A A
HCMP 450/2016
B IN THE HIGH COURT OF THE B
HONG KONG SPECIAL ADMINISTRATIVE REGION
C C
COURT OF FIRST INSTANCE
D MISCELLANEOUS PROCEEDINGS NO 450 OF 2016 D
E E
IN THE MATTER of an application
F on behalf of IP PUI LAM ARTHUR and F
IP PUI SUM, Joint and Several Trustees in
G G
Bankruptcy of HO YUK WAH DAVID
(“the Bankrupt”) for an Order of Committal
H H
and
I I
IN THE MATTER of Order 52, rule 3
J of the Rules of the High Court (Cap 4A, J
Laws of Hong Kong)
K K
L L
BETWEEN
IP PUI LAM ARTHUR Plaintiffs
M M
IP PUI SUM
N (Joint and Several Trustees in bankruptcy) N
O and O
P ALAN CHUNG WAH TANG and Defendants P
ALISON WONG LEE FUNG YING
Q Q
R R
Before: Deputy High Court Judge To in Court
S Date of Hearing: 20 September 2017 S
Date of Judgment: 20 September 2017
T T
Date of Reasons for Judgment: 11 October 2017
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A A
B B
REASONS FOR JUDGMENT
C C
D D
Introduction
E E
1. This is the sentencing hearing in relation to the defendants’
F contempt of court for failing to produce documents pursuant to an order F
of this court made on 18 March 2015 (the “Order”).
G G
H Background H
I 2. The plaintiffs are the joint and several trustees in bankruptcy I
(the “Trustees”) of Ho Yuk Wah David (the “Bankrupt”). The defendants,
J J
Tang and Wong, respectively, were partners of JBPB & Co (“JBPB”),
K an accounting firm formerly known as Grant Thornton. On 26 March K
2002, they were appointed as joint and several liquidators of CWT Textile
L L
Supplies Company Limited (in creditors’ voluntary liquidation) (“CWT”).
M Shortly after that, JBPB collapsed and was split into two camps. The M
N
defendants were in the minority partners’ camp. Eventually, they left N
JBPB to join Shinewing (HK) CPA Limited.
O O
3. As a result of investigation into the financial affairs of the
P P
Bankrupt, the Trustees believed that the Bankrupt had operated a complex
Q Q
scheme using nominees and about 30 offshore companies (collectively,
R
the “Bankrupt’s nominee companies”), one of which had some suspicious R
dealings with CWT.
S S
T T
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4. On 5 November 2013, Deputy High Court Judge Le Pichon
B ordered the defendants in their capacity as joint and several liquidators of B
CWT to produce documents relating to three payments made by CWT;
C C
and also ordered JBPB by consent to produce supporting documents
D relating to twelve payments made to JBPB by the Bankrupt’s nominee D
companies. Surprisingly, the defendants later denied JBPB’s solicitors,
E E
Messrs Chiu, Szeto & Cheng Solicitors & Notaries (“CSC”), had authority
F to enter into the order by consent on their behalf as minority partners and F
refused to comply with that order.
G G
H 5. To regularize the situation, on 7 February 2014 the Trustees H
applied by inter partes summons for orders that the defendants in their
I I
two different capacities do comply with the order of Deputy High Court
J Judge Le Pichon. The defendants appeared in person. Tang representing J
himself and Wong contested the application rigorously, as if the Bankrupt
K K
was standing in his shoes. He raised every possible argument, most of
L which were technical and all were unmeritorious. On 18 March 2015, L
I granted the disclosure order, paragraphs 3 of which required the
M M
defendants in their capacity as minority partners of JBPB to produce four
N N
categories of documents relating to the twelve receipts within 21 days (the
O
“Disclosure Order”). O
P 6. The time for providing disclosure expired on 8 April 2015. P
On that day, the defendants sent a letter to the Trustees’ solicitors
Q Q
attaching correspondences between them and CSC. Other than filing
R R
Tang’s 4th Affirmation five months later in purported compliance with
S
paragraph 4 of the Disclosure Order (which is irrelevant for the purpose S
of the present proceedings), they did nothing to comply with that order.
T T
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7. The Trustees commenced committal proceedings against the
B defendants. On 18 October 2016, I delivered judgment finding them B
liable for contempt for their breach of paragraph 3 of the Disclosure Order
C C
and adjourned the hearing to 28 October 2016 for sentence. I indicated
D that this is a bad case of contempt and a starting point of six months’ D
imprisonment would be the minimum.
E E
F 8. At the hearing on 28 October 2016, the defendants produced F
12 documents relating to the 12 receipts required to be produced under
G G
the Disclosure Order. At the request of their counsel, I adjourned the
H hearing to 3 November 2017 to enable the defendants to purge their H
contempt. On 3 November 2017, I further adjourned the sentencing
I I
hearing pending the Defendants’ appeal to the Court of Appeal.
J J
9. The appeal was heard on 24 January 2017. On 16 February
K K
2017, the Court of Appeal upheld the finding of contempt in respect of
L one category of documents, ie invoices and receipts, but not the other L
three and allowed the appeal to the extent that the order for committal is
M M
set aside. The Court of Appeal also made a costs order nisi that the
N defendants pay the Plaintiffs 80% of the costs of the appeal and below. N
O O
Principles on sentencing
P P
10. The court’s orders are made to be obeyed. Civil contempt of
Q court order is a serious matter. The principles applicable to sentencing Q
this type of offences have been usefully summarized by Au-Yeung J in
R R
Arboit v Koo Siu Ying (No 2) as follows:
1
S S
T T
1
[2016] 3 HKLRD 154 at paras 2 – 8
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(1) A prime consideration of the court in sentencing contempt is
B to signal the importance of demonstrating to the litigants that B
the orders of the court are to be obeyed.
C C
(2) The object of the sentence is both to punish the conduct in
D defiance of the court’s order and to serve a coercive function D
by holding out the threat of future punishment as a means of
E E
securing the protection which the order was primarily there
F to do: Crystal Mews Ltd v Metterick 2 and Re Barrell F
Enterprises . 3
The court has to strike a balance between the
G G
two objectives.
H (3) Imprisonment should be regarded as a sanction of the last H
resort. Any custodial term should be as short as possible and
I I
consistent with the circumstances of the case. The court has
an absolute discretion to suspend a sentence of imprisonment
J J
for such period and on such terms as it deems fit.
K K
(4) The court will have to consider all the circumstances of the
L
contempt, including the nature of the order and extent of the L
breach; whether the contempt was contumacious or
M unintentional; the reasons, motives and state of mind of the M
contemnor; and whether the contemnor appreciates the
N N
seriousness of the deliberate breach.
O (5) The court will have to consider aggravating and mitigating O
factors, including whether any prejudice is suffered by the
P P
plaintiff; whether the prejudice is capable of being remedied;
Q whether the contemnor has cooperated and purged the Q
contempt; and the personal circumstances of the contemnor.
