NICOLE STAR LOGISTICS CO LTD v. WONG KEI, KENA AND OTHERS

HCMP 1553/2024

[2025] HKCFI 4025

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1553 OF 2024

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J U D G M E N T

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1.  Introduction

1.1  By an Originating Summons filed on 19 August 2024 (“OS”), the Plaintiff (“P”) seeks a committal order against the 1^st to 3^rd Defendants (respectively “D1” to “D3” and collectively “Ds”).

1.2  These committal proceedings were initiated by an ex parte application made by P on 19 July 2024, which application was led by a statement filed pursuant to RHC Order 52, rule 2(2) (“Statement”) and the 2^nd Affirmation of Mr Lui Tsz Ho (“Lui”) filed in HCA 408/2023 (“Underlying Proceedings”). Lui is a partner of Messrs Simon CW Yung & Co (“SYC”), the firm representing P in the Underlying Proceedings and these proceedings.

1.3  As set out in the Statement, the gravamen of P’s complaints is that Ds have intentionally and deliberately breached 2 oral examination orders made pursuant to RHC Order 48 in the Underlying Proceedings:

(1)  The first order was made by Master J Wong on 23 May 2023 (“1^st Examination Order”);

(2)  The second order was made by Master Lai on 30 October 2023 (“2^nd Examination Order”).

1.4  As will be seen from the chronology set out below, the hearing of the 1^st Examination Order took place on 30 October 2023 (“30/10/23 Hearing”) and the hearing of the 2^nd Examination Order took place on 26 February 2024 (“26/2/24 Hearing”). The complaints in these proceedings are that, as a matter of record, Ds did not attend the 30/10/23 Hearing (“Count 1”) or the 26/2/24 Hearing (“Count 2”).

1.5  On 7 August 2024, leave was granted to P to commence these committal proceedings.

1.6  At the hearing, P was represented by Mr Jason Tang of counsel. Although the hearing before me was the first hearing of the OS, for the reasons set out below, I accede to Mr Tang’s invitation to deal with the OS summarily and in Ds’ absence. As explained below, I dismiss Count 1 as the application in respect of it is defective. I am, however, satisfied that Count 2 has been proved beyond reasonable doubt.

2.  Background

2.1  P commenced the Underlying Proceedings on 17 March 2023 against Sunny Smart International Development Limited (“Sunny Smart”). P obtained default judgment against Sunny Smart on 13 April 2023 (“Default Judgment”) in the sum of HK$7,888,892.67 together with interest thereon and costs (“Judgment Sum”).

2.2  Following the entry of the Default Judgment, P commenced garnishee proceedings against a bank of Sunny Smart and obtained a garnishee order nisi on 21 April 2023. On 12 May 2023, SYC informed the court that the garnishee proceedings would not be proceeded with, as the balance in the relevant bank account was negligible.

2.3  As the Judgment Sum remained wholly unsatisfied, P applied for and obtained the 1^st Examination Order against Ds.

2.4  D1 and D2 are equal shareholders (each holding 50% shareholding) and were the former directors of Sunny Smart. They resigned from their directorships on 4 January 2023 but remain as Sunny Smart’s only shareholders. In their stead, D3 was appointed as a director of Sunny Smart on the same date. In the documents filed with the Companies Registry, the addresses given were:

(1)  For D1 and D2, 610 Fan Ling Wai, Fanling, New Territories;

(2)  For D3, Room 610, 3/F. Fanling Wai, Fanling, New Territories (collectively “Last Known Addresses”).

(i)  The 1^st Examination Order

2.5  As stated earlier, the 1^st Examination Order was granted by Master J Wong on 23 May 2023 and required Ds to attend court on (initially) 10 July 2023 (“10/7/23 Hearing”). It is in the following terms:

“[D1 and D2] the former directors of the Defendant (Judgment Debtor) and [D3] a director of the Defendant (Judgment Debtor) do attend [the 10/7/23 Hearing] and be orally examined pursuant to Order 48 rule 1 of the Rules of the High Court as to what debts are owing to the Defendant (Judgment Debtor) and whether the Defendant (Judgment Debtor) has any and what other property and means of satisfying the [Judgment Sum] and [Ds] do produce any books or documents in the possession or power relating to the Defendant's (Judgment Debtor's) assets and liabilities at the time of the examination and that the costs of this application and of the examination thereunder be discretion of the Master in whose Court the examination has taken place.”

