SUCCESS HOUSE INDUSTRIES LTD AND OTHERS v. LIAO CHEN TOH

HCMP 1532/2019

[2024] HKCFI 2475

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1532 OF 2019

______________________

______________________

BETWEEN

______________________

__________________

JUDGMENT

__________________

1.  By an Originating Summons filed on 20 September 2019 (“OS”), the Plaintiffs seek an Order of Committal against the Defendant for breach of §§1-2 of the Order of DHCJ Yee dated 20 April 2016 made in HCA 2302/2014 (“Order”). This is the trial of the OS.

2.  The Order was for production by the Defendant of documents belonging to the Plaintiffs. In these proceedings, it is alleged that the Defendant had failed to return to the Plaintiffs: (1) the Ningbo Share Certificates[1]; (2) the Ningbo Financial Documents; and (3) the Dongguan Share Certificates (collectively “Subject Documents”) and therefore was in breach of §§1-2 of the Order.

Issues

3.  Pursuant to the directions of the court, the agreed issues in these proceedings are :

(1) Whether the following classes of documents fall within the meaning of paragraph(s) 1 and/or 2 of the Order:

(a) The Ningbo Share Certificates;

(b) The Ningbo Financial Documents; and/or

(c) The Dongguan Share Certificates. (“Issue 1”)

(2) If the answer(s) to Issue 1 is in the affirmative, whether the Defendant had the applicable class(es) of documents in his, his servants or agents’ possession, custody, power or control at the time of the Order, ie, 20 April 2016? (“Issue 2”)

(3) What constituted the requisite state of mind for the purpose of establishing the Defendant’s contempt of court? (“Issue 3”)

(4) Whether such state of mind is established before the court? (“Issue 4”)

Background

4.  The following factual background is not in dispute or indisputable[2]. HCA 2302/2014 was underpinned by the dispute of two brothers over the business empire left behind by their deceased father (“Senior”), the Loyal Group of companies. The Plaintiffs are part of the Group. They were incorporated in Hong Kong to hold the shares in subsidiaries in the Mainland. The unchallenged evidence of the Plaintiffs’ accountant, Ms Chang Shu-Hui (“Chang”), is that these companies are “paper companies with no business operation”.

5.  Amongst the Mainland subsidiaries, the 1^st and 2^nd Plaintiffs had an interest in a company called Ningbo Xin Qiao Chemical Industrial Co Ltd (“NXQ”), and the 2^nd and 3^rd Plaintiffs had an interest in DongGuan Xin-Chang-Qiao Plastics Co Ltd (“DXCQ”). NXQ and DXCG were wholly foreign owned enterprises in the Mainland.

6.  In June 2010, Senior passed away. Before his death, Senior and the Defendant were directors of each of the Plaintiffs. Senior was the Chairman of the Loyal Group. After he passed away, the Defendant became the Chairman of the Group and was in sole control of the Plaintiffs. A power struggle for the control of the Group then erupted within the Liao family, who are from Taiwan. The Defendant was opposed by his younger brother (“LWT”) and his mother (“Madam Liao”). Eventually, LWT and Madam Liao were able to assume control of the Group in March 2015.

7.  It is alleged by LWT’s camp that after assuming control of the Group, it was discovered that the Defendant had been dissipating the assets of the Plaintiffs. Corporate resolutions were passed in March and April 2015 to remove the Defendant as a director of the Plaintiffs, remove him as a signatory to the Plaintiffs’ accounts and to require the Defendant to return all the documents and properties of the Plaintiffs.

8.  As a result of the Defendant’s refusal to comply, the Plaintiffs made an application by Summons filed on 4 August 2015 (“2015 Summons”) for a mandatory production order to compel the Defendant to do so. The Defendant’s case in opposition was that he was in fact the sole beneficial owner of all the Mainland companies as he had provided all the financial contributions, and the Plaintiffs were merely investment vehicles.

The Order

9.  By a Decision dated 20 April 2016 (“Decision”), the 2015 Summons was determined in favour of the Plaintiffs. The Order was granted against the Defendant :

“1. [The Defendant] do within 28 days from the date of this Order return all accounting documents of [the Plaintiffs] that are within his, his servants or agents’ possession, custody, power or control to [the Plaintiffs] …

2. [The Defendant] do within 28 days from the date of this Order return all confidential corporate commercial information of [the Plaintiffs], whether in hard copy, electronic form or otherwise, that are within his, his servants or agents’ possession, custody, power or control to [the Plaintiffs] … including but not limited to:-

(a) information on the global investments made by [the Plaintiffs] as of 12 June 2010 and any updates thereafter, including the investment amount, the shareholding of [the Plaintiffs] in, the name of other shareholders and their respective shareholding in, and the management teams including the lists of the directors of, the invested companies, which include at least the following companies incorporated in the PRC:-

…

(4) [NXQ]

…

(10) [DXCQ]; and

…

(b) information and/or records received by [the Plaintiffs] from their global investments, which include at least the companies incorporated in the PRC as set out in paragraph 2(a) above;

(c) information on the distribution and/or allocation of share dividends and/or other returns received by [the Plaintiffs] from their global investments;

(d) the list of all transactions of [the Plaintiffs] with their affiliates (i.e. entities which directly or indirectly control, are controlled by or under common control with [the Plaintiffs]);

(e) the list of assets of [the Plaintiffs] as of 12 June 2010 and any updates thereafter, including the details of the assets and any encumbrances thereon;

…

Without being exhaustive and for the avoidance of doubt, the above information and documents include at least the following:-

…

(xii) All bankbooks and account statements of all of [the Plaintiffs’] accounts maintained with all and any banks in Hong Kong or elsewhere … as well as all documents submitted to and/or received from such banks concerning such accounts, from 12 June 2010 to the date of this Order;

…

(xvii) All documents in relation to transactions between [the Plaintiffs] and [DXCQ], Tianjin Xin-Long-Qiao Ltd, [NXQ] and Jiangyin Xin-He-Qiao Ltd …

3. [The Defendant] do within 21 days from the date of this Order remove himself, [Senior] and [the Defendant’s] agent or servant Mr. Chan Tang Chi (“CTC”) as signatories to the accounts of [the Plaintiffs] maintained with all and any banks in Hong Kong …

4. [The Defendant] do within 14 days from the date on which [the Defendant] is required to fulfil his obligations as stipulated in paragraphs 1 to 3 above respectively, whichever is later, make and file an affidavit/affirmation and serve the same on Robin Bridge & John Liu, solicitors for [the Plaintiffs], confirming that he has fully complied with the matters set out in paragraphs 1 to 3 hereinabove.

5. If [the Defendant], his servants or agents is/are no longer in possession, custody, power or control of any of the items, documents and information sought by [the Plaintiffs] in the paragraphs above, [the Defendant] do within 14 days from the date on which [the Defendant] is required to fulfil his obligations as stipulated in paragraphs 1 to 3 above respectively, whichever is later, make and file an affidavit/affirmation and serve the same on Robin Bridge & John Liu, solicitors for [the Plaintiffs], disclosing all facts within his knowledge as to the present whereabouts of such items, documents and information. …”

The Decision

10.  It is important to note that in relation to the Defendant’s obligation to return documents and information to the Plaintiffs, the learned Judge held that :

(1) It was remarkable that the Defendant did not seriously challenge the validity of the corporate resolutions (§29)[3];

(2) The starting point was that the Defendant should return to the Plaintiffs all the accounting documents and the confidential information contained in tangible forms such as documents and computer files of the Plaintiffs. The Plaintiffs were in any event the legal owner of such properties and the Defendant should have no right to retain them particularly in light of the resolutions (§50);

(3) The Defendant did not suggest and could not be heard to suggest any hardship he would suffer if he was ordered to return such matters to the Plaintiffs. The Plaintiffs of course required such properties for their operations and damages could not be an adequate remedy. Even if it was accepted that there was a triable issue as to whether they were in fact paper companies without genuine business activities, their directors should require such properties to fulfil their legal duties (§51);

(4) The Judge accepted that as a matter of principle, the Plaintiffs were entitled to the return of all their properties presently kept in the possession, custody and power of the Defendant and his agents (§53);

(5) In respect of the Defendant’s case that he was the sole provider of capital for the Mainland subsidiaries, the Judge noted that it was a “bare assertion without documentary support”.

Compliance with the Order

11.  On 14 September 2016, the Defendant purported to comply with the Order by way of his 9^th Affirmation (“D(9)”) in which the Defendant :

(1) Recited the key terms of the Order in §3;

(2) Explained in §5 how he instructed his solicitors to issue three letters to the Plaintiffs’ solicitors with appendices and documents enclosed, in compliance with the Order;

(3) Confirmed in §7 that: “apart from the information contained and documents enclosed in [his solicitors’ letters], those information/documents previously disclosed by me in this action and such documents/classes of documents to be described herein below, my servants, agents and I do not have in our possession, custody, power or control any other accounting documents or other confidential corporate commercial information of [the Plaintiffs] that are requested under paragraphs 1 and 2 of the Order”.

Alleged non-compliance of the Order

Ningbo Action

12.  Several years later, on 28 February 2019, the Defendant commenced proceedings in the Ningbo Intermediate People’s Court against NXQ, with the 1^st and 2^nd Plaintiffs joined as third parties. In those proceedings, the Defendant claimed that 81.74% of the equity interest in NXQ, which was registered under the names of the 1^st and 2^nd Plaintiffs, belonged to him. He had provided the capital contributions and the 1^st and 2^nd Plaintiff were holding the equity in the company on his behalf.

13.  In support of his claim, the Defendant filed the following documents with the Ningbo court :

(1) Share certificates of NXQ as well as Ningbo He-Qiao Chemical Industrial Co, Ltd (“NHQ”) (collectively, “Ningbo Share Certificates”). The latter was merged with NXQ in 2005 and no longer existed since then;

(2) Various bank statements, ledgers, and financial invoices relating to the 1^st and 2^nd Plaintiff (“Ningbo Financial Documents”).

Dongguan Action

14.  On 26 March 2019, the Defendant commenced another set of proceedings against DXCQ in the Dongguan Intermediate People’s Court, with the 3^rd Plaintiff joined as a third party.

15.  In this action, the Defendant claimed to own 70% of the equity of interest in DXCQ, which was held by the 3^rd Plaintiff on his behalf.

16.  In support of this action, shares certificates of DXCQ (“Dongguan Share Certificates”) were filed by the Defendant with the Dongguan court.

