PANG ZHENGYUN AND ANOTHER v. CHOW CHUN KIT the personal representative of the estate of CHOW WING CHEUK

HCMP 2251/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2251 OF 2016

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J U D G M E N T

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Introduction

1.  The 1^st plaintiff (“Madam Pang”) and the 2^nd plaintiff (“Chow Po Yuen”) apply for an Order that the defendant (“Mr Chow”) be committed for contempt of court on the ground that Mr Chow breached his undertaking to the court.

Undisputed Facts

2.  Mr Chow Wing Cheuk (“the Deceased”) died on 30 September 2011.  He was survived by a wife, a daughter and a son, Mr Chow.  Mr Chow is the administrator of his father’s estate (“the Estate”).

3.  Madam Pang alleges that she was the mistress of the Deceased and Chow Po Yuen is the natural daughter of the Deceased and Madam Pang.  Mr Chow disputes these.

4.  On 23 August 2012, Madam Pang and Chow Po Yuen commenced FCMP 182/2012 against the Estate, claiming financial provisions under the Inheritance (Provision for Family and Dependants) Ordinance, Cap 481.  It was later continued as HCMP 445/2015 (“the Main Action”).

5.  Later, the parties agreed to conduct a DNA test to decide if the Deceased was the biological father of Chow Po Yuen. On 2 May 2013, the DNA test result was known and Mr Chow considered the DNA result was not in favour of Madam Pang and Chow Po Yuen.

6.  In the Main Action, Mr Chow, as the personal representative of the Deceased and by way of a Consent Summons, gave an undertaking to the court “not to dispose of the Estate of the Deceased until further order of the Court” (“the 2012 Undertaking”). The 2012 Undertaking was incorporated into an order of His Honour Judge CK Chan dated 13 November 2012, which took effect on the same date.

7.  By another order dated 11 October 2013 made by His Honour Judge CK Chan, a new undertaking was given by Mr Chow that he “would not dispose of the Estate except to pay the debt and legal costs of these proceedings and the coming probate proceedings” (“the 2013 Undertaking”).

8.  In other words, pursuant to the 2012 Undertaking, Mr Chow was prohibited from disposing of the Estate during the period between 13 November 2012 and 10 October 2013.

9.  Mr Chow sold 2 classes of shares (“the subject shares”):

(a)   Publicly listed shares of the Deceased in the period from 3 January 2013 to 9 September 2013.

(b)   Shares in the private company, Arts Wing Design & Construction Co. Ltd, on 28 January 2013.

Parties’ respective case

10.  Madam Pang and Chow Po Yuen allege that Mr Chow breached the 2012 Undertaking by the sale of the subject shares.

11.  Mr Chow denies any breach.  His case is that he was only prohibited from distribution of the Estate to the beneficiaries.  In short, he should not diminish the value of the Estate by making payments.  Sale of assets without distributing the proceeds did not amount to “disposal”. 

12.  Mr Chow says that the same focus of not to distribute the Estate to the beneficiaries applies to the 2013 Undertaking.  The only difference is that under the 2013 Undertaking, he is allowed to make payments from the Estate to pay debts and legal costs.

13.  Mr Chow claims that apart from payment out for legal costs and debts pursuant to the 2013 Undertaking, the proceeds of sale of the subject shares are still kept in his DBS account starting with the number “0634” (“the DBS account”) which he has been using to deal with the Deceased’s Estate.  He has provided an account of the Estate updated to 26 April 2016 (“the 2016 accounts”), which showed disposal of shares, including the subject shares.

Applicable Legal Principles

14.  The burden is on the plaintiff to prove the defendant’s contempt beyond reasonable doubt: Kao, Lee & Yip v Donald Koo Hoi Yan (2009) 12 HKCFAR 830, §30.

15.  In Hao Xiaoying v Wong Yiu Lam William, HCMP 1968/2014, 2 March 2015, §33, Anthony Chan J laid down the proper approach in committal for civil contempt for breach of a court order:

A.   What is the proper meaning of the court order?

B.   Whether the defendant had in fact breached the court order so construed; and

C.   Whether any failure to comply with the court order was accompanied by the state of mind necessary to establish punishable contempt.

These principles apply equally to breach of an undertaking to the court.

16.  It is the duty of the defendants to find out the proper means of obeying the order: Kao, Lee & Yip, §23.

17.  No order will be enforced by committal unless it is expressed in clear, certain and unambiguous language: Kao, Lee & Yip, §23.

18.  In construing the meaning of an undertaking, one must construe the context or the factual background in which the undertaking was given: Tiong King Sing v Sam Boon Peng Yee, CACV 268/2015, 12 August 2016, §6.11.

19.  Any ambiguity in the order or undertaking will be construed in favour of the alleged contemnor. The contra proferentem rule is reversed in construing an undertaking for the purpose of contempt: See Hong Kong Civil Procedure 2017, Vol 1, §52/1/17.

20.  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, or that the defendant appreciated that he breached the order, and it would not be sufficient to negate liability where the defendant did not know or believe that his (deliberate) activities amounted to a breach: Hao Xiaoying, §37.

