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

HCA 8847/1993

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8847 OF 1993

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J U D G M E N T

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I.       INTRODUCTION

1.  On 2 April 2003, following trial, Ma J held that Mr Koo had breached his fiduciary duty to Kao Lee & Yip (KLY).  The breach was the result of Mr Koo setting up a firm (Koo & Partners (KP)) while still a KLY partner.  Ma J further found that Mr Koo had diverted legal work involving the Bank of China Group (BOC) from KLY to KP. 

2.  Ma J ordered that Mr Koo account to KLY for all profits earned by KP on BOC work in the 12 months from 1 October 1993 (the relevant period).  But such account was to make:

“due allowance against the [BOC] 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 [Mr Koo])”.

3.  On 19 September 2003 Ma J gave detailed directions (by consent) for the taking of the account he had ordered on 2 April 2003.

4.  Kao Lee & Yip (KLY) now applies to commit Mr Koo for contempt for failing to comply with Ma J’s September 2003 Order and related orders.  More particularly, KLY complains that Mr Koo has disobeyed 3 Orders.

5.  First, KLY says that Mr Koo ignored an Order of Mayo J dated 21 January 1994.  That directed Mr Koo to “maintain an account of all work which is undertaken by [KP] in relation to any former client of [KLY] until trial or further order”.

6.  Second, KLY says that Mr Koo wilfully disobeyed Ma J’s September 2003 Order in 2 respects.  Mr Koo (KLY contends) failed to exhibit and verify:

(1)     the account made pursuant to Mayo J’s Order (see Ma J’s Order §1(2)(b)); and

(2)     the account ordered to be taken by Ma J on 2 April 2003 (see Ma J’s Order §1(2)(c)).

7.  Third, KLY says that Mr Koo flaunted the Order of Deputy High Court Judge Muttrie dated 21 January 2004.  That was an unless order which gave Mr Koo until 18 February to comply with Ma J’s September 2003 Order.  The sanction for failing to meet the extension was that KLY would have leave to commence committal proceedings against Mr Koo.

8.  The issue before me is whether Mr Koo should be held liable in contempt for the breach of the 3 Orders identified by KLY.

II.      DISCUSSION

(A)     The law

9.  Before I can find that there has been a civil contempt, I must be satisfied beyond a reasonable doubt that the “actus reus” and the “mens rea” of the alleged contempt have been made out.

10.  What must be established by way of “actus reus”?  In essence, the plaintiff must show beyond a reasonable doubt that a person acted or omitted to act in some way contrary to a Court Order.

11.  But, in evaluating whether there has been non-compliance with its Order, the civil court of necessity concerns itself with substance, rather than mere form.  This is because the consequences of contempt are serious and may extend to imprisonment and a fine.  In general, a Court should not find that someone has acted in contempt, even though there has been substantial adherence with an Order and any non-compliance is merely trivial.  In a case of substantial compliance, it must be open to a Court to hold that the requisite actus reus has not been established.

12.  What must be shown by way of “mens rea”?  In Citybase Property Management Ltd. v. Kam Kyun Tak [2003] 2 HKC 98 (at 103H), Ma J stated:

“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 proof that (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....  Of course, the alleged contemnor should be aware of the order and the consequences of breaching it...”

13.  Subject to 3 observations, I adopt Ma J’s dictum as a working definition of the mental element in civil contempt.

14.  The 1^st observation concerns the motive to disobey.  I think that Ma J’s description of the mental element elides an intention to disobey with an intention to act or omit to act in a particular way.  The 2 classes of intention are distinct.

15.  Typically, the mens rea of a crime is an intention to perform the individual actions which together constitute the actus reus of an offence.  Motive is usually irrelevant in determining mens rea.  Whether or not an actor knows that his act constitutes an offence is immaterial.  Nor need the actor have an intention to disobey the law.  It is enough that he deliberately performs the act which constitutes the offence of which he is charged.

16.  I therefore doubt that there is such a substantial difference (as Ma J suggests) between establishing mens rea in criminal proceedings and in proceedings for civil contempt.  In both instances, motive (in the sense of an intention to disobey) is not relevant.  Instead, the Court must be satisfied beyond reasonable doubt that a person deliberately acts or refrains from acting contrary to an Order.

17.  The 2^nd observation concerns situations where (as here) the charge is not that a person acted in some way when he ought not to have done so, but that a person did not act in some way when he ought to have done so. 

18.  Suppose that the Court orders a person to achieve outcome Q.  Assume that the Order does not specify precisely how Q is to be achieved and that there are a number of ways in which Q might be accomplished.  A person might in good faith conclude that Q can be achieved by method X.  But suppose that, unfortunately, it turns out that X was flawed and only imperfectly achieves Q.

19.  Can it be said in such case that there has been a failure by the person to comply with the Court’s Order, merely because he chose a method X which (with hindsight) was ineffective to achieve Q?

20.  Commonsense dictates a negative answer to the question just posed.  Provided that the alleged contemnor chose method X in good faith, it would be odd for the law to hold that he deliberately intended not to achieve Q.

