CHINA SHANSHUI CEMENT GROUP LTD AND OTHERS v. ZHANG CAIKUI AND ANOTHER

HCMP 1574/2016

[2018] HKCFI 444

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO1574 OF 2016

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J U D G M E N T

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A. INTRODUCTION

1.  This is the trial of:

(a)   The Originating Summons taken out by the Plaintiffs seeking to commit the Defendants (“the Zhangs”) for contempt for failing to obey court orders for delivery over and disclosure of the Plaintiffs’ Records, and orders relating to a subsidiary called Shandong Cement; and

(b)   A summons issued by the Zhangs to set aside the order granting leave to issue committal proceedings or to strike-out these contempt proceedings on the ground of material non-disclosure (“the Set-Aside Summons”).

2.  The Set-Aside Summons was heard but dismissed on the first day of trial with reasons reserved.

B.  THE FACTS

3.  The underlying action is HCA 2880/2015 (“the Action”) The Plaintiffs are the plaintiffs in the Action, wherein the Zhangs are also the 1^st and 2^nd Defendants.

4.  The Plaintiffs are companies within a group of companies (the “Group”) wherein:

(1)   P1 is the parent company, whose shares are listed for trading on the Stock Exchange of Hong Kong Limited (“SEHK”);

(2)   P2 is a wholly owned direct subsidiary of P1;

(3)   P3 is a wholly owned direct subsidiary of P2; and

(4)   P3 is the sole shareholder of Shandong Shanshui Cement Group Company Limited (“Shandong Cement”), a PRC company which holds the vast majority of the Group’s assets, employs most of the Group’s staff and is responsible for about 99% of the Group’s revenues.

5.  Two court orders were said to have been breached, one made by Lok J on 24 December 2015 (“the December Injunction Order”) and another by Au-Yeung J on 8 January 2016 (“the January Injunction Order”) (collectively, “the 2 Orders”).

6.  Each of the 2 Orders was endorsed with a penal notice and was indisputably served on the Zhangs by service upon Deacons, on 15 February 2016, pursuant to DHCJ M Ng’s order dated 12 February 2016.

7.  The relevant terms of the 2 Orders all concerned the Plaintiffs’ Records and Articles of Association of Shandong Cement (“the AA”).  Those terms and the deadlines for compliance are summarized as follows:

Table A

Item	December Injunction Order [relevant paragraph in the order]	Deadline for compliance counting from 15.2.2016
1.	Each of the Zhangs was restrained from concealing from Ps or destroying or tampering with Ps’ Records, including those listed in Schedule 2 [§A(2)(a) and Schedule 2] (“Preservation Order”)
2.	Each of the Zhangs was to forthwith deliver over to Ps’ solicitors any of Ps’ Records or copies thereof which were in their possession, custody or control [§A(2)(b)] (“Delivery Over Order”)	Forthwith
3.	Each of the Zhangs must: (a) within 7 days of service, answer in writing the 5 questions concerning the whereabouts of Ps’ Records [§H(15)] (“Plaintiffs’ Records Disclosure Order”); and (b) within 7 days thereafter, provide an affirmation confirming those answers [§H(16)] (“Plaintiffs’ Records Confirmation Order”)	(a) 22 February 2016 (b) 29 February 2016
	January Injunction Order of Au-Yeung J       dated 8 January 2016	Deadline for Compliance
4.	Relevant portions of the December Injunction Order quoted above shall be continued until trial or further order [§1]
5.	Each of the Zhangs must within 14 days of this Order make additional disclosure concerning Ps’ Records and to provide a confirmatory affirmation, plus forthwith to deliver over Ps’ Records to Ps’ solicitors [A/6/70:§2] (“Plaintiffs’ Records Further Order”)	22 January 2016
6.	Each of the Zhangs was restrained from acting upon or exercising any power or entitlement pursuant to their 14 October 2015 amendments to the Articles of Association of Shandong Cement (“unlawful AA") and from misapplying any assets of Shandong Cement or any of its subsidiaries [§3a] (“Shandong Cement Injunction”)	Forthwith
7.	Each of the Zhangs must, within 21 days of service, execute the court-approved corrective amendments to Shandong Cement’s Articles of Association (the “Corrective Amendments”) [§3b].  Au-Yeung J approved the Corrective Amendments on 13 January 2016 (“Corrective Amendments Injunction”)	7 March 2016

8.  None of these orders in Table A have been complied with by the deadlines, so the Plaintiffs sought to commit the Zhangs for contempt.  I shall refer to each item as a Charge.

9.  On 14 June 2016, this court granted leave on paper on ex parte basis to the Plaintiffs to commence committal proceedings (“the Leave Order”).  On 21 June 2016, the Plaintiffs issued the Originating Summons for committal for contempt.

10.  The Zhangs issued the Set-Aside Summons on 20 December 2016 to set aside the Leave Order.  The grounds could be summarized as (i) misstatement in Mr Yen’s affidavit; (ii) non-disclosure of recovery of most of the Plaintiffs’ Records before service of the 2 Orders on the Zhangs; and (iii) non-disclosure of the fact that documents were not in the Zhangs’ possession but that of the Mayor and Deputy Mayor of Jinan.

11.  Mr Hollander submitted that those were material non-disclosures in relation to an Interlocutory Proprietary Injunction and orders giving rise to Charges 1-5, all concerning the Plaintiffs’ Records (“the PR Orders”)[1]. There were other allegations in relation to Charges 6 and 7 which the Zhangs had eventually not pursued.

12.  I will first give reasons for dismissal of the Set-Aside Summons in Sections C-H and then deal with the Originating Summons from Section I onwards.

C.  LEGAL PRINCIPLES FOR SETTING ASIDE AN EX PARTE ORDER

13.  When applying for an ex parte order, the duty is on the applicant to make full and frank disclosure to the court of all relevant facts which he knows.  Failure to do so may in itself be a ground for setting aside such an order.  Hong Kong Civil Procedure 2018, §§32/6/13 and 52/2/4.

14.  The duty to make full and frank disclosure continues where material information only comes to light after leave was granted but before hearing of the substantive proceedings: Hong Kong Civil Procedure 2018, §52/2/4 and RACP Pharmaceutical Holdings Ltd v Li Xiaobo anor, HCA 490/07, 14 April 2008, at §5.

