EVERGREEN INTERNATIONAL STORAGE & TRANSPORTATION CORP. v. THE HONG KONG AND SHANGHAI BANKING CORPORATION LTD AND ANOTHER

HCMP1619/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1619 OF 2007

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J U D G M E N T

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1. Before the court is an application by Evergreen International Storage & Transportation Corp. (“Evergreen”) against HBZ Finance Limited (“HBZ”) for Norwich Pharmacal discovery, named after Norwich Pharmacal Co v. Customs and Excise Commissioners [1974] AC 133 (HL).

Background

2. Evergreen’s claims in these proceedings arose out of the business of Uniglory Marine Corporation (“Uniglory”) whose rights and liabilities Evergreen has assumed in a corporate merger in 2002.

3. Uniglory was the carrier of certain university uniforms (“the Uniforms”) from Shanghai, PRC to Um Qaser, Iraq under 52 bills of lading, variously dated between October and December 2000 (“the Uniglory B/Ls”).

4. The Uniforms were sold and delivered to the Ministry of Higher Education and Scientific Research of Iraq (“MHESR”) under the “oil-for-food” program established by the Security Council of the United Nations under Resolution 986 passed in April 1995 to allow Iraq to sell oil to finance, inter alia, the purchase of humanitarian goods in the midst of United Nations sanctions against Iraq following Iraq’s invasion of Kuwait in 1990.

5. The supply of the Uniforms to MHESR went through a chain of contracts:

(1) MHESR awarded contracts for the supply of the Uniforms to El Hosan for Import & Export (“El Hosan”) and El Farse El Arabi (“El Farse”), both companies based in Egypt, in July 2000 as well as to Fast Trading & Contracting (“Fast Trading”), a company based in Qatar, in September 2000.

(2) El Hosan, El Farse and Fast Trading then entered into sub-contracts with SMQ Enterprises Limited (“SMQ”), a company based in Cyprus, for the supply of the Uniforms.

(3) SMQ in turn sub-sub-contracted the supply of the Uniforms to a Hong Kong company called Karim’s International (H.K.) Limited (“Karim”).

(4) Lastly, Karim sub-sub-sub-contracted the supply of the Uniforms to Zhejiang Textile Import and Export Corporation (“ZTIEC”), a PRC corporation.

6. BNP Paribas was the designated escrow bank for the “oil-for-food program” and as such responsible for the issue of letters of credit for the purchase of humanitarian goods using the proceeds from oil sales.  In payment of the Uniforms, BNP Paribas (New York Branch) issued in favour of each of El Hosan, El Farse and Fast Trading a letter of credit (“the BNPP L/Cs”).  The BNPP L/Cs in favour of El Hosan and El Farse required the Uniforms to be of Egyptian origin and to be shipped from Egypt to Baghdad via Um Qaser.  Evergreen does not have a copy of the BNPP L/C of which Fast Trading was the beneficiary but expects it to specify Qatar as the origin of shipment.

7. There is no evidence as to how El Hosan, El Farse and Fast Trading paid for the purchase of the Uniforms from SMQ.  SMQ itself arranged for Arab International Bank (El Tahrir Branch) (“AIB”) to issue in favour of Karim irrevocable transferable letters of credit (“the AIB L/Cs”) which Karim then transferred to ZTIEC though transferred letters of credit issued by HBZ (“the HBZ L/Cs”) on 7 and 8 August 2000.

8. The AIB L/Cs specified the ports of loading and discharge as Suez, Egypt and Um Qaser, Iraq respectively.  An amendment dated 11 October 2000 added the conditions that “only ocean-marine carrier bills of lading acceptable showing load port as Suez to Um Qasr with freight prepaid B/L” and “that no forwarders or short form bill of lading acceptable”.  By an amendment dated 28 September 2000, 31 October 2000 was fixed as the latest shipment date.

9. The HBZ L/Cs, as originally issued, also specified shipment from Suez to Um Qaser.  However, by an amendment dated 21 August 2000, the HBZ L/Cs were revised to allow shipment from Shanghai.

10. Uniglory was engaged to ship the Uniforms from Shanghai to Um Qaser through a chain of freight-forwarders.  The freight-forwarder with whom Uniglory dealt was Vast Ocean International Transportation Co. Ltd (“Vast Ocean”).  According to Evergreen, in the course of the prior negotiation, Vast Ocean had requested Uniglory to state the port of loading as Suez in the bills of lading to be issued by Uniglory.  Upon Uniglory’s refusal, Vast Ocean indicated that it would arrange for house bills of lading to be issued.  Then, sometime around October 2000, Vast Ocean told Uniglory that it was no longer necessary for the port of loading to be stated as Suez and requested Uniglory to issue bills of lading.  Hence, the Uniglory B/Ls were issued.

11. Beginning from 21 October 2000, Uniglory carried the Uniforms from Shanghai to Dubai where they were transhipped to Um Qaser by Simatech Shipping LLC (“Simatech”), a liner operator providing a “feeder” server to Iraq for Uniglory and a number of other carriers at the time.  The Uniforms were then delivered in Iraq by Simatech to the custody of the Iraq State Company for Water Transport (“SCWT”) which had exclusive authority over all activities at Iraqi ports including Um Qaser and arranged and authorized the unloading of cargoes and acted as marine agent for all carriers at such ports.

12. SCWT, in turn, released the Uniforms to MHESR against “letters of undertaking” issued by MHESR and not the Uniglory B/Ls.  It is Evergreen’s case that this was in accordance with the working practice for release of goods prevailing at Iraqi ports at the time and that Uniglory had advised Vast Ocean of such practice beforehand.

