CHOU YI FENG v. CHOU YI CHEN AND OTHERS

HCA 4393/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4393 OF 2001

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J U D G M E N T

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Introduction

1. There are 4 applications which need to be dealt with in this judgment:-

(a) the plaintiff's application for service of the injunction orders to be dispensed with;

(b) the defendants' application for setting aside leave to apply for committal for contempt of court;

(c) the defendants' application for the discharge of para. 5 of the injunction order dated 16 November 2001 (continued by the order dated 11 December 2001);

(d) the plaintiff's motion for committal for contempt of court.

Background Facts

2. The plaintiff is the daughter of the 2nd defendant and the sister of the 1st defendant (collectively "the defendants" and respectively "the mother" and "the sister"). The plaintiff is a director and minority shareholder of the 3rd defendant ("Super Asian"). According to the plaintiff, Super Asian is a Hong Kong-registered company engaged in the business of trading in bicycle materials, parts and accessories.

3. On 8 October 2001, the plaintiff commenced this action claiming in effect that her shares in Super Asian have been fraudulently transferred to the defendants and she has been removed as a director by fraud on the defendants' part. Further, a summons was taken out by the plaintiff for an interim injunction and an order was granted on 19 October 2001 ("the 19 Oct Order"). The terms of the 19 Oct Order relevant to this judgment were (in brief):-

(a) the mother be restrained from disposing 4,000 shares of Super Asian purportedly registered in her name;

(b) the defendants be restrained from withdrawing or transferring the deposit in the 2 bank accounts of Super Asian at the Shanghai Commercial Bank Ltd. (the 6th defendant herein) ("the Super Asian bank accounts");

(c) the defendants be restrained from removing the plaintiff as the president of a Golden Power Machine (Shenzhen) Ltd. ("Golden Power Machine") by amending the company records of Golden Power Machine kept by the Shenzhen authorities.

A Mareva injunction order was also granted against the sister. The 19 Oct Order was to remain in force until 16 November 2001. The inter partes summons for the continuation of the 19 Oct Order was heard on 16 November 2001. Sakhrani J ordered the 19 Oct Order to be continued (with amendments) until the adjourned hearing of the summons ("the 16 Nov Order").

4. The adjourned hearing took place on 11 December 2001 before Yeung J (as he then was). Insofar as is relevant to this hearing, an order was made:-

(a) allowing the defendants to operate the Super Asian bank accounts "in connection with the normal and usual business of [Super Asian]". The defendants must provide copies of the bank statements to the plaintiff not later than 3 days after receipt of the same;

(b) requiring the sister to inform the plaintiff's solicitors of particulars relating to the payments out of and into the Super Asian bank accounts since October 1998 and provide the related records;

(c) requiring full particulars to be given regarding the disposal of any money belonging to Super Asian if any such money has been paid into the sister's bank accounts, or paid according to her direction;

(d) requiring the above disclosure to be made by way of affidavit

(collectively "the 11 Dec Order").

5. The plaintiff contends that the defendants have not complied with the above court orders. By a statement pursuant to RHC Ord 52 r 2 dated 22 April 2002, the plaintiff asked for leave to commit the defendants for contempt of court. Leave to do so was given by Yeung J in an order dated 25 April 2002.

6. As will be further discussed below, on 6 May 2002, the plaintiff took out a notice of originating motion asking the defendants to be committed for contempt. The originating motion was first heard on 3 July 2002. Counsel for the plaintiff submitted that the defendants had breached the 19 Oct Order, the 16 Nov Order and the 11 Dec Order (collectively "the injunction orders"): see para. 4 of the plaintiff's skeleton submissions for use at that hearing.

7. By 3 July 2002, the defendants have (on 26 June 2002) taken out a summons to set aside the leave to commit given on 25 April 2002, essentially on procedural defects including the failure to properly serve the injunction orders on the defendants. The hearing on 3 July 2002 was adjourned because there was insufficient time to hear the parties. Arguments relating to the 4 applications (including the defendants' application taken out on 26 June 2002 and the plaintiff's motion for contempt) were advanced at the hearings on 26 September and 2 October 2002.

8. Between 3 July and 26 September, by an affirmation of the plaintiff's solicitors dated 27 July 2002, the plaintiff applied ex parte for the substituted service of the injunction orders. As a result of the correspondence passing between the court and the plaintiff, it was made known that the application was made for the purpose of the pending committal proceedings. I directed on 12 August 2002 that the application for substituted service (which by then included an alternative application for the dispensation of service of the injunction orders) to be heard inter partes. This explains why there were 4 applications before the court on 26 September 2002.

Statement pursuant to Ord 52 r 2

9. The statement pursuant to Ord 52 r 2 dated 22 April 2002 was a document required by Ord 52 r 2(2) the relevant part of which reads:-

"(2) An application for such leave must be made ex parte to a judge, and must be supported by a statement setting out the name and description of the applicant, the name, description and address of the person sought to be committed and the grounds on which his committal is sought ... ".

