LEE SHU HANG AND ANOTHER v. KAN LAP KEE (also known as “TERRY KAN”)

HCMP 2320/2020

[2025] HKCFI 1393

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2320 OF 2020

__________________

__________________

__________________

_______________

DECISION

_______________

1.  On 16 October 2024, this court handed down the decision dismissing the application by the defendant (“Kan”) with costs (“the Stay Decision”). Kan now applies for leave to appeal against the Stay Decision. Pursuant to earlier direction, the present application is now disposed of on paper, after no submission in reply has been received.

Background

2.  The dispute between the parties was set out in the judgment of this court dated 8 March 2022 (“the Judgment”) and the Stay Decision. Unless otherwise specified, this court adopts the same definitions and abbreviations as before.

3.  The application by Kan in the first instance was for stay of execution of the costs orders made by this court pursuant to the Judgment finding civil contempt on the part of Kan and the sentencing upon proof of contempt respectively (“the Stay Application”). The Stay Application was taken out after such costs have already been taxed and the Allocatur issued.

4.  By the time of the hearing of the Stay Application, it became clear that Kan could only be seeking to invoke the court’s inherent jurisdiction, and the major contention was that the enforcement of payment of the plaintiffs’ taxed costs should hold because the balance of his professional fees as liquidator in HCCW 236/2011 payable by the plaintiffs would exceed such costs payable by him.

5.  As part of the circumstances of this case, which this court had to take into account, the scene behind how the Stay Application came about since the costs orders have been made was set out in the Stay Decision before this court proceeded to discuss the grounds and arguments. Eventually, this court refused to stay. Hence the Stay Decision.

Principles

6.  Section 14AA(4) of the High Court Ordinance, Cap 4 provides that leave to appeal shall not be granted unless the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

7.  When it comes to challenge against the exercise of discretion of the court, the applicant must demonstrate that such decision of the court was plainly wrong. This would either be an error in law or failure to take into account relevant considerations (or taking into account irrelevant considerations) and thus leading to a conclusion which no reasonable tribunal would have drawn. Otherwise, the appellate court would refrain from interfering: see for instance Wong Kar Gee Mimi v Severn Villa Limited & Ors [2012] 1 HKLRD 887 at §31; Xu Hongbiao v Oasis Investment Group Limited & Ors[2024] HKCA 854 at §43.

8.  In this context, the intended appeal is expected to address error in the first instance, and not to regurgitate arguments in the hope for a possibly different view of the appellate court: see K&L Gates v Melco Crown Gaming (Macau) Limited[2019] HKCFI 200 at §7(iii) (on appeal: [2019] HKCA 350).

9.  I see no real dispute as to such principles.

Grounds of the intended appeal

10.  Draft notice of appeal is annexed to Kan’s summons for the present purpose. The following grounds are advanced, pointing out the following errors of this court:

(1)  error in assessing the evidence in respect of the potential of his entitlement by his pending cross claim exceeding such costs that the plaintiffs are entitled to;

(2)  error in applying the law by setting an unduly high threshold for granting a stay of execution;

(3)  error in failing to take into account other special circumstances and balance of prejudice which should favour stay.

Ground (2): the law

11.  I address the second ground first.

12.  The starting point that a judgment creditor should be able to take all legitimate measures to enforce the judgment instead of being deprived of its fruits was laid down by the appellate court: see for instance Credit Lyonnais v SK Global Hong Kong Ltd [2003] 4 HKC 104 at §§4; 25. Discretion in favour of stay of execution of judgment should be exercised in special, if not exceptional, circumstances. The same applies to costs orders. This court sees no reasonable prospect of arguing against that as the applicable test.

13.  That this court was not satisfied that Kan has discharged his burden of demonstrating the requisite special circumstances, which would have justified the stay, was a conclusion reached upon the consideration of the circumstances of the case. Amongst them was any abuse or manifest injustice arising from the plaintiffs’ exercise of their right of execution. It was in such context that this court considered specifically the amount of the plaintiff’s taxed costs being enforced and the timing of Kan’s conceiving the Stay Application.

14.  Kan’s disagreement with this court’s assessment of the circumstances, including those mentioned in the preceding paragraph, will be discussed under intended appeal ground (1) below. However, it is out of context for Kan to argue that this court somehow advocated abuse or manifest injustice as the threshold of the applicable test, which is therefore said to be unduly high and hence an error in law. Clearly, avoidance of injustice is the key consideration in granting stay: see Credit Lyonnais (above).

Ground (1): assessment of the circumstances

15.  In principle, mere existence of a cross action by the debtor against the judgment creditor will not ordinarily suffice for justifying a stay. It requires more. This is particularly true in the case of costs orders, which are recompense for the receiving party for the money expended in litigation with the party adjudged to be liable to pay such costs. This is a particularly relevant consideration as a matter of principle.

16.  Principled consideration aside, the circumstances projected by Kan was that first, he is potentially entitled to the balance of his professional fees as liquidator payable by the plaintiffs, as may be determined under the adjourned Misfeasance Summons/Reassessment Application, exceeding the taxed costs payable to them; and second, if the plaintiffs were allowed to enforce the costs orders, they would not be good for recovery of such projected net balance in his favour. It was in such context that the circumstances of the case should be, and were, assessed.

17.  Kan argues that this court failed to take into account that part of his fees and expenses in respect of which the plaintiffs complain under the Misfeasance Summons/Reassessment Application has been adjudicated against them. As far as he still relies on the observations of Hon G Lam J (as he then was) in making the 23/1/2020 Order, he is apparently yet to properly understand His Lordship’s discussion in his decision then for the purpose of the matter before him[1].

18.  As his counsel acknowledged in the Stay Application[2], it was Kan who indicated his readiness to accept interim payment of 50% of the liquidator’s fees then taxed ex parte, which Hon G Lam J decided to adopt after considering the circumstances of the case for the specific purpose of a conditional stay of the winding up as explained in his decision. In this connection, the determination pursuant to the 23/1/2020 Order so made expressly entails determination/re-determination, adjudication/re-adjudication and assessment/reassessment, which would effectively ascertain afresh the liquidator’s fees to which Kan ought to be entitled, albeit partly paid for the purpose of the conditional stay of the winding up Pak Tat. Hence the outcome of the pending Misfeasance Summons/Reassessment Application, and thus the likelihood of an ultimate net and substantial balance in favour of Kan, being fluid.

19.  Kan argues that this court failed to take into account his entitlement to further liquidator’s fees and expenses since April 2017 until his discharge[3]. However, this court’s analysis must applies to all the fees and expenses which Kan may be found to be entitled to under the pending Misfeasance Summons/Reassessment Application.

20.  The set-off envisaged by the cross-undertakings of the parties consists of that by Kan to repay any excess already received upon such an exercise according to the findings under the Misfeasance Summons/Reassessment Application. As far as it is said that the exercise may end up with a net balance in favour of Kan, one may not in principle argue against that as a matter of possibility. That said, one equally may not pitch such possibility at this stage in more concrete terms. The question then is whether or not that state of affairs known before this court sufficed for the purpose of the Stay Application.

21.  One must balance what the parties, particularly Kan, managed to project before this court as the outcome of the determination of the dispute and resultant entitlements in pending proceedings and the known amount of the taxed costs to which the plaintiffs have been adjudged to be entitled. This is also relevant to the consideration of the contention in respect of the likelihood of the plaintiffs being unable to pay back in the event of a net balance against them. All are relevant to the court’s exercise of discretion whether to stall the plaintiffs’ enforcement of the costs orders in question.

22.  Applying the test mentioned above, this court was not satisfied that Kan has discharged his burden in causing this court to so exercise the discretion in his favour in all those circumstances. Whilst Kan disagrees with this court’s conclusion, his argument that this court has failed to take into account some of those circumstances, in my view, does not possess a reasonable prospect of convincing the appellate court to interfere.

23.  One must note that this court in fact did not rule out considering stay on the basis of a possibility of a net balance of entitlement in favour of Kan eventually after the determination of the Misfeasance Summons/Reassessment Application. However, this court, as it was entitled to, factored in the consideration the appropriateness of stay only on terms. Such condition, if in the form of some payment into court, would also have addressed any concern about the plaintiffs’ worthiness in making possible repayment eventually. As noted in the Stay Decision, Kan was not forthcoming in this respect at all, despite opportunity to do so. He remains silent on this point for the present purpose.

24.  In other words, Kan is not challenging the appropriateness of the consideration of conditional stay in principle, but is standing firm that the Stay Application ought to have been granted and without any condition attached. Such stance is hardly convincing in the absence of concrete projection that it is most likely that the Misfeasance Summons/Reassessment Application would yield not only a net but also a substantial net balance in his favour in the circumstances which are heavily disputed and to be resolved at this stage. This court fails to see how accepting such stance of Kan would have been appropriate exercise of discretion in the circumstances before it.

Ground (3): other special circumstances and prejudice

25.  Kan argues that this court failed in taking into proper account of the issue of delay. It is difficult to see how so. Exactly because this court was acutely aware of the relevance of the scene behind how and when the Stay Application came to be conceived, the same was set out at the beginning of the Stay Decision. This court set out the fact of the time taken and the development since the costs orders until the Stay Application as the background.

26.  Kan essentially repeats his arguments and authorities on the issue of the alleged potential difficulty in recovering from the plaintiffs in the event of a net balance in favour of Kan upon conclusion of the Misfeasance Summons/Reassessment Application. However, the issue of recovery from the plaintiffs could not be considered without establishing the likelihood of that event. The assessment in respect of the likelihood of that event in the Stay Decision and, now for the present purpose, above refers. Decided cases in this respect vary according to their own facts. Re Lehman Brown Ltd (No 2) referred to by Kan and cited in the Stay Decision was one of those. So are Asparouh Ianev Dimitrov v Dominic Tak Ming Lau[2018] HKCA 356, Dar Al Arkan Real Estate v Al Refai [2016] 6 Costs LO 865 and Pacific Foundation Finance Limited v Fairyoung Holdings Limited HCA4029/1998 (4 November 1998) cited by Kan for the present purpose.

