ZHANG SHOUEN AND ANOTHER v. STANDARD CHARTERED BANK (HONG KONG) LTD

HCMP 682/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 682 OF 2015

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D E C I S I O N

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Background

1.  This is an application by originating summons for pre-action discovery of documents pursuant to section 41 of the High Court Ordinance (Cap 4).

2.  The applicants are a couple who are the customers of the respondent bank (“the bank”).  The applicants opened a joint account with Standard Chartered Bank Singapore Branch in March 2010 (“the Account”).  The Account is booked in the Singapore Branch but has been serviced by representatives of the bank in Hong Kong since its opening.

3.  The representatives of the bank who acted as relationship managers to service the Account were Mr S Chen from 17 May to 27 December 2010, Ms T Wong from 28 December 2010 to 10 January 2012, Mr S Chen again from 11 January 2012 to 23 December 2013, and Ms V Tung from 24 December 2013 onwards.

4.  Over the period from 10 June 2010 to 30 April 2014, the applicants deposited a total of US$48.8 million into and withdrew a total of US$12.6 million from the Account, with a total net deposit of US$36.2 million.

5.  The applicants state that until December 2013, all the bank statements of the Account were in English, which they could not read.  They used the hold mail service of the bank which meant that all statements, advices and other correspondence concerning the Account were delivered to a hold mail custodian address in Singapore.  In place of those statements, they requested their relationship manager, Chen, to provide them with Chinese versions of the statements of the Account.  The first of these was sent to the applicants in April 2011.  All together ten such Chinese statements had been sent by Chen or his assistants via their official email accounts with the bank, or in one case delivered by Chen in person, to the applicants between April 2011 and October 2013.

6.  The 1^st applicant alleges that, in addition, he had personal meetings with Chen and another representative of the bank called Mr T Jiang once every quarter, in which they would inform him of the net asset value of the Account, which the 1^st applicant recalls to be in line with the figures indicated in the Chinese statements.

7.  The applicants allege that they made their investment and banking decisions in respect of the Account on the basis of the information contained in those Chinese statements. 

8.  According to the bank, there were active trades in investment and financial products in the Account between June 2010 and April 2014, with about 270 transactions involving different types of securities and financial products such as equities, mutual funds, structured products including equity-linked notes, premium currency investment and decumulators.  The applicants also applied to the Singapore Branch for loan facilities in around October 2010 and had successively signed a total of three facility letters.  The bank also contends that in the documents provided by Chen to the applicants, there were references to loan interest being charged against the Account which should have alerted the applicants to the existence of loan drawdowns.

9.  The applicants do not dispute that they signed two facility letters dated October 2010 and August 2011 respectively, but they deny having signed a third facility letter dated June 2012.  They also say that they had not become aware of any loan drawdown since the Account was opened.

10.  The applicants say that the Chinese statements show that the Account had a total investment value of over US$41 million as of 27 December 2013, but they were informed by the bank in around April 2014 that there were bank loans of some US$23.8 million in the Account as at 19 March 2014 and that the net asset value of the Account was approximately US$12.3 million.  It is the applicants’ case that only then did they realise the Chinese statements provided by Chen were inaccurate.  They have since engaged forensic accountants to produce a summary of the discrepancies between the Chinese statements and the official bank statements.  The summary states that apart from the first of the Chinese statements, there has consistently been an overstatement of the net asset value of the Account in the Chinese statements.  In the last three Chinese statements dated July, August and October 2013 respectively, the net assets were overstated to the tune of more than US$20 million.

11.  The applicants allege that the Chinese statements were inaccurate in that they did not indicate there were any bank loans, did not indicate there were overdrafts, inaccurately reported the amounts of cash and shares in the Account, and sought to portray the net asset value of the Account as lying within a relatively close range of the net amount deposited.

12.  The applicants contend that the acts and omissions of Chen and his assistants were performed in the course of their employment by the bank, for which the bank is vicariously liable.  As I understand the applicants’ case there is no allegation of misappropriation of funds as such, and the bank has stated that there was no transfer of funds from the Account to any unrelated third party.

