Saif Partners Ii L P and Another v. Joe Zhixiong Zhou

CACV 625/2020 & CACV 190/2021
(Heard Together)

[2022] HKCA 117

CACV 625/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 625 OF 2020

(ON APPEAL FROM MISCELLANEOUS PROCEEDINGS NO. 208 OF 2020)

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CACV 190/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 190 OF 2021

(ON APPEAL FROM MISCELLANEOUS PROCEEDINGS NO. 208 OF 2020)

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Before :  Hon Cheung, Chu and G Lam JJA in Court

Date of Hearing :  15 December 2021

Date of Judgment :  15 December 2021

Date of Reasons for Judgment :  20 January 2022

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REASONS FOR JUDGMENT

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Hon Cheung JA :

I. The appeals

1.There are two appeals before us which arose from the judgments of Anthony Chan J in contempt proceedings in HCMP 208/2020 brought by the plaintiffs SAIF and SAIF Capital against the defendant Mr. Zhou.

2.In CACV 625/2020, Mr. Zhou, pursuant to leave granted by Anthony Chan J, appealed against the order dismissing his summons which sought to set aside the ex parte order of Anthony Chan J on 4 June 2020 dispensing with personal service on Mr. Zhou of the originating summons and ordering substituted service of the originating summons by delivery to Mr. Zhou’s solicitors (‘the substituted service order’).

3.In CACV 190/2021, Mr. Zhou appealed against the finding of contempt and the sentence of two months’ imprisonment made by Anthony Chan J for his breach of the Account Order made on 26 June 2018 by Deputy High Court Judge Field (‘Judge Field’).

4.We dismissed the appeals at the conclusion of the hearing. I will now give the reasons for our judgment.

II.   Background

5.The case has a long history. It began in HCCL 16/2016 (‘the Main Action’) where Mr. Zhou was the plaintiff and SAIF and SAIF Capital were the defendants. The background of the case relevant to the present appeals is extracted from the judgments of various levels of Court which had adjudicated on the matter.

1)   The Main Action

6.Mr. Zhou is a venture capitalist. Between 2004 and 2006, he worked for a private equity fund known as SAIF Partners. He was a limited partner in SAIF in which the general partner was SAIF Capital. SAIF, in which Mr. Zhou was a partner, controlled the business of a fund called SB Asia Investment Fund II L.P. (‘the Fund’).

7.The relations between Mr. Zhou and the other partners in SAIF, all of whom worked in the business, were governed at the relevant time by an Amended and Restated Limited Partnership Agreement of 29 June 2005 (‘the ALPA’) which was subject to the law of the Cayman Islands. Mr. Zhou sued SAIF and SAIF Capital for money due from them. They raised a counterclaim against Mr. Zhou for profits he made by reason of his breach of fiduciary duty that he owed to them. Judge Field found that the ALPA gave rise to a fiduciary duty on the part of Mr. Zhou, owed to the other partners in SAIF, to perform his duties as a partner in the interests of the partnership and the Fund which it controlled and not to make a personal profit from investment opportunities available to the Fund (‘the first finding’).

8.Judge Field went on to find that in October 2005, while a partner in SAIF, Mr. Zhou identified an investment opportunity in a PRC technology company named Show World Information Technology Co Ltd (‘Show World’). On his recommendation the Fund in April 2006 invested US$8 million through a new company, My Show Group Limited (‘My Show’) which established a PRC enterprise called Beijing Show World Science and Technology Co Ltd (a wholly owned foreign enterprise or ‘WOFE’) to which the assets and undertaking of Show World were transferred. Mr. Zhou was appointed a director of My Show and the WOFE.

9.During 2006, an employee of the WOFE developed a new technology for internet advertising. Judge Field found that this could have been profitably developed by WOFE. Instead, Mr. Zhou and the general manager of the WOFE diverted it to a company named Xinrui in which Mr. Zhou afterwards acquired a personal interest. What happened was Mr. Zhou then left SAIF and joined a rival fund, KPCB China Fund LP (‘KPCB’). He caused KPCB to invest in Xinrui. The investment was governed by an agreement referred to as the Xinrui investment agreement dated 24 August 2007. Judge Field held that this transaction was a breach of the plaintiff’s fiduciary duty to SAIF, in consequence of which he was accountable for the profit he had made (‘the second finding’).

10.The first and second findings led to the conclusion that Mr. Zhou was accountable to SAIF for any profit he had made on the Xinrui transaction. Judge Field made an order requiring him to disgorge the profit. Mr. Zhou’s appeal to this Court (Kwan VP, Barma and Au JJA) was dismissed.

11.The Court of Final Appeal granted Mr. Zhou leave to appeal on a discrete issue of whether SAIF was suing on behalf of contributors of the Fund. On appeal, it decided that SAIF was not suing in such a capacity and dismissed Mr. Zhou’s appeal.

2)  Events leading to the contempt proceedings in HCMP 208/2020

12.In the Main Action, Judge Field made the following orders against Mr. Zhou :

‘ 3. [he] shall account to the [SAIF] for any profit that [he] made as a result of the investment made by [KPCB] under the [Xinrui investment agreement] dated 24 August 2007;

4. all necessary enquiries and accounts be taken to identify and establish such profits made by [him]. For that purpose, [SAIF] shall have liberty to seek directions for taking of such accounts;

5. [he] shall pay to the [SAIF] any such identified and established profit and the [SAIF] shall hold any such profit on trust for [the Fund];

6. [he] shall also pay to [SAIF] (who shall also hold the same on trust for [the Fund]) interest upon any such identified profit, either pursuant to sections 48 and 49 of the High Court Ordinance (Cap.4) or, at [SAIF and SAIF Capital’s] election, under the equitable jurisdiction of the Court (‘the first order for account’);’

13.On 26 March 2018, Mr. Zhou provided his 1^st Affirmation in draft (‘Zhou 1^st’) purportedly in compliance with his obligation to account. He said that he had made no profit from the Xinrui investment. Accordingly to this affirmation :

(1)  KPCB invested US$8 million into Keygate/Xinrui on about 24 August 2007;

(2)  In April 2008, Mr. Zhou left KPCB to set up Keytone Ventures of which he was still a partner;

(3)  By that time, the Keygate/Xinrui investment had not gone well. In about July 2008, KPCB sold Keygate/Xinrui to Keytone at cost, i.e. US$8 million;

(4)  As there was no capital gain, no ‘carried interest’ was payable by KPCB to Mr. Zhou as a result of the sale to Keytone. He therefore personally made no profit from KPCB’s Keygate/Xinrui investment;

(5)  In December 2009, Keygate’s business failed;

(6)  On 13 July 2011, Keytone sold the remaining assets in Keygate for US$3.5 million. There was a loss of US$4.5 million to Keytone. Mr. Zhou therefore personally made no profit from Keytone’s investment in Keygate/Xinrui.

14.SAIF and SAIF Capital did not accept Mr. Zhou’s evidence and sought further orders from Judge Field. In a ruling dated 26 June 2018 (‘Account Decision’), Judge Field did not accept Mr. Zhou’s claim that he had fully complied with the first order for account by way of his 1^st Affirmation. Judge Field held that :

‘ [9] … given [the defendant’s] untruthful account … and the relative scarcity of the discovery he provided for the trial, [Mr. Zhou] is entitled to an order that goes wider than might have been conventionally appropriate in setting the modalities for an account of secret profits to be given by a fiduciary. It is also the case that, since [Mr. Zhou] did not himself provide the alleged US$8 million invested in Xinrui, the absence of any profit for [KPCB] on the US$8 million investment does not necessarily mean that [Mr. Zhou] personally did not benefit financially in one way or another from the investment.’

