Leong Ma Li v. High Fashion New Media Corporation Limited (Suing on behalf of Itself and Also in Its Capacity As the Sole Shareholder of Longford Information and Technology Co., Limited) (上海梁富信息科技有限公司)

Press Summary (English)

Press Summary (Chinese)

FACV No 6 of 2025

[2026] HKCFA 18

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO 6 OF 2025 (CIVIL)

(ON APPEAL FROM CACV NO 341 OF 2022)

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JUDGMENT

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Chief Justice Cheung:

1.I agree with the judgment of Mr Justice Lam PJ.  I also agree with the concurring judgment of Lord Hoffmann NPJ.  I am mindful that nothing should be said which might suggest that a court injunction may be subjected to collateral challenge in the course of contempt proceedings for its breach or non‑compliance. I am also careful to express no view on the underlying proceedings or the injunction which could be taken as pre‑judging any future application.  Subject to those reservations, I note the observations made by Mr Justice Ribeiro PJ in his judgment in relation to the proceedings and the injunction.

Mr Justice Ribeiro PJ:

2.I have had the advantage of reading in draft the judgment of Mr Justice Lam PJ.  I respectfully agree with its reasoning and conclusions in allowing the appeal against the finding of contempt and consequentially setting aside the committal order imposed on the appellant.  I also respectfully agree with the judgment of Lord Hoffmann NPJ.

3.I should also make it clear that I fully accept the importance of the rule against collateral challenge so that a court’s orders have to be obeyed unless and until they are set aside.  Nothing I say is intended to question that principle.

4.However, there are aspects of what I consider to be the oppressive way in which these proceedings have been conducted which I wish to highlight so that if any future proceedings are similarly conducted, such objectionable features should be recognized and meet with prompt challenges in court.

The joint venture

5.The factual background is set out in Mr Justice Lam PJ’s judgment.  The protagonists are the Lams (Lam Foo Wah and his two sons Will Lam Gee Yu and Well Lam Din Yu) who owned High Fashion Apparel Ltd (“HFA”) on the one hand, and Leong who owned Hansen International Ltd (“Hansen”) on the other. 

6.On 26 November 2013, HFA and Hansen entered into a joint venture agreement to develop an e-commerce retail platform on the Mainland.  They formed High Fashion New Media Corporation Ltd (“New Media”), a Hong Kong company, with HFA and Hansen contributing HK$26 million (65%) and HK$14 million (35%) respectively to its capital.  Leong and the Lams were appointed directors of New Media and Leong was named its first CEO.  Angela Yau Oi Kwan (“Yau”) was appointed New Media’s CFO.

7.For the joint venture’s Mainland operations, New Media formed and wholly owned Longford Information and Technology Co Ltd (“Longford”), a Mainland corporation.  The Lams and Leong were Longford’s directors and Leong was also its chairman and legal representative.  Madam Tong Lu Wah (“Tong”) was employed as Longford’s accountant.  Longford opened bank accounts with a branch of the Industrial and Commercial Bank of China in Shanghai (“ICBC”).  Capital contributions were credited to the ICBC capital account. 

8.Controversies arose in 2014, a few months after the joint venture agreement was signed.  According to the Lams, an arrangement (referred to as “the Protocol”) was agreed by them with Leong on 23 April 2014 for the ICBC capital account to be operated using Longford’s finance chop plus the signatures (meaning the personal seals) of Leong and Yau for transactions of less than RMB 1 million and using Longford’s seal plus the signatures of Leong and Will Lam for transactions of RMB 1 million or more. However, the Lams allege that some five days later, on 28 April 2014, Leong made herself the sole signatory of the Longford ICBC capital account without the consent of the other directors of Longford or New Media and that she attempted to withdraw RMB 300,000 and RMB 10 million without such authorisation.

9.Leong says in her defence that ICBC declined to set up a bank mandate along the lines of the Protocol, calling it too complicated.  She says that it was therefore agreed with Yau that Leong would operate the ICBC capital account using the Longford chop and her own seal, this being reflected in the bank mandate accepted by ICBC.  She says that this was known to the Lams who were well aware that neither Will Lam nor Angela Yau were ever signatories of that account.  While she accepts that RMB 300,000 was withdrawn for Longford’s operating expenses, she denies that she ever tried to withdraw RMB 10 million.

10.On 22 August 2014, the Lams passed a resolution to remove Leong as CEO of New Media, alleging dishonest acts on her part. 

The proceedings below

11.In the following month, on 18 September 2014, HFA applied in HCMP 2336/2014, under sections 732 and 733 of the Companies Ordinance (Cap 622), for leave to bring a statutory derivative action on behalf of New Media against Leong, seeking an injunction to restrain her from operating or dealing with the ICBC capital account except in accordance with the Protocol.  Chow J gave leave on 26 September 2014.  On the same day, the Longford board passed a resolution requiring compliance with the Protocol.

12.On 3 October 2014, New Media commenced HCA 1953/2014 as a purported derivative action seeking an order compelling Leong to act in accordance with the Longford resolution and restraining her from operating the ICBC capital account save in accordance therewith.  On 5 December 2014 in HCA 1953/2014, Chow J granted New Media an interlocutory injunction to such effect, ordering that:

“... Mary Leong is restrained by herself, her servants, her agents or on her own behalf or on the behalf of any other person, firm or company, whether as employee, officer, agent or otherwise howsoever dealing with the capital bank account which the 2^nd Defendant (‘Longford’) maintained with ICBC Shanghai (account no. 1001201629016236908) (‘Longford ICBC Capital Account’), except in accordance with the following arrangement unless before then it is varied or discharged by a further order of the court:

(i)     For transactions involving less than RMBl,000,000.00, the signatures of Mary Leong and Yau Oi Kwan must be obtained, in addition to the application of the Finance Chop of Longford; and

(ii)     For transactions involving RMBl,000,000.00 or above, the signatures of Mary Leong and Lam Gee Yu, Will must be obtained, in addition to the application of the Finance Chop of Longford (referred to hereinbelow as the ‘Longford Account Protocol’).”

13.The action then came to a halt.  A consent order was made by Master M Wong on 23 January 2015 that Leong be granted a general extension of time for filing her Defence terminable by notice in writing given by either party.  Thereafter, no steps were taken by New Media as plaintiff to progress the substantive action although the Lams continued to use the aforesaid interlocutory injunction against Leong.

14.That first occurred in 2017 when New Media applied to enforce the injunction.  By his judgment of 8 August 2017,[1] Chow J held that Leong had breached the same by causing a series of transactions to be made involving transfers from the ICBC capital account to other Longford ICBC accounts, which he held constituted a contempt.  It should be noted that it was not suggested that Leong had extracted funds for her own benefit.  On 3 October 2017, Chow J ordered Leong to pay fines of $400,000 and $150,000 and to pay costs on an indemnity basis.

15.Some three weeks later, on 23 October 2017, Leong sent an email to Tong in the following terms:

“As there is tremendous disagreement on management right between both shareholders of High Fashion New Media Corporation Limited, i.e. the parent company of Longford, both shareholders have taken out a series of actions in the High Court of Hong Kong to defend their rights, with the final outcome still pending. Since Longford, an enterprise in Mainland China, is a separate legal entity, in order to conserve the assets of the company, to protect the interests of the company and to uphold my personal reputation, I will no longer take part in Longford’s daily operations; however, as I am still the legal representative and a shareholder of the company, I will continue to protect the interests of the company in a reasonable and lawful manner. As regards Longford’s daily operating expenses, please apply to both shareholders periodically.”

