England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		18th February 2004

Mr. Justice Moore-Bick :


 


1. Background

1. This matter comes before the court by way of an application by the claimant, Nokia France S.A. ("Nokia") for an order committing the eighth defendant, Mr. Jin Yan, to prison for contempt of court.
2. The action arises out of a sale by Nokia to a company called Cybertech Distribution S.A. ("Cybertech") of a large number of mobile telephones under a contract containing a retention of title clause. Cybertech sold 57,000 of the telephones to a company called Ibericatel 38 SL ("Ibericatel"), also on terms which included a retention of title clause, and released the telephones to Ibericatel against an assurance that payment would be made within a few days. In the event, however, payment was not forthcoming and Cybertech in turn failed to pay Nokia. There are grounds for thinking that those behind Ibericatel had no intention of paying for the goods and that the company may have been incorporated for the purpose of carrying out a fraud of this very kind. The telephones themselves appear to have been sold to various buyers, mainly in England. Cybertech has gone into administration and Nokia is now seeking to recover the telephones themselves or (insofar as they may be irrecoverable) any proceeds of sale, relying on its retention of title.
3. Investigations carried out by Nokia's solicitors in London suggested that over 20,000 of the telephones were sold and delivered to the first defendant, Interstone Trading Ltd ("Interstone"), which shortly afterwards made a number of bank transfers totalling a little under £4 million to the bank account in Hong Kong of a company called Global Finance Enterprises Ltd, presumably by way of payment. Mr. Yan is a director of Interstone and the effective principal behind the company. An elaborate tracing exercise carried out by Nokia's solicitors suggested that a large part of the funds transferred by Interstone to Global Finance Enterprises Ltd found their way back to Interstone by way of bank accounts held by other companies in which Mr. Yan is interested or to which he has connections.
4. On the basis of this and other evidence on 12^th November 2003 Morison J. granted a worldwide freezing injunction and search orders against both Interstone and Mr. Yan. The freezing injunction included a paragraph requiring each respondent immediately to inform Nokia's solicitors to the best of his ability of all his assets worldwide and also to provide them with certain information about the number of telephones purchased by Interstone, the amount paid for them and the location of any traceable proceeds. In the case of Mr. Yan the search order related to a house known as 2 Gideon Mews and to any vehicles under his control on or around the premises. In the case of Interstone the search order related to the company's offices at Suite 509, Crown House, London NW10 and to vehicles under its control. In each case the order permitted seizure of various documents and records that were believed to be related to the disposal of the telephones and their proceeds of sale.
5. On 13^th November 2003 Mr. Schindler of Clyde & Co, Nokia's solicitors, together with a Chinese speaking trainee and one of the two supervising solicitors, Miss Margaret Briffa, went to Gideon Mews with a view to serving the freezing injunction and search order on Mr. Yan and conducting a search. As they entered the premises they saw a Mercedes-Benz motor car, registration number 33B, driven by an oriental lady approaching the security gate as if to leave. Mr. Yan was sitting in the car in the course of opening post when Miss Briffa approached him to serve the orders. She explained why she was there and then she and Mr. Yan went into the house to enable her to explain their effect in more detail. At some point the car was driven away. After the orders had been explained to Mr. Yan Mr. Schindler and his team came into the house and the search began. While they were at the house Mr. Schindler asked Mr. Yan various questions with a view to obtaining the information required by the orders.
6. After they had finished at Gideon Mews Miss Briffa and Mr. Yan went to Interstone's offices. The other supervising solicitor, Mr. Ralph Wehrle, had arrived before any of the staff and so was there when the offices were opened. He was eventually able to serve the orders on the managing director, Mr. Noel Dingwall, when he arrived shortly after 10 o'clock. Mr. Dingwall telephoned a solicitor, Mr. Kleinfeld, for advice. Miss Briffa and Mr. Yan reached Interstone's offices at about 11.20 a.m. and Mr. Kleinfeld arrived a few minutes later. Mr. Yan, Mr. Dingwall and Mr. Kleinfeld then spent some time together in discussions. Mr. Schindler arrived at the offices just before 2.00 p.m. The search of the offices began soon afterwards and continued until about 6.30 p.m.
7. On 19^th November 2003 Mr. Yan provided on behalf of himself and Interstone pursuant to paragraph 9 of the freezing injunction a document described as his "First Declaration". The matter came back before the court on 21^st November, but because Clyde & Co had already expressed dissatisfaction with the First Declaration it was agreed that Mr. Yan would provide further and better information in the form of an affirmation and that the orders should continue in the meantime. A document described as his "Second Affirmation" was served on 28^th November. However, Clyde & Co still did not think that Mr. Yan had given them a complete statement of his assets or that he had complied in all respects with the requirements of the orders and therefore on 19^th December 2003 they issued this application to commit him for contempt.

