Chan Ka Ho Abraham v. Tung Yin Ling Cora and Another

HCMP 103/2023

[2024] HKCFI 1642

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 103 OF 2023

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DECISION

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INTRODUCTION

1.By a Judgment dated 28 April 2023 (“the Contempt Judgment”)[1], the defendants were found guilty of having committed contempt of court in failing to comply with the Examination Orders. A warrant for committal was issued against each of the defendants.

2.The 2^nd defendant was subsequently arrested at the Lo Wu Control Point on 21 May 2023.

3.The 1^st defendant, having heard that the 2^nd defendant had been arrested, surrendered herself to the Court at the hearing on 22 May 2023 (“the May 2023 Hearing”), at which the 2^nd defendant was also brought to attend.

4.At the May 2023 Hearing, this Court gave directions for the defendants to file and serve affirmations in support of their plea in mitigation. Leave has also been granted for the plaintiff to file and serve affirmation in reply. Those directions have been duly complied with.

5.This is the Decision on sentence.

RELEVANT LEGAL PRINCIPLES ON SENTENCING

6.The relevant principles in relation to sentencing for contempt of court are well established.

7.In Arboit v Koo Siu Ying [2016] 3 HKLRD 154, Au-Yeung J held that:

“2. The starting-point is to acknowledge that contempt of civil court orders is a serious matter and that court orders are made to be obeyed. A prime consideration of the court in sentencing contempt is to ‘signal importance of demonstrating to litigants that the orders of these courts are to be obeyed’. By ‘litigants’, it is clearly referring to litigants in general and not just the contemnor himself. See Questnet Limited v Wilfred Royce Lane, HCA 1475/2006, Chu J (as she then was), 23 June 2008 (on sentence).

3. The object of the sentence is both to punish conduct in defiance of the court’s order and to serve a coercive function by holding out the threat of future punishment as a means of securing the protection which the order was primarily there to do: Crystal Mews Ltd v Metterick & ors [2006] EWHC 3087, §8, Collins J; re Barrell Enterprises [1973] 1 WLR 19, at 27C-D, English CA. The court has to balance the 2 objects.

4. The sentence for contempt may range from a fine to a term of imprisonment. The UK Contempt of Court Act 1981 imposes a maximum term of 2 years’ imprisonment but Hong Kong does not have that statutory limit.

5. Imprisonment should be regarded as a sanction of the last resort. Any custodial sentence should be as short as possible consistent with the circumstances of the case. Willwin Development (Asia) Co Ltd v Wei Xing, HCMP 2946/2014 (unreported, 16 November 2015), B Chu J, §4(f); CMA CGM v Ng Chip Choi Maurice, HCMP 2988/2014, 12 March 2015, Au-Yeung J,§24(1).

6. The court may suspend a term of imprisonment for such period or on such terms as the court deems fit: CMA CGM v Ng Chip Choi Maurice, §24(2); Order 52, rule 7. This is an ‘absolute discretion’ but it would be difficult to think of circumstances where a suspended order should be made when nothing further remains to be done to comply with the order: Hong Kong Civil Procedure 2016, Vol 1, §52/7/2.

7. The court will consider if there are:

i. Aggravating factors: Hao Xiaoying v Wong Yiu Lam William & Ors, HCMP 1968/2014, 2 March 2015, Anthony Chan J;

ii. Mitigating factors: Ge Transportation (Shenyang) Co Ltd v Lu Jinxiang, HCMP 1792/2013 (unreported, 22 January 2014) (DHCJ Marlene Ng); and

iii. Acts to purge the contempt, ie acts to atone for a contempt, eradicate it or cleanse it of its previous ill-effect which, in the case of a mandatory order, may be fulfilled if the contemnor thereupon does the act or causes it to be done: CJ v Flintshire BC [2010] EWCA Civ 393, at §6.

8. Relevant factors (which are not exhaustive) include:

(a) The nature of the order and breach in question, and the extent of the breach: Questnet Limited v Wilfred Royce Lane.

