HSBC PRIVATE BANK (SUISSE) SA v. MISSION BRIDGE LTD AND ANOTHER

HCA 406/2008
HCA 2538/2009
HCA 212/2012
(Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 406 OF 2008, 2538 OF 2009 AND 212 OF 2010

(Consolidated pursuant to the order of Master Levy dated 30 March 2010)

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DECISION

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1.  This is an application for specific discovery by the defendants.

BACKGROUND

2.  The plaintiff is a bank and part of the HSBC Group.

3.  The 2^nd defendant, Madam Lam Kin Fong, and her husband are in the textile and garment business.  Citimex Holding Limited (“Citimex”) is the holding company of their business.  Starting from about 2000, Citimex, through its account with HSBC, had invested and traded in financial products such as equity-linked notes and had subscribed for shares in initial public offerings (“IPOs”).

4.  It is the defendants’ case that, some time in 2005, the plaintiff’s staff, Ms Ellen Chan (“Ellen”), suggested to the 2^nd defendant to buy “odd lots shares” (碎股).  Ellen told the 2^nd defendant that these transactions were called “discount accumulation”.

5.  In 2005, the 1^st defendant, a BVI company known as Mission Bridge Limited, was established and it maintained an account with the plaintiff for the trading of financial products.  The 2^nd defendant, who is the sole beneficial owner of the 1^st defendant, had executed a guarantee in favour of the plaintiff in respect of the obligations of the 1^st defendant.

6.  When the 1^st defendant’s account was opened in 2005, the 2^nd defendant had signed a document acknowledging that the 1^st defendant was a “professional investor”. It is the defendants’ case that the 2^nd defendant was not aware of the implication of such classification when she signed the document.  At about the same time, another company known as Vision Bridge Limited (“Vision Bridge”) was established with the 2^nd defendant’s husband as its sole beneficial owner.

7.  Starting from about March 2007, the 1^st defendant had traded in a financial product known as accumulator through its account with the plaintiff.  The subject matters of the present action are 4 accumulator contracts made between the plaintiff and the 1^st defendant in the period from July to November 2007.  2 such contracts were partially unwound after the 1^st defendant failed to meet the margin call.  It is the plaintiff’s case that this resulted in substantial unwinding costs payable to the plaintiff.  Further, a large number of settlement payments due under the accumulators remain unpaid.

8.  The plaintiff then exercised its purported right to liquidate the 1^st defendant’s account.  However, even after this, substantial sums of about $180 million remain outstanding.  The plaintiff therefore sues the 1^st defendant for these sums and sues the 2^nd defendant on the guarantee.

9.  The defences put forward by the defendants to oppose the plaintiff’s claim can be summarised as follows:

(i)  the 1^st defendant was induced into entering into the accumulator contracts on the plaintiff’s misrepresentations that the plaintiff acted as an intermediary, but not as principal; various regulatory provisions would be complied with; and no more than 20% of the price of the total outstanding shares would be required as margin;

(ii)  there was a collateral contract between the plaintiff and the 1^st defendant that only 20% of the price of the total outstanding shares would be required as margin (“the 20% Margin Agreement”), which was breached when the plaintiff required mark-to-market margin;

(iii) the plaintiff was in breach of duties arising out of and from the provisions of the Code of Conduct for Persons Licensed by or Registered with the Securities Futures Commission and the Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules, Cap 571Q (“the Securities Rules”) and at common law, in particular it had made misrepresentations; acted as counterparty rather than intermediary; suggested the accumulators to the 1^st defendant notwithstanding the risk; failed to ensure that the 1^st defendant understood the risks; misclassified the 1^st defendant as a “professional investor”; failed to provide product guide and indicative term sheets to the 1^st defendant; and failed to provide daily margin statements to the 1^st defendant;

(iv)  the accumulator contracts are void and unenforceable for illegality in that daily margin statements were not provided as required under the Securities Rules; and

(v)  the 2^nd defendant’s guarantee is subject to a collateral agreement that it was only to cover the exposure of the 1^st defendant in subscriptions for shares in IPOs.