2. The Application

8. The application notice alleges nine separate breaches of the orders made on 12^th November and in some cases the particulars of the breach are extensive. Broadly speaking, however, they can be grouped under five heads: failing to provide to the best of his ability on 13^th November the information required by the orders in response to questions put to him by Mr. Schindler; shredding relevant documents and attempting to hide others during the search of Interstone's offices; failing to give full information about his assets and the Ibericatel transaction in his formal disclosure; transferring funds in breach of the order; and failing to disclose documents referred to in the search order. Taken as a whole, Nokia's complaint is that Mr. Yan continually prevaricated, was evasive and tried to suppress information until he realised that Nokia had already obtained it from other sources, or was about to do so.
9. Before turning to the various allegations made against him, however, it is necessary to say something about Mr. Yan himself in order to set them in context. Mr. Yan is Chinese by origin but has recently acquired British nationality. He has a reasonably good command of English, although it is not his first language, and appears to have little difficulty in using it in the conduct of his business affairs. He has extensive business interests, mainly in the Far East, but also in other parts of the world. These include an interest in a factory development in Cambodia, an interest in a property development project in China, currency trading in Hong Kong and various activities in the mobile communications market. He controls or has interests in a number of different companies which he uses as vehicles for his business operations.

(i) Failing to provide information on 13^th November

10. Paragraph 9(1) of the freezing injunction provided as follows:

". . . . . . . . the Respondent must immediately and to the best of his ability inform the applicant's solicitors of all his assets worldwide . . . . . . . ."

It was common ground, therefore, that on 13^th November Mr. Yan was obliged to provide the best information he could about his assets anywhere in the world in response to questions put to him by Mr. Schindler. One of the main complaints against him is that he failed to do so.

(a) U.K. Bank accounts

11. After Miss Briffa had served the freezing and search orders on Mr. Yan Mr. Schindler began to ask him questions about his assets. He did not volunteer information and it was necessary for Mr. Schindler to ask him about assets of different kinds. When he was asked whether he had any bank or building society accounts Mr. Yan mentioned his personal accounts with HSBC and Abbey National in Ealing, but he did not mention two other accounts he held in London, one with the Bank of China and one with the Bank of East Asia. When he did later disclose them he said that both of these accounts had been opened about ten years ago and had not been used for a long time. He said he did not know what the balance was on either of them and in fact the amounts were not substantial, totalling a little over £3,000.
12. I think it is understandable that in the unusual circumstances which existed on 13^th November Mr. Yan might have forgotten about two bank accounts neither of which seems to have had any particular relevance to Mr. Schindler's enquiries. Although his failure to disclose these accounts did involve a breach of the order, it did not represent a deliberate attempt to suppress information and I do not attach great importance to it.

(b) Foreign assets

13. More importantly, however, when he was first asked by Mr. Schindler whether he had assets abroad Mr. Yan failed to mention any of the accounts in Hong Kong which he has since disclosed. He also stated that he had no other savings or investment accounts. In response to the question whether he held shares in any companies other than Interstone, either in this country or abroad, Mr. Yan said that he did not.
14. It is now clear that these answers were untrue and that Mr. Yan held a variety of foreign assets. He had 20 bank accounts altogether in Hong Kong. These comprised an account with the Bank of China, 11 accounts with Standard Chartered Bank ("SCB") (one of which, the Dresdner Dit-Energiefonds account was an investment account rather than an ordinary current account), and 8 accounts with Citibank, three of which were very substantially in credit. He also held, directly or indirectly, an interest in two Chinese companies, Zhong Fang Tianxing Real Estate Development Co. Ltd. ("Zhongfang Tianxing") and Beijing Guotai Chang'an Guarantee Co. Ltd ("Beijing Guotai"), shares in a Cambodian company, (Cambodia) Jin Yan Developing and Investment Consultant Ltd, and had interests of one kind or another in other companies identified in schedule B to the search order. When he was originally asked about his assets abroad Mr. Yan denied having interests in any foreign companies, but he did eventually admit to his links to some of those companies referred to in schedule B when the schedule itself was put before him for comment.
15. Mr. Yan's explanation for having failed to mention any of these assets when first questioned by Mr. Schindler was that he was upset and bewildered by what was going on and as a result was not thinking straight. His relationship with his wife, Miss Wu, had been deteriorating and he had arrived back in this country on 9^th November to find that she had moved out of their house at 2 Gideon Mews taking all the furniture with her. She had disposed of his personal possessions, including all his papers, leaving the house virtually empty and uninhabitable and had gone to stay with her mother at another address, 14A Montpelier Road, taking their two children with her.
16. Mr. Yan said that on the morning of 13^th November Miss Wu had driven him to Gideon Mews to collect the post. They had had a bitter argument and he was upset as a result. When he was confronted by a number of strangers who insisted on searching the house and asking him questions about his personal and business affairs he became confused and flustered. He suggested that Mr. Schindler had acted in an aggressive and confrontational manner which he had found intimidating. During the period they were at Gideon Mews he had not received any legal advice and found the whole thing rather bewildering.
17. I can well understand that Mr. Yan may have found the experience of being served with freezing and search orders, having his house searched and being asked all sorts of questions about his affairs bewildering and irritating and I accept that a recent argument with his wife had left him feeling disconcerted. Nonetheless, I am unable to accept that he did not understand the general effect of the orders which were explained to him both by Miss Briffa and later by Mr. Schindler. Moreover, I should make it quite clear that I do not accept that any of the solicitors involved acted otherwise than in a proper and professional manner, either when they attended at Gideon Mews or later at Interstone's offices.
18. Despite the unusual nature of the situation in which he found himself, and even in the absence of any relevant documents, I am unable to accept that Mr. Yan completely overlooked the existence of all these assets outside the jurisdiction. The explanations he had been given of the nature and effect of the freezing order, not to mention the questions asked by Mr. Schindler, must have made it clear that he was required to provide information about his assets abroad as well as his assets in this country. Although I can accept that without access to paperwork or computer records he might have been unable to say with confidence exactly how many bank accounts he maintained in Hong Kong, I find it impossible to believe that he could have overlooked their existence altogether. Similarly, although he might have been unable to provide full details of all his business interests abroad, I find it impossible to accept that he provided as much information as was available to him from memory. In my view Mr. Yan is an astute person who was quite capable of weighing up the situation facing him. I am satisfied, applying the higher standard of proof appropriate to an allegation of contempt, that he decided not to say anything about these assets in the hope that Nokia would not discover them. This may have been a decision taken on the spur of the moment and was certainly taken before he had received legal advice, but it was nonetheless a deliberate failure to comply with the court's order.

