation to the use of the Leong Seal. This matter was not pleaded and was governed by PRC law of which there was no plea or proof.

(d)  The judge was wrong to find that the defendant’s (rather than Longford’s) relationship with ICBC was affected by the affixing of the Leong Seal on withdrawal slips for the Capital Account. ICBC’s legal relations were solely with Longford. The defendant had no legal relations with ICBC in respect of the Capital Account.

(e)  There was no plea or evidence or finding that the defendant had manifested her assent that Tong should act on her behalf so as to affect her legal relations with ICBC.

(3)  There is no actus reus for contempt in any event. The giving of the Leong Seal to Tong was not “dealing” with the Capital Account. The defendant’s authorisation of Tong to use the seal and Tong’s use of the seal were not sufficient to constitute the actus reus of a breach of the Injunction Order (Ground 3).

(4)  The defendant did not fail to take reasonable steps to prevent Tong from breaching the Injunction Order (Ground 4).

(5)  There is no plea on various allegations regarding the defendant’s alleged mental state (Ground 5).

43.  We will deal with the grounds of appeal in the order as stated above.

Ground 1: no plea that Tong was acting as agent of the defendant

44.  Mr Man’s arguments are along these lines:

(1)  The burden of proof rests throughout on the party pressing for committal for contempt. There is no burden on the party being cited for contempt to show he is not in contempt. This is a recognition of the presumption of innocence provided by Article 11(1) of the Hong Kong Bill of Rights as entrenched by Article 39 of the Basic Law[32].

(2)  The Order 52 statement is to be treated in a similar manner to an indictment in criminal proceedings and should state all the factual elements (but not the evidence) which, if proved, are sufficient to establish the contempt[33]. The same applies to the originating summons in proceedings for contempt[34].

(3)  Fairness requires that the defendant be informed at the outset what she is being accused of. Article 11(2)(a) of the Hong Kong Bill of Rights provides that everyone charged with a criminal offence shall be entitled to the minimum guarantee, in full equality, “to be informed promptly and in detail in a language which he understands of the nature and cause of the charge against him”. This is engaged in proceedings for contempt[35]. What is required is that “the person alleged to be in contempt shall know, with sufficient particularity to enable him to defend himself, what exactly he is said to have done or omitted to do which constitutes a contempt of court”[36].

(4)  Even in a general civil case, an originating summons must contain sufficient particulars to identify the cause or causes of action in respect of which the plaintiff claims relief or remedy (Order 7 rule 3(1)). At the substantive hearing, the applicant for committal cannot rely on any grounds not stated in the originating summons, being grounds in respect of which leave for making the order for committal has been granted[37].

(5)  Even in a general case, agency must be expressly pleaded[38]. Facts and particulars supporting an agency relationship must also be pleaded[39].

(6)  The amended originating summons merely alleged that “[the defendant], either by her own conduct or that of her agents or both, have failed to observe and comply with the Longford Account Protocol” (§1.4). It then referred to various transactions made through the Capital Account without the knowledge of Yau or Will Lam.

(7)  There is no finding in the Judgment that the defendant dealt with the Capital Account directly. Instead, the judge found that Tong was acting as the defendant’s agent when Tong dealt with the Capital Account (§40), and it was on this basis that the defendant was found vicariously liable for contempt (§12(7)).

(8)  There is no plea in the amended originating summons or the amended Order 52 statement that Tong was the defendant’s agent with respect to the transactions complained of, let alone any particulars supporting the alleged agency, or of any relevant PRC law for such a contention. As all the transactions took place in Shanghai, the proper law governing any supposed agency must be PRC law.

(9)  The absence of the necessary plea is in itself sufficient to impugn the finding of contempt. Furthermore, the absence of the necessary plea has occasioned obvious injustice in this instance. Because there is no plea that Tong was the defendant’s agent, there is no evidence or fair enquiry into relevant PRC law, the relevant aspects and manner in which the alleged agency is said to arise and operate, whether Tong was the defendant’s agent for “ensuring compliance with the order” (which would be irrelevant) or whether she was the defendant’s agent in “dealing with” the Capital Account (which is what the Injunction Order actually prohibits).

(10)  For the above reasons, the finding of agency cannot stand. Without this finding, there would be no breach of the Injunction Order and the appeal should be allowed on this ground alone.

45.  We do not think this ground of appeal is of any merit.

46.  The plaintiff had pleaded in the amended Order 52 statement and the amended originating summons that further breaches of the Injunction Order were committed by “[the defendant], either by her own conduct or that of her agents or both” in that they “have failed to observe and comply with the Longford Account Protocol” in the operation of the Capital Account. When pleading the case, the plaintiff would not know if the defendant had made any or all of the transactions complained of in the Capital Account personally, or whether a staff had applied the Leong Seal and the Finance Seal with the defendant’s knowledge and consent. If a staff had made any or all of the transactions, the plaintiff had no knowledge of name of the staff responsible. It would not be possible to plead that Tong was acting as the defendant’s agent or give particulars of the agency relating to Tong.

