KAO, LEE & YIP (a firm) v. DONALD KOO HOI-YAN AND OTHERS

FACV No. 27 of 2007

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 27 OF 2007 (CIVIL)

(ON APPEAL FROM CACV NO. 32 OF 2006)

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J U D G M E N T

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Mr Justice Bokhary PJ :

1.  I entirely agree with the judgment of Sir Gerard Brennan NPJ, and would add only certain observations on the case of Irtelli v. Squatriti [1993] QB 83, which observations I consider to be consistent with his views.  In that case the defendants executed a further charge on the property concerned despite an injunction prohibiting the sale, disposal or other dealing in the that property.  They were committed to prison for contempt.  Fresh evidence on appeal was admitted to the effect that they did not understand that executing a further charge was prohibited by the injunction.  It is true that two members of the English Court of Appeal expressed the view that the absence of such understanding on the defendants’ part meant that they were not in contempt.  But Sir Donald Nicholls V-C (as Lord Nicholls of Birkenhead then was) did not express any such view.  What he said (as one sees at p.93 D-E) is that on the basis of the fresh evidence, the judge’s order committing the defendants to prison should be set aside.  That is readily understandable.  And just because the Vice-Chancellor did not propose any alternative punishment, that does not necessarily mean that he thought that there was no contempt.  Even if their misunderstanding of the injunction’s effect was treated as mitigation rather than a defence, there would be good reason to order their release.  The plaintiff did not appear and was not represented at the hearing of the appeal, and there does not appear to have been any suggestion as to how in the circumstances the defendants might appropriately be dealt with for contempt if they were not kept in prison.  Nor does it appear that any useful purpose would have been served by fining them or ordering costs against them.  They were on legal aid and presumably impecunious.

2.  In making those observations, I have not forgotten that the Vice-Chancellor concluded his judgment by saying (at p. 93E) that a “knowing” breach of the order by the defendants had not been proved.  But he did not say that such lack of knowledge meant that they were not in contempt.  By contrast, Taylor LJ (as Lord Taylor of Gosforth CJ then was) did say precisely that, saying (at p.92F) that the judge “could not have been sure that [the defendants] had knowingly breached the court order and, therefore, he could not have been sure that they were in contempt.” (Emphasis supplied.)  It will, I trust, be understood that I am in entire agreement with everything which Sir Gerard Brennan says about the principle in Stancomb v. Trowbridge Urban District Council [1910] 2 Ch 190.  All that I am saying about Irtelli v. Squatriti is that, on my reading of the judgments therein, it is only by a majority that the case appears to run counter to that principle.

Mr Justice Chan PJ :

3.  I agree with the judgment of Sir Gerard Brennan NPJ.

Mr Justice Ribeiro PJ :

4.  I agree with the judgment of Sir Gerard Brennan NPJ.

Mr Justice Nazareth NPJ :

5.  I agree with the judgment of Sir Gerard Brennan NPJ.

Sir Gerard Brennan NPJ :

6.  This appeal is from a judgment of the Court of Appeal which allowed an appeal from a decision of Reyes J and which held the present appellant, Mr Donald Koo Hoi-yan, guilty of civil contempt.  Although the better view is that civil contempt is not a criminal offence, the punitive aspect of civil contempt proceedings has “caused the courts to treat those in peril in such proceedings in a like manner to those in peril in criminal proceedings” (Cobra Golf Inc. v. Rata [1998] Ch 109, 129, 155).  The penalty to which a person who fails or neglects to obey an order of the court is exposed imports many of the procedural safeguards which are characteristic of proceedings for a criminal offence.  Thus an allegation of civil contempt must be proved strictly and, on appeal, the restriction on the admission of fresh evidence which is a general feature of appeals in civil proceedings is relaxed.

7.  In this case, much of the material on which the appellant’s counsel relied was produced after the Court of Appeal had delivered its judgment but it was received by this Court and considered once its truthfulness had been assessed in a report by Reyes J.  This Court now has that report.  To trace adequately the history of events, the material recently produced must be incorporated.

The making of the Orders and the sequence of curial judgments

8.  Mr Koo had been an equity partner in the firm of solicitors, Kao, Lee & Yip (KLY) between December 1988 and October 1993.  One of the firm’s major clients was the Bank of China Group (BOC).  BOC proposed to establish an in-house Law Centre and Mr Koo gave notice to quit KLY with the intention of heading the Centre.  But when BOC decided not to proceed with the Law Centre, Mr Koo decided to establish his own law firm, Koo & Partners (KP) with the view of providing services to BOC.  The partners were Mr Koo and some former employees of KLY.  KP commenced practice on 1 October 1993. 

9.  KLY took immediate action.  On Thursday 30 September 1993, that firm applied ex parte for an Anton Piller order against Mr Koo and two of his intended partners in relation to certain documents, but that issue was resolved by the performance of undertakings given by the defendants and recorded in a Court order of that day.  KLY issued a writ against Mr Koo, his partners and an employee and, on 4 December 1993, KLY issued a summons against them alleging breaches of restraint of trade clauses in the KLY partnership agreement and seeking interlocutory injunctive relief to restrain KP from, inter alia, “soliciting legal business from, or doing any work or act normally done by solicitors for, any person or firm or corporation who or which shall have been a client of [KLY] within a period of 3 years preceding such cessation”, that is, the cessation of Mr Koo’s membership of the KLY firm. 

10.  On 14 January 1994, Mr Koo’s 3^rd Affirmation identified the former clients of KLY who had contacted him to give instructions since October 1993 and stated the “nature of the matters” on which those instructions had been received. 

11.  Mayo J refused to grant the injunction sought by KLY but ordered that Mr Koo “maintain an account of all work which is undertaken by KP in relation to any former client of the plaintiff until trial or further order” (This is the “first Order”).  An appeal to the Court of Appeal failed and an application for leave to appeal to the Privy Council was refused.

12.  After a considerable delay in prosecuting the principal proceedings, KLY’s action was tried by Ma J (as he then was) in April and May 2002.  By this time, KLY’s Statement of Claim had been considerably altered from its original form.  KLY sought no more than nominal damages for breach of contract, the chief claim for relief being an account of profits for breach of fiduciary duty by, inter alia, arranging for legal work involving the Bank of China Group to be diverted from KLY to KP.  This claim had been inserted in the Statement of Claim by amendment on 30 July 2001.  Although the defendants alleged prejudicial delay in relying on that claim, Ma J found no merit in the argument, pointing out that Mayo J had ordered the maintenance of an account of all work undertaken by KP in relation to any former clients of KLY until trial. 

13.  Ma J gave judgment on 2 April 2003 holding that Mr Koo had breached his fiduciary duty to KLY.  On 19 September 2003, his Lordship settled a formal judgment, ordering, inter alia, as follows:

“(a) [Mr Koo] do account to [KLY] for all profits earned by [KP] in relation to legal services provided by [KP] to the Bank of China Group for the 12 months commencing on the 1^st of October 1993 (after making due allowance against the said profits in respect of the expenses and overheads incurred in relation to such profits, including relevant salaries and an assessment, in monetary terms of time spent by solicitors and staff of [KP] (including that of the[Mr Koo])), and

(b) an account of such profits to be taken and [Mr Koo] do pay to [KLY] the sums (if any) found due on the taking of the said account.”

14.  By a contemporaneous order made by consent, Ma J gave detailed directions for the taking of the account.  For present purposes, the following part of those directions is relevant:

“1. For the purposes of taking the account of profits ordered against [Mr Koo], it is ordered that:

(1) The said account be taken by a Judge.

