ALLIED GROUP LTD. AND ANOTHER v. THE SECRETARY FOR JUSTICE AND ANOTHER

HCA4246/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4246 OF 2001

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D E C I S I O N

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1. This is the plaintiffs' appeal against the decision of the Registrar made on 30 January 2002 to adjourn the plaintiffs' summons for production of documents to be heard after the determination of the defendants' application to strike out the claim and together with the plaintiffs' summons for specific discovery.

Background

2. On 14 August 1992, the Financial Secretary, pursuant to section 143(1)(c) of the Companies Ordinance, Cap.32, appointed the 2nd defendant as an Inspector to undertake an investigation into the affairs of the plaintiffs. In connection with the company inspection, the Financial Secretary had appointed a steering group ("the Steering Group"). The Steering Group was to assist the Financial Secretary and one of its functions was to monitor the progress and costs of the investigation.

3. On 21 May 1993, the plaintiffs and their Chairman, Mr Lee Ming Tee, instituted judicial review proceedings against the then Attorney General and the 2nd defendant to challenge the decisions of the Financial Secretary to appoint the 2nd defendant as Inspector and the Steering Group. One of the principal grounds relied upon was that the involvement of the Steering Group had compromised the independence of the 2nd defendant as a Company Inspector. Affidavit evidence, including that of the 2nd defendant, had been filed in the judicial review proceedings. On 11 June 1993, Kaplan J dismissed the plaintiffs' application for leave to apply for judicial review and rejected the plaintiffs' contentions of an appearance of bias and of actual bias. The plaintiffs' appeal to the Court of Appeal was dismissed on 16 September 1993. The application for leave to appeal to the Privy Council was also dismissed.

4. In the meantime, the 2nd defendant had submitted his final report to the Financial Secretary. Criminal prosecutions were subsequently brought against the Chairman, Mr Lee Ming Tee, and another director of the plaintiffs, Mr Ronald Tse. Consequent upon the criminal prosecution, documents relating to the arrangements between the 2nd defendant and the Steering Group were disclosed by the prosecution to Mr Lee and Mr Tse by way of unused material. This led to an application to stay the criminal proceedings, which was ultimately unsuccessful. The judgment of the Court of Final Appeal on the appeal arising from the stay application was handed down on 22 March 2001.

This action

5. On 25 September 2001, the plaintiffs commenced these proceedings seeking to set aside the judgments of Kaplan J and of the Court of Appeal made in 1993 and also claiming damages including exemplary damages. The basis of the plaintiffs' claim is that in the 1993 judicial review proceedings, the defendants had misled the Court by filing affidavits that contained false evidence. The falsity alleged relates to the involvement of the Steering Group and the independence or otherwise of the 2nd defendant. The judgments, according to the plaintiffs, were obtained by fraud and should be set aside.

6. Upon being served with the Writ indorsed with the Statement of Claim, the 2nd defendant's solicitors wrote to the plaintiffs' solicitors pointing out that the claim appeared to be based on the unused material disclosed in the criminal prosecution and that the use of these material in these proceedings was a breach of the implied undertaking of non-disclosure attached to the documents. It was indicated that an application would be made to strike out the claim. The plaintiffs' solicitors in reply contended that for documents that had been used in the stay application in the criminal prosecution, they have been released from the common law undertaking attached to them. The plaintiffs however accepted that there were certain letters that remain subject to the undertaking. The Statement of Claim was then amended on 6 November 2001 to delete references to these letters.

7. On 13 November 2001, the plaintiffs issued a summons seeking specific discovery of 31 categories of documents under Order 24, rules 7 and 11(2), Rules of High Court ("the Specific Discovery Summons"). This was followed by the defendants' summonses to strike out the claim, which are fixed for argument on 29 July 2002. On 23 November 2001, Master Kwan ordered that the Specific Discovery summons be adjourned pending the disposal of the striking out summonses. The plaintiffs' appeal against the Master's order was dismissed on 10 December 2001.

The Order 24, rules 11 and 11A application

8. The 2nd defendant's application to strike out is supported by an affidavit made by the 2nd defendant ("the 2nd defendant's Affidavit"). By a letter dated 4 December 2001, the plaintiffs' solicitors requested production of four categories of documents said to have been referred to in the 2nd defendant's Affidavit. The request was made pursuant to Order 24, rule 10 Rules of High Court. Apart from item 4, which is the transcript of the proceedings before Pang J in connection with the stay application, the 2nd defendant did not comply with the request.

9. On 28 December 2001, the plaintiffs issued the summons in question to seek production of the outstanding three categories of documents pursuant to Order 24, rules 11 and 11A, Rules of High Court. The summons was amended on 10 January 2002 (the summons as amended is referred to as "the Summons"). On 30 January 2002, after hearing arguments, the Registrar ordered the Summons to be adjourned to be heard together with the Specific Discovery Summons and after the determination of the striking out applications. The Registrar also ordered costs in favour of the 2nd defendant to be taxed if not agreed.

