Kao, Lee & Yip (A Firm) v Donald Koo Hoi-yan And Others

Judgment Date25 June 2009
Subject MatterFinal Appeal (Civil)
Judgement NumberFACV27/2007
CourtCourt of Final Appeal (Hong Kong)
FACV000027/2007 KAO, LEE & YIP (a firm) v. DONALD KOO HOI-YAN AND OTHERS

FACV No. 27 of 2007

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 27 OF 2007 (CIVIL)

(ON APPEAL FROM CACV NO. 32 OF 2006)

_____________________

BETWEEN

KAO, LEE & YIP (a firm) Plaintiff/
Respondent
- and -
DONALD KOO HOI-YAN 1st Defendant/
Appellant
EDWIN LAU YI-HO 2nd Defendant
MOHAN DATWANI 3rd Defendant
VIVIEN FAN CHO-MAN 4th Defendant
MONICA CHEUNG YUN KWAN 5th Defendant
LEE SUK YEE (also known as LISA LEE) 6th Defendant

_____________________

Court :

Mr Justice Bokhary PJ, Mr Justice Chan PJ, Mr Justice Ribeiro PJ, Mr Justice Nazareth NPJ and Sir Gerard Brennan NPJ

Dates of Hearing :

22-23 May 2008 and 25-27 May 2009

Date of Judgment :

25 June 2009

_____________________

J U D G M E N T

_____________________

Mr Justice Bokhary PJ :

1. I entirely agree with the judgment of Sir Gerard Brennan NPJ, and would add only certain observations on the case of Irtelli v. Squatriti [1993] QB 83, which observations I consider to be consistent with his views. In that case the defendants executed a further charge on the property concerned despite an injunction prohibiting the sale, disposal or other dealing in the that property. They were committed to prison for contempt. Fresh evidence on appeal was admitted to the effect that they did not understand that executing a further charge was prohibited by the injunction. It is true that two members of the English Court of Appeal expressed the view that the absence of such understanding on the defendants’ part meant that they were not in contempt. But Sir Donald Nicholls V-C (as Lord Nicholls of Birkenhead then was) did not express any such view. What he said (as one sees at p.93 D-E) is that on the basis of the fresh evidence, the judge’s order committing the defendants to prison should be set aside. That is readily understandable. And just because the Vice-Chancellor did not propose any alternative punishment, that does not necessarily mean that he thought that there was no contempt. Even if their misunderstanding of the injunction’s effect was treated as mitigation rather than a defence, there would be good reason to order their release. The plaintiff did not appear and was not represented at the hearing of the appeal, and there does not appear to have been any suggestion as to how in the circumstances the defendants might appropriately be dealt with for contempt if they were not kept in prison. Nor does it appear that any useful purpose would have been served by fining them or ordering costs against them. They were on legal aid and presumably impecunious.

2. In making those observations, I have not forgotten that the Vice-Chancellor concluded his judgment by saying (at p. 93E) that a “knowing” breach of the order by the defendants had not been proved. But he did not say that such lack of knowledge meant that they were not in contempt. By contrast, Taylor LJ (as Lord Taylor of Gosforth CJ then was) did say precisely that, saying (at p.92F) that the judge “could not have been sure that [the defendants] had knowingly breached the court order and, therefore, he could not have been sure that they were in contempt.” (Emphasis supplied.) It will, I trust, be understood that I am in entire agreement with everything which Sir Gerard Brennan says about the principle in Stancomb v. Trowbridge Urban District Council [1910] 2 Ch 190. All that I am saying about Irtelli v. Squatriti is that, on my reading of the judgments therein, it is only by a majority that the case appears to run counter to that principle.

Mr Justice Chan PJ :

3. I agree with the judgment of Sir Gerard Brennan NPJ.

Mr Justice Ribeiro PJ :

4. I agree with the judgment of Sir Gerard Brennan NPJ.

Mr Justice Nazareth NPJ :

5. I agree with the judgment of Sir Gerard Brennan NPJ.

Sir Gerard Brennan NPJ :

6. This appeal is from a judgment of the Court of Appeal which allowed an appeal from a decision of Reyes J and which held the present appellant, Mr Donald Koo Hoi-yan, guilty of civil contempt. Although the better view is that civil contempt is not a criminal offence, the punitive aspect of civil contempt proceedings has “caused the courts to treat those in peril in such proceedings in a like manner to those in peril in criminal proceedings” (Cobra Golf Inc. v. Rata [1998] Ch 109, 129, 155). The penalty to which a person who fails or neglects to obey an order of the court is exposed imports many of the procedural safeguards which are characteristic of proceedings for a criminal offence. Thus an allegation of civil contempt must be proved strictly and, on appeal, the restriction on the admission of fresh evidence which is a general feature of appeals in civil proceedings is relaxed.