27.  Kan also complains about the plaintiffs’ issuance of statutory demand upon the handing down of the Stay Decision. Putting aside whether the decision of the plaintiffs to exercise such right in the circumstances deserves criticism as a matter for the Companies Court, such conduct subsequent to the Stay Decision does not sustains as a matter in support of satisfying the test under section 14AA.

Conclusion and order

28.  Therefore this court is not satisfied that the intended appeal on the grounds proposed has reasonable prospect of success. Nor is there suggestion that there is reason in the interests of justice that the appeal ought to be heard.

29.  The present application is dismissed with, on nisi basis, costs to the plaintiffs with certificate for counsel. Unless application to vary is made within 14 days from the date hereof, the nisi costs order will become absolute without further order. Upon that, the plaintiffs shall lodge and serve their statement of costs within 7 days, and Kan may lodge and serve his written comment within 7 days thereafter. Costs of the application payable by Kan will be summarily assessed on paper only.

Written submissions by Mr Martin Kok, instructed by D S Cheung & Co, for the plaintiffs

Written submissions by Mr Adrian Lee, instructed by Rita Law & Co, for the defendant

HCMP 2320/2020

[2024] HKCFI 2836

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2320 OF 2020

__________________

__________________

__________________

______________

D E C I S I O N

______________

1.  This is an application by the defendant (“Kan”) for stay of execution of, amongst others, costs orders.

Background

2.  The background of the dispute was set out in the judgment of this court dated 8 March 2022 (“the Judgment”). For the present purpose, this court continues to adopt the definitions and abbreviations in the Judgment.

3.  To recapitulate, the plaintiffs represent the estate of their late father who petitioned for the winding up of Pak Tat in HCCW 236/2011 in the circumstances explained in the Judgment. At one stage, the plaintiffs have applied for stay of the winding up and the discharge of Kan as the then liquidator. The plaintiffs have also taken out an application for the return and/or account by Kan of professional fees and expenses incurred in relation to a number of specific matters in the liquidation of Pak Tat on the ground of his alleged misconduct as liquidator, together with costs on indemnity basis, ie the Misfeasance Summons. The application was subsequently amended to include that for the assessment or taxation of liquidator’s bills lodged by Kan to be set aside and/or re-opened (“the Reassessment Application”).

4.  These came before Hon G Lam J (as he then was), who handed down his decision and made the order on 23 January 2020 (“the 23/1/2020 Order”). Amongst other things, His Lordship ordered that the winding up order against Pak Tat be stayed on conditions, one of which was that the plaintiffs would make to Kan interim payment of 50% of his costs as liquidator as taxed then minus the sum previously held by him on account. The Misfeasance Summons/Reassessment Application was adjourned.

5.  Pursuant to the 23/1/2020 Order, the winding up order in respect of Pak Tat was eventually stayed permanently by the order of the court on 15 December 2020 while the liquidators, including Kan, were formally discharged.

6.  The proceedings herein followed. The plaintiffs applied for committal order against Kan as the then liquidator of Pak Tat for breach of an order of the court made in the winding up proceedings of the company. By the Judgment, this court found the alleged contempt on the part of Kan was proved, and dismissed his counter-application. This court awarded costs against him on an indemnity basis.

7.  Hearing mitigation on 12 August 2022, this court sentenced Kan by way of a fine of HK$250,000 payable within 14 days (“the Sentencing”). This court awarded costs of and occasioned by the mitigation and sentencing hearing to the plaintiffs on an indemnity basis.

8.  The costs payable pursuant to the costs orders under the Judgment and the Sentencing were eventually taxed. On 20 February 2024, the Deputy Registrar issued the allocatur certifying the amount of the taxed costs (“the Allocatur”).

9.  By summons filed on 8 March 2024, Kan applies for stay of execution of the Allocatur as well as the costs orders made by this court upon the Judgment and Sentencing mentioned above until (i) his appeals against the Judgment and Sentencing (CACV 108/2022 and CACV 347/2022) have been finally disposed of; (ii) the Misfeasance Summons of the plaintiffs against the defendant has been finally determined; and (iii) taxation of all the Liquidators’ bills have been finally determined.

The plaintiffs’ summons filed on 26 June 2024

10.  In the course of the affidavit evidence for the present application, Kan made criticism by way of his affirmation in reply, causing those acting for the plaintiffs to seek leave to file a further affirmation. Hence their summons filed on 26 June 2024. The affirmation was meant to provide the most recent update of the status of the arbitration proceedings by the plaintiffs against the purchaser of the Shenzhen company owned by Pak Tat. Counsel for the plaintiffs acknowledged the limited purpose of the affirmation, but its admissibility was not strongly opposed by counsel for Kan. It is taken into account on a de bene esse basis.

Kan’s present application

11.  One should first note that the Allocatur does not exist as an order of the court directing Kan to pay the taxed costs independent of the actual orders to do so under the Judgment and the Sentencing. It follows that the Allocatur is not an order subject to stay independent of the costs orders under the Judgment and the Sentencing. Nor does the application in respect of it as lodged by Kan add anything to the application to stay the actual costs orders.

12.  The defendant indeed seeks to stay the two costs orders. For this he applies pursuant to O45, r11 or O59, r13 of the Rules of the High Court, Cap 4A or the inherent jurisdiction of the court.

13.  O59 r13 provides for the stay of execution of the judgment or order pending appeal. Kan’s appeals against the Judgment and the Sentencing were lodged on 12 April 2022 and 25 August 2022 respectively. However, the appeals were dismissed by the appellate court after hearing on 9 April 2024. Reasons for decision, according to the parties, would be handed down at any time soon. In the circumstances, O59 r13 ceases to provide the relevant jurisdictional basis for the present purpose.

14.  O45, r11 provides that a party against whom a judgment has been given or an order made may apply to the court for a stay of execution on the ground of matters occurring since the date of the judgment or order. Such have also been construed to refer to matters which impact on the validity of the judgment or order which, if established before the court, might justify the court in saying that this is not a judgment which on the material placed before it, it would allow to be exercised: see Credit Lyonnais v SK Global Hong Kong Ltd [2003] 4 HKC 104 (citing Tam Ho Man v Wong Kwok Tai, HCA 4736/1985 (20 October 1986).

15.  The matters raised by Kan and discussed above are not matters which occurred only after the Judgment and the Sentencing, let alone impacting the validity of the orders made: see for instance Baosteel Engineering & Technology Group Company Limited v China Zenith Chemical Group Limited[2022] HKCFI 2343. The fact was that stay of execution of the costs orders in these proceedings was not perceived until after the plaintiffs have issued demand for their taxed costs as certified by the Allocatur. That was 2 years after the costs order was made under the Judgment. Notwithstanding the appeals against the Judgment and the Sentencing, there has been no application for stay of execution of the costs orders until nearly 2 years after the first of these appeals was lodged as mentioned.

16.  The stance of Kan in the present application, as will be discussed below, is that the balance of his professional fees as liquidator payable by the plaintiffs are expected to exceed the plaintiffs’ costs. Such stance could have been taken even prior to the Allocatur. Yet Kan did so only now. Insofar as the delay had to do with the outstanding Misfeasance Summons and the Reassessment Application, those proceedings were admittedly adjourned because of Kan’s appeals against the Judgment and the Sentencing. If Kan attempts further appeals to the final court, as he indicated, one expects further delay will be engineered as a result.

17.  The above very much sets the scene behind how the present application came about.

18.  The application boils down to Kan’s appeal to this court to exercise the inherent jurisdiction to stay. Exercise of such jurisdiction however does not detract from the starting point that a judgment creditor should be able to take all legitimate measures to enforce the judgment instead of being deprived of its fruits: see for instance Credit Lyonnais (above) at §4. Discretion to stay remains to be exercised in special, if not exceptional, circumstances.

19.  Essentially, the defendant refers to the outstanding proceedings in respect of the Misfeasance Summons, and argues that he is potentially entitled to the balance of his professional fees as liquidator payable by the plaintiffs which would exceed the amount certified by the Allocatur to be payable to them. Further, he projects the risk that the plaintiffs, if allowed to execute the costs orders, will not be good for recovery which he may eventually be entitled to seek from them.

20.  The plaintiffs disagree.

21.  In principle, mere existence of a cross action by the debtor against the judgment creditor will not ordinarily suffice for justifying a stay. This was what the court in Baosteel Engineering (above) said (at §18), referring to Burnet v Francis Industries PLC [1987] 1 WLR 802. Whilst the court in Baosteel Engineering said so with in mind the context of the parties not being the same or in the same capacities, the relevance of the principle in my judgment is not compromised. It requires more than the mere existence of a cross claim by the debtor against the judgment creditor to be special circumstance justifying the deprivation of the judgment creditor of the fruits of the judgment. The same should apply to costs orders which are recompense for the receiving party for the money expended in litigation with the party found to be liable to pay such costs: see Perotti v Watson [2001] EWCA Civ 506 (at §§12; 15).

22.  In fact, it is common ground that pursuant to the 23/1/2020 Order, Kan has received 50% of his liquidator’s fees according to the amount as taxed by then apparently on an ex parte basis. That was receipt by Kan of a total sum of HK$4.47 million. However, whether Kan is entitled to keep the entirety of the payment received and any further liquidators’ fees as well as the quantum are now fluid.

23.  First, the 23/1/2020 Order was made pursuant to, amongst other things, undertaking by the plaintiffs to jointly and severally pay Kan’s liquidator’s fees to be determined, adjudicated, assessed and/or re-determined, re-adjudicated and/or re-assessed by the court under and/or pursuant to the Misfeasance Summons and the Reassessment Application. In line with that, Kan’s cross undertaking to repay any amount found by the court to have been paid to him in excess of his entitlement was recorded by His Lordship in his decision. Kan’s entitlement to his fees and their quantum will now hinge upon the findings and reassessment which the court may make in the pending proceedings.