15.  In deciding whether to set aside an ex parte order on the ground of material non-disclosure, the court adopts a four-limb test:

(a)   Was there non-disclosure of facts?

(b)   Were the facts not disclosed material?

(c)   Was the non-disclosure innocent?

(d)   If there was material non-disclosure, should the court nevertheless exercise its discretion not to discharge the ex parte order? 

Hong Kong Civil Procedure 2018, §32/6/13.

16.  In the context of contempt proceedings, unless the alleged contemnor can point to any prejudice suffered, the court will not set aside leave already granted on mere technicalities if that course might be contrary to the interest of justice.  Kao, Lee & Yip, at §§71‑73.

17.  The question to be asked is not whether there was material non-disclosure per se but, rather, whether the plaintiff’s statement provided sufficient information to enable the defendant to understand and to meet the charge and whether the defendant was left in doubt as to the contempt charge that he was facing: Secretary for Justice v Choy Bing Wing, CACV 11/2004, 3 December 2004, Yeung JA, at §65.

18.  Facts are material if they are relevant to the weighing operation which the court has to make in deciding whether or not to grant leave: Secretary for Justice v Choy Bing Wing, §48.

19.  In the case of deliberate misstatement or non-disclosure, the discretion not to set aside the ex parte order should rarely be exercised.  Even for non-deliberate non-disclosure, the discretion should be exercised with great caution.  Hong Kong Civil Procedure 2018, §32/6/13; Kan Hung Cheung v The Director of Immigration, HCAL 74/2007, 13 February 2008, §18, A Cheung J (as he then was).

D.  WAS THERE NON-DISCLOSURE OF FACTS RELATING TO THE PR ORDERS?

20.  Back in 2015 when the Plaintiffs sought the injunction orders, they were most concerned with the loss of their accounting records and suggested that it was difficult for the Plaintiffs to continue to carry on business without the accounting records.

21.  In §8 of Yen-5^{th [2]} filed on 31 May 2016 in the Action (“§8 of Yen-5^th”) in support of the leave application, Mr Yen deposed to this,

“Thus, it seems clear that since late November 2015, the Plaintiffs’ Records have all been under the custody, possession or control of the 1^st and 2^nd Defendants on the Mainland.” (emphasis added)

22.  Both Mr Yen and Mr Liu (who have filed affirmations on behalf of the Plaintiffs) confirmed that none of the Zhangs had returned any of the property or the Plaintiffs’ Records to the Plaintiffs.

23.  In fact, things had moved on since November 2015. On 30 January 2016, two weeks before the PR Orders were deemed to have been served on the Zhangs, the Plaintiffs had recovered a lot of their records after they had regained control of Shandong Cement’s headquarters in Jinan (“Jinan HQ” and the event “1/16 Seizure”).  On a literal interpretation, §8 of Yen-5^th was a misstatement.

24.  Although there was disclosure of the 1/16 Seizure, only chops (except the Shandong Cement chop) and licenses were mentioned.  There was non-disclosure to the court of recovery of the Plaintiffs’ Records.

25.  According to P1’s own Announcement dated 31/1/16, P1 was “taking stock of the books, other important documents and fixed assets of Shandong Shanshui in its headquarters. The Company will make further announcement(s) with updates on the progress of the takeover when appropriate”.  To date, no such update has been published.

26.  The Plaintiffs’ Records were broadly of 5 categories –

a.   Accounting records;

b.   Corporate records;

c.   Bank records;

d.   Employment records; and

e.   Correspondence with lawyers and regulators. 

27.  In respect of accounting records, Mr Yen did not dispute that: (1) the Group’s accounting function has always been centralized in the Group’s Finance Department based in the Jinan HQ; (2) the Plaintiffs were investment holding companies with no day-to-day business or operations; (3) their accounting records were minimal and maintained on the Group’s computerized accounting system; and (4) there were 2 handover lists dated 2/2/16 evidencing the return of numerous accounting and banking documents by Mr James Li of the Group Finance Department to 2 persons called Li Hengwen and Mr Yao Tianjun (“Li & Yao”).

28.  Mr Hollander pointed out that tellingly, 2 months after the 1/16 Seizure, the Plaintiffs were able to present the Group’s (including the Plaintiffs’) consolidated financial statements for the year ending 31 March 2016.  The limited qualification was that the New Board was unable to provide written representations that the Group’s accounts records were properly maintained, not that any significant part of these records were missing. See p65 of P1’s 2015 Annual Report prepared by KPMG (the independent auditor).

29.  As for corporate records, those for P2 and P3’s were kept by Prominent in Hong Kong whilst those for P1 was kept by Maples in the Cayman Islands and Prominent in Hong Kong. Further, other records like Plaintiffs’ directors’ meetings information, annual returns, tax returns were recovered following the 1/16 Seizure. Mr Yen tacitly admitted to these, save that the contents of the 2 handover lists were disorganised (Yen-1^st).

30.  As for bank records, Yen-1^st admitted that they were kept in the Jinan HQ but only part was recovered.

31.  As for employment records, Yen-1^st admitted that the Plaintiffs had recovered the service contracts between P1, but not P2 and/or P3 and its directors.  However, P2 and P3 were paper companies.

32.  As for correspondence with lawyers and regulators, it was James Li’s evidence that those documents were kept in Jinan HQ with copies kept by the Plaintiffs’ lawyers in Hong Kong. Yen did not challenge such evidence.

33.  Yen took only limited issue with the details in James Li’s affirmation.

34.  The fact that the Plaintiffs had recovered a lot of their records covered by the PR Orders after the 1/16 Seizure was borne out by the Plaintiffs’ own list of documents dated 20/1/17 in the Action.

35.  Further, in HCA 562/2016 commenced in March 2016, P3 and Shandong Cement sued the Mayors and Deputy Majors of Jinan for conspiracy with the Zhangs in forming a government working group “in order to take control of the [Group’s] property, assets, businesses and staff held through Shandong Cement”.  They sought a mandatory injunction to require the 2 Mayors to deliver up “[P3’s] property, including but not limited to the company chops, books and records to [P3] in Hong Kong”.

36.  Hence, Mr Hollander submitted that there was non-disclosure of P3’s own pleaded case that its property, including its records, were in the possession, custody or control of the 2 Mayors, not the Zhangs.

