Re Chu Kong

CACV 173/2017 &
CACV 174/2017
(Heard Together)

[2021] HKCA 1580

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 173 OF 2017

(ON APPEAL FROM HCMP 2120/2016)

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AND

CIVIL APPEAL NO 174 OF 2017

(ON APPEAL FROM HCMP 3605/2016)

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BETWEEN

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(HEARD TOGETHER)

Before:  Hon Cheung JA, Yuen JA and Barma JA in Court

Date of Hearing:  25 July 2018

Date of Judgment:  25 July 2018

Date of Reasons for Judgment:  27 October 2021

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REASONS FOR JUDGMENT

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Hon Cheung JA:

1.I agree with the Reasons for Judgment of Barma JA.

Hon Yuen JA:

2.I agree with the Reasons for Judgment of Barma JA.

Hon Barma JA:

Introduction

3.These were appeals by Chu Kong (“Chu”)  against those parts of the Decision and orders of DHCJ Saunders (“the Judge”)  dated 5 July 2017, by which the Judge:

(1)  set aside the ex parte leave granted to Chu by DHCJ Yee in HCMP 2120/2016 (on paper)  on 20 December 2016 to bring contempt proceedings against Sun Min (“Sun”), Yan Donghai (“Yan”), Chang Dafa (“Chang”)  and Pacific Bulk Shipping (Cayman)  Limited (“Pacific Bulk”)  (collectively “the contempt defendants”)  in respect of fabricated evidence used in an application for an injunction in HCA 2562/2014, in which the contempt defendants (except Yan)  and one other party (Lau Wing Yan (“Lau”))  were plaintiffs, and Chu and three others were defendants; and

(2)  in consequence, dismissed the contempt proceedings (HCMP 3605/2016)  brought by Chu pursuant to such leave.

4.CACV 173/2017 is Chu’s appeal against the setting aside of the ex parte leave in HCMP 2120/2016, and CACV 174/2017 is his appeal against the dismissal of his substantive contempt proceedings in HCMP 3605/2016.

5.Sun, Chang and Pacific Bulk cross appealed, with leave granted by DHCJ Marlene Ng (as she then was), against the Judge’s Costs Decision dated 31 July 2017 in respect of the applications dealt with by his Decision dated 5 July 2017, by which he “fix[ed] the allocation of time to fairly reflect the circumstances at 35% of the overall costs to [Chu] and 65% to [Sun, Chang and Pacific Bulk]”.

6.At the hearing, Chu was represented by the late Mr Gerard McCoy SC, while Sun, Chang and Pacific Bulk were represented by Mr Anson Wong SC.  Yan appeared in person, but (as in the court below)  did not take any active part in the proceedings.  At the conclusion of the hearing, we allowed the appeal and indicated that we would hand down our reasons for doing so later.  Having allowed the appeal and set aside the orders appealed against, it necessarily followed that the Costs Decision made by the Judge should also be set aside, and we indicated that we would deal with the question of costs before us and in the court below by way of an order nisi when giving the reasons for our judgment.  With apologies for the delay, these are my reasons for allowing the appeal, and the costs orders nisi that I would propose.

The factual background

7.It is convenient first to set out the factual and procedural background to these appeals.

8.The dispute between the parties in the underlying proceedings, HCA 2562/2014, centres on the control and operation of a vessel known as the “Grain Pearl” and control of the income generated by it.  The vessel is owned by Joint Silver Limited.  Chu is the sole director of Joint Silver, of which he and two associates (referred to below as the “Chu camp”)  are the 50% ultimate shareholders.  The other 50% shareholding in Joint Silver is ultimately owned by Lau, Sun and Chang (referred to below as the “Lau camp”).  There was also a second vessel called the Mineral Pearl, owned by a different company (Luck Silver Limited)  with the same ultimate ownership, to which the alleged arrangements mentioned below were also said to have applied.  However, the Mineral Pearl was disposed of before the proceedings began, and is not relevant for present purposes.  The summary below therefore focuses on the Grain Pearl only.

9.The Lau camp contend that by an oral agreement between the members of the two camps made in about March 2013, it was agreed that control and management of the Grain Pearl should be vested in the ultimate shareholders and decided upon by majority vote.

10.They contend further that, pursuant to a second oral agreement made at about the same time, Pacific Bulk was appointed to be the commercial manager of the Grain Pearl, with extensive powers over the vessel, including management and control of it, the seeking and negotiation of employment for it, the collection of payments arising from its operation, and the retention of such sums to defray the operating expenses and to repay a bank loan obtained for the financing of the vessel, which was guaranteed by Pacific Bulk.  The Lau camp also say that under the second oral agreement, Pacific Bulk could not be terminated as manager so long as the financing arrangements and its guarantee had not been discharged.

11.For its services as commercial manager, the Lau camp say that Pacific Bulk was to be paid a management fee of 1.25% of the freight or hire received for the vessel, to be charged by way of sub-charter arrangements by which Pacific Bulk would charter the vessel from Joint Silver, and then enter into charterparties with third parties on the market.

12.This version of events is disputed by Chu, who contends that there was no agreement in the terms of the first oral agreement alleged by the Lau camp, but only an “understanding” that Lau would be responsible for setting up the corporate structure as he saw fit.  He also denies that his position as sole director of Joint Silver was subject to the agreement of all the ultimate shareholders.