15.Judge Field went on to make the following order (‘the Account Order’) :

‘ (1) … [Mr. Zhou] must, within 36 days of the date hereof, provide an account duly verified by affidavit identifying and attaching all vouchers and documents that are relied upon of all income, including salary, fees, dividends and other remuneration whether by way of “Capital Distribution” and/or “Carried Interest” or similar payments received by [him] and/or entities owned and/or controlled by [him] down to 31 December 2012 (“the end date”) from (i) [KPCB] and its subsidiaries, affiliates and related entities (KPCB); and (2) Keytone Ventures LP and its subsidiaries, affiliates and related entities (“KV”), identifying the entitlement under which the said income or other remuneration was received, the aforesaid account to be supported by documents that [he] possesses, or are within his power and/for control, including at least the following :

(a) a copy of the relevant partnership agreements amongst inter alios [Mr. Zhou] on the one hand and KPCB and/or KV on the other, current down to the end date;

(b) a copy of any consulting or employment agreements amongst inter alia [Mr. Zhou] on the one hand and KPCB and/or KV on the other, current down to the end date;

(c) a copy of the distribution letters and notices issued by KPCB and/or KV to [Mr. Zhou] down to the end date;

(d) The whole package of sale and purchase agreements relating to the alleged transfer from KPCB to KV at US$ million;

(e) A full list of assets of Keygate/Xinrui/Neogrid immediately prior to the alleged disposition in July 2011 …’

16.By then, Mr. Zhou had lodged an appeal (CACV 62/2018) against Judge Field’s judgment in the Main Action. He also filed a supplementary notice of appeal to appeal against, inter alia, the Account Order on 11 July 2018. On 13 July 2018, he applied to stay the account-taking procedure directed under the Account Decision until the final determination of CACV 62/2018.

17.By a ruling dated 11 January 2019, Judge Field dismissed the stay application on the basis, inter alia, that there had been trenchant delay.

18.On 18 February 2019, Mr. Zhou provided his draft 4^th Affirmation (‘Zhou 4^th’) purportedly in compliance with the Account Order. He stated that he was required by the Account Order to account and disclose only what he alleged as profits made from the Xinrui investment. He stated :

‘ Although, I was not present at the [stay hearing], I have been informed by my lawyers who were present and I believe that, in the course of that hearing, the Trial Judge confirmed that … (b) his Ruling is limited to an account of the profits and income that I personally received from KPCB’s Keygate/Xinrui Investment and/or Keytone’s Keygate/Xinrui Investment and not to any other profits or income received by me’ ([16] of Zhou 4^th)

19.However, in his 4^th Affirmation, he also accepted that :

(1)  he was entitled to the ‘carried interest’ which was about 3% of the profit distributions paid to KPCB’s General Partner (of which he was one) ([29]); and

(2)  he was entitled to salaries of around US$1.2 to 1.5 million per year ([39]).

20.Mr. Zhou provided no further information in relation to these two types of payments as required by the Account Order, e.g.the dates, amounts, entitlements under which the amounts were received, and documentary support. Instead, he simply alleged that he did not and would not receive any amount ‘in respect of or relating to’ the Xinrui investment ([38], [40], [64] and [72]).

21.SAIF and SAIF Capital disagreed that Mr. Zhou had complied with the Account Order. On 6 March 2019, their solicitors wrote to the solicitors of Mr. Zhou :

‘ It must be plain to you and your client that the scope of the Account Order requires your client to provide an account … for all income … including but not limited to any income relating to the Keygate/Xinrui Investment, and indeed regardless of whether, in your client’s subjective view, such income relates to the Keygate/Xinrui Investment.’ (emphasis added)

22.On 25 March 2019, they applied for a further order to clarify any interpretation differences between the parties and to give Mr. Zhou a further chance to comply (‘Further Order Application’).

23.On 12 July 2019, the judgment in CACV 62/2018 was handed down by this Court in which Mr. Zhou’s appeal was dismissed.

24.By a decision dated 9 September 2019, Anthony Chan J refused the Further Order Application on the basis that such an order would serve no purpose as it was Mr. Zhou’s stance that he had fully complied with the Account Order and he ‘steadfastly declines a second chance’. Anthony Chan J observed that the matters might be further ventilated by way of contempt proceedings or in the taking of the account where the plaintiffs could falsify the account put forward by Mr. Zhou.

25.Two further affirmations which are relevant for the present appeal were filed by Mr. Zhou on 29 August 2019 and 24 September 2019, namely, his 6^th Affirmation (‘Zhou 6^th’) and 7^th Affirmation (‘Zhou 7^th’).

26.By Zhou 6^th, Mr. Zhou repeated his allegation that he did not have in his possession, custody or power any partnership, consulting or employment agreements between himself and KPCB. However, he had made enquiries with KPCB regarding such documents, and elaborated on his attempts to obtain the same. Up to the date of Zhou 6^th, no document had been supplied by KPCB.

27.Zhou 7^th provided a follow-up on the documents sought from KPCB. A total of 11 documents were disclosed in that affirmation. Mr. Zhou alleged that he had taken all reasonable steps and effort to fully account to the SAIF for any profit he made from the Xinrui investment, and to disclose all ‘responsive documents’.

28.On 5 February 2020, Judge Field granted leave to commence contempt proceedings against Mr. Zhou (‘the leave order’). SAIF and SAIF Capital’s application for leave was supported by a Statement made pursuant to Order 52, rule 2 (‘the Statement’) and Ho-Ping Lin’s 4^th Affirmation.

29.The originating summons for the contempt proceedings was issued on 10 March 2020. However, the hearing of the originating summons had to be adjourned due to the refusal by Mr. Zhou’s solicitors to accept service. The substituted service order was granted by Anthony Chan J on 4 June 2020 (‘the substituted service order’). He later granted leave to Mr. Zhou to appeal against the substituted service order which later became CACV 625/2020.

30.On 9 June 2020, Mr. Zhou applied to set aside the leave order. It was dismissed by Anthony Chan J. This Court refused to grant leave to appeal in CAMP 231/2020.

31.On 29 March 2021, Anthony Chan J found Mr. Zhou to be in contempt and on 21 October 2021 sentenced him to two months’ imprisonment. Mr. Zhou appealed (CACV 190/2021).

III.  CACV 625/2020

1)  Current authorities

32.I will deal with CACV 625/2020 first. The gist of Mr. Zhou’s argument is that he is a foreign litigant residing in Florida USA and the originating summons had not been properly served out of jurisdiction on him. The issue here is whether his submission to the jurisdiction of the Hong Kong courts by bringing the Main Action against SAIF and SAIF Capital dispensed with the need to serve the contempt proceedings on him out of jurisdiction. Anthony Chan J reviewed the English authorities such as Marketmaker Technology Ltd v CMC Group Plc [2008] EWHC 1556 (QB), Deutsche Bank AG v Sebastian Holdings Inc [2017] 1 WLR 1842 and Deutsche Bank AG v Sebastian Holdings (No 2) [2017] 1 WLR 3056 (upheld on appeal in Deutsche Bank AG v Sebastian Holdings Inc (Nos 1 and 2) [2019] 1 WLR 1737 and held :

‘ [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 his 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.’

33.Anthony Chan J’s approach was adopted by Deputy High Court Judge M K Liu in Liao Chen Toh v Loyal International Enterprises Co Ltd [2020] HKCFI 2272. On appeal, this Court ([2021] 4 HKLRD 202) adopted the English approach. This is what the Court held :

‘ 21. The starting point is that the Hong Kong courts do not have inherent extra-territorial jurisdiction over a litigant who is not residing in Hong Kong. Order 11 rule 1 of RHC provides the mechanism for obtaining leave to serve the Hong Kong proceedings on a foreign litigant if the gateway requirements as set out in O.11 are satisfied. This jurisdiction has been variously described as the long-arm jurisdiction or exorbitant jurisdiction and great caution must be exercised when a court is faced with an application to serve out.

22. It is, however, essential to recognise two other equally important principles. First, an exception for requiring leave to serve out is where the foreign litigant has already submitted to the jurisdiction of Hong Kong by, for example, commencing an action in our Courts. In Liberia v Gulf Oceanic Inc [1985] 1 Lloyd’s Rep 539, 544 col 2, Oliver LJ stated :

“… by becoming a litigant within the jurisdiction, a plaintiff submits himself to the incidents of such litigation, including liability to a counterclaim.”