13. Apparently, El Hosan, El Farse and Fast Trading had all obtained full payment for the Uniforms under the BNPP L/Cs.  The evidence adduced by Evergreen shows that El Hosan, El Farse and Fast Trading did so by submitting to BNP Paribas (New York Branch) bills of lading that were forgeries as none of the Uniglory B/Ls complied with the conditions as to the origin of shipment under the BNPP L/Cs.

14. ZITEC also obtained payment but only for the Uniforms shipped under 31 of the Uniglory B/Ls (“the Paid Uniglory B/Ls”), for which AIB had debited SMQ’s account under the AIB L/Cs.  ZTIEC claimed to have been unable to obtain payment for the Uniforms shipped under the remaining 21 Uniglory B/Ls (“the Unpaid Uniglory B/Ls”).  On the other hand, SMQ claimed to have been unable to obtain payment from El Hosan, El Farse and Fast Trading for the Uniforms for which it had paid under the AIB L/Cs as aforesaid.  Both SMQ and ZTIEC had taken legal actions against Uniglory on the premises of such non-payment.

15. Taking these actions in reverse order, in 2002, SMQ sued Uniglory in Egypt for compensation for wrongful release of the Uniforms for which SMQ had paid under the AIB L/Cs without production of the original bills of lading.  The Egyptian courts dismissed this action and SMQ’s appeal therefrom on the ground that SMQ was not a party to the Uniglory B/Ls.

16. Of greater relevance to this application is the action (“the ZTIEC Action”) commenced by ZTIEC against Uniglory in the Shanghai Maritime Court, PRC on 7 November 2001 for compensation for wrongful release of the Uniforms shipped under the Unpaid Uniglory B/Ls without production of the original bills of lading.  On 25 December 2002, ZTIEC obtained judgment for the sums of US$2,602,562 being the value of the Uniforms shipped under the Unpaid Uniglory B/Ls and RMB3,393,537.44 being the amount of tax refund that ZTIEC was supposed to receive for such uniforms.  Evergreen’s appeal and application for re-hearing were dismissed on 4 September 2003 and 5 February 2007 respectively.

17. Uniglory itself had also taken the offensive by suing BNP Paribas, BNP Paribas (New York Branch), HBZ, Simatech and ZTIEC in the Shanghai Maritime Court on 1 December 2003 for compensation for the loss and damage that it had suffered from shipping fraud (“the Uniglory Action”).  The Shanghai Maritime Court dismissed the Uniglory Action on 23 February 2006, holding that the loss and damage suffered by Uniglory was caused by its own wrongful release of the Uniforms shipped under the Unpaid Uniglory B/Ls.  Evergreen’s appeal was dismissed on 19 April 2007.

Purpose of these proceedings

18. Evergreen intends to apply to the Supreme Court of the PRC for a re-hearing of the ZTIEC Action.  The present application is made with a view to obtaining information that might assist Evergreen in overturning or, at least, reducing the judgment against Uniglory in the ZTIEC Action.

19. There is no dispute that as a matter of general principle, a Norwich Pharmacal order may, in an appropriate case, be made for discovery in aid of foreign proceedings or potential foreign proceedings : Manufacturer’s Life Insurance Company of Canada v. Harvest Hero International Ltd [2002] 1 HKLRD 828 (CA).

20. Initially, Evergreen left open the possibility of other actions that it may take (including applying for a re-hearing of the Uniglory Action to which HBZ was a defendant) and asked for leave to use the information obtained in these proceedings for the purposes of

(1) actual or contemplated proceedings against BNP Paribas, Simatech, ZTIEC or its affiliates in the PRC and elsewhere; and

(2) investigating, commencing and/or pursuing proceedings whether in Hong Kong, the PRC or elsewhere against persons or entities implicated in any wrongdoing disclosed by such information.  

21. Evergreen has since confirmed by a letter dated 23 October 2007 from its solicitors to HBZ’s solicitors that the purpose of this application is to obtain documents to assist in Evergreen’s intended application for a re-hearing of the ZTIEC Action and that Evergreen is prepared to undertake not to use the information disclosed to resuscitate old proceedings or commence fresh proceedings against HBZ.

Documents sought

22. Against the aforesaid background, Evergreen requires HBZ to disclose the following documents :

(1) transferred letters of credit for letters of credit that were transferred to ZTIEC or its affiliates by Karim relating to the purchase of university uniforms; and

(2) records for all payments that were made to Karim or ZTIEC or its affiliates. 

It is Evergreen’s case, supported by an uncontradicted PRC legal opinion, that it could not have obtained and would not be able to obtain sight of any of these documents in any past or future proceedings in the PRC.  I will proceed on this basis.

Information expected to be revealed

23. Evergreen seeks the aforesaid documents to confirm by what means and in what amounts ZTIEC had got paid for the Uniforms.

24. Evergreen wants such confirmation because it suspects that ZTIEC had

(1) in fact obtained payment for some, if not all, of the Uniforms shipped under the Unpaid Uniglory B/Ls with the use of unauthentic shipping documents (as in the case of El Hosen, El Farse and Fast Trading); and

(2) then proceeded to make a false or inflated claim against Uniglory in the ZTIEC Action. 

25. Evergreen’s suspicion that ZTIEC had collected more payment for the Uniforms than it had disclosed is fueled by the following:

(1) Firstly, sometime in 2001, the owner of Vast Ocean (“Mr Ngai”) informed Uniglory’s Mr Li  Li (“Mr Li”) that he had been informed by an employee of ZTIEC called Luo Jia that the losses suffered by ZTIEC should be less than the amount it claimed in the ZTIEC Action.  Then, sometime around 2003/2004, Mr Ngai himself indicated to Mr Li in a telephone conversation that the losses suffered by ZTIEC should be less than the amount it claimed in the ZTIEC Action.  Evergreen takes these statements to mean that ZTIEC had received payment for at least some of the Uniforms shipped under the Unpaid Uniglory B/Ls.  When Mr Tai Jiin-chyuan, Group Executive Officer, Legal Affairs of the Evergreen Group, contacted Mr Ngai in 2005 for assistance, Mr Ngai avoided his questions and said he did not have a clear recollection of the relevant events which had taken place quite some time ago.

