HCMP1574/2016 CHINA SHANSHUI CEMENT GROUP LTD AND OTHERS v. ZHANG CAIKUI AND ANOTHER - LawHero
HCMP1574/2016
高等法院（雜項）Au-Yeung J22/5/2018[2018] HKCFI 1192
HCMP1574/2016
A A
B HCMP 1574/2016 B
[2018] HKCFI 1192
C C
IN THE HIGH COURT OF THE
D HONG KONG SPECIAL ADMINISTRATIVE REGION D
COURT OF FIRST INSTANCE
E E
MISCELLANEOUS PROCEEDINGS NO 1574 OF 2016
F ____________ F
G BETWEEN G
CHINA SHANSHUI CEMENT GROUP
H H
LIMITED (中國山水水泥集團有限公司) 1st Plaintiff
I CHINA SHANSHUI CEMENT GROUP I
(HONG KONG) COMPANY LIMITED
J
(中國山水水泥集團(香港)有限公司) 2nd Plaintiff J
CHINA PIONEER CEMENT (HONG KONG)
K COMPANY LIMITED 3rd Plaintiff K
L
and L
ZHANG CAIKUI (張才奎) 1st Defendant
M M
nd
ZHANG BIN (張斌) 2 Defendant
N ____________ N
O O
Before: Hon Au-Yeung J in Court
P P
Date of Hearing: 23 May 2018
Q
Date of Reasons for Sentence: 31 May 2018 Q
R __________________________________ R
REASONS FOR SENTENCE
S S
__________________________________
T T
U U
V V
-2-
A A
B Introduction B
1. This decision should be read with my judgment handed down
C C
on 28 February 2018 (“the Judgment”), by which I found the Zhangs
D D
guilty of contempt of court.
E E
2. This was the sentencing hearing. The Zhangs were absent.
F F
Ms Lam of Deacons filed a summons seeking to adduce a draft affirmation
G of Zhang senior’s driver and Zhang junior respectively to explain the G
Zhangs’ absence. I dismissed the summons for reasons orally given.
H H
I 3. The Plaintiffs were keen to proceed with sentencing and asked I
the court to consider a fine or imprisonment. They did not press for an
J J
order to debar the Zhangs from defending the underlying action in
K HCA 2880/2015. I thus proceeded to hear the mitigation. K
L L
Legal principles on sentencing
M M
4. The principles have been set out in my decision in Arboit v
N Koo Siu Ying (No 2) [2016] 3 HKLRD 154 dated 18 May 2016, §§2-10: N
O (a) The starting-point is to acknowledge that contempt of civil O
court orders is a serious matter and that court orders are made
P P
to be obeyed. A prime consideration of the court in
Q sentencing contempt is to signal importance of demonstrating Q
to litigants that the orders of these courts are to be obeyed. By
R R
“litigants”, it is clearly referring to litigants in general and not
S just the contemnor himself. S
T T
U U
V V
-3-
A A
B (b) The object of the sentence is both to punish conduct in B
defiance of the court’s order and to serve a coercive function
C C
by holding out the threat of future punishment as a means of
D securing the protection which the order was primarily there to D
do. The court has to balance the 2 objects.
E E
(c) The sentence for contempt may range from a fine to a term of
F F
imprisonment.
G G
(d) Imprisonment should be regarded as a sanction of the last
H resort. Any custodial sentence should be as short as possible H
consistent with the circumstances of the case.
I I
(e) The court may suspend a term of imprisonment for such
J J
period or on such terms as the court deems fit. This is an
K K
“absolute discretion” but it would be difficult to think of
L
circumstances where a suspended order should be made when L
nothing further remains to be done to comply with the order.
M M
(f) The court will consider if there are aggravating factors,
N N
mitigating factors, and acts to purge the contempt.
O O
(g) Relevant factors (which are not exhaustive) include:
P (i) The nature of the order and breach in question, and the P
extent of the breach.
Q Q
(ii) Whether the contempt was contumacious or
R R
unintentional, the reasons, motives and state of mind.
S S
T T
U U
V V
-4-
A A
B (iii) Whether the claimant has been prejudiced by virtue of B
the contempt and whether the prejudice is capable of
C C
remedy.
D D
(iv) Whether the contemnor appreciates the seriousness of
E the deliberate breach. E
(v) Whether the contemnor has cooperated.