47.  It was in the defendant’s affirmation in opposition to the amended originating summons that she raised the defence she had not, “since 23 October 2017, dealt with or authorised any one to deal with the … Capital Account”[40]. She then named Tong as the staff responsible for the operation of the Capital Account and gave particulars of her instructions to Tong for this purpose in the 2017 Email. We have set out in detail the relevant paragraphs in her affirmation regarding this defence (that she ceased to participate in the daily operation of Longford since 23 October 2017 and that Tong was not her agent or servant but Longford’s), which she pursued without hindrance at the trial by her Senior Counsel who did not take any pleading point. We have also set out the relevant paragraphs in the affirmations filed in response on behalf of the plaintiff, in which the points were made that the defendant remained personally subject to the Injunction Order at all times and if she had authorised Tong to use the Leong Seal and the Finance Seal, she must be held vicariously liable for Tong’s use of the seals to operate the Capital Account not in accordance with the Longford Account Protocol.

48.  There was no unfairness to the defendant in all the circumstances. She was informed at the outset of the relevant allegations with sufficient particularity such that she would understand the nature and cause of the charge against her and was able to defend herself in the way she chose. There was no suggestion in the proceedings below that she was hampered in any way in pursuing her defence or that she was unable to counter the allegations how the alleged agency was said to arise or that the inquiry as to the alleged agency was unfair to her in any way. As to the complaint that there was no inquiry into relevant PRC law because of the lack of pleading of the proper law of the agency, this would be considered in the next ground of appeal.

49.  Mr Man argued that once the plaintiff had learnt of Tong’s name in the defendant’s affirmation in opposition, the plaintiff should have applied to amend the Order 52 statement and the originating summons to plead that Tong was the defendant’s agent. In support of his contention that an amendment of pleadings must be sought if some issue arises in the course of the proceedings, he cited Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 at §§27 to 31 and Tiong King Sing v Sam Boon Peng Yee at §7.1. The passages in these authorities he relied on were made in very different contexts and do not assist him.

50.  Mr Man then made the point that a matter does not become an issue simply because it is contested in affirmations and stressed that agency must be expressly pleaded, citing Bruce James Stinson v Gu Ming Gao at §§56 and 57. But that was an ordinary civil action, not proceedings for contempt. In an ordinary civil action, issues are defined by the pleadings exchanged, and pleaded issues define the scope of the evidence to be adduced. That is not the procedure in contempt proceedings.

51.  We fail to see the utility of requiring the plaintiff to amend the originating summons and the Order 52 statement to plead that Tong was the defendant’s agent, when sufficient particularity was given in the affirmation in opposition filed by the defendant as to the identity of the agent alleged by the plaintiff and the circumstances in which the alleged agent was instructed by the defendant. Although the procedures governing committal for contempt are strictly enforced when needed to safeguard the liberty of an alleged contemnor, and it has been emphasised that the Order 52 statement is to be treated like an indictment in criminal proceedings and the applicant cannot rely on any grounds not stated in the originating summons, it should be borne in mind the purpose of these requirements is to ensure that the alleged contemnor would be able to defend himself properly. As explained, no prejudice was occasioned to the defendant in this instance.

52.  As stated by Lord Woolf MR said in Nicholls v Nicholls [1997] 1 WLR 314 at 326[41], the court must not only take into account the interests of the contemnor but also the interests of the other parties and the interests of upholding the reputation of civil justice in general. If committal orders are to be set aside on purely technical grounds which have nothing to do with the justice of the case, then this has the effect of undermining the system of justice and the credibility of the court orders and is contrary to the interests of justice. “Today it is no longer appropriate to regard an order for committal as being no more than a form of execution available to another party against an alleged contemnor. The court itself has a very substantial interest in seeing that its orders are upheld”.

Ground 2: no basis for finding agency in any event

(a) Appointment of Tong as the defendant’s agent and PRC law

53.  Mr Man challenged the finding that Tong used the Leong Seal as the defendant’s agent on these grounds.

54.  The question of the capacity in which Tong used the Leong Seal is a question of mixed law and fact. The relevant facts are: (1) Longford is a PRC corporation, and Tong was an employee of Longford; (2) the Leong Seal which Tong utilised is the property of Longford, not the personal asset of the legal representative that could or should be carried around rather than being kept in Longford’s premises; and (3) the Capital Account was located in the PRC.

