RE SHUN ON CO. LTD.

HCCW 828/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 828 OF 2000

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D E C I S I O N

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The two applications

1. I have before me two summonses issued by the petitioners. The summons issued earlier in time on 9 September 2002 is a summons for a further and better list of documents and for specific discovery ("the discovery summons") against the 1st to 6th respondents, made under O. 24 r. 3 and 7 of the Rules of the High Court. On 13 September 2002, I gave certain directions for the hearing of this summons and adjourned it for argument. The later summons, which was issued on 22 November 2002, to be heard at the same time as the discovery summons, is for an unless order against Mr Yuen Cho Nang, the 3rd respondent herein, that unless within seven days of the order to be made he complies fully with his undertaking given by counsel and contained in the order of the court dated 30 September 2002 by providing to the petitioners copies of all accounting records of Shun On (USA) Inc. ("SOUS") kept by Mr John Richmond at the latter's office, the respondents be debarred from opposing the petition and an order be made granting the relief sought by the petitioners in the terms set out in the petition herein ("the enforcement summons"). Alternatively, the petitioners seek such order as the court deems just in the circumstances of the 3rd respondent's failure to comply with his undertaking and the order for discovery made on 30 September 2002. The enforcement summons is made under O. 24 r. 16, O. 45 and the inherent jurisdiction of the court.

2. For the background of these proceedings, I refer to the decision of Yuen J (as she then was) given on 11 February 2002 ("the 1st Decision") and my decision given on 30 September 2002 ("the 2nd Decision"). The decision I give on the present applications will be the third decision on discovery and it seems unlikely that this will be the last. The first discovery application was issued in July 2001. The order made on that application, for one reason or other, has still not been complied with in full. This state of affairs is plainly undesirable to all the parties involved in this litigation. I am giving fair warning that if the parties and their legal advisers do not adopt a more sensible and responsible approach in dealing with discovery in future, I may impose sanction in awarding costs on a higher scale against the culpable party, to be paid forthwith.

3. I propose to deal with the enforcement summons first, which arose out of the undertaking and order in the 2nd Decision.

The undertaking and order in the 2nd Decision

4. In the 1st Decision, Yuen J had ordered, inter alia, specific discovery to be given by the 3rd respondent of the ledger kept by SOUS containing its accounts with three companies incorporated in the United States, namely, MCI Investments Inc. ("MCI"), Cana Realty Group Inc. ("Cana Realty") and Cana Corporation ("Cana Corp"). After the 1st Decision was given, the 3rd respondent made his 2nd affirmation on 22 March 2002 in which he stated that the judge had assumed there was in existence the ledgers kept by SOUS whereas in fact there were none. He stated on oath that he was unable to give discovery as ordered because "SOUS does not and has not kept any 'ledgers' containing accounts with MCI and Cana Realty" and that "as regards Cana Corporation, SOUS does not have or maintain any ledgers concerning its accounts with Cana Corporation", although there are "massive" records and bookkeeping data which ran into 2,000 pages a year. Such records were generated in this way. SOUS had engaged Cana Realty to manage its properties and Cana Realty had in turn appointed an outside accountant, Mr Richmond, to process the bookkeeping data generated by Cana Realty and to prepare financial statements.

5. Extensive correspondence was exchanged between the parties' solicitors from March to June 2002 to attempt to reach some agreement as to what discovery should be given by 3rd respondent in view of his stated inability to give discovery of the ledgers of SOUS. As the differences could not be resolved, the petitioners restored their summons for discovery before me and I made the 2nd Decision. I should mention here I make no findings in this decision whether there are in fact in existence any ledgers of SOUS containing its accounts with MCI, Cana Realty and Cana Corp as ordered to be disclosed in the 1st Decision, as this is not strictly necessary to the resolution of the enforcement summons as things stand at this stage.

