CHEN YUNG NGAI KENNETH AND ANOTHER v. ALAN CHUNG WAH TANG AND ANOTHER

HCB 3819/2011 &
HCMP 631/2022

[2026] HKCFI 3589

HCB 3819/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

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HCMP 631/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 631 OF 2022

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D E C I S I O N

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INTRODUCTION

1.  There are before the court two summonses both dated 1 August 2024 issued in HCB 3819/2011 and HCMP 631/2022. They are taken out by Mr Alan Chung Wah Tang and Ms Hou Chung Man, who are the liquidators of Asia-Pac Infrastructure Development Ltd (“APIDL”). The summonses seek identical reliefs, which are:

(1)  to set aside the ex parte order made by Au-Yeung J on 13 May 2022 in HCB 3819/2011 granting leave to Mr Chen Yung Ngai Kenneth and Ms Chan Mei Mei acting as trustees-in-bankruptcy of Ho Yuk Wah David (a discharged bankrupt) to commence contempt proceedings against them; and

(2)  to dismiss HCMP 631/2022, being the contempt proceedings commenced pursuant to the ex parte order.

2.  In this decision, I shall call the trustees-in-bankruptcy of David Ho “the Trustees” and Tang and Hou, the defendants in the contempt proceedings, “the defendants”.

3.  The defendants are cited for contempt for making false statements in an affirmation made by Hou in HCB 3819/2011 and another affirmation also made by her in CACV 83/2020, and exhibiting to the latter documents which had been tampered with. There are four counts of contempt. I shall call the two affirmations “the HCB affirmation” and “the CACV affirmation”.

4.  The setting aside application is mounted on two grounds. First, for leave to bring contempt proceedings for a false statement in an affidavit, the approach and requirements under Order 41A, rule 9 applies, but they were not followed. The ex parte order obtained as a result was therefore defective. Second, there was material non-disclosure in the ex parte application.

BACKGROUND LEADING TO THE CONTEMPT PROCEEDINGS

5.  The bankruptcy proceedings of David Ho and the litigation between the Trustees and the defendants have a long history and are complex. I shall set out below only those background facts which are relevant to the contempt proceedings.

6.  David Ho was adjudged bankrupt on his own petition in 2011. He was discharged from bankruptcy in 2019. The Trustees took up the office in 2020, replacing the former trustees.

7.  APIDL is a company founded by David Ho in 1996 and was placed in creditors’ voluntary liquidation in 2013. The defendants were later appointed as its liquidators.

8.  David Ho sold his interest in the company in 2004. Notwithstanding that, the former trustees believed that David Ho remained as its beneficial owner. They commenced an action in HCA 971/2012 (“the 971 action”) to seek a declaration to that effect. After trial, the court found that APIDL was and is beneficially owned and controlled by David Ho: [2020] HKCFI 2518.

9.  APIDL had been involved in a number of litigations. It was the former trustees’ suspicion that David Ho was involved through nominees in the funding of these litigations. Of present relevance is the action brought by APIDL against its former legal advisers for negligence in HCA 806/2006 (“the 806 action”). After their appointment as liquidators, the defendants continued the action.

10.  The former trustees and the Trustees have issued a number of applications under section 29 of the Bankruptcy Ordinance, Cap 6, to find out about the funding situation of APIDL and ascertain whether the funds could be traced back to David Ho.

11.  The present contempt proceedings arise out of one of these section 29 applications. That is the application made against the defendants in HCB 3819/2011 in 2017. It was in resisting this application that Hou made the HCB affirmation on 19 April 2018. The application was refused at first instance in 2020: see the judgment reported at [2020] 2 HKLRD 608, [2020] HKCFI 578. But the Trustees’ appeal was allowed by the Court of Appeal in 2022: [2022] HKCA 110. The Court of Appeal ordered the defendants to produce certain information and documents. It was for the purpose of complying with this order that the defendants filed the CACV affirmation on 25 February 2022.

12.  In both affirmations, the defendants denied the existence of any funding relationships and funding arrangements involving David Ho.

13.  On 26 April 2022, the Trustees applied in HCB 3819/2011 on an ex parte basis for leave to bring contempt proceedings against the defendants for making false statements in the HCB affirmation and the CACV affirmation, and exhibiting to the CACV affirmation doctored documents. The application is supported by a statement and the 4^th affirmation of Kenneth Chen (“Chen 4^th”). The Trustees make four complaints.

14.  Under the first complaint, the Trustees say that Hou falsely stated that David Ho was not related to the funders of the 806 action. According to the Trustees’ investigation, the funders included True Treasure Enterprises Ltd, China New Investments Ltd (“CNIL”) and Fidelity Insurance Company Ltd (“FICL”), and David Ho was connected to them. And the defendants had full knowledge of the same.