R R
S S
T 2
[2006] EWHC 3087 (Ch) at [8], per Collins J (as he then was) T
3
[1973] 1 WLR 19, 27C –D, English CA
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11. Of all the factors listed above, the two most important ones
B are whether the contemnor has purged the contempt and whether the B
plaintiff has suffered any prejudice which is irremediable. If the
C C
contempt has been purged, the coercive function of the sentence has been
D spent. What remains to be addressed is punishment for the disobedience. D
Purging the contempt may even affect the sentencing option. While
E E
each sentence depends on its facts and circumstances, references may still
F be drawn from sentences passed the court in similar cases. F
G G
Purging the contempt, whether contumacious and intentional
H H
12. At the hearing on 28 October 2016, Tang produced
I 12 documents which did not fall within the category of invoices and I
receipts. Having retrieved the CWT case files, Tang produced six relevant
J J
receipts on 1 November 2016. On 2 November 2016, he produced more
K documents to the Trustees including three vouchers and one receipt. K
L L
13. In the meantime, he also liaised with the majority partners
M and agreed to pay the charge of $35,000 to cover the costs of the M
arrangement for examining JPBP’s records kept in the warehouse of Santa
N N
Fe. Eventually, he produced a comprehensive reply to the Trustees on
O 7 August 2017. But that exercise took nine months. O
P P
14. Mr Chen, counsel for the Trustees, submitted that the steps
Q taken by Tang were mere pretence and delaying tactics to buy time in the Q
hope that they would not have to produce any more documents if their
R R
appeal was successful. He referred to correspondences among the
S Trustees’ solicitors, Messrs Li, Wong, Lam & WI Cheung (“LWLC”), the S
defendants’ solicitors (“ONC”) and CSC. On the other hand, Mr Siu,
T T
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counsel for Tang, referred me to other correspondence to support
B his argument to the contrary. B
C C
15. A convenient starting point of enquiry is ONC’s letter dated
D 25 October 2016 to CSC seeking access to examine the records in the D
warehouse of Santa Fe. CSC replied on 4 November 2016 that the
E E
majority partners have no objection, but imposed a condition that the
F Trustees or their representatives must be present during the inspection. F
On 8 November 2016, ONC wrote to LWLC enquiring if the Trustees are
G G
agreeable to be present during the inspection.
H H
16. The matter sat there for about one and half months until
I I
19 December 2016 when LWLC requested ONC for a copy of CSC’s
J letter requesting the Trustees’ presence during the inspection. On the J
following day, ONC replied that their clients “do not agree that they are
K K
obliged to provide them”. On 23 December 2016, LWLC replied
L alleging that the request for the Trustees’ presence during the inspection L
was only ONC’s “bare allegation”. ONC took offence and retorted with
M M
some heated argument and demanded an answer to their request whether
N the Trustees will attend the inspection. On 3 January 2017, LWLC wrote N
back indulging in the same argument and said it was unreasonable to
O O
request the Trustees to attend the inspection and to incur unnecessary
P costs. On 6 January 2017, ONC wrote to CSC requesting if the majority P
partners would waive that particular condition. On 11 January 2017,
Q Q
CSC replied and agreed to waiving that condition.
R R
17. Pausing here, my observation is that LWLC’s one and half
S S
months’ inaction and their request for proof from CSC were quite
T T
unnecessary. There was no reason not to accept what was said by
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a member of the profession. Afterall, what ONC asked for was a simple
B answer. They could have replied “no” and ONC could have written to B
CSC to request a waiver. LWLC is responsible for the two months’ time
C C
wasted from 8 November 2016 to 5 January 2017. That said, the
D defendants’ stance was unnecessarily antagonistic. Probably, the D
acrimony created between the parties during the course of this series of
E E
litigation have overflowed to the parties’ solicitors.
F F
18. Again, the matter sat there for about two and half months
G G
until 31 March 2017 when ONC responded to CSC’s letter and provided
H a cheque of $35,000 and requested for arrangements to be made for the H
inspection. It should be noted that on 16 February 2017 the Court of
I I
Appeal had delivered its judgment. On 13 April 2017, CSC replied
J confirming that the earliest available inspection dates would be 27 or J
28 April 2017. Inspection eventually commenced in May 2017. A
K K
comprehensive reply was furnished to the Trustees on 7 August 2017.
L L
19. Mr Chen’s criticism is about the total inaction between
M M
11 January and 31 March 2017. During that period, there was an incident
N on 18 January 2017 in which Tang was assaulted causing injuries to N
his leg or legs. It was not known if he was hospitalized and, if he was,
O O
for how long. He said it affected his mobility, work and emotion. Be that
P as it may, that cannot explain why ONC could not have started making P
arrangements with CSC for the inspection. The inaction during this two
Q Q
and half months’ period is totally unexplained. The only inference is that
R R
it was because the defendants did not give further instruction to proceed.
S
I agree with Mr Chen’s submission that the defendants were stalling for S
time pending the outcome of the appeal in the hope that they would not
T T
have to produce anything if their appeal was successful.
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20. Mr Chen accepted that the contempt was purged. However,
B it took more than nine months. Discounting the time wasted by LWLC B
arguing about the requirement of the majority partners’ presence during
C C
the inspection and assuming in favour of the defendants that it took them
D a few months to comb through the files and records, there was a delay of D
two and half months on the defendants’ part, which I find was made with
E E
a deliberate intention to stall time pending the outcome of their appeal.
F The contempt was contumacious and intentional. F
G G
Prejudice to the Trustees
H H
21. Mr Siu argued in his comprehensive reply of 7 August 2017
I that Tang had given a detailed explanation as to how the documents I
disclosed are related to the 12 payments. In his comprehensive reply,
J J
Tang said that he had given such explanation before in the proceedings
K under HCB 3819/2011. As Mr Chen confirmed that the documents K
produced could not assist the Trustees in their investigation into the affairs
L L
of the Bankrupt, Mr Siu argued that the Trustees suffered no prejudice as
M a result of the defendants’ non-compliance with the Order. M
N N
22. That may well be the situation in an ordinary case involving
O ordinary contemnors. However, there is another aspect in the present O
case. The Trustees were investigating into the affairs of the Bankrupt
P P
who was reasonably suspected of being involved in a huge and
Q complicated fraud. Time was of the essence in such investigation. Q
Though Tang had given an explanation about the 12 payments in the
R R
HCB 3819/2011 proceedings, the Trustees were entitled to examine the
S documents to verify the veracity of the account given by them and to look S
for new lines of inquiry. Though the documents are proved to be not
T T
useful, the Trustees were made to incur unnecessary time and effort in
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pursuing the present course of action. They were made to wait for more
B than two years for documents which he could have easily produced. For B
reasons as given in the later part of this judgment, that category together
C C
with the other three categories of documents could have been easily
D produced in no time back in 2013 before the defendants’ partnership D
dispute escalated, if not in 2015. Furthermore, by taking the exceptionally
E E
antagonistic and unusual course of resisting the discovery application, the
F defendants put suspicion on the Bankrupt, if not also on themselves. F
They led the Trustees to the belief that they and/or the Bankrupt had
G G
something to hide, which is material to Trustees’ investigation. The
H Trustees were made to direct their time, energy and resources to this futile H
exercise which might have also diverted their attention to other more
I I
important or likely more fruitful starting points for investigation.