(2) Secondly, Evergreen cannot discern any logic as to why certain ZTIEC invoices were paid while others were not.  There is no pattern whether one goes by the dates of presentation of the invoices, the dates of issue of the corresponding bills of lading or the shippers (El Hosan, El Farse and Fast Trading).  Six of the invoices were paid just days before SMQ’s letter before action to Uniglory.  In the absence of an explanation, Evergreen believes that the selective payment of ZTIEC invoices was the result of arrangements agreed between ZTIEC, Karim and/or SMQ.

26. The bases upon which Evergreen surmises that ZTIEC had presented shipping documents other than the authentic Uniglory B/Ls are that none of the Uniglory B/Ls complied with the condition in the AIB L/Cs as to the port of loading and that 17 of the Paid Uniglory B/Ls were issued after 31 October 2000, the latest shipment date permitted under the AIB L/Cs.  Evergreen believes that ZTIEC had not presented the Uniglory B/Ls and had never intended to rely on such authentic shipping documents as a means to secure payment by Karim.  This was so because Uniglory had advised Vast Ocean, the freight-forwarder who arranged shipment of the Uniforms for ZTIEC, of the procedure for the release of goods delivered in Iraq so that ZTIEC would have realized that it could not rely on the bills of lading to be issued by Uniglory to secure payment of the Uniforms from Karim.

27. For the sake of completeness, I should also mention that

(1) On about 20 November 2000, Vast Ocean inadvertently faxed to Uniglory a copy of an irrevocable transferable letter of credit No. DCD08209137 (“the HSBC L/C”) issued by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in favour of Karim in respect of a total of 50,000 sets of university uniforms to be shipped from China to Dubai.

(2) This was used to ground an application in paragraph 1 of the Originating Summons against HSBC for disclosure of all letters of credit issued by HSBC for the purchase of university uniforms with Karim as beneficiary, in particular, the HSBC L/C, and all related documents including those presented to apply for payment under such letters of credit.

(3) In short, Evergreen suspected that the HSBC L/C had been transferred by Karim in favour of ZTIEC or its affiliate(s) and that the latter had received payment under the HSBC L/C for some of the Uniforms, using documents that would not include any of the Uniglory B/Ls.

(4) As HSBC did not oppose Evergreen’s application, an order in terms of paragraph 1 was made by Mr. Justice Sakhrani against HSBC on 12 September 2007.  Such order has been complied with.

(5)    At the hearing before me on 5 May 2008, in answer to my question, Mr Jonathan Wong, counsel for Evergreen, was instructed to confirm that the documents disclosed by HSBC had not yielded anything useful to Evergreen.  I take this answer to mean that there is no or no adequate evidence that ZTIEC or its affiliate(s) had received payment under the HSBC L/C for any of the Uniforms shipped under the Unpaid Uniglory B/Ls, as Evergreen has surmised.

Overview

28. The suspected wrongs in respect of which Evergreen seeks Norwich Pharmacal discovery are :

(1) the forgery and the presentation of unauthentic bills of lading to obtain payment for the Uniforms shipped under the Unpaid Uniglory L/Cs; and

(2) the making of a false or inflated claim in the ZTIEC Action against Uniglory despite such payment. 

29. Evergreen makes the present application not to discover the identity of the wrongdoer.  It has identified ZTIEC as the wrongdoer.

30. What Evergreen does not know and wants to find out through these proceedings is whether the said wrongs it suspects to have been perpetrated by ZTIEC had indeed been perpetrated.

31. It is implicit in Evergreen’s evidence that on the material presently available to it, it has no or no sufficient basis to even assert, not to mention prove, that the said suspected wrongs had been committed.

32. I see serious objections going to the court’s jurisdiction (as opposed to discretion) to order Norwich Pharmacal discovery in this case:

(1) Evergreen is fishing, there being no or no sufficient evidence for suspecting that the alleged wrongs had been committed at all.  

(2) The forgery and presentation of unauthentic shipping documents by ZTIEC to obtain payment for the Uniforms, if committed, was not a wrong against Uniglory.  The only wrong that can be alleged to have been committed by ZTIEC against Uniglory was the making of a false or inflated claim in the ZTIEC Action.  HBZ had not become involved or mixed up in such alleged wrong, even if committed.

Fishing application

The Issue

33. It is now settled that the Norwich Pharmacal jurisdiction is not confined to the identification of a wrongdoer but extends to discovery of other information that will enable the person who claims to have been wronged to protect his interests: see, for example, Yew Seng Computer (HK) Ltd v. Computerland Corporation [1986] HKLR 283, per Cons JA at p.286D-E.

34. In particular, the grant of Norwich Pharmacal discovery of information showing that a wrong has been committed by a known third party against the applicant is not without precedent. 

35. As I see it, the issue raised here is as to the standard to which the court has to be satisfied that a wrong has occurred to justify giving Norwich Pharmacal relief.

The authorities

36. Taking the authorities in chronological order, the starting point is P v. T Ltd [1997] 1 WLR 1309.  In that case, the plaintiff was in the employ of the defendant in a relatively senior position with responsibility to put out to tender major contracts.  He was told by the managing director of the defendant at 2 meetings that serious allegations had been made against him by an unidentified external party.  The managing director, however, refused to disclose the source of the allegations which had asked not to be named or the contents of the allegations since to do so would identify the party making them.  The plaintiff was then required to attend a disciplinary hearing to consider allegations of gross misconduct which had been made by an external party against him.  The plaintiff was given the opportunity to make representations but could not do so because again, the defendant disclosed no detail of the allegations save the defendant conclusion that they were evidence of gross misconduct in the way in which the plaintiff had conducted himself with external contractors.  Sir Richard Scott VC described the disciplinary hearing as no more than a farce.  The plaintiff was summarily dismissed at the conclusion of the hearing.  The plaintiff appealed his dismissal.  The appeal hearing was as farcical as the disciplinary hearing as it was conducted in the same manner with the case against the plaintiff being withheld from him.  It had become known within the industry that the plaintiff had been dismissed for alleged impropriety.  He was, however, unable to clear his name without knowing what the allegations against him were and who had made them.  He could not obtain another job and his career had been wrecked.