(c) Motor cars

19. While they were at Gideon Mews Mr. Schindler asked Mr. Yan about his cars. He specifically asked him whether he owned a Chrysler Voyager, registration number J1 NYA, which was one of the assets identified in the freezing injunction. Mr. Yan prevaricated. He said that he might have sold it to a friend and did not know where it was. When he gave evidence he explained that he and Miss Wu had discussed disposing of the car and that he was not sure at the time whether she had sold it while he was away on business. That was simply untrue. I accept that Mr. Yan and Miss Wu had discussed selling the vehicle, but nothing had been done about it while he was away and at the time he was questioned by Mr. Schindler he was still using it for his own purposes. Indeed, Miss Wu confirmed that she had been intending to drive him back to Montpelier Road to collect it when Mr. Schindler and his team arrived at Gideon Mews. Later the same day, however, Mr. Yan admitted to Mr. Schindler that the vehicle belonged to him and that he used it each day to travel to and from work, so his initial denial was of very limited effect in relation to the disclosure of his assets. It was of potentially greater significance in relation to the seizure of documents because the search order extended to Mr. Yan's cars and Mr. Schindler wanted to search them before there was an opportunity to remove any relevant papers. However, there is no evidence that any documents were improperly removed from the vehicle.
20. Mr. Schindler also asked Mr. Yan whether he owned the Mercedes-Benz motor car in which he had arrived at Gideon Mews that morning. Mr Yan told him that it was a company car. That was correct so far as it went, but he did not say which company owned it. It was in fact owned by Interstone and, as a director of that company, Mr. Yan ought to have made that clear to Mr. Schindler. However, it is not clear that at that stage Mr. Yan's attention was really drawn to the need to provide information about Interstone's assets as opposed to his own, and I am prepared to accept that his mind was directed simply to the question whether the car belonged to him or not. I accept, therefore, that any breach of the order in this respect was inadvertent.

(d) 14A Montpelier Road

21. Mr. Schindler also questioned Mr. Yan about property he owned. He admitted that he owned 2 Gideon Mews and a house in Greenwich which was let, but that was all. He said nothing about the house at 14A Montpelier Road where Miss Wu and his children were then living, although Mr. Stuart-Smith submitted that he was in fact the beneficial owner.
22. 14A Montpelier Road became something of a bone of contention between the parties. It has now been established that the registered owner is a company by the name of Pineview Consultancy Ltd incorporated in the British Virgin Islands. However, Mr. Yan had made two planning applications in respect of the property in his own name, giving it as his own address for those purposes, and had been responsible for putting in hand a substantial amount of refurbishment. The agent he used for the planning applications said, when asked, that he thought Mr. Yan owned the house. Moreover, Miss Wu confirmed that it had been the couple's intention to move there with their children from Gideon Mews when the refurbishment had been completed. All this suggests that Mr. Yan had an interest of some kind in the property. However, he said in evidence that the house belonged to his parents-in-law and that he had merely helped them in obtaining the planning consents. That part of his evidence was supported by Miss Wu who said that her father had told her that he was the owner of Pineview Consultancy. Miss Wu said that her mother currently resides at 14A Montpelier Road and that her father is in Beijing doing research for a book. None of her evidence on this point was challenged and in the light of the evidence as a whole I cannot be satisfied that Mr. Yan does have an interest in the property. The fact is that there is no evidence of the identity of the shareholders in Pineview Consultancy, other than what Miss Wu told me, and there is no other evidence that Mr. Yan acquired an interest in the property by other means. He cannot therefore be held to have disobeyed the order by failing to mention 14A Montpelier Road to Mr. Schindler when asked about his interests in property.