F F
(h) As circumstances of contempt vary greatly, there is little
G G
mileage to be gained from the citation of other cases on
H sentence. H
I I
5. The approach I shall adopt is to ascertain the extent of the
J J
breach as found by the court, the context in which the contempt had arisen,
K
effect of the breach on the Plaintiffs, explanations of the Zhangs, the K
aggravating factors, the mitigating factors, acts to purge the contempt and
L L
the personal circumstances of the Zhangs.
M M
The extent of the breach found by the court
N N
6. By the Judgment, I found Zhang senior guilty of the following
O O
charges:
P P
Charge 1: Failure to comply with an order restraining the
Q
concealment from the Plaintiffs or destroying or tampering Q
with the Plaintiffs’ records, including those listed in
R R
Schedule 2.
S S
Charge 2: Failure to comply with an order to forthwith deliver
T over to the Plaintiffs’ solicitors any of the Plaintiffs’ records T
U U
V V
-5-
A A
B or copies thereof which were in their possession, custody or B
control.
C C
Charge 3: Failure to comply with an order to answer in writing
D D
5 questions containing the whereabouts of the Plaintiffs’
E records and to provide an affirmation confirming those E
answers.
F F
Charge 4: Failure to comply with an order giving continued
G G
effect to the orders forming the subject-matter of Charges 1-3.
H H
st
Charge 6 (1 limb): Failure to comply with an order
I restraining D1 from acting upon or exercising any power or I
entitlement pursuant to amendments to the Articles of
J J
Association of Shandong Cement.
K K
Charge 7: Failure to comply with an order to execute the
L L
court-approved corrective amendments to Shandong
M
Cement’s Articles of Association. M
N N
7. Zhang junior was found guilty of Charges 1-3 only.
O O
Context in which the contempt has arisen
P P
8. Firstly, Charges 1-3 (and 4) formed one category. The acts
Q Q
for which the Zhangs were complained of concerned the Plaintiffs’
R documents, not the Zhangs’. Having been removed from office, the R
st
Zhangs simply had no reason to retain the documents. Charges 6 (1 limb)
S S
and 7 formed another category and were a continuance of Zhang senior’s
T defiant conduct under Charges 1-3. T
U U
V V
-6-
A A
B 9. Secondly, the Zhangs did not appear at the trial on liability for B
contempt. They did not appear at this hearing either, despite my express
C C
direction for their personal attendance in the Judgment. Viewed together
D with my reasons for rejecting the draft affirmations, the Zhangs simply had D
no intention to come before this court to face the consequence of their
E E
contempt.
F F
10. Thirdly, because the Zhangs had not presented themselves for
G G
cross-examination at the trial, their affirmations (items 16, 31 & 34 in the
H Defendants’ hearing bundle) were excluded from the evidence (“the H
excluded affirmations”). However, at this hearing, the Zhangs relied on
I I
the excluded affirmations to “explain” (not to “excuse”) their conduct or
J J
as acts of purging the contempt. This attempt to adduce the excluded
K
affirmations through the backdoor should not be allowed. K
L L
11. Fourthly, the contents of the excluded affirmations, if
M
accepted, could have exempted the Zhangs from liability for contempt for M
part or all of the Charges. One wonders why they did not attend the trial
N N
to try and get the best possible results for themselves? Even in the
O affirmations they have filed for the purpose of mitigation, the Zhangs have O
not explained why they did not attend the trial.
P P
Q 12. The irresistible inference was that the Zhangs dared not face Q
the cross-examination for fear of the truth being exposed and the truth
R R
would be against them. Accordingly, I place no weight on the excluded
S affirmations. S
T T
U U
V V
-7-
A A
B 13. Fifthly, Zhang senior joined the Shandong Cement Plant some B
50 years ago in 1968 and dedicated his entire career to building the
C C
Shanshui Group from a local cement plant to a substantial enterprise listed
D in Hong Kong. Zhang junior joined the Shanshui Group in March 2006 D
and succeeded his father first as General Manager in October 2010 and
E E
later as Chairman in March 2013.
F F
14. It is true that there was power struggle among different camps
G G
of shareholders in the Plaintiffs’ group. Zhang junior referred to tactics
H masterminded by Tianrui with the ulterior motive of taking over CSC H
without having to make a general offer to all CSC’s shareholders as
I I
mandated by the Hong Kong Code on Takeovers and Mergers.
