SAIF PARTNERS II L.P. AND ANOTHER v. JOE ZHIXIONG ZHOU

HCMP 208/2020

[2020] HKCFI 987

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 208 OF 2020

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D E C I S I O N

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1.  This is the Plaintiffs’ ex parte application for (a) dispensation of personal service in respect of their contempt proceedings against the Defendant (“Zhou”) by way of an Originating Summons filed on 10 March 2020 (“OS”); and (b) substituted service on Zhou of the relevant papers for the contempt proceedings by way of service on his solicitors (“MinterEllison”). Zhou resides in the US. This application is necessitated by Zhou’s refusal to accept service of the contempt proceedings on his solicitors.

2.  The alleged contempt arose from Zhou’s breach of a Disclosure Order granted by Deputy High Court Judge Field in HCCL 16 of 2016. 

3.  Shortly before the submission of this ex parte application to the court on 8 May 2020, the court was made aware of a Summons dated 7 May 2020 taken out by Zhou, acting via MinterEllison, in HCCL 16 of 2016 to set aside an ex parte Order of DHCJ Field dated 5 February 2020 (“Order”) granting leave to commence these contempt proceedings. 

4.  On the evidence before the court, there is little room to doubt that Zhou is well aware of the contempt proceedings and is using the rules of the court for game playing so as to frustrate the progress of the same.  Back in September 2019, represented by Senior Counsel and MinterEllison, Zhou succeeded in resisting an application by the Plaintiffs for him to serve a further affirmation in proper compliance with the Disclosure Order.  That application was dismissed upon the Plaintiffs’ undertaking to make an application for leave to commence contempt proceedings.  Hence, the intention of the Plaintiffs to bring contempt proceedings against him must have been known by Zhou then. 

5.  After issuing the OS[1], the relevant papers were served on MinterEllison by the Plaintiffs with a request of confirmation whether they would accept service on behalf of Zhou.  By their response dated 18 March 2020, MinterEllison stated that they did not have instructions to accept service. 

6.  The fact that Zhou has now sought to challenge the Order further confirms that he is quite aware of these contempt proceedings.

7.  By a set of directions in respect of both sets of proceedings (the OS and the setting aside application in HCCL 16 of 2016), the papers for this ex parte application were served on MinterEllison and the Defendant was required by the court to indicate whether he maintains his refusal to accept service of the contempt proceedings on his solicitors.  No reply was received by the court from either MinterEllison or the Defendant. 

Dispensation of personal service

8.  In respect of the dispensation of personal service, O 52, r 3(3) requires that the OS and the supporting documents must be served personally on the Defendant, unless such service is dispensed with by the court (r 3(4)). 

9.  O 11, r 9(1) provides that O 11, r 1 shall apply to the service out of jurisdiction of an originating summons.  However, there is no apparent gateway under O 11, r 1 for the service out of contempt proceedings brought to enforce procedural orders as opposed to judgments[2].  This lacuna had been noted in Hong Kong Civil Procedure 2020, vol 1, [11/1/4F].  According to the Plaintiffs’ submissions (represented by Mr Pao SC, and Mr Tang), there is no case law in Hong Kong discussing the applicable gateway to serve out contempt proceedings.

10.  The case of Navig8 Chemical Pools Inc v Inder Sharma, unrep, HCMP 2885/2016, 14 February 2017, was referred to in the above commentary of Hong Kong Civil Procedure.  In that case, leave to serve a concurrent originating summons out of jurisdiction was granted by a Master pursuant to O 11, r 1(m). 

English authorities

11.  On this topic, there are helpful authorities from England, where the procedural regime is different but sufficiently similar to that of Hong Kong. 

12.  In Marketmaker Technology Ltd & Ors v CMC Group Plc & Ors [2008] EWHC 1556 (QB), the claimants brought an application for injunctive relief against the defendants.  As a result of various improprieties on the part of the claimants in pursuing the application, a number of court orders had been made against them (§3).  The defendants then sought to commit one of the claimants, who was a PRC resident, for contempt relating to his breach of one such orders.  At that point, the PRC claimant’s English solicitors ceased to act.  As the PRC claimant did not have an English address, the defendants sought and obtained an order for alternative service and dispensation with personal service (§§16-17, 30).  At the hearing of the contempt, the PRC claimant argued that the court lacked jurisdiction, and sought to set aside the order for alternative service on the basis that in so applying no permission was sought for service out of jurisdiction (§24).  

13.  Teare J dismissed the application to set aside on the following grounds :

“26 … [the PRC claimant] submitted to the jurisdiction of this court the determination of his claim. Having done so, [he] submitted to the incidents of such litigation … Thus, had the defendants wished to bring a counterclaim against [the PRC claimant], they could have done so without the need to obtain permission to serve the counterclaim out of the jurisdiction. The defendants have not brought a counterclaim but they have obtained an order for the payment by [the PRC claimant] of costs incurred by them in responding to the claim brought against them in this court. They wish to enforce that order against [the PRC claimant]. They have so far failed to do so. In support of their continuing endeavour to enforce that order, they have issued an application to commit [the PRC claimant] for contempt, the contempt being his alleged failure to provide all the documents in his control which relate to his means of paying the amounts due in respect of costs.

27. The order for costs, and the ensuing application to commit for contempt, are ordinary incidents of the claim brought by [the PRC claimant] in this court against the defendant. There is, in my judgment, no need for the defendants to obtain permission to serve the application out of the jurisdiction and so establish this court’s jurisdiction over [the PRC claimant] in the matter of the application to commit for contempt, because he has already submitted to the jurisdiction of the court in respect of that application, since it is an ordinary incident of the claim which he has brought against the defendants …”.