24.  Actual merit of the plaintiffs’ challenge against Kan in those proceedings aside, reference by Kan to the taxed liquidator’s fees or its balance, as if this is what the plaintiffs should expect to owe to him, now becomes neither here nor there. Nothing said by His Lordship in his decision in making the 23/1/2020 Order may be borrowed to cast light on the likelihood of the eventual existence of a net balance in favour of Kan so as to justify stalling the plaintiffs from recovering their taxed costs. The court in Perotti (above) expressed (at §13) similar sentiment in such circumstances.

25.  Second, apart from the costs certified by the Allocatur, there are now the further costs of the appeals against the Judgment and the Sentencing, which Kan was ordered to pay to the plaintiffs. Whether or not Kan intends to attempt final appeal is neither here nor there insofar as such adjudged costs liability is concerned at least as of this stage.

26.  The circumstances, in my judgment, are distinguishable from those in Re Lehman Brown Ltd (No 2) [2015] 5 HKLRD 1, as the court there found them to be both unusual and sufficient in demonstrating the highly likely practical result of a one sided net liability, and hence special circumstance to justify a stay.

27.  Third, where the potential state of the alleged potential set-off between the parties’ respective entitlements contended by Kan is not so clear as alleged, the premise for considering the worthiness of the plaintiffs to meet any recovery action by Kan in due course becomes relatively weak. Further, worthiness of the plaintiffs in this respect would have been the concern when their undertaking was offered, which Hon G Lam J accepted and upon which His Lordship decided to make the 23/1/2020 Order. No issue was ever taken as to whether such undertaking would be worthless without fortification. In any event, it is incorrect to suggest that the plaintiffs have not adduced any evidence in respect of their assets, albeit held by overseas corporate vehicles but traceable in the form of substantial landed properties within the jurisdiction.

28.  Fourth, even assuming this court somehow considers that in principle the execution of the costs orders may be stayed pending the outcome of the Misfeasance Summons and Reassessment Application on the basis of a possible net balance between the parties’ liabilities to costs one way or the other, the fact remains that this is adjudged liability of Kan to pay the plaintiffs’ taxed costs as opposed to the uncertain outcome of the outstanding proceedings. In view of that, the court would be quite entitled to consider as a matter of balancing in the exercise of discretion to impose condition for any stay. A fair condition would be requiring such taxed costs or part of them to be paid into court or to a stakeholder in the interim. Certainly no such offer was made by Kan. Nor did his counsel make any proposal for enabling him to address such consideration, despite the opportunity given upon the issue being raised by this court at the hearing. Counsel relayed that he had no instruction regarding that from Kan.

29.  Last, in view of the amount of the costs certified by the Allocatur and timing of when Kan perceived bringing the present application as mentioned, I am hardly impressed that execution by the plaintiffs of the costs orders as taxed or satisfaction of the same by Kan now may be categorised as abusive and manifestly unjust respectively.

Conclusion and order

30.  I allow the plaintiffs’ application by their summons filed on 26 June 2024 in relation to the further affirmation with costs in the cause of Kan’s application.

31.  All matters considered, Kan’s present application is dismissed with, on nisi basis, costs to the plaintiffs with certificate for counsel. Unless application to vary is made within 14 days from the date hereof, the nisi costs order will become absolute without further order. Upon that, the plaintiffs shall lodge and serve their statement of costs within 7 days, and Kan may lodge and serve his comment within 7 days thereafter. Costs of the application payable by Kan will be summarily assessed on paper only.

Mr Martin Kok, instructed by D S Cheung & Co, for the plaintiffs

Mr Adrian Lee, instructed by Tang and So, for the defendant

HCMP 2320/2020

[2022] HKCFI 2671

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2320 OF 2020

__________________

__________________

BETWEEN

__________________

__________________

JUDGMENT

__________________

1.  On 8 March 2022, this court handed down the judgment (“the Judgment”) in respect of the plaintiffs’ application for committal order against the defendant and the effectively counter-application by the defendant. This court found the alleged contempt on the part of the defendant was proved, and dismissed the defendant’s application. Directions were then given for the purpose of the hearing of mitigation and sentencing. Written submissions were lodged and the parties were also heard today.

2.  For the present purpose, this court will not repeat what were already set out in the Judgment, but, where appropriate, will simply refer to the parts of the discussion in the Judgment. This court will also adopt the same definitions and abbreviations in the Judgment.

Preliminary

3.  Argument in respect of the factual matters behind the plaintiffs’ proof and Kan’s defence of the charge of contempt in these proceedings has been adjudicated upon. The contempt was found. For the purpose of mitigation, Kan was given leave to file affidavit evidence in respect of any facts pertinent to his mitigation. This however does not entail affidavit evidence from the plaintiffs in rebuttal as such. Nor is it contemplated that the prosecuting plaintiffs would be heard to oppose the mitigation with a view to securing a certain penalty. It is therefore not without reason for the reference by counsel for Kan to the similar principle in the criminal context: Archbold HongKong Criminal Law Pleadings Evidence & Practice 2022 (at §5.28).

4.  Sentencing and penalty for contempt is a matter for the court but not for the purpose of the plaintiffs as if they were claimants seeking a certain penalty against the defendant in these proceedings. Hence this court’s specific direction to the plaintiff to limit their submissions to assisting this court on the relevant principles and authorities on penalty: see Secretary for Justice v Chan Oi Yau Riyo [2020] 3 HKLRD 494 (at §53). This court specifically refrained from directing the plaintiffs to file affidavit evidence as if they were entitled to rebut the mitigation.

5.  Contrary to the above, the plaintiffs somehow saw fit to take out a summons on 16 June 2022 for leave to file an affirmation expressly for the purpose of rebutting the affidavit evidence and submission of Kan for mitigation. Further, most of such affirmation of the plaintiffs is by nature submission, not evidence. For the one point made in their intended affirmation that may be said to relate to the accuracy of Kan’s representation as to certain fact concerning them, the plaintiffs may be heard. Yet as explained during this hearing and below, their intended affirmation is still not called for. The attempt to file the affirmation in rebuttal of mitigation is unwarranted.

The principles of sentencing

6.  The principles of sentencing in case of contempt were set out in Arboit v Koo Siu Ying (No 2) [2016] 3 HKLRD 154 (at §§2-8).

7.  Conduct in defiance of the court’s order must meet with disapproval and punishment. Where appropriate, the sentence may also serve to coerce against future breach or to compel compliance. The sentencing options need no introduction, ranging from the most severe option of immediate custodial sentence, imprisonment term suspended on terms to financial penalty.

8.  The penalty must be appropriate and proportional, considering all the circumstances of the case. Such circumstances start with the specific breach and its surrounding circumstances. The court will consider if there are aggravating and mitigating factors. Relevant factors include the nature of the order and the breach as well as the extent of the breach; whether the contempt was intentional (including the reason or motive behind the breach); whether the plaintiff has suffered prejudice as a result of the breach; whether the contemnor appreciates the seriousness of the deliberate breach; and whether the contemnor has cooperated throughout the matter in question.

Consideration in the present case

9.  That Kan denied the charge, which was eventually proved, will not be held against him in the terms of sentence, as this was after all his right to put the plaintiffs to strict proof. By exercising such right, Kan could not be said to have continued or compounded the contempt in the circumstances of this case. The consequence of not conceding and putting the plaintiffs to proof was adequately addressed by the usual order of indemnity costs against him upon his conviction.

10.  Amongst others, the circumstances surrounding the contempt were explained in §§49 to 60 of the Judgment. They are relevant to sentencing.

11.  Kan now tries to explain his impeached conduct at the relevant time as the result of his misconception and misunderstanding about the relevant terms of the 2/11/2017 Order. This meets with strong comment by the plaintiffs by way of their intended affirmation and submission.

12.  As explained in the Judgment, the impression of this court obtained from the materials is that Kan essentially allowed himself to be convinced in doing what he considered to be legitimate and in defending his own conduct and reputation against the plaintiffs’ complaint against him in the SCIA Arbitration, which unavoidably conflicted with the proper and professional judgment expected of him in discharge of his duties as the liquidator of Pak Tat in line with the protocol set out in the 2/11/2017 Order. He now takes the consequence of that.

13.  Kan also pleads that he has derived no personal benefit from the breach. There was indeed no concrete allegation or evidence, and in any event this court made no finding, as to whether Kan has derived any tangible or economic benefit from the breach. In my judgment, as mentioned, he allowed his personal interest to conflict with the proper discharge of his duties as the liquidator of Pak Tat in line with the protocol set out in the 2/11/2017 Order.

14.  Kan also pleads that no prejudice was caused by his breach to the plaintiffs, in view of the fact that the submissions of the plaintiffs for the interest of Pak Tat were indeed placed before the SCIA, which eventually ruled in favour of the SPA against Pak Tat. The statements of Kan, subject conduct of breach of the 2/11/2017 Order, might have the effect of contradicting the effort made and the contentions advanced by the plaintiffs in their submissions. However, one may not say that it is more probable than not, let alone beyond reasonable doubt, that the SCIA would have reached a different conclusion but for those statements of Kan solely or predominantly.

15.  The charge against Kan was not his conduct in causing Pak Tat to enter into the SPA, the reasonableness of which was and still is questioned by the plaintiffs. The dispute in respect of that, as explained in the Judgment, forms the subject matter of the Misfeasance Summons which is yet to be determined. The nature of the breach, and thus contempt, as charged concerned his two statements to the SCIA submitted in breach of the protocol spelt out in 2/11/2017 Order, properly read and understood. This was made clear in the conclusion set out in §87 of the Judgment.

