XCHRX YAU CHIN KWAN AND ANOTHER v. TIN SHUI WAI DEVELOPMENT LTD.

HCA11520/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.11520 OF 1999

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J U D G M E N T

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1. This is an application under Order 24, rule 7 of the Rules of the High Court for specific discovery of five categories of documents.

2. The case arises out of an agreement for sale and purchase of an apartment at Maywood Court, Tin Shui Wai ("the Agreement"). The defendant was the developer and sold uncompleted flats during the course of construction. The plaintiffs entered into the Agreement to buy one such flat on 18 June 1997. They paid deposits totalling $1,293,000.

3. Under the Agreement, the defendant, as vendor, was obliged to continue with the construction and complete the development in compliance with the Government Grant and building plans before 31 December 1997. "Development" was defined in the Agreement as meaning the residential units and car parking spaces intended to be known as Blocks 1-8 of Maywood Court of Kingsland Villas.

4. If the vendor had not completed the development by 31 December 1997, the purchaser was entitled to rescind the Agreement and get the deposit back, with interest. If the purchaser did not rescind within 28 days, he was deemed to have elected to wait for completion of the development; in which case, interest was also payable on the deposit. If the development was not completed by 30 June 1998, similar provisions applied.

5. Once the development was completed, the vendor was obliged to apply to the Director of Lands within 14 days for a Certificate of Compliance or consent to assign the property. The vendor then had 28 days to notify the purchaser and completion was to take place within 14 days of notification.

6. Once the Certificate of Compliance or consent to assign was issued, it became conclusive evidence that the development had been completed or was deemed to be completed.

7. In this case, on 22 December 1997, the project architect certified that the development had been completed and the occupation permit was issued. On 23 December, the vendor's solicitors applied to the Director of Lands for consent to assign. Such consent was not forthcoming until 17 June 1998, and then only on condition that the defendant enter into an undertaking to complete work at the development by 30 September 1998, that undertaking being supported by a bank bond for HK$55,000,000.

8. In the meantime, the plaintiffs did not rescind as at 31 December 1997. They elected or were deemed to have elected to wait. On 27 June 1998, the defendant through its solicitors notified the plaintiffs that they were obliged to complete within 14 days. The plaintiffs did not complete then, nor after being served with a notice to complete dated 5 August 1998. There followed correspondence in the course of which the defendant purported to give the plaintiffs notice of determination of the Agreement on 22 September 1998 and the plaintiffs purported to rescind the Agreement on 1 April 1999. The plaintiffs now claim repayment of their deposits and other reliefs. The defendant counterclaims for damages for loss on re-sale of the flat.

9. It is the plaintiffs' case that notwithstanding the architect's certificate, the development had not been completed either at the date of application for consent to assign, i.e. 23 December 1997, nor even by the date on which that consent was given, i.e. 17 June 1998. Further, they say that they were wrongly denied the right to rescind and misled by misrepresentations by the defendant as to the state of the completion. They say that since the application for consent to assign was based on misrepresentation, the consent to assign could not preclude them from asserting that the development was not completed.

10. Against this background, the plaintiffs applied by summons for :

1. correspondence with and documents submitted to the Lands Department in connection with the application for consent to assign, including those relating to the undertaking and bank bond;

2. records of discussions or meetings which the defendant or its representatives had with the Lands Department, pertaining to the application for consent to assign and the execution of the undertaking and bond, including a specific meeting on 26 March 1998 referred to in a document of which discovery has already been made;

3. records of discussions or meetings between the defendant, the architect, contractors, sub-contractors, surveyors and others in respect of the progress of the construction works between 23 December 1997 and 17 June 1998;

4. the revised forms and final versions of the undertaking and bank bond;

5. approved building plans of the residential units and car parking spaces; and

6. the Authorised Person's letter of 4 May 1998, referred to in a document of which discovery has already been made.

11. The defendant now concedes that discovery should be given of the approved building plans (Item 5 above) and of the minutes of the meeting of 26 March 1998 if they exist, though counsel is instructed that, in fact, they do not. The remaining items are in dispute to a greater or lesser degree.

12. For a document or class of documents to be discoverable, the following criteria must be met :

1. it must be shown that there is in existence a specific document of class of documents;

2. it must be shown that the party against whom the order is sought has had such document or class of documents in its possession custody or power;

3. it must be shown that the document of class of documents relates to a matter in question in the action; and

4. it must be shown that the discovery is necessary to dispose fairly of the cause or matter in issue, or for the saving of costs.

13. The test of relevancy was propounded by Brett LJ (as he then was) in Compagnie Financiere du Pacifique v. Peruvian Guano Co. (1882) 11 QBD 55, where he said at p.63 :

"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. I have put in the words 'either directly or indirectly' because, as it seems to me, 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 to a train of enquiry ....."

This test was adopted in Hong Kong in Deak & Co. (Far East) Ltd v. NM Rothschild & Sons Ltd & Ors [1981] HKC 78. In that case, the court also held that in deciding whether discovery was necessary for fairly disposing of the cause or matter, one of the matters which the court had to bear in mind was whether it would be oppressive to order discovery. What was oppressive must depend upon the particular circumstances of each case. Science Research Council v. Nasse [1980] AC 1028 followed. Various other authorities were cited, particularly by the defendant, but there is no dispute as to the applicable law, so I will not refer to them specifically.

14. The defendant disputes the application mainly in respect of the second and third categories of documents of which discovery is sought, i.e. records of discussions or meetings between the defendant and the Lands Department and records of discussions or meetings between the defendant, the architect, contractors, sub-contractors, surveyors and others in respect of the progress of the construction works between 23 December 1997 and 17 June 1998. I will therefore deal with these first.

