TAI FOOK FUTURES LTD v. CHEUNG MOON HOI JEFF

HCA9932/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9932 OF 1999

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DECISION

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1.  At the restored hearing of the Summons for Direction, I dismissed the two summonses issued by the defendant and gave further directions on the Summons of Direction.  I now reduce my oral reasons into writing.

2.  Before dealing specifically with the summonses, it is necessary to give a brief account of the events in the action and of the central issue in dispute.  The summonses have to be understood and determined against these relevant backgrounds. 

Events in the action

3.  The plaintiff commenced this action on 17 June 1999 to recover from the defendant, debt occasioned by Hang Seng Index Futures (“HSIF”) contracts executed by the plaintiff on the defendant’s behalf.  The claim is in the amount of $800,265.84 together with interest.

4.  The defendant defends the claim on a number of grounds that include breach of the Client Agreement made between the parties, breach of the Hong Kong Futures Exchange Rules, failure to carry out instructions and breach of duty of care.  The defendant also counterclaims for declaratory relief and damages. 

5.  It is common ground that the contracts were executed in the morning of 28 April 1999.  The trading instructions were given during telephone conversations between the defendant’s wife and Miss Mica Mak, who was an account executive working with the plaintiff.

6.  Pleadings were closed in November 1999.  On 19 April 2000, directions were made under the Summons for Direction in relation to discovery and exchange of witness statements and expert evidence.  The plaintiff and the defendant filed their respective lists of documents in September and October 2000.  On 7 November 2002, the time for exchange of witness statements was extended to 21 November 2002.

7.  On 14 November 2002, the defendant gave notice to act in person.  At about the same time, the defendant applied for legal aid, which was unsuccessful.  Although the defendant had filed a supplemental list of documents, he did not proceed to exchange witness statements as directed under the Order.  

8.  On 24 March 2003, the defendant applied by summons for copy of the audio recording of the telephone conversations that took place on 28 April 1999, which was disclosed as item 16 in the plaintiff’s list of documents.  The defendant also applied for specific discovery in relation to the audio recording of the telephone conversations between his wife or him and Mica Mak on 29 April 1999.

9.  On 11 April 2003, Master Wolley ordered the plaintiff to “provide to the defendant copies of 2 tape recording cassette of the telephone conversations per item 16 of the plaintiff’s List of Documents”, and to disclose by way of supplemental list of document, “audio tape record of the telephone conversations” between the defendant and/or his wife and Mica Mak on 29 April 1999.  Master Wolley also extended the time for the defendant to exchange witness statements by 30 days to 11 May 2003.

10.  Pursuant to the Order, the plaintiff filed a 2^nd supplemental list of documents disclosing the audio recording of the conversations on 29 April 1999. The plaintiff also provided to the defendant copies of the recordings of the 28 and 29 April 1999 conversations.  The plaintiff further filed an affirmation made by its director verifying that the recordings supplied to the defendant are a complete record of all the conversations between the defendant and/or his wife and Mica Mak on 28 and 29 April 1999.

11.  On 21 May 2003, upon the application of the defendant by summons, Master Wolley ordered the plaintiff to file a further affirmation verifying that the recordings supplied to the defendant are the complete records of the conversations on the dates in question.  Master Wolley further extended the time for the defendant to exchange witness statements to 14 days after receipt of the plaintiff’s confirmation affirmation.

12.  The plaintiff filed and served the further verifying affirmation on 26 May 2003.  On 9 June 2003, just before the date for exchange of witness statements, the defendant made a second application for legal aid.  The application was unsuccessful.  There is as yet no exchange of witness statements.

13.  On 24 November 2004, the plaintiff served notice of intention to proceed and applied to the listing officer to restore the Summons for Direction for directions to set down the action for trial.  By a letter dated 12 December 2004, the defendant objected to the restoration of the Summons for Direction on the ground that the Order of 19 April 2000 relating to discovery and exchange of witness statements had not been fully complied with.

14.  On 29 December 2004, the Summons for Direction was restored for hearing on 7 March 2005.  By mistake, the hearing was listed before me as the Listing Judge, instead of before the Listing Master as provided for under Practice Direction 5.1, which came into effect after the 19 April 2000 Order. 

