Create Together Technology Co., Ltd v. Kong Hok Fung

HCMP 2295/2024

[2025] HKCFI 4965

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2295 OF 2024

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JUDGMENT

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1.This is an application by the Plaintiff by Amended Originating Summons dated 6 November 2024 (“the Amended OS”) for an order of committal against the Defendant on the grounds that he has breached and/or aided and abetted Welltec Industrial Equipment Limited (“Welltec”) to breach an injunction order made by this court against Welltec on 9 April 2024 in HCA 659/2024 (“the Injunction Order”) continued by DHCJ KC Chan by his order dated 19 April 2024.

2.The Injunction Order contains a properiety injunction and a Mareva injunction (“the Mareva Injunction Order”) . The Mareva Injunction Order is in the following terms:

“2. [Welltec], whether acting by itself, its nominees, servants or agents or any of them or otherwise, must not:-

(1) Remove from Hong Kong any of its assets which are within Hong Kong, whether in its own name or not, and whether solely or jointly owned, up to the value of USD3,450,000 or its Hong Kong dollars equivalent, or

(2) In any way dispose of or deal with or diminish the value of any of its assets, which are within Hong Kong, whether in its own name or not, and whether solely or jointly owned up to the value of USD3,450,000 or its Hong Kong dollars equivalent. This prohibition includes the following assets in particular:-

(i) any money in [the account numbered 016-478-000-616800 with DBS Bank (Hong Kong) Limited;

(ii) any money in the account numbered 382849103954401 with Bank of Communications (Hong Kong) limited; and

(iii) any money in the account numbered 86252202496 with Fubon Bank (Hong Kong) Limited.”

3.Madam Recorder Lam SC by her Judgment dated 6 November 2024 ([2024] HKCFI 2819) discharged the Marvea Injunction Order on the grounds that there is an interesting legal argument regarding the applicablility of restitution under unjust enjustment when a binding contract is in place. The learned Recorder opined that due to this legal question, the Plaintiff could not meet the threshold of showing a good and arguable case for the grant of a Marvea injunction (§§42-43,46).

4.In the Statement of Facts filed on 23 October 2024, the core complaint is that from the bank statements disclosed by the defendant pursuant to an ancillary disclosure order made by DHCJ KC Chan dated 10 May 2024, it was found out that after the grant of the Injunction Order, substantial amounts of monies were being withdrawn and transferred from the bank accounts of Welltec by the Defendant being the sole signatory of such accounts. The Defendant was served the Injunction Order endorsed with a penal notice and must have knowledge of the terms of the Injunction Order. He breached the Mareva Injunction Order and/or aided and abetted Welltec to breach the Marvea Injunctin Order by disposing of, dealing with, and/or diminishing the value of Welltec’s assets, which are within Hong Kong up to the value of USD3.45 million or its Hong Kong dollars equivalent from April to October 2024.

5.This court made an order in terms of the consent summons dated 10 February 2025 and gave directions to the parties regarding the filing of affirmations. The Plaintiff principally relies on the Affirmation of Crystal Lum dated 20 December 2024 and the Defendant has not filed any affirmation. By a letter dated 14 February 2025, the Defendant’s solicitors Messrs. Jal N. Karbhari & Co. indicated that the Defendant would not contest the present application.

6.Mr Leung, for the Defendant, confirms at the hearing that the Defendant admits the charge of contempt. Mr Leung further seeks leave to file the Affirmation of Kong Hok Fung dated 15 July 2025. The Affirmation sets out the factual matters relied upon by the Defendant for mitigation purposes.

7.No doubt the application should have been made much earlier. Knowing the Plaintiff has nothing to reply to the said affirmation and that the contents are relevant to sentencing, I grant leave to the Defendant to file the said affirmation.

The breach proved

8.In paragraph 35 of Crystal Lum’s Affirmation, she provides a table settting out the balances as at 18 April 2024 and October 2024 in the disclosed bank accounts of Welltec (“the Table”). The transfers and withdrawals in these bank accounts are also evidenced by Schedule 1 to the Amended OS (annexed hereto) and Schedule 1 to the Notice of Appointment to Hear Originating Summons. The Table appears below:

