STANDARD CHARTERED BANK v. SHEM YIN FUN AND ANOTHER

CACV 1984/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 1984 OF 2001

(ON APPEAL FROM HCMP NO. 3289 OF 1998)

_________________________

_________________________

_________________________

REASONS FOR JUDGMENT

_________________________

Hon Rogers VP:

1. This is an appeal from an interlocutory order made by Waung J on 26 July 2001. This case came before the judge on that day on a pre-trial review following directions which had been given by the judge on 15 May 2001. At the pre-trial review the judge made an order for discovery which is the subject of this appeal. At the hearing of the appeal, the plaintiff's appeal was dismissed with costs, with reasons to be handed down later. This we now do.

2. The originating summons in this action was issued on 13 July 1998. The relief sought on the summons was payment to the plaintiff bank of all monies and interest due on a mortgage which had been made some two years earlier and for vacant possession of the mortgaged premises, namely, Flat A, 15th Floor, Celeste Court.

3. The first trial of this action took place in September 1999. At that trial the judge did not hear oral evidence but decided the matter purely as a matter of law. The appeal was heard in March 2000. The Court of Appeal, in a very short judgment, indicated that there were remaining issues of fact which had yet to be decided and had to be tried. The Court of Appeal ordered that there should be pleadings and remitted the matter for trial before a different judge.

4. Pleadings have been exchanged and the matter was set down for trial to commence on 15 May 2001. However, the first defendant had unfortunately died in July 2000. His widow, the 2nd defendant, had applied for legal aid but that had not yet been granted and, furthermore, the proper representation of the estate of the 1st defendant had not been settled.

5. Not surprisingly, therefore, Waung J adjourned the trial of the action and the matter came before him on 26 July on a pre-trial review. It is pertinent to mention that on the previous day there had been no court sittings, due to a typhoon and on 26 July the judge was thus faced with coping with the list for 2 days.

6. There are issues to be tried as to whether the defendants were the beneficial owners of a flat or whether they were accommodation parties, the true owner being their daughter-in-law. The defendants had given a power of attorney over the flat to their daughter-in-law. That had been used in relation to the letting of the flat. The mortgage deed was signed by the daughter-in-law. For present purposes it suffices to say that the indication in the papers is that the mortgage was entered into as a security for banking facilities provided for companies unconnected with either the defendants, the mortgagors, or their daughter-in-law.

7. Apart from technical defences in relation to the power of attorney, the major defence which has been raised on the pleadings is that the mortgage constituted an unconscionable bargain and that the defendants had not been properly advised and had not been told to seek independent advice.

8. In relation to this there are, amongst others, witness statements from the plaintiff's solicitors. One is from a partner of the plaintiff's solicitors firm who had responsibility for the preparation of the mortgage documentation and another is from one of his then assistants.

9. As part of the process of discovery, it would appear that the defendants' solicitors had been given inspection of the plaintiff's solicitors conveyancing file prior to the first trial. Although the defendants' solicitors had requested approximately fifty pages of documents from the files, only five were supplied. An application was made for discovery prior to the first trial but was not proceeded with. In view of the course which was taken at the first trial, that is, perhaps, not surprising.

10. The matter of discovery was not raised again, either in correspondence or orally, until the pre-trial review on 26 July. The judge was evidently not best pleased by the fact that the question of discovery had not been raised at least in correspondence prior to the hearing. There was no formal application nor any supporting affidavit. The judge ordered that "the plaintiff do produce by 10 August 2001 the Deacons file and all relevant documents relating to the grant of the loan."

11. The judge made the order without giving reasons because, as explained in a letter from his clerk, the order was not opposed by the plaintiff at the hearing. We were informed by Mr Merry, who appeared on behalf of the plaintiff, that, at the hearing, he was taken somewhat by surprise by the application on behalf of the defendants for discovery but assessed the likelihood of the request being granted as such that he did not need to make any strenuous opposition thereto.

12. There has been no stay of the judge's order. Indeed no stay was ever asked for, either from the judge below or another judge in his absence, or from this court. This appeal has been brought on as a matter of urgency because the second trial of this action is due to commence on 17 September.

13. The points taken on this appeal are, first, that the application for discovery was made without any summons or affidavit or notice of any kind; second, that the application should have been made much earlier; third, that the defendants' lawyers have already inspected the file and have been provided with documents; and fourth, that the documents relating to the granting of the loan are not relevant and neither are some of the documents in the conveyancing file.