15. That there were such meetings or discussions can readily be inferred from the documents already disclosed. This is particularly so in respect of the bond and undertaking, the figure for which was revised upwards twice. Further, some minutes of meetings with sub-contractors have been exhibited by the plaintiffs' solicitor to his first affirmation, though these were obtained from another source. There does not seem to be any real dispute that records of such meetings and discussions are in the defendant's possession or control; the defendant's in-house counsel in her affirmation refers to "well over 100 lever arch files which contain, inter alia, documents that are relevant to some aspect of the progress and/or status of the construction works" since the commencement of the development.

16. The defendant says that apart from the question of relevance, the formulation of the categories of documents sought must be precise; that discovery must be necessary for disposing fairly of the issues and saving time and costs; and that there should be no order if the result would be oppressive. These principles are not in dispute.

17. The plaintiffs say that the issues to which the records relate are whether the defendant had completed the development in accordance with the building plans by 31 December 1997 or 30 June 1998. The records can be restricted to those for the period between the application for consent to assign on 23 December 1997 and its issue on 17 June 1998.

18. The defendant says that the only issue is whether the defendant had completed the development by 31 December 1997. The consent to assign was issued on 17 June 1998 and is conclusive evidence that the development had been completed or was deemed to be completed at that date. So the question of whether it was completed by 30 June is irrelevant. In any event, "development" was defined in the Agreement as meaning the residential units and car parking spaces intended to be known as Blocks 1-8 of Maywood Court of Kingsland Villas. To the extent that the records deal with matters outside that definition, they are irrelevant. Further, the request for discovery of the second and third categories of documents sought is too broad, vague and oppressive because the documents will necessarily deal with irrelevant matter. In effect, the defendant would have to review all the documents in its possession to see if there was anything relevant in them. Adequate discovery has already been given.

19. To my mind, information about the progress of the works on the residential units and car parking spaces, comprising Blocks 1-8, must be relevant insofar as it goes to show when and if they were completed in accordance with the building plans. That is the "development" as defined. This must include the whole of the blocks because the residential units and car parking spaces exist within them; there is no use having a residential unit, for instance, lacking part of the external walls or part of the windows, or doors, stairs and lifts by which to gain access, though a purchaser may no doubt be obliged by contract to take an apartment in a completed block in what is otherwise a building site.

20. Documents already uncovered either by discovery or by the plaintiffs themselves appear to show that as at the date of the bond and undertaking, i.e. 4 June 1998, minor external finishing works were outstanding. At 17 April, internal finishing works at the residential blocks were outstanding; there is mention in the architect's letter of that date to the Lands Department of outstanding works on bathroom ceilings and mirrors, home appliances, kitchen cabinets and so on; obviously, matters internal to the flats themselves. The minutes of meetings acquired by the plaintiffs also show internal works within the flats not completed.

21. It is apparent from the correspondence that there must have been meetings and discussions between the defendant or its advisers and the Lands Department about the progress of the whole site including the Maywood Court blocks. Further, the plaintiffs' solicitor, relying on information from an expert, says that there must have been regular site meetings with sub-contractors. These, too, would have covered the whole site, including those blocks.

22. I have no doubt that the records of such meetings and discussions are relevant to show the state of completion of the blocks in the period from 23 December 1997 to 17 June 1998. This goes to whether the defendant had completed the development as required by clause 4 of the Agreement. These records would come within the Peruvian Guano criteria in that they would directly or indirectly enable the plaintiffs either to advance their own case, or to damage that of the defendant.

23. The remaining question is whether the request is too wide, vague and oppressive as it stands. The defendant's witness makes much of the number of documents which must be gone through but this does not seem to take into account the plaintiffs' restriction of the records sought in the second and third categories to those between the 23 December 1997 and 17 June 1998. The plaintiffs' witness, relying on information he has obtained from an architect, says that the number must be much smaller and that, in any event, the defendant could be expected to have a very well-organised filing system so that they would be relatively easy to retrieve. There is nothing to contradict this and it seems entirely reasonable, given that the defendant is part of a major Hong Kong property developer. Obviously, there will be inconvenience, but inconvenience is not oppression.

24. Further, one has to have regard to the value to the plaintiffs of the discovery, as against the burden to the defendant. A single purchaser, in dealing with a large developer, must always be at some disadvantage in that he must rely on such information about progress, completion and so forth as the developer is prepared to give him. If he is not given enough information, then when there is a dispute, he may be seriously disadvantaged. So, obviously, the value of this information to the plaintiffs must be high. I do not see that the burden on the defendant in providing discovery of it, on the evidence before me, can be great.

25. I am satisfied that the requests for the second and third categories are not too wide, vague or oppressive.

26. I turn to the first category. Here, the defendant's case is that it has already made sufficient discovery. However, as Mr Fung, SC has pointed out, on the face of the documents disclosed, it is incomplete. At least one letter referred to has not been discovered. Further, there is a reference in the consent to assign dated 17 June 1998 to "conditions of the presale consent set out in my letter of the 7th day of March 1998". This does not appear in the bundle; I do not know if it is part of Item 27 of the defendant's list of documents, but if it is not disclosed, it certainly should be.

27. As to the fourth category, namely, the revised forms and final versions of the undertaking and bank bond, these are disclosed in draft form. The only remaining documents are the final executed versions. However, these and Item 6, the Authorised Person's letter, all go to show why the figure of the bond should have been revised upwards from $39 million to $55 million and it seems to me that they are relevant and should be disclosed.

28. There will, accordingly, be an order in terms of the plaintiffs' summons, save that the costs order will be nisi.