13.  From May 2014 onwards the applicants’ solicitors have written to the bank and its solicitors requesting for documents as well as all telephone recordings relating to the Account between 2010 and 2014.  The bank has provided a large amount of documents to the applicants including bank statements, contract notes, product summaries and loan confirmations.  There was some argument between the parties in correspondence about the applicants’ entitlement to have copies of the telephone recordings.  The final position was that the bank had, pursuant to the requests of the applicants for recordings relating to equity trading, decumulator trading, foreign exchange linked investment and equity linked investment, retrieved 130 telephone recordings and agreed to allow the applicants to listen to those recordings together with two advisers or friends per visit (which, the bank says, is more generous than provided by the guidelines issued by the Hong Kong Monetary Authority).  The bank has required the applicants and their accompanying visitors to sign a non-disclosure agreement.  The bank has also refused to make copies of the recordings for the applicants.  For reasons that I need not go into, the applicants have not to date listened to the recordings at the bank’s office as offered by the bank.

14.  Dissatisfied with the stance taken by the bank, the applicants seek, by the originating summons herein issued on 25 March 2015, an order for discovery and production of all recordings of telephone conversations between the bank’s representatives and the applicants from 24 March 2010 to April 2014. 

15.  The bank has since filed an affirmation stating, among other things, that the exact date and time of all telephone calls between the applicants and all of the bank’s representatives are not known, and that

“…if the Bank is asked to retrieve all telephone recordings between the Bank’s representatives and the Applicants, the Bank will have to listen to each day of the telephone recordings of the extension numbers used by each of the relevant Relationship Managers, Customer Service Managers and other staff of the Bank who might have talked to the Applicants over a period of 4 years from 24 March 2010 to April 2014 so as to identify whether, and if so, on what dates and at what time there were telephone conversations with the Applicants.”

16.  In response, the applicants have in an open letter dated 16 June 2015 narrowed down their application to discovery of the 130 recordings already retrieved by the bank pursuant to requests previously made.

17.  For present purposes, Mr Bernard Man SC who appeared for the applicants accepted that the recordings are the property of the bank.  Clause 9.3 of the General Terms and Conditions (July 2014 version) which govern the Account provides:

“9.3 Subject to any applicable law, you consent to us recording and/or monitoring our telephone conversations with you (and you confirm you are authorised to, and do provide consent on behalf of all account signatories or authorised persons). … You agree that the recorded conversations remain our property and we may dispose of them after such period as we may determine. Not all telephone conversations will be recorded.”

I proceed therefore on the basis that the applicants do not have any proprietary right to the recordings.  Nor have they contended that they have any enforceable right to have possession of the recordings or a copy of them either pursuant to the Personal Data (Privacy) Ordinance (Cap 486) or as an implied term of the banking contract.  The sole basis on which the applicants have sought an order for disclosure and production of the recordings in question is pre-action discovery under s. 41 of the High Court Ordinance and Order 24 rule 7A of the Rules of the High Court. It is therefore to these provisions that I now turn.

The statutory provisions

18.  S. 41 of the High Court Ordinance provides as follows:

“(1) On the application, in accordance with rules of court, of a person who appears to the Court of First Instance to be likely to be a party to subsequent proceedings in that Court in which a claim is likely to be made, the Court of First Instance shall, in such circumstances as may be specified in the rules, have power to order a person who appears to the Court of First Instance to be likely to be a party to the proceedings and to be likely to have or to have had in his possession, custody or power any documents which are directly relevant to an issue arising or likely to arise out of that claim-

(a) to disclose whether those documents are in his possession, custody or power; and

(b) to produce such of those documents as are in his possession, custody or power to the applicant or, on such conditions as may be specified in the order-

(i) to the applicant’s legal advisers;

(ii) to the applicant’s legal advisers and any medical or other professional adviser of the applicant; or

(iii) if the applicant has no legal adviser, to any medical or other professional adviser of the applicant.

