XCHRX MAGNITOGORSK INTEGRATED IRON AND STEEL WORKS AND ANOTHER v. VAREX & CO. GMBH AND OTHERS

HCA17492/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.17492 OF 1999

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D E C I S I O N

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The application

1. This is an application by the plaintiffs for further and better particulars of the Further and Better Particulars provided by the defendants in respect of their defence.

The Further and Better Particulars

2. Paragraph 15 of the Amended Defence pleaded that 500 shares were allotted to the 1st and 2nd defendants in consideration of the 1st and 2nd defendants assisting the 1st plaintiff in obtaining credit facilities and in the expansion of the 1st plaintiff's business outside Russia. As the plaintiffs were entitled to do, they asked how, when and where did the 1st and 2nd defendants assist the 1st plaintiff's business outside Russia. The answer given was that :

"(2)(a) From about 1990 the 1st Defendant traded, barter traded and distributed the 1st Plaintiff's products in Europe.

(b) From about May 1994 the 1st and 2nd Defendants acted as exclusive distributor of the 1st Plaintiff's products in Europe. A representative office for Europe called MMK Europe was set up for this purpose and for which the 2nd Defendant acted as the 1st Plaintiff's representative.

(c) From early 1994 until around the end of 1997 the 2nd Defendant acted as :-

(i) advisor to the 1st Plaintiff's then chairman Mr. Stavrikov; and,

(ii) the 1st Plaintiff's investment consultant with the task of obtaining credit facilities for the expansion and modernisation of the 1st Plaintiff's steel and iron plant.

(d) As Mr. Stavrikov's advisor, the 2nd Defendant (among other things) suggested setting up the 4th Defendant. As the 1st Plaintiff's investment consultant, the 2nd Defendant assisted (among other things) in obtaining credit facilities for the 1st Plaintiff of about US$1.6 billion."

Paragraph (2)(a)

3. The plaintiffs then asked further particulars on the answers provided. In relation to (2)(a), particulars were asked whether the 1st defendant traded, barter traded and distributed the 1st plaintiff's products in Europe as its agent and if it was the agent, the plaintiffs asked for the particulars of the appointment. The answer that was given was that contracts regulating the barter trade were made between the 1st plaintiff, the 2nd defendant and Tjazhpromexport. The defendants had not answered whether it was appointed as an agent, and if so, how was it appointed. The appointment of an agent clearly requires an agreement between the parties. Particulars of an agreement ought to be given : paragraph 18/12/5 of the Supreme Court Practice 1999. These are material facts, not evidence.

4. Further, the particulars given only answered the part on the barter trade agreement, no particulars were given of the other items, namely trade and distribution. Hence, the plaintiffs are entitled to these particulars as well.

5. The plaintiffs also asked for details of the buyers' price and quantity of products and contractual terms for each of the transactions of trading, barter trading and distribution. The answer provided was that the 1st plaintiff as supplier will have, among its records, details of all such buyers' prices and quantities. The plaintiffs denied that there was any such transaction and hence they require the particulars. In my view, an answer that certain facts are within the other party's knowledge is not an answer at all, because each party is entitled to know the outline of the case that his adversary is going to make against him and to bind him down to a definite case : paragraph 18/12/63 of the Supreme Court Practice. The plaintiffs are entitled to these particulars.

Paragraph (2)(b)

6. In respect of (2)(b), the plaintiffs asked how were the 1st and 2nd defendants appointed as the exclusive distributor of the plaintiffs' products in Europe. The answer that was given was that there was an agreement dated 3 June 1995 between the 1st plaintiff and the 1st defendant, and also a letter of intent signed between the 1st plaintiff, Tjaschpromexport and the 1st defendant.

7. The documents produced do not correlate to the pleadings of the defendants which pleaded that the 1st and 2nd defendants acted as the distributor since May 1994. The defendants must provide particulars of the 1st and 2nd defendants' appointment as the exclusive distributor.

8. Also in respect of (2)(b), the plaintiffs asked for the particulars of the shareholders of the representative office called "MMK Europe". The answer given was that MMK Europe was a representative office of the 1st plaintiff and thus it had no shareholders; it was controlled by those who controlled the 1st plaintiff.

9. According to a document produced by the defendants, namely a letter dated 8 June 1995 signed by Mr Stavrikov, the representative office should be MMK AG Europa instead of MMK Europe. In my view, the plaintiffs are entitled to have the particulars of the representative office in the name of MMK AG Europa.

10. The plaintiffs also asked for particulars of the names, price and quantities of the transactions carried out by the representative office. The defendants pleaded that these are within the personal knowledge of the plaintiffs. Again, the plaintiffs stated that there had been no business transactions in respect of product distribution and asked for particulars. As I have stated earlier, it is not an answer to a request to say that certain facts are within the knowledge of the other party. The plaintiffs are clearly entitled to have particulars of these transactions.

Paragraph (2)(c)

11. In respect of (2)(c), namely the role of the 2nd defendant as the advisor to Mr Stavrikov and also as to the investment consultant of the 1st plaintiff, the plaintiffs asked how was the 2nd defendant appointed. The answer given was that it was by way of protocols dated 1 November 1994 and 15 February 1997. The contents of these two documents do not show any appointment of the 2nd defendant as the 1st plaintiff's investment consultant. It is the defendants' case that the 2nd defendant had been appointed since 1994, they must particularize their case on this.

Paragraph (2)(d)

12. In respect (2)(d), the plaintiffs asked for particulars of the financial institutions from which the 1st plaintiff obtained credit facilities in the sum of US$1.6 billion.

13. The answer given was that as the beneficiary of the credit facilities, the 1st plaintiff is well aware of the financial institutions. The 1st plaintiff denied that there was any credit facilities obtained and asked for particulars. Again, in my view, the plaintiffs are entitled to these particulars on the basis of what I have indicated earlier.

14. The plaintiffs also asked for the particulars as to when, where and how the 2nd defendant assisted the 1st plaintiff. The answer given was that the documentary evidence of the 2nd defendant's participation in the negotiation will be disclosed upon discovery. This is not a proper answer. The discovery of documents do not serve the function of identifying the material facts that a party is entitled to know from the other party's pleadings. The plaintiffs are in my view entitled to the particulars that they sought.