(b) Whether the contempt was contumacious or unintentional, the reasons, motives and state of mind: Hong Kong Civil Procedure 2016, Vol 1, §52/9/2.

(c) Whether the claimant has been prejudiced by virtue of the contempt and whether the prejudice is capable of remedy: Crystal Mews Ltd v Metterick, §13.

(d) Whether the contemnor appreciates the seriousness of the deliberate breach: Crystal Mews Ltd v Metterick, §13.

(e) Whether the contemnor has cooperated: Crystal Mews Ltd v Metterick, §13.

9. […]

10. As circumstances of contempt vary greatly, there is little mileage to be gained from the citation of other cases: AXA China Region Insurance Co Ltd & anor v Li Yu Ping Ellen [2002] 3 HKC 339, 362 H-I, Stock JA.”

8.In La Dolce Vita Fine Dining Co Ltd v Zhang Lan [2019] 2 HKLRD 341, [2019] HKCFI 618, Mimmie Chan J also had the following to say at [8]:

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

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

Her Ladyship continued at [14] and [15]:

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

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

9.In Willwin Development (Asia) Co Ltd. v. Wei Xing & Others (HCMP 2946/2014, unreported, 16 November 2015), B Chu J also accepted that in a case where there has been a failure to comply with an order of the court and where there is no evidence to suggest that compliance was in any way difficult or impossible, a sentence of imprisonment would not be inappropriate. This would be particularly so in a case where the sentence was designed to enforce compliance. A sentence of imprisonment for a wilful failure to observe a court order can often be appropriate.[2]

AGGRAVATING AND MITIGATING FACTORS

Aggravating factors

10.Mr Tang for the plaintiff submitted that the Court should take into account the following factors[3] when deciding the sentence to be imposed:

(1)  The defendants had lied to this Court at the May 2023 Hearing when they alleged that the business of Mass Choice Limited had been hard-hit by the Covid-19 pandemic;

(2)  The defendants’ contempt have caused delay and irremediable loss to the plaintiff; and

(3)  The defendants have deliberately concealed the managerial role of Mr Yu Wing Leung (i.e. the ex-husband of the 1^st defendant and son of the 2^nd defendant) in Mass Choice Limited.

11.I accept that the defendants’ failure to comply with the November 2021 Order (in attending oral examination on 21 March 2022) has indeed caused irremediable loss to the plaintiff, in that by the time the plaintiff found out in the subsequent examination (held on 22 August 2023) that Mass Choice Limited has made a repayment of loan to the 2^nd defendant on 12 October 2020, it was already too late for the plaintiff to make any possible claim of unfair preference pursuant to section 266 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong)[4]. Although it is evident that the plaintiff had also caused some delay in its prosecution of HCA205/2018 (the underlying civil action which led to the Judgment[5]), this does not alter the fact that but for the defendants’ breach of the November 2021 Order, the plaintiff would have been able to challenge Mass Choice Limited’s repayment to the 2^nd defendant in time.

12.However, I do not accept that the factors under sub-paragraphs (1) and (3) above are aggravating factors.

13.First, even though it was indeed factually incorrect for the defendants’ counsel to submit in the May 2023 Hearing that the business of Mass Choice Limited was hard hit by the Covid-19 pandemic because this company had been closed in February 2018 (that is, before the pandemic hit Hong Kong in 2020), I accept the 1^st defendant’s explanation that:

(1)  She was in panic mode when she gave instructions to her solicitors on 21 – 22 May 2023, because she heard that the 2^nd defendant had been arrested and detained;

(2)  She was under tight time constraint when she gave instructions to her solicitors for the purpose of the May 2023 hearing;

(3)  When she gave instructions to solicitors in the aforesaid circumstances, she had mixed up Mass Choice Limited with other companies which were held under her name. She did not intentionally lie to the Court.