10. The importance of such a statement has been discussed in Hong Kong Civil Procedure 2002, para. 52/2/6:-

"The statement in support of the application is to be treated in a similar manner as an indictment in criminal proceedings having regard to the penal nature of the sanctions for contempt ... At the substantive hearing the applicant cannot rely on any grounds not contained in the statement without the leave of the court (r.6(3) and para. 52/6/2). The statement should state all facts relied in support of the application. Great care therefore must be exercised in drafting the statement. Leave granted pursuant to a defective statement may be set aside (see the discussion on strict compliance at para. 52/0/13)" (emphasis supplied).

The above paragraph in Hong Kong Civil Procedure 2002 continued to discuss what should be included in the statement. Among other things, the learned editors said that the statement should include:-

"... the grounds on which the committal is sought. There must be a reference to the order ... alleged to have been breached in case of civil contempt, the personal service thereof on the alleged contemnor (if necessary: see below) and how and in what manner is it alleged the same has been breached, with sufficient particularity to enable the alleged contemnor to defend himself, by telling him exactly what is it that he has done or failed to do which constitutes the contempt ... ".

11. The statement filed herein ("the statement") apparently alleges that the defendants were in breach of all of the injunction orders: see para. 8 to 18 (the 19 Oct Order) and 21 to 22 and 24 to 48 (the 16 Nov Order and the 11 Dec Order) thereof. Although the statement apparently makes the allegations set out above, whether the statement has adequately (or properly) set out the allegations is a matter in issue. This will be dealt with under the sub-heading "(4) Was the Statement Defective?".

12. At the time of the hearing before me, however, both sides initially proceeded on the basis that only the 16 Nov Order and the 11 Dec Order are relevant: see para. 1.3 of the plaintiff's skeleton argument dated 24 September 2002 and para. 2(a) and (b) of the defendants' skeleton argument dated 25 September 2002 (collectively "the inter partes injunction orders").

13. It was only at some time during the second day of the hearing (on 2 October 2002) that the plaintiff indicated the 19 Oct Order is also relied upon. The defendants complain in effect that this has taken them by surprise. It may well be so but, since the manner of how to exercise the court's discretion would be the same irrespective of whether only the inter partes injunction orders are involved, I would propose to deal with the applications on the basis all of the injunction orders are in issue.

Applications to (a) Set Aside Leave and (b) Dispense with Service, Etc.

14. As stated above, the defendants apply to set aside leave to apply to commit them for contempt whereas the plaintiff applies to dispense with service (and, possibly, also for substituted service) of the injunction orders. Because the matters relevant to (and hence the issues raised by the parties in relation to) these two applications are very closely inter-related (and may even be the same), I shall deal with them under the same sub-headings below.

(1) Were the Injunction Orders Served?

15. It is undisputed that the injunction orders have not been personally served on the defendants. Ord 45 r 7(2) provides:-

"Subject to Order 24, rule 16(3), Order 26, rule 6(3) and paragraphs (6) and (7) of this rule, an order shall not be enforced under rule 5 unless-

(a) a copy of the order has been served personally on the person required to do or abstain from doing the act in question, and

(b) 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" (emphasis supplied).

16. The defendants' first ground in support of this application is that the plaintiff has failed to personally serve, and hence the plaintiff cannot seek to enforce, the injunction orders. The plaintiff contends that substituted service was ordered by Chu J on 12 June 2002 and effected accordingly: para. 4.4, plaintiff's skeleton argument dated 24 September 2002.

17. With respect, the plaintiff's contention has no merit. The order of Chu J was made after leave to commit the defendants for contempt has been given (on 25 April 2002). In fact, it was made after the plaintiff has taken out the notice of originating motion (on 6 May 2002). Para. 1 of the order of Chu J was about the substituted service of "documents of the committal proceedings". It has nothing to do with the service of the injunction orders which, by virtue of Ord 45 r 7(2), the plaintiff is (and was) required to effect.

18. Further, it is unclear if the plaintiff's solicitors also rely on an order made by the master on 10 October 2001 giving leave to serve the writ (and all subsequent proceedings) out of Hong Kong: para. 3 to 8 of the affirmation of Mary Jean Reimer Lau dated 17 July 2002. This was not put forth by plaintiff's counsel at the hearing. I would therefore assume the master's order to be irrelevant. In any event, I do not find the master's order to be able to advance this part of the plaintiff's case.

(2) Should Service be Dispensed With?

19. Ord 45 rr 7(6) and 7(7) are relied upon by the plaintiff. They provide:-

"(6) An order requiring a person to abstain from doing an act may be enforced under rule 5 notwithstanding that service of a copy of the order has not been effected in accordance with this rule if the Court is satisfied that, pending such service, the person against whom or against whose property it is sought to enforce the order has had notice thereof either-

(a) by being present when the order was made, or

(b) by being notified of the terms of the order, whether by telephone, telegram or otherwise.

(7) Without prejudice to its powers under Order 65, rule 4, the Court may dispense with service of a copy of an order under this rule if it thinks it just to do so" (emphasis supplied).