13.Chu also contends that the arrangement with regard to operation of the vessel was very different from that under the second oral agreement alleged by the Lau camp.  Chu says that Pacific Bulk was not a commercial manager, but a commercial agent, with less extensive powers that did not include the power of management or control over the vessel.  Although Chu agrees that Pacific Bulk would be paid a fee of 1.25% for its services, that fee was properly to be described as an address commission and not a management fee (reflecting its status as a commercial agent and not a manager).  Contrary to the claim that Pacific Bulk was to be entitled to retain the income of the vessel to defray expenses and financing costs, Chu says that the arrangement called for all sums collected to be paid, net of the address commission, into Joint Silver’s bank account.  Chu also alleges that Pacific Bulk’s position as commercial agent could be terminated even while the financing arrangements for the vessel remained in place, so that Joint Silver was free to terminate Pacific Bulk’s commercial agency if it saw fit to do so.

14.The relationship between the two camps began to deteriorate in late 2013.  By late 2014, Chu (having earlier been replaced in this role)  was once again the sole director of Joint Silver (a state of affairs which the Lau camp says it had not agreed to), and in this capacity on 20 November 2014 caused Joint Silver to demand accounts from Pacific Bulk and to demand that all freight earned by the Grain Pearl and received by Pacific Bulk be transferred to Joint Silver.  When these demands were not acceded to, Joint Silver (acting through Chu)  purported to terminate Pacific Bulk’s appointment as commercial agent for the Grain Pearl, notifying the ship’s master, technical manager and a number of ship and cargo brokers of this on around 27 and 28 November 2014.

15.At this time (ie the end of November and beginning of December 2014), the Grain Pearl was carrying a cargo of soybeans from the United States to the PRC under a voyage charter arranged by Pacific Bulk with Orient Sunshine Shipping (Hong Kong)  Co Ltd (“Orient Sunshine”).  According to the Lau camp, Pacific Bulk entered into a back-to-back charter with Joint Silver, on identical terms save as to the rate, which was fixed at a rate that enabled Pacific Bulk to earn its 1.25% management fee.  On 5 December 2014, Orient Sunshine informed Pacific Bulk that the shipper of the cargo had been issued with a lien notice on behalf of Joint Silver in respect of alleged outstanding freight.  Pacific Bulk and the Lau camp say that the freight had in fact already been paid by the shipper to Pacific Bulk.

16.According to the Lau camp, the demand for accounts and payment over of the earnings of the Grain Pearl, the purported termination of Pacific Bulk’s position as manager of the vessel and the issue of the lien notice were all breaches of the second oral agreement referred to in paragraph 10 above.

17.In order to resolve the lien notice, and allow the cargo to be discharged without delay, the Lau camp proposed that the whole of the freight should be paid into an escrow account or into court, pending the resolution of the disputes between the two camps.  This proposal was not responded to by the Chu camp.

18.Against that background, the plaintiffs in the underlying action (the Lau camp and Pacific Bulk)  applied for and obtained an ex parte injunction from Wilson Chan J on 17 December 2014.  The injunction essentially prevented Joint Silver and the Chu camp from interfering with the discharge of the cargos, but one part of the order (paragraph 1(4))  appeared to prevent Joint Silver from giving any instructions to the master or crew or the technical manager of the Grain Pearl.  This part of the order was not continued on the return date, on undertakings being given by Joint Silver to give instructions to enable the cargos to be discharged in accordance with the relevant bills of lading.

The altered emails

19.The ex parte application was supported by an affirmation made by Sun, in which she deposed to the arrangements along the lines of the Lau camp’s case as set out above.  Exhibited to the affirmation were a substantial number of documents (running to well over 200 pages).  These included some 67 pages of e-mails which Sun described (at paragraphs 50 and 51 of her affirmation)  as examples of the charterparties entered into between Pacific Bulk and third party charterers on the one hand, and Pacific Bulk and Joint Silver on the other.  These were said to show how Pacific Bulk would seek out a suitable charter for the Grain Pearl on the market, and having entered into a charterparty with the third party charterer at market rates, then go on to enter into a matching charterparty with Joint Silver at a higher rate that would enable Pacific Bulk to make a profit of 1.25% as management fees.

20.Among those charterparties were several (Mr McCoy took us through a number of examples)  which showed Pacific Bulk receiving an address commission of 3.75% plus a management fee of 1.25%.  Such a payment structure would appear, on the face of it, to support the Lau camp’s case as to the arrangement between the parties – namely, that Pacific Bulk had been appointed as commercial manager of the vessel (and hence was earning management fees at the rate of 1.25%).  There was nothing in Sun’s affirmation to suggest that the source of these documents was other than Pacific Bulk itself.

21.In fact, the e-mail charterparties showing both address commission and management fee were not genuine original documents, but had been fabricated by Yan after the event, and supplied by him to Pacific Bulk and Sun for the purpose of the proceedings.  The exhibited charterparties also included different versions of e-mails, which only referred to a 5% address commission, and contained no mention of any management fee.  These were the genuine original e-mails that had been sent at the time the charterparties were entered into.  They were included in the exhibits, but without any explanation as to why there were two sets of e-mail charterparties for each fixture, in different terms, one of which (the altered or fabricated one)  contained a reference to management fees, which would support the Lau camp’s case, and another which did not, and thus was not particularly supportive of that case.

22.Unknown to Sun, Yan and the Lau camp, Chu had retained a cloned hard drive which contained all the original (unaltered)  versions of the e-mails in which the charterparties were advised by Yan to Pacific Bulk.  From this, Chu was able to see that certain of the e-mail charterparties exhibited by Sun (without attribution to Yan)  had been altered to include reference to a management fee.