J Evidence would also have become lost in course of time. The efforts of J
the discovery proceedings commenced by the Trustees since 2013 were
K K
all spent for nothing. In short, the Trustees were misled, their time and
L L
costs were wasted, and opportunities were lost. In my view, the Trustees
M
suffered prejudice which might even be irremediable. As experienced M
professional accountants specialized in insolvency work who have been
N N
appointed as liquidators and trustees in bankruptcy, they knew of this
O likely risk of prejudice. This is an aggravating factor. O
P P
Tang’s other mitigating factors
Q Q
23. Mr Siu invited the court to take into account the fact that the
R
contempt finding itself has already brought severely adverse impact on R
Tang’s professional career. Tang is a professional accountant specialized
S S
in insolvency work. He said that following the finding of contempt, the
T Official Receiver’s Office indicated that they would not nominate him as T
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a liquidator for any new “Panel A” cases; and Tang had indeed
B encountered difficulties in his proposed appointment in other cases. B
C C
24. I have no doubt about what Tang said. The Official
D Receiver expects a high degree of professional integrity and competency D
of those whom he appoints as liquidators or trustees in bankruptcy.
E E
Tang’s conduct of the disclosure application and his refusal to comply
F with the Disclosure Order not only fell far below the standard expected F
of a reasonable accountant but was also obstructive to the Trustees and
G G
counter-productive to the function of the Official Receiver. More
H importantly, a liquidator is an officer of the court. How can Tang expect H
the Official Receiver will appoint as liquidator someone who has
I I
demonstrated such an obstructive attitude towards trustees-in-bankruptcy
J and liquidators in their investigation of a bankrupt’s or a company’s J
affairs and who has demonstrated wilful defiance of the court’s order?
K K
The reaction of the Official Receiver is the natural consequence of
L his conduct. It could not carry much weight for mitigation purpose. L
M M
25. Tang said that a bankrupt of whom he is the
N trustee-in-bankruptcy and whose investigations have spanned over N
15 years cited the finding of contempt as the principal reason in their
O O
attempt to remove him as the trustee. That was a separate matter which,
P in any event, was resolved in favour of Tang. He suffered no damage. P
That incident carries little mitigation value.
Q Q
R 26. Tang also mentioned about a complaint by Sun Legend R
S Investments Limited to the Official Receiver. He attributed this complaint S
and his assault to the bankrupt mentioned in the above paragraph. For
T T
the same reasons these matters have no bearing on these proceedings.
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27. I shall, however, take into account his contribution in the
B insolvency profession, his social and church services. But I must say B
such mitigating factors are mildly useful where a fine is to be imposed.
C C
D Wong’s other mitigating factors D
E 28. Wong filed two affirmations in mitigation and also referred E
to another affirmation filed in HCB 3819/2011. She was a partner of
F F
JBPB and became the head of the Corporate Finance Division of the
G Restructuring, Insolvency and Investigation Department in 2008. Tang G
was the head of that department. She and Tang were appointed as joint
H H
liquidators of CWT in 2003. She said she and Tang would usually be
I named as joint and several liquidators such that one of them could take I
charge when the other was absent. She trusted Tang and had no doubt
J J
about the matters handled by Tang. Since 2013, her involvement in the
K old liquidation cases was reduced as she had to look after her sick mother K
and brother. She retired in June 2014 and since then had not visited the
L L
office of JBPB. She took a passive role in those liquidation cases and
M left Tang to take up the leading role. She was kept informed of important M
issues and the ways they were handled.
N N
O 29. I am unimpressed by her mitigation. The theme of her O
mitigation is that she had performed her duty as joint liquidator of CWT
P P
properly. There was no allegation that she and Tang had failed to comply
Q with the obligations imposed on them as liquidators of CWT. The Q
contempt in issue is their failure to comply with obligations imposed on
R R
them personally as minority partners of JBPB who had handled the affairs
S of CWT. Back in 2013, when Deputy High Court Judge Le Pichon made S
the order by consent requiring JPBP to make disclosures, she, along with
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Tang, took the position that CSC did not have authority to represent them
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as minority partners of JPBP. That led to fresh applications for disclosure
B being made and the Disclosure Order was made against them personally B
in their capacity as minority partners of JPBP in March 2015. She was
C C
required, as partners of JPBP, who had handled the affairs of the Bankrupt
D and CWT and who had possession, custody and control of the documents, D
to produce the documents.
E E
F 30. In her affirmation filed in HCB 3819/2011, she put the blame F
on the conditions imposed by the majority partners for their access to the
G G
files. Presumably she was referring to the inspection fee of $35,000.
H But she did not explain why she was unable to put up with the funds H
herself or persuade Tang to contribute. In court, she said that she offered
I I
to help Tang but Tang declined. I understand that at the time the Order
J was made she had retired from JBPB and had personal problems looking J
after her sick mother and brother. That does not relieve her of the
K K
obligation under that Order. In essence, what she said in her three
L affirmations is that she trusted Tang and left it to Tang to perform. The L
Order imposed a non-delegable personal obligation on her as well as Tang
M M
to produce the documents. She simply ignored the Order and did
N N
absolutely nothing. She just stood by and left it to Tang to decide how
O
to comply or not to comply with the Order. O
P 31. Save for her personal circumstances at the time and the P
character references from her close friends, I do not consider there are any
Q Q
mitigating circumstances.
R R
Tang’s sentence
S S
32. Tang is a professional accountant specialized in insolvency
T T
work and has much experience as trustee-in-bankruptcy as well as
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liquidator. He ought to know that one of a trustee’s function is to
B investigate the affairs and properties of the bankrupt and to report any B
irregularities to the Official Receiver. The discovery process is to enable
C C
the trustee to carry out his functions in gathering information about the
D assets, affairs and dealings of the bankrupt as effectively as possible, and D
with as little expense as possible. He knew that the Trustees were
E E
investigating into the affairs of the Bankrupt who was reasonably
F suspected of having committed significant frauds. The documents F
sought were to assist the Trustees in discharging their duty. Tang was
G G
the partner in JBPB who had handled the affairs of the Bankrupt and CWT.
H He was the most appropriate person to give discovery. H
I I
33. If an accountant has acquired possession, custody and
J control of documents in the course of his professional practice is required J
to produce them to the trustee-in-bankruptcy to enable the trustee to
K K
investigate the affairs of the bankrupt, he should and would maintain
L a neutral position, except where such production would be in breach of L
his duty of confidentiality owed to his client. The majority partners,
M M
whom I presume to be reasonably competent accountants, saw no
N N
objection to produce the documents and consented to their production.