(2) [Mr Koo] do within 28 days file and serve an affirmation:

(a) listing all entities within the Bank of China Group for which [KP] provided any legal services at any time within the period of 12 months commencing on 1^st of October 1993;

(b) exhibiting and verifying the account made pursuant to the Order of the Honourable Mr. Justice Mayo on the 21^st of January 1994;

(c) exhibiting and verifying the account ordered to be taken by the Honourable Mr. Justice Ma as aforesaid;

(d) listing and verifying all bills delivered, instructions received and payments received by [KP] in respect of the provision of any legal services at any time within the period of 12 months commencing on the 1^st of October 1993;

(e) giving full particulars of and verifying all expenses and overheads claimed in respect of revenue and/or profits earned by [KP] in respect of the provision of any legal services at any time within the period of 12 months commencing on the 1^st of October 1993;

(f) listing and verifying all books, vouchers, client ledgers, other documents (including, without prejudice to the generality of the foregoing, management accounts, profit and loss accounts, tax returns, partnership accounts and bank statements) which are in the possession custody or power of either [Mr Koo] or of [KP] and which relate to (a) to (e) above.

(3) [Mr Koo] be at liberty to file and serve within 28 days other affidavits or affirmations for the purpose of the taking of the account.

2. The Plaintiff shall be at liberty at any time to serve notice on [Mr Koo] requiring [Mr Koo] to produce for the Plaintiff’s inspection any document or class of documents specified in Paragraph 1(2)(f) herein (whether or not referred to in the Affirmation to be affirmed by [Mr Koo] pursuant to Paragraph 1(1) herein), and any other documents which are referred to in the Affirmation to be affirmed by [Mr Koo] pursuant to Paragraph 1(2) herein, and to permit the Plaintiff to take copies thereof.

3. [Mr Koo] do, within 4 days after the service of any notice upon him pursuant to Paragraph 1(2) herein, serve notice on the Plaintiff stating a time within 7 days after the service thereof at which the said documents may be inspected at a place specified in the notice.

4. The Plaintiff shall be at liberty to serve notice of objection to the said account ordered to be taken by the Honourable Mr. Justice Ma as aforesaid within 42 days after service upon the Plaintiff of the said account verified by affirmation as aforesaid.

5. The Plaintiff shall be at liberty to file and serve any affidavit or affirmation evidence in reply to [Mr Koo’s] affidavit or affirmation evidence within 42 days after service of [Mr Koo’s] affidavit or affirmation evidence.

6. The parties do file and serve on each other a Scott Schedule summarising their respective contentions at least 28 days before the date fixed for the taking of the said account.

7. The Plaintiff be at liberty to cross-examine:-

(1) [Mr Koo] on the Affirmation affirmed by him verifying the said account.

(2) the deponents of any other affidavit or affirmation served by [Mr Koo].

8. [Mr Koo] be at liberty to cross-examine the deponent of any affidavit or affirmation served by the Plaintiff.

9. [Mr Koo] do pay to the Plaintiff the sum (if any) found due on the taking of the said account.”

15.  The formal judgment and order by Ma J is the “second Order”.  The period specified in the second Order, namely, 12 months commencing on 1 October 1993, commenced before the date of the first Order on 21 January 1994, and it ended on 30 September 1994, before the trial in April 2002 which terminated the operation of the first Order.  Although the first Order related to work undertaken by KP and the second Order related to profits made by KP, Ma J evidently assumed that the account of work under the first Order would facilitate the calculation of the account of profits under the second Order.  Thereafter, extensions of time for compliance with the second Order (including the consent directions given by Ma J) were granted from time to time.

16.  Then, on 21 January 2004, Deputy High Court Judge Muttrie made the following order:

“1. There be final extension of the time for [Mr Koo] to file and serve any further affirmation and any other affidavits or affirmations for the taking of the Account pursuant to the Order of Mr. Justice Ma dated 19 September 2003 be extended to 4.00 p.m. on 18 February 2004 and unless [Mr Koo] complies with it by 4.00 p.m. on 18 February 2004, the Plaintiff have leave to commence committal proceedings against the First Defendant.

2. the costs of this application be to the Plaintiff, to be taxed if not agreed.”           

This is the “third Order”.

17.  On 16 December 2004, KLY filed a Statement supported by a verifying affidavit pursuant to Rule 52(2) of the High Court Rules seeking an order that Mr Koo be committed to prison for contempt for failing to comply with –

(1) Paragraph 2 of the first Order;

(2) Paragraph 1(2)(b) and (c) of the second Order; and

(3) Paragraph 1 of the third Order.

Deputy High Court Judge Saunders, on KLY’s ex parte application, on 23 December 2004 gave leave to commence proceedings for contempt on those grounds.  On 30 December 2004 a Notice of Motion for an order of committal on the stated grounds was filed and served on Mr Koo.  The notice was returnable on 7 March 2005 when Deputy High Court Judge Muttrie gave directions, including a direction that the Notice of Motion be adjourned to a date to be fixed.  In the event, the matter was heard and determined by Reyes J in December 2005.

18.  Reyes J dismissed the application with an order nisi for costs to be taxed on an indemnity basis.  KLY appealed to the Court of Appeal.  In November 2006, that Court (Le Pichon and Cheung JJA and Sakhrani J) was unanimous in allowing the appeal, setting aside the Order of Reyes J, finding that Mr Koo was guilty of contempt in the respects alleged in KLY’s notice of motion, remitting the question of penalty to the Court of First Instance for determination by a judge other than Reyes J and making an order nisi for Mr Koo to bear the costs of the appeal and the hearing in the Court of First Instance on an indemnity basis.  In April 2007, Deputy High Court Judge Carlson imposed a fine of $135,000 on Mr Koo together with an order for costs on an indemnity basis.

19.  The Court of Appeal refused Mr Koo leave to appeal to this Court against the judgment and order of the Court of Appeal.  He applied to this Court for leave to appeal pursuant to s.22(1)(b) of the Court of Final Appeal Ordinance, Cap. 484.  That application was granted and the appeal was listed for hearing on 22 May 2008.  Further affidavits that were not before the Court of Appeal were tendered by counsel for Mr Koo, the content of which was not accepted by counsel for KLY.  This Court remitted to Reyes J the question whether certain paragraphs of the further affidavits were true or otherwise.  The report by Reyes J is now before us, confirming in general the truth of the paragraphs of the affirmations referred to him.

20.  The material contained in those paragraphs was not before the Courts below but, as proceedings for committal for civil contempt have penal consequences, it was appropriate to apply the criminal rules relating to the admission of fresh evidence rather than the strict civil rule applied in Ladd v. Marshall [1954] 1 WLR 1489: see Daltel Europe Ltd v. Makki [2006] 1 WLR 2704, 2713, in which Lloyd LJ invoked the provision of the European Convention similar to art.10 of the Hong Kong Bill of Rights; Irtelli v. Squatriti [1993] QB 83, 88; Gulf Azoz Shipping v. Idisi [2001] EWCA Civ 21, para.2.  Applying s.83V of the Criminal Procedure Ordinance, Cap. 221, it appeared to this Court to be “necessary or expedient in the interest of justice” to ascertain the truth of the paragraphs in the latest affirmations by Mr Koo. 

21.  What is in issue on this appeal is whether Mr Koo has failed to comply with the first, second or third orders and whether that failure amounts to contempt.  Leaving aside for the moment an argument relating to the procedures adopted in pursuing the proceedings for contempt, it is necessary first to construe the several orders so as to ascertain their meaning and operation, then to determine whether Mr Koo has in fact complied with the orders as so construed and finally to consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

The meaning of the first Order

22.  The first Order was made in proceedings founded on an alleged breach of contract which, if established, would have entitled KLY to compensation assessed on the footing of the profits which KLY would have made from doing the work in fact done by KP if the KP defendants had not broken their KLY agreements and if KLY had been entrusted with that work by those who had been KLY clients in the 3 years prior to 1 October 1993.