J J
K
15. The Zhangs naturally would not want to hand over power of K
an enterprise they built up. That was understandable but the blatant
L L
contempt of court orders was still not excusable.
M M
Effect of breach of court orders on the Plaintiffs
N N
16. The bulk of the records were in the Jinan headquarter.
O O
Because of the uncooperation of the Zhangs, the Plaintiffs had to incur
P
costs and time to the extent of using a raid to get back their own documents. P
Till now, it is not possible for the Plaintiffs, without the assistance of the
Q Q
Zhangs, to say whether or not all the documents had been recovered.
R Whilst the Plaintiffs could still prepare financial statements despite R
documents still being missing, the inference, from the nature of the
S S
documents recovered and time spent on recovery, was that the Plaintiffs’
T business and regulatory duties had been affected. There was, however, no T
U U
V V
-8-
A A
B positive evidence about how the Plaintiffs were actually affected by the B
breach after the 1/16 Seizure.
C C
D 17. Charges 6-7 concerned a valuable subsidiary of the Plaintiffs. D
The Plaintiffs’ financial interests were directly harmed by the breach.
E E
F F
Explanations of the Zhangs
G 18. Zhang senior claimed not to have visited the Plaintiffs’ Hong G
Kong office after March 2013. He claimed to have retired in October 2015
H H
upon removal from the CSC board. He had spent most of his time
I travelling for leisure in the PRC and overseas. I note that if his retirement I
and travelling were true, he had simply no excuse in the past for filing un-
J J
notarized or notarized affirmations late.
K K
19. The Zhangs do not understand English. Zhang senior (but not
L L
Zhang junior) does not use computers. Before Zhang senior’s retirement,
M he would ask his personal assistant to obtain any information he required M
from a Mr Li (presumably Mr Li Xianguo) and James Li (D3 in the
N N
underlying action) who was in charge of the Hong Kong office. After his
O O
retirement, he had had no need for such records.
P P
20. Zhang junior admitted that he had authority and ability to
Q Q
access the most confidential information of the Plaintiffs, whether in Hong
R Kong or in Jinan, up to 30 January 2016 when the Plaintiffs and their R
associates seized control of the Jinan Headquarter.
S S
T T
U U
V V
-9-
A A
B 21. Until commencement of these contempt proceedings in 2016, B
the Zhangs had no idea that a data server was maintained in the Hong Kong
C C
Office and they still did not know what information it may contain.
D James Li was in charge of the Hong Kong Office. James Li handed over D
various items from the Hong Kong Office to Li Hengwen and Yao Tianjun
E E
which were passed to Li Xianguo for safekeeping in the Jinan Headquarter.
F Until he was evicted from the Jinan Headquarter by the Plaintiffs’ F
associates in the 1/16 Seizure, Li Xianguo was in charge of safekeeping the
G G
Shanshui Group’s records which might include some of the Plaintiffs’
H records. H
I I
22. The Zhangs asked rhetorically: who would have anticipated
J J
that the Plaintiffs would engineer the violent seizure of the Jinan
K
Headquarter in January 2016 beforehand and moved the records to K
somewhere beyond Jinan Headquarter? They thought that after the
L L
1/16 Seizure, the matter was resolved. Since they had nothing to deliver
M up, it would be an academic exercise to inform the Plaintiffs what they M
already knew.
N N
O 23. The Zhangs plainly knew where the Plaintiffs’ records could O
be found. However, they made no attempt to ask James Li or Li Xianguo
P P
to disclose documents in compliance with the court orders. It was simply
Q against common sense that, having known of the draconian 1/16 Seizure, Q
the Zhangs would have decided not to consult their lawyers but went about
R R
counselling the 200+ employees ousted by the Plaintiffs and their
S associates. In the light of such attitude, the Zhangs could not have been S
serious in even trying to “purge” any contempt.