(2) For the purposes of subsection (1), a document is only to be regarded as directly relevant to an issue arising or likely to arise out of a claim in the anticipated proceedings if—

(a) the document would be likely to be relied on in evidence by any party in the proceedings; or

(b)   the document supports or adversely affects any party’s case.”

19.  RHC Order 24 rule 7A relevantly provides as follows:

“(1) An application for an order under section 41 of the Ordinance for the disclosure of documents before the commencement of proceedings shall be made by originating summons (in Form No. 10 in Appendix A) and the person against whom the order is sought shall be made defendant to the summons.

…

(3) A summons under paragraph (1) or (2) shall be supported by an affidavit which must-

(a) in the case of a summons under paragraph (1), state the grounds on which it is alleged that the applicant and the person against whom the order is sought are likely to be parties to subsequent proceedings in the Court of First Instance;

(b) in any case, specify or describe the documents in respect of which the order is sought and show, if practicable by reference to any pleading served or intended to be served in the proceedings, that the documents are relevant to an issue arising or likely to arise in the proceedings and that the person against whom the order is sought is likely to have or have had them in his possession, custody or power.

(3A) In the case of a summons under paragraph (1), paragraph (3)(b) shall be construed as if for the word “relevant”, there were substituted the words “directly relevant (within the meaning of section 41 of the Ordinance)”.

…

(6) No person shall be compelled by virtue of such an order to produce any documents which he could not be compelled to produce-

(a) in the case of a summons under paragraph (1), if the subsequent proceedings had already been begun; or

(b)   in the case of a summons under paragraph (2), if he had been served with a writ of subpoena duces tecum to produce the documents at the trial.”

20.  Further, Order 24 rule 8(2) provides:

“No order for the disclosure of documents shall be made under section 41 or 42 of the Ordinance, unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

The principles

21.  The relevant statutory provisions have been carefully examined by Zervos J in VTB Debt Centre LLC v Top Fuel Corporation Ltd (unreported, HCMP 1543/2013, 16 April 2014), although the focus of the inquiry in that case was different, which was whether there was a likely claim and who were likely parties to it.  In paragraph 44 of his decision, Zervos J set out the conditions for exercising the court’s power to order pre-action discovery.  Splitting the third condition identified by his Lordship into two, the requirements may be stated as follows:

(1) The applicant appears to be likely to be a party to subsequent proceedings in the court[1] in which a claim is likely to be made.  In order to satisfy the requirement that a claim is likely to be made, the applicant must show a claim “may” or “may well” be made if discovery is granted.

(2) The respondent appears likely to be a party to such proceedings.

(3) The respondent appears likely to have or to have had in his possession, custody or power the document requested.

(4) The requested document is “directly relevant” to an issue arising or likely to arise out of that claim.  “Direct relevance” is shown only if:

(a) the document would be likely to be relied on in evidence by any party in the proceedings; or

(b) the document supports or adversely affects any party’s case.

(5) The applicant must satisfy the court that the order for pre-action discovery is necessary either for disposing fairly of the cause or matter or for saving costs.[2]

22.  The first four requirements as stated above are jurisdictional conditions.  Unless they are satisfied, the jurisdiction to order pre-action discovery does not arise.  If they are satisfied, the court has a “power” – in my view a discretionary power – to order pre-action discovery of the document in question.  The fifth requirement means that the court will not exercise its power to make an order unless discovery is necessary either for disposing fairly of the cause or matter or for saving costs.  Subject to this, however, the discretion seems to me to be an unfettered one to be exercised in all the circumstances of the case.

23.  There are in addition important requirements imposed by Order 24 rule 7A including, in particular, the need for an affidavit that satisfies the requirements of rule 7A(3) as modified by rule 7A(3A).  This means that the affidavit must:

(1) state the grounds on which it is alleged that the applicant and the respondent are likely to be parties to subsequent proceedings in the court;

(2) specify or describe the document in respect of which pre-action discovery is sought;

(3) show, if practicable by reference to any pleading intended to be served in the proceedings, that

(a) the document is “directly relevant”[3] to an issue arising or likely to arise in the proceedings, in the sense that

(i) the document would be likely to be relied on in evidence by any party in the proceedings; or

(ii) the document supports or adversely affects any party’s case; and

(b) the respondent is likely to have or have had the document in his possession, custody or power.

