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

HCCL 16/2016

[2020] HKCFI 2423

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 16 OF 2016

(TRANSFERRED FROM HIGH COURT ACTION NO 1551 OF 2010)

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HCMP 208/2020

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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(Heard Together)

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D E C I S I O N

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1.  There are 2 Summonses before the court. They were both taken out by Mr Zhou, who is the Plaintiff in HCCL 16/2016 and the Defendant in HCMP 208/2020.

2.  By his Summons filed on 9 June 2020 in HCCL 16/2016 (“HCCL Summons”), Zhou applies to set aside an order of DHCJ Field dated 5 February 2020 granting, inter alia, leave to the Defendants (“SAIFs”) to commence committal proceedings against him.  By another Summons filed on 22 June 2020 in HCMP 208/2020 (“HCMP Summons”), Zhou seeks to set aside this court’s Order to dispense with personal service and for substituted service in respect of the Originating Summons issued against him for contempt of court (“OS”).

Background

3.  The disputes between the parties had been the subject matter of a number of judgments, decisions and rulings of the court.  The following is a summary of the relevant facts, in particular, the material procedural steps.

4.  In HCCL 16/2016, DHCJ Field gave judgment on 14 February 2018 against, inter alia, Zhou on a Counterclaim for breach of fiduciary duty, and declared a duty on his part to account to the 1^st Defendant (“SAIF LP”) to disgorge any profit made in respect of an investment.  Zhou’s appeal against the judgment was dismissed by the Court of Appeal on 12 July 2019.

5.  On 18 September 2018, Zhou filed his first affirmation (“Zhou 1^st”) in purported compliance with the duty to account.  SAIFs took issue with the adequacy of Zhou 1^st, and applied for further directions from the court as to the manner in which disclosure in aid of the account should be made, and how the account should be taken.

6.  In a Ruling dated 26 June 2018, DHCJ Field disagreed with Zhou that he had by Zhou 1^st provided a proper account.  Consequently, the learned Judge made a comprehensive order covering the disclosure to be made by Zhou for the account, and the directions for the taking of the account (“June 2018 Order”).

7.  On 13 July 2018, Zhou applied for a stay of the June 2018 Order pending appeal.  On 11 January 2019, DHCJ Field declined the application.  In his Ruling, the learned Judge observed that “[t]here has been very considerable delay in the taking of this account.”

8.  On 18 February 2019, SAIFs were provided with a draft of Zhou’s 4^th affirmation[1] (“Zhou 4^th”) in purported compliance of the June 2018 Order.  SAIFs did not regard Zhou 4^th as compliant.  By a letter from their solicitors (“Fangda”) dated 6 March 2019 to Zhou’s solicitors (“MinterEllison”), SAIFs set out what they contended to be the deficiencies in Zhou 4^th.  No reply was made to the letter. 

9.  On 25 March 2019, SAIFs applied for a further order, to clarify any interpretation differences between the parties and to give Zhou another chance to comply with the June 2018 Order (“Further Order Application”). 

10.  The Further Order Application was delayed when Zhou made another application for a stay pending appeal, which was successful.  It should be noted that in his appeal Zhou also challenged the June 2018 Order, including the power to make the Order and the breadth of it. 

11.  After the dismissal of Zhou’s appeal in July 2019, the Further Order Application came before this court on 9 September 2019.

12.  This court dismissed the Further Order Application in light of Zhou’s stance that he had fully complied with the June 2018 Order and he “steadfastly declines a second chance”.  Upon SAIFs’ undertaking to initiate contempt proceedings against Zhou within 28 days, the costs of the Further Order Application were ordered to be in the cause of the contempt proceedings.

13.  On 8 October 2019, SAIFs sought ex parte leave to commence contempt proceedings against Zhou.  The application was made by letter submissions of that date.  It was supported by, inter alia, a Statement dated 3 October 2019 (“Statement”) and the 4^th affirmation of Ho-Ping Lin (“Lin”) filed on 8 October 2019[2].

14.  On 5 February 2020, DHCJ Field granted leave to commence contempt proceedings and dispensed with the requirements for personal service of the June 2018 Order with a penal notice endorsed thereon.  In his Decision handed down on 11 March 2020, the learned Judge observed that “it is distinctly arguable that [Zhou] is in breach of the [June 2018 Order]”.