O
But, Tang took an inexplicable position of first objecting to the authority O
of CSC in representing them as partners of JBPB to enter into a consent
P P
order; and, second, contesting the discovery application rigorously as if
Q
he were the Bankrupt by raising every objection, however technical and Q
unmeritorious. Not only that such conduct fell far below that of a
R R
reasonable accountant, he created suspicion on himself by such conduct.
S As result, the Trustees incurred enormous costs in pursuing the disclosure S
application and the contempt proceedings. According to Wong, their
T T
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own costs was $2.3 million with Tang acting in person in the disclosure
B application. The Trustees’ costs were definitely much more. B
C C
34. Mr Siu submitted that Tang’s contempt was not intentional
D and that he was only being obstinate. He referred to the following D
observations of the Court of Appeal4:
E E
“In this case the breach of paragraph 3 is not casual or
F accidental. The defendants clearly knew that they had to F
comply with it but chose not to do so because they chose not to
carry out the inspection of documents due to their own view
G (and I think, rather stubbornly) on the payment of charges and G
the efforts involved in such an exercise. They had ignored the
H bigger picture of their obligation to comply with paragraph 3.” H
I I am not in disagreement with that finding, but consider that was only one I
of the lesser reasons for his non-compliance. Given his background,
J J
Tang ought to know that the court’s order was to be complied. Given
K the background of this litigation, he ought to know committal proceedings K
L
would follow if he did not. On the date due for production, he only sent L
a letter to the Trustees’ solicitors attaching a few correspondences
M M
between him and CSC. His refused to produce the documents was
N
deliberate. Back in 2013 or even 2014 before the partnership had N
completely broken down, there was no question of such payment. Tang
O O
and Wong were minority partners of JBPB. The majority partners on
P behalf of the entire firm instructed CSC to consent to the disclosure order P
to be made against the firm. Had Tang not taken the peculiar and
Q Q
inexplicable position of denying CSC had authority to represent him and
R Wong, the order would have been made binding the entire firm including R
himself. At the time, he had access to the documents and JBPB’s
S S
resource to locate them. He could have instructed his staff in JBPB to
T T
4
CACV 214/2016 (unreported), 16 February 2017, at para 7.2
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do the search and produced not only the category of documents now
B concerned, but all four categories. But he was determined not to produce B
any of them. He raised every possible argument, and I emphasise, as if
C C
the Bankrupt was in his shoes. His position as I found in the disclosure
D proceedings was that he was to decide what was to produce, not the D
Trustee or the court. He maintained that position even after he received
E E
the Disclosure Order. I mentioned these factual background relating to
F the application for the Disclosure Order in HCB 3819/2011 and my F
adverse comments on Tang’s conduct in those proceedings only by way
G G
of background to support my finding of his mental state in not complying
H with the Disclosure Order. However much I disapprove of his conduct H
in those proceedings, it has no bearing on the sentence that I am going to
I I
impose. Tang is only to be sentenced for what he has failed to do since
J the date of the Order, ie 18 March 2015. I find that his refusal to comply J
was not merely because of his obstinate view as to whether he should pay
K K
the charge, but was a determined and persistent refusal from the very
L L
beginning when there was no issue about those charges. He was
M
determined that the court’s order was subject to his pleasure. He M
deliberately treated the court’s order with the utmost contempt.
N N
O
35. While I accept that Tang has purged the contempt, that was O
not a reflection of his remorsefulness. There was an unexplained delay
P P
of about two and half months between the time when CSC waived the
Q
requirement of the Trustee’s presence during the inspection and Q
his payment of the fees which I find was caused by Tang’s intention to
R R
adopt a wait and see attitude. It was only a month and half after the
S Court of Appeal had handed down judgment that he resumed making S
arrangements with CSC for the inspection. He knew he had exhausted
T T
all avenues to resist disclosure. I find that he only made the disclosure
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for the purpose of mitigating the likely sentence he was going to receive
B and not out of remorsefulness. This finding reduces the possible B
discount purging a contempt would have on sentence.
C C
36. Costs of the contempt proceedings is also one mitigating
D D
factor. The Defendants will have to bear the costs of the proceedings on
E an indemnity basis. Those costs are likely to be substantial. I shall E
take that into account when determining the starting point of the fine I am
F F
going to impose.
G G
37. Mr Chen suggested a fine of $400,000 for Tang and $200,000
H H
for Wong. Mr Siu referred me to Arboit in which the contemnors were
I fined $200,000. He reminded me that the contemnors in that case were I
very rich and committed a wholesale breach of order whereas Tang was
J J
only found by the Court of Appeal to be liable for failing to produce one
K out of four categories of documents. I agree with his observations, but K
L
precedents only have a referencing value. L
M 38. Given its history, this is a very bad case of contempt. It is M
an aggravating factor that the contemnor, being an experienced
N N
accountant and liquidator who is knowledgeable about the bankruptcy
O O
regime and liquidation regime, the purpose of the disclosure and that time
P
is of the essence in any investigation into the affairs of a bankrupt P
suspected of having defrauded his creditors, was determined to obstruct
Q Q
the Trustees’ investigation. It was against that background he made
R a determined refusal to comply with the Disclosure Order. There is a R
public interest element in this case. While Tang has purged the contempt,
S S
there was an unexplained delay of two and half months which indicated
T that he did so only for the purpose of reducing his sentence and less out T
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of remorsefulness. That reduces the discount which his purging of the
B contempt would otherwise have earned. While the documents disclosed B
were not useful to the Trustees, there is nevertheless some prejudice
C C
suffered by the Trustees. I can give little weight to this factor.
D D
39. Having regard to all the circumstances in this case,
E E
including the likely costs liability, I consider a starting point of $400,000
F appropriate for the seriousness of this case. I reduce it to $300,000. F
G G
Wong’s sentence
H H
40. As Wong adopted a negative role in complying with the
I disclosure order by leaving it to Tang to perform, what I have said about I
Tang applies equally to her. This is because the duty of disclosure is
J J
a non-delegable one. Having regard to her passive role, her personal
K circumstances and the fact that she has retired, I consider a lower starting K
point of $300,000 appropriate and reduce the fine to $200,000.
L L
M Costs M
N 41. I also make the usual costs order that the defendants shall N
pay the Trustees’ costs on an indemnity basis.
