KOT SEE FOR v. CHAN LEONG HANG

HCMP 2323/2020

[2021] HKCFI 498

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2323 OF 2020

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REASONS  FOR  JUDGMENT

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1.  On 24 February 2021, at the first hearing of the originating summons dated 21 December 2020 (“OS”) seeking an order that the defendant be committed to prison for his contempt of court, after hearing the plaintiff, I was persuaded to the requisite standard of proof that the defendant has been guilty of contempt of court. Notwithstanding the defendant’s absence at the hearing, I ordered the issuance of a warrant for committal against him and awarded costs of these proceedings against him on indemnity basis.

2.  I now give reasons.

HCA 2208/2019

3.  It is the plaintiff’s case that he was induced by various conspirators into making substantial payments to certain nominee recipients in respect of a non-existent investment scheme.

4.  The defendant was one such alleged nominee recipient, who received a total of HK$15 million by way of 3 cheques dated 21 September 2018 defrauded from the plaintiff.  These sums were paid into the defendant’s account numbered 961-xxxxxx-942 (“defendant’s account”) at the Industrial and Commercial Bank of China Limited.

5.  On 29 November 2019, the plaintiff commenced HCA 2208/2019 against, inter alia, the defendant herein as the 9^th defendant.  It is claimed that the plaintiff is entitled to, among other relief, a declaration of trust over the sums received by the defendant, alternatively restitution of the same.

6.  Prior to the commencement of HCA 2208/2019, on 26 November 2019, upon the plaintiff’s ex parte application, this court granted against the defendant a proprietary/Mareva injunction over the sums received in the defendant’s account (“Injunction Order”).

7.  Insofar as it is material to the OS, paragraphs 4 and 5 of the Injunction Order imposes upon the defendant the following disclosure obligation (“disclosure order”):

“4. The 9^th Defendant must inform the Plaintiff through his solicitors in writing within 72 hours of being served with this Order of (i) his dealings with the sums received by him as set out in Annex III and the current whereabouts of their traceable proceeds; and (ii) all his assets of an individual value of HK$50,000 or more in Hong Kong, whether in his own name or not and whether solely or jointly owned, giving the value, location and details of all such assets. The 9th Defendant may be entitled to refuse to provide some or all of this information on the grounds that it may incriminate him.

5. This information must be confirmed in an affidavit which must be served on the Plaintiff’s solicitors within 7 days after this Order has been served on the 9^th Defendant.”

8.  The Injunction Order warned in paragraph 13 that it is a contempt of court knowingly to assist in or permit a breach of the order.

9.  The Injunction Order was also endorsed with a penal notice in both Chinese and English as follows:

“若你疏於遵守或遵從本命令,你可能被裁定藐視法庭而你(或你的董事)可被判入獄或罰款或你的資產可能會被扣押。

If you neglect to obey or comply with this Order, you may be held to be in contempt of court and you and/or any of your director(s) may be imprisoned, fined or your assets may be seized.

若任何知悉本命令的人士促使或協助違反本命令,該人士亦可能會被裁定藐視法庭。”

Any other person who knows of this Order and does anything which helps or permits the Defendant (or any of them) to breach the terms of this Order may also be held to be in contempt of court and may be imprisoned, fined or have their assets seized.”

Service of the Injunction Order on the defendant and non-compliance with the disclosure order

10.  On 29 November 2019, the plaintiff’s solicitors served, inter alia, a sealed copy of the Injunction Order on the defendant by leaving the documents at the defendant’s then last known address at 2/F, 42 Tong Sheung Tsuen, Lam Tsuen, Tai Po, New Territories, Hong Kong (“defendant’s first address”).

11.  At the hearing of the plaintiff’s inter partes summons on 6 December 2019, the defendant did not appear and the Injunction Order was continued against the defendant by Deputy High Court Judge Leung until trial or the further order of the court (“Continuation Order”).

12.  On 12 December 2019, the plaintiff’s solicitors served on the defendant a sealed copy of the Continuation Order, indorsed with the same penal notice, by inserting the same through the letter box for, and by sending the same by ordinary post to, the defendant’s first address.

13.  Despite the said attempts to serve the defendant, the plaintiff heard nothing from the defendant until 11 May 2020 when his solicitors, Mayer Brown (“MB”) received a letter from Ho & Associates (“HA”), saying that they had instructions to act for the defendant who had not been served with any court documents.  HA requested all documents that may concern the defendant to be served on them.

14.  By a letter dated 12 May 2020, MB clarified that the court documents relevant to the defendant had been served on him at the defendant’s first address.  HA was asked to file and serve on MB a notice to act as soon as possible so that MB could serve documents on the defendant via HA. 