Chu’s applications

23.On 11 February 2015, Chu and Joint Silver applied by summons to set aside the injunction granted by Wilson Chan J on 17 December 2014.  One of the grounds on which discharge was sought was the use of and reliance on the altered e-mails by the plaintiffs.  The initial evidence filed in response to the setting aside application did not clearly address this point.  However, on 29 January 2016, about a month before the discharge application (which had been fixed for hearing on 25 February 2016)  was due to be heard, Sun filed further evidence (her third affirmation), and Yan filed his first affirmation.  In these affirmations it was admitted that the e-mails setting out the charterparties which contained references to a management fee payable to Pacific Bulk had been altered by Yan, and an explanation for this was proffered, together with a statement that Sun and Pacific Bulk had not been aware of the alteration at the time of the application for the injunction.

24.Chu and Joint Silver thereupon applied (on 16 February 2016)  for leave to cross-examine Sun and Yan on their affirmations.  The cross-examination summons was made returnable on 25 February 2016, the date fixed for the hearing of the injunction discharge application.  On 25 February 2016, DHCJ Yee heard the cross-examination application.  The discharge application was not actively pursued by Chu and Joint Silver at that hearing, as it was considered that the outcome of the cross-examination application would have an impact on how the discharge application would be dealt with.  In the event, DHCJ Yee ruled that the discharge summons should be dealt with at the trial of the substantive proceedings, and dismissed the cross-examination summons, on the basis that Sun and Yan could be cross-examined at the trial.

The contempt application

25.Chu then sought ex parte leave (in HCMP 2120/2016)  to commit Sun and the other contempt defendants for contempt, on the basis that Yan had fabricated the e-mails that purported to show Pacific Bulk receiving a management fee of 1.25%, Sun had used the fabricated e-mails in her evidence filed on behalf of herself, Chang and Pacific Bulk, and had not indicated that these e-mails had been sourced from Yan (thus giving the untrue impression that they were documents of Pacific Bulk).  The case for bringing contempt proceedings against Chang and Pacific Bulk turns on an allegedly altered invoice issued by Pacific Bulk which was chopped by Chang on its behalf, which contained a reference to a 1.25% management fee, which reference is alleged to have been superimposed on the invoice.  This aspect of the matter was not particularly focussed on at the hearing before the Judge, or before us.

26.The application for leave to bring contempt proceedings was dealt with by DHCJ Yee, who had heard the cross-examination and discharge summons.  As noted in [3(1)] above, DHCJ Yee gave leave to bring contempt proceedings against all the contempt defendants, having considered the application on paper.

27.Owing to a procedural error, those acting for Chu failed to issue and serve a Notice of Appointment to hear the Originating Summons in HCMP 3605/2016 seeking the committal of the contempt defendants within the time limited for doing so.  As a result, Chu applied (in HCMP 3605/2016)  for leave to issue and serve such a Notice of Appointment out of time.  The contempt defendants, for their part, applied (in HCMP 2120/2016)  to set aside the ex parte leave granted by DCHJ Yee to bring the contempt proceedings, and (in HCMP 3605/2016)  for the dismissal of the contempt proceedings.  All of these applications came before the Judge, who granted the extension of time sought by Chu (which was not really opposed by the contempt defendants), but set aside the ex parte leave and consequently dismissed the contempt proceedings issued pursuant to that leave.

The Judge’s judgment

28.In setting aside the ex parte leave and dismissing the contempt proceedings, the Judge first rejected the contention made on behalf of the contempt defendants that Chu lacked standing to bring contempt proceedings because the acts complained of were criminal contempts, which should be pursued not by individual litigants, but by the Secretary for Justice, or alternatively, only after the Secretary for Justice had been consulted and given consent or approval.  He held that the proceedings were civil proceedings and that accordingly such consent was not required (see [43]-[44] of his judgment).

29.The Judge then went on to consider the contempt defendants’ argument that Chu had not disclosed a viable case for criminal contempt.  He rejected this argument, holding (on the basis of the decision of To J in Tiong King Sing v Sam Boon Peng Yee [2015] HKLRD 981 at [41])  that the purpose of the leave application was to filter out unfounded or oppressive applications, and that it was only necessary to demonstrate a good arguable case that the contempt alleged had been committed.  He held (at [48] of his judgment)  that a good arguable case had been established by Chu, noting that the e-mails setting out the terms of the charterparties were admittedly altered, and had been put forward without stating that they had been altered, or any explanation of why they were altered.

30.However, the Judge went on to hold (at [49]-[96] of his judgment)  that Chu had been guilty of material non-disclosure in a number of respects, and that the non-disclosures prevented the ex parte judge from properly considering whether or not the complaints of contempt should have been allowed to go forward, so that the ex parte leave should be set aside.  Having rejected an allegation of material non-disclosure in relation to locus to complain of the contempt (which was based on the rejected contention that the approval of the Secretary for Justice was required), the Judge found Chu had been guilty of non-disclosure in the following respects:

(1)  failing to make it clear, in the application for leave to bring contempt proceedings, that the issue of whether Pacific Bulk was a commercial agent or a commercial manager was a matter of limited significance in the context both of the initial injunction application, and of the overall dispute between the parties, and thus failing to make proper disclosure as to the gravity of the alleged contempt (see [56]-[74] of the judgment below);

(2)  failing to disclose that Chu had applied to DHCJ Yee for leave to cross-examine the contempt defendants for the purposes of the application to discharge the injunction, and that this application had been rejected (see [76]-[86] of the judgment below);

(3)  failing to disclose that Chu had made a complaint to the police concerning the altered e-mails (see [87]-[90] of the judgment below); and

(4)  failing to disclose that Chu was engaged in extensive litigation with the contempt defendants, there being some 12 ongoing pieces of litigation between them (see [91]-[96] of the judgment below).