(e) Place of residence

23. Having discovered that 2 Gideon Mews, where Mr. Yan said he was living, was empty of furniture, Nokia made a further application to Morison J. for an order that he immediately inform their solicitors in writing of each of his places of residence in this country. The purpose of the order was to enable searches to be made of all the places where Mr. Yan might be holding documents that had a bearing on the Ibericatel transaction and the disposal of the proceeds of sale of the telephones. An order was made later the same day.
24. When asked by Mr. Schindler where he was living Mr. Yan made no mention of 14A Montpelier Road, but Mr. Stuart-Smith submitted that it was one of his places of residence and ought to have been disclosed.
25. Mr. Yan returned from his travels to find 2 Gideon Mews empty and for practical purposes uninhabitable. He said that he had spent two nights at 14A Montpelier Road and had then gone to stay at a flat belonging to a friend. He did not say exactly how long that arrangement lasted, but he said that he later returned to 2 Gideon Mews which remains his home. He admitted that he regularly visited his wife and children at 14A Montpelier Road and that he sometimes stayed overnight, perhaps even for two nights, but that was all. His account was borne out by Miss Wu, whose evidence again was not challenged.
26. In the light of this evidence I am unable to accept that 14A Montpelier Road was a place of residence as far as Mr. Yan was concerned on 13^th November, or indeed at any material time after that. If during that period someone had asked him where he lived, he might have referred to 2 Gideon Mews as his normal home and his friend's flat as his temporary home, but I do not think he would have said that he lived at 14A Montpelier Road. If one accepts Miss Wu's evidence, as I do, she moved there to avoid living with him any longer. No doubt regular visits to see the children were tolerated, but they were neither so frequent nor so prolonged as to make that house one of his places of residence.

(f) Interstone Trading Incentives Ltd

27. In June 2003 on the advice of a firm of tax advisers, MGI Wenham Major, Mr. Yan implemented a scheme to provide tax efficient remuneration and incentive benefits for the staff of Interstone. Under that scheme a company called Interstone Trading Incentives Ltd was formed, 1,900 preference shares in which were held by Gerrard Nominees (Jersey) Ltd to the order of Mr. Yan. The funds needed to set up this scheme had originally come from Interstone. At the end of September 2003 a dividend of £1,425,000 became payable in respect of those shares. Mr. Yan gave directions for £1,347,793.75 to be paid to one of his accounts in Hong Kong and the balance to the advisers. A further dividend of £380,000 became payable on 31^st December 2003.
28. Mr. Yan did not disclose the existence of these assets on 13^th November, or indeed at any time prior to 29^th January 2004, by which time Clyde & Co. had already discovered their existence. He said that those shares did not represent his assets because he held them as trustee for Interstone, but no documents evidencing any such arrangement have been identified. Mr. Yan said in evidence that the scheme had been cancelled in October 2003 and that the funds were due to be returned to the company for that reason alone, but that is not what the documents disclose and I am unable to accept his evidence in this respect. The dividend had been paid in accordance with Mr. Yan's instructions only a short time before Mr. Schindler asked him about his assets and the assets of Interstone. Again, I find it impossible to accept that he thought that they did not need to be disclosed since, whichever view of the evidence one takes, either he or Interstone were entitled to receive the funds in question. The existence of these shares ought therefore to have been disclosed at the outset.

(g) Company pension scheme

29. Mr. Yan was also a beneficiary of a company pension scheme operated by Interstone. The size of his interest is not substantial and he says he overlooked it. Although the failure to disclose it did involve a further breach of the order, I do not think that it was very serious or adds much to the breaches already established.

(h) The Ibericatel transaction

30. Paragraph 9(2) of the freezing injunction required Mr. Yan to inform Nokia's solicitors immediately and to the best of his ability of the number of telephones that had been bought by Interstone, the total amount paid for them, the whereabouts of the traceable proceeds, including full details of bank accounts into which such sums were paid, and the whereabouts of the traceable proceeds of any sums received by Interstone from the sale of the telephones.
31. Mr. Stuart-Smith submitted that when Mr. Schindler asked him about the Ibericatel transaction on 13^th November Mr. Yan was entirely vague, playing down his own involvement and said that he was not aware of the details. When Mr. Schindler drew his attention to the involvement of Global Finance Enterprises Ltd he admitted that Interstone had paid the price of the telephones to that company, but said that he did not know where the money had gone after that. However, in his Second Affirmation made on 28^th November Mr. Yan said that Global Finance Enterprises Ltd belonged to a man he knew only as 'Tony' with whom he had previously done a lot of business involving Nokia telephones and that it was Tony who had introduced the Ibericatel transaction to him. Moreover, he also disclosed that in May 2003 Tony had lent him £3 million which had been made available through the accounts of two companies, 108 Investments Ltd in which Mr. Yan held an interest, and E-Global Trading Ltd on whose account he was a signatory.
32. Mr. Stuart-Smith submitted that all this information was of great importance to anyone seeking to find out where the proceeds of the Ibericatel transaction had gone and that Mr. Yan ought to have given it to Mr. Schindler on 13^th November when he was first asked about the matter. I quite accept that Nokia might have been assisted in its enquiries by knowing that the money due to Ibericatel had been paid away to a company under the control of Tony, but it is important to bear in mind that Mr. Yan's obligation to provide information about the Ibericatel transaction was defined by the terms of the order itself. Paragraph 9(2) did not oblige him to provide information about the general background to it or to identify other persons involved in it. He ought to have volunteered the information that the price was paid to Global Finance Enterprises Ltd, but he was not obliged to provide the other information which it is now said he improperly withheld.