21.  Ma J’s dictum cited above supports this conclusion in 2 ways.

22.  First, Ma J stresses that the mental element requires proof that the person knew of the facts which would make his omission a contempt.  A person cannot know such facts where he honestly believes that his chosen method is a practical means for bringing about Q.

23.  Second, that X ultimately proved inadequate as a method may be characterised as an “accidental” event.  This is because the fact that X turned out to be abortive was outside the alleged wrongdoer’s expectation or contemplation.  He did not think that X would fail to achieve (or would only imperfectly attain) Q.

24.  The 3^rd observation concerns mistakes of law.  In criminal proceedings, ignorance of the criminal law does not refute mens rea.  But a mistake as to civil law may negative mens rea.

25.  As I have noted, here it is sought to punish someone for a failure to act in a particular way.  But suppose that person genuinely believes that, much as he wishes to do so, he cannot conform to the letter of a Court Order.  Suppose that this belief is due to advice from his lawyer that on the facts there is an impediment under civil law from strict compliance with the Court Order.  Assume that this advice, although given in good faith, is erroneous.

26.  In such circumstance, can it be said that there is a deliberate intention not to comply with the relevant Court Order? 

27.  This sort of question is more likely to arise when one deals with omissions to act as opposed to situations where one has acted in some positive way said to constitute an offence.  Criminal law normally deals with positive acts which constitute an offence.  It is rare for someone to be punished in the criminal court for omitting to act in some way.

28.  I believe that a judge should hesitate to find the mens rea for civil contempt in the given premises.  The omission to act arises, in spite of one’s will, as a result of wrong advice.  The advice may be on a matter of law, but it involves civil and not criminal law.

29.  Within the terms of Ma J’s dictum, the proffering of the faulty advice on civil law can be described as an event which is outside the alleged contemnor’s control.  The omission as a result of such advice would be “accidental” rather than deliberate.

30.  I now turn to analyse whether the requisite actus reus and mens rea have been made out in relation to the 3 Orders identified by KLY.

(B)     Judge Muttrie’s January 2004 Order

31.  It is convenient to start with Judge Muttrie’s Order. 

32.  The Order extended Mr Koo’s time for complying with Ma J’s September 2003 Order.  If there was a failure to comply with the letter of that Order, then KLY automatically had leave to apply to commit Mr Koo for contempt.

33.  It follows that non-compliance with Judge Muttrie’s Order does not provide a free-standing basis on which to hold Mr Koo in contempt.  Whether there has been contempt in relation to that Order must depend on whether there has been non-compliance with Ma J’s Order.  The real issue is whether Mr  Koo should be cited for contempt in respect of any breach of Ma J’s September 2003 Order.

(C)    Mayo J’s January 1994 Order

C.1        KLY’s argument

34.  Mr Jeremy Chan (appearing for KLY) submits that Mr Koo is in contempt of this Order on the following basis:

(1)	There is actus reus.  By Mr Koo’s own admission, apart from the records which KP would normally have kept even in the absence of any Order by Mayo J, Mr Koo did not keep any special record of the work done by KP for former KLY clients.
(2)	Mens rea can be inferred.  Mr Koo knew of Mayo J’s Order.  He is a solicitor and must have known of the consequences of disobeying the Order.  When Mr Koo decided not to keep any special record of KP’s work for former clients, he must have taken that course deliberately, rather than inadvertently.  Mr  Koo must thus have intended to disobey Mayo J’s Order.

35.  I am not persuaded by Mr Chan’s argument.

C.2    Mens rea

36.  Mr Koo says that, when he considered Mayo J’s Order in January 1994 with his then solicitors (Messrs. Alsop Wilkinson), he concluded that:

“the proper and diligent preparation of the books and financial records of Koo & Partners would be proper performance of the order of 21 January 1994”.

37.  Accordingly, Mr Koo felt that the records generated in respect of a given file constituted an adequate accounting in terms of Mayo J’s Order.

38.  In previous hearings in this action, Mr Koo has been criticised by judges for failing to keep time sheets despite Mayo J’s Order.  In his Judgment dated 6 September 2004 on KLY’s application for interim payment, Waung J (at §18) characterised the lack of time sheets as “very surprising”.  In his Judgment dated 19 May 2005 on further directions for an account, Judge Muttrie (at §54) observed: “There is ample evidence that KP did not keep time sheets.  No doubt they should have.”

39.  On affirmation, Mr Koo has explained that, rightly or wrongly, he thought that developments in information technology systems from the 1990s onwards rendered the keeping of time sheets obsolete.  This (Mr  Koo believed) was especially true for KP since much of its work involved the provision of conveyancing and intellectual property services which were charged on a value basis rather than on the basis of time spent.  With time cost bills in civil litigation, it was KP’s practice to instruct law costs draughtsmen to estimate proper charges based on reviews of files.

40.  Note that Mayo J’s Order does not specify any particular manner in which an “account” should be maintained by way of compliance with the Order.  On the contrary, the simple word “account” can encompass different methods of record-keeping.

