XCHRX EKPAC CHINA LTD. AND OTHERS v. NEWMAN LIU CHI MAN AND OTHERS

HCA 1984/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1984 OF 1995

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(Consolidated by order of Master O'Donnell dated 5 September 1995)

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REASONS FOR DECISION

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1. This is an appeal by the Defendants against the decision of acting master Muttrie ordering the interrogatories served on the 3rd Plaintiff by the Defendants be withdrawn. The Defendants contend that the 3rd Plaintiff should answer such interrogatories. Hence the present appeal.

2. The 3rd Plaintiff's claim against the Defendants is for breach of contract, breach of fiduciary duties and conspiracy to divert business from the Plaintiffs to the Defendants.

3. The 3rd Plaintiff claims to be entitled to profit derived from certain distributorship agreements between Kone Corporation and Svetruck A.B. and associated companies of the 3rd Plaintiff.

4. The 1st and 2nd Defendants are the ex-employees and officers of the 3rd Plaintiff.

5. It is the 3rd Plaintiff's allegation that the 1st and 2nd Defendants, having left the 3rd Plaintiff, formed and/or are in control of other companies to persuade Kone Corporation and Svetruck A.B. to terminate their agreements with the Plaintiff companies and then transfer the business to the Defendant companies.

6. The Plaintiffs allege that the 1st and 2nd Defendants persuaded or tried to persuade the Plaintiffs' employees to join the Defendant companies.

7. The Plaintiff also allege that the Defendants had obtained secret commission from crane installation sub-contractors known as Dalian Crane totalling just over US$300,000.00 in respect of 3 installation projects at Mawan, Ningbo and Shekou.

8. The Defendants' interrogatories served on the Plaintiff related to commission of US$12,500.00 allegedly paid to one, Mr. Eero Keihari, the marketing manager of Kone Crane VLC in connection with works carried out for China National Technical BJG. There was also a reference to a commission paid to a 3rd party whom the Defendants suspected also to be Mr. Eero Keihari as the document indicated that it was commission paid to EK in respect of the Mawan project.

9. The Defendants want response from the Plaintiff if such commission was paid, if so, the purpose and the basis for which the commission was paid. The Defendants also want to know who approved such payments and if Mr. Eero Keihari had been authorised by Kone to receive the payments.

10. One of the matters raised in the defence is that Kone Corporation terminated its agreement with the Plaintiff companies because they had paid secret commission to Mr. Eero Keihari in order to obtain business benefit and advantage.

11. It is suggested by the Defendants that one of the key issues involved in this case is what was the cause of the termination of the Kone agreement and the interrogatories in question would be relevant to such issue.

12. Interrogatories of course are admissible if they are necessary for disposing fairly of the cause or matters or for saving costs.

13. The interrogatories served by the Defendant, in my view, are clearly relevant to some of the issues involved in this particular case, namely the reason for Kone to terminate its contract with the Plaintiff companies. This allegation, if established, would of course assist the Defendants' case.

14. I do not agree with Mr. Carolan's suggestion that the issue only related to quantum of damages.

15. What was the reason for Kone to terminate the agreement with the Plaintiffs is of course a matter to be resolved at the trial by the trial judge. Kone's termination of the contract may be with the result of the reasons put forward by the Plaintiffs, namely breach of contract and/or fiduciary duties of the Defendants. It may be due to the reasons put forward by the Defendants, namely misconduct on the part of the Plaintiffs or a combination of the two or some other matters.

16. As I indicated, in the course of counsel's argument that at these matters clearly can only be properly resolved at the trial.

17. But the issues raised by the Defendants' interrogatories are clearly, in my view, relevant even at this stage.

18. Those issues had been fairly and squarely raised in the pleadings and in my view, witnesses for both parties must deal with those matters in their statements. I think there is a legitimate expectation that the witnesses must cover this aspect in their statements.

19. I am given to understand that the Plaintiffs had already filed their witness statements but had not served them as the Defendants' witness statements are not yet ready.

20. On this aspect, the only comment I would make is that if the Plaintiffs' witnesses had not dealt with the questions of commission allegedly paid to Mr. Eero Keihari, consideration should be given to the filing of additional or supplemental witness statements, so that those aspects can be covered as well.

21. I have considered counsel's submission. In my view, the issues raised by the interrogatories may be more conveniently dealt with in witness statements and such approach is also fairer for both parties.

22. As Mr. Carolan observes, the payment of commission may be neither here nor there unless there is positive evidence to suggest that the termination of the Kone agreement was the result of the payment of such commission.

23. I am persuaded in this particular case, the serving of interrogatories by the Defendants would not be saving costs but increasing it.

24. As I had observed earlier it is fairer to both sides that the matters in issue should be dealt with after the exchange of the witness statements.

25. On the appeal before me and in the exercise of my discretion, the order I propose to make is that the interrogatories served by the Defendants on the 3rd Plaintiff are to be dealt with after the exchange of the witness statements. In that regard, I grant the parties liberty to apply, if necessary. The order of acting master Muttrie is varied to the extent aforesaid.