14. In relation to the first point, although there was no summons or notice and there was no supporting affidavit, there are unusual circumstances in relation to this case, some of which I have already outlined. The fact that the defendants did not have a full legal aid certificate until very late is one such factor. On 26 July, the judge was faced with the situation where he had to make a decision then and there. This case had unfortunately been bedevilled by a first trial and an appeal, which has entailed the matter being heard all over again. The second trial was due to come on early in the new term. The judge was hearing the matter shortly before the long vacation and there was clearly no time to adjourn the matter for further consideration. In the circumstances no doubt it would have been helpful for the judge to have had a formally prepared application. He, himself, was well aware of that fact, but exercised his discretion to go ahead and consider the matter. For that he cannot be criticised.

15. The fact that there have been prior opportunities for discovery, again, cannot be determinative of the matter. The fact that there has already been inspection of the solicitors' file is only partially relevant because copies of those documents which the defendants' solicitors regarded as relevant, although presented to the defendants' counsel for examination at the first trial, have not been provided on a permanent basis.

16. In my view, because this case is coming on for trial in a very short time, this court has to be extra cautious in exercising its functions. Any further delay of this matter is clearly undesirable. The order made by the judge is a matter of case management. That is primarily a matter for the trial judge unless injustice can be shown to be likely. This court will, as a rule, only interfere with case management decisions of a trial judge where it can be shown that the decision was either so clearly wrong that it cannot be allowed to stand or otherwise injustice will be occasioned.

17. One defence, which is sought to be raised, is that the plaintiff has acted unconscionably in the mortgage transaction. Specifically this ground turns upon the allegation that the defendants were not given proper advice as to the transaction which was being entered, albeit apparently unknowingly, on their behalf and that adequate steps were not taken to insure that they were given advice to take independent legal advice prior to the transaction being entered into it. One of the matters which might be relevant to this defence is the degree of risk to the defendants involved in the transaction.

18. Mr Merry complains that many of the documents relating to the plaintiff's dealings with the borrowers may be irrelevant. It is said that the production of the documents ordered by the judge may give rise to irrelevant cross-examination or other evidence at the trial. It is also said that in view of the manner in which the application was made at the pre-trial review it is not known what were the documents which the judge considered should be produced.

19. There are a number of matters to be observed in this regard. In the first place the judge confined the documents to be produced from the plaintiff's files to relevant documents. Those must be documents which are relevant to the issues raised on the pleadings. It is for the plaintiff's solicitors to decide, in the first place, what are the relevant documents. If there were any doubt about the relevance of particular documents guidance could be sought from the court. In the second place, the documents ordered were limited to those relating to the granting of the loan and, hence, there was, in that respect, some limitation also.

20. The fact that documents are disclosed on discovery does not dictate that irrelevant matters can be raised or cross-examined on at trial.

21. In the present circumstances, it does not avail the plaintiff to complain in this court that it should not be put to the trouble of deciding what are relevant documents. No attempt has, apparently, yet been made to ascertain whether that task does, indeed, involve any difficulty, either by reason of the volume of documents or otherwise.

22. Mr Merry sought to argue that some of the categories of documents referred to in the defendants' counsel's skeleton arguments were irrelevant. For my part I would not be prepared to rule out any such categories on the grounds of relevance.

23. In argument, Mr Merry did not pursue, at any rate with any vigour, the points in relation to the solicitors' conveyancing file. No doubt that was partly due to the history of the matter. It appears that the defendants' solicitors were given inspection of that conveyancing file as long ago as July 1999. Although the partner of the plaintiff's solicitors' firm in charge of the case originally said, on affidavit, that inspection was without his knowledge, it has now been conceded, in the light of evidence filed by the defendants' solicitor, that he did have such knowledge, although he now has no recollection. So, too, it might be added that the insinuation, contained in that partner's affidavit, that, somehow, copies of one of the documents contained in that plaintiff's solicitors' conveyancing file were surreptitiously obtained, is now withdrawn. It is conceded that the defendants' solicitors were given those documents by the plaintiff's solicitors. In the circumstances it is clear that the defendants' solicitors have already had sight of the documents and, indeed, have selected the documents that they considered relevant. I see no reason to disturb the judge's order.

24. For these reasons this appeal was dismissed. I would only add that it would seem that if the plaintiff is put to any difficulty in preparing the documents for discovery prior to the trial, insofar as that difficulty is caused by the fact that there are only a few days left prior to the trial, that difficulty is of their solicitors' own making.

Hon Le Pichon JA:

25. I agree.