PACIFIC BULK SUPRAMAX CO LTD v. WONG MAN KAM PATRICK AND ANOTHER

HCMP 1632/2021

[2025] HKCFI 3326

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1632 OF 2021

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BETWEEN

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JUDGMENT

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1.   Introduction

1.1  This is the substantive hearing of the Plaintiff’s application for a committal order against the 1^st Defendant (“Wong”) and the 2^nd Defendant (“Leung” and together with Wong hereinafter referred to as “Ds”). Leave was granted to the Plaintiff (“P”) to commence these committal proceedings in relation to 3 acts of contempt (respectively “Act of Contempt 1 to 3” and collectively “3 Acts of Contempt”) set out at sections C2, C4 and C5 of the statement filed by P pursuant to RHC Order 52, rule 2(2) on 13 September 2021 (“Statement”)[1]. Pursuant to Anthony Chan J’s order dated 2 February 2023, the present trial only deals with liability issues.

1.2  The 3 Acts of Contempt are concerned with P’s application in HCMP 1190/2020 (“Underlying Proceedings”) for a Mareva injunction against Bintan Mining Corporation (“BMC”). At the material time, Wong and Leung were shareholders and the only directors of BMC. As set out at Statement §3, the 3 Acts of Contempt are stated to be as follows[2]:

(1) Act of Contempt 1: Wong and Leung (a) knowingly aided and abetted BMC to provide the “C&D Sale Proceeds Undertaking” (as set out below), knowing[3] at all times it was a worthless and empty undertaking based on false premises that could not be fulfilled and (b) alternatively and in any event willfully failed to take reasonable steps to procure BMC to comply with the C&D Sale Proceeds Undertaking;

(2) Act of Contempt 2: Wong and Leung knowingly[4] swore false affirmations, and instructed legal representatives to make representations to court on behalf of BMC to the effect that BMC’s shareholding in its wholly-owned subsidiary, Bintan Mining SI Limited (“BMSI”), is and was at all material times sufficiently valuable to cover the Mareva injunction;

(3) Act of Contempt 3: Wong and Leung willfully failed to take reasonable steps to procure BMC to comply with the “Asset Disclosure Orders” made by DHCJ Le Pichon at the hearing on 23 February 2021 (as set out below).

1.3  At the trial, I was ably assisted by P’s counsel Mr Christopher Chain SC (leading Mr Arthur Poon) and Mr Rimsky Yuen SC (leading Mr Nicholas Oh) for Ds.

1.4  There is a disagreement between counsel on whether the case pursued by P in closing in respect of Act of Contempt 2 represents an impermissible departure from the Statement. For present purposes, suffice to state that P’s case as pursued in closing (1) no longer focuses on a quantitative complaint premised on whether the value of BMSI was sufficiently valuable to cover the monetary limit sought in the Mareva injunction but on a qualitative complaint based on whether BMSI was operating as a going concern and (2) is a complaint grounded on a failure to caveat or qualify the evidence filed by Wong and Leung in the Underlying Proceedings at the hearing before DHCJ Le Pichon on 23 February 2021.

1.5  Pursuant to the directions previously given by Anthony Chan J, the parties have provided to the court a Statement of Agreed Facts (“SAF”) and an Agreed List of Issues (“ALOI”).

2.   Background

2.1  The matters set out in this section are largely taken from the SAF.

(i) Relevant parties

2.2  On 3 March 2014, P was incorporated in Hong Kong and at all material times part of the Pacific Bulk group of shipping companies. P was the disponent owner of a number of vessels which were chartered by BMC under a number of charterparties to transport bauxite to various destinations.

2.3  BMC was incorporated in the British Virgin Islands on 7 July 2006. On 21 February 2019, it was registered as a non-Hong Kong company under part 16 of the Companies Ordinance Cap 622. As stated above, at the material time, Ds were BMC’s only directors. By a resolution dated 25 March 2021, Ds placed BMC into voluntary liquidation.

2.4  The primary business of BMC was the mining and export of bauxite from the Solomon Islands for sale to its customers abroad.

2.5  On 28 February 2014, BMSI, a wholly-owned subsidiary of BMC, was incorporated in the Solomon Islands. At all material times, Ds were BMSI’s only directors. BMSI operated a bauxite mine (“Mine”) on Western Rennell in the Solomon Islands (parcel number 298-005-1) (“Land”). A number of agreements were entered into between Asia Pacific Investment Development Limited (“APID”), BMC, BMSI and/or the Solomon Islands Government in relation to the mining operation. APID is and was at all material times independent from BMC. In the series of agreement executed:

(1) APID, BMC and BMSI entered into a Heads of Agreement dated 21 March 2014, whereby, inter alia, APID appointed BMC and BMSI to manage, supervise and undertake the mining, marketing and selling of bauxite for 25 years;

(2) The Solomon Islands Government entered into a Memorandum of Understanding dated 14 July 2014 with APID and BMSI, by which, inter alia, the Solomon Islands Government agreed to grant to BMSI the exclusive mineral rights to mine the West Rennell bauxite deposit and BMSI agreed to pay to the Solomon Islands Government a royalty equal to 6.5% of the gross value of all raw bauxite materials extracted from the Mine;

(3) APID entered into a Mining Lease dated 5 September 2014 with the Solomon Islands Government, whereby APID was conferred with the exclusive right to carry out mining operations on the Land;

(4) APID entered into a Mining Agreement dated 11 March 2016 with the Solomon Islands Government.

2.6  As a result of the COVID pandemic, travel restrictions were imposed by the Solomon Islands Government on 21 March 2020, which restrictions were only lifted in November 2021. After June 2020, there had not been any sale of bauxite by BMC and BMSI and the proceeds of sale were only received by BMC and/or BMSI up to 30 June 2020. In August 2020, the mining operations carried out by APID and/or BMSI were suspended and thereafter never resumed. On or around 13 November 2021, the liquidators of BMC procured BMSI to be wound up voluntarily.

2.7  As will be seen below, the financial predicaments of BMC and BMSI form a prominent feature in Acts of Contempt 1 and 2.

(ii) The Underlying Proceedings

2.8  By an originating summons dated 10 August 2020 (“OS”), P applied for a domestic Mareva injunction in aid of initially 15 ongoing arbitrations between P and BMC in respect of alleged outstanding fees owed by BMC to P under 15 charterparties. On the same day, DHCJ Victor Dawes SC (as he then was) granted a domestic Mareva injunction on P’s ex parte application, which order was continued on 14 August 2020 pending the determination of the OS (“Domestic Order”). The monetary limit of the Domestic Order was around US$5.6 million (“Original Monetary Limit”).

2.9  On 18 August 2020, BMC commenced the 16^th arbitration in relation to a further charterparty between the parties.

2.10  On 1 September 2020, P applied for leave to amend the OS to include the 16^th arbitration and sought a worldwide Mareva injunction against BMC. At the hearing on 4 September 2020, DHCJ Jin Pao SC (as he then was) made the following orders:

(1) He granted the amendment application but did not agree to grant a worldwide Mareva injunction on an interim basis;

(2) He ordered BMC to give disclosure of the following matters by affirmation:

(a) Whether its shareholding in BMSI was subject to any encumbrances, and if so, provide particulars of the encumbrances;

(b) The current estimated valuation of its shareholding in BMSI based on its valuation of BMSI on a net tangible assets basis (“BMSI Valuation Order”);

(3) He granted P liberty to apply after BMC’s compliance with the preceding paragraph;

(4) He recorded the following undertakings given by BMC:

(a) Not to dispose of or deal with or diminish the value of BMC’s shareholding in BMSI;

(b) Not to cause or procure, in any capacity, BMSI to make any disposition which would likely result in the diminishing of BMSI’s value.

2.11  The valuation evidence subsequently filed by BMC did not comply with the BMSI Valuation Order. In the event, P did make a further application under the liberty to apply provision by a summons dated 5 October 2020 to renew its application for a worldwide Mareva injunction, which application was heard by DHCJ Jin Pao SC on 15 October 2020. In his decision given on the same day (“15/10/20 Decision”), the learned Deputy Judge recounted the matters which led to the orders made on 4 September 2020 and also those which led to P’s renewed application, including BMC’s non-compliance with the BMSI Disclosure Order:

“[1] There is before the court is a summons of 5 October 2020. This is a renewed application made by the plaintiff to obtain a worldwide Mareva injunction against the defendant together with ancillary disclosure orders. Because of the urgency of the matter, I have decided to give my reasons orally at the conclusion of the hearing.

[2] The matter arises in this way. On 10 August 2020, DHCJ Dawes SC granted an ex parte domestic Mareva injunction in the sum of approximately US$5.6 million in aid of Hong Kong arbitration proceedings under section 45 of the Arbitration Ordinance. Those arbitrations were commenced on 10 July 2020 and the injunction was continued by the same judge on 14 August 2020.

[3] On 20 August 2020, the defendant gave disclosure of its assets in Hong Kong which showed that its only assets in Hong Kong were sums in its Hong Kong bank account. The total amount was less than HK$400,000, and needless to say, this was far less than the sum covered by the domestic Mareva injunction.

[4] In view of this information, on 1 September 2020, the plaintiff applied to vary the domestic Mareva to essentially convert it into a worldwide Mareva. The plaintiff relied on the fact that the assets within the jurisdiction as shown by the disclosure were insufficient to satisfy its claims in the arbitration proceedings.

[5] The matter was first heard before me on 4 September 2020. At that time, the defendant had limited time to prepare its evidence. But it did refer to the fact that it had a wholly-owned subsidiary incorporated in the Solomon Islands, Bintan Mining SI Limited (BMSI). It was said that the defendant’s shareholding in BMSI was valuable and that BMSI was carrying on a substantial business and that it was not a fly-by-night company. These matters were raised by Mr Brown on behalf of the defendant to negate the suggestion there was a risk of dissipation of assets.

[6] At that time, there was a valuation provided which showed that the fair value of the 100 per cent equity interest in operating the mine for 25 years was US$108 million but the valuation was dated 13 November 2018. At that time, I did not know whether these shares were encumbered nor did I know the current asset position of the subsidiary because the valuation provided was outdated.

[7] At the hearing on 4 September, the defendant gave undertakings, inter alia, not to dispose or deal with its shareholding in BMSI. In view of that undertaking and appreciating that the defendant had limited time to prepare its evidence, in lieu of granting the plaintiff’s injunction, I ordered the defendant to provide a valuation of BMSI within 21 days on a net tangible asset basis and to confirm whether its shareholding was encumbered.

[8] The reason I made the disclosure order was that I considered it would provide a practical and effective way to evaluate the current asset position of BMSI. I considered that disclosure done in this way could potentially address any concerns about a real risk of dissipation of assets and would provide a clearer picture of the financial position of BMSI, bearing in mind that the defendant only had limited time to prepare their evidence for 4 September. It would also allow the defendant sufficient time to put their evidence in a proper manner.

[9] I granted the parties liberty to apply in the event that anything arose from the disclosure which would require the court’s attention. I was not informed at the hearing that it was anticipated there would be any difficulties in complying with the disclosure order.

[10] On 25 September 2020, the defendant filed an affirmation which did not comply with the order. Unusually, there was a valuation provided but it provided a valuation of the defendant and not BMSI. The valuation was also not done on the requested basis. It was done on a cash‑flow basis. This provided a valuation of the defendant at US$91 million at June 2020.

[11] I do not accept that the explanation for non-compliance with the court order provided is satisfactory[5]. It is unsatisfactory because if the question was simply one of timing, the defendant could make an application for an extension of time. If there were good reasons to require more time, these could have been canvassed in a time application. In addition, there was no reference to any of the underlying financial statements of either the defendant or its subsidiary, BMSI.