T T
U U
V V
- 10 -
A A
B 24. In respect of Charge 6 (1st limb), Zhang senior deposed that B
he took no part in issuing the 12 public announcements and that there was
C C
no evidence that the Plaintiffs had suffered any or any material prejudice
D as a consequence of his non-compliance with court orders. In respect of D
Charge 7, he deposed that he lacked capacity to sign the court-approved
E E
amendments. The High Court Registrar had executed the amendments and
F Zhang senior thought it was no longer necessary for him to sign. F
G G
25. Such explanations have been considered in the Judgment
H when the Zhangs put the Plaintiffs to strict proof. It is not open to Zhang H
senior now to argue against finding of fact when he could have done so at
I I
the trial. The Plaintiffs did suffer prejudice in having to issue counter-
J J
announcements to clarify to shareholders, and suffered the risk of losing
K
control of its most valuable subsidiary. K
L L
26. In summary, none of the explanations bore scrutiny.
M M
Purging of the contempt
N N
27. Charges 1, 2 and 3 could be purged even after the handing
O O
down of the Judgment. The Zhangs have not done anything towards
P
purging. In particular, the important data server has not been recovered. P
Q Q
28. Charges 6 (1st limb) and 7 could not be purged. What was
R done under Charge 6 could not be undone. The Corrective Amendments R
were executed by the High Court Registrar. Zhang senior purported to
S S
execute the corrective amendments only on 25 April 2018, which served
T no useful purpose. T
U U
V V
- 11 -
A A
B 29. Each of the Zhangs has made an “unreserved apology” to this B
court and the Plaintiffs. Having regard to the context of the contempt
C C
proceedings, and their failure to purge the contempt, such apologies rang
D hollow. D
E E
Personal circumstances of the Zhangs
F F
30. Zhang senior is aged 67. He is a PRC national with Zhang
G junior as his only son. His “good character” was attested by testimonials G
of 3 independent character witnesses. Zhang junior is aged 40. He is
H H
a PRC national, married with a son and a daughter.
I I
31. Each of the Zhangs has a clear record and this was the first
J J
time he was convicted of civil contempt. Each of them has championed
K various charitable and aid relief programs. K
L L
32. These personal circumstances weigh little in mitigation in the
M context of a civil case. Not much weight would be put on the fact of their M
being first offenders. The public must not be misled to believe that every
N N
person has one chance of disobeying a court’s order: Arboit v Koo, §37.
O O
P
33. Nor would the medical conditions of Zhang senior in having P
diabetes and high blood pressure affect the sentence. His medical needs
Q Q
can be brought to the attention of the Correctional Services Department to
R ensure that he would be given appropriate treatment: Arboit v Koo, §41. R
S S
34. The Zhangs have to face a multitude of court proceedings and
T huge legal costs. They were stressful to Zhang senior and highly disruptive T
U U
V V
- 12 -
A A
B to his retired life. He had lost his control in shareholding over CSI. Zhang B
junior has lost his leadership and otherwise rosy career within the Shanshui
C C
Group. However, these were all risks attendant on litigation and not
D entirely caused by the contempt proceedings. D
E E
Aggravating or mitigating factors
F F
35. There are no mitigating factors. I maintain my view in
G paragraph 143 of the Judgment that the Zhangs’ non-compliance under the G
respective Charge was wholesale, deliberate and obstructive to the
H H
Plaintiff’s recovery of their own records.
I I
J Sentence J
36. A fine will give the wrong message to the offender that he
K K
could buy non-compliance. A term of imprisonment of 3 months for each
L charge is appropriate. Charges 1-3 (and 4 for Zhang senior only) form one L
group whilst Charges 6 (1st limb) and 7 form another. Taking into account
M M
the totality of sentence, I order a total sentence of 4 months for Zhang
N senior and 3 months for Zhang junior. There are no reasons to justify N
suspension of the sentence.
O O
P 37. A warrant of arrest will be issued against each of the Zhangs. P
Q Q
38. Costs are to be borne by the Zhangs on the same basis as in
R R
the Judgment, with certificates for 2 counsel. However, costs of the
S
Plaintiffs’ submission in exceeding the limit imposed by paragraph 147(8) S
of the Judgment and the unnecessary hearing bundles are not recoverable.