10.  The plaintiff disputes the defendants’ allegations.  It maintains that the defendants entered into the disputed transactions fully aware of the attendant risks and contractual obligations and were happy to reap the benefits of their arrangements with the plaintiff until the market moved against them, at which point they grasped for any pretext to renege on their bargain.

11.  The defendants seek discovery of the following 3 classes of documents:

(i)  recordings of the telephone conversations between the plaintiff’s personnel and the defendants from January 2005 to June 2008, or alternatively, in respect of the 6 time periods stated in the summons;

(ii)  documents (in both physical and electronic forms and including telephone recordings) submitted to or generated by the plaintiff’s London office from January 2007 to January 2008 regarding the defendants’ credit and margin limits, collateral requirement, investment portfolio and/or positions (“the London Margin Documents”); and

(iii)  emails to or from the plaintiff’s staff, Ellen or Randy Chu (“Randy”), regarding credit limits, margin shortfalls or calculation of margin in the accounts of the 1^st defendant and Citimex from August to September 2007 and November  2007 to June 2008 (“the Margin Emails”).

12.  The main battlefield between the parties is about the telephone recordings.  The defendants are seeking discovery of all the telephone recordings between the plaintiff’s representatives and the defendants from January 2005 to June 2008, a period of 42 months.  Even on the defendants’ alternative stance, the defendants are seeking 17 months of telephone recordings.

13.  According to the plaintiff, far more time, costs and effort will be involved in the discovery of audio recordings than any other text based materials.  As explained by Mr Gareth Morgan, the plaintiff’s Head of Operational Risk, the entire audio retrieval team of the plaintiff will have to be involved in the process, which is “immensely time consuming”.  As the exact dates and times of the calls are known, the retrieval team will have to listen to all the telephone conversations of the relevant periods which “may extend to many thousands of hours”.  The considerations of client confidentiality and privacy are also paramount in the process.  In addition to the retrieval process itself, further and considerable time is required to ensure against breaches of client confidentiality and data privacy in the discovery process.  Taking into account the nature of audio recordings and business of the plaintiff, I do not think that Mr Morgan has exaggerated the difficulties facing the plaintiff if the court were to order it to disclose all the audio recordings listed out in the summons.

14.  Up to this stage, the plaintiff has retrieved and reviewed about 700 audio recordings and disclosed the relevant parts of those recordings to the defendants.  In his affidavit, Mr Morgan has also explained the basis as to how the plaintiff has selected those particular 700 audio recordings, which are mainly relate to the dates for the trading of each of the 4 accumulator contracts which are the subject matters of the present dispute and some of the important dates mentioned in paragraph 12 of Mr Morgan’s affidavit.

LEGAL PRINCIPLES

15.  Both parties agree with the following established legal principles relating to specific discovery: the party seeking the order for discovery must establish a prima facie case that a specified document or class of documents exists; that the party against whom the order is sought has or had the documents in his possession, custody or control; and that the documents relate to a matter in question in the action.  The relevance of the documents under application is to be determined by pleadings.  If the party seeking discovery establishes a prima facie case, it is for the party objecting to the order for discovery to satisfy the court that the discovery is not necessary either for disposing fairly of the cause or matter or for saving costs.  It is also trite law that fishing and oppressive requests shall not be allowed (see: Hong Kong Civil Procedure 2012, vol 1, §24/7/1).

16.  Following the CJR, the increasing emphasis is for the court to limit discovery in the context of its duty actively to manage the case.  Firstly, O 24 r 15A of the RHC was introduced giving the power to the court to limit discovery for the purpose of managing the case and furthering the underlying objectives specified in O 1A.