[12] On 14 October 2020, the defendant has produced evidence of a certificate of tangible asset value in relation to BMSI. This is prepared by a qualified professional in the Solomon Islands which states that on a physical verification that the company’s tangible assets amount to approximately 187 million Solomon dollars or approximately US$23 million. It is stated that the company could operate as a going concern and that there was insignificant debt in its financial position and all funding of the company was by internal sources. There was, however, no statement of the exact liabilities of the company because they did not conduct a full audit.

[13] Before me today, Mr Chain has argued that there was a real risk of dissipation. He relied on the two instances of dishonest conduct which featured prominently in the ex parte application. He also argued and relied on the non-compliance with the court order and even on the most recent information provided to the court that there was nothing concrete about the liabilities of BMSI, and in those circumstances, bearing in mind that there was insufficient assets in Hong Kong, that the case warranted an imposition of a worldwide Mareva.” (emphasis added)

2.12  At the hearing on 15 October 2020, DHCJ Jin Pao SC refused to covert the Domestic Order into a worldwide Mareva injunction. The learned Deputy Judge said as follows:

“[27] In my view, the evidence now provided before the court does negate the risk of dissipation which the plaintiff relies on. It would be difficult, in my view, for this mining company which does, on the face of the documents, appear to be substantial, to suddenly dissipate its assets with a view to avoiding judgment on the plaintiff’s claim. I also bear in mind that the mining rights in relation to the subsidiary are matters of considerable value.

[28] I have also taken into account that there is an undertaking provided to the court in relation to the BMSI shares. That, I expect, will continue. I have also been informed that there is an additional undertaking that will be provided in relation to the receipt of trade receivables that will be placed in the defendant’s bank account in ICBC in Hong Kong.

[29] On the basis of those undertakings and on the basis of the present information before the court, I am not satisfied that there is a real risk of dissipation of the defendant’s assets, and for those reasons, I would dismiss the application of 5 October.” (emphasis added)

2.13  The additional undertaking referred to at 15/10/20 Decision §28 includes the C&D Sale Proceeds Undertaking which is the subject matter of Act of Contempt 1 (§1.2(1) above). It is in, inter alia, the following terms:

“[1] The Defendant undertakes that it will direct and procure that (l) … and (2) the sum of US$2,068,197.95 payable by C&D Logistics (Tianjin) Co., Ltd to the Defendant (the “C&D Sale Proceeds”), be paid into the Defendant’s accounts with the Industrial and Commercial Bank of China Nos. 861512076761 or 861530188013.

[2] The Defendant further undertakes:

[a] To take reasonable steps to recover the C&D Sale Proceeds as soon as practicable;

[b] To inform the Solicitors for Plaintiff of the steps taken to recover the C&D Sale Proceeds by 1 November 2020 and thereafter monthly on the first day of each month; and

[c] To promptly inform the Solicitors for Plaintiff as and when any of the C&D Sale Proceeds are received.”

2.14  As set out in the 15/10/20 Decision, a number of valuation reports had been adduced by BMC prior to the hearing on 15 October 2020. Chronologically, there was a report prepared by Stern Appraisal Ltd dated 13 November 2018 valuing 100% equity interest of BMC to be HK$851,900,000 (“Stern Appraisal Report”), a report prepared by Hong Kong Appraisal Advisory Limited showing that the value of BMC as at 30 June 2020 on a discounted cash-flow basis was US$91 million (“HKAAL Valuation Report”), a certificate of gross tangible asset value of BMSI prepared by Messrs Ting & Co showing the value as of 9 October 2020 to be Solomon Islands Dollars 187,614,731 (approximately US$23 million) (“BMSI Gross Tangible Asset Valuation”)[6]. As noted at 15/10/20 Decision §10, the HKAAL Valuation Report was not compliant with the BMSI Valuation Order. As also noted at 15/10/20 Decision §12, Messrs Ting & Co was a firm of Registered Practicing Accountant in the Solomon Islands.

2.15  Subsequent to the 15/10/20 Decision, a further valuation prepared by Messrs Ting & Co was provided by BMC’s former solicitors to P’s solicitors on 17 November 2020, valuing BMSI’s net tangible asset to be Solomon Islands Dollars 171,008,865 (approximately US$20.5 million) as at 15 October 2020 (“BMSI Net Tangible Asset Valuation” and together with the valuation reports set out in the preceding paragraph, collectively “Valuation Reports”).

2.16  For present purposes, it is pertinent to note that the Valuation Reports were all conducted on a forward-looking basis, and in particular, the valuations carried out by Messrs Ting & Co (ie the 2 tangible asset valuations) assumed BMSI was able to run as a going concern. The Valuation Reports and related evidence filed by BMC (affirmed by Wong and Leung) in the Underlying Proceedings form the subject matters of Act of Contempt 2 (§1.2(2) above).

2.17  The substantive hearing of the OS (as amended) was heard by DHCJ Le Pichon on 23 February 2021. In her written decision handed down on 15 March 2021 (“15/3/21 Decision”), the learned Deputy Judge acceded to P’s application to extend the Domestic Order to a worldwide Mareva injunction (“Worldwide Order”), increased the Original Monetary Limit to around US$8.1 million (“New Monetary Limit”) and directed BMC to make ancillary disclosure of assets worldwide and further disclosure of the details of any disposition or transfer of assets on or after 1 March 2020 up to the 15 March 2021, ie the Asset Disclosure Orders which form the subject matters of Act of Contempt 3 (§1.2(3) above).

2.18  I shall return to the 15/3/21 Decision below[7]. Suffice it to state for present purposes that DHCJ Le Pichon was critical of BMC in at least the following material respects (15/3/21 Decision §§88-89);

(1) When BMC proffered the BMSI Net Tangible Asset Valuation on 17 November 2020, it must have known that the basis for that valuation was no longer valid;

(2) BMC gave the C&D Sale Proceeds Undertaking when it must have known that the undertaking was worthless;

(3) The above events could not be explained away as innocent errors or misjudgments and were deliberate and dishonest acts undertaken to deceive and mislead.

3.   The case advanced against Ds in the Statement and Ds’ defence

3.1  As set out at Hong Kong Civil Procedure 2025 Note 52/2/6, a statement filed pursuant to RHC Order 52, rule 2(2) 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. At the substantive hearing, the applicant cannot (except with the leave of the court) rely on any grounds not stated in the originating summons, being grounds in respect of which leave for making the application for an order for committal has been granted.

3.2  As noted above, there is a disagreement between counsel on whether the case pursued by P in closing in respect of Act of Contempt 2 is within the scope of the case advanced in the Statement. I need to determine whether the case pursued by P in closing is, as characterized by Mr Yuen, an impermissible departure from the Statement or, as contended by Mr Chain, a mere permissible narrowing down of its case already contained the Statement.

(i) Act of Contempt 1

3.3  The false premises upon which the C&D Sale Proceeds Undertaking was based are particularized at Statement §36 to be as follows:

(1) The C&D Sale Proceeds comprised 30% of the balance said to be due under 3 C&D Contracts entered into between BMC[8] and C&D Logistics (Tianjin) Co Ltd (“C&D Tianjin”) from February[9] to April 2020;

(2) The C&D Sale Proceeds were to be payable 5 to 6 months from the 3 C&D Contracts, ie they were payable before the hearing before DHCJ Jin Pao SC on 15 October 2020 at which the C&D Sale Proceeds Undertaking was given by BMC;

(3) C&D Tianjin had confirmed in writing that it all along considered that it was not liable to pay the balance of 30% to BMC, as the 3 C&D Contracts in fact formed part of a larger transaction comprising an agency agreement and a financing agreement (“Wider C&D Arrangement”). Under the Wider C&D Arrangement:

(a) C&D Tianjin acted as an agent of ВМС whilst also providing upfront financing to ВМС (equivalent to 70% of the contract price), to be repaid from the price payable by downstream purchasers within a 90-day period;

(b) As there were no such downstream purchases within the 90-day period, ВМС would be liable to repay C&D Tianjin immediately the 70% from its own funds, and C&D Tianjin was likewise not liable for the 30% balance.

3.4  P’s primary case is pursued on the basis that Ds aided and abetted BMC in giving the C&D Sale Proceeds Undertaking knowing that it was a worthless and empty undertaking by reason of their knowledge of the Wider C&D Arrangement.

3.5  P’s alternative case against Ds is premised on a willful failure to take reasonable steps to procure BMC to comply with the C&D Sale Proceeds Undertaking. As set out at Statement §42, P’s complaint is that since 2 November and 1 December 2020, BMC failed to give any further monthly updates as to its efforts to recover the C&D Sale Proceeds. Statement §43 asserts that this alternative case is premised on RHC Order 45, rule 5(1), on the basis that Ds, being the only directors of BMC, had acted in contempt of court due to their willful failure to take reasonable steps to ensure that the undertaking was complied with.

3.6  On the primary case, Ds’ defence is that (1) there is a reasonable doubt as to whether the alleged Wider C&D Arrangement existed or P cannot prove beyond reasonable doubt that the alleged Wider C&D Arrangement existed and (2) even if the alleged Wider C&D Arrangement existed, there is a reasonable doubt as to whether Ds knew that it existed or P cannot prove beyond reasonable doubt that Ds knew of its existence.

3.7  On the alternative case, whilst Ds accept that BMC did not comply with its obligation to provide the monthly updates, Ds contend that the evidence is insufficient to conclude that the failure was accompanied by the state of mind necessary to establish punishable contempt or that there was willful failure.

(ii) Act of Contempt 2

3.8  The manner in which Act of Contempt 2 is prosecuted by P has shifted over the course of the trial. Prior to closing, in view of the court’s queries, Mr Chain had disavowed reliance on a number of paragraphs advanced in the Statement[10]. The principal dispute between counsel on the scope of Act of Contempt 2 is however not related to the curtailed scope crystallized prior to closing but on the case advanced by P in closing. The curtailed scope advanced before closing is, in gist, as follows:

(1) In the course of the Underlying Proceedings, through affirmation evidence and 3 valuations submitted by BMC (collectively “BMSI Valuation Evidence”), BMC had consistently averred that its shareholding in BMSI was highly valuable and sufficient to dispel any risk of dissipation (Statement §50);

(2) The BMSI Valuation Evidence is particularized at Statement §51:

(a) The affirmation evidence refers to Wong’s 3^rd Affirmation §18 filed in the Underlying Proceedings (“Wong 3^rd (1190)”)[11] stating that the value of BMC’s 100% equity interest in operating the Mine for 25 years was US$108,871,442 (ie the valuation in the Stern Appraisal Report);

(b) The 3 valuations referred to at Statement §50 are clarified to mean the Stern Valuation Report, the BMSI Gross Tangible Asset Valuation and the BMSI Net Tangible Asset Valuation (no reference was made to the HKAAL Valuation Report);

(c) At the hearing on 15 October 2020 before DHCJ Jin Pao SC, BMC’s submission was that BMC’s shareholding in BMSI was valuable and that BMSI was carrying on a substantial business and not a fly-by-night company (as recorded at 15/10/20 Decision §5 reproduced above);

(3) Statement §52 refers to the evidence in Leung 2^nd (1190) affirmed on 14 October 2020 that, with reference to the BMSI Gross Value Certificate, Leung and Wong remained very positive about the future of BMC in light of its well-established business relations with the top smelters in the Mainland (“BMC Prospects Assertion”);

(4) Statement §53 asserts that taking the BMSI Valuation Evidence and the BMC Prospects Assertion together, in the context of the arguments BMC were putting forward, Ds’ evidence was to the effect that:

(a) BMC’s shareholding in BMSI was at all material times valuable, greater than the Original Monetary Limit[12] and sufficient to dispel any risk of dissipation (“Statement §53(a)”);

(b) BMSI was at all material times able to run and operate its mining operation as a going concern;

(c) There was no incident that had not been disclosed to the court which could render the valuation reports of BMSI inaccurate and/or misleading;

