LEE SHU HANG AND LI SIN MAN SELINE (AS THE PERSONAL REPRESENTATIVES OF THE ESTATE OF LEE SAI NAM, DECEASED) v. KAN LAP KEE (ALSO KNOWN AS “TERRY KAN”)

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 _______________________ IN THE MATTER OF an application on behalf of LEE SHU HANG AND LI ‍SIN MAN SELINE (as ‍the personal representatives of the estate of LEE SAI NAM, deceased) against KAN LAP KEE (also known as “TERRY KAN” for Orders of Committal ______________________ BETWEEN LEE SHU HANG AND LI SIN MAN SELINE Plaintiffs (as the personal representatives of the estate of LEE SAI NAM, deceased) and KAN LAP KEE (also known as “TERRY KAN”) Defendant ______________________ Before: Deputy High Court Judge Leung in Court Date of Hearing: 16 September 2021 Date of Judgment: 8 March 2022 JUDGMENT 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 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. 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. 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. 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”). 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. 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. 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. 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. 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. 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”). 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”): 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). 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). 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). 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). 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: 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; …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” 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: adjourned §1(1) and (2) of the Direction Summons for argument, and gave directions for the filing of affirmation evidence; gave an order in terms as proposed above as regards §1(3) of the Direction Summons (hence §4 of the 2/11/2017 Order); gave an order in terms of §1(4) of the Direction Summons (hence §5 of the 2/11/2017 Order); and gave liberty to apply. 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 1st 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 2nd Statement”). On 3 ‍October 2018, Kan made an application 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: 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; 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; If the answer to (1) was in the affirmative, whether the petitioner’s submission should be filed by the Liquidators; 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; 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); 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). In the 3/10/2018 Application, Kan explained what caused him to ask the above questions, namely that: 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; 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 2nd Statement; and 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. 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. 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. 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. The charge now laid by the plaintiffs against Kan is that the 1st and the 2nd 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. On 11 January 2019, DHCJ To granted leave for the plaintiffs to commence the committal proceedings against Kan on condition that they should proceed only after the conclusion of the Stay & Discharge Summons. Service of the penal notice was dispensed with. On 25 January 2019, the above sealed order was served on Kan. 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. On 23 January 2020, G Lam J handed down his decision. 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: 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 the Misfeasance Summons be adjourned for further directions. 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. The plaintiffs followed by commencing the present proceedings on 21 December 2020 pursuant to the leave of DHCJ To mentioned above. 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 In hearing a case of civil contempt, the court adopts the following 3-stage approach, namely: First, construe the order to ascertain its meaning and operation; Second, determine whether the alleged contemnor was in breach of the order as so construed; and Third, consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt. 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. 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. 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. 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 A couple of preliminary observations. 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. 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. 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. 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 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 1st or the 2nd Statements to SCIA. 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. 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. 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. 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. 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. 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. 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. 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. 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: rebut the supplemental submission filed by the plaintiffs pursuant to the 2/11/2017 Order; persuade the SCIA that Kan did have the power and authority to enter into the SPA on Pak Tat’s behalf; 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; make representations to the SCIA regarding the alleged liquidation process of Pak Tat and Shenzhen Lianda; criticise the conduct of Chen, the co-liquidator of Pak Tat; criticise the plaintiffs and the liquidation committee of Shenzhen Lianda for being allegedly uncooperative; persuade the SCIA that the plaintiffs had no standing to make submissions on behalf of Pak Tat; and make representations to the SCIA as to the effect of the 2/11/2017 Order (which was incorrect). 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. 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. 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 1st and the 2nd Statements. 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. 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 1st and the 2nd 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. 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. All matters considered, the decision to file the 1st and the 2nd 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 It is beyond doubt that Kan submitted the 1st and 2nd 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 2nd Statement. There can be no doubt that Kan was aware of the terms of the 2/11/2017 Order when he submitted the 1st and 2nd 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 1st and 2nd Statements. That said, in the 2nd ‍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. 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 1st and the 2nd Statements. 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 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: the Plaintiffs failed to make continuing full and frank disclosure; there was inordinate delay in commencing these proceedings; the contempt was technical and minor. Continuing full and frank disclosure 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. Kan refers to the following matters which, he says, ought to but were not revealed to the court: G Lam J’s decision is said to have dismissed the plaintiffs’ complaints about him or vindicated him of the same. The SCIA Arbitration resulted in an award in favour of Youpeng against Pak Tat, suggesting that the plaintiff’s complaints were also not accepted. Several affidavits of Kan and correspondence were not disclosed to the court. There was inordinate delay. 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. 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. 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. 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 1st and the 2nd Statements. The plaintiffs must prove the alleged breach of the order beyond reasonable doubt. 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. 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. 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. 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. 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 1st and the 2nd 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. 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 1st and the 2nd 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. 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. 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 1st and the 2nd 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. As to the affidavit evidence, those that, according to Kan, were not disclosed are the 1st, 4th, 5th and 6th affidavits filed in HCCW 236/2011. His 2nd and 3rd affidavits were disclosed. Kan’s 4th, 5th and 6th 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. 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. 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 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. The plaintiffs applied for leave to commence the present proceedings in November 2018, two ‍months after Kan has issued the 2nd ‍ 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. 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 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. 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 1st and the 2nd Statements in the SCIA arbitration proceedings. Kan’s representation in the 2nd Statement that he was somehow under no obligation under the 2/11/2017 Order was indeed regrettable. 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. 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 (5th 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.” 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 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 1st Statement and the 2nd 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. 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: 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. 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. 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. Kan must attend the adjourned hearing in person. 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. 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. ( Simon Leung ) Deputy High Court Judge Mr Douglas Lam SC leading Mr Alan Kwong and Mr Jiang Zixin 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