37. In addition to pursuing the defendant for various relief for unfair dismissal, the plaintiff in P v. T Ltd also applied by motion for an order for disclosure to him by the defendant of the allegations made against him and their source with the express intention of using the information to bring a claim against the source in defamation and/or malicious falsehood.  Norwich Pharmacal discovery was necessary because it was not possible for the plaintiff to know for certain whether he did or did not have a viable cause of action against the informant without knowing the information that was supplied.  He gave affidavit evidence that he had not committed any act justifying the description of gross misconduct.

38. In ordering Norwich Pharmacal discovery, Sir Richard Scotts VC said at p.1318C-F :

“In that respect his position is not the same as that of the plaintiff in the Norwich Pharmacal case ... In the Norwich Pharmacal case the plaintiff was able to demonstrate that tortious infringements of patent rights were being committed.  It did not know by whom.  It did not know whom to sue.  But that there was tortious conduct against it was not in question.  In the present case, it is in question whether a tort has been committed against the plaintiff.  He believes that it has.  The purpose of any order I make, as I suppose of any order that a judge ever makes, is to try to enable justice to be done.  It seems to me that in the circumstances of the present case justice demands that the plaintiff should be placed in a position to clear his name if the allegations made against him are without foundation.  It seems to me intolerable that an individual in his position should be stained by serious allegations, the content of which he has no means of discovering and which he has no means of meeting otherwise than with the assistance of an order of discovery such as he seeks from me.  It seems to me that the principles expressed in the Norwich Pharmacal case, although they have not previously been applied so far as I know to a case in which the question whether there has been a tort has not clearly been answered, ought to be applicable in a case such as the present.”

39. P v. T Ltd was considered and distinguished at first instance by Rimer J in Axa Equity & Law Life Assurance Society Plc v. National Westminster Bank Plc [1998] PNLR 433, another instance of an application for Norwich Pharmacal discovery being put on the basis that it was required to confirm if the applicant had a case against an identified third party. 

40. In that case, the plaintiffs were investors who had subscribed for some £19 million of mortgage debenture stock issued by a listed company which owned and managed hotels.  The company defaulted in payment of the interest due on the stock and eventually went into administrative receivership.  The managing director was subsequently convicted of a number of offences of knowingly making misleading, false or deceptive statements and of forging or falsifying documents for the issue.  The investors had taken out a generally indorsed writ of summons against the company’s auditors who carried out certain works in connection with the listing particulars, including the preparation of a working capital report and works in relation to a statement of indebtedness and extracts from the company’s audited financial statements.  The investors had formed the belief that some of the financial information in the listing particulars and the audited accounts was untrue or misleading or contained material omissions in that the company’s indebtedness had been understated by £7 million and its available cash assets overstated by £4 million. The writ claimed damages against the auditors for negligence or breach of duty under s. 150 of the Financial Services Act 1986.  The writ was, however, not served upon the auditors because the investors thought they would be unable to plead an adequate case of inaccuracy or negligence.  The investors then issued a notice of motion against, inter alia, the company and 2 banks which were the company’s principal lenders, seeking discovery of documents in their possession relating to the preparation by the auditors of the company’s accounts and the listing particulars.

41. Insofar as it is relevant for present purpose, the investors, by their solicitor, asserted in their evidence on the motion that they were not in position to plead a case against the auditors because while they believed they had a case, they did not actually know whether they in fact had one, or if they did, what its factual basis was and whether it was of sufficient quality to make it worth progressing to trial.  Rimer J, accepting such evidence, dealt with the application on the basis that further prosecution of the action against the auditors was dependent upon obtaining sufficient discovery to enable the investors to know whether they had a case against the auditors.  Rimer J further came to the view that the investors claim based on s. 150 was extremely weak and was more likely to fail than not.  The claim in negligence was somewhat stronger but the investors faced major difficulty in proving a breach of duty.

42. Having taken such view, Rimer J dismissed the motion for discovery on grounds of, inter alia, the poor quality of the investors’ case against the auditors and did so as a matter of jurisdiction and not discretion.  His Lordship concluded at p.457A-D :

“... I have come to the conclusion that the orders sought against the five defendants are of a type which the courts do not make and, were the applications to be opposed by the defendants, it would decline to make them.  That is because they are in the nature of “fishing” orders and because they are not justified by any exception or qualification to the mere witness rule.  Moreover, I agree with Mr Hollander that the correct analysis is that the court has no jurisdiction to make the orders sought.  I do not consider that the correct analysis is that the court has a general jurisdiction to make discovery orders of all sorts and for all purposes against anyone but merely declines to make orders of the present sort as a matter of discretion and if the application is opposed.  I prefer the view that the development of English law has reached the point that it recognises a jurisdiction to make discovery orders of, inter alia, the Norwich Pharmacal type, but that it has not reached the point where it recognises a jurisdiction to make orders of the type sought by the plaintiffs in the present case.  On the contrary, it has recognised that it cannot and does not make such orders. ...”