16.It is not disputed that since 23 October 2017, Leong has not dealt with or authorised any dealings with the ICBC accounts.  On 9 November 2017 she resigned as Longford’s chairman and handed the relevant seals to Tong, the accountant employed by Longford, for Tong to operate the ICBC accounts on behalf of Longford.  Subsequently, on 28 May 2020, Leong was replaced by Wong Siu Mui Julisa (“Wong”) as legal representative of Longford and on 24 February 2021, prior to the contempt trial, Wong had withdrawn RMB10,940,000 from the ICBC capital account, largely emptying it out.

17.Remarkably, some months after Leong’s replacement, on 19 June 2020 New Media obtained leave to bring fresh contempt proceedings against her for breach of Chow J’s order of 5 December 2014, almost six years after it had first been obtained.  By its Amended Originating Summons dated 14 October 2020, New Media sought Leong’s committal for alleged further breaches involving unauthorised transactions from the capital account without the signatures of Yau or Will Lam.

18.Four categories of transactions were listed totalling RMB 64,708,895.34 in the four years or so between 29 April 2016 and 23 July 2020.  The largest category of transactions by far was Category B totalling RMB 56,000,000.00 which were transfers of idle cash in the capital account to fixed deposits in order to earn interest.  The other three categories comprised Category A, involving 30 payments totalling RMB 7,492,916.00 described as petty cash (apparently transferred from the Longford capital account to its current account); Category C, comprising seven transactions totalling RMB 484,007.00 said to be for rent, travel expenses, lawyers’ fees and air tickets and accommodation; and Category D, seven payments totalling RMB 731,972.34, naming Longford as transferee, covering various transactions said to be for rent, rental deposit, reimbursement of vehicle maintenance expenses, air tickets and salary.  Plainly, certainly as far as the RMB 56 million, as well as sums used for Longford’s expenses, are concerned, it is not suggested that the funds were extracted by Leong for her own benefit.

19.It seems to me that the following objectionable features of the proceedings emerge.

20.The Lams throughout had 65% majority control of the joint venture companies and their boards, so it was always open to them to remove Leong from management of the joint venture companies and of the ICBC bank accounts if they were concerned about her stewardship of joint venture funds.  However, they did not replace her until some six years after launching the purported derivative action.  By that action, they sought orders designed to keep Leong in charge of the bank accounts while imposing the Protocol requirements as constraints on her by way of an interlocutory injunction, thereafter utilising that injunction to threaten contempt proceedings.

21.The derivative action, brought on the application of HFA as a shareholder in New Media against Leong, purportedly under sections 732 and 733 of the Companies Ordinance, was ill-conceived.  As is clear from section 732, such proceedings are brought where misconduct is committed against a company, by a member of that company in respect of a cause of action vested in the company, with relief sought on behalf of the company. 

22.The proceedings were brought on HFA’s application on behalf of New Media but New Media has no discernible cause of action against Leong.  New Media was not party to any contract binding Leong to deal with the account according to the Protocol. While Longford had passed a resolution requiring Leong, as a director and legal representative of Longford to act in accordance with the Protocol, that gave New Media no rights against Leong.  The bank accounts which were the subject-matter of the Protocol involved Longford’s and not New Media’s funds. No proceedings have been brought by Longford.  Thus, objection could have been taken as to the absence of any basis for New Media to obtain an injunction restraining Leong from “dealing with the capital bank account which ... Longford maintained with ICBC ... except in accordance with” the Protocol.  The consequent contempt proceedings were based on the ill-founded purported derivative action and the interlocutory injunction obtained thereunder. 

23.But leaving aside the flaws in the constitution of the derivative action, some 10 years have now passed since progress on the substantive proceedings ceased.  But that does not mean that the Lams have let the action die a natural death.  Even after Leong had resigned on 9 November 2017 as Longford’s chairman and handed her seal to Tong for Tong to operate the ICBC accounts on behalf of Longford, and even after, on 28 May 2020, Leong was replaced by Wong as legal representative of Longford, the Lams, through New Media, sought to commit Leong to prison for contempt alleging breach of the interlocutory injunction’s Protocol requirements.  Complaints of Leong’s alleged responsibility for Tong’s operation of the ICBC account after Leong had relinquished control are misdirected since Tong was employed by Longford, a company which was throughout under 65% control by the Lams.  Given the fundamental change in circumstances, it is difficult to see how contempt proceedings, let alone an order for committal to prison, were justified.

24.It is striking that at the hearing before this Court, counsel for the respondent submitted that certain issues “raising serious questions to be tried” remained, despite no steps having been taken to advance any trial of such questions over the last ten years.  It is true that Leong agreed to a consent order suspending her obligation to file a defence.  If that had been where the action had been left, it would no doubt in due course have been susceptible to being dismissed for want of prosecution.  But New Media continued to pursue Leong on the basis of alleged breaches of the interlocutory injunction granted back in 2014 without any effort to progress the substantive action.  It is plainly incumbent on a plaintiff who actively seeks interlocutory injunctive relief to progress the action and not simply to exploit the injunction granted on an interlocutory basis without bringing the substantive issues to trial.

25.In my view, the present proceedings have been pursued in an oppressive manner and if an abuse of process objection had been taken in the courts below, it may well have been sustained.  It is to be hoped that in future no similar cases will arise, but if they do occur, that appropriate objections will be raised.

Mr Justice Fok PJ:

26.I agree with the judgments of Mr Justice Lam PJ and Lord Hoffmann NPJ, as to the disposal of the appeal, and also the observations of Mr Justice Ribeiro PJ regarding the oppressive manner in which the proceedings have been conducted.

Mr Justice Lam PJ:

27.This appeal raises the question of the liability of one person for the acts of another person in contempt proceedings.  Further, the submissions of counsel bring into focus the rule against collateral attack in the contempt jurisdiction.

28.The dispute between the parties has had a chequered history.  In the present appeal, the appellant (“Leong”) appeals against the finding that she was guilty in a second set of contempt proceedings[2] in respect of the operation of a bank account.  This appeal is only mounted in respect of the finding of liability.  Penalty was dealt with by Deputy High Court Judge H Au-Yeung (“the Judge”), as he then was, in the Court of First Instance in a separate judgment.  That decision is subject to a separate appeal currently pending before the Court of Appeal.  If we were to come to the conclusion that the appeal against liability should be allowed (as in my view we should for the reasons given below), it must necessarily follow that the penalty question need not be further pursued and whatever penalty imposed should be set aside.  On the other hand, if we were to come to the view that liability for contempt should be upheld, the appeal against penalty would have to take its own course in the Court of Appeal.

Background and litigation history   

29.The protagonists in this case are two camps in a joint venture.  On one side is Leong, the appellant, who through a Hong Kong company, Hansen International Ltd (“Hansen”), held 35% shareholding in the joint venture company incorporated in Hong Kong, High Fashion New Media Corporation Ltd (“New Media”).  Leong is the defendant in the underlying action HCA 1953/2014 (“the Underlying Action”).

30.The other camp is the Lam family consisting of Lam Foo Wah (“Lam Senior”) and his two sons Will Lam Gee Yu (“Will Lam”) and Well Lam Din Yu (together “the Lams”).  Lam Senior was the majority shareholder in High Fashion International Ltd, a Hong Kong listed company dealing in garments and related merchandise. It wholly owned High Fashion Apparel Ltd (“HFA”), a BVI company.  HFA held 65% shareholding in New Media.  