O O
P P
( Anthony To )
Q Deputy High Court Judge Q
R R
Mr David Chen, instructed by Li, Wong, Lam & WI Cheung,
for the Plaintiff
S S
Mr Patrick Siu, instructed by ONC Lawyers, for the Defendant
(Alan Chung Wah Tang)
T T
The Defendant (Alison Wong Lee Fung Ying), appeared in person
U U
V V
IP PUI LAM ARTHUR AND ANOTHER (Joint and Several Trustees in bankruptcy) v. ALAN CHUNG WAH TANG AND ANOTHER
A A
HCMP 450/2016
B IN THE HIGH COURT OF THE B
HONG KONG SPECIAL ADMINISTRATIVE REGION
C C
COURT OF FIRST INSTANCE
D MISCELLANEOUS PROCEEDINGS NO 450 OF 2016 D
E E
IN THE MATTER of an application
F on behalf of IP PUI LAM ARTHUR and F
IP PUI SUM, Joint and Several Trustees in
G G
Bankruptcy of HO YUK WAH DAVID
(“the Bankrupt”) for an Order of Committal
H H
and
I I
IN THE MATTER of Order 52, rule 3
J of the Rules of the High Court (Cap 4A, J
Laws of Hong Kong)
K K
L L
BETWEEN
IP PUI LAM ARTHUR Plaintiffs
M M
IP PUI SUM
N (Joint and Several Trustees in bankruptcy) N
O and O
P ALAN CHUNG WAH TANG and Defendants P
ALISON WONG LEE FUNG YING
Q Q
R R
Before: Deputy High Court Judge To in Court
S Date of Hearing: 20 September 2017 S
Date of Judgment: 20 September 2017
T T
Date of Reasons for Judgment: 11 October 2017
U U
V V
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A A
B B
REASONS FOR JUDGMENT
C C
D D
Introduction
E E
1. This is the sentencing hearing in relation to the defendants’
F contempt of court for failing to produce documents pursuant to an order F
of this court made on 18 March 2015 (the “Order”).
G G
H Background H
I 2. The plaintiffs are the joint and several trustees in bankruptcy I
(the “Trustees”) of Ho Yuk Wah David (the “Bankrupt”). The defendants,
J J
Tang and Wong, respectively, were partners of JBPB & Co (“JBPB”),
K an accounting firm formerly known as Grant Thornton. On 26 March K
2002, they were appointed as joint and several liquidators of CWT Textile
L L
Supplies Company Limited (in creditors’ voluntary liquidation) (“CWT”).
M Shortly after that, JBPB collapsed and was split into two camps. The M
N
defendants were in the minority partners’ camp. Eventually, they left N
JBPB to join Shinewing (HK) CPA Limited.
O O
3. As a result of investigation into the financial affairs of the
P P
Bankrupt, the Trustees believed that the Bankrupt had operated a complex
Q Q
scheme using nominees and about 30 offshore companies (collectively,
R
the “Bankrupt’s nominee companies”), one of which had some suspicious R
dealings with CWT.
S S
T T
U U
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A A
4. On 5 November 2013, Deputy High Court Judge Le Pichon
B ordered the defendants in their capacity as joint and several liquidators of B
CWT to produce documents relating to three payments made by CWT;
C C
and also ordered JBPB by consent to produce supporting documents
D relating to twelve payments made to JBPB by the Bankrupt’s nominee D
companies. Surprisingly, the defendants later denied JBPB’s solicitors,
E E
Messrs Chiu, Szeto & Cheng Solicitors & Notaries (“CSC”), had authority
F to enter into the order by consent on their behalf as minority partners and F
refused to comply with that order.
G G
H 5. To regularize the situation, on 7 February 2014 the Trustees H
applied by inter partes summons for orders that the defendants in their
I I
two different capacities do comply with the order of Deputy High Court
J Judge Le Pichon. The defendants appeared in person. Tang representing J
himself and Wong contested the application rigorously, as if the Bankrupt
K K
was standing in his shoes. He raised every possible argument, most of
L which were technical and all were unmeritorious. On 18 March 2015, L
I granted the disclosure order, paragraphs 3 of which required the
M M
defendants in their capacity as minority partners of JBPB to produce four
N N
categories of documents relating to the twelve receipts within 21 days (the
O
“Disclosure Order”). O
P 6. The time for providing disclosure expired on 8 April 2015. P
On that day, the defendants sent a letter to the Trustees’ solicitors
Q Q
attaching correspondences between them and CSC. Other than filing
R R
Tang’s 4th Affirmation five months later in purported compliance with
S
paragraph 4 of the Disclosure Order (which is irrelevant for the purpose S
of the present proceedings), they did nothing to comply with that order.
T T
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A A
7. The Trustees commenced committal proceedings against the
B defendants. On 18 October 2016, I delivered judgment finding them B
liable for contempt for their breach of paragraph 3 of the Disclosure Order
C C
and adjourned the hearing to 28 October 2016 for sentence. I indicated
D that this is a bad case of contempt and a starting point of six months’ D
imprisonment would be the minimum.
E E
F 8. At the hearing on 28 October 2016, the defendants produced F
12 documents relating to the 12 receipts required to be produced under
G G
the Disclosure Order. At the request of their counsel, I adjourned the
H hearing to 3 November 2017 to enable the defendants to purge their H
contempt. On 3 November 2017, I further adjourned the sentencing
I I
hearing pending the Defendants’ appeal to the Court of Appeal.
J J
9. The appeal was heard on 24 January 2017. On 16 February
K K
2017, the Court of Appeal upheld the finding of contempt in respect of
L one category of documents, ie invoices and receipts, but not the other L
three and allowed the appeal to the extent that the order for committal is
M M
set aside. The Court of Appeal also made a costs order nisi that the
N defendants pay the Plaintiffs 80% of the costs of the appeal and below. N
O O
Principles on sentencing
P P
10. The court’s orders are made to be obeyed. Civil contempt of
Q court order is a serious matter. The principles applicable to sentencing Q
this type of offences have been usefully summarized by Au-Yeung J in
R R
Arboit v Koo Siu Ying (No 2) as follows:
1
S S
T T
1
[2016] 3 HKLRD 154 at paras 2 – 8
U U
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A A
(1) A prime consideration of the court in sentencing contempt is
B to signal the importance of demonstrating to the litigants that B
the orders of the court are to be obeyed.
C C
(2) The object of the sentence is both to punish the conduct in
D defiance of the court’s order and to serve a coercive function D
by holding out the threat of future punishment as a means of
E E
securing the protection which the order was primarily there
F to do: Crystal Mews Ltd v Metterick 2 and Re Barrell F
Enterprises . 3
The court has to strike a balance between the
G G
two objectives.
H (3) Imprisonment should be regarded as a sanction of the last H
resort. Any custodial term should be as short as possible and
I I
consistent with the circumstances of the case. The court has
an absolute discretion to suspend a sentence of imprisonment
J J
for such period and on such terms as it deems fit.
K K
(4) The court will have to consider all the circumstances of the
L
contempt, including the nature of the order and extent of the L
breach; whether the contempt was contumacious or
M unintentional; the reasons, motives and state of mind of the M
contemnor; and whether the contemnor appreciates the
N N
seriousness of the deliberate breach.
O (5) The court will have to consider aggravating and mitigating O
factors, including whether any prejudice is suffered by the
P P
plaintiff; whether the prejudice is capable of being remedied;
Q whether the contemnor has cooperated and purged the Q
contempt; and the personal circumstances of the contemnor.
