UOB KAY HIAN FUTURES (HONG KONG) LTD v. LAI, LAWRENCE AND ANOTHER

HCA 1946/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1946 OF 2011

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DECISION
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I. INTRODUCTION

1.  The plaintiff (“P”) was/is a participant of the Hong Kong Future Exchange Limited (“HKFE”) and a licensed corporation to conduct Type 2 (dealing in futures) regulated activities[1] registered with the Securities and Futures Commission (“SFC”).  The 1^st defendant (“D1”) was its account executive.

2.  P claimed that:

(a) P together with other companies were/are members/ subsidiaries of the UOB Kay Hian Group (“Group”).

(b) On/about 13 November 2002, D1 made an agreement with members of the Group (“2002 Agreement”) to (i) guarantee the liabilities of his clients and (ii) indemnify the Group for non-recoverable liabilities of his clients. 

(c) P introduced the 2^nd defendant (“D2”) as client to P.  On/about 31 May 2010, D2 entered into a futures client agreement with P and opened/maintained an account with P for trading in futures/options contracts (“D2 Account”).  At all material times, D2 was served by D1.

(d) On/about 11 October 2010, D1 entered into a further agreement with P (“2010 Agreement”) to confirm he agreed to serve D2 and be responsible to the Group for obligations and liabilities arising from trades/transactions effected by D2 through D1.

(e) On/about 14 March 2011, P notified D1 of a margin call of JP¥53,524,997 for the D2 Account.  As at 25 October 2011, there was a debit balance of HK$24,466,180.31 under the D2 Account incurred by D2’s trades/transactions effected through D1. 

On 28 November 2011, P commenced the present action against D1 and D2 to claim for the sum of HK$24,466,180.31 with interest and costs.

3.  D1 denied liability.  He did not admit the 2002 Agreement, which (even if it existed) (a) was not enforceable for want of certainty, intention and/or consideration, and (b) had implied terms to the effect that P as creditor shall from time to time advise him of his liabilities as guarantor and that the liabilities of D1’s clients must be bona fide and incurred lawfully.

4.  D1 claimed that by the 2010 Agreement he agreed to be responsible for D2’s obligations/liabilities (if validly made) in his capacity as account executive and not as guarantor.  He averred that P as D2’s broker/agent in futures trading activities owed her a duty of care to protect her interest, so even if the 2010 Agreement were a guarantee agreement (which D1 denied), it would have the same implied terms as for the 2002 Agreement.

5.  D2 contended P “has imposed a position limit for [the D2 Account] of about 400 futures contracts.  By such position limit, D1 legitimately believed that D2, at all material times, cannot have entered into an open position of significantly more than 400 contracts”.[2] The earthquake/tsunami disaster in Japan on 11 March 2011 caused messy trading/clearing environment outside anyone’s reasonable contemplation, but P had not cautioned D1 (a) about his alleged potential liability as guarantor for D2 and/or (b) that D2 had unrealistically breached her position and other limits by her new trading activities on 14‑15 March 2011, and P was therefore in breach of its duty of care to D2 and of the implied terms in the 2002 and/or 2010 Agreements.

6.  D1 further claimed there were breaches of the rules of the HKFE (“HKFE Rules”), the “Code and Conduct for Persons Licensed by or Registered with SFC” (“SFC Code”), and the implied terms of the 2002 and 2010 Agreements.  D1 also had a counterclaim against P which did not concern the present application.

7.  P’s Reply disputed D1’s Defence, and denied his Counterclaim.  P averred that D2’s trading in inter alia Nikkei 225 Index Futures (“N225 Futures”) was conducted on/through the Singapore Exchange Limited (“SGX”) and not through HKFE, so the HKFE Rules and SFC Code were not applicable.  P further averred inter alia that (a) D1 was at all material times aware of the approved trading limit of each client he served (including that of D2), (b) D1’s applications on 5 July, 14 September and 11 October 2010 to P to increase D2’s trading limit from HK$100,000 to HK$4,000,000, HK$6,500,000 and HK$7,500,000 respectively were approved, (c) P’s Settlement Department would inform D1 the position/liabilities of each client he served by way of daily report, and (d) the trading activities under the D2 Account (including those on 11, 14 and 15 March 2011) were executed through D1 so he was fully aware of them.

II.  SUMMONS AND APPEAL

8.  On 8 November 2013, D1 applied by summons (“Summons”) for specific discovery of inter alia “Document detailing “position limits” for all [his] clients, trading N225 futures and HSI futures [ie Hang Seng Index Futures (“HSI Futures”)] contracts, orders executed through “UOB Bullion Singapore” [ie UOB Bullion and Futures Limited (“UOBB”)], under the Sub “Account G” (Please see attached email)” (“Requested Document”). The attached email dated 6 November 2011 from D2 to P’s solicitors referred to the Requested Document as follows:

“There are documents related to the “position size limits of both [N225 Futures] contracts and [HSI Futures] contracts, at the executing broker [UOBB] Singapore” for [D1’s] clients (under the UOB kayHian HK Ltd, sub account G). [D1] signed the document and Rex Au was witness to this.”

9.  D1 filed 3 affirmations on 8 and 13 November and 13 December 2013 respectively in support of the Summons (“D1’s 1^st, 2^nd and 3^rd Affs”). P filed the 3^rd affirmation of its head of credit department Tse Helen Kwokmun (“Tse”) on 8 January 2014 (“Tse Aff”) in opposition.

10.  The substantive hearing of the Summons with 2 hours reserved came before Master Chow on 7 July 2014.  It was adjourned part-heard to 25 September 2014 with another 2 hours reserved.  On 21 November 2014, Master Chow handed down a 40-page written decision (“Decision”), and dismissed the Summons with costs (including all costs reserved) to P to be summarily assessed (“Order”).  On 27 December 2014, such costs were summarily assessed at HK$74,000 (“Assessment Order”).

11.  On 15 December 2014, D1 filed Notice of Appeal to set aside and to stay execution of the Order (“Appeal”).  Since the Appeal was out of time for about 10 days, he also applied for extension of time to appeal (“Leave Application”) and filed a further affirmation in support of the Leave Application (“D1’s 4^th Aff”). 

12.  The Appeal and Leave Application came before me for hearing on 4 March 2015 (“1^st Hearing”).  D1 (who was self-represented all along) was absent, but he did inform P shortly before the 1^st Hearing he could not attend as he was feeling unwell.  On the morning of the 1^st Hearing, he sent through to P’s solicitors a medical certificate confirming he had sought medical treatment on that day and was granted sick leave for 4-5 March 2015 (inclusive).  So I adjourned the Leave Application and Appeal, and the adjourned hearing came before me again on 18 May 2015 (“2^nd Hearing”). 

