A bauxite ore mining company based in the Solomon Islands delayed the grant of a worldwide Mareva injunction against it by 4 months, by offering undertakings that it would secure incoming sales proceeds said to be worth approximately USD 2 million.
After the worldwide Mareva injunction was eventually granted, it was discovered that the so-called incoming sales proceeds never existed.
Following a 9-day trial before the High Court ([2025] HKCFI 3326), the sole shareholders and directors of the company were found personally liable for contempt of court, for (1) knowingly aiding and abetting the company in putting forward false undertakings which could not be fulfilled; and (2) failing to procure the company to comply with its ancillary disclosure obligations under the worldwide Mareva.
Factual Background
The case arose out of a cross-border commercial dispute.
Bintan Mining Corporation (“BMC”), a BVI-incorporated company engaged in the business of mining and export of bauxite ore from the Solomon Islands, chartered vessels from the Plaintiff to ship its cargo to the PRC Mainland. The 1st and 2nd Defendants were BMC’s only directors and shareholders at the material times.
The Plaintiff commenced multiple London-seated arbitration proceedings against BMC for outstanding freight and demurrage totalling over USD 10 million.
A domestic Mareva injunction was initially obtained by the Plaintiff against BMC, but it then became apparent that worldwide protection was required.
In October 2020, to resist the grant of an interim worldwide Mareva injunction, the Defendants procured BMC to give an undertaking to the Court that it would secure imminently incoming sales proceeds of US$2 million, arising from 3 completed bauxite ore sales contracts (“Sales Proceeds Undertaking”). The Court accepted the Sales Proceeds Undertaking and no interim injunction was granted.
No sales proceeds were ever received by BMC. 4 months later, in February 2021, the Court granted a worldwide Mareva injunction in favour of the Plaintiff, and directed BMC to make ancillary disclosure of its assets worldwide (“Asset Disclosure Order”). BMC failed to comply with the order.
Decision
The Court concluded that the Plaintiff proved beyond reasonable doubt that the Sales Proceeds Undertaking was a worthless and empty undertaking based on false premises, which the Defendants were fully aware of. No sales proceeds were ever payable to BMC as the 3 bauxite ore sales contracts were part and parcel of a wider cargo financing agreement. The Defendants were also found to have wilfully failed to take reasonable steps to ensure BMC’s compliance with the Asset Disclosure Orders.
Key Takeaways
A. Undertaking on False Premises – Legal Test:- The legal test on contempt for giving an undertaking on false premises is the same as that of giving a false statement on affidavit. The plaintiff has to show (1) the falsity of the statement / undertaking, (2) the statement has or would have interfered with the course of justice in some material respect; and (3) at the time it was made, the maker of the statement knew that it was false and that the false statement was likely to interfere with the course of justice.
B. Directors’ Personal Duty to Ensure Compliance:- Corporate personality does not insulate directors from contempt of court. Directors are personally responsible for ensuring that Court orders are properly obeyed. A director is required to use his position and power to ensure the company’s compliance. Cursory and inadequate efforts, or a failure to supervise subordinates to comply with the court order, could amount to failure to take reasonable steps.
C. Belated Compliance – No Defence:- Belated compliance with a disclosure order that serves no useful purpose is no defence to contempt. In particular, in the context of ancillary disclosure orders in aid of Mareva injunctions, information on the company’s assets is usually uniquely within the knowledge of the directors. The Plaintiff is under no duty to police BMC’s compliance and/or actively raise an instance of non-compliance with the contemnor.
D. Guidance on Pleading Requirements for Statement of Contempt:- A Statement of Contempt must plead with sufficient particularity to enable a contemnor to defend himself, and what exactly he is said to have done or omitted to do which constitutes a contempt of court. The Statement should also state all the factual elements (but not the evidence to be relied on) which, if proved, are sufficient to establish the contempt.
E. Personal Attendance of Contemnor in Civil Contempt Trial:- In an earlier case management decision of the Honourable Q Au Yeung J ([2023] 4 HKLRD 152), the Court refused to allow the 1st Defendant to give evidence by video-conferencing facility (“VCF”) in the UK, despite having established a genuine medical emergency. This is the first case in Hong Kong which considers in detail a VCF application in the context of civil contempt proceedings. The Court accepts that contempt proceedings, although civil in nature, seeks to punish disobedience to the Court, and “is no better example of a proceeding which calls for the physical attendance of witnesses to be examined under the solemn atmosphere of the court”.
Read the liability judgment here: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=171075&currpage=T
Read the VCF judgment here: https://legalref.judiciary.hk/lrs/common/search/search_result_detail_frame.jsp?DIS=154109&QS=%2B&TP=JU
Mr Christopher Chain SC, leading Mr Arthur Poon, instructed by CMS Hong Kong, acted for the Plaintiff.
