KOT SEE FOR v. CHAN LEONG HANG

HCMP 2323/2020

[2021] HKCFI 1305

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 SENTENCE

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1.  The first hearing of the originating summons herein took place on 24 February 2021 in the absence of the defendant. On the grounds set out in the Reasons for Judgment handed down on 26 February 2021 (“Judgment”), I found the defendant guilty of contempt of court and awarded the plaintiff the costs of these proceedings on an indemnity basis. The contempt was constituted by the defendant’s refusal or failure to perform the disclosure order (“Disclosure Order”) ancillary to a proprietary/Mareva injunction granted against the defendant on 26 November 2019 in HCA 2208/2019 (“Injunction Order”) regarding 3 sums of money (adding up to $15 million) (“Sums”) said to have been defrauded from the plaintiff and paid into the defendant’s bank account. A warrant for the defendant’s committal was issued, which led to his apprehension on 2 March 2021. The defendant was duly brought before this court for mention on the same day. He was subsequently released on bail pending sentence on conditions, inter alia, that he paid $100,000 into court.

2.  At the sentencing hearing yesterday, I committed the defendant for a term of imprisonment of 6 months, suspended for 14 days for a last opportunity to the defendant to comply with the Disclosure Order.  If the defendant persists in his non-compliance with the Disclosure Order, the plaintiff shall apply to this court for an order that the defendant be taken into custody immediately.  I also ordered the defendant to pay the plaintiff’s costs of these proceedings since the hearing on 24 February 2021 on an indemnity basis.

3.  I now give reasons and summarily assess costs.

Relevant sentencing principles

4.  The principles on sentencing for contempt of civil court orders are established:

(1) Court orders are made to be obeyed.

(2) Contempt of civil court orders is a serious matter.

(3) In sentencing, the court seeks to signal to litigants in general, not just the contemnor, that the orders of these courts are to be followed.

(4) The court has to balance between punishing the conduct in defiance of the court’s order and holding out the threat of future punishment as a means of securing the protection for which the order was in the first place made.

(5) As circumstances may vary greatly, the sentence for contempt may range from a fine to a term of imprisonment. Imprisonment should be regarded as a sanction of the last resort. Any custodial sentence should be as short as possible and consistent with the circumstances of the case.

(6) The court will consider if there are aggravating/mitigating factors and acts purging the contempt, if any. The following is an inexhaustive list of relevant factors:

(a) the nature of the order;

(b) the breach in question and the extent thereof;

(c) whether the contempt was contumacious or unintentional - the reasons, motives and state of mind of the contemnor;

(d) whether the contemnor appreciates the seriousness of the breach;

(e) whether the contempt has caused the plaintiff any irredeemable prejudice;

(f) whether the contemnor has been cooperative.

See Arboit v Koo Siu Ying (No 2) [2016] 3 HKLRD 154, [2]-[10] per Queeny Au-Yeung J; China Shanshui Cement Group Ltd v Zhang Caikui [2018] HKCFI 1192, [4] per Queeny Au-Yeung J; JSC BTA Bank v Solodchenko (No 2) [2012] 1 WLR 350, [45] per Jackson LJ.

5.  Whether the contemnor has purged the contempt and whether the plaintiff has suffered any irremediable prejudice are particularly weighty considerations.  If the contempt was wilful and contumelious and has not been purged, the starting point is a term of immediate imprisonment: Law Lai Lan v Tamang Prem Chandr[2018] HKCFI 536, [41] per Deputy High Court Judge To.

6.  In the case of a breach of an injunction order, subject to the presence of mitigating factors, the starting and primary penalty is imprisonment (normally measured in months).  Information concerning assets is uniquely within the defendant’s knowledge and is pertinent to police a Mareva injunction.  A fine is inappropriate when the defendant has not purged or offered to purge his contempt: La Dolce Vita Fine Dining Co Ltd v Zhang Lan [2019] 2 HKLRD 341, [15], [18] and [20], per Mimmie Chan J.

7.  As explained by Jackson LJ in JSC BTA Bank v Solodchenko (No 2) [2012] 1 WLR 350, any deliberate and substantial breach of the restraint or disclosure provisions of a freezing order is a serious matter, which normally attracts an immediate custodial sentence measured in months.  Where there is a continuing failure to disclose relevant information, the court should consider imposing a long sentence to encourage future co-operation by the contemnor.  See [51], [55]-[56].