15.  On 7 May 2020, Zhou filed his HCCL Summons. 

16.  By reason of the General Adjourned Period, the OS was only taken out on 10 March 2020.  Fangda attempted to serve the OS on MinterEllison on 11 March 2020.  On 18 March 2020, Minter Ellison replied that they had no instructions from Zhou to accept service.  The refusal to accept service led to the adjournment of the first hearing of the OS pending SAIFs’ application for, inter alia, substituted service.

17.  On 8 May 2020, SAIFs applied ex parte for leave to dispense with personal service of the OS and for substituted service.  The application was supported by Skeleton Submissions and Lin’s 1^st affirmation under HCMP 208/2020.

18.  By a letter dated 11 May 2020 to Zhou, MinterEllison and Fanda, Zhou was asked by the court to confirm whether he maintained refusal to accept service.  No reply from Zhou or his solicitors was received.  By a Decision dated 4 June 2020, the court granted dispensation of personal service of the OS and ordered substituted service of the OS and the supporting material on MinterEllison.  Service was effected on 8 June 2020.

19.  On 22 June 2020, Zhou filed his HCMP Summons.

20.  For completeness, in respect of the accounting exercise, SAIF LP had filed its objection to Zhou’s account on 20 November 2019.  A PTR was fixed before a Master.  Unfortunately, it had to be re-fixed to 3 September 2020 by reason of the Covid-19 pandemic.

21.  Further, there is an appeal by Zhou to the Court of Final Appeal which will be heard on 1 December 2020.

Issues

HCCL Summons

22.  Three grounds of complaint had been put forward by Zhou in the HCCL Summons: (a) the 2^nd Defendant (“SAIF GP”) does not have locus; (b) material non-disclosure; and (c) DHCJ Field should not have dispensed with personal service of the June 2018 Order.

23.  In his viva voce submissions, Mr Barlow SC, who appeared with Mr Chan for Zhou, also argued that the Statement had failed to make out a prima facie case of contempt. 

HCMP Summons

24.  Likewise, 3 grounds had been advanced by Zhou.  In addition to the locus point and material non-disclosure (largely the same arguments made in the HCCL Summons were also deployed here), there is a point of law whether the court had jurisdiction over the service of the OS on Zhou given that he resided (and resides) in Florida, USA. 

Law

25.  Contempt proceedings should be only be brought as a last resort when no alternative powers of the court could be invoked: see Hong Kong Civil Procedure 2020 (“HKCP”), vol 1, [52/1/8].

26.  There are strict requirements in respect of the O 52, r 2 statement used to support the leave application.  Such a statement “is to be treated in a similar manner as an indictment in criminal proceedings”, and should “state all the factual elements which, if proved, are sufficient to establish the contempt”, “how and in what manner is it alleged the order … has been breached, with sufficient particularity to inform the alleged contemnor … what it is that he has done or failed to do which constitutes the contempt”. Leave granted pursuant to a defective statement may be set aside: HKCP, [52/2/6].

27.  In Citybase Property Management Ltd v Kam Kyun Tak [2003] 2 HKC 98, it was held by Ma J (as he then was) :

“14. Before considering whether a contempt has been committed where the breach of a court order is involved, the court must be satisfied of the following:

(1) The relevant order, together with an appropriate penal notice, must generally have been personally served on the alleged contemnor: RHC Order 45, rule 7(2)(a), (4). …

(2) The relevant order must also contain, as I have said, a penal notice.  Where there has been a failure in this regard, the court nevertheless has the power to enforce the order subject of course to the exercise of its discretion: see Order 45, rule 7(6); Hong Kong Civil Procedure 2002 at para 45/7/6.  However, it is in my view essential that the alleged contemnor shall have been told, whether by being present in court or by being notified by telephone, telegram or otherwise, that the consequences of breaching any order made is to be held in contempt of court and liable to a process of execution.  This I regard as a natural consequence of Order 45, rule 7(4) which requires a penal notice to be endorsed on the relevant order.  In my view, whether the penal notice is made in writing or given orally, the alleged contemnor must be made aware of the consequences of a breach of the relevant order.  It would be an extremely rare exercise of discretion under Order 45, rule 7(6) for the court to dispense with this requirement and in principle, I cannot conceive of any circumstances in which it would be right to dispense with such a requirement: c.f. Hong Kong Civil Procedure 2002 at para 52/2/9.”