T T
U U
V V
- 13 -
A A
B 39. I thank counsel for their assistance. B
C C
D D
E E
F (Queeny Au-Yeung) F
Judge of the Court of First Instance
G High Court G
H H
Mr Barrie Barlow SC and Ms Rachel Lam instructed by Wilkinson & Grist,
I I
for the 1st, 2nd and 3rd plaintiffs
J Mr Graham Harris SC and Mr Jean-Paul Wou, instructed by Deacons, for J
the 1st and 2nd defendants
K K
L L
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
V V
CHINA SHANSHUI CEMENT GROUP LTD AND OTHERS v. ZHANG CAIKUI AND ANOTHER
A A
B HCMP 1574/2016 B
[2018] HKCFI 1192
C C
IN THE HIGH COURT OF THE
D HONG KONG SPECIAL ADMINISTRATIVE REGION D
COURT OF FIRST INSTANCE
E E
MISCELLANEOUS PROCEEDINGS NO 1574 OF 2016
F ____________ F
G BETWEEN G
CHINA SHANSHUI CEMENT GROUP
H H
LIMITED (中國山水水泥集團有限公司) 1st Plaintiff
I CHINA SHANSHUI CEMENT GROUP I
(HONG KONG) COMPANY LIMITED
J
(中國山水水泥集團(香港)有限公司) 2nd Plaintiff J
CHINA PIONEER CEMENT (HONG KONG)
K COMPANY LIMITED 3rd Plaintiff K
L
and L
ZHANG CAIKUI (張才奎) 1st Defendant
M M
nd
ZHANG BIN (張斌) 2 Defendant
N ____________ N
O O
Before: Hon Au-Yeung J in Court
P P
Date of Hearing: 23 May 2018
Q
Date of Reasons for Sentence: 31 May 2018 Q
R __________________________________ R
REASONS FOR SENTENCE
S S
__________________________________
T T
U U
V V
-2-
A A
B Introduction B
1. This decision should be read with my judgment handed down
C C
on 28 February 2018 (“the Judgment”), by which I found the Zhangs
D D
guilty of contempt of court.
E E
2. This was the sentencing hearing. The Zhangs were absent.
F F
Ms Lam of Deacons filed a summons seeking to adduce a draft affirmation
G of Zhang senior’s driver and Zhang junior respectively to explain the G
Zhangs’ absence. I dismissed the summons for reasons orally given.
H H
I 3. The Plaintiffs were keen to proceed with sentencing and asked I
the court to consider a fine or imprisonment. They did not press for an
J J
order to debar the Zhangs from defending the underlying action in
K HCA 2880/2015. I thus proceeded to hear the mitigation. K
L L
Legal principles on sentencing
M M
4. The principles have been set out in my decision in Arboit v
N Koo Siu Ying (No 2) [2016] 3 HKLRD 154 dated 18 May 2016, §§2-10: N
O (a) The starting-point is to acknowledge that contempt of civil O
court orders is a serious matter and that court orders are made
P P
to be obeyed. A prime consideration of the court in
Q sentencing contempt is to signal importance of demonstrating Q
to litigants that the orders of these courts are to be obeyed. By
R R
“litigants”, it is clearly referring to litigants in general and not
S just the contemnor himself. S
T T
U U
V V
-3-
A A
B (b) The object of the sentence is both to punish conduct in B
defiance of the court’s order and to serve a coercive function
C C
by holding out the threat of future punishment as a means of
D securing the protection which the order was primarily there to D
do. The court has to balance the 2 objects.
E E
(c) The sentence for contempt may range from a fine to a term of
F F
imprisonment.
G G
(d) Imprisonment should be regarded as a sanction of the last
H resort. Any custodial sentence should be as short as possible H
consistent with the circumstances of the case.
I I
(e) The court may suspend a term of imprisonment for such
J J
period or on such terms as the court deems fit. This is an
K K
“absolute discretion” but it would be difficult to think of
L
circumstances where a suspended order should be made when L
nothing further remains to be done to comply with the order.
M M
(f) The court will consider if there are aggravating factors,
N N
mitigating factors, and acts to purge the contempt.
O O
(g) Relevant factors (which are not exhaustive) include:
P (i) The nature of the order and breach in question, and the P
extent of the breach.
Q Q
(ii) Whether the contempt was contumacious or
R R
unintentional, the reasons, motives and state of mind.
S S
T T
U U
V V
-4-
A A
B (iii) Whether the claimant has been prejudiced by virtue of B
the contempt and whether the prejudice is capable of
C C
remedy.
D D
(iv) Whether the contemnor appreciates the seriousness of
E the deliberate breach. E
(v) Whether the contemnor has cooperated.