17.  There is no dispute that the Subject Documents were not referred to in D(9). The Plaintiffs contend that these documents fall within the scope of §§1-2 of the Order and ought to have been returned by the Defendant to them in compliance with the Order.

Applicable principles

18.  I see no real dispute between the parties on the applicable principles of law. With gratitude, I adopt with modifications the summary set out in the opening submissions of Mr Ho SC, who appeared with Mr Wou for the Defendant, as follows.

19.  The proper approach to committal for civil contempt by reason of breach of a court order is a three-stage test –

(1) Construe the relevant Court Order to ascertain its meaning and operation;

(2) Determine whether the defendant has in fact complied with the Order as so construed; and

(3) Finally, consider whether any failure to comply was accompanied by the state of mind necessary to establish punishable contempt.

See Hong Kong Civil Procedure 2024, vol 1, [52/1/16]; Kao Lee & Yip v Donald Koo Hoi Yan (2009) 12 HKCFAR 830, §21

20.  It is trite that contempt proceedings are quasi criminal in character because the liberty of the accused is at stake. An allegation of civil contempt must be proved strictly to the criminal standard of beyond reasonable doubt.

See Cheung Hing v Wong Chor Cheung, unrep, HCMP 1828/2011, 7 February 2013, §§22, 49; Alan Chung Wah Tang & Anr v Lee Siu Fong & Anr[2022] HKCFI 3683, §24.1

21.  On the other hand, the defendant has the right to remain silent and there is no burden on him to prove anything.

See HKCP 2024, [52/1/17]; Bruno Arboit v Koo Siu Ying, unrep, HCMP 2749/2012, 8 March 2016, §110

22.  In construing the Court Order, its words are to be given their ordinary and natural meaning and are to be construed in their context, including the historical context and having regard to its object.

See SDI Retail Services Ltd v The Rangers Football Club Ltd [2021] EWCA Civ 790, §44

23.  The court will not enforce an order in contempt proceedings which is ambiguous or unclear in a material respect. Any ambiguity in the Court Order will be resolved in favour of the defendant.

See Bruno Arboit v Koo Siu Ying, supra, §113

24.  In the context of contempt proceedings arising from an alleged failure to produce documents in compliance with a production order, the burden is on the plaintiff to prove, beyond reasonable doubt, that –

(1) The documents in question have been identified with sufficient clarity and specificity in the Court Order;

(2) The documents were in existence at the time of the Court Order;

(3) They were within the custody or power of the defendant at the time of the Court Order; and

(4) The defendant had nevertheless intended not to produce them.

See Alan Chung Wai Tang, supra, §25; Ip Pui Lam Arthur & Anr v Alan Chung Wah Tang & Anr, unrep, CACV 214/2016, 16 February 2017, §4.2

Witnesses

25.  Three witnesses were called at the trial. Mr Yang Cheng-Ta (“Yang”) was the only witness for the Plaintiffs. He was graduated in law. He first joined the Loyal Group in 2004 as a legal advisor. He left the Group in 2010 shortly after Senior had passed away. Yang re-joined the Group in 2013. He became a director of the Plaintiffs in 2016, and a director of NXQ and DXCQ in 2020.

26.  Whilst there is insufficient reason to doubt the credibility of Yang as a witness, he had little personal knowledge in respect of the matters relevant to these proceedings. For instance, he only learned about the reason why the Ningbo Share Certificates and Dongguan Shares Certificates were issued as a matter of second hand hearsay. The information was obtained via the financial controller of the Group from the ex-financial controller, Mr Chan Tang Chi (“Chan”). On his knowledge that the original Share Certificates were kept by the ex-financial controller, it was something he was told by Chan many years ago.

27.  In fairness, I should say that Mr Ho had set out a number of forceful reasons why Yang is not a reliable witness in paras 45 to 47 and 49 of his closing submissions based on Yang’s own evidence that he was told by Chan about the Share Certificates before about 2010 and yet he had put forward a case that the Plaintiffs did not known about the Share Certificates until they were deployed by the Defendant in the Mainland proceedings. I am prepared to give Yang the benefit of doubt that he might have forgotten about the conversation with Chan until he had to deal with this topic in response to Chang’s 2^nd affirmation dated 26 August 2024.

28.  The Defendant called two witnesses, Chang and Ms Shen Wen-Hui (“Shen”). I find them both to be candid and reliable witnesses. Chang is a qualified accountant who practises in Taipei. Chang’s firm has been providing accounting and tax advice to the Group since the end of 2009. Shen is a qualified accountant in the Mainland. She joined NHQ in December 1993. During 1993 to 2004, she was responsible for the accounting works of NHQ and NXQ. She continued to work for the Group in Ningbo after 2004 and was promoted to the position of manager of the administration department of the South China business department in 2011.

29.  In about December 2018, Chang was asked by the Defendant to provide support for Shen, who went to Taipei in January 2019 to look for documents which might support the Ningbo Action. The suggestion to do so was made by the lawyers handling the Ningbo Action (“Ningbo lawyers”). The Defendant agreed with the suggestion and asked Shen to look at the documents left behind by Senior, which had been placed in storage in Taipei. Chang had a discussion with the Defendant and Shen shortly after the Share Certificates were found by the latter. As regards Shen, apart from her evidence on the discovery of various documents, she was able to explain where some of the Subject Documents came from.

30.  I shall deal with the details of the witnesses’ evidence in the discussions on the issues below.

Issue 1

31.  In respect of the construction of the Order, it is common ground that paras 1 and 2 of the Order only covered the documents of the Plaintiff. This is clearly right in light of the terms of the Order (in particular, the use of the words “return” and “of”) and the dicta quote at paras 10(2) to (4) above.

Share Certificates

32.  I consider, firstly, whether the Share Certificates were the properties of the relevant Plaintiffs. The uncontested Mainland law expert evidence before the court is that: (a) neither NXQ nor DXCQ was a “joint stock company limited” which was qualified to issue stocks; and (b) the Ningbo Share Certificates and Dongguan Share Certificates were not lawful and valid legal documents.

33.  The expert evidence is consistent with the information of NXQ and DXCQ kept by the National Enterprise Credit Information Publicity System of the Mainland, which was publicly available. According to the Information, the shareholders of NXQ and DXCQ (including the Plaintiffs) were recorded to have made contributions to the companies in terms of cash, physical objects or “others”. There is no record of any shares owned by the shareholders.

34.  Further, the expert evidence is consistent with the evidence of Chang that the Shares Certificates were in the form normally used in Taiwan for Taiwanese companies (NXQ and DXCQ were Mainland companies). The Certificates were apparently printed in Taiwan. Chang said that upon closer examination she discovered that the Certificates were not endorsed. There was a requirement that share certificates had to be endorsed by a bank or appropriate authority to be valid.

35.  Shen’s evidence was that as far as she knew NHQ, NXQ and DXCQ had never issued any shares. She confirmed that these companies were not companies limited by shares under Mainland law. Given that Shen had been working as the accountant of NHQ and NXQ for many years and her qualification, such evidence clear deserve weight.

36.  Finally, Yang’s evidence is that the information he obtained via the financial controller of the Group was that: “the reason for the preparation of the Share Certificates was to provide a sense of security to the Japanese minority investors as it was in their business culture to possess physical share certificates. Therefore, the group developed a practice to prepare share certificates for its subsidiaries even though there may not have been any legal requirement to do so” [emphasis added]. The Information showed that both NXQ and DXCQ had Japanese shareholders.

37.  Yang went on to state his belief that the Share Certificates were printed with the requirements of Art 162 of the Taiwan Company Act in mind, “notwithstanding that they concern the shares of a company in China.” Helpfully, he produced a share certificate of a Taiwanese company related to the Plaintiffs which was in substantially similar format to that of the Ningbo Share Certificates and Dongguan Share Certificates.

38.  In light of these evidence, there is no basis to contend, let alone prove beyond all reasonable doubt, that the Ningbo Shares Certificates or the Dongguan Shares Certificates were the properties of any of the Plaintiffs. These documents cannot properly be regarded as genuine share certificates. It is, with respect, fanciful to believe that there were actually issued to the Plaintiffs by NXQ or DXCQ as if they were proper legal documents. Indeed, the evidence is that they were kept by the financial controller of the Group, Chan.

39.  As to the submission of Mr Wong SC, who appeared with Mr Lam for the Plaintiffs, that the Share Certificates reflected the contribution of the Plaintiffs in NXQ and DXCQ, it is a bare assertion not grounded on the evidence. No attempt was made to try to demonstrate how the Certificates can be correlated with the registered contributions of the Plaintiffs.

40.  The court is alive to the Defendant’s reliance on the Share Certificates in the Ningbo Action and the Dongguan Action. In both actions, he made a declaration in similar terms as follows (quoting the Ningbo declaration) :

“1. Since the funds and machinery equipment of [NXQ] (including [NHQ]) invested in the name of [the 1^st Plaintiff] were provided by the declarant i.e. [the Defendant], the physical share certificates of [NXQ] (see attachment) registered in the name of [the 1^st Plaintiff], as shown in the attachment, are legally held and possessed by the declarant [the Defendant] for his rights.

2. In summary, the physical share certificates of [NXQ], as shown in the attachment to this declaration, are held and possessed by the declarant [the Defendant] for his rights. This declaration is hereby issued to certify the above.”

41.  The Declaration is at odds with Chang’s evidence that the Defendant was very surprised when he saw the Share Certificates. Chang remembered that the Defendant said he heard that his father had printed share certificates for the benefit of the Japanese. It is possible that the Defendant had wrongly tried to take advantage of the Certificates to bolster the Ningbo Action, but that would not assist the Plaintiff’s case here.

42.  In the premises, the Share Certificates did not fall within the Order and the Plaintiff’s case regarding these documents falls at the first hurdle.

Ningbo Financial Documents

43.  In respect of the Ningbo Financial Documents, they can be found in exhibit “YCT-29” of Yang’s 10^th affirmation. There are over 200 pages of documents with some duplicates.

44.  Shen’s evidene is that with the exception of 8 documents, which were exhibited as “SWH-8”, the rest were the financial documents of NXQ. At the beginning of 2019, they were copied from the accounting books and vouchers of NXQ and sent to the Ningbo lawyers to support the Ningbo Action. The originals of these documents were always kept in the data room of NXQ. They do not belong to the Plaintiffs, said Shen.

45.  Putting aside “SWH-8”, there is no reason to doubt the evidence of Shen. Indeed, she was not challenged in cross-examination on this part of her evidence. It should also be said that it is evident from reading the documents that many of them were the vouchers and related supporting documents of NXQ.