6. The 2nd Decision was my attempt to resolve in a pragmatic way the differences as to the extent of the discovery that should be given by the 3rd respondent, on the premise that there were no ledgers of SOUS in existence. I made no order for discovery of items 1, 3 to 10 of the schedule of the documents sought by the petitioners, on an undertaking given by leading counsel for the 3rd respondent. By the undertaking, the 3rd respondent is to "(1) make arrangement for the petitioners' representatives to inspect all accounting records kept by Mr John Richmond in support of the Summaries and Analysis at the office of Mr John Richmond, or another venue in the United States to be agreed between the parties; and (2) make available to the petitioners copies of such of the above-mentioned accounting records as may be requested by the petitioners upon agreement of the petitioners to pay the reasonable photocopying charges therefore".

7. The reasons for not ordering the 3rd respondent to give formal discovery right away but to accept his undertaking to make available for inspection in the first instance all the accounting records of SOUS kept in Mr Richmond's office are set out in paragraphs 25 to 39 of the 2nd Decision. It was expressly envisaged in the 2nd Decision that after inspection has been carried out by the petitioners, and if relevant documents were identified as a result, the respondents would give formal discovery by serving and filing a further list of documents. If the parties were in disagreement as to which of the documents inspected should be formally disclosed, they would have liberty to apply to the court.

8. After the 2nd Decision was handed down on 30 September 2002, and when a draft order was submitted for my approval, it was pointed out to me by the petitioners' solicitors that the 3rd respondent had not specified in his undertaking the time within which he should provide access to the documents and that the respondents' solicitors had rejected the petitioners' request to carry out inspection during October. The petitioners' solicitors also proposed to provide in the draft order the period within which the inspection of documents may be made and copies are to be provided and the number of people who could attend the accountant's office to carry out inspection, to avoid further argument on these matters. As I took the view that it would be desirable to provide for these matters in the order, the parties were invited to make proposals to these matters by letter before the order was to be drawn up. After taking into account the responses on both sides, the order on the 2nd Decision that was approved and sealed on 25 October 2002 contained inter alia the following terms:

"1. There be no order for discovery in respect of items 1, 3 to 10 in the Schedule hereto upon the undertaking by Counsel on behalf of the 3rd Respondent that:-

(i) the Petitioners' representatives be given access to inspect all accounting records of SOUS kept by Mr John Richmond at his offices within November 2002;

(ii) the above mentioned accounting records should, for the avoidance of doubt, include, but not be limited to, the accounting records listed under the first paragraph of Part Five of the Respondents' Analysis; and

(iii) the Petitioners be given copies of such of the said accounting records of SOUS as may be requested by the Petitioners within 7 days of such request and upon agreement of the Petitioners to pay the reasonable photocopying charges for the same.

2. The Petitioners' representatives shall total no more than 4 in number and shall be permitted to conduct such inspection at the offices of Mr John Richmond for a period of 14 days, between the hours of 9:00 am to 5:30 pm each day."

What happened subsequently

9. Once again, extensive correspondence was exchanged on the implementation of the undertaking given by the 3rd respondent and the order that was subsequently approved, this time involving not just the solicitors for the parties in Hong Kong, but also their attorneys in the United States.

10. When the petitioners' solicitors first requested inspection of the documents in early October 2002, it was envisaged that the scale of the exercise was such as to make it necessary for the petitioners' solicitors to fly from Hong Kong to Oregon to conduct the inspection, as the 3rd respondent has deposed that there are 2,000 pages of documents a year with the accounting records going back to 1989 for 13 years. As the petitioners wished to proceed with the inspection as soon as practicable, it was agreed by the respondents' solicitors that the petitioners should make direct contact with Mr Richmond's office to confirm arrangements. The petitioners instructed an attorney in Oregon, Mr Joseph Field, to liaise with Mr Richmond. Mr Field was asked to conduct a preliminary inspection to assess the scope of the documents to be made available by the 3rd respondent for inspection, so as to enable the petitioners' solicitors to decide how best to inspect and copy the documents.