7. In this case, much of the material on which the appellant’s counsel relied was produced after the Court of Appeal had delivered its judgment but it was received by this Court and considered once its truthfulness had been assessed in a report by Reyes J. This Court now has that report. To trace adequately the history of events, the material recently produced must be incorporated.

The making of the Orders and the sequence of curial judgments

8. Mr Koo had been an equity partner in the firm of solicitors, Kao, Lee & Yip (KLY) between December 1988 and October 1993. One of the firm’s major clients was the Bank of China Group (BOC). BOC proposed to establish an in-house Law Centre and Mr Koo gave notice to quit KLY with the intention of heading the Centre. But when BOC decided not to proceed with the Law Centre, Mr Koo decided to establish his own law firm, Koo & Partners (KP) with the view of providing services to BOC. The partners were Mr Koo and some former employees of KLY. KP commenced practice on 1 October 1993.

9. KLY took immediate action. On Thursday 30 September 1993, that firm applied ex parte for an Anton Piller order against Mr Koo and two of his intended partners in relation to certain documents, but that issue was resolved by the performance of undertakings given by the defendants and recorded in a Court order of that day. KLY issued a writ against Mr Koo, his partners and an employee and, on 4 December 1993, KLY issued a summons against them alleging breaches of restraint of trade clauses in the KLY partnership agreement and seeking interlocutory injunctive relief to restrain KP from, inter alia, “soliciting legal business from, or doing any work or act normally done by solicitors for, any person or firm or corporation who or which shall have been a client of [KLY] within a period of 3 years preceding such cessation”, that is, the cessation of Mr Koo’s membership of the KLY firm.

10. On 14 January 1994, Mr Koo’s 3rd Affirmation identified the former clients of KLY who had contacted him to give instructions since October 1993 and stated the “nature of the matters” on which those instructions had been received.

11. Mayo J refused to grant the injunction sought by KLY but ordered that Mr Koo “maintain an account of all work which is undertaken by KP in relation to any former client of the plaintiff until trial or further order” (This is the “first Order”). An appeal to the Court of Appeal failed and an application for leave to appeal to the Privy Council was refused.

12. After a considerable delay in prosecuting the principal proceedings, KLY’s action was tried by Ma J (as he then was) in April and May 2002. By this time, KLY’s Statement of Claim had been considerably altered from its original form. KLY sought no more than nominal damages for breach of contract, the chief claim for relief being an account of profits for breach of fiduciary duty by, inter alia, arranging for legal work involving the Bank of China Group to be diverted from KLY to KP. This claim had been inserted in the Statement of Claim by amendment on 30 July 2001. Although the defendants alleged prejudicial delay in relying on that claim, Ma J found no merit in the argument, pointing out that Mayo J had ordered the maintenance of an account of all work undertaken by KP in relation to any former clients of KLY until trial.

13. Ma J gave judgment on 2 April 2003 holding that Mr Koo had breached his fiduciary duty to KLY. On 19 September 2003, his Lordship settled a formal judgment, ordering, inter alia, as follows:

“(a) [Mr Koo] do account to [KLY] for all profits earned by [KP] in relation to legal services provided by [KP] to the Bank of China Group for the 12 months commencing on the 1st of October 1993 (after making due allowance against the said profits in respect of the expenses and overheads incurred in relation to such profits, including relevant salaries and an assessment, in monetary terms of time spent by solicitors and staff of [KP] (including that of the[Mr Koo])), and

(b) an account of such profits to be taken and [Mr Koo] do pay to [KLY] the sums (if any) found due on the taking of the said account.”

14. By a contemporaneous order made by consent, Ma J gave detailed directions for the taking of the account. For present purposes, the following part of those directions is relevant:

“1. For the purposes of taking the account of profits ordered against [Mr Koo], it is ordered that:

(1) The said account be taken by a Judge.

(2) [Mr Koo] do within 28 days file and serve an affirmation:

(a) listing all entities within the Bank of China Group for which [KP] provided any legal services at any time within the period of 12 months commencing on 1st of October 1993;

(b) exhibiting and verifying the account made pursuant to the Order of the Honourable Mr. Justice Mayo on the 21st of January 1994;

(c) exhibiting and verifying the account...

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