46.  In para 53 of the closing submissions of Mr Wong, some documents were identified and it was submitted that they must have been found in the storage room in Taipei. I am unable to agree that in the face of Shen’s evidence such inference can be drawn :

(1) In respect of the Telegraphic Transfer Application Form dated 18 August 1999, although the 1^st Plaintiff was stated to be the remitter, it is accepted that the applicant of the transfer was the Defendant and the money to be transferred came out of his bank account. Given that NXQ was the beneficiary, I see no good reason why a copy of the document could not have been retained by NXQ as part of it accounting record.

(2) In respect of the 3 Certificates of Reinvestment of Profits Distributed to Foreign Party all dated 18 October 1999, although the Certificates referred to a request by the 1^st Plaintiff to reinvest the profits from NHQ into that company, it is quite possible that the applications for the Certificates were made by NHQ. It is logical because NHQ was subject to the rules and regulations of the Mainland and the Certificates were to show compliance. There is therefore no good reason to believe that the documents were, contrary to Shen’s evidence, found in Taipei.

(3) As regards an invoice for 2 electrical machines issued to the 1^st Plaintiff dated 4 September 1992, which was apparently a faxed copy. I note that the 1^st Plaintiff’s contribution to NXQ included “physical objects” (see also para 1 of the Defendant’s declaration at para 40 above). It is possible that the machines were sent to NXQ or NHQ many years ago as part of the 1^st Plaintiff’s contribution and a copy of the invoice was sent over to Mainland as record. I bear in mind that the 1^st Plaintiff did not have any business operation of its own. In any case, based on this solitary document, I am not prepared to doubt the evidence of Shen.

47.  Mr Wong submitted that the Ningbo Financial Documents were all found in Taipei because they were notarised in Taiwan. I see no substance in the point. It might well have been a matter of convenience for the Defendant to have the supporting evidence for the Ningbo Action notarised in Taiwan because he was based there.

48.  Finally, Mr Wong had made a host of forensic points in the Plaintiffs’ closing submission to, inter alia, overcome Shen’s evidence that the vast majority of the Ningbo Financial Documents were the documents of NXQ. For instance, it was said that since the NXQ documents which Shen had provided to the Ningbo lawyers were regarded as insufficient. Therefore, the documents used for the Ningbo Action must have been found in Taipei. It is a tenuous forensic point of no proper evidential underpinning. Given the nature of these proceedings, I am not attracted by any of Mr Wong’s forensic points, none of which I find to be sufficiently grounded on the evidence.

49.  I turn to the 8 pages of documents contained in “SWH-8”. Two of the documents were duplicated. Hence, there were 6 documents in total. Two of the 6 documents were the bank statements of Triple Dragon Ltd and do not fall within the Order (there is no dispute on that). The remaining 4 documents were HSBC documents of the 1^st Plaintiff (“HSBC Documents”), namely, (1) a signature card dated 22 December 2009; (2) an undated declaration and undertaking, which was probably signed as part of an account opening procedure; (3) an outward remittance application form dated 25 August 2010; and (4) another outward remittance application form dated 21 December 2010. Shen’s evidence is that the HSBC Documents were found in Taipei.

50.  Based the evidence and the analysis set out above, I hold that with the exception of the HSBC Documents, the Ningbo Financial Documents do not fall within the Order.

Issue 2

51.  I need only deal with the HSBC Documents under this issue. Putting aside the fact the Documents were only found in January 2019 by Shen in the storage room, I have to decide whether the documents left behind by Senior and kept in the storage room were within the possession, custody, power or control of the Defendant or his servants or agents.

52.  The only evidence before the court is that the documents in the storage room were Senior’s documents left behind by him. Whether the documents were originally kept in the Group head office in Taiwan during Senior’s life time and subsequently moved during the relocations of the head office, and whether some of the documents were disposed of as obsolete according to Taiwan accounting and tax regulations is not altogether clear from the evidence. Chang’s evidence in this regard was of a very general nature.

53.  The high watermark of the Plaintiffs’ case is that the Defendant knew about the documents left behind by his father, knew where they were stored and opened the door to the storage room for Shen. These are indeed the totality of the evidence in relation to Issue 2. There is no evidence whether the storage room was under lock.

54.  The court was referred by Mr Wong to Securities and Futures Commission v Ernst & Young [2015] 5 HKLRD 293 at §84 where Peter Ng J summarised the law as follows :

(1) “Possession”, in the context of discovery, means “the right to the possession of a document” – it does not require actual physical possession;

(2) “Custody” means “the actual physical or corporeal holding of a document regardless of the right to possession, for example a holding of a document by a party as servant or agent of the true owner”.

(3) “Power” means “an enforceable right to … obtain possession or control of the document from the person who ordinarily has it in fact”.

55.  On these principles, I do not believe that the Defendant (or his servants or agents) had possession or power over Senior’s documents. Such rights must belong to his estate. Madam Liao was appointed the Administrator of Senior’s BVI estate. There is no evidence whether she was appointed the Administrator of Senior’s Taiwan estate. It is unlikely that no Administrator had been appointed given that Senior passed away in 2010.

56.  As to custody, I see no sufficient basis to find that the Defendant’s ability to access the storage room means that he had custody over the documents inside. He might simply have taken the liberty to access the storage room without asking for permission from the appropriate person, likely to be the Administrator.

57.  In respect of control, Mr Wong referred the court to Berkeley Square Holdings Ltd v Lancer Property Asset Management Ltd [2021] EWHC 849 (Ch) where Vos J (as he then was) examined the authorities and helpfully summarised the principles at §46 for determining whether documents held by one person are under the control of another where there is no legally enforceable right to access the documents :

(1) The relationship between the parties is irrelevant. It does not depend on there being control over the holder of the documents in some loose sense, such as a parent and subsidiary relationship;

(2) There must be an arrangement or understanding that the holder of the documents will search for relevant documents or make documents available to be searched;

(3) The arrangement may be general in that it applies to all documents held by the third party or it could be limited to a particular class or category of documents. A limitation such as an ability to withhold confidential or commercially sensitive documents will not prevent the existence of such an arrangement;

(4) The existence of the arrangement or understanding may be inferred from the surrounding circumstances. Evidence of past access to documents in the same proceedings is a highly relevant factor;

(5) It is not necessary that there should be an understanding as to how the documents will be accessed. It is enough that there is an understanding that access will be permitted and that the third party will co-operate in providing the relevant documents or copies of them or access to them;

(6) The arrangement or understanding must not be limited to a specific request but should be more general in its nature.

58.  On these principles, I cannot see how it can be said that the Defendant had control over Senior’s documents.

59.  Mr Wong submitted that the HSBC Documents belonged to the 1^st Plaintiff even those they were amongst the documents left behind by Senior. I accept the proposition. As a matter of law, the documents were held by Senior as the servant or agent of the 1^st Plaintiff. However, the point does not advance the Plaintiffs’ case here.

60.  This issue requires the court to find whether the Defendant (or his servants or agents) had possession, custody, power or control of the HSBC Documents at the time of the Order, ie, 20 April 2016. On this, there is simply no evidence. I am unable to see how the events of 2019 can prove a positive case beyond all reasonable doubt in favour of the Plaintiffs. There is no evidence of where the documents were in 2016 or whether the Defendant knew about them at that time. I remind myself that at the time of the proceedings before DHCJ Yee, the Defendant had no document to support his claim of ownership over NXQ or DXCQ (see para 10(5) above).

61.  In the premises, I answer Issue 2 in the negative.

62.  For completeness, I shall deal with the remainder of the issues succinctly.

Issue 3

63.  The answer to this issue (requisite state of mind) can be found in the principle summarised in para 24(4) above. The act or omission in breach of a court order has to be done “consciously” and “not … unintentionally” (see Kao, Lee & Yip, supra, §53).

64.  I accept Mr Ho’s submission that for the requisite state of mind, the Plaintiffs must prove that: (a) the Defendant’s withholding of the Subject Documents was intentional; and (b) that he knew of all the facts which made it a breach of the Order (see Lee Siu Fong, supra, at §29).

Issue 4

65.  I am inclined to believe that the Defendant did not know about the Share Certificates. He was surprised to see them when they were found and had only heard about them. Apart from Chang’s evidence, the fact is that the Ningbo Share Certificates were dated 1993, 2001 and 2005. The Dongguan Share Certificates were dated 2003. The Defendant only became the CEO of the Group in 2008. The probabilities are that they were printed as an assurance to the Japanese shareholders, and it was done at the time when Senior was in charge of the Group.

66.  As to the HSBC Documents, I do not believe that the Defendant knew about their existence in the storage room. Otherwise, he would not have asked Shen to go to Taipei to see if she could find any relevant materials in the documents left behind by his father. This is consistent with the fact that the Defendant had no documentary support for his case before DHCJ Yee.

67.  In conclusion, I hold that that the Plaintiffs have failed to establish the requisite state of mind of the Defendant for the purpose of these proceedings.

68.  Finally, I agree with Mr Ho that contempt proceedings (given its penal nature) should only be pursued as a last resort. In cases of civil contempt, the prime consideration must be the enforcement of the court order in question (see China Metal Recycling (Holdings) Ltd v Chun Hei Man [2018] 1 HKLRD 455, at §60).

69.  In this case, the Share Certificates are not real share certificates. Some of them related to NHQ which had ceased to exist in 2005. The HSBC documents were dated 2009 or 2010. I agree with Mr Ho that it is difficult to see these documents as serving any useful purpose to the Plaintiffs in September 2019 when they chose to resort to the draconian power of committal.

Disposition

70.  For the above reasons, the OS is dismissed with costs to the Defendant and a certificate for 2 counsel, to be taxed if not agreed.

71.  I am grateful for the assistance of counsel.

Mr William Wong SC and Mr Justin Lam, instructed by Robin Bridge & John Liu, for the 1^st to 3^rd Plaintiffs

Mr Ambrose Ho SC and Mr Jean-Paul Wou, instructed by Deacons, for the Defendant

HCA 2302/2014 & HCMP 1532/2019

[2020] HKCFI 2661

HCA 2302/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2302 OF 2014

________________________

________________________

________________________

________________________

HCMP 1532/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1532 OF 2019

________________________

________________________

________________________

(Dealt with together)

____________________

DECISION

____________________

1.  On 4 September 2020, I handed down a decision (“the Main Decision”), in which I dismissed the LCT’s Summonses. On 18 September 2020, LCT filed 2 summonses in HCA 2302/2014 and HCMP 1532/2019, seeking leave to appeal against the Main Decision, and a stay of the Contempt Proceedings pending the final determination of LCT’s intended appeal. This decision should be read together with the Main Decision. For ease of reference, the abbreviations used in the Main Decision are adopted herein.