F F
(h) As circumstances of contempt vary greatly, there is little
G G
mileage to be gained from the citation of other cases on
H sentence. H
I I
5. The approach I shall adopt is to ascertain the extent of the
J J
breach as found by the court, the context in which the contempt had arisen,
K
effect of the breach on the Plaintiffs, explanations of the Zhangs, the K
aggravating factors, the mitigating factors, acts to purge the contempt and
L L
the personal circumstances of the Zhangs.
M M
The extent of the breach found by the court
N N
6. By the Judgment, I found Zhang senior guilty of the following
O O
charges:
P P
Charge 1: Failure to comply with an order restraining the
Q
concealment from the Plaintiffs or destroying or tampering Q
with the Plaintiffs’ records, including those listed in
R R
Schedule 2.
S S
Charge 2: Failure to comply with an order to forthwith deliver
T over to the Plaintiffs’ solicitors any of the Plaintiffs’ records T
U U
V V
-5-
A A
B or copies thereof which were in their possession, custody or B
control.
C C
Charge 3: Failure to comply with an order to answer in writing
D D
5 questions containing the whereabouts of the Plaintiffs’
E records and to provide an affirmation confirming those E
answers.
F F
Charge 4: Failure to comply with an order giving continued
G G
effect to the orders forming the subject-matter of Charges 1-3.
H H
st
Charge 6 (1 limb): Failure to comply with an order
I restraining D1 from acting upon or exercising any power or I
entitlement pursuant to amendments to the Articles of
J J
Association of Shandong Cement.
K K
Charge 7: Failure to comply with an order to execute the
L L
court-approved corrective amendments to Shandong
M
Cement’s Articles of Association. M
N N
7. Zhang junior was found guilty of Charges 1-3 only.
O O
Context in which the contempt has arisen
P P
8. Firstly, Charges 1-3 (and 4) formed one category. The acts
Q Q
for which the Zhangs were complained of concerned the Plaintiffs’
R documents, not the Zhangs’. Having been removed from office, the R
st
Zhangs simply had no reason to retain the documents. Charges 6 (1 limb)
S S
and 7 formed another category and were a continuance of Zhang senior’s
T defiant conduct under Charges 1-3. T
U U
V V
-6-
A A
B 9. Secondly, the Zhangs did not appear at the trial on liability for B
contempt. They did not appear at this hearing either, despite my express
C C
direction for their personal attendance in the Judgment. Viewed together
D with my reasons for rejecting the draft affirmations, the Zhangs simply had D
no intention to come before this court to face the consequence of their
E E
contempt.
F F
10. Thirdly, because the Zhangs had not presented themselves for
G G
cross-examination at the trial, their affirmations (items 16, 31 & 34 in the
H Defendants’ hearing bundle) were excluded from the evidence (“the H
excluded affirmations”). However, at this hearing, the Zhangs relied on
I I
the excluded affirmations to “explain” (not to “excuse”) their conduct or
J J
as acts of purging the contempt. This attempt to adduce the excluded
K
affirmations through the backdoor should not be allowed. K
L L
11. Fourthly, the contents of the excluded affirmations, if
M
accepted, could have exempted the Zhangs from liability for contempt for M
part or all of the Charges. One wonders why they did not attend the trial
N N
to try and get the best possible results for themselves? Even in the
O affirmations they have filed for the purpose of mitigation, the Zhangs have O
not explained why they did not attend the trial.
P P
Q 12. The irresistible inference was that the Zhangs dared not face Q
the cross-examination for fear of the truth being exposed and the truth
R R
would be against them. Accordingly, I place no weight on the excluded
S affirmations. S
T T
U U
V V
-7-
A A
B 13. Fifthly, Zhang senior joined the Shandong Cement Plant some B
50 years ago in 1968 and dedicated his entire career to building the
C C
Shanshui Group from a local cement plant to a substantial enterprise listed
D in Hong Kong. Zhang junior joined the Shanshui Group in March 2006 D
and succeeded his father first as General Manager in October 2010 and
E E
later as Chairman in March 2013.
F F
14. It is true that there was power struggle among different camps
G G
of shareholders in the Plaintiffs’ group. Zhang junior referred to tactics
H masterminded by Tianrui with the ulterior motive of taking over CSC H
without having to make a general offer to all CSC’s shareholders as
I I
mandated by the Hong Kong Code on Takeovers and Mergers.
