WADDINGTON LTD v. CHAN CHUN HOO THOMAS AND OTHERS

HCA 3291/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3291 OF 2003

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REASONS FOR DECISIONS

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1.  This case has been fixed for trial on 15 July 2013 with 9 days reserved. I am not the trial judge assigned to hear this case.

Background

2.  I have already set out the background of this case in my previous Reasons for Decisions dated 7 May 2013 (“the Previous Reasons”), and I do not want to repeat the same here.  For the purpose of the present Reasons for Decisions, I would adopt the same abbreviations that I have used earlier.

3.  On 27 March 2013, I dismissed the EY Summons. One of the reasons for the dismissal of the EY Summons is that such application should have been directed against Yugang (see: para 29 of the Previous Reasons). Following that decision, the plaintiff issued another third party discovery summons on 28 March 2013 against Yugang (“the Yugang Summons”).  The documents required to be disclosed in the Yugang Summons are wider than those requested in the EY Summons.  Apart from all the correspondence between Yugang and its auditor, EY, relating to the sale of the Prestige shares, the plaintiff, by way of the Yugang Summons, is asking Yugang to disclose, inter alia, all its correspondence with the 2^nd defendant relating to the sale of the Prestige shares.  In the hearing on 5 June 2013, I dismissed the Yugang Summons. 

4.  On 7 May 2013, the plaintiff filed ex parte applications for leave to issue 2 respective writs of subpoena duces tecum against Mr Lee Ka Sze Carmelo (“Mr Lee”) and Ms Chiang Sui Fook Lilian (“Ms Chiang”), who were the solicitors acting for Yugang and the 2^nd defendant respectively in the sale of the Prestige shares.  The Master referred the applications to me for consideration.  Since the making of the applications appeared to be an attempt by the plaintiff to get the documents under the Yugang Summons through the back door, I directed the plaintiff to take out inter parte summonses for such applications.  The plaintiff did so and the summonses (“the Subpoenas Summonses”) came me on 5 June 2013.  I dismissed the Subpoenas Summonses in the hearing.

5.  I now give my reasons for these decisions.

The Yugang Summons

6.  The reasons put forward by the plaintiff in support of the Yugang Summons are more or less the same as those in support of the HSBC, the PWC and the EY Summonses as stated in the Previous Reasons.   In short, the plaintiff says that the documents requested are relevant to the issues of corporate control of the various entities including the 2^nd defendant, the timing of the sale of the Prestige shares to Yugang, the reasons behind the sale of the Prestige shares by Profit Point and the sale of the Prestige shares to Yugang, and the liabilities of the 2^nd defendant.

7.  Subject to the sanction of the court, Yugang has no objection for the disclosure of certain documents including retainer letters and engagement letters through which Yugang engaged the solicitors’ firm, Woo Kwan Lee & Lo, and EY to commence the works on the sale of the Prestige shares to Yugang and certain documents passing between Yugang or Funrise and the 1^st or 2^nd defendants in relation to the sale of the Prestige shares.  For the remaining documents, Yugang objects the discovery on the grounds that the documents are not relevant to the issues of the case, the discovery of the documents is not necessary for the fair disposal of the case or for saving costs, and the documents requested have not been identified with precision.

8.  I do not find it necessary to decide on these particular issues.  In my judgment, from the case management perspective, the court should not allow third party discovery at such a late stage of the proceedings even if the documents are relevant to the issues of the case.

9.  This case has a long history, and the parties have had ample time for the preparation of the case.  In the various listing questionnaires filed by the plaintiff prior to the granting of leave to set down, the plaintiff had confirmed that there was no other outstanding interlocutory application. Up to now, no reason has been put forward by the plaintiff to justify the delay in the making of the third party discovery applications.  Some of the documents requested in the Yugang Summons might have been included in the EY Summons taken out by the plaintiff on 22 October 2012, but this cannot explain why the discovery application relating to the other documents, which prima facie are relevant to the issues of the case, had only been made on 28 March 2013 which was shortly before the PTR and only about 3.5 months before the trial.

10.  Now that the trial will take place in less than 6 weeks’ time.  If the discovery order is made, some time should be allowed to Yugang to locate the documents in order to comply with the obligations under the discovery order.  In other words, the parties will only be able to obtain the documents shortly before the trial.  This is wholly undesirable and would place undue burden on the parties in the preparation of the trial.

11.  Further, there is a real risk that, if third party discovery is ordered, it may prompt another round of discovery and filing of witness statements which would have the effect of derailing the trial itself. Taking into account the history of the conduct of the present litigation, such risk is real.  Further, if there are some other documents referred to in the documents disclosed by Yugang, it would be very difficult for the court to deny, for example, the defendants’ request for discovery of further documents or to adjourn the trial for further investigation.  Unlike the documents ordered to be disclosed under the HSBC Summons and the PWC Summons, most of the documents covered by the Yugang Summons are Yugang’s own documents, or the correspondence between Yugang and its professional representatives.  Since Yugang is not a party to the proceedings, the plaintiff and the defendant may have to seek further clarifications from the relevant personnel of Yugang about the contents of the new documents.  As I see it, there is a real risk that the parties may have to call additional witnesses or to carry out further investigation to deal with the possible matters raised in the new documents.

12.  Based on the aforesaid, from the case management perspective, the court should adopt a robust approach and put a stop to all new discovery, otherwise there would be no end to such exercise.  This should be the case even if Yugang has no objection to disclose some of the documents listed out in the Yugang Summons.  I therefore dismissed the whole Yugang Summons.