(d) Ds honestly held the belief that they were positive about the future business prospect of BMC (collectively “BMSI Value Representations”);

(5) Statement §54 asserts that the BMSI Value Representations were false and untrue for the following reasons:

(a) After June 2020, there had not been any sale of bauxite by BMC and/or BMSI and proceeds of sale were only received by BMC and/or BMSI up to 30 June 2020;

(b) Since around August to September 2020, the actual mining process/operation conducted by BMSI on the Land had ceased as a result of the impact of COVID;

(c) In or around October 2020, the Solomon Islands Government reclaimed the Land and in particular: (i) on 9 October 2020, the National Criminal Investigation Department of the Solomon Islands (“NCID”) applied to revoke the Perpetual Estate Register for the Land (“Revocation Application”) and (ii) as evidenced by a Revocation Letter dated 19 October 2020, the Registrar of Titles acted upon NCID’s application and recovered the Perpetual Estate Register for the Land, thus restoring its ownership to “customary land” (“Land Revocation”) ;

(d) On 25 March 2021, 10 days after the 15/3/21 Decision, BMC went into voluntary liquidation;

(e) It was revealed to the creditors at the first creditors’ meeting that (i) BMSI ceased operations and trading in August 2020, (ii) according to the Statements of Affairs filed by Wong and Leung on 9 April 2021, the realizable value of BMC was only around US$6.9 million against claims in excess of US$51 million, and (iii) also according to the Statements of Affairs, the value of BMC’s investment in BMSI had a book value of over US$21 million but the estimated realizable value was only around US$2 million;

(6) Statement §55 asserts that Wong and Leung, as the only 2 directors of both BMC and BMSI, knew that the BMSI Value Representations were false and untrue;

(7) Statement §56 asserts that by knowingly swearing false affirmations to the effect of putting forward the BMSI Value Representations, the court could potentially have been misled and deceived, and in particular, it is alleged that despite having knowledge of BMSI ceasing trading in or around August 2020, that fact was not disclosed by Ds until after the 15/3/21 Decision.

3.9  Pausing here, as set out at 15/3/21 Decision, the issue of Land Revocation was the primary reasons for DHCJ Le Pichon’s view that the BMSI Net Tangible Asset Valuation was no longer valid (§§75, 81 and 88). However, the foreign law experts were not made available for cross-examination for the purpose of these committal proceedings.

3.10  As pointed out by Mr Yuen, the case pursued by P in its written closing is focused solely at the hearing on 23 February 2021 before DHCJ Le Pichon and only on the basis that P had failed to qualify/caveat the use of the BMSI Valuation Evidence at that hearing. In his oral closing address, Mr Chain further conceded that, as regards the BMSI Valuation Representation, no further reliance was placed on the allegation that a representation was made to the effect that BMC’s shareholding in BMSI was at all material times valuable, greater than the Original Monetary Limit and sufficient to dispel any risk of dissipation (ie Statement §53(a)).

3.11  Ds’ defence on the case pursued by P in closing may be summarized as follows:

(1) P’s case in the Statement has never specifically targeted at the hearing on 23 February 2021 but is based on the allegation that the BMSI Valuation Evidence was false at all material times. By conceding that the BMSI Valuation Evidence was not false at the time they were made or adduced, P has instead impermissibly changed its case to one of failure to caveat or qualify the use of the BMSI Valuation Evidence at the hearing on 23 February 2021;

(2) Even if the shift in P’s case is permissible, it cannot withstand scrutiny. On a high level of generality, amongst other factor, (a) it is inherently improbably that Ds intended or sought to mislead the court at the hearing before DHCJ Le Pichon and the court was in fact not misled, (b) there is cogent evidence that Ds honestly held the BMC Prospects Assertion, not least because the COVID pandemic was unprecedented and any judgments on business prospects must be viewed in that light, (c) it is indisputable that there continued to be financial injections by Ds from March 2020 up until 30 April 2021 into BMC/BMSI up of no less than US$4.8 million, (d) the fact that BMC was placed into voluntary liquidation does not show that the BMC Prospects Assertion to be false.

(iii) Act of Contempt 3

3.12  The complaint made at Statement §§57-61 is that, in breach of the Asset Disclosure Orders, BMC failed to disclose the details of transfers or disposals of assets by BMC’s subsidiaries, namely New Expert (Macao Commercial Offshore) Limited (“New Expert”) and BMSI within the ordered disclosure period. It is said that Ds had failed to take reasonable steps to procure BMC to comply with the Asset Disclosure Orders.

3.13  Ds’ defence is that (1) committal proceedings should be a last resort; (2) the evidence shows that even if BMC was in breach of the Asset Disclosure Orders, the failure was neither willful nor intentional; and (3) Ds have since purged their contempt.

4.   The applicable principles

4.1  Apart from differences in emphasis, there is no real dispute between counsel on the general principles.

4.2  In contempt proceedings, strict proof of liability beyond reasonable doubt is required. The defendant does not have to prove anything. If there is a hypothesis which might reasonably be consistent with the defendant’s innocence, then he should be acquitted: Re Bramblevale Ltd [1970] Ch 128 at 137 and Concorde Construction Co Ltd v Colgan Co Ltd [1984] HKC 253 at 257.

4.3  As to what is sufficient to surmount the threshold of beyond reasonable doubt, whist that standard of proof does not require certainty, the test to be applied is whether one is “sure” of guilt and it is unhelpful to distinguish between “sure” and “certain”: HKSAR v Fok Ka Po Joe [2018] 2 HKLRD 1223 §§59-60.

4.4  Where the defendant wishes to put in issue a matter which is potentially exculpatory, an evidential burden arises, but the plaintiff continues to bear the persuasive burden to prove his case. In such cases, there must be evidence supporting such exculpatory matter which is sufficiently substantial that it raises a reasonable doubt as to the defendant’s guilt. Unless such a reasonable doubt is removed, the plaintiff fails to prove his case: Ip Pui Lam Arthur & Ip Pui Sum (Joint and Several Trustees in Bankruptcy) v Alan Chung Wah Tang and Alison Wong Lee Fung Ying, CACV 214/2016, 16 February 2017 §4.3.

4.5  There is no real dispute that the giving of a false undertaking falls to be determined as an equivalent of giving a false statement on affidavit. The elements that need to be satisfied are (1) the falsity of the statement in question; (2) the statement has or would have interfered with the course of justice in some material respect; and (3) at the time it was made, the maker of the relevant statement knew that it was false and that the false statement was likely to interfere with the course of justice: Numeric City Ltd v Lau Chi Wing [2016] 4 HKLRD 812 §35. However, actual interference with the course of justice is not required, provided that the making of the false statement was likely to cause such interference.

4.6  In terms of a breach of a court order, the approach to committal is a 3-stage process, namely (1) to construe the relevant court order to ascertain its meaning and operation; (2) to determine whether the defendant has in fact complied with the orders as so construed; and (3) to consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt: Kao, Lee & Yip (a firm) v Donald Koo Hoi-Yan & Ors (2009) 12 HKCFAR 830 §20.

4.7  In relation to committal against a director:

(1) As regards RHC Order 45, rule 5(1), P has to show that: (a) the director in question was fully aware of the terms of the order with which the company must comply; (b) he had knowledge at a time when he could use his position as a director to secure compliance; and (c) he was aware that if he did not use his position, steps could be taken against him personally to enforce compliance. In particular, the director has to have willfully failed to take such reasonable steps to ensure compliance of the court order, and a director is not necessarily liable simply by virtue of the company itself being in contempt, for it is one thing to punish a director for the company’s failure to do something where it lies within the power of the director to ascertain whether the order has been obeyed and to ensure compliance if it has not but it is another to punish him if he had no reasonable opportunity to ensure compliance: Excel Noble Development Ltd & Ors v Wah Nam Group Ltd & Ors [2001] 4 HKC 148 at 155I to 157H and Crown Times International Ltd v Chan Yim Ping [2007] HKCU 142 §12;

(2) Insofar as the “aiding and abetting” basis is concerned, the director has to be shown to have notice of the order, and there must be evidence of personal misconduct on the part of the director or officer: Nicolas Pappadis v Chan Shing Sheung Barry & Ors [1989] 1 HKC 33 §41(f)-(i).

4.8  Contempt proceedings should only be pursued as a matter of last resort. Whilst there are cases where it is necessary that the court should exercise its power in the punishment of contempt to achieve compliance with its order, there are other cases where lesser options should be explored before one is to resort to the draconian power of committal. Whenever there is a reasonable alternative available instead of committal to prison, that alternative must be taken: China Metal Recycling (Holdings) Ltd (in compulsory liquidation) & Anor v Chun Hei Man & Ors [2018] 1 HKLRD 455 §60.

5.   The witnesses

5.1  P called Madam Sun Min (“Sun”) and Mr Yuan Weiming (“Lawyer Yuan”). Sun was at the material time the Commercial General Manager of P and Lawyer Yuan a Mainland lawyer and a senior partner of Beijing Zhonglun W&D (Tianjin) Law Firm (“Zhonglun”). Zhonglun was engaged by P to conduct investigation into the Wider C&D Arrangement. Ds themselves elected to give evidence.

5.2  In assessing credibility of the witnesses, I have borne in mind the approach set out in cases such as Hui Cheung Fai v Daiwa Development Ltd, HCA 1734/2009, 8 April 2014 §§77-82, namely the credibility of a witness should be assessed by reference to contemporaneous documentation where it exists, as well as inherent probabilities having regarding to all the facts that are known. It is also important to bear in mind the internal consistency of the evidence of a witness, which is often tested by a comparison between the oral testimony of the witness on the one hand and his witness statement.

5.3  In the context of contempt proceedings, Mr Yuen reminds me that it is important for the court not to give the impression that it simply has to decide who to believe. Instead, the court must be sure that the complainant is telling the truth.

5.4  In terms of general observations, I think Mr Yuen in closing was forensically realistic to accept that there are a number of occasions where Ds were unable to offer wholly satisfactory answers to questions posed by Mr Chain or the court. However, Mr Yuen reminds me of D1’s health condition and the nature of these contempt proceedings was such that Ds would find giving evidence a very stressful experience, relaying on Group Seven Ltd v Ali Nasir [2017] EWHC 2466 (Ch) §51. I have borne these submissions in mind but I have to counter-balance them against Mr Chain’s submissions that the bases of the 3 Acts of Contempt are supported by documentary evidence (in relation to Act of Contempt 1), undisputed factual circumstances known to Ds (in relation to Act of Contempt 2) and indisputable non-compliance of the Asset Disclosure Orders (in relation to Act of Contempt 3).

5.5  Another aspect which merits mention is Mr Yuen’s submission that Sun and the group to which P belongs may have a history of using fabricated documents in court proceedings here in Hong Kong and elsewhere. Reference is, made to, for example, Re Chu Kong [2021] HKCA 1580 §§46 and 62 (upheld by the Court of Final Appeal in Sun Min & Ors v Chu Kong (2022) 25 HKCFAR 318). However, for reasons set out below, I agree with Mr Chain that Sun’s role in these proceedings is limited and the most relevant and probative documents (which are in dispute) were produced by Lawyer Yuan whose credibility has not been challenged.

5.6  Mr Yuen also reminds me that when considering Ds’ potential liability, it is important to bear in mind the different responsibilities and roles played by Wong and Leung, not only in relation to the operation of BMC and/or BMSI but also in relation to the handling of the Underlying Proceedings. Mr Yuen points out that Wong was predominantly responsible for the business and operational aspects of BMC whilst Leung for the accounting and banking operations. In particular, Leung was at the material time a practicing accountant and did not work full time in BMC/BMSI. I do not understand Mr Chain to have disagreed with the foregoing propositions.

