Cartier International Ag and Others v. Dynasty Jewelry (Hong Kong) Ltd and Others

CACV 232/2021, [2025] HKCA 818

on appeal from [2021] HKCFI 138 &

[2021] HKCFI 1005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 232 OF 2021

(ON APPEAL FROM HCMP 704 OF 2018)

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BETWEEN

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J U D G M E N T

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Hon Barma JA (giving the Judgment of the Court):

1.By a judgment dated 22 August 2023 (“the Judgment”), this court (Yuen JA, Barma JA and G Lam JA)  dismissed the defendants’ appeal (and allowed in part the plaintiffs’ cross-appeal)  against two judgments of Mimmie Chan J (“the Judge”)  dated 19 January 2021 (“the Contempt Judgment”)  and 16 April 2021(“the Penalty Judgment”)  by which the Judge respectively (i)  found the defendants guilty of contempt of court by their breach of a consent order dated 27 October 2017 (“the Consent Order”)  and a consent judgment dated 20 December 2017 (“the Consent Judgment”); and (ii)  imposed a fine on the 1^st defendant and committed each of the 2^nd and 3^rd defendants to a term of imprisonment.

2.The facts and issues in the substantive appeal (and the cross-appeal), as well as the court’s reasons for dismissing the appeal (and for allowing in part the cross-appeal), are set out in the Judgment (at [2023] HKCA 1002).  We will not repeat them here.

3.At the conclusion of the hearing on 17 January 2023, we extended the stay of execution of the penalties imposed on the defendants by the Judge pending delivery of the Judgment, as well as leaving open the question of costs of the appeal (and of the cross-appeal)  to be addressed by the parties, in respect of which the plaintiffs and the defendants lodged written submissions on 5 September 2023 (respectively “Ps’ Costs Skel” and “Ds’ Costs Skel”).

4.The defendants subsequently applied, by a Notice of Motion filed on 19 September 2023, for leave to appeal against the Judgment to the Court of Final Appeal. The application for leave is opposed by the plaintiffs.

5.Upon joint application by the parties on 5 October 2023 and by order of this court dated 6 October 2023, execution of the defendants’ penalties was further stayed until determination of the Notice of Motion.

6.In respect of the Notice of Motion, the defendants and the plaintiffs respectively lodged written submissions on 4 October 2023 (“Ds’ Skel”)  and on 17 October 2023 (“Ps’ Skel”), which were followed by the defendants’ reply submissions on 24 October 2023 (“Ds’ Reply”).  Although Ds’ Skel was lodged one day late, having regard to the short delay and the explanation provided in [1] of Ds’ Skel, we would grant leave for the defendants to lodge and rely on the same in support of the present application.

7.Having considered the Notice of Motion and the parties’ written submissions, we see no reason to depart from the usual practice of determining an application of this kind on the papers.  We have therefore determined the defendants’ application on the basis of the documents filed.

The present application

8.The Notice of Motion identified numerous “questions”, spread across 9 paragraphs, all of which are said to be questions of great general or public importance (“GGPI”).  The “or otherwise” ground is not relied upon by the defendants. These “questions” are set out fully in the Appendix to this judgment. 

9.We agree with Mr Philips Wong, for the plaintiffs, that the “questions” set out in the Notice of Motion are not properly formulated as questions and take the form of submissions or argument, rather than proper questions of GGPI. 

10.In our view, the matters stated at some length in the Notice of Motion can be more appropriately reformulated into a single proposed question as follows:

“In proceedings for an order for committal for civil contempt of court where the burden is on the applicant to prove such contempt to the criminal standard, whether there is a burden on the respondent to lay the evidential basis for a hypothesis which might be consistent with the respondent’s innocence (which in the present case was the issue of whether statements made by the 2^nd and/or 3^rd defendants as to additional customers and sales, pertaining to the four instances in respect of which the Judge found breaches of the recipient disclosure orders in the Consent Order and Consent Judgment, were or might have been mere “sales talk”)[1], and if so, how could such a burden on the respondent be reconciled with his entitlement not to call any evidence, his right to silence and counsel’s duty not to put matters lacking in evidential basis to a witness? (‘the Question’)”

The Question

11.In respect of the Question as reformulated above, the following aspects of this court’s reasoning in the Judgment dismissing the defendants’ appeal should be noted:

(i)  There was no dispute by the parties at any stage of the proceedings as to the fundamental principles applicable to civil contempt actions, including the principle that the burden of proving contempt (to a criminal standard)  was on the plaintiffs (see [22] of the Judgment).

