Read the full judgment text of CACV 000011/1989 on BabelCite. This Court of Appeal judgment was delivered on 2 June 1989 before Hunter JA, Fuad V-P, Power JA.
Civil – Contempt of court – Committal of company director – Failure of company to comply with court order – Two routes: under O 45 r 5(1)(iii) with r 7(3) requiring personal service on the director, or as an aider and abettor of the company's contempt – Applicant under O 51 r 1(2) confined to grounds stated – ex parte Mareva injunction and positive discovery order – Whether order should have been granted at all – Whether director had been served – Whether charge was properly framed – Whether conduct amounted to contempt – Civil procedure – Appellate intervention in findings of contempt. Hong Kong Lotus Scientific Development Limited faced a Mareva injunction and an order for asset discovery made ex parte on 18 September 1988, with a fresh order in identical terms made by Macdougall J on 28 September 1988. The third respondent, Cris Chiu-Yin Yip, president and director of the company, swore an affirmation on 30 September 1988 disclosing shares, real property and 'other valuable assets' but not bank accounts, and on 19 September 1988 deposited joint venture share certificates with the company's bank for 'safe custody'. Held, allowing the appeal: (1) There are two basic routes by which a director of a company may be committed for contempt arising from the company's failure to comply with a court order – under O 45 (which may lead to an order of committal against the officer under r 5(1)(iii) subject to the personal service requirement in r 7(3), unless service is dispensed with under r 7(7)) and as an aider and abettor of the company's contempt (per Cartier International B.V. v Kaybee International Ltd [1985] HKLR 127), the latter requiring personal misconduct and knowing defiance (per Eveleigh LJ in Z v A-Z [1982] 1 QB 558 at 578). (2) In the statement filed in support of an application under O 51 r 1(2) the applicant must specify the basis of the application, and subject to amendment is confined to the ground so stated; following Sir John Donaldson MR in Chiltern District Council v Keane [1985] 1 WLR 619 at 622, the alleged contemnor must know with sufficient particularity what he is said to have done. A charge framed as 'failing to cause' the company to comply is directed only at the O 45 route and cannot be converted into a charge of knowing defiance or aiding and abetting. (3) The second finding of contempt (as a director) could not stand because the third respondent was never served with Macdougall J's order at the appropriate time and the judge had expressly declined to dispense with service. (4) The first finding (aiding and abetting) could not stand because it was not the basis of the charge as framed in the supporting statement or amended Notice of Motion. (5) The third finding, arising from the deposit of share certificates with the bank, could not stand: on the evidence, in particular the bank's own subsequent release of the certificates accepting no pledge, the transaction was at most a simple deposit for safe custody, not a charge, pledge or dealing in the shares. (6) Observations upon the making of ex parte Mareva and discovery orders: a Mareva is not a tool to obtain priority for an unsecured creditor; allegations of mismanagement, not dissipation, do not justify an all-assets Mareva; and ex parte positive orders for discovery will rarely be appropriate – the proper course is a restrictive Mareva with a short return date at which any discovery can be considered inter partes. The penalties of 14 days' imprisonment, 5 days concurrent, and a fine of HK$20,000 (or in default 3 days' consecutive imprisonment) were all set aside; the question of costs was reserved for further submissions.
Legal issues: Whether finding of contempt as a director under O.45 can stand without proper service of the order · Whether a director can be found guilty of contempt as an aider and abettor when the charge was framed only under O.45 · Whether the third finding of contempt (dealing in joint venture shares) was sustainable on the evidence · Propriety of the ex parte Mareva and discovery orders in the underlying proceedings
Outcome: Appeal allowed; all three findings of contempt and the associated penalties against the third respondent/appellant (Cris Chiu-Yin Yip) set aside.