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

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BETWEEN

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JUDGMENT

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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.