XCHRX MARINER INTERNATIONAL HOTELS LTD. v. ATLAS LTD. AND ANOTHER

HCA10714/1998, HCA10752/1998 and
HCA10821/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS.10714, 10752 AND 10821 OF 1998

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(Consolidated)

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D E C I S I O N

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1. This is an application for discovery of documents in a case which, on any view, is a substantial piece of litigation. Should the parties be unable to reach a settlement and it is necessary for it to go to trial, by its very nature it is a case which will require a mass of documentation. The court must balance, on the one hand, a recognition that in order to do justice to both sides in a case of this type a huge amount of paper will be generated and on the other hand, the discovery exercise must not get out of control.

2. This particular application has spanned three full days. There has already been substantial discovery. The plaintiff, who have been represented by Mr Ronny Tong SC, Mr Danny Choi and Miss Yvonne Cheng, are seeking further discovery of documents listed in a 18-page schedule to their application. The defendants, who have been represented by Mr Edward Chan SC and Mr Tommy Lo, have resisted each and every item. For the sake of expedience Mr Tong has not pursued a small proportion of the items.

3. The court's approach to this application is as follows. I will firstly outline the general principles of law which are to be applied to this application. At the same time I will deal with some of the particular legal arguments that have arisen which are peculiar to this particular summons. Then in respect of each of the 40 items which are pursued (some of which are multiple items) I will either make an order in terms, or an amended order or no order. I consider it neither necessary nor appropriate to give a full and balanced explanation for the discovery or non-discovery of every single sheet of paper. Each order for discovery is as a result of the application of one or more of the following principles.

GENERAL PRINCIPLES

4. The "Peruvian test" from The Compagnie Financiere et Commerciale du Pacifique v. The Peruvian Guano Company (1882) 11 QBD 55 CA remains good law. It is worth repeating :

"... the documents to be produced are not confined to those, which would be evidence either to prove or to disprove any matter in question in the action ... It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary ... a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences ..."

5. In Taylor v. Anderton [1995] 1 WLR 447 Sir Thomas Bingham MR noted that the definition of "relevance" in the Peruvian test was framed "in the widest possible terms".

6. Mr Chan for the defendants has endeavoured to persuade the court to adopt a narrow definition of relevance and materiality. He cites the remarks of Colman J in O. Co. v. M. Co. [1996] 2 Lloyds Report p.347 :

" The principle was never intended to justify demands for disclosure of documents at the far end of the spectrum of materiality which on the face of it were unrelated to the pleaded case of the plaintiff or defendant and which were required for purely speculative investigation. The excessively wide application of Brett L.J.'s formulation of relevance has probably contributed more to the increase of the costs of English civil and commercial litigation in recent years than any other factor other than the development of the photocopying machine. That formulation must not, in my judgment, be understood as justifying discovery demands which would involve parties to civil litigation being required to turn out the contents of their filing systems as if under criminal investigation merely on the off-chance that something might show up from which some relatively weak inference prejudicial to the case of the disclosing party might be drawn. On the contrary, the document or class of documents must be shown by the applicant to offer a real probability of evidential materiality in the sense that it must be a document or class of which in the ordinary way can be expected to yield information of substantial evidential materiality to the pleaded claim and the defence to it in the broad sense which I have explained. If the document or class cannot be demonstrated to be clearly connected to issues which have already been raised on the pleadings, or which would in the ordinary way be expected to be raised on the pleadings, if sufficient information were available, the application should be dismissed."

7. These are undoubtedly laudable sentiments. However, in my judgment Mr Chan seeks to apply this judgment to the present case in an overly restrictive way. He rightly says, and Mr Tong does not disagree, that the key words from Order 24, rule 2(1) namely "relating to any matter in question between (the parties)" refer not to the subject matter of an action but the questions in the action. By way of example Mr Chan applies that principle in the following way. He submits that one of the real issues in the case is whether the defendants gave good title to the Hotel on completion. Therefore the questions in the action go to the issue of good title not good construction. Thus, generally speaking documents which are relevant solely to construction issues have no or little probative value. Mr Tong submits, and in my opinion correctly, that this is an unrealistically narrow view of what the case is, in truth, about. He does not seek documents in relation to matters which are not part of his pleaded case. Moreover, the question of title is not a narrow conveyancing point but an issue which will necessarily involve investigation into, examination of and expert evidence about structural and construction matters. It would be dangerous at this stage to go into more detail. The fact is that the plaintiff is entitled to further discovery in order to do justice to its case. Furthermore, it is the plaintiff's claim which must be considered for this exercise not the defendants' defence.