55.  Mr Man argued whether or not the placing of the Leong Seal with Tong under the above relevant facts amounted to an authorisation by the defendant to Tong to use the Leong Seal to operate the Capital Account requires an inquiry into the role and powers of the legal representative in the context of the governance structure of Longford. It should be borne in mind that Longford had a board of directors made up of the defendant and the three members of the Lam family on the plaintiff’s side, and a board meeting could be called to give directions to Tong. These are matters which should be governed by PRC law, being the law of the place with the closest and most real connection to the alleged agency relationship.

56.  There was however no plea or proof of PRC law by either party in the proceedings below. Mr Man submitted that the presumption of similarity does not apply, as it should be limited to cases in which it is reasonable to expect that the foreign law is likely to be materially similar to Hong Kong law on the matter in issue (Brownlie v F S Cairo (Nile Plaza) LLC [2022] AC 995 at §§126, 143 to 149). As examples, he cited Shaker v Al-Bedrawi [2003] Ch 350 at §§64 to 68 (presumption of similarity not applied where it is unrealistic to expect the law of Pennsylvania to be materially similar to English law, which followed a European Community Directive on company law); and Damberg v Damberg [2001] NSWCA 87 at §§161 to 163 (the court refused to assume that German law in relation to the avoidance or evasion of capital gains tax was the same as Australian law). It is plainly unreasonable to presume that PRC law is materially similar to Hong Kong law in this instance. Hong Kong law neither recognises nor ascribes legal significance to the role of a legal representative, and therefore cannot provide guidance on whether, and if so to what extent, the acts of an employee of a company can or should be attributed to a legal representative of the company. Hence, in the absence of PRC law evidence, the plaintiff has failed to discharge its burden of proving beyond reasonable doubt that Tong acted as the defendant’s agent in using the Leong Seal.

57.  Mr Man further submitted that even as a matter of Hong Kong law, the judge has not identified any act by which the defendant could have effectively appointed Tong as her (rather than Longford’s) agent, in circumstances where the defendant ceased to participate in the daily operation of Longford since 23 October 2017[42]. He contended that under Hong Kong law, a director who hands over to an employee of the company a chop belonging to the company does not appoint the employee his agent. By the same token, the handing over of the Leong Seal – being property belonging to Longford – to Tong could not have amounted to appointing Tong as the defendant’s (rather than Longford’s) agent. The Leong Seal, even though it bears the defendant’s name, remained Longford’s property and was to be used only for Longford’s purpose.

58.  Mr Man’s contention that PRC law is required to prove Tong’s agency relationship with the defendant is a new point not raised before the judge. Ms Rachel Lam, SC[43] submitted for the plaintiff that we should not entertain this new point on appeal, to avoid unfairness to the plaintiff. It is well established that new points which are fact sensitive or may otherwise affect the course of evidence or conduct of the case at the hearing below should not be allowed. The raising of new point by one party may lead to the other party raising counter arguments, and the consideration of such counter arguments may involve factual assessment in a different light from that undertaken by the court below[44]. Had the defendant raised the contentions made by Mr Man in the court below, this would clearly impact on the course of the evidence, the assessment of the evidence, and the forensic arguments arising from the evidence. We think there is substance in Ms Lam’s submission.

59.  Furthermore, where neither party has raised the issue of foreign law, the court is not concerned with the applicability or otherwise of the “presumption of similarity” but applies the “default rule”. As explained by Lord Leggatt JSC in Brownlie v F S Cairo (Nile Plaza) LLC at §112, these two different rules are conceptually distinct. The presumption of similarity is a rule of evidence concerned with what the content of foreign law should be taken to be. By contrast, the default rule is not concerned with establishing the content of foreign law but treats English law as applicable in its own right where foreign law is not pleaded.

60.  As stated by Lord Leggatt in §116:

“The rationale for applying English law by default, however, depends upon neither party choosing to advance a case that foreign law is applicable. If either party pleads that under the relevant rules of English private international law foreign law is applicable to an obligation, and that case is well founded, it is the duty of the court to apply foreign law.”

61.  There is no public policy which prevents the operation of the default rule (§114). It is not uncommon that actions are brought in the English courts in which the parties are content for the court to apply English law, even though it is apparent that foreign law would be applicable if either party chose to rely on it (§115).

62.  Mr Man submitted that the default rule should not apply in this instance as these are proceedings for contempt. The burden is on the plaintiff to plead and prove each element to make out its case for contempt, including the proper law that governed the alleged agency relationship. Since the plaintiff had not done so, the defendant should not take the blame for this and the default rule would have no application.