(ii) Concealing and destroying relevant documents

33. The offices of Interstone are quite small, comprising a general outer office at one end of which there is a pair of rooms separated from the general office by clear glass partitions. One of these doubles as a meeting room and document storage room; the other forms a small private office containing two desks. Each room has a door which opens into the general office; they are separated from each other by a solid partition.
34. Having arrived at the offices before they were open, Mr. Wehrle was eventually allowed to wait in the meeting room until someone arrived on whom the orders could be served. As soon as the managing director, Mr. Noel Dingwall, arrived Mr. Wehrle served the orders and explained their effect to him. Mr. Dingwall indicated that he wanted legal advice and spoke to a solicitor, Mr. Kleinfeld. At about 11.20 a.m. Miss Briffa and Mr. Yan arrived having come direct from Gideon Mews. When Mr. Kleinfeld arrived a few minutes later, he, Mr. Yan and Mr. Dingwall went into the meeting room while Miss Briffa and Mr. Wehrle waited in the outer office. After about 25 minutes Mr. Yan and Mr. Dingwall went from the meeting room into the private office where they sat at desks and began to collect papers. The door to the office was left open. After a few minutes Mr. Dingwall returned to the meeting room and a moment later Miss Briffa and Mr. Wehrle heard the sound of a shredder. Mr. Wehrle went quickly to the office and asked Mr. Yan if he was using the shredder; he said he was not. Mr. Wehrle backed out of the office and explained the position to Mr. Kleinfeld, who was still in the meeting room. Mr. Kleinfeld went into the office and asked Mr. Yan if he had shredded any documents. Again Mr. Yan said he had not. Mr. Kleinfeld told him that he was not to shred any documents and returned to the meeting room.
35. Soon after 12.30 p.m. the conference between Mr. Yan, Mr. Dingwall and Mr. Kleinfeld came to an end. Miss Briffa went to the meeting room and began to discuss documents with Mr. Kleinfeld. As a result of a question that arose in relation to the claim form Miss Briffa opened an envelope from Clyde & Co. that she had handed to Mr. Yan earlier that day and noticed that among the papers were two documents that did not relate directly to the proceedings. One was in English and was addressed to a director of (Cambodia) Jin Yan Developing and Investment Consultant Ltd; the other was a manuscript document written in Chinese on headed paper. Later that afternoon when Mr. Schindler asked Mr. Yan about the papers he admitted that he was a director of the Cambodian company, but he denied that the Chinese document had anything to do with him. Mr. Schindler's assistant pointed out that the document bore his name, but he denied it. It was agreed that Miss Briffa should look after these documents for the time being. When Mr. Schindler left he was allowed to take away with him waste from the shredder.
36. The material that had been taken from the top of the pile of waste in the shredder was sent for expert reconstruction. It was found to contain a document of several pages written in Chinese, partly typescript and partly manuscript, in which the characters representing "Zhong", "Fang" and "Jin" occurred a number of times. The character for "Zhong" exactly matched the character used by Zhongfang Tianxing in its headed paper. There were indications that the document had contained an agreement of some kind.
37. Mr. Yan admitted that he had shredded a document, as Mr. Wehrle and Miss Briffa had thought, but said that he was just going through the usual routine of shredding unwanted papers while he was waiting for documents to be found. I am unable to accept that. This incident occurred part way though Mr. Yan's meeting with Mr. Kleinfeld and before Mr. Schindler and his team had come into the office to start executing the search order. There was no reason why Mr. Yan and Mr. Dingwall should have broken off their meeting with Mr. Kleinfeld other than to look in their office for additional documents that might be relevant to the order. It was not a time for idly shredding unwanted material.
38. The difficulty of accurately identifying the Chinese characters, added to the inherent difficulty of piecing the document together, places severe limits on the information that can safely be derived from this material. Nonetheless, the exercise was not altogether wasted. In the first place, since the document contained both typed and manuscript characters it is unlikely to have been of no business value, and in any event I am satisfied that it related to Zhongfang Tianxing. Moreover, the fact that Mr. Yan denied using the shredder, not once but twice, suggests that he knew he had done something wrong. He said that he had lied on the spur of the moment out of embarrassment, and I recognise that that does sometimes happen, but it is difficult to see what Mr. Yan had to be embarrassed about if he thought he had acted perfectly properly. Moreover, he has not at any stage explained what the document was and why it was unwanted. Mr. Walker Q.C. forcefully made the point that Mr. Yan knew that Miss Briffa and Mr. Wehrle were keeping an eye on him from the outer office and must have realised that they would hear the shredder. Perhaps so, but that still does not explain why he was embarrassed at having done what by his account was a perfectly innocuous act or why he did not say what the document was.
39. The document in Chinese found by Miss Briffa in Clyde & Co.'s envelope turned out to be a fax consisting of four pages of manuscript on the headed paper of Zhongfang Tianxing. It was addressed to "Brother Jin" and contained a report on the company's activities. The other document was a letter from the Kingdom of Cambodia relating to an application to invest in a cigarette factory in Phnom Penh. Mr. Yan said that he did not know how either of those documents had found its way into the envelope, but he assumed that he had swept them up inadvertently with other papers from the table in the meeting room.
40. Although the meeting room doubled as a document storage room, I do not accept any implicit suggestion that it was generally untidy or that documents were left lying on the table. On the contrary, both supervising solicitors said that it was tidy and Mr. Wehrle said that the table was bare when he arrived earlier that morning. Even if some papers had been lying on the table when Mr. Kleinfeld arrived, it is likely that they would have been tidied up when the meeting with him began. The overwhelming likelihood in my view is that Mr. Yan himself got the documents out some time during the morning and that he was therefore conscious of their existence.
41. It is quite possible, of course, to sweep up a loose document inadvertently with other papers, but if that is what had happened, there would have been no reason for Mr. Yan to deny that the documents related to him or that his name appeared in the one written in Chinese. He said that he had lied out of irritation and tiredness. Mr. Schindler asked him about these two documents at the end of the day when the search was coming to a close and I am sure that it had been a very long and tiring day for Mr. Yan. However, I do not think that is sufficient to explain his reaction. The shredding incident suggests that he did not want to allow Mr. Schindler to take away documents relating to Zhongfang Tianxing and the fact that he lied about the document in the envelope suggests that he had indeed been trying to conceal it and did not want to be caught out. I am quite sure that he did seek to prevent both documents falling into the hands of Clyde & Co. by shredding one and seeking to hide the other. These are serious contempts. Not only were they deliberate; the whole purpose of his actions was to frustrate the order as far as these particular documents were concerned.

