TIONG KING SING v. SAM BOON PENG YEE

CACV 268/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 268 OF 2015

(ON APPEAL FROM HCMP NO. 2206 OF 2014)

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REASONS FOR JUDGMENT

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Hon Cheung CJHC :

1. I agree with the reasons for judgment of Cheung JA.

Hon Cheung JA :

I.  Committal for contempt

2.1  The plaintiff applied by way of originating summons to commit the defendant (‘for the ease of reference to other proceedings mentioned in this judgment, I will refer him as the 1^st defendant’) for contempt of Court for his breach of two undertakings contained in the order of Louis Chan J dated 22 February 2013 and of the order of Louis Chan J dated 13 January 2012 (‘the Injunction Order’) as amended by an order dated 30 January 2012 in HCA 1517 of 2011.  To J found the 1^st defendant to be in contempt but adjourned the question of sentence to be dealt with later.

2.2  The 1^st defendant appealed.  At the conclusion of the hearing, we allowed the appeal, set aside the order of To J (including the order to amend the originating summons and statement filed for the purpose of instituting the contempt proceedings).  We dismissed the amended originating summons and granted costs of the appeal and below to the 1^st defendant with a certificate for two counsel.  I now give reasons for our decision.

II.  The background

1)  The parties and their dealings

3.1  The plaintiff is a Malaysian Chinese.  He was the owner of all the shares in Wijaya International Investment Limited, later renamed as W International Investment Group Limited (‘W Group Limited’), which in turn owns all the share capital of Chongqing Wijaya Realty Limited (‘Chongqing Wijaya’), later renamed as Chongqing Whittier Homes Limited (‘Chongqing Whittier’).  Chongqing Wijaya owns a major commercial and residential property development in Ba Nan District in Chongqing (the ‘Ba Nan Project’) in the Mainland.

3.2  The 1^st defendant is also a Malaysian Chinese.  He was the general manager of Chongqing Wijaya since September 2009.

3.3  In 2009, the plaintiff sold all his shares in W Group Limited to the 1^st defendant and his nominee, namely, New Sunshine Investments Limited (‘New Sunshine’) who was the 2^nd defendant in HCA 1517/2011 (‘the 2^nd defendant’), for RMB 333.5 million, payable by seven instalments over a period of three year until 1 March 2012.

3.4  After paying three instalments totalling RMB83.5 million, the 1^st defendant defaulted.  Later the parties entered into two variation agreements to pay the balance of RMB250 million plus an additional sum of RMB300 million between July 2011 and January 2014.  The variation agreements provided for inspection of the accounts of W Group Limited by the plaintiff’s representative.  The 1^st defendant only paid RMB5 million towards the additional sum.  The outstanding balance of the purchase price of RMB250 million and the outstanding balance of the additional sum of RMB295 million remain unpaid.

2)  The Injunction Order

3.5  In September 2011, the plaintiff commenced HCA 1517/2011 against the 1^st and 2^nd defendants. On 10 January 2012, the plaintiff applied for a Mareva injunction against the 1^st and 2^nd defendants or alternatively an order that they pay into court the sum of RMB245 million. The application was first heard on 13 January 2012 before Deputy High Court Judge Louis Chan (as he then was), who adjourned the application to 2 March 2012 for a substantive hearing.  He also made an interim injunction order (i.e. the Injunction Order) against the 1^st and 2^nd defendants which was subsequently amended on 30 January 2012:

(1)   The 1^st and/or 2^nd defendant(s) shall pay the sum of RMB45,000,000 on or before 20 January 2012 into a designated account as agreed by the parties.  

(2)   The 1^st and/or 2^nd defendant(s) shall not either by themselves or servants, employees, agents howsoever dispose of, deal with, alienate, pledge, mortgage or encumber:

a)   all those shares of W International Group Limited, formerly known as Wijaya International Investment Limited, a company incorporated in and under the laws of Hong Kong SAR; and

b)   all those shares of Chongqing Wijaya Realty Company Limited, incorporated under the laws of the PRC.

(3)   The 1^st and/or 2^nd defendant(s) shall provide the plaintiff’s solicitors, on a weekly basis, commencing on 13 January 2012, written reports of the sale and/or disposal of and/or any creation of encumbrances on the units and landed properties comprising the Ba Nan Project.  This requirement of such reports will cease upon the 1^st and/or 2^nd defendants’ provision for security in the sum of RMB95,000,000 or by some other method agreed with by the plaintiff’s solicitors or approved by the Court.