2.  I have directed that the leave application and the stay application made by LCT be determined on paper without an oral hearing.  Both sides have provided me detailed written submissions, and I have considered the same.

The Leave Application

3.  Leave to appeal would only be granted if the appeal has a reasonable prospect of success (which means that the prospect of success is reasonable and more than fanciful, without having to be probable), or there is some other reason in the interests of justice why the appeal should be heard^[1].

4.  LCT submits that there are reasonable prospects of success in his intended appeals against the Main Decision by relying upon the following grounds:

(1)  This court has no jurisdiction over LCT, a resident out of jurisdiction, in relation to the Contempt Proceedings.  In particular, Ps failed to obtain leave to serve the Originating Summons in the Contempt Proceedings out of jurisdiction in accordance with Order 11 rule 1, which sets out the entire and mandatory code for the service of an originating summons out of jurisdiction.

(2)  Without prejudice to LCT’s jurisdictional challenge, LCT also argues that Ps’ Contempt Statement is incurably defective, by reason that the allegations set out therein were not sufficiently particularised so as to enable LCT to defend himself.

(3)  LCT also submits that the Contempt Proceedings should be struck out and dismissed as an abuse of process, given that it is (at most) a pointless satellite litigation which were not pursued by Ps for any legitimate ends.

5.  LCT is also relying upon the “some other reason in the interests of justice” limb to seek leave to appeal.  In LCT’s submissions, the points of law involved in the issue of jurisdiction and service for contempt proceedings are plainly of general and public importance, in respect of which guidance from the Court of Appeal would be to the public advantage. 

6.  Having read the draft notices of appeal prepared by LCT and the written submissions of Senior Counsel and Counsel for LCT, with respect, I am of the view that LCT is repeating the arguments put before this court on the previous occasion.  I have explained why I could not accept these arguments in the Main Decision, and I am not going to repeat the same here.  I am not satisfied that LCT has demonstrated a reasonable prospect of success in his intended appeal.  I refuse to give leave to appeal to LCT under the “reasonable prospect of success” limb.

7.  Notwithstanding the above, and although I am of the view there is no merit in the Jurisdiction Argument put forward by LCT, I reach the conclusion that I should allow LCT to seek a determination on the Jurisdiction Argument from the Court of Appeal.

8.  Ps give me an update that the Saif Partners case went before Anthony Chan J again on an inter partes basis.  The learned judge handed down a decision on 17 September 2020[2], in which he maintained his view on the jurisdiction issue expressed in the first decision[3].  I am in complete agreement with Anthony Chan J on the jurisdiction issue.  However, I have to recognize the fact that there is not yet any Court of Appeal’s decision on the point.

9.  I should allow LCT to pursue the Jurisdiction Argument in the Court of Appeal, so that the Court of Appeal would have an opportunity to determine the jurisdiction issue.  This area of the law would very much benefit from appellate guidance.  I would give leave to appeal to LCT under the “some other reason in the interests of justice” limb, but such leave is confined to the jurisdiction issue only.  Under s.14AA(3)(a) of the High Court Ordinance, I may grant leave to appeal in respect of a particular issue only.

10.  Since I only grant leave to appeal to LCT in respect of the jurisdiction only, if LCT lodges an appeal pursuant to this leave, LCT may only raise the jurisdiction issue in the notice of appeal.

The Stay Application

11.  I have given LCT leave to appeal.  From the case management’s perspective, I would order stay of the Contempt Proceedings pending the outcome of the appeal.

12.  Ps oppose the stay application and refer me to ChuKongv Sun Min[4], in which Marlene Ng J mentioned that breaches of orders should ordinarily be dealt with swiftly and effectively[5].  In my view, each case depends upon its own facts.  In these proceedings, the jurisdiction issue is a crucial issue.  If the Court of Appeal reverses my ruling on the jurisdiction issue, that would be the end of the Contempt Proceedings.  Obviously, there cannot be a final determination in the Contempt Proceedings before the outcome of the appeal is known.

13.  Before the Main Decision, Ps and LCT have agreed that there should be a stay of the Contempt Proceedings pending the determination of the LCT’s Summonses.  This agreement was given effect by a consent order made by me on 2 January 2020.  I have dismissed the LCT’s Summonses in the Main Decision, but I have also given leave to appeal to LCT.  In these circumstances, granting a temporary stay to LCT pending the outcome of the appeal would in effect be a mere extension of the previous stay granted by this court by consent. 

14.  Further, I agree with LCT that Ps have not demonstrated any pressing urgency for the Contempt Proceedings.  The Contempt Proceedings are not directed at obtaining compliance with the Subject Order. As to the return of the Documents, this is a matter among the final reliefs sought by Ps in HCA 2302/2014.

15.  Taking into account all the above, I am of the view that the stay sought by LCT should be granted.

Disposition

16.  I grant leave to appeal to LCT, but the leave granted is limited to the Jurisdiction Argument put forward by LCT only.  I also order that there be a stay of the Contempt Proceedings pending the outcome of the appeal.  LCT shall prepare the draft orders in accordance with this decision and, after seeking Ps’ comments thereon, submit the same to this court for approval.

17.  There be a costs order nisi that costs of the leave application and costs of the stay application be costs in the appeal, with a certificate for 2 counsel.

18.  I thank counsel for the helpful assistance provided to the court.

HCA 2302/2014 & HCMP 1532/2019

[2020] HKCFI 2272

HCA 2302/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2302 OF 2014

________________________

________________________

________________________

________________________

HCMP 1532/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1532 OF 2019

________________________

________________________

DECISION

________________________

1.  The following summonses are before me:

(1) LCT[1]’s summonses dated 3 December 2019 (“LCT’s Summonses”) filed in HCA 2302/2014 (“the Action”) and HCMP 1532/2019 (“the Contempt Proceedings”), for inter alia setting aside the ex parte Order made by me on 10 September 2019 (“the ExParte Order”), and dismissing the Contempt Proceedings against LCT; and

(2) Ps[2]’ summons dated 24 December 2019 (“Ps’ Summons”) filed in the Contempt Proceedings for leave to issue and serve the notice of entering the originating summons therein for hearing (“the Notice of Hearing”) on LCT out of time.

2.  I have directed that the said summonses be determined on paper without an oral hearing.  Mr Anson Wong SC (leading Mr Martin Kok) for LCT and Mr William Wong SC (leading Mr Justin Lam) for Ps have provided me detailed written submissions, and I am grateful for that.

Background

3.  The background facts set out in the paragraphs below are taken from Ps’ written submissions.  These matters do not appear to be disputed by LCT.

4.  The factual background of the litigation has been succinctly summarized by Lok J in his reasons for decision dated 30 March 2016, and by DHCJ Kent Yee in his decision dated 20 April 2016.  Both decisions are decisions made by the Court in the Action.

5.  The Action concerns a dispute over a family business known as the Loyal Group:

(1) The Loyal Group was founded by Liao Yo Chang (“Liao Senior”) and is one of the world’s largest manufacturers for EPS, a raw material used in packaging and construction.

(2) Liao Senior was the patriarch of the Liao family comprising inter alia (1) his sons, LCT and Liao Wen Toh (“LWT”) and (2) his wife, Liao Hwang Hsiang (“HH”) (collectively, “Liao Family”). The Liao Family is from Taiwan.

6.  As to the structure of the Loyal Group:

(1) The Loyal Group comprises interalia Ps.

(2) The holding company is Loyal International Enterprises Co Ltd (“LIE”), which is the sole shareholder of P1, P2 and P3. LIE is incorporated in the BVI.

(3) P1, P2 and P3 are all incorporated in Hong Kong and hold shares in wholly-owned subsidiaries in the Mainland China (“the Mainland Subsidiaries”).

7.  Prior to Liao Senior’s death in 2010:

(1) LIE was owned by Liao Senior, D and LWT in the proportion of 40%, 40%, and 20% respectively.

(2) LCT was the Chief Executive Officer of the Loyal Group from 2008 to 2010.

8.  After Liao Senior’s death in 2010, a power struggle for control of the Loyal Group erupted within the Liao Family, with LWT and HH in one camp, and LCT in another.

9.  Liao Senior passed away without leaving a will. By reason of the arrangement prevailing before Liao Senior’s death, Ps’ remaining directors became LCT and Step Harvest Limited (which was merely a nominee director representing Ps’ accountants).  It is Ps’ case that immediately after Liao Senior’s death, LCT had sole control of Ps.

10.  HH was appointed as administrator of Liao Senior’s estate and proceeded to distribute inter alia Liao Senior’s 20% shareholding in LIE.  Following this distribution, LIE was owned by LCT, LWT, and HH in the proportion of 46.6%, 46.6%, and 6.6% respectively. As a result, LWT and HH owned 53.2% of LIE and assumed effective control of LIE and the Loyal Group.

11.  According to Ps, on assuming control of LIE, LWT and HH investigated into the financial status of the Loyal Group.  Those investigations revealed that, from February to October 2012, LCT had been dissipating the assets of Ps by transferring away their shares in the Mainland Subsidiaries and huge sums of money in the amount of US$92,850,000 (“the Sum”) in Ps’ bank accounts to LCT’s own corporate vehicles.  It is the Ps’ case that LCT effectively pillaged Ps of their assets just in time before LWT and HH could regain de facto control of Ps.

12.  LWT and HH then took steps to try to regain control of the Ps in the face of stiff resistance by LCT to hold onto Ps.  They did so by passing the following resolutions of the Ps (“the Resolutions”):

(1) Resolutions dated 18 March 2015 to impose on LCT (whilst he was still a director of Ps) the obligation to inter alia return of all corporate items, accounting documents and confidential corporate commercial information belonging to Ps and remove himself and others as signatories of the Ps’ bank accounts;

(2) Resolutions dated 9 April 2015 to interalia remove LCT as a director of each of Ps;

(3) Resolutions dated 26 April 2015 to remove LCT as the bank signatory of the Ps’ accounts.