E.  WAS THE NON-DISCLOSURE MATERIAL?

37.  Mr Barlow SC submitted that the grounds of the Zhangs’ application consisted of vague allegations of material non-disclosure.  The Zhangs had not identified what, if any, prejudice they had suffered as a result of the alleged material non-disclosure.  Nor had they demonstrated that they misunderstood or were not provided with sufficient information as to the charges they had to face.

38.  I disagree.  The analyses of Mr Hollander were succinct and supported by reasons.  The need to recover the Plaintiffs’ Records was at the core of the Plaintiffs’ application for injunction and disclosure. If the Plaintiffs had recovered all or virtually all of the Plaintiffs’ Records, the Plaintiffs might not be able to prove that the Zhangs were in possession, custody or power of the Plaintiffs’ Records and hence contempt proceedings might be unnecessary. Insistence on its pursuit when it was not essential to do so was itself a prejudice. The fact that the Charges were properly framed on their face and the Zhangs understood them would not undermine that prejudice.

39.  In my view, the misstatement and the non-disclosure of recovery were material to the court’s weighing exercise as to whether or not to grant leave:  Secretary for Justice v. Choy Bing Wing, above; and China Shanshui Cement Group Ltd & ors v Zhang Caikui & ors, HCA 2880/2015, 18 July 2017, at §§33-39, 47(2) and 53(1). The Plaintiffs should have at least informed the court of the volume of documents recovered, however incomplete it appeared to them.  If they were unable to say that it was complete or not, say so, with reasons. 

40.  As to non-disclosure of the Plaintiffs’ own pleaded case in HCA 562/2016, the endorsement of claim alleged conspiracy with the Zhangs.  Yen-5^th deposed to the fact that the Plaintiffs bitterly fought the Plaintiffs, along the way recruiting the assistance of a diverse range of supporters, including the Mayor and Deputy Mayor of Jinan, various triads or street thugs and (at times) confused employees of the Group.  Throughout that time, each of the Zhangs has held himself out as being a director of Shandong Cement and as the persons who were entitled to manage Shandong Cement and its subsidiaries.  If conspiracy was established, the Zhangs could hardly deny that the Mayors’ possession of the Plaintiffs’ Records was not also the Zhangs’.  In any case, that action was discontinued on 25 July 2016.  I do not find this head of non-disclosure to be material.

F.  WAS THE MISSTATEMENT OR NON-DISCLOSURES INNOCENT?

41.  With regard to the misstatement, §8 of Yen-5^th must be read in context.  The PR Orders were against D1-D5 in the Action. In §§6 and 7 of Yen-5^th, Mr Yen was explaining that James Li (D3 in the Action) had handed over the Plaintiffs’ Records to the agents of the Zhangs; D4 and D5 deposed to having no control over the Plaintiffs’ Records that were in the Hong Kong Office.  In that context, §8 was really saying that since late November 2015 (just before the New Board took over), the Plaintiffs’ Records have all been under the custody, possession or control of the Zhangs (D1 and D2), ie not in that of D3-D5.  I do not regard that as a deliberate attempt to mislead the court in any way.

42.  The subject matter of the first set of non-disclosure was within the knowledge of the Plaintiffs.  At the time the receivers took over, the Hong Kong Office was stripped of records including a data server.  Till now the data server has not been recovered.  As §12(b) of Yen-3^rd stated, it was impossible for the Plaintiffs to make any quantitative assessment of just how much or how little of the Plaintiffs’ Records had been recovered without the assistance of the Zhangs.

43.  Mr Yen’s affidavits were to demonstrate that the Zhangs all along resisted rather than assisted recovery.  It was through a convoluted channel that the Plaintiffs were able to recover their own records.

44.  The Plaintiffs did not hide the 1/16 Seizure from the public shareholders.  I do not think they wanted to gain anything from hiding the recovery of records from the court.

45.  In my view, the non-disclosure was innocent rather than deliberate. 

G.  SHOULD THE COURT NEVERTHELESS EXERCISE ITS DISCRETION NOT TO DISCHARGE THE EX PARTE ORDER?

46.  Even if there was any material non-disclosure, the court may still re-grant leave: Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd [2007] 4 HKC 372, Rogers VP, at §§16-18. 

47.  If this court had been informed of the misstatement and non-disclosure, it would still have granted the Leave Order for the reasons given in Section F above. 

48.  Specifically, Mr Yen testified that the data server could have contained material information as to the running of the Plaintiffs.  That was credible in these days when commerce relied on electronic data.  Even just for the data server, it was still worth granting or re-granting the Leave Order in this case.  As will be seen in the analyses below, there were still lots of records not handed over by the Zhangs.

H.  CONCLUSION ON THE SET-ASIDE SUMMONS

49.  I find that there was misstatement and one set of material non-disclosure on the part of the Plaintiffs but those were innocent.  I would still have granted or re-granted the Leave Order if I had been told the full picture.  The Set-Aside Summons was therefore dismissed. 

I.  THE COMMITTAL PROCEEDINGS

50.  At the trial, I gave leave to the Plaintiffs to amend the Originating Summons. Despite the amendments, Mr Barlow SC confirmed that the Plaintiffs no longer sought committal for breach of any order concerning the Plaintiffs’ property.

51.  The Plaintiffs relied on the evidence of 4 witnesses (including James Li).  The Zhangs elected not to adduce any evidence.  Their defences raised procedural and substantive issues.

52.  On procedural issues, Mr Hollander submitted that:

(a)   The Plaintiffs were in breach of their undertaking to the court in failing to take out an inter parte summons pursuant to the January Injunction Order; and

(b)   The penal notice was not placed on the front of the court orders.

53.  On substantive issues, Mr Hollander queried if it had been proved beyond reasonable doubt that the Zhangs were in possession, custody or control of the Plaintiffs’ Records, whether a “nil return” was required if it was not shown that the Zhangs had anything to disclose, whether the Zhangs had acted in contravention of the AA and whether they could have executed the Corrective Amendments pursuant to one order without breaching the other.