28.  On the exercise of discretion under O 45, r 7(7) to dispense with personal service and/or the penal notice, the court was referred to 3 authorities by the parties.  The highest authority is the Court of Final Appeal case of Kao, Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830, at §69.  Not dissimilar to the present case, it was a case about a breach of a duty to account and there was an issue on dispensation from the requirement for personal service of the underlying order.  It was held (the judgment was given by Brennan NPJ) that :

“… The purpose of O.45, r.7(2) is to ensure that notice of the Order is given to the party bound. In this case, the first Order for the maintaining of an account of work followed Mr Koo’s proffering of his keeping of a record of work for former KLY clients as a reason for refusing an injunction preventing him from commencing the practice of KP. Then the Order was considered by him and his solicitor shortly after the Order was made in order to chart his future conduct. In the circumstances, it is entirely just to make a dispensing order.”

29.  I agree with Mr Manzoni SC, who appeared with Mr Tang for SAIFs, that the CFA took a common sense approach in resolving the issue.  On the facts of that case, evidence that Koo must have considered the Order with his solicitors was held sufficient to support a dispensation order.  The ultimate question was whether it was just to make the order.

30.  In AXA China Region Insurance Co Ltd v Li Yu Ping [2002] 3 HKC 339, giving the judgment of the court, Stock JA :

(1)  held that the power to dispense with service applied to mandatory as well as to prohibitory orders, and that the court is conferred with an unfettered discretion under O 45, r 7(7) (§34);

(2)  cited with approval from Jolly v Staines County Court Circuit Judge [2000] 2 FLR 69 where the English Court of Appeal held that :

“In principle the jurisdiction should not be exercised too readily, lest what should be a dispensing power for use in exceptional circumstances may gradually undermine the express requirements of Ord. 29, r.1(3).” (§36);

(3)  held that there is also a power to dispense with the penal notice requirement (§37);

(4)  adopted the legal test in Nicholls v Nicholls [1997] 1 WLR 314 (Lord Woolf, MR) – that the discretion 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.” (§44);

(5)  on granting dispensation (the Order was served on the contemnor with a penal notice but those requirements were not met in respect of a later order which varied it), took into consideration the fact that the contemnor had filed had an affirmation in purported compliance with the Order (as varied) which evidenced that she knew she was legally obliged to do so and that failure to do so would lead to consequences (§46).

31.  In Lau Yee Ching v Wong Tak Kwong, unrep, HCCW 807/2004, 6 October 2005, Kwan J (as she then was), at §39, held that the discretionary power for dispensation should be only be exercised where the court is satisfied beyond reasonable doubt that :

(1)  the contemnor knew of the terms of the Orders;

(2)  the contemnor was well aware of the consequences of disobedience;

(3)  the contemnor was aware of the grounds relied on as a breach with sufficient particularity to be able to answer the charge.

32.  Lau Yee Ching was followed in Willwin Development (Asia) Co Ltd v Wei Xing, unrep, HCMP 2946/2014, 12 October 2015, at §90, per B Chu J.

33.  Mr Manzoni submitted that the test in Lau Yee Ching is a narrow one, whilst the higher courts have kept the test flexible.  Lau Yee Ching pre-dated Kao, Lee & Yip, and therefore should be considered to be subject to the later CFA decision.  In Willwin Development, it does not appear that the CFA decision was cited to the court.  I shall return to Lau Yee Ching below.

Analysis

HCCL Summons – Locus

34.  Zhou complains that SAIF GP has no locus in bringing contempt proceedings because the June 2018 Order provided that the account is to be provided to SAIF LP.  Firstly, it is, at the highest, a procedural point and only goes to costs.  There is no dispute that SAIF LP has locus to enforce the June 2018 Order and it is a party to the contempt proceedings.

