LA DOLCE VITA FINE DINING CO LTD v. ZHANG LAN

HCMP 585/2017
HCMP 586/2017
(heard together)

[2019] HKCFI 618

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 585 OF 2017

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AND

HCMP 586/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 586 OF 2017

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(Heard Together)

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J U D G M E N T

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1.  On 14 March 2018，I found the Defendant to be in contempt of Court, for breach of an Order made on 26 February 2015 (“Order”) which required her to disclose all of her assets of an individual value of HK$500,000 or more, which Order was in aid of a Mareva injunction made against the Defendant on the same day. The facts of the case are already set out in the Judgment dated 14 March 2018 (“Judgment”).

2.  Today is the adjourned hearing fixed to hear the parties’ submissions on the appropriate penalty and consequential orders to be made in respect of the Defendant’s contempt (“Penalty Hearing”).  The date of the Penalty Hearing was fixed as early as 27 July 2018.

3.  On 8 February and 15 February 2019, the Defendant through her solicitors confirmed in writing to the Plaintiff and to the Court that the Defendant had no objection to the orders to be sought by the Plaintiffs in respect of the penalty for contempt, and that she would not make any submissions on penalty. The solicitors asked in their letter to the Court that their attendance at the Penalty Hearing be excused.

4.  On 28 February 2019, the Plaintiffs filed and served their submissions on sentencing, for the Penalty Hearing. 

5.  On the same day, the Court issued directions to the parties, directing that as the Defendant’s solicitors remained on the record, they should attend the Penalty Hearing and make submissions on why an immediate custodial sentence should not be imposed on the Defendant.

6.  In response, the Defendant’s solicitors wrote to the Court on 28 February 2019, pointing out that they had no instructions to make any submissions, and confirming that the Defendant had no objection to any order that may be made by the Court (including for committal).  The Court issued a reminder in writing to the Defendant through her solicitors, that she had been found guilty of contempt of Court and was obliged to appear at the Penalty Hearing, and that a warrant of arrest can be issued to secure her attendance.

7.  Notwithstanding the Court’s directions and reminder, the Defendant failed to appear at the Penalty Hearing today.  Her solicitors confirmed in court that they had no instructions to make any submissions on behalf of the Defendant, in respect of the penalty and consequential orders to be made, or by way of mitigation on behalf of the Defendant in respect of her contempt.

8.  The legal principles applicable to sentencing for contempt of court have been summarized in Suzanne Ruth Henderson v Scott Henderson HCMP 2016/2014, 14 April 2016 and Wilwin Development (Asia) Co Ltd v Wei Xing, HCMP 2946/2014, 16 November 2015.  In Suzanne Ruth Henderson, the court emphasized that contempt of civil court orders is a serious matter.  A prime consideration of the court in sentencing contempt is to signal the importance of demonstrating to litigants that orders of the court are to be obeyed.  The jurisdiction of the court in contempt proceedings arises out of its inherent jurisdiction to enforce its own orders.  The purpose of the law of contempt is not to protect the dignity of judges but to prevent interference with the due administration of justice.  As succinctly pointed out in RACP Pharmaceutical Holdings Ltd v Li Xiaobo HCA 490/2007:

“The first principle is that court orders are made to be obeyed. They are not guidelines, to be ignored or paid lip service to at the behest of the parties affected. They are the building blocks by which the administration of justice is made workable. Litigants who willfully breach orders at the expense of their opponents to their advantage do so at the risk of losing their liberty for being in contempt of court.”

9.  The case of JSC BTA Bank v Solodchenko (No 2) [2012] 1 WLR 350 highlights the punitive and coercive aspects of a sentence for contempt, the latter being relevant when the contemnor has been ordered to do an act and continues to act in breach. 

10.  In this case, I have borne in mind the circumstances of the making of the Mareva injunction and the disclosure order contained in the Order, which was granted in aid of an arbitration commenced by the Plaintiffs against the Defendant on the Mainland, in respect of a claim for damages resulting from the Plaintiffs’ acquisition of shares from the Defendant for the consideration of US$286,815,887. 