15.  Under the second complaint, the Trustees say that Hou falsely stated that there was no litigation funding arrangement for the 971 action. According to the Trustees’ investigation, there was indeed funding arrangement for the action which was connected to David Ho. And the defendants had full knowledge of the same.

16.  Under the third complaint, the Trustees say that Hou falsely stated that FICL did not have any funding arrangement with APIDL. Based on the Trustees’ investigation, FICL had a funding arrangement with APIDL in the 806 action. And the defendants had full knowledge of the same.

17.  Under the fourth complaint, the Trustees say that four bank remittance slips issued by Chong Hing Bank Ltd dated 28 May 2013, 30 September 2013, 28 February 2014 and 16 May 2014, which were exhibited as evidence to the CACV affirmation, had been tampered with in that the information concerning the remitter and the remitting bank was intentionally removed from the exhibited copies, not by way of redaction but by way of disguising the information as if it had never existed. The defendants intentionally produced false and misleading evidence.

18.  On 3 May 2022, Au-Yeung J raised a requisition on the leave application. She asked the Trustees whether there was any reason why contempt was pursued instead of perjury.

19.  The Trustees replied by their solicitors’ letter of 5 May 2022.

20.  On 13 May 2022, Au-Yeung J granted leave (on paper).

21.  On 23 May 2022, the Trustees commenced the contempt proceedings in HCMP 631/2022. Service was effected on 24 August 2022.

22.  On 1 August 2024, the defendants took out the present application to set aside the ex parte leave.

DELAY

23.  The Trustees raise a preliminary objection about the delay in the taking out of the application. It was made almost two years after service. They contend that the application should be dismissed on the basis of inordinate and unjustified delay alone.

24.  Mr David Chen, counsel for the Trustees, submits that an application to set aside a grant of leave should be made timeously: see Ng Enterprises Ltd v Urban Council [1995] 2 HKC 571 at 581F-G. The Trustees have suffered real and significant prejudice as a result of the delay in that substantial time and costs have already been incurred in reviewing the defendants’ opposing evidence (running to 66 pages of text) and preparing their own evidence in reply (running to 42 pages of text). If the application is to prevail, these time and costs will be completely wasted. Furthermore, the defendants have offered no good reason for the delay.

25.  I agree that the delay is not justified. However, I need to have regard to the nature of these proceedings. If found liable for contempt, the defendants will face penal consequence, including imprisonment. There is therefore a lot to be said for hearing them on the substantive merits of the setting aside application, notwithstanding the delay. As for the alleged prejudice concerning the wasted costs, the court may consider ordering the defendants to bear them even in the event that leave is set aside as it is only right that they should absorb those costs which could have been avoided but for their own delay.

26.  I therefore would decline to dismiss the application on the ground of delay.

27.  I shall now address substantively the two grounds put forward by the defendants.

ORDER 41A, RULE 9

28.  Leave is required before committal proceedings may be brought: Order 52, rule 2(1). The first ground raises the question of what approach the court should follow, and what threshold it should apply, in an application for leave to commit a defendant for contempt for making a false statement in an affidavit (which includes exhibiting false evidence to an affidavit).

29.  In essence, the defendants’ contention is this.

(1)  First, the approach and requirements applicable to Order 41A, rule 9 should apply, even though that rule expressly governs committal for making a false statement in a document verified by a statement of truth.

(2)  Second, and significantly, Order 41A, rule 9 imposes more stringent requirements for leave than Order 52.

(3)  Third, in their ex parte application, the Trustees did not draw the above to the attention of the judge. As a result, the Order 41A, rule 9 approach was not followed. The defendants therefore say that the leave granted was defective and should be set aside.

30.  In support of the above propositions, Mr Eugene Kwok, counsel for the defendants, primarily rely on the following authorities:

(1)  the English Court of Appeal decision in KJM Superbikes Ltd v Hinton [2009] 1 WLR 2406;

(2)  the Hong Kong Court of Appeal decision in Numeric City Ltd v Lau Chi Wing [2016] 4 HKLRD 812;

(3)  the decision of Coleman J in Hwang Joon Sang v Golden Electronics Inc (No 3) [2021] 5 HKLRD 301, [2021] HKCFI 3296; and

(4)  the Hong Kong Court of Appeal decision in Re Chu Kong [2021] HKCA 1580.

31.  I shall now deal with the three points made by the defendants.

Does the Order 41A, rule 9 approach apply to contempt for false affidavit?

32.  Order 41A, rule 9 provides as follows:

“(1) Proceedings for contempt of court may be brought against a person if he makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.

(2) Proceedings under this rule may be brought only—

(a) by the Secretary for Justice or a person aggrieved by the false statement; and

(b) with the leave of the Court.

(3) The Court shall not grant the leave under paragraph (2) unless it is satisfied that the punishment for contempt of court is proportionate and appropriate in relation to the false statement.