5.7  Whilst I have acceded to Mr Yuen’s invitation to first deal with Act of Contempt 2, I should make it clear that, irrespective of the rejuggling of the order in which the 3 Acts of Contempt are dealt with, I have considered the evidence overall as a whole in reaching my conclusions.

6.   Act of Contempt 2

(i) The arguments on the scope of Act of Contempt 2

6.1  Mr Chain relies on the principles set out at Cosimo Borrelli (Trustee of SFC Litigation Trust) v Allen Tak Yuen Chan [2018] 2 HKLRD 496 §§20-33):

“[20] The requirement of Order 52 rule 2(2) is to set out in the statement “the grounds on which [the] committal is sought”. It has been said in many cases what is required is that the alleged contemnor “shall know, with sufficient particularity to enable him to defend himself, what exactly he is said to have done or omitted to do which constitutes a contempt of court”, and every statement “must be looked at against its own background” to ascertain whether enough information has been given to the alleged contemnor to meet the charge (Chiltern District Council v Keane at 622A to C). The extent of particularity required depends on the nature of the order alleged to be breached and the background of the case…

[24] …The Statement is to be read “fairly and sensibly as [it] would be read by a reasonable person in the position of the alleged contemnor” and the crucial question is whether such a person, “having regard to the background against which the committal application is launched, [would] be in any doubt as to the substance of the breaches alleged.” …

[26] As stated by Sir Gerard Brennan NPJ in Kao, Lee & Yip v Koo Hoi Yan at §73:

“Although the procedures governing committal for contempt are strictly enforced when needed to safeguard the liberty of an alleged contemnor, the discretionary power to dispense with a procedural requirement is available in appropriate case. As Lord Woolf MR said in Nicholls v Nicholls [1997] 1 WLR 314, 326:

‘… Like any other discretion, the discretion provided by the statutory provisions 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 contemnor but also the interests of the other parties and the interests of upholding the reputation of civil justice in general. Today it is no longer appropriate to regard an order for committal as being no more than a form of execution available to another party against an alleged contemnor. The court itself has a very substantial interest in seeing that its orders are upheld. If committal orders are to be set aside on purely technical grounds which have nothing to do with the justice of the case, then this has the effect of undermining the system of justice and the credibility of the court orders. While the procedural requirements in relation to applications to commit and committal orders are there to be obeyed and to protect the contemnor, if there is non-compliance with the requirements which does not prejudice the contemnor, to set aside the order purely on the grounds of technicality is contrary to the interests of justice …’”…

[31] It has been emphasised repeatedly by the courts that a statement filed pursuant to Order 52 rule 2(2) 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. Hence, the statement should state all the factual elements (but not the evidence to be relied on) which, if proved, are sufficient to establish the contempt…

[33] A statement filed pursuant to Order 52 rule 2(2) is of vital importance. It has the two‑fold function of informing the alleged contemnor of the charge he has to meet, and discharging the applicant’s duty of making full and frank disclosure in the ex parte leave application. Practitioners tasked with preparing the statement should approach this with great care, treating this document as equivalent to an indictment in criminal proceedings, and making sure they have stated all the factual elements required to be proved to establish the alleged contempt.”

6.2  In my view, the case pursued by P in closing is markedly different from that set out in the Statement. As stated above, an order was made to the effect that the parties are to be bound by the ALOI. Whilst it has been said at Sun Tian Gang & Anor v Changchun High & New Technology Industries Development Parent Company & Ors [2025] HKCA 188 §138 that an agreed list of issue is not meant to supersede the pleadings (by analogy the Statement in the present case), the ALOI does provide a useful starting point to assess whether the case pursued by P in closing would cause unfairness to Ds.

6.3  Act of Contempt 2 is dealt with at ALOI §(3) which provides as follows:

“Whether the Defendants knowingly swore false affirmations, and instructed legal representatives to make representations to Court on behalf of BMC, to the effect that BMC's shareholding in BMSI is and was at all material times sufficiently valuable to cover the Mareva injunctive relief obtained by PB on its claim for outstanding fees under various invoices issued by PB for inter alia freight and demurrage (initially USD 5,626,382.50 on 10 August 2020 and subsequently USD 8,114,052.44 on 15 March 2021[13]). In particular:

(a) Whether the 1^st and/or 2^nd Defendants had specifically instructed legal representatives to make the representations to Court on behalf of BMC now relied on by the Plaintiff in relation to Act of Contempt 2. [inserted by Defendants; the Plaintiff does not agree this issue arises from the filed court documents and evidence]

(b) Whether or not BMC's shareholding in BMSI was, at the time the 1^st and/or 2^nd Defendants deposed their affirmations and/or allegedly instructed legal representatives to make representations to Court on behalf of BMC, of sufficient value to cover the Mareva injunctive relief obtained by the Plaintiff?

(c) If BMC's shareholding in BMSI was not sufficient to cover the value of the Mareva injunctive relief, whether the 1^st and/or 2^nd Defendants knew so at the time they deposed their affirmations and/or allegedly instructed legal representatives to make representations to Court on behalf of BMC?”

6.4  As has been observed in Cosimo Borrelli, the extent of particularity required depends on the nature of the complaints and the background of the case. Cosimo Borrelli is a case on breach of a court order. Similarly, in the more recent case of High Fashion New Media Corporation Ltd v Leong Ma Li [2024] HKCA 1067 which is also a contempt case concerned with a breach of court order, the following observations were made by the Court of Appeal:

“[46] The plaintiff had pleaded in the amended Order 52 statement and the amended originating summons that further breaches of the Injunction Order were committed by “[the defendant], either by her own conduct or that of her agents or both” in that they “have failed to observe and comply with the Longford Account Protocol” in the operation of the Capital Account. When pleading the case, the plaintiff would not know if the defendant had made any or all of the transactions complained of in the Capital Account personally, or whether a staff had applied the Leong Seal and the Finance Seal with the defendant’s knowledge and consent. If a staff had made any or all of the transactions, the plaintiff had no knowledge of name of the staff responsible. It would not be possible to plead that Tong was acting as the defendant’s agent or give particulars of the agency relating to Tong...

[47] It was in the defendant’s affirmation in opposition to the amended originating summons that she raised the defence she had not, “since 23 October 2017, dealt with or authorised any one to deal with the … Capital Account”. She then named Tong as the staff responsible for the operation of the Capital Account and gave particulars of her instructions to Tong for this purpose in the 2017 Email.”…

[48] There was no unfairness to the defendant in all the circumstances. She was informed at the outset of the relevant allegations with sufficient particularity such that she would understand the nature and cause of the charge against her and was able to defend herself in the way she chose. There was no suggestion in the proceedings below that she was hampered in any way in pursuing her defence or that she was unable to counter the allegations how the alleged agency was said to arise or that the inquiry as to the alleged agency was unfair to her in any way…”

6.5  Act of Contempt 2 is not a complaint premised on a breach of a court order but one premised on presentation of a misleading case. Unlike the situation considered in High Fashion, and bearing in mind that it is always P’s case that Ds were the only directors of BMC (and BMSI), there ought to be no difficulty for P to set out all the requisite particulars, especially when the present complaint is essentially a “post-mortem” criticism of what ought to have been disclosed in the Underlying Proceedings. In my view, the content of the alleged misleading evidence and how the misleading evidence was presented must be the gravamen of the complaint and ought to be particularized. In this regard, a complaint that the evidence was false at all material times is very different from one complaining that the evidence was (or could be) true at the time of filing but had become inaccurate by the time of the hearing due to intervening events. Equally, swearing false evidence is a very different complaint from one premised on a failure to caveat/qualify evidence which was (or could be) true but had become inaccurate, and insofar as a complaint premised on a failure to caveat/qualify is advanced, it seems to me that it is incumbent upon P to particularize when and how Ds ought to have, but failed to, put forward the caveat and qualification.

6.6  The case pursued by P in closing relies on Thomas v Jakes [2012] EWHC 525 (Ch). In that case, one of the acts of contempt was advancing a false case before the court on 29 July 2011. One of the respondents filed an affidavit on 1 July 2011 to state that certain shares were in the respondents’ possession, but in fact the respondents had parted possession with them on the day before the hearing. Briggs J (as he then was) said as follows:

“[26] The respondents did not attend personally but were represented by solicitors and counsel at the hearing on 29 July 2011. Mr Jakes’ affidavit made on 1 July 2011, specifically in opposition to the then pending first application to commit, and therefore for the purposes of being used at that hearing, asserted that the Shares were in his safe in Bratislava.

[27] It was clearly implicit in Mr Davies’ skeleton argument for the respondents for the hearing on 29 July that the respondents still retained possession, or at least control, of the Shares…

[28] It is plain (and the contrary has not been suggested), that the respondents’ English legal representatives were wholly unaware on 29 July 2011 that the Shares had by then been delivered to the Slovak liquidator. The circumstances in which the court was invited to, and then did, set a fresh deadline for delivery up were such that it was a common understanding of the court and of the parties that the making of such an order would not (as it has turned out to be) be wholly in vain. A false case was therefore presented to the court.

[29] The conduct of the respondents alleged in that context to have amounted to a contempt consists of their failure to inform the court, through their legal representatives, of their disposal of the Shares on the day before the hearing. I must be satisfied, if a contempt is to be proved, that this was deliberate in the sense that the respondents appreciated both that their disposal of the Shares would be relevant to the court’s decision-making on 29 July and that the court would assume, in the absence of any correction, that the Shares remained under the respondents’ control, as had been asserted in Mr Jakes’ affidavit made on 1 July. In short, I must be satisfied that there was a deliberate rather than accidental or negligent deception of the court.” (emphasis added)

6.7  As an overarching observation, I agree with Mr Yuen that Thomas is factually very different from the present case.

6.8  First, the falsity in Thomas is factually binary, in that either the subject shares were or were not in the possession of the respondents.

6.9  Conversely, the BMSI Value Representations (as finally pursued by Mr Chain) consist of matters[14] (“Pursued BMSI Value Representations”) which reasonably involve an assessment of business judgments and/or legal advice provided and received:

(1) BMSI was at the material time able to run and operate its mining operation as a going concern;

(2) There is no incident that has not been disclosed to the court which could render the Stern Appraisal Report, the BMSI Gross Tangible Asset Valuation and the BMSI Net Tangible Asset Valuation inaccurate and/or misleading;

(3) Leung and Wong honestly held the belief that they were positive about the future business prospect of BMC.

6.10  Secondly, in Thomas, the legal representatives did not know that the respondents parted with the shares. In other words, the respondents had deliberately withheld a demonstrable falsity from their legal representatives. In the present case, as pointed out by Mr Yuen, even in the skeleton filed on behalf of BMC for the hearing on 23 February 2021 by counsel Mr Toby Brown (which had not been provided to Ds prior to the hearing), references were made to matters which are germane to the assessment of the Pursued BMSI Value Representations, for example, “the precise valuation of BMSI does not matter” and “BMC’s operations had been significantly, but temporarily impacted by Covid 19”.

