HEATHER ANNE VOCE v. THE HENLEY GROUP LTD

HCA1370/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1370 OF 2006

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D E C I S I O N

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1. This is an application by the Plaintiff, Heather Anne Voce, for further discovery in this action which she has brought against the Defendant, The Henley Group Limited.  Although the application was, in form, an application for a further and better list of documents pursuant to RHC Order 24 rule 3, it seems that what the Plaintiff is really seeking is an order for specific discovery under RHC Order 24 rule 7.  However, I do not think that anything really turns on the form of the summons as the Defendant responded to the application on the basis that it was, in fact, an application for specific discovery.

2. The Plaintiff is a schoolteacher.  The Defendant is a firm of independent financial advisers.  Mr Kevin Slattery was a financial adviser who was formerly employed by the Defendant from about 1995 until he was dismissed on 10 June 2005.  Mr Slattery was also, for a period of time, a director and shareholder of the Defendant.  According to further and better particulars filed by the Defendant, Mr Slattery was one of its directors from 31 August 2002 until 24 March 2005, and also a 50 per cent shareholder in the Defendant from 5 September 2002 until 15 September 2005.

3. The Plaintiff and Mr Slattery were also personally acquainted as he was the son-in-law of Mrs Barbara Gall and the late Mr Justice Gall, and Mrs Barbara Gall was the headmistress of the school at which the Plaintiff taught.  She and the Plaintiff were on friendly terms and it seems that the Plaintiff had met Mr Slattery socially through Mrs Gall, or members of her family, on a number of occasions. 

4. According to the Plaintiff, she was recommended to consult Mr Slattery as to her financial affairs by Mrs Gall and, following that recommendation, she says that she did consult Mr Slattery and, as a result, invested various sums of money through him.  The Plaintiff says that the investments which she made through Mr Slattery were, in fact, made by her with the Defendant, and that the Defendant is accordingly responsible for the return to her of such investments or their value.  She says that, on various occasions between December 2002 and April 2005, she invested sums totalling some US$568,993 with the Defendant, through Mr Slattery, and that by May 2005, the investments made with these sums had grown to some US$903,252.56, as appears from a statement provided to her by Mr Slattery at about that time, the statement being one which was printed on the Defendant’s letterhead.

5. The Plaintiff’s case is that the terms of the investment were that she could withdraw all or part of her investment on three months’ notice being given and that she has given such notice to the Defendant, but the Defendant has failed to repay any part of such investment to her.

6. The Defendant’s case is that none of the sums paid by the Plaintiff to Mr Slattery were investments made with or through the Defendant, rather they were moneys paid to Mr Slattery to invest for the Plaintiff pursuant to an arrangement between the Plaintiff and Mr Slattery in his personal capacity, which had nothing to do with the Defendant.  The Defendant points to various pieces of evidence in support of its position.  It points first to the fact that it is not in fact licensed by the Securities and Futures Commission to handle client moneys and that it makes this clear to clients and potential clients in its publicity materials and in various documents provided to, and forms filled in by, clients when they engage the Defendant as their financial advisers.  The Defendants rely, in particular, on one such form filled in by the Plaintiff in this case in which that does appear to be stated.

7. The Defendant relies also on other matters to show that the Plaintiff knew that she was dealing with Mr Slattery in his personal capacity, including a hearsay statement made by the late Mr Justice Gall to the other shareholder and director of the Defendant, Mr Anthony Michell, to the effect that it was he who had introduced the services of Mr Slattery as a financial adviser and as someone who could make investments on behalf of the Plaintiff, to the Plaintiff, but that he had indicated to the Plaintiff that in dealing with Mr Slattery in that way, she would be dealing with him in his personal capacity and not as a representative of the Defendant.

8. Other evidence on which the Plaintiff relies includes evidence such as bank paying-in slips in relation to the sums paid over by way of the alleged investment with the Defendant, which appear to show that the moneys were paid not into any bank account of the Defendant, but into personal accounts of either Mr Slattery or his wife, or himself and his wife jointly.

9. The Defendant denies having ever received any part of the US$568,993 that the Plaintiff claims to have invested with it.

10. For her part, the Plaintiff responds that she does not agree that she was dealing with Mr Slattery in his personal capacity, or that she knew, or should have known, that this was the case.  She relies on various matters such as the fact that she had meetings with Mr Slattery at the Defendant’s offices, and was provided by Mr Slattery with statements showing the value of her investments at different times on the letterhead of the Defendant, in support of her position.

11. It is clear, I think, from the pleadings, that this is the main, and, indeed, perhaps the only real issue in the dispute between the parties, so that the main issue for determination in these proceedings will be: what was the status of the investments that the Plaintiff made with Mr Slattery?  Were they, as the Plaintiff suggests, investments made through Mr Slattery but with the Defendant?  Or were they, as the Defendant suggests, investments made with Mr Slattery in his personal capacity, which had nothing to do with them?

