XCHRX CHINA WEAL LTD. v. LAM SAU WAH

HCA 12281/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 12281 OF 1997

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D E C I S I O N

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1. This is the Defendant's appeal against the order of Master Lung dated 3 December 1999 where he dismissed the Defendant's application for specific discovery of documents which are listed in the Schedule to the summons and the Schedule to the Notice of Appeal.

2. The Plaintiff brings this action against the Defendant seeking a number of relief which in essence is aimed at recovering a unit in Tai Koo Shing from the Defendant. The Plaintiff alleges that it paid for this unit and the Defendant was only holding the unit on trust for the Plaintiff. The price paid in about January 1992 and February 1992 for the unit totalled $2,405,000. The Plaintiff claims that it paid the price by way of 2 cheques, one of $190,500 and the other of $2,249,147.5. The total of the 2 cheques was $2,439,647.5.

3. The Defendant denies these allegations. She admits that the Plaintiff paid the 2 cheques for purchasing the unit. However, she claims that this was because she had in January 1992 paid the Plaintiff cash in the sum of $2.44 million. These cheques were in effect repayment to the Defendant of the cash sum she paid to the Plaintiff earlier.

4. On 6 September 1999, the Defendant took out a summons asking for specific discovery of the following documents:-

(a)	the Plaintiff's minutes of board meeting authorizing payment of the purchase price of the suit property;
(b)	the Plaintiff's instruction vouchers and/or slips to issue the 2 cheques;
(b)	the Plaintiff's certified and audited accounts for the periods 1992/93 and 1993/94.

The Plaintiff resisted this application essentially on the ground that the documents requested for are not related to any matter in question in the cause or matter and/or not necessary.

5. The Plaintiff does not dispute that the requested documents are or had been in the Plaintiff's possession, custody or power. This is not surprising as there is good basis for believing that they are or have been in the Plaintiff's possession, custody or power.

6. The test for deciding whether a document is related to "any matter in question" between the parties is summarized in The Supreme Court Practice 1999, para 24/2/11. The learned editors said: "They are not limited to documents which would be admissible in evidence ... nor to those which would prove or disprove any matter in question: any document which, it is reasonable to suppose, 'contains information which may enable the party (applying for discovery) either to advance his own case or to damage that of his adversary, if it is a document which may fairly lead him to a train of enquiry which may have either of these two consequences' must be disclosed".

7. In one of the Defendant's affirmations in support of the application, it was alleged that the audited accounts may show that the unit was a real property held by the Plaintiff. I do not think that this is a well-founded belief. It is part of the Plaintiff's case that the reason why the Defendant was asked to hold the unit was exactly because the Plaintiff did not want the burden of being the legal owner of the unit: see para. 5 of the Statement of Claim. Therefore it is possible that the audited accounts may not show the unit as being held by the Plaintiff as its real property. Having said that I consider that the requested documents (save as to one item which will be referred to later) fall within the test summarized in The Supreme Court Practice 1999 (see above). The treatment of the total sum of $2,439,647.5 in the audited accounts and the Plaintiff's minutes of the board meeting and the Plaintiff's instruction vouchers and/or slips relating to the 2 cheques, may fairly lead "the Defendant to a train of inquiry" which may enable the Defendant either to advance her case or to damage that of the Plaintiff.

8. Ms Catton's arguments in opposition can be summarized as follows:-

(a)	the requested documents are irrelevant;
(b)	this application is a "fishing expedition";
(c)	the Defendant delayed in making this application.

9. In relation to point (a), she argues that the issue in the action is whether the Defendant had paid cash of $2.44 million to the Plaintiff under what in effect was a "loan" agreement. The requested documents have nothing to do with this "loan". I do not agree. While the court may also have to decide whether there was a "loan" advanced by the Defendant in cash, the issue of what was the reason (or purpose) for drawing the 2 cheques would be another issue which needs to be decided. The Plaintiff pleaded that the reason for doing so was that Defendant agreed to hold the suit property as the Plaintiff's trustee whereas the Defendant pleaded that the reason for doing so was to repay the cash "loan".

10. The learned Master apparently accepted Ms Catton's point (a) because Ms Catton told me the learned Master observed that the Defendant had the burden of proving the existence of the cash loan. I do not think that the burden of proof necessarily lies with the Defendant but even if it does, it does not mean that the requested documents are "irrelevant" as that word is understood in the context of discovery of documents.

11. Ms Catton's point (b) is that the party applying for specific discovery needs to provide more information about the contents of the requested documents, otherwise the application can be regarded as a "fishing expedition". This argument has to be decided having regard to the circumstances of each case. In the present case, I consider the Defendant has provided sufficient details of the existence and the nature of the requested documents, and why they relate to a matter in question between the Plaintiff and the Defendant. I therefore disagree that this application is a "fishing expedition".

12. As regards point (c), the following chronology is relevant:

(1)	the Lists and Supplemental List of Documents of the Defendant were filed in June 1998, September 1998 and November 1998 respectively. The Lists and Supplemental List of Documents of the Plaintiff were filed in May 1998 and October 1998 respectively;
(2)	the Plaintiff applied for specific discovery of documents in November 1998;
(3)	the action was set down for trial in November 1998;
(4)	the Defendant applied for specific discovery of documents in September 1999;
(5)	the trial of this action was scheduled to commence on 1 March 2000.

In these circumstances, although the Defendant's application can be regarded as late, taking into account the relevance of the requested documents to the matter in question, the nature and number of the documents requested, the time between the order to be made herein and the commencement of the trial, I do not find the delay to be excessive or undue.

13. For the above reasons, I do not agree with the learned Master's conclusion. The appeal is allowed and the learned Master's order is set aside. An order is made in terms of the paragraphs 1 and 2 of the Notice of Appeal. However, I do not consider that the 1993/94 audited accounts are relevant because the relevant transaction occurred in about January 1992 or February 1992. This item is therefore to be deleted from paragraph 2c of the Notice of Appeal.

14. Subject to this exception, the appeal is allowed as stated earlier.