23.  Reyes J noted that Mayo J did “not specify any particular manner in which an ‘account’ should be maintained by way of compliance with the [first] Order”.  If the first Order had merely required the keeping of records without specifying the records which had to be kept, there may well have been an argument that such an Order was too ambiguous to found contempt proceedings merely for a failure to keep a record in a particular form.  “It is an elementary principle of justice and fairness”, said Munby J in Harris v. Harris  [2001] 3 FCR 193, 227, “that no order will be enforced by committal unless it is expressed in clear, certain and unambiguous language.”  In Iberian Trust Ltd v. Founders Trust and Investment Co. [1932] 2 KB 87, 95, Luxmoore J was concerned with an order “that the plaintiffs do have a return of the said shares within 14 days.”  He observed:

“… Am I to spell out of that an order on the defendant company to do something?  I think not.  If the Court is to punish any one for not carrying out its order the order must in unambiguous terms direct what is to be done.”

But a distinction must be drawn between an ambiguous order and an order which requires a party to do a specific act and leaves it to that party to determine the way in which that requirement is to be obeyed.  In Iberian Trust, Luxmoore J accepted what Chitty J had said to that effect in Attorney-General v. Walthamstow Urban Council (11 Times LR 533).  Commenting on these cases, Wilcox J in Concrete Constructions Pty Ltd v. Plumbers and Gasfitters Employees’ Union of Australia and Another (1987) 72 ALR 415, 424 said:

“… there is a fundamental difference between an order which is uncertain and an order which, being certain in its meaning, leaves to the addressee a choice as to the manner of compliance.  An example is furnished by the Walthamstow case, referred to by Luxmoore J in Iberian Trust, supra.  As Luxmoore J said, an order restraining a defendant from discharging sewage into a particular brook is ‘definite enough in its terms’, notwithstanding that there may be a number of engineering solutions to the problem of compliance.  Provided that the order specifies with certainty the result to be achieved it is not normally for the applicant to suggest, or for the court to prescribe, a particular method of complying with the order.  As Chitty J said in Walthamstow, ‘it was the duty of the defendants to find out the proper means of obeying the order’.” 

24.  Although the first Order did not prescribe the form in which the account of work was to be maintained, the circumstances in which the Order was made establishes the purpose of the account which was ordered.  In the event of KP being held liable for breach of contract, an assessment of damages would require particulars of the relevant work done by KP and of the clients on whose instructions the work had been done in order to allow KLY to calculate its profits on that work if that work had not been lost by the breach of contract.  Reference to the circumstances in which the Order was made is not needed to resolve an ambiguity in the Order but it confirms the clear meaning of its terms, namely, that “all work which is undertaken by KP” was to be accounted for.  Mr Koo could not have mistaken what was required for his 3^rd Affirmation had informed Mayo J that Mr Koo had :

“caused to be kept a record of all work done for clients who are also clients of the Firm with details of billings and professional costings.  I believe that damages would be an adequate remedy and I do not accept that damages would as Mr Kao puts it be ‘incalculable’.  The records referred to above show the value of work done so that the only remaining issue as to damages from the Firm’s viewpoint would be whether the clients who came to me would have given that work to the Firm following my departure from the Firm”.      

25.  In the context of proceedings for breach of contract, “work undertaken by KP does not mean work which KP promised to do but work actually done.  The account was not to be an account of the instructions received or of costs charged or of amounts received but of work done. 

26.  Of course, it was advisable for Mr Koo to keep the records needed to establish the correctness of the account of the work undertaken (White v. Lincoln (Lady)  (1803) 8 Ves.Jun. 363; 32 ER 395; In re Lee, Ex parte Neville (1868) LR 4 Ch.App. 43) but the obligation was to maintain an account of work in whatever form was suitable for the purpose.  The order was sufficiently certain in its terms to warrant proceedings for committal in the event of breach, and it had to be obeyed.  As Romer LJ said in Hadkinson v. Hadkinson [1952] P. 285, 288 in a passage approved by the Privy Council in Isaacs v. Robertson[1985] AC 97, 101-102:

“It is the plain and unqualified obligation of every person against, or in respect of whom, an order is made by a court of competent jurisdiction, to obey it unless and until that order is discharged.”

His Lordship described this as an obligation of “uncompromising nature”.  In Howitt Transport v. Transport and General Workers’ Union [1973] ICR 1, 10, Sir John Donaldson expressed the view that:

“… orders of any court must be complied with strictly in accordance with their terms.  It is not sufficient, by way of answer to an allegation that a court order has not been complied with, for the person concerned to say that he “did his best.”  The only exception to that proposition is where the court order itself only orders the person concerned to “do his best.”  But if a court order requires a certain state of affairs to be achieved, the only way in which the order can be complied with is by achieving that state of affairs.”

27.  Even if a party is legally advised that an order has been made invalidly, delay in complying with the order is legitimate only pending application to the court to discharge the order.  In M v. Home Office [1994] 1 AC 377, Lord Woolf said (at p.424):

“… If … there is a situation in which the view is properly taken (and usually this will only be possible when the action is taken in accordance with legal advice) that it is reasonable to defer complying with an order of the court until application is made to the court for further guidance then it will not be contempt to defer complying with the order until an application has been made to the court to discharge the order.  However, this course can only be justified if the application is made at the first practicable opportunity and in the meantime all appropriate steps have been taken to ensure that the person in whose favour the order was made will not be disadvantaged pending the hearing of the application.”

28.  No application was made to Mayo J for further guidance in relation to the first Order.

29.  The maintaining of an account containing particulars of work was a substantial burden which Mr Koo accepted and, in determining the form in which the account was to be kept, it had to be kept in mind that the account, if so ordered at trial, would have to be produced to KLY and to convey to KLY the requisite information to allow quantification of KLY’s damages.  The requirement that the account be maintained until trial and not merely constructed after trial was essential to ensure that, in the business of a solicitor’s practice, relevant facts would be recorded before inevitably risking their being lost or overlooked.

Compliance with the First Order

30.  In proceedings for contempt, strict proof of guilt is required (In re Bramblevale Ltd [1970] Ch 128, 137; Dean v. Dean [1987] 1 FLR 517, 520, 523; Concorde Construction Co. Ltd v. Colgan Co. Ltd [1984] HKC 253, 257.  In In re Bramblevale, Winn LJ said (at p.137):

          “… unless the guilt of the appellant was proved with such strictness of proof as is consistent with the test ‘beyond reasonable doubt’; or, as my Lord has more than once put it, consistent with such standard as the court, with its responsibility, regards as consistent with the gravity of the charge – a test which I personally prefer – the decision that he should be imprisoned for contempt of court cannot be sustained.”

Lord Denning MR held that proof must be “beyond reasonable doubt”. 

31.  It was not necessary to maintain a documentary or hard copy of the work done by KP in order to comply with the first Order.  If particulars of the relevant work done were entered into a computer program which allowed a list of work done to be simply retrieved either in printed or digital form accessible by KLY, there would be compliance with the Order.

32.  In the event, as Mr Koo’s latest affirmations now reveal, the following features of the office practices of KP are relevant to the question whether Mr Koo complied or attempted to comply with the first order:

(1) When, or shortly after, KP commenced practice in October 1993, that firm installed computer software systems called respectively PPOS (“Professional Practice Operating System”) and Konto.  Until 1995 PPOS had no accounting function.  The financial accounts of the firm were kept in the Konto system until 1995 when the PPOS system was enhanced to perform accounting functions and to replace the Konto system.