Banks Account numbers	Account balance as at 18 April 2024	Amounts allegedly deducted / withdrawn (as asserted by the Defendant after OS was issued)	Account balance as at Oct 2024
Bank of Communication (Hong Kong) Limited   382-849-1-039544-02	–HKD 12,872,939.81 (31.3.2024)	–HKD 330,468.07	–HKD 4,240,261.24
Citibank N.A., Hong Kong Branch   006-391-62205226 (1220522004)	HKD 2,084,020.16 Time deposit: maturity on 28 May 2024, maturity amount HKD 2,084,020.16	–HKD 2,087,305.68	HKD 32,324,95
Fubon Bank (Hong Kong) Ltd   128-862-0732929-5	HKD 364,678.10   (11.4.2024)	–HKD 674,082.15	–HKD 309,062.06
Fubon Bank (Hong Kong) Ltd   128-862-0732930-2	HKD 104,340.61   (9.4.2024)	–HKD 1,760,530.15	–HKD 158,082.61
Fubon   128-862- 5220249-6	USD 350,448.12   (10.4.2024)	–USD 378,712.59	–USD 27,833.77
Hong Leong Bank Berhad, Hong Kong Branch   248-0010001478 (100010010001478344)	HKD 76,986.32 (31.3.2024)	–HKD 6,919,903.99	HKD 8,384.18
HSBC   004-178-821633-001	– HKD 1,723,541.22	–HKD 59,844.30	–HKD 1,783,385.52

9.The Defendant has not adduced any contrary evidence and does not dispute that these activities in the bank accounts amount to breaches of the Mareva Injunction Order. He is the sole shareholder and director of Welltec and the transfers and withdrawals were made intentionally. He had the requsite state of mind and he committed personally and aided and abetted the breaches with his full knowledge of the Mareva Injunction Order.

10.I am satisfied that the Plaintiff has proved beyond doubt the breaches and the Defendan’s contempt is proved on his own admission.

Applicable sentencing principles

11.I reviewed the authorities expounding the relevant sentencing principles in Poon Ki Chi v Poon Chuk Hung Jason [2024] 2 HKLRD 851 and I believe it suffices for me to reproduce the material paragraphs (§§18 to 19) thereof below:

“… In China Shanshui Cement Group Limited and Ors. v Zhang Caikui and Anor. [2018] HKCFI 1192, at §4, Madam Au Yeung J, for the material prinicples, referred to her previous decision in Arboit v Koo Siu Ying (No 2) [2016] 3 HKLRD 154, §§2-10:

(a) 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.

(b) 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. The court has to balance the 2 objects.

(c) The sentence for contempt may range from a fine to a term of imprisonment.

(d) 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.

(e) The court may suspend a term of imprisonment for such period or on such terms as the court deems fit. 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.

(f) The court will consider if there are aggravating factors, mitigating factors, and acts to purge the contempt.

(g) Relevant factors (which are not exhaustive) include:

(i) The nature of the order and breach in question, and the extent of the breach.

(ii) Whether the contempt was contumacious or unintentional, the reasons, motives and state of mind.

(iii) Whether the claimant has been prejudiced by virtue of the contempt and whether the prejudice is capable of remedy.

(iv) Whether the contemnor appreciates the seriousness of the deliberate breach.

(v) Whether the contemnor has cooperated.

(h) As circumstances of contempt vary greatly, there is little mileage to be gained from the citation of other cases on sentence.”

Mr Chan refers to the decision of Lisa Wong J in Kot See For v Chan Leong Hang [2021] HKCFI 498 in which the learned judge said this (at §§26-27):

“26. Sir Gerard Brennan NPJ authoritatively laid down these principles in Kao, Lee & Yip v Donald Koo Hoi Yan (2009) 12 HKCFAR 830 at [6], [21], [24], [30]:

(1) The objective of civil contempt proceedings is the maintenance of the court’s authority. The administration of justice would be undermined if any court order could be disregarded with impunity.

(2) An allegation of civil contempt must be proved strictly. The contemnor’s guilt is to be proved beyond reasonable doubt.

(3) Where the alleged contempt is based on a failure to comply with a court order, it is necessary to (a) construe the relevant order to ascertain its meaning and operation; (b) determine if the defendant in fact complied with the order so construed; and (c) consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

27. As to the relevant state of mind in civil contempt:

(1) It is sufficient to demonstrate (a) that the contemnor’s conduct was intentional in the sense of consciously, voluntarily and unaffected by any mistake, as opposed to casually, accidentally or unintentionally; and (b) that he knew the facts which rendered it a breach of the order.

(2) It is not necessary to show that the defendant realised that his conduct would constitute a breach.

(3) Reasons, motives and understandings of the contemnor may be highly relevant to penalty but not to liability.

See Arlidge, Eady & Smith on Contempt (5^th ed, 2017), §§12-94 – 12-95; Kao, Lee & Yip, [45], [46] & [53] per Sir Gerard Brennan NPJ.”

12.Mr Leung cites to me Wong Luen Hang v Chan Yuk Lung [2023] HKCFI 304 in which Linda Chan J highlighted that whilst it is immaterial that the breach was committed in reliance on a third party’s advice, even legal advice, questions as to the bona fides of the persons who are in contempt, and their reasons, motives and understandings in doing the acts which constitute the contempt of court, may be highly relevant in mitigation of the contempt.