15.  On 28 February 2005, the defendant filed a summons (“the defendant’s 1^st summons”) applying for an order that the plaintiff do disclose the vendor, brand name and model number of the recording system used by the plaintiff to record the telephone conversations between the defendant and his wife and Mica Mak on 28 and 29 April 1999.

16.  On 2 March 2005, the defendant issued a second summons (“the defendant’s 2^nd summons”) seeking to compel the plaintiff to apply to Hong Kong Exchanges (“HKE”) and Securities and Futures Commission (“SFC”) for all communications, documents and tapes exchanged between the plaintiff, HKE and SFC in connection with the complaint lodged by the defendant against the plaintiff.  Under the summons, the defendant also seeks an order directing the plaintiff to file an affirmation confirming that it did not receive and possess copies of trade recap of HSIF contracts for April 1999 (“trade recap”) that had been faxed by the defendant’s wife to Mica Mak in the afternoon of 29 April 1999.

The central issue

17.  The central issue in dispute between the parties relates to the meaning or construction to be given to the oral instruction related by the defendant’s wife to Mica Mak over phone on 28 April 1999.  The relevant words in question are “上700,係700穿一穿落黎”.  In a nutshell, the defendant’s case is that Mica Mak failed to carry out the instruction to sell or close the contracts after the HSIF had hit the position of 13,700.  The plaintiff’s case is that the oral instruction, as understood in the trade, means to sell after the HSIF had gone above 13,700 and then dropped to below 13,700.  The plaintiff says there is no breach of the instruction in that the HSIF did not go above 13,700 on 28 April 1999. The plaintiff further says that when the HSIF dropped below 13,700 after hitting the position, Mica Mak had asked the defendant’s wife whether to sell contracts and was told to wait.

18.  It is also the defendant’s case that during the telephone conversations on 29 April 1999, Mica Mak told the defendants’ wife that the HSIF did not hit the position of 13,700 on 28 April 1999, and that in response, the defendant’ wife faxed her a trade recap of 28 April 1999 to show that there was trading at 13,700. 

19.  It is common ground that the defendant had on 30 April 1999 complained to Hong Kong Futures Exchange.  The plaintiff had in connection with the complaint provided documentation and materials, including tape recordings of the conversations between the defendant or his wife and Mica Mak.  On 2 July 1999, Hong Kong Futures Exchange concluded the investigations and found in favour of the plaintiff.  The investigation report had been disclosed in the plaintiff’s list of documents.

The underlying reason for the defendant’s summonses

20.  The underlying reason for the defendant’s summonses is his belief and contention that the recordings of the telephone conversations as disclosed and supplied by the plaintiff were not the complete records of the all the conversations on 28 and 29 April 1999.  The defendant takes the view that the audio tapes had been tampered with.  He says that the part of the conversation on 29 April 1999, in which Mica Mak told his wife that the instruction was not executed because HSIF did not hit the 13,700 position, had been deleted.

21.  It is also because of this belief that the defendant made the application in May 2003 that led to the second order of Master Wolley dated 21 May 2003.  It is clear from the defendant’s submissions that notwithstanding the plaintiff’s verifying affidavit, the defendant remains of the view that the recordings disclosed and supplied by the plaintiff were not the complete and true records of the conversations that had taken place between his wife and Mica Mak.

The defendant’s 1^st summons

22.  By the defendant’s 1^st summons, the defendant seeks information on the vendor, brand name and model number of the recording system used by the plaintiff to record the telephone conversations on 28 and 29 April 1999.  The defendant said the information was required to enable him to engage the appropriate expert to inspect the master tape(s) of the recordings in question with a view to ascertaining whether the tape(s) had been tampered with.  He explained that the tape recordings would show that the instruction given was clear and he and his wife had not changed the instruction.

23.  Mr Lui for the plaintiff explained that the plaintiff’s telephone recording system is computer-operated, the recordings were captured and stored in the computer and there was no “master tape” as such.  For the purpose of litigation, the plaintiff had caused the conversations to be extracted from the computer system and recorded on audio tapes, and duplicated copies in the form of CD-Rom had been supplied to the defendant.  The plaintiff has no objection to the defendant inspecting the audio tapes.  The plaintiff however opposed the defendant’s 1^st summons on the ground that it was irrelevant to the issue in dispute.