J J
K
15. The Zhangs naturally would not want to hand over power of K
an enterprise they built up. That was understandable but the blatant
L L
contempt of court orders was still not excusable.
M M
Effect of breach of court orders on the Plaintiffs
N N
16. The bulk of the records were in the Jinan headquarter.
O O
Because of the uncooperation of the Zhangs, the Plaintiffs had to incur
P
costs and time to the extent of using a raid to get back their own documents. P
Till now, it is not possible for the Plaintiffs, without the assistance of the
Q Q
Zhangs, to say whether or not all the documents had been recovered.
R Whilst the Plaintiffs could still prepare financial statements despite R
documents still being missing, the inference, from the nature of the
S S
documents recovered and time spent on recovery, was that the Plaintiffs’
T business and regulatory duties had been affected. There was, however, no T
U U
V V
-8-
A A
B positive evidence about how the Plaintiffs were actually affected by the B
breach after the 1/16 Seizure.
C C
D 17. Charges 6-7 concerned a valuable subsidiary of the Plaintiffs. D
The Plaintiffs’ financial interests were directly harmed by the breach.
E E
F F
Explanations of the Zhangs
G 18. Zhang senior claimed not to have visited the Plaintiffs’ Hong G
Kong office after March 2013. He claimed to have retired in October 2015
H H
upon removal from the CSC board. He had spent most of his time
I travelling for leisure in the PRC and overseas. I note that if his retirement I
and travelling were true, he had simply no excuse in the past for filing un-
J J
notarized or notarized affirmations late.
K K
19. The Zhangs do not understand English. Zhang senior (but not
L L
Zhang junior) does not use computers. Before Zhang senior’s retirement,
M he would ask his personal assistant to obtain any information he required M
from a Mr Li (presumably Mr Li Xianguo) and James Li (D3 in the
N N
underlying action) who was in charge of the Hong Kong office. After his
O O
retirement, he had had no need for such records.
P P
20. Zhang junior admitted that he had authority and ability to
Q Q
access the most confidential information of the Plaintiffs, whether in Hong
R Kong or in Jinan, up to 30 January 2016 when the Plaintiffs and their R
associates seized control of the Jinan Headquarter.
S S
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A A
B 21. Until commencement of these contempt proceedings in 2016, B
the Zhangs had no idea that a data server was maintained in the Hong Kong
C C
Office and they still did not know what information it may contain.
D James Li was in charge of the Hong Kong Office. James Li handed over D
various items from the Hong Kong Office to Li Hengwen and Yao Tianjun
E E
which were passed to Li Xianguo for safekeeping in the Jinan Headquarter.
F Until he was evicted from the Jinan Headquarter by the Plaintiffs’ F
associates in the 1/16 Seizure, Li Xianguo was in charge of safekeeping the
G G
Shanshui Group’s records which might include some of the Plaintiffs’
H records. H
I I
22. The Zhangs asked rhetorically: who would have anticipated
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that the Plaintiffs would engineer the violent seizure of the Jinan
K
Headquarter in January 2016 beforehand and moved the records to K
somewhere beyond Jinan Headquarter? They thought that after the
L L
1/16 Seizure, the matter was resolved. Since they had nothing to deliver
M up, it would be an academic exercise to inform the Plaintiffs what they M
already knew.
N N
O 23. The Zhangs plainly knew where the Plaintiffs’ records could O
be found. However, they made no attempt to ask James Li or Li Xianguo
P P
to disclose documents in compliance with the court orders. It was simply
Q against common sense that, having known of the draconian 1/16 Seizure, Q
the Zhangs would have decided not to consult their lawyers but went about
R R
counselling the 200+ employees ousted by the Plaintiffs and their
S associates. In the light of such attitude, the Zhangs could not have been S
serious in even trying to “purge” any contempt.