11. I do not propose to go into the details of the discussion on 24 October 2002 between Mr Field and Miss Saidee McKay, who is Mr Richmond's assistant. There is dispute between them as to what was said. What is not in dispute is that Miss McKay had told Mr Field that a car accident in 1996 had caused extensive damage to Mr Richmond's office and destroyed most of the copies of the source materials. She also stated that the records that are boxed would need to be reassembled and computer data can be re-printed.

12. On 31 October 2002, Mr David Harper, the attorney of the 3rd respondent in Oregon, faxed to Mr Field an inventory of the records held by Mr Richmond that would be available for inspection.

13. On 5 November 2002, Mr Field attended Mr Richmond's office to carry out a preliminary inspection. In his estimate, the documents shown to him would only amount to about 6,000 pages in total (Mr Field's estimate is disputed by the respondents' solicitors who asserted in their letter dated 13 November 2002 that there are about 16,000 to 18,000 pages of documents, reduced from 25,000 pages as initially deposed to by the 3rd respondent). He made an inventory at the time of all the documents shown to him in the presence of Mr Harper, using the exact words appearing on the files to describe the documents listed in his inventory, and sent a typed copy of the inventory to Mr Harper on 6 November 2002. According to Mr Field, nine lever files and one of the ring-binders shown to him were marked "SOUS General Ledger", it is however disputed by the respondents' solicitors on 15 November 2002 that this was the case.

14. Mr Field also informed Mr Harper during his inspection on 5 November 2002 that he would engage a litigation copying service to attend at Mr Richmond's office to pick up all the records of SOUS for copying by way of digital scanning at the premises of the copying service, as scanning would require sophisticated digital copying equipment unsuitable to be moved from job to job. I understand from Mr Field that the copying of bulk documents by litigation copying services is a common feature of discovery in the United States and it has become common in recent years to copy by scanning instead of manual copying and marking of documents, because scanning is much more convenient and cost effective. Obviously, it will be much more efficient to send copies of the documents scanned onto compact discs to Hong Kong. By then, the petitioners' solicitors had decided that as there are far fewer documents to inspect, it would be more economic to copy all the documents and send them to Hong Kong for review instead of sending someone from Hong Kong to Oregon to examine the documents in Mr Richmond's office.

15. On 6 November 2002, a professional copier engaged by Mr Field went to Mr Richmond's office with a copy of Mr Field's inventory to review the documents so as to give an estimate of the cost of copying the documents by scanning. He was not shown the full set of documents shown to Mr Field. On 6 November 2002, Mr Harper sent a fax to Mr Field stating that his client has interpreted the order on the 2nd Decision to mean that copying of the documents is to be made, not by scanning, and that the copying must be done in Mr Richmond's office. On 7 November 2002, Mr Harper sent Mr Field another fax stating that the respondents' solicitors has informed him that according to the order on the 2nd Decision, the petitioners are to inspect the records in Mr Richmond's office and make a list of those documents they want to be copied. Mr Harper also stated that he was advised by the respondents' solicitors as no order for discovery was made in respect of items 1, 3 to 10 in the Schedule to the order, the petitioners "may copy only what is in [item] 2 as appropriate". He received instructions from SOUS that Mr Field would not be allowed to copy "all its financial record" as originally envisaged.

16. Mr Field took advice from the petitioners' solicitors and wrote to Mr Harper on 8 November 2002 enclosing a copy of the letter from the petitioners' solicitors of the same date to the respondents' solicitors refuting the interpretation that the order only allowed copies to be made of the documents in item 2 in the Schedule, and requesting to inspect all of the documents in the inventory that had been drawn up by Mr Field and to mark relevant documents for copying by a litigation copying service.

17. On 11, 13 and 15 November 2002, the respondents' solicitors wrote to the petitioners' solicitors putting forward their interpretation of the 2nd Decision and the order. In summary, they contended as follows:

(1) The purpose of allowing the petitioners access to the documents at Mr Richmond's office is to identify the source documents relating to (a) "property management fees"; (b) "legal accounting and consulting fees"; and (c) "leasing commission", set out in the Summaries and Analysis provided by the 3rd respondent in May and June 2002. No permission is given to the petitioners to look at any documents they wish.