35.  Secondly, I agree with Mr Manzoni that the objection is without basis because SAIF GP is a beneficiary of any profit which may be disgorged in the account exercise :

(1)  SAIF LP is a Cayman Islands limited partnership of which SAIF GP is its general partner[3];

(2)  As analysed by the Court of Appeal in Zhou’s application for leave to appeal to the CFA, such a partnership is not a separate legal entity, ie, it is a partnership in the true sense, and “SAIF PARTNERS II L.P.” is simply the firm-name denoting all the partners[4];

(3)  SAIF GP is a partner of SAIF LP;

(4)  Zhou therefore has a liability to account to SAIF GP as a partner of SAIF LP.

36.  Mr Manzoni also pointed out that SAIF GP had provided an undertaking under the June 2018 Order, and therefore entitled to enforce it.  Mr Barlow said that the undertaking had to be given by SAIF GP because it was the controlling partner.  I do not believe that this matter adds much to the above analysis.

Material non-disclosure

37.  The law in this area is trite and requires no reiteration. 

38.  Zhou has 3 complaints[5] :

(1)  SAIFs withheld from DHCJ Field his known case that he had complied with the June 2018 Order by the filing of Zhou 4^th;

(2)  SAIFs failed to disclose to the learned Judge that by filing their evidence (Lin 5^th) in objection to Zhou 4^th, SAIF LP had triggered the account-taking trial process thereby rendering the contempt proceedings unnecessary and an abuse of process;

(3)  SAIFs failed to inform the learned Judge that Zhou had complied with the disclosure obligations under the June 2018 Order by providing his 5^th, 6^th and 7^th affirmations.

39.  In respect of (1), it is very difficult to understand.  The alleged compliance is nothing but Zhou’s own insistence.  His case in this regard was summarized in §29 of the Statement, and it was clearly taken into account by DHCJ Field in his Decision on Application for Leave to apply for an Order of Committal dated 11 March 2020, §§7-8.  There was no non-disclosure.

40.  Further, the learned Judge granted the June 2018 Order and had a full understanding of the obligations it imposed.  In para 11 of the Decision, the learned Judge expressed the view that there is a distinctly arguable case that Zhou is in breach of the order.

41.  In respect of (2), by relying on (a) the principle that contempt proceedings is one of last resort (see para 25 above) and (b) an observation by this court in the Decision on the Further Order Application that: “… the precious resources of the court should be expended on either contempt proceedings against [Zhou] or in the taking of the account … to falsify the account put forward by him”, Mr Barlow argued that the contempt proceedings is an abuse of process. 

42.  I am unable to agree.  To begin with, the said observation was not a ruling made on contested arguments and cannot be used to limit the course open to SAIFs. 

43.  Secondly, SAIFs have never accepted Zhou 4^th as compliant with the June 2018 Order.  Para 11 of Lin 5^th stated as follows :

“I wish to state at the outset that [SAIF LP] is of the firm view [Zhou] has failed to comply with the [June 2018 Order] for failing to produce a satisfactory account.  … [SAIF LP] is thus handicapped from properly raising objections.  … The present notice of objection is compiled on the basis of the “account” which [Zhou] has so far provided … [SAIF LP] reserves the right to refer to any further disclosure arising out of, inter alia, the contempt proceedings.”

44.  To put the matter in proper context, the June 2018 Order provided a timetable for the taking of account. Lin 5^th was filed in compliance with the same, and under an unless order[6].

45.  Further, it is quite clear from Lin 5^th that SAIF LP’s position is that by reason of Zhou’s failure to comply with the June 2018 Order, in particular the disclosure obligations therein contained, it is handicapped in presenting its case and has to fall back on asking the court to draw inferences against Zhou. 

46.  I accept Mr Manzoni’s submission that the accounting process will not resolve the inadequacy of Zhou’s compliance with the June 2018 Order.  I am unable to see why it is an abuse of process for SAIFs to pursue the contempt proceedings in the circumstances.  Zhou cannot, by his refusal to comply with a court order, limit the right of SAIFs to enforce that order. 