31.Following his decision in relation to the applications before him, the Judge dealt with the costs of those applications in his further decision dated 31 July 2017, in the manner described in [5] above.

The appellant’s contentions

32.Chu now appeals against the decision of the Judge.  Although the Notice of Appeal contains a large number of grounds, Mr McCoy helpfully consolidated these into three broad areas.  In essence, it is contended that the Judge erred in the following main respects:

(1)  He was fundamentally mistaken in thinking that the e-mails were a “small issue” that were likely to be of little importance in the context of the proceedings, and thus erred in concluding that there had been material non-disclosure or misstatement in relation to the significance of the e-mails and the question of whether Pacific Bulk were commercial managers or commercial agents.

(2)  Having regard to the fact that this was a case of admitted fabrication of documents, there was a strong case for concluding that the contempt proceedings should be permitted to proceed, and it was not appropriate to consider, at the leave stage, explanations or justifications that were or might be put forward.

(3)  As to the other alleged non-disclosures, there was either no failure to disclose, or the non-disclosure did not relate to a material matter.  In particular, the cross-examination application and decision had in fact been disclosed and was referred to in Chu’s evidence, the failure to disclose the police report was not material, and the failure to spell out the various proceedings between Chu and his companies and the contempt defendants was also overstated and thus was not material.

The respondents’ contentions

33.For Sun, Chang and Pacific Bulk, apart from contending that the Judge’s decision was correct for the reasons he gave, Mr Wong also sought to argue that the Judge should have found in his clients’ favour in the following respects set out in the amended respondents’ notices filed by them:

(1)  The Judge should have held that the contempt was criminal in character and should have been brought by or with the consent of the Secretary for Justice, who should have been joined as a party if such consent was not given, such that Chu did not have locus to bring the proceedings.

(2)  The Judge should have held that no prima facie case of contempt had been made out.  In the respondents’ notices it was contended that this was because of the allegedly convoluted terms of the contempt statements, which were criticised as vexatious and impossible to understand.  However, at the hearing, Mr Wong sought to argue that the claim of contempt against his clients should not have been allowed to proceed, as there was no allegation in the contempt statement that they (in particular Sun)  were actually aware that the e-mails complained of had been fabricated at the time when Sun exhibited them to her affirmation in support of the application for an injunction.

(3)  The Judge should have expressly held (in so far as he had not done so)  that it was not in the public interest for contempt proceedings to be brought, as Chu’s complaints were convoluted, vexatious and unintelligible, they would in any event be dealt with at the trial of the proceedings, and because it was clear that Chu was a vindictive litigant seeking to use the contempt proceedings to place pressure on the contempt defendants.

(4)  The Judge should also have found that there was non-disclosure in respect of the locus point mentioned in subparagraph (1)  above.

34.At the hearing, Mr Wong SC put forward what he described as two key points.  The first concerned the nature of the application before Wilson Chan J, and was to the effect that having regard to the nature of the injunction sought and its purpose (being to enable discharge of the goods on board the vessel to the consignee)  and the fact that an undertaking to pay the freight into court had been offered, the question of whether Pacific Bulk was a commercial manager or a commercial agent was of no real significance.  The second was a submission that Chu himself had, on various occasions and in various documents, referred to Pacific Bulk as a manager or commercial manager of the vessel.

35.Additionally, Sun, Chang and Pacific Bulk also appealed against the costs order ultimately made by the Judge.

Locus/whether consent of SJ required

36.I propose first to deal with the question of whether the consent of (or absent consent, the joinder of)  the Secretary for Justice was required, such that absent either of these steps being taken, Chu did not have locus himself to bring the contempt proceedings.  Mr Wong SC submitted that (contrary to the Judge’s view)  the contempt in this case was a criminal contempt as it involved an alleged interference with the process of the courts (and not simply a failure to comply with a court order), and that there were sound reasons why the Secretary for Justice should be involved in any decision as to whether or not any contempt proceedings should be brought in respect of such matters, which would also be susceptible to criminal prosecution for perjury or perverting the course of justice.

37.The Judge said at [43] of his judgment that in the light of Re Kennedy (No 3) [2009] 1 HKC 57 and Secretary for Justice v Cheung Kai Yin [2016] 4 HKLRD 367, a contempt consisting of a lie in an affidavit in civil proceedings are civil proceedings for contempt.

38.In my view, it is necessary to distinguish between two aspects of contempt proceedings.  The first is whether the contempt alleged is a civil or criminal contempt.  This is determined by the nature of the allegedly contumelious act. Where the act consists of the failure to comply with a court order in civil proceedings, it is a civil contempt.  However, where the act consists of the doing of something which interferes with the course of justice (for example by giving false evidence under oath, or making false statements in affidavits or affirmations, or interfering with officers of the court in the execution of their duties), it is a criminal contempt.  The second aspect relates to the procedural nature of the proceedings by which it is sought to bring the contemnor before the court.  In this respect, the characterisation of a contempt as civil or criminal in nature is not determinative of the procedural nature of the contempt proceedings – the procedural nature derives from the nature of the underlying proceedings in which the contempt is alleged to have taken place.  While it is likely that all proceedings for civil contempt will of necessity be civil proceedings as a matter of procedure, it will not necessarily follow that proceedings for criminal contempt will be criminal proceedings, procedurally speaking.  Where the contempt takes place in the course of civil proceedings, the contempt proceedings themselves are, procedurally, to be regarded also as civil proceedings.  Where it takes place in the course of criminal proceedings, the contempt proceedings that result with procedurally be characterised as criminal proceedings.