(4) Where there is relevant evidence to meet the requirement in rule 8(2) that discovery is necessary either for disposing fairly of the cause or matter or for saving costs, the affidavit should of course also cover those matters.

24.  While s. 41 and rule 7A both refer simply to “document” without express mention of “class of document” (as there is in Order 24 rule 7 which concerns specific discovery), I do not think this precludes the court from compendiously ordering pre-action discovery of a class of documents as such (see by analogy Cheung Kai Wing v Mok Sheung Shum t/a Mok Sum Kee [1993] 2 HKC 113, 120), provided it is shown that all the documents in the class meet the jurisdictional requirements including, in particular, that of direct relevance.  As Mr Man SC accepted, it is not enough to show that some only of the documents in the class meet the threshold condition, for the court has no jurisdiction to order discovery of documents only because some other documents belonging to the same class fall within the statutory provisions.  The applicant has to show that each document in the class is a document that falls within s. 41 and rule 7A.  The wider the class is drawn, the more difficult it will be for the applicant to show that the documents within it all pass the threshold.  A similar principle applies in relation to specific discovery, in that where a claim for specific discovery of a class of documents is made, the class must not be described so widely as to include documents which are not relevant to the issue: Molnlycke AB v Procter & Gamble Ltd (No. 3) [1990] RPC 498; see also Tullett Prebon (Hong Kong) Ltd v Chan Yeung Fong Nick (unreported, HCA 2197/2009, 9 June 2011) at §§77-84 in the context of discovery from third parties.

25.  It is however important to bear in mind two significant differences between specific discovery pursuant to rule 7 and pre-action discovery pursuant to s. 41 and rule 7A, quite apart from the stage at which the application may be made.

26.  First, the test of relevance for specific discovery under rule 7 is that the document or class of document “relates to one or more of the matters in question in the cause or matter”.  This has, since at least the decision in Compagnie Financière et Commerciale du Pacifique v The Peruvian Guano Co (1882) 11 QBD 55, 62-63,[4] been taken to mean that a document is relevant if it “contained information either directly or indirectly enabling the party seeking discovery either to advance his own case or to damage that of his adversary, or which might fairly lead to a train of inquiry which might have either of those consequences”.[5] 

27.  In the case of pre-action discovery under s. 41 and rule 7A, in contrast, the legislation has made a deliberate departure from that generous test of relevance.  A document is susceptible to pre-action discovery under those provisions only if it is “directly relevant to an issue arising or likely to arise out of [the] claim”, and it is only to be so regarded if “(a) the document would be likely to be relied on in evidence by any party in the proceedings; or (b) the document supports or adversely affects any party’s case”.  The first limb of this two-pronged test imports a condition of likelihood.  “Likely” is used in a number of places in s. 41 and it seems to me that the word “likely” in s. 41(2)(a) has the same meaning as it has in s. 41(1), that is to say, “may well” or “reasonable prospect”: see VTB Debt Centre LLC v Top Fuel Corporation Ltd, supra, at §37.  The applicant has to show that the document may well be relied upon in evidence by a party in the proceedings.  In contrast, the second limb of s. 41(2) is that the document supports or adversely affects a party’s case, not merely that it is likely to do so.  That said, in a case where the applicant has not seen the document in question, he can only reasonably be expected to prove this on a balance of probabilities. 

28.  Pre-action discovery is thus decidedly not intended to be simply general discovery or specific discovery taking place before commencement of an action.  It is not intended to extend to “background” documents or documents simply leading to a possible “train of inquiry”, but is confined to documents that are “directly relevant” within the meaning of s. 41.