47.  Finally, the principle of last resort has been misused by Zhou. The authority of Kennedy v Cheng Kelly (2009) 12 HKCFAR 601 cited by Mr Barlow provides an illustration of the proper application of the principle.  In that case, the liquidator of a company disclosed the transcripts of private examination of the former directors of the company conducted under s 221 of the Companies Ordinance, Cap 32.  The CFA held that no contempt was committed. Para 16 of the judgment referred to the finding of the High Court on one of reasons advanced by the liquidator in support of his argument that there was no case to answer on the contempt.  Kwan J (as she then was) referred to the principle of last resort and took the view that even if the directors’ complaints were justified, “it is clear that there were other steps that they could have taken.  There was … ‘simply no need to resort to contempt proceedings’”.

48.  The issue in Kenney was whether the leave of the court was required for the disclosure of the transcript (see §1).  Apart from this obvious difference, in the present case there is no other step open to SAIFs to obtain compliance by Zhou.  In Kennedy, the directors might seek an injunction to prevent the use of the transcripts.

49.  For completeness, I agree with Mr Manzoni that given that Lin 5^th was filed after leave was grant to bring contempt proceedings, at the highest, disclosure of Lin 5^th could only be in fulfilment of SAIFs’ continuous obligation of disclosure.  For the reasons already discussed, I do not believe that Lin 5^th has any material impact on the consideration of leave.  There is no material non-disclosure. 

50.  As regards (3) (see para 38 above), there is nothing in the complaint.  Zhou’s 5^th to 7^th affirmations were all brought to the notice of DHCJ Field: see Lin 4^th, §7(o), (u) and (v). 

Prima facie case

51.  Zhou’s bold challenge that there is no prima facie case of contempt against him has no merit.  It is inappropriate for the court to engage in a detailed analysis of the issues which are likely to be ventilated in the contempt proceedings.  For the present purpose, I need only say that I agree with the observation of DHCJ Field that: “In my judgment it is distinctly arguable that Mr Zhou is in breach of the [disclosure obligations under the June 2018 Order] as alleged by [SAIFs].”

Dispensation

52.  There are 2 scattergun points made by Zhou which can be dealt with briefly.  In respect of the complaint that the dispensation order was applied for ex parte, I agree with Mr Manzoni that O 52, r 2(2) provides that leave to commence contempt proceedings should be obtained ex parte. It is a requirement for leave to be granted that there be proof of personal service: HKCP [52/2/6].  The application for dispensation of the requirement for personal service (and penal notice) was rightly taken out in the context of the wider leave application. 

53.  As regards other procedural “defects”, DHCJ Field was clearly informed of the fact that the June 2018 Order had not been sealed promptly (it was sealed on 28 March 2019), nor had it been served in accordance with the normal requirements: see Statement, §§43 to 45 and the Leave Decision, §12.

54.  The dispensation involved two aspects – personal service of the June 2018 Order and penal notice. 

55.  In respect of the failure to personally serve the June 2018 Order, endorsed with a penal notice, on Zhou.  SAIFs’ evidence was that the sealed order (without a penal notice) was served on Zhou’s solicitors on the day it was sealed.  It is common ground that Zhou resided (and resides) in Florida. 

56.  Mr Manzoni submitted that this case should be considered in light of the fact that Zhou had actively participated in the proceedings, including of course the application which led to the June 2018 Order, and had been represented all along by a team of lawyers of good standing.  Indeed, Zhou was represented by Senior and junior counsel in that application, which was extensively contested[7]. Thus, Zhou was fully aware of the relief sought against him by SAIFs and the Order subsequently made. 

57.  In the circumstances of this case, I can understand why the sealed Order was served on Zhou’s solicitors, especially when he resided abroad.  However, it should be said that more could have been done to ensure the compliance with the service requirements, eg, Zhou could have been asked via his solicitors if he would waive such requirements or efforts could have been made to serve the Order, properly endorsed, on him in Florida.  The court does not lightly overlook the non-compliance.  On the other hand, the law dictates that it is a matter which should be taken into consideration on the requirements of justice: see AXA China Region Insurance, which is binding on this court. 

58.  The fact that Zhou was and is fully aware of the terms of the June 2018 Order is not open to doubt.  In Zhou 2^nd (used in support of his stay application) and Zhou 4^th, both of which were filed by his solicitors, the terms of the June 2018 Order were recited.  The June 2018 Order was later challenged in Zhou’s appeal unsuccessfully. 