J.  LEGAL PRINCIPLES ON COMMITTING FOR CONTEMPT

54.  In hearing a committal for civil contempt, the Court adopts a three stage test:

(1)   Construe the relevant court order to ascertain their meaning and operation;

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

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

See Hong Kong Civil Procedure 2018, §52/1/16, Kao Lee & Yip v Donald Koo Hoi Yan (2009) 12 HKCFAR 830 per Brennan NPJ at §21.

55.  Contempt proceedings are quasi criminal in character because the liberty of the accused contemnor is at stake. The burden is on the applicant to prove his case beyond reasonable doubt: Kao Lee & Yip, per Brennan NPJ at §§6, 30.

56.  In order to establish the necessary state of mind, it is not necessary to prove that the alleged contemnor’s conduct was contumacious, ie that he directly intended to disobey the order.  It is sufficient to prove that the act constituting breach was made intentionally, not casually or accidentally: Kao Lee & Yip, at §§45-46.

57.  The respondent has the right to remain silent and does not have to prove anything: HKCP 2018, §52/1/17.  However, adverse inferences may be drawn from his election not to call evidence which could displace the prima facie case against him: Ip Man Shan Henry & anor v Ching Hing Construction [2003] 1 HKC 256 per DHCJ Lam (as he then was) at §155; Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434, per Le Pichon, JA at §28. 

58.  Mohammed Khawaja v Paresh Popat [2016] EWCA Civ 362, per McCombe, LJ at §§26-29 was a case on civil contempt where the trial judge drew adverse inference against the defendant who filed 2 affidavits but declined to undergo cross-examination. 

K.  PROCEDURAL DEFENCES

K1.  Plaintiffs’ breach of the Undertaking

59.  The January Injunction Order was given upon the Plaintiffs’ undertaking to the court to issue an inter parte summons against Zhang junior within 14 days of the service of the Amended Writ of Summons for continuation of the January Injunction Order (“the Undertaking”).  The 14 days expired on 29 February 2016.

60.  Mr Keith Ho, solicitor of Wilkinson & Grist (“WG”) acting for the Plaintiffs, testified that he did not know when the inter parte summons was issued.  Counsel agreed that the matter could be dealt with in correspondence. Mr Barlow SC said that it was something that Deacons would know because the summons was served on them.

61.  After completion of oral evidence, on 4 October 2017, pursuant to the request of Deacons, WG enclosed a copy of the purported inter-parte summons filed on 28 December 2015 (“the December summons”) returnable on 8 January 2016.   As the Undertaking was given on 8 January 2016, that summons had nothing to do with the Undertaking.

62.  Deacons immediately wrote again to press WG on the point. On 6 October 2017, Deacons received the following response:

“We refer to your letter of 4 October. Please do not waste any more time with any more pointless letter – to which we will not reply.”

63.  I was quite clear that the Plaintiffs had not issued the inter parte summons and brushed off proper enquiries from Deacons.  In fact, the question of whether the Undertaking should be varied or the Plaintiffs should be released from it is the subject matter of an unresolved summons issued by them whilst this judgment was being written.

64.  Breach of an undertaking to the court is a serious matter that can amount to contempt of court: Arlidge, Eady and Smith on Contempt, 5^th ed, §12.201.

65.  Mr Hollander submitted that, the Plaintiffs themselves being in contempt of court, it would be quite wrong for them to proceed with the present contempt proceedings against the Zhangs.

66.  In my view, that was not necessarily the case. Much depends on the nature of the Undertaking and the breach.

67.  As a starting point, with or without the Undertaking, if this court had been informed of the failure to issue the inter parte summons, this court would have directed the Plaintiffs to serve it first and have it heard before considering making the Leave Order.  That would be in line with the practice of first giving an ex parte order to minimize the damage to the Plaintiffs’ interest, followed by a chance to the respondent to oppose the continuation of the ex parte order and finally using contempt proceedings as the last resort.

68.  Mr Barlow SC submits that although procedural safeguards to the liberty of an alleged contemnor will be strictly enforced, in the absence of prejudice to him, the court has discretionary power to dispense with procedural requirements in appropriate cases: Kao, Lee & Yip, at §73, applying Nicholls v Nicholls:

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

69.  In my view, whilst the court has an interest in seeing that its orders are obeyed, it equally has an interest in seeing that a person whose liberty is at stake has been given a fair opportunity to make representation.

70.  In the present case, the January Injunction Order involved continuation of a draconian injunction, disclosure obligations and orders affecting Shandong Cement and powers of its directors.  Failure to issue an inter parte summons was not a technical omission that could be overlooked.  It prejudiced the entitlement of a party to the due process of the law.  It was of no use to say, with hindsight, that since he did not obey the ex parte order, he would have disobeyed an order made inter parte anyway.

71.  Worse still,

(a)   §2 of the January Injunction Order was not even covered by the December summons, so the disclosure obligation was made without any prior notice to the Zhangs; and

(b)   §2 required the Zhangs to give the disclosure within 14 days of the January Injunction Order, ie the deadline was past by the time of service on the Zhangs.

72.  The January Injunction Order expressly stated that it was ex parte as against Zhang junior.  Accordingly, Charges 4-7 in Table A against him must be dismissed on this procedural defence alone.

73.  Charges 1-3 are still valid as against Zhang junior.  The deadlines for compliance with the December Injunction Order were on or before the time for issuing the inter parte summons.  

74.  As for Zhang senior, this procedural defence was plainly available to him in respect of Charge 5 (which relied on §2 of the January Injunction Order). Charge 5 has since been dropped upon amendment to the Originating Summons.

75.  As for Charges 6 and 7, Lok J gave a substituted service order in respect of Zhang senior on 24 December 2015.  Zhang senior was accordingly served through Deacons on 30 December 2015 with a copy of the Concurrent Amended Writ of Summons in the Action and the December summons.  See §3 of the Reasons for Decision of this court on 15 January 2016 and §2 of the affirmation of service of Chan Hoi Tao.  Although Deacons returned the papers to WG, that did not undermine the effective service.  This procedural defence would not apply to Zhang senior as the hearing against him proceeded on inter parte basis.