(4) Proceedings under this rule are subject to the law relating to contempt of court and this rule is without prejudice to such law.”

33.  It is not the defendants’ contention that Order 41A, rule 9 directly applies to the present committal application. That must be correct, as the rule expressly refers to a document verified by a statement of truth and there is no mention of affidavit at all.

34.  However, due to the similar nature of the act of making a false statement in a document verified by a statement of truth and the same act in an affidavit, I accept the defendants’ submission that the approach which the court applies when determining the question of leave should be the same in both instances of contempt.

35.  As a matter of principle, both acts involve a party (or his witness) telling lies in court documents which are intended to be used to advance one’s case in a litigation. They are therefore both attempts to interfere with the proper administration of justice, which the court has the power to punish by way of committal as a matter of public policy. And both are instances of criminal contempt (as opposed to civil contempt).

36.  The only notable differences between the two are that in the case of an affidavit, the person lies on oath and that the content of his affidavit becomes evidence once sworn whereas in the case of a document verified by a statement of truth, the person does not make any oath when signing the document, which content does not become evidence until and unless it is adopted as such.

37.  However, these differences do not alter the fundamental nature of the act of making false statements, and a person engaging in such act should be held accountable for interfering with the course of justice in the same way in both cases. Hence, when a person aggrieved by the false statements seek to commit the maker of the statements for contempt, the approach and requirements which the court should apply at the leave stage should be the same.

38.  The authorities are clear on this.

39.  KJM Superbikes concerned an application for permission to commit for contempt for knowingly making a false statement verified by a statement of truth. Moore-Bick LJ said this when discussing the applicability of witness immunity, at para 11:

“A witness who knowingly makes a false statement in the course of giving evidence orally or in an affidavit does not expose himself to an action for damages at the suit of anyone injured as a result, but he does expose himself to the risk of prosecution for perjury and as such is publicly accountable for his attempt to interfere with the course of justice. Since the introduction of the Civil Procedure Rules witness statements made for use in procedural applications, as well as documents of many other kinds, must be supported by a statement of truth. Statements of truth are not made on oath, but the principle that a person who knowingly makes a false statement intended for use in proceedings should be held accountable is equally applicable.” (underline added)

40.  In Hwang Joon Sang, Coleman J remarked, at para 20, that the requirement for affidavits to be sworn as to their truth is closely similar to the requirement for other documents to be verified by a statement of truth. This is because the mischief aimed at by both requirements is the prevention, or at least strong deterrence against, giving false evidence. His Lordship concluded, at para 22, that while Order 41A, rule 9 is not directly applicable to an application for leave to commit based on a false affidavit, the approach which the court adopts for Order 41A, rule 9 cases should apply.

41.  Similarly, in Re Chu Kong, the Court of Appeal remarked, at para 60, that there is no reason why the Order 41A, rule 9 approach should not equally apply to contempt for false affidavits, and that includes the express requirement in rule 9(3), to which I shall come back shortly.

42.  I therefore conclude that the approach and requirements applicable to a committal application brought under Order 41A, rule 9 equally applies to an application for leave to commit for contempt for knowingly making a false statement in an affidavit.

Does Order 41A, rule 9 impose more stringent requirements than Order 52?

43.  The defendants say that Order 41A, rule 9 imposes more stringent requirements than Order 52 at the leave stage in three ways:

(1)  First, under Order 41A, rule 9, the court needs to consider whether it is in the public interest for contempt proceedings to be brought. That question does not arise under Order 52.

(2)  Second, as regards the merits of the alleged contempt (ie the actus reus and the mens rea), an applicant needs to demonstrate a strong case under Order 41A, rule 9 whereas an applicant only needs to demonstrate a prima facie case under Order 52.

(3)  Third, the requirement in Order 41A, rule 9(3) applies under which the applicant needs to show that punishment for contempt is proportionate and appropriate in relation to the false statement. This requirement is absent in Order 52.

44.  I shall first look at the requirements for obtaining leave to commit for contempt for knowingly making a false statement in a court document (which term I shall adopt to denote an affidavit or a document verified by a statement of truth below). I shall then examine whether the defendants’ contention that Order 41A, rule 9 imposes more stringent requirements than Order 52 is correct.

45.  What marks out contempt for knowingly making a false statement in a court document from, for instance, contempt for disobeying a court order is its public interest dimension as explained in KJM Superbikes. This public interest dimension gives rise to specific requirements and threshold which an applicant needs to meet before he is permitted to commence committal proceedings in respect of the false statement. KJM Superbikes has been applied by the Hong Kong courts both at first instance and appellate levels.