43. In coming to this conclusion, Rimer J first noted that all members of the House of Lords in Norwich Pharmacal regarded the plaintiffs therein as having the strongest prima facie case of infringement against the importers.  In particular, Rimer J referred to the citation by Lord Cross of Chelsea of a passage from Post v. Toledo, Cincinnati and St Louis Railroad Co (1887) 11 NE 540, a decision of the Supreme Court of Massachusetts, which included the statement that “a bill for discovery cannot be used to enable a plaintiff to fish for information of any causes of action he may have against other persons than the defendant” and said at pp.445C-446B :

“Lord Cross said that he found that decision:

‘... of great assistance in the solution of the problem before us in this case.  The court which decided it was of high standing; it was decided in the light of the old English Chancery authorities which as the case was decided as long ago as 1887 the judges were probably in a better position to understand than we are; and it lays down a reasonable principle by which to judge whether a plaintiff should have this sort of discovery.’

I interpret Lord Cross as approving the whole of the passage he cited from the Post case, including the statement that bills of discovery could not be used “to enable a plaintiff to fish for information of any causes of action he may have against other persons other than the defendant”.  The Norwich Pharmacal case was not about an application for discovery of that sort.  It was in no sense a fishing application.  It was based on the premise that the plaintiffs had a clear case for infringement against the importers and there was no question of the plaintiffs fishing for information as to whether they had any such case.  Had they been, then I consider it likely that their application would have failed.  Lord Kilbrandon’s judgment also proceeded on the basis that the plaintiffs had a clear case against the importers: see page 200A-B.

By contrast with the Norwich Pharmacal case, the plaintiffs in the present proceedings do not have a prima facie case against Coopers.  Nor on the material before the court do they even disclose an arguable case, since their evidence concedes that, on the information at present known to them and without the desired discovery, they cannot plead a case against Coopers and cannot hope to progress their writ to a trial.  The whole point of their discovery application against the defendants is to find out if they do have a case against Coopers.

In my judgment, Norwich Pharmacal provides no authority at all for the proposition that discovery for that purpose can properly be ordered against third parties.  On the contrary, I consider that it is implicit in the judgments of most of their Lordships that such discovery cannot be ordered and the citation from the Post case, which Lord Cross approved, include a specific statement to that effect.”  

44. Rimer J then considered submissions by counsel for the investors based on subsequent authorities, namely RAC Corp v. Reddingtons Rare Records [1974] 1 WLR 1445; Société Romanaise de la Chaussure SA v. British Shoe Corporation Ltd [1991] FSR 1; Bankers Trust Co v. Shapira [1980] 1 WLR 1274 and Mercantile Group (Europe) AG v. Aiyela [1994] QB 366 in which the wrongdoers were already identified and the purpose of the order was not to identify a wrongdoer.  His Lordship observed that in none of those cases was discovery sought to ascertain whether the plaintiff had a cause of action against a suspected wrongdoer and that disclosure was ordered on the basis that the plaintiff did have a prima facie or strong prima facie claim against the identified wrongdoer.  Rimer J summarized at p.444A-C :

“... The plaintiffs have identified Coopers as alleged wrongdoers and have issued a writ against them.  The defendants against whom they seek discovery are, in principle, compellable to give evidence at any trial so that, on the face of it, the discovery order sought against them infringes the mere witness rule and cannot therefore be made.  There are exceptions to the mere witness rule, of which Norwich Pharmacal provides one type of example, and the Bankers Trust and Aiyela cases provide others.  The present case does not fall within any of those exceptions.  Mr. McQuater’s argument is, in effect, that there is a further exception, namely the case where, although the alleged wrongdoer has been identified, there will be no trial unless the desired discovery is obtained since without it the plaintiffs will not know if they have a case at all, cannot therefore plead it and cannot progress it to trial.  In my judgment, however, there is no such further exception.  For reasons given earlier, I consider that applications for discovery for that purpose are in the nature of “fishing” applications which the court will not allow.”

45. Rimer J was also referred by counsel for the investors to P v. T Ltd, which case his Lordship described at p.454D as “fairly remarkable” and at p.457A as turning on its own “very unusual facts”.  Rimer J cited the passage quoted in §38 above and said at pp.456B-457A :

“That passage underlines that Norwich Pharmacal itself was a case where the plaintiffs had a prima facie case against the known wrongdoer.  The Vice-Chancellor recognised that the case before him did not satisfy that test since, until the allegations were known, it remained in question whether a tort had been committed against the plaintiff at all.  That recognition is, in my view, consistent with the conclusion to which I have come, that the Norwich Pharmacal principle is not one which enables a plaintiff to obtain a discovery order for fishing purposes.  In a sense, the application by the plaintiff in P. v. T. Ltd was in the nature of a fishing application since whilst he believed he had done nothing to warrant a charge of gross misconduct, he was not in a position to assert that the maker of the allegations had committed a wrong against him until he knew what the allegations were.  For the reasons he gave the Vice-Chancellor made the discovery order sought.  The case was of course one which cried out for the making of the order which the Vice-Chancellor made and it would appear to me to be a grave defect in our system of justice if the courts could not provide the plaintiff in that case with the remedy he wanted.  It is, if I may respectfully say so, not in the least surprising that the Vice-Chancellor made the order which he did and his judgment reflects how he considered that, in the particular circumstances of the case, justice demanded that he should do so.

Mr McQuater relies on that case as showing that the Norwich Pharmacal principle or, at any rate, its extension in P. v. T. Ltd does enable the court to make discovery orders against third parties even in cases where the plaintiff, until he has the desired discovery, is not in a position to assert a prima facie case of wrongdoing against the intended defendant.  I agree with Mr McQuater that the decision in P. v. T. Ltd can be regarded as going further than any previous decision.  I do not, however, regard it as an authority for justifying the order sought in the present case.  The Vice-Chancellor emphasised the special nature of the facts in the case before him.  I do not consider that he would have regarded himself as establishing a new general principle that an intending plaintiff who wishes to find out if he has a case against an intended defendant is entitled to discovery against third parties directed at assisting him in that enquiry.  In my judgment, any such development would be inconsistent with the Norwich Pharmacal case itself and also with the decision of the Court of Appeal in the Aiyela case, which latter was apparently not cited in P. v. T. Ltd.  In my judgment, the case is one which turned on its own very unusual facts and I do not regard it as establishing any wider principle applicable to the present case.”