3.6  After the substantive hearing on 2 March 2012, Louis Chan J reserved his decision and continued the Injunction Order.  The plaintiff had also issued a summons seeking payment into Court by the 1^st defendant of the remaining instalments of the purchase price based on an admission by the 1^st defendant.  Louis Chan J dismissed this summons on 2 March 2012.

3.7  On 22 February 2013 Louis Chan J gave his judgment and found against the plaintiff and dismissed the plaintiff’s summons for Mareva injunction.  He discharged the Injunction Order and further ordered costs nisi to be paid by the plaintiff to the 1^st defendant together with certificate for two counsel.  He further dismissed the alternative relief sought by the plaintiff that the defendants be required to pay RMB245 million into court. 

3)  The undertakings

3.8  At the hearing before Louis Chan J on 2 March 2012 the defendants through their counsel had offered to give undertakings to the Court in the event that the application for Mareva injunction was to be dismissed.  Eventually, the parties reached terms on giving mutual undertakings.  On the part of the 1^st and 2^nd defendants, their undertaking was:

(1)  to maintain the sum of RMB45,000,000 at a bank in Chongqing as agreed by the parties;

(2)  to provide the plaintiff’s solicitors weekly reports of the sale and/or disposal of and/or creation of encumbrances on the units and landed properties comprising the Ba Nan Project;

(3)  not to either by themselves or servants, employees, agents howsoever dispose of, deal with, alienate, pledge, mortgage or encumber:

a)  all those shares of W Group Limited;

b)  all those shares of Chongqing Wijaya;

(4)  to allow Mr Wong Aik Loung and no more than three accountants to inspect the books and accounts of Chongqing Wijaya upon reasonable prior notice.

3.9  The undertaking of the plaintiff was to refrain whether by himself, his servants, agents or otherwise howsoever from causing any harassment to the 1^st and 2^nd defendants and Chongqing Whittier and/or any interference and disruption to the 1^st and 2^nd defendants carrying on with the Ba Nan Project. 

3.10  Louis Chan J in his judgment of 22 February 2013 stated that:

‘ 78. The parties have offered cross-undertakings which are to have effect upon dismissal of the application for Mareva injunction.’

III.  Events leading to the present application

4.1  In May 2014, a group of men in the presence of the plaintiff caused harassment to the 1^st defendant at the office of Chongqing Wijaya. 

4.2  On 13 May 2014, the 1^st and 2^nd defendants applied ex parte for leave to issue committal proceedings against the plaintiff for his breach of undertaking.  On 4 June 2014, To J granted them leave to issue an originating summons for committal of the plaintiff.

4.3  On 10 June 2014, the 1^st and 2^nd defendants issued an originating summons under HCMP 1404 of 2014 applying for an order of committal against the plaintiff (the ‘Defendants’ Committal Summons’). 

4.4 On 30 July 2014, the plaintiff applied to set aside the leave granted to issue the Defendants’ Committal Summons and to have that summons dismissed.  Those applications were heard by To J on 19 December 2014.  On 21 January 2015, To J handed down his decision dismissing both of the plaintiff’s applications.

4.5  On 15 August 2014, the plaintiff sought leave to commence contempt proceedings against the 1^st defendant.  Leave was granted by Louis Chan J.

IV.  Position of the 1^st defendant in the present proceedings

5.1  The first undertaking is for the 1^st and 2^nd defendants ‘to maintain a deposit of RMB45 million at a bank in Chongqing as agreed by the parties’.  The second undertaking is for the 1^st and 2^nd defendants ‘to provide the plaintiff’s solicitors weekly reports of the sale and/or disposal of and/or creation of encumbrances on the units and landed properties comprising the Ba Nan Project’.

5.2 The 1^st defendant did not file any evidence in the present proceedings.  Instead, he took issues on the construction of the meaning of his first undertaking and made submissions that there was no intentional breach of the second undertaking.  

V.  The first undertaking

1)  To J’s view on the first undertaking

6.1  As the plaintiff’s case on the construction of the first undertaking and the defendant’s breach thereof was upheld by To J (except on the issue of the supervising account required by the Chongqing Land Bureau), it is not necessary for me to set out the plaintiff’s arguments.  I will summarise To J’s view on the matter.  The underlining theme of To J’s decision is that the purpose of the first undertaking is for the 1^st defendant to provide security for the plaintiff’s claim.  In other words the first undertaking is to demonstrate the 1^st defendant’s ability to make payment if found liable.