46.  Knowingly making a false statement in a court document is liable to interfere with the course of justice. Committal proceedings brought for this type of case are therefore public law proceedings. Accordingly, when the court grants leave to a private litigant to pursue committal proceedings, it is giving him permission to litigate not for his own benefit but to pursue the public interest. Where leave is granted, the litigant is acting in a public rather than a private role. It is for this reason that the court needs to be satisfied that the case is one in which the public interest requires that the contempt proceedings are brought and that the applicant is a proper person to bring them: KJM Superbikes at paras 9 and 11.

47.  Moore-Bick LJ formulated the question at the leave stage in this way:

“ultimately the only question is whether it is in the public interest for such proceedings to be brought” (para 16)

48.  When answering this question, the court is to take into account a host of factors, including the strength of the evidence. The court is to weigh all the relevant factors and decide whether the alleged contempt, if proved, is of sufficient gravity for there to be a public interest in taking proceedings in relation to it: para 16.

49.  As for the threshold of the merits of the case (ie the actus reus and the mens rea of the alleged contempt), it was held that a “strong case” needs to be shown at the leave stage by reason of the public interest dimension. Moore-Bick J explained, at para 17:

“In my view the wider public interest would not be served if courts were to exercise the discretion too freely in favour of allowing proceedings of this kind to be pursued by private persons. There is an obvious need to guard carefully against the risk of allowing vindictive litigants to use such proceedings to harass persons against whom they have a grievance, whether justified or not … In my view there is also a danger of reducing the usefulness of proceedings for contempt if they are pursued where the case is weak or the contempt, if proved, trivial. I would therefore echo the observation of Pumfrey J in the Kabushiki Kaisha Sony Computer case [2004] EWHC 1192 (Ch) at [16] that the court should exercise great caution before giving permission to bring proceedings. In my view it should not do so unless there is a strong case both that statement in question was untrue and that the maker knew that it was untrue at the time he made it. …” (underline added)

50.  The “strong case” threshold was applied in subsequent English cases:

(1)  In Norman v Adler [2023] 1 WLR 4232, the Court of Appeal said that a strong case (or, interchangeably, a strong prima facie case) means a case in which the evidence is sufficiently strong, without more, to satisfy the criminal standard of proof: para 39.

(2)  In Ocado Group plc v McKeeve [2021] EWCA Civ 145, the court referred to a “strong prima facie case” and explained that this threshold would filter out cases which can, even on a prima facie basis, be assessed as weak or tenuous.

51.  In Hong Kong, the principles explained in KJM Superbikes were adopted in Numeric City. That case concerned false statements made in a witness statement verified by a statement of truth. Hence, Order 41A, rule 9 directly applied. Poon JA (as he then was) quoted (at para 13) a summary from the then edition of Hong Kong Civil Procedure and quoted (at para 17) paras 16 and 17 of the judgment of KJM Superbikes in full. Both extracts referred to the requirement of a “strong case”.

52.  The principles in KJM Superbikes were again applied in Hwang Joon Sang, a case concerning false affidavits. Coleman J reiterated the ultimate question which should be answered at the leave stage, namely “whether it is in the public interest in the overall circumstances of any individual case to permit committal proceedings in that case”: para 23. Furthermore, when assessing the merits of the plaintiff’s case, his Lordship expressly stated that the case was “strong”: para 25(3).

53.  Lastly, in Re Chu Kong, Barma JA similarly applied the principles explained in KJM Superbikes and, on the evidence in that case, found that “there is obviously a strong case” for the alleged contempt of making false statements in affidavits: para 62.

54.  On the issue of threshold, Mr Chen (for the Trustees) disputes the defendants’ contention and argues that that the Hong Kong courts do not apply a “strong case” threshold, and instead treat the strength of the merits as only one of the factors to be taken into account.

55.  More specifically, he refers to what Lam VP (as he then was) said about the function of the leave requirement in China Metal Recycling (Holdings) Ltd v Chun Hei Man [2018] 1 HKLRD 455, at para 81:

“The leave application is a filtering process to screen out oppressive applications and those which obviously have no chance of success, see Tiong King Sing v Sam Boon Peng Yee (No 2) [2015] 3 HKLRD 99 at [6].”

56.  In Tiong King Sing v Sam Boon Peng Yee HCMP 1129/2015, 21 July 2015, Lam VP endorsed the approach of the first instance court when granting leave, namely that the applicant needs to show only a prima facie case and the court is not required to weigh the relative strength of the parties’ case at this stage: paras 11 and 12.

57.  Lastly, on this point, in Re Kennedy (No 3) [2005] 2 HKC 73, Kwan J (as she then was) described the threshold for leave for contempt as “a low one” (see para 27).

58.  Hence, it appears that there are two lines of cases in Hong Kong which point to different threshold tests at the leave stage. Numeric City, Hwang Joon Sang and Re Chu Kong suggest that a strong case (or a strong prima facie case) is required whereas cases such as China Metal and Tiong King Sing suggest a lower threshold of a prima facie case.