The Subpoenas Summonses

13.  Since I disallow the plaintiff’s application for discovery of documents by Yugang, the court should not permit the plaintiff to obtain the same documents, through the back door, by requesting Mr Lee (the solicitor acting for Yugang in the sale of Prestige shares) to attend the trial to produce such documents.

14.  Ms Chiang was acting for the 2^nd defendant in the sale of the Prestige shares.  From the case management perspective, the court should likewise not allow the plaintiff to issue a subpoena against her.  Firstly, the plaintiff had not indicated in any of the listing questionnaires that it intended to call Ms Chiang or Mr Lee as one of its witnesses at the trial.  No reason has been put forward to justify the change in the stance.  Secondly, the plaintiff has all along been trying to obtain third party discovery by way of summonses.  No reason has been put forward by the plaintiff as to why it had not taken out similar application against Ms Chiang earlier together with the HSBC, PWC and EY Summonses.  Thirdly, there is a real risk that the documents to be disclosed by Ms Chiang at the trial will necessitate further investigation by the parties with the result of derailing the trial itself.  Based on these reasons, the court should not grant leave to issue a subpoena against Ms Chiang.

15.  In his submission, Mr Lam, counsel for the plaintiff, relies on the passage in para 32/7/1 of Hong Kong Civil Procedure 2013 and argues that the proper procedure is for the court to grant leave to issue the subpoenas at this stage.  After the issuance of the subpoenas, it is always open to the intended witnesses to apply to set aside the subpoenas.

16.  I disagree.  The said passage only states that the judge should not and cannot take it upon himself to decide issues relating to the relevance and usefulness of any evidence that may be given, and so leave to issue a subpoena should be granted unless the application is an abuse of process.  To me, as there is a pending third party discovery summons against Yugang, it is certainly an abuse of process in applying for leave to issue a subpoena against Mr Lee with a view to obtain the documents through the back door.  For the subpoena against Ms Chiang, knowing full well the sentiment of the court about late applications expressed in the earlier hearings and the court’s concern that similar applications can disrupt the trial date, the plaintiff should have issued a third party discovery summons against Ms Chiang with a view to seek a proper determination by the court.  In such circumstances, trying to obtain the documents through another channel is an abuse of process. Further, it is not open to the plaintiff to argue that, in view of the urgency of the trial, the plaintiff can simply apply for such subpoenas by-passing the court’s determination on the propriety of the third party discovery.   Hence, I dismissed the Subpoenas Summonses.

Costs

17.  Based on my ruling that the making of the applications for leave to issue subpoenas is an abuse of process, I ordered the plaintiff to pay the 1^st defendant, Mr Lee and Ms Chiang the costs of the Subpoenas Summonses on an indemnity basis.

18.  For the Yugang Summons, I ordered the plaintiff to pay the costs of Yugang on an indemnity basis.  Since Yugang is a third party which has been dragged into the litigation at a very late of the proceedings, Yugang should be able to recover its costs on a full indemnity basis.

19.  In determining the issue of costs of the Yugang Summons vis-à-vis the plaintiff and the 1^st defendant, I have taken into account the dicta of Lam JA in Li Xiao Yun & Anr v China Gas Holdings Ltd, unreported, CACV 39/2013 (decision of the Court of Appeal in on 11 March 2013) that the applicant for late application should normally be expected to face an adverse costs order on indemnity basis.  However, since I did not award costs on indemnity basis in respect of the other late applications mentioned in the Previous Reasons, to maintain consistency, I awarded such costs against the plaintiff on a party-and-party basis.

20.  Finally, I would repeat the dicta I have made in the Previous Reasons about late applications:

“51. In this action, the parties have taken out a lot of late applications shortly before the PTR. This practice is highly unsatisfactory and should be discouraged. Apart from the prejudice likely to be caused to the parties by such late applications including the possible adjournment of the trial, there is serious disruption to the court diary as the court has to struggle to find some time during the limited time before the trial to hear the applications (see also the dicta of Lam JA in Li Xiao Yun & Anr v China Gas Holdings Ltd, unreported, CACV 39/2013, decision on 11 March 2013, at §18).

52. But for the timing of the applications, most of these applications do have merit and the courts are always puzzled as to why these applications are made so late.

53. Express warning about late applications has already been given in §34 of Practice Direction 5.2, and practitioners should be reminded that late applications may be dismissed on the basis of delay alone. Unless there are exceptional circumstances and there are good reasons for the delay, one should not expect the courts to grant any late applications taken out shortly before the PTR. This is the case even if the applications have satisfied all the other threshold requirements for the granting of the relevant orders. Practitioners should therefore give serious thought about the question relating to outstanding interlocutory applications when they fill in the listing questionnaires before the case is set down for trial, otherwise they only have themselves to blame if their late applications are rejected on the ground of delay alone. Further, as pointed out by Lam JA in Li Xiao Yun & Anr v China Gas Holdings Ltd, supra, at §18), applicant for late application should normally be expected to face an adverse costs order on indemnity basis.

21.  Further under the new CJR regime, the court, when facing an application for leave to issue a subpoena against a fresh witness shortly before the trial, is bound to consider the effect of such application on the trial and whether the testimony from such witness would have the possible effect of derailing the trial.  Hence, unless there are good reasons to the contrary, practitioners should always include the names of the possible witnesses in the listing questionnaires to avoid the possibility of the court disallowing such witnesses to testify at the trial.