16.  That said, the plaintiffs are keen at correcting the representation of Kan in this respect. That is also the one point made in their intended affirmation which I am prepared to hear for the sole purpose of avoiding any misrepresentation or misunderstanding of fact introduced by Kan in his mitigation. In his mitigation, Kan represents that the plaintiffs have not sought to set aside the SCIA award, and is taken to have accepted it as sound and correct. The plaintiffs point out that this is factually wrong. Application was lodged in February 2021 to the Mainland court for setting aside the award, which failed in June 2021. Kan stands to be so corrected on the facts represented in his mitigation. In court, counsel for Kan readily accepted that correction.

17.  There are aggravating features in the present case. One was that the abovementioned approach of Kan was not reasonably expected of him in his role and as an officer of the court. Yet the specific manner in which he committed the error must also be borne in mind.

18.  As explained in the Judgment, Kan took a neutral stance, which was acknowledged by the court in the hearing of the subsequent application for his discharge as a liquidator of Pak Tat. Faced with the finding of contempt against him in these proceedings, Kan’s suitability was also questioned and he had to back out from undertaking the liquidator’s duties in numerous insolvency cases. Incidental investigation into his conduct by the Official Receiver and the professional body is also contemplated. The severity of the penalty to be imposed will also have bearing on his capacity to continue his pre-existing commitment in current insolvency cases, and hence potential collateral impact to the third party stakeholders in those connections. The materials show that such repercussions are not unreal. These are relevant considerations, and would not be all brushed aside simply on the basis that he has only himself to blame for all those repercussions.

19.  Reference is also made to the previous contributions made by Kan to the development of the insolvency law and practices in the past years. Instances of those are provided. They serve to cast light on his previous good character and the potential impact of the conviction and the sentence to be passed on his reputation in the profession.

20.  As mentioned, the appropriate penalty should reflect the degree of disapproval by the court of the contempt. Yet the same should be proportional in all the circumstances of the case. In the circumstances of the present case, this court comes to the conclusion that a financial penalty would be appropriate.

21.  Cases cited by counsel are taken into account. For the proved contempt, Kan is hereby fined a sum of HK$250,000. He has 14 days to pay the fine to the court. If he fails to do so, a warrant of arrest will be issued for bringing him to court for an answer and consideration of penalty for the new offence.

Costs

22.  Costs of and occasioned by this mitigation and sentencing hearing shall also be borne by Kan, to be taxed on an indemnity basis, if not agreed.

23.  In line with this court’s observation about the propriety of the plaintiffs’ summons for leave to file their affirmation for this hearing and the acknowledgment by counsel for the plaintiffs, this court makes no order in respect of that summons including that as to costs.

Mr Alan Kwong, instructed by D S Cheung & Co, for the plaintiffs

Mr Edwin Choy SC leading Mr Patrick Siu and Mr Adrian Lee, instructed by Tang and So, for the defendant

HCMP 2320/2020

[2022] HKCFI 651

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2320 OF 2020

_______________________

______________________

_______________________

JUDGMENT

_______________________

1.  The plaintiffs are the executors of the estate of their late father, Lee Sai Nam (“Lee Sr”). Lee Sr was the sole beneficial owner of Pak Tat Trading Co (“Pak Tat”). Pak Tat was once subject to a winding up order (HCCW 236/2011) which has by now been permanently stayed. The plaintiffs allege that one of the then joint and several liquidators of Pak Tat, now discharged, has been in breach of an order of the court made in the winding up proceedings. With leave of the court, they commenced the present committal proceedings against him. The former liquidator denies the charge, and also took out a recent application to discharge/set aside the leave and to strike out these proceedings.

BACKGROUND

2.  Lee Sr founded the Luen Tat group of companies, which carried on the business of manufacturing and trading watchbands.  Pak Tat was the group’s manufacturing arm which held 100% shareholdings of the manufactory Lianda Metal Watchband (Shenzhen) Co Ltd (“Shenzhen Lianda”) in Shenzhen.  Shenzhen Lianda owned various pieces of land in Shenzhen, which also constituted the major assets of Pak Tat.

3.  Since 2008, there was serious dispute between Lee Sr and his eldest son Ken Li regarding the affairs of and the beneficial interest in the group.  That gave rise to litigations involving the various related individuals and companies.  HCA 1711/2009 was the main action where the major dispute was the beneficial ownership of Pak Tat.

4.  In the course of the litigation, Lee Sr (as the major creditor) petitioned for the winding up of Pak Tat, ie HCCW 236/2011 mentioned above.  Apparently, the intention behind was to preserve Pak Tat by putting the company into the hands of the liquidators appointed by the court pending the resolution of the dispute in respect of its beneficial ownership in HCA 1711/2009.

5.  On 1 December 2011, Hon Harris J made an order winding up Pak Tat in HCCW 236/2011.  The defendant (“Kan”) and Mr Kenneth Chen (“Chen”), then both of ShineWing Specialist Advisory Services Limited (“ShineWing”), were appointed as Pak Tat’s joint and several liquidators (collectively the “Liquidators”).

6.  HCA 1711/2009 was tried before this court. Lee Sr passed away in a fortnight after the conclusion of the trial.  The plaintiffs, Seline Lee (the daughter) and Richard Li (the younger son), became the executors of their late father’s estate.

7.  On 9 December 2015, this court handed down judgment and held, amongst others, that Lee Sr was the sole beneficial owner of the shares in Pak Tat.  The judgment was affirmed by the Court of Appeal on 19 January 2017 in CACV 2/2016.

8.  With the above outcome in favour of Lee Sr, the plaintiffs as the executors of Lee Sr’s estate sought to stay the winding up order with a view to regaining control over its affairs.  Meanwhile the plaintiffs also question Kan’s conduct during the liquidation of Pak Tat.

9.  Kan is said to have wrongfully hijacked the affairs of Pak Tat to the exclusion of his co-liquidator, Chen.  There was disagreement between Chen and ShineWing, and so was there between Kan and Chen on the conduct of the liquidation of Pak Tat.  This eventually led to Chen’s departure from Shinewing, and his tender of resignation as the liquidator of Pak Tat in 2018.

10.  Significantly, in the course of the liquidation, Kan has caused Pak Tat to enter into a sale and purchase agreement on 9 December 2016 (“SPA”) to dispose of its 100% shareholding in Shenzhen Lianda to a Shenzhen Youpeng Investment Co Ltd (“Youpeng”), which the plaintiffs criticise as commercially unsound as well as illegal and void under the Mainland law.  Conspiracy between Youpeng and Kan is also suggested.

11.  It was in these circumstances the plaintiffs (as the personal representatives of Lee Sr, the petitioner) issued on 9 January 2017 a summons in HCCW 236/2011 to stay the winding-up order against Pak Tat and to discharge the Liquidators (the “Stay & Discharge Summons”).

12.  In the meantime, Youpeng commenced arbitration proceedings at the Shenzhen Court of International Arbitration (“SCIA”), seeking to enforce the SPA against Pak Tat (the “SCIA Arbitration”).  While the handing down of the arbitration award was pending, the plaintiffs took out a summons before the Hong Kong court on 12 September 2017 for the following orders or directions with regard to the exercise of powers by the Liquidators (the “Direction Summons”):

(1)  The Liquidators do reject the proofs of debt against Pak Tat filed by Ken Li, the liquidators of Luen Tat and another person (§1(1) of the summons).

(2)  The SPA be declared void and/or ineffective, and the Liquidators be directed to exercise their best endeavours to set it aside (§1(2) of the summons).

(3)  The Liquidators do authorize the plaintiffs as the personal representatives of the Lee Sr to have the conduct of the SCIA Arbitration or alternatively the Liquidators together exercise their best endeavours to contest the arbitration (§1(3) of the summons).

(4)  Kan be ordered and/or directed to consult Chen and to seek his consent before he makes any decision with regard to the administration of the affairs of Pak Tat, and this should be done no less than 7 work days before the intended decision is made.  If no agreement or consent relating to such decision can be reached, Chen and Kan shall accordingly seek directions from the court (§1(4) of the summons).

13.  At the hearing of the Direction Summons on 2 November 2017, the plaintiffs through counsel proposed to adjourn the matters under §(1), (2) and (4) of the summons for substantive argument to be heard at the same time of the Stay and Discharge Summons.  As regards §1(3), the plaintiffs sought an order in the following terms on urgent basis:

“As regards paragraph 1(3) of the Summons:

(1) the personal representatives of Petitioner’s estate (namely…Richard Lee and …Seline Li) be authorized to (a) make an application for filing a supplemental submission to the Shenzhen Court of International Arbitration; and (b) file the said supplemental submissions;

(2) …Kan do take any reasonable and necessary steps to facilitate Richard Lee and Seline Li to (a) make the said application for filing supplemental submission to the Shenzhen Court of International Arbitration; and (b) file the said supplemental submissions”

14.  Youpeng intervened in the proceedings in respect of the Direction Summons.  At the end, and apparently by consent, DHCJ To made the order in question on 2 November 2017 (“the 2/11/2017 Order”) whereby he:

(1)  adjourned §1(1) and (2) of the Direction Summons for argument, and gave directions for the filing of affirmation evidence;

(2)  gave an order in terms as proposed above as regards §1(3) of the Direction Summons (hence §4 of the 2/11/2017 Order);

(3)  gave an order in terms of §1(4) of the Direction Summons (hence §5 of the 2/11/2017 Order); and

(4)  gave liberty to apply.

15.  With the authorisation under §4 of the 2/11/2017 Order, the plaintiffs through their Mainland lawyers lodged their written submissions dated 28 December 2017 with SCIA.  Kan as liquidator on behalf of Pak Tat then lodged a Chinese written statement dated 29 December 2017 with the SCIA (“the 1^st Statement”).  After the plaintiffs’ further written submission to SCIA dated 30 July 2018, Kan on behalf of Pak Tat lodged another Chinese written statement dated 15 September 2018 with the SCIA (the 2^nd Statement”).

