XCHRX OLIVIA DAVIES v. LAU SHEK YAU JOHN and Others

1994 No. A3617

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. In these proceedings, the plaintiff alleges that the first, second, third, fourth and ninth defendants wrongfully conspired together to deprive the fifth defendant, in which the plaintiff held shares, of its legitimate rights to certain business with the Shanghai Metro Corporation relating to advertising in the underground railway, and to close the fifth defendant down. As against the sixth, seventh and eighth defendants, the plaintiff claims that they are constructive trustees of their shares in the ninth defendant, and are liable to account to the fifth defendant in respect of them. The plaintiff alleges 26 overt acts between 30 September 1992 and 3 November 1992 in pursuance of the alleged conspiracy. These are the main allegations of fact, and one might expect that it will be from the evidence of these acts that the court will be asked to infer the conspiracy. By and large, these allegations of fact are, by the defence, put in issue. There is no suggestion that the allegations are immaterial or irrelevant.

2. On 9 May 1995, the plaintiff issued a summons asking for an order under Order 24, rule 7 that the first, second, third, fourth, sixth and seventh defendants file an affidavit or affirmation stating whether some 39 documents or classes of documents have at any time been in their possession, custody or power, stating when they parted with them or what became of them. On 5 July 1995, the Master made such an order in respect of only two of the documents. On 11 July 1995, the plaintiff lodged a notice of appeal against that decision.

3. In Lee Nui Foon v Ocean Park Corp. (No.1) [1995] 2 HKC 390, Cheung J. said -

"The principles relating to the application for specific discovery can be summarised as follows :

(1) The party seeking the order has to make out a prima facie [case] that:

(i) there is in existence a specific document or class of documents;

(ii) the party against whom the order is sought has or had the document in his possession, custody or power;

(iii) the document or class of documents relates to a matter in question in the action; and

(iv) discovery is necessary either for disposing fairly of the cause or matter or for saving costs.

(See Deak and Company (Far East) Limited v. N.M. Rothschild and Sons Limited and Others (Civil Appeal No.78 of 1981 and Berkeley Administration Inc. and Others v. McClelland and Others [1990] F.S.R.381).

(2) The prima facie case may be based on the probability arising from the surrounding circumstances or in part on specific facts deposed to. (Note 24/7/1 Supreme Court Practice 1995)

(3) "Relevance" means something which contains information either directly or indirectly enabling the party seeking discovery either to advance his own case or to damage that of his adversary, or which may fairly lead to a train or inquiry which may have either of these consequences.

(See Campagnie Financiere ET Commercial Du Pacific v. The Peruvian Guano Company (1882) 11 Q.B.55

(4) A document may be relevant either by reason of its character - for instance, the mere fact that it is a document of a particular kind - or it may be relevant by reason of its contents, and, if the applicant is relying upon a particular class of documents because they may have certain contents, it is not enough for him to say "there must be this particular class of documents" unless the mere fact that they belong to the class is sufficient to constitute relevancy. If the mere fact that they belong to the class is not sufficient to constitute relevancy, but the relevancy has to depend upon the particular contents, then there must be a prima facie case for particular contents made, before, discovery can be granted.

(See Astra-National Productions Ltd. v. Neo-Art Production Ltd. and Others [1928] W.N.918.)

(5) Where a claim to see a class is made, the class must not be defined or described so widely as to include documents which are not relevant to the issue (Note 24/7/11)."

4. Counsel are agreed that these are the principles I should apply in this case, save that Mr Whitehead pointed out that the words used by Brett L.J. in the Compagnie Financiere case, at page 63, were somewhat wider than is suggested by Cheung J. -

"It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon 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."

5. I will apply these principles to the case before me, and will do so in relate to each document or class of document requested, although I may not mention the considerations expressly.

6. Before proceeding to consider the documents and classes of documents listed in the summons, I will make some general remarks.

7. All the defendants are linked in one way or another. They are acting together in these proceedings; only one defence has been filed by all, and they are represented by the same solicitors and counsel. If a document or class of documents relating to a matter in question in the action is in existence, it is likely that it is, or was, in the possession, custody or power of one or other of the defendants, although it may not be possible to say which of them. In this situation, it seems to me, the pursuit of justice is not to be frustrated by difficulty in identifying which of the defendants have, or had, a particular document or class of document. If other conditions are satisfied, the order should be made against all the defendants. There is no hardship here. Each of the defendants can very easily say whether or not he has the document in question.

