CANNIE PO KING PANG v. CELESTIAL SECURITIES LTD

HCA 3319/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3319 OF 2002

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J U D G M E N T

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Background:

1.  Ms Pang invests in stocks and shares on the Stock Exchange of Hong Kong.  Celestial is a securities dealer carrying on business in Hong Kong.  Between 28 November 2001 and 23 January 2002, Ms Pang deposited $2,330,000 with Celestial for the purchase of shares.

2.  The account Ms Pang held at Celestial was a cash account, containing cash, and shares held by Celestial, but owned by Ms Pang.  In accordance with her instructions certain shares were purchased.  Ms Pang alleges that Celestial wrongfully, and without her knowledge and authority, dealt in 1,400,000 shares in Takson Holdings Ltd, and that accordingly she has suffered a loss, which, on the statement of claim, is not yet quantified.  Celestial resist the claim.

3.  There are two summonses before me, dated 12 April 2005, and 19 April 2005.  That dated 19 April 2005, relating to a stay of execution of a costs order, may be dealt with shortly.  No order is now required.  The order has been complied with following taxation.  That summons will be dismissed by consent, with costs to Celestial on a party and party basis.

4.  That dated 12 April 2005, seeks 7 different orders, item 5 having been dealt with, the remaining matters being concerned with discovery.  I propose to deal sequentially with the various orders sought.

Order 1; the Nicelog records:

5.  The Nicelog system is a system whereby telephone conversations made on telephone lines in Celestial’s office are recorded.  It is the normal practice that following the execution of an order a broker should telephone the client, using a telephone that is attached to the Nicelog system and confirm the instruction.  There is then a record confirming the transaction.

6.  It is plainly in the interests of Celestial to produce the records of the confirmation of the instructions by Ms Pang.  It is certainly arguable that in the absence of any Nicelog record of confirmation by a broker to Ms Pang that there was no such instruction from her.  Consequently it is open to Ms Pang to argue  that any transaction undertaken, and not confirmed by a Nicelog confirmation was, on the balance of probabilities, an unauthorised transaction.

7.  An undertaking was given by Celestial to Burrell J. on 10 December 2004, relating to the disclosure of Nicelog recordings.  Three affidavits have been filed in compliance with the undertaking.  There is a clear assertion by affidavit that in relation to some of the transactions there is no Nicelog record.  In the summons before me Ms Pang asked for an order that Celestial file an affirmation by way of further compliance of the undertaking given to Burrell J.   As I understand the position Mr Leung insists that the missing Nicelog records be disclosed.

8.  The application is entirely misconceived.  Celestial has fully disclosed all relevant records as best it can.  Indeed, that same view, that all relevant records were disclosed, was made plain by Deputy High Court Judge Poon at para 22 of his judgement of 29 August 2005.  It is right that there is an absence of Nicelog records in relation to some transactions.  Celestial will have to face the consequences of that, however that may be determined by the trial judge.  But there is nothing in the evidence to suggest that Nicelog records exist which are being concealed.  That which does not exist cannot be disclosed.  The affidavit is conclusive, and there is no evidence to suggest there ought to be any further inquiry.

9.  The order sought is refused.

Order 2; inspection of computer records:

10.  This issue came before me in the course of an appeal against a decision of Registrar C Chan in August and September last year.  In that appeal I ordered the production of certain computer records relating to a transaction known as transaction 17 in the statement of claim.  That order required Celestial to identify the persons with user numbers 6007 and 7777, which numbers appeared in computer records that had been previously discovered.  That identification was given.  Upon inspection of the records it was discovered that an account number “CT269” was allocated to transaction 17 which number was not Ms Pang’s account number.  A further affidavit from Celestial asserts that it is now unable to identify to whom the number CT269 was assigned at the relevant period.