(iii) Mr. Yan's formal disclosure

42. Paragraph 10 of the freezing injunction directed Mr. Yan to provide an affidavit confirming the information required of him under paragraph 9 within 3 working days of service of the order. The intervention of the week-end meant that the affidavit should have been served by the end of the day on 18^th November. In the event Mr. Yan's First Declaration was served on 19^th November, but no point was taken about the brief delay.
43. Mr. Stuart-Smith submitted that this declaration was seriously defective in a number of respects, despite the fact that Mr. Yan had by then had time to collect his thoughts and take legal advice. In view of what I have said already it is unnecessary to deal any further with the ownership of 14A Montpelier Road, Mr. Yan's place of residence, the ownership of the vehicles or the background to the Ibericatel transaction. Furthermore, since in that document Mr. Yan disclosed his interest in 108 Investments Ltd, it is unnecessary to deal any further with the companies identified in schedule B to the search order. However, it is necessary to consider how he dealt in that document with his other assets, particularly his assets abroad.

(a) Bank accounts

44. It is common ground that Mr. Yan failed to provide full information in relation to the personal bank accounts in this country that he did disclose. He said that he was concentrating on more significant matters and, although it does represent another breach of the order, I accept that it was a minor one in the context of the matter as a whole.
45. However, the deficiencies of the declaration in relation to his bank accounts abroad were much more significant. Mr. Yan disclosed the existence of a single account with SCB in Hong Kong which he described as a trading account in which he held funds belonging to several people as well as himself. He did not mention the Dresdner Dit-Energiefonds investment account or the fact that he held 11 separate accounts at the bank. He disclosed a single account with Citibank in Hong Kong whereas in fact he held 8 accounts there. He did not seek to suggest that he was not aware of the existence of these accounts when he made his declaration, but he said that he was advised by the solicitors acting for him at the time that the information he gave in that declaration was sufficient. It plainly was not, and it seems to me that there are only two possibilities: either he failed to give his solicitors all the information available to him or they wrongly advised him that he need not give detailed disclosure.
46. When Mr. Yan made his second affirmation he said no more about his accounts in Hong Kong. Instead, most of the document was devoted to the background to the Ibericatel transaction and his dealings with Tony. By that time he was receiving advice from a new firm of solicitors, but apparently neither he nor they saw any need to enlarge upon the information given in his first declaration. The fact that Mr. Yan has given much more detailed information in his third affirmation is mainly due to the fact that Nokia has issued this application supported by Mr. Schindler's affidavit pointing out the serious deficiencies in the earlier documents. I am surprised that any competent firm of solicitors should have thought that satisfactory to give such limited information in response to paragraph 9(1) of the freezing injunction, but I cannot be sure that Mr. Yan withheld the relevant information from them or that his failure to give proper disclosure was deliberate.