59.  It can be seen from the contents of Zhou’s affirmations, especially Zhou 4^th and Zhou 5^th, that he repeatedly argued that he had complied with the June 2018 Order.  Undoubtedly, these arguments were advanced with the benefit of the advice of his lawyers.  It would be very surprising if Zhou was not advised about the consequences of failure to comply with the Order.  There is considerable force in Mr Manzoni’s submission that the repeated acknowledgment and arguments made in Zhou’s affirmations that he had complied with the Order demonstrate that Zhou knew that he needed to comply and that there would be consequences of disobedience.

Personal service

60.  Drawing the strands together, there is a clear case for the dispensation of personal service.  Zhou was and is fully aware of the terms of the June 2018 Order (even the narrower test of Lau Yee Ching (see para 31 above) would be satisfied).  Thus, the lack of personal service resulted in no prejudice to him.  The requirements of justice are strongly in favour of dispensation.  I should say that the persistent non-compliance here, if established, flies in the face of the court. 

Penal notice

61.  Much of the above analysis applies to the consideration here. However, it was submitted by Mr Barlow that the Lau Yee Ching test cannot be satisfied based solely on the fact that Zhou was advised by his lawyers.  But the evidence goes further than that. 

62.  It may be helpful to revisit first principles and consider the rationale for a penal notice.  In Bell v Tuohy [2002] 1 WLR 2703, CA, Neuberger J (as he then was) observed at §53 :

“The purpose of giving notice in writing to a defendant to the effect that his failure to comply with a court order could lead to his being sent to prison is to bring home to him the terms of the court order and the seriousness of his failing to comply with that order, and to give him a proper opportunity to consider his position, to take advice, and to make appropriate arrangements. In the the present case, I think that, by the time the judge decided to commit Mr Tuohy, he had had every possible opportunity to appreciate and consider his position, …”

63.  The further evidence which goes to show that Zhou was aware of the consequences of breach of the June 2018 Order came from what transpired at the hearing of the Further Order Application.  At that hearing, Zhou, acting by his lawyers, steadfastly declined a second chance to comply.  There is considerable force in Mr Manzoni’s submission that it was something that no lawyer would do unless Zhou was fully informed of his rights and the consequences of non-compliance.  Moreover, the following exchange took place between Senior Counsel of the parties :

“Mr Pow SC: Do I take my learned friend’s not responding as an acknowledgment that they do not want a second chance to comply with the order, knowing that we’ll move for contempt?

Mr Barlow: … [my client’s] position is that he’s complied with the order.  Now if there are contempt proceedings, as we know, ignorance of the law is no excuse.”

64.  The costs of the failed Further Order Application were ordered to be in the cause of the contempt proceedings which SAIFs undertook to initiate. There was thus ample warning of the contempt proceedings.

65.  In my view, what was said by Senior Counsel on behalf of SAIFs at the hearing of the Further Order Application is no different to a penal notice as a matter of substance.  Clearly, Zhou was warned that if he refused to comply with the Order, contempt proceedings would follow.  Indeed, SAIFs gave an undertaking to commence such proceedings.

66.  A penal notice is a convenient way by which the consequences of disobeying a court order are brought to the awareness of the person subject to the order.  In Citybase Property, Ma J (as he then was) acknowledged that a penal notice might be given orally (see §14(2) at p.102F).

67.  Apart from Mr Manzoni’s submission that in declining a further chance to comply with the Order through his Senior Counsel, Zhou must have been fully advised by his legal team about the seriousness of the matter and the consequences of disobedience, it is inconceivable that Zhou’s team of lawyers would have failed to advise him on the outcome of the proceedings and the expectation of contempt proceedings. 

68.  In these circumstances, I have no reasonable doubt that Zhou was and is fully aware of the consequences of disobeying the June 2018 Order. 

69.  For these reasons, I am of the view that exercising the discretion vested in this court under O 45, r 7(7) to dispense with the service of the Order would best reflect the requirements of justice.