While both parties accept that the power conferred by Order 45 rr 7(6) and 7(7) is a discretionary power, they differ both as regards what are the relevant matters when the court exercises this power as well as how the discretion is to be exercised in this case.

20. The defendants submit that, in relation to Ord 45 r 7(7), the court's discretion is to be exercised only in the clearest cases, where it can be shown that the person against whom enforcement is sought (a) has notice of the order and (b) is evading service of it. On the other hand, the plaintiff argues that only the question of that person's knowledge of the order is relevant to the discretion. Once it has been established he knew of the order, whether he is also evading its service is irrelevant.

21. The defendants' above submission can find support in Arlidge, Eady & Smith on Contempt (1999) 2nd Ed.:-

"There is, even in the case of an order requiring a given act to be done, a power to dispense with service. This is in practice exercised only in the clearest cases; for example, where it can be shown that the person has notice of the order and is evading service of it. The mere fact that he was present when the order was made is not sufficient to dispense with service".

The authority cited by Arlidge is In re Tuck [1906] 1 Ch 692 the material parts of the judgment of which read:-

"This appeal raises an important question of practice ...

The learned judge held that the objection that the order had not been served until after January 1 was not a good objection, because the defendant was present in Court when

the order was made, and therefore personal service was unnecessary. In support of this view the learned judge referred to Hyde v. Hyde, where Cotton L.J. said: 'It is true that as a general rule no order will be made ... unless it can be shewn that there has been personal service of the order disobeyed, but there are exceptions to that rule. If it were proved, for instance, that the person was actually in Court at the time the order was made, service would be unnecessary in order to obtain process for contempt, and personal service is also dispensed with if it is shewn that the reason why there has been no personal service is that the person to be served has evaded service.' ...

... it is a clear dictum from Cotton L.J., and one which deserves careful consideration. It was not suggested to us that there was any reported case in which this dictum had been acted upon, and it is not easy to understand on what ground the cases where a defendant evaded service of an order of which he had notice came to be discussed at all if the fact of notice, apart from evasion, could be deemed sufficient to dispense with service of the order. ...

It was, however, suggested that the settled practice of the Court is in favour of the view that the order need not be served 'if the Court is satisfied that the person to be served is aware of the order.' This is the statement in the Annual Practice, p. 592, but the authorities cited do not justify it. In order to ascertain what has been the settled practice we thought it desirable to consult ... the senior registrar, who has been good enough to send us a memorandum, ... : 'The practice in the registrar's office where an order has been made for a person to do an act within a limited time is to require that the order be personally served ... except ... where, in the opinion of the Court, the service has been evaded; and it has not been the practice to make an exception on the ground that the person ordered to do the act was aware of the order ... " (emphasis supplied) (pp. 694-696).

In re Tuck (and Century Insurance Co. v. Larkin [1910] 1 Ir.R. 91) is also relied upon in Hong Kong Civil Procedure 2002, para. 45/7/7 for the proposition that the fact that a person was present in court when the order was made is not of itself sufficient to dispense with service of the order.

22. On the other hand, the plaintiff submits that, in relation to Ord 45 r 7(7), the court's discretion is completely unfettered, although in exercising this discretion the court will usually consider whether the contemnor has knowledge of the order. In relation to the nature of the discretion, the plaintiff's submission is supported by the court of appeal's observation in Excel Noble Development Ltd. and Others v. Wah Nam Group Ltd. and Others, unrep., CACV 910 of 2000 (29 May 2001).

23. As has been noted by the English court of appeal in Davy International Ltd. and Others v. Tazzyman and Others [1997] 1 WLR 1256, the court's discretionary power to permit enforcement of its orders even though personal service has not been effected can be found in Ord 65 r 4 [substituted service], Ord 45 r 7(6) [prohibitory orders] and Ord 45 r 7(7). The decision in Davy International was concerned with whether the court's power under Ord 45 r 7(7) can be exercised retrospectively. Morritt L.J. observed that:-

"... the powers under Ord. 65, r. 4 saved by the paragraph [referring to Ord 45 r 7(7)] are concerned with substituted service and that paragraph (7) does not sit very happily with paragraph (6)".

24. The English court of appeal's observation that Ord 45 r 7(7) does not sit happily with Ord 45 r 7(6) is probably related to this. Ord 45 r 7(6) is expressly related to "[an] order requiring a person to abstain from doing an act". This type of order is commonly called a prohibitory order. Conversely, Ord 45 r 7(7) is wholly unlimited in its wording and so can cover both a prohibitory order as well as an order requiring a person to do an act (commonly called a mandatory order). Ord 45 r 7(6) expressly prescribes that the court may in its discretion permit enforcement of a prohibitive order if it is satisfied that the contemnor has notice of it either because he was present in court or because he has been notified by other means. Ord 45 r 7(7) which, at least on the face of its express wording, is not limited to prohibitive orders, does not however contain such express restriction regarding the court's discretionary power.

