SILVER STONE DEVELOPMENT LTD AND ANOTHER v. LAU KWONG CHING, JAMES AND OTHERS

HCA2206/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

IN THE COURT OF FIRST INSTANCE

ACTION NO. 2206 OF 2000

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R U L I N G

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Introduction

1.  On the hearing of the pre-trial review on 26 January 2006, I was told by counsel then representing the plaintiffs that the matter was ready for trial and that the pleadings and discovery required no further attention and that there were no outstanding interlocutory matters to attend to. 

2.  Subsequent to that hearing Mr Barlow was briefed to appear for the plaintiffs on the trial, he being the third counsel instructed by the plaintiffs’ solicitors.  Having considered the papers in readiness for the trial, he has decided that further specific discovery needs to be made by the 3rd defendant, that an application should be made for the plaintiffs to be released from a presumed admission of an important document and that the amended-statement of claim should be re-amended.

3.  This has translated itself into three summonses which have occupied the first two days of this 12-day trial.  I am now required to give a ruling on these applications.  As must be obvious, this is an unhappy state of affairs which should never have been allowed to happen.  I have not inquired how this has come about but it seems plain that some blame must attach to those previously instructed on behalf of the plaintiffs.

The Summonses

4.  The applications really divide themselves into two.  I propose to take the application for specific production first.  The summonses relating to the presumed admission, as a result of the effect of Order 27 rule 4, and for the re-amendment to the statement of claim essentially go together.  Given the lateness of these summonses and their importance the defendants have, unsurprisingly, resisted them on their merits but they have additionally submitted that in the event of my making the orders asked for, the trial should be adjourned to allow them to respond in terms of giving them time to file consequential amended pleadings and to consider what further, if any, evidence should be called.  Mr Barlow is anxious that these trial dates should be held given the fact that the action is very stale; the writ was issued six years ago and there is bound to be a substantial delay before new trial dates can be allocated.  He starts, therefore, from the very difficult position of making these applications at the latest possible moment and says that no adjournment should be given to the defendants because, he submits, none is necessary. 

5.  He goes further and says that if I am minded to grant his applications, but only on the terms of an adjournment, then he will abandon the applications.  My approach therefore must be that I will only make the orders sought, which I will, of course, consider separately, if I also consider that no injustice will be done to the defendants by my refusing them an adjournment. 

Order 27 rules 7 and 12

6.  I now turn to the Production Summons under Order 24 rules 7 and 12, at pages 1 to 3 of bundle A3.  This is what is asked:

“1.  The 3rd defendant, through a responsible director, make an affidavit or affirmation stating whether it has now or has ever had in its custody, power or possession any documents relating to the investigation by the Securities and Futures Commission between November 1999 and July 2001: (a) the conduct of the 3rd defendant; (b) falls away so I do not have to deal with that; (c) of the conduct of the 3rd defendant’s former director and SFC registered dealer, Ho Yuen Wa, Ida.  In relation to the 3rd defendant’s execution or performance of the transactions pleaded in paragraph 5 of the amended statement of claim herein at paragraphs 5 and 6 of the 3rd defendant’s amended defence;

2.  The 3rd defendant be ordered to produce to the court and to the plaintiffs’ solicitors copies of all such documents.” 

7.  The background to this is that the SFC investigated the conduct of Miss Ho in relation to her part in the disposal of the shares which are the subject of this action.  The plaintiffs had pressed for disclosure of documents relating to this investigation.  The 3rd defendant resisted on the basis of lack of relevance and, additionally, having regard to secrecy provisions contained in section 59 of the repealed Securities and Futures Commission Ordinance, Cap.24. There is no doubt that these documents exist and are in the possession of Miss Ho, who will be giving evidence on behalf of the 3rd defendant, and also in the possession of the 3rd defendant itself.

8.  Dissatisfied with that refusal the plaintiffs applied to Master Kwan for an order to compel production.  This was heard on 28 June 2004 and dismissed.  The master held that the application failed to pass muster on the basis of relevance or, rather, the lack of it.  The plaintiffs did not appeal against that refusal and the matter has been allowed to remain as it is until now.  This gives rise to two very interesting points. 

Should there have been an appeal?

9.  Firstly, Mr Yeung, who appears for the 3rd defendant, says that the application is abusive of the court’s process.  What should have happened is that the plaintiffs should have appealed.  By coming again now is to ignore the clear procedures of the court where interlocutory applications of this sort should be dealt with within the well-established rules for the determination of these sorts of issues, which would be by appeal from the master’s refusal, potentially, I suppose, all the way to the Court of Final Appeal, and, in any event, well before the trial.  Mr Barlow says that Order 24 rule 12 entitles him to make the application.  It is in these terms:

“At any stage of the proceedings in any cause or matter the court may, subject to rule 13(1), order any party to produce to the court any document in his possession, custody or power relating to any matter in question in the cause or matter, the court may deal with the document, when produced, in such manner as it thinks fit.” 

Rule 13(1) says this:

“no order for the production of any documents for inspection, or to the court, or for the supply of a copy of any document shall be made under any of the foregoing rules unless the court is of the opinion that the matter is necessary, either for disposing fairly of the cause or matter or for saving costs.”

10.  It seems to me that this power is very wide and I am able to exercise it if, in all the circumstances, I consider that to be the right course.  I have a discretion as to whether I do so but it seems to me that I must bear in mind a number of factors, including the fact that a previous unsuccessful application has been made from which there has been no appeal. This is a weighty consideration but it is not a conclusive one.  Had there, for instance, been an appeal to a High Court judge which had been dismissed, then I would have felt much more inhibited about exercising the discretion.  A fortiori, had there also been a further appeal to the Court of Appeal from the judge.  As a matter of principle, therefore, I consider that I am able to exercise the jurisdiction.  From that I now turn to the merits.

