TENWOW INTERNATIONAL HOLDINGS LTD (IN LIQUIDATION) AND ANOTHER v. PRICEWATERHOUSECOOPERS (A FIRM) AND ANOTHER

CACV 522/2024, [2025] HKCA 296

On Appeal From [2024] HKCFI 1146

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 522 OF 2024

(ON APPEAL FROM HCCL 5 OF 2023 & HCCL 6 OF 2023 (Consolidated))

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J U D G M E N T

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Hon G Lam JA (giving the Judgment of the Court):

1.  In our judgment handed down on 23 December 2024 (“Judgment”),[1] we allowed the 2^nd defendant’s appeal from the decision of the judge below dated 2 May 2024,[2] and made an order, inter alia, for a letter of request to be issued to the Shanghai High People’s Court. The letter of request was applied for by the 2^nd defendant on the basis that its own working papers relating to the audit of the plaintiffs are located in Shanghai and that their production to the plaintiffs in Hong Kong pursuant to the 2^nd defendant’s discovery obligations in the ongoing action here is prohibited by Mainland laws except with the approval of the relevant authorities in the Mainland. The letter of request was sought under the Arrangement on Mutual Taking of Evidence in Civil and Commercial Matters between the Courts of the Mainland and the Hong Kong Special Administrative Region[3] (“Mutual Arrangement”) signed between the Supreme People’s Court and the Hong Kong SAR.

2.  By Notice of Motion, the plaintiffs now seek leave from this court to appeal to the Court of Final Appeal, on the ground that the appeal would raise issues of great general or public importance or issues which otherwise ought to be the subject of determination by the Court of Final Appeal. Two questions are set out in the Notice of Motion, as follows:

Question 1:

Does the Hong Kong Court’s jurisdiction to issue a letter of request extend to securing the production of documents which a party to litigation in Hong Kong is under an existing obligation to produce as part of general discovery, regardless of whether or not such documents are material to an issue at trial and admissible in evidence at trial?

Question 2:

Does a request for a Mainland Court to facilitate regulatory approval for production of documents in Hong Kong proceedings as part of general discovery fall within the scope of Article 6 of the Arrangement on Mutual Taking of Evidence in Civil and Commercial Matters between the Courts of the Mainland and the Hong Kong Special Administrative Region?

3.  We note that the matter in question is an interlocutory decision and that interlocutory appeals on procedural issues such as discovery are rare and exceptional: CSAV Group (Hong Kong) Ltd v Jamshed Safdar (2007) 10 HKCFAR 629. In the present case, however, as recognised in the Judgment at §37, the letter of request sought was “not a typical one”. The dispute is not on the usual principles of discovery or their application. Rather, this is the first contested case involving the issuance of a letter of request to aid in the discovery and production in Hong Kong of audit working papers located in the Mainland, the previous two similar cases being unopposed applications: see Judgment at §§57 & 95. As discussed in the Judgment at §§47-55, there are relevant decisions in other jurisdictions, notably the UK and the US. The 2^nd defendant drew support for its contention from the US decision of Société Nationale Industrielle Aérospatiale v United States District Court for the Southern District of Iowa 482 US 519 (1987), whereas the plaintiffs relied on the UK authorities, which this court distinguished. The questions proposed raise issues of principle concerning the use of the letter of request procedure in the present context, and may well have relevance to future Hong Kong cases, in particular auditors’ negligence suits, involving the need to inspect or produce restricted documents located in the Mainland. It should also be recalled that in asking this court for leave to appeal from the judge, the 2^nd defendant itself submitted that “this case raises an important question of law and of immense importance to firms involved in the audit of Mainland listed businesses.”[4]

4.  Opposing the present application, the 2^nd defendant submits that the proposed appeal is academic because the process for issuing the letter of request has been set in motion. A revised draft letter of request was submitted to the Registrar of the High Court on 14 February 2025 (and, we are prepared to infer, may well have been issued to the Shanghai court by now). Once the letter of request is issued, whether the request will be granted is a matter for the Mainland court, over which the Hong Kong courts have no control. It appears that the plaintiffs will press ahead with the trial scheduled in March 2026 regardless of the outcome of the proposed appeal. Seeking to present this proposed appeal as an opportunity for the Court of Final Appeal to provide guidance for future cases is not a legitimate reason for seeking leave to appeal to that court.

5.  We do not accept this argument. As submitted on behalf of the plaintiffs, the proposed appeal will have an impact on how and when the 2^nd defendant discharges its discovery obligation in the Action below. If the appeal is determined before the documents in question have been produced pursuant to the letter of request procedure, and the Court of Final Appeal finds that a letter of request should not be issued and reinstates the order of the judge below, the 2^nd defendant will simply be required to produce the documents in question to the plaintiffs in Hong Kong, and the parties will notify the Mainland court or authorities that the letter of request does not need to be further processed. Even if the letter of request has been processed and led to the production of the documents covered by the letter before the Court of Final Appeal hears the case or gives its decision, the appeal will not be rendered academic because discovery is a continuing obligation and in fact the 2^nd defendant has served two supplemental lists of documents the production of which, albeit not directly the subject matter of the judge’s or this court’s decision, is likely to be governed by the decision of the Court of Final Appeal.