17.  Secondly, the case law also supports such approach.  In §24/0/12 of the Hong Kong Civil Procedure 2012, vol 1, the learned authors said the following:

“The increasing emphasis on active case management has resulted in exhortations from the Court of Appeal that interlocutory discovery skirmishes should be avoided if possible and that the real issues in dispute ought to be identified and brought to trial for resolution without waste of time and extensive discovery. An example is Cable & Wireless HKT Telephone Ltd (formerly Hong Kong Telephone Co. Ltd) & Another v. City Telecom (H.K.) Ltd & Another, unreported, CACV No. 197 of 1999, February 1, 2000, [2000] H.K.E.C. 386, CA, in which Rogers J.A. expressed the view that this was a case that required strong case management to ensure that the issues between the parties were properly and efficiently dealt with. The judge then identified the issues in the case and said that they should be resolved expeditiously and by limiting discovery where possible. … … …”

18.  In Sunny Tadjudin v Bank of America, National Association, unreported, HCA 322/2008 (decision on 22 December 2011) at §7, M Chan DHCJ also said the following:

“It is also clear that post CJR, the Court should give effect to the underlying objectives of the rules and procedures when it exercises its powers under Order 24 and when it interprets the provisions of Order 24. In deciding whether any documents relates to a matter in question in the action, whether any document is or has been in the possession, custody or power of a party, and whether discovery of a document sought is necessary either for disposing fairly of the cause or matter or for saving costs, the Court should always bear in mind the objectives of cost effectiveness, expeditious disposal of cases, proportionality, procedural economy and ensurance of fairness between the parties.”

19.  With these principles in mind, I turn to the requests of the defendants.

TELEPHONE RECORDINGS BETWEEN FEBRUARY TO OCTOBER 2005

20.  The defendants initially sought the discovery of the telephone recordings from January 2005 to June 2008, a period of 42 months.  But in his submission, Mr Li, counsel for the defendants, quite sensibly, just focuses on the requests for the 6 time periods specified in the summons.

21.  Firstly, the defendants seek discovery of the telephone recordings in the period from February to October 2005 allegedly containing the discussions on the following matters:

(i)  the granting of credit limit to Citimex;

(ii)  the identification of Citimex as a “professional investor”;

(iii)  the purchase of “odd lots shares”; and

(iv)  the incorporation of the 1^st defendant and Vision Bridge.

(i)   The granting of credit limit to Citimex

22.  In her 2^nd affirmation filed on 15 February 2012, the 2^nd defendant claims that the purpose of increasing the credit limit of Citimex in 2005 was to enable Citimex to trade in Renminbi currency rather than to trade in stock-related products such as accumulators, and there must have been some discussions in the telephone recordings to support the defendants’ allegation in this regard.  However, the 2^nd defendant cannot supply the court with any further details about the contents of these alleged discussions.

23.  I myself cannot see the relevance of such discussions. Firstly, the plaintiff has made no claim against Citimex.

24.  Secondly, there is no allegation of any misrepresentation by the plaintiff relating to the credit limit extended to Citimex, and so I cannot understand how the alleged discussions are relevant to the various defences pleaded by the defendants in the Amended Defence and Counterclaim.  Further, the subject matters of the present case are the accumulator contracts made in 2007, and these alleged discussions took place 2 years before the relevant transactions.  The defendants also knew full well that they were trading on accumulators on margin, and that is why the defendants say there was the 20% Margin Agreement (see also the discussions alleged by the defendants in §39 below).  In such circumstances, what is the relevance of such discussions?  To me, the defendants are just fishing for evidence here, and so I deny the defendants’ request for such telephone recordings.

(ii)     The classification of Citimex as a professional investor

25.  According to the 2^nd defendant, there should have been some discussions in the telephone conversations from June to August 2005 about the classification of Citimex as a professional investor within the meaning of the Securities Rules.  It is said that the materials requested will show Citimex’s “purpose” in being identified as a professional investor, and whether the plaintiff had ascertained the defendants’ investment experience or explained the risks of being identified as a professional investor.  However, the 2^nd defendant cannot supply the court with any further details about the contents of these discussions.

26.  Again, I cannot see the relevance of the alleged discussions.  Firstly, the dealings between the plaintiff and Citimex are irrelevant to the issues in the case.