(2) The procedure provided under the order is that the petitioners will attend Mr Richmond's office for an on-site inspection of the accounting documents. They should identify the relevant documents and give the respondents a list of each and every document for which copies are requested. If any documents requested are relevant to the issues as stated in (1), such documents will be disclosed by the respondents in a further and better list of documents to be filed and verified on affidavit and copies thereof will be supplied to the petitioners upon payment of the prescribed photocopying charges. The respondents may object to some of the documents requested.

(3) Scanning of all the documents inspected by Mr Field, without regard to their relevance to the issues, is not permitted under the order.

(4) On the premise that 14,000 to 15,000 pages (revised downwards from the earlier estimate of 16,000 to 18,000 pages) are to be manually photocopied, it is estimated that it would take a clerk, fully engaged over 12 working days to do the photocopying and the respondents would need at least 21 days for the copying and despatch of the documents. If Mr Field's estimate of 6,000 pages is correct, at least 14 days would be required for copying and despatch (I pause here to note that according to the petitioners, only one day is required if digital scanning is used, at an initial cost of US$720 with extra compact discs available at US$5 per disc).

18. The inspection process came to a standstill as the respondents' attorney did not wish to be placed in an untenable position of being used by Hong Kong lawyers to interpret an order of the Hong Kong court. To resolve the impasse, the petitioners issued the enforcement summons.

The enforcement summons

19. At the hearing, Mr Fung, SC submitted on behalf of the respondents that the proper interpretation of the 2nd Decision is as stated in the above letters of the respondents' solicitors and made the following points in addition:

(1) Inspection under the order is not meant to be formal discovery. It is not intended that all or any of the documents offered for inspection must be disclosed.

(2) The petitioners must first inspect the documents and identify relevant documents. The respondents may object to the disclosure of such documents, in which event the matter will be decided by the court.

(3) Contrary to the above, the petitioners have not bothered to conduct any bona fide inspection but have demanded a "wholesale disclosure of all the documents offered for inspection", which was not contemplated by the order.

(4) In making the order, the court could not have intended to deprive the respondents the right to raise objection about supplying copies of documents on the ground of privilege, as once inspection of the documents has taken place their contents are revealed and admissible as secondary evidence and the other party is entitled to copies of the documents notwithstanding an omission by mistake to claim privilege in the list of documents (Hong Kong Civil Procedure 2002, Vol. 1, para. 24/9/5). It was asserted that there are "privacy issues relating to tenants' personal information" in some of the documents offered for inspection, and that the respondents will object to production of these documents on the ground of privilege under the laws of the United States.

20. I do not accept the above submissions.

21. It should be fairly clear on a proper reading of the 2nd Decision and consequent order that informal inspection of documents at Mr Richmond's office is to be followed by the provision of copies of the documents requested. The copying process is an inherent and integral part of the informal inspection. As submitted by Mr Bartlett for the petitioners, if the petitioners are allowed to inspect the documents in the United States and return to Hong Kong with merely a list of those documents they request to be copied, and the respondents could then object to provide copies of any of the documents requested, the whole process would fall apart.

22. As this process is not formal discovery, the relevance of the documents should not be gone into at this stage. This accords with the wording and spirit of the order. The rationale for the undertaking given by the respondents, which led to the order providing for informal inspection and provision of copies, is that there will be no concession by the respondents on the relevance of documents inspected in this informal process. The relevance of the documents is to be gone into when formal discovery is given by the respondents in filing a further and better list of documents in due course, this would be done after the petitioners have reviewed the documents they inspected with the benefit of copies provided as requested and have identified the relevant documents they would ask the respondents to disclose in the further and better list. It is simply wrong for the respondents to maintain that the effect of the order is such that copies of the documents would only be provided to the petitioners at the end of the formal discovery process, i.e. after a further and better list of documents has been filed by the respondents.