(b) Interstone Trading Incentives Ltd

47. Mr. Yan said nothing in his first declaration about the shares he held in Interstone Trading Incentives Ltd. He ought to have disclosed their existence and the fact that he was entitled to receive further sums from the company at the end of December 2003. Since Mr. Yan was in receipt of legal advice at the time he made his declaration one might infer that he simply did not mention the existence of this asset to those who were then acting for him. It is possible that he told them that these were assets held in trust, but if that were the case the shares ought to have been disclosed as an asset of Interstone on whose behalf, as well as his own, the declaration was served. The same would apply if the money was to be repaid as a return of capital. As a director of the company Mr. Yan was under a duty to ensure as far as he could that it also complied with its obligations under the freezing injunction. Accordingly, Mr. Yan was in breach of the order in this respect.

(c) Shares in Zhongfang Tianxing and Beijing Guotai

48. Neither of these were mentioned in Mr. Yan's first declaration and in view of his efforts on 13^th November to withhold documents relating to Zhongfang Tianxing from Clyde & Co., he can hardly have overlooked the existence of these two companies, even without the benefit of the papers that Miss Briffa had taken with her for safe keeping. He did disclose (Cambodia) Jin Yan Development and Consulting Ltd (of whose existence Mr. Schindler was already aware), but minimal details were given. I could have understood a failure on the part of Mr. Yan to give full and precise details of his interests in Zhongfang Tianxing and Beijing Guotai, but the complete omission of any reference to them must have been deliberate.
49. Any doubt about that was laid to rest by Mr. Yan himself, however. In his amended third affirmation made on 3^rd February and in his evidence before me he said that his interests in these two companies were liabilities, not assets, and that he had been advised that he need not disclose them. I can only wonder what information Mr. Yan gave to those advising him. The reason he gave for treating these as liabilities was that substantial payments had to be made to enable the development project to come to fruition, but he accepted that it was one which was expected to be profitable in the long run, as one would expect. It may well be that the present value of the shareholdings is small, but no evidence has been put forward that would justify treating them as liabilities for the purposes of an order of this kind. Accordingly, I am satisfied that there was a further breach of the order by Mr. Yan in failing to disclose his shares in these two companies.

(d) The company pension scheme

50. It is more difficult to understand how this could have been overlooked by the time of drafting the affirmation, but it is not the most important asset to have slipped through the net.
51. In the circumstances I am satisfied that the formal disclosure given by Mr. Yan was seriously defective as a result of a deliberate failure on his part to identify all his foreign assets.

(iv) Transfers of funds after 12^th November

52. Between 14^th and 19^th November 2003 four transfers were made on Mr. Yan's instructions from accounts at SCB to various recipients. On 14^th November two payments were made to a Ms Mei Ling Huang on behalf of a Mr. Wang, one of HK$2,560,000 and one of HK$6 million. The latter is said to have been made by mistake and to have been reversed. A payment of HK$6 million was made, also on 14^th November, to Beijing JetMedia Advertisement Co. Ltd and a payment of £620,000 was made on 18^th November 2003 to Mobile Phone Centre, Dubai. Mr. Yan said that all these payments had been made in the ordinary course of his business and were therefore permitted under the terms of the freezing injunction.
53. Mr. Yan produced various documents evidencing these payments and tending to show that they related to ordinary business transactions, but Mr. Stuart-Smith challenged that conclusion. He recognised that in the face of the material before me I could not be sure that the payments did contravene the terms of the order, but he submitted that the burden was on Mr. Yan to satisfy me, on the balance of probabilities, that they fell within the scope of the exception and that he had failed to do so. This raises a question of the construction of the order itself.
54. The terms of the order in the present case follow the standard form for a worldwide freezing injunction to be found in Appendix 5 to the Admiralty & Commercial Courts Guide. Paragraph 5 prohibits the respondent from dealing with or disposing of his assets up to the stated value; the effect of the order is further clarified by paragraphs 6 and 8. Paragraph 11(2), however, states that the order does not prohibit the respondent from dealing with or disposing of his assets in the ordinary and proper course of business. Despite the fact that this comes under the heading "Exceptions to this Order", I do not think that the respondent bears the burden of proving that a payment which is said to have been made in contravention of the order was in fact made in the ordinary course of business. Paragraph 11(2) is worded in unqualified terms and makes it clear that payments in the ordinary course of business fall outside the terms of the order altogether. In my view a person should not be held in contempt of court unless the case against him is properly established. If the applicant alleges that the respondent is in breach of the order in a way that renders him liable to punishment by imprisonment, it is for him to establish that breach in every essential respect. It does not follow, however, that the respondent can sit back and do nothing. Once the applicant has put before the court credible evidence that a payment was not made in the ordinary course of business the court may well be willing to make a finding to that effect against the respondent if he has failed to put forward any justification supported, where appropriate, by appropriate evidence.
55. However, even if I am wrong about that, I am satisfied that the payments made by Mr. Yan in the present case were made in the ordinary course of business. Mr. Yan explained the purposes for which they had been made and produced documents supporting his account. Among them were the instructions sent to SCB requesting it to make the transfers. Two of those instructions bear the date 10^th November and if they were written on those dates they provide further support for Mr. Yan's case. The third instruction bears the date 18^th November.
56. In his amended third affirmation Mr. Yan said that he had "prepared the authority" for each of the payments on the date shown in the instructions to the bank. That is consistent with the documents themselves and with the dates on which the bank carried out the transactions. However, in cross-examination he said that when he used the expression "preparing the "authority" for a payment he was referring to the conclusion of the underlying transaction pursuant to which it was made. He said he had backdated the instructions to the bank to enable him to provide evidence to the payees that the transfers had been put in hand some days earlier.
57. There was nothing else to support that explanation of the documents and I am satisfied that it was false. I can see that in some circumstances he might have wished to mollify a pressing creditor by sending him evidence that instructions had been given to the bank a few days earlier, but there is no evidence that a copy of the relevant instruction was sent to any of the payees. Moreover, each of the instructions was implemented within a few days of the date it bears (in one case the next day), so it could not have been suggested that the bank was to blame for excessive delay in implementing it. The payment instructions were put to Mr. Yan in cross-examination to show that he was well aware of the existence of the account at SCB when he failed to disclose it to Mr. Schindler on 13^th November. I think he said the first thing that came into his head in an attempt to deflect the point, not appreciating that the dates on the instructions would assist him in establishing that the payments were made in the ordinary course of business. The fact that he did so, of course, says nothing for his credibility generally.