16.  On 3 October 2018, Kan made anapplication by letter in HCCW 236/2011 to DHCJ To for directions (“the 3/10/2018 Application”).  The application was made ex parte for alleged urgency arising out of the direction of the SCIA for further submissions to be lodged on or before 8 October 2018.  Kan sought directions in respect of the following questions:

(1)  Pursuant to the 2/11/2017 Order, whether or not petitioner (ie his estate represented by the plaintiffs) could make any submission for and on behalf of Pak Tat to SCIA or on any matters relating to the company;

(2)  If the answer to (1) was in the negative, should the petitioner only file their submission to represent their own interest as creditor and contributory of Pak Tat in the arbitration proceedings;

(3)  If the answer to (1) was in the affirmative, whether the petitioner’s submission should be filed by the Liquidators;

(4)  Whether the Liquidators should make further submission for and on behalf of Pak Tat in response to the queries from SCIA; and whether further comment could be made in response to the submission made by the petitioner on behalf of Pak Tat;

(5)  As Chen has resigned in April 2018 as a liquidator of Pak Tat (though the resignation procedures and formalities were outstanding), whether Kan should still be required to seek consent from Chen pursuant to the 2/11/2017 Order (while Kan referred to the practical difficulty and concern about the legal consequence and the cost implication as well as the validity of the submission for and on behalf of the company which might be challenged);

(6)  If the answer to (5) above was in the affirmative but Chen did not respond to his request for consent, whether Kan should file the draft response to SCIA (while his view was that he had the right to defend the personal allegations against him, and the response was required by SCIA which did not constitute any decision of Pak Tat).

17.  In the 3/10/2018 Application, Kan explained what caused him to ask the above questions, namely that:

(1)  since the 2/11/2017 Order, the plaintiffs through their Mainland lawyers filed their submissions to the SCIA directly instead of through or by the Liquidators for and on behalf of Pak Tat, and the contents of those submissions were not supervised or approved by the Liquidators;

(2)  in the plaintiffs’ submission to SCIA, the plaintiffs made unfounded and personal allegations against him as one of the liquidators of Pak Tat, which he defended by the 2^nd Statement; and

(3)  there was in Kan’s view no restriction under the 2/11/2017 Order against the Liquidators making further submissions in the arbitration; and the SCIA also raised queries for the parties concerned and requested further submissions.

18.  On 5 October 2018, DHCJ To dismissed the 3/10/2018 Application.  In his written reasons dated 8 October 2018, DHCJ To saw the application by Kan to have been taken out on two bases.

19.  DHCJ To saw the application in respect of questions (1) to (4) mentioned above as an attempt to re-define or limit the scope of §4 of the 2/11/2017 Order.  His Lordship referred to the purpose of the Direction Summons which was to protect the interest of the creditors, the contributories and Pak Tat.  The petitioner (Lee Sr, and now his estate) was the beneficial owner and the major creditor of Pak Tat.  The petitioner represented the interest of the creditors, contributories and Pak Tat.  In the circumstances, the interest of the creditor and contributory of Pak Tat was the same as the interest of the petitioner.  It was out of concern that Kan’s personal interest would conflict with the interest of the petitioner, the creditor and Pak Tat that its personal representatives (ie, the plaintiffs) were authorised as per §4 of the 2/11/2017 Order.  In face of such apparent conflict, Kan was badly misconceived to suggest that the petitioner’s submissions to the SCIA pursuant to §4 of the 2/11/2017 Order should be subject to the supervision and approval of the Liquidators.  The supplemental submissions authorised by the court were intended to be supplemental to those made by the Liquidators for and on behalf of Pak Tat and were therefore the supplemental submissions of Pak Tat.  Now the submissions of the petitioner were before the SCIA.  The 2/11/2017 Order had served its purpose.  The SCIA had jurisdiction over the dispute.  Kan should adopt a neutral position, but it would be a matter for him if he so wished to side with Youpeng.  How he would go about doing that would also be a matter for the SCIA.  Giving direction as sought by Kan might be seen as interfering with the function of the arbitral tribunal.  Considering the application as an attempt to overturn §4 of the 2/11/2017 Order, the learned Deputy Judge refused to give directions in respect of questions (1) to (4) posed by Kan mentioned above.

20.  The other basis of the 3/10/2018 Application, as Kan explained in the application, was the resignation of Chen as a liquidator in April 2018.  DHCJ To considered that the application for direction in respect of questions (5) and (6) above on this basis was made by Kan in utmost bad faith, as it was engineered to create surprise and ambush on the plaintiffs.  The alleged urgency was not justified.  Insofar as §5 of the 2/11/2017 Order was concerned, Kan had not applied to vary that after knowledge about Chen’s purported resignation.  Whilst it was no longer possible to seek consent from Chen, Kan had to seek direction from the court.  Insofar as his conduct of proceedings before the SCIA was concerned, §4 of the 2/11/2017 Order remained.  Kan had not sought specific directions on his conduct of the arbitration proceedings, and the court was not prepared to give any blank direction particularly when the plaintiffs were not heard.  The application in respect of questions (5) and (6) of the 3/10/2018 Application was therefore refused.

21.  The charge now laid by the plaintiffs against Kan is that the 1^st and the 2^nd Statements were issued to SCIA in breach of §5 of the 2/11/2017 Order in that Kan did so without consulting Chen or seeking his consent or seeking direction of the court.  By ex parte summons dated 20 November 2018, the Plaintiffs applied for leave to commence committal proceedings against Kan on this basis.

22.  On 11 January 2019, DHCJ To granted leave for the plaintiffs to commence the committal proceedings against Kan on conditionthat they should proceed only afterthe conclusion of the Stay & Discharge Summons.  Service of the penal notice was dispensed with.

23.  On 25 January 2019, the above sealed order was served on Kan.

24.  The Stay and Discharge Summons in HCCW 236/2011 was eventually heard before Hon G Lam J (as he then was) together with a further summons taken out by the plaintiffs for the estate of Lee Sr, the petitioner, on 4 October 2018 for the return and account by Kan of professional fees and expenses incurred in relation to a number of specified matters in the liquidation of Pak Tat on the ground of his alleged misconduct as liquidator (“the Misfeasance Summons”).  As mentioned, part (§1(1) and (2)) of the Direction Summons was previously adjourned by virtue of the 2/11/2017 Order to be dealt with at the same time as the Stay and Discharge Summons.

25.  On 23 January 2020, G Lam J handed down his decision.

26.  Regarding the adjourned part of the Direction Summons, the outstanding debt owed by Pak Tat to the minor creditor (ie Ken Li) was resolved by way of the undertaking of the estate of Lee Sr.  The debt owed to the major creditor (ie the estate of Lee Sr) was waived.  The issue of the validity of the SPA was not properly a matter to be determined in the winding up proceedings or even the Hong Kong court.  Regarding the Stay and Discharge Summons, G Lam J considered that if stay was granted, discharge of the Liquidators would follow.  His Lordship eventually ordered that:

(1)  the winding-up order against Pak Tat be stayed on the conditions that (a) Kan be paid 50% of his taxed costs as liquidator; and (b) the plaintiffs should waive the indebtedness that Pak Tat owed to the estate of Lee Sr; and

(2)  the Misfeasance Summons be adjourned for further directions.

27.  It took some time for the plaintiffs to satisfy condition (1)(a) above.  Upon being satisfied that the conditions were satisfied, G Lam J acceded to the joint application of the plaintiffs and Kan, and ordered on 15 December 2020 that the winding-up order against Pak Tat be stayed permanently and the Liquidators be discharged accordingly.

28.  The plaintiffs followed by commencing the present proceedings on 21 December 2020 pursuant to the leave of DHCJ To mentioned above.

29.  A fortnight before the present hearing, on 1 September 2021, Kan took out his summons seeking to discharge/set aside DHCJ To’s leave and to strike out these proceedings (“Kan’s Summons”).

THE PRINCIPLES

30.  In hearing a case of civil contempt, the court adopts the following 3-stage approach, namely:

(1)  First, construe the order to ascertain its meaning and operation;

(2)  Second, determine whether the alleged contemnor was in breach of the order as so construed; and

(3)  Third, consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

31.  With regard to the third stage, it is not necessary to prove that the alleged contemnor’s conduct was contumacious, i.e. that he intended to disobey the order.  It is sufficient to prove that the act constituting the defendant’s conduct was intentional (i.e. neither casual nor accidental) and that he knew of the facts which made it a breach of the order.

32.  The quasi-criminal character of contempt proceedings entails the burden of the plaintiff to prove the contempt beyond reasonable doubt.  Any reasonable doubt should be resolved in favour of the defendant.

33.  The concern in case of contempt of court order is not merely between the parties but also that of the court to see that its order is obeyed and that non-compliance or breach would not be disregarded with impunity.

34.  The above principles were explained in, amongst others, Bruno Arboit v Koo Siu Ying, HCMP 2749/2012 (8 March 2016); Kao, Lee & Yip v Koo Hoi Yan Donald (2009) 12 HKCFAR 830; 張月清v. Tsui Yiu Hei[2019] HKCFI 2970; Yeung Lin Mui v. Chu Kwok Wai [2020] 5 HKLRD 379 cited by counsel.  They are undisputed.

PRELIMINARY

35.  A couple of preliminary observations.

36.  First, hearsay and affidavit evidence is admissible unless otherwise directed by the court: see Numeric City Ltd v. Lau Chi Wing [2016] 4 HKLRD 812 (CA) at §§23-27.  However, the contemnor is entitled to invoke the right to silence, and to choose to make submission of no case to answer upon the court hearing the plaintiff’s evidence.  His affidavit, albeit filed, will be admitted into evidence only if he has a case to answer and he chooses to deploy it for such purpose: see In re B (Contempt of Court: Affidavit Evidence) [1996] 1 WLR 627 at 629D-F.  Counsel for Kan indeed made this point in their submission.

