Mathnasium Center Licensing, Llc v Chang Chi Hung (Also Known As Alex Chang

CourtHigh Court (Hong Kong)
Judgment Date18 March 2019
Neutral Citation[2019] HKCFI 664
Citation[2019] 2 HKLRD 375
Subject MatterMiscellaneous Proceedings
Judgement NumberHCMP1550/2017
HCMP1550/2017 MATHNASIUM CENTER LICENSING, LLC v. CHANG CHI HUNG (also known as ALEX CHANG)

HCMP 1550/2017

[2019] HKCFI 664

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1550 OF 2017

________________________

IN THE MATTER of an application on behalf of MATHNASIUM CENTER LICENSING, LLC against CHANG CHI HUNG (張志洪) (also known as ALEX CHANG) for an order of committal
and
IN THE MATTER of Order 52 rule 3 of the Rules of the High Court, Cap. 4A

________________________

BETWEEN
MATHNASIUM CENTER LICENSING, LLC Plaintiff

and

CHANG CHI HUNG (張志洪) Defendant
(also known as ALEX CHANG)

________________________

Before: Hon Wilson Chan J in Court
Dates of Hearing: 20-23 November & 17 December 2018
Date of Judgment: 18 March 2019

________________________

J U D G M E N T

________________________

A. INTRODUCTION

1. By the Plaintiff’s Originating Summons herein, the Plaintiff seeks to commit the Defendant, Alex Chang (“Chang”), for contempt of court.

2. Briefly, the Plaintiff’s case is that: –

(1) On 8 May 2015, the Plaintiff commenced HCA 1012/2015 (the “Action”) against Mathnasium Hong Kong Ltd (“Mathnasium HK”). The claim related to a Regional Franchise Agreement dated 20 November 2009 (“RFA”). Under the RFA and the Plaintiff’s claims in the Action, the scope or performance of some of Mathnasium HK’s obligations depended on the number of centres it operated.

(2) In its Defence and Amended Defence, Mathnasium HK admitted that it opened and operated 12 learning centres (“HK Centres”). The admission was verified by two statements of truth made by Chang, the sole shareholder and then director of Mathnasium HK.

(3) The Plaintiff then sought summary judgment on 27 May 2016, and Mathnasium HK practically consented to the Plaintiff’s application when the application was heard on 20 June 2016. Eventually, the Plaintiff, relying on the admission, entered into a Tomlin order (the “Tomlin Order”) with Mathnasium HK on 22 June 2016.

(4) The Plaintiff then sought to enforce the schedule to the Tomin Order (the “Tomlin Schedule”), which refers to inter alia “all the learning centres operated by [Mathnasium HK] in Hong Kong from May 2012 to-date”, but was unsuccessful. The Plaintiff therefore took out a summons to enforce the Tomlin Schedule (the “Enforcement Summons”) on 15 July 2016.

(5) The application was initially granted by Master K Lo on 18 July 2016, but her decision was by consent overturned on appeal by this court on 10 November 2016. Importantly, it transpired from Mathnasium HK’s opposition to the Enforcement Summons that the admission was false, and the Plaintiff has been gravely prejudiced as the Tomlin Schedule cannot be satisfactorily enforced. The administration of justice has been materially interfered with.

(6) The Plaintiff’s case is that Chang had no honest belief in the admission or his statements of truth, and knew of the likelihood of them interfering with the administration of justice.

(7) Accordingly, the Plaintiff applied for leave in January 2017 pursuant to Order 41A, rule 9 and Order 52, rule 2 of the Rules of the High Court. Leave was granted by this court on 22 June 2017. This court observed that: –

“I am satisfied that the punishment for contempt of court is proportionate and appropriate in relation to the false statements alleged to have been made by Chang Chi Hung (張志洪) (also known as Alex Chang), having regard to (i) the strength of the case against the alleged contemnor; and (ii) the significance of the alleged false statements in the proceedings in which the alleged false statements were made.”

3. The Plaintiff bears the burden to prove the following matters beyond reasonable doubt (Numeric City Ltd v Lau Chi Wing [2016] 4 HKLRD 812, at paragraph 35): –

(1) The falsity of the statement in question (section B below);

(2) The statement has or would have interfered with the course of justice in some material respects (section C below); and

(3) At the time it was made the maker of the statement had no honest belief in the truth of the statement and knew of its likelihood to interfere with the course of justice (section D below).

B. FALSITY OF THE STATEMENTS

B1. The making of the statements

4. On 8 May 2015, the Plaintiff issued a Writ of Summons in the Action against Mathnasium HK endorsed with a Statement of Claim claiming against Mathnasium HK, inter alia: –

(1) The outstanding royalty payments due and payable to the Plaintiff (the “Royalty Payments”) pursuant to the RFA.

(2) The Statement of Claim stated that, pursuant to the RFA, the exact amount of the Royalty Payments is (subject to a minimum monthly payable amount) dependent on the number of students attending the learning centres operated by Mathnasium HK (at paragraph 3(c)).