See also Marketmaker Technology Ltd, [26]. A foreign party may also submit to our jurisdiction by voluntarily steps in the proceedings that had commenced against him in Hong Kong: Astro Exito Navegacion Sa v WT Hsu [1984] 1 Lloyd’s Rep 266, 270, and Chan Hon v Bayer Healthcare Ltd [2020] HKCA 1090, [44]. Another situation is where the defendant is already physically in Hong Kong and the originating process is served on him in Hong Kong: Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454.

23. Second, when the jurisdiction has been established against a person, the jurisdiction must include matters which are incidental to the claim or order, examples of matters which are incidental to the claim in which the Court has jurisdiction over the defendant are those relating to the enforcement of court orders like contempt of court proceedings and other orders like orders for costs. In Crest Home Plc v Marks [1987] AC 829, 860E-G, Lord Oliver held :

“ … The proper policing and enforcement or observance of orders made and undertakings given to the court in an action are, in my judgment, as much an integral part of the action as any other step taken by a plaintiff in the proper prosecution of his claim. The normal procedure where the contempt complained of is that of a party to the action is to apply for committal by motion in that action as an incidental step in the action.”

24. This principle is recently restated by Gross LJ of the English Court of Appeal in Deutsche Bank AG (Nos 1 and 2) which affirmed the first instance decision of Teare J in Deutsche Bank AG (No 2).

“[55] … To my mind, the judge’s reasoning was impeccable: (i) an order of a court must carry with it the means to enforce that order; (ii) the means to enforce an order are therefore a necessary incident of that order; (iii) an order for committal is one of the means of enforcing court orders; (iv) accordingly, the committal application is incidental to the CPR Pt 71 order. On this view, it would follow that DB does not require permission to serve the committal application out of the jurisdiction.”

In that case the person cited for contempt was at the time physically within the jurisdiction. Teare J held:

“[12] Mr Matthews rightly submits that there is a public interest in ensuring that the English court does not overstep its territorial reach. However, in this case the court had jurisdiction to make the Part 71 order against Mr Vik because he was physically within the jurisdiction: see the judgment of Cooke J in Deutsche Bank AG v Sebastian Holdings Inc [2016] CP Rep 2. Thus the territorial reach of the English court was not overstepped. In my judgement, when an application incidental to the Part 71 order is issued DB does not need to establish jurisdiction again simply because Mr Vik is now outside the jurisdiction. The matter is no different from the case where permission is obtained to serve a claim out of the jurisdiction and thereafter the claimant wishes to make an application against the defendant which is incidental to the claim in respect of which he obtained permission to serve out. The claimant does not need to establish jurisdiction a second time.”

25. Teare J in his earlier decision of Marketmaker Technology Ltd stated:

“[27] The order for costs, and the ensuing application to commit for contempt, are ordinary incidents of the claim brought by the fourth 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 fourth 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. Counsel’s submission would have had force had this been a case where permission to serve out was required in order to establish jurisdiction over the fourth claimant, but it is not such a case.”

26. It is recognised that under O.52 r.3 of RHC, the party after obtaining leave to issue contempt proceedings must issue an originating summons against the party who is in contempt and service of the originating summons must be effected in the ordinary way under the rules. But, in our view, the submission of Mr.Wong SC (together with Mr.Lam) for the plaintiffs is correct that the principles in the English authorities that we have discussed do not depend on the procedural feature that contempt proceedings are issued within the original proceedings. To the contrary, they are based upon the consideration of the substantive mature of contempt proceedings. Gross LJ in Deutsche Bank AG (Nos 1 and 2) held :

“[70] … Thirdly, like Teare J (in the passage at para 11, already set out), I can see no reason why committal applications cannot both be ‘new’ or ‘separate’ but yet still incidental to ‘an order … validly made against a person whilst he was within the jurisdiction of the court and in respect of which it is said that he has acted in contempt’. All must depend on the factual context.”

27. In our view, the contempt proceedings are clearly incidental and an integral part of the action following the granting of the injunctions against LCT.

28. Mr. Chan stressed that contempt proceedings must now be commenced by an originating summons which like a writ of summons is an originating process. Accordingly, the service of the originating summons on a defendant not within the jurisdiction must satisfy the gateway requirements of O.11 r.1. We see no conflict between the nature of an originating summons and dispensing with the need to satisfy the gateway requirements in order to serve it on a foreign defendant when that defendant is already brought into the jurisdiction of the Court by his own submission. This is because our Court already had jurisdiction over him in respect of the subject matter of the action of which contempt proceedings arising from the action is an integral and incidental part. There is no issue of the Court overstepping its long-arm or exorbitant jurisdiction because it does not as LCT has already submitted to the jurisdiction of our Court.’

2)   Grounds of appeal

34.The grounds of Mr. Zhou’s appeal are as follows :

(1)  Anthony Chan J erred in law in rejecting his case that the Court lacked jurisdiction to make the substituted service order because :

i)  As the Court’s jurisdiction to order service of originating process upon a foreign defendant is statutory, the Court had no inherent jurisdiction to make such an order.

ii)  The Rules of the High Court (‘RHC’) Order 11 regime forbids service of Hong Kong originating process outside the jurisdiction otherwise than in accordance with its terms and contains no ‘gateway’ rendering ‘permissible’ (Order 11, rule 1(1)) service out of the jurisdiction of a concurrent originating summons seeking the committal for contempt of court of a foreign defendant.

iii)  Absent an applicable RHC Order 11, rule 1(1) ‘gateway’, service of Hong Kong originating process is ‘impermissible’ e.g. Mercedes Benz AG v. Leiduck [1996] 1 AC 284 per Lord Mustill at 296H-297B and Kayden Ltd v. Securities and Futures Commission (2010) 13 HKCFAR 696 per Ribiero PJ at [27]-[28] and [50].

(2)  Anthony Chan J erred in law in rejecting the contentions that :

i)  The service of originating process upon a foreign defendant requires either personal service upon him within Hong Kong or service upon a Hong Kong address where he has recently resided or worked.

ii)  Otherwise, if the foreign defendant cannot be served here, service of concurrent originating process is only ‘permissible’ within the RHC Order 11 regime.

iii)  Where service is impermissible, RHC Order 52, rule 3(4) and/or Order 65, rule 4 do not render it permissible (see : Tillemont Shipping Corp. SA v. Taitexma Enterprise Corp [1993]2 HKC 129 per Bokhary JA at 132E-133C and Bank of China (Hong Kong) Ltd v. Regal Link Investment Ltd [2009] 3 HKLRD 203 per Yuen JA at [31]-[38]), including her quotation with approval :

‘ ...... if a party “cannot properly enter through the front door ... he should not be allowed to enter through the back door ......’

(iv)  Deliberate circumvention of the RHC Order 11 regime is impermissible.

3)  My view

35.Mr. Zhou is basically advancing the same arguments that I had addressed in Liao Chen Toh. The principle that Order 11 provides the complete code for the jurisdiction on service out as stated in decisions such as Leiduck, Kayden Ltd, Tillemont Shipping Corp SA and Regal Link Investment Ltd was expressly adopted and recognized by this Court in Liao Chen Toh. However, these authorities are not concerned with the issue of submission to jurisdiction by Mr. Zhou which renders personal service of the contempt proceedings on him unnecessary. Mr. Zhou had failed to overcome the difficulties he faced by reason of his submission to jurisdiction. Liao Chen Toh is binding on us unless it can be shown that the decision is plainly wrong : Solicitor 24/07 v. Law Society of Hong Kong (2008) 11 HKCFAR 117. I am of the view that he has failed to cross this high threshold.

36.Order 52, rule 3 of the RHC provides that :

‘ 3.―(1) When leave has been granted to make an application for an order of committal, the application shall be made by originating summons to a judge and unless the Court granting leave has otherwise directed, there must be at least 8 clear days between the service of the originating summons and the day named therein for the hearing.

(1A) The originating summons shall state the grounds in respect of which leave for making an application for an order of committal has been granted.