8. This court shares the views expressed by Stone J in Vashdev Essardas Mahbubani t/a Vashi's Export Co. v. Motis Exports Ltd and others (unreported) in 1997 :

"As no doubt will become known by commercial practitioners, my attitude, as Judge presently in charge of the Commercial List, is that in general discovery is a good thing, and that in cases of doubt I am more likely to lean in favour of discovery than against it. In this connection I am reminded of one of the broad principles of the common law as expressed by Lord Justice Bingham (as he then was) in the case of Ventouris v. Mountain [1991] 1 WLR 607 at 611H, where the learned Lord Justice observed as follows:

'Our system of civil procedure is founded on the rule that the interests of justice are best served if parties to litigation are obliged to disclose and produce for the other party's inspection all documents in their possession, custody or power relating to the issues in the action. This is not of course a necessary rule but it is firmly established here. It is not however an absolute rule, as exceptions such as legal professional privilege and public interest immunity demonstrate. Nonetheless, disclosure being generally regarded as beneficial, any exception has to be justified as serving the public interest which gives rise to the exception ...'"

9. It should not be thought however that this represents a charter for opening the flood gates on discovery. If doing justice is an onerous task then so be it. The task of the court will often be to determine when "doing justice to the claim" stops and "fishing" or, to use another analogy "the scatter gun approach" starts. At that point the onerous nature of the discovery exercise passes from the necessary and permissible to the unnecessary and impermissible.

10. With the above general principles in mind the rules require that in respect of each item sought :

(a) there must be sufficient evidence that the document exists;

(b) the document must relate to matters in issue; and

(c) there is sufficient evidence that the document is in the possession, custody or power of the other party.

If these conditions are satisfied the court retains a discretion whether or not to order disclosure.

11. It is recognized by the plaintiff in this case that many of the documents sought are not in the possession or custody of the defendants. Mr Tong's case for discovery in such instances is that the documents are within the power of the defendants. Without going into the detail of the complex contractual chain, Mr Chan concedes that the real "employer" in this project was Hang Lung ("Hang Lung" appears in a number of different contractual forms but for the purpose of this application it is sufficient to refer simply to "Hang Lung"). However he submits that documents in the possession of the main contractor, other contractors and sub-contractors, the architects, the quantity surveyor and so on are not within the power of the defendants and therefore not discoverable. In support he cites Lord Diplock (at p.635) in Lonrho Ltd v. Shell Petroleum Company [1980] QB :

"... the expression 'power' must, in my view, mean a presently enforceable legal right to obtain from whoever actually holds the document inspection of it without the need to obtain the consent of anyone else."

He therefore submits that, for example, professional advisors are in the position of independent contractors. Documents generated in the course of them discharging their duties are not possessed by them, as agents for their principals.

12. In my judgment for Hang Lung to give a blanket refusal to discover any documents on basis that they are in the possession of the main contractors, architect etc. is an unrealistically narrow and wrong stance to adopt. This was a major building project. In such a project the contractual chain and framework can become very complex and, at times, artificial.

13. For the purposes of this discovery exercise it is right and proper for the architect to be regarded as an agent of the employer. Mclnnes on Hong Kong Construction Law 1999 makes the following observation :

"Standard forms of contract often give the architect broad supervisory powers and empower him to act as the employer's agent: clause 11 of the RICS/HKIA Forms. As the employer's agent, the architect is not a party to traditional main contracts and contracts independently with the employer. Contracts are not entered into with contractors as a rule and, save any warranties which are given by the architects, their obligations toward contractors will be those which arise under common law. Locally, the terms of their agreement are often in the standard form: see the Form of Agreement between Client & Architect and Scale of Professional Charges prepared by the HKIA and discussed in more detail below. Under both the HKIA and RICS Forms, the architect has power to determine disputes, issue instructions and certificates, and make a wide range of determinations which affect both the employers and contractors."