15.  HA served their notice to act for the defendant on MB on 14 May 2020, with a request that all relevant documents be served on them.  This was done by MB on 15 May 2020.  In particular, the documents served on HA included a sealed copy of the Injunction Order indorsed with a penal notice and a sealed copy of the Continuation Order indorsed with a penal notice (“Orders” collectively).

16.  By a letter dated 6 July 2020 to HA, MB noted that as of that date, they had yet to receive any information or affidavit from the defendant pursuant to the disclosure order under the Injunction Order and put on the record that the defendant had failed to comply with the disclosure order in beach of the Injunction Order and that such breach was continuing.  MB requested the defendant to comply with the disclosure order within 7 days from 6 July 2020, failing which the plaintiff would take further actions against the defendant without further notice.

17.  On 3 August 2020, MB asked to serve the Orders on the defendant personally at HA’s office on 6 August 2020.

18.  HA responded to such request by letter of the following date to the effect that they no longer had instruction to act for the defendant in HCA 2208/2019 and enclosed a copy of the defendant’s notice to act in person filed on 29 July 2020 and giving 2/F, 322 Kau Liu Ha, Lam Tsuen, Tai Po, New Territories, Hong Kong (“defendant’s new address”) as the defendant’s address.

19.  Despite the provision of the defendant’s new address, attempts by MB’s process server to effect personal service of the Orders (both indorsed with the said penal notice) on the defendant at the defendant’s new address on 4 and 13 August 2020 did not succeed.  Nobody answered the door.  In the end, the documents had to be inserted through the letter box for the defendant’s new address. 

20.  The defendant had been given advance notice of the second visit by MB’s process server by MB’s covering letter dated 4 August 2020 and was specifically requested to contact MB to make alternative arrangement if the date and/or time proposed by MB was inconvenient to him.

21.  I note that MB’s covering letter dated 13 August 2020 required the defendant to comply with paragraph 4 of the Injunction Order within 72 hours of being served with the Injunction Order and paragraph 5 within 7 days from 13 August 2020.  Such request has been ignored so far.

Committal proceedings

22.  Against the aforesaid background, upon the plaintiff’s ex parte application filed in in HCA 2208/2019 on 10 September 2020, on 10 December 2020, I

(1)  granted leave to the plaintiff to commence committal proceedings against the defendant for failure to perform the disclosure order in breach of the Injunction Order;

(2)  dispensed with personal service of the Orders on the defendant; and

(3)  gave leave to the plaintiff to serve the relevant documents on the defendant by way of substituted service by ordinary post to the defendant’s new address.

23.  I considered it appropriate to (1) dispense with personal service of the Orders and (2) allow substituted service of relevant documents on the defendant by ordinary post to the defendant’s new address for these reasons:

(1)  Evening assuming that the attempts at service at the defendant’s first address were all ineffective in bringing the Orders to the notice of the defendant[1], the defendant was represented by solicitors, i.e. HA, from at least 11 May to 28 July 2020.  The Orders were, at HA’s request (presumably on instruction), served on them on 15 May 2019.  One would have further expected the solicitors to provide the defendant with the documents and to advise the defendant as to their contents, in particular, the terms of Orders and the consequences of non-compliance with such orders.

(2)  MB’s letter dated 6 July 2020 to HA requested the defendant to comply with the disclosure order within 7 days from 6 July 2020, failing which the plaintiff would taken further actions against the defendant without further notice.  Again, one would have expected the solicitors to relay to the defendant such request and advise him of the possible further actions that the plaintiff may take in the event of non-compliance including committal proceedings.

(3)  The Orders had been twice inserted through the letter box for the defendant’s new address which was provided by the defendant himself in his notice to act in person in HCA 2208/2019.  There was no reason to think that the documents so served would not reach the defendant.

(4)  MB’s attempts to make appointments to effect personal service on the defendant on 6 August 2020 at HA’s office and on 13 August 2020 at the defendant’s new address were both evaded/ignored.

24.  Pursuant to my order dated 10 December 2020, the plaintiff issued the OS to seek the committal of the defendant for his contempt of court.  On 23 December 2020, all material documents including the OS, the 1^st affirmation of Chen Hoi Kei dated 21 December 2020 filed in support of the OS and the notice of appointment to hear OS also dated 21 December 2020 were served by ordinary post to the defendant’s new address.  To date, the plaintiff and his solicitors had not received from the defendant any acknowledgement of service of the OS; or any information given pursuant to the disclosure order.

25.  I was satisfied that the plaintiff has complied with all procedural requirements for the commencement of the present committal proceedings.