R R
S S
T 2
[2006] EWHC 3087 (Ch) at [8], per Collins J (as he then was) T
3
[1973] 1 WLR 19, 27C –D, English CA
U U
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A A
11. Of all the factors listed above, the two most important ones
B are whether the contemnor has purged the contempt and whether the B
plaintiff has suffered any prejudice which is irremediable. If the
C C
contempt has been purged, the coercive function of the sentence has been
D spent. What remains to be addressed is punishment for the disobedience. D
Purging the contempt may even affect the sentencing option. While
E E
each sentence depends on its facts and circumstances, references may still
F be drawn from sentences passed the court in similar cases. F
G G
Purging the contempt, whether contumacious and intentional
H H
12. At the hearing on 28 October 2016, Tang produced
I 12 documents which did not fall within the category of invoices and I
receipts. Having retrieved the CWT case files, Tang produced six relevant
J J
receipts on 1 November 2016. On 2 November 2016, he produced more
K documents to the Trustees including three vouchers and one receipt. K
L L
13. In the meantime, he also liaised with the majority partners
M and agreed to pay the charge of $35,000 to cover the costs of the M
arrangement for examining JPBP’s records kept in the warehouse of Santa
N N
Fe. Eventually, he produced a comprehensive reply to the Trustees on
O 7 August 2017. But that exercise took nine months. O
P P
14. Mr Chen, counsel for the Trustees, submitted that the steps
Q taken by Tang were mere pretence and delaying tactics to buy time in the Q
hope that they would not have to produce any more documents if their
R R
appeal was successful. He referred to correspondences among the
S Trustees’ solicitors, Messrs Li, Wong, Lam & WI Cheung (“LWLC”), the S
defendants’ solicitors (“ONC”) and CSC. On the other hand, Mr Siu,
T T
U U
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A A
counsel for Tang, referred me to other correspondence to support
B his argument to the contrary. B
C C
15. A convenient starting point of enquiry is ONC’s letter dated
D 25 October 2016 to CSC seeking access to examine the records in the D
warehouse of Santa Fe. CSC replied on 4 November 2016 that the
E E
majority partners have no objection, but imposed a condition that the
F Trustees or their representatives must be present during the inspection. F
On 8 November 2016, ONC wrote to LWLC enquiring if the Trustees are
G G
agreeable to be present during the inspection.
H H
16. The matter sat there for about one and half months until
I I
19 December 2016 when LWLC requested ONC for a copy of CSC’s
J letter requesting the Trustees’ presence during the inspection. On the J
following day, ONC replied that their clients “do not agree that they are
K K
obliged to provide them”. On 23 December 2016, LWLC replied
L alleging that the request for the Trustees’ presence during the inspection L
was only ONC’s “bare allegation”. ONC took offence and retorted with
M M
some heated argument and demanded an answer to their request whether
N the Trustees will attend the inspection. On 3 January 2017, LWLC wrote N
back indulging in the same argument and said it was unreasonable to
O O
request the Trustees to attend the inspection and to incur unnecessary
P costs. On 6 January 2017, ONC wrote to CSC requesting if the majority P
partners would waive that particular condition. On 11 January 2017,
Q Q
CSC replied and agreed to waiving that condition.
R R
17. Pausing here, my observation is that LWLC’s one and half
S S
months’ inaction and their request for proof from CSC were quite
T T
unnecessary. There was no reason not to accept what was said by
U U
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A A
a member of the profession. Afterall, what ONC asked for was a simple
B answer. They could have replied “no” and ONC could have written to B
CSC to request a waiver. LWLC is responsible for the two months’ time
C C
wasted from 8 November 2016 to 5 January 2017. That said, the
D defendants’ stance was unnecessarily antagonistic. Probably, the D
acrimony created between the parties during the course of this series of
E E
litigation have overflowed to the parties’ solicitors.
F F
18. Again, the matter sat there for about two and half months
G G
until 31 March 2017 when ONC responded to CSC’s letter and provided
H a cheque of $35,000 and requested for arrangements to be made for the H
inspection. It should be noted that on 16 February 2017 the Court of
I I
Appeal had delivered its judgment. On 13 April 2017, CSC replied
J confirming that the earliest available inspection dates would be 27 or J
28 April 2017. Inspection eventually commenced in May 2017. A
K K
comprehensive reply was furnished to the Trustees on 7 August 2017.
L L
19. Mr Chen’s criticism is about the total inaction between
M M
11 January and 31 March 2017. During that period, there was an incident
N on 18 January 2017 in which Tang was assaulted causing injuries to N
his leg or legs. It was not known if he was hospitalized and, if he was,
O O
for how long. He said it affected his mobility, work and emotion. Be that
P as it may, that cannot explain why ONC could not have started making P
arrangements with CSC for the inspection. The inaction during this two
Q Q
and half months’ period is totally unexplained. The only inference is that
R R
it was because the defendants did not give further instruction to proceed.
S
I agree with Mr Chen’s submission that the defendants were stalling for S
time pending the outcome of the appeal in the hope that they would not
T T
have to produce anything if their appeal was successful.
U U
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A A
20. Mr Chen accepted that the contempt was purged. However,
B it took more than nine months. Discounting the time wasted by LWLC B
arguing about the requirement of the majority partners’ presence during
C C
the inspection and assuming in favour of the defendants that it took them
D a few months to comb through the files and records, there was a delay of D
two and half months on the defendants’ part, which I find was made with
E E
a deliberate intention to stall time pending the outcome of their appeal.
F The contempt was contumacious and intentional. F
G G
Prejudice to the Trustees
H H
21. Mr Siu argued in his comprehensive reply of 7 August 2017
I that Tang had given a detailed explanation as to how the documents I
disclosed are related to the 12 payments. In his comprehensive reply,
J J
Tang said that he had given such explanation before in the proceedings
K under HCB 3819/2011. As Mr Chen confirmed that the documents K
produced could not assist the Trustees in their investigation into the affairs
L L
of the Bankrupt, Mr Siu argued that the Trustees suffered no prejudice as
M a result of the defendants’ non-compliance with the Order. M
N N
22. That may well be the situation in an ordinary case involving
O ordinary contemnors. However, there is another aspect in the present O
case. The Trustees were investigating into the affairs of the Bankrupt
P P
who was reasonably suspected of being involved in a huge and
Q complicated fraud. Time was of the essence in such investigation. Q
Though Tang had given an explanation about the 12 payments in the
R R
HCB 3819/2011 proceedings, the Trustees were entitled to examine the
S documents to verify the veracity of the account given by them and to look S
for new lines of inquiry. Though the documents are proved to be not
T T
useful, the Trustees were made to incur unnecessary time and effort in
U U
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A A
pursuing the present course of action. They were made to wait for more
B than two years for documents which he could have easily produced. For B
reasons as given in the later part of this judgment, that category together
C C
with the other three categories of documents could have been easily
D produced in no time back in 2013 before the defendants’ partnership D
dispute escalated, if not in 2015. Furthermore, by taking the exceptionally
E E
antagonistic and unusual course of resisting the discovery application, the
F defendants put suspicion on the Bankrupt, if not also on themselves. F
They led the Trustees to the belief that they and/or the Bankrupt had
G G
something to hide, which is material to Trustees’ investigation. The
H Trustees were made to direct their time, energy and resources to this futile H
exercise which might have also diverted their attention to other more
I I
important or likely more fruitful starting points for investigation.
