SUN FOOK KONG (CIVIL) LTD v. MULTIPIPE RENOVATION LTD

   HCA 2504/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2504 OF 2008

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BETWEEN

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J U D G M E N T

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1.  This is the plaintiff’s motion against the defendant and Mr. Carlmen Chan Wah Tat (“Mr. Chan”) for committal for their contempt of court for failing to comply with my order of 24 December 2008 (“the order”). Mr. Chan is the sole shareholder and director of the defendant.

2.  The order was made after a contested hearing where the parties were represented by counsel and solicitors. The order that I made included an order by paragraph 1 that:

“ the Defendant do forthwith deliver or cause to be delivered or take steps to deliver all construction plant, machineries and equipment directly or indirectly purchased by the plaintiff under the subcontract in relation to the drainage, maintenance and construction works in the Mainland South Districts under the Main Contract No. DC/2007/11 (the “Subcontract”) as set out in the list attached hereto as Appendix I (the “Equipment”).”

3.  The order also included an order by paragraph 3 that :

“ the Defendant do forthwith deliver or cause to be delivered or take steps to deliver all pipe lining materials directly or indirectly purchased by the Plaintiff under the Subcontract which has not yet been used in the Subcontract (the “Material”).”

4.  Appendix I of the order listed out the eight items said to constitute the Equipment.

5.  The facts leading up to the grant of the order are set out in the Reasons for Judgment handed down on 6 January 2009 which I shall not repeat here. Briefly, the plaintiff is the main contractor of the drainage project in respect of the drainage, maintenance and construction works in the Mainland South Districts under the Main Contract No. DC/2007/11. The employer is the Drainage Services Department of the Government. The defendant is a specialist subcontractor in pipe lining works. The defendant was the subcontractor of the plaintiff in respect of works under a subcontract.

6.  I was concerned with an application for an injunction by the plaintiff which included mandatory orders for the defendant to deliver the Equipment and the Material to the plaintiff. On 24 December 2008 I made the order.

7.  The defendant failed to comply with the order despite demands made on it by the plaintiff to do so.

8.  Mr. Chan was also served with the order with a penal notice endorsed thereon.

9.  The plaintiff applied for leave ex parte to commit the defendant and Mr. Chan for their contempt.

10.  On 16 January 2009 I made an order that personal service of the order on the defendant was to be dispensed with and that leave be granted to the plaintiff to apply for committal of the defendant and Mr. Chan for their contempt in failing to comply with the order.

11.  The notice of the motion was issued on 13 January 2009. I have since given directions for the filing of evidence.

12.  Mr. Chan has relied on his 2^nd affirmation filed on 25 June 2009 in opposing the plaintiff’s application. He has also given oral evidence and has been cross-examined.

13.  Mr. Chan disclosed in his 2^nd affirmation that the Equipment and the Material were, in fact, stored in a rented yard since November 2008, that is before the order.

14.  At paragraph 8 of his 2^nd affirmation he said that due to the poor financial status of both the defendant and himself they were unable to meet the monthly rental of the yard since December 2008 and that the landlord of the yard was keeping the Equipment and the Material as a lien for the rental and deposit. He said that the items could be recovered upon payment of the outstanding rental and deposit but that the defendant and he himself were unable to make such payments due to their financial condition. He also proposed that the plaintiff should settle the outstanding rental with the landlord to obtain release of the same from the landlord of the yard. This was rejected by the plaintiff.

15.  A few days ago Mr. Chan made another proposal to the plaintiff whereby he would contribute $30,000 towards the outstanding rental and deposit payable to the landlord of the yard and the plaintiff to pay the balance. Subject to working out some matters of detail, I have been informed by Mr. Wong, counsel for the plaintiff, that an agreement in principle has been reached as to the release of the goods from the yard without prejudice to proceeding with the plaintiff’s motion for committal.

16.  I accept that even though the order would now be complied with, the plaintiff is entitled to proceed with the motion.

17.  The obligation is on the plaintiff to prove beyond reasonable doubt that the defendant and Mr. Chan are guilty of contempt of court in failing to comply with the order. The defendant and Mr. Chan do not have to prove anything.

18.  There is no requirement on the part of the plaintiff to show that the defendant and Mr. Chan intended to disobey the order. It is sufficient to prove that they knew the facts which were said to make their act or omission a contempt and that such act or omission was not accidental. The defendant and Mr. Chan should, however, be aware of the order and the consequences of breaching it (Citybase Property Management Ltd v Kam Kyun Tak and others (No. 1) [2003] 2 HKC 98 at page 103 per Ma J (as he then was)).

