FEMS INTERNATIONAL LTD. v. NATIONAL INSURANCE CO. LTD.

HCCL 99/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.99 OF1997

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J U D G M E N T

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The application

1. There is before the Court a summons dated 13 December 2002 issued by the plaintiff herein, Fems International Limited, which seeks an Order that the interrogatories without order filed and served by the defendant herein, National Insurance Co. Ltd, be withdrawn with costs to the plaintiff.

2. This is an action by Fems to recover from National, its insurer, the value of three cargoes of electronic goods which in September 1995 were shipped on board two vessels in Hong Kong for sea voyages from Hong Kong to Paraguay via Paranagua, Brazil.

3. These electronic goods had been sold by Fems to a buyer in Paraguay, one Dansun SRL, a company owned and operated by a Mr Medlej. This latter gentleman turned out to be a fraudster, because each of the three cargoes so shipped were wrongfully obtained by Mr Medlej by means of the presentation of counterfeit bills of lading following discharge in Paranagua in October 1995.

4. The three cargoes in question were insured under three individual policies of insurance issued by the defendant, which has declined indemnity thereunder. Hence this action.

5. Each of the policies were subject to the Institute Cargo Clauses (A), and were on identical terms. An endorsement for each policy was agreed on 29 November 1995, wherein the period of cover was extended. However the claim by the plaintiff herein is made with reference to the period covered by the original policies.

6. The defence herein was substantially amended in December 2000, such amendments being consequent, I am told, upon the filing in late November 2000 of the witness statement of the plaintiff's main witness, Mr Suresh, the Business Development Manager of Fems.

7. This case bears striking similarities to another case recently decided in the Commercial Court, Miruvor Ltd v. National Insurance Co. Ltd [2002] 3 HKC 531, a case in which the aforesaid Mr Medlej acted in a like manner in presenting false documentation in order to obtain the eight shipments of electrical goods there in question absent payment therefor. The decision in Miruvor currently is subject to appeal, the decision of the Court of Appeal in that case having been reserved.

The relevant principles

8. There is no dispute between the parties to this application as to the broad principles to be applied. It is accepted that the allowance or refusal of interrogatories is entirely a matter within the discretion of the court, and that interrogatories which relate to any matter in question between the parties are admissible providing that they are necessary either for disposing fairly of the cause or matter or for saving costs: see Hong Kong Civil Procedure 2002, Order 26 rule 1, and also Lee Nui Foon v. Ocean Park Corp (No 2) [1995] 2 HKC 395, a decision of Cheung J (as he then was) wherein the learned judge set out the principles applicable for the grant of interrogatories.

9. In addition to these authorities I also take this opportunity to refer to a decision of Colman J in the English Commercial Court in Det Danske Hedeselskabet v. KDM International PLC [1994] 2 Lloyd's Rep 534 (which was not referred to in argument) wherein the learned judge outlined the approach of the Commercial Court towards interrogatories. After referring to the relevant commentary in the Guide to Commercial Court Practice the tenor of which was that despite the then-recent rule change permitting service of interrogatories without prior order the more restrictive approach of the Commercial Court was likely to remain in place Colman J noted the following "very specific yardsticks" which should be borne in mind :

"First, unless the answers are essential for the preparation of the requesting party's case for trial and cannot reasonably be expected to emerge from requests for further and better particulars and further discovery or witness statements, interrogatories will not normally be ordered. For this reason the service of interrogatories before witness statements have been exchanged will almost always be premature.

Secondly, information which is relevant to matters in issue only in the sense that it may lead to further inquiry or that questions about it could be asked in cross-examination at the trial will not be essential information for the purposes of the first consideration.

Thirdly, requests for information which, although it may be relevant to matters in issue, can be provided only by means of detailed research or investigation which the party interrogated would not otherwise carry out for the purpose of preparing for trial will hardly ever qualify as being necessary either for disposing fairly of the cause or matter or for saving costs.

Fourthly, hypothetical questions should not normally be asked.

Fifthly, requests for information ascertainable by cross-examination at the trial are inappropriate unless the party questioning can establish that it is essential for the proper preparation of his case that such information is made available to him before trial, in the sense that if the matter is left until cross-examination at the trial that party will, or probably will be irremediably prejudiced in his conduct of the trial or the trial may be unduly interrupted or otherwise disorganized by the late emergence of the information."

10. I agree with and adopt these observations which, with respect, continue to make eminent good sense in the context of commercial court practice.