The Merits

11.  Despite Mr Yeung’s submissions to the contrary, I am in no doubt that the subject matter of the SFC’s investigation of Miss Ho’s conduct is entirely relevant to the issues raised in the pleadings about the way in which Miss Ho allowed the shares to be transferred to Asia Glory Limited, the 6th defendant.  Her conduct, for which she was reprimanded, will have to be considered by me.  The fact that it has fallen below her profession’s “best practice” rules, to put it neutrally, is clearly material.  Mr Barlow, therefore, is able to pass the initial and crucial test of relevance as well as showing that this is necessary for “disposing fairly of the cause or matter” as required by Rule 13(1).

The Secrecy Provisions

12.  The next matter, which is equally important, is whether Miss Ho, by producing the documents, will fall foul of the secrecy provisions, to which I have already referred, and thereby expose herself to criminal sanctions.  Mr Yeung, in an ingenious submission, says that despite the repeal of the old Securities and Futures Commission Ordinance, its section 59 continues to apply to this case.  I do not think that this argument can survive the analysis to which it has been subjected by Mr Barlow.  He has amply demonstrated that s.378 of the new ordinance replaced s.59, which section was not the subject of any of the transitional provisions in the 10th schedule of the new ordinance (Cap.571).  Under this new regime disclosure in proceedings such as these is specifically exempted from the new ordinance’s secrecy provisions.  Miss Ho would not therefore be liable to any sanction by the production of these documents.

Prejudice caused by lateness

13.  Lastly, I must address the prejudice argument caused by the very late application.  Whilst there may be substantive prejudice in the sense of material being admitted in evidence, which would show Miss Ho and the 3rd defendant in an unfavourable light, that would be something that they would have to live with, as all litigants have to when faced with evidence that is unhelpful to their case.  The question is whether without an adjournment they would face procedural prejudice by not being able to prepare for this now new evidence.

14.  For my part I cannot see how the 3rd defendant can complain of this; they are all too familiar with this material.  As to the other defendants, whilst this may well impact on their cases, and particularly in the case of Mr Kwok, the 2nd defendant, I would have thought that there will be sufficient time before Miss Ho comes to give evidence for them to prepare for it.  At the end of the day this is a balancing exercise.  I have highly relevant evidence which will come in late.  Nevertheless I am satisfied that there will be sufficient time for the defendants to prepare themselves to meet it.  Accordingly, Mr Barlow will have his orders under this summons.  I will deal with costs at the end.

The time summons

15.  Next I turn to the time summons, bundle A3, pages 124 and 125.  Again this is all very late.  This relates to a second power of attorney which was disclosed by the 3rd defendant in its list on 18 April 2001.  Under Order 27 rule 4 the plaintiffs had 21 days to challenge the authenticity of the document.  This was overlooked.  As matters presently stand, unless they get the order asked for to serve their notice out of time they cannot do so.  It seems to me that this power of attorney is one of the really crucial documents in the case.  It was purportedly signed by Mr Lau, the 1st defendant.  It is said to follow on from an earlier power of attorney which is also under challenge in a variety of ways. 

16.  As long ago as November 2001, when Deputy High Court Judge To dismissed the 3rd defendant’s appeal from a refusal to have the action against it struck out, it was known that this power of attorney was said by the plaintiffs to be bogus.  Although perhaps that stance was then only communicated to the 3rd defendant, the other defendants not being involved in that proceeding, it strikes me that the failure to challenge authenticity within the Rule in timely fashion was a very grievous oversight by those then representing the plaintiffs.  This is one of the documents that will go to the heart of this dispute. 

17.  To refuse the plaintiffs an opportunity to challenge this document’s provenance and authenticity would produce a very lop-sided trial with vital evidence in terms of the challenge to the document being excluded.  I have no doubt that I should make the order, all other things being equal.  The real question is whether justice requires me to do so on terms of an adjournment, which would mean Mr Barlow abandoning the application.  Of course where this is being made so late, the plaintiffs can hardly complain if I were to grant the order on terms of an adjournment and they would then have to look to those responsible for the oversight if they were to lose the action and could show that the challenge to the power of attorney would have materially affected the result.

18.  Having considered everything that Mr Yeung and Mr Szeto have said, and what Mr Lau and Mr Joseph Szeto, the 5th defendant, have also observed, I am satisfied that a challenge to this document at this very late stage would not cause any forensic prejudice.  They do not need an adjournment of the trial, although I will be accommodating to them during the trial if any matters arise which need some sort of short delay.  This time summons therefore succeeds.

The Amendment Summons

19.  Lastly, I come to the amendment summons.  Mr Barlow says that provided I give him his order on the time summons he does not need to re-amend by means of the proposed paragraph 17E.  The other amendments, he says, are in to “tidy up” the pleading, as he describes it.  That tidying-up should have been done long ago.  He will have to live with the pleading as it presently stands.  He has provided voluntary particulars of the amended-statement of claim for which Mr Yeung and Mr Szeto appear to be grateful.  The matter will therefore be conducted on the pleadings as they presently stand and this summons must therefore stand dismissed.

Costs

20.  Whilst it is not an immutable rule that he who is late pays, I think this is what should happen in this case.  The d

efendants behaved perfectly reasonably in resisting the matter where all these summonses have been brought so late.  So that is the order that I shall make.