In an interlocutory application, the Defendant and the Plaintiff reached terms on the mutual undertakings which were included as part of a Court Order. The undertakings in question were 1) the Defendant was to maintain the sum of RMB 45,000,000 at a bank account(“the First Undertaking”) and 2) the Defendant was to provide the Plaintiff weekly reports of the status of the assets at issue(“the Second Undertaking”).
The Plaintiff applied to commit the Defendant for contempt of Court for his breach of two undertakings. At the Court of First Instance, it was held that the Defendant acted in contempt. The Defendant appealed to the Court of Appeal.
The First Undertaking
The CFI judge found that the sum in the agreed amount was not properly deposited in the account as agreed by the parties. The CFI characterized the conduct of the Defendant as “deliberate and contumacious”.
Interestingly, the Court of Appeal adopted a purposive approach and rejected the CFI’s finding that the First Undertaking was intended to be the security for the Plaintiff’s claim. Moreover, there was not any evidence of the discussion between the parties to work out an agreement for the designated account. In light of these uncertainties, the First Undertaking was too unclear to be enforceable.
The Second Undertaking
The Plaintiff applied to amend the originating summons so that further alleged breaches of the Second Undertaking were to be considered by the Judge, which was opposed by the 1st Defendant. The Judge in CFI did not make a ruling at the hearing but decided the issue in his judgment to the effect that he allowed the amendment and found that the Defendant was in contempt of all of the originally pleaded and newly alleged breaches.
The Court of Appeal considered this approach “faulted”. The court stressed that contempt proceedings were of penal nature, and hence require strict proof of guilt beyond reasonable doubt. It also entails that fairness requires the person cited for contempt to be informed at the outset of all allegations made against him. The statement in support of the application was to be treated in a similar fashion as an indictment in criminal proceedings. If the CFI approach was adopted, the Defendant would be deprived of the opportunity to defending against the additional allegations.
The court also held that the elements of contempt were not merely a strict proof of breach – but also involved a question of guilty intention on the part of the Defendant. The court then leniently held that the Defendant’s breach was an “unintentional slip”. Applying such a high threshold, the Court of Appeal held that the Defendant was not in contempt.
Implications
The implications of this case are two-fold. Firstly, despite the undertakings being part of the court order, the purpose of the undertaking (and the language of the undertaking) must be clear and certain enough in order to be enforceable. Secondly, a breach of a Court undertaking does not automatically translate to contempt of Court. The Court will have to be satisfied that the Defendant acted with the guilty intention as well.