39.It follows that the Judge was right to characterise the contempt proceedings before him as civil proceedings in the procedural sense, although the alleged contempt was to be regarded as criminal in nature (a distinction that does not appear to have been adverted to by the Judge).

40.Where a criminal contempt takes place in civil proceedings, there is in my view no impediment to an application for leave to commence contempt proceedings being made by a party aggrieved by the contempt, without involving the Secretary for Justice.  In England, it is clear that while conduct amounting to criminal contempt in civil proceedings may be dealt with by a prosecution for perjury, it remains open for a party to pursue the matter by way of contempt proceedings which are procedurally civil in nature (see eg Hydropool Hot Tubs v Roberjot [2011] EWHC 121 (Ch)  and KJM Superbikes Ltd v Hinton [2009] 1 WLR 2406), without the involvement of the Attorney General, and that in appropriate cases, leave to bring contempt proceedings will be granted.  In Hong Kong, civil proceedings for contempt (which as explained above, extends to both civil and criminal contempts in the context of civil proceedings)  are subject to RHC Order 52, and the leave procedure provided for thereunder, which contain no requirement to involve the Secretary for Justice in the proceedings.

41.Mr Wong SC submitted that it would be appropriate for the Secretary for Justice’s consent to be obtained, or failing that for her to be joined in the contempt proceedings.  In support of this submission, he drew our attention to Aurol Anthony Sabastian v Sembcorp Marine Ltd [2013] SLR 246, a decision of the Singapore Court of Appeal, in which it was held that the Attorney General (the Singapore equivalent of the Secretary for Justice)  should be consulted in cases involving criminal contempt.  Mr Wong SC submitted that this was appropriate because criminal contempt was of a sui generis nature, and could result in a sentence of imprisonment, whereas civil contempt proceedings were dealt with summarily.  It was therefore desirable to involve the Secretary for Justice in the proceedings to ensure that only suitable cases were pursued.  He also suggested that such a requirement would ensure that the Secretary for Justice was apprised of all interferences with the administration of justice, and that it was relevant to have in mind that the Secretary for Justice is responsible for the institution of criminal proceedings.

42.It does not seem to me that these matters justify the involvement of the Secretary for Justice in all civil proceedings for contempt which relate to criminal contempts, in that they concern matters which involve interferences with the administration of justice.  There is, to my mind, no good or compelling reason why it should not be open to a litigant in civil proceedings in which the opposing party has committed a criminal contempt by, for example, lying on affidavit or fabricating documents, to pursue the matter by way of criminal contempt proceedings.  The affected litigant’s interests will be directly affected by the acts of contempt complained of, which may have a significant impact on the proceedings.  The existing procedure under RHC Order 52, with a requirement that leave be obtained, provides a suitable and time-tested process for the vetting of intended claims for contempt, such that obviously unsustainable or abusive proceedings for contempt will be weeded out at an early stage.  In these circumstances, I do not consider that there is (or should be)  any requirement that the Secretary for Justice’s consent be obtained for the bringing of civil proceedings for criminal contempt.  Nor do I see any need for the Secretary for Justice to be joined in the proceedings.

43.Dealing with the specific points raised by Mr Wong SC mentioned in [40] above:

(1)  While it is true that criminal contempt may be regarded as being of a sui generis nature, this does not of itself call for the involvement of the Secretary for Justice.

(2)  Nor does the fact that criminal contempts summarily dealt with by civil proceedings may result in imprisonment call for the Secretary’s involvement.  Civil contempts, too, can and do result in sentences of imprisonment, yet it is not suggested that contempt proceedings based on the breach of a court order, however serious the breach, should require the Secretary’s involvement.

(3)  Ensuring that only suitable cases be pursued is, as I have stated, sufficiently dealt with through the leave procedure applicable to civil proceedings for contempt (whether criminal or civil contempt)  pursuant to RHC Order 52.

(4)  Further, I do not consider that apprising the Secretary for Justice of apparent interferences with the course of justice justifies requiring all criminal contempt proceedings in civil matters to be prosecuted by the Secretary for Justice and not the party affected.

(5)  Finally, the fact that the Secretary for Justice is responsible for criminal proceedings in Hong Kong does not appear to be a relevant factor where, as here, the proceedings by which the contempt is sought to be dealt with are civil proceedings.

44.I would therefore reject the suggestion that the Secretary for Justice’s consent should be required before civil proceedings for criminal contempt are brought. Additionally, I see little point in requiring the Secretary for Justice to be made a party to all such proceedings, and I would reject this suggestion also.

45.It follows from this that the non-disclosure complaint based on the alleged failure to bring the so called locus point to the attention of the ex parte judge is not well founded, and must also be rejected.

Whether prima facie case of contempt made out

46.As to the complaint by the contempt defendants that the Judge erred in concluding that a prima facie case of contempt had been established, it seems to me that the Judge was clearly entitled (and was, with respect, correct)  so to conclude.  There was here an admitted fabrication of documents, and the use of such fabricated documents for the purposes of the ex parte application for injunctive relief.  On the face of it, it would seem likely (if not inevitable)  that had the fabrication gone undetected, such fabricated documents would have been relied upon throughout the proceedings thereafter.  In those circumstances, the Judge was entirely justified in concluding that the allegations of contempt had been established on a prima facie basis, at least.  Although it is right to note that Sun contended that she was unaware of the fabrications at the time when the documents were exhibited to her first affirmation in support of the ex parte injunction application, the absence of any indication that the documents were not those of Pacific Bulk, coupled with the fact that Sun was the person responsible for managing the affairs of Pacific Bulk and might be expected to have received the original undoctored documents, and to know that the undoctored documents did not contain any reference to management fees, establishes in my view, a prima facie case of the contempts complained of.