23. It is true that it was initially envisaged that the petitioners would only request for copies of some of the documents inspected, no doubt because of the sheer volume of documents involved as stated by the 3rd respondent at that time. When it was realised that the volume of documents to be examined was to be reduced from 25,000 pages to 6,000 pages, the petitioners decided to ask for copies of all the documents offered for inspection so that the review could be done in the offices of the solicitors in Hong Kong instead of examining each and every document in Mr Richmond's office. In my view, it is clearly within the terms and the spirit of the order for the petitioners to request for copies of all, not just some, of the documents inspected in the informal process. The undertaking offered by the 3rd respondent relates to inspection of "all accounting records kept by Mr John Richmond in support of the Summaries and Analysis at the office of Mr John Richmond" and he has agreed to make available to the petitioners "copies of such of the above-mentioned accounting records as may be requested by the petitioners upon agreement of the petitioners to pay the reasonable photocopying charges therefore". This is consistent with the offers made throughout by the 3rd respondent in correspondence and on affidavit, as mentioned in the 2nd Decision, in that in none of the offers was any qualification made regarding relevance or any claim for privilege in providing copies of the documents as may be requested by the petitioners.

24. As for the claim for privilege that might be lost by providing copies of the documents to the petitioners in this informal process, I am sceptical about this argument which was only raised cursorily without elaboration in the extensive correspondence of the respondents' solicitors. I am quite unable to see at present how any claim for privilege could arise under Hong Kong law in respect of the accounting records offered for inspection. In any event, to lay this argument to rest, Mr Bartlett has offered an acknowledgment on behalf of the petitioners that the provision of copies in the informal inspection would not be regarded as a waiver of privilege, so that the respondents will be at liberty to raise any claim of privilege at the relevant time which is when they file a further and better list of documents.

25. I am of the view that relief should be granted on the enforcement summons. I am not minded to make an unless order at this stage and Mr Bartlett has not pressed for this. It seems to me it would be far better to resolve the impasse by ordering specifically what the 3rd respondent is required to do to comply with the order consequent on the 2nd Decision. I consider I do have power, under O. 24 r. 11(2), to order the 3rd respondent to permit the petitioners to inspect all the accounting records of SOUS kept by Mr Richmond on the undertaking given by the 3rd respondent as contained in the order in the 2nd Decision.

26. Further, by virtue of O. 24 r. 11A(1), any party who is entitled to inspect any documents under any provision of O. 24 or any order made thereunder may at or before the time when the inspection takes place serve on the party who is required to produce such documents for inspection a notice (which shall contain an undertaking to pay the reasonable charges) requiring him to supply a true copy of any such document as is capable of being copied by photographic or "similar process". This provision is met in that there was an application for specific discovery by the petitioners under O. 24 r. 7 and the order recording the undertaking of the 3rd respondent consequent on the 2nd Decision was made in that context. The petitioners have served notice on the respondents' solicitors on 8 and 12 November 2002, requesting copies of the documents offered for inspection by digital scanning with an undertaking to pay the charges thereof. As the respondents have failed to comply with this within seven days of receipt of the notice provided in r. 11A(2), under r. 11A(3) the court may, on the application of either party, make "such order as to the supply of that document as it thinks fit".

27. Mr Fung has made no submissions why the copies of the documents should not be supplied in compact discs by digital scanning, which would appear to be a more convenient, efficient, and cost effective mode as compared to manual photocopying.

28. I make the following orders on the enforcement summons:

Within seven days of the handing down of this decision, the 3rd respondent do

(i) produce for inspection by the petitioners the 44 volumes of accounting records of SOUS that were made available for inspection at the office of Mr John Richmond on 5 November 2002; and

(ii) supply to the petitioners copies of all the accounting records produced for inspection or such of the said documents as may be requested by the petitioners on compact discs by digital scanning upon the undertaking of the petitioners to pay reasonable charges thereof.

29. As for the costs of the enforcement summons, I make an order nisi that the respondents are to pay the costs of the petitioners in any event.