11.  Mr Leung now seeks further detailed examination of computer records with a view to discovering the identification of the holder of account CT269.  Mr Chang correctly referred to Paul’s Model Art Gmbh & Co KG v  U T Limited, unreported  CACV 139/2005, as authority for the proposition that the relevance of the document is dependent upon the real issue in the case, which in turn must be one identified in the pleadings.  It seems to me that it will not even be an issue in the proceedings as to who held account number CT269.  The key factor is that it was not Ms Pang’s account, and so the transaction ought not to be able to be allocated to her.  Notwithstanding that position it appears that Mr Leung is determined to pursue the matter at the trial.

12.  The clear position of Celestial is that it is unable to say who held that account number.  It is plainly in interests of Celestial that they identify the holder of that account number and I am confident that if there was information available which would enable that identification it would have been forthcoming.  Celestial will have to face the consequences of that position and the likely adverse inferences that will be drawn against it in those circumstances.  But the fact that that will be made an issue at the trial, subject to any ruling the judge may make as to relevance, it does not necessarily result in the computer documents being discoverable.

13.  Nothing Mr Leung has said persuades me that the microscopic examination that he seeks of the computer records will reveal the identity of the person or company to whom that number was allocated.  The data that has already been retrieved from inspection of transaction 17 demonstrates that the further inspection sought by Mr Leung would lead nowhere.

14.  I am satisfied that this request is nothing more than a fishing expedition by those advising Ms Pang to seek, by the microscopic examination of the computer records, any anomaly possible.  That such an exercise is the improper is plain from the decision in Vo Thi Do & Ors v The Director of Immigration [1998] 1 HKLRD 729.  In the face of the clear statement of Celestial that they have no record as to who held account number CT269 at the relevant time, and in the absence of any evidence that would point to that information being discovered from the computer records, the discovery becomes a fishing expedition.  The examination sought is quite out of proportion to any realistic possibility that useful information might be discovered from further inspection.

15.  The order sought is refused.

Order 3; existence of computer files:

16.  This order is now not sought as a further affidavit by Celestial has established the existence of the computer files.  Although that affidavit was made after the summons was filed it was made well before any preparation for argument of the summons.

Order 4; the resumption of the plaintiff’s summons dated 31 August 2004:

17.  Celestial has complied with this summons and agrees to consent to a costs order on the summons in any event of a party and party basis.

18.  That summons is dismissed by consent with costs accordingly.

Order 5: a bilingual judge for a “strike out summons”:

19.  This order is no longer sought.  It is now admitted that it was by reason of inadvertence on the part of Ms Pang’s solicitors that the sealed Order fixing the hearing date for the strike out summons failed to include a specific direction in relation to a bilingual judge.

Order 6; wasted costs in relation to the allegation of forgery by Ms Pang

20.  Mr Leung, in his submissions, said that Ms Pang sought a wasted costs order against Celestial for alleged default in discovery relating to the Nicelog tapes containing conversations between Ms Pang and employees of Celestial.  That submission does not accurately reflect the order sought in the summons.  The order sought was limited to Ms Pang’s costs “in establishing alleged forgery in relation to the record of a conversation purportedly taking place at 16:44:34 on 18 January 2002 between Ms Pang and Douglas Yu.”

21.  Ms Pang had identified the number of the telephone being called by Mr Yu, allegedly to her, in which there was apparently confirmation of a transaction.  She asserted that the number that was called was not her number.  She contended that the record of the conversation was forged.  She reported the matter to the police, but after being informed by the police that there was no case to answer pressed the matter both in these proceedings and with the police.  The gravest allegations have been made not only against Celestial, but against their solicitors and counsel.

22.  The assertion that the number was not her number has now been demonstrated to be utterly wrong.  The suggestion of forgery has been demonstrated to be quite baseless.  The grave allegations made against Celestial’s solicitors and counsel have been shown to be quite unjustified.

