JOYCE T. ONGSIP t/a LT ENTERPRISES CO v. PIMATRONICS LTD

HCA 611/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.611 OF 2010

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REASONS FOR DECISION

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The application

1.  The defendant by the original action has taken out this application under Order 24 rules 7(1) and 11(2) of the Rules of the High Court, Cap.4A for specific discovery of the documents set out in the Schedule attached to the summons dated 31 March 2012.

2.  Order 24 rule 7(1) provides:

Subject to rule 8, the Court may at any time, on the application of any party to a cause or matter, make an order requiring any other party to make an affidavit stating whether any document specified or described in the application or any class of document so specified or described is, or has at any time been, in his possession, custody or power, and if not then in his possession, custody or power when he parted with it and what has become of it. (L.N. 157 of 2003 and L.N. 199 of 2003)

Order 24 rule 11(2) provides:

Without prejudice to paragraph (1), but subject to rule 13(1), the Court may, on the application of any party to a cause or matter, order any other party to permit the party applying to inspect any documents in the possession, custody or power of that other party relating to any matter in question in the cause or matter.

3.  The plaintiff opposes this application.

The legal principles

4.  Counsel for the plaintiff Miss So and Counsel for the defendant Mr Chiu agree the legal principles set out in the following authorities are applicable:

a.  Tullett Prebon (Hong Kong ) Ltd. v. Chan Yeung Fong Nick & Ors HCA 2197/2009[1], in which it was decided that the applicant had the burden of proving the existence of the documents; plaintiff’s possession of the documents, custody or power of the documents; relevancy and it was necessary for fair disposal of the disputes or for saving costs;

b.  The Compagnie Financiere Et Commerciale Du Pacifique v. Peruvian Guano Co (1882) 11 QBD 55 on relevance, which must be “document relates to the matters in question in the action…” The pleadings must, therefore, be the starting point for determination of relevance.

c.   Mariner International Hotels Limited v. Atlas Limited and Another HCA 10714, 10752, 10821/1998 (consolidated)[2], in which the learned Judge, in his analytical approach to the definition of relevance in Peruvian Guano case held that the court should not allow “fishing” exercise for evidence and stop any “scatter gun approach”. This is obviously correct as such approaches contravene the provisions under Order 24 rules 8(1) and 13(1), viz. the principle of fairness and saving of costs.  Mr. Chiu, in his reply skeleton submission points out that in the judgment, Burrell J. had remarked that the approach must not be applied in a too restrictive manner.  Having considered the relevant authorities, Burrell J. came to find: “The task of the court will often be to determine when

‘doing justice to the claim’ stops and ‘fishing’ or, to use another analogy ‘the scatter gun approach’ starts. At that point the onerous nature of the discovery exercise passes from the necessary and permissible to the unnecessary and impermissible.” See paragraph 9.

The facts

5.  Briefly stated, the facts of this case are that the plaintiff has been operating the business of agent for customers and charges commission for the services rendered.  By an agreement dated 13 October 2005 (“the agreement”), she was appointed by the defendant as the exclusive agent for solicitation of orders from certain customers (“the customers”) specified in the agreement for certain products manufactured by the defendant, for which she was entitled to charge 10% of the net sales as commission. Pursuant to the agreement, the defendant had paid the commission as agreed between 2005 and September 2008. Between September 2008 and September 2009, the defendant had failed to pay certain quantities of the products, the commission of which amounted to HK$1,100,860.86, hence this action against the defendant.

6.  The defendant admitted that he had not paid the said sum.  The reasons for so doing are that before entering into the agreement, a Mr. Ocean Lee, who was an employee of a holding company of which the defendant is a 100% shareholder, had represented to the defendant that the plaintiff was the recognized sales agent of the customers and the defendant must place orders through the plaintiff. [Defence – 5][3] However, the defendant subsequently discovered that the representation was false as the customers denied having recognized agent.  The defendant further discovered that part of the commissions paid to the plaintiff was, in fact, paid to a person called Mr. Kevin Pintar, a former Materials Manager of one of the customers, who did not have the permission of the customers to accept the commission, contravening section 9(1) of the Prevention of Bribery Ordinance Cap. 201. [Defence – 13]  The defendant also says that the plaintiff had rendered no service to him because it was through Mr. Ocean Lee’s connection with the customers that the orders were placed with the customers and that the plaintiff had given no other service such as advice on business to the defendant.  The defendant therefore says that the commissions paid to the plaintiff were paid under mistakes and he counterclaims for their return.

