LEE SHU HANG AND ANOTHER v. KAN LAP KEE (also known as “TERRY KAN”)

HCMP 2320/2020

[2022] HKCFI 2671

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2320 OF 2020

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BETWEEN

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JUDGMENT

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1.  On 8 March 2022, this court handed down the judgment (“the Judgment”) in respect of the plaintiffs’ application for committal order against the defendant and the effectively counter-application by the defendant. This court found the alleged contempt on the part of the defendant was proved, and dismissed the defendant’s application. Directions were then given for the purpose of the hearing of mitigation and sentencing. Written submissions were lodged and the parties were also heard today.

2.  For the present purpose, this court will not repeat what were already set out in the Judgment, but, where appropriate, will simply refer to the parts of the discussion in the Judgment. This court will also adopt the same definitions and abbreviations in the Judgment.

Preliminary

3.  Argument in respect of the factual matters behind the plaintiffs’ proof and Kan’s defence of the charge of contempt in these proceedings has been adjudicated upon. The contempt was found. For the purpose of mitigation, Kan was given leave to file affidavit evidence in respect of any facts pertinent to his mitigation. This however does not entail affidavit evidence from the plaintiffs in rebuttal as such. Nor is it contemplated that the prosecuting plaintiffs would be heard to oppose the mitigation with a view to securing a certain penalty. It is therefore not without reason for the reference by counsel for Kan to the similar principle in the criminal context: Archbold Hong Kong Criminal Law Pleadings Evidence & Practice 2022 (at §5.28).

4.  Sentencing and penalty for contempt is a matter for the court but not for the purpose of the plaintiffs as if they were claimants seeking a certain penalty against the defendant in these proceedings. Hence this court’s specific direction to the plaintiff to limit their submissions to assisting this court on the relevant principles and authorities on penalty: see Secretary for Justice v Chan Oi Yau Riyo [2020] 3 HKLRD 494 (at §53). This court specifically refrained from directing the plaintiffs to file affidavit evidence as if they were entitled to rebut the mitigation.

5.  Contrary to the above, the plaintiffs somehow saw fit to take out a summons on 16 June 2022 for leave to file an affirmation expressly for the purpose of rebutting the affidavit evidence and submission of Kan for mitigation. Further, most of such affirmation of the plaintiffs is by nature submission, not evidence. For the one point made in their intended affirmation that may be said to relate to the accuracy of Kan’s representation as to certain fact concerning them, the plaintiffs may be heard. Yet as explained during this hearing and below, their intended affirmation is still not called for. The attempt to file the affirmation in rebuttal of mitigation is unwarranted.

The principles of sentencing

6.  The principles of sentencing in case of contempt were set out in Arboit v Koo Siu Ying (No 2) [2016] 3 HKLRD 154 (at §§2-8).

7.  Conduct in defiance of the court’s order must meet with disapproval and punishment. Where appropriate, the sentence may also serve to coerce against future breach or to compel compliance. The sentencing options need no introduction, ranging from the most severe option of immediate custodial sentence, imprisonment term suspended on terms to financial penalty.

8.  The penalty must be appropriate and proportional, considering all the circumstances of the case. Such circumstances start with the specific breach and its surrounding circumstances. The court will consider if there are aggravating and mitigating factors. Relevant factors include the nature of the order and the breach as well as the extent of the breach; whether the contempt was intentional (including the reason or motive behind the breach); whether the plaintiff has suffered prejudice as a result of the breach; whether the contemnor appreciates the seriousness of the deliberate breach; and whether the contemnor has cooperated throughout the matter in question.

Consideration in the present case

9.  That Kan denied the charge, which was eventually proved, will not be held against him in the terms of sentence, as this was after all his right to put the plaintiffs to strict proof. By exercising such right, Kan could not be said to have continued or compounded the contempt in the circumstances of this case. The consequence of not conceding and putting the plaintiffs to proof was adequately addressed by the usual order of indemnity costs against him upon his conviction.

10.  Amongst others, the circumstances surrounding the contempt were explained in §§49 to 60 of the Judgment. They are relevant to sentencing.

11.  Kan now tries to explain his impeached conduct at the relevant time as the result of his misconception and misunderstanding about the relevant terms of the 2/11/2017 Order. This meets with strong comment by the plaintiffs by way of their intended affirmation and submission.