2.6  A penal notice was endorsed on the backsheet of the 1^st Examination Order.

2.7  P was unable to effect personal service of the 1^st Examination Order on Ds. Eventually, P applied for and on 30 June 2023 was granted an order for substituted service of the 1^st Examination Order (“30/6/23 Order”) by (1) sending the 1^st Examination Order together with the 30/6/23 Order by prepaid ordinary post to the Last Known Addresses and (2) advertising a notice of the examination proceedings in Chinese once in the “Hong Kong Commercial Daily”.

2.8  I am satisfied on the evidence before me that the 30/6/23 Order has been complied with. On 18 July 2023, the 1^st Examination Order and the 30/6/23 Order were sent by prepaid ordinary post to Ds at the Last Known Addresses. On 27 July 2023, a notice of the 1^st Examination Order was advertised. As such, pursuant to the terms of the 30/6/23 Order, there was good and sufficient service of the 1^st Examination Order.

2.9  Given the issues relating to service and since the 1^st Examination Order was only served by substituted service after the 10/7/23 Hearing, that hearing was vacated and the hearing of the 1^st Examination Order was later refixed to be heard on 28 August 2023 (“28/8/23 Hearing”).

2.10  On 16 August 2023, Master Ho granted an order for substituted service (“16/8/23 Order”) of the notice of restored hearing of the 1^st Examination Order “under cover of a letter with notice of the restored hearing and the relevant warning” by (1) sending the same with a copy of the 16/8/23 Order by prepaid ordinary post to the Last Known Addresses and (2) advertising a notice of the same once in the “Hong Kong Commercial Daily”.

2.11  Again given the issues relating to service, by an order made on 18 August 2023 (“18/8/23 Order”), the 28/8/23 Hearing was vacated and the hearing of the 1^st Examination Order was refixed to the 30/10/23 Hearing.

2.12  As stated earlier, I am of the view that the application in respect of Count 1 is defective. In both the Statement (§§28 and 29 thereof) and the OS (§§28 and 29 of the Schedule to the OS), it is contended that the notice of the 30/10/23 Hearing was served on Ds in compliance with the 16/8/23 Order.

2.13  It is perhaps unfortunate that submissions were made on the basis that 16/8/23 Order had been complied with, in particular when the relevant advertisement in the hearing bundle is a very condensed version and not entirely legible. Upon confirmation by counsel after a query was made of SYC after the hearing, it now transpires that what was done was not compliant with the 16/8/23 Order. Instead, whilst part of the 16/8/23 Order was complied with, in that on 12 September 2023, the requisite cover letters and copies of the 16/8/23 Order and the 18/8/23 Order were sent by prepaid ordinary post to Ds at the Last Known Addresses (and the cover letters themselves expressly referred to the 30/10/23 Hearing), the notice which was advertised on 20 September 2023 only referred to the 28/8/23 Hearing and not the 30/10/23 Hearing.

2.14  As is plain from the terms of the 16/8/23 Order, what was required to be advertised was a notice of the same information contained in the materials sent by prepaid ordinary post pursuant to that order (§2.10 above). Under the terms of the 16/8/23 Order, the methods of service prescribed therein were cumulative, and as such, it was only upon compliance with all of them that there would be good and sufficient service of the notice of the restored hearing of the 1^st Examination Order.

2.15  It is trite that the Statement 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, and unless with the leave of the court, the applicant cannot rely on grounds not stated in the originating summons, being grounds in respect of which leave for making the application for a committal order has been granted: Hong Kong Civil Procedure 2025 Note 52/2/5. As has been stated in Cosimo Borrelli (Trustee of SFC Litigation Trust) v Allen Tak Yuen Chan [2018] 2 HKLRD 496 §33, a statement filed pursuant to RHC Order 52, rule (2) has a two-fold function, one of which is for the purpose of discharging the applicant’s duty of making full and frank disclosure in the ex parte application.