(1)  Construction of the first undertaking

6.2  To J held that on the true construction of the first undertaking, the 1^st defendant must :

(i)  maintain a deposit with an unencumbered balance at or above the level of RMB45 million in his, or New Sunshine’s or a third party’s account which he or New Sunshine has unfettered power to dispose of or use as a security;

(ii)  the account must be with a bank in Chongqing; and

(iii)  the account must be agreed by the parties.

(2)  Breach of the first undertaking

6.3  To J found that pursuant to the Injunction Order, the 1^st defendant had been providing copies of certificates issued by the Chongqing branch of the China Construction Bank (the ‘Bank’) of a RMB45 million deposit in an account known as the ‘814 Account’ in the name of Chongqing Wijaya.  Commencing on 24 December 2013, the 1^st defendant produced certificates for the deposit issued by the Bank relating to an account known as the ‘861 Account’ instead. 

6.4 The deposits in the 814 Account and the 861 Account belong to Chongqing Wijaya.  They do not belong to the 1^st defendant or 2^nd defendant.  They are encumbered and cannot be used by the 1^st defendant or 2^nd defendant.  The accounts were never agreed to by the plaintiff.

6.5 As the 814 Account and the 861 Account are the accounts of Chongqing Wijaya and not that of the 1^st defendant or 2^nd defendant, technically, they are third party’s accounts.  The fact that an individual by himself holds practically all the shares in a company does not in any way make the property or assets of the company his.  As against the Bank, neither the 1^st defendant nor the 2^nd defendant had unfettered power over the funds in those accounts.  Chongqing Wijaya cannot be compelled to withdraw funds out of those accounts to discharge the liability of the 1^st and 2^nd defendants, if they are found liable to the plaintiff.  As the 2^nd defendant is the 1^st defendant’s nominee and through it the 1^st defendant is effectively in control of Chongqing Wijaya and its bank accounts, it cannot be argued that the 1^st defendant’s breach caused by corporate personality issue was just technical. 

6.6  The accounts were not unencumbered or freely disposable in the 1^st defendant’s hands.  According to KPMG’s 1^st Report the operation of the 814 Account was subject to the Real Estate Development Loan Closed Management Agreement (the ‘Closed Management Agreement’) and the Fixed Assets Loan Agreement (the ‘Fixed Assets Loan Agreement’) signed by the 1^st defendant on behalf of Chongqing Wijaya on 22 December 2010. 

6.7  Under the Fixed Assets Loan Agreement, Chongqing Wijaya borrowed RMB145 million from the Bank for a period of 36 months from 27 December 2010 to 26 December 2013.  The funds in the 814 Account were secured for the purpose of repaying loans advanced by the Bank under that agreement.  Under the terms of the agreement with the Bank, the account was subject to supervision and control of the Bank and may not be withdrawn except with the consent of the Bank.  The Bank had control over the funds in the account as if it were a first charge over the funds in the account.

6.8  Whilst it was accepted by the plaintiff that the account opened by the 1^stdefendant was not agreed by the plaintiff, To J rejected the 1^stdefendant’s argument that it was not in breach of the Injunction Order because the parties had not agreed on an account and the obligation to pay RMB45 million into or maintain any account never arose. 

6.9 To J held that,

‘ 61. The obligation to comply with a court order rests on the party who has been ordered to perform. There is no burden on the party for whose benefit the order was made. The burden is therefore on the Defendant and New Sunshine to secure or procure agreement on the designated account into which the money be paid pursuant to the Injunction Order and to maintain that account. They must do so forthwith, meaning within such time as is reasonably practicable. The duty to comply is owed to the court and not to the party for whose benefit the order was made. If for any reason the party obliged to perform cannot comply, even if it is due to the fault of the party for whose benefit the order was made, he should apply to court for direction or for extension of time for compliance or for variation or even discharge of the order or undertaking. It lies ill in his mouth to say the obligation has not yet arisen because we have not agreed the account. It is even worse, if non-compliance is due to his self-imposed obstruction. The argument of sequential obligations or approach in compliance is disingenuous. To adopt Ms Eu’s sequential approach would open the gate to parties obliged to perform to avoid performance by putting up excuses for not agreeing to an account into which to pay or maintain the deposit. Having so construed the 1st Undertaking and rejected Ms Eu’s submission, I find that the Defendant was in breach of the 1st Undertaking. What remains is for me to analyse his excuse so as to make a further finding whether the breach was substantial or just technical.’