(2) Initially there were four departments of KP: Banking, Aircraft and Ship Finance, Project and Finance, and Conveyancing.  Later, departments were established for Information and Technology, China Practice, Commercial, Commercial Litigation and Employment Practice.

(3) The early PPOS system provided for information to be stored under the following headings:

(a) File Number.

(b) File Type.

(c) Matter.

(d) Identity of solicitor and officer handling the file.

(e) Master File reference.

(f) Cross Reference.

(g) Amount (seemingly the amount involved in the transaction).

(h) Particulars of costs charged, forecast or waived.

(i) Date when file opened and by whom.

(j) Date when file modified and by whom.

(k) Date when file closed and by whom.

(l) Names of the Parties involved in the transaction.

It appears that further headings were provided for files opened in the Conveyancing Department.  Samples of printouts produced by that Department show entries stating :

(m) Description of the property involved in the transaction.

(n) Statement of the costs charged and/or waived.

(o) Status of the file at the date when last entry made.

(4) Some files other than conveyancing files contain documents which evidence the original instructions received and many conveyancing files contain a copy of the relevant sale and purchase agreement.

(5) Before a file was sent for storage, the office procedure required completion of a form which identified, inter alia, the number of the carton in which the file was stored.

33.  Mr Koo chose to keep his firm’s records in digital form and the PPOS program was designed to record the names of the clients, the instructions received or the nature of the work to be done and the costs which were anticipated, billed and received.  But the program did not provide for the recording of the particulars of work actually done.  However, much of the work done by the Conveyancing Department might have been closely related to the instructions received as indicated by an entry under the heading “File Type”.  Thus a file such as file 93-00007 having the file type “Mortgage” which identified the amount advanced, the mortgagor and the property mortgaged would indicate in general terms what work was done if the transaction had no complicating features and standard conveyancing practice were followed.  In addition, the “Status” entry might contain (as file 93-00007 contained) the steps taken to complete registration and delivery of the title deeds to the Bank.  But the PPOS system did not provide the framework for recording the work done in a complicated transaction or work done by other departments.  Copies of PPOS printouts have been produced for some of the files that have been missing and they reveal a deficiency in the recording of work done.  For example, the PPOS entry for file number ASF9300002, handled by the Aircraft and Shipping Finance Department on the instructions of the Bank of China describes the “Matter” as “Term Loan of HK$60m to finance the down payment on three (3) Airbus A301-600R Aircraft”.  Whether KP drafted the loan agreement or merely advised on a document already drafted, whether KP researched and advised on the agreement between the borrower and the seller of the aircraft or negotiated any security for the loan or procured the execution of security documents is information that cannot be recovered from the PPOS program.  What is now known – presumably the information was derived from the Konto program – is that a bill for HK$150,540 was paid in January 1994.  The file which was opened in October 1993 was not closed until May 2001 by an employee identified by the initials “lhy” who left the firm.  The file is now missing.  Similarly, a missing Litigation Department file number 94-00643 related to a “Matter” described as “DCJ action 8755/93 Judgment Debtor”.  It was opened in February 1994 and modified in May 1994 but the PPOS record does not disclose what, if any, action was taken to enforce the judgment debt nor whether the file was closed.  There is no record of any bill or payment.      

34.  Moreover, such information as was entered in the program relating to the instructions received or the nature of the work to be done was accessible only by a person who was familiar with the practice of the Conveyancing Department (and perhaps of other Departments) to enter that information sometimes under the heading of “Matter” and sometimes under the heading of “File Type”.  Indeed, Mr Koo’s former solicitors who were charged with the responsibility of preparing a list of the relevant files listed some 700 files as having “no details provided” because there was no entry under “Matter” although there was an entry under “File Type” and sometimes there was an indication of work actually done under the “Status” heading.  As Reyes J reported after hearing evidence concerning the matters covered in Mr Koo’s 21^st Affirmation, Mr Koo himself conducted a spot check on 1 or 2 PPOS entries which had blank boxes under the “Matter” heading and then accepted that there were 700 of the relevant files with “no particulars provided”.  It was only when another of Mr Koo’s solicitors prepared a revised list of files (exhibited to Mr Koo’s 19^th affirmation filed on 4 August 2006 as exhibits DK-23 and DK-24) that data entered under headings other than “Matter” was incorporated into a list of the relevant files.

35.  Information was recovered from the covers of files to be incorporated in the column “KP file description” which appears in these exhibits.  After collecting information from the file covers and the particulars under the “Matters” and “File type” headings of entries in the PPOS program DK-23 and DK-24 provided the best information available from the office procedures of KP.  Mr Koo deposed that :

“DK-23 and DK-24 is now complete and records in columnar format, the file number, file description, date of document containing original instruction, description of document, details of original instruction, date of receipt/payment chop, receipt number/bill number, amount received and bill number in which payment was made for.”

DK-23 (which deals with BOC files) does not record the work done on the listed files.  It does not show compliance with the first Order.  Indeed, it demonstrates the contrary.  Many of the files listed in DK-23 describe the instructions received as “To prepare a legal charge” but a wide range of charges for work so described is indicative of wide variation in the work entailed in carrying out the instruction.  Some of the files listed show cryptic instructions, for example, “Enclosing copies of Supplemental Agreement for necessary action by KP” and “To procure all necessary legal procedures in relation to this matter” (File 00493).  Those instructions stimulated action which resulted in bill payments of $646,512 spread over 10 months but there is no description of the work done to earn these fees.  An earlier exhibit (DK-8) showed this file as opened on 20 January 1994 but not closed until 24 September 1997.  Other instances of files that have generated substantial fees without particulars of the work done appear in DK-23. 

36.  As the first Order was designed to allow KLY, if successful in its claim for breach of contract, to quantify its damages by reference to the profits that it would have derived had it been instructed to perform that work, Counsel for KLY points to the absence of time sheets to demonstrate the absence of particulars of work done and hence non-compliance with the Order.  Time sheets were not kept by KP because, so Mr Koo said, the fees to be charged were either scheduled fees or fees negotiated with the client.  True it is that, had time sheets been kept, they might well have shown what work was done but their absence does not add to the proof that the office procedure adopted by KP did not maintain an account of that work.

37.  The evidence which Mr Koo placed before the Courts below relating to the first Order was that he and his then solicitors reviewed the first Order in January 1994 and, he deposed –

“… ‘when I reviewed the Order of Mayo J with my then solicitors in January 1994, we reached the conclusion that the proper and diligent preparation of the books and financial records of Koo & Partners would be proper performance of the [first Order].  I did not prepare a separate account.  Since the date of that order, I have taken care to ensure that the books and financial records of Koo & Partners and supporting vouchers have been maintained and preserved for the purposes of the [first Order] …’”

The evidence now available demonstrates that the institution and implementation of the procedures of KP did not constitute “proper performance” of the first Order.  Yet that assertion was the basis of the decision of Reyes J to acquit Mr Koo of the charge of contempt of the first Order.  However, it failed to satisfy the Court of Appeal of compliance with the first Order in the light of what then appeared to be an absence of particulars in 700 out of 2000 files which were described as having “no details provided”.

38.  Counsel for Mr Koo submitted that the information now available shows that details were available in the Konto program for those 700 files once the particulars entered under “File type” are added to the particulars under “Matter” and that information supplemented, if need be, by the files themselves, recorded all the information required by the first Order, apart from some few missing files which are of minimal or no significance.  But Mr Koo was ordered to maintain an account which could be provided to KLY to show the work which KP had done; the first Order did not require Mr Koo merely to preserve KP’s records of instructions received (the data in the File type and Matter headings) and to keep files through which KLY would have to search in order to ascertain what work KP had done.  An account of work and the records of work from which an account could be prepared are different things.  “That is so as a matter of ordinary language”, to adopt what Christopher Clarke J said, albeit in a different context, in Gallaher International Limited v. Tlais Enterprises Limited [2008] EWHC 804, para.661.