The appeal

10. The plaintiffs now appeal against the Registrar's Order, seeking an order that the Summons be restored for argument before a master on a date before the striking out applications. At the hearing, both parties agree that if the appeal is successful, the Summons ought to be heard before a judge in chambers so as to save the time and costs of one round of appeal.

11. The question for determination at this appeal is whether the Summons should be heard before the striking out applications.

12. For the plaintiffs, it is argued that the inspection of the documents specified in the Summons is necessary for disposing fairly of the defendants' striking out applications so that the Summons must be heard before the hearing of the striking out applications. The plaintiffs say that the documents are relevant to the issue of whether the 2nd defendant had sought and/or received inputs from the Steering Group, and will in turn shed light on whether the evidence filed in the 1993 judicial review proceedings is misleading, and also whether the plaintiffs have a proper basis for the claim of fraud against the 2nd defendant. Mr Kwan says that if the Summons is to be heard after the striking out applications, it is in effect ordering a trial before the hearing of a discovery application.

13. The 2nd defendant, on the other hand, argues that the Summons is but a fresh attempt to seek the documents requested for in the Specific Discovery Summons. It is submitted that the Summons serves the same objectives of fishing for evidence and getting round the implied undertaking attached to the materials disclosed in the criminal prosecutions in that documents disclosed in these proceedings will not be tainted with breach of implied undertaking. Mr Lewis therefore says that the Summons is in effect seeking to reverse the normal burden of proof in civil proceedings by requiring the 2nd defendant to produce documents to enable the plaintiffs to make good the claim against him.

Reasons for decision

14. It is useful to begin by looking at the documents sought for in the Summons and the context in which they are said to have been referred to in the affidavit of the 2nd defendant.

15. The three Categories of documents sought in the Summons are:

"(1) 'Draft text' and 're-draft' of the 2nd Defendant's Report referred to in paragraph 6 of the 2nd Defendant's affidavit,

(2) The 2nd Defendant's communications in writing with the Steering Group referred to in paragraph 10 of the 2nd Defendant's affidavit, and

(3) Documents gathered by the 2nd Defendant and his team from January 1993 to August 1993 referred to in paragraph 14 of the 2nd Defendant's affidavit."

16. The relevant parts of the 2nd defendant's Affidavit read as follows:

(1) Paragraph 6

"The transactions in question were enormously complex and my investigations ultimately extended to approximately 250 related companies, requiring the interviewing of approximately 80 individuals and the obtaining and reviewing of a huge volume of documentation from 425 companies and other persons (comprising the equivalent of approximately 1600 lever arch files of documents). The main body of my Report (volume 1) is 709 pages, with a supporting volume of appendices. This went through a large number of re-drafts, by reason principally of developments in the evidence, developments in my analysis of the huge and complicated body of evidence, and (from May 1993 onwards) my review of the comments received from a large number of parties (listed in Appendix 7 to my Report) to whom I had circulated draft text. Communications with the Plaintiffs, their associates and representatives also required the devotion of substantial time and resources."

(2) Paragraph 10

"I communicated with the Steering Group in writing and by attending some meetings with its members. In so far as I attended such meetings, my time was principally spent on discussions as to the costs of the investigation. As summarised in my Affidavit of 1 June 1993, other subjects were to my knowledge also discussed at Steering Group meetings including, of particular relevance to these proceedings, the format of my report."

(3) Paragraph 14

"The interviews were largely completed by January 1993, following which I started to draft my Report. Meanwhile, further information and documents continued to be gathered by my team and I until about March 1993 (and continued to be received until shortly before finalisation of my Report in August 1993)."

17. It is not in dispute that the documents requested for in the Summons overlap with the documents sought under the Specific Discovery Summons. The 1st and 2nd categories of documents under the Summons are the same as those under paragraphs 16, 17 and 24 of the Schedule of documents to the Specific Discovery Summons. This being the case, as a matter of good case management, the Summons ought prima facie to be heard together with the Specific Discovery Summons. This is so unless it is demonstrated that the determination of the Summons is necessary for the fair disposal of the striking out applications, so that it becomes important for the Summons to be heard before the striking out applications.

18. The Summons is issued under Order 24, rules 10, 11 and 11A, seeking discovery on the basis that references have been made to the documents sought in the 2nd defendant's Affidavit. Under Order 24, rules 10, 11 and 11A, the Court's jurisdiction is not confined to documents particularly described or identified in a pleading or affidavit. But where the document is not specifically mentioned, the document must be directly alluded to : Dubai Bank Ltd v. Galadari [1990] 1 WLR 731, 739, Hong Kong Civil Procedure 2002, Vol. 1, para. 24/10/1.