6.10  To J further held the defendant’s conduct is deliberate and contumacious:

‘ 70. Stepping back and looking at what this breach is all about, I find this is not the case of a defendant with a stack of cash earnestly wanting to deposit into an account but was prevented from performing his obligation by the plaintiff refusing or unreasonably refusing to agree an account into which to place the deposit. This is not the case of a defendant, through ignorance, relied on the funds in a third party account over which he has de facto control as performance of his obligation. The funds in the account were secured for the purpose of repaying the Bank and over which the Bank had effectively a first charge. The funds were not unencumbered as represented to the court by the Defendant through his counsel.

71.  In that light, the Defendant’s conduct is obviously deliberate and contumacious.  He executed the Fixed Assets Loan Agreement and the Closed Management Agreement on behalf of Chongqing Wijaya.  Corporate personality issue apart, he knew the funds in the 814 Account were secured to the Bank and not freely disposable by him.  Yet, he instructed his counsel to inform the court that the funds were unencumbered.  He instructed his counsel to tell the court that the funds could not be transferred to Guangzhou without incurring unnecessary and substantial costs and causing tax implications.  Louis Chan J expressed surprise.  For my part, I would not accept that assertion on face value without production of evidence, especially as C&C had asserted they had obtained accounting and legal advice to that effect.  Given his proven deceptive behaviour, I wonder if there is any truth in that assertion.  I would take another step further to infer from his deceptive behaviour that what he instructed his counsel to tell the court was to thwart any attempt by the court requiring him to transfer the funds to be placed in an account in the Guangzhou branch of the Bank to which the Plaintiff’s solicitor could be made a joint signatory.  I also doubt the truthfulness of what he told his solicitors that there would be tax implication if a non-PRC citizen is made a joint signatory of a bank account, not a joint holder.  I think almost if not all foreign companies or joint venture companies carrying on business in the PRC have accounts operated by joint signatories who are non-PRC citizens.  The Defendant is a United States citizen and not a PRC citizens.  He seems to have no problem about tax implication in his signing accounts for Chongqing Wijaya.  These demonstrate the hollowness of his assertions.  Accordingly, I draw the irresistible inference that right from inception, the Defendant set out to deceive the court and never had any intention to honour his 1^st Undertaking. All these assertions about charges and levies for transferring funds from Chongqing to Guangzhou and tax implications if a non-PRC citizen is appointed as signatory of a bank account were mere excuses deployed by him to avoid reaching agreement on a designated account to which to transfer the funds for the purpose of performing the 1^st Undertaking.  I find the breach was intentional, substantial and contumacious.  This finding, incidentally, also dealt with the mens rea requirement for the contempt.’

2)  Requirement of contextual interpretation

6.11  In order to construe the meaning of the first undertaking, one must construe the context or the factual background in which the first undertaking was given.  It is apparent from a reading of To J’s judgment from paragraphs 48 to 55, before he reached his construction on the meaning of the first undertaking, he was focusing specifically on the Injunction Order of 13 January 2012 as amended on 30 January 2012 instead of in the context of the position taken by the 1^st defendant at the hearing on 2 March 2012 and the decision of Louis Chan J of 22 February 2013 in which he set out the undertakings of the parties.  In my view, this is a flawed approach.  For the purpose of argument, I am prepared to assume, but without deciding, that paragraph 1 of the Injunction Order is capable of bearing the meaning as construed by To J.  At that stage, the merits of the application was not gone into and the Injunction Order was imposed plainly to preserve the status quo until the full arguments were heard.  However, the situation must clearly be different with the arguments being advanced at the hearing on 2 March 2012 and when Louis Chan J gave his judgment on 22 February 2013 in which he had made specific findings on the merits of the plaintiff’s application for Mareva injunction and for payment into court which do not sit well with the plaintiff’s case that the first undertaking was given by the 1^st defendant in order to provide security for his claim.

6.12  Before I consider the findings by Louis Chan J, it is pertinent to bear in mind that the application before him was the third attempt by the plaintiff for Mareva injunction and other relief of a similar nature.  The plaintiff had failed in the previous two attempts. 