The pleadings

7.  I notice that from the pleadings before me, it seems that the defendant has not pleaded conspiracy among the plaintiff, Mr. Ocean Lee and Mr. Kevin Pintar to defraud commission from the defendant.  I have raised this issue with Mr. Chiu in order to clarify the position.  Mr. Chiu has stated clearly that he had deleted the allegation of conspiracy in the original pleadings because he found that there was no evidence to support conspiracy.

8.  I shall now deal with Mr. Chiu’s application for the discovery of the documents.

Category 1 - item (a) and (b) being the tax returns and bank statements 2005-2009 of the plaintiff

9.  The plaintiff opposes the application of disclosure of the documents on the basis that they are not relevant to the issues in dispute. The relationship of the plaintiff and Mr. Ocean Lee and Mr. Kevin Pintar is not the issue for the trial as it has no bearing on the agreement. The documents may start a chain of further discovery of other documents, which will escalate the costs. Miss So refers to Sunny Tadjudin v. Bank of America, National Association HCA322/2008[4], in which the Deputy Judge remarked “…when it interprets the provisions of Order 24……the Court should always bear in mind the objectives of cost effectiveness, expeditious disposal of cases, proportionality, procedural economy and ensurance of fairness between the parties.”See paragraph 7.  This must be right as the law has imposed this obligation on the court under Order 1A rule 2 (1)(a) and (b):

2.     Application by the Court of underlying objectives (O. 1A, r. 2)

(1)   The Court shall seek to give effect to the underlying objectives of these rules when it-

(a) exercises any of its powers (whether under its inherent jurisdiction or given to it by these rules or otherwise); or

(b) interprets any of these rules or a practice direction

10.  In reply to the plaintiff’s dispute that those documents are not relevant to the issues in dispute, Mr. Chiu argues that the documents are relevant for the defendant to build up his case.  He says in paragraph 7 of

his skeleton submissions: “In line with cases involving elements of dishonesty and concealment, the Defendant naturally relies on circumstantial evidence to build up a prima facie case pointing to the antic of the plaintiff, namely she was not really running a business to provide agency services by procuring orders from the customers” He also says that the documents would shed light on why money went to Mr. Kevin Pintar as he says: “There was no known reason whatsoever why Kevin Pinta(r) should receive any money from the Defendant.” [Skeleton - 8][5]

11.  It is apparent that in the Counterclaim, the defendant has made serious allegation of dishonesty against the plaintiff.  The substance of the defence amounts to conspiracy among the plaintiff, Mr. Ocean Lee and Mr. Kevin Pintar to defraud money from the defendant. Mr. Chiu agrees that the defendant is making allegation of conspiracy in the loose sense.

12.  What Mr. Chiu puts forth to me today in relation to his pleadings as set out in paragraph 7 of his skeleton submission is contrary to the decision of the Court of Appeal in A. D. S.(body corporate) v. Wheelock Marden & Company Limited & Others CACV 24,25, 36, 37 & 104/1994[6] at page 13-14 where the Court of Appeal said:

“…When it comes to a claim in the tort of conspiracy, what the pleader has to do in regard to pleading an overt act or overt acts is this. He has to plead at least one overt act which is the act of all the alleged conspirators or, failing that, a number of overt acts which include at least one act on the part of each conspirator. And the overt act or overt

acts pleaded must be such as to show: (i) that the conspiratorial agreement alleged against the defendants had been entered into by each and every one of them; (ii) that the agreement, and not merely the intention of one person alone, was implemented; and (iii) that such implementation caused the damage complained of.