27.  Secondly, there is nothing in the pleadings to show why the telephone conversations on this subject are relevant.  According to the defendants’ case, the plaintiff had wrongly classified the 1^st defendant as a professional investor.  At the trial, the plaintiff would have the evidential burden to adduce evidence to justify as to why the 1^st defendant had been so classified.  So far as I understand it, the plaintiff is only relying on the written acknowledgment signed by the 2^nd defendant in the documents for the opening of the trading accounts, the oral explanations given by the plaintiff’s staff before the signing of the said documents and the nature of the previous transactions to justify why the 1^st defendant had been so classified.  Nothing turns on the contents of the telephone conversations.  In other words, it is not necessary for the defendants to obtain the telephone recordings to prove the negatives, ie the plaintiff had failed to ascertain the defendants’ investment experience or explained the risks of being identified as a professional investor.  If it is part of the plaintiff’s case that it had taken such steps by discussing the matters with the 2^nd defendant over the telephone, the plaintiff would have the burden to produce the telephone recordings concerned and not the defendants.  Hence, the defendants are just trying to fish for evidence here, and so I deny the defendants’ request for such telephone recordings.

(iii)    The purchase of “odd lots shares”

28.  According to the 2^nd defendant, Ellen suggested to her to purchase “odd lots shares” during the telephone conversations between March to September 2005.  It is the defendants’ case that the telephone recordings would be relevant in showing how Ellen had recommended the “odd lots shares” to her and what were said as to the nature and risks of those transactions.

29.  Again, I cannot see the relevance of the audio recordings on this particular subject.  The dealings between the plaintiff and the defendants relating to the purchase of “odd lots shares” in 2005 are quite irrelevant to the trading of accumulators in 2007.

30.  In the Amended Defence and Counterclaim, the defendants plead that Ellen had given “Discount Accumulation Advice” to the 2^nd defendant in 2005.  However, if one looks at the contents of this “Discount Accumulation Advice”, the defendants only aver that Ellen had failed to explain to the 2^nd defendant that:

(i)  the “discounted accumulation” was in the nature of leveraged transactions;

(ii)  there was a margin requirement for the transactions; and

(iii)  the investor would in any way be borrowing from or drawing on any credit facilities with HSBC to finance any of the transactions.

31.  Assuming for the purpose of argument that the “Discount Accumulation Advice” is relevant, which should not be the case as the two products, ie the “odd lots shares” and accumulator, are different products and there is a time gap of 2 years between these two different kinds of transactions, why do the defendants need to obtain the telephone recordings to prove that Ellen had not made such explanations to the 2^nd defendant?  Once the defendants have made the allegation about the absence of explanation at the trial, the evidential burden would be on the plaintiff to prove that it had made such explanations to the defendants (if that is part of the plaintiff’s case).  The burden is not on the defendants, and so I cannot understand why they need to obtain the telephone recordings to establish their defence.  In my judgment, the defendants are just fishing for evidence here, and so I deny the defendants’ request for such telephone recordings.

(iv)     The incorporation of the 1^st defendant and Vision Bridge

32.  According to the 2^nd defendant, there were telephone conversations in the period from February to October 2005 about the purpose of setting up the 1^st defendant and Vision Bridge.  In fact, Ellen had helped her to set up the two companies which served as the investment vehicles of the 2^nd defendant and her husband respectively.

33.  Again, I cannot see the relevance of such telephone discussions.  The object and the purpose for the setting up of two companies have nothing to do with the issues of the case, and I cannot understand how these telephone discussions can help the defendants to establish any of the defences pleaded in the Amended Defence and Counterclaim.

34.  Based on the aforesaid, I refuse to order discovery of the telephone recordings in the period from February to October 2005, which was about 2 years prior to the trading of accumulators on the part of the defendants, on the ground that they are not relevant to the issues of the case.  Further, the defendants cannot make any specific allegation about the contents of these telephone conversations which can actually assist their case, and so the court would not allow such kind of fishing exercise on the part of the defendants.