8. The plaintiff has filed two affidavits in support of her application. The defendants have remained silent. They have made no attempt to give any assistance to the court on dealing with this matter. They have not said that there is any difficulty in complying with any order the court might make. This is relevant because Mr Kwok has said that an order might involve discovering "tons" of documents, and the fifth defendant might have "thousands" of employees. There is no evidence of this whatsoever, which I would have expected if the defendants thought that complying with any order would be unduly onerous or oppressive.

9. It seems to me that, in many cases, the documents concerned should be limited to those covering the period of the overt acts alleged; say the months of September, October and November 1992. I will refer to this as "the relevant period".

10. The discovery sought is wide and far-reaching, but the issues left on the pleadings are numerous. And it is the nature of the conspiracy that, if the plaintiff's case is right, she will not be able to produce any direct evidence of the plot; the documents that may go towards establishing that conspiracy, and from which inferences may be drawn, are exclusively in the possession of the defendants.

11. The documents and classes of documents mentioned by the plaintiff in relation to the fifth defendant in the summons are -

"1. All correspondence from 1/9/92 to date relating to the matters pleaded (particularly but without limiting the general duty of disclosure, correspondence between the company and the Shanghai Metro Corporation)".

12. Mr Whitehad concedes that item 1 is too wide. It should, he says, be restricted to correspondence between the fifth defendant and the Shanghai Metro Corporation. The defendants admit that there were negotiations with the corporation. What happened during and following these negotiations is an issue between the parties. It is probable, indeed almost certain having regard to the way negotiations are normally conducted, that these negotiations involved correspondence, and this correspondence is relevant to the issue. This correspondence should be discovered.

"2. Statutory Books of the company together with Minutes of all directors meetings and all shareholders' meetings".

13. Central to the dispute between the parties is the manner in which the fifth defendant was managed, and whether its directors mismanaged it contrary to their ficuciary duties. This will involve a close scrutiny of inner workings of the fifth defendant, both financially and otherwise. Item 2 is clearly relevant to show what was going on in the company during the relevant period. The statutory books and the minutes covering the relevant period should be discovered.

"3. All ledger account records in addition to that disclosed at 83 and 84 of Defendants' List of Documents".

14. For the same reasons, the ledger accounts covering the relevant period should be discovered.

"4. Cheque books and cheque stubs".

15. The plaintiff alleges that, as part of the conspiracy to run down the fifth defendant, its cash assets were "milked". There should be discovery of these documents for the relevant period.

"5. Bills showing itemised telephone calls for period : 1/9/92 to date".

16. The purpose of this request is not clear to me. Presumably, evidence is sought of communications from the fifth defendant to others. The contents of the calls will not appear from these documents, so I do not think the matter will be advanced by their disclosure. This request is refused.

"6. Management accounts for each year since incorporation.

7. Audited account for each year since incorporation".

17. For the reasons already given, there should be discovery of these accounts covering of the relevant period.

"8. All employment letters and/or contracts with staff".

18. One of the objects of the conspiracy, it is said, was to run down the fifth defendant so that it could not take advantage of the business available to it. In this respect, it would be relevant to inquire into the staff position of the fifth defendant over the relevant period. These documents, covering the relevant period should be discovered. As I have said, the defendants have produced no evidence suggesting that this would be oppresive or unduly burdensome.

"9. Bank account opening forms for all accounts opened in the name of the company after 12/9/92 together with specimen signature cards, authorised signature forms; cards etc. and all bank statements".

19. These documents are relevant to the manner in which the fifth defendant's finances were managed, and who was in control of them. These documents covering the relevant period should be discovered.

20. The plaintiff mentions the following documents relating to the eighth defendant -

"10. All correspondence with agents giving instructions to set up company in British Virgin Islands.

11. Certificate or similar document of incorporation;

12. Charter or constitution and by-laws (i.e. documents similar to memo and articles);

13. Certificate of Registration under Part XI of the Company Ordinance, Cap. 32;

14. All documents submitted in respect of registration under Part XI of the Companies Ordinance, Cap. 32;

15. Application for Business Registration Certificate;

16. Business Registration Certificate plus similar and/or documents ancillary thereto;

17. All issued share certificates;

18. Statutory or similar books including all minutes of all directors and shareholders' meetings since incorporation;

19. All documents respecting the appointment of directors, secretary and auditors; the issuance of shares, the opening of bank accounts, the appointment of officers, the opening of bank accounts bank statements and authorised signatories of the company;

20. All cheque books and cheque stubs;

21. Management accounts for each year since incorporation;

22. Audited accounts for each year of incorporation".

21. The eighth defendant is a company that, the plaintiff alleges, reaped part of the benefit of the business that should have gone to the fifth defendant. The circumstances in which this company was set up, the identities of its shareholders, and, generally, its activities over the relevant period are germane to the matters in question in the action. In so far as these documents relate to the ongoing activities of the eighth defendant - the minutes under item 18, and items 20, 21 and 22 - discovery should be restricted to those covering the relevant period.