(2) Unless within 14 days after such leave was granted the originating summons is entered for hearing the leave shall lapse.

(3) The originating summons, accompanied by a copy of the statement and affidavit in support of the application for leave under rule 2, must be served personally on the person sought to be committed.

(4) Without prejudice to the powers of the Court under Order 65, rule 4, the Court may dispense with service of the originating summons under this rule if it thinks fit to do so.’

37.Order 52, rule 3(4) gives the Court the discretion to dispense with service of the originating summons for contempt. In England, the application for contempt is by way of notice of motion. Subject to this, the former English Order 52, rule 4(3) is in the same terms. Lord Donaldson of the English Court of Appeal held in Mansour v Mansour [1989] 1 FLR 418 at page 420 :

‘ There is nothing on the face of that rule which limits the discretion of the court under Ord. 52, r. 4(3). No doubt it is a factor to be taken into consideration that the respondent to the notice of motion is resident abroad but, for my part, I cannot see that other rules fetter this rule.......However, for my part, I cannot see any grounds for fettering the judge’s discretion by reference to considerations whether or not leave to serve out of the jurisdiction was required or was obtainable. If he had not been prepared to dispense with service, then certainly it would have been necessary to consider whether leave could be granted and should be granted in order to enable there to be personal service in accordance with Ord. 52, r. 4(2). But, as I say, I cannot see why, if it is appropriate, if it is just, to dispense with service, one should be concerned with leave.’

38.In my view, our Order 52, rule 3(4) provides the juridical basis for Anthony Chan J to dispense with personal service of the originating summons for contempt on Mr. Zhou. I further agree with the view expressed by G Lam JA at [83] to [86]. Accordingly, the appeal was dismissed.

IV.  CACV 190/2021

1)  Grounds of appeal

39.Mr. Zhou advanced nine grounds of appeal which are summarised as follows. Anthony Chan J erred :

(1)  by disregarding the principle that contempt proceedings should only be invoked as a last resort (‘Last resort ground’);

(2)  by disregarding the principle that no order will be enforced by committal unless it is expressed in clear terms and holding that the terms of Account Order are abundantly clear (‘Unclear Account Order ground’);

(3)  by disregarding the principle that the Statement and originating summons for contempt must be clear and by holding the terms of these documents are clear when they are, in fact, ambiguous, confusing and incapable of satisfying the requirement for a criminal indictment (‘Ambiguous charge ground’);

(4)  in rejecting Mr. Zhou’s submission that the charge as contained in Para.1a of the originating summons (‘the Para.1a Charge’) was invalid as being bad for multiplicity (‘Multiplicity ground’);

(5)  in failing to identify which of the multiple charges in the Para.1a Charge have been proved beyond reasonable doubt (‘Unclear finding ground’);

(6)  in failing to show Mr. Zhou had the necessary mens rea to commit the contempt (‘Mens rea ground’);

(7)  in not finding that SAIF and SAIF Capital had failed to discharge their evidential burden of proving that ‘it was within the power of Mr. Zhou to do what the order required, not for Mr. Zhou to establish that it was not within his power to do it’ (‘Burden of proof ground’);

(8)  by disregarding the absence of evidence to prove any of the multiple charges beyond reasonable doubt. Five sub-grounds are identified (‘Charges not proved ground’); and

(9)  in imposing two months’ sentence.

40.In his oral submission, Mr. Barlow (together with Mr.Chan) for Mr. Zhou focused on Ground 4 (Multiplicity ground), Ground 1 (Last resort ground), Ground 8(1) and (2) (Charges not proved ground’), Ground 6 (Mens rea ground’), Ground 7 (Burden of proof ground) and Ground 8(3), (4) and (5) (Charges not proved ground).

2)  My view

41.Before I deal with the grounds of appeal, I will address the following matters first :

(1)   The Account Order

42.What prompted Judge Field to make this order was the complaint by SAIF and SAIF Capital about the inadequacy of Mr. Zhou’s 1^st Affirmation which Anthony Chan J summarised as follows :

‘ 16. ......There was no explanation why Keytone had paid USD8 million for an investment which had not gone well. Also, Zhou was caught out on his failure to make discovery of documents regarding KPCB’s investment in Keygate/Xinrui when he was specifically asked to do so for the purpose of the trial.

17. The Plaintiffs say that the documents exhibited to Zhou 1^st demonstrated that his previous answer that such documents were not in his possession, custody or power was patently untrue, and Zhou had been suppressing disclosure unless he found it useful for his purpose.

18. Further, Zhou 1^st was totally silent as to the salaries, fees and bonuses that he ought to have received by virtue of his position as a partner of KPCB and later Keytone. At least part of such income must be attributable to the Xinrui Investment, say the Plaintiffs.’

43.It is clear that Judge Field did not find Mr. Zhou to be a credible witness. This can be seen from his judgment of 14 February 2018 on the Main Action. This is one of the factors that one must bear in mind and which was reflected in Judge Field’s ruling when he expanded upon the first order for account and made the Account Order which is set out in [15] above.

(2)  Ambit of the Account Order

44.Mr. Zhou’s in his 4^th Affirmation stated what he understood to be the ambit of the Account Order which is referred to at [18] above.

45.Mr. Zhou’s understanding of the ambit of the Account Order was not supported by the exchange between Judge Field and Mr. Barlow at the hearing on 11 January 2019 when Mr. Zhou applied to stay the taking of the account. The exchange was repeated in [26] of the judgment below.

‘ Mr Barlow (Zhou’s senior counsel): There is an additional argument, of course, and that goes to the scope of the discovery that’s been ordered requiring [Zhou] to obtain documents from other non-parties, including KPCB.

Court: [Zhou] must provide such documents as fall within the classes identified in the order as he is able to obtain. The order doesn’t require [him] to bring any legal proceedings against the holders of documents.

Mr Barlow: I’m very grateful for that, my Lord.

Court: He must make all reasonable attempts to obtain the documents and if he is unable to obtain the documents then he must set out the circumstances of that situation. What he has got to do is to make all reasonable efforts to obtain them and, as I understand it, that exercise has not been (sic) begun.

Mr Barlow: I don’t’ think there’s any evidence that it hasn’t been (sic) begun, but there is certainly plenty of evidence as to the difficulties involved.

Court: [Zhou] has got to do his best to obtain these documents that fall within this class. ... At the moment what is required is action by [Zhou] in order to obtain these documents ... These documents have been ordered so that a proper assessment can be made as to what benefits [Zhou] has received which derive from the Xinrui investment. The order does not depart from an order that is in aid of recovery of the secret profit. The order does not say that any salary that has been received has been paid over. Discovery must be made of all benefits, remuneration and the like that’s been received by Mr Zhou so that a realistic assessment can be made as to what he has received by virtue of the Xinrui Investment Group. So I think that that, with respect, is manifest from the order that I made.’ (emphasis added)

46.The part of the holding by Judge Field as emphasised clearly shows that the ambit of the Account Order goes beyond what Mr. Zhou perceives to be the case.

47.It is in such a context and notwithstanding Mr. Zhou’s 6^th and 7^th Affirmations in purported compliance with the Account Order, that Judge Field on 5 February 2020 granted leave to SAIF and SAIF Capital to issue the present contempt proceedings. Judge Field in his written Decision dated 11 March 2020 stated :

‘ 11. In my judgment it is distinctly arguable that Mr Zhou is in breach of the Disclosure Order as alleged by the Applicants. It is clear that his response to the Disclosure Order was carefully considered and it is likely that it will be no defence that he was advised by his lawyers that the disclosure he provided was in conformity with the order.’