46. The Court of Appeal ([1998] CLC 1177) upheld Rimer J’s decision to dismiss the motion but on the grounds that the orders for discovery sought against the banks and the company would infringe the ‘mere witness’ rule because the investors could plead an arguable case against the auditors such as to give rise to a trial in due course in which both the banks and the company could be compelled to produce the documents sought and also that the banks were not so mixed up in the alleged tortious acts of the auditors as to warrant an order for discovery against them.  

47. Insofar as it is material to the case before me, Morritt LJ, with whom Brooke and May LJJ concurred, disagreed with Rimer J’s assessment of the prospects of the investors’ claim against the auditors both under s. 150 and in negligence.  And bearing in mind that a party was required to plead the material facts on which he relied and not the evidence by which he hoped to prove them, Morritt LJ saw no problem in the investors pleading good causes of action against the auditors and concluded that the investors already had sufficient information to ensure that there was a trial of the case they sought to make against the auditors if they chose to make it.  In this regard, Morritt LJ held (at p.1183A-B, §18) that the court must have regard to all the evidence and was not bound by the conclusion of the investors’ solicitors as to the ability of the investors to plead and prove their claim so far as it depended on matters before the court.

48. Towards the end of his judgment, at p.1185D-E, Morritt LJ said obiter in favour of an applicant seeking Norwich Pharmacal discovery, not of the identity of a wrongdoer, but of a fact without which he could not properly formulate a claim against a known suspected wrongdoer the following :

“25. Counsel for the investors raised in the course of argument the case where, although the identity of the wrongdoer is known, one fact crucial to the proper allegation of his liability is not but is susceptible of ascertainment from a known document in the hands of a third party.  It was suggested that in such a case if the third party had been mixed up in the relevant transaction then there was no objection to an order for discovery; the mere witness rule would not be infringed because without the ascertainment of the missing fact there would be no trial; the application would not be lacking in particularity so as to be stigmatized as mere fishing for the document constituting the piece missing from the jigsaw puzzle would be capable of identification.  It is not necessary to decide the point and I do not do so but I see much force in it.  The consequence would be that the principle of Norwich Pharmacal would be applicable in any case where, for whatever reason, the action for which the document or information was required could not in its absence proceed to trial and would not be confined to cases in which the reason why the action could not so proceed was ignorance as to the identity of the proper defendant.  The establishment of such a proposition would also enable effect to be given to the reference made by Lord Reid in Norwich Pharmacal to the duty to provide ‘full information’ as well as the identity of the wrongdoer without giving rise to a general obligation to give disclosure (cf. Arab Monetary Fund v Hashim (No.5) [1992] 2 All ER 911 at p.914).”

49. I pause to observe that the different conclusion drawn by the Court of Appeal as to the apparent merits of the investors’ case against the auditors and the investors’ ability to sufficiently plead such case without the assistance of the information sought to be discovered does not, in my opinion, detract from what Rimer J said regarding fishing applications properly so called. 

50. Nor do I read the above quoted passage from Morritt LJ’s judgment as suggesting that Norwich Pharmacal discovery of a fact necessary for the proper formulation of a claim against a known suspected wrongdoer can be ordered regardless of the quality of the applicant’s case for such a claim.  Before the Court of Appeal, counsel for the investors did not contend that this case was so similar on its facts to that of any previously decided cases as to be determined by that earlier decision.  Counsel accepted that Rimer J’s analysis of the earlier decisions and the distinctions between those cases and this was right.  See p.1181H.  

51. P v. T Ltd was followed in Carlton Film Distributors Ltd v. VCI Plc [2003] FSR 876 in which the intended claimant had licensed the intended defendant to make licensed copies of a number of films.  The intended defendant did not itself make the copies.  These were made by the respondent on the intended defendant’s behalf.  The licence agreement between the intended claimant and the intended defendant contained restrictions as to the quantities that could be manufactured.  Although the intended claimant had a right for an audit to be conducted, the intended defendant had made it plain that they did not have in their records dates of manufacture.  The respondent had records of what had been made and when in the form of daily machine lists.  The application for Norwich Pharmacal discovery of these daily machine lists against the respondent (against whom the intended claimant had no cause of action) was based on what Jacob J described as “reasonable grounds for supposing” that there was over-production during the course of the licence agreement.  The intended claimant admittedly did not have enough material to plead an allegation that there had been a breach of the licence agreement and to sign a statement of truth required by CPR 22.1(1)(a) without the documents sought. 

52. In finding jurisdiction to make the order sought, Jacob J noted that things had moved on since Norwich Pharmacal.  In particular, P v. T Ltd showed that Norwich Pharmacal extended to cases where there was a good indication of wrongdoing, but not every piece of what the claimant needed to plead a case was fully in position.  This extension was supported by Morritt LJ’s above-quoted dictum which seemed to Jacob J to have considerable force.  See pp.878-879, §§ 9-12.