III.  LEAVE APPLICATION

13.  Order 58 rule 1 (3) of the Rules of the High Court (“RHC”) provides inter alia that unless the court otherwise orders, the notice of appeal against a master’s decision or order must be issued within 14 days after the decision or order appealed against was given or made.  Under the proviso “unless the court otherwise orders” in Order 58 rule 1 (3) of the RHC and pursuant to Order 3 rule 5 of the RHC, the court has a discretion to grant enlargement of time to appeal.

14.  In Postwell Ltd v Cheng Kap Sang,[3] DHCJ Wong Yan Lung SC stated that:

“…… Although I agree …… that the absence of an acceptable explanation for the delay does not preclude the court’s discretion to extend time, I am of the view that in applications for extension of time to appeal an adverse order or adjudication, as opposed to extension of time to remedy other procedural default, the court should be slow to accede to the application in the absence of an acceptable reason for the delay.”

15.  In considering whether to extend time to appeal, the court has to consider all relevant factors, particularly (a) the length of the delay, (b) the reasons for the delay, (c) the merits of the proposed appeal, and (d) the degree of prejudice to the other party.[4] DHCJ Peter Ng SC (as he then was) in Hady v Bazar[5] reminded that in the post-Civil Justice Reform (“CJR”) era, it is incumbent on the court to give effect to the underlying objectives of the RHC when exercising any of its powers,[6] but the court must always recognise that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.[7]

16.  In D1’s 4^th Aff, D1 claimed he received the Decision on 26 November 2014 via the post.  He went to the High Court on 12 December 2014 to ask for assistance on the procedure for appeal against the Decision, and was informed he had 14 calendar days in which to lodge the Appeal.  He apologised for the delay and urged this court to hear the Appeal.

17.  Whilst recognising D1 was self-represented, there was no explanation why he did not make enquiries to ascertain the procedure for appeal from 26 November to 12 December 2014.  Mr Leung, counsel for P, accepted not many litigants acting in person would be aware of the time limit for appeal, but suggested that upon receipt of an adverse decision or order which any such litigant did not accept it would be incumbent on him to make enquiries as to how and when to challenge such decision or order. 

18.  However, I bear in mind the Decision comprised 40 pages, and D1 as litigant in person would reasonably require time to read/understand the same in order to decide whether to appeal and if so to frame the grounds of appeal.  Here, D1’s grounds of appeal were set out in 7 pages of D1’s 4^th Aff, and the delay was only 10 days.  Despite complaint by Mr Leung, I do not think the delay caused any significant prejudice to P in the particular circumstances herein given the history of the Summons which took more than a year for adjudication below.

19.  In any event, the lack of any satisfactory reason for the delay is only one factor to be taken into account in the exercise of my discretion.  The primary consideration in the exercise of my discretion is to secure just resolution of the dispute between the parties.  For the reasons set out below, although I am prepared to uphold Master Chow’s decision in declining specific discovery of the Requested Document, I rest my conclusion on reasons different from those given in the Decision, which necessarily has impact on the costs order made in the Decision/Order.  In the particular circumstances of this case, I find there is justification to grant the Leave Application.

IV.  D1’s 1^ST, 2^ND AND 3^RD AFFS

20.  D1 claimed he was employed by P as a broker.  He placed his client’s orders for N225 Futures contracts through P’s sub-account G with UOBB.  D1’s clients had trading limits approved by P and UOBB, who would monitor the “up to the minute” positions.  The Requested Document, a document signed by D1 and P’s director, was described as follows:

“Document relates to:

: [D1] executed/placed “Nikkei futures” orders, for the client ([D2]) account, via telephone, “directly” to [UOBB], Singapore.

: client ([D2’s]) “Nikkei futures positions” were conducted through the UOB Kay Hian Futures Account sub-account G, held under [UOBB], in Singapore.

: “sub account G” in Singapore, was solely for the use of [D1’s] clients, not for [P’s] other brokers.

: This ‘sub-account G” had “position limits” set and monitored by [P and UOBB].

Please note, that [the Requested Document was] witnessed by [P’s] employee, Rex Au.”

“1. [D1 was] employed by [P], as an account executive (Broker), in the Hong Kong office.

[D1] placed [his] orders “verbally” to the appropriate [UOBB] dealer.

[D1] “did not” execute/place the “client orders” through [his] computer terminal/login account.

2. [D1] executed/placed “HSI futures” orders, for clients, though [P’s] trading desk, in Hong Kong.

[D1] executed/placed “Nikkei futures” orders, for clients, through [P’s] affiliated company in Singapore, called [UOBB].

On various occasions, [D1] executed “HSI futures” through [UOBB].

[P] had other hong kong brokers/dealers, who also placed “Nikkei futures” orders at [UOBB], for UOB Kay Hian HK clients.

To avoid confusion, all [D1’s] client orders were placed/executed at [UOBB], in the name of “UOB Kay Hian HK Ltd-sub account G”.

3. [D1] signed the document, which was titled similarly to “Trading Limits of Dealers of [UOBB]”.

[D1] cannot recall the actual signing of this document, but it should be before 9^th July 2010.

Rex Au, employed of [P], was witness to this document.

4. This document was very specific in its description, in regards to [D1’s] “total overall clients” position limits, executed/placed at [UOBB].

Although each client had their own individual “margin/equity limits’ at UOB Kay Hian HK Ltd, [D1’s] “total position limits for all my clients” executed/placed at [UOBB], were detailed in this document.

- the position limits, for “Nikkei futures” was in the region of 400 contracts.

- the position limits, for “HIS futures” was in the region of 120 contracts.

-- executed at [UOBB] under the account “UOB Kay Hian HK Ltd-sub account G”.

V.  TSE’s AFF

21.  Tse explained that having considered D1’s portfolio of existing clients at the time, P’s management approved his application to increase his then position limit of 100 lots of N225 Futures so that he was authorised to place orders for 180 lots of N225 Futures for all his clients with UOBB (P’s global futures broker) with effect from 10 February 2009 pursuant to a document known as “Application of Trading Limit for Futures & Option Dealing” (“2009 Document”).  On/about 9 February 2010, D1’s position limit of 180 lots of N225 Futures was changed to a monetary limit of HK$6,000,000, and by a document known as “Application for Trading Limit of Dealers – UOBB” dated 9 July 2010 it was increased to HK$10,000,000 with nothing written in the “Remarks” section (“2010 Document”).  Tse noted there were 8 documents of various dates known as “Application of Ad Hoc Trading Limit for Futures Dealing (Futures Account)” for D2 (“Horn Applications”).