(3)   The charge

48.Paragraph 1 of the originating summons stated that :

‘ 1. The Defendant be committed to prison for his contempt of this Court in breaching or disobeying paragraph 1 of the Order of Deputy High Court Judge Sir Richard Field made on 26 June 2018 in HCCL 16/2016 (the “Order”) in that after service of the Order on the Defendant, the Defendant disobeyed or breached the Order by failing to:

a. provide an account, duly verified by affidavit identifying and attaching all vouchers that are relied upon, of all income, including salary, fees, dividends and other remuneration whether by way of “Capital Distribution” and/or “Carried Interest” or similar payments received by the Defendant and/or entities owned and/or controlled by the Defendant down to 31 December 2012 (the “End Date”) from (i) KPCB China Fund LLP and its subsidiaries, affiliates and related entities (“KPCB”); and (2) Keytone Ventures LP and its subsidiaries, affiliates and related entities (“KV”), identifying the entitlement under which the said income or other remuneration was received, the aforesaid account to be supported by documents that the Defendant possesses, or are within his power and/or control;

b. provide the specific documents listed in paragraph 1(b), 1(c) and 1(d), including to provide (or if such is not within the Defendant’s possession, power and/or control, confirmed on oath that such is the case):

i. a copy of any consulting or employment agreements amongst inter alia the Defendant on the one hand and KPCB and/or KV on the other, current down to the End Date;

ii. a copy of the distribution letters and notices issued by KPCB and/or KV to the Defendant down to the End Date;

iii. the whole package of sale and purchase agreements relating to the alleged transfer from KPCB to KV at US$8 million,

as particularised in the Plaintiffs’ Statement made pursuant to Order 52 rule 2(2) of the Rules of the High Court dated 3 October 2019 filed in HCCL 16 of 2016 on 8 October 2019, a copy of which is served together with this Summons;’

49.Paragraph 1 expressly pleaded that the particulars of breach by Mr. Zhou are as set out in the Statement. The particulars in the Statement are as follows :

‘ Mr Zhou’s breach of the disclosure Order in Contempt of Court

26. On 18 February 2019, Mr Zhou filed his draft Fourth Affirmation (the “4^th Affirmation”) in purported compliance with the Disclosure Order. Despite the clear intimation by DHCJ Field on what this Honourable Court expects Mr Zhou to do under the Disclosure Order, Mr Zhou breached the Disclosure Order in the following respects.

27. First, Mr Zhou breached paragraph 1 of the Disclosure Order by failing to “provide an account, duly verified by affidavit identifying and attaching all vouchers that are relied upon, of all income, including salary, fees, dividends and other remuneration whether by way of “Capital Distribution” and/or “Carried Interest” or similar payments received by [Mr Zhou] and/or entities owned and/or controlled by [Mr Zhou] down to 31 December 2012 (“the end date”) from (i) KPCB-CF and its subsidiaries, affiliates and related entities (KPCB); and (2) Keytone Ventures LP and its subsidiaries, affiliates and related entities (“KV”), identifying the entitlement under which the said income or other remuneration was received, the aforesaid account to be supported by documents that [Mr Zhou] possesses, or are within his power and/or control”.

28. In fact:-

(a) Nowhere in his 4^th Affirmation had he even attempted to conduct such an exercise of listing out his income and identifying the entitlement under which such was received.

(b) Further, despite bank account statements being an obvious disclosure requirement given that income is being accounted for (a fact implicitly, if not explicitly, accepted by Mr Zhou at paragraph 22 above), Mr Zhou did not even provide one single bank account statement.

29. Instead, Mr Zhou basically claimed that he had nothing to account, for he unilaterally qualified his disclosure obligation by adding to the Disclosure Order a qualification which did not exist, i.e., that his obligation to disclose is limited to income from KPCB and/or KV’s investment into Keygate/Xinrui. This is evident from the following:-

(a) In his 4^th Affirmation, Mr Zhou specifically stated as follows:-

“ Although, I was not present at the 11 January 2019 hearing of my stay application, I have been informed by my lawyers who were present and I believe that, in the course of that hearing, the Trial Judge confirmed that: ...(b) his Ruling is limited to an account of the profits and income that I personally received from KPCB’s Keygate/Xinrui Investment and/or from [KV’s] Keygate/Xinrui Investment and not to any other profits or income received by me”. [emphasis added]

(b) Further, in his 4^th Affirmation, Mr Zhou divided his accountable income into two categories, one consisting of “Carried Interest” or “similar payments”, and the other consisting of all other income which he defined as “Other Income”. Mr Zhou asserted that since the only way in which he and Zhou’s Entities could receive any profit from KPCB or KV in the Keygate/Xinrui Investment was by distributions of capital gains or profits from the investment:-

“all ‘Other Income’ payments or receipts, including the return of the seed capital, ‘salary’, fees’, ‘dividends’ and ‘other remuneration’ are (as my lawyers have previously explained to the Court and [SAIF] completely irrelevant to the account that was ordered in the Judgment and the [Accounts Order]”.

(c) As a result, Mr Zhou only affirmed that he:-

“ did not receive any other form of Other Income from KPCB in respect of or relating to KPCB’s Keygate/Xinrui Investment and nor did any of [Zhou’s Entities]” and “did not receive any Other Income from [KV] ...in respect of or relating to [KV’s] Keygate/Xinrui Investment and nor did any of [Zhou’s Entities]”.’

(4)   Anthony Chan J’s decision

50.Anthony Chan J found Mr. Zhou to be in contempt for breach of paragraph 1 of the Account Order in respect of his failure to provide the account as specified but not in respect of the disclosure of documents. The basis of his finding that paragraph 1 was breached is as follows :

‘ An account of ALL income

66. Under the Order, Zhou has to identify all items of income down to 31 December 2012 received by him and/or entities owned and/or controlled by him from (i) KPCB and its related entities and (ii) Keytone Ventures LP and its related entities.

67. For each item of income, Zhou has to identify the entitlement under which it was received, eg, the income was salary. Further, Zhou has to disclose all documents within his power and/or control in support of the account.

68. I agree with Mr Pow that the account may be provided by drawing up a table of all items of income which Zhou and his related entities had received from KPCB and Keystone (and their related entities),and attaching the supporting documents. The fact that such a simple exercise has not been carried out, despite the resources available to Zhou,speaks volumes.

69. The charge against Zhou here is that he had unilaterally read down the scope of the Account Order, namely, his obligation was limited to income from the investment of KPCB and/or Keystone (and their related entities) into Xinrui (see, as an example, para 28 above). Consequently,Zhou has failed to account for all his income as ordered by the court.

70. The charge is sufficiently clear from paras 28 and 29 of the Statement which is relied upon in the Originating Summons (pp 2-3) for these contempt proceedings. I am in no doubt that Zhou was and is fully aware that he has to account for all his income, and the reading down was deliberate and done with the purpose of evading his obligations under the Account Order. I disagree with the submission that the charge against Zhou for his failure to account is unclear.

71. Plainly, Zhou has not fulfilled his obligations. He has never tried to identify all the income which fit the prescriptions in the Account Order.

72. Even according to Zhou 4^th (see also para 24 above), Zhou has not account for the following income:

(1) Para 29 of Zhou 4^th referred to Zhou’s entitlement to receive“carried interest” from KPCB (and/or its related entities). By April 2008 (when he left KPCB), his “vested “carried interest” was about 3% of the profit distributions paid to the General Partner” [emphasis added]. Zhou made no attempt to even disclose the amount in question;

(2) Paras 69 and 70 referred to the management fee received by Keytone Management (of which Zhou was the controlling shareholder) from which Zhou was paid salaries and possibly further payment by way of distribution of “remaining funds”. He simply failed to account for such payment(s) under the pretext of they had “no direct or indirect connection to [Xinrui Investment]”.

73. For completeness, I do not believe that Zhou was in any way misled by his lawyers. There is no suggestion to that effect, and even if that were the case, the erroneous advice would have been corrected in light of the Plaintiffs’ strong and continuing objection, as well as the views expressed by the Court, over the purported compliance of the Account Order by Zhou.

74. In the premises, I find it proved beyond all reasonable doubt that Zhou is in breach of the Account Order by failing to account for all his income.’