14. By the same token, structural engineers and authorized persons, must, as a matter of law, be appointed. They clearly act on the employers behalf in their dealings with the sub-contractors. In this case Chow Associates Ltd were appointed as architects and authorized person for the project. They dealt with and corresponded with the many parties to the development. There can be no doubt in my judgment that Hang Lung have power over the documents generated as a result of this relationship.

15. Mr Tong has referred the court to lengthy passages in Yaruda Fire & Marine Insurance Co. v. Oreon Marine Insurance Underwriting Agency [1995] 1 Lloyds Reports and Taylor v. Rundell (1841) Cr. & Ph.104. They are authority for the discovery he seeks in this case. The latter case concludes with these words :

" If it is in your power to give the discovery, you must give it; if not, you must shew that you have done your best to procure the means of giving it. ..."

16. A passage from Hudson's Building and Engineering Contracts, 11th edition is to the point :

" Thus it is submitted that letters written to the contractor in relation to the contract, correspondence with quantity surveyors or clerks of works appointed under the contract, local and planning authorities, consultants of all kinds, and all other correspondence arising in the administration of the contract satisfy the test and are the property of the client. On the other hand, personal memoranda or communications between members of his own staff or firm, and calculations and private notes used by them, will remain his property. ..."

17. Mr Tong recognizes the distinction which is made here. No discovery is being made in relation to the latter category.

18. Before moving on to the particular items one further issue requires separate consideration. The plaintiff's application is in four parts. Part 1 is called the "3M requests". In the course of Deacon's inspection of documents on behalf of the plaintiff they placed "3M" stickers on documents, particularly correspondence, where a letter referred to an enclosure having been sent to the defendants but the enclosure was not available and has not been discovered. There is no disagreement between the parties that the letter or document to which the 3M sticker is attached is discoverable. The defendants however do not concede that the document to which the enclosure refers is also discoverable. I am satisfied that an enclosure to a document, where the enclosure is sent to the defendant or his agent, is discoverable along with the source document, subject to the question of relevance. Where the plaintiff's claim discovery of such a document it is presumed to be prima facie relevant. The onus is on the defendant to establish by affirmation, and not by mere assertion, that it is not material. The decision in Ormerod Grierson & Co. Ltd v. St George's Ironworks Ltd (1906) 95 LT 694 was cited in support :

"For the purpose of an application for production of certain specified documents on the ground that they relate to matters in question in the action, if a relevant letter scheduled to an affidavit of documents is produced, privilege not being claimed, and it refers to any other letter or document, that other letter or document is at once prima facie relevant to the matter in question in the action, and the person making the affidavit of documents must make an affidavit respecting that document."

THE APPLICATION

19. I turn now to the schedules attached to the two summonses. The first summons is sub-divided into three parts, the second summons deals with the fourth part. It is to be noted that both summonses ask for (1) a further and better list of documents and (2) an affirmation verifying the list in the usual terms.

20. The expression "order in terms" or "amended order in terms" means simply that the document in issue is discoverable, the court having applied the principles outlined above.

PART I - THE "3M REQUESTS"

(1)	Under Item 15. Order in terms.
(2)	Under Item 63. Order in terms save that request 4 is limited to the swimming pool layout plan only.
(3)	Under Item 83. No order.
(4)	Under Item 88. Order in terms.
(5)	Under Item 95. Order in terms.
(6)	Under Item 97. Order in terms.
(7)	Under Item 107. No order.
(8)	Under Item 115. No order.
(9)	Under Item 116. No order.
(10)	Under Item 117. Order in terms.
(11)	Under Item 124. Order in terms.
(12)	Under Item 125. No order.
(13)	Under Item 127. Order in terms.
(14)	Under Item 128. Order in terms limited to requests 1, 20 and 22.
(15)	Under Item 129. No order.
(16)	Under Item 131. Order in terms.
(17)	Under Item 153. No order.
(18)	Under Item 157. Order in terms.
(19)	Under Item 159. No order.
(20)	Under Item 183. No order.
(21)	Under Item 210. Order in terms.
(22)	Under Item 211. Order in terms.
(23)	Under Item 214. No order.
(24)	Under Item 216. Order in terms limited to requests 6 and 7.

