SIME INSURANCE BROKERS (HK) LTD v. YIP KWOK FAI AND OTHERS

HCA 3710/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3710 OF 2001

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(HCA 3710/2001 to be consolidated with HCA 3992/2001
and HCA 5370/2001 pursuant to the order made by Master C B Chan on 23 May 2003)

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D E C I S I O N

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Background

1. This is the 1st and 2nd Defendants' appeal against Master De Souza's order made on 5 June 2003 refusing their application for specific discovery pursuant to Order 24 rule 7 of the Rules of the High Court. At the material time, the 1st Defendant was employed by the Plaintiff as its marketing and servicing manager and deputy general manager. The 2nd Defendant was the wife of the 1st Defendant. Since 1 July 1993, she purportedly carried on a business of insurance consultants under the name of Associateship Insurance Consultants ("AIC"). The Plaintiff's case is that without the prior consent and knowledge of the Plaintiff as to the relationship between the 1st and 2nd Defendants, the 1st and 3rd Defendants procured the 2nd Defendant's consultancy business, AIC, to be appointed as the Plaintiff's sub-agent and earned commission. The Defendants' case is that their relationship was known to the Plaintiff, the appointment of AIC was open and was an inducement made by the Plaintiff's then managing director to entice the 1st Defendant to join the Plaintiff. The central issue of these proceedings are whether the relationship of the 1st and 2nd Defendants and the relationship of the 2nd Defendant and AIC were known to the Plaintiff when AIC was appointed as a sub-agent in or about late 1993.

2. The relevant legal principles relating to applications for specific discovery were succinctly set out by Cheung J, as he then was, in Lee Nui Foon v Ocean Park Corporation (No 1) [1995] 2 HKC 390 at 391 H to 392G. In particular, it is for the applicant to make out a prima facie case, inter alia, that (a) there is in existence a specific document or class of documents; that (b) the documents sought to be discovered relate to a matter in question in the action and that (c) discovery was necessary either for disposing fairly of the cause or matter or for saving costs.

"Class A Documents"

3. The documents sought to be discovered fall within three classes. The "Class A Documents" concern the Plaintiff's records relating to the approval of AIC's application for appointment in late 1993 and the subsequent appointments. According to the affirmations of Cheng Chun Hung, an ex-accountant of the Plaintiff, applications for appointment as sub-agents were submitted to the then Managing Director, Stanley Ko, for approval and would be kept in the canvasser box file. The 2nd Defendant has also made an affirmation to the like effect. This evidence is not contradicted by the Plaintiff. There is therefore a prima facie case that the documents exist.

4. Mr Yee submitted that these documents are relevant to show that the 2nd Defendant never hid herself behind AIC in her application to the Plaintiff and as such is relevant to the issue in dispute. Mr Lam argued that the issue is whether the 1st Defendant has procured the 2nd Defendant's appointment as a sub-agent of the Plaintiff under the name of AIC without the knowledge and consent of the Plaintiff. He sought to resist the discovery on the ground that a copy of the approval of the 2nd Defendant's appointment for 2001 had been disclosed by the Plaintiff and the Plaintiff's solicitors have informed the Defendants by letter that it was the only document of that class in the Plaintiff's possession. He also relied on the fact that the Defendants have disclosed a copy of the 2nd Defendant's application dated 12 December 1993.

5. According to the handwritten notes by Albert Tsang on the 2001 application, the 2nd Defendant's appointment had been approved in 1994 and a copy of the approval was kept in the canvasser file. This contradicts the Plaintiff's solicitors' letter that the Defendant's application for appointment for 2001 was the only document it has. If indeed that was the case, the Plaintiff should file an affirmation to that effect. For my part, the document is highly relevant. Inference may be drawn either way from the notes made on the document as well as from the information or lack of information provided by the 1st and 2nd Defendants on the application form. Certainly, the discovery is necessary for saving costs, at least, if not for disposing fairly of the cause or matter. I order discovery of the "Class A Documents".

"Class B Documents"

6. This class of documents concern the employer's returns of the remuneration and pensions in respect of the 1st Defendant throughout his entire employment with the Plaintiff. There is no doubt that these documents must have existed. The Plaintiff does not deny their existence and its possession of the same.

7. Mr Yee submitted that these documents show that the marital relationship of the 1st and 2nd Defendants was known to the Plaintiff and for that purpose their discovery is relevant. Mr Lam resisted the discovery on the basis that the fact that the Defendants' relationship as husband and wife being stated in the returns does not mean the arrangement in respect of AIC's appointment was made known to the Plaintiff. This is a matter of inference. However, the returns for the years ending 31 March 1996 to 31 March 2001 have been disclosed. These returns are more than enough for the Defendants' purpose. The discovery of earlier returns would have nothing to add to but costs. Accordingly, I refuse the discovery of the "Class B Documents".

"Class C Documents"

8. These documents concern the written documents submitted by the Plaintiff to the Inland Revenue Department regarding the commission earned by the 2nd Defendant through AIC since its appointment as sub-agent. These are ordinary tax documents which must have existed and must have been kept by the Plaintiff. The Plaintiff does not deny their existence and its possession of the same. There is a prima facie case of the existence of these documents.

9. Obviously, these documents relate to the quantum of the Plaintiff's claim for restitution and/or damages and the 2nd Defendant's counterclaim for outstanding commission. The actual amount of commission paid to the 2nd Defendant is in dispute and these documents could shed light on this factual dispute.

10. Mr Lam resisted the discovery on the ground that the documents in support of the Plaintiff's claim for the relevant period had been disclosed to the Defendants. He said that the truthfulness and accuracy of the Plaintiff's account record and payment vouchers are not challenged by the Defendants or at least the Defendants failed to deal with them in their witness statements and pleadings and did not even take the trouble to inspect them despite the invitation of the Plaintiff's solicitor on 10 January 2002. As such he submitted the discovery sought was a "fishing" exercise and ought to be refused. On the other hand, according to the Defendant's amended defence and counterclaim, the 2nd Defendant disputed the amount of commission payable. This is an issue in dispute for which the 2nd Defendant is entitled to test the Plaintiff's evidence against documents the Plaintiffs submitted to the Inland Revenue Department. Discovery of these documents is therefore necessary for disposing fairly of the matter. Accordingly, I order discovery of the "Class C Documents".

Conclusion

11. Accordingly, I order discovery of the "Class A Documents" and "Class C Documents". As neither parties has been wholly successful in the appeal, I consider it appropriate that costs of the appeal be in the cause.