29.  Direct relevance must be demonstrated by the affidavit supporting the application, “if practicable by reference to any pleading served or intended to be served in the proceedings” (rule 7A(3)).  The reference in the rule to pleading and the requirement of a draft pleading “if practicable” underlines the particularity required of the allegation of relevance.  In any event the affidavit should explain in sufficient detail what the intended claim is, what issues arise or are likely to arise out of it, and how the document sought is directly relevant to such issues in the sense defined in s. 41(2).  As Zervos J stated in VTB at §37:

“An applicant, therefore, is expected to have some understanding of and justification for the case he has against a potential defendant when applying for pre-action disclosure, and this needs to be sufficiently particularized to avoid any unwarranted or fishing applications. The burden of persuasion rests with the applicant to show the nature of the claim that he intends to make, that he and the potential defendant are likely to be parties to the claim and that the potential defendant is likely to have documents that are directly relevant to issues in the claim. This will depend on the clarity and particularization of the issues submitted by the applicant that are likely to arise out of the claim that may be made.”

30.  It needs to be emphasised that because the jurisdiction to order pre-action discovery does not arise unless the documents in question are directly relevant to an issue arising or likely to arise, it is important that the issues be identified by the applicant.  As Waller LJ said in Bermuda International Securities Ltd v KPMG [2001] Lloyd’s Rep PN 392 at §26 (cited with approval in Black v Sumitomo Corporation [2002] 1 WLR 1562 at §76):

“The new rule allows the court in certain circumstances to order pre-action disclosure. … The circumstances spelt out by the rule show that it will ‘only’ be ordered where the court can say that the documents asked for will be documents that will have to be produced at the standard disclosure stage. It follows from that, that the court must be clear what the issues in the litigation are likely to be i.e. what case the claimant is likely to be making and what defence is likely to be being run so as to make sure the documents being asked for are ones which will adversely affect the case of one side or the other, or support the case of one side or the other.” [6]

31.  The second difference is that in an application for specific discovery, rule 8(1) means that no order for discovery will be made if discovery is not necessary either for disposing fairly of the cause or matter or for saving costs.  The burden lies on the party resisting discovery (as opposed to production) to show that discovery is not so necessary: Innovisions Ltd v Chan Sing Chuk & ors [1992] 1 HKC 348, 351. 

32.  In the case of pre-action discovery, the onus is reversed.  Order 24 rule 8(2) provides that no order is to be made under s. 41 “unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs”.  This clause, found also in rule 13(1) which concerns the production of documents generally, places the burden squarely on the applicant to satisfy the court that the order is necessary in the manner described, not only that the document is relevant or that discovery is desirable: In re Au Shui-yuen Alick [1991] 1 HKLR 525, 531; Dolling-Baker v Merrett [1990] 1 WLR 1205, 1209. 

33.  In the context of pre-action discovery, if the documents can be shown to be “directly relevant” in the sense defined in s. 41, they will also necessarily be relevant in the Peruvian Guano sense, and can therefore be expected to be disclosed in the ordinary course of the action after proceedings have been commenced.  It is in my view therefore incumbent upon an applicant for an order for pre-action discovery to show, not only that discovery of the document in question is necessary, but that discovery of the document before commencement of the action is necessary.  The precise justification will vary from case to case, but an obvious reason would be where a key document is needed by the plaintiff before he can properly plead a potentially good claim.  As was recognised in the Final Report of the Chief Justice’s Working Party on Civil Justice Reform (2004) at §487, the pre-action discovery regime is intended to strike

“a reasonable balance between the need to protect against harassment and fishing applications on the one hand and the need to enable a potentially meritorious plaintiff to bring a claim which could not effectively otherwise be brought”.

34.  It should be noted that in determining whether there is power to order pre-action discovery as well as whether to exercise the power under s. 41 of the Ordinance, modern English authorities are likely to be of limited direct assistance and care must be taken in relying on them because of the different regimes adopted in the two jurisdictions.  One significant difference is immediately apparent on a reading of the rules.  Rule 31.16(3)(d) of the (English) Civil Procedural Rules provides there is power to order pre-action disclosure only where, inter alia, such disclosure is “desirable” in order to “(i) dispose fairly of the anticipated proceedings; (ii) assist the dispute to be resolved without proceedings; or (iii) save costs”.  This is to be contrasted with RHC rule 8(2) which uses the word “necessary” instead of “desirable”.  Further, as Zervos J pointed out in VTB Debt Centre LLC v Top Fuel Corporation Ltd, supra, at §34, the English system is marked by the presence of pre-action protocols (as well as a practice direction on pre-action conduct where no pre-action protocol applies), which require the pre-action disclosure of key documents relevant to the issues in dispute.  Neither such protocols nor that practice direction have been adopted in Hong Kong.  In this jurisdiction, so far as the use of pre-action discovery to promote settlement is concerned, the Final Report on Civil Justice Reform expressly stated (at §488):