39.  Mr Koo neither commenced nor maintained an account of all work which was undertaken by KP in relation to any former client of KLY.

Liability for breach of the first Order

40.  Because of the punitive consequences of guilt of civil contempt, counsel for Mr Koo submitted that proof of civil contempt required proof not only of the fact of breach of a court order (the actus reus) but also proof of a mental element (mens rea) in the same way as proof is required of those elements in a criminal prosecution (Lim Chin Aik v. The Queen [1963] AC 160, Sweet v. Parsley [1970] AC 132, 149; Gammon (Hong Kong) Ltd v. Attorney-General of Hong Kong [1985] 1 AC 1, 12).  Relying on the provisions of art.87 of the Basic Law and art.11(1) of the Bill of Rights, counsel submitted that the “presumption of means rea has acquired constitutional underpinning”.

41.  In criminal law, mens rea relates to the elements of the offence – the actus reus – which are defined by the statute or the common law which creates the offence.  These facts are characteristically the external elements of the offence: the specific act or omission of the offender, the circumstances in which the act is done or the omission is made and the result of the act or omission.  The requirement of “mens rea” in relation to any offence depends on the external element of the offence to which it relates.  As Lord Hailsham said in R v. Morgan [1976] AC 182, 213:

“The beginning of wisdom in all the ‘mens rea’ cases to which our attention was called is, as was pointed out by Stephen J in Reg. v. Tolson 23 QBD 168, 185, that ‘mens rea’ means a number of quite different things in relation to different crimes.”

Leaving aside offences requiring proof of a specific intent, mens rea is negatived if an act or omission is involuntary, or if there is a mistake about the circumstances which make the act or omission a crime or if an element of the crime is a result of the act or omission and the result is accidental.  If the proscribed act is done or omission is made without these negativing factors, the offender is said to have a “general intent” or mens rea to commit the offence (see He Kaw Teh v. The Queen (1985) 157 CLR 523, 569-572; 596).

42.  Counsel for the appellant submits that the relevant mens rea to be proved in cases of civil contempt is an intention “to interfere with or impede the due administration of justice”.  That is, an intention which runs counter to the objective of proceedings for civil contempt.  The objective of such proceedings, no less than the objective of proceedings for criminal contempt, is the maintenance of the court’s authority (A.M.I.E.U. v. Mudginberri Station Pty Ltd (1986) 161 CLR 98, 106; Kirk v. Walton [2009] 1 All ER 257).  Curial orders granted to enforce a civil right must be obeyed, else litigants would be left to the remedy of self-help.  As Lord Diplock observed in Attorney-General v. Times Newspapers Ltd [1974] AC 273, 308:

“There is an element of public policy in punishing civil contempt, since the administration of justice would be undermined if the order of any court of law could be disregarded with impunity.”

(See also per Lord Wilberforce in Heatons Transport (St. Helens) Ltd v. Transport and General Workers’ Union [1973] AC 15, 109). 

43.  The classic statement about the mental element in civil contempt, approved by a line of authority too substantial to be discounted, appears in the judgment of Warrington J in Stancomb v. Trowbridge Urban District Council [1910] 2 Ch 190, 194:

“In my judgment, if a person or a corporation is restrained by injunction from doing a particular act, that person or corporation commits a breach of the injunction, and is liable for process for contempt, if he or it in fact does the act, and it is no answer to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order.  I think the expression ‘wilfully’ in Order 42, r.31 is intended to exclude only such casual or accidental and unintentional acts as are referred to in Fairclough v. Manchester Ship Canal Co. [1897] W.N. 7.”

44.  In Fairclough (1897) 41 SJ 225, Lord Russell CJ had said:

“We desire to make it clear that in such case no casual or accidental and unintentional disobedience of an order would justify either commitment or sequestration.  Where the court is satisfied that the conduct was not intentional or reckless, but merely casual and accidental and committed under circumstances which negative any suggestion of contumacy, while it might visit the offending party with costs and might order an inquiry as to damages, it would not take the extreme course of issuing an order either of commitment or of sequestration.”

The rule under which proceedings were taken in Fairclough and in Stancomb provided for the enforcement of court orders by committal if the disobedience to the order was “wilful” (E.O.42, r.31) but later rules (E.O.45, r.5) omitted that requirement.  Lord Wilberforce commented in Heatons Transport (St. Helens) Ltd v. Transport and General Workers’ Union [1973] AC 15, 109 that “[a]ny effect which that omission may have (for instance perhaps as reducing the applicant’s burden of proof to establish a prima facie case) cannot be in favour of the party who has disobeyed the order”.  The Hong Kong rule which most closely approximates the later English rule is O.45, r.5.  It does not contain the element of wilfulness.  The Hong Kong rule does not deny the applicability of the Stancomb principle.  In England, as Lord Wilberforce observed in Heatons Transport (at p.109):

“… The view of Warrington J. has thus acquired high authority.  It is also the reasonable view, because the party in whose favour an order has been made is entitled to have it enforced, and also the effective administration of justice normally requires some penalty for disobedience to an order of a court if the disobedience is more than casual or accidental and unintentional.”

45.  In Spectravest Inc. v. Aperknit Ltd [1988] FSR 161, 173-174, Millett J said:

“To establish a contempt of court, it is sufficient to prove that the defendant’s conduct was intentional and that he knew of all the facts which made it a breach of the order.  It is not necessary to prove that he appreciated that it did breach the order … Authority for this conclusion may be found in Heatons Transport (St. Helen’s) Ltd. v. Transport & General Workers’ Union ([1972] 3 All ER 101 at 116-117, [1973] AC 15 at 108-110), and Mileage Conference Group of the Tyre Manufacturers’ Conference Ltd.’s Agreement ([1966] 2 All ER 849, [1966] 1 WLR 1137).  In the first of those cases, Lord Wilberforce described as contempt conduct which was ‘neither casual nor accidental and unintentional.’” 

The House of Lords again approved the Stancomb principle in Director of Fair Trading v. Pioneer Concrete (UK) Ltd [1995] 1 AC 456.  It has been applied in Hong Kong.  In Citybase Property Management Ltd v. Kam Kyun Tak (No. 1) [2003] 2 HKC 98, Ma J, in the course of finding a defendant guilty of civil contempt in breaching an order requiring her to cease using premises for the processing of food, observed (at p.103) :

“Unlike in criminal proceedings, where mens rea has to be demonstrated, there is no requirement in civil contempt proceedings to show that the alleged contemnor intended to disobey the order (ie his conduct was contumacious).  It is sufficient to proof (a) that he knew the facts which are said to make his act or omission a contempt and (b) that such act or omission was not accidental”.

Although I would doubt, with respect, the dichotomy which Ma J drew between the liability for crime and the liability for civil contempt, it is clear that liability for civil contempt does not depend on a contumacious intent.

46.  Of course, a contumacious disobedience to an order negates the possibility that the disobedience is “casual or accidental and unintentional” and is relevant to the penalty to be imposed for a contempt, but it is not an element to be established in cases of civil contempt by a party directly bound by an order.  If the mens rea in civil contempt were to extend to a contumacious intention to breach the order made by a court, it would go beyond the mens rea applicable to criminal offences.