47.It is of course possible that at the end of the day, Sun, Chang and Pacific Bulk will succeed in establishing that they (and particularly Sun)  are not guilty of the contempts alleged against them, but that is a matter for trial of the contempt proceedings, and does not detract from the existence of a prima facie case at this stage.

48.As for the complaint that the Judge should have found that a prima facie case was not established because of the convoluted or unintelligible nature of the contempt statement, I am satisfied that the essence of the complaints, as summarised in [24] above, is sufficiently clear from the contempt statement.

49.Turning to Mr Wong SC’s complaint that the allegation of contempt against Sun was defective for failing positively to allege that Sun was aware of the falsity of the doctored documents when putting them forward in her affirmation, it seems to me that this is not a complaint that is open to the contempt defendants as it is not a point that has been raised in their respondents’ notice.  Although Mr Wong suggested that this was covered by paragraph 2 of the respondents’ notice, that paragraph complains only of the allegedly convoluted and unintelligible nature of the contempt statement, and a suggestion that it did not identify how the alleged contempt constituted a serious interference with the administration of justice.  It clearly does not cover the point now being sought to be made by Mr Wong SC.

50.I would therefore reject the suggestion that the Judge was wrong to conclude that a prima facie case of contempt had been made out.

Whether Judge erred in assessment of significance of altered emails

51.Turning to the first of the broad grounds of criticisms of the judgment made by Mr McCoy SC, it is apparent from the judgment that the Judge was persuaded that the emails of which complaint was made by Mr Chu were of relatively minor significance in the context of the ex parte injunction application, and indeed, in the context of the underlying proceedings as a whole.  Thus, at [95] of the judgment, the Judge described their falsity as “a small issue”, which “may even be of so little moment in the whole context of the trial that it will not attract the attention of the judge”.  Earlier in the judgment, the judge observed at [63] that the pleadings contained no assertion that anything turned on the distinction between a commercial agent and a commercial manager, at [64] that the emails were only exhibited as “examples” to illustrate the arrangement between Joint Silver and Pacific Bulk, at [65] that the affirmations were not made for the underlying proceedings but for the injunction application, and that the skeleton submission in support of that application referred neither to the emails nor to the position of manager.  He also noted at [70] that the original undoctored email was also an exhibit (also not specifically referred to)  to Sun’s 1^st affirmation.  From this, he concluded that the importance of the emails had been overstated by Chu, and that the contempt related to a matter of little significance.

52.With respect, I am unable to agree with the Judge’s assessment of the significance (or insignificance)  of the doctored emails, and consider that he was plainly wrong to come to the view that they were a matter of little significance.

53.First, it is clear from the pleadings that whether Pacific Bulk was a commercial manager (as it claims)  or a commercial agent (as the Chu camp contends)  is one of the central issues in the underlying dispute between the parties.  The difference between the parties is summarised at [9] to [13] above.  It is clear from that summary that at least for the purposes of the underlying proceedings, the distinction between commercial agent and commercial manager was one of significance.  So far as the injunction application was concerned, even if one accepts that the injunction was of more limited scope, and was aimed principally at ensuring that the cargo then laden on board the Grain Pearl could be delivered to its consignee, it remained necessary for the Lau camp to explain the basis of its claim, and in doing so, it was they who asserted that Pacific Bulk was the commercial manager.

54.Further, given that the agreement (ie the Second Agreement)  which lay at the heart of the dispute between the parties was made orally, a determination of Pacific Bulk’s status as being that asserted by the Lau camp would be very likely to weight the scales in favour of the Lau camp when the court considered which side’s version of the oral agreement was to be accepted.  As Mr McCoy pointed out, the relief sought in the underlying proceedings included a declaration as to the terms of the Second Agreement, and a claim for damages for its breach.  It was therefore one of the key issues for consideration.  Where the court is called upon to determine which version of an oral agreement should be accepted, it will generally look to the contemporaneous documents as being a good guide to the truth of the matter. For that reason, it is vital that the court should be provided with genuine documents, and not misled by doctored versions of them.

55.The other reasons stated by the Judge for considering the emails to be of minor significance do not appear to hold water.  The fact that they were described as examples does not render them of less importance.  On the contrary, as apparently genuine contemporaneous documents said to exemplify the true arrangement between the parties, they were of real importance.  As to the Judge’s observation that there were no references to commercial management in the skeleton argument in support of the application for the injunction, Mr McCoy demonstrated that this was simply wrong, and that there were some 12 references to Pacific Bulk being a commercial manager in the skeleton argument.  As to the suggestion that the emails might be less important in the context of the injunction application, quite apart from the fact that Yan saw fit to provide them and Sun to use them, presumably on the basis that they would serve to strengthen their case for the injunction, they would, as I have explained above, also be of utility in seeking to establish in the underlying proceedings that the oral agreement was in fact on the terms alleged by the Lau camp, and not those alleged by the Chu camp.  Finally, while it does appear to be the case that the original undoctored emails were also included in the bundle of documents, it should be observed that if they were the only versions exhibited, they would not appear to support the claim that Pacific Bulk was a commercial manager, and thus the inclusion of the doctored emails would seem more likely than not to assist the Lau camp in its attempts to establish its case.