K2.  Penal notice not on the front of the order

76.  It is a requirement that an injunction order is served with a penal notice prominently placed on the order itself.  This is not a service requirement but a notice requirement.  The purpose is not to effect service but to make sure that the defendant is aware of the potentially serious consequences of breach of the order. In fact, it is a condition precedent to any enforcement proceedings by order of committal and it would be an extremely rare exercise of discretion under O45 r7(6) for the court to dispense with this requirement. See Hong Kong Civil Procedure 2018, §§45/7/1, 45/7/6,and 52/2/9; Citybase Property Management Ltd v Kam Kyun Tak (No.1) [2003] 2 HKC 98, Ma J (as he then was) at §14(2).

77.  Mr Hollander submitted that the penal notice for each of the 2 Orders was deficient in that it was placed on the back sheet, which could not be described as part of the order. If the back sheet was omitted, the order would still have been regarded as served. Moreover, the notice was not placed prominently.  He submitted that the court would not normally proceed with a contempt application in the absence of an effective penal notice because it was a fundamental requirement: Leicester County Council v Saracen Dyers, (2002) EWHC 2068 (QB).

78.  Rightly or wrongly, endorsing a penal notice on the back sheet has been a long-time practice.  The practice ought to be corrected as soon as possible to place the penal notice in the body of the order itself.

79.  Mr Hollander has rightly described the purpose of a penal notice. However, the Zhangs are represented by an experienced firm of litigation solicitors. It could hardly be imagined that the penal notice endorsed on the back sheet would have escaped the attention of Deacons or that they have not explained the effect of the penal notice on the Zhangs.

80.  The case of Leicester County Councilrelied on by Mr Hollander was distinguishable because in the UK, there is an express rule in the Civil Procedure Rules for the penal notice to be endorsed on the front of an order, which does not exist in Hong Kong.

81.  I hold that this procedural defence would not assist the Zhangs.

L.  SUBSTANTIVE DEFENCES

82.  The Zhangs have not complied with any of the orders in Table A.  Their failure to adduce evidence meant that there was nothing to contradict the Plaintiffs’ evidence or to enable this court to consider if the culpability of one Zhang differed from the other.  However, the court must still be satisfied that the relevant Charges are individually proved beyond reasonable doubt against each of the Zhangs. 

Charges 1 and 2 in Table A: Breach of Preservation Order and Delivery Over Order (cf Statement §§13(1) and 14(1))

83.  The core issue was whether or not the Zhangs were in possession, custody or control of the Plaintiffs’ Records.

84.  Mr Hollander has summarized the evidence neatly:

(a)   P1 and P2 were investment holding companies and P3 was a company that did some limited business as a sales agent;

(b)   Each of Plaintiffs was a HK company;

(c)   The substantial business was operated by or through Shandong Cement which was a PRC company, not the Plaintiffs;

(d)   The HK records and the Cayman records were records to which the Plaintiffs had access at all times after the critical date of 15 February 2016;

(e)   To the extent that the Plaintiffs records were kept at the Jinan HQ, the Plaintiffs had recovered them in the 1/16 Seizure;

(f)   The key date was the date of service, 15 February 2016.  There could be no allegation of breach before then;

(g)   James Li had returned the documents in his control to Li & Yao when he left the Plaintiffs’ employment in November 2015;

(h)   Mr Yen was aware (notwithstanding §8 of Yen-5^th) that many of the documents referred to in James Li’s affirmation had been returned to the Plaintiffs prior to 16 February 2016;

(i)   Although Mr Yen knew about the 1/16 Seizure and the Plaintiffs had made a public announcement about it the following day, he did not make any effort to obtain those Plaintiffs’ documents that had been recovered in Jinan HQ until mid-April 2016. This stood in stark contrast to the submissions and evidence (Yen’s affidavit filed on 27/5/2016) put before the court at the time the Plaintiffs sought the December Injunction Order, suggesting that the Plaintiffs were in difficulty in conducting their business and at risk of incurring criminal liability through lack of books and records. Mr Hollander submitted that this reflected adversely on Mr Yen’s credibility and significantly overstated the Plaintiffs concerns about their books and records at the time they applied for the December Injunction Order; and

(j)   Mr Yen identified items (l), (q), (u)[3] and the data server as the unrecovered items that formed the subject matter of James Li’s handover to Yao.

85.  Mr Hollander submitted that there was simply no evidence that either of the Zhangs has been in possession of any of Plaintiffs’ Records since 16 February 2016.  The last question Mr Yen was asked in cross examination was this:

“Q: For the records which you have not recovered, all you can tell the Court is that they are not in the Jinan HQ, and you cannot say what has happened to them but you suspect the defendants.

A:   You may put it that way.”

Mr Barlow did not re-examine on that answer.

86.  Again, the summary of evidence had to be looked at in context. Before the new board of the Plaintiffs took over in early December 2015, the records in the Plaintiff’s Office were stolen.  The computer data was erased.  At that time James Li was the person in Hong Kong in charge of the Plaintiffs’ Records. That was how the December Injunction Order came about.

87.  The Plaintiffs of course could not contend that their own witness, James Li, was giving untrue evidence: The Filiatra Legacy [1991] 2 Lloyds Rep 337, 361.  However, there was nothing to prevent the court from assessing his credibility as in any case and placing the appropriate weight on his evidence.

88.  James Li was D3 in the Action.  He was, in my view, a cunning witness who would give long speeches to qualify many of his answers to sidetrack issues.  By way of example, it took the court a series of questions (as quoted in Mr Barlow SC’s closing submission) before he would admit that the Zhangs, being the “biggest” officials in the Group of companies, had the authority and ability to access the data server (containing, amongst others, documents from the Hong Kong Office), documents in the Jinan HQ and even the most confidential information of the Plaintiffs in Hong Kong or Jinan.

89.  James Li claimed that the handovers were to Li and Yao “of the 1^st Plaintiff”.  I am unable to agree. Li and Yao were sent by the Zhangs as their agents at a time when Zhang junior was P1’s chairman.  Li had never been an employee of the Plaintiffs and had never worked in the Plaintiffs’ HK Office.

90.  The Plaintiffs had of course recovered a lot of documents in the 1/16 Seizure.  Even after the 1/16 Seizure, without the assistance of the Zhangs:

(a)   In early February 2016, Mr Yen had asked the new senior management of Shandong Cement to see whether they could recover any of the Plaintiffs’ Records that had been taken by Li and Yao to the Jinan HQ;

(b)   In about March 2016 (after the service on the Zhangs), Mr Yen received confirmation that some Group company seals or chops had been found in the Jinan HQ; and

(c)   In about April 2016 (again after the service on the Zhangs), some documents that had come from the Plaintiffs’ Office were discovered.