41.  What is evident from his Judgment of 21 January 1994 is that, in substance, Mayo J was directing Mr Koo to have in place some record-keeping system whereby (if Mr Koo was held liable after trial) KP’s work between January 1994 and trial for former KLY clients could be readily quantified.

42.  There are many ways in which a person might meet the thrust or substance of Mayo J’s Order.  One method (possibly the optimum one) might include the use of time sheets.  But I am not persuaded by Mr Chan’s submission that Mayo J’s Order must entail the use of time sheets.

43.  It may be that, had I been in Mr Koo’s position, I would have instituted a system of time sheets to comply with Mayo J’s Order.  But what I would have done is strictly irrelevant.  It is more pertinent to ask whether Mr Koo’s chosen method was an unreasonable means of seeking to comply with Mayo J’s Order.

44.  In my judgment, the method which Mr Koo decided upon in January 1994 was reasonable.  The conventional records generated by a firm’s information system in connection with a given file could conceivably have been enough to enable accurate reconstruction of work done over a given period.  In such case, no special records would be needed.  At any rate, Mr Koo thought so and I can see nothing outrageous in such view to cast doubt on the genuineness of Mr Koo’s belief.

45.  Unfortunately, Mr Koo’s belief in technology turned out to be mis-placed.  Thus, some 10 years after Mayo J’s Order, Mr Koo is unable to provide details of some 700 of about 2,000 BOC files.  It appears that there are also some 70 files (of which 40 have bills and 30 do not) which have gone missing.

46.  But as discussed in Section II.A above, the mere fact that (with hindsight) the method chosen by Mr Koo to accomplish Mayo J’s “account” has proved ineffective does not imply that Mr Koo intended to flaunt Mayo J’s order.   I do not accept Mr Chan’s submission that, on the basis of the 70 missing files, I should infer that the requisite mental element is present beyond a reasonable doubt.

C.3    Actus reus

47.  I have already stated my view that Mayo J’s judgment did not require the keeping of special records or the maintenance of time sheets.  It follows that, by themselves, the failure to keep special records or time sheets cannot prove the actus reus of the alleged contempt.

48.  Mr Chan asks rhetorically what the purpose of Mayo J’s order was, if it was not requiring Mr Koo to do something more than he would normally have done.

49.  The question is not helpful.

50.  Mayo J’s Order required Mr Koo to institute a system of monitoring work done in respect of former KLY clients.  In 1994 Mr Koo assessed whether he had such a system in place at KP.  Rightly or wrongly, he concluded that he had a system and nothing more needed to be done. 

51.  In those premises, Mr Chan’s question might be turned around: why should Mr Koo do something more, if (as far as Mr Koo was concerned) he was already complying with Mayo J’s Order?

52.  Mr Chan submits that there has plainly been non-compliance with Mayo J’s Order, given the large number of files which have either gone missing or for which no details can be provided.

53.  However, I do not think that the fact that files or records are missing establishes actus reus beyond a reasonable doubt.

54.  Files inevitably go missing over 10 years as they are moved in and out of storage.  Documents, records or other details which may once have been within files can also disappear for any number of innocent reasons (including a client’s instruction that material be returned) which would not be attributable to Mr Koo.

55.  Given KP’s size from 1994 to 2003, it is unrealistic to expect that Mr Koo (even with the best will in the world) could personally keep track of every one of over 2,000 files so as to ensure that no file went missing and no detail was ever lost.

56.  I accept that there may be literal non-compliance with Mayo  J’s Order.  Evidently, Mr Koo is unable to given a full account for the work done on every single file handled by KP between 1994 and 2003.  But, as I have indicated, the Court must ask whether there has been substantial non-compliance with Mayo J’s order.  

57.  I doubt that any determination of this latter question of substance can simply hinge on what might be called a “numbers game”.  I do not think (for instance) that one can say that, because 700 out of 2,000 or more than 30% of BOC files are lacking details, it follows that there is substantial non-compliance. 

58.  Not all files are equal.  Some files involve more work than others.  The 700 files may or may not represent 30% of the work volume or monetary value of the totality of BOC files.  That files lack details or have gone missing is regrettable.  In an ideal world such things should not happen.  But, given the high standard of proof called for, I do not think that the problematic files are any sufficient basis for finding contempt.

59.  The onus is on KLY to establish beyond reasonable doubt that there has been substantial non-compliance with Mayo J’s Order.  I am not persuaded that, on actus reus, that burden has been discharged.

C.4    Summary

60.  I find that neither the mens rea nor actus reus requisite for contempt have been proved on Mayo J’s Order.

D.      Ma J’s September 2003 Order

D.1    KLY’s argument

61.  Mr Chan’s case on this Order may be summarised as follows:

(1)	There is actus reus.  Mr Koo has not verified any account made pursuant to the Order of Mayo J or the September 2003 Order of Ma J.
(2)	There is mens rea.  Mr Koo has been personally served with Ma J’s September 2003 Order.  Plainly, Mr Koo knows that he has to verify relevant accounts.  His omission to verify cannot be accidental, but must be deliberate.