51.In his decision on sentence, Anthony Chan J summarized the bases of his finding as follows :

‘ 3. Under the Judgment, it was found that :

(1) Zhou had deliberately read down the Account Order to evade his obligations thereunder (Judgment, §§69-70);

(2) Zhou never tried to identify all the income which fit the prescriptions in the Account Order (Judgment, §71);

(3) Zhou had failed to account for the amount he received due to his vested “carried interest” paid to the General Partner of KPCB (Judgment, §72(1));

(4) Zhou did not account for the management fee received by Keytone Management (of which Zhou was the controlling shareholder) from which he was paid salaries and possibly further payment by way of distribution of “remaining funds” (Judgment, §72(2)).’

52.I will now deal with the grounds of appeal in the same order as submitted by Mr. Barlow.

i)  Ground 4 (Multiplicity ground)

53.It is well established that the statement and the content of the originating summons in support of committal for contempt must be in clear and unambiguous terms so as to inform the potential contemnor what he was being accused of : Kao Lee & Yip v. Koo Hoi Yan (2009) 12 HKCFAR 830 at [23] and Tiong King Sing v Sam Boon Peng Yee [2016] 4 HKLRD 548.

54.Mr. Barlow referred to the Para.1a Charge and relying on an annotation submitted that the Para.1a Charge contained within it a minimum of at least 24 different and alternative classes or individual potential charges of breach or disobedience. He submitted that the Para.1a Charge and the Statement did not inform Mr. Zhou ‘with sufficient particularity to enable him to defend himself, what exactly he is said to have done or omitted to do which constitutes a contempt of court’ (Chiltern District Council v. Keane [1985] 1 WLR 619 per Sir John Donaldson, MR at 622A-E) and they did not clarify whether SAIF and SAIF Capital allege that Mr. Zhou ‘was in breach of every single requirement of [the Account Order] or only some, and if so which, of them.’ (Chiltern District Council)

55.In my view, Mr. Barlow has adopted too narrow an approach by focusing solely on the Para.1a Charge itself. As pointed out earlier, the Para.1a Charge expressly pleaded that it relied on the particulars in the Statement which I have already set out in [49] above. The underlying charge as particularised is that Mr. Zhou had deliberately read down the Account Order, meaning that he had restricted it to profits and income that he personally received from KPCB’s Keygate/Xinrui investment and from [KV’s] Keygate/Xinrui investment (Statement [29]) and also Mr. Zhou failed to identify all the income which fits the prescriptions of the Account Order (Statement [28a]).

56.Since Mr. Zhou unilaterally chose to restrict the scope of disclosure to this narrow ambit, SAIF and SAIF Capital could only formulate the charge on such a basis. It would be pedantic in such a situation to require them to state categorically the specific item of income Mr. Zhou had not disclosed. In my view, there is no ambiguity involved in Anthony Chan J’s finding that Mr. Zhou had read down the Account Order and failed to identify all income and also that Mr. Zhou in his 4^th Affirmation had not disclosed his ‘carried interest’ and the management fees from which his salaries were paid. These failures clearly come within the scope of the Para.1a Charge and the Statement. I do not see how Mr. Zhou could have misunderstood the charge that was laid against him allegedly because the Para.1a Charge contained multiple charges.

ii)  Ground 1 (Last resort ground)

57.It is well established that contempt proceedings should only be brought as a last resort when no alternative powers of the Court could be invoked : Kennedy v. Cheng Kelly (2009) 12 HKCFAR 601 at [16]; China Metal Recycling (Holdings) Ltd v. Chun Hei Man [2018] 1 HKLRD 455 at [60], [75] and [78]. Mr. Barlow submitted that SAIF and SAIF Capital had already engaged the ‘alternative powers of the court’ to seek redress in respect of the subject of the Para. la Charge by invoking the trial procedure of the Account Order by means of affirmation evidence intended to contradict Mr. Zhou’s IV Account (i.e. the account in his 4^th Affirmation) and to initiate the account-taking process before a master in order to cross-examine Mr. Zhou and to seek to alter the final balance in Mr. Zhou’s IV Account.

58.It is correct that SAIF and SAIF Capital are pursuing the account taking process but the usefulness of that exercise will depend in the first place on the extent of disclosure made by Mr. Zhou. They had attempted to bring the Further Order Application to compel him to make full disclosure but this was refused by Anthony Chan J who observed in his decision of 9 September 2019 :

‘ 9. For completeness, it should be mentioned that the cards are on the table concerning the alleged non-compliance of the Order by the Plaintiff. It is very clear that he is not accepting the second chance offered by the Defendants. In the event of contempt proceedings, the Plaintiff may be at risk of having these matters taken into account by the court.’

59.In reality, the plaintiffs had exhausted all alternative means to get a meaningful disclosure from Mr. Zhou and committal for contempt was indeed the last resort available.

iii)  Ground 8(1) and (2) (Charge not proved ground)

60.The first two instances under Ground 8 relied upon by Mr. Barlow are :

a)  The Para. la Charge alleged ‘that after service of the [Account] Order on [Mr. Zhou, he] disobeyed or breached the Order ...’ when the evidence showed that the Account Order has never been served on him (which was the reason for the plaintiffs seeking and obtaining within HCCL 16/2016 an ex parte order dispensing with such service) and therefore none of the multiple charges was engaged.

b)  Paragraph 25 of the statement identified the deadline for Mr. Zhou’s compliance with the Account Order as 18 February 2019. So any breach or disobedience must pre-date 19 February 2019 (the ‘Deadline’) and yet the statement and the plaintiffs’ case purported to incorporate multiple references to post-Deadline events.

61.These two points can be shortly dealt with. On the issue of service, the Account Order was served on Mr. Zhou’s solicitors because of his evasion of service. Judge Field granted an order pursuant to Order 45, rule 7 dispensing with the personal service of the Account Order on him (‘the dispensation order’). After his failure to set aside the dispensation order, Mr. Zhou sought leave to appeal but was refused by this Court. As to the second point, the reference to the so-called post-Deadline events are statements concerning the procedural history of the case such as the judgment of this Court of 12 July 2019, the Further Order application and the dispensation order being obtained. All these are relevant matters for Judge Field in considering whether to grant leave to issue the contempt proceedings. I do not see how these matters would adversely affect SAIF and SAIF Capital’s case for contempt or advance Mr. Zhou’s case in any way.

iv)  Ground 6 (Mens rea ground), Ground 7 (Burden of proof ground) and Ground 8 (3), (4) and (5) (Charge not proved ground)

62.In respect of Ground 6, Mr. Barlow referred to the following two paragraphs of the judgment below :

‘ 61. The procedural history of these matters has been set out above in some detail because, apart from its relevance, the case against Zhou may be said to be self-evident from what had gone on in these matters. It should be noted that Zhou has all along been represented by an experienced team of lawyers led by senior counsel.

62. I agree with Mr Pow that there is no question of Zhou having unintentionally breached the Account Order. Indeed, no such suggestion was made on his behalf. Therefore, mens rea is not an issue. The focus of the court’s inquiry is whether the Account Order has been breached by Zhou (the actus reus).’

63.He submitted that Anthony Chan J had first incorrectly, as a matter of law, treated the perception that Mr. Zhou had retained competent legal representation in HCCL 16/2016 as absolving SAIF and SAIF Capital of their legal requirement to prove their Para.1a Charge beyond reasonable doubt. Further, contrary to what Anthony Chan J had held above, a finding of mere breach of a court order does not constitute a valid verdict of contempt of court in the absence of a reasoned conclusion (which the judgment did not contain) as to whether or not the breach ‘was accompanied by the state of mind necessary to establish punishable contempt’ : Kao, Lee & Yip (supra) per Sir Gerard Brennan, NPJ at [21], meaning non-compliance that had been shown to be more than ‘causal, accidental or unintentional’ [53].