6.11  It is in the above context that I agree with Mr Yuen that the case pursued by Mr Chain in closing represents an impermissible departure from the Statement, or in the alternative, I am of the view that the case pursued by P has not been properly or sufficiently particularized in the Statement:

(1) There is no express reference to any submissions, representations, omissions or failure to correct the Pursued BMSI Value Representations at the hearing on 23 February 2021. In so far as there was any reference to that hearing, Statement §55(e) only asserts that despite the Revocation Letter being issued on 19 October 2020, BMC failed to disclose the same on 17 November 2020 to P at the time when BMC provided the BMSI Net Tangible Asset Valuation (not the court) and proceeded to rely on the BMSI Net Tangible Asset Valuation at the hearing before DHCJ Le Pichon. However, as the foreign law experts were not made available for cross-examination, Mr Chain accepted that the court is not in a position to determine the disputed opinion on the effect of the Land Revocation at these committal proceedings;

(2) Insofar as any reliance is placed on Statement §53(d), ie there is no incident that has not been disclosed to the court which could render the Stern Appraisal Report, the BMSI Gross Tangible Asset Valuation and the BMSI Net Tangible Asset Valuation inaccurate and/or misleading, no specific timing is identified. Whilst Mr Chain relies on Statement §50 which identifies the relevant period as “in the course of these proceedings” and submits that such identification is wide enough to cover the hearing on 23 February 2021, it seems to me that the foregoing submission is in fact a tacit admission of a lack of particularization;

(3) Taking a step back, it seems to me plain that ALOI shows that a failure to caveat or qualify at the hearing on 23 February 2021 was not the focus of the parties. It is pertinent to note that at ALOI §(3)(a), P itself disagreed whether Ds had specifically instructed to make representations to the court was an issue which arose out of the filed court documents and the evidence. As has been pointed out by Mr Yuen, the insertion of ALOI §3(a) by Ds was on the basis that the Statement only made specific reference to submissions made at the hearing on 15 October 2020 (Statement §51(b)), not the hearing on 23 February 2021;

(4) Proceeding on the test adumbrated in Thomas relied on by P, it is incumbent upon P to prove that there was a deliberate rather than accidental or negligent deception of the court, and as a corollary, Ds can potentially raise by way of defence that the position adopted was as a result of legal advice received, bearing in mind that the Pursued BMSI Value Representations were not binary factual matters. In my view, it is highly relevant that, as recorded at 15/3/21 Decision §§3-13, there was an application by BMC to adjourn the hearing on 23 February 2021 to file further evidence in response of Sun 5^th (1190), but in the meantime, BMC was willing to submit to a worldwide Mareva injunction in substantially the same terms sought by P. What advice was given to Ds prior to the hearing which led to the adoption of that position is in my view pertinent to the assessment of the allegation whether the alleged failure to caveat/qualify was deliberate;

(5) In his oral closing address, Mr Chain confirmed unequivocally that no suggestion was made that the valuation evidence adduced by BMC was false at the time it was adduced[15] and hence he disavowed any further reliance on Statement §53(a). It would therefore mean that the case pursued by P in closing is that after 17 November 2020 (the date on which the BMSI Net Tangible Asset Valuation was provided to P’s solicitors), Wong and Leung should have taken steps to caveat or qualify the BMSI Valuation Evidence. There is no particularization of what ought to have been done and by when, and in particular, the reliance on Thomas suggests that the caveat or qualification should or could have been done by Mr Brown at the hearing before DHCJ Le Pichon. The lack of particularization is reflected by the fact that any discussions between BMC and its legal representatives were only explored in the course of cross-examination of Wong and Leung (and only after the issue was raised by the court on Day 5). As has been pointed out by Mr Yuen, the mere fact that Mr Brown had argued the case was consistent with Ds’ instructions (as argued by Mr Chain) says nothing about the instructions that were actually given, and more importantly, whether those instructions were given as a result of legal advice provided (see also §6.24 below). In my view, had the case pursued by P in closing been properly particularized, it seems to me more likely than not that specific evidence (upon obtaining legal advice) would have been adduced by Ds.

6.12  For the above reasons, I am of the view that the shift of P’s case to one of failure to caveat/qualify the BMSI Valuation Evidence at the hearing on 23 February 2021 either represents a departure from the Statement or alternatively is one that lacks particularization occasioning prejudice to Ds. On this basis alone, Ds should be acquitted of Act of Contempt 2.

(ii) Merits of Act of Contempt 2 (Primary case)

6.13  For completeness, I deal with counsel’s arguments on merits briefly.

6.14  P’s case is that the Pursued BMSI Value Representations were false and misleading by reason of what has been termed as BMSI’s Dire Financial Situation:

(1) For nearly 1 year since March 2020, as a result of COVID, the Solomon Islands was in lockdown and BMC/BMSI were relying on advances made by D to settle expenses and liabilities;

(2) For nearly 8 months since June 2020, there has been no sale of bauxite by BMC/BMSI;

(3) For nearly 7 months since July 2020, BMC received no income from the sale of bauxite;

(4) For nearly 6 months since August 2020, mining operations had been completely suspended;

(5) For 4 months since 19 October 2020, BMSI’s right to mine in the Land on its face faced a risk of being adversely affected by the Land Revocation;

(6) In the Statements of Affairs signed by Wong and Leung following BMC’s voluntary liquidation, Wong admitted that at the end of 2020[16], BMC was unable to pay its debts as they became due (insolvent) and Leung admitted that BMC became insolvent at the end of February 2021.

6.15  The bulk of the elements making up BMSI’s Dire Financial Situation is set out in the SAF. Mr Yuen’s comment on subparagraph (5) of the preceding paragraph is that, as stated above, since P had conceded at trial that it would not invite the court to make any findings on Solomon Islands law or to resolve any dispute between the Solomon Islands legal experts, P cannot establish beyond reasonable doubt any adverse effect of the Land Revocation. I agree.

6.16  The case pursued by Mr Chain in closing is as follows:

(1) The central tenor of the evidence put forward by BMC was that BMSI’s mining operation was an on-going, operating and substantial business and not a fly-by-night company, and given that BMSI owned fixed assets as part and parcel of operating the mining business, there was negligible risk of dissipation;

(2) Based on BMSI’s Dire Financial Situation, each of the Pursued BMSI Value Representations was false, namely (a) as of February 2021, BMC and BMSI were clearly unable to run and operate their mining operation as a going concern, and on the contrary, they were on the brink of insolvency (if not in fact insolvent), (b) the case put forward by BMC at the hearing on 23 February 2021 perpetuated the false impression that BMSI’s mining operation was active leading up to February 2021 and there was no incident that had not been disclosed to the court which could render the content of the valuation reports inaccurate and/or misleading and (c) D’s could not have honestly held the belief that they remained positive about BMC’s business prospect.

6.17  In my view, Ds have raised a reasonable doubt in at least the following respects.

6.18  First, the mere existence of BMSI’s Dire Financial Situation does not mean that the mining operations could not continue as a going-concern. In the court’s experience, many companies in financial trouble may still be treated as a going concern by their auditors by reason of an express undertaking of funding from shareholders. In the present case, as has been pointed out by Mr Yuen, the unchallenged evidence is that no less than US$4.8 million was injected by Ds from March 2020 up until 30 April 2021, well after the 15/3/21 Decision.

6.19  Secondly, and as a corollary, it is Ds’ evidence that the cessation of the mining and sale of bauxite by BMC and BMSI was intended to be a temporary suspension primarily due to COVID. Ds’ evidence shows that BMSI did not have substantial indebtedness and BMC’s indebtedness was owed to “friendly” creditors. I accept Mr Yuen’s submission that there is no reason why, during the COVID pandemic, a business with little bank financing or external liabilities, with continued injection of capital, could not simply bide its time and wait for the pandemic to blow over before resuming operations.

6.20  Thirdly, as a matter of inherent probabilities, on P’s case, Ds should have known or understood BMSI’s Dire Financial Situation, Ds would have no reason to worry about a worldwide Mareva injunction. Where Ds had continued to inject funds into the operation of BMC/BMSI (the total sum of which was not far less than the Original Monetary Limit), there is at least a reasonable doubt as to P’s case that Ds did not genuinely and honestly believe that BMC/BMSI should be regarded as substantial ongoing operations.

6.21  Fourthly, as submitted by Mr Yuen (with which Mr Chain did not disagree in his oral closing address), whilst motive is not legally a necessary element, it is always relevant to consider the lack of motive. It is stated at Mortgage Agency Services Number One Ltd v Cripps Harries LLP [2016] EWHC 2483:

“[88] Of particular relevance to a case of fraud such as the present is the question of motive. By and large dishonest people are dishonest for a reason. They tend not be dishonest wilfully or just for fun. Establishing a motive for deceit, or conspiracy, is not a legal requirement, but if a motive cannot be detected or plausibly suggested then wrongful intention (to tell a deliberate lie in order to deceive) is less likely. The less likely the motive, the less likely the intention to deceive, or to conspire unlawfully. In many, if not most, fraud cases this would not be a particularly live point. The defendant is often a person who would be a direct beneficiary of the fraud, and a plausible motive is, to that extent, relatively easily propounded. The present case is, however, different.”

6.22  As has been pointed out above, in seeking an adjournment of the hearing on 23 February 2021, BMC was willing to submit to a worldwide Mareva injunction in substantially the terms sought by P during the adjourned period. In my view, there was a lack of motive on Ds’ part to refrain from caveating/qualifying the evidence at the hearing before DHCJ Le Pichon. In any event, it is clear from 15/3/21 Decision §§76(i) and 78 that DHCJ Le Pichon was aware that the then latest valuation report (ie the BMSI Net Tangible Asset Valuation) was outdated and of limited assistance.

6.23  Fifthly, as submitted by Mr Yuen, there is at least a reasonable doubt as to whether Ds had deliberately presented the BMC Prospects Assertion but they knew that it had become false as at the hearing of 23 February 2021, notwithstanding the fact that BMC was placed in voluntary winding-up on 25 March 2021. D1’s evidence is that Ds decided to place BMC into voluntary liquidation not only because of the COVID pandemic but also in view of the difficulty in continuing to operate BMSI in view of the 15/3/21 Decision, but for which, it was possible that Ds could still have injected funds into BMSI and to keep it operating as a going concern. In the Statements of Affairs, the book value of BMSI was still stated to be US$21 million and I accept Mr Yuen’s submission that the realizable value of US$2 million may be explained by the fact that a piecemeal disposal by a company under liquidation is wholly different from the sale of an entire business as a going concern.

6.24  Sixthly, I also agree with Mr Yuen’s submission that the skeleton filed by Mr Brown on behalf of BMC for the hearing before DHCJ Le Pichon made the ultimate point that BMSI represented a significant asset owned by D and could not be disposed of quickly, bearing in mind that the issue in debate was whether there was a real risk of dissipation. Related to the scope argument dealt with above is that what advice was given to Ds is highly relevant. This is because a view can at least be reasonably held that the financial predicaments suffered by BMC/BMSI were not by themselves (unless unjustified dispositions can be shown) factors which would be regarded as factors from which a risk of dissipation could be inferred.

6.25  Had it been necessary, for the above brief reasons, I would also have acquitted Ds of Act of Contempt 2.

7.   Act of Contempt 1 (Primary Case)

7.1  ALOI §(1) identifies the following issues for Act of Contempt 1 (Primary Case):

“Whether the 1^st and/or 2^nd Defendants aided and abetted BMC in giving the C&D Sale Proceeds Undertaking on false premises, knowing at all times it is a worthless and empty undertaking based on false premises that could not be fulfilled. In particular:

(a) Whether the Wider C&D Arrangement existed?

(b) Whether the Wider C&D Arrangement rendered the C&D Sale Proceeds Undertaking worthless and empty, or one that could not be fulfilled?

(c) If answer to (l)(a) and (l)(b) is yes, whether therefore the C&D Sale Proceeds Undertaking given by BMC was a worthless and empty undertaking based on false premises that could not be fulfilled at the time it was given?”

7.2  In the SAF, the following facts are agreed (with my supplements):

(1) C&D Tianjin (as buyer) entered into 3 C&D Contracts date 31 March, 14 April and 27 April 2020 with BMC (as seller). The 3 C&D Contracts were referred to at the material times by the parties as respectively “Shipment 412”, “Shipment 413” and “Shipment 415”. C&D Tianjin is a 95% owned subsidiary of C&D Logistics Group (“C&D Group”);

(2) Under the terms of the 3 C&D Contracts, 70% of the provisional cargo value was payable within 7 working days after C&D Tianjin confirmed it owned the cargo right and all the goods had centered the buyer’s storage at discharging port and the balance was payable upon presentation of a balance invoice issued by the seller. On 29 April, 4 May and 21 May 2020, BMC issued 3 commercial invoices to C&D Tianjin, the summation of which represents the C&D Sale Proceeds (“Commercial Invoices”).