21.  Regarding the alleged contemnor’s knowledge of the order, it is necessary for the plaintiffs to prove not merely that he knew that an order has been made but that he also knew of the material terms of the order: Hong Kong Civil Procedure 2017, Vol 1, §52/1/17.

22.  It is immaterial that the breach was committed in reliance on a third party’s advice, even legal advice: Kao, Lee & Yip, §53.  It only goes to mitigation: Mileage Conference Group of the Tyre Manufacturer’s Conference Ltd’s Agreement [1966] 1 WLR 1137, 1162H-1163A.

23.  I now analyse the issues in accordance with paragraph 15 above.

Issue A: What is the proper meaning of the 2012 Undertaking?

24.  I approach this issue by: looking at (i) the plain meaning of the words used; and (ii) the background by which the 2012 Undertaking came into existence.

25.  Mr Lau, counsel for Mr Chow, relies on 3 dictionary meanings of “dispose of”:

(1)   Oxford Dictionaries:  Get rid of by throwing away or giving or selling to someone else; (emphasis added)

(2)   Cambridge English Dictionary: To get rid of something or deal with something so that the matter is finished;

(3)   Dictionary.com:

(a)   To deal with conclusively; settle

(b)   To get rid of; discard

(c)   To transfer or give away, as by gift or sale (emphasis added)

(d)   To do way with, destroy.

26.  In my view, it is plain that the term “dispose of” includes “sell” as it rids the Estate of that asset.  The term has multiple meanings but it is not ambiguous, contrary to Mr Lau’s submission.

27.  As to the background, Mr Lau contends that taking into account the letters and the background of the 2012 Undertaking, it is fair and objective for Mr Chow to understand that his duty as the administrator was as described in paragraph 11 above.  The understanding between the parties was clearly to maintain the status quo.

28.  The letters in October before the 2012 Undertaking showed that there was not a complete ban on administration.  The suggestions were for Mr Chow to undertake not to distribute the Estate so as not to affect Madam Pang and Chow Po Yuen’s potential interests; the best and safe approach was to preserve the status quo.  After the 2012 Undertaking, the letter from Mr Chow’s solicitor dated 29 May 2013 again stated “不作遺產分配”.

29.  However, there was an amendment to the wording of the 2012 Undertaking in the draft consent summons dated 7 November 2012 replacing “distribution of the Estate” with “dispose of the Estate” by Madam Pang’s solicitors.  The amendment was deliberate.  The amended words stood out in manuscript form against a background of typed words and was highlighted with a “cloud” next to it.  The amendment was adopted in the Consent Summons filed with the court.

30.  Accordingly, the objective circumstances leading to the 2012 Undertaking plainly intended not only to prohibit distribution but also disposal.

31.  There is no dispute as to service of the order dated 13 November 2012 on Mr Chow.  It is not a defence for him to act on his previous notions or to say that he had not read the order containing the 2012 Undertaking.  The duty was on him to ascertain the meaning of the 2012 Undertaking and not to rely on subjective notions.

32.  I find that “dispose of” plainly included “sell”.

Issue B: Whether Mr Chow had in fact breached the 2012 Undertaking so construed

33.  Mr Chow claims that the assets remained in the Estate though the form has changed.  The sale was to prepare for the settling of debts of the Estate in the future as there was not sufficient cash at the time.  At the time of sale, he believed the 2012 Undertaking would sooner or later come to an end.  The sale proceeds of the shares were first transferred to his stock account before they were transferred to the DBS account.  Those sale proceeds were reflected in the 2016 accounts.

34.  In my view, even if he is correct, these only go to mitigation but not liability for breach.  In any case, there is only his bare assertion that the money has remained.  The 2016 accounts only showed what Mr Chow asserted as an account of the Estate, but were not proof of the whereabouts of the proceeds.  I find that Mr Chow had breached the 2012 Undertaking so construed.

Issue C: Whether any failure to comply with the 2012 Undertaking was accompanied by the state of mind necessary to establish punishable contempt

35.  There cannot be any dispute that Mr Chow intentionally, voluntarily and deliberately sold the subject shares.

36.  Mr Chow clearly acted under the wrong notion that he was merely precluded from distribution but not sale.  He said his ex-lawyers were all along aware of his sale of assets, though not the specific shares.  His former lawyer claimed to have told him not to dispose of or diminish the value of the private limited company/business, and for those parts which had already been realized, not to distribute to beneficiaries.  Mr Chow denied receiving such advice.  Nonetheless, wrong subjective notions, wrong legal advice or failure of lawyers to draw the amendment to the wording of the draft consent summons to Mr Chow’s attention would not negate the liability in civil contempt.

Conclusion

37.  I am satisfied beyond reasonable doubt that the 3-stage test in Hao Xiaoying have been satisfied.  Mr Chow has breached the 2012 Undertaking by selling the subject shares in the Estate and was guilty of contempt of court.

38.  I adjourn this case to a date to be fixed with 1 hour reserved for sentence and reserve the question of costs to that date.

39.  I thank counsel for their assistance.