24.  The legal basis for the defendant’s 1^st summons is unclear.  It is unclear whether it is for specific discovery under Order 24 or for interrogatories under Order 26 of Rules of the High Court.  That aside, in my view, the application should be refused for four reasons.

25.  Firstly, the information sought is irrelevant to the issue in dispute and is not necessary for disposing fairly of the cause in dispute or for saving costs.  As noted above, the central issue rests upon the meaning and construction to be given to the oral instruction given by the defendant’s wife to Mica Mak.  The telephone conversations, especially those on 29 April 1999, do not shed light on the issue.  Secondly, the plaintiff’s directors had by two verifying affirmations filed on 25 April and 26 May 2003 stated on oath that the recordings disclosed were the complete and true records of all the telephone conversations.  At this interlocutory stage, the defendant cannot seek to challenge the statement made on oath by seeking further discovery.  Thirdly, the defendant has no positive case on the recordings.  He is hoping that the information and/or the inspection may reveal that the recordings were incomplete or had been tampered with.  It is a fishing attempt.  Fourthly, to the extent it is said that the recordings will show Mica Mak is untruthful, it is not permissible to seek discovery or interrogatory solely for the purpose of impeaching the credit of the opposing party or its witness: Hong Kong Civil Procedure 2004 vol. 1 at p.440 para.24/8/2.

26.  The defendant’s 1^st summons is dismissed with costs to the plaintiff in any event, to be taxed if not agreed.

The defendant’s 2^nd summons

27.  By the defendant’s 2^nd summons, the defendant seeks to compel the plaintiff to obtain from HKE and SFC the materials in the investigation file relating to the defendant’s complaint.  The main materials that the defendant is after are the recordings of the relevant telephone conversations supplied by the plaintiff to the investigating authorities.  The defendant hopes to compare those with what he had been supplied and to ascertain whether the latter were complete records.

28.  It is not in dispute that the plaintiff had in March 2004 supplied to the defendant copies of all the correspondence and documents exchanged between the plaintiff and the investigating authority.  It is also not in dispute that in July 2004, HKE had by letter informed the plaintiff that the investigation file, including copies of the recordings, had been destroyed, and the plaintiff had provided a copy of the letter to the defendant.  The defendant, however, did not accept this.

29.  In my view, this part of the defendant’s 2^nd summons should be refused for two main reasons.  Firstly, the defendant has no basis for contending that the copies of recordings provided to Hong Kong Futures Exchange in 1999 were different from those disclosed to the defendant.  This is particularly so, considering that the investigation was concluded with findings in the plaintiff’s favour.  Secondly, it is evident from the reply from HKE that the investigation file and the copies of recordings had been destroyed.  The defendant has no basis for believing otherwise.  It is a futile exercise to order the plaintiff to obtain the materials from HKE and SFC.

30.  By the defendant’s 2^nd summons, the defendant also seeks to have the plaintiff confirming on oath whether it had received the trade recap said to have been faxed by the defendant’s wife to Mica Mak.  Admittedly, this is for the purpose of showing Mica Mak is not credible.  As said above, specific discovery will not be allowed for the sole purpose of discrediting a party or his witness: Hong Kong Civil Procedure 2004 vol. 1 at p.440 para.24/8/2.

31.  Additionally, the discovery sought is not relevant to the issue in dispute and is not necessary for disposing fairly of the dispute in issue or for saving costs. 

32.  The defendant’s 2^nd summons is dismissed with costs to the plaintiff in any event, to be taxed if not agreed.

The Summons for Direction

33.  As to the Summons for Direction, clearly there has been unnecessary and long delay in bringing this action to trial.  The defendant’s witness statements have been outstanding since April 2000 when the order was first made.  Since then, there had been no less than three extensions for the defendant to exchange witness statements.  The defendant however says he cannot finalize and exchange the witness statements without confirming whether the recordings supplied to him are complete and true records.  I do not accept this.  In my view, the defendant should get on with the preparation and the exchange of the witness statements.  The parties should work diligently and expeditiously to bring the action to trial.  The early resolution of the dispute is very much in the parties’ interest.

34.  I therefore grant a final extension of 30 days for the defendant to exchange witness statements with the plaintiff.  I further list the case for a checklist hearing before the Listing Master on 29 June 2005 at 2:30p.m.  The parties should file and serve updated checklists no later than 3 clear days before the hearing.