23.  Ms Pang has been obliged to acknowledge that conversation was a conversation with her.  Ms Pang has been obliged to acknowledge that the number was in fact her China mobile roaming number.  Apparently she subscribed to a telephone that had a good package for China mobile roaming, but did not use her name to subscribe to the telephone but her brother-in-law’s name.  Consequently, she says, when identifying the number she did not recognise it as a number that was in her use.  Quite why she should be the user of the telephone for that purpose, but have the number recorded in the name of her brother-in-law, is quite beyond my understanding.

24.  What is plain is that the whole matter arose because of her own completely misguided assertion, which she has been forced to retract completely.  In these circumstances there cannot be any basis whatsoever for a wasted costs order against Celestial.  The costs incurred arose solely as a result of Ms Pang’s own forgetfulness as to the telephone number she used when in China and her own persistence in pursuing the matter in the way in which she did by involving not only this Court, but the police.

25.  Mr Leung, when pressed by any as to these circumstances, sought refuge in suggesting that I should adjourn this matter to the end of the trial.  To do so only be to prolong this part of the argument.  The argument is hopeless.  There is simply no basis for the order sought.

26.  The order sought is refused.

Relief 7; further discovery of dealing sheets:

27.  Ms Pang asks for an order that Ms Tonnie Yu, a director of Celestial, file an affidavit explaining the whereabouts of seven sets of  documents listed under Schedule 3 of the summons, these comprising certain dealing sheets and a document known as a “forced sale notice”.

28.  I am satisfied that no further discovery is required.  Items (ii) and (iii) were supplied to Ms Pang’s solicitors before the summons was taken out.  Items (i) and (iv) were referred to in the affidavit of Tse Ming Kit, (para 4).  Mr Chang sensibly concedes that the affidavit was technically insufficient because it did not properly address the question as to when those items were last in the possession of Celestial.  Items (v) and (vi) were referred to in the 3^rd affidavit of Tonnie Yu (para 3).  The same situation applies.  Item (vii) was referred to in the affidavit of Kitty Tang, (para 10), and Kelvin Kwok, (para two),.  Again the same situation applies.  Celestial has offered to make a further affirmation to the effect that the documents are lost and that they are unable to say precisely when those documents were last in their possession. 

29.  There is no sensible reason why Ms Pang should not have been advised to accept the further affidavit offered in order to remove the technical deficiency, and provide, formally, the explanation that is already known to her advisors.  To refuse to accept that affidavit and persist with the summons was futile.

30.  As Ms Pang clearly knows what the situation is, the order sought is refused.  I expect Celestial to file the clarifying affidavit.

31.  Plainly the documents are relevant.  Again, Celestial will have to face the consequences of their failure to produce or satisfactorily explain the absence of the documents.  It seems to me that it is better for Ms Pang to proceed to trial and invite the trial judge to draw appropriate inferences from the absence of documentation on the part of Celestial than it is to spend money on futile discovery applications.

Interrogatories:

32.  As an alternative to further discovery of computer records Mr Leung sought interrogatories pursuant to a summons dated 2 November 2005.  At the same time the summons for interrogatories was before the Master and had not been resolved.  Mr Leung asked me to deal with that summons notwithstanding the fact that it was then before the Master and not listed before me.  Mr Leung had filed a further summons to the Master seeking the removal of the summons for interrogatories for hearing before me.  No order had been made on that summons on the date the matter came before.  He asked me to deal with the matter on the basis that the Master had made an order removing the matter for hearing before me.  While perhaps a sensible course, there was no proper basis upon which I could proceed in that way.

33.  Mr Leung did not address the question of interrogatories in his skeleton argument, although at the hearing of the summons he sought the interrogatories in the alternative.  Mr Chang was not in a position to argue the matter.

34.  In those circumstances it would be inappropriate for me to rule on that summons in this judgement.  I make no order and leave the matter to be dealt with as the Master considers appropriate.

Costs:

35.  Ms Pang has failed comprehensively in the relief sought in the summons.  In only two respects, (Orders 3 & 4), could it be said in any sense that she has had any success.  As to Order 3, the matter was resolved well before the hearing of the summons and resulted in no argument by either side.  Order 4 was resolved by the compliance by Celestial with the order shortly after the summons was filed.  Celestial agreed to pay costs on the summons, enforcement of which was sought.  Consequently these aspects of the summons have not required any preparation or argument by either party and were not addressed at the hearing.