70.  It must follow from the above discussions that the 2^nd requirement of Lau Yee Ching test is also satisfied. 

3^rd requirement of Lau Yee Ching

71.  With respect, I do not believe that the 3^rd requirement of awareness of the grounds relied on as a breach with sufficient particularity applies to dispensation of personal service or endorsement of a penal notice on the order to be enforcement.  The function of informing the contemnor the grounds relied on as a breach with sufficient particularity belongs to the statement filed pursuant to O 52, r 2(2). 

72.  I have examined all the authorities cited in para 39 of Yau Yee Ching.  It is apparent that the reference to the 3^rd requirement came from the first instance judgment (HHJ Alton) which was cited in para 29 of the judgment of the Carnwath LJ in Benson v Richards [2002] EWCA :

“Having identified these technical problems, [HHJ Alton] noted that under CCR 29 Rule 1 the Court had a discretion to dispense with service of the order or the application notice if it thought it just to do so; and that by implication this would also involve dispensing with the requirement for a penal notice (p 22). However, in deciding whether to exercise that discretion, the court would need to be satisfied that the purposes of the requirements had been achieved. As she put it, the court would have to be satisfied “beyond reasonable doubt” that the defendant knew the terms of the orders relied on, that she was well aware of the consequences of disobedience, and that she was aware of the grounds relied on as a breach with sufficient particularity to be able to answer the charge (p23).”

73.  It is reasonably clear that the 3^rd requirement was in relation to the “application notice”.  In Benson, HHJ Alton was dealing with the committal proceedings.  Under County Court Rules 1981, Ord. 29, r. 1(4), an application notice was required to initiate the committal proceedings and it had to be served on the contemnor personally.  Pursuant to r. 1(4A), the notice should be supported by an affidavit stating the grounds on which the application was made and the affidavit had to be served with the notice.  Those procedural requirements (application notice and supporting affidavit) may be equated with an originating summons, the statement and verifying affidavit prescribed under O 52, RHC. 

74.  Even if I were wrong on the applicability of the 3^rd requirement, I agree with Mr Manzoni that the narrower test can be satisfied in this case. It would be disingenuous for Zhou to claim that he is not aware of the grounds relied on by SAIFs as breaches of the June 2018 Order with sufficient particularity. One only needs to examine the terms of that Order and the purported compliance by Zhou to see the mismatch.  The letter from Fanda to MinterEllison dated 6 March 2019 which highlighted the deficiencies in Zhou 4^th was ignored (see para 8 above).

Jurisdiction

75.  Zhou’s argument here is that, based on a number of authorities, eg, Mercedes Benz AG v Leiduck [1996] 1 AC 284, there is no applicable gateway under O 11, r 1 for the service of the OS out of jurisdiction on Zhou, and there is no inherent jurisdiction of the court to permit such service either. 

76.  Firstly, the above propositions of law were squarely brought to the attention of the court in SAIFs’ ex parte application for leave to dispense with personal service of the OS and for substituted service: see SAIFs’ written submissions dated 8 May 2020 and the Decision of the court dated 4 June 2020 (“Decision”).

77.  Secondly, the authorities relied upon did not deal with the situation in this case where Zhou, the party to be served with the OS, had brought proceedings in Hong Kong and thereby submitted to the jurisdiction of the Hong Kong court.  The principles adumbrated in those authorities are not in conflict with the analysis set out in the Decision. 

78.  Apart from relying on those authorities, Zhou had not identified any fragility in the analysis in the Decision.  The issue was summarised in para 17 of the same:

“With respect, I fully agree [with the decisions of Teare J]. 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.”

79.  In the Decision, this court agreed with and applied the analysis of Teare J set out in two English authorities.  In Annex A of his skeleton arguments, Mr Barlow had included an analysis of the procedural difference of the English regime.  However, the rationale that once a party is subject to the jurisdiction of the court he must also be subject to the same on the incidental contempt proceedings does not turn upon any procedural difference. 

80.  I am unable to see any merit in Zhou’s challenge.

Disposition

81.  For these reasons, both the HCCL Summons and the HCMP Summons are dismissed.  There be an costs order nisi that the costs of both Summonses be paid by Zhou with a certificate for 2 counsel in favour of SAIFs.

82.  I am grateful to counsel for their assistance.