22. The plaintiff requests the following documents in relation to the ninth defendant -

"23. Similar items to those mentioned in respect of King Brilliant Ltd. above insofar as they relate to a Hong Kong registered company;

24. All contracts between the company and advertisers in Hong Kong

and Shanghai in respect of renting advertising space in the Shanghai Metro together with invoices and receipts;

25. Contracts of employment of directors by the company;

26. All other contracts of employment;

27. Advertising Rate Cards;

28. All press releases and promotional material in newspapers or magazines both in Hong Kong and elsewhere;

29. All contracts with Hou Kee Engineering and others in respect of the construction of bill-board frames in Shanghai Metro;

30. Bank Statements".

23. The ninth defendant is the company that entered into the joint venture with Shanghai Metro Corporation, and in which, the plaintiff alleges, the fifth defendant should have been a substantial shareholder. The documents relating to the ninth defendant may well show, if the plaintiff's case is well-founded, how it was that fifth defendant was excluded from participation. So far as the documents relate to the continuing activities of the ninth defendant, discovery should be restricted to cover only the relevant period.

24. The documents relating to the first, second, third, sixth and seventh defendants requested by the plaintiff are as follows -

"31. Statement to police by 2nd Defendant made on 16/12/92".

The Master ordered the disovery of this document.

"32. Pages of passports of each relating to the period 1/9/92 to date".

25. The relevance of these documents is to trace the movements of the human defendants. A conspiracy involves people meeting together. The presence of some of the defendants at the same place at the same time, perhaps in Shanghai, would be relevant to the matter in question. These documents relating to the relevant period should be discovered.

"33. Business or calling cards of each which bear a logo or name which includes the words : "Metro-Ads".

34. All other business or calling cards of each which bear the address : 2302-3 Fook Lee Commercial Centre;

35. All other business or calling cards of each which bear the name/address of Land Concepts".

26. The relevance of these documents would be to establish the links between the human defendants and the ninth defendant, which entered into the joint venture agreement. They should be disclosed.

"36. Bank statements of 2nd Defendant for October 1992 into which alleged $100,000.00 Director Loan of 1st Defendant was paid".

27. This is relevant to a specific allegation by the plaintiff, and goes directly to a matter in question. They should be disclosed.

28. In relation to two other companies, Metroads Media International Ltd and Shanghai Metroads Advertising Co. Ltd., the plaintiff seeks other documents -

"37. Documents of the nature mentioned in 23 and 24 above and all documents relevant to the alleged conspiracy and the matters pleaded in the Amended Statement of Claim".

29. For the sake of convenience, I repeat items 23 and 24 -

"23. Similar items to those mentioned in respect of King Brilliant Ltd. above insofar as they relate to a Hong Kong registered company;

24. All contracts between the company and advertisers in Hong Kong

and Shanghai in respect of renting advertising space in the Shanghai Metro together with invoices and receipts".

30. The evidence establishes that there are links between these companies and the defendants, and their names suggest a connection with the joint venture. The documents of the nature mentioned in items 23 and 24 should be disclosed. However, the request relating to the other documents is far too wide - "all documents relevant to the alleged conspiracy and matter pleaded in the Amended Statement of Claim". The defendants cannot be expected to comply with this, and I cannot narrow it down within the terms of the description given. This request is refused.

31. In relation to CCD & Associates Ltd, Metroads International Ltd, Houn-Cheong Enterprises Ltd, and Golden Mile Hotel Management Ltd., the plaintiff seeks these documents -

"38. All leases and/or documents respecting the rental of office space at Fook Lee Commercial Centre, Sun Hung Kai Centre and/or Evergo House".

32. The evidence suggests that there are links between at least some of the defendants and Houn-Cheong Enterprises Ltd and Golden Mile Hotel Management Ltd. It seems they share the same premises as the ninth defendant. Houn-Cheong may have been involved in the winding down of the fifth defendant. These documents may help to show the nature of the relationship.

33. In relation to the joint venture contract, the plaintiff asks for discovery of -

"39. The agreement, contract and/or other documents entered into with Shanghai Metro Corporation of Shanghai which were subsequent to and in furtherance of the "preliminary" agreement pleaded in paragraph 4(e) of the Defence".

34. Discovery of these documents was ordered by the Master.

35. In the result, I order discovery by the defendants within 14 days to the extent indicated in this judgment. There seems no reason why the costs should not follow the event. I make an order nisi that the defendants pay the costs of this application in any event before me and the Master, with a certificate for counsel.

(J.K. FINDLAY)

Judge of the High Court