PART II

21. This part requests files and/or documents which are missing from the defendants list. They are described as "gaps" in that list. For example where a series of minutes have been inspected but some seem to be missing. The request was first made by letter from Deacons on 12 January 2000.

(1)	Under Item 124. No order.
(2)	Under Item 125. Order in terms.
(3)	Under Item 129. No order.
(4)	Under Items 130-131. Order in terms.
(5)	Under Items 132-137. Order in terms limited to requests 18 and 19 under paragraph 29 of the schedule.
(6)	Under Items 138-139. Order in terms limited to requests 24, 25 and 26 under paragraph 30 of the schedule.
(7)	Under Items 141-163. No order.
(8)	Under Items 63, 115-123. No order.

PART III

22. This is for a further and better list of documents. The request was firstly made by letter dated 20 July 2000. The request was declined by letter dated 11 November 2000. It has been further sub-divided as follows :

A. Documents not disclosed in the defendants list

23. Under paragraph 34. Order in terms limited to paragraphs (d) and (e). Paragraph (e) is further limited by deleting the words "works orders ... and works records."

24. Under paragraphs 35 and 36. Order in amended terms as follows :

"... contracts and supporting documents relating to the construction of the Hotel and to the provision of furniture, fixtures, fittings, decoration, appliances, equipment, services, amenities and installations in all parts of the Hotel limited to (a)-(e) inclusive"

25. Under paragraphs 37 and 38. Order in terms save that "and all interim results thereafter" be deleted.

26. Under paragraph 39. No order.

B. Documents of CAL (the Architect)

27. Order in terms of paragraph 40 of the schedule amended as follows :

(i) line 4 : delete "including" and substitute "limited to";

(ii) line 4 : delete "inter alia";

(iii) line 7 : delete "and other relevant parties".

C. Documents of Fargo

(i) Order in terms of paragraph 41.1 of the schedule with the same amendments as in paragraph 40 (above);

(ii) Order in terms of paragraph 41.2 limited to sub-paragraphs (b), (d) and (e).

D. Documents of D.G. Jones & Partners

28. No order.

E. Documents of PBA

29. Order in terms of paragraph 43 of the schedule amended by substituting "limited to" instead of "including" in line 3.

F. Documents relating to the chilled water pipes and related openings

30. Order in terms of paragraph 44 of the schedule amended by deleting :

(i) "including but not" in sub-paragraph (b);

(ii) "or other parties" in sub-paragraphs (c) and (d).

G. Documents relating to concrete plinths, chiller plants, metal cat-walk and I-beam on the roof

31. Order in terms of paragraph 45 of the schedule amended by deleting "or other parties" in sub-paragraphs (c) and (d).

H. Paragraph 46 of the schedule

32. No order.

I. Documents relating to renovation of the Grand Plaza Hotel rooms in December 1996

33. Order in terms of paragraph 47 of the schedule amended by :

(i) deleting "including but not" in line 3 ;

(ii) deleting sub-paragraphs (b), (c), (d), (f), (i), (j) and (k);

(iii) deleting in sub-paragraph (h) the words "documents, design drawings, drawings, ... catalogues samples, sample boards".

J. Documents relating to the lobby of the Grand Plaza Hotel

34. Order in terms of paragraph 48 of the schedule amended by :

(i) deleting "including but not" in line 4;

(ii) deleting sub-paragraphs (a), (b), (c), (e), (h), (i) and (m);

(iii) deleting the words "documents, samples, sample boards" in sub-paragraph (g).

K. Documents relating to the letting of Hotel

35. Order in terms of paragraph 49 of the schedule save that line 1 be amended to "all written advertisements which have".

36. The plaintiff's second summons dated 30 November 2001 contains a continuation of the same schedule.

PART IV : DOCUMENTS REQUESTED PURSUANT TO A LETTER OF 18 SEPTEMBER 2001

37. Order in terms of paragraphs 50 and 51.

38. It is acknowledged that :

(i) compliance with this order will take up considerable time; and

(ii) ultimately the outcome may be the defendants deposing to the fact that they have taken all necessary steps to gain possession of a particular document which hitherto had been within their power (as ruled by this decision) but not within their actual possession. Nonetheless, it is reasonable to expect that full compliance will ultimately save costs by crystallizing the issues should the matter go to trial.

39. For each summons I make an order nisi that the costs be to the plaintiff in any event.