62.  I am not persuaded that Mr Koo is in contempt of Ma J’s September 2003 Order.

D.2    Preliminary matter 1: Terminology and procedure

63.  I should clarify at the outset some confusion that has arisen in relation to terminology and procedure.

64.  When the Court orders an account of profit, the accounting party (Party A) typically prepares and verifies his version of what the final account should be.  See RHC Order 43, Rule 4.

65.  The party to whom account is being made (Party B) may then challenge particular items in A’s version or allege that A’s version is incomplete.  See RHC Order 43, Rule 5. 

66.  A responds to B’s case by accepting or rejecting B’s contentions.  A may amend his version of the final account to reflect any admitted errors. 

67.  If A and B cannot agree on what the final account should be, the matter proceeds to a substantive hearing, where the Court decides between the rival contentions.  The Court may agree with some, all or none of A’s version of the final account.  The account taken by the Court then becomes the final account.

68.  There are 2 points which I wish to make in relation to this basic procedure.

69.  First, the word “account” can refer to:

(1)     A’s version of what the final account should be,

(2)     B’s version of what the final account should be,

(3)     the substantive hearing to arrive at the final account; or,

(4)     the final account actually determined by the Court.

70.  One must always bear in mind the context in which the word “account” is being used.  For example, the word “account” in Ma J’s September 2003 Order refers to different things in different paragraphs.  Paragraph 1(2)(c) refers, for instance, to Mr Koo’s version of what the final account should be.  Paragraph 9, on the other hand, refers to the forthcoming substantive hearing before the Court to determine a final account.  It is important to be clear about the particular sense in which the word “account” is being used at any given time.

71.  Second, in verifying and putting forward his version of the final account, A is signifying that, to the best of his knowledge, information and belief, the version of account being rendered by him is true and accurate. 

72.  A’s version may be in error.  The final account taken by the Court may differ from A’s version in major respects for any number of reasons.  For example, A may have rendered his account on mistaken principles or A’s account may contain material omissions.

73.  But the mere fact that A’s version is wrong in some or even numerous respects does not mean that by verifying his account A perjured himself.  If A genuinely and non-recklessly (albeit mistakenly) believes that a transaction (say) did not generate profit for which he has to account or if A (say) inadvertently fails to take account of some document, it is difficult to see how A can be held to have deliberately misled the Court.

D.3    Preliminary matter 2: Verification of account prepared pursuant to

          Mayo J’s Order

74.  Given my conclusion that there is no contempt of Mayo J’s Order, there can be no contempt of Ma J’s September 2003 Order as far as Mayo J’s Order is concerned. 

75.  The reality is that Mr Koo is not in a position fully to verify an account taken pursuant to Mayo J’s Order.  This is because the method of accounting chosen by him in respect of Mayo J’s Order has proved to be imperfect.  But (as I have said) that outcome must be “accidental,” an unintended result for which it would be wrong to hold Mr Koo in contempt.  The requisite mens rea is lacking.

76.  That leaves the question whether Mr Koo is in contempt of Ma J’s direction to verify an account of BOC work done during the relevant period.  On that issue, it is convenient to begin by examining events since Judge Muttrie’s January 2004 Order and considering whether the actus reus of a contempt has been made out.

D.4    Events since Judge Muttrie’s January 2004 Order

77.  On 16 February 2004 Mr Koo filed a 1^st Affidavit by his accounting expert Mr Ian Robinson.  In his affidavit, Mr Robinson stated that he systematically examined KP’s BOC files over the relevant period.  Based on his calculations, Mr Robinson concluded that KP had incurred a loss of $830,777 on BOC work during the relevant period. 

78.  On the next day, Mr Koo filed an 11th Affirmation stating that “to the extent that [Mr Robinson’s] document refers to me or to documents produced by me, I agree with it and confirm the truth of those documents”.

79.  On 29 March 2004 KLY took out a summons seeking particulars and discovery in relation to certain matters.  Those matters include:

(1)	The “Connected Files” issue.  This concerns a dispute on the treatment of files which appear on their face to be non-BOC files and so to fall outside the account ordered by Ma J.  KLY argues that the files are nonetheless BOC files since their content is “connected” with certain BOC files.
(2)	The “Disbursements” issue.  This concerns a dispute on the extent (if any) to which in Mr Koo can set off disbursements against KP’s profits on BOC work.
(3)	The breakdown of certain entries (such as depreciation) in an Estimated Profit and Loss Account.

The summons remains to be heard substantively.

80.  On 16 July 2004, having met with KLY’s accounting experts (Ernst & Young (EY)), Mr Robinson made a 2nd Affidavit, revising his previous calculations. 

81.  Mr Koo’s solicitors (TDW) wrote to KLY on the same day, stating that Mr Robinson’s 2^nd Affidavit was “part of the evidence that [Mr  Koo] will be relying upon in the Account [to be taken pursuant to Ma J’s order of April 2003]”.  The letter stated that Mr Koo was “prepared to make an affirmation verifying all of the documents that have been produced for the Account to date, including this second affidavit of Ian Robinson”.  But the letter suggested that such an affirmation should await a court ruling on the “Connected Files”.