6.13 On 28 June 2011, the plaintiff commenced HCA 1069/2011 as an action in aid of arbitration proceedings in Singapore.  On the same day, he applied ex parte for a Mareva injunction to restrain the 1^st and 2^nd defendants from disposing of the shares and the assets of W Group Limited and Chongqing Wijaya.  The application came before Poon J (as he then was) who made no order.

6.14  By a letter dated 5 July 2011, the plaintiff through his then solicitors, Huen & Partners (‘H&P’) communicated to the 1^st and 2^nd defendants that he considered them to be in repudiation of their agreement and demanded, among other things, the return of the shares in W Group Limited.

6.15 On 8 July 2011, the plaintiff commenced HCMP 1289/2011 seeking essentially similar injunctive relief against the 1^st and 2^nd defendants as before.  On the same day, he applied ex parte for Mareva injunction and succeeded before To J.  He then discontinued HCA 1069/2011.

6.16  At the inter partes hearing on 12 August 2011, Chung J discharged the ex parte injunction on the ground of material non-disclosure and on the plaintiff’s failure to establish a real risk of dissipation of assets.  Chung J also refused to re-grant the injunction inter partes.  That action was subsequently discontinued.

6.17  As summarised by Louis Chan J in his judgment of 22 February 2013, Chung J, had apart from discharging the plaintiff Mareva injunction granted by To J, also considered and rejected the plaintiff’s argument that there was a risk of dissipation of assets.  This is Louis Chan J’s summary :

‘ 52. Apart from material non-disclosure, [Chung J] also considered the merits of the plaintiff’s claim of risk of dissipation of assets by the [1^st and 2^nd defendants]. [Chung J] agreed with the defendants that mere breach of contract does not provide the basis for alleging such risk.

53.  Regarding the transfer of the sale shares to the 2^nd defendant, the defendants relied on the provisions in the agreement for sale and purchase and the custodian agreement and denied any breach by virtue of such transfer.  They further offered an undertaking not to further deal with these shares.

54.  Regarding the loans raised on the security of the sale shares and the assets of Chongqing Wijaya, they were kept by the 2^nd defendant.  [Chung J] found that there was no proper basis for thinking that substantial assets had been siphoned off.

55.  Regarding the alleged refusal of inspection (which was denied by the defendants who also offered an inspection by the plaintiff on 8 August 2011), [Chung J] opined that such could not properly ground a real risk of dissipation of assets.

56.  Regarding the real property project in Guangdong, [Chung J] found evidence showing that it was acquired for W International.

57.  On the whole, [Chung J] also found against the plaintiff on the issue of risk of dissipation of assets.’

6.18  The plaintiff argued before Louis Chan J that there was material change of circumstances since the previous applications.  This was rejected by Louis Chan J who expressly found that there was no risk of dissipation of assets by the 1^st and 2^nd defendants and further there was no basis for the plaintiff to demand payment of the remaining instalments under the sale and purchase agreement.  This is what Louis Chan J held :

‘ 62. Leading counsel [for the plaintiff] referred to the 1^st defendant’s failure to pay the instalments of purchase price and profit on time or at all. He also complained that the 1^st defendant had unlawfully transferred the sale shares to the 2^nd defendant and had dealt with the assets of W International without authority so as to strip it of all value. Moreover, the defendants have refused inspection of the books and account of Chongqing Wijaya by the plaintiff. Counsel also submitted that there is cogent evidence of the defendants’ dissipation of assets and an imminent risk that they were in the process of disposing or alienating the entire Ba Nan Project to 3rd parties.

63.  Regarding the complaint of non-payment of purchase price and profit, since the plaintiff has by his solicitors’ letter of 5 July 2011 purportedly accepted the alleged repudiation of the agreement of sale and purchase by the 1^st defendant, there is no basis for him to demand payment of the remaining instalments under the agreement of sale and purchase as varied by the 1^st and 2^nd variation agreements. 

64.  Even if the 1^st defendant should offer to pay him money per the agreement as varied, he would not be in a position to accept the same as the receipt of the remaining purchase price as purchase price would prejudice his claim for the return of the sale shares.  I therefore see no basis for this complaint or any argument that the failure of the 1st defendant to tender payment per the agreement can be construed as risk of dissipation when the plaintiff is not in a position to demand or accept the same pursuant to the agreement.  This is also one of the main grounds advanced by leading counsel for the defendants in opposition to the application for continuation of the ex parte injunction and I agree with it.