Discussion

8.  In the defendant’s case, the contempt was no doubt wilful and contumelious.  

(1) The Injunction Order warned in paragraph 13 thereof that it is a contempt of court knowingly to assist in or permit a breach of the order. It was also endorsed with a penal notice in both Chinese and English that the defendant may be held to be in contempt of court and may be imprisoned if he neglected to obey or comply with the order.

(2) As noted in the Judgment, evening assuming that the attempts at service before 15 May 2019 at the defendant’s address then last known to the plaintiff were all ineffective in bringing the Injunction Order to the notice of the defendant, the defendant was represented by solicitors from at least 11 May to 28 July 2020. The Injunction Order was, at such solicitors’ request (presumably on the defendant’s instruction), served on them on 15 May 2020. One would have further expected the solicitors to provide the defendant with the document and to advise the defendant as to its content, including the terms of the Disclosure Order, and the consequences of non-compliance. Consequently, the defendant should, at the latest, have notice of the Disclosure Order in round about mid May 2020.

(3) By the plaintiff’s solicitors’ letter dated 6 July 2020 to the defendant’s solicitors, the defendant was requested 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. Again, one would have expected the defendant’s 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.

(4) The Injunction Order had subsequently been twice inserted through the letter box for the address provided by the defendant himself in his notice to act in person dated 29 July 2020 in HCA 2208/2019. There is no reason to think that the documents so served would not reach the defendant.

(5) The defendant has had ample time and abundant opportunity to comply with the Disclosure Order since mid May 2020, should he be minded to do so.

(6) Instead of complying with the Disclosure Order, the defendant evaded/ignored the plaintiff’s solicitors’ attempts to make appointments to effect personal service on him on 6 August 2020 at his solicitors’ office and on 13 August 2020 at the address provided by the defendant as aforesaid.

(7) Lastly, at the hearing on 2 March 2021, this court had explained to the defendant, directly in Cantonese, the reason for which he was arrested and brought before the court, i.e. the commencement of HCA 2208/2019 and the allegations made therein by the plaintiff against him, the making of the Injunction Order against him, the Disclosure Order under the Injunction Order, the finding of contempt of court that this court has made against him due to his failure to comply with the Disclosure Order, the serious nature of such a finding and the possible penalties therefor, including a term of imprisonment. The defendant was further cautioned that with a view to mitigating the penalty, he should consider purging the contempt by complying with the Disclosure Order.

9.  The contempt is continuing.  The defendant has not purged the contempt.  I do not accept his apology/expression of remorse (which I find insincere and half-hearted) or explanation (which I consider incredible) at the hearing yesterday that he had tried to retain solicitors to advise and represent him after 2 March 2021 but he could not afford the “enormous” legal costs.  It is not suggested that the information to be provided under the Disclosure Order is complicated or voluminous.

10.  The plaintiff has suffered, and will continue to suffer, irreparable prejudice so long as the Disclosure Order is breached.  An ancillary disclosure order is often made by court at the same time as or after granting a proprietary/Mareva injunction for certain necessary purposes, which will of course be compromised or defeated in the event of breach.  The Disclosure Order in this case obligates the defendant to disclose, and verify on oath, (1) his dealings with the Sums and the current whereabouts of their traceable proceeds and (2) all his assets of an individual value of HK$50,000 or more in Hong Kong.  The former information is required by the plaintiff in tracing and locating the Sums while the latter information will allow him to police compliance with the Mareva aspect of the Injunction Order.  By withholding such information from the plaintiff, the defendant is (1) frustrating or delaying the plaintiff’s efforts in the recovery of the Sums and (2) making it difficult for the plaintiff to enforce the Mareva aspect of the Injunction Order.

11.  Not only has the defendant persisted in the contempt of court, he has not adduced any evidence on mitigation either notwithstanding the opportunity to do so given by the court.  In this connection, directions were given at the 2 March 2021 hearing for the filing and service of evidence relevant to sentencing.

12.  In these circumstances, I believe I am here dealing with a very recalcitrant defendant.  An immediate custodial sentence of 6 months is called for.

13.  However, for the sake of the plaintiff and with reluctance, I am prepared to suspend the sentence for 14 days to give the defendant a final chance to purge the contempt by complying with the Disclosure Order, albeit belatedly.

Assessment of costs

14.  Turning to costs, I summarily assess the costs awarded to the plaintiff under my orders dated 24 February 2021 and 6 March 2021 at $110,000 and $120,000 respectively.  The defendant shall pay such costs within 14 days from today.

15.  Lastly, I thank Mr Victor Lui, counsel for the plaintiff, for his able assistance.