91.  However, I do not agree with Mr Hollander that the Plaintiffs had obtained most of the documents.  On the evidence, after 15 February 2016, at least items (l), (q) and (u) identified from James Li’s handover to Yao, some bank documents, correspondence with lawyers and regulators, the data server and some emails, were not recovered.  Without the assistance of the Zhangs’ disclosure, it was simply not possible to identify the volume of missing records. 

92.  Mr Hollander rightly conceded that the data server was a significant item.  In fact, Mr Yen believed that many emails could be read from them and one could see from them how the previous management handled the Plaintiffs’ business.

93.  In answer to the court’s series of questions, Mr James Li had to admit that the data server contained documents from the Hong Kong Office.  The Zhangs had authority and ability to access the most confidential information of the Plaintiffs, whether in Hong Kong or in Jinan and that must have included, in my view, the data server.  

94.  The December Injunction Order specifically required the Zhangs to deliver over, amongst others, computer data and hard drives and to state their current whereabouts.  The Zhangs could not have overlooked the importance of the data server.  No one would have possession or better knowledge of its whereabouts but the Zhangs. 

95.  Mr Hollander said that following the 1/16 Seizure, the Zhangs had lost their access to or power to retrieve documents in the Jinan HQ.  On the Plaintiffs’ own evidence, Zhangs and their agents were evicted from there on 30 January 2016. 

96.  With respect, this was an assumption that the Zhangs could only have kept the Plaintiffs’ Records at the Jinan HQ.  It overlooked the fact that the Zhangs (being the highest officials) had, in the first place, removed or caused to be removed the Plaintiffs’ Records from the HK Office to places only known to themselves, Jinan HQ or otherwise.

97.  According to Yen-1^st, for 4 days up to the 1/16 Seizure, thousands of workers were in peaceful protest near the Jinan Plant but the former directors brought with them an armed mob to resist the protest.  On 30 January 2016, the protesting workers, with the assistance of the police in Jinan, managed to enter the Jinan Plant.  In the process of recovering the Plaintiffs’ property kept at the Jinan Plant, the documents were scattered in different places when the Jinan police got into the Jinan Plant.  In my view, all of these (though happening before service of the 2 Orders) could not have happened without approval or knowledge of the Zhangs.  Mr Yen’s inference that the Zhangs’ henchmen were trying to destroy or conceal evidence, including some of the Plaintiffs’ Records, was a reasonable one.

98.  The further inference was that after service of the 2 Orders, the Zhangs continued to have possession of the unrecovered records and the data server, but not at the Jinan HQ.  They persisted in not handing over to the Plaintiffs.

99.  Further, there would have been records not necessarily in Jinan before or after service of the 2 Orders, eg the correspondence with lawyers and regulators.  The Zhangs did nothing to deliver over (even copies) to the Plaintiffs or disclose their whereabouts and the Plaintiffs had to obtain them from the lawyers or (by court order) from the regulators.  In this respect, it was an understatement for Mr Hollander to say that the Plaintiffs were but investment holding companies and that they had all the records to operate.  P1 was a listed company and needed to deal with regulators and lawyers and debt issues regarding US$ bonds.

100.  The Zhangs have purported to file affirmations of witnesses which had either been expunged or were not relied on at this trial.  The irresistible inference was that the Zhangs simply dared not go on oath to state that they did not have possession, custody or power of any of the Plaintiffs’ Records after 15 February 2016, or explained why they failed to comply with the Preservation Order or Delivery Over Order.  

101.  It was plainly the case that the Zhangs are still in possession, custody or power of some of the Plaintiffs’ Records; and just the data server alone would have justified a finding of breach of the Preservation Order and Delivery Over Order.  I find it proved beyond reasonable doubt that the Zhangs are guilty of Charges 1 and 2.  Their disobedience simply defeated the purpose of the Preservation Order and Delivery Over Order.

Charge 3 in Table A – Plaintiffs’ Records Disclosure Order and Plaintiffs’ Records Confirmation Order (cf Statement §§13(2) and 14(2); 13(3) and 14(3) )

102.  It is common ground that the Zhangs have not provided any disclosure or affirmation as required.  They were plainly in breach of the Plaintiffs’ Records Disclosure Order and Plaintiffs’ Records Confirmation Order.

103.  However, Mr Hollander submitted that if the court was not satisfied that the Zhangs were in custody, possession or control of the Plaintiffs’ Records, it should consider whether a “nil return” was required under the terms of the order.  In other words, could there be a breach merely because there had been no disclosure where it had not been shown that the Zhangs had anything to disclose?

104.  In my view, this was a hypothetical issue for it has never been the Zhangs’ case that they did not have anything to disclose.

105.  In any case, a distinction should be drawn between an order to produce and one to disclose.  The former requires the applicant to show that the alleged contemnor was in possession, custody or control of an item sought.  The latter is for the alleged contemnor to deny that he had the information sought (if that be the case) after the applicant has shown that the alleged contemnor disclosed nothing.

106.  Question (a) of the 5 questions asked each of the Zhangs if he had been responsible for or had assisted in the removal of the Listed Items from the Plaintiffs’ Hong Kong Office.  Mr Hollander very fairly accepted that it would have required a nil return in any event. 

107.  Questions (b) to (e) asked each of the Zhangs to provide full details of his involvement or assistance, knowledge as to who removed the Listed Items from the Plaintiffs’ Office, the locations to which they were transferred and their current whereabouts and information as to the existence, current form and whereabouts of any copies of the Listed Items.

108.  Questions (b) to (e) were intended to assist the Plaintiffs in locating their own records and identify the culprits who unlawfully dealt with them – all to aid the Preservation Order.  I fail to see why a nil return (if that be the case) was not required.

109.  I find Charge 3 proved beyond reasonable doubt against the Zhangs.  This will hold true even if they are no longer in possession, custody or control of any of the Plaintiffs’ Records.

Charge 4 in Table A – Continuation of orders

110.  This is a charge that covers Charges 1-3.  It was proved beyond reasonable doubt as against Zhang senior but dismissed as against Zhang junior for the first procedural defence (paragraph 72 above).