82.  Having again met EY, on 20 August 2004 Mr Ian Robinson filed a 3^rd affidavit in which he further amended his figure for KP’s BOC work.  He now believed that KP had made a net profit of about $1,333,634.00 on BOC work during the relevant period.

83.  Mr Mark Side of TDW also filed an affidavit on 20  August  2004.  There Mr Side mentioned his advice to Mr Koo that, until resolution of the “Connected Files” issue, it was premature for Mr  Koo to verify an account as ordered by Ma J in September 2003.

84.  On 30 August 2004 Mr Koo issued a summons seeking the Court’s direction on how certain expenses, costs and overheads should be dealt with in an account of BOC profits.  This “Methodology” summons remains outstanding.

85.  In about September 2004 Waung J ordered that Mr Koo pay KLY $12,171,241.88 as an interim payment of the net profit on the BOC work for which Ma J ordered Mr Koo to account.  Mr Koo has paid this sum to KLY.

86.  On 16 December 2004 KLY filed a Statement of its grounds for initiating committal proceedings against Mr Koo.  KLY issued a Notice of Motion seeking to commit Mr Koo to prison for contempt on 30  December 2004.

87.  On 4 April 2005 Mr Side filed a 6^th Affidavit.  That stated (at §13):

“When I considered the fact that nearly every one of the tens of thousands of documents within the Account [ordered by Ma J] was generated by others and has never been seen by [Mr Koo] because they are documents on client files conducted by the solicitors at [KP] other than [Mr Koo], or accounting documents produced by the accounts departments of [KP], I considered carefully how [Mr Koo] could realistically, properly and honestly discharge his duty to give an affirmation verifying the Account.  It seemed to me that it would be irresponsible for me to draft and then to advise [Mr Koo] to make a simple short form affirmation similar to sort often used, for example, to verify list of documents in discovery by which [Mr Koo] purported to verify every document in the Account.  I was most concerned to avoid initially going down the path of least resistance and preparing such an affirmation only to expose [Mr Koo] to the obvious criticism from the Court or during cross examination on the Account that in the circumstances of this case he could not have done what he had stated in such an affirmation.  There was no process or procedure of review of documents by [Mr Koo] that I could devise covering such a great number of transactions of such great value and which had generated so many documents that could make the affirmation by [Mr Koo] responsible and accurate.”

88.  At the same time Mr Koo filed a 16^th Affirmation in which he repeated the concerns in §13 of Mr Side’s 6th Affidavit.  Mr Koo added:

“However, I wish to reduce the areas of dispute between the parties as much as possible.  For this reason, and with the advice of my lawyers and in this affirmation, I wish to state that I believe the following classes o documents, which are the documents exhibited to my earlier affirmations made for the purposes of the Account and the affidavits made by the expert instructed by me, Mr Ian Robinson, are schedules of all of the accounting documents in possession, custody or control of [KP] during the period of the Account and are true and complete copies of the documents.  I verily believe that the contents of the accounting documents mentioned below are true because they are documents produced by my firm, [KP], though I am not the author of those documents.”

89.  The 16^th Affirmation then particularises the classes of accounting documents being verified by Mr Koo as follows:

“	i.	The books, financial records and supporting vouchers kept by the Accounts department of [KP] from 21 January 1994 to date for the purpose of the performance of the Order of Mayo J made on 21 January 1994;
	ii.	The list of files opened by [KP] for [BOC] clients for the relevant period exhibited by me as ‘DK-8’, the list of files opened by [KP] for Non-[BOC] clients for the relevant period exhibited by me as ‘DK-9’ and the list of all files opened by [KP] for the relevant period exhibited by me as ‘DK-10’ compiled by the accounts department of KP];
	iii.	The management accounts exhibited by me as ‘DK-11’ and the profits and loss accounts (audited and unaudited) exhibited by me as ‘DK-12’ of [KP] for the relevant period compiled by the Accounts Department of [KP];
	iv.	All books, vouchers, client ledgers, management accounts, profit and loss accounts (audited and unaudited), partnership accounts and genera ledgers compiled by the accounts staff of [KP] as shown and exhibited by me as ‘DK-13’;
	v.	All billing details provided to Ian Robinson to assist him in preparing his exhibits ‘IGR-5’ and ‘IGR-6’;
	vi.	The computer statements for each [BOC] file opened during the relevant period including all the voucher entries for disbursements and bills raised on each particular file referred to in paragraph 4 of Ian Robinson’s second affidavit and the running list of all the disbursements incurred from 1/10/1993 till 16/7/2004 ‘IGR-13’ and the documents referred to in paragraphs 11 & 37 of Ian Robinson’s second affidavit;
	vii.	Payment vouchers, cash vouchers and journal vouchers for the period from 1/10/1993 to 30/10/1994 the documents referred to in paragraph 26 of Ian Robinson’s second affidavit;
	viii.	Documents produced to Ian Robinson by [KP] showing the detailed breakdown of ‘other income’ of HK$54,092.00/54,189.43; and
	ix.	Trial balance as at 30/6/1994 and ‘IGR-15’ and the documents referred to in paragraph 36 of Ian Robinson’s second affidavit.”