47.  The Appellant challenges the application of the Stancomb principle, submitting that it is too strict.  There are some observations in Irtelli v. Squatriti [1993] QB 83 to support the submission.  The appellants who had been restrained from selling, disposing of or otherwise dealing with certain property, had executed a charge over it.  They were committed to prison for four months for contempt.  Although they had been advised by a solicitor, Farquharson LJ doubted whether the appellants “did intend to act in contempt of the court’s authority” (at p.90).  Taylor LJ said that the court could not be sure “that the appellants had knowingly breached the court order and, therefore”, a court could not be sure “that they were in contempt” (p.92F).  Nicholls V-C concluded that there was not “a knowing breach” of the court order because the appellants “did not understand that executing a … charge was prohibited by the order.”  In this case, and in others cited to support that submission, the court seems to focus on the harshness of the penalty in the instant case rather than on the mental element of contempt.

48.  Thus, in Phonographic Performances Ltd v. Amusement Caterers (Peckham) Ltd [1964] Ch 195, Cross J was considering whether to commit to prison the directors of a company in breach of an order.  Although he observed that civil contempt bears a penal or disciplinary character where there is “a measure of contumacy”, he then said (at p.199):

“I think, therefore, that although the order has now been complied with, I must consider whether it can be said in this case that the directors of the company were deliberately setting the court at defiance and were really treating the order of the court as not worthy of notice.  If that is the true view, then notwithstanding that the order has now been complied with, it may well be that a punishment ought to be inflicted on them.”

In Adam Phones Ltd v. Goldschmidt [1999] 4 All ER 486, a defendant who was required to hand over a source program of computer software and to delete any copies thereof, handed over what he thought was the program required but which was slightly different and placed his copy of the program in the recycle bin but did not overwrite (and thereby delete) it.  When proceedings for civil contempt were brought, Jacob J cited what Millett J had said in Spectravest Inc. v. Aperknit Ltd (at p.493) but observed (at p.494):

“… Free from authority I would have sided with Irtelli’s case.  The purpose of the remedy for contempt of court is to ensure obedience to the court’s order.  If a man honestly tries to obey the order but makes a mistake (always assuming the court believes him), then I can see no point in saying he is guilty and that his honest mistake goes merely to mitigation.  Indeed it is an abuse of language to say that a man honestly trying to obey the order of the court is showing ‘contempt’.”

It may be that the breach in Adam Phones fell within the “unintentional” exemption in the Stancomb principle.  In Concorde Construction Co. Ltd v. Colgan Co. Ltd (No. 2) [1984] HKC 253, Rhind J, having made an order requiring Colgan Co. Ltd, a building owner, to deposit certain moneys claimed by a builder into a separate bank trust account, dismissed contempt proceedings against the directors of Colgan for Colgan’s failure to make the deposit.  Colgan was “devoid of both assets and income”.  He said:

“Because it lacks the means to comply with my order, I am satisfied that Colgan cannot be regarded as in contempt.  Nor has any contempt been established against either … the two named directors.”

But this was not a case of a voluntary omission to comply with a mandatory injunction, it was a case where the injunction was impossible of performance.  Its omission was “unintentional” in the sense that, in a criminal context, it would be said that an offender who is unable to avoid making a prohibited omission does so involuntarily and lacks a general intent to commit the crime.  In Roger Paul Germain Yves Fromentin v. Kim’s Yacht Co. Ltd et al HCA 1226/2004 (unrep. 7 June 2005), although a defendant delivered a “shipbuilder’s certificate” as directed by an order, the certificate did not have the expected effect, in the case of a vessel built and moored in Xinhui in Mainland China, of transferring ownership and allowing the vessel to be delivered into custody at Tuen Mun.  Yam J could not say that the defendant “knew with mens rea that by following the strict letters of the order …[he] would be in contempt of court” (p.5).  This may be a case of an order ill-suited to achieve the intended result rather than a case of breach.  Otherwise the ineffectiveness of the shipbuilder’s certificate would be “accidental” in failing to produce the result of transferring ownership.

49.  Mr Thomas SC, with the candour that gives force to advocacy, drew the Court’s attention to authorities in Hong Kong and other common law countries which have adopted the Stancomb principle.

50.  The submission that proof of an intention to interfere with or impede the due administration of justice is necessary to liability for civil contempt cannot be accepted.  To require proof of such an intention would not only exceed the scope of the excuses admitted by the Stancomb v. Trowbridge U.D.C. line of cases but also would go beyond what would be required in proof of a criminal offence having the same elements as a civil contempt. 

51.  Counsel for the Appellant submitted that, even if that the Stancomb approach is correct in proceedings brought to enforce an order, it is not correct in proceedings brought to punish a party for a past failure to comply with an order.  Although it is correct to say that the litigation which gave rise to these proceedings was ultimately resolved by payment of the amount found to be due by Reyes J on 7 June 2007 when he took the account ordered by Ma J, the issues between the parties were alive when the notice of motion for contempt was issued on 30 December 2004.  At that time, Waung J had made an order for an interim payment but KLY were pressing for Mr Koo to exhibit and verify an account of profits in accordance with para.1(2)(c) of the second Order to enable the final account to be taken.  For reasons appearing below, no such account was provided until Mr Koo filed his 17^th Affirmation on 5 September 2005 (or, arguably, his 16^th Affirmation on 4 April 2005).  At the time when the proceedings for contempt were commenced, their purpose was clearly enforcement of the second Order with which Mr Koo’s default in compliance with the first Order was connected.

52.  However, let it be assumed that at this stage there is no further need for enforcement of the several Orders.  Then, it was submitted, there must be proof that the party intended to interfere with or impede the due administration of justice.  The dichotomy which this submission seeks to create between enforcement (the subject matter of O.45) and penalty (the subject matter of O.52) does not exist.  The penalty of committal for contempt is provided in order to ensure compliance with a court’s order, a disincentive to any interference with or impeding of the due administration of justice.  If the liability to penalty, once the time for compliance is past, ceases to be applicable to those who had not intended to interfere with or impede the due administration of justice, the incentive to comply with an order within the proper time would be lessened, if not eliminated.  Proceedings for enforcement and proceedings for penalty cannot be divided by the application of divergent principles.

53.  There is no reason, either of policy or authority, for adopting a criterion of liability for civil contempt that is stricter than that defined by the Stancomb principle.  The exception for breaches that are not “casual or accidental or unintentional” ensure that no injustice is done when the breach of the court order is occasioned by such a cause.  But when an act or omission in breach of a court order is done or made consciously, voluntarily and unaffected by any mistake – that is, not casually, or accidentally or unintentionally – it is immaterial that the breach was committed in reliance on a third party’s advice, even legal advice. In re Mileage Conference Group of the Tyre Manufacturers’ Conference Ltd’s Agreement [1966] 1 WLR 1137; [1966] 2 All ER 849 is the authority chiefly cited for the proposition that reliance on legal advice is no defence if a breach is established.  Megaw J, reading the judgment of the Restrictive Practices Court, said (at p.1162):

“We conclude, therefore, that the breaches of undertaking here were contempts of court, even though it were to be shown that they were things done, reasonably and despite all due care and attention, in the belief, based on legal advice, that they were not breaches.”

Distinguishing penalty from liability, his Lordship later said:

“Questions as to the bona fides of the persons who are in contempt, and their reasons, motives and understandings in doing the acts which constitute the contempt of court, may be highly relevant in mitigation of the contempt.  Bona fide reliance on legal advice, even though the advice turns out to have been wrong, may be relevant, and sometimes very important, as mitigation.  The extent of such mitigation must, however, depend upon the circumstances of the particular case, and the evidence adduced.”