25. The English court of appeal described the discretion for dispensing with personal service of an order under Ord 45 r 7(6) as a "very limited power of dispensation" and can only be exercised according to the "condition prescribed for its exercise" (see p. 1261H). Having compared the difference in the wordings of Ord 45 r 7(6) and Ord 45 r 7(7), and having taken into account the requirements of Ord 45 rr 7(2) to 7(4), the court of appeal concluded that Ord 45 r 7(7) is not confined in its operation to any particular point in time.

26. Although Davy International was an appeal which merely determined that the discretion under Ord 45 r 7(7) can be exercised retrospectively, a number of decisions relating to the nature of the discretion have been referred to in the judgment:-

(1) Gordon v. Gordon [1946] P 99;

(2) Turner v. Turner (1978) 122 SJ 696;

(3) Hill Samuel & Co. Ltd. v. Littaur, The Times, 13 April 1985.

27. The following passages in Davy International discussed the nature of the court's discretion for dispensing with service of the order:-

"It is convenient first to consider Gordon v. Gordon ... The Court of Appeal held that there was no power to commit the husband. Lord Greene M.R. said, at pp. 105-106:

'The principle that, where a definite time is mentioned in the order for doing something, service of the order after the expiration of that time is not sufficient to found proceedings for contempt is well established.'

Later, he said, at p. 109:

'In the present case it is clear that the order was not properly served in time. In view of that, there was no such breach of the order as would justify proceedings in contempt, and the fact, which I am assuming, that the [contemnor] knew all about the order in plenty of time does not justify us in any way in departing from the requirements of the rule.'" (p. 1262B-E).

"[In] Turner v. Turner ... the husband was not served with any order to [the effect that he should hand the child to the wife] and failed to comply with what he had heard the judge had required of him ... Lord Denning M.R. said:

'[Counsel for the husband] relied on Gordon v. Gordon ... it seems to me that it turned on the construction of the Matrimonial Causes Rules 1944 as they were at that time. ... I am glad to say that the rules, so far as the High Court is concerned, have been altered. This has been done by Ord. 45, r. 7(7). It says the court may dispense with service of a copy of an order under this rule if it thinks it just to do so. ... If there ever was a case for service of a copy to be dispensed with it is such a case as the present. The husband was present in court. He heard the order. He knew all about it. Then he disappeared ... The court can dispense with service and proceed at once against him for contempt.'

Eveleigh L.J. ... agreed. He added:

'Gordon v. Gordon was a case governed by the Rules of the Supreme Court as they then were, Ord. 41 r. 5. That rule has been replaced by Ord. 45 r. 7, and by paragraph (6) in particular ... [the text of Ord 45 r 7(6) was then set out] But paragraph (7) goes on, [the text of Ord 45 r 7(7) was then set out] The rules have clearly been altered to ameliorate the position as it existed in Gordon v. Gordon, and I do not think that [that case] governs this present case at all. ... '" (pp. 1262E-1263G).

"[Turner v. Turner] was followed by the Court of Appeal in Hill Samuel & Co. Ltd. v. Littaur ... In that case the court was concerned with a prohibitory order but because the conditions prescribed by rule 7(6) had not been complied with, it could not be enforced unless the power conferred by rule 7(7) was both available and exercised. The judge had held that he could and should exercise that power and proceeded to enforce the order. The Court of Appeal concluded that he was right.

... Parker L.J. said:

'... Here the defendant knew precisely the terms of Robert Goff J.'s order. ... He knew ... that he was acting in breach of the order ... As to the exercise of the discretion, the only point made was that the plaintiffs had failed to serve, but that can avail nothing, for paragraph (7) is to deal with cases where there has been a failure to serve. ... ' .

Sir David Cairns said:

'... I am quite satisfied that R.S.C. Ord. 45 r. 7(7) means what it says, that the discretion thereby conferred on the court is not restricted in the way contended for ... '" (p. 1264B-H).

28. The following propositions can be distilled from the above observations and/or conclusions of the Hong Kong court of appeal (in Excel Noble) and the English court of appeal (in Davy International, Turner and Hill Samuel & Co. Ltd.):-

(a) Ord 45 r. 7(6) applies to prohibitory orders and the discretion thereunder is only available when the conditions prescribed by it are met;

(b) Ord 45 r 7(7) however confers an unfettered discretionary power and can be exercised whenever it is just to do so;

(c) the old authorities before the changes to the Rules (made in England in the mid-1960's) can no longer be relied upon to fetter the court's discretion under Ord 45 r 7(7).

In view of these propositions, I do not agree with the defendants' submission that service of the injunction orders can only be dispensed with if there is evidence not only of (a) the defendants' notice of the orders but (b) their evasion of service of the order.

29. I turn now to the relevant facts of the present case before considering how my discretion should be exercised. The defendants were not personally present in court when the injunction orders were made. Ord 45 r 7(6)(a) is therefore inapplicable. There is no direct evidence that they have been notified of the terms of those orders and so it is doubtful if the condition laid down by Ord 45 r 7(6)(b) is satisfied. The plaintiff, in applying for the dispensation of those orders, relies essentially on Ord 45 r 7(7).

30. It is common ground that it is for the plaintiff to establish her case against the defendants to the court's satisfaction adopting the criminal standard of proof, that is, beyond reasonable doubt.