(ii)  The appeal was brought primarily against the Judge’s findings of contempt arising from the ‘four instances’ of breach of the recipient disclosure orders contained in the Consent Order and Consent Judgment found by the Judge (see [4]-[5], [23], [31], [34]-[35] of the Judgment).

(iii)  The ‘four instances’ were referred to in the plaintiff’s affirmation evidence at trial, and the defence sought only to cross-examine one of the plaintiff’s witnesses, Mr Ahmed, a private investigator employed by the plaintiffs, but did not seek to cross-examine the plaintiffs’ other witnesses, all of whom were made available to the defendants for cross-examination.  The defendants, as they were entitled to, elected not to give evidence, nor did they seek to rely on their evidence that had been filed in opposition to the application for committal for contempt (see [23]-[24] of the Judgment).

(iv)  In the appeal, the defendants sought to overturn the Judge’s factual findings on the existence of additional, actual and undisclosed sales (revealed in the ‘four instances’), for which the usual threshold of such findings being “plainly wrong” required to be satisfied (see [40] of the Judgment).

(v)  In making those factual findings, the Judge relied on (i)  verbal statements made by the 2^nd and 3^rd defendants in the course of the ‘four instances’ and (ii)  WhatsApp messages (and photographs of the jewellery sold to other customers in those sales)  sent by the 2^nd and 3^rd defendants to Mr Ahmed, which corroborated their verbal statements to Mr Ahmed, as admissions of additional, undisclosed actual sales (see [43]-[54] of the Judgment).

(vi)  There was no inconsistency, as alleged by the defendants, in the Judge’s determination and analysis with respect to the manufacturing allegations (which she dismissed)  and breaches of the recipient disclosure orders (which she upheld), as the evidence in support of the latter was stronger and carried greater weight (such evidence being photographs of and references to specific items of sold jewellery in the messages and the statements of the 2^nd and 3^rd defendants made to the plaintiffs’ investigators).  There was also no challenge by the defendants at trial against the plaintiffs’ evidence in this regard (see [47], [57]-[59] of the Judgment).

(vii)  For these reasons, we concluded that there was no basis for this court to disturb (i)  the Judge’s assessment of Mr Ahmed’s credibility, given that his evidence as to the ‘four instances’ was unchallenged by the defence and was also supported by probative evidence in the form of, inter alia, the WhatsApp messages and photographs (see [67] of the Judgment); and (ii)  the Judge’s finding that the defendants had breached the recipient disclosure orders were thus in contempt of court (see [66]-[73] of the Judgment).

12.The primary position of the defendants, as stated by Mr Sarony SC in his submissions in Ds’ Skel and Ds’ Reply, is essentially that the defendants’ contention of ‘sales talk’ amounted to nothing more than a mere ‘hypothesis’ (for which, he submitted, no evidence on the defendants’ part was required)  and did not amount to a ‘positive case’ put forward by the defendants (for which evidential basis was required)  (see Ds’ Skel at [5]-[7]; Ds’ Reply at [4]).

13.He submitted that as the plaintiffs’ case is premised on actual sales of the infringing items, they had “[put] the cart of proof of sale before the horse”, and exhibited a “cavalier disregard” for the principles observed by Ma J (as he then was)  in Citybase Property Management Ltd v Kam Kyun Tak & Ors (No.1) [2003] 2 HKC 98 at [17(1)] by failing to prove that there were actual sales or to provide an explanation as to why “first hand evidence” in support of actual sales was unavailable (see [6] of Ds’ Reply).  Mr Sarony emphasised, at [7] of Ds’ Reply, that the reference by the 2^nd and 3^rd defendants to sales to other customers could only be for “the purpose of the sales technique, puffing, boasting”.

14.With respect to Mr Sarony, we are unable to subscribe to the logic behind his submissions and consider the aforesaid arguments to be untenable.

15.First, the Judge had rejected the defendants’ claim of ‘sales talk’ in respect of the four instances, and this court did not consider such rejection to be plainly wrong (see [61]-[65] of the Judgment).

16.Second, we do not consider Mr Sarony’s purported distinction between ‘hypothesis’ and ‘positive case’ helpful, or justified.  There is simply no basis for attempting to dress up the defendants’ case or defence that what they told Mr Ahmed was no more than ‘sales talk’ as a mere ‘hypothesis’ in order to try to circumvent their burden of adducing some evidence in support of it.