31.On 26 November 2013, HFA and Hansen entered into a joint venture agreement with a view to developing, managing and operating an e-commerce platform for the retail of apparel and other related merchandise involving brands owned by the High Fashion Group.  To this end, HFA and Hansen contributed HK$26 million and HK$14 million respectively to the capital of New Media.  As mentioned, HFA owned 65% and Hansen owned 35% of New Media’s shares.  Leong and the Lams were appointed directors of New Media, and Leong was named its first Chief Executive Officer (“CEO”).  Angela Yau (“Yau”), the Chief Financial Officer (“CFO”) of the High Fashion group was tasked by the Lams to oversee the finances of New Media and its subsidiaries. 

32.New Media formed and wholly owned Longford Information and Technology Co Ltd (“Longford”), a corporation incorporated in Shanghai.  The Lams and Leong were directors of Longford, and Leong was also its chairman and legal representative.  Longford opened bank accounts, including a capital account, a current account and a fixed deposit account with a branch of the Industrial and Commercial Bank of China in Shanghai (“ICBC”).  Capital contributions of the New Media shareholders were credited to the Longford ICBC capital account.

33.Thus, as a matter of corporate structure, the Lams commanded a majority in the boards of New Media as well as Longford, though on the executive level, Leong was the CEO of New Media and the chairman and legal representative of Longford.

34.Such an arrangement turned out to be problematic, and controversies arose in 2014. According to the Lams, an arrangement (“the Protocol”) was made with Leong on 23 April 2014 whereby the ICBC capital account would be operated using Longford’s finance chop plus the signatures (meaning the personal seals) of Leong and Yau (the CFO of New Media) for transactions of less than RMB 1 million; and using Longford’s seal plus the signatures of Leong and Will Lam for transactions of RMB 1 million or more.  The Lams alleged that some five days later, on 28 April 2014, Leong made herself the sole signatory of the Longford ICBC capital account without the consent or authorisation of the other directors of Longford or New Media, and that she attempted to withdraw RMB 300,000 and RMB 10 million without such consent or authorisation.

35.Leong’s case was that ICBC had declined to set up a bank mandate along the lines of the Protocol.  As Yau and Will Lam refused to leave their seals in Shanghai for the operation of the ICBC accounts, it was consequently agreed that Leong would operate the ICBC capital account using the Longford chop and her own seal (“the Leong seal”).  It was thus known to the Lams from the outset that neither Will Lam nor Yau were ever signatories of that account.  While she accepted that RMB 300,000 was withdrawn for Longford’s operating expenses, she denied that she ever tried to withdraw RMB 10 million.

36.On 22 August 2014, the Lams passed a resolution to remove Leong as CEO of New Media and took various actions to shut her out of Longford’s management, alleging dishonest acts on her part.  In September 2014, Leong caused Hansen to commence an action in HCA 1724/2014 against HFA, New Media and two of the Lams (“the Hansen Action”), alleging breach of the joint venture agreement, and therein obtained an interim injunction against her removal as New Media’s CEO[3].  With that interim injunction in place, Leong continued with her involvement in the daily operations of New Media until October 2017.

37.On 26 September 2014, the Lams exercised their majority voting power on the board of Longford, causing it to pass a resolution requiring the bank mandate for the operation of the ICBC capital account to be changed such that it would fall in line with the Protocol.  After that, New Media commenced the Underlying Action in October 2014.  The prayers in the Statement of Claim sought an order compelling Leong to act in accordance with the Longford resolution and restraining her from operating the ICBC capital account save in accordance therewith. 

38.Upon HFA’s undertaking to pay the ordinary business expenses of New Media and its subsidiaries, on 5 December 2014, pursuant to an application by New Media in the Underlying Action, Chow J granted an injunction (“the Injunction”) in these terms: 

“[Leong] be restrained by herself, her servants, her agents or on her own behalf or on the behalf of any other person, firm or company, whether as employee, officer, agent or otherwise howsoever dealing with the capital bank account which Longford maintained with ICBC Shanghai …, except in accordance with the following arrangement…:

(i) For transactions involving less than RMB1,000,000, the signatures of [Leong] and [Yau] must be obtained, in addition to the application of the Finance Chop of Longford; and

(ii)   For transactions involving RMB1,000,000 or above, the signatures of [Leong] and [Will Lam] must be obtained, in addition to the application of the Finance Chop of Longford.”

39.The parties did not take steps to bring the Underlying Action or the Hansen Action to trial.  Hence, there was no finding by the court as to the cause(s) of the breakdown of the relationship between Leong and the Lams, nor of their respective substantive legal liabilities towards each other.  Instead, in 2016, the Lams caused New Media to bring contempt proceedings against Leong for alleged breaches of the Injunction concerning the operation of the ICBC capital account between 14 January 2015 and 16 February 2016.  

40.By his judgment of 8 August 2017[4], Chow J found that Leong had caused a series of transactions to be made, essentially involving transfers from the ICBC capital account to other Longford ICBC accounts, which he held constituted contempt.  It was not suggested that Leong had extracted the funds for her own benefit.  In terms of penalty, Chow J imposed a fine on Leong in the sums of HK$400,000 and HK$150,000, and ordered costs on an indemnity basis[5].

41.In light of that experience, Leong decided to stay away from the daily operations of Longford.  She sent an email to Tong, the financial controller of Longford, on 23 October 2017 (“the 2017 Email”) in the following terms:

“As there is tremendous disagreement on management right between both shareholders of High Fashion New Media Corporation Limited, i.e. the parent company of Longford, both shareholders have taken out a series of actions in the High Court of Hong Kong to defend their rights, with the final outcome still pending. Since Longford, an enterprise in Mainland China, is a separate legal entity, in order to conserve the assets of the company, to protect the interests of the company and to uphold my personal reputation, I will no longer take part in Longford’s daily operations; however, as I am still the legal representative and a shareholder of the company, I will continue to protect the interests of the company in a reasonable and lawful manner. As regards Longford’s daily operating expenses, please apply to both shareholders periodically.”[6]

42.Tong had been employed by Longford since February 2017.  Upon receiving the 2017 Email, she replied to Leong indicating that she would apply by email to “both shareholders” (meaning HFA and Hansen) in respect of Longford’s operational expenses.  After Leong had refrained from taking part in the daily operations of Longford, Tong handled the operation of the ICBC accounts of Longford.  She communicated directly with Yau (as the representative of HFA) regarding the expenses of Longford. 

43.Meanwhile, on 9 November 2017, Leong resigned as Longford’s chairman and surrendered possession of the Leong seal to Tong for her to operate the ICBC accounts on behalf of Longford.  On 28 May 2020, Leong was replaced by Wong Siu Mui Julisa as the legal representative of Longford. 

44.New Media obtained leave in June 2020 to bring a second set of contempt proceedings against Leong for further alleged breaches of the Injunction, involving unauthorised transactions from the ICBC capital account without the signatures of Yau or Will Lam. 

45.The lower courts found Leong guilty of contempt by reason of her failure to take all reasonable steps to see that the Injunction was obeyed.

The basis for the lower court’s holding that Leong was liable

46.After the 2017 Email, the actual transfer of funds in the bank accounts of Longford was handled by Tong.  Leong herself did not give any instructions to Tong in that regard, other than the 2017 Email.  The operation of the ICBC capital account required, among other things, the affixing of (a) the Leong seal and (b) Longford’s finance chop.  The lower courts held that Leong was “vicariously liable” for the acts of Tong because she had allowed Tong to use her seal in the operation of the ICBC capital account.  By entrusting Tong with her seal, the courts held that Leong had authorised Tong to act as her agent.