14.Furthermore, the reason why the defendants’ counsel mentioned about Covid-19 in his submissions should be noted. In counsel’s skeleton submission lodged for the purpose of the May 2023 Hearing, it was explained that:

“D1 and D2 were the two directors of Mass Choice. The business of the company was hard hit by COVID and it did not have the financial means to hire legal representative when the summary judgment was obtained by P on 24 June 2021 for the sum of HK$1,140,000 in HCA 205/2018. D1 and D2 were not well versed with legal procedures and mistakenly thought that the liability of the HCA action lies on the company but not themselves. They did not pay sufficient attention to the Examination Orders […]”[6]

15.It can be seen that counsel’s intention was to explain why the defendants did not seek counsel’s advice at the material time. It was said that it was down to the financial situation of Mass Choice Limited, which was the judgment debtor of which the defendants were directors. In such situation, I think it might well be more forceful if counsel informed the Court in the May 2023 Hearing that the business of Mass Choice had in fact been closed down already. Viewed in such light, I accept that the defendants did not intentionally mislead the Court[7].

16.Second, the criticism that the defendants have deliberately concealed the managerial role of Mr Yu in Mass Choice Limited is unfair, because this matter has been revealed by the 1^st defendant when she was examined on 23 August 2023. There is no evidence that she has “deliberately concealed Mr Yu’s role”.

17.Although it may be said that the defendants could have, before the examination took place on 23 August 2023, volunteered to the plaintiff the information that it was in fact Mr Yu who knew the best about Mass Choice Limited, I am of the view that such failure should not be viewed as an aggravating factor since there was no legal obligation on the part of the defendants to do so.

Mitigating factors

18.The defendants’ counsel submitted that the Court should take into account a number of mitigating factors.

19.First, the contempt has been fully purged.

20.In this regard, in my view, the Court should focus on the contempt which the defendants are found to have been committed, namely:

(1)  To attend court for examination purpose; and

(2)  To produce documents pursuant to the Examination Orders.

21.It is undisputed that they have complied with the same subsequent to the Contempt Judgment.

22.However, the plaintiff alleged that they had been evasive or at least ambivalent in their answers given in examination, and therefore, it was said, they should not be treated as having purged their contempt. Counsel for the plaintiff concluded in his submissions:

“49. Meanwhile, D2 simply denied knowledge of most if not all of the questions relating to Mass Choice’s financial affairs. Regardless of whether that is true, such an answer is not helpful for P’s asset recovery exercise. If both Ds had no/little knowledge, they could have informed P in advance who would have knowledge of such matters […].”

23.Insofar as it is the plaintiff’s submission that the defendants should not be regarded as having purged their contempt unless they have given useful information which assists in the plaintiff’s asset recovery exercise, I disagree with such submission. Pursuant to the Examination Orders, putting aside the part concerning production of documents for the time being, the defendants were only required to attend the examination and be examined. They have already done so, without refusing to answer any questions thereat. In such circumstances, I do not think there is room to argue that they have not purged their contempt, even if the answers obtained were not helpful for enforcement of the Judgment.

24.I therefore accept the defendants’ argument that they have fully purged their contempt.

25.Second, the defendants argued that their breach was less serious than a breach of an order which is prohibitive in nature because their breach was “one-off”.

26.The defendants’ counsel has failed to draw this Court’s attention to any authority to the effect that the sentence of contempt committed in relation to a mandatory order should be less than a prohibitive order.

27.On my part, I am not aware of any general principle as such.

28.Further, it is factually incorrect for counsel to say that the defendants’ breach was one-off. There were two court orders concerning two court hearings, and the defendants have attended none of those hearings.

29.I will therefore not take this as a mitigating factor.

30.Third, the defendants’ counsel submitted that the defendants did not commit the contempt wilfully or contumaciously. As I pointed out at the hearing, this is not a point which counsel is at liberty to take, because it is contrary to a finding made at [39] of the Contempt Judgment.