J Evidence would also have become lost in course of time. The efforts of J
the discovery proceedings commenced by the Trustees since 2013 were
K K
all spent for nothing. In short, the Trustees were misled, their time and
L L
costs were wasted, and opportunities were lost. In my view, the Trustees
M
suffered prejudice which might even be irremediable. As experienced M
professional accountants specialized in insolvency work who have been
N N
appointed as liquidators and trustees in bankruptcy, they knew of this
O likely risk of prejudice. This is an aggravating factor. O
P P
Tang’s other mitigating factors
Q Q
23. Mr Siu invited the court to take into account the fact that the
R
contempt finding itself has already brought severely adverse impact on R
Tang’s professional career. Tang is a professional accountant specialized
S S
in insolvency work. He said that following the finding of contempt, the
T Official Receiver’s Office indicated that they would not nominate him as T
U U
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A A
a liquidator for any new “Panel A” cases; and Tang had indeed
B encountered difficulties in his proposed appointment in other cases. B
C C
24. I have no doubt about what Tang said. The Official
D Receiver expects a high degree of professional integrity and competency D
of those whom he appoints as liquidators or trustees in bankruptcy.
E E
Tang’s conduct of the disclosure application and his refusal to comply
F with the Disclosure Order not only fell far below the standard expected F
of a reasonable accountant but was also obstructive to the Trustees and
G G
counter-productive to the function of the Official Receiver. More
H importantly, a liquidator is an officer of the court. How can Tang expect H
the Official Receiver will appoint as liquidator someone who has
I I
demonstrated such an obstructive attitude towards trustees-in-bankruptcy
J and liquidators in their investigation of a bankrupt’s or a company’s J
affairs and who has demonstrated wilful defiance of the court’s order?
K K
The reaction of the Official Receiver is the natural consequence of
L his conduct. It could not carry much weight for mitigation purpose. L
M M
25. Tang said that a bankrupt of whom he is the
N trustee-in-bankruptcy and whose investigations have spanned over N
15 years cited the finding of contempt as the principal reason in their
O O
attempt to remove him as the trustee. That was a separate matter which,
P in any event, was resolved in favour of Tang. He suffered no damage. P
That incident carries little mitigation value.
Q Q
R 26. Tang also mentioned about a complaint by Sun Legend R
S Investments Limited to the Official Receiver. He attributed this complaint S
and his assault to the bankrupt mentioned in the above paragraph. For
T T
the same reasons these matters have no bearing on these proceedings.
U U
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A A
27. I shall, however, take into account his contribution in the
B insolvency profession, his social and church services. But I must say B
such mitigating factors are mildly useful where a fine is to be imposed.
C C
D Wong’s other mitigating factors D
E 28. Wong filed two affirmations in mitigation and also referred E
to another affirmation filed in HCB 3819/2011. She was a partner of
F F
JBPB and became the head of the Corporate Finance Division of the
G Restructuring, Insolvency and Investigation Department in 2008. Tang G
was the head of that department. She and Tang were appointed as joint
H H
liquidators of CWT in 2003. She said she and Tang would usually be
I named as joint and several liquidators such that one of them could take I
charge when the other was absent. She trusted Tang and had no doubt
J J
about the matters handled by Tang. Since 2013, her involvement in the
K old liquidation cases was reduced as she had to look after her sick mother K
and brother. She retired in June 2014 and since then had not visited the
L L
office of JBPB. She took a passive role in those liquidation cases and
M left Tang to take up the leading role. She was kept informed of important M
issues and the ways they were handled.
N N
O 29. I am unimpressed by her mitigation. The theme of her O
mitigation is that she had performed her duty as joint liquidator of CWT
P P
properly. There was no allegation that she and Tang had failed to comply
Q with the obligations imposed on them as liquidators of CWT. The Q
contempt in issue is their failure to comply with obligations imposed on
R R
them personally as minority partners of JBPB who had handled the affairs
S of CWT. Back in 2013, when Deputy High Court Judge Le Pichon made S
the order by consent requiring JPBP to make disclosures, she, along with
T T
Tang, took the position that CSC did not have authority to represent them
U U
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A A
as minority partners of JPBP. That led to fresh applications for disclosure
B being made and the Disclosure Order was made against them personally B
in their capacity as minority partners of JPBP in March 2015. She was
C C
required, as partners of JPBP, who had handled the affairs of the Bankrupt
D and CWT and who had possession, custody and control of the documents, D
to produce the documents.
E E
F 30. In her affirmation filed in HCB 3819/2011, she put the blame F
on the conditions imposed by the majority partners for their access to the
G G
files. Presumably she was referring to the inspection fee of $35,000.
H But she did not explain why she was unable to put up with the funds H
herself or persuade Tang to contribute. In court, she said that she offered
I I
to help Tang but Tang declined. I understand that at the time the Order
J was made she had retired from JBPB and had personal problems looking J
after her sick mother and brother. That does not relieve her of the
K K
obligation under that Order. In essence, what she said in her three
L affirmations is that she trusted Tang and left it to Tang to perform. The L
Order imposed a non-delegable personal obligation on her as well as Tang
M M
to produce the documents. She simply ignored the Order and did
N N
absolutely nothing. She just stood by and left it to Tang to decide how
O
to comply or not to comply with the Order. O
P 31. Save for her personal circumstances at the time and the P
character references from her close friends, I do not consider there are any
Q Q
mitigating circumstances.
R R
Tang’s sentence
S S
32. Tang is a professional accountant specialized in insolvency
T T
work and has much experience as trustee-in-bankruptcy as well as
U U
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A A
liquidator. He ought to know that one of a trustee’s function is to
B investigate the affairs and properties of the bankrupt and to report any B
irregularities to the Official Receiver. The discovery process is to enable
C C
the trustee to carry out his functions in gathering information about the
D assets, affairs and dealings of the bankrupt as effectively as possible, and D
with as little expense as possible. He knew that the Trustees were
E E
investigating into the affairs of the Bankrupt who was reasonably
F suspected of having committed significant frauds. The documents F
sought were to assist the Trustees in discharging their duty. Tang was
G G
the partner in JBPB who had handled the affairs of the Bankrupt and CWT.
H He was the most appropriate person to give discovery. H
I I
33. If an accountant has acquired possession, custody and
J control of documents in the course of his professional practice is required J
to produce them to the trustee-in-bankruptcy to enable the trustee to
K K
investigate the affairs of the bankrupt, he should and would maintain
L a neutral position, except where such production would be in breach of L
his duty of confidentiality owed to his client. The majority partners,
M M
whom I presume to be reasonably competent accountants, saw no
N N
objection to produce the documents and consented to their production.