The discovery summons

30. I turn to the discovery summons. In the schedule to the summons, the petitioners seek discovery of all documents of SOUS or Cana Realty which

(i) support the averments of the 3rd respondent in his first affirmation dated 21 January 2002 that the land and building costs of the First Interstate Tower ("the Tower") in 1990 or 1991 had amounted to US$21.23 million;

(ii) support the respondents' contention in their solicitors' letter dated 3 September 2002 that the land and building costs of the Tower were in the estimated region of US$16 million to US$17 million;

(iii) support or explain the calculation of the "buildout" expenses or other expenses purportedly incurred and included in the calculation of land and building costs of the Tower as averred in the said letter of the respondents' solicitors dated 3 September 2002 and the third affirmation of the 3rd respondent dated 11 July 2002; and

(iv) evidence the purported payments made by the tenants of the Tower to, and receipt by, SOUS or Cana Realty and/or any of the respondents, constituting reimbursements relating to the buildout expenses of the Tower.

31. At the adjourned hearing of the summons, Mr Bartlett informed the court that he would not seek discovery of the documents in item (i), after I have indicated to him I would regard such documents to be of peripheral relevance to the matters in issue, in view of the further evidence filed by the 3rd respondent in his fourth affirmation dated 17 October 2002, which was after the summons was adjourned, deposing that the figure of US$21.23 million is the present value of the Tower and explaining how that figure is arrived at, by adding to the construction costs over the years the buildout expenses or tenement improvement reimbursed by instalments by the tenants throughout the tenancy. Mr Bartlett wished to reserve his position on item (ii), after the petitioners have had an opportunity of considering the accounting records of SOUS that should have been made available for inspection pursuant to the order made on the 2nd Decision.

32. In respect of items (iii) and (iv), Mr Bartlett submitted that the petitioners would seek discovery of the following documents in lieu of these items:

(a) owner statements sent by Cana Realty to SOUS for all properties managed by Cana Realty on behalf on SOUS for the period from 1993 to 2000; and

(b) schedules of collected income for 1993 to 1998, similar to the schedules exhibited as exhibit 13 to the first affirmation of the 3rd respondent dated 21 January 2002.

33. The relevance of the documents to the issues in dispute is said to arise in this way. It is part of the petitioners' case that the respondents had procured unsecured advances of the funds of Shun On Company Limited ("the Company") to SOUS for building the Tower. The value of the Tower in 1990 was assessed to be no more than US$14.5 million, far less than the land and building costs at US$21.23 million as stated in the first affirmation of the 3rd respondent, and which the petitioners had understood the 3rd respondent to mean the costs of the Tower as in 1990 or 1991. On this basis, the petitioners have alleged that the project was an unfeasible over-improvement of the site and had constituted gross mismanagement of Company assets, thereby causing unfair prejudice to the petitioners.

34. It was only after the petitioners had received the expert evidence of the respondents' valuer in July 2002 that they came to realise the respondents might not accept the land and building costs in 1990 or 1991 were US$21.23 million and the letter of the respondents' solicitors dated 3 September 2002 confirmed this. The case of the respondents, as stated in that letter, is that the Tower had cost only US$16 to 17 million, after taking into account the "buildout" expenses which were recoverable from the tenants throughout the tenancy period.

35. As mentioned above, the 3rd respondent gave an explanation in his fourth affirmation how the "actual" land and construction costs of the Tower was arrived at, which he has put at about US$15,123,127.01 or US$15.69 million, and stated that the figures were arrived at with the advice and assistance of Mr Richmond and the project manager of the Tower, Cana Realty. He produced a summary of expenses of three pages and an analysis of one page to explain the figure of US$15 million odd. However, the source documents were not disclosed.

36. As for the buildout expenses, the 3rd respondent explained in his fourth affirmation that particulars of the payments and reimbursements can be found in the owners statements, an example of which he produced in exhibit 23 to his affirmation, although this does not give a breakdown of the payments and reimbursements for each of the tenants.