47.Before 23 October 2017, Leong was in charge of the daily operations of Longford, and Chow J accordingly found her to be responsible for the dealings in the ICBC capital account that were contrary to the Protocol in the first contempt judgment of 8 August 2017.  Chow J came to that conclusion against the background that, at that stage, “Longford’s staff worked under Leong’s instruction or direction generally, and that the relevant transfers could not have taken place without Leong’s approval and consent”[7].  In such a context, Chow J made the following observation:

“Leong could and should have taken possession of her personal seal, or put in place an effective system to ensure that there was no dealing with the Capital Account except in accordance with the specified signing arrangement. In the circumstances, Leong must be regarded as being legally responsible …”[8]

48.After the first contempt judgment, as mentioned above, the involvement of Leong in the operations of Longford changed materially.  Notwithstanding that Tong was an employee of Longford (and not an employee of Leong) who operated the Longford accounts in such a capacity, the lower courts adopted the above reasoning of Chow J[9]  and found that she had also acted at the same time as the agent of Leong because of the use of the Leong seal.

49.In terms of the control by Leong over Tong, the focus of the Court of Appeal[10] was on the Leong seal[11]:

“… By handing over the Leong Seal to Tong whilst at the same time remaining as the authorised sole signatory on the bank mandate, it stands to reason that the defendant must be able to exercise control over Tong’s use of the Leong Seal. This was evidenced in the instructions she gave to Tong in the 2017 Email …”

50.The Court of Appeal considered the corporate governance of Longford to be irrelevant:

“… Whether or not the placing of the Leong Seal with Tong amounted to authorisation by [Leong] to Tong to use the seal to operate the Capital Account does not require an inquiry into the role and powers of legal representative in the context of the governance structure of Longford …” [12]

“The role and powers of [Leong] as the legal representative of Longford and corporate governance of Longford have no relevance to the question whether Tong was entrusted by [Leong] to operate the Capital Account and was thus acting as [Leong’s] agent in applying the Leong Seal …”[13]

51.The lower courts were of the view that the Injunction imposed a duty on Leong to take positive steps to entrust a person to operate the account in accordance with the Protocol.  Thus, Kwan VP said:

“… In essence, she entrusted another person to comply with the Injunction Order. By placing the Leong Seal with Tong and entrusting her to operate Longford’s bank accounts including the Capital Account, the defendant had clearly authorised Tong to use the Leong Seal on her behalf.”[14] (my emphasis)

“… the defendant clearly manifested to Tong that she was willing for Tong to act on her behalf to operate the Capital Account …”[15]

52.Such a duty was, according to the lower courts, derived from the principle taken to be established in Hone v Page[16], which had been followed in China Metal Recycling (Holdings) Ltd v Chun Hei Man[17].

53.In other words, the lower courts did not make any finding to the effect that, after the 2017 Email, Leong had instructed Tong to operate the bank account in breach of the Protocol.  Instead, they held that Leong was “vicariously liable”[18]   because it could be reasonably foreseen that Tong would act in breach of the Injunction, notwithstanding Leong’s express instruction in the 2017 Email that Tong should seek approval from both shareholders for daily operating expenses, and Tong’s assurance to Leong in her reply that she would do so.

Two different bases for establishing liability

54.In Hone v Page, Slade J found the defendant guilty of contempt for breach of his undertaking not to distribute yellow advertising cards for a minicab business.  Notwithstanding the defendant’s instruction to the contrary, his employees and some self-employed drivers associated with his business continued to distribute the cards.  His Lordship held that:

“… a man must be deemed to do a relevant act ‘by his servants or agents’ … if (a) the persons who did the acts were his servants or agents, (b) the acts were done in the course of the service or agency, and (c) he either (i) authorised the acts or (ii) could reasonably have foreseen the possibility of such acts and failed to take all reasonable steps to prevent them.”[19]

55.This formulation actually amalgamates two different legal bases for holding a defendant responsible for the acts of others.  For acts authorised by the defendant himself (limb (i) of (c) in the formulation), it is readily explicable since a defendant who is subject to a court order cannot escape liability by instructing someone else to do the prohibited acts.  However, for acts which were not authorised by him (viz. limb (ii) of (c) in the formulation), it imposes a positive obligation on the defendant to prevent other persons from doing the prohibited acts.  The explanation for the second limb is more nuanced and the lower courts relied on this limb in finding Leong guilty of contempt[20]. 

56.On the facts of Hone v Page, Slade J found that the defendant had failed to take the precaution of requiring all his drivers and employees to return all the yellow cards to him, and it could have been reasonably foreseen that some drivers would disregard his formal instructions if he did not do so.  The self-employed drivers were regarded as the agents of the defendant[21] in distributing the yellow cards.

57.Apart from giving an undertaking not to distribute the cards, the defendant in Hone v Page also gave an undertaking to take all reasonable steps to secure the removal of such cards from circulation[22].  Hence, the defendant was subject to a positive obligation as well as a negative restraint, though Slade J’s discussion focused on the negative restraint.    

58.Though the approach of Slade J had been endorsed by the English Court of Appeal in AG for Tuvalu v Philatelic Distribution Corporation Ltd[23] and Re Supply of Ready Mixed Concrete[24], there was not much discussion as to the juridical basis for the formulation under limb (c)(ii).

59.The juridical basis of limb (c)(ii) was examined in World Wide Fund for Nature v THQ/Jakks Pacific LLC[25].  Carnwath LJ (as he then was) identified two different bases for holding someone liable for the acts of others[26].  For the first basis, viz. the one under limb (c)(i) in Hone v Page, His Lordship held that a defendant is directly responsible for the acts of its officers, servants or agents, within the course of their duties[27].  Liability for contempt was attached by the imputation of such acts by the servants or agents to the employer or principal.

60.Instead of vicarious liability, I prefer to refer to this as liability established on an Imputation Basis.  Vicarious liability is usually understood in the context of tortious liability and it is potentially confusing to use the same expression to hold a defendant liable for contempt on account of the acts of another person.  Unlike the concept of vicarious liability for tortious acts, it is not necessary to establish that the agent or servant himself is liable for contempt before his acts can be imputed to the defendant.   

61.The Imputation Basis follows naturally from the standard form injunction, introduced by Lord Uthwatt in Marengo v Daily Sketch and Sunday Graphic Ltd[28], prohibiting acts “by themselves, their servants or agents”.  After attending to the objection to the then prevailing version of the standard formulation (which could lead to the wrong impression that an injunction was actually made against the servants, agents or other persons), Lord Uthwatt elaborated on the intent and effect of the standard term as re-formulated by His Lordship (which is currently adopted in practice):

“The substance of the matter is that the defendant is to be enjoined whatever method he may use in committing the prohibited acts. It is not, indeed, necessary to refer to servants, workmen and agents at all, but it may be desirable to mark the amplitude of the order by including in it some reference to them…”[29] (my emphasis)

62.Peter Gibson LJ in THQ highlighted that the standard formulation was not intended to cover acts of third parties not authorised by a defendant:

“It was its own actions which it was undertaking not to perform in such a way. If its licensee of its own motion did a prohibited act, that would not be the act of [the defendant] through its licensee… The reference to licensees in the injunction is, in accordance with Lord Uthwatt’s guidance in Marengo [1948] 1 All ER 406 at p.407 ‘nothing other than a warning against wrongdoing to those persons who may by reason of their situation be thought easily to fall into the error of implicating themselves in a breach of injunction by the defendant.’ As Mr Carr QC rightly said, the warning is aimed at the third party’s participation in the defendant’s actions and not at the third party’s independent action.”[30] (my emphasis)

63.The judgment of Carnwath LJ in THQ was to the same effect.  His Lordship agreed with the following submission of counsel regarding the reference to acts of servants or agents in an injunction:

“The qualification … does no more than identify that [a defendant] cannot avoid the scope of the injunction by … authorising or causing the doing of the prohibited acts by others…”[31] (my emphasis)

64.Under the Imputation Basis, so long as an employee had acted in the course of and within the scope of his employment, the employer would be liable unless the conduct of the employees could be described as merely casual or accidental and unintentional: see Director General of Fair Trading v Pioneer Concrete (UK) Ltd[32]. Though that case concerned the liability of a corporate employer, the line of authorities discussed in the judgment of Lord Nolan encompassed the liability of a non-corporate employer[33]. For the acts of an agent, the critical question is whether the agent was acting within the scope of authority conferred by the principal[34].  There is no additional requirement that the principal could reasonably have foreseen such acts and failed to take any reasonable steps to prevent them[35].