35.  Finally, even if the materials are relevant, the requests are exceptionally wide.  Taking into account the time and effort that need to be spent in retrieving the identified telephone conversations of a period of about 9 months, I would also refuse discovery on the ground that the whole exercise is disproportionate to the fair disposal of the cause or matter of the case.

TELEPHONE RECORDINGS OF MARCH 2007

36.  According to the 2^nd defendant, she had a telephone discussion with Ellen on or about 26 March 2007 whereby Ellen told her that for customer investing in accumulators, he or she would have to deposit and maintain in the account cash or stocks as security for each accumulator in the amount of 20% of the total value of the number of shares to be purchased over the period covered by the accumulator at the specified price, and that for this purpose, HSBC would value the stocks in a customer’s account at different discounts to their market values.  In support of such allegation, the 2^nd defendant has produced the alleged contemporaneous record that she made in her notebook.

37.  This is a specific allegation about a particular statement made in the telephone conversations.  Further, such alleged statement would be relevant for the court to determine whether the parties had made the 20% Margin Agreement.  In such case, the defendants should be allowed to have access to the telephone recordings in the relevant period of time.

38.  According to the 2^nd defendant, the plaintiff has disclosed the telephone recordings on 20 and 28 March 2007 to the defendants but they do not contain the relevant discussions.  In such circumstances, the defendants extend the request to the whole month of March 2007.  As time and effort to be spent in retrieving the audio recordings of this particular month should not be excessive, and the contents of the discussions are directly relevant to the issues of the case, I order the plaintiff to disclose the telephone recordings for the whole month of March 2007.

TELEPHONE RECORDINGS FROM JULY TO AUGUST 2007

39.  According to the 2^nd defendant, there were some telephone discussions between Ellen and her as to how to deal with the matter in the case that the negative balance in the trading account of the 1^st defendant exceeded the credit limit.  After these discussions, the 2^nd defendant signed a number of documents applying to increase the credit limit of the 1^st defendant including the guarantee dated 16 August 2007.  In order to understand the background leading to the signing of these documents, disclosure of the telephone recordings during such period of time is necessary.

40.  The plaintiff has already disclosed a telephone recording on 6 August 2007 which contains a discussion on the execution of the documents for the increase of the credit limit of the 1^st defendant’s account. The defendants suggest that the plaintiff “has not disclosed other more important telephone recordings”, but it is unclear what this refers to.

41.  The problem with the defendants’ request is that they have failed to identity anything said in the telephone conversations that can assist the defence case or are relevant to the issues of the case.   The main grounds of defence relied on by the defendants are that the plaintiff’s staff had made certain misrepresentations about the financial products and had failed to explain the risks involved to the defendants, and that the plaintiff was in breach of the 20% Margin Agreement and had wrongly classified the 1^st defendant as a professional investor, and that the accumulator contracts are void for illegality.  In such circumstances, I cannot see how the discussions relating to the increase of credit limit are relevant to the issues of the case.  As I see it, the defendants are only fishing for evidence with a view to boost the defence case, and it is trite law that such kind of exercise should not be allowed.

TELEPHONE RCORDINGS OF NOVEMBER 2007

42.  According to the 2^nd defendant, on 7 November 2007, she had given certain instructions to Ellen by telephone for the trading of accumulator under the 4^th contract. In this regard, the plaintiff has disclosed the telephone recording of that particular day.

43.  However, the 2^nd defendant claims that after that telephone conversation, she had another telephone conversation with Ellen whereby Ellen told her that the market condition on that day was not favourable for the trading of accumulator under the 4^th contract and Ellen had tried to contact her to verify the instruction.  Further it was the practice of the plaintiff to confirm with the client after the plaintiff had carried out the trading instructions.  According to the 2^nd defendant, the disclosure of these telephone recordings is necessary for the court to understand the background relating to the trading of accumulator under the 4^th contract.