63.  We are not persuaded that the default rule should operate in a different manner when it comes to contempt proceedings. In an ordinary civil action, the burden on the plaintiff is to plead and prove it has a legally valid claim. It is not incumbent on the plaintiff to advance a case that foreign law is applicable. If either party chooses to do so, and if foreign law is indeed applicable, the plaintiff will be required to show that it has a good claim under the foreign law. But if neither party chooses to raise foreign law as applicable, the default rule operates and the court treats Hong Kong law as applicable in its own right, notwithstanding that the plaintiff has the burden of proving it has a valid claim in law. Under the adversarial system, if a party does not rely on foreign law even though it would be entitled to do so, it is not for the court to apply foreign law on its own initiative. There is no good reason why these considerations do not apply to contempt proceedings.

64.  Ms Lam further submitted that the defendant’s reliance on the lack of plea or proof of PRC law is misplaced, and is in truth a red herring. Whether or not the placing of the Leong Seal with Tong amounted to authorisation by the defendant to Tong to use the seal to operate the Capital Account does not require an inquiry into the role and powers of legal representative in the context of the governance structure of Longford, as contended by Mr Man. We are inclined to agree with Ms Lam.

65.  The Injunction Order restrained the defendant personally from operating the Capital Account except in accordance with the Longford Account Protocol. As summarised by her trial counsel, it is her case that “she gave clear instructions to [Tong], an employee of Longford, to apply to the two shareholders for approval of Longford’s business expenses before she operates the Capital Account”. In essence, she entrusted another person to comply with the Injunction Order. By placing the Leong Seal with Tong and entrusting her to operate Longford’s bank accounts including the Capital Account, the defendant had clearly authorised Tong to use the Leong Seal on her behalf. There is obvious foundation of the appointment of Tong as the defendant’s agent for this purpose.

66.  The role and powers of the defendant as the legal representative of Longford and the corporate governance of Longford have no relevance to the question whether Tong was entrusted by the defendant to operate the Capital Account and was thus acting as the defendant’s agent in applying the Leong Seal. It is unnecessary to engage PRC legal opinion in this regard.

67.  Nor is it relevant that the Leong Seal belonged to Longford and was not the personal property of the legal representative. We agree with the judge this does not assist the defendant, as there cannot be any dispute that the legal representative’s chop must not be affixed without the authorisation of the legal representative[45]. The Leong Seal was required to operate the Capital Account. It should only be affixed on the withdrawal slips of the Capital Account by the defendant or by another with her authorisation. By passing the Leong Seal to Tong, and instructing her in the 2017 Email to apply to both shareholders of Longford periodically as regards Longford’s daily operating expenses, the defendant has clearly authorised Tong to act on her behalf. As rightly submitted by Ms Lam, the question is not whether Longford has authorised Tong to operate the Capital Account, but whether the defendant has authorised Tong to do so.

68.  There is no merit in Mr Man’s contentions under this sub-heading.

(b) Fiduciary duties owed by Tong to the defendant

69.  Mr Man attacked the finding in §45(2) of the Judgment that Tong owed fiduciary duties to the defendant when Tong used the Leong Seal, which was one of the judge’s reasons to support his holding that Tong was the defendant’s agent. He submitted that this finding is central to why Tong was the defendant’s (rather than Longford’s) agent and it is not based on any proper plea, proof or logic. He repeated his contention that if and to what extent Tong owed duties to the defendant is a matter governed by PRC law, that there was no plea or proof of PRC law in this regard by either party, that it cannot reasonably be assumed the concept of fiduciary duties exists under PRC law and/or that the substance of the duties owed by Tong under PRC law would be materially similar.

70.  Mr Man further submitted that even as a matter of Hong Kong law, there is no basis to find that Tong owed fiduciary duties to the defendant for these reasons:

(1) There is no principle of law that when an officer of a company hands over a seal belonging to the company to another employee of the company for use for the purposes of the company, the recipient owes fiduciary duties to the first-mentioned officer.

(2) The judge did not identify any act or conduct by which Tong could have owed fiduciary duties to the defendant. Fiduciary duties are onerous and not lightly imposed and a court should exercise a great deal of caution before importing fiduciary duties into an essentially commercial relationship[46].

(3) Tong was an employee of Longford and in affixing Longford’s legal representative chop for Longford’s purposes, she was acting in the course of her employment with Longford. Any fiduciary duties Tong might have owed were owed to Longford and not to the defendant.

71.  We do not propose to deal with Mr Man’s contentions about PRC law in this regard, as they are along the same lines as the submissions he made earlier.

72.  The judge gave no reasons for finding that fiduciary duties were owed by Tong to the defendant when Tong used the Leong Seal. We do not think his finding can be supported.