11.  I have also taken into consideration the following matters.

12.  There has been no admission on the Defendant’s part of any breach by her of the Order.  Nor has there been any apology tendered by the Defendant, any indication of remorse, or any offer to remedy the breach and purge the contempt as found, by making full and proper disclosure of her assets.  Despite having clear notice of the Judgment and the findings made against her, despite having advanced notice of the Penalty Hearing, and despite the Court’s reminder of her need to attend court, she has refused to attend the Penalty Hearing without giving any explanation or excuse, save that she has no submissions to make. Her refusal to appear at the Penalty Hearing without any good reason given casts doubt as to whether she has any intention at all to comply with the sanction to be imposed.

13.  The Defendant has filed notice of appeal against the findings of contempt made in the Judgment, but unless and until such findings are set aside, this Court is entitled to proceed with sentencing on the basis of the findings already made. 

14.  There is a strong public interest to ensure that orders of the court should not be flouted, although the individual circumstances of each case must always be evaluated.  Imprisonment should be regarded as a sanction of last resort.

15.  Subject to mitigating factors, if any, the starting and primary penalty for contempt of court in breaching an order in the nature of an injunction is imprisonment.  The normal penalty for breaches of injunction orders is imprisonment measured in months (Asia Islamic Trade Finance Fund v Drum Risk Management Ltd [2015] EWHC 3748 (Comm), Bunge SA v Huaya Maritime Corporation of the Marshall Islands [2017] EWHC 90 (Comm), Law Lai Lan v Tamang Prem Candr [2018] HKCFI 536). 

16.  There is no evidence to suggest that the Defendant acted under pressure in refusing to make the disclosure.  Her breach of the Order was deliberate and intentional (as found in the Judgment).  She deposed to having knowledge of the effect of the Mareva injunction and the Order.

17.  The Defendant’s breach of the Order is continuing.  Having been given various opportunities before the committal proceedings to remedy her breach and to make proper disclosure, she has maintained her refusal to comply with the Order.  In the latest letters from her solicitors, whilst there were repeated statements that she had no submissions to make on any order as the Court thinks fit to be imposed, there was, markedly, no indication of any intention on the Defendant’s part to comply with any order to be made by the Court, or to purge her contempt.  There is no demonstration of remorse, acceptance of responsibility, or offer of remedy.

18.  The Defendant’s breach of the Order is serious.  The Mareva injunction and the Order for disclosure were granted in relation to the Plaintiffs’ claim to recover over US$286 million from the Defendant.  She disclosed assets in the region of US$1.28 million only, when the article on Christie’s interview with the Defendant suggested that she had a large art collection of substantial value.  Information concerning assets is uniquely within the Defendant’s knowledge, and such information as sought under the Order is pertinent to the Plaintiffs’ ability to prevent dissipation of the Defendant’s assets - the entire purpose of the Mareva injunction - and to police the Mareva injunction. The Plaintiffs will suffer prejudice by virtue of the Defendant’s breach and deliberate flouting of the Order, by avoiding full disclosure of her assets.

19.  In view of the Defendant’s manifested intention not to comply with the Order for disclosure, there is no point to make a suspended order as an incentive for the Defendant’s compliance.  A writ of sequestration is inappropriate in the present case when her assets in Hong Kong have already been frozen by the Mareva injunctions.

20.  A fine is clearly not appropriate, when the Defendant has not purged or offered to purge her contempt, but has continued to show defiance to the Order.

21.  The fact that the Defendant may not be in Hong Kong is not a reason to refrain from imposing a custodial sentence (JSC BTA Bank v Solodchenko [2011] EWHC 2908, Bunge SA v Huaya Maritime Corporation of the Marshall Islands [2017] EWHC 90 (Comm)).

22.  In all the circumstances of this case, I consider that an immediate custodial sentence of 12 months should be imposed on the Defendant, and I grant an Order for Committal and a Warrant for Committal, in terms of the drafts submitted by the Plaintiffs.  There will also be an order that the costs of the committal application should be paid by the Defendant to the Plaintiffs on an indemnity basis, with certificate for 3 counsel.