31.Fourth, it was submitted that the defendants have been fully cooperative since the Contempt Judgment. They have fully paid the plaintiff’s costs of these proceedings (up to the hearing on 28 April 2023) on indemnity basis. Apart from documents which are covered by the Examination Orders, they have provided the plaintiff with additional documents which were not covered by the said orders. As far as the 1^st defendant is concerned, once she has heard about the arrest of the 2^nd defendant, she has sought legal advice right away and surrendered herself to the Court.

32.I agree that these are matters which should be taken into account in their favour.

33.Fifth, the defendants have, since the May 2023 Hearing, appreciated the seriousness of their breach of the Examination Orders. They are deeply remorseful, and have apologised to the Court. Apparently they have learnt a lesson. This is particularly true for the 2^nd defendant as she has been kept in custody for a night before she was brought to attend the May 2023 Hearing. I accept that these are relevant matters which should be taken into account.

34.Sixth, the defendants’ counsel informed the Court that both defendants have poor health. However, I do not think the Court should place much weight on this factor, unless, for example, the parties are coming to the last days of their lives.

35.Seventh, the defendants’ counsel reminded this Court that this is the first time that the defendants are convicted of contempt of court. However, I do not think the Court should place much weight on this factor. Court orders are to be obeyed by all. While it should be regarded as an aggravating factor for a party to be convicted of contempt of court for more than once, I do not think it is right for anyone to say that a party is entitled to be treated leniently merely because it is the first time that he/she has breached a court order.

THE APPROPRIATE PENALTY

36.In the present case, the most important mitigating factor which the Court should bear in mind is that the defendants have fully purged their contempt.

37.I also accept that they have been fully cooperative since the Contempt Judgment.

38.They are now deeply remorseful, and have apologised to the Court.

39.However, this Court should also bear in mind that the contempt concerns a serious breach of two court orders in that the defendants have intentionally failed to comply with them. Their breaches have led to irremediable loss to the plaintiff. The defendants apparently have adopted a “catch me if you can” attitude when the plaintiff was attempting to serve them with the court orders.

40.I must admit that this is not an easy case and I have very nearly decided to send both defendants to prison. However, having considered all circumstances, particularly the fact that the defendants have fully purged their contempt, I accept that immediate custodial sentence is not called for in the present case, and a fine is more appropriate.

41.When the Court considers the level of fine to be imposed, it has to take into account the personal background of the contemnor.

42.The 1^st defendant is now 47 years old. She is a mother of 4 children (aged 7, 9, 11 and 15). She is now in the course of divorce from Mr Yu (the Divorce Petition was filed on 8 November 2021). She is a director/manager of various companies and has a monthly income of around $30,000. Be that as it may, as disclosed upon this Court’s further enquiry, she is also receiving maintenance pending suit in the sum of $100,000 per month from Mr Yu. She is holding a substantial amount of assets in the region of $8 – $9 million. She is also a sole proprietor of a restaurant.

43.The 2^nd defendant is now 67 years old. She is divorced. She is a director/manager of various companies and has a monthly income of around $26,000. Having said that, she is the sole proprietor of 2 restaurants. She is also holding a substantial amount of assets in the region of $8 – $9 million.

44.When I set the amount of fine, I should also bear in mind the indemnity costs order which has been made in the hearing held on 28 April 2023 and the indemnity costs order which is to be made at the end of this hearing.

45.Be that as it may, given the seriousness of the matter, I do not think the level of fine should be set too low, otherwise a wrong signal would be sent.

46.I therefore impose a fine of $200,000 on each of the defendants, which shall be paid on or before 2 July 2024.

COSTS

47.The plaintiff’s costs of and occasioned by these proceedings should be paid by the defendants on indemnity basis. Such costs are assessed on gross sum basis at $180,000, and shall be paid on or before 2 July 2024.

OTHERS

48.The bail conditions imposed on the defendants on 22 May 2023 are discharged, and the bail money of $35,000 each may be used to set off part of the fine.

Mr Jason Tang, instructed by Tso Au Yim & Yeung, for the plaintiff

Mr Simon Kwong, instructed by Long An & Lam LLP, for the 1^st and 2^nd defendants