14.  In Deutsche Bank AG v Sebastian Holdings Inc [2017] 1 WLR 1842 and Deutsche Bank AG v Sebastian Holdings Inc (No 2) at[2017] 1 WLR3056 (upheld on appeal, [2019] 1 WLR 1737), the bank sued the 1^st defendant company for a debt.  Subsequently, it joined the 1^st defendant’s director as the 2^nd defendant and obtained a costs order against him.  It then obtained an order to examine the 2^nd defendant as to the 1^st defendant’s means.  When the 2^nd defendant breached the orders, the bank sought leave for service out of the jurisdiction, relying on the “gateway” that the ‘claim is made to enforce any judgment or arbitral award’.

15.  Teare J refused leave to serve out on the basis that the order which the 2^nd defendant allegedly breached was not a ‘judgment’ – a judgment was one which related to a payment of money.  However, Teare J held that no permission to serve out was actually required and dispensed with personal service and ordered alternative service.  In gist, his reasoning was that :

(1)     As a matter of principle, where jurisdiction in respect of a claim or an order was established over a person, the jurisdiction which was established must include jurisdiction in respect of matters which were incidental to that claim or order;

(2)     An order of a court must carry with it the means to enforce that order.  If it did not there would be no utility in the order for it could be disobeyed without the threat of sanction.  The means to enforce an order were therefore a necessary incident of the order.  An order for committal was one of the means by which court orders were enforced.  For that reason, an order for committal was a necessary incident of a court order;

(3)     Therefore, if the court had seized jurisdiction over a person (eg, by way of personal service or service out with leave), it was not necessary to seek permission to serve out any process for contempt.

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.

18.  However, there remains the issue of personal service of the OS on Zhou, unless such service is dispensed with by the court.  The consideration of dispensation is closely related to that of substituted service.

19.  In Secretary for Justice v Choy Bing Wing, unrep, HCMP 4694/2003, 25 October 2005, personal service of the contempt proceedings had been effected, but Mr Choy evaded the service of the notice of hearing and he was absence from the same.  Hartmann J (as he then was) laid out the following principles on the court’s exercise of discretion to dispense with personal service in contempt proceedings :

“29. … it is only in exceptional cases that it would be right not to give personal service of a hearing …

31.     … the weight of authority is to the effect that the discretion which is vested in the court pursuant to O.52, r.3(4) is a discretion which must be exercised, in all the circumstances, best reflect the requirements of justice.  In determining this, the court must not only take into account the interests of the person whose committal is sought for contempt but also the interests of other parties, the Secretary and court users generally, as well as the important interests of upholding the reputation of civil justice in general. …”

20.  In addition to the matters identified in paras 3 to 6 above, it should be mentioned that there are 2 other sets of on-going proceedings involving these parties, and that Zhou is represented by MinterEllison in both of them.  Firstly, there is a hearing on 8 July 2020 before a Master for an account of profits which was ordered against Zhou in HCCL 16 of 2016.  Secondly, Zhou had appealed against the judgment in that action, and the final appeal is to be heard in December 2020.

21.  In light of these evidence, there is a strong inference of game playing, if not evasion of service as contended by the Plaintiffs, by Zhou.  Such behaviour flies in the face of the court, and constitutes an affront to the Underlying Objectives under O 1A, r 1 (expeditious and costs-effective disposal of proceedings; procedural economy; and fair distribution of the court’s resources).  Putting up an obstacle by not accepting service on his solicitors, thereby putting the Plaintiffs to serve the proceedings on him in the US, for the sake of delaying the progress of the proceedings is quite contrary to Zhou’s duties under O 1A, r 3 to assist the court to further those Objectives.  Playing game with the rules of the court cannot be tolerated. 

22.  Bearing in mind that Zhou must be aware of these proceedings and there is a perfectly reasonable alternative mode of service (see below), I believe that the requirements of justice call for the dispensation of personal service of the OS, and I so order.

Substituted service

23.  The court has a discretion to order substituted service of the OS.  O 65, r 4(1) provides that such service may be ordered if “it appears to the Court that it is impracticable for any reason to serve that document in the manner prescribed on that person”.  Pursuant to r 4(3), substituted service “is effected by taking such steps as the court may direct to bring the document to the notice of the person to be served”.

24.  I am satisfied that it is not practical to serve the OS personally upon Zhou in the US when he has solicitors here actively pursuant various applications on his behalf, including the setting aside of the Order. 

25.  Such view is consonant with the Underlying Objectives of increasing the cost-effectiveness of any practice and procedure to be followed in relation to the OS (O 1A, r 1(a)); ensuring the expeditious disposal of the OS (O 1A, r 1(b)); promoting a sense of reasonable proportion and procedural economy in the conduct of the OS (O 1A, r 1(c)); ensuring fairness between the parties (O 1A, r 1(d)); and ensuring that the resources of the court are fairly distributed (O 1A, r 1(f)). 

26.  Further, given Zhou’s obstructive attitude, it is likely that personal service of proceedings on him in the US will result in unnecessary delay and inflation of costs.

27.  The proposed alternative of service on MinterEllison is plainly appropriate.

28.  For these reasons, I grant the application and make an order as per the draft order attached to Mr Pao’s submissions dated 8 May 2020.

29.  Last but not least, I am grateful for the assistance rendered to the court by counsel.