65.  Regarding the transfer of the sale shares to the 2^nd defendant, that is prima facie blessed by a number of provisions in the agreement of sale and purchase and the custodian agreement.  I do not think the transfer can be used to suggest a risk of dissipation.’

6.19  In respect of the plaintiff’s alternative application for the 1^st defendant to make payment into Court, Louis Chan J expressly held that he could not order him to pay the money as security:

‘ 75. The plaintiff’s summons also prays for an alternative order that the 1^st defendant be required to pay RMB245 million into court. However, I have refused the application for a Mareva injunction. I also cannot order the 1^st defendant to pay this sum into court as security for judgment for the plaintiff. The reason being that the plaintiff has purportedly accepted the alleged repudiation of the agreement for sale and purchase and is claiming the return of the sale shares. He is not seeking performance of the agreement or a judgment in the action for payment by the defendant according to the sale and purchase agreement. I therefore dismiss this alternative relief as well.’

6.20  In my view, in the light of these express finding, To J was wrong to construe the purpose of the first undertaking was to show the 1^st defendant’s ability to make payment to the plaintiff if found liable and therefore the money to be maintained in an agreed account is in the form of a security.  It is because of this wrong approach that led him to construe the first undertaking in the manner as he did.  It is apparent from the transcript of the hearing before Louis Chan J on 2 March 2012 that during the exchange between Louis Chan J and counsel, Ms Eu SC for the 1^st defendant referred to a dated bank deposit in respect of money in Chongqing being unencumbered.  Ms Eu, however, had, at the same time, stated that the plaintiff was not entitled to any security because he cannot show that there had been dissipation of assets.  She further submitted that

‘ it’s an abuse of process to try it a third time, and also on their claim, my Lord, I stress it’s on their claim, they’re not entitled to anything other than the shares, and in fact they have been overpaid. They had to pay us back.’

6.21  This is contrary to To J’s view that Ms Eu had offered the undertaking by way of security for the plaintiff’s claim.

6.22  Further, it is apparent from the transcript that, the undertakings were made in response to the suggestion made by Louis Chan J. The transcript recorded that Louis Chan J said to the parties :

‘ Is there anything that can be done, on the one hand, to lead the 1st and 2nd defendants to have the peace of mind to continue developing the [Ba Nan] project so that it will be bring (sic) to fruition, because I think a lot of work still have to be done for the purpose of the further development, and it seems that the project now has a worth that is more than at its inception or at the time when it was handed over to the 1st and 2nd defendants.

  …..

  whilst on the other hand, leave the plaintiff also the peace of mind to attend to his other affairs without worrying that the company may be denuded so that when the time for payment comes there be nothing left.’

6.23  One may ask what was the purpose of the first undertaking?  Ms Eu argued that it was given to ward off the plaintiff from harassing the defendants in the Ba Nan Project.  In the light of the submissions by Ms Eu before Louis Chan J and his findings, this explanation is not as far fetched as it may appear on first blush.  More importantly, it has certainly not been demonstrated by the plaintiff that the intention of the 1^st defendant in giving the first undertaking was to provide security for its claim with the attendant requirements that it should be encumbrance free.

6.24  Likewise, that the first undertaking requires an account to be agreed upon by the parties should not be brushed aside as being an insignificant element.  It is of note that the plaintiff had not filed any evidence in relation to the discussion by the parties, if any, in relation to the working out of the requirement of an agreed account under the first undertaking after the judgment of Louis Chan J of 22 February 2013.

6.25  It has been clearly stated by the authorities that it is an elementary principle of justice and fairness that no order will be enforced by committal unless it is expressed in clear, certain and unambiguous language: per Munby J in Harris v Harris [2001] 3 FCR 193, 227 and adopted by the Court of Final Appeal, per Sir Gerard Brennan NPJ in Kao, Lee & Yip (a firm) v Donald Koo Hoi Yan and Others (2009) 12 HKCFAR 830, 846.  In my view, adopting the contextual approach to interpretation, the plaintiff has failed to establish that the first undertaking bears the meaning as decided by To J.  This being the case there is no question of the 1^st defendant being in contempt.  The question of the defendant’s conduct being deliberate and contumacious is simply not engaged.