65.As explained by Lord Wilberforce in Heatons Transport (St Helens) Ltd v Transport and General Workers’ Union[36], the test for liability in respect of the acts of a servant and that of an agent is the same: was the servant or agent acting within the scope of authority conferred by the master or the principal? The only difference is that a servant usually has a wider scope of authority because his employment is more permanent and he has a larger range of duties.

66.It follows that in respect of the acts of an agent outside the scope of his actual authority, liability for such acts cannot be attached to his principal on the Imputation Basis.   

67.For the second basis, Carnwath LJ regarded it as being based on a requirement implied into the standard form of injunction, that the defendant shall take such steps as are within his power to prevent his licensee from performing acts which, if performed by the party enjoined, would constitute a breach[37].  I shall call this the Implied Term Basis.

68.Obviously, under the Implied Term Basis, liability cannot be attached in respect of acts of all other persons.  Otherwise, an impossible burden would be placed upon a defendant.  Slade J restricted it to persons who were employees or agents of the defendant.  But if the acts were within the scope of duties or authority of such persons, there would not be any need to resort to the Implied Term Basis since liability could be attached under the Imputation Basis.  Hence, Slade J must have been referring to acts of employees or agents outside their scope of duties or authority under his limb (c)(ii).  The Implied Term Basis was applied to the self-employed drivers acting as agents for the defendant on the facts of Hone v Page.

69.In THQ, Carnwath LJ extended the coverage of the Implied Term Basis to the acts of a licensee, if he was someone over whom the defendant had the power to stop from committing the prohibited acts, and where the defendant had unreasonably failed to exercise that power[38].  Hence, notwithstanding that an injunction is negative in nature, when it is reasonably foreseeable that a prohibited act may be done by someone and the defendant has the power to stop it, the failure to exercise that power would constitute a breach of the injunction on the Implied Term Basis.  On the facts of THQ, such a liability was not established against the defendant.  

70.In Super Max Offshore Holdings v Rakesh Malhotra[39], Sir Michael Burton sitting as a High Court Judge summarised the principle as follows:

“… a negative injunction may carry within it an obligation to ensure compliance by, as in Hone v Page ..., himself, his servants, or agents or otherwise howsoever. That includes the need for reasonable endeavours where an instruction has been given to someone under a defendant’s control who has obeyed that instruction, and who can be procured by the person who gave it to withdraw or recall that instruction, in compliance with the order. The passage in Slade J’s judgment … is not limited to a defendant’s employees but extends to anyone whom the defendant can control …”[40]

Separate considerations for the Imputation Basis and the Implied Term Basis

71.In my judgment, once it is acknowledged that the approach in Hone v Page encompassed two different bases, clear identification of the juridical basis for holding a defendant liable for contempt in respect of the acts of others is essential to the analysis as to whether such a liability should be attached in a particular set of facts. 

72.As mentioned, the Imputation Basis is quite straightforward as it only involves a consideration of whether the relevant acts of the servants or agents were within the scope of their employment or authority.  It is within the power of a defendant to take effective steps to prevent his servants or agents from doing the acts prohibited by an injunction.  Faced with a court order, it does not suffice for a defendant to merely give orders and wash his hands of the matter and disclaim further responsibility, since the acts of his agent or servant within their scope of authority or employment would be regarded as his own acts.  But this is confined to acts which are within the actual authority of the agent or the scope of employment of the servant.

73.On the other hand, the Implied Term Basis is more complicated.  To start with, I have difficulty in accepting that such a term could be implied, simply from the standard form injunction, to embrace acts by servants, agents or other persons without having regard to their scope of authority.  Lord Uthwatt’s rationale for such a formula in Marengo v Daily Sketch and Sunday Graphic Ltd[41] was only directed towards acts within the actual authority of the agent or servant.  Whilst I accept that in some cases it may be possible for such a term to be implied on the facts, I do not accept that such a term must be implied in all cases.  In Hone v Page, in view of the undertaking given by the defendant to remove the offending cards from circulation, there was no difficulty with attaching liability.  

74.One must tread very carefully with the notion of implying a positive term into a negative injunction.  It is a first principle of great importance that the court must ensure that an injunction is expressed in clear and unambiguous terms, so that a defendant knows, as a matter of fact, exactly what he is required to do or not to do[42].  It is incumbent upon a party seeking an injunction to set out clearly in his application what acts are prohibited, and what steps are required to be undertaken, as it is inherently unfair to punish a defendant for contempt when the obligation he or she is required to perform is not obvious from the terms of the injunction.

75.In the authorities cited above, it is said that the implied obligation to take positive steps to ensure another person acts in accordance with an injunction stems from a defendant’s control, and the foreseeability of that person acting otherwise.  However, as demonstrated by the facts of the present case, there can be uncertainties arising from the degree of control and the reasonableness of requiring a defendant to take positive steps to prevent another person from acting in breach of an injunction.  In cases where there may be such ambiguities or uncertainties, I do not accept that it is sound to imply positive obligations into a negative restraint.  In such cases, the court should insist that the positive obligation to be undertaken by a defendant in respect of potential liability for the acts of third parties be clearly set out in the injunction.  

76.In this connection, Ms Lam SC very fairly and properly accepted that it would be a better practice for such positive obligations to be clearly set out in the injunction.  If that were so, the court would be able to have a better grasp as to the full extent of the obligations imposed on a defendant (and be in a better position to assess whether it is just and convenient to impose such obligations in the circumstances of the case) and a defendant would be fairly notified of the extent of his obligations under an injunction. 

Leong should not be held liable for the operation of the Longford account by Tong 

77.In the present case, the injunction was a negative one restraining Leong, by herself, her servants, and her agents from dealing with the ICBC capital account except for transfers made in accordance with the Protocol.  The Injunction did not impose explicitly a positive obligation on Leong to ensure that other persons would comply with the Protocol in the operation of the account.

78.In respect of acts which took place when Leong was still the chairman of Longford and was personally involved in its daily operations, one can readily accept that the employees of Longford should be regarded as her agents in the operation of the ICBC capital account.  But the same cannot be said after her resignation and after she had ceased to be involved in its daily operations.  She was the minority on the board of Longford, and the Lams had majority control over the business operations of Longford.  The Lams were also taking steps to exclude her from the management.  The evidence shows that Tong was aware of the interest of the Lams (through HFA and New Media) in Longford and that she communicated with their designated representative, Yau, for approval of operational expenses.  There is no evidence suggesting that Leong had instigated or encouraged Tong to disregard Yau’s instructions or that Leong did anything to undermine the authority of the Lams.  