If the pleader fails to do that, then, depending on whether the failure is in respect of all the defendants or only some or one of them, then either the plea is liable to be struck out altogether or it is liable to be struck out as against some or one of the defendants.”

13.  Mr. Chiu, having agreed that conspiracy has not been pleaded, says that he will rely upon the suspicious circumstances of the relationship among Dennis Lim (an employee of the plaintiff), Ocean Lee and Kevin Pintar, the court should draw an inference that they conspired to defraud the defendant. But this is inconsistent with the decision of the Court of Appeal in Tempra Virginia Pido v. Compass Technology Company Limited & Another CACV 210-217/2009[7]. At paragraph 25 of the judgment, the Court of Appeal said: “In any event, the formulation of a party’s cause of action should clearly and cogently be made in the pleadings. It should not be left to an exercise of drawing inferences.”

14.  Besides, Mr. Chiu has also placed heavy reliance on the illegality issue as pleaded in paragraphs 13 and 14 of the Defence.  He says that the documents under this category will be relevant to this issue. [Skeleton – 9]. In the Defence, he pleaded in paragraph 14: “By reason of the aforesaid matters, the Agreement is illegal, void and unenforceable as against the Defendant.”

15.  Granted that some of the commission money was paid to Mr. Kevin Pintar, who did not have the customers’ permission to accept commission, it is beyond me to understand Mr. Kevin Pintar’s act would have made the agreement between the plaintiff and defendant illegal contract. The agreement, as is not disputed by the parties, is a contract between the plaintiff and the defendant only.

16.  Mr. Chiu in his skeleton submission has told me that the purpose of getting the documents under this category is for the purpose of building up his prima facie case. This amounts to a fishing exercise, which is forbidden by Burrell J. in  Mariner International Hotels Limited v. Atlas Limited and Another HCA 10714, 10752, 10821/1998 (consolidated). For this reason, I disallow the documents under this category.

Category 2 – items (c) (d) and (e), being documents relating to the employment of Dennis Lim by the Plaintiff

17.  Mr. Chiu supports his application for the documents under this category by saying that he did not understand why Dennis Lim, who has signed the agreement on behalf of the plaintiff, had to conduct his business behind the name of his wife. Mr. Chiu suspects that there is something for Dennis Lim to hide. [Skeleton -11]. He says that the emails will enhance the possibility that there was some personal attribute of Dennis Lim (instead of an employee of his wife) that brought him into the “triangular relationship” consisting of Kevin Pintar, Ocean Lee and Dennis Lim himself [Skeleton - 12].  This is another way of saying that there was a conspiracy among the three people to defraud. For the same reasons I have set out for Category 1, I find that this is another exercise of fishing for evidence.  I dismiss the application for this category.

Category 3 – items (f) and (g), documents between the plaintiff and ECCO/Vision Alert

18.  ECCO is one of the customers.  Item (f) is technical as the plaintiff has already said in the Affirmation of Lim Fung Ping dated 7 May 2012 that there was no such document.  Mr. Chiu would like the plaintiff to repeat this in an affirmation made under Order 24 rule 7. There is no prescribed form for an affirmation under Order 24 rule 7.  I consider that the plaintiff’s affirmation has served the purpose for Order 24 rule 7.  It is unnecessary to make another affirmation in order to save costs.

19.  As to (g), Miss So says that those documents have been given to the defendant.  Mr. Chiu, however, submits that the email letters appear to have been edited as there are signs of editing and there are deliberate blanks.  He says that he will not go further if those copies were the print-outs from the computer, which Miss So has kindly confirmed to be the case.  Therefore, it is not necessary for me to make any order for this item.

20.  As to the costs of this application, they should follow the event and be awarded to the plaintiff, with the costs reserved for this application and counsel’s certificate, summarily assessed at $55,000.00 as agreed.

The order

21.  I shall now make an order in terms as follows:

a. The defendant’s summons is dismissed;

b. Costs of the application, including the costs reserved and for the hearing today with certificate for counsel, be to the plaintiff, summarily assessed at $55,000 as agreed, to be paid within 14 days from the date hereof.