The interrogatories

11. The 35 interrogatories sought to be administered in this case are, in effect, in five distinct tranches. I deal with them as follows.

Interrogatories 1-3

12. These three questions deal with Fems' introduction to Dansun/Medlej, and request details of whom made the introduction, and also of investigations made by Fems with regard to Dansun.

13. I do not accept that these interrogatories are valid or that they should be permitted. Mr Suresh's witness statement is unequivocal as to the circumstances of the first contact he says that Mr Medlej introduced himself to Fems in July 1995 and I further accept the submission on the part of the plaintiff that interrogatories are not generally permitted where the object is to obtain an admission of fact which can be proved by a witness who will (as is clearly here the case) be called at trial, and that therefore the interrogatories will not save but add to costs.

14. Moreover, this is a case wherein payment (which of course did not take place due to the fraud) was to be on D/P terms, that is, a transaction anticipating payment against documents. I currently fail to see the necessity for the type of inquiries now sought to be pursued, notwithstanding Mr Gobindpuri's argument, with which I have not been persuaded, that these matters go to issues of non-disclosure and misrepresentation. The witness statement is clear, and Mr Suresh can be cross-examined on the point. I note further that the defendant has felt able to plead (at paragraph 11(2)) that the representations made with regard to "their buyers" were "false", and further to plead the failure to "carry out any or any adequate investigations" of Dansun (paragraph 11(2)(ii)(a)), averments which presumably emanate from an existing factual basis.

15. I order that these interrogatories be withdrawn.

Interrogatories 4-12

16. This block of interrogatories focuses upon what has been termed the "10% deposit" issue, namely that there remains a question about whether the three shipments the subject of the three policies and thus of this claim had attracted the necessary 10% deposit under the relevant contract of sale.

17. It is not easy to grasp why this element of the case is thought to be "puzzling", as Mr Gobindpuri submits in his skeleton argument. The defendant pleads that Dansun "failed to pay the plaintiffs the contractual deposit or any part thereof" (paragraph11(2)(f)), whilst the plaintiff's case is to the contrary. Whilst the deposit issue is not canvassed in Mr Suresh's witness statement, in his affidavit sworn in support of this application Mr Roberts, the solicitor handling this litigation on behalf of the plaintiff, unequivocally deposes to the fact that "it is the plaintiff's case that the 10% deposit was paid by Dansun in connection with the three sale and purchase agreements", noting that such payment is evidenced in discovery by a Remittance Advice of the Hong Kong Bank dated 2 August 1995, and further observing that such is consistent with payment on a D/P basis and where the total deposit received by the seller is often held on a 'roll-over' basis to cater for the deposit for subsequent shipments.

18. The documents disclosed (which respectively bear the handwritten annotation of '88' and '89') are consistent with the plaintiff's case in this regard, and the defendant is in no doubt as to the case it has to meet. I accept the submission that such information as is presently to hand is sufficient for the purpose of the fair disposal of this issue at trial.

19. As to Mr Gobindpuri's argument that if indeed the deposit has been paid, as is alleged, the plaintiff ought to give credit for the amount of the deposit against the amount of the claim, I agree. No doubt such will be the case, and it seems to me that this simply is a matter of housekeeping. His further argument that knowing pursuit of a claim for the full value is fraudulent and may cause the whole claim to be forfeited strikes me as an optimistic scraping of the barrel.

20. The position has been made eminently clear on behalf of the plaintiff, and no doubt formal clarification of the quantum of this claim will be forthcoming in due course. In the meantime I am not minded to grant these interrogatories, which in my view are unjustified and must be withdrawn.

Interrogatories 13-14

21. These two interrogatories deal with arrangements for discharge and storage at Paranagua of the three shipments of goods the subject of these policies, and arrangements for their onward carriage from Paranagua to Ciudad del Este.

22. Mr Gobindpuri says that these questions go to the primary issue of duration of the insurance cover pursuant to clause 8.1 of the ICC(A) the triple considerations under this head being the sub-issues of 'ordinary course of transit', 'final warehouse' and 'election' and that his client is in the position of wishing to run a termination argument without knowing in fact what happened.

23. To this Mr Clark responded that the witness statement of Mr Suresh already sufficiently canvasses this issue (at paragraph 15 thereof), that he can be cross-examined on the point, and that the information already in the defendant's possession is sufficient for the purpose of the fair disposal of this issue.

24. I agree. I accept that the particular legal issues isolated under this head by Mr Gobindpuri are currently the subject of appellate consideration in Miruvor, op.cit., but I do not consider that this fact should delay my conclusion in terms of this aspect of this application.