56.It is convenient at this juncture to deal with the two major points advanced by Mr Wong SC at the hearing.  The first point was that one had to have regard to the context in which the emails were deployed, this being the application for the injunction which Mr Wong SC submitted was of relatively limited scope.  As to this, as I have observed above, the doctored emails cannot be regarded solely in that very limited context, as they would also have formed part of the evidence which was likely to be deployed at the trial, where they might well have been relied upon by the court in coming to its decision as to where the truth lay in relation to the rival contentions as to the oral agreement that had been made between the parties.  The second point was that there was material to show that Chu himself had on occasion referred to Pacific Bulk as a manager.  That may be so, but it does not detract from the fact that given that the original emails do not seem to have contained any reference to management fees, the inclusion of a reference to management fees in the doctored emails would seem to be likely to provide further support for the Lau camp’s position.  Just as the inclusion of the original emails does not excuse the proffering of the doctored emails, neither does the fact that there may be some evidence emanating from Chu that is supportive of the Lau camp’s case.

57.For all of the foregoing reasons, I am satisfied that the Judge fell into error in coming to the view that the emails were a matter of little significance.

58.In consequence, the Judge’s conclusion that there was non-disclosure or misstatement by Chu in relation to the significance of the emails so as to justify the discharge of the ex parte leave to bring the contempt proceedings cannot stand.

The materiality of the contempt and whether contempt proceedings would be proportionate

59.Mr McCoy’s second broad point was that as this was a case of admitted tampering with evidence, there was clearly a good prima facie case of contempt which was of sufficient significance that contempt proceedings would be justified and proportionate.  In that respect, he submitted that whether or not there was an explanation or justification for the acts complained of was a matter which should be considered at trial of the contempt proceedings, and not in the context of whether or not leave to bring such proceedings should be granted.

60.Mr McCoy drew our attention to a number of authorities to the effect that the purpose of the leave application is to filter out obviously unfounded or oppressive applications (see eg Anthony Eric Ryan Hotung v Ho Yuen Ki (unrep, CACV 178 of 2006, 25 September 2009), Tiong King Sing v Sam Boon Peng Yee (unrep, HCMP 1129 of 2015, 21 July 2015)).  He drew our attention to Numeric City Ltd v Lau Chi Wing [2016] 4 HKLRD 812 where it was held by the Court of Appeal that leave should be granted only where the court is satisfied that punishment for contempt is proportionate and appropriate, but queried whether this should be confined to contempt proceedings in respect of statements of truth under RHC Order 41A rule 9.  I can see no reason why it should be so confined, and I would accept that the court is entitled and required to consider this question, albeit bearing in mind that the application is one for leave, and not the substantive hearing of the contempt proceedings, so that the question is simply whether the proceedings should be permitted to go further, with full consideration of the merits left for the substantive hearing.

61.In this respect, the factors set out in KJM Superbikes Ltd v Hinton (supra)  appear to me to be apposite.  As Moore Bick LJ observed at [16] of that case:

“Whenever the court is asked by a private litigant for permission to bring proceedings for contempt based on false statements allegedly made in a witness statement, it should remind itself that the proceedings are public in nature and that ultimately the only question is whether it is in the public interest for such proceedings to be brought. However, when answering that question there are many factors that the court will need to consider. Among the foremost are the strength of the evidence tending to show not only that the statement in question was false, but that it was known at the time to be false, the circumstances in which it was made, its significance having regard to the nature of the proceedings in which it was made, such evidence as there may be of the maker’s state of mind, including his understanding of the likely effect of the statement and the use to which it was actually put in the proceedings. Factors such as these are likely to indicate whether the alleged contempt, if proved, is of sufficient gravity for there to be a public interest in taking proceedings in relation to it. In addition, the court will also wish to have regard to whether the proceedings would be likely to justify the resources that would have to be devoted to them.”

62.Taking those matters into consideration, it seems to me that there is obviously a strong case for saying that the emails in question were in fact doctored (this having now been admitted), and that this must have been known to Yan.  As far as Sun is concerned, it must be strongly inferable that she must have known that the emails were not from Pacific Bulk’s own documents, but had been supplied by Yan for the purposes of the injunction application.  As Pacific Bulk had its own set of such emails (but undoctored ones), it seems fair to think that Sun could (and should)  have noted that the emails supplied by Yan were, to say the least, questionable.  The significance of the emails has been discussed in the previous section of this judgment, and for the reasons there given, I would regard them as being of real significance, and not merely trivial or peripheral.  It would seem likely that the relevant contempt defendants must have understood the significance of the emails.  In all of these circumstances, I have difficulty in seeing how it could be plausibly suggested (although Mr Wong SC tried valiantly to do so)  that this was not a case in which the bringing of contempt proceedings was justified.  Regardless of whether or not the proceedings succeed at the end of the day (which will depend on the explanations and evidence put forward by the contempt defendants and the assessment of the judge hearing the contempt proceedings)  the issue raised by them, of manipulation and fabrication of documentary evidence that goes to the heart of a dispute as to the terms of an oral contract, seems to me self-evidently to be something about which any court would be extremely concerned, as it would directly affect the court in its attempt to ascertain the truth of the matter.

63.A number of points made by the Judge to suggest that contempt proceedings were not justified or proportionate do not, with respect, seem to me to be well-founded. 

64.Contrary to the Judge’s view that the contempt would resolve itself in the trial of the underlying proceedings ([95] of the judgment), once dismissed, the contempt proceedings would not come up for consideration again.  At best, the question of whether or not the suspect emails had been doctored might be the subject of consideration and findings at the trial, but this would not deal with the question of what consequences, if any, should be visited on those responsible for the fabrication of the documents, and the use to which they were put.