13.  LCT refused to comply with the Resolutions.  As a result, Ps applied for an interlocutory injunction by a summons dated 4 August 2015 (“the 2015 Summons”) in the Action to compel LCT to comply with the Resolutions.  LCT’s case in opposition was essentially that he was in fact the sole beneficial owner of all of the Mainland Subsidiaries, as he had provided all the financial contributions, and Ps were only investment vehicles.

14.  DHCJ Yee allowed Ps’ application as per the 2015 Summons and made the following order against LCT in his decision dated 20 April 2016 (“the Subject Order”):

“1. [LCT] do within 28 days from the date of this Order return all accounting documents of [Ps] that are within his, his servants or agents’ possession, custody, power or control to [Ps]…

2. [LCT] do within 28 days from the date of this Order return all confidential corporate commercial information of [Ps], whether in hard copy, electronic form or otherwise, that are within his, his servants or agents’ possession, custody, power or control to [Ps]… including but not limited to:-

(a) information on the global investments made by [Ps] as of 12 June 2010 and any updates thereafter, including the investment amount, the shareholding of [Ps] in, the name of other shareholders and their respective shareholding in, and the management teams including the lists of the directors of, the invested companies, which include at least the following companies incorporated in the PRC…

(b) information and/or records received by [Ps] from their global investments, which include at least the companies incorporated in the PRC as set out… above…

…

4. [LCT] do within 14 days from the date on which [LCT] required to fulfil his obligations as stipulated in paragraphs 1 to 3 above respectively, whichever is later, make and file an affidavit/affirmation and serve the same on Robin Bridge & John Liu, solicitors for [Ps], confirming that he has fully complied with the matters set out in paragraphs 1 to 3 hereinabove.

5. If [LCT], his servants or agents is/are no longer in possession, custody, power or control of any of the items, documents and information sought by [the Plaintiffs] in the paragraphs above, [LCT] do within 14 days from the date on which [LCT] is required to fulfil his obligations as stipulated in paragraphs 1 to 3 above respectively, whichever is later, make and file an affidavit/affirmation and serve the same on Robin Bridge & John Liu, solicitors for [Ps], disclosing all facts within his knowledge as to the present whereabouts of such items, documents and information. …”

15.  Separately, on 22 March 2016, Ps succeeded in obtaining preservation and disclosure order from Lok J to preserve the Sum. 

16.  By a letter dated 20 June 2016, Ps’ solicitors (“RBJL”) wrote to LCT’s solicitors (“KWM”) in relation to LCT’s availability for effecting personal service of inter alia the Subject Order and requested for a reply by 27 June 2016.  There was no reply from KWM by 27 June 2016.  As a result, on 29 June 2016, Ps applied for an order that leave be granted to serve inter alia the Subject Order on LCT out of jurisdiction in Taiwan.

17.  On 4 July 2016, KWM replied and said that LCT had no plan to travel to Hong Kong at the moment, and they were not in a position to advise Ps the time and place for Ps to effect personal service of the Subject Order.

18.  On 6 July 2016, a hearing was held before DHCJ Seagroatt in respect of LCT’s application for an extension of time to comply with the order made by Lok J.  Upon the judge’s own initiative, Ps’ application for leave to serve the Subject Order out of jurisdiction was brought before the Court.  The judge granted Ps’ application to serve out in that hearing in the presence of KWM.

19.  Ps then took steps to serve inter alia the Subject Order endorsed with a penal notice on LCT in Taiwan.  Ps’ repeated attempts to personally serve the Subject Order on LCT in Taiwan were met with grave difficulties.

20.  At first, by a letter dated 20 July 2016, RBJL wrote to KWM in an attempt to arrange personal service of the Subject Order on LCT in Taiwan.  KWM replied on 26 July 2016.  KWM confirmed LCT’s residential address in Taiwan but did not accede to RBJL’s request for facilitating personal service of the Subject Order on LCT.

21.  Ps then made the following attempts to try to effect personal service of the Subject Order on D[3]:

(1) On 29 July 2016, an attempt was made to serve the Subject Order at the last known registered residence of LCT in Taiwan (ie the same address confirmed in KWM’s letter dated 26 July 2016). However, the security guard stated that LCT did not live in the building.

(2) On the same date, an attempt was made to serve the Subject Order at the registered office of at least 7 companies in which LCT was the registered representative.  This was also one of the addresses which LCT confirmed to be his in a hearing in Taiwan.  An assistant to LCT stated that LCT was not in the office and he was not in Taiwan.  He refused to pass the documents to LCT or allowing Ps’ representatives to leave the documents at the premises.

(3) Later on the same date, an attempt was made to serve the Subject Order at an address which LCT used in the most recent annual return form filed by P2 in Hong Kong.  The receptionist there said that LCT reserved a room at the office but did not have a regular visiting schedule. She refused to pass the documents to LCT.

(4) LCT was summonsed to appear at a courtroom at 9:30 am on 24 August 2016 for a criminal trial in the Taipei Summary Court and the Ps intended to serve the documents on LCT there.  However, LCT’s lawyer reported to the judge that LCT could not attend the trial as he had to visit a doctor due to an emergency medical situation.

22.  As a result of an application made by a consent summons filed on 15 June 2016, the time for compliance with the Subject Order was extended to 7 July 2016.  Subsequently, as a result of an application made by a consent summons filed on 13 July 2016, the time for compliance was extended to 29 July 2016. Thereafter, as a result of a further application made by a consent summons filed on 31 August 2016, the time for compliance was further extended to 2 September 2016.

23.  On 14 September 2016, LCT made his 9^th affirmation (“LCT 9^th”) to comply with the Subject Order.  In that affirmation, LCT recited the key terms of the Subject Order at [3].  In [7], LCT said:

“I also confirm that apart from the information contained and documents enclosed in the KWM Letters, those information/documents previously disclosed by me in this action and such documents/classes of documents to be described herein below, my servants, agents and I do not have in our possession, custody, power or control any other accounting documents or other confidential corporate commercial information of [Ps] that are requested under paragraphs 1 and 2 of the Order” (“the Affirmed Statement”).

24.  On 11 April 2017, KWM wrote to RBJL, stating interalia that LCT was prepared to facilitate Ps’ personal service of the order made by Lok J on him in Taiwan at a courtroom in Taiwan at 2:00 pm on 17 April 2017.

25.  According to Ps, what happened on 17 April 2017 is as follows[4]:

(1) LCT did not appear at 2:00 pm and Ps’ representatives (a Taiwan lawyer and a director of Ps) waited until about 2:15 pm before LCT appeared.  When LCT saw Ps’ representatives, he walked away from them.

(2) A senior employee of LCT stood between the Ps’ representatives and LCT, asking for the documents to be handed to him. However, the Taiwan lawyer spoke loudly to LCT informing him that she had to serve the documents on him personally.

(3) When the Taiwan lawyer walked towards LCT, LCT stepped backwards and suddenly walked into a male toilet.  Being a female, the Taiwan lawyer could not follow LCT into the toilet.

(4) LCT then left the toilet and walked into the courtroom. The Taiwan lawyer followed him and left the documents (including the Subject Order) near him, informing him that the documents were placed there.

26.  In respect of the matters set out in Chen Aff and Lee Aff, LCT does not admit those matters.  At the same time, LCT denies that he has evaded service of any document in any way.

Alleged breaches of the Subject Order by LCT

27.  Ps allege that LCT has breached the Subject Order and Ps discovered the breaches in the circumstances set out in the paragraphs below.  As to whether LCT has breached the Subject Order as alleged by Ps, this is a matter to be resolved in the Contempt Proceedings and I make no comment on the matter in this decision.  I only set out the alleged breaches and the discovery of the same according to Ps’ case as a background.

28.  On 28 February 2019, LCT initiated a claim in Ningbo against inter alios P1 and P2. LCT filed and relied upon copies of a batch of share certificates, on which P1 is listed as the owner of the shares (“Ningbo Share Certificates”).  LCT also filed and relied upon copies of a number of bank statements, ledgers and financial invoices directly relating to P1 and P2 to demonstrate how (on his case) investments were made through P1 (“Ningbo Financial Documents”).

29.  On 26 March 2019, LCT initiated another claim in Dongguan against interalios P3.  LCT filed and relied upon copies of a batch of share certificates, on which P3 is listed as the owner of the shares (“Dongguan Share Certificates”).

30.  Ps’ case is that the Ningbo Share Certificates, the Ningbo Financial Documents and the Dongguan Share Certificates (collectively, “the Documents”) are “accounting documents” and “confidential corporate commercial information” of Ps within the meaning of the Subject Order.  Given that the Documents were produced by LCT in the Mainland legal proceedings and LCT has not been in control of the Ps since 2015, LCT must have obtained the Documents before such time and then held onto such documents.

31.  In breach of the Subject Order, LCT never disclosed the existence of the Documents to Ps and never returned the Documents to Ps. Further, on this basis, the Affirmed Statement in LCT 9^th must be untrue.  Ps therefore applied for leave to commence contempt proceedings against LCT.

32.  At the same time, by reason of LCT’s evasion of service of the Subject Order, Ps applied for dispensation of personal service subject to effecting substituted service on KWM.

33.  Ps obtained the Exparte Order on 10 September 2019.  By the ExParte Order, leave is given to Ps to commence committal proceedings against LCT, service by leaving the documents at the office of KWM is deemed to be good and sufficient service and personal service of the originating summons to be issued is dispensed with.  It would be necessary to mention that the leave given to Ps to commence committal proceedings is limited to the alleged contempt by LCT by breaching [1] and [2] of the Subject Order.  The leave does not concern any alleged contempt in relation to the Affirmed Statement.