90.  On 31 August 2005 Mr Andy Choi (another accounting expert engaged by Mr Koo) produced his 1^st Affirmation.  There Mr Choi stated that in his opinion (subject to the resolution of the “Connected Files” issue) KP had made a net profit of $3,834,557.00 on BOC work during the relevant period.  Mr Choi set out his calculations in detailed tables and appendices to his affirmation.

91.  On 5 September 2005 Mr Koo by a 17^th Affirmation verified Mr Choi’s 1^st Affirmation and “all the underlying primary documents exhibited to the report and adopt it as my account pursuant to the [September 2003] Order of [Ma J]”. 

92.  Mr Koo further expressed his belief in Mr Robinson’s affidavits as “a true and accurate Account when each was served”.  Mr  Koo stated that he adopted and agreed “with the progression of the analysis as Ian Grant Robinson adapted his views”.  Where there were inconsistencies between Mr Robinson and Mr Choi, Mr Koo said that he preferred the latter’s opinion.

93.  Lastly, by his 17^th Affirmation, Mr Koo verified and adopted “all of the original documents that are being put into discovery as true and complete and accurate records and documents”.  In particular, he verified “each of the schedules and all of the exhibits and other documents exhibited as ‘IGR-1’ to ‘IGR-16’ to [Mr Robinson’s] affidavits”.

D.5    Actus reus

94.  In my judgment, the 16^th Affirmation constituted a verification of the documents, records, accounts and calculations which Mr  Koo then believed gave a true and accurate account of the profit made by KP on BOC work over the relevant period.  The 16^th Affirmation complied in substance with §1(2)(c) of Ma J’s September 2003 Order.

95.  That version of final account might be right or wrong.  In fact, Mr Koo has since revised his version to incorporate Mr Choi’s calculations.  Further, KLY may disagree with Mr Koo, believing his version of account to be misleading, inaccurate or incomplete.  But Mr  Koo has at least verified what he says should be the final account.

96.  KLY does not accept that Mr Koo has substantially complied.  KLY takes a number of points against what Mr Koo has done.  Those points are in my view unduly pedantic and lacking in merit.

97.  KLY notes that Mr Koo’s 16^th Affirmation did not verify all 16 exhibits to Mr Robinson’s affidavits. 

98.  But I think it was plain from the 16^th Affirmation that Mr Koo was adopting Mr Robinson’s affidavits in their entirety, even if Mr Koo did not expressly state that he was verifying all Mr Robinson’s 16 exhibits.  At any rate, the alleged defect (if it was one) was corrected by Mr Koo in his 17th Affirmation.

99.  KLY says that the verifications in the 16^th and 17^th Affirmations are not in standard form.  Mr Chan suggests verification should be along the following lines:

“The said account is just and true in all and every item and particulars therein contained, according to the best of my knowledge, information and belief.”

100.  The words just quoted are taken from Form 1601 in Chitty andJacob’s Queen’s Bench Forms (21^st ed.), p.1182.  I confess that I do not see any real difference between what Mr Koo has done by his 16^th and 17^th Affirmations and the precedent cited by Mr Chan.

101.  I appreciate that by his 6^th affidavit Mr Side suggested that there was difficulty in Mr Koo verifying documents and records which he himself did not personally compile.  Mr Side questioned whether a blanket verification “to the best of Mr Koo’s knowledge, information and belief” would be of any practical value to the Court.  Nonetheless, by his 16^th Affirmation, Mr Koo has in practical terms given such a blanket verification.

102.  KLY submits that Mr Choi’s affirmation “fails to state a case”.  Until that is done (Mr Chan submits) there is nothing to which KLY can respond.

103.  I do not understand the argument.  Mr Choi’s conclusion (in light of the records, accounts and calculations which he has analysed and exhibited) is that KP made a net profit of $3,834,557.00 on BOC work during the relevant period.  Mr Koo’s case seems clear and KLY cannot be in any doubt about its basic substance.

104.  If there is real doubt or obscurity on Mr Koo’s part, KLY can request further particulars or discovery in the usual way.  If Mr Koo refuses the request, the Court can then decide whether or not the additional information or material should be provided. 

105.  KLY seems to complain (although Mr Chan denies this) that the verification excludes the “Connected Files”. 

106.  It is true that Mr Koo’s verification is qualified.  The verification is expressly subject to the outcome of the “Connected Files” dispute.  Mr Koo contends that he does not need to account for the “Connected Files”.  As a result, unsurprisingly, those files do not form part of his rendering of account. 

107.  KLY disputes the correctness of Mr Koo’s omission of the “Connected Files” from his account.  KLY says that there must be an accounting of those files.  But until the Court resolves the issue, either upon the hearing of KLY’s summons on the “Connected Files” or in the substantive hearing of the account ordered by Mr Ma, it is hard to see why Mr Koo should be forced to verify an account of profit including the “Connected Files”.

108.  It follows from all the foregoing that from April 2005 (the time of his 16^th Affirmation) the actus reus for contempt was lacking.

D.6    Mens rea

109.  Mr Chan says that, even if the 16^th and 17^th Affirmations comply with Ma J’s Order, they are belated.  At least until mid-2005, Mr  Koo must have been in contempt of Ma J’s Order.