Relevant legal principles on contempt

26.  Sir Gerard Brennan NPJ authoritatively laid down these principles in Kao, Lee & Yip v Donald Koo Hoi Yan (2009) 12 HKCFAR 830 at [6], [21], [24], [30]:

(1)  The objective of civil contempt proceedings is the maintenance of the court’s authority.  The administration of justice would be undermined if any court order could be disregarded with impunity.

(2)  An allegation of civil contempt must be proved strictly.  The contemnor’s guilt is to be proved beyond reasonable doubt.

(3)  Where the alleged contempt is based on a failure to comply with a court order, it is necessary to (a) construe the relevant order to ascertain its meaning and operation; (b) determine if the defendant in fact complied with the order so construed; and (c) consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

27.  As to the relevant state of mind in civil contempt:

(1)  It is sufficient to demonstrate (a) that the contemnor’s conduct was intentional in the sense of consciously, voluntarily and unaffected by any mistake, as opposed to casually, accidentally or unintentionally; and (b) that he knew the facts which rendered it a breach of the order.

(2)  It is not necessary to show that the defendant realised that his conduct would constitute a breach.

(3)  Reasons, motives and understandings of the contemnor may be highly relevant to penalty but not to liability.

See Arlidge, Eady & Smith on Contempt (5^th ed, 2017), §§12-94 – 12-95; Kao, Lee & Yip, [45], [46] & [53] per Sir Gerard Brennan NPJ.

Dealing with an absent contemnor

28.  Where the contemnor is absent at the hearing, provided service is properly effected or dispensed with, the court may proceed with the hearing, although the plaintiff would come under a duty to bring all relevant matters to the court’s attention: Navig8 Chemical Pools Inc v Inder Sharma, HCMP 2885/2016, unreported, 14.2.2017, [14]-[23] per Anthony Chan J.  Where contempt is found, the court should issue a warrant for committal to have the defendant arrested, and brought before the court as soon as possible so that he may make submissions on the appropriate penalty: Navig8 Chemical Pools, [43]-[44].

29.  I was satisfied that the defendant had been properly served with these proceedings and notice of the hearing on 24 February 2012 but chose not to attend the hearing.  The address to which, inter alia, the OS, the supporting affirmation, the notice of appointment to hear OS by which the date and time of the 24 February 2021 hearing was given etc were posted on 23 December 2020 was given by the defendant in his notice to act in person.  There is no reason to think that documents sent by ordinary post to such address would not reach or come to the attention of the defendant.

Defendant plainly guilty of contempt of court for breach of Injunction Order

30.  Applying the three-stage approach in Kao, Lee & Yip:

(1)  Paragraphs 4 and 5 of the Injunction Order are standard and unambiguous.  Paragraph 4 requires the defendant to inform the plaintiff’s solicitors, within 72 hours of being served with the order, (a) his dealings with the sums received in the defendant’s account from the plaintiff and the current whereabouts of their traceable proceeds; and (b) all his assets of an individual value of HK$50,000 or more in Hong Kong.  Paragraph 5 requires the confirmation of the aforesaid information in an affidavit, to be served on the plaintiff’s solicitors within 7 days after being served with the order.

(2)  There is no question that the defendant was aware, but acted in breach, of the disclosure order.  In this connection, I repeat [23] above.  Leaving aside the earlier attempts to serve the defendant at his first address, the defendant had since 15 May 2020 been repeatedly served with the Orders through his solicitors and at the address provided by him for the purpose of service in HCA 2208/2019.  His attention had also been specifically drawn to the disclosure order in MB’s numerous covering letters.  To date, the defendant still has not provided any information of (a) how he had dealt with the HK$15 million he received from the plaintiff or their current whereabouts; or (b) whether he has any valuable assets in Hong Kong and if so, what those assets may be, let alone serving any affidavit/affirmation to confirm such information.

(3)  The irresistible inference is that the defendant’s non-compliance with the disclosure order was intentional in the relevant sense and that he knew the facts that rendered such non-compliance a breach of the Injunction Order.

31.  I was persuaded beyond reasonable doubt that the defendant is guilty of contempt of court for failing to comply with the disclosure order under the Injunction Order.  In his absence, the appropriate course was for the court to issue a warrant for committal to have him arrested and brought before it as soon as possible so that he may make submissions on the penalty: Navig8 Chemical Pools, supra, [43]-[44].  I therefore ordered that a warrant for committal be issued against the defendant.

Costs

32.  Indemnity costs is the usual order where contempt had been found: see, e.g. Navig8 Chemical Pools, supra, [45].  I ordered that the costs of and occasioned by these proceedings be paid by the defendant on indemnity basis, to be taxed if not agreed.