Grounds of LCT’s applications

34.  LCT has put forward the following grounds in support of his applications:

(1) This Court has no jurisdiction over LCT and cannot make the order relating to service in respect of LCT as a foreign defendant.  LCT argues that Ps cannot not satisfy any of the “gateways” for service out under Order 11 rule 1 for service out, and Ps cannot be permitted to evade the mandatory Order 11 regime by a substituted service order.   Ps failed to draw to my attention in the exparte application of the applicable principles in this regard, including appellate authorities which are binding on this Court.  (“Jurisdiction Argument”)

(2) Ps’ exparte application for dispensation of personal service and substituted service was made on an entirely false premise, namely that it was “practically impossible” for Ps to personally serve the Contempt Proceedings on LCT within the supposed “short 14-day window”.  There is however no legal basis to suggest that there is any such “14-day window”.   Hence this involves a materially false and misleading statement of law.  Further, the Subject Order was not served on LCT before the expiration of the time within which LCT was required to do the acts as specified in the order.  (“Improper Service Argument”)  

(3) Ps failed to draw to my attention in the ex parte application the “very strict approach” taken by the Court in respect of the Contempt Statement, and the extent of particulars which are necessary to enable LCT to fairly defend himself.  LCT argues that the Contempt Statement is embarrassing and devoid of particulars.  (“Lack of Particulars Argument”)

(4) Ps also failed to draw to my attention in the exparte application that contempt proceedings should be pursued as a last resort, and that the Court would not permit satellite contempt proceedings. (“Last Resort Argument”) 

35.  The merits of these arguments will be examined in turn in the paragraphs below.

General principles on an application for leave to commence contempt proceedings

36.  It would be useful to set out the general principles concerning an application for leave to commence contempt proceedings.  Since the application is made on an exparte basis, the applicant has a duty to make full and frank disclosure. The nature and purpose of the leave procedure is a mere filtering process, filtering out oppressive applications or those which have some suspicion of oppression, or those which obviously have no chance of success.  Any application to strike out contempt proceedings can only succeed in plain and obvious cases.

37.  As said by the Court of Appeal in SJv ChoyBing Wing[5]:

“62. We also wish to point out that the contempt proceeding against the Respondent is still at an early stage. The Applicant had only obtained leave to apply for an order of Committal under Order 52 Rule 2 and had just served the Contempt Notice of Motion on the Respondent. The hearing of the Motion of committal had to be adjourned because of the Respondent’s application to strike out.

63. At this early stage, the court is not concerned with the admissibility of evidence or whether the Applicant can successfully prove her allegations against the Respondent nor is the court concerned with the possible defence of the Respondent or whether such defence will succeed.

64. Order 52 Rule 2 stipulates the requirement to obtain leave to apply for committal in the following terms:

‘An application for such leave must be made exparte to a judge, and must be supported by a statement setting out the name and description of the applicant, the name, the description and address of the person sought to be committed and the grounds on which his committal is sought, and by an affidavit, to be filed before the application is made, verifying the facts relied on.’

65. The purpose of the statement in support of an application for leave is simply to provide the person sought to be committed with enough information to enable him to meet the charge. Sir John Donaldson MR said in no uncertain terms in ChilternD.C.v Keane [1985] 1 WLR 619 at 622 C:

‘Every notice of application to commit must be looked at against its own background. The test, as I have said, is: does it give the person alleged to be in contempt enough information to enable him to meet the charge?’

66. In Aqua-Leisure Industries, Inc and anotherv Auqa Aplash Ltd HCA 18928 of 1998, it was accepted that “the statement in support of an application is to be treated in similar manner as an indictment in criminal proceedings, having regard to the criminal nature of the sanctions for contempt”.

67. The Indictment Rules under Cap 221 provide under Rule 3 that “every indictment shall contain, and shall be sufficient if it contains, a statement of the specific offence with which the accused is charged describing the offence shortly, together with such particulars as may be necessary for giving reasonable information as to the nature of the charge”.

68. There can be no doubt that the statement dated 17 December 2003 filed by the Applicant pursuant to Order 52 Rule 2(2) contains detailed particulars of her allegations against the Respondent. Those particulars are clearly more than adequate to enable the Respondent to meet the contempt charge against him.

69. In [the verifying affirmation], court documents such as pleadings, affirmations, judgments and transcripts of hearings were exhibited together with news reports and magazine articles. It is such documents that the Respondent objects to on the basis that they are hearsay documents.

70. Technically, there was no need for the Applicant to exhibit those documents in the verifying affirmation. Order 52 Rule 2(2) only obliges the Applicant to verify the facts relied on, ie the contents of the statement containing the information to enable the Respondent to meet the charge.

71. The exhibited documents, including the newspaper reports and the magazine articles, contain further details of the Applicant’s allegations against the Respondent. The Applicant was only trying to provide the Respondent with as much information as possible.

72. How such allegations are to be proved and whether evidence tending to prove those allegations are admissible, as with all evidence in a criminal case, can and should only be dealt with at the substantive hearing.

……

75. Any application to strike out under the inherent jurisdiction of the court or under Order 18 Rule 19 of the Rule of the High Court can only succeed in plain and obvious cases. “The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out” (HaFrancescav TsaiKut Kan (No.1) [1982] HKC 382 per Silke JA).”

38.  The applicant has an obligation of making full and frank disclosure in applying for leave.  Materiality is to be determined by the Court, not by the applicant or his legal advisors.  As said by Lam VP in ChinaMetal Recycling (Holdings) Ltd v ChunHei Man[6]:

“80. …… it is opportune to remind practitioners on the duty of a party seeking leave to apply for committal and state our views on the processing of an application for leave. A party seeking leave, as with every party making an ex parte application, has a duty to give full and frank disclosure, see Secretary for Justicev ChoyBing Wing CACV 11 of 2004, 3 December 2004, at [46] to [48]; HongKong Civil Procedure 2017 paragraph 52/2/4; TiongKing Sing v SamBoon Peng Yee [2015] 1 HKLRD 981 at [35]; PatChung Pat Wo Tong (HongKong) Ltd v LawYan Wai HCA 1719 of 2010, 5 May 2017.

The leave application is a filtering process to screen out oppressive applications and those which obviously have no chance of success, see TiongKing Sing v Sam Boon Peng Yee [2015] 3 HKLRD 99 at [6].  In order to satisfy the duty of full and frank disclosure, an applicant must give to the court the relevant information which is material to the consideration as to whether an application for committal should be filtered out, including information material to suspicion of oppression in proceeding by way of committal.  Materiality is to be determined by the court, not the applicant or his legal advisers, see TiongKing Sing v Sam Boon Peng Yee HCMP 1129 of 2015, 21 July 2015, at [13].”

39.  The duty of making full and frank disclosure does not only cover factual issues but also include questions of law[7].  However, as to material non-disclosure on law, it would not be right to gauge whether the ex parte procedure has been abused by measuring that application against the very full argument and citation of authorities before the Court in the inter partes hearing^[8].

40.  In considering whether the ex parte leave should be set aside, the Court should take into the account the interest of the alleged contemnor, the interests of the other parties, and the interests of justice.  The Court should not set aside ex parte leave for commencing committal proceedings on the basis of pure technicalities which do not prejudice the respondent. As said by Sir Brennan NPJ explained in Kao,Lee & Yipv DonaldKoo Hoi Yan[9]

“73. Although the procedures governing committal for contempt are strictly enforced when needed to safeguard the liberty of an alleged contemnor, the discretionary power to dispense with a procedural requirement is available in appropriate case. As Lord Woolf MR said in Nichollsv Nicholls [1997] 2 All ER 97, 108 :

‘… Like any other discretion, the discretion provided by the statutory provisions must be exercised in a way which in all the circumstances best reflects the requirements of justice. In determining this the court must not only take into account the interests of the contemnor but also the interests of the other parties and the interests of upholding the reputation of civil justice in general. Today it is no longer appropriate to regard an order for committal as being no more than a form of execution available to another party against an alleged contemnor. The court itself has a very substantial interest in seeing that its orders are upheld. If committal orders are to be set aside on purely technical grounds which have nothing to do with the justice of the case, then this has the effect of undermining the system of justice and the credibility of the court orders. While the procedural requirements in relation to applications to commit and committal orders are there to be obeyed and to protect the contemnor, if there is non-compliance with the requirements which does not prejudice the contemnor, to set aside the order purely on the grounds of technicality is contrary to the interests of justice …’ ” (Emphasis added.)

41.  Even if the exparte leave is set aside, in considering re-granting the leave, the concern is not same as the concern in the context of Mareva injunction or AntonPiller order, for re-granting leave for service out would not effectively allow the applicant to retain the advantage obtained by the original order[10].

Jurisdiction Argument

42.  LCT makes the following points in his written submissions:

(1) Under Order 11 rule 1, service out of jurisdiction is only permissible if the claim falls under one of the “gateways” set out thereunder.  Order 11 is regarded as an “entire code” for the jurisdiction to grant leave to serve out, in that any gaps in it cannot be filled by the Court’s inherent powers[11].

(2) In a case where a foreign defendant cannot be served under the mandatory Order 11 regime, the Court would not order substituted service or dispensation with personal service.  The Court would not dispense with service of a writ on a party who was not amenable to the jurisdiction of the Hong Kong court unless there was leave to serve out under Order 11 rule 1[12].  An order for substituted service should be refused unless it is demonstrated that the case falls clearly within one of the sub-paragraphs of Order 11 rule 1(1)[13].

(3) Ps have failed to properly disclose the aforesaid authorities in the ex parte application, which include authorities binding upon this Court.

43.  LCT argues that the points put forward by Ps on the jurisdiction issue in the exparte application are unsound.  In LCT’s submissions:

(1) Ps may not derive any assistance from Deutsche Bank AG v Sebastian Holdings[14].  On the basis of that authority, Ps submits that leave is not required for service out of jurisdiction in respect of contempt proceedings which are incidental to the original order, for which jurisdiction was already established.  LCT argues that this submission is wrong.  LCT argues that there is a fundamental difference between the Hong Kong regime and the English regime in respect of commencement of contempt proceedings.  Under the Hong Kong regime, the contempt application “shall be made by originating summons to a judge” under Order 52 rule 3(1).  This is in contrast with the English position, for which the contempt proceedings are commenced within the existing proceedings in which the original order was granted.  Further, as is clear from the reasoning of that case, the English decision turned on CPR provisions which have no counterpart in the Hong Kong Rules of the High Court.

(2) Ps’ second argument advanced in the exparte application, ie leave could be granted under Order 11 rule 1(1)(m), is also wrong.  The “gateway” under Order 11 rule 1(1)(m) applies where “the claim is brought to enforce any judgment or arbitral award”.  Here, Ps are not seeking to enforce any “judgment” at all, but rather Ps are attempting to commence contempt proceedings on the basis of an interlocutory injunction order. 

(3) Ps’ third and final argument advanced in the ex parte application is that the Court has power to order that personal service be dispensed with under Order 52 rule 3(4).  However, Ps failed to draw to the ex parte judge’s attention the Court of Appeal’s decisions in Regal Link and Tillemont Shipping.  In the light of these authorities, Ps’ third argument must fail. 

44.  Thus, LCT argues that this Court has no jurisdiction over him in respect of the Contempt Proceedings as he is out of the jurisdiction and there are no available gateways under Order 11 rule 1 for leave to serve him out of jurisdiction.