13.Mr Chan, for the Plaintiff, reminds this court that deliberate breaches should be met with an immediate term of imprisonment, which is measured in months rather than weeks: Yu Quan Li & Anor. Suen Kin Wing [2024] HKCFI 109..

14.Lastly, it is trite that any subsequent discharge of the injunction breached by the defendant provides no defence or mitigating factors. As long as an order is in force, it must be obeyed no matter what happens to it afterwards: see Arlidge, Eady & Smith on Contempt (5^th ed. 2017), §12-163.

15.Mr Chan has helpfully referred to this court a number of authorities in which custodial sentences were passed for breaches of injunction by dissipation of assets. I do not find it necessary to set them out here and each case is really dependent on its own facts.

Mitigation

16.I have read the Defendant’s affirmation. On his evidence, Mr Leung advances the following mitigating grounds.

17.The Defendant was only actively involved in the withdrawals of funds from Dah Sing Bank account until 7 May 2024 upon the influence of inaccurate advice given by his former legal representatives, namely, Messrs. Pansy Leung Tang & Chua and his bank manager at Dah Sing Bank. The Defendant alleges that his lawyer advised him that apart from the three specified banks in the Mareva Injunction Order, he could use the funds in the other bank accounts of Welltec, in particular, Dah Sing Bank accounts, to continue to run its business. His former legal representative only advised him that the Mareva Injunction Order applied to all the bank accounts of Welltec on or around 7 May 2024.

18.The bank manager at Dah Sing Bank also reassured the Defendant that the Mareva Injunction Order did not cover Welltec’s accounts with Dah Sing Bank.

19.The Defendant arranged more than HK$10,000,000 to be deposited into the Bank of Communications and Hong Leong Bank accounts. These deposits , in his submission, should be considered as partial purge of his contempt.

20.The Defendant should not be held responsible for the withdrawals amd deductions made by the banks themselves despite their notice of the Mareva Injunction Order.

21.There was a consistently positive (and increasing) balance over November 2023 to April 2024 in the PAO Bank account.

22.As regards theDefendant’s personal circumstances, he is 63 years old, having a clear record. He is facing an imminent divorce with his wife whom he married about 20 years ago. He lost his reputation as a businessman and has suffered psychological stress and insomnia due to the legal proceedings among the Plaintiff, Welltec and him.

23.The Defendant makes an unreserved apology to this court showing his deep remorse.

Discussion

24.This is a serious and intentional breach of the Mareva Injunction Order in my view. The Defendant tried to deflect some blame onto his former lawyers and the bank manager only in the eleventh hour. I cannot readily accept his explanation, which is not really supported by the withdrawals and transfers in the accounts after 7 May 2024. His former lawyers and the bank manager had no chance to respond to his allegations too.

25.Regarding the alleged partial purge of the contempt by the deposit of HK$10 million to the accounts with the Bank of Communications and Hong Leong Bank, as rightly pointed out, such injection of funds to the former account merely reduce the heavy deficit and the account still remains heavily in the red. For the latter, there were actually substantial withdrawals shortly after the deposit.

26.I cannot accept that the Defendant could do nothing to stop the banks to make “automatic deductions/withdrawals” from the accounts of Welltec. The banks have not been given a chance to respond to this allegation. Such purported automatic deductions for interest payments are relatively insignificant, nevertheless.

27.In my view, the admission of contempt and the apology tendered are the only mitigating factors of substance despite my sympathy for his hardship.

28.By reason of the cynical and delibrate breaches, the Plaintiff was deprived of the protection afforded by the Mareva Injunction Order.

29.I have considered all the authorities helpfully drawn to my attention by Mr Chan, which indicate that an imprisonment term appears to be a very common sentencing option for breaches of Mareva injunctions. Of course, each case has to be decided on its own facts.

30.In the present case, I believe that an immediate custodial sentence is appropriate. Taking into all the mitigating factors and his personal circumstances, I am satisfied that the Defendant should stand committed to prison for a period of 2 months.

31.The Plaintiff asks for indemnity costs and its Statement of Costs is available for my summary assessment. Having heard Mr Leung’s submissions on the Statement of Costs, I summarily assessed the costs of the Plaintiff of the Amended OS payable by the Defendant at HK$500,000 to be paid within 28 days.

32.Lastly, I thank Mr Chan and Mr Leung for their helpful assistance in this matter.

Mr Chan Yip Hei, instructed by Ivan Tang & Co., for the Plaintiff

Mr Kevin Leung, instructed by Messrs. Jal N. Karbhari & Co., for the Defendant

ANNEX

Schedule 1 to the Amended OS