22.  Tse stated she had caused a diligent search of all P’s records and was only able to identify the 2009/2010 Documents that might possibly meet D1’s description of the Requested Document.  D1 indicated the 2010 Document was not the one, and the 2009 Document was not known as “Trading Limits of Dealers at UOB Bullion Singapore” and not witnessed by Rex Au. 

23.  Tse said in any event the 2009 Document was not relevant because D2 was not yet P’s client when it was signed,[8] and less than 2 months after D2 became P’s client D1 by the 2010 Document applied to increase the limit on his authority to place orders with UOBB from HK$6,000,000 to HK$10,000,000.  So when D2 breached her client futures agreement in March 2011, D1’s authority to place orders with UOBB was governed by the 2010 Document with a monetary limit of HK$10,000,000 that superseded D1’s authority to place orders with UOBB for all his clients up to 180 lots of N225 Futures under the 2009 Document.

24.  Tse claimed that if the 2009 document was not the Requested Document, the Summons ought to be dismissed because P was not in possession of any other document that might meet D1’s description of the Requested Document, but if the 2009 Document was the Requested Document, the Summons ought to be dismissed because P had failed to show how it was relevant to the present action.

VI.  APPEAL – LEGAL PRINCIPLES

25.  It is trite that an appeal from the master to judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time.  The judge will give the weight it deserves to the previous decision of the master; but he is in no way bound by it.[9]

26.  In pages 2-8 of D1’s 4^th Aff, D1 disputed the reasoning in various paragraphs of the Decision, and they were in effect his grounds of appeal for the purpose of the Appeal.

27.  After the CJR, Order 58 rule 1(5) of the RHC provides that “[no] further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds”.  The phrase “special grounds” is the same expression as in Order 59 rule 10(2) of the RHC and requires the conditions laid down in Ladd v Marshall[10] to be satisfied.[11]  The Ladd v Marshall conditions are: (a) the evidence could not have been obtained with reasonable due diligence for use at the hearing below, (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c) the evidence must be such as is presumably to be believed.  DHCJ Au‑Yeung (as she then was) in Bank of China (Hong Kong) Limited v Certain Aim Limited[12] said as follows:[13]

“… Order 58, rule 1(5) was introduced to curb the undesirable practice before the [CJR] when parties sought to adduce a further round(s) of evidence on appeal after an unfavourable decision from a Master. Rule 1(5) aims at effecting a change of culture so that parties should prepare their application properly at the earliest possible opportunity and lay all cards on the table prior to the hearing before a Master. The spirit of this rule will be defeated if a party is allowed to revert to the pre-CJR practice. …”

28.  Mr Leung objected to pages 2-8 of D1’s 4^th Aff on the basis that the Ladd v Marshall considerations had not been satisfied.  At the 2^nd Hearing, I received such affirmation evidence on de bene esse basis.   Having carefully considered pages 2-8 of D1’s 4^th Aff, I have no doubt that with reasonable diligence those matters could have been raised before Master Chow and they would not have satisfied the Ladd v Marshall requirements.  But this is subject to my decision below to receive materials by way of evidence in (a) the July and September Submissions[14] and (b) D1’s oral submissions made to Master Chow on the July and September submissions that travelled beyond D1’s 1^st, 2^nd and 3^rd Affs (collectively, “New Materials”) for the purpose of the Appeal,[15] which meant that any part of the New Materials reiterated in pages 2-8 of D1’s 4^th Aff would not be excluded.

VII.  JULY AND SEPTEMBER SUBMISSIONS

29.  D1 prepared written submissions for the hearings on 7 July and 25 September 2014 described as the July and September Submissions in paragraph 30 of the Decision.  There were 5 attachments to the July Submissions described as Sets A(a)-(b), B, C, D and E.  Except for the 2009/2010 Documents, Horn Applications and extracts from D1’s Defence and Counterclaim, the July/September Submissions contained some evidence/explanation that travelled beyond D1’s 1^st, 2^nd and 3^rd Affs.

30.  Despite objection by P’s solicitor against D1’s failure to file affirmation evidence to substantiate the July/September Submissions,[16] Master Chow heard oral submissions by D1 on 2 days based on the July/September Submissions.[17] But it was unclear from the Decision whether the learned master formally received the New Materials and then heard D1 on them as part of D1’s case for the Summons or whether they were merely received de bene esse.  But when Master Chow handed down the Decision 2 months later, she criticised D1 for not setting out in his affirmations the requisite supporting evidence and only giving oral explanations at the hearings,[18] and she concluded that “the submissions of [D1] should be disregarded”[19] because it would have been an affront to the underlying objectives under Order 1A rule 1 of the RHC to deny P “a chance to make a considered reply”.[20]

31.  Master Chow also criticised D1 for failing to comply with case management directions to file/serve affirmation in reply to the Tse Aff, and she disbelieved D1’s explanation that he (a) misunderstood the master who gave such directions and (b) thought he could present his arguments in reply at the hearing.[21] The learned master castigated D1 for his inertia “to find out for himself what the legal requirements are and …… albeit without justification, [to harbour] an expectation that guidance in the navigation of the legal minefield and coaching as to the steps he should take would be provided by the court”.[22]

32.  Master Chow reproved D1 for taking up 2 hours of the hearing on 7 July 2014 on oral submissions that should have been made on affirmation such that by the time the hearing resumed on 25 September 2014 the application had dragged on for over 10 months.  The learned master found “such waste of court time could and should have been avoided”,[23] and concluded as follows:

“76. Noting the many chances afford to [D1] to ensure that he would not go off course, permitting [D1] to have another chance to rectify the deficiency in the evidence adduced by him will not be conducive to achieving the objective of ensuring that a case is dealt with as expeditiously as is reasonable practicable. The case is almost ready to be set down for trial. This summons for discovery is the only outstanding interlocutory application. To turn the clock back now after so many months have passed since the time for [D1] to file his affirmation in reply and for the progress of the application to be drawn to the attention of the court by way of the joint report will be highly unjust to [P].

77. In light of the above findings, [D1’s] application for discovery should be dismissed.  I should add that even if I were to disregard the procedural irregularities outlined above, I do not think [D1] has made out a case for the exercise of the court’s power to order specific discovery.”