37.  However, the above evidence rule has no meaningful operation in the circumstances of the present case.  Kan makes no distinction in relying on his same affidavit evidence filed for the purpose of answering the plaintiff’s charge as well as supporting his summons for discharge of the leave and striking out of these proceedings.  Insofar as his summons is concerned, the burden rests on him to substantiate it by evidence instead of silence.  This court pointed that out when the present hearing commenced, and counsel for Kan sensibly accepted that all affidavit evidence before this court should be taken into account in determining both sides’ applications in the circumstances of this case.

38.  Second, amongst his submissions, counsel for Kan suggests that the parties did not have the chance to fully argue the Direction Summons before DHCJ To, who also did not have the benefit of the sight of G Lam J’s judgment mentioned above.  Had it been otherwise, he argues, that summons should have been dismissed and the 2/11/2017 Order should not have been made.

39.  The above argument is neither valid nor fair. The parties were heard on the Direction Summons before the 2/11/2017 Order was made.  Counsel could only be understood to be referring to the benefit of hindsight instead of that of sight of G Lam J’s judgment by DHCJ To at the time, as that judgment came into existence only in January 2020.  In any event, any suggestion that the 2/11/2017 Order would have been liable to be set aside is irrelevant.  So long as it was not set aside or stayed, it was binding on Kan and must be complied with: see Kao, Lee & Yip (above) at §26; China Shanshui Cement Group Ltd v. Zhang Caikui[2021] HKCA 1139 at §7.2.  The question of whether or not the plaintiffs were right in commencing these proceedings, notwithstanding the judgment of G Lam J, is another issue which will be discussed below.

MEANING OF THE 2/11/2017 ORDER

40.  Kan essentially argues that §5 of the 2/11/2017 Order covers decisions regarding the administration of the affairs of Pak Tat, but not the conduct of the proceedings in the SCIA Arbitration.  In other words, he was under no obligation to consult Chen or seek direction from the court for issuing the 1^st or the 2^nd Statements to SCIA.

41.  There could be no dispute that §5, or indeed the entirety, of the 2/11/2017 Order must be construed not only literally but also in context.  The context is considered in the light of the Direction Summons, which gave rise to the order made, and the terms of the order made.  Hence the matters set out under the background section above.

42.  On behalf of Kan, it is pointed out that instead of the terms of §1(3) of the Direction Summons, the plaintiffs at the hearing before DHCJ To did not press for authorisation for them to conduct the arbitration proceedings or alternatively for the Liquidators to exercise their best endeavours to contest the arbitration.  Instead, the plaintiffs sought authorisation from the court to make supplemental submissions to the SCIA, and for Kan to take any reasonable and necessary steps to facilitate that. Those became the terms of §4 of the 2/11/2017 Order.  Kan therefore argues that DHCJ To never intended to intervene in his continuing to conduct the arbitration proceedings or to require the same to be conducted by him and Chen jointly.  With §4 of the 2/11/2017 Order, which was sought and given specifically with regard to the SCIA arbitration, §5 of the order, Kan argues, could not possibly have anything to do with the conduct of the arbitration proceedings.

43.  On behalf of the plaintiffs, it is argued that the construction of §5 of the 2/11/2017 Order by Kan is wrong.  They also point out that that is contrary to Kan’s own understanding as manifested by his ex post facto 3/10/2018 Application specifically with reference to the submissions lodged and the proposed further submission to be lodged with the SCIA. Further, the explanation of DHCJ To in his reasons dated 8 October 2018 in refusing Kan’s application does not support his construction of the order.

44.  It appears to me that literally the ambit of §5 is broad enough to cover any decision with regard to the administration of the affairs of Pak Tat, which must be in the context of its liquidation.  There is no ambiguity about that.  On 2 November 2017, DHCJ To, as he was not asked to do at the hearing, did not direct that the arbitration proceedings before the SCIA had to be conducted by the Liquidators jointly.  There was also no order restricting Kan from continuing the conduct of the arbitration proceedings, except for what he was ordered to do pursuant to §4 of the order.  However, I do not accept that in making an order in terms of §5 of the order, the learned Deputy Judge consciously excluded the arbitration proceedings altogether from the ambit of the affairs of Pak Tat in liquidation.  The reason is simply that first, the arbitration concerned the disposal of the major asset of Pak Tat in the course of its liquidation; and second Kan conducted such arbitration proceedings in his capacity as liquidator representing Pak Tat.

45.  That said, it cannot be that any step in the arbitration proceedings before the SCIA would fall within §5 of the 2/11/2017 Order.  This depends on whether such step is taken to implement or is reflective of a decision with regard to the affairs of Pak Tat under liquidation.  Indeed, both parties address this point.  As the starting point, whether or not a step in the arbitration proceedings constitutes such a decision depends not only on the nature but also on the substance and impact of the step with regard to the affairs of Pak Tat under liquidation.

46.  On behalf of the plaintiffs, counsel accepts that conduct such as placing an order for stationery would not appeal to anyone as a decision with regard to the administration of the affairs of Pak Tat in liquidation.  I would however qualify that by reference to the substance and impact of such conduct.  If the order for stationery is for such quantity and in such manner that would call for explanation from the perspective of proper and reasonable administration of the affairs of Pak Tat, the decision to place such an order may very well fall within §5, which requires the prior consultation or consent of the other liquidator or direction of the court.

47.  By the same token, one does not simply look at the nature of the step in question taken by Kan in the arbitration proceedings being merely the filing of his two statements.  One must consider the substance and impact of such steps before one may conclude if the filing of such statements constituted or was reflective of a decision in the administration of the affairs of Pak Tat in liquidation caught by §5.

48.  In this regard, Kan argues that the arbitration proceedings concerned the enforcement of the SPA in respect of the shares of Pak Tat, and the relevant decision was that of entering into the SPA.  Therefore, filing the statements in the arbitration proceedings did not constitute any decision regarding the affairs of Pak Tat.  If he were right, no decision made by the Liquidators in the course of the conduct of the arbitration proceedings could fall within the ambit of §5 of the 2/11/2017 Order.  In view of the starting point explained above, I cannot agree.

49.  Kan then argues that he merely stated the law and facts in his submissions before the SCIA.  That appears to sound neutral.  However, the undeniable purpose of his two statements in question was to rebut, if not frustrate, the supplemental submissions filed by the plaintiffs that they were expressly authorised by DHCJ To to do under §4 of the 2/11/2017 Order.  As summarised by counsel for the plaintiffs, the substance and impact of the two statements in question were to:

(1)  rebut the supplemental submission filed by the plaintiffs pursuant to the 2/11/2017 Order;

(2)  persuade the SCIA that Kan did have the power and authority to enter into the SPA on Pak Tat’s behalf;

(3)  persuade the SCIA that the transaction pursuant to the SPA was commercially sound and preferable to the deal reached by the liquidation committee of Shenzhen Lianda;

(4)  make representations to the SCIA regarding the alleged liquidation process of Pak Tat and Shenzhen Lianda;

(5)  criticise the conduct of Chen, the co-liquidator of Pak Tat;

(6)  criticise the plaintiffs and the liquidation committee of Shenzhen Lianda for being allegedly uncooperative;

(7)  persuade the SCIA that the plaintiffs had no standing to make submissions on behalf of Pak Tat; and

(8)  make representations to the SCIA as to the effect of the 2/11/2017 Order (which was incorrect).

50.  In other words, those were Kan’s statements in respect of Pak Tat’s stance as to the validity of the SPA, the commercial soundness of the deal under the SPA, his powers and authority in the liquidation process of Pak Tat and Shenzhen Lianda as well as the plaintiffs’ written representation.  The statements were made to impact on the SCIA Arbitration in respect of the enforceability and enforcement of the SPA, which concerns the entire shareholding in Shenzhen Lianda and thus the major asset of Pak Tat.  Not only were the statements filed to contradict the stance of the petitioner and the major creditor of Pak Tat, but they were also filed to effectively side with Youpeng which sought to enforce the SPA in the proceedings.  It would be unreal to say that filing statements with such contents and for such purpose was not reflective of the decision of Kan with regard to the administration of the affairs of Pak Tat in liquidation.  Focusing on the conclusion of the SPA with Youpeng, as if it were the only relevant decision in the affairs of Pak Tat in liquidation, as Kan does, loses sight of the whole context and picture.

51.  Kan argues that he should nevertheless be entitled to defend himself against the plaintiffs’ allegations in their submissions.  I would not argue whether or not he should be entitled to defend himself.  However, the reality is that there is always more to his discharge of his duties as the liquidator than his personal perspective of defending the allegations.  Problem could indeed arise in case of conflict between his duties and personal interest.  It is a matter of judgment on his part as to whether and, if yes, what step to take in these circumstances which will not flout the 2/11/2017 Order.  As to that, DHCJ To indeed explained that in his written reasons dated 8 October 2018 when dismissing Kan’s 3/10/2018 Application.  The venue of seeking direction of the court in case of potential conflict of interest was expressly provided for under §5 of the 2/11/2017 Order.

52.  Indeed, the questions raised in the 3/10/2018 Application, in particular (4), (5) and (6) mentioned above, reflect that Kan did share the understanding as to the ambit of §5 of the 2/11/2017 Order mentioned above. By question (4), Kan asked DHCJ To if the Liquidators should make further submission for and on behalf of Pak Tat in response to the request of the SCIA, and whether further comment could be made in response to the further submissions of the plaintiff to the SCIA.  He asked the question, notwithstanding his personal view about the ambit of §§4 and 5 of the 2/11/2017 Order.  The fact was that he decided not to ask the court such question before filing the 1^st and the 2^nd Statements.