(v) Failure to disclose scheduled items

58. Finally, Mr. Stuart-Smith submitted that, in view of the very limited number of documents that Mr. Yan has so far disclosed, he must still be in breach of the search order in failing to hand over documents falling within schedule B.
59. It is necessary to begin by considering the search order itself. Paragraph 6 ordered Mr. Yan to permit the search party to enter 2 Gideon Mews (and any other premises belonging to him disclosed under paragraph 18) in order to search for the items listed in schedule B. Paragraph 18 ordered him to inform Nokia's solicitors where all the listed items were and by paragraph 16 he was ordered to hand over to them immediately any of the listed items in his possession or under his control. The listed items included documents referring to various named companies and individuals, including Ibericatel, 108 Investments Ltd and Global Finance Enterprises Ltd, as well as all bank statements for the period from 1^st April 2003 to the date of the order and all documents referring to any company of which Mr. Yan was a director, company secretary or authorised signatory or in which he had a beneficial interest. The search order against Interstone was framed in the same terms.
60. When the search orders were executed very few documents falling within schedule B were found either at 2 Gideon Mews or at Interstone's offices or in Mr. Yan's immediate personal possession. In particular, no documents were found relating to any of his Hong Kong bank accounts and the information which is now available in relation to those accounts had to be obtained by Clyde & Co. from the bank itself. When the search party met him at Gideon Mews Mr. Yan was not carrying a wallet, bank cards or mobile telephone, so on the face of it he had none of the usual means of dealing with the requirements of daily life, let alone attending to the needs of his businesses. However, he was able to give precise instructions to SCB on 10^th and 18^th November to make the transfers to which I referred a little earlier. Mr. Stuart-Smith submitted that Mr. Yan must therefore have kept some records relating to those particular transactions, if nothing else, and that it was very likely that he maintained other basic records, either in paper or electronic form, because it would have been impossible for him to control his business affairs without them.
61. I agree that it would have been difficult for Mr. Yan to manage his business affairs without records of some kind and indeed he says himself in paragraph 13 of his amended third affirmation that without access to his records he could not reasonably have been expected to recall accurately all the details of his interests when he was questioned by Mr. Schindler on 13^th November. However I am not satisfied on the evidence currently available that he was maintaining a significant quantity of documents at some unidentified address. Miss Wu described how she had cleared everything out of the house when she decided to leave 2 Gideon Mews and in doing so had disposed of all her husband's papers and personal effects. Her evidence was not challenged and if correct would account for the absence of the kind of records that one would otherwise expect to exist. It is true that that did not prevent Mr. Yan from giving instructions to SCB on 10^th and 18^th November, but the information needed to make those transfers could easily have been provided by telephone. In the light of Miss Wu's evidence and the evidence of Mr. Yan himself I am not persuaded that he still has in his possession listed items that have not been disclosed to Nokia's solicitors.

3. Conclusions

62. It follows from what I have already said that I am satisfied that Mr. Yan failed to comply with the orders made against him in a number of respects, some of which were more serious than others, and was thereby in contempt of court. Of these, his failure to give proper disclosure of his accounts in Hong Kong and the deliberate destruction of a relevant document are of particular concern; so also, albeit to a slightly lesser extent, is his attempt to hide the documents relating to his interests in China and Cambodia. In the circumstances I consider that Nokia was well justified in making the present application, one result of which has been to lead to the production of much fuller information than had previously been provided. Mr. Stuart-Smith fairly accepted that Nokia is no longer invoking the court's jurisdiction in order to coerce Mr. Yan into providing proper information or documents and that is of itself some indication of the fact that he has, albeit reluctantly and late in the day, now substantially complied with the orders against him. There is no evidence that any funds have slipped through the net as a result of his failure to comply with the orders fully and promptly, but the fact remains that he has wilfully disobeyed the court's orders and that as a result Nokia has been put to considerable expense in obtaining from other sources and without his assistance information that would have been more quickly and more readily available if he had complied with them.