33.  I do not agree.  If formally receiving D1’s new materials beyond D1’s 1^st, 2^nd and 3^rd Affs by way of evidence would have caused irreparable prejudice by depriving P of a fair opportunity to respond, the learned master could have made a preliminary ruling on admissibility of the July Submissions upon objection made by P’s solicitor at the hearing on 7 July 2014.  Had the learned master decided against D1 by disallowing any new material by way of evidence in the July Submissions, D1 would not have been able to rely on the September Submissions and/or oral submissions premised on such new materials in which case there would not have been any delay at all.  Alternatively, had the learned master thought it would not have been appropriate to make any immediate ruling, procedural fairness (which is as equally important as substantive justice) would have required it to be made known to D1 (especially when he was self-represented) that the New Materials were only received de bene esse, so both D1 and P would have understood the question of admissibility of such materials/evidence was at large pending subsequent decision.  If such course had been adopted, the question of delay would not have arisen since it would be necessary to hear addresses on the New Materials in order to decide on their admissibility.

34.  Since the Appeal is by way of re-hearing, this court is not bound by Master Chow’s decision on admissibility of the New Materials.  So at the 2^nd Hearing, I informed D1 and Mr Leung that I would receive the New Materials and D1’s oral submissions thereon on de bene esse basis. 

35.  Mr Leung maintained P’s stance that D1 was not entitled to rely on the New Materials for the purpose of the Appeal since they were not evidence properly placed before the court.  D1 contended otherwise.  In my view, given the procedural history as explained above (including the fact that the New Materials were received and D1 was heard on them for 2 hearing days before Master Chow) and further given that even up to the 2^nd Hearing P had not outlined how it would need to answer the New Materials (bearing in mind it was P’s case that it did not have the Requested Document in its possession, custody or power), I am persuaded that in the particular circumstances of this case, I should exercise my discretion to allow the New Materials for the purpose of the Appeal.

VIII.  SPECIFIC DISCOVERY – LEGAL PRINCIPLES

36.  Under Order 24 rule 7 of the RHC, a party may apply for an order requiring any other party to make an affidavit stating whether any document or class of document specified or described in the application is or has at any time been in his possession, custody or power, when he parted with it and what has become of it.  But if the court is satisfied that discovery is not necessary, or not necessary at that stage of the cause or matter, it may dismiss or adjourn the application, and shall in any case refuse to make such an order if and so far as it is of opinion that discovery is not necessary either for disposing fairly of the cause or matter or for saving costs.[24]

37.  Court’s approach Hong Kong Civil Procedure 2015 states inter alia as follows:[25]

“…… But this is not sufficient unless a prima facie case is made out of (a) possession, custody, or power, and (b) relevance of the specified documents …… This prima facie case may be based merely on the probability arising from the surrounding circumstances or in part on specific facts deposed to. …… See too Berkeley Administration v. McClelland [1990] F.S.R. 381 where at 382 the court restated the principles as follows: (1) There is no jurisdiction to make an order under RSC, O.24 r.7, for the production of documents unless (a) there is sufficient evidence that documents exist which the other party has not disclosed; (b) the document or documents relate to matters in issue in the action; (c) there is sufficient evidence that the document is in the possession, custody or power of the other party. (2) When it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order disclosure. (3) The order must identify with precision the document or documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure ……”[26]

38.  Existence of the documents  In Ngan In Leng v Chu Yuet Wah (No 1), DHCJ Queeny Au-Yeung (as she then was) said as follows:[27]

“42. A prima facie case on existence may be established on merely showing the probability arising from the surrounding circumstances or on specific facts deposed to: Hong Kong Civil Procedure 2012, Vol 1, p.553 para.24/7/1. For example, a prima facie case on existence may be established simply by assessing whether it is business practice for a certain type of document to exist: Union Bank of India v General Nice Resources (Hong Kong) Ltd (unrep., HCA 299/2007, [2010] HKEC 704), 10 May 2010, Bharwaney J, [10].”

39.  Relevance  It is for the party seeking specific discovery to demonstrate a prima facie case for inter alia the relevance of the documents sought to the “matters in question”.  The well-known test for determining “relevance” is set out in The Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Company as follows:[28]

“…… It seems to me that every document relates to the matters in question in the action, which not only would be evidence on any issue, but also which, it is reasonable to suppose, contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words ‘either directly or indirectly’ because, as it seems to me, a document can properly be said to contain information which may enable a party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of enquiry, which may have either of these two consequences: the question upon a summons for a further affidavit is whether the party issuing it can shew, ……, that the party swearing the first affidavit has not set out all the documents falling within the definition which I have mentioned and being in his possession or control ……”[29]

40.  On the Peruvian Guano test of “relevance”, the real question is whether the documents sought to be discovered are relevant to the issues between the parties to the litigation or, putting it in another way, to the “questions in the action”.[30] There has been suggestion that the issues or questions must be those identified in the pleadings, but it was held in Thorpe v Chief Constable of Greater Manchester Police[31] that matters can be “in question” or be the subject of controversy between the parties even though not expressly raised on the pleadings.  But even if an issue is raised in the pleadings, it is not necessarily determinative as to whether it relates to a “matter in question”.[32]  

41.  Necessity According to Hong Kong Civil Procedure 2015,[33] if the party seeking discovery establishes a prima facie case, it is for the party objecting to the order for discovery to satisfy the court that the discovery is not necessary either for disposing fairly of the cause or matter or for saving costs under Order 24 rule 8 of the RHC.[34] Such provision brings in the question of evidential materiality of the discovery sought to a particular issue.  DHCJ Horace Wong SC in Chan Hung v Yung Kwong Chung said as follows:[35]

“32. In any given case, there is likely to be a spectrum of evidential materiality within which documents may fall. There may be documents which are central to the pleaded issues; but there may also be documents which fall at the other end of the spectrum in that though they may ‘fall within the letter of Lord Justice Brett’s formulation of relevance for discovery purposes’, they are documents which are unlikely to contain or yield information of such evidential materiality to the pleaded case (in the broad sense mentioned above) of the parties as to make their disclosure necessary for the fair disposal of the proceedings or to save costs. The Court is entitled to take the view that although relevance in the Peruvian Guano sense has been established, it is not necessary for them to be disclosed. The power to refuse unnecessary discovery of documents is expressly conferred by the rules of court.