53.  As DHCJ To explained, behind §4 of the 2/11/2017 Order was the intention of enabling the plaintiffs to present their case, which represented the interest of the petitioner (Lee Sr’s estate) who was also the sole beneficial owner of Pak Tat.  The submissions to be filed by the plaintiffs, which Kan had to take all necessary steps to facilitate, would be those of Pak Tat and supplemental to its submissions (previously lodged by Kan as its liquidator).  Hence DHCJ To’s criticism of Kan’s misconception that the plaintiffs’ submissions should somehow align with what he considered to be appropriate.  Instead, to cope with the apparent conflict of the personal interest of Kan, who was instrumental to the conclusion of the SPA, and the interest of the petitioner (and the plaintiffs), who wanted to have the SPA set aside, one would have expected Kan to adopt a neutral position.  It would be a matter for Kan as to whether and, if yes, how he would go about appearing to side with Youpeng and contradicting the plaintiffs before the SCIA.  However, if he ever intended to be other than neutral, as he appeared to be, I say it would be a material decision in the administration of the affairs of Pak Tat in liquidation that was caught by §5 of the 2/11/2017 Order.

54.  By questions (4), (5) and (6) in the 3/10/2018 Application, Kan asked DHCJ To for direction with regard to §5 of the 2/11/2017 Order with specific reference to his submissions and the proposed draft further submissions in response of the request of the SCIA.  He specifically referred to the concern about validity and costs of the proposed further submissions.  The learned Deputy Judge also pointed out that notwithstanding the concern now expressed by Kan about the impracticability of consulting or seeking consent of Chen, he had not sought variation of the terms of §5 of the order or specific directions on his conduct of the proceedings before the SCIA after he has been notified of the tender of resignation by Chen in April 2018.  The learned Deputy Judge refused to entertain the application for such direction on an ex parte basis in the absence of justified urgency.  If §5 of the 2/11/2017 Order was irrelevant, there would have been no point for the learned Deputy Judge to refer to the expectation that the concern now raised by Kan should have caused him to seek direction earlier.  Again, Kan apparently decided not to ask similar questions before filing the 1^st and the 2^nd Statements which effectively served to frustrate what the plaintiffs were authorised to do pursuant to §4 of the 2/11/2017 Order.  The reasons of DHCJ To do not lend support to Kan’s construction of §§4 and 5 the 2/11/2017 Order.

55.  Is there reasonable doubt as to whether Kan might genuinely have had incorrect or imperfect understanding attributable to ambiguity of the 2/11/2017 Order?  As mentioned, §§4 and 5 of the 2/11/2017 Order literally are not ambiguous.  In view of Kan’s understanding as manifested by the 3/10/2018 Application discussed above, I would say the same as far as he is concerned.

56.  All matters considered, the decision to file the 1^st and the 2^nd Statements, in terms and for the purpose as they were, in the arbitration proceedings in response of the submissions made by the plaintiffs pursuant to §4 of the 2/11/2017 Order, in my view, falls within the ambit of §5 of the order.  Kan should have consulted Chen and sought his consent or if that was impossible, as DHCJ To observed, sought direction of the court.

WHETHER KAN WAS IN BREACH

57.  It is beyond doubt that Kan submitted the 1^st and 2^nd Statements without regard to §5 of the 2/11/2017 Order.  Chen confirmed that, and Kan also admitted that through solicitors in October 2018.  As DHCJ To observed, Kan has not sought direction from the court even after he was given to know that Chen purported to resign as liquidator in April 2018 prior to his submission of the 2^nd Statement.

58.  There can be no doubt that Kan was aware of the terms of the 2/11/2017 Order when he submitted the 1^st and 2^nd Statements to SCIA.  The order was made after his then counsel was heard.  The sealed copy of the order was served on his solicitors.  He literally referred to the order in both the 1^st and 2^nd Statements.  That said, in the 2^nd Statement, Kan somehow represented to the SCIA that the 2/11/2017 Order, being one made by way of consent, did not impose any obligation on him (or in his words, “并不存在法院强制本人的任何行为”).  This was regrettable, in view of the above discussion in respect of its terms and effect as well as Kan’s own understanding of the order at the material time.  The case of Sectorguard Plc v Dienne Plc [2009] EWHC 2693 cited on his behalf must be understood in its context, and does not assist him in this respect.

59.  Kan must be taken to be aware of the need to act in accordance with the 2/11/2017 Order or else there would be consequences. Kan professes in, amongst other businesses, administration of company in liquidation with decades of relevant experience.  As liquidator appointed by the court, he was answerable as an officer of the court.  As mentioned, he was legally represented when the 2/11/2017 Order was made.  His awareness of the terms and effect of the order was demonstrated by his 3/10/2018 Application, albeit only an afterthought and subsequent to the submission of the 1^st and the 2^nd Statements.

60.  It is not necessary to establish contumacious intent.  However, Kan’s breach came with the state of mind necessary to establish punishable contempt.

KAN’S SUMMONS

61.  Whilst his summons was said to be taken out pursuant to O32, r6, Rules of the High Court, which provides for the court’s jurisdiction to set aside ex parte order, what Kan actually asks is for the ex parte leave granted by DHCJ To to commence the present proceedings to be discharged/set aside and/or these proceedings commenced to be struck out for abuse of process on the following grounds:

(1)  the Plaintiffs failed to make continuing full and frank disclosure;

(2)  there was inordinate delay in commencing these proceedings;

(3)  the contempt was technical and minor.

Continuing full and frank disclosure

62.  There could be no dispute the plaintiffs applying for leave to commence committal proceedings, as in any ex parte application, was under a duty of full and frank disclosure in presenting their case and their statement filed pursuant to O52.

63.  Kan refers to the following matters which, he says, ought to but were not revealed to the court:

(1)  G Lam J’s decision is said to have dismissed the plaintiffs’ complaints about him or vindicated him of the same.

(2)  The SCIA Arbitration resulted in an award in favour of Youpeng against Pak Tat, suggesting that the plaintiff’s complaints were also not accepted.

(3)  Several affidavits of Kan and correspondence were not disclosed to the court.

(4)  There was inordinate delay.

64.  It is readily apparent that what are referred to under (1) and (2) above were events occurring subsequent to the application for leave.  There was no way the plaintiffs could be expected to disclose them when applying for the ex parte leave.  However, Kan describes these as matters covered by the plaintiffs’ continuing duty of full and frank disclosure.

65.  What Kan argues has nothing to do with the integrity of the ex parte leave.  The ex parte order in question is leave to commence legal proceedings.  Unless the ex parte leave is set aside, it is spent upon the commencement of the committal proceedings pursuant to such leave.  If the facts subsequent to such leave materially overturn or remove the very basis for granting the leave, it may be said that the commencement of the committal proceedings, notwithstanding these material developments subsequent to the granting of leave, amounts to abuse of process. For that reason, the proceedings so commenced may be said to be liable to be struck out.  If one reads properly what Le Pichon JA said in Chu Hung Ching v Chan Kam Ming [2001] 1 HKC 396 at 402, which Kan relies on for his proposition, one would understand that.  Her Ladyship was explaining the duty to disclose material change in circumstances since the ex parte hearing up to the inter partes hearing which would affect the truthfulness of the very basis for seeking and obtaining the ex parte interim injunction.

66.  So understood, the above statement as to the applicant’s duty of disclosure is not really inconsistent with what counsel for the plaintiffs argue in answer.  What counsel for the plaintiffs argue is that the duty of a party to make full and frank disclosure continues until the other party is fully and properly apprised of what had occurred on the ex parte application, and at which point the other party is no longer under a continuing disability to protect its own interests: see China Medical Technologies Inc (In Liq) v. Bank of China (Hong Kong) Ltd [2019] 2 HKLRD 710 (CA) at §70 (and footnote); Gee on Commercial Injunctions at §9-027; JSCBTA Bank v. Mukhtar Ablyazov [2018] EWHC 259 (Comm)at §§10-13; and BCS Corporate Acceptances Ltd v.Terry [2018] EWHC 2349 (QB) at §78.  The other party is in a position to seek to set aside the leave. What counsel for the plaintiff argues as a matter of principle, in my view, does not actually contradict what caused Le Pichon JA to say in Chu Hung Ching.

67.  Another point is that it serves no purpose of Kan to point out that some of the matters set out in the background section of the statement filed pursuant to O52 or the affirmations in support of the plaintiffs’ application have changed as things have developed subsequently and prior to the commencement of these proceedings.  They were set out as background for the Direction Summons and the consequential 2/11/2017 Order.  In issue is whether or not Kan has acted contrary to the terms of the 2/11/2017 Order which remained intact by the relevant time, namely when Kan filed the 1^st and the 2^nd Statements.  The plaintiffs must prove the alleged breach of the order beyond reasonable doubt.

68.  Back to the decision of G Lam J in respect of the Stay and Discharge Summons.  Kan argues that His Lordship has dismissed the plaintiff’s allegations against him or vindicated him of the same.  I do not think that G Lam J intended to do so.  Nor did he affirmatively do so.

69.  As mentioned, also before G Lam J then, together with the Stay and Discharge Summons, was the Misfeasance Summons whereby the plaintiffs target the professional fees and expenses of the Liquidators essentially on the ground of mal-administration of the affairs of Pak Tat in liquidation by Kan, including those complained about by the plaintiffs in these proceedings.  Insofar as the Misfeasance Summons was concerned, G Lam J adjourned the application.   Insofar as the Stay and Discharge Summons was concerned, G Lam J considered that it was not necessary to consider the application for discharge of the Liquidators, as this should follow if the stay was granted.

70.  What caused G Lam J to conclude that the winding-up order against Pak Tat could be stayed was first, the agreement of the petitioner (ie Lee’s estate) to provide for the debt owed by Pak Tat to the minor creditor and to waive the debt owed by Pak Tat to him, which, as mentioned above, constituted the major liability of the company; and second the express neutral stance of Kan throughout the application.  In other words, His Lordship did not have to adjudicate the dispute in respect of the alleged misconduct of Kan that the plaintiffs complained about in the application to discharge the Liquidators or the Misfeasance Summons.