31. Although there is no direct evidence of the defendants' knowledge of the injunction orders, the plaintiff argues that there is ample circumstantial evidence of the same:-

(a) the defendants were legally represented at each of the 3 inter partes hearings where the injunction orders were granted or continued;

(b) prior to the hearing before Yeung J on 11 December 2001, the defendants actively contested the application and filed affidavit evidence in rebuttal;

(c) the defendants' legal representatives took part in the hearing on 24 January 2002 for the amendment of the 11 Dec Order. The part of that order relating to the sister's obligation of disclosure was amended accordingly;

(d) some of the documents required by the 11 Dec Order (as amended) to be disclosed to the plaintiff were provided by the defendants;

(e) in relation to the 16 Nov Order, the defendants wrote to the Shenzhen Industrial and Commercial Bureau on 1 November 2001 giving an indemnity to the Bureau for any dispute or legal consequence for the removal of the plaintiff as the president of Golden Power Machine;

(f) the defendants have filed a defence and counterclaim on 23 April 2002.

32. In relation to the above matters relied upon by the plaintiff, her argument that the defendants knew of the injunction orders is correct if, but only if, their legal representatives have informed the defendants:-

(1) the injunction orders were made;

(2) the terms of the injunction orders;

(3) the nature of the injunction orders, namely, they were orders of the court which should be obeyed;

(4) the consequence of not obeying a court order.

It has not been suggested by the plaintiff that the defendants knew of the injunction orders through other means. If it were so suggested, there is no evidence to support it.

33. The fact that the defendants have provided some of the documents or partly performed what was required of them by the injunction orders does not necessarily mean that the terms of the injunction orders were known to the defendants. Their legal representatives might have merely told them to provide the documents or asked them to perform some of the matters required by the injunction orders (without explaining to them the terms of the injunction orders).

34. Although this has not been referred to in the plaintiff's skeleton argument dated 24 September 2002 or the speaking notes dated 2 October 2002, I notice that there is no evidence from the defendants directly denying their knowledge of the injunction orders.

35. No doubt one can reasonably expect legal practitioners in Hong Kong to have informed their clients of the matters set out in sub-paragraphs (1) to (4) above. But a reasonable expectation does not meet the criminal standard of proof which is that the disputed matter has been proved beyond reasonable doubt.

36. The plaintiff has not (but could have) argued that there is likewise no evidence from the defendants' legal representatives whether denying or confirming they have informed the defendants of the injunction orders. What they have or have not informed the defendants of is legally privileged information the privilege of which belongs to the defendants.

37. By reason of the matters above, I cannot be satisfied beyond reasonable doubt that the defendants have knowledge of the injunction orders (or, insofar as it may also be relied upon, the 19 Oct Order). I therefore consider that there is no proper basis to rely on Ord 45 r 7(6).

(3) Has Time for Complying with the Injunction Orders Expired?

38. Counsel for the defendants also contends that the time for complying with the injunction orders has not yet expired and so the defendants have not been in contempt of court. This contention can be summarised as follows.

39. Para. 5 of the 16 Nov Order states that:-

"[The defendants] shall forthwith take all reasonable steps to reinstate [the plaintiff] as the President ... " (emphasis supplied).

Counsel for the defendants argues that an order which stipulates that an act should be done "forthwith" is legally the same as an order which does not prescribe any time for performing the act; in other words, such an order is not one covered by Ord 42 r 2(1) the relevant part of which provides:-

"... a judgment or order which requires a person to do an act must specify the time after service of the judgment or order, or some other time, within which the act is to be done" (emphasis supplied).

Merely stating that an act should be done "forthwith", so counsel argues, is not specifying the time within which the act is to be done. In this connection, counsel relies on Winner Food Products Ltd. v. Chung Yat-ming [1989] 1 HKLR 371. Godfrey J (as he then was) said therein:-

"The first authority (in point of time) cited to me was Halford v. Hardy [1899] WN 243. The report states as follows:

'By a judgment of 6th July 1899, the plaintiff undertook forthwith to execute an indenture ... The defendants by their counsel undertook forthwith to execute such indenture ... The plaintiff executed an engrossment of a deed ... but [the defendants] refused or neglected to execute it. The plaintiff moved for the defendants' committal to prison.'

... The judge [in Halford] pointed out that since no time was specified in the undertaking a 'four-day order' was necessary (that is to say, the sort of order made in the Chancery Division to supplement an earlier order in which no time is specified for the performance of the act required).

... the judge said that having had an opportunity of consulting all (but one) of the judges in the Chancery Division, he though he might say that there was a consensus of opinion, ... that in the case of an undertaking of this kind there ought either to be service in accordance with the rules, that is to say, in accordance with the provisions requiring the endorsement of the penal notice, or an order in the nature of a four-day order ... " (emphasis supplied) (pp. 373-374 of Winner Food).

Winner Food was not a case involving the issue of whether the order made therein complied with Ord 42 r 2(1).