33. Indeed in the O Company v M Company case mentioned above, after dealing with the question of relevance, Colman J further held at p.352:

‘… I would only add that if I had held that the applicable analysis of relevance derived from Compagnie Financiere du Pacifique v Peruvian Guano Co., sup., was wide enough to include as relevant those documents in respect of which I have refused to make an order for discovery, I should in each case have held that discovery was not necessary either for disposing fairly of the matters in issue or for saving costs under O.24. r.8. Documents of which discovery is necessary for the fair disposal of a matter in issue must at least have a demonstrable evidential materiality. For the reasons which I have given in relation to relevance I am not satisfied that all those documents covered by items 9, 10 and 20 do so.’

Hence Colman J would have arrived at the same conclusion by applying O.24 r.8 if he had simply followed the ‘letter’ of Brett L.J.’s formulation in the Peruvian Guano case on the question of relevance.”

42.  This is echoed in Hong Kong Civil Procedure 2015 which states that “[an] application for discovery of a specific class of documents was refused in Kahn (David) Inc v Conway Stewart & Co Ltd [1972] F S R 69 upon the grounds that the probative value of the documents, if they existed, would be so slight as not to justify the inconvenience of giving discovery; and upon grounds that such discovery was not in the circumstances necessary for determining the issue to which it was said to relate ……”[36]

43.  Discovery affidavits are conclusive  The making of an order for specific discovery does not preclude the other party from deposing in the affidavit that he in fact does not have the documents in his possession, custody or power.  Generally speaking, the affidavit in answer is invariably taken at face value, and subject to limited exceptions, it is conclusive as to relevance and existence or otherwise of documents at the interlocutory stage so that the applying party cannot seek to contravene the statements or assertions in the affidavit either by way of a further contentious affidavit or by applying to cross-examine the deponent.[37]

44.  In Edmiston v British Transport Commission, there was already on the file an affidavit sworn by the defendant’s staff setting out certain documents and deposing to the fact that there were no other relevant documents before the application for further discovery was made.  Singleton LJ found there was nothing in the supporting affidavit for the application which enabled the court to go behind the conclusiveness of the discovery affidavit, and discovery was refused.[38]

45.  But if the affidavit is shown to be insufficient by its content or by admissions made in the proceedings, in such a case a further affidavit may be ordered.[39] “[The discovery] affidavit is not regarded as conclusive only where it can be shown that there has been insufficiency of discovery.  The insufficiency can be demonstrated by (a) the pleadings, the list and affidavit of documents themselves, or documents referred to therein; (b) any other source that constitutes an admission of the existence of a discoverable document not so far discovered; (c) an apparent exclusion of documents from discovery by a party under a misconception of the case: Matthews & Malek, §6.43”.[40]

IX.  APPEAL - DISCUSSION

46.  D1 confirmed the 2009/2010 Documents were not the Requested Document, which document was in relation to his “total overall client” position limits, executed/placed at [UOBB] Singapore” and witnessed by Rex Au.  D1 clarified what he meant was Rex Au saw him sign the Requested Document in Hong Kong, but his orders for N225 Futures contracts were executed/placed at UOBB.

47.  Master Chow opined “this piece of information is of no help in establishing that the documents sought exist, that they are relevant to the issue in dispute, or that they are in the possession, custody or control of the [P]”.  She said “[there] is thus no need to address the point”[41] because (a) it was not P’s case that Rex Au signed the Requested Document and/or his name appeared on it, and (b) there was no affidavit from Rex Au that he witnessed D1’s signing of the Requested Document.

48.  I disagree.  Surely D1’s contention that P’s employee actually saw him sign the Requested Document must be pertinent to the questions of whether (a) such document actually exists and (b) it is in P’s possession, custody or control.  Before one criticises D1 for failing to produce any affidavit by Rex Au, one must not forget that (i) Rex Au was/is P’s employee and (ii) D1 is only required to establish a prima facie case rather than to provide absolute proof on existence of the Requested Document. In my view, absence of corroboration on oath by Rex Au does not call for throwing out D1’s assertion about the Requested Document that Rex Au witnessed his signing it.

49.  As explained in paragraph 38 above, a prima facie case on existence (and thus P’s possession, custody or control) of the Requested Document could arise from the surrounding circumstances or even business practice.  D1 reminded that P was/is a financial institution.  According to him, paper trail/record was the mainstay of financial institutions, and essential source for explaining, justifying and validating (and in due course understanding) management decisions.  Any apparent deviation from or omission in compliance with standard procedure/record would raise “red flag” as to whether there was in fact other undisclosed documentation of relevant management decisions that would fill the lacuna.  On such basis, D1 urged this court to accept that financial institutions would not have approved any increase in his trading limits without his signed application and/or documented management explanation/approval, and that against such contextual background his discovery request made commercial sense.

50.  I do not propose to repeat Master Chow’s summary of D1’s submissions in paragraphs 44-62 of the Decision, and will only deal with matters relevant for the purpose of my decision on the Appeal.

51.  I start with D1’s explanation of the function of trading limits imposed on him as account executive.  He placed orders for N225 Futures for his clients under sub-account G of P’s account with UOBB in Singapore.  UOBB would not know and was not concerned with the equity and cash position of D1’s clients.  Rather, UOBB acted on D1’s trading limits imposed on him as part of P’s risk control measures.  This meant (a) the aggregate trades for all clients of D1 as account executive could not exceed his own trading limits in terms of monetary value and/or number of contracts, and (b) if they did D1 would have to apply for increase of his own trading limits.

52.  According to D1, P concurrently imposed 2 types of limits, ie total position limit and total monetary limit, on him.  The former restricted the total number of contracts and the latter restricted the total dollar value of the trades he could effect for all his clients.  So even if a client had extra equity, D1 could not buy N225 Futures contracts for such client that would exceed D1’s total position and/or total monetary limits unless there was variation of such limits by application, justification and approval.  D1 said such risk control mechanism afforded protection to both P’s and D1’s clients. 

53.  D1 submitted that the Requested Document set out his total position limit of about 400 N225 Futures contracts for sub-account G at UOBB, which also served a risk control function during margin fluctuation.  In times of market turbulence, the margin threshold could go up by 30%, which meant D1’s total position limit would prevent him from buying more than 280 N225 Futures contracts in the aggregate for all his clients. But in a quiet market, the margin threshold could go down by 30% so his clients in the aggregate could notionally buy up to 550 N225 Futures contracts, his total position limit would prevent him from buying more than about 400 contracts for all his clients.

54.  I now turn to D1’s explanation of the existence of the Requested Document in the above context.  There was no dispute that (a) by the 2009 Document D1 applied to increase of his total position limit from 100 lots to 180 lots of N225 Futures and such application was approved by P, and (b) by the 2010 Document D1 made a signed application for increase of his total monetary limit from HK$6,000,000 to HK$10,000,000 that was eventually approved but no explanation, justification or remark was given on the relevant form. 