O
But, Tang took an inexplicable position of first objecting to the authority O
of CSC in representing them as partners of JBPB to enter into a consent
P P
order; and, second, contesting the discovery application rigorously as if
Q
he were the Bankrupt by raising every objection, however technical and Q
unmeritorious. Not only that such conduct fell far below that of a
R R
reasonable accountant, he created suspicion on himself by such conduct.
S As result, the Trustees incurred enormous costs in pursuing the disclosure S
application and the contempt proceedings. According to Wong, their
T T
U U
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A A
own costs was $2.3 million with Tang acting in person in the disclosure
B application. The Trustees’ costs were definitely much more. B
C C
34. Mr Siu submitted that Tang’s contempt was not intentional
D and that he was only being obstinate. He referred to the following D
observations of the Court of Appeal4:
E E
“In this case the breach of paragraph 3 is not casual or
F accidental. The defendants clearly knew that they had to F
comply with it but chose not to do so because they chose not to
carry out the inspection of documents due to their own view
G (and I think, rather stubbornly) on the payment of charges and G
the efforts involved in such an exercise. They had ignored the
H bigger picture of their obligation to comply with paragraph 3.” H
I I am not in disagreement with that finding, but consider that was only one I
of the lesser reasons for his non-compliance. Given his background,
J J
Tang ought to know that the court’s order was to be complied. Given
K the background of this litigation, he ought to know committal proceedings K
L
would follow if he did not. On the date due for production, he only sent L
a letter to the Trustees’ solicitors attaching a few correspondences
M M
between him and CSC. His refused to produce the documents was
N
deliberate. Back in 2013 or even 2014 before the partnership had N
completely broken down, there was no question of such payment. Tang
O O
and Wong were minority partners of JBPB. The majority partners on
P behalf of the entire firm instructed CSC to consent to the disclosure order P
to be made against the firm. Had Tang not taken the peculiar and
Q Q
inexplicable position of denying CSC had authority to represent him and
R Wong, the order would have been made binding the entire firm including R
himself. At the time, he had access to the documents and JBPB’s
S S
resource to locate them. He could have instructed his staff in JBPB to
T T
4
CACV 214/2016 (unreported), 16 February 2017, at para 7.2
U U
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A A
do the search and produced not only the category of documents now
B concerned, but all four categories. But he was determined not to produce B
any of them. He raised every possible argument, and I emphasise, as if
C C
the Bankrupt was in his shoes. His position as I found in the disclosure
D proceedings was that he was to decide what was to produce, not the D
Trustee or the court. He maintained that position even after he received
E E
the Disclosure Order. I mentioned these factual background relating to
F the application for the Disclosure Order in HCB 3819/2011 and my F
adverse comments on Tang’s conduct in those proceedings only by way
G G
of background to support my finding of his mental state in not complying
H with the Disclosure Order. However much I disapprove of his conduct H
in those proceedings, it has no bearing on the sentence that I am going to
I I
impose. Tang is only to be sentenced for what he has failed to do since
J the date of the Order, ie 18 March 2015. I find that his refusal to comply J
was not merely because of his obstinate view as to whether he should pay
K K
the charge, but was a determined and persistent refusal from the very
L L
beginning when there was no issue about those charges. He was
M
determined that the court’s order was subject to his pleasure. He M
deliberately treated the court’s order with the utmost contempt.
N N
O
35. While I accept that Tang has purged the contempt, that was O
not a reflection of his remorsefulness. There was an unexplained delay
P P
of about two and half months between the time when CSC waived the
Q
requirement of the Trustee’s presence during the inspection and Q
his payment of the fees which I find was caused by Tang’s intention to
R R
adopt a wait and see attitude. It was only a month and half after the
S Court of Appeal had handed down judgment that he resumed making S
arrangements with CSC for the inspection. He knew he had exhausted
T T
all avenues to resist disclosure. I find that he only made the disclosure
U U
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A A
for the purpose of mitigating the likely sentence he was going to receive
B and not out of remorsefulness. This finding reduces the possible B
discount purging a contempt would have on sentence.
C C
36. Costs of the contempt proceedings is also one mitigating
D D
factor. The Defendants will have to bear the costs of the proceedings on
E an indemnity basis. Those costs are likely to be substantial. I shall E
take that into account when determining the starting point of the fine I am
F F
going to impose.
G G
37. Mr Chen suggested a fine of $400,000 for Tang and $200,000
H H
for Wong. Mr Siu referred me to Arboit in which the contemnors were
I fined $200,000. He reminded me that the contemnors in that case were I
very rich and committed a wholesale breach of order whereas Tang was
J J
only found by the Court of Appeal to be liable for failing to produce one
K out of four categories of documents. I agree with his observations, but K
L
precedents only have a referencing value. L
M 38. Given its history, this is a very bad case of contempt. It is M
an aggravating factor that the contemnor, being an experienced
N N
accountant and liquidator who is knowledgeable about the bankruptcy
O O
regime and liquidation regime, the purpose of the disclosure and that time
P
is of the essence in any investigation into the affairs of a bankrupt P
suspected of having defrauded his creditors, was determined to obstruct
Q Q
the Trustees’ investigation. It was against that background he made
R a determined refusal to comply with the Disclosure Order. There is a R
public interest element in this case. While Tang has purged the contempt,
S S
there was an unexplained delay of two and half months which indicated
T that he did so only for the purpose of reducing his sentence and less out T
U U
V V
- 18 -
A A
of remorsefulness. That reduces the discount which his purging of the
B contempt would otherwise have earned. While the documents disclosed B
were not useful to the Trustees, there is nevertheless some prejudice
C C
suffered by the Trustees. I can give little weight to this factor.
D D
39. Having regard to all the circumstances in this case,
E E
including the likely costs liability, I consider a starting point of $400,000
F appropriate for the seriousness of this case. I reduce it to $300,000. F
G G
Wong’s sentence
H H
40. As Wong adopted a negative role in complying with the
I disclosure order by leaving it to Tang to perform, what I have said about I
Tang applies equally to her. This is because the duty of disclosure is
J J
a non-delegable one. Having regard to her passive role, her personal
K circumstances and the fact that she has retired, I consider a lower starting K
point of $300,000 appropriate and reduce the fine to $200,000.
L L
M Costs M
N 41. I also make the usual costs order that the defendants shall N
pay the Trustees’ costs on an indemnity basis.
O O
P P
( Anthony To )
Q Deputy High Court Judge Q
R R
Mr David Chen, instructed by Li, Wong, Lam & WI Cheung,
for the Plaintiff
S S
Mr Patrick Siu, instructed by ONC Lawyers, for the Defendant
(Alan Chung Wah Tang)
T T
The Defendant (Alison Wong Lee Fung Ying), appeared in person
U U
V V
HCMP450/2016 IP PUI LAM ARTHUR AND ANOTHER (Joint and Several Trustees in bankruptcy) v. ALAN CHUNG WAH TANG AND ANOTHER - LawHero