12. There was no real dispute as to the principles applicable to this application.  It is for the Plaintiff to make out a prima facie case that: first, there was in existence a specific document, or class of documents, of which discovery is sought; second, that the Defendant has, or has had, the document in its possession, custody or power; third, that the document, or class of documents, relates to a matter in question in the action; and finally, that the discovery sought is necessary either for disposing fairly of the cause or matter or for saving costs.

13. As I have said, the central issue in these proceedings relates to the nature of the investment made by the Plaintiff through Mr Slattery.  By this application, the Plaintiff seeks discovery of six classes of documents and I shall deal with each of these in turn.

14. The first document sought is described as an unredacted copy of a letter to the Defendant’s clients dated 10 June 2005, as referred to in paragraph 21 of Mr Anthony Michell’s witness statement. 

15. By way of background, it is necessary to say that in Mr Michell’s witness statement, he dealt with, among other things, the circumstances in which Mr Slattery’s employment with the Defendant came to be terminated and how he ceased to be a director of, or shareholder in, the Defendant.  In essence, it appears that Mr Slattery’s services were terminated because it was considered that he had been in breach of his obligations under the consultancy agreement under which he was employed, and also in breach of his obligations as a director of the Defendant.  The particular matters complained of were that, among other things, he had borrowed money from clients of the Defendant in contravention of its compliance manual and his consultancy agreement, thus bringing the Defendant into disrepute; that he had misused his company credit card by using it to withdraw money for his personal use; that he had failed to repay the company for the cost of personal travel which he had caused it to pay on his behalf; and that, notwithstanding having had ample opportunity to do so, he had failed to pass the necessary qualifying examinations to obtain a licence as a registered independent financial adviser.

16. In his statement, Mr Michell describes these matters and then goes on, in paragraph 21, to say that the Defendant had written to four of the clients who had made loans to Mr Slattery and whose loans were, apparently, at that point still outstanding, to explain to them that the Defendant had come to know of these loans that had been made, to explain that the obtaining of these loans by Mr Slattery was in breach of the Defendant’s compliance manual and Mr Slattery’s employment contract, to indicate that, as far as they were aware and as far as they were concerned, the loans in question were a personal matter between Mr Slattery and the clients concerned, but offering to provide any information or assistance that they could if that was desired by the clients.  Mr Michel went on to say that, out of the four clients, three had responded to the Defendant by getting in contact with them and indicating that, as far as they, the clients, were concerned, the loans were a personal matter between Mr Slattery and themselves.

17. Initially, although this document was referred to in Mr Michel’s witness statement, it seems that discovery was not made of it in the list of documents filed by the Defendant.  However, on request for its disclosure being made, it was indicated that a copy of the letter would be sent - or rather, a copy of the template for the letter would be provided.  This was duly done.  However, the template did not identify the clients to whom it was sent and discovery is therefore sought, in effect, of documents that would enable those clients to be identified.  It is not, I think, suggested by the Defendants that some such documents do not exist.  The Defendant says, however, that they are not relevant to any issue in the proceedings.

18. Mr Chan, appearing for the Plaintiff, submitted that the documents were relevant in that they might put the Plaintiff on a train of inquiry by identifying potential witnesses who could give evidence on behalf of the Plaintiff in these proceedings.  When asked as to the nature of the evidence that the witnesses concerned might be able to give, he suggested that the evidence might be of a similar fact nature relating to other situations in which clients had dealings with Mr Slattery which were said by the Defendant to be personal in nature.  Mr Chan said that the main interest was in the one client who had, as he understood it, indicated that he or she did not agree with the Defendant’s position that the loans were a personal matter between the client and Mr Slattery.  He suggested that such similar fact evidence was admissible and that to seek to adduce it would be justified, not least because, he said, the Defendant itself had sought to rely on similar fact evidence in the form of a statement to be made by Mr Nicholas Gall, the son of the late Mr Justice Gall, in which he speaks of a meeting between himself, his late father and Mr Michell, in which Mr Justice Gall informed Mr Michel, among other things, that the Gall family had invested sums of money through Mr Slattery but that this was understood by them to be on a personal basis and nothing to do with the Defendant.  Mr Justice Gall had, it was said, also indicated that, to his recollection, it was he who had introduced the Plaintiff to Mr Slattery as a potential investment adviser, although he says that he made it clear to the Plaintiff that in dealing with Mr Slattery, she would be dealing with him personally, in his personal capacity, and not as an agent or representative of the Defendant.

19. With respect to Mr Chan, I find it difficult to accept his submission that the documents sought would in some way relate to any matter in issue in these proceedings.  As I have indicated, the only real matter in issue in these proceedings relates to the capacity in which Mr Slattery acted when he received moneys from the Plaintiff for investment.  I do not see that any information that could be obtained from any of the four clients who had made loans to Mr Slattery as opposed to making investments with him, could have any bearing on that issue.