73.  The hallmark of a fiduciary duty is a requirement that a person pursues the interests of another at the expense of his own. Fiduciary duties can arise because the essence of the relationship is such that one party is obliged to act for the benefit of another (such as trustees and beneficiaries, directors and companies). They may also arise as a result of specific obligations or functions undertaken by a person that requires the law to impose a duty positively to act in the best interest of another, to the exclusion of other interests, including his own[47]. It does not appear from the essence of the relationship between the defendant and Tong or the specific obligation or function undertaken by Tong that the law would impose a requirement that Tong must pursue the interests of the defendant at the expense of Tong’s own interest.

74.  However, we do not agree with Mr Man that the finding of fiduciary duties is of central importance such that without this finding, the holding that Tong was the defendant’s agent cannot be sustained. Not every agent owes fiduciary duties to the principal. As explained above, it depends on the essence of the relationship, or the specific obligations or functions undertaken by the agent.

75.  Mr Man referred to Bright Gold Ltd v Mega Well Development Ltd [2020] 4 HKLRD 26 at §§94 and 95[48], in which Lam VP set out the definition of agency in Bowstead and Reynold on Agency[49] at para 1-001 (“Agency is the fiduciary relationship which exists between two persons …”) and quoted from Haringey LBC v Ahmed [2018] HLR 9 at §28 (“The usual characteristics of an agency relationship may be said to be authority for the agent to affect the principal’s relationship with third parties, a fiduciary duty owed by the agent to the principal, and an ability on the part of the principal to exercise a degree of control over the agent.”) and from UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567 at §91 (“the absence of any of these main characteristics must … be a significant pointer away from the characterisation of a particular relationship as one of agency, even though there may be rare exceptions.”)

76.  The usual characteristics mentioned in the above authorities serve as good starting point in the assessment whether a relationship constituted an agency in the legal sense, as Lam VP stated in §94 of Bright Gold Ltd v Mega Well Development Ltd. The usual characteristics are not immutable. Allsop P gave a lucid and extended analysis of the legal principles relating to agency in Tonto Home Loans Australia PTY Ltd v Tavares & Ors [2011] NSWCA 389 at §177[50]:

“Not every independent contractor performing a task for, or for the benefit of, a party will be an agent, and so identified as it, or as representing it, and its interests. Agency is a consensual relationship, generally (if not always) bearing a fiduciary character, in which by its terms A acts on behalf of (and in the interests of) P and with a necessary degree of control requisite for the purpose of the role. Central is the conception of identity or representation of the principal … Examples and contexts may be infinite, and any arrangement must be understood and characterised by reference to its legal terms in context. In McKenzie v McDonald [1927] VLR 134 at 144 Dixon AJ, in saying that not every agent stands as a fiduciary, was recognising that the word ‘agent’ is used in many senses and is apt to mislead, citing Kennedy v De Trafford at 188. That is, however, no more than to say that the word ‘agent’ has a potentially wide and varying meaning in life and business and that, on some occasions, the business description will be given to someone who is not a fiduciary. … It is sufficient to recognise that the essential characteristic is that one party (A) acts on the other’s (P’s) behalf, and that this will generally be in circumstances of a requirement or duty not to act otherwise than in the interests of P in the performance of the consensual arrangement. Bowstead and Reynolds on Agency … include in the conception of agency the characteristic of fiduciary duty. The duty will, of course, conform with the extent and scope of the agency and thus be of potentially varied content, recognising that context (in particular, perhaps, a market or commercial context) may attenuate the rigour or content of the fiduciary duty … .The necessary good faith implicit in a fiduciary character in the relationship reflects the character of identity or representation that the relationship essentially carries.”

77.  We do not think the absence of one of the usual characteristics is fatal to the plaintiff’s case of an agency relationship between the defendant and Tong. The matter has to be looked at in the round and considered with the other characteristics, which was how the judge approached this issue in the Judgment[51]. The essential characteristic is that Tong acted on behalf of the defendant in affixing the Leong Seal, and central to this is the representation of the principal. An agency generally but not always bears a fiduciary character. The scope of the agency and the conforming duty vary from case to case, and the rigour and content of the duty may be attenuated by the context of the consensual arrangement.

78.  For the above reasons, we reject Mr Man’s arguments under this sub-heading. We will consider the other usual characteristics to see whether the holding that Tong was the defendant’s agent may be impugned or upheld.

(c) The defendant’s ability to exercise control over Tong

79.  The judge found there is no doubt that the defendant had the ability to exercise control over Tong as to the usage of the Leong Seal[52]. Mr Man submitted this was not pleaded in the amended originating summons and the amended Order 52 statement and so the judge should not have made this finding. He repeated his submission that whether, and if so to what extent, the defendant had the ability to exercise control over Tong as to the usage of the legal representative chop is governed by PRC law, and the legal status and powers of the legal representative and the legal representative’s relationship with other employees of Longford. There was no plea or proof of the relevant PRC law by either party. In any event, Hong Kong law does not contain a principle that the defendant, rather than the board of directors, would have control over Tong as to the usage of the Leong Seal.