59.  In this regard, it is notable that China Metal and Tiong King Sing are cases of civil contempt whereas the contempt in Numeric City, Hwang Joon Sang and Re Chu Kong are instances of criminal contempt. In my view, given the inherently different nature of the two types of contempt, it is justified to adopt a higher threshold when granting leave in cases of criminal contempt than in civil contempt.

60.  The distinction between the two types of contempt was explained by the Court of Final Appeal in Chu Kong v Sun Min (2022) 25 HKCFAR 318, [2022] HKCFA 24.

61.  A civil contempt involves the breach of a court order or an undertaking to the court. As explained by Lord Neuberger NPJ, the purpose of a committal application for civil contempt is primarily directed towards ensuring that court orders and undertakings are obeyed and thus protecting the private rights of the party in whose favour the order was made or the undertaking was given. At the same time, the court of course has a substantial interest in seeing that its orders are upheld: paras 25 to 28.

62.  On this, his Lordship said, at para 25:

“The civil contempt procedure therefore exists ultimately for the benefit of the party in whose favour the order was made or undertaking given.”

63.  By contrast, a criminal contempt is one which “so threatens the administration of justice that it requires punishment from the public point of view”. It is conduct which goes beyond mere non-compliance with a court order or undertaking and involves a serious interference with the administration of justice: para 26. As explained in KJM Superbikes, committal proceedings brought for this type of conduct are brought for the public interest. And it is by reason of this public interest dimension that a strong case must be shown for obtaining leave so as to guard against the risk of allowing vindictive litigants to use committal proceedings to harass other parties.

64.  However, this public interest dimension as explained in KJM Superbikes is not present (or, at least, does not feature as prominently) in cases of civil contempt. The plaintiffs in such cases are pursuing committal proceedings to coerce compliance with orders or undertakings made in their favour and, in doing so, are trying to protect their private rights and acting for their own benefit, as opposed to acting in the public interest. Therefore, the policy justification for imposing a higher threshold in criminal contempt cases does not apply (or, at least, does not apply with full force).

65.  In this regard, I acknowledge that Re Kennedy (No 3) is a criminal contempt case. However, it is clear that the issue of threshold was not an issue in that case. In any event, apart from commenting that the threshold was “a low one”, the court did not spell out precisely what the applicable threshold should be. Hence, this authority does not affect the above analysis.

66.  For these reasons, I conclude that at the leave stage, an applicant needs to show a strong case, as opposed to a mere prima facie case, on the merits in cases of criminal contempt, which include contempt for making false statements in court documents.

67.  As regards Mr Kwok’s submission that the “proportionate and appropriate” requirement, as set out in Order 41A, rule 9(3), also applies to contempt for making false statements in an affidavit, that is in line with what Barma JA said in Re Chu Kong. In that case, a submission was made that the requirement should be confined to applications brought under that rule and not otherwise. His Lordship ruled against such submission and said, at para 60:

“I can see no reason why it should be so confined and I would accept that the court is entitled and required to consider this question, albeit bearing in mind that the application is one for leave, and not the substantive hearing of the contempt proceedings, so that the question is simply whether the proceedings should be permitted to go further, with full consideration of the merits left for the substantive hearing.”

68.  I therefore conclude that at the leave stage, an applicant needs to satisfy the court that the punishment of contempt is proportionate and appropriate in relation to the allegedly false affidavit.

69.  To recap, I agree with Mr Kwok’s submission on the requirements for obtaining leave to commence committal proceedings for knowingly making false statements in court documents, namely that the public interest test applies, the “strong case” threshold applies, and the “proportionate and appropriate” requirement applies. I would however make one further point in order to address his follow-on submission that Order 41A, rule 9 imposes more stringent requirements than Order 52.

70.  And the point is this. The public interest dimension as explained in KJM Superbikes applies not only to cases of knowingly making false statements in court documents but also applies generally to other instances of criminal contempt. Acts amounting to criminal contempt are acts which are liable to interfere with the course of justice and is punishable by the court for that reason. It is therefore self-evident that the rationale for applying the specific requirements (as identified above) should be equally applicable in other instances of criminal contempt. In other words, the specific requirements which need to be met in leave applications in respect of contempt for making false statements in court documents should similarly be met in leave applications for other instances of criminal contempt.

71.  It is for this reason that I do not agree with Mr Kwok’s submission that Order 41A, rule 9 imposes more stringent requirements than Order 52. Order 52 applies to both civil and criminal contempt. It can be said that more stringent (or specific) requirements apply to the latter than the former at the leave stage. Therefore, when it comes to formulating the proper approach to take when deciding the issue of leave, the material distinction to draw is the distinction between civil contempt and criminal contempt, rather than the distinction between the two orders.

Was the ex parte application defective?