“Since pre-action protocols have not been recommended for general adoption in Hong Kong, it is not proposed to specify as a discretionary factor, the desirability of pre-action disclosure in aid of early settlement.”

The present case

35.  Although the Account was opened with the Singapore Branch whereas the respondent here is the bank in Hong Kong, Mr Dawes SC who appeared for the bank did not dispute that the first three of the five requirements referred to in paragraph 21 above are met in this case.  On the evidence it is clear that a claim is likely to be made by the applicants against the bank, and it is accepted that the telephone recordings are in the bank’s possession.

36.  The crucial question is whether the fourth requirement is satisfied.  Unless there is sufficient evidence that the documents sought are directly relevant to an issue arising or likely to arise in the intended proceedings, the jurisdiction to make the order does not arise.  The evidence in this case, however, provides scant information of the intended claim or the issues that may arise.  In the supporting affirmation, the 1^st applicant stated:

“8. My wife and I will seek relief against the Bank for … Chen’s failure to follow our instructions in respect of the operation of the Account, and for forgery and misrepresentations in respect of Facility Letters. But we have been advised and believe that it is not necessary to detail all such claims in this affirmation.

9. We have been advised and believe that it would suffice for us to set out, as we do below, the false portfolios … Chen and his assistant had sent to us.  It would be obvious that we have a good claim against the Bank, and hence the Bank is a likely party in subsequent proceedings in the High Court.”

37.  After referring to the circumstances in which they obtained the Chinese statements, how those statements were inaccurate and when they discovered the true position of the Account, the 1^st applicant continued:

“20. I have been advised and verily believe that the Telephone Records are directly relevant to an issue arising or likely to arise out of our claim in the anticipated proceedings. They would evidence precisely what representations had been made to us by … Chen and other officers of the Bank, and also whether they made the misrepresentations negligently or fraudulently. They would also be relevant to whether, and if so what, explanation had been given by the Bank to us as to the risk, return and performance of various investment products.”

“Telephone Records”, in that affirmation, meant all recordings of telephone conversations between the bank’s personnel and the applicants from 24 March 2010 to April 2014.

38.  I have to say that the affirmation is as confusing as it is inadequate.  First, it is said that the applicants will seek relief against the bank for Chen’s failure to follow instructions, but there is nothing in the two affirmations filed by the applicants suggesting that Chen had failed to follow their instructions in respect of the operation of the Account, or identifying what instructions Chen is alleged to have failed to follow.  The applicants explained at length how the Chinese statements were given to them and in what ways they transpired to be inaccurate, but said nothing other than the bare assertion quoted above that could show any conceivable basis for alleging that Chen had failed to follow their instructions. 

39.  Then it is said that the applicants will seek relief for forgery and misrepresentations in respect of facility letters.  It seems to be alleged that the clients’ signature on the third facility letter was forged.  It is entirely unclear, however, what the alleged misrepresentations were.  It is simply impossible to discern from the evidence or otherwise how the Telephone Recordings would be directly relevant to any issues in these claims.

40.  There is an assertion that the Telephone Recordings would be relevant to the explanations (if any) given by the bank to the applicants of the risk, return and performance of various investment products, but there is no hint whatsoever in the evidence that the applicants wish to complain, or have any prima facie grounds for complaining, of any mis-selling of products or negligent advice given about investment products.  The request for documents for this purpose seems to me plainly to be a fishing exercise.