40. The footnote to Ord 42 r 2(1) in Hong Kong Civil Procedure 2002 states the following with regard to the effect of an order which fails to specify a time for doing an act:-

"... The rule does not apply to merely prohibitive orders ...

The requirements of para. (1) must be strictly complied with before a judgment or order can be entered on the ground of the failure of a party to do an act within a specified time ... and therefore an order in the form that 'unless' a party should do an act within a specified time without specifying the time after service [or] some other time for the act to be done is bad and judgment entered pursuant thereto will be set aside (Van Houten v. Foodsafe Ltd. (1980) 124 S.J. 277).

... It is proper that after the fixed date in the order some such words as 'or subsequently within four days after service' should be inserted by the court without any express instructions (Re Tuck [1906] 1 Ch. 692 at 696, CA)" (para. 42/2/1).

Hence, the failure of a judgment or order to comply with the strict requirement of Ord 42 r 2(1) will result in the judgment being set aside. Para. 42/2/1 of The Supreme Court Practice 1999 contains the same footnote on this point. In re Tuck was not cited as an authority to the effect that an order which requires an act to be done "forthwith" will not comply with Ord 42 r 2(1). In fact, Hong Kong Civil Procedure 2002 (and the English White Book) says this about such an order:-

"Forthwith has been held to be a sufficient expression of time for doing an act directed by an order (Thomas v. Nokes (1868) L.R. 6 Eq. 521, Halford v. Hardy (1900) 81 L.T. 721). An order to do an act forthwith means that the act is to be done as soon as it can reasonably be done. See Hillingdon LBC v. Cutler [1968] 1 Q.B. 124 ... " (para. 42/2/2).

41. Thus, I disagree with defence counsel's above contention. The injunction orders were validly made. If they had been properly served (or the defendants otherwise knew of them at the time), they ought to have been complied with "as soon as [they] can reasonably be done". If I had been satisfied that the defendants had notice of the injunction orders, I would have been satisfied that they had failed to do so within a reasonable time after the injunction orders have been made.

(4) Was the Statement Defective?

42. This part of the defendants' complaint is that the statement failed to specify the following matters:-

(a) whether, and if so when, the injunction orders were personally served on the defendants;

(b) whether the served copies of the injunction orders were endorsed with a penal notice.

At the hearing, counsel for the defendants also complained that the statement has failed to state clearly the alleged breach or to give particulars in support thereof.

43. In relation to sub-paragraph (a) above, the plaintiff does not dispute the lack of a reference in the statement to service (whether personal or otherwise) of the injunction orders. However, the plaintiff argues that it is unnecessary to do so because in fact no service thereof has ever been effected. In this connection, the plaintiff relies on the footnote in Hong Kong Civil Procedure 2002, para. 52/2/6 quoted above under the heading "Statement pursuant to Ord 52 r 2". The relevant part is repeated here for convenience:-

"... There must be a reference to the order ... alleged to have been breached in case of civil contempt, the personal service thereof on the alleged contemnor (if necessary: see below) ... " (emphasis supplied).

44. I disagree with the plaintiff. The purpose of Ord 52 r 2 in requiring a statement is obvious. As stated earlier, a statement is treated as an indictment. It enables the court and the contemnor to know what case the contemnor has to meet. This aside, as the statement is presented to the court in support of the ex parte application for leave to commit, the duty to make full and frank disclosure should apply to the contents of the statement. The above passage in Hong Kong Civil Procedure 2002 states that the statement should refer (among other things) to the personal service on the contemnor (if personal service is necessary). If personal service is unnecessary because, for example, service has already been dispensed with, or substituted service has been ordered and effected, there is no valid reason why the same should not be referred to in the statement as well. After all, service of the order(s) (upon which the committal proceeding is founded) is almost always an important factor in the court's discretion as to whether leave to commit should be given. To conclude, I find that the statement is defective in failing to alert the ex parte judge to the lack of personal service, or the lack of an order dispensing with service, or one permitting substituted service.

45. Having so concluded, it is unnecessary to consider defence counsel's submission whether the contents of the statement are deficient in that the material facts and particulars in support are lacking. I therefore only observe that the statement is at the very least not clear with regard to the inter partes injunction orders.

46. Para. 7 of the statement is about the 19 Oct Order which has not been relied upon at the hearing. Para. 8 to 18 of the statement are concerned with the alleged breach of the 19 Oct Order.

47. Para. 19 and 20 of the statement refer to the making of the 16 Nov Order and the adjournment of the inter partes hearing to a later date. Para. 23 of the statement sets out the relevant terms of the 11 Dec Order. The part of the statement where it is alleged that the defendants have been in breach of the inter partes injunction orders are para. 21 to 22 and 24 to 44 thereof. Para. 45 and 46 of the statement refer to the defendants' legal proceedings in the mainland. Para. 48 of the statement alleges that by reason of the matters in the preceding paragraphs, the defendants have breached the injunction orders.