72.  Mr Kwok’s third point is that in their ex parte application, the Trustees did not draw to the attention of the judge that Order 41A, rule 9 imposes more stringent requirements than Order 52. For the reasons stated above, this point falls away as that is not the relevant distinction to be drawn.

73.  Mr Kwok further submits that the statement and Chen 4^th did not deal with why the punishment for contempt was proportionate and appropriate or whether it was in the public interest to permit contempt proceedings to be brought.

74.  It is true that the requirements and threshold discussed above were not explicitly set out in the Trustees’ leave documents. However, this in itself does not lead to the conclusion that the ex parte judge did not apply the proper approach. In respect of an allegation of knowingly making a false statement, it would be clear to an ex parte judge that he or she should apply the requirements applicable to criminal contempt when deciding whether to grant leave or not. He or she would know that the ultimately determinative question is whether the public interest requires contempt proceedings to be brought in the circumstances of the case. Hence, I reject the defendants’ submission that there was a need to explicitly refer to the applicable requirements in the statement or the supporting affidavit. I therefore decline to find that the leave application was defective.

75.  In any event, in the Trustees’ solicitors’ letter to the court dated 5 May 2022 (see para 19 above), in answering Au-Yeung J’s requisition, Hwang Joon Sang was cited for its discussion of the option of perjury. Paras 22 and 23 of the decision was quoted. In para 23, the judge emphasised that ultimately the court is to decide whether it is in the public interest to allow committal proceedings to be brought. Mr Chen submits, and I agree, that the Trustees did draw to the court’s attention the ultimate question to be answered at the leave stage.

76.  For the above reasons, the first ground is not made out.

77.  The complaint under the second ground is material non-disclosure. There are three allegations.

MATERIAL NON-DISCLOSURE – ORDER 41A, RULE 9

78.  The defendants contend that the Trustees failed to draw the ex parte judge’s attention to Order 41A, rule 9 and its approach and requirements, and that constituted material non-disclosure justifying the setting aside of the ex parte order. For the reasons stated above, there was no need for the Trustees to do so.

79.  As a separate point, the defendants rely on what Poon JA said in Numeric City at para 18:

“In our view, it is always incumbent upon an applicant who wishes to cite a person for contempt for making a false statement to state explicitly that he is seeking leave under O.41A r.9(2) so that the court’s vigilance is aroused.”

80.  The defendants say that the Trustees had failed to follow the above guidance.

81.  I do not think that the above passage in Numeric City applies to the present case for the simple reason that the Trustees are not relying on Order 41A, rule 9 to pursue the present committal application.

82.  The material non-disclosure ground based on Order 41A, rule 9 is not made out.

MATERIAL NON-DISCLOSURE – FICL

83.  The second allegation of material non-disclosure relates to the third complaint of contempt which concerns FICL.

84.  Under that complaint, the Trustees say that Hou falsely stated that FICL did not have any funding arrangement with APIDL when in fact it had in the 806 action, and the defendants had full knowledge of it. Before the ex parte judge, the evidence in support of that was contained in paras 57 and 58 of Chen 4^th which read:

“57.  … FICL had at least made in total HK$7,659,000 for APIDL, consisting of the following payments (the “Payments”):

(1)  A transfer of HK$6.5 million transferred from FICL’s account … to APIDL’s then legal representatives Cheng Yeung & Co’s (“CYC”) Clients’ Account on 3 February 2015 …

(2)  A cheque in the sum of HK$500,000 dated 17 February 2015 issued by APIDL to SHINEWING Specialist Advisory Service Limited (“SHINEWING”); and

(3)  A transfer of HK$659,000 from the Account to CYC’s Clients Account on 10 March 2015.

58  However, the only record in relation to the communications for the above substantial payments made by FICL is a letter of interest for the Co-funding from FICL dated 5 January 2015. Copy of the said letter is now shown to me and produced as Exhibit “CYNK-52”.”

85.  Notwithstanding Chen’s evidence that the letter dated 5 January 2015 was the “only record” in relation to the communications for the payments made by FICL, there were in fact two further letters written by FICL in relation to those payments. The letters were dated 31 March 2022 and 19 April 2022 and addressed to the Trustees’ solicitors. Both were marked “Without Prejudice”.

86.  In the 31 March 2022 letter, FICL stated:

(1)  FICL had never been a co-funder of the 806 action.

(2)  In late 2014, CNIL invited FICL to co-fund the 806 action, but FICL refused to participate due to the high-risk nature.

(3)  FICL had been a regular business partner of CNIL and its director, Tony Cheung. FICL made a few payments in early 2015 on behalf of CNIL on Tony Cheung’s instructions. These payments were refunds for previous payments made to FICL prior to 2015.

(4)  FICL did not have any funding agreement or interest in the 806 action.

(5)  FICL’s shareholders and directors did not know David Ho or have any contact with him.