T T
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A A
B 24. In respect of Charge 6 (1st limb), Zhang senior deposed that B
he took no part in issuing the 12 public announcements and that there was
C C
no evidence that the Plaintiffs had suffered any or any material prejudice
D as a consequence of his non-compliance with court orders. In respect of D
Charge 7, he deposed that he lacked capacity to sign the court-approved
E E
amendments. The High Court Registrar had executed the amendments and
F Zhang senior thought it was no longer necessary for him to sign. F
G G
25. Such explanations have been considered in the Judgment
H when the Zhangs put the Plaintiffs to strict proof. It is not open to Zhang H
senior now to argue against finding of fact when he could have done so at
I I
the trial. The Plaintiffs did suffer prejudice in having to issue counter-
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announcements to clarify to shareholders, and suffered the risk of losing
K
control of its most valuable subsidiary. K
L L
26. In summary, none of the explanations bore scrutiny.
M M
Purging of the contempt
N N
27. Charges 1, 2 and 3 could be purged even after the handing
O O
down of the Judgment. The Zhangs have not done anything towards
P
purging. In particular, the important data server has not been recovered. P
Q Q
28. Charges 6 (1st limb) and 7 could not be purged. What was
R done under Charge 6 could not be undone. The Corrective Amendments R
were executed by the High Court Registrar. Zhang senior purported to
S S
execute the corrective amendments only on 25 April 2018, which served
T no useful purpose. T
U U
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A A
B 29. Each of the Zhangs has made an “unreserved apology” to this B
court and the Plaintiffs. Having regard to the context of the contempt
C C
proceedings, and their failure to purge the contempt, such apologies rang
D hollow. D
E E
Personal circumstances of the Zhangs
F F
30. Zhang senior is aged 67. He is a PRC national with Zhang
G junior as his only son. His “good character” was attested by testimonials G
of 3 independent character witnesses. Zhang junior is aged 40. He is
H H
a PRC national, married with a son and a daughter.
I I
31. Each of the Zhangs has a clear record and this was the first
J J
time he was convicted of civil contempt. Each of them has championed
K various charitable and aid relief programs. K
L L
32. These personal circumstances weigh little in mitigation in the
M context of a civil case. Not much weight would be put on the fact of their M
being first offenders. The public must not be misled to believe that every
N N
person has one chance of disobeying a court’s order: Arboit v Koo, §37.
O O
P
33. Nor would the medical conditions of Zhang senior in having P
diabetes and high blood pressure affect the sentence. His medical needs
Q Q
can be brought to the attention of the Correctional Services Department to
R ensure that he would be given appropriate treatment: Arboit v Koo, §41. R
S S
34. The Zhangs have to face a multitude of court proceedings and
T huge legal costs. They were stressful to Zhang senior and highly disruptive T
U U
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A A
B to his retired life. He had lost his control in shareholding over CSI. Zhang B
junior has lost his leadership and otherwise rosy career within the Shanshui
C C
Group. However, these were all risks attendant on litigation and not
D entirely caused by the contempt proceedings. D
E E
Aggravating or mitigating factors
F F
35. There are no mitigating factors. I maintain my view in
G paragraph 143 of the Judgment that the Zhangs’ non-compliance under the G
respective Charge was wholesale, deliberate and obstructive to the
H H
Plaintiff’s recovery of their own records.
I I
J Sentence J
36. A fine will give the wrong message to the offender that he
K K
could buy non-compliance. A term of imprisonment of 3 months for each
L charge is appropriate. Charges 1-3 (and 4 for Zhang senior only) form one L
group whilst Charges 6 (1st limb) and 7 form another. Taking into account
M M
the totality of sentence, I order a total sentence of 4 months for Zhang
N senior and 3 months for Zhang junior. There are no reasons to justify N
suspension of the sentence.
O O
P 37. A warrant of arrest will be issued against each of the Zhangs. P
Q Q
38. Costs are to be borne by the Zhangs on the same basis as in
R R
the Judgment, with certificates for 2 counsel. However, costs of the
S
Plaintiffs’ submission in exceeding the limit imposed by paragraph 147(8) S
of the Judgment and the unnecessary hearing bundles are not recoverable.
T T
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A A
B 39. I thank counsel for their assistance. B
C C
D D
E E
F (Queeny Au-Yeung) F
Judge of the Court of First Instance
G High Court G
H H
Mr Barrie Barlow SC and Ms Rachel Lam instructed by Wilkinson & Grist,
I I
for the 1st, 2nd and 3rd plaintiffs
J Mr Graham Harris SC and Mr Jean-Paul Wou, instructed by Deacons, for J
the 1st and 2nd defendants
K K
L L
M M
N N
O O
P P
Q Q
R R
S S
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