2.16  In my view, the factual matter asserted in the Statement, namely that the 16/8/23 Order had been complied with is plainly inaccurate and was only uncovered upon the court’s query.

2.17  On this basis, Count 1, namely the allegation that Ds breached the 1^st Examination Order by failing (intentionally and deliberately) to attend the 30/10/23 Hearing falls to be dismissed. For the reasons stated in the preceding two paragraphs, I refuse to accede to Mr Tang’s invitation to disregard the foregoing non-compliance.

(ii)  The 2^nd Examination Order

2.18  At the 30/10/23 Hearing, Master Lai made the 2^nd Examination Order in the following terms:

(1)  The examination of Ds was adjourned to a date to be fixed with an estimated time of 30 minutes for further directions;

(2)  Ds were ordered to supply copies of or make available originals for copying the documents specified in the 2^nd Examination Order not later than 21 days before the adjourned hearing and to produce them at the adjourned hearing;

(3)  A warning was included in the 2^nd Examination Order, and in so far as material to these committal proceedings, the warning included one which stated that Ds must attend the examination whenever required and if any of them failed to attend the examination without good cause being shown, they were liable to face contempt of court proceedings.

2.19  A penal notice was endorsed on the backsheet of the 2^nd Examination Order.

2.20  On 30 November 2023, the adjourned hearing was fixed to be heard on 18 January 2024 (“18/1/24 Hearing”).

2.21  On 3 January 2024, Master Ho granted an order for the substituted service (“3/1/24 Order”) of the 2^nd Examination Order and the Notice of Adjourned Hearing by (1) sending the same together with the 3/1/24 Order to Ds by prepaid ordinary post to the Last Known Addresses and (2) advertising a notice of the same once in the “Hong Kong Commercial Daily”.

2.22  Meanwhile, by an order dated 9 January 2024 (“9/1/24 Order”), the 18/1/24 Hearing was vacated and the hearing of the 2^nd Examination Order was refixed to the 26/2/24 Hearing and P was ordered to inform Ds of the adjourned hearing.

2.23  I am satisfied on the evidence that the 3/1/24 Order and 9/1/24 Order have been complied with. Substituted service was effected on 12 and 22 January 2024 respectively by (1) prepaid ordinary post to the Last Known Addresses (2) advertisement of a notice in the “Hong Kong Commercial Daily”.

2.24  As stated above, Ds did not attend the 26/2/24 Hearing and, as a result, the 2^nd Examination Order was further adjourned sine die with liberty to restore.

3.  Summary disposal of the OS in Ds’ absence

3.1  On 19 August 2024, P issued the OS, supported by the affirmations of Lui and Mr Cheung Cheong Ngok (a legal executive of SYC). On the same day, P filed a Notice of Appointment to hear the Originating Summons with a hearing date of 9 January 2025 (“Notice of Appointment”).

3.2  P was unable to effect personal service of the OS, the Notice of Appointment and the supporting affirmations on Ds. As a result, P applied for and was granted an order for substituted service of those documents on 16 December 2024 (“16/12/24 Order”) by way of advertisement and prepaid ordinary post to the Last Known Addresses.

3.3  On the evidence, the 16/12/24 Order has been complied with, in respect of the OS, the Notice of Appointment and the supporting affirmations. No acknowledgement of service has been filed by any of the Ds.

3.4  As Mr Tang has fairly pointed out, there are 2 procedural issues. First, under RHC 52, rule 3(3), the OS “accompanied by a copy of the statement and affidavit in support of the application for leave under rule 2” must be served on Ds. In the present case, only the OS and its supporting affirmations were served in accordance with the 16/12/24 Order. Secondly, although the Notice of Appointment was served in compliance with the 16/12/24 Order, the original hearing date on 9 January 2025 was vacated and refixed to 3 March 2025. P has since provided the Statement and its supporting affirmation by insertion into the letterboxes at the Last Known Addresses and sent the Notice of Adjourned Hearing by prepaid ordinary post on 5 February 2025 to Ds at the Last Known Addresses, which letters were not returned by the Post Office through the Dead Letter Service. At the hearing, Mr Tang invited the court to dispense with the service requirement or to waive the irregularities.