54.  In the present case, the mens rea that must be proved to show Mr Koo’s liability for breach of the first Order is his conscious and voluntary decision not to maintain an account of the work actually undertaken by KP for former clients of KLY but to keep the files and ledgers and the records kept in the Konto and PPOS programs in the hope that that would suffice if he were ever ordered to produce an account as ordered by Mayo J.  The hope was misconceived.  The conclusion which Mr Koo and his then solicitors reached in January 1994 that “the proper and diligent preparation of the books and the financial records of [KP] would be proper performance of the [First] order” was erroneous since the books and financial records were not designed to “maintain an account of all work … in relation to any former client of [KLY] until trial”. 

55.  Indeed, Mr Koo’s inability to exhibit and verify an account made pursuant to the first Order when required to do so within 28 days by para.1(2)(b) of the second Order demonstrates his failure to obey the first Order.  The plea that he “did his best” or that the ordinary practice of his office was considered by him and his solicitor as adequate does not show that the failure was “casual or unintentional or accidental”.  Mr Koo was guilty of contempt of the first Order.

Liability for breach of Paragraph 1(2)(b) of the Second Order

56.  Paragraph 1(2)(b) was ordered under the misapprehension that there was an account compiled pursuant to the first Order that was capable of being exhibited and verified.  But there was no such account and para.1(2)(b) of the second Order could not have been obeyed by Mr Koo.  True it is that the absence of the account and the misapprehension under which Ma J made the second Order are to be attributed to Mr Koo’s default, but it does not follow that he is guilty of contempt for failing to exhibit and verify an account which was never brought into existence.  The gravamen of para.1(2)(b) of the second Order was not the compiling of an account but the exhibition and verification of an account already in existence.  Mr Koo was incapable of complying with para.1(2)(b), just as the defendants in Concorde Construction Co. Ltd v. Colgan Co. Ltd (No. 2) [1984] HKC 253 were incapable of depositing moneys when there were none to deposit.  There can be no penal liability for a failure to perform an impossible task.  Had Mr Koo obeyed the first Order, then his failure to exhibit and verify the account which would have been available would have exposed him to liability for contempt of para.1(2)(b).

Compliance with Paragraph 1(2)(c) of the Second Order

57.  Paragraph 1(2)(c) was ordered in consequence of the Order that Mr Koo do account to KLY for the profits earned in relation to legal services provided by KP to BOC for the 12 months from 1 October 1993 to 30 September 1994.  The first step was to produce an account of profits – not of work done – which Mr Koo might exhibit and verify.  The PPOS and Konto programs and KP’s ledger contained information which showed the gross billings and receipts of KP during the relevant 12 months from 1 October 1993 to 30 September 1994. 

58.  Mr Koo engaged highly qualified accountants to prepare the required account, first Mr I G Robinson and later Mr Andy Choi Man On.  By his 17^th Affirmation filed on 5 September 2005, Mr Koo adopted Mr Choi’s report as his account and verified that report (contained in Mr Choi’s first Affirmation) “and all the underlying primary documents exhibited to that report”.  It is accepted that this satisfied the obligation imposed by para.1(2)(c) of the second Order but it was, of course, too late to comply with the time limited by that Order and extended by the third Order.

59.  Counsel for Mr Koo submitted that para.1(2)(c) of the second Order was complied with by the affirming of Mr Koo’s 11^th Affirmation on 17 February 2004 prior to the time limited by the third Order.  In his 11^th Affirmation, Mr Koo referred to the first Affirmation of Mr I G Robinson, a highly qualified accountant whom Mr Koo had retained to analyse the files relating to BOC work during the year covered by the second Order and to prepare the required account.

60.  Mr Robinson’s Affirmation described the information that had been provided to him by KP and others, including Mr Koo.  In particular, a list of BOC files for the relevant period had been produced by KP and had been an exhibit (DK-8) to an earlier affirmation by Mr Koo.  DK-8 contained billing information for many of the files and Mr Robinson caused a review of a sample of those files to be conducted.  He prepared his own schedule, adding some additional billing information and some comments on some of the files.  This schedule became exhibit IGR-3 to his affidavit.  Both DK-8 and IGR-3 listed some 700 files with “no details provided”.  Based on the examinations which he had conducted and the information with which he had been supplied, Mr Robinson calculated that KP had made a loss on BOC business during the relevant year amounting to HK$830,777.

61.   Mr Robinson’s Affirmation and its exhibit IGR-3 were not an account of “all profits earned” by KP.  The absence of particularity for a large number of files, some of which were missing, precluded any statement of profit except by broad estimation.  Mr Koo’s 11^th Affirmation did not purport to verify even the estimate which Mr Robinson had made.  Mr Koo’s affirmation of the truth of Mr Robinson’s Affirmation was limited “to the extent that that document refers to me or to documents produced by me”.  Most of the material referred to by Mr Robinson had been produced by persons other than Mr Koo.

62.  It follows that, by the time limited by the third Order, Mr Koo had failed to exhibit and verify the account ordered by Ma J.  There had been no application for a variation of the second Order.  Reyes J had acquitted Mr Koo of contempt in relation to the order in para.1(2)(c), however, because of the legal advice he had received from his solicitor that he could not lawfully verify an account based upon documents produced by persons within the firm of KP other than Mr Koo.  Subsequently that advice was reversed but Reyes J, regarding Mr Koo as having acted under a mistake of civil law, held that his conduct was not engaged in with mens rea.  His Lordship said (para.129) :

“129.    I should add that, despite his dilemma, Mr Koo did not simply stop doing anything by way of an account.  On the contrary, he instructed Mr Robinson to produce an account and calculations.  He then did, what he thought was the utmost which he could do, which was to verify documents adduced by Mr Chan ‘to the extent that Mr Robinson’s document refers to me or to documents produced by me’.”

63.  Counsel for Mr Koo supported this approach.  He sought to distinguish In re Mileage Conference Group from the present case on the ground that that case was concerned with advice as to the meaning of the order while the present case is concerned with what an accountable party may lawfully do to obey the order.  It was submitted that, if there be a mistake of civil law which leads to non-compliance, mens rea is negatived.  In support of this argument, counsel cited R v. Gould [1968] 2 QB 65, a bigamy case in which the accused mistakenly believed that his previous marriage had been dissolved.  The citation was taken from an observation in Archbold (para.17-23) that “[a] mistake as to the civil law may have the effect of negativing mens rea”.  There is, of course, an exception to criminal liability for property offences when an alleged offender has acted in exercise of a bona fide claim of right, but R v. Gould was not a case of mistake of law.  Diplock LJ, speaking for the Court of Appeal, held this not to be a mistake of law but a mistake of fact.  He adopted the reasoning of Dixon J in an earlier Australian case, Thomas v. The King (1937) 59 CLR 279, 306, where Dixon J pointed out that “a mistake as to the existence of a compound event consisting of law and fact is in general one of fact and not a mistake of law”.  In a contempt case, a mistake about the legitimacy of action to comply with a court order is no excuse for non-compliance.  If it were otherwise, obedience to court orders would be problematic: dependent on the correctness of legal advice about what the party bound by the order might lawfully do to obey it.  In the present case, there was no mistake of fact.  Both Mr Koo and his solicitor were aware of the material on which Mr Robinson’s estimate had been based and on the provenance of that material.  The mistake was merely an error in appreciating what was required to verify an account. 

64.  Mr Koo was guilty of contempt for disobedience to the order in para.1(2)(c) of the Second Order.

The third Order and its meaning

65.  The third Order is expressed as an extension of the time that had originally been specified in the second Order.  It cast no new obligation on Mr Koo but extended the time within which to discharge his obligation under the second Order.  Mr Koo’s failure to discharge that obligation was a breach of the second Order because he did not obey the second Order within the extended time.  The extension of time did not duplicate Mr Koo’s liability for contempt for disobedience of para.1(2)(c).