44.  Although this is the allegation of the 2^nd defendant in her affirmation, the relevance of a particular document is determined by reference to the issues pleaded in the pleadings and not by reference to the allegations contained in affidavits.  In the Amended Defence and Counterclaim, there is no allegation that the plaintiff’s representative had given wrong advice to the defendants about the trading of accumulator under the 4^th contract, and so in my judgment, such telephone recordings are quite irrelevant and the defendants are only fishing for evidence which may be favourable to her case.  I therefore deny such request.

TELEPHONE RECORDINGS OF DECEMBER 2007

45.  According to the 2^nd defendant, Randy had supplied a document to her dated 19 December 2007 which contained the method of calculating the amount of assets and securities in the 1^st defendant’s trading account for the margin requirement.  After that, she had various telephone conversations with Ellen to discuss the contents of the said document.  During these discussions, it seemed that Ellen was not aware that the plaintiff would require the 1^st defendant to put in more security beyond the 20% margin.  The 2^nd defendant claims that the contents of these discussions, in particular the said reply from Ellen, may help the defendants to establish the existence of the 20% Margin Agreement.

46.  Whether the parties had made the 20% Margin Agreement and whether the plaintiff had made the “20% Margin Statement” as defined in the Amended Defence and Counterclaim are some of the main issues of the case.  As these telephone recordings may help the court to determine these particular issues, I allow the defendants’ request in this regard.  However, as the 2^nd defendant claims that these discussions were based on the contents of the document dated 19 December 2007, the alleged discussions must have taken place on or after the said date.  I therefore only order the plaintiff to disclose the telephone recordings from 19 to 31 December 2007.

TELEPHONE RECORDINGS BETWEEN MARCH AND MAY 2008

47.  Commencing from November 2007, the plaintiff had asked the defendants to provide further security in the trading account of the 1^st defendant to meet the margin requirement.  As the defendants had failed to answer such margin call, the plaintiff had started to unwind some of the accumulator contracts of the 1^st defendant from January 2008, an action which was objected by the defendants.

48.  In March 2008, the 2^nd defendant received the Chinese version of the plaintiff’s Standard Regulations (標準章則).  After reading the said document, she made some enquiries with Ellen over the telephone about: (i) the classification of accumulators under the Standard Regulations; and (ii) the method of calculating the losses resulting from the unwinding of the accumulator contracts.  Ellen was not sure about the answers and said she would follow up the matter with the legal department of the plaintiff.

49.  I cannot see how these telephone conversations are relevant to the issues in the case and how they can assist the defendants in establishing their defences mentioned above.  Again the defendants are only trying to fish for evidence here.  Further, the request is disproportionate covering the telephone recordings of 3 months in total.  I therefore reject the defendants’ request in this regard.

THE LONDON MARGIN DOCUMENTS

50.  The defendants also seek discovery of the London Margin Documents, which are documents submitted to or generated by the plaintiff’s London office from January 2007 to January 2008 regarding the defendants’ credit and margin limits, collateral requirement, investment portfolio and/or positions.

51.  Despite the able submission of Mr Li, I cannot see the relevance of the London Margin Documents.  The defendants’ case is that, in view of the 20% Margin Agreement, the plaintiff was wrong to demand for additional collateral or to unwind the accumulator contracts.  Whatever allegations made by the defendants against the plaintiff, such allegations were directed against the plaintiff’s office in Hong Kong, and there is no allegation involving the role of the plaintiff’s London office with regard to any credit or margin limits of the defendants.  In my judgment, this is a classic case of a fishing expedition.

52.  Further, as the documents sought extend to a wide range of materials over a considerable period of time (ie 13 months), including telephone recordings and other forms of physical and electronic materials, the request is simply too wide and disproportionate.

THE MARGIN EMAILS

53.  The defendants also request for the discovery of the Margin Emails, which are emails to or from the plaintiff’s staff, Ellen or Randy, regarding credit limits, margin shortfalls or calculations of margin in the account of the 1^st defendant or Citimex from August to September 2007 and November 2007 to June 2008.