45.  Ps refer me to a recent decision of Anthony Chan J in Saif Partners II LPv Joe Zhixiong Zhou[15], which was handed down on 4 June 2020.  The issue of serving contempt proceedings on a foreign alleged contemnor was before the Court in that case.  The learned Judge observed that there was no apparent gateway under Order 11 rule 1 for the service out of contempt proceedings brought to enforce procedural orders as opposed to judgments[16].  After reviewing Marketmaker Technology Ltd & Ors v CMC Group Plc & Ors[17], Deutsche Bank AG v Sebastian Holdings Inc[18] and Deutsche Bank AG v Sebastian Holdings Inc (No2)[19], the learned Judge said:

“16. In summary, these English authorities stand for the following propositions. In a case where (a) the court had already established jurisdiction over a party to proceedings due to his submission to jurisdiction (Marketmaker) or (b) the court had already established jurisdiction over a party to proceedings, whether by way of service within jurisdiction or by service out properly authorised (Deutsche Bank), and the contempt complained of arose out of and is incidental to an order made in those proceedings, permission to serve out against the contemnor is not required, and it is possible to obtain an order dispensing with personal service and for alternative service.

17. With respect, I fully agree.  The analysis of Teare J resonates with common sense.  Once a party is under the jurisdiction of the court, it would not be necessary to invoke O 11, which provides for the extension of the court’s jurisdiction (to parties situated aboard), against him.  In this case, Zhou brought proceedings against the Plaintiffs in HCCL 16 of 2016.  He had submitted to the jurisdiction of the court, and it is unnecessary to invoke O 11 for the service of the contempt proceedings on him.”

46.  Ps submits that the exact reasoning in Saif Partners applies mutatismutandis to the present case.  LCT commenced the Action against Ps and thereby submitted himself to the jurisdiction of this Court. The contempt complained of arises out of and is incidental to an order made in the Action.  Leave for service out of the Contempt Proceedings against LCT is therefore not required, and an order dispensing personal service and for alternative service can be made.  Ps further submits that although Saif Partners is not binding upon me, unless LCT can demonstrate that the decision is plainly wrong, I should follow that decision in the present case[20].

47.  In Ps’ submissions, LCT’s argument is simply an affront to policy and common sense.  It means that sanctions for non-compliance with court orders would become meaningless so long as the alleged contemnor has left the jurisdiction.  It is clear that the decision in Saif Partners is correct and there is no prospect at all for LCT to demonstrate that it is plainly wrong for me not to follow it.

48.  LCT argues that Saif Partners is a decision made by this Court in an ex parte application.  In making that decision, the Court did not have the benefit of considering the Privy Council’s decision in Mercedes Benz[21], and the Court of Final Appeal’s decision in Kayden[22], and the Court of Appeal’s decisions in Regal Link[23] and Tillemont Shipping[24].  All these decisions should be binding upon the learned Judge. LCT submits that the learned Judge was wrong in adopting the English position, for the reason that unlike the English regime, contempt proceedings in Hong Kong are commenced under fresh proceedings by way of Originating Summons.  In essence, LCT is saying that Saif Partners is a decision per incuriam and should not be followed.

49.  LCT further argues that it was a deliberate decision of the Working Party on Civil Justice Reform and the High Court Rules Committee not to include any gateway for contempt proceedings in Order 11 rule 1(1), for they considered that it was not appropriate to exercise jurisdiction over overseas parties in contempt cases.

50.  I am not persuaded by LCT’s submissions.  In my view, Saif Partners is a well-reasoned decision and has been correctly decided.  That decision should be followed.  Further, even if I have to decide the matter afresh, I would also arrive at the conclusion as set out by the learned Judge in [16] and [17] of that decision.

(1) On the question of whether it is necessary to have leave to serve the contempt proceedings out of jurisdiction on an alleged foreign contemnor, who has already submitted to the jurisdiction of the Hong Kong Court in a set of proceedings, and the contempt complained of arose out of and is incident to an order made in those proceedings, the point is not covered by the authorities cited by LCT.  I do not regard the non-mentioning of these authorities in the ex parte application by Ps as a material non-disclosure.

(2) The only authority on the point revealed by the diligent research of both all counsel is Saif Partners, which was handed down very recently, ie on 4 June 2020.

(3) The fact that contempt proceedings in Hong Kong are commenced under fresh proceeding by way of originating summons does not affect the analysis in Saif Partners at all.  While the alleged contempt arose out of and is incidental to an order made in the proceedings, in which the alleged contemnor has already submitted to the jurisdiction of the Hong Kong Court, there is no reason why leave to serve the contempt proceedings out of jurisdiction is required.  If LCT’s argument is correct, that would mean that a foreign party, after submitting himself to the jurisdiction of the Hong Kong Court in the original proceedings, may disobey the orders made by the Hong Kong Court in those proceedings without any consequence, for no contempt proceedings against that foreign party can possibly be pursued.  That is completely absurd.

(4) The point as mentioned in subparagraph (1) above has only been decided in Saif Partners and not in any other authority.

I do not see any contradiction between Saif Partners and any other authorities, including authorities which are binding upon the Court of First Instance. 

(5)     I refuse to accept LCT’s submission that the Working Party on Civil Justice Reform and the High Court Rules Committee deliberately chose to confer a privilege on foreign litigants who have submitted themselves to the jurisdiction of the Hong Kong Court in legal proceedings, ie the privilege of being immune from contempt after flouting the orders made by the Hong Kong Court in the original proceedings.  LCT has not produced any legislative material in support of this bold contention.  As to why no gateway for contempt proceedings is provided in Order 11 rule 1(1), the answer has been provided in Saif Partners.

51.  I rule against LCT on the Jurisdiction Argument.

Improper Service Argument

52.  LCT submits that Ps’ application for substituted service and dispensation of personal service was made on a false premise (“the 14-day issue”), namely that it was not practicable or was practically impossible for LCT to be personally served within the short 14-day window.  The alleged 14-day window is misconceived.  Order 52 rule 3(3) provides: “Unless within 14days after such leave was granted the originating summons is entered for hearing the leave shall lapse”.  The rule only requires that the originating summons for the Contempt Proceedings to be “entered for hearing” within the 14-day period, which means issuing a notice of appointment to hear the originating summons[25].  The rule does not require the originating summons to be served within the 14-day period.

53.  LCT further argues that Ps also failed to draw to my attention in the exparte application the exceptional nature of dispensation with personal service.  There is no basis to suggest that LCT has ever evaded service, and this is no justification for dispensation of personal service.

54.  LCT also complains that the Subject Order was only served on him after the expiration of the time within which he had to comply with the order (“service timing issue”).

(1) Order 45, rule 7(2)(b) provides:

“…… an order shall not be enforced… unless… in the case of an order requiring a person to do an act, the copy has been so served before the expiration of the time within which he was required to do the act”.

(2) The Subject Order was served on LCT on 17 April 2017.  However, the time for compliance with the Subject Order expired on 2 September 2016.  Hence, the Subject Order was not served “before the expiration of the time within which he was required to do the act”.

(3) Ps failed to draw to the Court’s attention of Order 45, rule 7(2)(b) at the ex parte stage.  In turn, Ps also failed to disclose that (a) the Subject Order was only served about 7 months after the expiration of the time for compliance, and that (b) the consequence is that the Subject Order “shall not be enforced” under Order 45, rule 7(2)(b). 

55.  By the Affirmation of Bryan Sum of RBJL dated 23 December 2019, Ps explained when RBJL was making the ex parte application, RBJL at that time was of the view that there appears to be a conflict between Order 28 rule 2 in which the HongKong Civil Procedure 2020, Volume 1, at §28/1A/2 commented that “[a]n appointment before the court should generally only be taken after the time for filing affidavits have expired” and Order 52 rule 3(2) which imposed a 14-day time frame.  Further, Order 12 rule 5 and 9(3) together allow a defendant to acknowledge service within 14 days. The timeframe under Order 52 rule 3(2) would mean a notice of appointment to hear the originating summons would be filed before the filing of the acknowledgement of service.  Having considered all these, RBJL took the view that it would be necessary to issue the originating summons and serve the same on LCT within the 14-day period prescribed in Order 52 rule 3(2).

56.  Senior Counsel for Ps in his written submissions accepts that, upon reviewing the authorities, in the light of the ChengKam Mun case, “entered for hearing” in Order 52 rule 3(2) should mean issuing a notice of appointment to hear the originating summons.  There is no requirement that the originating summons must be served on the respondent within the 14-day period. Nonetheless, Ps submit that the dispensation with personal service and the substituted service order are justified for there is strong evidence showing that LCT was evading service.  See [16] – [25] above.

57.  I note that LCT denies that he was evading service at any time.  However, in my view, based upon the evidence produced by Ps at the exparte stage[26], I am satisfied that there is prima facie evidence showing that Ps was evading service.  I do not agree that at the exparte stage, there was non-disclosure of any material facts by Ps.  In my view, at the ex parte stage, Ps have produced evidence to show that LCT might be evading service.

58.  It is true that the ChengKam Mun case was not cited to this Court at the ex parte stage. However, there is no evidence showing that RBJL was aware of this decision, or ought to be aware of this decision, at the exparte stage.  Further, it would not be right to gauge whether there was any material non-disclosure on law in the ex parte application by measuring that application against the very full argument and citation of authorities in this interpartes paper determination.  I would not say that there was any material non-disclosure on law by Ps on the service issue in the exparte stage.

59.  In my view, the 14-day issue would not invalidate the Contempt Proceedings in any event. If the order for substituted service and the leave to dispense with personal service are set aside, the consequence would be that Ps have to take steps to effect service on LCT again.  One must bear in mind that the purpose of service is to ensure that the respondent has full notice of the proceedings against him.  There is no doubt that LCT is fully aware of the matters in the Action and in the Contempt Proceedings, as he has filed LCT’s Summonses and made affirmations in support of these summons.  In these circumstances, there would be no practical reason to set aside the leave for dispensing personal service and the order for substituted service.

60.  As to the service timing issue put forward by LCT as summarized in [54] above, it is clear that LCT has already had full knowledge of the terms of the Subject Order at least since 15 June 2016. As set out in [22] above, on 15 June 2016, Ps and LCT together filed a consent summons for an order allowing LCT to have further time to comply with the Subject Order.  Obviously, LCT must have been aware of the terms of the Subject Order before seeking further time to comply with the same.