53. The Norwich Pharmacal application in Mitsui & Co Ltd v. Nexen Petroleum UK Ltd [2005] 3 All ER 511 arose out of the sale by the defendant’s former holding company, EnCana UK Holdings Ltd, to Nexen Energy Holdings International Ltd of the entire issued share capital of the defendant.  The defendant’s primary asset was its interest in the Buzzard Field, the most significant oil field to be discovered in the North Sea in the past decade.  The claimant was in an advanced stage of negotiation with EnCana UK Holdings’ parent company, EnCana Corp., for the acquisition of the defendant’s interest in the Buzzard Field and contended that EnCana Corp. had entered into an oral protocol agreement not to solicit offers from third parties in relation to the defendant’s interest in the Buzzard Field (the first limb) and to advise the claimant of any bona fide offers from third parties in relation to the Buzzard Field assets and to allow the claimant an appropriate time to respond to any such offer (the second limb).  EnCana Corp. announced the sale to Nexen Energy just before the claimant and EnCana Corp. were due to sign the legal documentation.  It was common ground that the court must proceed on the basis that the claimant had a real prospect of establishing the existence and enforceability of the protocol agreement.  It was also common ground that if the claimant established the existence and enforceability of the protocol agreement, there was established a breach of the second limb.  The claimant suspected that EnCana Corp. had also, in breach of the first limb, solicited from Nexen Energy’s holding company, Nexen Inc, an offer to purchase the defendant and applied for Norwich Pharmacal discovery to obtain the necessary evidence to establish whether or not this suspicion was well-founded and to enable the claimant to determine whether to sue EnCana Corp. or not. 

54. Lightman J observed, at pp.517f-518e, §§19-20, that the Norwich Pharmacal jurisdiction, as subsequently developed, encompassed circumstances where disclosure of crucial information or a missing piece of the jigsaw, other than the identity of the wrongdoer, was required to enable the applicant to bring a claim against a known wrongdoer.  His lordship set out, at p.518e-f, §§21, three conditions to be satisfied for the court to exercise the extended power to order Norwich Pharmacal relief :

(1) a wrong must have been carried out, or arguably carried out, by an ultimate wrongdoer;

(2) there must be the need for an order to enable action to be brought against the ultimate wrongdoer; and

(3) the person against whom the order is sought must be mixed up in so as to have facilitated the wrongdoing and be able or likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued. 

55. The application was dismissed on the grounds that :

(1) The exercise of the court’s jurisdiction to order Norwich Pharmacal relief against third parties who were mere witnesses innocent of any participation in the wrongdoing being investigated was a remedy of last resort.  The jurisdiction was only to be exercised if the third parties were the only practicable source of information so that, unless and until they disclosed what they knew, there could be no litigation in which they could give evidence.  On the material before the court, the claimant could, or ought to be able to, obtain the necessary pre-action disclosure from EnCana Corp. 

(2) There was no evidence that the defendant was mixed up in or facilitated the suspected breach of contract.

56. There was no issue that the first condition had been satisfied.   It appears from the report that the claimant had grounds for strong suspicion that EnCana Corp. ‘tipped off’ Nexen Inc about the proposed sale of its interest in the Buzzard Field and thereby or otherwise solicited interest and an offer by Nexen Inc.  There was evidence that EnCana UK Holdings and the defendant claimed that Nexen Inc became interested in purchasing the defendant’s interest in the Buzzard Field on around 19 October 2004.  The agreement for sale was signed on 29 October 2004 which meant that Nexen Inc formulated the bid by Nexen Energy from start-to-finish in approximately 10 days.  That agreement contained a mutual covenant to keep confidential information relating to the negotiations leading to the agreement.  Between 5 and 26 November 2004, the claimant tried to ascertain from EnCana Corp. how it completed the transaction with Nexen Inc so quickly and why it failed to notify the claimant about Nexen Inc’s offer.  EnCana Corp. failed to provide satisfactory details of how Nexen Inc’s bid came about, claiming such information to be confidential.  The transaction was completed on 1 December 2004. 

57. Lastly, it was held in MacDoel Investments Ltd v. Federal Republic of Brazil [2007] JLR 201 that it was not unjust that a duty to disclose should arise where the court was satisfied that there was a reasonable suspicion that the third party had been mixed up in the wrongdoing.  The Jersey Court of Appeal (Bailhache, Bailiff, Smith & Jones JJA) so held partly because they saw no reason to require a higher threshold in respect of the question whether or not the defendant was a person who had become mixed up in the wrongdoing given that something less than prima facie evidence of wrongdoing was sufficient to enable the court to order disclosure.  Lord Kilbrandon’s speech in Norwich Pharmacal at p.205G-H and Jacob J’s decision in Carlton Film Distributors Ltd v. VCI Plc were referred to. 

The principles

58. In my view, the points of principle that can be derived from the above authorities are as follows. 

59. The categories of information for which Norwich Pharmacal discovery can be ordered are not close.  As said by Lord Woolf CJ in Ashworth Hospital Authority v. MGN Ltd [2002] 1 WLR 2033 (HL) at p.2049, §57, using P v. T Ltd as an illustration, new situations are inevitably going to arise where it will be appropriate for the jurisdiction to be exercised where it has not been exercised previously.

60. In an appropriate case where it is necessary in the interests of justice, Norwich Pharmacal discovery can be obtained, not on the basis of an actual tort, but to find out if a wrong had been committed against the applicant and if so, the precise nature of the wrong.

61. This, I believe, is not inconsistent with the summary of principles by Ma J in A Co v. B Co [2002] 3 HKLRD 111 at p.117G-H, §13(1), one of which is the requirement of cogent and compelling evidence that serious tortious or wrongful activities had taken place.  I say so because in dealing with the defendant’s objection that the plaintiff before him was “fishing” for information, Ma J drew attention to P v. T Ltd as an instance where the court ordered Norwich Pharmacal discovery notwithstanding the plaintiff’s inability to demonstrate to the court’s satisfaction the factors he referred to at p.120F-H, §13 of his judgment.  

62. However, this is not to say that Norwich Pharmacal discovery to verify wrongdoing is to be lightly ordered.  Orders for this purpose must by their nature be exceptional and rare.  Although the applicant is essentially not in a position to show a prima facie case of wrongdoing and is acting on no more than a suspicion that wrongdoing may have been committed, such suspicion must be founded upon facts and circumstances which plausibly give rise to the suspicion and which the court can reasonably act on.  In this regard, in P v. T Ltd, in support of the possible causes of action in defamation and malicious falsehood, Sir Richard Scott V-C did have before him evidence that the unidentified third party had made an allegation of gross misconduct against the plaintiff and the plaintiff’s deposition on affidavit that he had done nothing that justified such allegation.  