6.  Turning to the proposed Question 1, we consider that as formulated by the plaintiffs, it is too broadly framed, and fails to identify the important context, namely, that the documents have been enumerated with particularity, they are in the possession of the party in question, they have not been produced by that party because of prohibition by the law of the place where they are located, and the letter of request is sought for the purposes of overcoming the legal impediment in that jurisdiction. To put the question in its proper context, it should be amended as follows:

Does the Hong Kong Court’s jurisdiction to issue a letter of request extend to securing the production by a party to litigation in Hong Kong of documents which (a) are in the possession of that party, (b) have been enumerated in that party’s list of documents, (c) that party is under an existing obligation to produce as part of general discovery, but (d) are prohibited from such production without the requisite approval under the law of the place where the documents are located, regardless of whether or not such documents are material to an issue at trial and admissible in evidence at trial?

7.  The 2^nd defendant submits that Question 1 raises a new point not argued before. It is said that materiality and admissibility are concepts not raised before the judge or this court, where the primary focus was on whether letters of request may be issued to assist in the production of documents by a party and that it was not argued that a letter of request should not be issued because the documents in question may or may not be material to the issues at trial or admissible in evidence.

8.  In our view, the objection has arisen in part because of the overly broad way in which Question 1 was formulated by the plaintiffs. Once reformulated, it can be seen more clearly that the question is not a new point. The plaintiffs have argued before the judge and this court that the jurisdiction to issue a letter of request is for securing evidence as opposed to disclosure (in the sense of discovery) of documents. In granting the 2^nd defendant’s application for a letter of request, this court has never said that letters of request may generally be used for discovery. Rather, this court said that, in the context under discussion, the fact that the documents may not necessarily become evidence in the Action is not a categorical bar to the issue of a letter of request for the kind of purpose contemplated: see §46 of the Judgment. It may be fair to say that the plaintiffs now wish to place more emphasis on the concepts of materiality and admissibility, but we do not think it right to characterise it as an entirely new point.

9.  Question 2 concerns the interpretation of Article 6 of the Mutual Arrangement. This case appears to be the first contested case that considers its applicability in relation to overcoming a legal impediment arising from Mainland laws to the production in Hong Kong of a party’s own documents situated in the Mainland. Given the prevalence of cross-border arrangements for auditing Hong Kong listed companies with Mainland businesses, and that similar disputes may recur in relation to discovery of documents if litigation arises from such audits, it seems to us that this question may have significance well beyond the present case.

10.  On behalf of the 2^nd defendant it is submitted that Article 6 is only relevant to whether there is a basis for believing that the letter of request, if issued, would be executed by the Mainland recipient, and that this is therefore an issue of Mainland law. It is said that the Shanghai High People’s Court, as the recipient of the letter of request, is in a far better position to interpret Article 6 when it decides whether to process the letter of request. It is further said that the test of the pudding is in the eating, in that if the Shanghai court accedes to the request, it shows that it accepts that the letter of request comes within the Mutual Arrangement, and vice versa.

11.  We do not accept this argument. It is for a party seeking a letter of request from the Hong Kong court to show that it falls within the Mutual Arrangement and, if there is a dispute, it is for the Hong Kong court to construe the Mutual Arrangement and decide whether the letter of request applied for falls within its scope. In our opinion, the Hong Kong court should not abdicate this responsibility and take an approach whereby it would simply issue the letter of request irrespective of that dispute and without coming to a view on the question, and wait and see whether it is eventually acceded to by the relevant Mainland court. There is of course a possibility in any given case that the requesting court and the recipient court may come to different views as to whether the request falls within the Mutual Arrangement. This does not mean the requesting court should not form its own view at all. As far as a Hong Kong requesting court is concerned, it ought to grapple with the question and provide reasons for its view. Article 3 of the Mutual Arrangement provides that if the requested party considers that the requested matter does not fall within the scope of assistance is provided in the Mutual Arrangement, it may return the letter of request and specify the reasons therefor. This will enhance mutual understanding which is important for the proper functioning and potential improvement of the Mutual Arrangement such as through Article 11, which provides that any problem arising from the implementation of the Mutual Arrangement or any amendment to be made to it should be resolved through consultation between the Supreme People’s Court and the HKSAR Government.

12.  For the above reasons, we give leave to the plaintiffs to appeal from our Judgment to the Court of Final Appeal on the basis of Question 1 as reformulated above and Question 2. The costs of this application will be in the cause of the appeal.