79.With respect, the lower courts focused too narrowly on Leong’s handing over of the Leong seal to Tong.  Though Leong was still nominally the legal representative of Longford (until May 2020) and the bank mandate had not been changed, it was understandable for her to leave the Leong seal with Tong, the financial controller of Longford when she sought to distance herself from the daily operations of the company.  Unless one takes the view that the Injunction required Leong to monitor the operation of the bank account and ensure compliance with the Protocol because it involved the use of her seal, the handing over of the Leong seal was similar to a resigning chairman leaving behind the key to a safe in the company to the financial controller of the company.  Given the circumstances leading to her resignation, and the 2017 Email, a positive obligation to monitor the operation of the account after October 2017 cannot be implied into the Injunction.  I respectfully disagree with the Court of Appeal that the corporate governance of Longford after October 2017 is irrelevant in determining whether Leong had acted in breach of the Injunction on account of the acts of Tong.   

80.The approach of the lower courts overlooked an important distinction between the mere act of using the Leong seal and the operation of the ICBC capital account.  The operation of the account involved not only the use of the Leong seal, but also the use of the company chop and the seeking of approval in accordance with the Protocol.  The prohibited act under the Injunction is the operation of the account, not the use of the Leong seal.  In the operation of the account after October 2017, Tong functioned as the employee and financial controller of Longford, not as Leong’s agent.  Tong’s acts in that regard cannot be said to be directed, instructed or caused by Leong.  Tong was not under Leong’s control in the operation of the ICBC capital account.  Therefore, the Imputation Basis is not applicable.

81.There was no discussion in the lower courts as to the basis on which a term along the line of limb (c)(ii) in Hone v Page could have been implied into the Injunction. Insofar as it was assumed that such a term could be implied generally as a matter of law, I respectfully disagree for the reasons already canvassed.

82.On the facts of the present case, there is no valid basis for implying a term into the Injunction requiring Leong to continue to supervise Tong in the operation of the ICBC capital account even after she resigned as chairman and ceased to be involved in the daily operations of Longford. 

83.In coming to the conclusion that the 2017 Email was not sufficient to avoid a breach of the Injunction and that Leong could reasonably have foreseen that Tong would not comply with the Injunction, the lower courts placed reliance on the modus operandi previously adopted by Longford when transferring funds from the ICBC capital account to its current account for anticipated expenses.  The difficulty with that line of reasoning is that the courts did not examine the corporate governance of Longford and its daily operations after Leong had ceased to be involved in its daily operations.  The Lams were the majority on the board of Longford and there were direct communications between Yau and Tong.  The lower courts seem to have proceeded on the basis that Leong must have envisaged that the Lams would not exercise their managerial authority over Tong to prevent her from continuing with the past practice after Leong’s resignation.  In such circumstances, I do not accept that Leong should be required to take positive steps to ensure that Tong would not continue with the previous practice.  Tong was, after all, an employee of Longford.

84.It is surprising that the lower courts attached some significance to Leong not informing Tong of the Injunction (with the judge’s rejection of Leong’s evidence in that respect) and proceeded on the basis that Tong was ignorant of the Injunction, notwithstanding that the outcome in the first contempt proceedings was obviously the precursor to the 2017 Email and Leong’s resignation as chairman.  In any event, the Lams, whether by themselves or through Yau, were in as good a position as Leong to inform Tong of the terms of the Injunction and to direct her to comply with the Longford resolution.   

Answers to the questions of law and the outcome of the appeal

85.In granting leave to appeal, the Appeal Committee referred to two questions of law put forward by Leong:

“Question 1

Where:

(a) the terms of a prohibitory injunction prohibit specific future acts, and do not require the taking of any positive steps, including to cause the cessation of a particular state of affairs; and

(b) an alleged agent of the alleged contemnor has committed an act prohibited by the injunction, but that act was not directed by the alleged contemnor;

whether the alleged contemnor may be in breach of the injunction, and in particular whether the principles in Hone v Page [1980] FSR 500 may apply.

Question 2

Where the alleged agent's conduct is not proven beyond doubt to be more than casual or accidental and unintentional, or unaffected by an honest mistake or inadvertence, or to constitute a contempt of itself, whether the alleged contemnor as principal can be found guilty of contempt by the ‘deeming’ effect under the third principle of Hone v Page [1980] FSR 500, namely, that the principal either (i) authorised the acts of the alleged agent, or (ii) could reasonably have foreseen the possibility of such acts and failed to take all reasonable steps to prevent them.”

86.Mr Wong SC boldly contended that the approach in Hone v Page should not be applicable to negative injunctions.  However, among the authorities in which this approach has been considered and applied are cases involving negative injunctions.  As we have seen, Hone v Page itself involved a negative undertaking (although a positive undertaking was also given).  AG for Tuvalu v Philatelic Distribution Co Ltd, Re Supply of Ready Mixed Concrete, THQ and Super Max Offshore Holdings v Rakesh Malhotra are all cases involving negative injunctions.

87.For liability under the Imputation Basis, there is no reason in principle why it should not be applied to negative injunctions.  This is not disputed by Mr Wong and the focus of the first question is in relation to acts not directed by the alleged contemnor.  

88.For liability under the Implied Term Basis, as discussed earlier, one should first decide whether a term can be implied and, if so, what is the extent of the implied obligation that could be justified on the facts of the case.  In cases where a term under Slade J’s limb (c)(ii) or the refined formulation of Sir Michael Burton in Super Max Offshore can be implied, a negative injunction would carry with it the positive obligation to act in accordance with such an implied term.  For the reasons given above, such a basis cannot be found in the present case.

89.Mr Wong submitted that the application of the Implied Term Basis to a negative injunction is inconsistent with the principle that it is necessary to prove beyond reasonable doubt that the relevant act was more than casual, accidental or unintentional, as a breach could be found when a defendant carelessly, accidentally or upon a genuine mistake failed to foresee and prevent an agent from committing the prohibited act.

90.I do not accept this submission.  A genuine casual, accidental or unintentional breach of an implied term of an injunction would not render a defendant liable as he would be protected by the exception postulated by Warrington J in Stancomb v Trowbridge Urban District Council[43].  But that exception does not excuse the negligent failure to comply with an injunction, including a negative injunction embodying a positive obligation under either the Imputation Basis or the Implied Term Basis.  Failure on the part of a director of a company subject to an injunction to take reasonable steps to supervise or investigate has always been a basis for holding that director in contempt, see AG for Tuvalu v Philatelic Distribution Corporation Ltd[44].

91.It is a false premise to say that the Stancomb exception exonerates a negligent breach of an injunction.  Mr Wong submitted[45] that an honest mistake or inadvertence could afford a defence to a charge of contempt, and that in the present case, Leong should not be held liable if she mistakenly believed that Tong would operate the account in accordance with the Protocol, or if Tong mistakenly believed that she did not need to seek the requisite approval from the shareholders.  With respect, I do not agree that the authorities support such a wide proposition.  The kind of mistake Jacob J alluded to in Adam Phones Ltd v Goldschmidt[46]was a scenario where a man had honestly tried to obey the order, but made a mistake in overlooking a trivial and technical item.  It was in such a context that Sir Gerard Brennan NPJ characterised such a mistake as falling within the “unintentional” exemption in the Stancomb principle.  These authorities do not provide support for the submission that either the Imputation Basis or Implied Term Basis could operate in a manner inconsistent with the Stancomb principle. 

92.However, in the present case, for the reasons given above, as there is no proper basis for imputing to Leong the operation of the Longford account by Tong and no valid ground for a positive obligation to be implied, the finding of contempt cannot be sustained.  The appeal should be allowed accordingly.