36.  In respect of all those matters which were addressed at the hearing, Ms Pang has failed.  Ms Pang must pay Celestial’s costs on the summons dated 12 April 2005, to be taxed on a party and party basis and paid forthwith.

The adjournment of the summons:

37.  The summons of 12 April 2005, first came before me for hearing on 21 November 2005.  On that day Mr Chang was obliged to seek an adjournment of the proceedings because of the failure of Ms Pang’s then solicitors to comply with Practice Direction 5.4 in relation to interlocutory summonses to a judge in chambers.  That non-compliance was admitted by Mr Leung at the hearing on 21 November 2005.  I adjourned the question of costs on the adjournment to the end of the interlocutory matter.

38.  I have listened carefully to everything that Mr Leung has had to say in relation to the substantial and serious defaults that were made in relation to the plain requirements of the Practice Direction.  The skeleton argument did not reach Celestial’s solicitors until 5.31 p.m. on 17 November 2005, 30 hours late.  The hearing bundles, containing some 900 pages, although paginated, were not inserted into lever-arch files, and were delivered 54 hours late.  The late delivery of the bundles made any consideration Mr Chang could give to the skeleton extremely difficult.   Mr Chang was required to prepare his submissions without properly knowing the case he had to answer.  He was unable to cross reference his skeleton, as at the time it was required to be filed in court he had not received the bundles.  Mr Chang has demonstrated to me that the draft chronology prepared by Mr Leung contained very significant omissions.

39.  None of the explanations Mr Leung has offered to me justify the extent of the non-compliance.  The relevant authorities are clear.  They are Sanyo Electric Trading Co Ltd v Leung Kwok Hing [1993] 1 HKLR 253 and Tong Yi Sang v Fung Law & Ng [1993] 2 HKC 665.  The Practice Direction is intended to be complied with.  Significant breaches of the Practice Direction resulting, as it did in this case, with an adjournment and a waste of the court’s time will be met with orders for costs.

40.  I am satisfied that this is an appropriate case to award costs of and incidental to the adjournment of the hearing on 21 November 2005, to be paid by Ms Pang forthwith, to be taxed on an party and party basis if not agreed.

41.  Mr Chang also sought an order that Ms Pang’s solicitors should undertake to the Court not to charge her for any of the costs incurred arising out of and incidental to the adjournment of the hearing.  I propose to leave it to the solicitors and Ms Pang to deal with that matter together.  The interlocutory steps in these proceedings have grown out of all proportion to the relief sought.  To a large extent the interlocutory steps have resulted from Ms Pang’s assertions in relation to the telephone number referred to in paras 20-26 above.  It appears to me that there has been default on both sides, Ms Pang initially in failing to identify the telephone number, and her solicitors, in advising her to persist with the matter.

42.  I make no order requiring such an undertaking and leave it to Ms Pang to negotiate the matter with her solicitors.

A comment:

43.  I have said that the interlocutory steps being taken in this matter have grown out of all proportion.  So far Ms Pang has taken out 8 summonses for specific discovery and she has made no fewer than 24 affirmations.  These include allegations of forgery and serious misconduct not only against Celestial, but also against its solicitors and counsel.  Those allegations, correctly characterised by Mr Chang as “wild”, have not been substantiated.  The costs involved to date must be enormous and must be coming very close to exceeding any relief that might be obtained were Ms Pang wholly successful in the writ.

44.  The outcome of the applications that I have had to consider in this judgement demonstrates the futility of the course being pursued.  I endorse completely the words of Deputy High Court Judge Poon at para 26 of his judgement of 29 August 2005, as to the application of resources in this matter, which have not the slightest sense of proportionality in relation to the litigation.

45.  It is time to bring the matter on for trial.