80.  We agree with Ms Lam that the above submissions are of no merit.

81.  We do not propose to deal with the contentions on PRC law as we have dealt with and rejected similar submissions for the reasons mentioned earlier. We consider the pleading sufficient, and we have addressed the pleading objections earlier.

82.  The legal status and powers of the legal representative and the legal representative’s relationship with other employees of Longford are irrelevant, for the reasons mentioned earlier. The question is not whether the defendant could have exercised control over Tong as the legal representative of Longford, but whether she had any control over Tong in the usage of the Leong Seal. According to the bank mandate, the defendant was sole signatory of the Capital Account. By handing over the Leong Seal to Tong whilst at the same time remaining as the authorised sole signatory on the bank mandate, it stands to reason that the defendant must be able to exercise control over Tong’s use of the Leong Seal. This was evidenced in the instructions she gave to Tong in the 2017 Email. There is no basis to interfere with the judge’s finding of fact.

(d) Legal relations between the defendant and ICBC

83.  The judge found that in authorising Tong to affix the Leong Seal on the withdrawal slips of the Capital Account on the defendant’s behalf, the defendant’s relationship with ICBC was affected in that the bank accepted the withdrawal requests on the basis that the transactions were authorised by the defendant as the legal representative[53].

84.  Mr Man submitted that this finding is wrong in law. The defendant did not have any legal relations with ICBC as the Capital Account was held in the name of Longford and the legal relationship of ICBC relating to the Capital Account was solely with Longford. The affixing of the Leong Seal could not have affected the defendant’s relationship or legal relations with ICBC. The absence of authority on the part of Tong to affect any of the defendant’s relationship or legal relations with ICBC is a significant pointer away from the characterisation of the relationship between the defendant and Tong as one of agency.

85.  We do not accept the above submissions. It is wrong to suggest that the defendant did not have any relationship or legal relations with ICBC. The defendant was the sole signatory of the Capital Account. The Leong Seal should only be affixed by the defendant or by another with her authorisation to operate the Capital Account. As found by the judge, ICBC accepted the withdrawal requests on the basis that the transactions were authorised by the defendant as the legal representative.

(e) Manifestation of assent

86.  Mr Man referred to one of the main characteristics of agency stated in Bowstead and Reynold on Agency at para 1-001, which reads as follows: “Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his legal relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation.” He submitted that there was no plea or evidence, and the judge did not make any finding, that the defendant had expressly or impliedly manifested assent that Tong should act on her behalf so as to affect the defendant’s legal relations with ICBC, and Tong did not manifest assent so to act or so act pursuant to the manifestation. The absence of any manifestation of assent is fatal to the finding of agency between the defendant and Tong.

87.  Mr Man further argued that the 2017 Email is flatly against the existence of any manifestation of assent, because the defendant stated in that email that she would no longer take part in Longford’s daily operations and asked Tong to apply to both shareholders of Longford periodically as regards Longford’s daily operating expenses.

88.  There is no merit in the above submissions. We reject the contention that the pleading of agency is inadequate, for the reasons we have given in Ground 1.

89.  We reject also the contention that there was no evidence of manifestation of assent. For manifestation of assent, it is sufficient if the principal manifested to the agent that the principal is willing for the agent to act, and the agent does so in circumstances indicating that the agent’s acts arise from the principal’s manifestation. The nature of the inquiry is objective. A manifestation is conduct by a person observable by others. It is a broader concept than communication. The relevant state of mind is that of the person who observes or otherwise learns of the manifestation[54].

90.  On an objective analysis, by handing over the Leong Seal to Tong and instructing her in the 2017 Email to apply to both shareholders of Longford periodically as regards Longford’s daily operating expenses, the defendant clearly manifested to Tong that she was willing for Tong to act on her behalf to operate the Capital Account and Tong had done so indicating that her acts arose from the defendant’s manifestation.

91.  For all the above reasons, we reject the contention in Ground 2 that there is no basis for finding agency.

Ground 3: no actus reus for contempt

92.  The complaint here is that the Injunction Order prohibits the defendant from “dealing with” the Capital Account other than in accordance with the Longford Account Protocol, but there was no plea and no finding that the defendant had been “dealing with” the Capital Account through Tong. Hence, the actus reus for contempt is absent.

93.  Mr Man emphasised that the Injunction Order must be strictly construed and any ambiguity should be resolved in favour of the alleged contemnor. He cannot be committed for contempt on the ground he has broken a court order upon one of two constructions of that order. Merely giving the Leong Seal to Tong was not “dealing with” the Capital Account, as both the Finance Seal and the Leong Seal were required to operate the account, apart from filling in and submitting requisite documentation to ICBC. The defendant’s alleged authorisation of Tong to use the Leong Seal and Tong’s use of the Leong Seal were plainly not sufficient to make up the actus reus for contempt, as these acts did not constitute a breach of the Injunction Order.