41.  The affirmation also asserted that the Telephone Recordings would show precisely what representations had been made to the applicants by Chen and other bank officers.  It is wholly unclear what kind of representations the applicants were referring to.  There is simply no evidence that Chen or others made any oral misrepresentations causing loss and giving rise to a likely claim.  Since the applicants were themselves party to the telephone conversations, it should not be overly onerous to expect them at least to give an idea of what they were looking for.

42.  Narrowing the request down to the 130 recordings already retrieved by the bank does not, in my view, address the problem.  The 130 recordings relate to the placing of orders for the investment transactions entered into for the Account and fall within the period from 22 June 2010 to 18 June 2014.  The applicants have not in any way described the nature of the contents of these recordings, what they think they are likely to contain and what in particular they consider to be useful and necessary for them to obtain prior to instituting a claim against the bank.  The applicants have in my opinion failed to show what the likely issues in question are in the claim that they are going to bring against the bank and how each of the 130 recordings is directly relevant to the issues.

43.  A disciplined and highly focussed approach is in my view necessary in pre-action discovery. The jurisdiction was never meant to provide pre-action general discovery of documents or even pre-action specific discovery of background or “train of inquiry” documents.  The primary legislation limits pre-action discovery to documents directly relevant to the issues, and the rules require direct relevance to be shown by evidence.  The rules also require a draft pleading, if practicable.  That gives one a sense of the level of particularity in the evidence expected.  In ordinary discovery, relevance is of course generally determined with reference to the pleadings: see eg Re Estate of Ng Chan Wah (unreported, HCAP 5/2003, 5 March 2003).

44.  In the present case no draft pleading in whole or in part has been produced.  No explanation has been given why it was impracticable to supply it.  Had the issues likely to arise been detailed in the affirmation itself, the lack of an exhibited draft pleading need not in my view be fatal.  But the affirmation itself neither provided sufficient particulars of the intended claim nor showed what issues are likely to arise and how the documents sought are directly relevant to the issues.  In my judgment the applicants have signally failed to establish the direct relevance of the documents sought to any issues likely to arise in the claim.

45.  Mr Man SC said it would be difficult to imagine that a heavily litigated US$24 million claim would not somehow involve the telephone recordings in the evidence.  I do not think this is the correct approach to the question at hand.  One has to start with the nature of the intended claim, the constituent elements of the cause of action, the allegations being made by the intended plaintiff, and the issues that are likely to arise.  This requires an applicant to supply meaningful details of the intended claim, so that the potential defendant can properly respond to the application and evidence, and so that the court can see from the combined evidence of the parties the likely issues and assess, by reference to the issues, the direct relevance, if any, of the documents sought.  The applicants’ failure to establish direct relevance in this way is in my view fatal to the application. 

The requirement of rule 8(2)

46.  It is therefore unnecessary to consider the further question whether the applicants have demonstrated that the order sought is necessary either for disposing fairly of the cause or matter or for saving costs.  Mr Man SC acknowledged that he could already plead a non-demurrable statement of claim in relation to the allegedly inaccurate Chinese bank statements on the basis of the materials in the applicants’ possession.  He further submitted that the falsity of the Chinese statements had not been disputed by the bank, that on that basis the applicants have a strong prima facie cause of action, and that the telephone recordings were sought for “refinement” of the pleading, to “dot the i’s and cross the t’s”.  I have some doubt whether in these circumstances pre-action discovery can be said to be necessary for either of the two purposes specified in rule 8(2).  If it is said that pre-action discovery should be ordered simply because it would save costs by avoiding the need for amendment (however minor) of pleadings after discovery in the ordinary way, this might mean an order for pre-action discovery should be made in a great many cases, perhaps even almost as a matter of course.  This would have the potential of generating a great deal of expensive and time-consuming satellite litigation even before the actions proper have been commenced.  I very much doubt that was the legislative intention behind s. 41 and rule 7A.  As it is, however, I need not express any concluded view on the requirement of rule 8(2) in this case.

Disposition

47.  For the above reasons, the application is dismissed. There will be a costs order nisi in favour of the bank.