71.  The plaintiffs sought costs of the application against Kan personally on an indemnity basis (as they do under the Misfeasance Summons).  His Lordship considered that ordering a liquidator to bear personally on an indemnity basis the costs of an application for stay was extraordinary.  Instead, the court should primarily focus on the liquidator’s stance in and response to the application itself.  As mentioned, the court noted that Kan has indicated a neutral stance throughout the application.  Further, His Lordship repeated that he did not need to resolve the dispute or make findings in respect of the plaintiffs’ complaints against Kan.  Even when referring to the complaints under the Misfeasance Summons, which, as mentioned, was adjourned for further directions, His Lordship made his comment insofar as that was relevant to considering the costs of the application for stay of the winding up order.  Understood properly, what His Lordship said in the decision about the plaintiffs’ complaints against Kan could not be taken as indicative, not to mention decisive, of the parties’ dispute in this respect to be adjudicated.

72.  It was also in the above context that G Lam J referred to the plaintiffs’ complaint about Kan not acting together with Chen, his co-liquidator.  However, the event referred to was the conclusion of the SPA in the course of the liquidation, not the filing of the 1^st and the 2^nd Statements to SCIA.  Even then, the court repeated that he was not in a position to delve into the dispute between Chen and ShineWing, including Kan, or to resolve the factual disputes between the Liquidators.

73.  In his decision, His Lordship did continue to state that in the case of joint and several liquidators appointed by the court, they would be conferred with powers that can be exercised by them jointly but also powers that can be exercised by them severally.  However, that was, as His Lordship put it, the principle as to what the legal powers of joint and several liquidators prima facie mean.  He continued to refer to section 196(4) of the Companies Ordinance, which provides that if more than one liquidator is appointed by the court, the court shall declare whether any act required or authorized to be done by the liquidator is to be done by all or any one of them.  Nothing in such statement of principle or provision can be said to affirm the conduct of Kan in submitting the 1^st and the 2^nd Statements in their terms and for their purpose as explained by Kan in the ex post facto 3/10/2018 Application as being within the power of the Liquidators to do alone instead of jointly.  More relevantly, such principle and provision would not override an actual order of the court, namely §5 of the 2/11/2017 Order, governing the conduct of the Liquidators.

74.  Kan also argues that the award in the SCIA Arbitration served to dismiss the allegations of the plaintiffs presented to the arbitral tribunal.  The award was handed down on 24 June 2020.  The contention is that the plaintiffs should not have commenced these proceedings, in view of the award.

75.  The award was in favour of enforcing the SPA. However, it casts no light on the integrity of the 2/11/2017 Order or the leave to commence committal proceedings for breach of the order, and hence the footing of these proceedings.  Nor is it relevant to whether or not Kan was in breach of the 2/11/2017 Order by filing the 1^st and the 2^nd Statements without compliance with its §5.  As such, the fact was not material in the sense that commencement of these proceedings, notwithstanding the award, could be said to be an abuse of process.

76.  As to the affidavit evidence, those that, according to Kan, were not disclosed are the 1^st, 4^th, 5^th and 6^th affidavits filed in HCCW 236/2011.  His 2^nd and 3^rd affidavits were disclosed.  Kan’s 4^th, 5^th and 6^th affidavits in HCCW 236/2011 were all filed in or after late July 2019.  I agree with the plaintiffs that the alleged lacking affidavits are not relevant to these proceedings, as they have no bearing on the meaning and ambit of the 2/11/2017 Order or whether or not Kan was in breach of it.

77.  Kan also complains that the plaintiffs failed to disclose to the court his correspondence with DHCJ To.  However, the letter from Kan containing the 3/10/2018 Application was disclosed in Seline Li’s supporting affirmation.  So were the written decision and reasons of DHCJ To dated 5 and 8 October 2018 respectively.  What was not disclosed was Kan’s subsequent letter dated 29 November 2018 whereby he explained and apologized to the court for the 3/10/2018 Application.  To that, DHCJ To replied in writing on 30 November 2018 by stating that it was noted.  I agree with the plaintiffs that it would be unrealistic to speculate that DHCJ To somehow failed to have the necessary grasp of the picture for the lack of such correspondence.

78.  Kan’s complaint about material non-disclosure of delay on the part of the plaintiffs could not be understood to be referring to the time when the ex parte application for leave was made.  As to the time taken since the leave until the commencement of these proceedings, the plaintiffs do not concede there was inordinate delay.  The issue of delay will be discussed in the next section.

Delay

79.  Kan argues that there was inexplicable and unjustifiable delay on the part of plaintiffs in seeking leave to commence contempt proceedings and issuing the originating summons.

80.  The plaintiffs applied for leave to commence the present proceedings in November 2018, two months after Kan has issued the 2^nd Statement in September 2018.  DHCJ To granted leave, which the plaintiffs might proceed with only after the conclusion of the Stay and Discharge Summons. On 23 January 2020, G Lam J granted the permanent stay of the winding-up order and discharged the Liquidators subject to condition precedent mentioned above.  The plaintiff satisfied the pre-conditions in September 2020, and the actual order to stay was granted on 15 December 2020.  The plaintiffs have explained the time taken for satisfying the condition precedent, which was not seriously contradicted for the present purpose.  The originating summons was filed on 21 December 2020.

81.  I am not of the view that there has been inordinate and inexplicable delay on the part of the plaintiffs.  More importantly, the notion of delay is never considered in a vacuum.  It is always considered in the light of not only the explanation for the time taken but also, if not more relevantly, the prejudice.  There is insufficient, if at all, materials in support of any substantial prejudice to Kan.

Technical or minor breach

82.  Kan suggests that his breach, even if proved as charged, was merely technical and minor, in the light of G Lam J’s decision and the SCIA award.  The relevance and effect of these matters subsequent to the application for and grant of leave to commence these proceedings were discussed above.  They do not afford any basis for Kan’s argument that the leave ought not to have been granted in the first place or alternatively the leave was liable to be set aside on the ground that it has lost legitimate footing.  In any event, the leave remained intact when these proceedings were commenced.  As such, the leave was spent.

83.  As a liquidator appointed by the court, Kan was under the duty as officer of the court: see Allied Ever Holdings Ltd v. Li Shu Chung[2021] HKCA 577 at §6.8.  Breach either knowingly or without proper regard to the terms of a court order obliging him to exercise the power given by the court in a particular manner is never minor.  DHCJ To’s explanation in his reasons dated 8 October 2018 with reference to the apparent conflict of interest between the parties reinforces the ramification of the decision of Kan to lodge the 1^st and the 2^nd Statements in the SCIA arbitration proceedings.  Kan’s representation in the 2^nd Statement that he was somehow under no obligation under the 2/11/2017 Order was indeed regrettable.

84.  Is the breach technical in the sense that its impact has been overtaken by events so that such breach would have brought about no material difference or damage to the plaintiffs?  Kan argues that it is.  He argues that no purpose will be served by committal because the 2/11/2017 Order has been spent upon the stay of the winding up order and the discharge of the Liquidators.  Committal also would not alter the outcome of the arbitration, which reflects the rejection of the plaintiff’s contentions in the arbitration proceedings.

85.  I do not agree.  Committal is never just a means of ensuring future obedience of an order but also penalizing for breach: see Re Grantham Wholesale Fruit, Vegetable and Potato Merchants Ltd [1972] 1 WLR 559 at p.565F-G; Arlidge, Eady & Smith on Contempt (5^th ed) at §3-7.  As DHCJ Saunders said in Sino Wood Investment Ltd v. Wong Kam Yin [2004] 2 HKLRD 324 at §50:-

“There is clearly a duality of purpose in punishing civil contempt. It is right that orders can be made compelling obedience to a Court order but there are many examples of the imposition of a penalty for a contempt that has already been committed, even if there is no threat of repetition, in order to uphold the authority of the Court and for the sake of the proper administration of justice.”

86.  In the circumstances as discussed above, I do not accept that Kan may excuse from the issue of penalty upon proven breach. Whether or not the circumstances referred to by Kan provide mitigation is of course another matter.

CONCLUSION

87.  For reasons including those discussed above, Kan’s summons is dismissed.  I find the alleged contempt is proved beyond reasonable doubt, namely by submitting the 1^st Statement and the 2^nd Statement to the SCIA without consulting Chen and obtaining the consent of Chen or alternatively seeking direction of the court in the circumstances of the present case, Kan was in contempt of §5 of the 2/11/2017 Order.

88.  Taking into account the general adjournment of court proceedings, and the incidental general closure of the court registry, announced by the Judiciary on 4 March 2022, I give the following directions:

(1)  Leave to Kan to file affirmation in respect of mitigation only, if any, within 5 working days after the re-opening of the court registry for the relevant business.

(2)  Mitigation and penalty are adjourned to be heard before this court on a date to be fixed in consultation with counsel’s diary with 1 hour reserved.

(3)  Written submissions shall be lodged with copies of the relevant authorities not less than 7 days before the adjourned hearing.  The plaintiffs may limit their submission to assisting the court on the relevant principles and authorities on penalty.

(4)  Kan must attend the adjourned hearing in person.

89.  The court has jurisdiction to award indemnity costs against an established contemnor: Koo Hoi Yan Donald v. Kao, Lee & Yip (2009) 12 HKCFAR 904 at §12.  Such an order is normally appropriate to reflect the disapproval by the court of the flouting of its order by the contemnor.

90.  On nisi basis, costs of these proceedings and the costs of the application for leave to commence these proceedings as well as the costs of Kan’s summons (including any costs reserved) shall be paid by Kan to the plaintiffs to be taxed on an indemnity basis, if not agreed, with certificate for two counsel.  Absolute costs order will be made upon conclusion of the adjourned hearing.