25. I take the view that these interrogatories similarly are not justified in terms of the considerations alluded to earlier in this judgment, and that they are not essential for the proper preparation of the defendant's case. This information is within the knowledge of the plaintiff's witnesses, who no doubt will be pressed in cross-examination upon these aspects, and no irremediable prejudice has been made out if these interrogatories remain unanswered.

26. It follows that this category of interrogatories also are to be withdrawn.

Interrogatories 15-29

27. This category of questions covers matters relating to the four separate shipments of electronic goods which were also sold by Fems to Dansun and which were not stolen and ultimately recovered from Paranagua. No claim is made for, and there is no pleaded issue in relation to, these other four shipments.

28. Mr Gobindpuri submitted that absent information regarding contemporaneous shipments to the same buyer that there is a danger that the Court will be deciding this case in a vacuum or worse, misled. He suggested that the arrangements in place for these other shipments will cast light on the arrangements for the subject shipments, and as to the plaintiff's 'mindset' in terms of how the plaintiff treated the warehouse in Paranagua which matters will go to the defendant's argument pursuant to clause 8.1 ICC(A) as to duration/termination of the insurance in question.

29. For his part Mr Clark castigated this tranche of requests as nothing more than a blatant 'fishing' expedition. There was no difference, he submitted, between the three shipments which were stolen and the four that were not, given the same buyer and the same mode of delivery, whilst whether the 10% advance payment was made with regard to these other four shipments was nothing to the point - any non-disclosure argument relating to individual policies was relevant to that specific policy itself and to nothing else. As to 'mindset', he submitted that such was the same in terms of the three that were stolen as for the four that were rescued, and he pointed out that it was accepted on behalf of the defendant that these matters were not canvassed in the existing pleadings. I note also that Mr Suresh makes reference in his witness statement to the recovery of these other four shipments, and that certain documents already have been disclosed regarding such recovery.

30. Whilst I appreciate that there may be aspects of these particular requests which have been drafted with an eye upon certain of the arguments canvassed within the Miruvor op.cit. appeal, absent any contrary ruling from the appellate court (and there is none to-date) I intend to proceed on the basis of the legal analysis set out by this court in Miruvor, for example as to arguments regarding election and the ordinary course of transit. And given that no distinguishing features have been asserted to exist between the three purloined shipments and the other four, for which of course no claim is made, I can discern no necessity for these interrogatories either. They seem to me to fall within none of the established guidelines to which earlier I have adverted, and I do not accept that they are necessary for the fair disposal of this particular cause or for saving costs.

31. Accordingly, these interrogatories are also to be withdrawn.

Interrogatories 30-35

32. These interrogatories seek information as to the steps taken in Brazil by the plaintiff regarding the theft and whether legal proceedings had been commenced in Brazil against customs clearance agents responsible for clearing the stolen shipments.

33. These questions are said by the defendant to go to the issues of whether the assured took reasonable steps to minimize its loss pursuant to clause 16 ICC(A), and also the knowledge the plaintiff had prior to requesting an extension to the policies by means of an endorsement dated 29 November 1995.

34. To this Mr Clark submitted that the losses with respect to which this claim is made took place within the life of the three policies as originally issued, and that there is no question of a claim within the extended period of these policies; in this connection he disputed Mr Gobindpuri's assertion that non-disclosure allegations referable purely to the endorsements retroactively suffused the policy as a whole.

35. Be that as it may. Even on the basis that such was arguable, Mr Clark pointed out that there was no doubt on the existing material as to what the plaintiff in fact did, pointing to the witness statement of Mr Suresh as to what he did when he went to Ciudad del Este, and his explanations of what he found at the time of his visit, matters upon which he was able to be cross-examined.

36. I agree. In my view there is sufficient material already available to the defendant, and once again I fail to see that these interrogatories are necessary for the fair disposal of this action or for saving costs. In my view this request, also, must be withdrawn.

Order

37. There is to be an order in terms of the plaintiff's summons dated 13 December 2002, with the addition of the words "to be taxed if not agreed" in terms of the costs of this application.

Postscript

38. This action has been in existence since the issuance of proceedings on 11 June 1997, not far short of 6 years ago. Whilst I appreciate that the appeal in Miruvor, op.cit., may have some bearing upon the actions of the parties, in my view it is now time to push this litigation to trial. Given the history of this case, I perceive neither reason nor justification for any further delay in resolving this dispute.