55.  D1 submitted it would have been impossible for P to approve such substantial increase in his total monetary limit without any explanatory remark,[42] and the only plausible reason would have been his signed and approved application for increase of his total position limit from 180 lots to about 400 N225 Futures contracts made between the 2009 and 2010 Documents.  D1 said this was echoed in paragraph 9(a) of D1’s Defence and Counterclaim.[43] He also gave an illustration by relying on two emails from Choong and Cai of SGX in June 2014 (“Emails”) which I will turn to below.[44]

56.  In contrast, P by the Tse Aff claimed that the 2009 Document increased D1’s total position limit from 100 to 180 lots of N225 Futures, but on/about 9 February 2010 D1’s total position limit was changed to a total monetary limit of HK$6,000,000, and later it was increased to HK$10,000,000 by the 2010 Document.  However, the Tse Aff did not state or exhibit relevant documentation for change of D1’s total position limit to total monetary limit on/about 9 February 2010.

57.  In the circumstances, the crucial difference between P’s and D1’s respective case turned D1’s trading limit(s) between the 2009 and 2010 Documents in respect of N225 Futures contracts placed by D1 with UOBB for all his clients, ie P claimed there was just D1’s total monetary limit, but D1 claimed his total position limit was still applicable and his total position and total monetary limits worked in tandem to limit the trades he could place in respect of N225 Futures with UOBB for all his clients.  In my view, such difference went to the question of whether, how and to what extent D1’s trades for D2 in respect of N225 Futures placed with sub-account G at UOBB exceeded the trading limits, which in turn went to the question of whether P owed/breached any duty of care to D1 and/or breached any implied terms under the 2002 and/or 2010 Agreements.  These questions are obviously matters of controversy between the parties in this action.

58.  By the Decision, Master Chow rejected D1’s submissions on both existence and relevance of the Requested Document.  Before I turn to D1’s submissions before me which focused on his disagreements with Master Chow’s views, I need to reiterate two matters which form a running theme in the analysis below.  First, D1 was only required to establish a prima facie case and not an absolute case on existence and relevance of the Requested Document.  After all, at this interlocutory stage, the court would not be in a position to make any “findings” in favour of either P’s or D1’s case or come to any definitive decision on the Requested Document merely on affirmation evidence and/or the New Materials.  Secondly, the Peruvian Guano test of relevance required the court to consider whether it was reasonable to suppose the Requested Document would contain information that may (not must) either directly or indirectly enable D1 to advance his own case or to damage P’s case, which test plainly recognised that sometimes adversaries in litigation might raise different contentions.  But unless it was clear that the requested document(s) were irrelevant, it would not be appropriate to conflate the parties’ different contentions to downplay relevance.

59.  I bear in mind the Appeal is by way of rehearing. Having considered the matter afresh, I am satisfied on D1’s explanations as to P’s business practice and the nature of his case (in contra-distinction to that of P) that there was a prima facie case on existence and relevance of the Requested Document.  Master Chow decided otherwise.  Since P relied on her reasons for decision for the purpose of the Appeal in answer to the New Materials whilst D1 disputed them, which contentions are also pertinent to the issue of costs below, it is necessary to turn to those matters.

60.  First, Master Chow found D1’s contention that the Requested Document was his applicable total position limit to be a shift in goalposts from D1’s pleaded case in paragraph 9(a) of the Defence and Counterclaim, ie the position limit was imposed on D2 in respect of the D2 Account, and she came to the view that “[the] variation in the description can only mean that [D1] is talking about different documents, and the document he is now seeking does not match the description in the pleadings”.[45]

61.  As a starting point and as explained in paragraph 40 above, it was incumbent on D1 to establish a prima facie case on existence and relevance to “questions in the action” irrespective whether they were pleaded.  D1 submitted that if he was subject to a total position limit of about 400 N225 Futures contracts, then any/all of his clients would be subject to the same cap so that any client with extra equity could buy other instruments through the Hong Kong trading desk but not any more N225 Futures contracts through UOBB without application by D1 to P for ad hoc increases of his own position limit (but this never happened for D1 in respect of the D2 Account). 

62.  It was evident from the level of trading activities in the D2 Account as recorded in the Horn Applications that D2 was probably a major client of D1 for N225 Futures contracts.[46] Plainly, if D1 was subject to a total position limit, that total position limit would also apply to the D2 Account such that D2 who would not be able to purchase N225 Futures contracts in excess of 400 contracts.  I am unable to discern from D1’s pleadings that the position limit applicable to the D2 Account as pleaded was definitely not D1’s total position limit and had to be a position limit applicable only to D2 and not to D1 and/or his other clients.  As seen in paragraph 20 above, it is telling that D1’s 3^rd Aff drew a distinction between “each client [having] their own individual “margin/equity limits’ at UOB Kay Hian HK Ltd” (which sits well with the Horn Applications that spoke of monetary limits for D2) and his own total position limit.  This arguably suggested that the position limit as referred to in D1’s pleadings was D1’s total position limit, and I am unconvinced at this interlocutory stage there was clear contradiction between D1’s pleadings and his present contention.

63.  Secondly, D1 tried to illustrate his point with the Emails[47] that concerned margin requirements for N225 Futures contracts.  Using the initial revised margin as at 2 June and 14 July 2010, D1 worked out that 420 N225 Futures contracts would be about HK$9,800,000 which he said would explain why there was no explanatory remark in the 2010 Document that increased his total monetary limit to HK$10,000,000 (ie he must have already applied to increase his total position limit and P had approved such increase limit to 400-420 N225 Futures contracts some time between the dates of the 2009 and 2010 Documents).

64.  Master Chow made a number of criticisms of such illustration put forward by D1.  She queried:

(a) why the margin values for June/July 2010 and not those for other months were chosen, and suggested that if the latter differed greatly from the former, then the value of 420 N225 Futures contracts might not be about HK$10,000,000;[48]

(b) why D1’s reference to 420 (as opposed to 400) N225 Futures contracts only surfaced after D1 received the Emails, and she cast doubt on D1’s late recollection of the 5% increase in the limit from 400 to 420 N225 Futures contracts;

(c) whether the manuscript annotations on the Emails came from SGX or whether they were D1’s calculations, how they were arrived at, and/or why they should be adopted;

(d) why D1 adopted the value of the initial revised margin as at 2 June and 14 July 2010 but not as at other dates, and she cast doubt on the correlation between two dates/values in the Emails;[49]

(e) the absence of documentary evidence of the HK$/JP¥ exchange rate “despite the relative ease for producing such proof”.

