BONDS GROUP CO LTD v. KWAN DANIEL AND OTHERS

HCA 1861/2017

[2019] HKCFI 2757

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1861 OF 2017

________________________

________________________

_________________________________

DECISION

_________________________________

Introduction

1.  By paragraph 1 of the summons filed by the Defendants (“Ds”) on 16 May 2019 (“the Summons”), Ds applied for the specific discovery of various documents, 4 classes of which remain contested by the Plaintiff (“P”). The 4 classes of contested documents are: -

(1)     All correspondence between P and Propertywise in relation to the due diligence work on Discreet Ltd (“the Company”) and the residential development known as Grand Riviera (“Class (e) Documents”); 

(2)     All correspondence between P and Visionary in relation to the due diligence work on the Company and Grand Riviera (“Class (f) Documents”); 

(3)     All subsequent, supplemental, additional, alteration or cancellation agreements between P and Propertywise in relation to the due diligence work on the Company and Grand Riviera (“Class (g) Documents”); and

(4)     All subsequent, supplemental, additional, alteration or cancellation agreements between P and Visionary in relation to the due diligence work on the Company and Grand Riviera (“Class (h) Documents”).

 (Collectively, “the Contested Documents”)

2.  I heard substantive arguments in relation to the discovery of the Contested Documents today.  My decision is to (1) order discovery of the Contested Documents; and (2) order P to pay all costs of and incidental to paragraph 1 of the Summons, including costs previously reserved, to Ds, summarily assessed by me, with Certificate for Counsel, at HKD 239,125, forthwith (“the Decision”). 

3.  My reasons for the Decision are as follows. 

Background Facts

4.  According to the Amended Statement of Claim (“ASoC”), P’s claim against Ds is based on a homemade Chinese document dated 20 April 2017 (“the Homemade Document”) on the purchase of 70% of the shares in the Company at the price of HKD 245 million. 

5.  P’s case is that P accepted Ds’ repudiation of the Homemade Document in June or July 2017, as a result of which P lost, inter alia, the benefit of the Homemade Document, and is entitled to damages. 

6.  Ds’ case is that even if they were in breach of the Homemade Document, clause 10b of the same limited the quantum of damages payable by Ds to P to 5 times the amount of all expenses spent by P in due diligence exercises, subject to a ceiling of HKD 2 million, and the clause is valid. 

7.  On 14 June 2019, Ds filed an affirmation, paragraphs 32 to 37 of which explained, with full particulars, why the amount of damages to be paid by Ds could be zero, and why Ds would need to inspect the Contested Documents in order to verify their position on quantum. 

8.  P never filed any affirmation to answer paragraphs 32 to 37 of Ds’ affirmation substantively.  P did, however, file a short affirmation on 20 August 2019 to update this Court on solicitors’ correspondence. 

Ds’ Submissions

9.  Mr Meyrick Wong, Counsel for Ds, submits, inter alia, that it is plain and obvious that the Contested Documents are directly relevant to the issue of quantum, and clearly necessary for the resolution of the dispute on quantum, and that as such P should state on affidavit whether it has or had in its possession custody or power all of the Contested Documents. 

P’s Submissions

10.  Mr David Morrison, Solicitor for P, submits, inter alia, that (1) P’s expenses on due diligence exercises would only be relevant if P claimed those costs, but P did not; and (2) there was no basis for Ds to assume the Contested Documents existed.  Based on these two purported grounds of objection, P asks that the Summons be dismissed with costs. 

My View

11.  In gist, I agree with Ds’ submissions, and disagree with P’s. 

12.  On the “relevance” point, it is with respect extraordinary for P to have focused entirely on its own pleaded case and ignored Ds’ pleaded case. Relevance in civil litigation is determined by the issues in dispute as revealed by examining the pleadings filed by all parties.  P’s expenses on due diligence work may not be relevant to P’s case, but they are relevant to Ds’ case, and as such they are relevant in this litigation for the purposes of specific discovery applications. 

13.  On the “existence” point, it is also extraordinary for P to say there was no basis for Ds to assume correspondence or related documents existed.  As P had admitted, certain documents in P’s possession, such as service agreements, invoices, cheques and receipts, etc, had been disclosed voluntarily.  If those documents which existed were obviously created for the purpose of being dispatched to others (a corporation does not normally sign an agreement with itself, or issue an invoice to itself, or issue a cheque to itself, or issue a receipt to itself), one would be quite entitled to assume (as Ds do) that some form of cover letter or cover email must have existed.  More importantly, if the documents did not exist, all that P would have to do would be to say so on affidavit, which P never did. 

14.  In my view, the Contested Documents are necessary for Ds to run their pleaded case.  Ordering disclosure would be beneficial to the just and effective resolution of this litigation.  There is no substance in P’s two purported grounds of objection.  I order P to file and serve, within 14 days from today, an affidavit stating whether it has in its possession, custody or power the Contested Documents, and if the same or any of them had been but is not now in P’s possession, custody or power, stating when P parted with the same and what has become of the same. 

Costs

15.  Costs should follow the event.  Ds are the winner.  All costs of the Summons should be paid by P to Ds. 

16.  On the question of Certificate for Counsel, in my judgment it was plainly necessary for Ds to engage a “senior junior” Counsel to assist in the preparation of this matter, and to argue the Summons, given the great importance of the Contested Documents to Ds’ case.  As it turned out, Mr Wong, Counsel for Ds, had in fact been most helpful to this Court. 

17.  On the quantum of costs, Ds claim HKD 240,425.  Pursuant to paragraphs 13 & 14 of Practice Direction 14.3, I examined each item in Ds’ Statement of Costs, and also the final figure.  I take the view that Item C3(e) is excessive, as this hearing lasted just under 1 hour.  There should be a deduction of HKD 1,300.  All other sums claimed, including all sums of Counsel Fees claimed, are reasonable and proper. 

18.  Taking a broad-brush approach in assessing quantum of costs, I consider a total figure of HKD 239,125 to be fair and reasonable. 

Final Remarks

19.  All litigants and their legal representatives are reminded that they all have a general duty to “act sensibly” in litigation.  That had been emphasized in, for example, (1) the Judgment of the Court of Appeal, dated 31 August 2017, in Asgain Co Ltd v Cheng Ka Yan [2017] 4 HKLRD 779; (2) the Judgment of Mr Registrar KW Lung (as DHCJ KW Lung then was), dated 29 August 2017, in Glory Sky Finance v Chen Jianhua (HCMP 2482 / 2014); (3) the Letter from Mr Registrar KW Lung to the Chairman of the Bar dated 4 September 2017; and (4) the Bar Circular No. 168/17 dated 3 October 2017, all of which predated P’s opposition to the Summons.  For applications for specific discovery in particular, if all parties act sensibly, substantial costs on unnecessary arguments can be saved.  P’s decision to oppose paragraph 1 of the Summons appears to me to be far from sensible, especially since complying with that paragraph would most probably have been substantially cheaper than arguing against it.  The obvious litigation risk of losing paragraph 1 of the Summons, and being ordered to pay costs to Ds forthwith, could have been easily avoided had P acted more sensibly.  I hope that in the future, all litigants and their legal representatives would bear their general duty to “act sensibly” in litigation in mind.

20.  I do thank both advocates for their most able assistance.