17.The defendants’ reliance on general criminal principles, such as that the plaintiff is said to bear “the criminal burden of proof” (see [6] of Ds’ Reply), is misconceived.  In civil contempt proceedings, the plaintiff bears the burden of proving contempt on the part of the defendant to the criminal standard – i.e. beyond a reasonable doubt.  Once such burden is discharged on the evidence to the satisfaction of the trial judge, leading to the judge’s finding of contempt, the evidential burden of laying some evidential basis for any defence (whatever label is put on it)  advanced by the defendant in an attempt to avoid a finding of contempt, must lie with the defendant himself. This is no different from the position in criminal cases. Once a prima facie case has been established on the basis of the prosecution evidence, it is for the defendant to put forward countervailing evidence.  If he fails to do so, he can have no complaint should he be convicted.

18.In the present case, the plaintiffs satisfied the Judge beyond reasonable doubt that the defendants have breached the recipient disclosure order in respect of the ‘four instances’, and we have in the Judgment set out our reasons as to why the Judge’s conclusions as to such breaches should not be disturbed.

19.The defendants’ complaint is essentially that they should not have been required by the court to adduce any evidence in support of a contention (i.e. “sales talk”)  advanced by them, when such contention was (they suggest)  nothing more than a mere ‘hypothesis’ as opposed to a properly and duly advanced ‘positive case’ for their own defence.  We are unpersuaded by this supposed distinction, which in our view is wholly lacking in merit. 

20.While it is established principle that a defendant does not bear the burden of disproving any part of a plaintiff’s case (the burden of proving which rests squarely on the plaintiff), it is, to our mind, misconceived to suggest that a defendant to court proceedings whether civil or criminal, may blithely advance a contention that is contrary to the plaintiff (or opposing party)’s case, but not be required to adduce any evidence in support of such contention, so that the plaintiff is in effect required to disprove such ‘hypothesis’.

21.Even more problematic is the implication of such an argument that the court itself should be expected to entertain and have regard to such ‘hypothesis’ in the absence of any evidential basis provided by the party advancing it.

22.This does not, in our view, infringe on the defendant’s ‘right to silence’.  Nor does it contravene his right not to call evidence.  It remains the case that the defendant is under no obligation to call evidence or to speak.  But it does not follow from this that, if the plaintiff makes good a prima facie case against the defendant, that the defendant may not be convicted of contempt in the absence of some contrary evidence or explanation provided by him.

23.Similarly, we do not see how requiring evidence to be forthcoming from the defendant in support of his case of, here, ‘sales talk’, engages the duty of counsel not to put a case for which there is no evidential foundation.  If Mr Sarony’s clients were not in a position to give evidence that what they did was merely to make ‘sales talk’ or puffery, it would not be proper for that case to be run.  It would not, we think, be open to the defendants to suggest that this was a mere ‘hypothesis’ but one to which the court should have regard.

24.Further, Mr Sarony’s reliance on the dicta of Ma J (as he then was)  at [17(1)] of Citybase Property Management Ltd does not advance the defendants’ position (see [8] of Ds’ Skel).  In that paragraph, Ma J stated:

“17.  Having said that the standard of proof is the criminal one (i.e. beyond reasonable doubt), I should however point out what may possibly regarded as anomalies in this type of proceedings:

(1)  Affidavit evidence is invariably used in committal proceedings unless otherwise directed by the court … Furthermore, hearsay evidence is permissible … The court obviously has a discretion whether or not to disregard such evidence and is certainly duty bound to consider carefully the quality of such evidence. I would, however, make this observation: where contempt proceedings are involved, although affidavit evidence is both admissible and normal, it is important that as much first hand evidence of the actual contempt is adduced or if not, an explanation given as to why such evidence is unavailable. This is not to fetter a court's consideration of hearsay evidence where appropriate, but no court would wish to make a finding of contempt unless the evidence to support such a finding was good. It is to be borne in mind that in contempt proceedings, there is no burden on the respondent to prove his innocence…”

25.The following may be deduced from the above paragraph:

(1)  Affidavit evidence is admissible in contempt proceedings, and a court’s discretion to admit and consider hearsay evidence where appropriate is unfettered.

(2)  As much first hand evidence of actual contempt should be adduced, or “if not” (meaning if there is no or inadequate first hand evidence of actual contempt), an explanation should be provided as to why such evidence is “unavailable”.

(3)  The court would be inclined to make a finding of contempt if the evidence in support was “good”.

26.In the present case, the plaintiffs’ witnesses who gave evidence of alleged contempt on the part of the defendants did provide affidavit evidence and were made available for cross-examination at trial.  The defendants had elected not to cross-examine the plaintiffs’ witnesses with the exception of Mr Ahmed. There can therefore be no legitimate complaint that the plaintiffs had failed to adduce good first hand evidence on the defendants’ contempt, which evidence was accepted by the Judge whose findings were undisturbed by this court on appeal.