The rule against collateral attack

93.The above conclusion is sufficient for the disposal of the present appeal.  However, the Appeal Committee also granted leave on the “or otherwise” basis.  Counsel therefore addressed this Court on three other questions concerning the proper constitution of the Underlying Action and its prosecution:

“(a) in so far as the present action is brought derivatively on behalf of New Media, it is not properly constituted in accordance with sections 728 to 738 of the Companies Ordinance (Cap 622); alternatively,

(b) whether or not constituted as a derivative action, HCA 1953/2014 fails to disclose a viable cause of action vested in New Media or capable of being asserted on behalf of Longford in support of the injunctive relief sought and obtained; alternatively,

(c) non-prosecution of the Action since January 2015, in the light of the relief claimed in the Writ and the events which have since occurred, provides a basis for challenging continuation of the injunction and its enforcement by an order of committal.”

94.In addition, Ms Lam very properly asked this Court to consider the rule against collateral attack.  Counsel submitted that the validity of an order or the underlying action is never a relevant consideration in determining whether a defendant has committed contempt.  It is no defence to say that the order disobeyed should not have been made.  A court order has to be obeyed until it is set aside.  In this sense, contempt proceedings have a life of their own.

95.This submission merits serious consideration before we embark upon any discussion of the three “or otherwise” questions.  This Court should be very slow in undermining the well-established rule against collateral attack which, as explained in the authorities discussed below, is of paramount importance for the due administration of justice.  If this Court’s consideration of the “or otherwise” questions can have the effect of compromising that rule, I would refrain from doing so. 

96.The rule against collateral attack is well supported by authorities.  In Hadkinson v Hadkinson [1952] P 285, the English Court of Appeal refused to hear an appeal against an order for the return of a child on the ground that the Applicant was in contempt for breaching that order.  Romer LJ explained the rationale for the need to obey a court order even if it was being challenged at p.288:

“It is the plain and unqualified obligation of every person against, or in respect of whom, an order is made by a court of competent jurisdiction, to obey it unless and until that order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void. ‘A party who knows of an order, whether null and void, regular or irregular, cannot be permitted to disobey it ... It would be most dangerous to hold that the suitors, or their solicitors, could themselves judge whether an order was null and void–whether it was regular or irregular. That they should come to the court and not take upon themselves to determine such a question: that the course of a party knowing of an order which was null and irregular and who might be affected by it was plain. He should apply to the court that it might be discharged. As long as it existed it must not be disobeyed’ (Per Lord Cottenham LC in Chuck v Cremer (1846) Cooper temp Cott 205, 338).

Such being the nature of this obligation, two consequences will, in general, follow from its breach.  The first is that anyone who disobeys an order of the court … is in contempt and may be punished by committal …”

97.The judgment was cited and applied by Lord Diplock in the Privy Council in Isaacs v Robertson [1985] 1 AC 97 at p.102C.  That was an appeal from the Court of Appeal of Saint Vincent and the Grenadines.  The defendant was in breach of an interlocutory injunction, and the plaintiff applied for his committal for contempt.  The first instance judge held that the order was a nullity because it was made at a time when the action was deemed to have been abandoned.  The Court of Appeal allowed the appeal, holding that although the order ought not to have been made and would be liable to be set aside if the defendant had applied to do so, the defendant was still in contempt for disobeying it.  The Court of Appeal also held that in such circumstances, no penalty by way of a fine or imprisonment should be imposed (see p.101B to C), though the defendant had to pay the costs of the plaintiff.  The decision was upheld in the Privy Council.

98.Lord Diplock laid emphasis on the fact that it was an order made by a court of unlimited jurisdiction.  At p.102H, His Lordship said:

“… in relation to orders of a court of unlimited jurisdiction it is misleading to seek to draw distinctions between orders that are ‘void’ in the sense that they can be ignored with impunity by those persons to whom they are addressed, and orders that are ‘voidable’ and may be enforced unless and until they are set aside.”

His Lordship said at p.103B to D that:

“[counsel was unable to refer to any case in which] order[s] of a court of unlimited jurisdiction [had] been held to fall into a category of court orders that can simply be ignored because they are void ipso facto without there being any need for proceedings to have them set aside. The cases that are referred to … do not support the proposition that there is any category of orders of a court of unlimited jurisdiction of this kind; what they do support is the quite different proposition that there is a category of orders of such a court which a person affected by the order is entitled to apply to have set aside ex debito justitiae in the exercise of the inherent jurisdiction of the court without his needing to have recourse to the rules that deal expressly with proceedings to set aside orders for irregularity and give to the judge a discretion as to the order he will make.”

99.Thus, Lord Diplock was of the view that a party subject to an order made by a court of unlimited jurisdiction should bring proceedings to set it aside, whatever the nature of the defect.  In the meantime, he or she is not at liberty to disobey it.  Hence, he remarked at p.103E that the concepts of voidness and voidability are inapplicable to orders made by a court of unlimited jurisdiction.

100.In M v Home Office [1994] 1 AC 377, the Secretary of State was found to be in contempt for breaching a court order requiring the return of an asylum seeker who had been removed by officers of the Home Office.  The Secretary of State cancelled the return arrangement after he was advised by lawyers that the order of the High Court judge was made without jurisdiction and that steps would be taken to set aside the order.  The judge later did in fact set aside the order.  The asylum seeker instituted contempt proceedings.  He was unsuccessful at the first instance but the Court of Appeal decided by a majority in his favour, holding the Secretary to be in contempt.

101.The House of Lords upheld the finding of contempt.  Isaacs v Robertson was cited and applied.  For present purposes, the following dicta in the judgment of Lord Woolf at pp.423H to 424B is pertinent:

“Here there are two important considerations. The first is that the order was made by the High Court and therefore has to be treated as a perfectly valid order and one which has to be obeyed until it is set aside … The second consideration is that it is undesirable to talk in the terms of technical contempt. The courts only make a finding of contempt if there is conduct by the person or body concerned which can, with justification, be categorised as contempt. If, therefore, there is a situation in which the view is properly taken (and usually this will only be possible when the action is taken in accordance with legal advice) that it is reasonable to defer complying with an order of the court until application is made to the court for further guidance then it will not be contempt to defer complying with the order until an application has been made to the court to discharge the order. However, this course can only be justified if the application is made at the first practicable opportunity and in the meantime all appropriate steps have been taken to ensure that the person in whose favour the order was made will not be disadvantaged pending the hearing of the application.” (my emphasis)

102.In Kao, Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830, Sir Gerard Brennan NPJ endorsed Romer LJ’s statement of principle in Hadkinson at [26] of the judgment.

103.Similar views were expressed in the joint judgment of Young and McGrath JJ in Siemer v Solicitor-General [2013] 3 NZLR 441 at [191] and [192]:

“Provided the court had power to make an order of its kind, a court order is binding and conclusive unless and until it is set aside … Collateral attacks on such orders are not permitted. Neither the parties, nor other persons subject to an order, are permitted to arrange their affairs in accordance with their perceptions of its flaws, including any individual views they may have concerning the validity of the order …

The rules that breach of a court order will constitute contempt of court and that collateral challenge in contempt proceedings is not permitted maintain stability in the law and protects the ability of the courts to exercise their constitutional role of upholding the rule of law …”

104.Their Honours provided for certain exceptions to this general rule at [224] and [225] to cater for cases where a person had no opportunity to challenge the order, which have no application in the present case.  Subject to that, their conclusion was set out at [226]:

“In all other circumstances, the rule of law and the authority of the courts require that individuals subject to court orders obey such orders unless and until they are set aside … Breaching a court order and then raising a collateral attack as a defence in consequent contempt proceedings cannot provide a further opportunity to challenge a court order where a challenge by application to the court or appeal was available.”