12.  As explained in the Judgment, the impression of this court obtained from the materials is that Kan essentially allowed himself to be convinced in doing what he considered to be legitimate and in defending his own conduct and reputation against the plaintiffs’ complaint against him in the SCIA Arbitration, which unavoidably conflicted with the proper and professional judgment expected of him in discharge of his duties as the liquidator of Pak Tat in line with the protocol set out in the 2/11/2017 Order. He now takes the consequence of that.

13.  Kan also pleads that he has derived no personal benefit from the breach. There was indeed no concrete allegation or evidence, and in any event this court made no finding, as to whether Kan has derived any tangible or economic benefit from the breach. In my judgment, as mentioned, he allowed his personal interest to conflict with the proper discharge of his duties as the liquidator of Pak Tat in line with the protocol set out in the 2/11/2017 Order.

14.  Kan also pleads that no prejudice was caused by his breach to the plaintiffs, in view of the fact that the submissions of the plaintiffs for the interest of Pak Tat were indeed placed before the SCIA, which eventually ruled in favour of the SPA against Pak Tat. The statements of Kan, subject conduct of breach of the 2/11/2017 Order, might have the effect of contradicting the effort made and the contentions advanced by the plaintiffs in their submissions. However, one may not say that it is more probable than not, let alone beyond reasonable doubt, that the SCIA would have reached a different conclusion but for those statements of Kan solely or predominantly.

15.  The charge against Kan was not his conduct in causing Pak Tat to enter into the SPA, the reasonableness of which was and still is questioned by the plaintiffs. The dispute in respect of that, as explained in the Judgment, forms the subject matter of the Misfeasance Summons which is yet to be determined. The nature of the breach, and thus contempt, as charged concerned his two statements to the SCIA submitted in breach of the protocol spelt out in 2/11/2017 Order, properly read and understood. This was made clear in the conclusion set out in §87 of the Judgment.

16.  That said, the plaintiffs are keen at correcting the representation of Kan in this respect. That is also the one point made in their intended affirmation which I am prepared to hear for the sole purpose of avoiding any misrepresentation or misunderstanding of fact introduced by Kan in his mitigation. In his mitigation, Kan represents that the plaintiffs have not sought to set aside the SCIA award, and is taken to have accepted it as sound and correct. The plaintiffs point out that this is factually wrong. Application was lodged in February 2021 to the Mainland court for setting aside the award, which failed in June 2021. Kan stands to be so corrected on the facts represented in his mitigation. In court, counsel for Kan readily accepted that correction.

17.  There are aggravating features in the present case. One was that the abovementioned approach of Kan was not reasonably expected of him in his role and as an officer of the court. Yet the specific manner in which he committed the error must also be borne in mind.

18.  As explained in the Judgment, Kan took a neutral stance, which was acknowledged by the court in the hearing of the subsequent application for his discharge as a liquidator of Pak Tat. Faced with the finding of contempt against him in these proceedings, Kan’s suitability was also questioned and he had to back out from undertaking the liquidator’s duties in numerous insolvency cases. Incidental investigation into his conduct by the Official Receiver and the professional body is also contemplated. The severity of the penalty to be imposed will also have bearing on his capacity to continue his pre-existing commitment in current insolvency cases, and hence potential collateral impact to the third party stakeholders in those connections. The materials show that such repercussions are not unreal. These are relevant considerations, and would not be all brushed aside simply on the basis that he has only himself to blame for all those repercussions.

19.  Reference is also made to the previous contributions made by Kan to the development of the insolvency law and practices in the past years. Instances of those are provided. They serve to cast light on his previous good character and the potential impact of the conviction and the sentence to be passed on his reputation in the profession.

20.  As mentioned, the appropriate penalty should reflect the degree of disapproval by the court of the contempt. Yet the same should be proportional in all the circumstances of the case. In the circumstances of the present case, this court comes to the conclusion that a financial penalty would be appropriate.

21.  Cases cited by counsel are taken into account. For the proved contempt, Kan is hereby fined a sum of HK$250,000. He has 14 days to pay the fine to the court. If he fails to do so, a warrant of arrest will be issued for bringing him to court for an answer and consideration of penalty for the new offence.

Costs

22.  Costs of and occasioned by this mitigation and sentencing hearing shall also be borne by Kan, to be taxed on an indemnity basis, if not agreed.

23.  In line with this court’s observation about the propriety of the plaintiffs’ summons for leave to file their affirmation for this hearing and the acknowledgment by counsel for the plaintiffs, this court makes no order in respect of that summons including that as to costs.