27.As submitted by Mr Wong, by ‘sales talk’, the defendants were positively suggesting that their statements of actual sales of infringing goods to other customers were false (see [9] of Ps’ Skel)  – i.e. the defendants denied the existence of actual sales.  This contention was advanced to counter the plaintiff’s case, which had been accepted by the Judge on the evidence, that actual sales indeed took place.  The burden was therefore on the defendants to satisfy the court by evidence that the additional sales did not actually occur.  They simply failed to do so. 

28.For completeness, we would say that while a defendant or respondent is entitled not to adduce evidence by way of defence, and may elect not to give evidence at trial, these elections (which are matters for the defence)  clearly do not preclude the court from making adverse findings against him on the strength of the plaintiff’s (and all available)  evidence, as in the present case.  It is putting the cart before the horse to suggest that counsel for the defendant had a duty not to put the case of ‘sales talk’ to the plaintiffs’ witness where such case was merely a ‘hypothesis’ with no evidential basis.  If such ‘hypothesis’ or ‘case’ had no support in evidence, or instructions from the defendants which they were prepared to attest to, reliance on it by the defendants for any purpose in these proceedings would, as we have explained above, have been problematic and it should not have been raised.

29.For these reasons, the Question is plainly unarguable, and cannot be said to be one of GGPI.  We accordingly dismiss the Notice of Motion filed on 19 September 2023.

30.Although we dismiss Notice of Motion, we will extend the stay of execution for [28] days from the date of this judgment to enable the defendants to make an application for leave to appeal to the Court of Final Appeal should they wish to do so.  In the event that such an application for leave to appeal is lodged within the time limited for doing so, the stay will be further extended pending the determination of that application.

31.The application having been dismissed, we see no reason why costs should not follow the event.  We therefore order (on a nisi basis)  the defendants to pay the plaintiffs’ costs of this application, to be taxed on the indemnity basis if not agreed, having regard to the lack of merit in the application.

Costs of the appeal and cross-appeal

32.As to the costs of the appeal before us, Mr Wong for the plaintiffs submitted that costs of the defendants’ appeal, inclusive of the costs of the written submissions on costs, should follow the event.  As to the costs of the cross-appeal, he submitted that notwithstanding that it was only allowed in limited part, hardly any time was used at the hearing for argument on parts of the cross-appeal on which the plaintiffs were ‘unsuccessful’ (namely the review of the defendants’ penalties)  (see [7]-[8] of Ps’ Costs Skel), and so such costs should also be awarded to the plaintiffs.  Mr Wong further submitted that these costs should be assessed on an indemnity basis in accordance with general practice, as the plaintiffs had little to gain in prosecuting these proceedings but to compel the defendants to comply with the court’s orders (see [9] of Ps’ Costs Skel). 

33.Messrs C&T Legal LLP (“Messrs C&T”)  for the defendants accepted that costs of the appeal should follow the event, and that such costs should be awarded to the plaintiffs on an indemnity basis (see [1] of Ds’ Costs Skel).  In respect of the costs of the cross-appeal however, they submitted that as the court had only found for the plaintiffs in respect of breaches of the supplier disclosure order and that they did not succeed on their “primary case”, costs of the cross-appeal should be awarded to the defendants (see [4] of Ds’ Costs Skel).  Messrs C&T went on to submit that considering matters in the round, the overall “appropriate outcome should be no order as to costs”.

34.We are of the view that costs of the defendants’ appeal should follow the event, and should be assessed on an indemnity basis.  As regards the costs of the cross-appeal, while the plaintiff was partially successful, it was successful only to the extent of the mirror image of the recipient disclosure breaches found by the Judge, and failed in respect of the wider case in respect of the Judge’s failure to deal with the additional infringing goods as listed in Schedule 1 to the respondent’s notice (see [38] and [75] of the Judgment). Taking matters in the round, we think that there should be no order as to costs of the cross-appeal.  The costs awarded are to be taxed on the indemnity basis if they cannot be agreed.