66.  There was no contempt of the third Order.

Procedural Issues

67.  Order 45, r.5(1) provides for the enforcement by committal or fine of a mandatory order when the defendant is “required by a judgment or order to do an act within a time specified in the judgment or order” and refuses or neglects to do it within that time or an extension of that time.  Order 45, r.7(2) requires a copy of such an order to be served on the defendant “before the expiration of the time within which he was required to do the act”.  The first Order did not specify a particular date or time within which the account was to be maintained nor was that Order served on Mr Koo until 24 March 2004, after the trial before Ma J.

68.  Counsel for Mr Koo submitted that the first Order could not be enforced by committal either because it did not specify a particular date or time within which the account was to be maintained or because it was not served until after the duty to maintain an account had expired.  Order 45, r.5(1) follows upon O.42, r.2(1) which provides that a mandatory order must specify “the time after service of the … order, or some other time, within which the act is to be done”.  A mandatory order to perform an act continuously until a specified date or event occurs is an order to do the act from time to time as needed to ensure continuity until the occurrence of the specified date or event.  So construed, the first Order is an order which complies with the requirements of O.42, r.2(1) and which is amenable to enforcement under O.45, r.5(1).  Moreover, no application to set aside the first Order was made and it had to be obeyed unless and until it was set aside.

69.  The requirement of timely service under O.45, r.7(2) was not met in the case of the first or second Order but O.45, r.7(7) authorizes the Court to dispense with service “if it thinks it just to do so” and that power may be exercised as well after as before the time specified in a mandatory order (Davy International Ltd v. Tazzyman [1997] 1 WLR 1256).  An application for dispensation was formally, albeit without a supporting summons and affidavit, made by counsel for KLY, but it seems to have faded from consideration in the course of argument in the courts below.  The absence of a formal summons and supporting affidavit is no bar to the making of an order when the party affected has adequate notice of the application and the court is apprised of the relevant facts.  A dispensing order can and should be made by this Court.  The purpose of O.45, r.7(2) is to ensure that notice of the Order is given to the party bound.  In this case, the first Order for the maintaining of an account of work followed Mr Koo’s proffering of his keeping of a record of work for former KLY clients as a reason for refusing an injunction preventing him from commencing the practice of KP.  Then the Order was considered by him and his solicitor shortly after the Order was made in order to chart his future conduct.  In the circumstances, it is entirely just to make a dispensing order. 

70.  Counsel for Mr Koo raised the further objection that the procedure prescribed by O.52 of the High Court Rules was not followed in the present case and that the failure to do so was fatal to the application for committal of Mr Koo.

71.  The initiating step in committal proceedings is the filing of a statement setting out, inter alia, “the grounds on which … committal is sought”, supported by an affidavit verifying the facts relied on (rule 2).  Leave to commence proceedings is sought from a judge and, if granted, a notice of motion containing the same grounds subject to variation by the judge’s order is filed and served personally on the defendant, accompanied by the statement and the affidavit.  In the present case, the grounds for committal in the statement and in the notice charged that Mr Koo had failed to comply with :

“(1) Paragraph 2 of the Order of the Honourable Mr. Justice Mayo dated 21^st January 1994;

(2) Paragraph 1(2)(b) and (c) of the Order of the Honourable Chief Justice Ma dated 19^th September 2003; and

(3) Paragraph 1 of the Order of the Deputy High Court Judge Muttrie dated 21^st January 2004.”

72.  The “grounds” referred to in r.2 do not comprehend the evidence that is to be relied on in proof of the contempt but the factual elements which, if proved, are sufficient to establish the contempt.  In the present case the identification of the specific provisions of each order sufficiently allege what had to be done to comply and non-compliance was charged.  This was a sufficient and appropriate statement of the grounds for committal of Mr Koo, and it is immaterial whether the evidence adduced at the trial corresponded with the facts alleged in the initiating statement and the verifying affidavit.  

73.  Although the procedures governing committal for contempt are strictly enforced when needed to safeguard the liberty of an alleged contemnor, the discretionary power to dispense with a procedural requirement is available in appropriate case.  As Lord Woolf MR said in Nicholls v. Nicholls [1997] 2 All ER 97, 108 :

“… Like any other discretion, the discretion provided by the statutory provisions must be exercised in a way which in all the circumstances best reflects the requirements of justice.  In determining this 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.  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.  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.  While the procedural requirements in relation to applications to commit and committal orders are there to be obeyed and to protect the contemnor, if there is non-compliance with the requirements which does not prejudice the contemnor, to set aside the order purely on the grounds of technicality is contrary to the interests of justice …”

Conclusion

74.  It is not necessary to examine the reasoning of the courts below, much of which was based on an understanding of the facts which has been overtaken by the evidence adduced by leave of this Court.  The judgment of the Court of Appeal correctly found, for the reasons above stated, that Mr Koo was guilty of contempt of court for disobedience to the first Order and para.1(2)(c) of the second Order.  It was in error, again for the reasons above stated, in holding Mr Koo guilty of contempt for disobedience to para.1(2)(b) of the second Order and for disobedience to the third Order, and the judgment must be varied accordingly.

75.  The Court of Appeal remitted the question of penalty to the Court of First Instance where Carlson DHCJ, being bound by the findings of the Court of Appeal, imposed a fine of $135,000.  As Mr Koo ought not to have been found guilty of contempt in respect of para.1(2)(b) of the second Order or the third Order, the Court of Appeal’s order remitting the question of penalty must now be set aside and a remittal order limited to the question of penalty for contempt of the first Order and para.1(2)(c) of the second Order substituted.  The consequence is that the Order of Carlson DHCJ imposing the fine must be set aside – as this Court may order pursuant to s.17 of its statute – so that a further sentencing hearing will have to be listed.  As the elimination of Mr Koo’s liability for contempt on two of the counts charged makes only a minor difference to his overall culpability, the result of the rehearing may be little different.  It may be in the interests of both parties that they agree on the amount of the fine and advise the judge accordingly.  The judge would not be bound by that advice but he or she may well take it into account and dispense with a further full scale hearing before imposing the new fine.

76.  I would order as follows:

(1) Service of the first and second Orders on Mr Koo before the expiration of the respective times within which he was required to comply with the first Order and para.1(2)(c) of the second Order be dispensed with.

(2) The appeal be allowed in part.

(3) The Order of the Court of Appeal be varied by deleting –

(a) paragraph 1(2)(b) from para.(ii) of the findings;

(b) paragraph (iii) of the findings; and

(c) order (3) of the Court’s order and in lieu thereof inserting an order in the following terms:

“the question of penalty for the contempt of court committed by the 1^st defendant in failing to comply with para.2 of the Order of the Honourable Mr Justice Mayo dated 21^st January 1994 and with para.1(2)(c) of the Order of the Honourable Ma CJHC dated 19^th September 2003 be remitted back to the Court of First Instance for determination by a Judge (other than the Honourable Mr Justice Reyes).”

(4) The Order of Carlson DHCJ imposing a fine of $135,000 on Mr Koo be set aside.

(5) That there be an order nisi that the appellant bear the costs of and incidental to this appeal calculated on an indemnity basis and that the appellant be at liberty to file submissions in writing as to costs within 14 days of the date of this judgment and that any submissions in reply be filed within 14 days thereafter and in the absence of any such submissions that the order nisi stand as an order absolute without further order.

 

Mr Justice Bokhary PJ :

77.  The Court unanimously dispenses with service as Sir Gerard Brennan NPJ proposes and allows the appeal in part to the extent and with the order as to costs which he proposes.