Master Chow concluded that “[in] the absence of such explanations, and in light of the timing of the change in the number of futures contracts that the document sought is supposed to relate to, the revised figure of 420 contracts could have been arrived at by working backwards from the date available to come up with a figure that is closest to the HK$10 million limit approved under the 2010 Document”.[50]

65.  In my view, the learned master erred in adopting the aforesaid approach to the Emails.  At this interlocutory stage, D1 was not obliged to establish his full/complete case by disproving other possibilities that might lead to a different interpretation of the Emails.  That would be a matter for assessment of factual evidence and legal arguments at trial.  In the meantime, one must not forget that D1’s submissions on the Emails were intended to be illustrative only, and in my view they would not detract from D1’s primary submissions set out in paragraphs 54-55 above.  At this interlocutory stage, it is also inappropriate to draw a definitive conclusion from D1’s affirmation evidence and the New Materials (without testing such evidence/materials at trial) that D1 must have used the margin values in the Emails to work backwards towards a figure close of HK$10,000,000 to make up or bolster his case.  I also note that D1 in his pleadings referred to “a position limit of about 400 futures contracts” and in D1’s 3^rd Aff referred to “the position limits, for “Nikkei futures” was in the region of 400 contracts” (my emphasis).  I am unconvinced there was any belated shift on D1’s part from 400 to 420 N225 Futures contracts for the Requested Document. 

66.  Thirdly, Master Chow found the description for the Requested Document in D1’s 3^rd Aff also touched on trading limits for HSI Futures, but pointed out D1 failed to clarify whether approval for increase in trading limits for HSI Futures were carried out separately from N225 Futures.  The learned master said that if D1’s total monetary limit applied to both types of futures contracts, the total position limit of 400‑420 N225 Futures contracts would have been incorrect unless D1’s position limit for trading in HSI Futures was reduced from 120 contracts to zero.[51]

67.  But even taking the matter to its highest as set out in the above paragraph, it at best showed that D1’s case on correlation between his total position and total monetary limits called for some clarification, but at this interlocutory stage before final determination on the merits I am not persuaded it went so far as to demonstrate non-existence or irrelevance of the Requested Document.  More importantly, despite dispute between the parties on whether or not there was breach of D1’s and/or D2’s trading limits that led to breach of duty of care or breach of implied terms on P’s part, to date P had not disclosed/discovered under Order 24 of RHC any documentation that evidenced the alleged change of D1’s total position limit into a total monetary limit on/about 9 February 2010.  P’s solicitor informed Master Chow that such change was effected by way of an internal email,[52] but P resisted disclosure on the basis it was not the Requested Document.[53] But in the absence of such documentation, I cannot conclude/infer at this interlocutory stage that there was necessarily anything untoward in relation to the total position limits for N225/HSI Futures contracts vis-à-vis the total monetary limit.

68.  Fourthly, Master Chow noted 7 out of 8 Horn Applications contained explanations for increase of D2’s monetary limit, but in the Horn Application dated 29 November 2010 the increase in monetary limit from HK$7,500,000 to HK$18,000,000 (which increase was even greater than the increase recorded in the 2010 Document) was approved without explanation.  The learned master regarded this as an example of P’s approval for increase of trading limit without explanation or justification that went against D1’s submissions.[54]

69.  However, as D1 explained, prior to the Horn Application dated 17 November 2010 there was already an approved ad hoc increase from HK$7,500,000 to HK$16,600,000 (with explanation given) that was valid until 17 December 2010, so the Horn Application dated 29 November 2010 only sought an effective increase of 9% from HK$16,500,000 to HK$18,000,000, which increase was sufficiently covered by D1’s equity of HK$21,000,000 as recorded in the Horn Application dated 17 November 2010. Given such objective information, I am unconvinced the matters raised by the learned master detracted from the prima facie case on existence and relevance of the Requested Document.

70.  Fifthly, Master Chow noted the 8 Horn Applications documented a number of ad hoc increases of D2’s monetary limit from HK$4,700,000 to HK$17,000,000 which exceeded D1’s total monetary limit of HK$10,000,000.  The learned master concluded that “[by D1’s] account given at the hearing, when the limits of the clients exceed his personal limits, he would have to seek approval for increase.  The risk management system that he so emphatically insists as having been put in place cannot work if such a breach is not taken care of”.[55]

71.  In my view, the learned master might have misunderstood D1’s case on the position limit.  D1 contended that any client of his with extra equity could purchase other instruments that might be subject to corresponding trading limits for such other instruments (eg total position limit of 120 contracts for HSI Futures), but not N225 Futures in excess of D1’s position limit of about 400 contracts unless there was ad hoc approval to increase D1’s total position limit (which never happened).  Thus, the risk control mechanism imposed by D1’s total position limit would not prevent his clients from purchasing other instruments with their extra equity, but the total monetary limit would kick in to cap the number of contracts D1 could buy for his clients upon margin fluctuation.  It is at the heart of D1’s case that despite such risk control mechanism P by allowing purchases that exceeded D1’s/D2’s trading limits was in breach of the duty of care owed to D1 and of the implied terms of the 2002 and/or 2010 Agreements.  I am not persuaded D2’s monetary limit was necessarily inconsistent with D1’s pleaded case, which must be a matter for trial.

72.  Sixthly, Master Chow found the Horn Applications that imposed D2’s trading limits in monetary terms tallied with D1’s total monetary limit in the 2010 Document, and in the absence of evidential support for D1’s allegation that “the monetary limit could not have superseded the position limit because the two work together” and given “the lack of any explanation as to why the client-specific limits were only in terms of dollar amount, I am not persuaded that the two limits invariably work concurrently”.[56]

73.  I note that in approving increases for D2’s monetary limits in the Horn Applications, D2’s margin requirement, cash balance and equity were specifically noted.  As explained by D1, D2 as client should have equity before he bought/sold instruments, but D1 as accountant executive did not have to show client’s equity or cash balance before placing orders for N225 Futures at UOBB.  On such basis, the risks posed by D1 and D2 were different.  But more importantly, the learned master erred in conflating P’s and D1’s case, which were quite different, and in making inappropriate findings at this interlocutory stage.  Whether the total position and monetary limits invariably worked together would be a matter for trial.