87.  In the 19 April 2022 letter, FICL further stated:

(1)  Tony Cheung had made a number of payments to FICL in 2014 for the purpose of some investment projects in China.

(2)  Tony Cheung indicated he would withdraw from the investments after FICL decided not to co-fund the 806 action. Tony Cheung subsequently requested FICL to refund his payments into the investments and pay to various parties on behalf of CNIL.

(3)  The two parties were working on projects which were totally unrelated to the litigation project.

88.  Mr Kwok submits that the contents of the two letters were plainly material, and that had they been disclosed to the ex parte judge, leave for the third complaint would not have been granted. Furthermore, Chen 4^th contained a positive assertion that the only communication on the FICL payments was the letter dated 5 January 2015. In light of the existence of the two subsequent letters, that assertion was untrue and misleading.

89.  In reply, the Trustees make three points:

(1)  The two letters were without prejudice communications.

(2)  Without prejudice communications should be disclosed in ex parte applications if otherwise the court may be misled without such disclosure: see, eg, Gee, Commercial Injunctions (7^th ed) at para 10-018.

(3)  In the present case, however, the non-disclosure of the letters did not in any way mislead the judge. This is because it was made clear in Chen 4^th that the existence of funding arrangements between FICL and APIDL was disputed. In any event, the two letters from FICL contained only bare assertions with no substantiating documentary proof. In other words, the judge was aware that the relationship between FICL and APIDL was disputed, and therefore was not misled in any way by the non-disclosure of the two letters, which merely made the same point.

90.  For present purposes, I shall assume (without deciding) that the two letters constituted without prejudice communications. I consider that as part of the Trustees’ duty of full and frank disclosure, these letters should have been disclosed for two reasons.

91.  First, it is self-evident that FICL’s denial of litigation funding and the reasons for the denial as expressly stated in the two letters were highly relevant to the subject matter of the third complaint. It is true that they are bare assertions. Nevertheless they are on their face evidence contradicting the Trustees’ case. As such, they may potentially affect the strength of their case on the merits. As explained above, the strength of the merits is a material factor at the leave stage. The letters should therefore have been brought to the attention of the court. It is for the court, not the Trustees, to determine the materiality of the evidence.

92.  Second, without the disclosure of the two letters, the positive allegation in Chen 4^th that the 5 January 2015 letter was the “only” record in relation to the communications in respect of the FICL payments is factually incorrect and plainly misleading. On this, Mr Chen submits that, properly understood in its context, the word “only” means the only contemporaneous record. I do not accept that submission. If the Trustees in fact meant that when Chen 4^th was made, there is no apparent reason why they could not have expressly said so. Furthermore, the Trustees did not make an assertion to that effect in their opposing evidence filed in this setting aside application. I therefore do not accept that is what they meant in Chen 4^th.

93.  I therefore find that there was material non-disclosure by reason of the Trustees’ failure to disclose the two letters of FICL. The leave granted in respect of the third complaint should be set aside.

MATERIAL NON-DISCLOSURE – BANK REMITTANCE SLIPS

94.  The third allegation of material non-disclosure relates to the fourth complaint of contempt concerning the bank remittance slips.

95.  Under that complaint, the Trustees say that the four bank remittance slips exhibited to the CACV affirmation had been tampered with.

96.  In the statement, after setting out the complaint, the Trustees referred to correspondence exchanged between their solicitors and the then solicitors of the defendants about the CACV affirmation in para (19). It read:

“On 25 March 2022, LWL [ie the Trustees’ solicitors] issued a detailed letter to Messrs. So Keung Yip & Sin setting out the breaches and false statements committed by the Respondents. However, on 4 April 2022, they have only come up with a holding reply. On 6 April 2022, LWL issued another letter to chase for their reply which was not responded to by the Respondent up to the date of this Statement.”

97.  On 26 April 2022, the Trustees lodged their leave application.

98.  What happened shortly afterwards was that the defendants sent a letter dated 10 May 2022 to the Trustees’ solicitors, substantively responding to the various allegations made by the Trustees in the earlier letter. One of the responses was in relation to the allegation of tampering of the bank remittance slips. Hou wrote:

“I strongly deny that any documents including the numerous bank remittance advices produced under Hou 1^st have been tampered with, whether as alleged or at all. Better copies of the 5 Chong Hing Bank remittance advices are however now produced in Appendix 1.”

99.  Four of the bank remittance slips attached to the letter corresponded with the four slips which the Trustees complained about in the statement. The former appeared in a “portrait” orientation whereas the latter appeared in a “landscape” orientation. It can be seen from the former that the information alleged to have been intentionally removed appeared in the last few lines of the documents.