3.5  In respect of the first irregularity, I am persuaded that I should accede to Mr Tang’s invitation. The OS includes a Schedule which substantially reproduces the content of the Statement. Under RHC Order 52, rule 3(4), the Court may even dispense with the service of the originating summons if it thinks just to do so. As has been stated in Secretary for Justice v Choy Bing Wing [2005] 4 HKC 416:

“[31] On our understanding of the relevant authorities concerning procedural regularity in respect of the validity of committal orders, there has in recent years been a change of emphasis in the approach of the courts. Today, the weight of authority is to the effect that the discretion which is vested in this court pursuant to O 52 r 3(4) is a discretion which must be exercised in a way which, in all the circumstances, best reflects the requirements of justice. In determining this, the court must not only take into account the interests of the person whose committal is sought for contempt but also the interests of other parties, the Secretary and court users generally, as well as the important interests of upholding the reputation of civil justice in general…”

3.6  Further, as has been stated in AXA China Region Insurance Co Ltd v Li Yu Ping Ellen [2002] 3 HKC 339:

“After hearing argument, we entertained no doubt but that the requirements of justice in the present case were best reflected by an order under O 45 r 7(7) dispensing with personal service upon the defendant of the order of Judge Muttrie of 17 November 2000 and, in so far as may be necessary, with the requirement to endorse on the order of 17 November a penal notice in the terms specified by O 45 r 7(4) and, accordingly, we make such an order. There is no conceivable prejudice or injustice to the defendant in so doing. Indeed none has been suggested. Instead, reliance has been placed upon the importance of observing the rules in cases in which the liberty of the subject is at issue, and upon the suggested limitation, to which we have earlier referred, of the circumstances in which the power under r 7(7) is to be exercised. We do not, by our decision in this case, gainsay the importance of O 45 r 7(2) and 7(4) nor, for one moment, encourage laxity in observance of those requirements. That said, to allow the failure to effect personal service of the second order to render invalid the committal proceedings and the committal order would, in this case, permit the triumph of pure form and technicality over the clear interests of justice, devoid of any prejudice to the defendant.”

3.7  Where, as here, the OS has reproduced substantially the Statement, I agree with Mr Tang that it cannot be said that any or any prejudice of substance has been caused by the fact that the OS was served but not accompanied with the Statement and its supporting evidence since the supporting evidence is in substance only a short verification affirmation.

3.8  As regards the second irregularity, I also accept Mr Tang’s invitation to dispense with personal service of the Notice of Adjourned Hearing. As stated earlier, the Notice of Adjourned Hearing was sent by prepaid ordinary post to Ds at the Last Known Addresses on 5 February 2025 and was not returned As observed in Choy Bing Wing:

“[28] The authorities are clear that, in terms of O 52 r 3, notice of an adjourned hearing must also be served personally on the person to be committed.

[32] We made the order dispensing with the need for personal service on the basis that, this being an exceptional order, it was nevertheless one which best reflected the requirements of justice.

[33] The respondent had notice of the original hearing date of the notice of motion on 26 September 2005…

[34] Although we received no direct notice of the respondent’s indisposition, we nevertheless adjourned the hearing. The respondent, a well-educated man and a litigant himself of some experience, must have known that the matter would be adjourned and not simply abandoned.

[36] In addition, a letter dated 7 October 2005 was posted by registered mail to the respondent on that same date. There was no evidence that the registered letter was not duly delivered. A copy of that letter was sent by ordinary post. The evidence indicates that this copy letter was received too.

[37] Further, on 18 October 2005, a letter was faxed to the respondent at his offices by the Department of Justice making specific reference to the hearing to take place on 20 October 2005.