74.  Seventhly, Master Chow held that the Requested Document was irrelevant because (a) the Tse Aff deposed to a change from a total position limit to a total monetary limit for D1 on/about 9 February 2010, and (b) on 9 July 2010 such total monetary limit of HK$6,000,000 was increased to HK$10,000,000 by the 2010 Document that remained applicable for the D2 Account during the volatile market situation in March 2011.  The learned master opined that since D1 argued D2 had entered into an open position of significantly more than 400 N225 Futures contracts but he worked out 420 such contracts would be about HK$10,000,000 (which meant breach of D1’s total position and total monetary limits), D1 could “simply draw support from the 2010 Document and the document sought is not relevant”.[57]

75.  In short, the learned master held that despite D1’s case that there was breach of his total position limit as well as his total monetary limit which D1 said amounted to P’s breach of the duty of care and breach of implied terms of the 2002 and/or 2010 Agreements, D1 should merely rely on documentation that would demonstrate breach of his total monetary limit and not documentation that would arguably demonstrate breach of his total position limit.  I cannot understand why D1 should have one arm tied behind his back, and this is certainly no basis for saying the Requested Document was irrelevant or unnecessary.

76.  Eighthly, Master Chow believed it was possible D1’s total monetary limit of HK$10,000,000 was “not equivalent to the 420 contracts position limit” “because of the turbulent market conditions in March 2011 …… In that case, there could be breach of the limit set in terms of lot number but not a breach of the limit in monetary terms.  There is no evidence, or submissions for that matter, before me to show that the position [D1] seeks to rely.  Without the necessary information to fill in the gap in the case of [D1], the only conclusion that can be reached is that he has failed to satisfy the court that an order should be made under Order 24 rule 7”.[58]

77.  It is not for the court hearing an interlocutory application for specific discovery to require proof or to make findings on the ultimate issues at trial. Quite simply, the trading limits of D1 and D2 were very much at the heart of the issues in controversy between the parties.  It is D1’s case that there was breach of the trading limits and hence P was in breach of obligations owed to D1/D2, but P contended that trades for D2 were within the approved limits.  As a corollary to this contested issue, there was further dispute over whether D1’s operative trading limit(s) were his total position and total monetary limits or just his total monetary limit.  These disputes alone would have been sufficient to require Peruvian Guano discovery of all documents pertaining to D1’s trading limits and/or changes to his trading limits during the relevant period.  Ultimately, what exactly were D1’s applicable trading limit(s) and whether there had been breach thereof would be a matter for trial.

78.  In light of all of the above matters, I am convinced D1 had established a prima facie case on existence and relevance of the Requested Document.  But that is not the end of the matter because Tse deposed she had caused a diligent search of P’s records to be made and was unable to find any document that came within the description for the Requested Document other than the 2009/2010 Documents which D1 said were not the Requested Document. 

79.  As explained in paragraphs 43-45 above, unless it could be shown that the Tse Aff was insufficient by the pleadings, lists of documents and the Tse Aff itself and/or by admissions made by D1, it would be taken as conclusive at this interlocutory stage so that D1 could not seek to contravene the same or apply to cross-examine Tse.  Here, there was no admission by P in its pleadings or elsewhere of the existence of the Requested Document.  Rather, P’s allegation that it did not have the Requested Document in its possession, custody or power stemmed from difference/contest between the parties’ respective case, ie P claimed D1’s total position limit had been superseded on/about 9 February 2010, but D1 claimed his total position limit was still effective.  Such difference cannot be resolved on affidavit/submissions at this interlocutory stage.  Rather, it is a matter for resolution at trial.  Should D1 be able to convince the trial judge of the persuasiveness of his case and/or to trump P’s contentions at trial, he may urge the trial judge (if he can) to draw adverse inferences against P for failing to disclose/discover the Requested Document.  But there is no basis for me to go behind the conclusiveness of the Tse Aff at this stage, and hence D1’s application for specific discovery of the Requested Document is refused.

80.  Neither Mr Leung nor D1 addressed me on the costs order made by Master Chow in the Decision/Order.  Although the learned master reserved her decision to be handed down by way of the Decision, she heard addresses on costs by P’s solicitor.  D1, who obviously did not know the outcome of his application for the Requested Document, understandably had no submissions to make on costs at the 2^nd Hearing.  But in the Decision the learned master granted an absolute and not nisi order that D1 shall pay P’s costs for the discovery application (including all costs reserved) to be summarily assessed. 

81.  In my view, procedural fairness would have required D1 to be given an opportunity to address on the issue of costs after knowing the outcome of and reasons for the court’s decision on the Summons, and hence the costs order below should have been made on a nisi basis.  Given my conclusion on the substantive application under the Summons, I agree that P was entitled to costs of the Summons after 9 January 2014 when the Tse Aff was filed.  I have found that D1 had shown a prima facie case on existence and relevance, but his pursuit of the Requested Document became unjustified when the Tse Aff verified that such document was not in P’s possession, custody or control.  Since the propriety of P’s request would turn on the ultimate findings at trial, the appropriate costs order below should be (a) costs of the Summons up to and including 9 January 2014 (including all costs reserved if any) be costs in the cause and (b) D1 shall pay P costs of the Summons after 9 January 2014 (including all costs reserved if any) to be taxed if not agreed. 

X.  CONCLUSION

82.  In the circumstances, I grant the following orders:

(a) leave be granted for D1 to appeal against the Decision/Order out of time;

(b) costs of the Summons up to and including 9 January 2014 (including all costs reserved if any) be costs in the cause;

(c) D1 shall pay P costs of the Summons after 9 January 2014 (including all costs reserved if any) to be taxed if not agreed;

(d) save and except for (b)-(c) above, the Appeal be dismissed.

83.  Further to the order made in (b)-(c) above, it follows that the Assessment Order that summarily assessed costs payable by D1 to P at HK$74,000 has to be set aside.  I therefore order that the Assessment Order be set aside.

84.  In respect of the costs for the 1^st Hearing, both D1 and P were innocent parties.  Although D1 was ill and could not attend the 1^st Hearing, P could not be faulted for having incurred costs to engage legal representatives to appear at such hearing.  In the circumstances, a fair order would be P’s costs in the cause, which meant P would only recover costs if it succeeded at trial.

85.  I grant a costs order nisi that (a) costs of the 1^st Hearing be P’s costs in the cause, and (b) save and except for (a) above, D1 do pay P costs of the Leave Application and 80% of the costs of the Appeal (including all costs reserved if any) to be taxed if not agreed.  Although I have allowed the Leave Application, it was D1 who sought indulgence from the court and he should bear costs of such application. Save for the minor question of part of the costs below, D1 failed in the Appeal and costs should follow event.