64.There is a dispute whether the issue of mens rea was raised below. Mr. Barlow disagreed that it had not been raised. Irrespective of whether it was raised or not, I am satisfied, like Anthony Chan J, that the plaintiffs had proved beyond reasonable doubt that Mr. Zhou had the necessary intention. In Kao Lee & Yip, Sir Brennan NPJ of the Court of Final Appeal adopted the statement of Millett J in Spectravest Inc v Aperknit Ltd [1988] FSR 161, 173-174 on how a contempt for breach of a court order is established :

‘ To establish a contempt of court, it is sufficient to prove that the defendant’s conduct was intentional and that he knew of all the facts which made it a breach of the order. It is not necessary to prove that he appreciated that it did breach the order. ...... In the first of those cases, Lord Wilberforce described as contempt conduct which was “neither casual nor accidental and unintentional.” ’

65.The history of the litigation clearly showed that Mr. Zhou’s conduct was intentional and that he knew all the facts which made it a breach of the Account Order by not providing the required information. The ambit of the Account Order had been repeatedly canvassed in various court proceedings when the complaint was that Mr. Zhou had deliberately read down the ambit of the Account Order. The ambit of the Account Order was also one of the subject matter of the appeal in CACV 62/2018. It is necessary to repeat fully this Court’s decision on what was submitted by Mr. Zhou on this issue in that appeal :

‘ 131. A number of objections were taken in respect of this part of the order in the Accounts Ruling by which the plaintiff was required to provide an account of “all income, including salary, fees, dividends and other remuneration whether by way of “Capital Distribution” and/or “Carried Interest” or similar payments received by P and/or entities owned and/or controlled by P down to 31 December 2012 (“the end date”) from (i) [KPCB] and its subsidiaries, affiliates and related entities …; and (2) [KV] and its subsidiaries, affiliates and related entities…”.

132. The plaintiff contended that the order complained of exceeded the permissible bounds for an order to account. He stressed that his obligation is “to account for profits which have been made in breach of fiduciary duty, not simply to account for profits in the abstract.” (Snell’s Equity (33rd ed), §7-055) He should not be made to account for more than he actually received as a result of his breach. One of the matters required of him was to account for “all income, including salary”. Other money he earned such as the salary he agreed with KPCB before they made the Xinrui investment was not within the scope of the judgment order, as this was not profit he derived from KPCB’s investment made under the Xinrui Investment Agreement.

133. He also complained that the order impinged upon his rights, the rights of KPCB and the rights of subsidiaries, affiliates and related entities of KPCB and KV, requiring them to disclose to the defendants (who are trade competitors) wide-ranging commercially sensitive information that was outwith the judgment and the Xinrui counterclaim. Furthermore, other than the plaintiff, the other entities had not been given any opportunity to be heard.

134. I reject all the above contentions. Similar submissions had been made before the judge.

135. The plaintiff was not asked to account for profits in the abstract. He was ordered to account for any profit he made as a result of the investment made by KPCB under the Xinrui Investment Agreement. The Accounts Ruling made clear that given the plaintiff’s untruthful account of when he began to discuss a possible investment in Xinrui and the relative scarcity of the discovery he provided for the trial, it is appropriate to make “an order that goes wider than might have been conventionally appropriate in setting the modalities for an account of secret profits to be given by a fiduciary”. It is with such considerations in mind that the order was made, so that the court can properly ascertain whether and to what extent those monies could be regarded as falling within the scope of his duty to account and disgorge, instead of merely relying on the assertion made in his affirmation of 25 March 2018.

136. As for monies received including “salary, fees, dividends and other remuneration”, assuming that his salary was agreed with KPCB before they made the Xinrui investment, if his salary was enhanced as a result of the profits he brought in by such investment, this may well be a profit attributable to his breach of fiduciary duty for which he would come under a duty to account.’

66.Mr. Zhou clearly knew what was required of him. His steadfast refusal to make further disclosure in the Further Order Application further supported this view. His protestation that he was still confused despite the repeated clarification and that he did not have the mens rea is hollow and has no substance. The fact that Anthony Chan J found the Para.1b Charge not proved does not assist Mr. Zhou in respect of the Para 1a Charge.

67.The gist of Mr. Zhou’s argument on Ground 7 is that the SAIF and SAIF Capital have not been able to demonstrate (let alone prove beyond reasonable doubt) (1) any causal link between Mr. Zhou’s deposed understanding of the terms of the Account Order and (2) any item of actual undisclosed ‘income’.

68.Anthony Chan J was well aware of the principle on the burden of proof in contempt. Mr. Zhou’s argument is putting SAIF and SAIF Capital’s case on its head. As pointed out earlier, it is precisely because of Mr. Zhou’s reading down of the Account Order that he did not make a full disclosure of his income. What was his income must be something privy to himself. Further, as stated earlier, even based on his own evidence, he had not disclosed requisite information in relation to the ‘carried interest’ and the management fee from which his salary was paid. This failure arose precisely because he chose to adopt an unjustifiably narrow reading of the Account Order.

69.Ground 8 (3), (4) and (5) are as follows :

Ground 8 (3).  There was no evidence that Mr. Zhou’s understanding of the ambiguous terms of the Account Order was consciously incorrect or that he had deliberately or contumeliously breached the Account Order.

Ground 8 (4).  There was no evidence (including in the 4^th Affirmation of Ho-Ping Lin) that Mr. Zhou or any entities owned and controlled by him had received any income or any salary or any fees or any dividends or any other remuneration which had not been disclosed within Mr. Zhou’s IV Account.

Ground 8 (5).  As Mr. Zhou had shown in his written and oral submissions below :

i)  The trial evidence and in particular his affirmations showed that he had complied with his reasonable understanding of the unclear and ambiguous terms of the Account Order which Anthony Chan J upheld in respect of Para.1b Charge but rejected in respect of the Para.la Charge.

ii)  SAIF and SAIF Capital’s ‘evidentiary’ case comprised argument (actually rhetoric and conjecture or rhetorical conjecture) and not admissible contempt trial evidence.

iii)  Their suggested ‘factual’ inferences (including those cited in [61]-[62] of the judgment) were (as a matter of law) inexigible from the admissible trial evidence.

iv)  They had failed to adduce evidence to rebut Mr. Zhou’s IV Account or to rebut the trial evidence of Mr. Zhou’s compliance.

70.In respect of Ground 8(3), I have already addressed the test for contempt for breach of a court order. Deliberate breach or a contumacious intention to breach the order is not an element required to be established in cases of civil contempt by a party directly bound by an order : Kao Lee & Yip [46]. In any event, it is clear that Anthony Chan J found the breach was deliberate. As Sir Brennan also observed ‘[46] a contumacious disobedience to an order negates the possibility that the disobedience is “causal, or accidental and unintentional” ’.

71.Ground 8(4) is a repetition of Mr. Zhou’s argument in another form which I have already dealt with. As Mr.Pow SC (with Mr.Tang) for the plaintiffs had submitted :

‘ Until Mr. Zhou files a proper affirmation covering the entire scope of the Disclosure Order, a proper investigation into the question of whether he made complete disclosure cannot meaningfully begin.’

72.Again, many of the complaints in Ground 8(5) have already been advanced in different guises by Mr. Zhou and addressed by us. The real complaint here is that the 4^th Affirmation of Mr.Lin of SAIF and SAIF Capital constituted the entirety of the evidence below and he was not offered for cross-examination. It was said that this failure breached Mr. Zhou’s constitutional Hong Kong Bill of Rights legal right to ‘have examined the witnesses against him’ before Anthony Chan J adjudged him guilty of contempt. That constitutional right cannot be taken away by any judge’s order for directions for trial.

73.In my view, the short answer is that Mr. Zhou by his counsel had not applied to cross-examine Mr.Lin. Anthony Chan J held :

‘ 57. There was no application to cross-examine the Plaintiffs’ witness, Mr Lin. The Plaintiffs are entitled to rely upon Mr Lin’s affirmation evidence in these proceedings: see Numeric City Ltd v Lau Chi Wing [2016] 4 HKLRD 812, §23.’

74.It is also of note that Mr. Zhou had not filed any evidence in opposition to the contempt application before Anthony Chan J.

75.To conclude, none of the grounds advanced is of substance which would vitiate the finding that Mr. Zhou was in contempt by not complying with the Account Order.

76.Ground 2 (Unclear Account Order ground) and Ground 5 (Unclear finding ground) were not pursued by Mr. Barlow in his oral submission. These two grounds are clearly unsustainable given what I have discussed above.