[38] When all of these matters are taken into account, and when it is borne in mind that the respondent continues to run a business from his offices, certainly continues to employ staff there and keep in touch with that staff, in our view it is the only reasonable inference to be drawn that the respondent did in fact learn of the adjourned dates of hearing but chose to ignore that information.

[39] As we have said, if, however, we are mistaken in this regard, it is, in our view, apparent that the respondent has taken active steps to avoid being served with the notice of the adjourned hearing or to learn of the dates of the adjourned hearing through the letters sent to his offices marked specifically for his attention. To put it shortly, he has taken deliberate and active steps to place himself beyond the reach of the court.” (emphasis added)

3.9  Applying the above observations to the present case, I take stock of the following matters:

(1)  As pleaded in the Statement of Claim in the Underlying Proceedings, Sunny Smart was in breach of its payment obligations towards P since around March 2021 and partial payments were made by Sunny Smart between December 2021 and July 2022, during which period D1 and D2 were Sunny Smart’s only shareholders and directors;

(2)  The Underlying Proceedings were commenced on 17 March 2023;

(3)  Shortly before the commencement of the Underlying Proceedings, D1 and D2 resigned as directors of Sunny Smart but remained and still remain as the only shareholders of Sunny Smart;

(4)  Sunny Smart did not defend the Underlying Proceedings thereby allowing the Default Judgment to be entered;

(5)  The Judgment Sum has remained wholly unsatisfied and Ds have simply not engaged P in settling the Judgment Sum or responded to the oral examination process;

(6)  The Last Known Addresses were at all material times the addresses stated in the filings with the Companies Registry.

3.10  By reason of the above matters, I am persuaded that I should dispense with the need for personal service of the Notice of the Adjourned Hearing.

3.11  It is also upon the foregoing basis that I accede to Mr Tang’s invitation to deal with the OS summarily and in Ds’ absence. As observed in Navig8 Chemical Pools Inc v Inder Sharma, HCMP 2885/2016, 14 February 2017:

“[14] The first hearing of an originating summons is typically for directions as to the further conduct of the proceedings (see Practice Directions 5.8). However, the court’s power under O 28, r 4(1), which allows the court to make an order in favour of a plaintiff as the nature of the case may require, is preserved under PD 5.8, para 2(a).

[15] The power under O 28, r 4(1) allows the court to dispose of the originating summons if there is no triable issue: see Hong Kong Civil Procedure 2017, rubric 28/4/1. Such power of summary disposal can be exercised against an absent defendant and at the first hearing of the originating summon: Mesirow Financial Administrative Corp v Best Link Industrial Co Ltd, unrep., HCMP 1846/2015, 10 September 2015, at §31.

[16] The court is also empowered by O 32, r 5(1), made applicable to the hearing of an originating summons by O 28, r 1, to proceed with a summons at its first or any resumed hearing in the absence of a party if, having regard to the nature of the application, the court thinks it expedient to do so: Mesirow, §13.

[17] Under O 35, r 5(2), the court may require to be satisfied that the summons or, as the case may be, notice of the time appointed for the adjourned hearing was duly served on a party before proceeding in his absence. This means that r 5(1) may only be invoked if a party fails to attend the hearing after having being validly served with the summons or notice of the hearing: Mesirow, §14.

[18] In similar terms, O 28, r 6 provides that where the court is asked to proceed in the absence of a party who has failed to acknowledge service, it may require to be satisfied that the party has so failed.

[20]   In contempt proceedings, once the court is satisfied as to the service of all necessary documents, it may proceed with the hearing despite the absence of the defendant, as the court’s process should not be frustrated by the recalcitrance of the same: Hong Kong Civil Procedure 2017, rubric 52/6/4.”

3.12  In the present case, the OS, the Notice of Appointment and the supporting affirmations have all been served in compliance with the 16/12/24 Order and I am prepared to “cure” the 2 irregularities which have been brought to my attention. I see no reason why the court should not proceed with the proceedings despite Ds’ absence.

4.  Count 2

4.1  In my view, there is no doubt that Count 2 has been established. I should point out that P’s complaint is that Ds had breached the 2^nd Examination Order in failing to attend the 26/2/24 Hearing and not in failing to comply with the disclosure obligations set out in the 2^nd Examination Order: P’s Skeleton Submissions §6.2.