(i) P’s evidence

7.3  P’s evidence to show that the existence and effect of the Wider C&D Arrangement is as follows.

7.4  Contemporaneous with the execution of the 3 C&D Contracts, C&D Tianjin (as agent) and BMC (as principal) also executed corresponding agency agreements dated 31 March, 14 April and 27 April 2020 (“3 C&D Agency Contracts”). The 3 C&D Agency Contracts were signed by Wong and bore BMC’s company chop. The following are, inter alia, the express terms of the 3 C&D Agency Contracts:

“II Agent’s rights and obligations:

[1] Agent shall import the goods on behalf of Principal and sign a purchase contract（hereinafter referred to as "Purchase Contract"）[referencing the corresponding C&D Contract] with Principal in its own name, and shall also sign a sales contract（hereinafter referred to as "Sales Contract"）with the domestic customer designated by Principal. (hereinafter referred to as "Domestic Customer") to sell such goods to Domestic Customer. Principal undertakes that the payment terms between Agent and Domestic Customer does not involve credit sale. Should the goods not be sold out within the agreed time, Agent shall be entitled to require Principal to repurchase the goods. Purchase Contract and Sales Contract mentioned above have been confirmed by Principal, and all responsibilities of Agent arising from the signing and performance of them and their respective annexes shall be borne by Principal.

Purchase Contract signed between Principal and Agent is only for the convenience of determining the specifications, prices and payment of the goods, and does not change the legal relationship of Agency between both parties. The rights and obligations of both parties shall be subject to this Contract.

[2] Before Agent receives the full amount of payment under this Contract, all the interests of goods (including but not limited to title in goods and other rights and interests, such as insurance interests), and the rights and interests under Purchase Contract and Logistics Contract shall be solely owned by Agent. Without the written confirmation of Agent, Principal is not entitled to and shall not take delivery of goods or claim other contractual interests from the storageor any other parties for any reason.

III Principal’s rights and obligations

[6] Principal shall, within 90 days after the cargo arrive in the warehouse (hereinafter referred to as "Sale Duration"), promise to sell all the goods out which enable Agent to receive the full amount of payment for the goods, expenses (including but not limited to bank charges, value-added taxes, customs duties, logistics fees and customs clearance fees), agency fees, interest on capital occupation and other expenses (hereinafter referred to as "Full Amount"). If Principal fails to sell the goods out within the agreed time or enable Agent to receive the Full Amount, it shall be obliged to repurchase the goods unsold and make up the Full Amount to Agent.

IV Financial Settlement

[1] The Agent shall, on the condition that the goods are warehoused and their property is confirmed by the warehouse, pay Principal 70% of the payment for the goods hereunder…

[5] After Agent assists Principal to complete the sales of all goods and receives the full payment for goods, Agent shall make final settlement with Principal after deducting the Full Amount including advance payment for goods, taxes, ocean freight, bank charges, insurance expenses, agency fees, interest etc

V Liability for breach of contract

[2] If Agent fails to receive the Full Amount within the Sale Duration mentioned above (including but not limited to the default of Domestic Customer) or Principal fails to pay for or take delivery of the goods according to this Contract or fails to pay or add the deposit according to this Contract, it shall be deemed as breach of contract, and Principal shall immediately perform the repurchase obligation, bearing liquidated damages at 0.05% of the amount of this Contract from the due date, in addition to returning the advances and expenses paid by Agent and paying the Full Amount including agency fees payable, interest on capital occupation, etc. Meanwhile. Agent shall have the right to take measures to make up for the loss, including but not limited to refusing to pay any payable, offsetting the arrears with the payment for the goods sold, selling the remaining goods on its own (the selling prices shall be subject to the actual settlement between Agent and Principal) and other measures deemed reasonable by Principal, and all losses incurred by Agent shall be borne by Principal.”

7.5  As may be seen from the above express terms of the 3 C&D Agency Contracts, the relationship between BMC and C&D Tianjin was not one of seller and buyer but was in gist a financing arrangement secured by the goods shipped on Shipments 412, 413 and 415. 70% of the value of the goods would be advanced by C&D Tianjin to BMC upon confirmation of property rights to the goods. The obligation to source a buyer was on BMC to enable payment of the Full Amount to C&D Tianjin, contractually within a 90-day period (ie the Sale Duration) from the goods’ arrival in the warehouse. In the event of breach by BMC, C&D Tianjin was not obliged to “make final [financial] settlement” with BMC and BMC was obliged to repurchase the goods but C&D Tianjin was entitled to sell the goods on its own to make up for its loss.

7.6  At the time when P commenced these committal proceedings, the 3 C&D Agency Contracts were not made available to P. They were only subsequently provided by C&D Tianjin in response to garnishee (or equivalent) proceedings commenced by Zhonglun on behalf of P in June 2022 against C&D Tianjin in Mainland (“Mainland Garnishee Proceedings”) as an annexure to its Statement of Objection dated 19 July 2022 (“Statement of Objection”). Another annexure provided by C&D Tianjin was an email from Wong to C&D Tianjin dated 17 April 2020 attaching a signed copy of the 2^nd C&D Agency Contract at the request of C&D Tianjin (“17/4/20 Email”). The 17/4/20 Email was sent from Wong’s email account (patrick@crownunited.com) and copied to, inter alia, Mr Herman Wong, the general manager of BMC (“Herman”).

7.7  Prior to the provision of the 3 C&D Agency Contracts and the 17/4/20 Email by C&D Tianjin, there were the following other documentary evidence showing the existence of the Wider C&D Arrangement. In largely chronological order:

(1) On 16 April 2020, Wong sent a WeChat message (“16/4/20 WeChat Message”) to Mr Lau Wing Yan (“Mr Lau”), the owner of P, attaching a Cargo Delivery Notice dated 13 April 2020 (“Cargo Delivery Notice”) issued by C&D Tianjin to BMC. The Cargo Delivery Notice refers to the 1^st C&D Agency Contract (and not the corresponding C&D Contract);

(2) On 24 June 2020, there was a meeting between P (represented by inter alia Sun and Lau), BMC (attended by Wong, Leung and Herman) and the Chartering Broker (“24/6/20 Meeting”). In the transcript of the 24/6/20 Meeting, Wong expressly said Shipments 412 and 413 had been pledged (not sold) to C&D Tianjin;

(3) In subsequent correspondence issued by P or its solicitors in June and July 2020 (especially Sun’s email issued immediately after the 24/6/20 Meeting to Ds and Herman), P had always operated on the premise that P had been told by BMC that Shipments 412, 413 and 415 had not been sold by BMC and BMC or its former solicitors never corrected the premise;

(4) Through Lawyer Yuan’s investigations into the Wider C&D Arrangement, it was provided with the following the information:

(a) a letter dated 21 October 2020 from C&D Tianjin to Zhonglun (“21/10/20 Letter”) which set out the Wider C&D Arrangement but stated that it declined to provide the 3 C&D Agency Contracts due to commercial considerations;

(b) by WeChat communication with Madam Zheng Weiying and Mr Chen Zhexin (“Chen”), legal counsel of C&D Group, it was confirmed that the 21/10/20 Letter was sent by C&D Tianjin and that Shipments 412, 413 and 415 had not been sold by BMC by December 2020 and therefore C&D Tianjin was not liable to BMC under the Wider C&D Arrangement;

(5) As stated earlier, there was an unsuccessful application for adjournment before DHCJ Le Pichon to enable BMC to file further evidence. At §67 of Leung’s draft affirmation[17] (“Draft Leung 3^rd (1190)”), by reference to Wong 1^st (1190) §80, it was stated that the relationship between BMC and C&D Tianjin was one of principal and agent, similar to the arrangements made between BMC and Xiamen CCRE International Trade Co Ltd (“CCRE”);

(6) A comparison between the terms in the 3 C&D Agency Contracts and those in the agreement between BMC and CCRE dated 10 July 2020 (“CCRE Agent Financing Agreement”) shows that their effect was similar although it is pertinent to note that the CCRE Agent Financing Agreement only comprised one document, in contrast with the Wider C&D Arrangement which was set out in two sets of agreements.

(ii) Ds’ case

7.8  I should point out that Mr Yuen in his closing submissions does not vouch for the evidence given for the first time by Wong and Leung in their viva voce evidence set out at section C3.4 of P’s Closing Submissions. It is unnecessary for me to deal with that evidence.

7.9  By way of background, it is Ds’ evidence that:

(1) BMC only started to do business with C&D Tianjin in 2020;

(2) Prior to November 2019, BMC used to sell the bauxite through a company called Bosense International Group Limited (“Bosense”);

(3) On 16 November 2019, BMC terminated its relationship with Bosense and engaged others to market and sell the bauxite, one being Mr Shi Qiang of Shanghai Beijixing Enterprise Limited (“Shi Qiang”). Mr Shi Hao (“Shi Hao”) was Shi Qiang’s assistant;

(4) Due to COVID, Wong and Leung were not able to visit customers in the Mainland and had to rely on Shi Qiang to sell bauxite in the Mainland;

(5) Shi Qiang introduced C&D Tianjin to BMC and the 3 C&D Contracts were negotiated between BMC and C&D Tianjin directly but through Shi Hao.

7.10  Mr Yuen relies principally on the following evidence:

(1) Ds have steadfastly maintained all along that they do not have knowledge or recollection or preparing, drafting, approving, seeing, reading, signing, receiving, delivering and/or sending the 3 C&D Agency Contracts;

(2) BMC itself had engaged a lawyer in the Mainland on 16 March 2021 to investigate inquire with C&D Group as to the authenticity of the 21/10/20 Letter. The lawyer was told by, inter alia, Chen that C&D Group had not seen the letter before and it had not been submitted by C&D Tianjin for approval. Further, BMC’s liquidators had sought to verify the 21/10/20 Letter with the C&D Group in June 2021;

(3) BMC either by itself, through Shi Hao or by its liquidators chased for the C&D Sale Proceeds;

(4) C&D Tianjin had not taken an action to recover the sums advanced under the 3 C&D Agency Contracts and had never raised the Wider C&D Arrangement when confronted by a demanded BMC to pay the C&D Sale Proceeds;

(5) The fact that the Wider C&D Arrangement had to be documented by 3 sets of 2 agreements was commercially suspicious, when juxtaposed against the self-contained CCRE Agent Financing Agreement;

(6) The transcript of the 24/6/20 Meeting shows that Lau himself thought that BMC had been defrauded by Shi Qiang;

(7) Sun’s own position on the Mainland Garnishee Proceedings is suspicious, as there would have been no reason for P to commence the Mainland Garnishee Proceedings if she truly believed that C&D Tianjin was not indebted to BMC for the C&D Proceedings by reason of the Wider C&D Arrangement.

7.11  The overall case presented by Mr Yuen is that, like Act of Contempt 2, there was no motive for Ds to give the C&D Sale Proceeds Undertaking to avoid a worldwide Mareva injunction since, on P’s case, by October 2020, BMC/BMSI prospects were already dim. There is a serious question on the independent verifiability of the Wider C&D Arrangement in the light of C&D Tianjin’s reluctance and reticence of C&D Tianjin to confirm its existence to the liquidators of BMC, Ds’ Mainland lawyer or Ds with the sole exception being P. Even if the Wider C&D Arrangement existed, the evidence does not show beyond reasonable doubt that Ds knew about the Wider C&D Arrangement, in particular in the case of Leung.