VI.  Second undertaking

7.1  The originating summons of the plaintiff stated that it sought committal of the 1^st defendant ‘for breach of his undertakings’.  It is not disputed that on that basis the effective date for the purpose of considering the breach is from the date of the order dated 22 February 2013, which contained the undertaking.  In the particulars of the 1^st defendant’s breach of the second undertaking, in addition to two breaches that occurred after the 22 February 2013, four breaches that occurred from the date of Injunction Order dated 13 January 2012 but prior to 22 February 2013 were also relied upon by the plaintiff.  The 1^st defendant’s stand before To J was to address only the breaches that had occurred from the time of the second undertaking.  The plaintiff then sought amendment of the originating summons and the statement to plead expressly that the committal was for the 1^st defendant’s breaches of ‘the Injunction Order and the undertakings’.  This was opposed by the 1^st defendant.  To J, however, did not make a ruling at the hearing on the amendment but only decided this issue in his judgment by which he allowed the amendment and found the 1^st defendant in contempt for all six breaches of the Injunction Order and the second undertaking. 

7.2 In my view this approach is faulted.  Due to the penal nature of contempt proceedings this will require strict proof of guilt beyond reasonable doubt of the person cited for contempt (see the cases referred to by Sir Gerard Brennan NPJ in Kao, Lee & Yip at 849).  Likewise, fairness will require the person cited for contempt to be informed at the outset what he is being accused of.  As repeatedly said, the statement in support of the application for leave to commence contempt proceedings is to be treated in a similar manner as an indictment in criminal proceedings having regard to the penal nature of the sanctions for contempt (see para. 52/2/6 of Hong Kong Civil Procedure 2016).  The same reasoning will apply to the originating summons which commences the contempt proceedings after leave has been granted.  To defer making the decision on the amendment until the giving of the judgment means that the 1^st defendant was deprived of an opportunity of meeting the additional allegations of breach.  The response to these new allegations may involve strategic decisions on the part of the 1^st defendant.  In my view the decision to allow the amendment after the hearing is wrong.  

7.3  Mr McCoy SC for the plaintiff conceded that, if the amendment is disallowed, then the only breach of the second undertaking is the non-disclosure of the charge created by Chongqing Wijaya in favour of the Fudian Bank.

7.4 It is true that the 1^st defendant had not reported this charge but it is equally clear that the 1^st defendant had made disclosure to the plaintiff of Chongqing Wijaya’s intention in a shareholders meeting to create the charge in favour of Fudian Bank.  To J held that the disclosure of such an intention is insufficient because what is required is a disclosure of the charge after it had been created and the 1^st defendant had failed to comply with this requirement.  In my view, one should step back and ask: if the 1^st defendant had already disclosed the intention to create the charge, is it likely that he intended not to comply with the second undertaking by not disclosing it after its creation or whether it is more likely or, at least, equally likely that the non disclosure was due to an unintentional slip? This is where the strict proof of beyond reasonable doubt comes into play.  On the material before To J, he was no doubt influenced by the fact that there were six allegations of breach by the 1^st defendant.  Had the cumulative effect of the other five breaches been removed from his consideration, I have no doubt that To J would have come to a different view on the 1^st defendant’s breach on this issue.

VII.  Delay and abuse of process

8. Ms Eu also relied on the long delay by the plaintiff in issuing the contempt proceedings which came after the 1^st defendant had commenced contempt proceedings against the plaintiff.  Ms Eu characterized it as an act of retaliation and referred to the Court’s inherent discretionary power to strike out contempt proceedings for delay and abuse as discussed in cases such as Taylor v Ribby Hall Leisure Ltd [1998] 1 WLR 400.  As the judgment of To J cannot be sustained on the grounds that I have mentioned, it is not necessary to address this topic. 

VIII.  Conclusion

9. Accordingly the appeal was allowed as indicated.

IX.  Costs of preparation of appeal bundles

10. The plaintiff’s solicitors in their letter dated 28 June 2016 had objected to the inclusion of unnecessary documents in the appeal bundles.  The defendant’s solicitors had prepared a core bundle and six bundles in this appeal totalling 1350 pages.  The 1^st defendant’s solicitors accepted that many of these documents were not necessary for the appeal.  This Court has repeatedly disapproved of the practice of indiscriminately putting unnecessary documents in the appeal bundles.  We will only allow the defendant 50% of the costs of preparing the bundles both on a party and party basis and solicitor and client basis.

Hon Poon JA :

11. I agree with the reasons for judgment of Cheung JA.