Charge 5 in Table A – Plaintiffs’ Records Further Order (cf Statement §§13(4) and 14(4))

111.  Charge 5 has been withdrawn upon amendment of the Originating Summons.

Charge 6 – Shandong Cement Injunction (cf Statement §§13(5) and 14(5))

112.  Allegedly, the Zhangs:

(a)   Continued to hold themselves out as being entitled to exercise the powers and entitlements of directors of Shandong Cement;

(b)   Purported to exercise the same; and

(c)   Managed the assets of Shandong Cement.

113.  §3(a) of the January Injunction Order provided as follows:

“Restrain them and/or any employees, agents or parties assisting each or both of them from acting upon or exercising any power or entitlement pursuant to the amended Articles of Association of [Shandong Cement] alleged to have been unlawfully altered on 14 October 2015 and/or from misapplying any assets of Shandong Cement or of any of its subsidiaries.” (underline added)

114.  On the face of it, Charge 6 did not show breach of the express wording of the Shandong Cement Injunction.  “Holding out” or “purporting to exercise” were different from “acting upon or exercising”.  “Managing” the assets of Shandong Cement” was not the same as “misapplying” and was not in itself culpable.

115.  Mr Liu was specifically asked in cross examination which article of the unlawful AA was relied upon but he could not point to one.  When questions were asked about the amended AA by reference to the Schedule attached to the January Injunction Order, Mr Barlow objected to the questioning on the basis that the amended AA were not before the Court and thus it was inappropriate for questions to be asked about them.

116.  Mr Hollander submitted that there was no breach of the Shandong Cement Injunction.

117.  In my view, in construing the Shandong Cement Injunction, it is important not to lose sight of its purpose.  The Zhangs had been removed as directors back in 3 December 2015.  They would not accept it.  They unlawfully amended the AA to give themselves directorship, under clause 5.2.2.1, without any restrictions in the 3 years following the amendment.  To be precise, the shareholders had no power to remove them from office. The Corrective Amendments were to halt the Zhangs’ attempted misappropriation of Shandong Cement or its subsidiaries and have them reverted to the Plaintiffs as true owners.

118.  Accordingly, any act that the Zhangs carried out or any holding out as director would have been pursuant to the unlawful AA instead of a particular article.

119.  The Zhangs have allegedly continued, to the present date, to rely upon the unlawful AA as their stated justification for continuing: (a) to hold themselves out as being current directors of Shandong Cement; and (b) to disregard the new Shandong Cement board that was installed by the Plaintiffs. The relevant conduct, after 15 February 2016, that the Plaintiffs relied on included (i) issuing of public announcements, (ii) engaging in litigation in the Mainland Courts, (iii) misapplications of the Shandong Cement company seal, and (iv) conduct in relation to Shandong Cement’s other assets.

120.  I am afraid that the alleged conduct required some distillation as it contained some misdescription or irrelevant matters.

121.  The public announcements allegedly concerned evidence of:

(a)   The Zhangs’ relocation of the Shandong Cement business (including 200 employees expelled from the Jinan Plant) after the 1/16 Seizure to the premises of Shanshui Heavy;

(b)   The Zhangs’ initiation of proceedings in Mainland China in the name of Shandong Cement;

(c)   The Zhangs’ denial that Shandong Cement’s company seal (which they wrongfully retained) was wrongfully used in initiating litigation in the name of Shandong Cement and the confirmation that they continued to operate from Shanshui Heavy.

(d)   The Zhangs’ claim as to who the lawful current legal representative of Shandong Cement was based on recent enquiries.

P1 was obliged to issue public announcements through SEHK to counter the Zhangs’ illegitimate public announcements in the Mainland.

122.  There was some misdescription in the Plaintiffs’ case concerning public announcements, eg there was no mention of relocation of 200 employees in item (a).  To the extent, item (b) meant institution of proceedings, this was not true as Shandong Cement was the defendants. 

123.  Regarding Mainland litigation, the Plaintiffs alleged that the Zhangs had unlawfully applied the seal of Shandong Cement to cause it to engage in litigation in the Mainland.  To the extent this meant Shandong Cement defended the litigation, it was not clear how the seal had been applied or how the Zhangs participated.  As recently as September 2017, the Zhangs had allegedly utilised Shandong Cement’s seal in order to commence new litigation in the Jinan Courts in which they asserted that they were the legal directors of Shandong Cement.  This was a new allegation not in the Plaintiffs’ affidavits and should be disregarded.

124.  Regarding misapplications of the Shandong Cement company seal, Yen-8^th stated that because the Zhangs still hold the company seal and chop for Shandong Cement (and also those of its key subsidiaries), the Plaintiffs have not been able to secure recognition on the Mainland (either through the Mainland Courts or through the Jinan Companies Registry) of the status of the new board or the Corrective Amendments. Consequently, as matters presently stand, the Zhangs and their agents continue to control most of the affairs of Shandong Cement. Any legal proceedings brought by Shandong Cement against the Zhangs would not yield any orders that are enforceable in the Mainland where Shandong Cement does business.

125.  However, the evidence showed that it was Zhang junior who has been claiming to be the legal representative of Shandong Cement.  In the normal course of events, he but not Zhang senior would have been the person in custody of the seal and chop.  He but not Zhang senior would have been responsible for alleged misapplications of the seal or chop (including authenticating the public announcements or documents in Mainland proceedings).

126.  Regarding conduct in relation to Shandong Cement’s other assets, Yen-8th stated that there were at least 2 instances where the Zhangs have misappropriated substantial assets of Shandong Cement that are unlikely to be recoverable: (i) acquisition of a “subsidiary” called Qilu Property Company Limited (“Qilu”); and (ii) control of 44.99% of Shanshui Heavy pursuant to the unlawful AA after sale of 55.05%.

127.  The matters in the preceding paragraph were, as Mr Hollander pointed out, made in support of the Plaintiffs’ ex parte application for worldwide Mareva injunction which was later discharged by G Lam J on the ground of material non-disclosure: China Shanshi Cement v Zhang Cai Kui & ors, HCA 2880/15, 18 July 2017, §36-39.  Amongst others, it was held to be material non-disclosure not to inform the court that the proper plaintiff for claims relating to Qilu and Shandong Heavy was Shandong Cement and not the Plaintiffs.