94.  Mr Man further submitted that the judge was wrong to hold that the defendant had entrusted Tong to comply with the Injunction Order and she had not taken reasonable steps to prevent breaches by Tong[55]. The Injunction Order is a prohibitive injunction restraining the defendant from doing certain things, not an injunction by which the defendant is mandated to positively continue a state of affairs. Hence, the proper question is whether the defendant had breached the Injunction Order by doing what is enjoined, ie “dealing with” the Capital Account. The judge has not answered that question.

95.  We do not accept Mr Man’s submissions.

96.  By the Injunction Order, the defendant is restrained “by herself, her servants, her agents or on her own behalf or on behalf of any other person, firm or company” from “dealing with” the Capital Account except in accordance with the Longford Account Protocol. §1.4 of the amended originating summons pleaded that the defendant “either by her own conduct or that of her agents or both, have failed to observe and comply with the Longford Account Protocol” and that various transactions have been made through the Capital Account without the knowledge and approval of Yau or Will Lam since the grant of the Injunction Order. The culpable acts were the defendant’s dealing with the Capital Account through her agent on multiple occasions without following the Longford Account Protocol. That was the actus reus of the contempt, being conduct prohibited under the Injunction Order. It was never a case of merely handing over the Leong Seal to Tong.

97.  The principle governing whether an individual enjoined by an order of the court has breached it by that individual’s agent was stated by Slade J in Hone v Page [1980] FSR 501 at 507 as follows:

“In the absence of authority, I am prepared to assume in favour of the defendant that the form of undertaking does not expose the giver of the undertaking to absolute liability for the acts of its servants or agents. Nevertheless, again in the absence of authority, I think that a man must be deemed to do a relevant act ‘by his servants or agents,’ within the meaning of an undertaking given in this form, if (a) the persons who did the acts were his servants or agents, (b) the acts were done in the course of the service or agency, and (c) he either (i) authorised the acts or (ii) could reasonably have foreseen the possibility of such acts and failed to take all reasonable steps to prevent them.”

98.  This statement was adopted by the English Court of Appeal in A-G for Tuvalu v Philatelic Distribution Corporation Ltd [1990] 1 WLR 926 at 936H to 937B and In re Supply of Ready Mixed Concrete [1992] QB 213 at 236F to G and 243A to B. The latter case was overruled in Director General of Fair Trading v Pioneer Concrete (UK) Ltd [1995] 1 AC 456, but only in its application of requirement (c) to a corporate defendant[56].

99.  In Hong Kong this statement of principle was adopted as correct by Deputy High Court Judge To in Crown Times International Ltd v Chan Yim Ping & Ors (HCA 1313/2006, 25 January 2007) at §9 and by B Chu J in China Metal Recycling (Holdings) Limited (in compulsory liquidation) v Chun Hei Man & Ors (HCMP 3396/2015, 18 November 2016) at §§57(7) and 109. For the purpose of this appeal, we proceed on the basis that it correctly states the law.

100.  Applying the principle as stated in Hone v Page, insofar as the defendant has entrusted Tong to comply with the Injunction Order as her agent, the defendant would be vicariously liable for Tong’s acts if she either (i) authorised Tong’s acts of operating the Capital Account not in accordance with the Longford Account Protocol; or (ii) could reasonably have foreseen the possibility of such acts of Tong and failed to take all reasonable steps to prevent them. It does not suffice for the defendant to merely give orders and wash her hands off the matter and disclaim any further responsibility; she must take all reasonable steps to see that her orders were obeyed[57].

101.  There is no error in the judge’s approach[58]. This was the approach adopted in §16 of the Previous Contempt Judgment, in which it was recorded that this was not seriously disputed by the defendant. The judge has properly addressed the question whether the defendant had breached the Injunction Order “by herself, her servants, her agents or on her own behalf or on behalf of any other person, firm or company” in “dealing with” the Capital Account not in accordance with the Longford Account Protocol.

Ground 4: the defendant’s failure to take all reasonable steps to prevent Tong from breaching the Injunction Order

102.  Mr Man argued that the judge was wrong in finding that the defendant had failed to take reasonable steps to prevent Tong from breaching the Injunction Order[59]. He contended that the judge erroneously found that where the defendant had not told Tong about the terms of the Injunction Order and there was no evidence that Tong had any knowledge of the requirements imposed by the Injunction Order, it could reasonably be foreseen that Tong would not comply with the Injunction Order.

