WAH SUN HONG LTD v. WONG LEE YUK PING AGNES

HCA 333/2016

[2019] HKCFI 993

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 333 OF 2016

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D E C I S I O N

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1.  The plaintiff seeks an order for part of the costs of the interim preservation order to be borne by Cheng, Kwok & Chang, Certified Public Accountants (“CKC”). They say it was necessitated by the attitude of CKC as CKC had refused by correspondence to give an undertaking to preserve the documents.

2.  I note from the correspondence that the plaintiff had, through their solicitors, tried to elicit the necessary undertaking to preserve from CKC about over a year ago, the first letter relied on being 1 February 2018.  Apart from two holding replies, CKC never gave any concrete reply.  In view of the imminent expiry of the seven-year period for auditors to preserve documents, the plaintiff took out the present application for interim preservation order against CKC.

3.  CKC immediately responded.  They did not oppose what was sought in the summons but they opposed the application for costs against them.  Mr Chang of CKC frankly told this court that they had been advised by their lawyers not to reply to the correspondence from the plaintiff insofar as the interim preservation order was concerned.

4.  In my view, the starting point is that CKC is a non-party.  They are a firm of auditors with professional duties and accounting practices to follow.  Having heard the submissions, I have considered the following points.  If CKC had been willing to give an undertaking:

(1)   What undertaking should they give? The letter dated 1 February 2018 did not set out the schedule of documents to which the undertaking should apply. 

(2)   The letter dated 1 February 2018 even imposed an onerous duty on CKC to keep the letter confidential and not to tip off Mrs Wong by disclosing the contents of the letter or the demands made by the plaintiff on CKC. 

(3)   Even if CKC had reasonably agreed to preserve documents, I do not think they had a duty to preserve the documents beyond the seven‑year period required by usual accounting practice or the law.  In the premises, the plaintiff would still have to come to court in order to get a preservation order to cover the period after those seven years.  It was apparent that this trial would be fixed for some time in the period after expiry of those seven years for preserving documents by an auditor.

(4)   As pointed out by Mr Chang of CKC, the letter of 1 February 2018 indicated that the plaintiff would apply to court for discovery and preservation orders if CKC had not replied by 7 February 2018.  So CKC expected an application soon after that day, and it took over a year before the plaintiff came to court.

5.  This court appreciates the good sense of the plaintiff in trying to avoid court proceedings with a third party.  On the other hand, CKC could have responded sensibly with a letter to the other side, imposing conditions for undertakings and so forth.  It would have greatly saved the court’s time.

6.  However, taking all matters into account and looking at things in the round, I do not consider CKC, being a third party, as being so unreasonable as to expect a proper court order requiring it to disclose documents before giving the necessary undertaking.  As things turned out, soon after the plaintiff issued the present summons, CKC had agreed to an order being granted.  They had not stood in the way of the plaintiff’s application. 

7.  Taking all circumstances into account, I do not think it is appropriate for the court to make an order for CKC to bear any part of the costs of this application.  The costs will be as I have previously ordered: costs of compliance by CKC to be borne by the plaintiff in the first instance and all costs relating to this summons to be in the cause as between the plaintiff and the defendant.