128.  In any case, the alleged misappropriation of proceeds or assets of Qilu and Shandong Heavy happened before 15 February 2016 and are irrelevant to these contempt proceedings.

129.  Having distilled the evidence regarding paragraph 119 above, it was not proved beyond reasonable doubt how Zhang senior was guilty in respect of the Mainland proceedings and misapplication of the seal or chop, or conduct after 15 February 2016 in relation of Shandong Cement’s other assets.  Nor was there evidence of his “misapplying” assets of Shandong Cement or its subsidiaries.

130.  However, the issue of 12 public announcements of Shandong Cement between 16 February 2016 and May 2016, and the relocation of Shandong Cement to the premises of Shanshui Heavy could not be something done without knowledge of the Zhangs.  The Zhangs were 2 of the 3 self-claimed directors.

131.  The substance of the public announcements and relocation displayed the Zhangs’ continuous denial of the Plaintiffs’ installation of a new board and the Zhangs’ holding out as directors and management of the business of Shandong Cement pursuant to the directorship under the unlawful AA.

132.  There being no explanation and no evidence to distinguish their culpability, and based on the fact that the Zhangs were the most senior persons in control of Shandong Cement, the act of one would be attributable to that of the other.

133.  I find the first limb of Charge 6 (acting upon or exercising power or entitlement pursuant to the unlawful AA) proved beyond reasonable doubt against Zhang senior.

Charge 7 in Table A – Corrective Amendments Injunction (cf Statement §§13(6) and 14(6))

134.  The Zhangs disobeyed the Corrective Amendments Injunction Order, making it necessary for the Registrar to execute the Corrective Amendments on their behalf.  To this charge, Mr Hollander contended that:

(a)   There had to be a single order identifying what the Zhangs must do; but in fact the January Injunction Order ordered the Zhangs to execute corrective amendments to the AA without approving any corrective amendments; when the court approved the Corrective Amendments on 13 January 2016, there was no injunction on that day requiring the Zhangs to do anything.

(b)   The Zhangs had been removed as directors and were not in a position to execute the Corrective Amendments. 

135.  With regard to contention (a), injunctive commands need not be within a single order: AXA China Region Insurance Co Ltd v Li Yu Ping Ellen [2002] 3 HKC 339 (where the 2^nd order varied the 1^st).

136.  A reasonable reader, having been served with the January Injunction Order and the 13 January 2016 order would not be left in any doubt as to the Corrective Amendments that the Zhangs had to execute.

137.  With regard to contention (b), according to Mr Hollander, pursuant to article 15.3 of the amended AA, the Corrective Amendments could only be effected following approval by the Shandong Cement board, the Shandong Cement shareholder (ie P3) and the Jinan authorities.  According to the Plaintiffs, the Zhangs had been removed as directors of Shandong Cement as early as 3 December 2015.  After 15 February 2016, the Plaintiffs have insisted that the Zhangs were no longer officers of Shandong Cement.  Moreover, the Zhangs alone were in no position to execute the Corrective Amendments since approval of the Jinan authorities would have been required.  In the past, the Jinan authorities had interfered with Shandong Cement’s business according to P1’s public announcement.  Mr Hollander submitted that the Shandong Cement Injunction and the Corrective Amendments Injunction were inconsistent and it would be impossible to perform one without breaching the other. 

138.  The short answer to contention (b) was that the authority of the Zhangs to execute the Corrective Amendments was conferred by the court and not the AA. The Corrective Amendments Injunction was directed at the Zhangs personally and not at their capacity as directors.

139.  Contention (b) was plainly an afterthought because up until the High Court Registrar executed the corrective amendments on behalf of the Zhangs on 20 April 2016, the Zhangs had still regarded themselves as directors and Zhang junior the legal representative of Shandong Cement.  There was no evidence that any of them addressed his mind to his legal capacity before deciding not to execute the Corrective Amendments.  Nor had the Zhangs adduced evidence to show that the Jinan authorities would have hindered the execution.

140.  The defence to Charge 7 has no merits.  I find Charge 7 proved beyond reasonable doubt against Zhang senior. 

M.  FINDINGS

141.  In respect of Zhang senior, I find Charges 1-4, 6 (first limb) and 7 proved beyond reasonable doubt.

142.  In respect of Zhang junior, Charges 1-3 are proved beyond reasonable doubt.  Charges 4-7 are dismissed on the procedural ground that the Plaintiffs have failed to take out an inter parte summons.

143.  All of the Zhangs’ non-compliance under the respective Charge was wholesale, deliberate and obstructive to the Plaintiffs’ recovery of their own records.  The Zhangs’ failure to comply with the disclosure orders reinforced the court’s belief that they were in possession, custody or control of part of the Plaintiffs’ Records and data server.

144.  If the Plaintiffs were found to have breached the Undertaking, the court may punish them.  However, it would be an affront to the dignity of the court and disproportionate to the gross non-compliance to dismiss the Charges for which the Zhangs are now found guilty of due to breach of the Undertaking.

145.  The case is adjourned for sentence to a date not more than 4 months from the date of this judgment, with 3 hours reserved. 

146.  The Plaintiffs succeeded in the bulk of the Charges against Zhang senior and hence should have costs on the usual indemnity basis. Zhang junior should bear half of the costs of the Plaintiffs jointly and severally with Zhang senior.

147.  I make an order nisi that:

(1)    The Zhangs shall bear the costs of the Set-Aside Summons;

(2)   Zhang senior shall bear the costs of the Originating Summons including the leave application on indemnity basis;

(3)   Zhang junior should bear half of the costs in point (2) jointly and severally with Zhang senior.

(4)   All costs shall be with certificates for 2 counsel, to be taxed if not agreed;

I also order that:

(5)   The Zhangs are each at liberty to file and serve affirmations on matters relevant to sentencing within 28 days from the date of handing down of this judgment; 

(6)   No further affirmations shall be filed without leave of the court;

(7)   The Zhangs are at liberty to lodge and serve written submission 14 days before the date of sentence;

(8)   The Plaintiffs are at liberty to reply within 3 days thereafter, limited to answering points of law; and

(9)   Personal attendance of the Zhangs at the hearing is required.

148.  I thank counsel for their assistance.