19. For my part, I have considerable reservation as to whether the 2nd defendant's Affidavit does make references to the documents now sought within the meaning contemplated by the Rules. It will be apparent from reading the three paragraphs alone or against the whole of the affidavit that there is no direct allusion to the documents sought. In Quilter v. Heatley (1883) 23 Ch. D. 42, 50, Lindley LJ pointed out that the purpose of Order 24, rule 10 is "to give the opposite party the same advantage as if documents referred to had been fully set out in the pleadings". This purpose has no relevance or application in the present context.

20. It is the plaintiffs' contention that the documents sought are relevant to whether the 2nd defendant had received inputs from the Steering Group, and in turn whether the affidavits filed in the 1993 judicial review proceedings were true. When the three categories of documents sought are mentioned by in the 2nd defendant's Affidavit, it is not in the context of a discussion of these issues. Neither is the 2nd defendant using the documents to refute the plaintiffs' allegations or to substantiate his defence.

21. It is also to be noted that it was also the plaintiffs' contention and position in the appeal against Master Kwan's order adjourning the Specific Discovery Summons to be heard after the striking out applications that these documents are relevant to the issues identified above. Given that there is no direct allusion in the affidavit to these documents in connection with the issues identified, the 2nd defendant's Affidavit has not brought about any change of circumstances as to point to a need for ordering discovery before the striking out applications are heard.

22. One of the principal grounds for dismissing the appeal against Master Kwan's order is that to request the defendants to make discovery before the striking out applications is tantamount to asking the defendants to assist the plaintiffs to make good their claims by providing documents that may strengthen the claim and will not be subject to the challenge on breach of implied undertaking of non-disclosure. This is effectively reversing the civil burden of proof.

23. Mr Lewis argues that the same objection applies to the Summons. Mr Kwan's response is that the concern is no longer relevant given that a defendant in a striking out application carries the burden of justifying his application. I do not agree. It is one thing to say that a defendant carries the burden of making out a plain and obvious case that the statement of claim should be stuck out on the grounds relied upon, including that the claim as pleaded is untenable, it is another thing to require a defendant to positively render assistance to the plaintiff by making available documents that may prove the claim. I am unable to see the reasoning behind the submission that the discovery sought in the Summons is no more than asking the 2nd defendant to justify his striking out application, even if one of the grounds for striking out relates to the merits of the case.

24. For the reasons above, I do not accept that the determination of the Summons is necessary for the fair disposal of the striking out applications. I am therefore in agreement with the Registrar's decision to adjourn the Summons to be heard together with the Specific Discovery Summons and after the striking out applications. The appeal should be dismissed with costs to the 2nd defendant.

Costs

25. Mr Lewis asks for a gross sum costs order be made and, for that purpose, he had, shortly before the hearing, lodged a skeleton bill. Subsequent to the hearing, the plaintiff's solicitors by letter dated 7 March 2002 indicated that they objected to an order for gross sum costs and that they regarded the skeleton bill to be neither reasonable nor accurate.

26. The 2nd defendant's skeleton bill covers the costs of both the Summons and the hearings before the Registrar and also this appeal. As the Registrar had already made an order for the 2nd defendant's costs to be taxed, I have no power to make a gross sum costs order in respect of the Summons and the hearings before the Registrar. The 2nd defendant has not cross-appealed against the costs order. Mr Lewis accepted this when this was pointed out to him at the hearing of the appeal.

27. As to the costs of the appeal, I am of the view that a gross sum costs order is appropriate. This is a short interlocutory appeal that does not involve voluminous documents or lengthy arguments. No further evidence was filed and there was only one court appearance. A gross sum costs order will serve to save the time and costs of taxation.

28. The part of the 2nd defendant's skeleton bill on the appeal covers Mr Lewis' involvement in considering and preparing for the appeal, including drafting the skeleton submission, and in communicating with client on the appeal. A total of 4 hours 36 minutes is claimed. This is a reasonable amount of time. The hearing of the appeal took 1½ hours. There will also be time spent on reading this decision and communicating it to client. A total of 6 hours 15 minutes is therefore a reasonable amount of time. Mr Lewis seeks an hourly rate of $3,200. He was admitted in 1984 in England and Wales and in 2000 in Hong Kong. In reckoning the seniority of fee earner, primary regard is to have to his year of admission in Hong Kong, although the experience in other jurisdictions may be taken into account in arriving at an upward adjustment. Applying this principle and having regard to the nature of the appeal, a reasonable hourly rate is $3,000. Thus assessed, the appropriate amount for a lump sum costs order is $18,750. There will be an order nisi to this effect.

Conclusion

29. For the reasons stated above, the appeal is dismissed. There is an order nisi that the plaintiffs pay the 2nd defendant the costs of the appeal assessed pursuant to Order 62, rule 9(4)(b) at $18,750.