(iii) Overall comments on the evidence

7.12  As mentioned at §5.5 above, I agree with Mr Chain that Sun’s role in these proceedings is limited. As is plain from the preceding 2 subsections, P’s case is based on the documents and the truly disputed documents (ie the 21/10/20 Letter and the 3 C&D Agency Contracts) were obtained and adduced by Lawyer Yuan. In my view, the fact that Sun may have attracted unflattering comments in other court decisions involving the use of fabricated documents does not affect the cogency of the documentary evidence. As submitted by Mr Yuen in closing, the important question is whether the documents emanated from C&D Group/C&D Tianjin and adduced by Lawyer Yuan should be taken on their face value.

7.13  As has been pointed out by Mr Yuen, it is incumbent for P to show beyond reasonable doubt that all the elements of Act of Contempt 1 (Primary Case) were established at the latest by 15 October 2020 when the C&D Proceedings Undertaking was offered by BMC and accepted by DHCJ Jin Pao SC. The undertaking was offered in Leung 1^st (1190) dated 8 October 2020 in the following terms:

“[24] BMC has sold the 412/Cargo, 413/Cargo, and 415/Cargo to C&D Logistics (Tianjin) Co Ltd (“C&D”) in the sums of US$2,288,977.05, 2,391,536.37 and 2,455,692.34 respectively in the total amount of US$7,136,205.76. BMC has received 70% of the prices with the remaining 30% in the total amount of US$2,068,197.95 to be paid by C&D as evidenced by the [the Commercial Invoices].

[26] I hereby undertake on behalf of BMC… that the [C&D Sale Proceeds] will be paid in the ICBC Account.”

(iv) Existence of the Wider C&D Arrangement and its effect

7.14  In my view, the documentary evidence overwhelmingly shows that the 3 C&D Agency Contracts were signed by Wong. I agree with Mr Chain that the evidence relied on by Ds and the submissions made on their behalf does not have the effect of casting doubt on the documentary evidence relied on by P:

(1) The 3 C&D Agency Contracts were all signed by Wong. Whilst the 3 C&D Agency Contracts are stated to be signed in Xiamen City and it is Wong’s evidence that he was not in the Mainland at the time of the execution of the 3 C&D Agency Contracts, the 17/4/20 Email plainly shows that the 2^nd C&D Agency Contract was sent by email to Wong for his signature;

(2) I also do not accept Wong’s “surmise” and “speculation” (Wong’s own words) that Herman only gave the signing page of the 3 C&D Agency Contracts to Wong to sign and Wong somehow signed them without being aware of the agreements and Herman sent the 17/4/20 Email using Wong’s email account without Wong’s instructions notice or consent. In my view, the surmise and speculation are without factual basis and unbelievable. As pointed out by Mr Chain, BMC and C&D Tianjin are expressly described as principal and agent on the signing page of the 3 C&D Agency Contracts, whereas they are respectively described as seller and buyer in the 3 C&D Contracts. Therefore, it was extremely unlikely that only giving Wong the signing page of the 3 C&D Agency Contracts could have hoodwinked Wong. In any event, it would not have escaped Wong’s attention that he has signed 2 sets of agreements for each transaction with C&D Tianjin, and bearing in mind that C&D Tianjin was a new customer, even taking into account Wong’s health condition at the time, it was extremely unlikely that Wong would not have raised any questions had he believed that BMC entered into a simple sale and purchase agreement with C&D Tianjin. I further accept Mr Chain’s submission that, in any event, there is no conceivable reason for Herman to go off on a frolic of his own unbeknownst to Ds in relation to the Wider C&D Arrangement;

(3) The suggestion that Herman wanted to keep Wong in the dark about the Wider C&D Arrangement is also inconsistent with the 16/4/20 WeChat Message. Whilst it is Wong’s evidence that he did not pay attention to the Cargo Delivery Notice, the 16/4/20 WeChat Message shows that transactional documents with reference to the 1^st C&D Agency Contract was contemporaneously available and accessible to Wong and disseminated to others (in this case Lau);

(4) As recorded in the 24/6/20 Meeting, Wong expressly said to Lau and Sun that Shipments 412 and 413 had been pledged (not sold) to C&D Tianjin. Whilst Mr Yuen has reminded me that there are different types of pledges (托盤)and Wong’s representation that Shipments 412 and 413 had been pledged to C&D Tianjin may not support the existence of the Wider C&D Arrangement, the important takeaway from this is that Wong plainly knew that Shipments 412 and 413 had not been sold to C&D Tianjin, despite the fact that, by that time, all of the Commercial Invoices had been issued. Further, there were extensive discussions on Shipment 412 during which Wong, Lau and/or Herman never once suggested that it had been sold to C&D Tianjin when the relevant Commercial Invoice had already been issued;

(5) In Sun’s email to Ds and Herman sent after the conclusion of the 24/6/20 Meeting, it was put on record that BMC advised that various shipments including Shipments 412, 413 and 415 had not been sold. The email also expressly set out the following:

“We provided Mv Shun Fu BMC 412 full information to BMC during the meeting. Pacific Bulk would [be] investigating cargo details about rest [of the] shipments at the moment. We suggest that BMC check via their own channels such information for all these shipments which BMC have not sold so far. BMC agrees to check asap these information and advise Pacific Bulk. Pacific Bulk confirm that we would assist to verify, confirm and/or supply additional information if /when necessary.”

(6) Prior to 30 June 2020, no update was provided by BMC to state that any of Shipments 412, 413 and 415 had been sold. As set out at SAF §35, after June 2020, there had not been any sale of bauxite by BMC and BMSI and the proceeds of sale were only received by BMC and/or BMSI up to 30 June 2020.

7.15  Under the terms of the 3 C&D Agency Contracts, the 90-day period within which BMC had to locate a buyer would run from the arrival of the cargo in the warehouse. Using Shipment 412 as an example, according to the relevant Commercial Invoice, it sailed on 20 March 2020 and according to the Cargo Delivery Notice the goods were warehoused on 13 April 2020 (slightly less than one month). Shipment 415 sailed on 19 April 2020 and would therefore have arrived at the warehouse in around mid May 2020. Therefore the 90-day period would have expired before the Leung 1^st (1190).

7.16  Bearing in mind that there was no sale of any bauxite after June 2020, it is plain that BMC was unable to comply with the 90-day period and was therefore in breach of the 3 C&D Agency Contracts. As such, under the terms of the 3 C&D Agency Contracts, C&D Tianjin was not obliged to pay the C&D Sale Proceeds to BMC.

7.17  Turning to the factors relied on by Mr Yuen to cast doubt on the Wider C&D Arrangement:

(1) I am not persuaded that any or any significant weight should be attached to the engagement of a Mainland lawyer by BMC to carry out investigation into the 21/10/20 Letter. BMC engaged its Mainland lawyer on 16 March 2021, immediately after the 15/3/21 Decision was handed down in which DHCJ Le Pichon made rather scathing remarks against BMC. In particular, DHCJ Le Pichon recorded that the Wider C&D Arrangement was “put directly to BMC in a letter of 24 November 2020” and “BMC made no submissions in response to those allegations” (§§85-86). Whilst Mr Yuen submits that the investigation was carried out well before the commencement of these committal proceedings, it seems to me that the belated investigation was as a result of a knee-jerk reaction to the 15/3/21 Decision and there is no explanation as to why the investigation was not carried earlier;

(2) As regards BMC’s efforts to chase for the C&D Sale Proceeds, I agree with Mr Chain’s observation that under the terms of the C&D Contract, BMC was entitled to payment of the C&D Sale Proceeds upon presentation of the Commercial Invoices (the latest being 21 May 2020). Yet, BMC only chased for payments after the giving of the C&D Sale Proceeds Undertaking;

(3) I do not find it surprising that C&D Tianjin did not chase BMC for the return of the sums advanced. Under the terms of the 3 C&D Agency Contracts, C&D Tianjin was effectively a secured creditor, in that it was entitled to sell the goods in the event of BMC’s breach. Bearing in mind that only 70% of the value of the goods was advanced, it was likely that C&D Tianjin’s losses were contained. I agree with Mr Chain that it is not for P to speculate on the commercial actions of C&D Tianjin;

(4) As regards C&D Tianjin’s initial reluctance to provide the 3 C&D Agency Contracts to Lawyer Yuan (as set out in the 21/10/20 Letter), I accept Mr Chain’s submission that it was entirely reasonable as P is a third-party to the contractual relationship and the agreements contained sensitive information. Conversely, faced with the Mainland Garnishee Proceedings, there was every reason for C&D Tianjin to adduce the 3 C&D Agency Contracts and the 17/4/20 Email in the Statement of Opposition;

(5) I accept Sun’s explanation that the Mainland Garnishee Proceedings were commenced in response to Ds’ denial of the Wider C&D Arrangement and were a legitimate and practical method to ascertain C&D Tianjin’s position through a formal avenue;

(6) In so far as Mr Yuen relies on Lau’s comments made at the 24/6/20 Meeting that BMC might have been deceived by Shi Qiang, such comments were only a conjecture. As has been pointed out by Mr Chain, it has not been suggested by Ds that they had been deceived by Shi Qiang;

(7) As regards the observation that the Wider C&D Arrangement was documented in 2 separate sets of documents as opposed to in a single contract as in the case of the CCRE Agent Financing Agreement, such observation is only relevant to whether it was possible that the 3 C&D Agency Contracts could have been fabricated. For the reasons stated above, I am in no doubt that the 3 C&D Agency Contracts were not fabricated.

7.18  I am therefore satisfied so as to be sure that the Wider C&D Arrangement existed and the Wider C&D Arrangement was the contractual arrangement between BMC and C&D Tianjin by their execution of the 3 C&D Agency Contracts.

(v) Knowledge of Ds

7.19  By reason of the above analysis, it is plain that Wong had knowledge of the Wider C&D Arrangement.

7.20  I am also satisfied beyond reasonable doubt that Leung had knowledge of the Wider C&D Arrangement. Whilst it is true that Leung was not directly involved in the execution of the 3 C&D Agency Contracts, it is plain that by the 24/6/20 Meeting, the issue of outstanding freight owed by BMC was becoming an important topic between P and BMC. Leung attended the 24/6/20 Meeting and the discussions on Shipment 412 were extensive. Under the terms of the 3 C&D Contracts, the C&D Sale Proceeds had become due upon the presentation of the Commercial Invoices, well before the 24/6/20 Meeting. Yet, Leung never saw fit to correct P’s understanding that the Shipments 412, 413 and 415 had not been sold. One has to bear in mind that Leung was responsible for the accounting and banking operations of BMC and in view of the then prevailing circumstances, one would have thought that chasing for the C&D Sale Proceeds was an obvious source of financial relief. Leung never saw fit to reply and correct P’s position stated on multiple occasions that it was told by BMC at the 24/6/20 Meeting that Shipments 412, 413 and 415 had not been sold. I accept Mr Chain’s submission that the irresistible inference to draw from Leung’s failure to correct P’s repeated representations[18] is that what P said was true and corresponded with Ds’ understanding that Shipments 412, 413 and 415 had not been sold to C&D Tianjin and therefore BMC could not pay for the outstanding freight owed to P. Leung 1^st (1190) §24 relied on the Commercial Invoices as evidence of the sale of Shipments 412, 413 and 415 to C&D Tianjin but it is plain from the 24/6/20 Meeting that neither Wong nor Leung treated the Commercial Invoices as having such effect.

(vi) Conclusion on Act of Contempt 1 (Primary Case)

7.21  I am therefore satisfied so as to be sure that Leung 1^st (1190) §24 reproduced at §7.12 above was false, in that BMC had not sold Shipments 412, 413 and 415 to C&D Tianjin and Ds knew that it was false and that the false statement was likely to interfere with the course of justice. As is made plain from the 15/10/20 Decision, DHCJ Jin Pao SC refused to convert the Domestic Order into a worldwide Mareva injunction partly by reason of the C&D Sale Proceeds Undertaking.