37. The petitioners seek discovery of the documents in support of the case advanced by the respondents on the land and building costs of the Tower, in view of the apparent change in the evidence filed by the respondents. At this stage, their focus is primarily on the buildout expenses, as it is not entirely clear from the respondents' evidence how the reimbursement of the buildout expenses are accounted for on the present information and documents disclosed, for the reasons as explained in the letter dated 19 November 2002 of Mr Kevin Keithley, a certified public accountant in Oregon engaged by the petitioners to consider the relevant documents. I am satisfied that the documents sought in items (a) and (b) as stated above are relevant to the issues in dispute. These documents are relevant to the calculation of buildout expenses and the alleged reimbursement of the same by the tenants.

38. As for the existence of these documents, this is apparent from the evidence of the respondents as I have mentioned above. I am also satisfied these documents are within the possession, custody or power of the respondents. These are the documents of SOUS and it was held in the 1st Decision that the 3rd respondent has sufficient control or power over SOUS for the purpose of an application for specific discovery for the documents of SOUS. Further or alternatively, these are the documents generated by Cana Realty as the agent of SOUS under a Construction and Management Agreement between these entities, pursuant to which Cana Realty was obliged to "keep separate accounting of all asset income and expenses" and its actions would be "subject to the complete control of [SOUS] and under [SOUS's] absolute direction".

39. The only other matter to consider is whether discovery of these documents should be given for the fair disposal of the dispute in the exercise of my discretion. The petitioners have sought to narrow down the ambit of the discovery sought from "all documents" relating to items (iii) and (iv) in the schedule to the summons to the specific items in (a) and (b) mentioned above. I do not think it would be oppressive to require the respondents to produce the documents in items (a) and (b), which are specific and restricted in scope.

40. I am mindful of the fact that in the last hearing in September 2002, the petitioners sought discovery in item 10 of the schedule of documents relating to all payments of rental income of SOUS collected by Cana Realty for the period from September 1999 to August 2000 because of an apparent discrepancy in the "collected" income and the rental income, which the respondents have explained was due to the buildout expenses. Mr Fung has complained that the petitioners are revisiting the same point that has been disposed of in September 2002. If the respondents had complied with the order made on the 2nd Decision and the petitioners had the opportunity of reviewing the documents offered for inspection with copies of the documents requested, this complaint might have some justification. As it is, I do not think this is a valid reason for not ordering specific discovery, notwithstanding that the respondents are at the same time required to give inspection and provide copies of the documents requested under the order I have made on the enforcement summons. If the documents in items (a) and (b) are among the documents offered for inspection at Mr Richmond's office on 5 November 2002, no additional action by the respondents would be required. In the event that these documents are not among the documents kept in Mr Richmond's office, the respondents would be required to do what is necessary to disclose these documents. So an order for specific discovery would serve a purpose.

41. I make the following order on the discovery summons:

(1) Within 28 days of the handing down of this decision, the 1st to 6th respondents do

(i) make and serve on the petitioners a further and better list of documents within the classes specified hereunder

(a) owner statements sent by Cana Realty to SOUS for all properties managed by Cana Realty on behalf of SOUS for the period of 1993 to 2000; and

(b) schedules of collected income for 1993 to 1998, similar to the schedules exhibited at "YCN-13" to the first affirmation of the 3rd respondent dated 21 January 2002;

(ii) make and file an affirmation stating whether they have, or have at any time had, in their possession, custody or power any document within the classes specified in (i) above and if the documents or any of them have been but are not now in the possession, custody or power of any of the respondents, stating when they parted with them and what has become of the same.

(2) The petitioners be at liberty to restore for argument the application for specific discovery in relation to item (ii) in the Schedule to the summons.

42. As for the costs of the discovery summons, I make an order nisi that the 1st to 6th respondents do pay the petitioners' costs of this application in any event. I take the view that if the respondents had complied with the order made on the 2nd Decision, and had given the petitioners the opportunity of reviewing the accounting records of SOUS with copies of the documents requested, it is possible that this further application might not have been necessary.