4.2  Navig8 is also a case concerning committal proceedings initiated by reason of the defendant’s failure to attend a hearing for oral examination. The following observations are made:

“[25] The proper approach in committal for civil contempt by reason of a breach of a court order is a three-stage test, namely:

(a) the relevant court order must be construed to ascertain its meaning and operation;

(b) it must be determined whether the defendant has in fact complied with the order so construed;

(c) it must be determined whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

See Hao Xiaoying v Wong Yiu Lam William & Ors, unrep., HCMP 1968/2014, 2 March 2015, at §35.

[26] The burden was on the Plaintiff to prove that the Defendant’s contempt was beyond reasonable doubt: GE Transportation (Shenyang) Co Ltd v Lu Jinxiang, unrep., HCMP 1792/2013, 22 January 2014, at §24.

[27] To establish a contempt of court for breach of a court order, it is sufficient to prove that the defendant’s conduct was intentional in the sense that it was conscious and voluntary. It is not necessary to prove a contumacious intent on the part of the defendant. Nor is it necessary to prove that the defendant appreciated that he did breach the order. It would not be sufficient to negate liability where the defendant did not know or believe that his (deliberate) activities amounted to a breach: Kao, Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830, at §§42-55; Contempt of Court by Miller, 3rd edn (2000), at §14.52.

[28] Mr Brown, who appeared for the Plaintiff, submitted that the Plaintiff’s burden here was easily discharged to the requisite standard. I agreed with Mr Brown insofar as the Defendant’s failure to comply with the Examination Order was concerned.

[29] The Examination Order, and the orders made after the 16 October 2015 to adjourn the Examination to the 27 September 2016, were straight forward and self-explanatory, ie, there could be no doubt as to what the Defendant was required to do in order to comply with the orders. In particular, he was required to attend court for examination.

[30] It was likewise clear that by his non-attendance at the Examination on 27 September 2016 (the Plaintiff did not rely, for the present purpose, on the non-attendance on 21 March 2016), the Defendant had not complied with the Examination Order.

[31] There could be no doubt that the Defendant’s failure to comply with the Examination Order was intentional.”

4.3  In my view, the above observations are entirely applicable to and apposite in the present case. The terms of the 2^nd Examination Order were straightforward and self-explanatory. Like the observations made in Navig8, I am in no doubt that Ds’ failure to comply with the 2^nd Examination Order by their non-attendance at the 26/2/24 Hearing was intentional.

4.4  For completeness, Mr Tang has fairly pointed out that, in Ds’ absence, P has a duty to bring all relevant matters to the court’s attention, including those in Ds’ favour. He points out that Ds may argue that they were not in contempt because the notice adjourning the 2^nd Examination Order (ie the 9/1/24 Order) did not contain a fresh penal notice. I accept his submission that where, as here, the 2^nd Examination Order itself was endorsed with a penal notice, there was no requirement for the 9/1/24 Order to be endorsed with a penal notice, it being simply an order modifying the timeline of the 2^nd Examination Order: Treherne v Dale (1884) 27 Ch D 66 as applied in in AXA at §29.

4.5  I therefore find that Count 2 is proved beyond reasonable doubt.

5.  Penalty

5.1  As observed at Navig8 §42, in a similar situation, an immediate custodial sentence measured in months may be appropriate.

5.2  However, Ds were absent from the hearing of the OS. Following the approach in Navig8, the appropriate course is for the court to issue a warrant for committal to have Ds arrested and brought before it as soon as possible so that they may make submissions on the penalty: Navig8 §43.

5.3  For the above reasons, I order that a warrant for committal be issued against each of the Ds.

6.  Costs

6.1  There is no reason why costs should not follow the event.

6.2  Where contempt has been found, the Court would usually order indemnity costs against the contemnors. As I have dismissed Count 1, I order that the costs of and occasioned by these proceedings in respect of Count 2 only be paid by Ds on an indemnity basis, to be taxed if not agreed.