48. Para. 21 to 22 and 24 to 44 of the statement essentially refer to the correspondence passing between the parties wherein the plaintiff alleged that the defendants were in breach of the injunction orders. Without deciding whether this is sufficient for the purpose of Ord 52 r 2, the plaintiff's case would have been much easier to understand if the plaintiff had expressly and directly set out what were the defendants' act(s) (or omission(s)) said to have constituted the contempt.

(5) Penal Notice

49. Since the injunction orders have not been served, it goes without saying that the requirement of Ord 45 r 7(4) regarding penal notice has not been complied with. This point, however, stands or falls with the points raised under the sub-heading "(2) Should Service be Dispensed With?".

(6) Full and Frank Disclosure

50. I have already considered the defendants' complaint regarding the plaintiff's failure to state in the statement that the injunction orders have not been served under the sub-heading "(4) Was the Statement Defective?" and so will not repeat the point here.

(7) Manner in which Court's Discretion Should be Exercised

51. I already concluded under the sub-heading "(2) Should Service be Dispensed With?" the plaintiff has not proven beyond reasonable doubt that the defendants have had notice of the injunction orders.

52. At the hearing on 3 July 2002, the defendants' application to set aside leave to commit was already taken out. Former counsel for the defendants indicated that the application was based (among other things) on the plaintiff's failure to serve the injunction orders. In a letter dated 9 July 2002, the plaintiff's legal representatives apparently recognised the need for service of the injunction orders. They said:-

"In the event that [the defendants] evade service of the Documents [which included the inter partes injunction orders], an application for substituted service of the Documents will be made against [them] with costs without further notice ... ".

As stated above, at least at one stage, there was an ex parte application for substituted service by way of the affirmation of the plaintiff's solicitors dated 27 July 2002.

53. At the subsequent hearings, counsel for the plaintiff (correctly) did not pursue the application for substituted service. Such an application would imply:-

(1) there was a need for service of the injunction orders;

(2) the injunction orders would only be treated as having been served from the time when the order permitting substituted service (if such an order was granted) has been complied with;

(3) the committal proceeding instituted before substituted service is effected will very probably have to be aborted because of procedural irregularity, namely, the injunction orders have not been properly served at the commencement of the committal proceedings.

54. By reason of the matters set out under sub-headings (1), (2) and (4) to (6) above, I do not consider that there is any proper basis for exercising the discretion pursuant to Ord 45 rr 7(6) or 7(7) in the plaintiff's favour. The plaintiff's application for dispensing with service of the injunction orders is dismissed. On the other hand, it is appropriate to set aside the leave given to commit the defendants for contempt. I will exercise my discretion to set aside leave.

Defendants' Application to Discharge Injunction Order

55. This application is limited to para. 5 of the 16 Nov Order (continued by the 11 Dec Order) which reads:-

"[The defendants] shall forthwith take all reasonable steps to reinstate [the plaintiff] as the President (董事長) of [Golden Power Machine] including the making of all necessary applications and filings to the Shenzhen Industrial and Commercial Bureau (工商局) or other PRC public authorities as may be necessary for the purpose of reinstating the appointment of [the plaintiff] as the President of [Golden Power Machine]" ("the reinstatement order").

56. The defendants submit that the reinstatement order should be discharged because of material change of circumstances. The following principles are undisputed:-

(1) whether the reinstatement order is discharged by this court does not affect the outcome of the other applications now before the court;

(2) the court has an inherent jurisdiction to discharge its own interlocutory injunction orders even though they were made after an inter partes hearing when there has been a material change of circumstances: see, for example, Hong Kong Civil Procedure 2002, para. 29/1/46; London Underground Ltd. v. NUR (No. 2) [1989] IRLR 343; Chu Hung Ching v. Chan Kam Ming [2001] 1 HKC 396, 401D, 403A;

(3) the court will re-consider and discharge those orders when it is just and convenient to do so: RD Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. [1977] 3 WLR 752, 763H.

57. The material change of circumstances relied upon by the defendants has been set out in the affirmation of Victor Yip-tim Ng dated 26 June 2002. It can be summarised as follows. The plaintiff's husband applied to incorporate a "金多利金屬製品（深圳）有限公司" ("the New Co.") in Shenzhen in September 2001. The plaintiff was the director of Gold Power Industrial Holdings Ltd. ("Gold Power Industrial") in Hong Kong. The New Co. commenced operation in December 2001 with the plaintiff as its managing director. Searches by the defendants disclosed that it has the same registered address as Golden Power Machine. The plaintiff was appointed as the chairman of the New Co. and the New Co. has the same scope of business as Golden Power Machine. Further, it was reported in a bicycling magazine published in Taiwan that the New Co. was the same as Golden Power Machine and the plaintiff was the New Co.'s manager. The New Co. traded through Gold Power Industrial. The association between the New Co. and Golden Power Machine was repeated in the "Taiwan Bicycle Parts Guide 2002-2003". The defendants argue that the above were acts calculated to mislead the customers of Golden Power Machine into believing they were trading with Golden Power Machine when in fact they were trading with the New Co.

58. The plaintiff submits, firstly, that the issue is res judicata because these matters have been raised at the hearing before Yeung J on 11 December 2001 and they have been considered by Yeung J: para. 3.4 to 3.5 of the skeleton argument dated 24 September 2002.