Written Submissions by Mr Philips BF Wong and Mr William Tse, instructed by Robin Bridge &  John Liu, for the plaintiffs

Written Submissions by Mr Neville Sarony SC and Ms Angel W Lau, instructed by C&T Legal LLP, for the defendants  

Appendix

The Questions

1.  In the context of Civil proceedings for an Order for Committal for Contempt of Court, where: -

a.  the burden of proof is on the applicant/plaintiff,

b.  the standard of proof is criminal,

c.  there being no onus on the respondent/ defendant to prove anything given his / her right to remain silent, and

d.  there exists a hypothesis which might reasonably be consistent with the respondent/ defendant's innocence,

(Concorde Construction Co Ltd v Colgan Co Ltd & Another (No.2) [1984] HKC 253 per Rhind J at p.257 D-E)[2]

1.1  Does it then fall upon the respondent/defendant to lay the evidential basis for such a hypothesis?

1.2  If Question 1.1 above is answered in the affirmative, how is that burden on the respondent/defendant to be reconciled with: -

a.  his / her entitlement not to call any evidence; and

b.  Counsel’s duty not to put to a witness any matter upon which no evidence is adduced.

2.  The argument put forward on behalf of the Defendants - and accepted by the trial Judge in rejecting, among other things, the Plaintiffs’ primary contention that the Defendants were major manufacturers of counterfeit jewellery[3] - is that absent proof of actual sales, the Defendants’ statements of having sold Infringing Items could equally well be no more than sales talk.

3.  In rejecting the Defendants’ appeal in relation to the four instances, the Court of Appeal held at §61(2)that: -

In any event, there was no evidence from the defendants to suggest that their statements (whether in relation to manufacturing or sales to other customers)  were mere sales talk. The defendants elected not to rely on their affirmations made for the purposes of the contempt hearing, and did not offer themselves for cross-examination.  Although Mr Sarony submitted that the court should give the defendants the benefit of all reasonable doubts before convicting them of contempt, it seems to us that where a positive case (such as statements being mere sales talk or boasting)  is being put forward to explain away statements that might reasonably be accepted as statements of fact, it is necessary for some evidential basis to be laid before the court can be asked to have regard to the explanation.  No such evidential basis was laid here. (Emphasis added)

4.  The Defendants were not advancing a positive case but a hypothesis, being an idea or explanation of something that is based on a few known facts but that has not yet been proved to be true or correct, in other words, a theory.  In the context of proof beyond a reasonable doubt, a hypothesis is a reasonable inference to be drawn from known facts.  It is submitted that drawing that inference is the function of the fact-finding tribunal, not that of a witness to the case.  Were Counsel required to put a hypothesis to the witness, effectively turning a hypothesis into a positive case (as erroneously decided by the Court of Appeal),[4] it would then need an evidential basis, which in itself would reverse the onus of proof, compelling the Defendants to give evidence and exposing themselves to cross-examination, contrary to his / her right to remain silent.

5.  Ma J (as His Lordship then was)  observes in City base Property Management Ltd v Kam Kyun Tak & Ors (No. 1) at §17(1),[5]

... where contempt proceedings are involved, although affidavit evidence is both admissible and normal, it is important that as much first hand evidence of the actual contempt is adduced or if not, an explanation given as to why such evidence is unavailable. This is not to fetter a court's consideration of hearsay evidence where appropriate, but no court would wish to make a finding of contempt unless the evidence to support such a finding was good. It is to be borne in mind that in contempt proceedings, there is no burden on the respondent to prove his innocence. (Emphasis added)

6.  The Plaintiffs’ case is premised on proof of actual sales of Infringing Items without adducing direct, first-hand evidence of such sales whatsoever, or any explanation as to why such evidence is unavailable.

7.  The Plaintiffs, having failed to secure direct, first-hand evidence of actual sales, sought to prove the fact of sales on the basis of statements made in the course of oral exchanges between the 2^nd or 3^rd Defendant (who was trying to solicit more business)  and the Plaintiffs’ inquiry agent Ahmed. These statements, properly described as such in the early part of the Court of Appeal Judgment at §§31(1)-(3),subsequently lose their neutral character and become the four “instances of self-confessed dealings in Infringing Goods”at §39(1)[6], “a clear admission”at §46 and “an admission”at §49.

Concurrent findings of fact

8.  The proposition of law upon which the Court of Appeal reached its decision, namely, by effectively reversing the burden of proof, would violate a fundamental principle of law with regard to a defendant in Committal for Contempt proceedings and is so erroneous as to require correction. In Sky Heart Ltd v Lee Hysan Estate Co Ltd [l999] l HKC 18, 34B-F, Bokhary PJ, citing the leading case of Srimati Bibhabati Devi v Kumar Ramendra Narayan Roy [1946] AC 508 at 521-522 (where Lord Thankerton delivers an advice in the Privy Council), notes: -

(4.)  …That the violation of some principle of law or procedure must be such an erroneous proposition of law that if that proposition be corrected the finding could not stand; … The question whether there was evidence on which the courts could arrive at their finding was such a question of law.

9.  It is respectfully submitted that the present case falls squarely into this category.