V.  Sentence

77.Mr. Zhou argued that the two months’ sentence and indemnity costs order were wrong when :

1)  As best he could, he had provided the account ordered by the Account Order.

2)  In doing so, he had devoted a large amount of time, effort and cost in compiling his account and in doing his best to comply (even after the deadline for disclosing documents had expired) with the Account Order.

3)  He was ordered to account for payments received (by himself or his entities) for a period of up to 11 years earlier and beyond all usual document-retention regimes.

4)  He has consistently affirmed that the Xinrui business failed without achieving any success and neither KPCB nor Keytone made any profit on their Xinrui investments.

5)  SAIF and SAIF Capital have suffered no harm that cannot be corrected within the HCCL 16/2016 account-taking trial in March 2022.

6)  Anthony Chan J was wrong not to take into account his order that he is to pay indemnity costs which are likely to be in the order of several million dollars.

78.The arguments advanced are a repetition of the arguments that had already been advanced before Anthony Chan J. I would highlight some of the holdings he made :

‘ 9. I regret to say that the court is unable to accept the Affirmation as a genuine attempt by Zhou to purge his contempt by providing the relevant information required under the Account Order.

10. First and foremost, Zhou is plainly a sophistication person, engaged in the business of investment funds and earning a very handsome income. Plainly, he was (and is) able to read the Account Order. There was nothing confusing about it. At all material times, he was assisted by an experienced team of lawyers led by a senior counsel.

...

13. The repetitive suggestion of having been misled is baseless, flies in the face of the Judgment and only serves to fortify the finding that Zhou is a recalcitrant party who resorts to playing litigation games to deny justice to the Plaintiffs (Judgment, §91).

14. If Zhou was genuinely remorseful and wanted to purge his contempt, he could easily have (a) set out (preferably in a table the use of which would be helpful to both him and the readers) ALL the income which he and the entities owned or controlled by him had received from (i) KPCB and its related entitles and (ii) Keytone Ventures LP and its related entities down to 31 December 2012; (b) identify the entitlement under which each item of income was received; and (c) disclose the supporting documents which were within his power or control (Judgment, §§66-67).

15. The Affirmation did not do that. Notably, the Affirmation did not address whether any of the entities owned or controlled by Zhou had received any income provided under the Account Order. The burden is not on the court to wade through the purported compliance of Zhou with a fine toothcomb to see what may be missing. If Zhou failed to comply fully with a perfectly plain Order despite the many opportunities opened to him to do so, he must live with the consequences.

....

17. Further, Mr Pow SC, who appeared with Mr Tang for the Plaintiffs, rightly pointed out that there was no suggestion in the Affirmation that Zhou had made any attempt to produce any supporting document for the disclosure he made in the Affirmation, especially the documents from Keytone, which was under his control.

18. The management fees disclosed in the Affirmation were in excess of US$5 million. The payment of US$1.2 million in 2012 was only made 6 years before the Account Order was granted on 26 June 2018. The court would require a good deal of persuasion to believe that Zhou had no supporting document for such payment. As an example, he should have declared and paid tax on the income. The tax record could have been produced.

19. I reject Zhou’s suggestion that his failure to comply with the Account Order had caused no prejudice to the Plaintiffs. It was found otherwise in the Judgment (§92). The plain fact is that without the requisite disclosure by Zhou the Plaintiffs will not be in a position to advance a case based on proper evidence (as opposed to estimates) at the hearing for the taking of the Account (due to take place in March 2022).

...

21. I also agree with Mr Pow that the breach of the Account Order by Zhou is contumacious and cynical. Such breach is continuing. Zhou had been forewarned that he might be cited for contempt of court (Judgment, §35).

22. I can find no mitigating circumstances before the court. Zhou’s apology to the court was made on the basis of any appearance of evasiveness, which was allegedly not intended (Affirmation, §§44 and 46). It was not a demonstration of genuine remorse but paying lip [service] with the hope of getting a lenient sentence.’

79.In my view, Anthony Chan J had fully considered all the circumstances before he imposed the sentence of two months’ imprisonment which accords with the range of sentence imposed by the Court for breach of its order. Indemnity costs order is also invariably ordered in contempt proceedings.

80.Accordingly, the appeal in CACV 190/2021 was dismissed.

VI.  Costs

81.The plaintiffs are entitled to be paid their costs in both appeals with a certificate for two counsel. In CACV 190/2021, an indemnity costs order is imposed. In CACV 625/2020 a party and party costs order is imposed.

Hon Chu JA :

82.I agree with the reasons given by Cheung and G Lam JJA.

Hon G Lam JA :

83.I agree with the reasons for judgment given by Cheung JA and would only add a few words in relation to the point on service.

84.Prior to 2 April 2009, an application for committal, after the requisite leave of the Court had been given, had to be brought by motion.[1] Where there were extant proceedings in which the alleged contempt was committed, the motion could be taken out within those proceedings and did not therefore have to be an originating motion.[2] The notice of motion had to be served personally.[3] Because it was a notice of motion issued in existing proceedings, however, it could be served on a defendant out of the jurisdiction pursuant to Order 11, rule 9(4).[4] The effect of that paragraph is that if it was necessary to obtain leave to serve the originating process in the proceedings (such as the writ of summons) out of the jurisdiction, leave would be required for service of the notice of motion out of the jurisdiction. If no leave to serve the writ out of the jurisdiction was required, no leave would be necessary for service of the notice of motion for committal out of the jurisdiction: Mansour v Mansour [1989] 1 FLR 418, 421.

85.As part of the Civil Justice Reform, Order 52 was amended such that an application for committal is to be brought by originating summons.[5] Clearly an originating summons falls outside Order 11, rule 9(4), and instead falls within rule 9(1) which applies rule 1 to, inter alia, originating summonses.[6] Mr. Barlow submits that since none of the gateways under rule 1 applies to an application for committal, such an originating summons simply cannot be served on a person outside the jurisdiction even though he is a party to the proceedings in which the order in question was made. But there was no consultation for or mention of such a change in the reform exercise. The amendments made to Order 52, rule 3 were made by rule 40 of the Rules of the High Court (Amendment) Rules 2008.[7] The legislative materials indicated that the relevant object was to abolish originating motions as a means of commencing proceedings, pursuant to Recommendation 14 in the Final Report on Civil Justice Reform.[8] In my view, it would be surprising if the Working Party which made the recommendation, or the Rules Committee which amended the rules, had intended to cut down the jurisdiction of the Court in contempt cases in this way. The true position based on the rules as amended is that even though an application for committal is made by originating summons and therefore, in form, a new proceeding, it is nonetheless incidental to the order being enforced. Where the person is already subject to the jurisdiction of the Court in respect of that order, as in the present case, leave to serve the originating summons on that person out of the jurisdiction is not required. For this reason, as explained in greater detail in Cheung JA’s judgment above, I agree that Mr. Barlow’s submission should be rejected.

86.Even if there were indeed a lacuna in the rules for service as submitted by Mr. Barlow, it seems to me that the Court still has the power to dispense with service, as provided in Order 52, rule 3(4). I respectfully agree with the passage quoted by Cheung JA above from Mansour v Mansour, p 420. Order 52, rule 3(4) empowers the Court to dispense with service, not just personal service, even though the application is one made by originating summons. There is nothing to show that the power is available only where the defendant to the application for committal is within the jurisdiction. Neither Tillemont Shipping Corp SA v Taitexma Enterprise Corp & others [1993] 2 HKC 129 nor Bank of China (Hong Kong) Ltd v Regal Link Investment Ltd [2009] 3 HKLRD 203 deals with a rule that specifically empowers the Court to dispense with service of an originating summons altogether.

Mr. Barrie Barlow SC and Mr. Chan Pat Lun, instructed by MinterEllison LLP, for the Defendant

Mr. Jason Pow SC and Mr. Alexander Tang, instructed by Fangda Partners, for the 1^st & 2^nd Plaintiffs