The present case

63. The facts and circumstances summarised in §§25 and 26 above are, to my mind, insufficient to pass the “reasonable suspicion” threshold. 

64. The fact that other parties in the chain of supply of the Uniforms had obtained payment under different letters of credit with the use of forged bills of lading is a red herring and irrelevant.  As noted by Mr J.E. Jamison of Messrs Clifford Chance, solicitors for HBZ, the letters of credit under which ZITEC should apply for payment were the HBZ L/Cs, not the AIB L/Cs.  The HBZ L/Cs had been revised to permit shipment from Shanghai.  The Uniglory B/Ls were actually compliant.  There was no need for ZTIEC to use any other shipping documents. 

65. As for the amount that ZTIEC had got paid for the Uniforms, there is evidence of the payment that had been made by SMQ in the form of 2 copy letters dated 10 June 2001 (which was some 6 months after the last shipment of the Uniforms from Shanghai in December 2000) from AIB to SMQ, certifying that AIB had debited SMQ’s current account with it for various sums that AIB had transferred to the beneficiaries of the AIB L/Cs.  The numbers of the bills of lading under which the goods paid for were shipped were listed.  The 21 Unpaid Uniglory B/Ls were not among them, meaning that SMQ had not paid for the Uniforms shipped under such bills of lading.  Also, SMQ’s letter before action to Uniglory dated 14 June 2001 referred only to the 31 Paid Uniglory B/Ls.  Thereafter, SMQ claimed against Uniglory on the basis that it had paid for the Uniforms shipped under the 31 Paid Uniglory B/Ls but had not been able to recoup such payment from El Hosan, etc.  Other than what was paid by SMQ under the AIB L/Cs, there is no evidence of any other funds out of which ZTIEC was paid.  There is certainly no evidence that Karim had paid ZTIEC any sum which Karim had not been able to recoup from SMQ under the AIB L/Cs.  In the light of the aforesaid evidence, I feel unable to attach any weight to :

(1) the hearsay statement by ZTIEC’s employee and the statement by Vast Ocean’s owner (which must also be hearsay) that the losses suffered by ZTIEC should be less than the amount it claimed in the ZTIEC Action, the meanings of which appear to me to be most ambiguous; or

(2) the payment of some but not all of ZTIEC’s invoices in no or no discernable pattern. 

HBZ not mixed up

66. The second objection mentioned in §32 above should be obvious and need no elaboration.

67. At the hearing, when I raised this objection, Mr Wong urged me to view the forgery and presentation of unauthentic shipping documents to obtain payment for the Uniforms and the making of a false or inflated claim against Uniglory by ZTIEC as a single transaction.  I do not think this is right on proper analysis.

68. One cannot emphasize enough the extraordinary nature of Norwich Pharmacal relief (see, e.g., A Co v. B Co, per Ma J at p.116J, §12).  In my view, there is no room for imprecision or approximation.  The purpose of an order for Norwich Pharmacal discovery is to provide a party who has been wronged with the information that he requires to seek redress against the wrong by action or otherwise assert his legal rights against the wrongdoer in respect of such wrong.  It is therefore important to identify the precise wrong or suspected wrong of which the applicant claims to be the victim and in respect of which he has legal rights to assert. 

69. Nor can one emphasize enough the significance of the requirement of involvement in the wrongdoing on the part of the party against whom Norwich Pharmacal discovery is sought.  As explained by Lord Woolf CJ in Ashworth Hospital Authority v. MGN Ltd, at p.880A-B, §§35-36, the need for involvement, though not stringent, is still a significant threshold requirement because it distinguishes the party against whom Norwich Pharmacal discovery is sought from a mere onlooker and justifies the intrusion to be occasioned to that party by an order for disclosure. 

70. Uniglory has no locus to raise any claim out of ZTIEC’s alleged forgery and presentation of unauthentic shipping documents to obtain payment for the Uniforms.  Uniglory only became a victim when ZTIEC allegedly made a false or inflated claim against it in the ZTIEC Action after having so obtained payment for all or part of the Uniforms shipped under the Unpaid Uniglory B/Ls.  

71. The only things that HBZ had done were processing ZTIEC’s application for payment and making payment under the HBZ L/Cs.  The point is not, as Mr Jamison puts it, that HBZ was merely doing what it does as a bank.  In Norwich Pharmacal, the Customs and Excise Commissioners acted in performance of their statutory duties but they were held to have become “mixed up” in the importation of the infringing goods because without certain action on their part such infringements could never have taken place and they had therefore facilitated the commission of such tortious acts: per Lord Reid at p.174F.  See also Lord Morris at p.181B-D; Viscount Dilhorne at p.188C-D; Lord Cross at p.197F-G and Lord Kilbrandon at p.204B-D.  So here the real point is that HZB did not, by processing ZTIEC’s application for payment or making payment under the HBZ L/Cs, facilitate the making of the allegedly false or inflated claim by ZTIEC against Uniglory.  On this, I refer to the third of the 3 conditions for the grant of Norwich Pharmacal relief as formulated by Lightman J in Mitsui & Co Ltd v. Nexen Petroleum UK Ltd at p.518e-f.  I also refer to §21 of Morritt LJ’s judgment in Axa Equity & Law Life Assurance Society Plc v. National Westminster Bank Plc.  

72. For the foregoing reasons, I dismiss Evergreen’s application against HBZ. 

73. I also make an order nisi that Evergreen should pay HBZ the costs of this application, including costs previously reserved, to be taxed if not agreed.