(3) Further, as stated in the Statement of Claim, pursuant to the RFA, Mathnasium HK owed a number of post-termination obligations in respect of the learning centres operated by Mathnasium HK (at paragraph 3(i)-(j)). The Statement of Claim sought an order that Mathnasium HK do comply with these post-termination obligations (prayer at paragraph (b)).

5. To this end, paragraph 5 of the Statement of Claim stated that, to the best of the Plaintiff’s knowledge or information, Mathnasium HK “opened and operated” 12 centres in Hong Kong (ie the HK Centres).

6. On 4 September 2015, Chang, the sole shareholder and the then sole director of Mathnasium HK, caused a Defence and Counterclaim to be filed in the Action.

7. Paragraph 7 of the Defence pleaded that “Paragraph 5 is admitted”.

8. The Defence and Counterclaim dated 4 September 2015 was verified by a Statement of Truth dated 4 September 2015, signed by Chang as the director of Mathnasium HK.

9. On 5 November 2015, Chang caused an Amended Defence and Counterclaim to be filed in the Action. Paragraph 7 of the Amended Defence again pleaded that “Paragraph 5 is admitted”. The Amended Defence and Counterclaim was also verified by Chang’s Statement of Truth.

10. In the premises, Chang caused Mathnasium HK to admit its opening and operation of the HK Centres (the “Subject Admission”). The Subject Admission was verified by the Statements of Truth, both signed by Chang (the “Statements of Truth”).

11. The Plaintiff’s case is that Chang and Mathnasium HK have repeatedly accepted or affirmed the truth of the Subject Admission: –

(1) On 27 May 2016, the Plaintiff took out a summons for summary judgment and/or interim payment (the “O.14 Summons”). In support, the Plaintiff filed, inter alia, an Affidavit of Ms Whitney Novak dated 23 May 2016 in the Action (“Novak’s Affidavit”): –

(a) Paragraph 10 of Novak’s Affidavit referred to a letter from the Plaintiff’s solicitors, Robertsons, to Mathnasium HK. The 12 HK Centres were listed in Schedule 1 to the letter.

(b) Paragraph 11 of Novak’s Affidavit went on to state that “instead, [Mathnasium HK] defiantly continues to use the Plaintiff’s proprietary system and operate 13 “Mathnasium Centre” in Hong Kong, albeit trading under an alternative name”. Paragraph 35 of Novak’s Affidavit further stated that “[Mathnasium HK] continues to fail and/or refuse to account to the Plaintiff for the minimum royalties due and to use the Plaintiff’s marks and proprietary system without a valid license in its 13 Centers around Hong Kong”.

(2) Mathnasium HK did not file any evidence in opposition to the O.14 Summons. Mathnasium HK did not seek to contradict Ms Novak’s suggestion that Mathnasium HK operated the 13 centres (including the 12 HK Centres), which was consistent with the Subject Admission.

(3) When the O.14 Summons was heard on 20 June 2016, Mathnasium HK practically consented to the Plaintiff’s application. Mathnasium HK’s solicitor informed the court that “the Defendant is trying to surrender his hand”. He did not dispute the suggestion that “the Defendant doesn’t want to file evidence in opposition and they accept that judgment be entered by consent”.

(4) Eventually, the Plaintiff relied on the Subject Admission, and entered into a Tomlin Order with Mathnasium HK on 22 June 2016, which schedule refers to inter alia “all the learning centres operated by the Defendant in Hong Kong from May 2012 to-date”. The Plaintiff issued the Enforcement Summons on 15 July 2016 to enforce the Tomlin Schedule.

(5) When the Enforcement Summons was heard before Master K Lo on 18 July 2016, Mathnasium HK’s solicitor initially informed the court that the HK Centres “are not operated by the Defendant’s company or owned by the Defendant of the Action” (page 15, line T of the transcript). After an adjournment, the Plaintiff’s solicitor confirmed (to which the Defendant of the Action’s solicitor did not object) that “1 to 13 [ie the HK Centres and one other centre] is not disputed” (page 20, line M of the transcript).

(6) In the same hearing on 18 July 2016, Mathnasium HK’s solicitor did not object to the suggestion that the operation of the HK Centres was “not disputed” (page 20I-O), and positively suggested that “reasonable access” to those HK Centres could be ordered (page 22L-Q). Further, the (then valid) order of Master K Lo dated 18 July 2016 provides that the Plaintiff had access to “all the learning centers operated by [Mathnasium HK] in Hong Kong from May 2012 to-date, limited to those listed from 1-13 in Annexure 1 hereto”.

12. Thus, the Plaintiff’s case is that Chang and Mathnasium HK had repeatedly accepted or affirmed the truth of the Subject Admission.

B2. The falsity of the statements

13. It transpires that the Subject Admission, verified by the Statements of Truth, is false: –

(1) As stated above, the Plaintiff took out the Enforcement Summons on 15 July 2016, and the application...

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