54.  According to the defendants, the plaintiff has disclosed 48 emails from Ellen to the credit department of the plaintiff, containing reports of the 2^nd defendant’s replies to certain matters raised by the plaintiff.  However, the plaintiff has not disclosed the emails from the credit department to Ellen.  Further, according to the telephone recording of 17 August 2007, Ellen told the 2^nd defendant that she had been informed by the plaintiff’s credit department that there was a shortfall of US$14,600,000 in the margin account of the 1^st defendant, and so the defendants want the plaintiff to disclose the specific instructions given by the credit department to Ellen relating to the shortfall in the margin account.

55.  I cannot understand how these instructions or emails are relevant to the issues in the case.  The only possible connection I can see is that these documents may shed some light on the question as to whether the plaintiff has mitigated its loss in unwinding the accumulator contracts.  However based on the materials before me at this stage, I cannot understand how these instructions may affect the duty of mitigation on the part of the plaintiff.

56.  In an application for specific discovery, the applicant would have to discharge the burden of showing the relevance of the documents requested.  Vague allegation that certain documents are relevant without demonstrating how these documents are relevant is simply not enough, and it is also wrong for the court to make speculation about the relevance of the documents.  As the defendants have failed to discharge such burden by the existing materials, and the request appears to me to be no more than a fishing expedition, I refuse the defendants’ request for the discovery of the Margin Emails.

OTHER CONSIDERATIONS

57.  In support of the request for discovery of the telephone recordings, Mr Li has also relied on the following arguments:

(i)  based on a circular issued by the Hong Kong Monetary Authority to the banks dated 5 November 2008 (“the HKMA Circular”), there is a duty on the banks to allow customers to have access to the telephone recordings;

(ii)  as the claim of the plaintiff is in excess of HK$180 million, it justifies the investment of resources to retrieve the audio recordings requested  by the defendants.

58.  In my judgment, these arguments cannot take the defendants’ case any further.  Assuming that a particular customer has been carrying on trading activities with a bank for 10 years, he or she cannot just go to the bank and ask for all the telephone recordings for the past 10 years. The bank simply does not have the resources to retrieve all the recordings, and I do not think that it was the intention of HKMA Circular to impose such onerous duty on the banks.  As I see it, there must be a particular purpose to support the request for the audio recordings, for example, to confirm whether the client had given a particular instruction to the bank relating to certain transaction.  General requests for telephone recordings should not be entertained.

59.  In most of the requests in the present case, the defendants are only making vague allegations without the support of detailed particulars.  The defendants are simply unable to tell the court what were said in the telephone conversations that can assist the defendants’ case.  Further, the requests are not relevant to the issues of the case as defined in the pleadings.  No matter how big is the size of the claim, such kind of fishing exercise should not be allowed.  In addition, even if the size of the claim justifies the investment of resources to retrieve the audio recordings, it may not justify the time that is needed for the process which “may extend to many thousands of hours”.

60.  Based on the aforesaid, I make an order in terms of paragraphs 1 and 2 of the discovery summons dated 10 February 2012, save that the documents covered by the discovery would be limited to the telephone recordings of March 2007 and from 19 to 31 December 2007.  Taking into account the time that may be needed to retrieve the audio recordings, the time stated in paragraph 1 of the summons would be extended to 35 days with liberty to apply.

61.  For the costs of the discovery summons, since the plaintiff succeeds in resisting most of the requests, I make an order nisi that the defendants do pay to the plaintiff 75% of the costs of the summons, which shall be made absolute 14 days after the date of the handing down of this Decision.

62.  The plaintiff has supplied the court with a list of proposed directions for the future conduct of the case.  These proposed directions may need to be revised in light of my decision on discovery.  I therefore direct the parties to submit the agreed proposed directions to the court for approval within 21 days.  In the case of any disagreement between the parties, they are directed to attend the listing officer within 28 days to fix a date for CMC before the court.