105.Mr Wong valiantly tried to persuade us that there is another exception to the rule when a plaintiff does not have the requisite leave or right to bring a derivative action, and a defendant is therefore entitled to have the injunction set aside ex debito justitiae.  He submitted that the lack of leave or standing to bring a derivative action would mean that the court has no power to grant the injunction[47], which would not be a valid order[48].  Alternatively, counsel submitted that the defects in an underlying action must preclude any penalty from being imposed on a defendant, even if a finding of contempt is made[49]. 

106.Though Mr Wong’s alternative proposition may generally be a sound one, the present appeal is an appeal brought only against the finding of liability in the second contempt proceedings.  Another appeal against penalty is pending before the Court of Appeal.  In such circumstances, this Court should not express views which are only relevant to the question of penalty but not relevant to liability.

107.As far as liability for contempt is concerned, the mere fact that an order is liable to be set aside ex debito justitiae does not afford an excuse to a defendant who has acted in breach of such an order.  This was the point made by Lord Diplock in Isaacs v Robertson at p.103 (to which I have referred above).  That case concerned an injunction which should have been set aside ex debito justitiae because the underlying claim was deemed to have been abandoned, and was incapable of being revived, see p.99B to C.

108.The authorities cited by Mr Wong did not address the issue of whether defects in the constitution of a derivative action could exempt a defendant from liability for contempt.  In Wilton UK Ltd v Shuttleworth, after coming to the conclusion that the failure to seek and obtain permission to commence a statutory derivative action[50] invalidates subsequent steps in the proceedings, the learned judge also held that the court has the power to retrospectively validate steps taken without permission[51].  Hence, the defect in the constitution of a derivative action does not necessarily mean that no contempt could have been committed if a defendant breached a court order in such an action.

109.Notwithstanding the efforts of Mr Wong, I am not persuaded that the “or otherwise” questions give rise to any ground to disapply the rule against collateral attack.  In other words, the determination of those questions would not be of any avail to Leong in the present appeal had she been unsuccessful on the Hone v Page ground.  The exception provided by Lord Woolf in M v Home Office[52] and the exceptions discussed by Young and McGrath JJ in Siemer v Solicitor-General[53] are not applicable in the present case, as Leong had not made any application to strike out the Underlying Action or to set aside the Injunction, even though she had ample opportunity to do so.  Had such applications been made when the contempt proceedings were pending, the court might have a discretion in deciding whether leave to commence proceedings should be granted and/or whether to hear the committal before the disposal of those applications.  Dilatory or tactical applications made at a late stage with a view to delaying the committal proceedings cannot afford a sufficient ground for withholding contempt proceedings[54].  

110.In the present instance, neither the parties nor the lower courts had given any consideration to the issue of the proper constitution of the Underlying Action prior to the point being brought up in the leave application before this Court.  Moreover, no appeal had been brought against the judge’s finding that despite the lack of progress in the Underlying Action, the contempt proceedings were not an abuse of process[55].

111.Though this Court must have all the powers of the lower courts in doing justice, we must also exercise appellate self-restraint, bearing in mind that any obiter views expressed on the “or otherwise” questions would have ramifications beyond the disposal of the immediate appeal which we are in no position to consider properly.  We are not seised with an appeal against the finding on liability and penalty imposed in the first contempt proceedings.  Nor are we seised with any application for the striking out of the Underlying Action.  If Leong had taken out the relevant applications in the Court of First Instance, that court and the Court of Appeal would have had the opportunity to consider the same with the benefit of arguments in such applications, before these questions were, if necessary and appropriate, to be addressed by this Court.  

112.The conclusion on the Hone v Page questions is sufficient for the disposal of this appeal, and the penalty that had been imposed on Leong must necessarily be set aside, irrespective of the propriety of the Underlying Action.  In such circumstances, the good administration of justice does not compel this Court to take the very exceptional course of sidestepping the usual elucidation and distillation of issues in the intermediate appellate process to address the “or otherwise” questions on its own motion, which would inevitably carry the risk of undermining the important rule against collateral attack.  I would therefore decline to express any views on the “or otherwise” questions.  

Lord Hoffmann NPJ:

113.I agree with the judgment of Mr Justice Lam PJ and add a few words of my own.

114.“Vicarious liability” ordinarily means liability for the wrongful act of another person with whom one has a specified relationship; master and servant, principal and agent and so on.  If an employee commits a wrongful act in the course of his employment, the employer is vicariously liable.  It cannot be too strongly emphasised that there is no such liability for breach of an order of court.  The person against whom the order has been made will be liable only for his own acts or omissions.  Depending upon the terms and construction of the order, these may include an omission to take steps to prevent others from doing things which would have been breaches of the order if done by the person against whom the order had been made.  Judges have occasionally said that such liability was vicarious.  But the word is best avoided because the liability is for the omission of the person against whom the order was made, not for the act of the person who did it.  If there was no such culpable omission, there is no liability.  Thus in Hone v. Page [1980] FSR 500, where an employer of taxi drivers had given the court an undertaking that he would not “(whether by his himself or his servants or agents ...) ... distribute cards ... involving the use of the colour yellow”, his drivers had in their possession stocks of such cards and continued to use them.  Slade J said he was in breach of the undertaking only because he knew the drivers had the cards and could reasonably have complied with his undertaking by asking for them to be returned to him.

115.In this case Leong handed over access to the Longford accounts to Tong, the company’s financial controller, to whom she sent the e-mail quoted by Lam PJ at paragraph 41, telling her of the litigation between the shareholders and suggesting that she apply periodically to them both in respect of payment of Longford’s expenses.  The bank required that dealings with the Longford account be vouched by the company chop and Leong’s seal.  She therefore handed over her seal to Tong.  It is Tong who is alleged to have made the payments in breach of the undertaking.  So the question is whether Leong should reasonably have done something to prevent this from happening.

116.The courts below regarded the fact that Leong handed over her seal as somehow constituting Tong as her agent and thereby making her vicariously liable for Tong’s acts.  But that seems to me wrong in both its premise and its conclusion.  As for the premise, Tong was never Leong’s agent.  She was an employee of the company and there is no suggestion that she was an inappropriate person to perform the duties of dealing with the bank account.  Handing over the Leong seal was, as Lam PJ has said, no different from giving her the key of the safe.  There is no basis for saying that it constituted her Leong’s agent.

117.As for the conclusion, liability for breach of an order of the court is, as I have said, never vicarious.  The question is whether Leong herself ought somehow to have prevented the payments which are alleged to have been in breach of the injunction.  Tong was the financial controller of a company in which the respondents had an indirect controlling interest.  She had been told of the fraught situation between the shareholders.  It does not seem to me unreasonable for Leong to entrust the bank account to an apparently neutral employee and leave her to get on with it.  I would therefore reject the argument that Leong was herself in breach of the injunction and allow the appeal.

Chief Justice Cheung:

118.Accordingly, the Court unanimously allows the appeal and makes an order nisi that the respondent pay the appellant the costs of the appeal.  If any party seeks to vary the order nisi, written submissions shall be filed and served within 14 days of the date of this judgment.  Any written submissions in response shall be filed and served within 14 days thereafter.  The Court will determine the question of costs on the papers.

Mr Wong Yan Lung SC, Mr Anthony Chan SC, Mr Howard Wong and Mr Shaun Elijah Tan, instructed by P C Woo & Co, for the Defendant (Appellant)

Ms Rachel Lam SC, Ms Eva Leung and Mr Jason Fee, instructed by Hugill & Ip, for the Plaintiff (Respondent)