100.  The significance of the 10 May 2022 letter is that it was received by the Trustees three days before the ex parte order was granted. It is Mr Kwok’s submission that the Trustees had an ongoing duty of full and frank disclosure as long as the application remained on an ex parte basis, and the duty remained in place even after the ex parte order was granted.

101.  Accordingly, it is submitted that the Trustees ought to have disclosed the 10 May 2022 letter to the judge upon receipt as its contents were clearly relevant to the fourth complaint in the following ways:

(1)  Para (19) of the statement conveyed the message that the defendants’ solicitors had so far only given a holding reply. That was no longer correct as the 10 May 2022 letter was a substantive reply.

(2)  The defendants provided in that letter what appeared to be complete copies of the four bank remittance slips. Any allegation of tampering was thus cured, and that would call into question the appropriateness of contempt proceedings which should only be pursued as a sanction of last resort.

102.  In response, Mr Chen submits that the letter only contained a bare denial of tampering. In any event, it constitutes evidence concerning whether there was any intention of tampering, which is only relevant to the merits of the committal application and possibly sentencing, and is not relevant or material to the court’s consideration at the leave stage.

103.  I accept Mr Kwok’s submission as set out in para 101(1) above and reject Mr Chen’s submissions. Importantly, in my view, the defendants’ denial of tampering and the provision of what appeared to be complete copies of the bank remittance slips are highly relevant matters in the court’s assessment of (1) the strength of the Trustees’ substantive case and (2) the need to pursue contempt proceedings, which would in turn inform the judge’s decision on whether the alleged contempt was of sufficient gravity for there to be a public interest in taking proceedings in relation to it. Again, it is for the court to assess the materiality of the evidence, not the Trustees.

104.  I therefore find that there was material non-disclosure by reason of the Trustees’ failure to disclose the letter of 10 May 2022. The leave granted in respect of the fourth complaint should be set aside.

RE-GRANT

105.  The next issue is whether the court should exercise its discretion to re-grant the leave in respect of the third and fourth complaints.

106.  Mr Chen invites the court to do so for the following reasons:

(1)  The Trustees genuinely believed that the matters complained of did not have to be disclosed.

(2)  It is unlikely that disclosure of the matters would have altered the judge’s decision to grant leave, as they concern the merits of the contempt proceedings which is not a material factor at the leave stage.

(3)  There is a strong public interest in holding the defendants, being officers of the court and insolvency practitioners, to high standards of honesty and integrity expected of them.

(4)  The parties have already prepared the evidence for the substantive contempt proceedings.

107.  The principles regarding whether there should be a re-grant of the relief in case of material non-disclosure are well known: see, eg, Fantastic State Ltd v Tien’s Organic Farm [2019] 3 HKLRD 438, [2019] HKCA 687, paras 37 to 40.

108.  I consider that the Trustees have not provided any good reason for the non-disclosure.

(1)  In respect of the non-disclosure of the two letters from FICL, they now say that at that time they believed, and they still believe, that without prejudice correspondence should not be disclosed and, in any event, the letters only contained bare assertions on FICL’s part, and they were advised and believed that bare assertions are not matters which need to be disclosed.

(2)  In respect of the non-disclosure of the 10 May 2022 letter concerning the bank remittance slips, Hou said:

“Indeed, it was precisely because the May 2022 Letter only contained a bare denial and was immaterial that the Trustees did not disclose the same.”

(3)  In my view, the Trustees’ views were unjustified.

(4)  Even if they believed that without prejudice correspondence should not be disclosed, there was no reason why they could not have disclosed at least the fact of the existence of without prejudice correspondence concerning the complaint about FICL.

109.  I also reject Mr Chen’s submission that the merits of the Trustees’ case is not a material factor at the leave stage.

110.  The discretion to re-grant relief is only to be exercised sparingly. Here, I consider that the need to uphold the public interest by enforcing the requirement of full and frank disclosure outweighs the matters now relied on by the defendants. I therefore refuse to re-grant the leave in respect of the third and fourth complaints.

CONCLUSION

111.  For the above reasons, I order that the ex parte order made in HCB 3819/2011 granting leave to the Trustees to commence contempt proceedings in respect of the third and fourth complaints be set aside, and the contempt proceedings in HCMP 631/2022 insofar as they relate to those two complaints be dismissed. The remainder of the setting aside application is dismissed.

112.  On costs, the Trustees and the defendants each have some success in the application. Instead of making an order granting costs to each side in respect of their successful part, I order on a nisi basis that the costs of the whole application be in the cause of the contempt proceedings. To reflect that the defendants were guilty of delay in the taking out of the setting aside application and for the reasons stated in para 25 above, I make a costs order nisi that the defendants do have costs of the contempt proceedings in HCMP 631/2022 insofar as they relate to the third and fourth complaints save that the costs incurred on and occasioned by the opposing affidavit evidence and the reply affidavit evidence in relation to those two complaints be to the Trustees.