61.  Ps submit that LCT is relying upon his own evasion of service to frustrate the enforcement of the Subject Order by contempt proceedings, which is gamesmanship at its worst.  Ps will make an application to dispense with service of the Subject Order under Order 45 rule 7(7) after the dismissal of LCT’s Summonses.  That application can be made at any stage of the proceedings[27].

62.  I must say that the service timing argument put forward by LCT is unattractive, and Ps has a real prospect of success in obtaining leave to dispense with service of the Subject Order under Order 45 rule 7(7).

63.  Given that LCT must be aware of the terms of the Subject Order a long time before the expiration of the time for compliance specified in the order, I do not regard that there has been any material non-disclosure on the service timing by Ps.

64.  In my judgment, there is no merit in the Improper Service Argument at all.

Lack of Particulars Argument

65.  LCT argues that the statement in support of the Contempt Proceedings (“the Contempt Statement”) is woefully unparticularised and defective, and hence the leave to commence contempt proceedings must be set aside.

66.  LCT complains that in respect of the “Ningbo Share Certificates”, the “Ningbo Financial Documents” and the “Dongguan Share Certificates” mentioned in [10] of the Contempt Statement, no sufficient particulars of the same have been given, and as a result LCT does not have enough information to enable himself to meet the charge against him.  LCT is arguing that by reading the Contempt Statement, he would not be able to know why the Documents would fall within the ambit of “accounting documents” in [1] of the Subject Order, or “confidential corporate commercial information” as defined in [2] of the Subject Order.  LCT also does not know on what basis Ps are saying that the Documents are within the possession, custody, power or control of LCT.  Further, LCT does not know why Ps would say that LCT has breached the Subject Order in matters relating to the Documents.

67.  I have carefully read the Contempt Statement. In [11] – [13] of that statement, Ps have set out what are Ningbo Share Certificates, Ningbo Financial Documents, and Dongguan Share Certificates.  In [14], Ps say “[the Documents] had never been returned to [Ps].  By not returning [the Documents], pursuant to [the Subject Order], [LCT] is in breach of Paragraphs 1 and 2 of [the Subject Order]. …”  So the alleged breach committed by LCT is not returning the Documents to Ps, contrary to [1] and [2] of the Subject Order.  In my view, the charge against Ps has been clearly set out in the Contempt Statement.  As to whether the Documents fall within the scope of either [1] or [2] of the Subject Order, and whether the non-returning of the same (assuming the alleged non-returning did occur) constitutes a breach of the Subject Order, these would be matters to be argued in the substantive hearing in the Contempt Proceedings.  I should not make any ruling on these matters at the present stage.

68.  LCT also makes a complaint concerning the Affirmed Statement under this head.  However, the Affirmed Statement is not an issue in the Contempt Proceedings[28].  There would be no need to deal with LCT’s arguments concerning the Affirmed Statement.

69.  In my judgment, there is no merit in the Lack of Particulars Argument.  I refuse to accept this argument.

Last Resort Argument

70.  LCT submits that contempt proceedings should only be brought as a last resort when no alternative powers of the Court could be invoked[29]. LCT argues that the Contempt Proceedings commenced by Ps are satellite litigation which are not pursued by Ps for any legitimate ends.  The Contempt Proceedings should be dismissed as an abuse of process.

71.  LCT submits:

(1) The Contempt Proceedings are not directed at the obtaining of compliance with the Subject Order, and would not serve any useful purpose at all.  LCT refers me to AdamPhones Ltdv Gideon Goldschmidt[30], in which the court found that contempt proceedings “were not likely to serve any useful purpose”, in a case where the defendant consciously deleted certain files in breach of court order.  LCT argues that even if he had any obligation to return the Documents to Ps, the Contempt Proceedings would not serve any useful purpose, since Ps have already received the Documents[31] and there could no longer be any issue of compliance.  If LCT has committed any contempt, the contempt would be a purely technical one.

(2) Ps have not written to LCT to register their complaint of contempt prior to the application for leave to commence contempt proceedings.  There may be a genuine bonafide disagreement on the interpretation of the Subject Order.  This is something which Ps should do and have not done.  Ps may try to resolve the difference between them and LCT by direct communication, or may seek an adjudication from the Court on the true meaning of the order.  All these should be done before resorting to contempt proceedings.

72.  Each case must depend upon its own facts.  In the case of Adam Phones Ltd cited by LCT, there was no dispute between the parties that the defendant made an honest mistake as to the terms of the order in relation to the handling of the relevant records.  Here, Ps’ case is that the Documents are clearly within the scope of the Subject Order.  In September 2016, by LCT 9^th, LCT conveyed a message to Ps that he had complied with the Subject Order.  However, in February and March 2019, in the Mainland legal proceedings commenced by LCT against Ps, Ps came to realize that LCT had deliberately withheld the Documents for about 2½ years, in breach of the Subject Order.  If all these allegations are true, in order to preserve the dignity of the Subject Order and in the interest of justice, I do not see any other alternative apart from bringing LCT to justice by contempt proceedings.  Whether Ps’ allegations can be proved is a matter to be resolved in the substantive hearing of the Contempt Proceedings.

73.  I refuse to accept the Last Resort Argument put forward by LCT.

P’s Summons

74.  By Ps’ Summons, Ps seek leave to issue and serve the Notice of Hearing out of time.  Since the Contempt Proceeds are based upon the alleged breached of [1] and [2] of the Subject Order by LCT, this is a civil contempt case.  In the circumstances, the Court has jurisdiction to extend the time provided in Order 52 rule 3(2)[32].

75.  LCT opposes the application. LCT submits that Ps’ application is a belated application.  Further, the Contempt Proceedings are fundamentally defective in various respects and ought to be struck out.  In these circumstances, there is no reason to grant the time extension sought by Ps.

76.  For the reasons set out in this decision, I do not agree that the Contempt Proceedings are fundamentally defective and liable to be struck out.  Further, I agree with Ps that:

(a) The purpose of the time requirement in Order 52 rule 3(2) is to ensure that contempt proceedings would be prosecuted by the applicant promptly after leave to apply for an order of committal has been granted[33].  In the present case, LCT does not allege that there has been any delay by Ps in prosecuting the Contempt Proceedings.  I am of the view that there is no delay in these contempt proceedings.

(b) The Notice of Hearing was not issued within the 14-day period due to the view taken by RBJL at the ex parte stage.  See [55] above.  That view, although may not be correct, is a genuine view taken by RBJL.

(c) There is no prejudice to LCT if the time extension sought by Ps is granted.  In the circumstances, there is no reason to exercise my discretion against Ps’ application for a time extension.

(d) If the leave to commence contempt proceedings lapses because Ps have not issued the Notice of Hearing within the 14-day period, that does not deprive the Court of any further jurisdiction to grant fresh leave to Ps[34].  I am of the view that Ps’ application for an order of committal against LCT is arguable.  That being the case, even if Ps have to apply for leave to commence contempt proceedings afresh, I would still grant leave to Ps.

77.  Bearing all the aforesaid in mind, I am of the view that the time extension sought by Ps should be granted.

Other matters

78.  LCT has put forward an argument in his 14^th Affirmation dated 3 December 2019, which does not seem to be pursued by Senior Counsel for LCT in his written submissions.  For the sake of completeness, I would briefly deal with this argument.

79.  LCT argues that Ps have adopted the wrong procedure by applying for order for substituted service and dispensation with personal service in the Action instead of in the Contempt Proceedings.  There is no merit in this argument.

(1) There is no rule in Order 52 prohibiting the simultaneous granting of leave to commence contempt proceedings and leave to dispense with personal service and order for substituted service.  There is also no rule prohibiting granting an order for dispensing personal service and an order for substituted service in the original action.  By way of example, in LuckySun Development Ltdv Gainsmate International Ltd[35], leave to commence contempt proceedings and dispensation of personal service were granted together.

(2) In any event, even if Ps have adopted a wrong procedure as alleged by LCT, LCT has not shown any prejudice to him as a result of the wrong procedure.  The Court should not set aside orders on the basis of mere technicalities which result in no prejudice to the alleged contemnor.  See [40] above.

80.  There is another matter concerning some additional documents provided by RBJL to the Court on 18 August 2020 (“the Additional Documents”).  The Additional Documents are:

(1) transcripts of the hearing on 6 July 2016 before DHCJ Seagroatt; and

(2) correspondence passing between RBJL and KMW in relation to the said hearing.

81.  By their letter dated 20 August 2020, KWM indicated a strong objection to the inclusion of the Additional Documents in the paper determination of LCT’s Summonses and Ps’ Summons.  KWM said that the introduction of the Additional Documents at this very late stage would deprive LCT of any fair or proper opportunity to address and respond to the matters raised in the Additional Documents, and would not be fair to LCT.

82.  On 25 August 2020, RBJL wrote to the Court and said that although introducing the Additional Documents after lodging the agreed bundles was not ideal, providing the said documents to the Court was a bona fide attempt by Ps to assist the Court.  Given the nature of the documents, LCT would be well aware of the contents of the same at all times.

83.  In my view, although the suggestion to include the Additional Documents in the paper determination was made at a very late stage, the Additional Documents are merely transcripts of the hearing on 6 July 2016 and the correspondence passing between the parties’ solicitors.  As said by RBJL, LCT is well aware of the contents of these documents at all times. Further, Senior Counsel for LCT is able and has made submissions in relation to the Additional Documents in his written submissions.  I do not see any valid reason to exclude the Additional Documents in the paper determination.  The Additional Documents are treated as part of the documents before the Court in this paper determination. 

Disposition

84.  For the reasons set out in the above, I am of the view that there is no merit in LCT’s Summonses.  I dismiss LCT’s Summonses.  I also make an order in terms of [1] of Ps’ Summons, giving leave to Ps to issue and serve the Notice of Hearing out of time.

85.  As to the costs of the LCT’s Summons, I am of view that costs should follow the event and be paid by LCT to Ps.  As to the costs of Ps’ Summons, on the one hand Ps are seeking indulgence from this Court.  On the other hand, LCT has vigorously opposed Ps’ application but failed.  In these circumstances, I would award HK$1,040 to LCT.  Save that, costs of Ps’ Summons should be paid by LCT to Ps.  The costs of all these summonses are to be summarily assessed.  I make a costs order nisi giving effect to the above.  There be leave to Ps to file and serve a bill of costs for summary assessment within 7 days after the costs order nisi becoming absolute.  There be leave to LCT to file and serve a written reply to the said bill within 7 days thereafter.

86.  Lastly, it remains for me to thank all counsel for the helpful assistance rendered to the Court.