19.  And in Kao, Lee & Yip (a firm) v Donald Koo Hoi Yan & Ors, FACV 27 of 2007, Court of Final Appeal, 25 June 2009, Sir Gerard Brennan NPJ said at paragraph 45 that

“...... it is clear that liability for civil contempt does not depend on a contumacious intent.”

20.  There is no doubt that the defendant and Mr. Chan were aware of the order and the consequences for failing to comply with it. There was a penal notice endorsed on the order.

21.  That the order has not been complied with until the very recent agreement in principle is not really disputed.

22.  Mr. Chan’s evidence is to the effect that the defendant and he himself are financially unable to pay the rental charges and deposit to the landlord of the yard to secure the release of the Equipment and the Material.

23.  Mr. Chan submitted that he has used his best endeavours to try and comply with the order. I do not accept this. In any event, this does not provide a defence. The order was to forthwith deliver or cause to be delivered or take steps to deliver the Equipment and the Material. The order was not to use best endeavours to do so.

24.  Despite being ordered to forthwith deliver or cause to be delivered or take steps to deliver the Equipment and the Material, it was only after the contempt proceedings were well under way that the defendant wrote on 2 March 2009 to the plaintiff asking the plaintiff to collect the Equipment and the Material from the storage yard.

25.  I have heard the evidence and the cross-examination of Mr. Chan. I do not believe that he and the defendant were financially incapable of paying the storage charges and deposit to seek release of the Equipment and the Material after the order was made.

26.  Mr. Chan confirmed in evidence what he had said in paragraph 18 of his 1^st affirmation to the effect that the defendant had fixed assets worth $10,000,000, although they may not fetch anywhere near that in a forced sale.

27.  I bear in mind that the storage fees are $26,000 per month with a deposit of one month’s storage fees. I reject Mr. Chan’s evidence that the defendant and he himself are financially unable to raise money to pay the outstanding storage charges for the Equipment and the Material.

28.  I would also refer to Re Texgar Ltd [2001] 2 HKC 426 where it was held that if a company were financially incapable of meeting the order, the proper course was to depose to the same on affirmation giving full and frank disclosure of the financial means. That was not done in that case and has also not been done in this case.

29.  The bank statements in evidence disclosed by Mr. Chan are selective and do not show the financial position for the whole period from the time of the order.

30.  I should, however, mention that I place no reliance on the fact that school fees were paid by Mr. Chan for his son in England. I accept this part of Mr. Chan’s evidence that the payment in and withdrawal on 16 April 2009 from the defendant’s bank account of about $100,000 represented a loan that his wife had obtained from her relatives for the specific purpose of paying school fees for their son.

31.  However, as the bank statements of the defendant show, there were other payments made by the defendant in April and May 2009. Mr. Chan said that these were payments to staff of the defendant who were owed money by the defendant. That, however, shows that it was a conscious and intentional decision to deploy the income received by the defendant for its expenses rather than for the storage and deposit charges to release the Equipment and the Material so as to comply with the order.

32.  I am satisfied beyond reasonable doubt that the defendant and Mr. Chan are guilty of contempt of court in failing to comply with the order and I so find.

[After hearing submissions]

33.  I have found the defendant and Mr. Chan guilty of contempt of court. I bear in mind that the order has now been complied with, although belatedly and only after the plaintiff has brought these contempt proceedings right up to this day. The primary purpose for instituting these contempt proceedings was to enforce the order. That has now been done. Failing to comply with a court order is, of course, a serious and not a trivial matter.

34.  I bear in mind the sentences that have been passed in other cases. Each case, however, depends on its own facts. I am satisfied that Mr. Chan has tried to comply with the order at a late stage and the matters that he has raised really go to mitigation rather than an excuse for not complying with the order.

35.  In the circumstances of this case I think that justice will be served if I do not impose any penalty on the defendant and Mr. Chan but simply make an order against both of them that the costs of all these proceedings be paid by the defendant and Mr. Chan such costs to be taxed on an indemnity basis and to be paid forthwith. To make it clear, the costs of the plaintiff’s application, including the costs reserved when obtaining ex parte leave and the costs reserved on 23 February 2009 and 30 June 2009 and to-day are all to be the plaintiff’s costs to be paid by the defendant and Mr. Chan to be taxed on an indemnity basis and to be paid forthwith.