110.  I do not agree.  I do not believe that the failure to verify before April 2005 was accompanied by the necessary mental element.

111.  Mr Side has given affidavit and live evidence to the effect that he advised that Mr Koo could not meaningfully verify his version of the final account.  This (Mr Side told Mr Koo) was because of the volume of documents, records and accounts involved.  Mr Koo could not conceivably be familiar with every detail of such material and so could not (as a matter of civil law) affirm its veracity. 

112.  Mr Side also felt that, until such matters as the dispute over the “Connected Files” were resolved, Mr Koo could not affirm that the account he was giving was true and accurate.  What if (Mr Side asked) the “Connected Files” had to be accounted for, contrary to Mr Koo’s belief?  The account would then not be true and accurate as verified by Mr Koo.

113.  Having heard Mr Side’s cross-examination by Mr Chan, I accept that he advised Mr Koo in good faith along the lines which I have just summarised.  I also accept that Mr Side genuinely believed that his advice was correct.

114.  Nonetheless, the advice was probably over-cautious.  The advice did not carefully distinguish between the final account yet to be determined by the Court and Mr Koo’s version of what that final account should be. 

115.  All that Mr Koo was being called upon to verify by §1(2)(c) of Ma J’s Order was the truth of his version of the final account “to the best of his knowledge, information and belief”. 

116.  It goes without saying that, given the size of KP’s operations, Mr Koo must rely to a greater or lesser extent on the work of others in compiling records, accounts, documents and calculations. 

117.  Provided that he genuinely believes that those others have done their job properly and provided he is not reckless in such belief, then Mr Koo should be able to say that “to the best of his knowledge, information and belief” his proffered version of accounts is true and accurate.

118.  Mr Koo may prove to be wrong in (say) his view that the “Connected Files” or other transactions should be excluded.  But that alone would not be enough to transform his verification into an act of perjury.

119.  Nevertheless, having received Mr Side’s advice, it is understandable why Mr Koo would be reluctant to verify the truth and accuracy of his version of accounts.  Mr Koo, although a solicitor himself, is not a specialist in civil procedure and litigation.  Mr Side is.  If Mr Side gives such advice (albeit mistaken), why should Mr Koo disregard the same? 

120.  Mr Koo found himself in a dilemma.  He was called upon (and no doubt wished) to verify his version of final account, but was under the impression that it was not possible to do so as a matter of civil law in the circumstances of this case.

121.  As I have discussed in Section II.A of this Judgment, I do not think that it is possible to say here that Mr Koo’s non-compliance prior to April 2005 was deliberate.  Although there may have been actus reus (in the sense of literal non-compliance) before April 2005, I do not think that there was mens rea.  Certainly, there must at least be a reasonable doubt on mens rea for the period before April 2005.

122.  Mr Chan is scathing about Mr Koo’s explanation for his literal non-compliance.  Why then (Mr Chan asks) did not Mr Koo ask for an extension or seek a clarification of the ambit of §1(2)(c) of Ma J’s Order?  Mr Koo (Mr Chan submits) cannot refuse to act in accordance with an Order and not at least apply to vary it.

123.  I do not think that the criticism of Mr Koo is fair.  As Mr Side noted in cross-examination, Mr Koo effectively sought a clarification of Ma J’s Order.  He did this in mid-2004 by setting out his position on KLY’s Summons relating to the “Connected Files” and by taking out the Methodology Summons. 

124.  Mr Koo (acting on Mr Side’s advice) believed that the Court’s determination of these matters would indicate whether the “Connected Files” and other transactions should be included in his version of accounts.  Once issues of that nature had been clarified, then a complete verification could be given.

125.  Mr Chan suggests that such reasoning would lead to a chicken-and-egg problem.  One would never (Mr Chan observes) be able to verify a version of final account until the Court had ruled on every difference between the parties over what precisely has to be accounted for.  There could never be compliance with Ma J’s Order until the final account is taken.  But the final account cannot be taken until Mr Koo verifies his version of final account.

126.  I would agree with Mr Chan’s criticism of Mr Side’s advice in this respect.  That is why (as I have indicated) I believe the advice to have been flawed.

127.  But the fact is that the advice was given.  Simply, because the advice was erroneous, does not mean that its having been tendered can be ignored by the Court.  It is part of the background which I must take into account when evaluating mens rea.

128.  Nor does the faulty nature of the advice lead me to question (as Mr Chan does) whether it was actually given and (if so) given in good faith.  The advice is not so wrong that it can be inferred that no rational lawyer or layman could possibly have believed or accepted it.

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”.

130.  Events from April 2005 suggest that TDW has since had a re-think of Mr Side’s earlier advice and such re-think has concluded that Mr Koo can at civil law go further towards verifying his version of accounts.  Mr Koo has thus done so.

D.7    Summary

131.  In relation to §§1(2)(b) and (c) of Ma J’s September 2003 Order, I find that contempt has not been established beyond a reasonable doubt.