103.  His argument was along these lines. First, there was no pleading in the amended originating summons or the amended Order 52 statement that the defendant failed to tell Tong about the terms of the Injunction Order, that Tong did not have knowledge of the same, or that it could reasonably be foreseen that Tong would not comply with it. It was not open to the judge to make these findings in the absence of pleadings. Second, the finding that it could reasonably be foreseen that Tong would not comply with the Injunction Order is plainly unsustainable in any event. The 2017 Email referred to ongoing litigation between the shareholders of Longford and instructed Tong to apply to both shareholders periodically as regards Longford’s daily operating expenses. There was no plea and no proof the defendant knew that Tong would not apply to both shareholders as regards Longford’s daily operating expenses, and the Injunction Order would have been complied with had both shareholders given their approval when Tong applied to them.

104.  The pleading objections have no merit. Tong’s involvement was raised by the defendant as a defence, so was the 2017 Email. It would not be possible, nor was it necessary, for the plaintiff to plead in the amended originating summons or the amended Order 52 statement the matters mentioned by Mr Man as aforesaid. There was no unfairness and no prejudice to the defendant in these circumstances, for the reasons we have explained in Ground 1.

105.  As for the challenge to the finding of fact that it could reasonably be foreseen Tong would not comply with the Injunction Order, the high threshold for the appeal court to disturb such finding is plainly not met. Ms Lam referred to these findings of primary fact which provided the basis for the secondary or inferential finding that it could reasonably be foreseen Tong would not comply with the Injunction Order:

(1)  the defendant had not informed Tong about the terms of the Injunction Order[60];

(2)  the defendant made up the allegation she had informed Tong about the Longford Account Protocol in a telephone conversation[61];

(3)  she also made up the allegation she had persistently reminded Tong to ask for Yau’s approval for Longford’s expenses[62];

(4)  the defendant was well aware of the modus operandi adopted in transferring funds from the Capital Account to the current account, usually in the sum of RMB 300,000 under the description of “備用金” (reserve fund), for expenses yet to be claimed[63];

(5)  in the 2017 Email, the defendant did not instruct Tong not to transfer money under the modus operandi, and she must be taken to have authorised Tong to deal with the Capital Account in the absence of Yau’s or Will Lam’s signature. In other words, the Injunction Order would be breached even if Tong had acted in full compliance with the defendant’s instructions in the 2017 Email[64].

106.  We agree with Ms Lam there is solid support for the finding that it could reasonably be foreseen that Tong would not comply with the Injunction Order. We reject Ground 4.

Ground 5: no plea on the defendant’s alleged mental state

107.  This is again a pleading complaint. It was submitted that the judge’s finding of contempt relies on other allegations regarding the defendant’s mental state which have not been pleaded by the plaintiff and hence it was not open to the judge to make findings. Mr Man seeks to impugn the findings that the defendant was “well aware” of the modus operandi by which sums of RMB 300,000 were transferred to the current account under the description of “備用金” (reserve fund) and such funds would be transferred from the Capital Account before approval was sought from Yau or Will Lam[65]; that the defendant had knowledge of and understood the Previous Contempt Judgment[66]; and that the defendant had knowledge of Yau’s repeated requests for supporting documents and Tong’s response which showed that she was not prepared to comply[67]. He contended that the judge was not entitled to make findings of knowledge on the defendant’s part because the above allegations have not been pleaded by the plaintiff.

108.  The pleading objection of Mr Man is misconceived.

109.  The key question regarding the mental element is whether the defendant knew that what she did would constitute a contempt of court. She must have been fully aware of the terms of the Injunction Order and the Previous Contempt Judgment. It is sufficient to prove that she knew the facts which are said to make her act or omission a contempt of court and that such act or omission was not accidental. It is not necessary to prove that she deliberately intended to disobey the court order[68]. It is pleaded in the amended originating summons at §§1.2(ix) and 1.4 that she was aware of the terms of the Injunction Order, that there was no compliance with the order in that various transactions had been made through the Capital Account and that the defendant (by her own conduct or that of her agents or both) did not seek the approval or signatures of Yau or Will Lam before the transactions.

110.  The finding of the defendant’s knowledge of the modus operandi was based on her own admission at the trial[69]. The finding that she had knowledge of Yau’s repeated requests for supporting documents and of Tong’s response was based on her acceptance at the trial that she had read the email exchanges between Yau and Tong (she was copied with the emails by Yau and Tong) to keep herself apprised of what was going on[70].

111.  The pleading of the mental state of the defendant is adequate and it was open to the judge to make those findings of knowledge.

Conclusion

112.  We dismiss the defendant’s appeal as none of the grounds of appeal is of merit.

113.  There is no dispute that in the event the appeal is dismissed, the defendant should pay the plaintiff’s costs on an indemnity basis. We make this order accordingly.