59. The relevant part of the judgment of Yeung J dated 11 December 2001 is para. 11 thereof:-

"Mr Fung [for the defendants] also suggests that the plaintiff had not made full disclosure of the following material facts ...

... The plaintiff has started a new company [Gold Power Industrial] ... and has diverted customers of Chuan Shun to remit payments intended for Super Asia [sic] to [Gold Power Industrial]" (emphasis supplied).

The judgment of Yeung J merely dealt with the allegation of diversion of funds to Gold Power Industrial. The allegation raised in Mr Ng's affirmation is about diversion (or at least potential diversion) of business to the New Co. I do not consider that the matter falls within the doctrine of issue estoppel or res judicata.

60. Further, the allegation of diversion of funds was apparently disputed by the plaintiff at the hearing on 11 December 2001 and hence Yeung J said in his judgment:-

"The plaintiff suggests that monies transferred from Super Asia's [sic] account to hers were used for the business purposes of Super Asia [sic] and therefore there was no misappropriation. Those disputes are disputes as to facts and it is not for me at this stage to resolve such disputes" (para. 12).

61. Despite the reliance placed by the defendants on Mr Ng's affirmation, the plaintiff decided not to adjourn the application so as to file and serve affidavit in response. As a result, there is no evidence to contradict the matters summarised above. Plaintiff's counsel submits that since Mr Ng was only the handling solicitor and not a party to the litigation, he does not have personal knowledge of the facts summarised above. The plaintiff argues that no weight should be placed on the allegations contained in Mr Ng's affirmation.

62. It is of course up to a litigant to decide whether he needs to apply to adjourn an application so as to enable evidence to be filed and served. But he has to bear the consequence(s) of his decision. Here the plaintiff has decided not to adjourn and so Mr Ng's affirmation is left uncontroverted by evidence. It is true that Mr Ng was the handling solicitor only. However, hearsay evidence is admissible in interlocutory proceedings: Ord 41 r 5(2). Moreover, most of the important matters Mr Ng deposed to are supported by documents which apparently came from credible sources. In these circumstances, I do not find any valid reason for not giving weight to his affirmation.

63. If the plaintiff has become the managing director of a company the business of which is highly likely to compete with that of Super Asian and/or Golden Power Machine, this is a factor relevant to whether the reinstatement order should be discharged.

64. The defendants also rely on a judgment given by the Shenzhen People's Court dated 5 August 2002 ("the Shenzhen judgment"). They contend that this judgment is final and conclusive on the merits of the plaintiff's claim in the present action. With respect, I disagree. There is no need to set out the details of the Shenzhen judgment. In short, the Shenzhen judgment merely decided that according to the records kept by Golden Power Machine and those kept by the authorities in the mainland, the plaintiff was not entitled to keep the properties of Golden Power Machine, namely, its seal, business documents, machinery or factory premises. The Shenzhen judgment was hence concerned with a claim based in essence on trespass on the plaintiff's part. The issues involved in the present action are very different (see under the heading "Background Facts").

65. By reason of the above matters, I disagree with the defendants' argument, based on the Shenzhen judgment, that:-

(1) the plaintiff no longer has locus standi to continue with this action;

(2) there is no serious question to be tried on the merits of the plaintiff's claim herein.

However, taking into account the undisputed evidence that the plaintiff is involved in the management of a company whose business will likely compete with that of Super Asian and/or Golden Power Machine, the balance of convenience lies in discharging the reinstatement order.

The Defendants' Right to be Heard

66. The plaintiff contends that the defendants having breached the injunction orders are precluded from seeking to have them set aside: para. 2.1 to 2.4 of the skeleton argument dated 24 September 2002.

67. The general rule is that a party in contempt cannot be heard or take proceedings in the same cause until he has purged his contempt: Hadkinson v. Hadkinson [1952] P 285, 295-296. This is, however, subject to exceptions, one of which being a party in contempt may apply to purge the contempt, or appeal with a view to setting aside the order on which his contempt is founded: 9(1) Halsbury's Laws of England (1998) 4th Ed., para. 511, text to nn. 3 and 4. Even in cases where the rule is prima facie applicable, the court appears to retain a discretion whether to hear the party in contempt: 9(1) Halsbury para. 511, text to n. 8.

68. The defendants either fall within the above exception; alternatively, it is a case where my discretion should be exercised in allowing them to be heard.

Plaintiff's Motion to Commit for Contempt

69. It follows that the plaintiff's motion to commit the defendants for contempt should be dismissed. Insofar as it may be argued that even though leave to commit for contempt has been set aside, it is still within my discretion to allow the committal proceeding to continue (see, for example, Hong Kong Civil Procedure 2002, para. 52/2/2), I will (assuming such power exists) decline to do so.

Costs

70. There is no apparent reason to depart from the usual rule that costs should follow the event. There will be a costs order nisi that the costs of the applications be to the defendants. I shall hear the parties as to whether those costs should be paid by the plaintiff or the plaintiff's solicitors.