65.As to the Judge’s suggestion that whether or not contempt proceedings should be brought should have been left for consideration after the trial (as is implicit in [95] and [96] of the judgment), there is no factual dispute as to whether or not the documents were altered.  This is admitted.  There is thus no need to wait for the outcome of the trial to ascertain whether or not the factual basis of the contempt is well-founded.  It is of course open to the court dealing with the contempt proceedings, once they are commenced, to case manage them appropriately, which may include deciding that they should be heard after the trial, rather than before.  This point also appears to sit somewhat uncomfortably with the Judge’s criticism of Chu (at [93] of the judgment)  for not having brought the application for leave to commence contempt proceedings earlier.

66.As for the suggestion that the contempt defendants might be cross-examined at trial ([73] of the judgment), it seems far from clear that the contempt defendants will appear to give evidence, and in any event, given the admitted fabrication of the documents, it is not readily apparent why the decision as to whether or not to permit the bringing of proceedings for contempt should await cross-examination, if there is any.

67.Finally, the suggestion that Chu had delayed bringing the contempt proceedings ([93] of the judgment)  appears to overlook the fact that it took some considerable time and pressing by Chu and his legal representatives before the eventual admission that the documents in question had been modified and fabricated.

68.I therefore am of the view, contrary to that of the Judge, that this was clearly a case in which contempt proceedings were proportionate.

Material non-disclosure

69.Although Mr McCoy suggested that the principles of material non-disclosure should be applied with limited force to the leave stage of contempt proceedings, it seems to me that this question is not open for serious debate in the light of the decision of the Court of Appeal in Numeric City, where it was held that the duty of full and frank disclosure applies with full force to contempt proceedings.

70.That said, I do not think that the matters identified as non-disclosures by the Judge called for the discharge of the ex parte leave that had been granted for the contempt proceedings to be brought against the contempt defendants.

71.Having regard to my conclusions as to the significance of the alleged contempt, and in particular the significance of the distinction between a commercial manager and a commercial agent, it follows, as stated in [57] above, that the Judge’s conclusion that there was non-disclosure or misstatement by Chu in relation to the significance of the emails and the contempt cannot stand.

72.As to the alleged failure to disclose the decision in relation to Chu’s summons for cross-examination, this was in fact disclosed in Chu’s 7^th affirmation, to which both the summons for the cross-examination application, and the decision on it of DHCJ Yee (who was, as it happened, the judge dealing with the contempt application)  were exhibited.  At the hearing, Mr Wong SC properly accepted that this matter had in fact been disclosed.  It thus cannot constitute non-disclosure.

73.As to the failure to disclose that a complaint had been made to the police, on which no action had been taken, I cannot see that this was a matter of any real materiality.

74.As to the alleged failure to disclose that there were 12 sets of proceedings between the parties, the materiality of this would presumably go to a suggestion that Chu was acting oppressively.  However, as Mr McCoy pointed out, two of those proceedings were the proceedings now under appeal, the contempt defendants were not respondents to four other sets of proceedings, and of the remaining six, Chu was a plaintiff in three and his companies were plaintiffs in the other three, and none of the proceedings had been struck out.  While in other circumstances, the existence of multiple proceedings between the same parties might give rise to a suspicion of oppression, given the rather complex relationship between the parties that was unravelling, it cannot be said that this was likely to be the case here.  More significantly, given the nature of the contempt alleged, and its implications for the proper administration of justice, it seems to me to be impossible to suggest that seeking to bring proceedings in relation to the contempt could realistically be regarded as oppressive.  I would therefore reject the suggestion that the failure to spell out all of the proceedings in which the parties or their proxies were engaged amounted to material non-disclosure such as to justify discharge of the ex parte leave that had been granted to bring the contempt proceedings.

75.The final allegation of non-disclosure, which was rejected by the Judge, related to the question of locus and the need to obtain the consent of the Secretary for Justice.  As indicated in [44] above, I am satisfied that there is no merit in this complaint either.

Conclusions

76.For all of the foregoing reasons, I was satisfied that the appeal should be allowed, the orders of the Judge below should be set aside and Chu’s leave to commence contempt proceedings be restored, and the substantive contempt proceedings allowed to continue.

Cross appeal on Costs

77.As noted above, the contempt respondents appealed against the costs order made by the Judge.  However, whatever might be the merits of that appeal had Chu’s appeals been dismissed, in the light of our having allowed the appeals, it followed that the costs order below would necessarily have to be set aside, and a fresh order for costs dealing with the costs below as well as the costs of this appeal made by this court.  It is therefore not necessary to consider the arguments in respect of that part of the contempt defendants’ respondents’ notice.

Costs

78.So far as costs are concerned, as the outcome of this appeal is that Chu has been successful in his appeal and should have succeeded below, I would therefore make an order nisi that the costs of this appeal (including those of the original respondents’ notice but except for those attributable to the amendments introduced by amended respondents’ notice to deal with the Judge’s costs order below), and of the hearing below be paid by the 1^st, 3^rd and 4^th respondents to Chu, such costs to be taxed on the party and party basis if not agreed.  As for the costs attributable to the amended respondents’ notice of cross-appeal relating to the costs order made by the Judge, it seems to me that there are substantial grounds for thinking that the order made by the Judge was wrong in principle, and in those circumstances, I would make an order nisi that there should be no order as to costs in respect of those costs.

Mr Gerard McCoy SC and Mr Toby Brown, instructed by Howse Williams, for the applicant in CACV 173/2017 and for the plaintiff in CACV 174/2017

Mr Anson Wong SC, Mr Alexander Tang and Mr Terrence Tai, instructed by DLA Piper Hong Kong, for the 1^st, 3^rd and 4^th defendants in CACV 174/2017

The 2^nd defendant in CACV 174/2017 appeared in person