E.      Miscellaneous matters

E.1    Cross-examination and the weight of evidence

132.  Judge Muttrie directed on 7 March 2005 that no affidavit evidence filed by the parties could be used at the hearing of this motion for contempt, unless the deponents were available for cross-examination.

133.  At the start of this hearing, I mentioned that I regarded Judge Muttrie’s direction as impliedly being subject to any subsequent direction by me as the judge hearing the motion.  I did not think that Judge Muttrie intended to fetter my discretion in respect of the proper conduct of this inquiry in relation to evidence.

134.  Mr Grossmann SC (appearing for Mr Koo) stated that his client did not propose to tender himself for cross-examination.  Mr  Grossmann submitted that the burden was on KLY to prove its case beyond reasonable doubt.  There was no burden on Mr Koo to prove his innocence.  See Citybase (at 103G).  A person (such as Mr Koo) facing the threat of imprisonment could not be obliged (Mr Grossmann reasoned) to subject himself to cross-examination and the Court should not simply ignore his evidence.

135.  In my view, the proper course to take was to consider all affidavit evidence put before me, whether or not the deponent was tendered for cross-examination.  The failure to put oneself forward for cross-examination may (but need not necessarily) affect the weight to be given to one’s affidavit statements.

136.  Here, although Mr Koo was not cross-examined, Mr Side was.  Since Mr Side’s evidence corroborated much of what Mr Koo has deposed to in affirmation, I felt that I could accord significant weight to Mr Koo’s statements. 

137.  Some aspects of Mr Koo’s affirmation evidence dealt with matters before Mr Side became his solicitor.  I am thinking in particular of Mr Koo’s explanation of his response to Mayo J’s Order.  Since those explanations appeared plausible and given the corroboration provided by Mr Side of Mr Koo’s later actions, I thought that (taking everything in the round) Mr Koo’s evidence could not just be discounted.

E.2    “Hardball” and costs

138.  It would be helpful if I give an indication of my thinking on costs.

139.  In his April 2003 Judgment, Ma J said (at §168):

“Lastly, as a postscript to this judgment, I would just remark on a consistent theme run by Mr McCoy [Mr Koo’s counsel] that Kao was an vindictive man who, together with Yip, has caused the present litigation to be maintained against the defendant out of spite.  This is going too far and I take the opportunity to reject this accusation. Kao and Yip are, like Koo, extremely ambitious men who often played ‘hardball’.  They insist on the enforcement to the fullest extent of what they regard as their legal entitlement.  There is nothing wrong in this, whatever one may personally think about such behaviour.  While it is true that KLY has failed on some claims and have on others, only obtained nominal damages and furthermore, has only at a very late stage abandoned the action against the fifth defendant, these are matters that go towards the incidence of costs.”

140.  “Hardball” is one thing; pointless maintenance of a motion of contempt is another.  A major theme of Mr Grossmann’s submissions has been to ask the rhetorical questions: What has been the purpose of these contempt proceedings?  How will these proceedings advance the taking of a final account by the Court?

141.  I share Mr Grossmann’s concerns.  To my mind, KLY’s continuation of these contempt proceedings since mid-April 2005, seems to have been based on purely pedantic grounds, elevating form over substance.

142.  It appears to me that these proceedings have been maintained largely for tactical reasons to exert maximum pressure on Mr Koo.  That would be oppressive in nature and the Court’s procedure should not be used for such abuse.

143.  As will be evident from this Judgment, since April 2005 (at the earliest) and September 2005 (at the latest) there has been (as far as I can discern) no real impediment to KLY responding to Mr Koo’s version of what the final account should be. 

144.  Mr Koo’s case has been reasonably clear for some time.  It may be rife with error, lacuna or inaccuracy.  But those are not matters to be resolved through contempt proceedings and the threat of penal sanction.

145.  Mr Grossmann has indicated that he will seek indemnity costs if Mr Koo prevails (as Mr Koo has done). 

146.  My preliminary view is that there is a case for indemnity costs.  I set out below what I believe (subject to any further submissions from counsel) to be the appropriate costs order.  In my judgment (as Ma J has himself signalled), the wasteful consequences of pointless “hardball” should be reflected in an appropriate costs order.

III.     CONCLUSION

147.  KLY’s application to commit for contempt is dismissed.

148.  There will be an Order Nisi as follows:

(1)     KLY shall pay Mr Koo’s costs wholly attributable to the contempt application.

(2)     Such costs are to be taxed on an indemnity basis in any event.

(3)     All other costs are reserved.

149.  By the expression “costs wholly attributable to the contempt application” I refer to those costs which have been incurred solely for the purpose of the contempt application. 

150.  An example should make what I mean by the expression clearer. 

151.  Mr Choi’s 1^st Affirmation is essentially intended for use at the taking of the final account before me.  Thus, even if there had been no contempt hearing, Mr Koo would have incurred the costs of such affirmation.  The costs of the affirmation cannot be wholly attributable to the contempt application.  Instead, the costs of Mr  Choi’s statement should fall within the costs which I have reserved.  Those reserved costs will be dealt with following the Court’s determination of the final account.

152.  There will be liberty to apply.