7.22  I am therefore satisfied beyond reasonable doubt that a committal order should be made against Ds in respect of Act of Contempt 1 (Primary Case).

8.   Act of Contempt 1 (Alternative Case)

8.1  As set out at SAF §31, since the letter dated 1 December 2020, BMC did not provide P with any further monthly updates as to its efforts to recover the C&D Sale Proceeds.

8.2  Ds admitted that they were aware of the undertaking to provide monthly updates. P specifically reminded BMC (through BCC) to comply with the undertaking on 7 January 2021.

8.3  Mr Yuen points out that it cannot be gainsaid that Ds were overwhelmingly preoccupied with handling the Underlying Proceedings (including preparation of evidence in response to Sun 5^th (1190) and the arbitral proceedings.

8.4  Wong's evidence is that Ds were tied up in various matters. Nevertheless, he confirmed there was no difficulty or impossibility to comply with the undertaking. Leung admitted that there was no excuse, and the non-compliance was an oversight.

8.5  It is common ground that Draft Leung 3^rd (1190) contains updates on the recovery of the C&D Sale Proceeds. Mr Chain submits that the relevant parts could have been easily extracted to comply with the undertaking. Conversely, Mr Yuen contends the foregoing instead that Ds at the time did intend to provide further information and thus supports Ds’ contention that the failure was neither willful nor intention. Further, Mr Yuen reminds me that the unchallenged evidence was that D1 himself admits that he was the primary contact person between with BMC’s former solicitors and had assumed responsibility for providing the necessary updates.

8.6  The difficulty with Mr Yuen’s submission is that after DHCJ Le Pichon refused to grant an adjournment, there was no attempt by Ds to comply with the undertaking prior to the commencement of these committal proceedings and therefore the content of Draft Leung 3^rd (1190) was never made available to P. In any event, I note that Draft Leung 3^rd (1190) is on its face inconsistent with Leung 1^st (1190) where it was stated that Shipments 412, 413 and 415 had been sold to C&D Tianjin. The relevant parts read as follows:

“[73] At the end of November 2020, Mr Shi informed us that US$2 million would be remitted to our bank accounts in January. Therefore, we instructed Chark to notify LHW on 1 December 2020 that this sum would be paid into our bank accounts.

[74] When we followed up the progress of payments with Mr Shi, he told us that C&D tried to sell the 3 cargoes to Chalco at US$41/DMT and asked us to waive the balance of the 30% cargo prices which was met with Mr Shi’s objections. Consequently, Mr Shi and C&D’s relationships have deteriorated and he has not been able to re-confirm his previous indication that US$2m will be remitted to our bank account. When we are no longer confident to honour any indication, we have refrained from making further representation to PB or LHW. This is not due to any dishonesty on our part but our serious concerns about making promise that we cannot deliver.

[75] Patrick and I both sat in at the hearing on 15 October 2020. We confirmed to our legal representatives that we were able to give our undertaking to this Court when we were confident to comply with the undertakings. However, the events subsequently developed are unfortunately out of our expectation. Otherwise, we would not have agreed to give our undertaking to this Court as we take our duty very seriously” (emphasis added)

8.7  As I understand Leung’s evidence, whilst he states that some parts of the Draft Leung 3^rd (1190) were not entirely accurate, he does not suggest that the above parts was inaccurate. Given that the position was Ds were both aware that the C&D Sale Proceeds Undertaking could in substance no longer be performed, it was all the more reason for that information to be provided pursuant to the monthly update obligations.

8.8  I am satisfied beyond reasonable doubt that Ds willfully failed to take reasonable steps to procure BMC to provide regular updates in accordance with the C&D Sale Proceeds Undertaking.

9.   Act of Contempt 3

9.1  The Asset Disclosure Orders provide as follows:

“[3] The Defendant must, within 24 hours of the date hereof, inform the Plaintiff in writing of:-

(a) All its assets (and all assets held by its direct or indirect subsidiaries) of an individual value of HK$ 10,000 or more, whether in or outside Hong Kong, whether in its own name or not, and whether solely or jointly owned, giving the value, location and details of all such assets.

(b) All such assets held by the Defendant (and its direct or indirect subsidiaries) which were transferred and/or otherwise disposed of on or after 1^st March 2020 up to the date hereof, giving the details of such transfer and/or disposition including but not limited to:-

(i) The nature of the asset transferred;

(ii) The value of the asset transferred;

(iii) The means by which the transfer took place;

(iv) The details of the recipient(s) and/or transferee(s) of the asset (including but not limited to the name, address, telephone number, and email address);

Provided that the defendant may be entitled to refuse to provide some or all of this information on the grounds that it may incriminate it.

[4] The information provided pursuant to paragraph 3 above must be confirmed in an affidavit which must be served on the plaintiffs solicitors within 7 calendar days of the date hereof.”

9.2  The complaint is that BMC was in breach of 3(b), in BMC failed to disclose the details of the transfer or disposal of assets by BMC’s subsidiaries, namely New Expert and BMSI within the ordered disclosure period. In particular:

(1) Whilst the bank statements of BMSI’s account of Bank of South Pacific Limited were disclosed, no details were provided in respect of the payments made from that account (“South Pacific Payments”);

(2) Whilst the bank statements of New Expert’s account maintained with China Guangfa Bank Co Ltd were disclosed, no details were provided in respect of payments made from that account (“Guangfa Payments”);

(3) Whilst the bank statements of New Expert’s account maintained with Industrial and Commercial Bank of China were disclosed (“ICBC Payments”).

9.3  Ds contend that they were unable to fully comply with the Asset Disclosure Orders (a) due to the short timeframe, (b) BMC’s former solicitors decidedly not to act for BMC abruptly, (c) P’s failure to request for further compliance in respect of the South Pacific Payments, Guangfa Payments and the ICBC Payments, (d) Ds have purged their contempt in respect of the Guangfa Payments and the ICBC Payments and (e) Ds did not willfully fail to take reasonable steps in relation to the South Pacific Payments as they had delegated the collation of information to its staff Mr Fred Tang (“Tang”), the general manager of BMSI stationed in the Solomon Islands, and in any event BMSI was later put into voluntary liquidation.

9.4  Ds also resist alleged Act of Contempt 3 on the basis that committal proceedings should be a last resort.

9.5  Mr Yuen submits as follows:

(1) Ds are not contending that BMC had no obligation to disclose details of the South Pacific Payments, Guangfa Payments and ICBC Payments under the Asset Disclosure Orders, but it is another matter to commit Ds when the evidence shows that Ds would have provided the details if the omission had been drawn to their attention. The evidence shows that after the Ancillary Disclosure Orders were made on 15 March 2021, Ds had made substantial efforts (notwithstanding the sudden resignation of BMC’s former solicitors from acting for BMC) in (a) seeking and obtaining P’s consent for a reasonable length of time to comply with the Ancillary Disclosure Orders and (b) giving full disclosure of BMC’s assets in Wong 5^th (1190) and Wong 6^th (1190). Coupled with the fact that Ds had in fact disclosed the relevant bank statements of the South Pacific Account, Guangfa Account and ICBC Account, this clearly showed that (a) Ds had been making best endeavours to comply with the Asset Disclosure Orders and (b) Ds had no intention to conceal any assets from P;

(2) There was simply no reason why P could not have included the requests for the details of the South Pacific Payments, Guangfa Payments and ICBC Payments in the letter dated 26 March 2021 (“26/3/21 Letter”) sent by its solicitors after BMC filed Wong 5^th (1190), by which P wrote to raise further requisitions;

(3) Moreover, the fact that P did not ask for the details of the South Pacific Payments, Guangfa Payments and ICBC Payments or take out a bankers books application, despite having reviewed Wong 5^th (1190) in March 2021, goes to show that they did not, in fact, have any real or genuine concern about where the South Pacific Payments, Guangfa Payments and ICBC Payments went. It could not now lie in P’s mouth to claim at P’s Closing §§103-105 that the Alleged 3^rd Act of Contempt had somehow frustrated P’s assessment of the need to invoke the Chabra jurisdiction over third parties;

(4) In relation to the South Pacific Payments, P points to cheques that Ds, as directors of BMSI, could have obtained. D2’s testimony, however, was that it was Tang who was the signatory of the bank account, not Ds, and as Tang was in Australia and unable to return to Solomon Islands, he could not obtain the cheques. Tang had also explained that a lot of the cheques were cash cheques (and so there would be no information on who the recipient/transferee was). Despite Ds having asked Tang to find colleagues on the Solomon Islands to make arrangements, Tang did not follow-up or report to Ds. It appears, therefore, that Ds did use their positions to delegate the collation of the details to Tang but such delegation did not result in any of the details sought;

(5) Taking all of the above into account, the evidence shows that even if BMC was in breach of the Asset Disclosure Orders, the failure was neither wilful nor intentional.

9.6  In my view, it cannot be said that the complaints now made by P are trivial in nature. As set out at 15/3/21 Decision:

“[107] In addition to the usual ancillary disclosure order, PB now seeks disclosure of the details of any disposition or transfer of assets on or after 1 March 2020 up to the date of the order to be made herein. The evidence shows that of funds of approximately US$11.8 million paid into BMC's Hong Kong bank accounts between March and June 2020. By 10 August 2020, only US$40,000 remained.

[108] Given the amount transferred out of BMC's Hong Kong bank accounts within such a short time span, it is not unlikely that those funds have been transferred to other entities under circumstances that would fall within the Court's Chabra jurisdiction.

[109] I agree that such an order would be appropriate in the circumstances of the present case.”

9.7  As regards Mr Yuen’s reliance on the proposition that committal proceedings should be a remedy of last resort, I agree with Mr Chain that there is no alternative means by which P could have obtained information in relation to BMSI and/or New Expert as they are uniquely within the knowledge of Ds. If it is suggested that the alternative means contemplated was for P to have expressly asked Ds to comply with the Asset Disclosure Orders in respect of the Guangfa Payments, the ICBC Payments and the South Pacific Payments, I do not regard it to be a correct proposition that P should police BMC’s compliance. As submitted by Mr Chain, it is perverse that the contemnor’s non-compliance with the unambiguous terms of an order can be excused simply because the person in whose favour the order was made did not specially raise an instance of non-compliance with the contemnor.

9.8  I also agree with Mr Chain that the belated compliance with the Asset Disclosure Orders in relation to the ICBC Payments and the Guangfa Payments. The contempt was only purged on 8 March 2020 and the information provided no longer serves any useful purpose contemplated by the 15/3/21 Decision.

9.9  In relation to the South Pacific Payments, as submitted by Mr Chain, it is within the powers of Ds as directors of BMC and BMSI to take reasonable steps to secure compliance with the Asset Disclosure Orders, whether by themselves or by appropriate delegation to employees of BMSI. I do not accept the evidence in the present case shows that Ds had properly supervise Tang and/or colleagues in the Solomon Islands to comply with the Asset Disclosure Orders. As submitted by Mr Chain, the evidence is that Ds had asked Tang to find colleagues in the Solomon Islands for assistance but Tang did not report back to Leung and he did not chase for an answer. In my view, the foregoing efforts made by Ds were cursory and inadequate. I do not accept Leung’s suggestion made for time in cross-examination that he in fact did follow up with Tang. I find that Ds have failed to properly supervise Tang and/or colleagues in the Solomon Islands to comply with the Asset Disclosure Orders.

10.   Conclusion

10.1  I am satisfied so as to sure that a committal order should be made against Ds in respect of Act of Contempt 1 (both primary and alternative cases) and Act of Contempt 3.

10.2   There shall be a hearing for further submissions on the appropriate penalty, and any other necessary and consequential order (including costs). The parties should attend before the Listing Officer to fix a date as early as possible, for hearing within the next 4 months.

10.3  The parties should agree on directions for further conduct, and in the absence of agreement, a date should be fixed for the Court to make the appropriate and necessary directions.