20. Further, it seems to me that whatever may be the merits of relying on similar fact evidence, it does seem to me that, read fairly, the evidence that has been put forward in relation to dealings between the Gall family and Mr Slattery are, if relevant at all, of more of a background nature.  It seems to me that the main point that is relied upon by the Defendant in the evidence of Mr Nicholas Gall relates to the suggestion that the Plaintiff was in fact informed of, and was therefore aware of, the fact that, in dealing with Mr Slattery, she would be dealing with him personally, rather than with the Defendant.

21. Of course, whether or not that evidence is ultimately accepted is a matter for the trial judge at the end of the day, and I do not, at this stage, express any views one way or another as to whose evidence is to be preferred on this critical issue.  But it does seem to me that the nature of the transactions that are dealt with in the letters concerned are very different in nature from those which are at the heart of these proceedings and, for that reason, I do not see that any such evidence would be relevant to these proceedings, or that any of those clients, in giving evidence as to the loans which they had made to Mr Slattery, could in any way be giving evidence that would relate to any matter in issue in these proceedings.

22. I would also point out that, to the extent that Mr Chan understood Mr Michell as saying that one of the clients in question had disputed the personal nature of the loan transaction with Mr Slattery, this would appear to be a misreading of the relevant part of Mr Michell’s statement which states simply that three clients made contact with the Defendant.  The fact that one client did not do so, does not indicate, one way or another, that any particular attitude to the nature of the loans having having been expressed by that client.

23. The second document that is sought was described as the unredacted police statement of Mr Michell.  The circumstances in which this document came into existence are that Mr Michell made a statement to the police, perhaps following a complaint made by the Gall family to the police in respect of Mr Slattery and his mishandling or misappropriation of funds which they had invested with him.  The police statement of Mr Michell deals with, among other things, the position of the Plaintiff and her investments with the Defendant firm.  However, when the document was disclosed, it was made clear to the Plaintiff that the Defendant would blank out from it certain parts that contained information relating to other clients that was, they said, irrelevant to these proceedings.  The version of the document that has been disclosed is, in fact, blanked out, in that two paragraphs, one longer and one shorter, have been obliterated in the copy that was produced for inspection and made available to the Plaintiff.

24. It is, I think, open to a party in proceedings who is making discovery to seal up or cover parts of documents which are irrelevant to matters in issue in the proceedings.  I do not think that this was disputed by Mr Chan.  Mr Chan, however, suggested that what had been blanked out went further than simply concealing the names of the clients concerned in respect of whom there might be legitimate confidentiality concerns.  However, Mr Hughes, the solicitor acting for the Defendant has gone on affidavit in these proceedings to say that the matters which have been blanked out are, first, matters that relate to other clients and, second, matters which are irrelevant to these proceedings. 

25. In general, unless some good reason is shown for going behind it, the oath of a party, or of his representative, as to the relevance or otherwise of documents which are disclosed on discovery is conclusive.  With respect to Mr Chan, I do not think that there is anything in the manner in which the blanking out was carried out that suggests that Mr Hughes may have mistaken himself or misapplied his mind to the question of whether or not the matters blanked out were in fact relevant to these proceedings.  In the circumstances, it seems to me that there is nothing that I can rely on to suggest that the blanking out was carried out otherwise than properly and, in the circumstances, I cannot see that there is any basis on which the unredacted police statement of Mr Michel should be made available.

26. The third category of documents of which discovery is sought has been described as all documents relating to the exchange of Mr Slattery’s 50 per cent shares in the Defendant with Mr Michell, as referred to in paragraph 23 of Mr Michell’s witness statement.  It is true that Mr Michell mentions, in paragraph 23 of his witness statement, that following the dismissal of Mr Slattery, negotiations took place and arrangements were made for Mr Michell to acquire Mr Slattery’s shareholding in the Defendant.  However, this is mentioned in passing in Mr Michell’s statement which provides a description of the background to Mr Slattery’s departure in all his various capacities from the Defendant, whether as an employee, a director or a shareholder. 

27. Despite Mr Chan’s submissions to the effect that there might be material in documentation relating to the share transfer that might throw light on the possible claims that might arise, in that there might have been, for example, a term of the agreement relating to potential claims against the Defendant arising as a result of Mr Slattery’s conduct, it seems to me that the precise terms on which Mr Slattery departed from the Defendant and the precise details of the terms on which he transferred his shares in the Defendant to Mr Michell are not matters that could in any way throw light on the key issue in these proceedings.

28. In this respect, I think it is important to bear in mind that the issues in these proceedings are defined by the pleadings and not by what the parties have to say in their witness statements.  Although it will often be the case that parties will raise matters in their witness statements which are matters of background or of peripheral importance, whether or not the matters that they speak to in their witness statements are relevant to the issues in the proceedings is a matter that has to be judged by reference to the pleadings.

29. As I have said, given that the issue in these proceedings relates to the capacity in which Mr Slattery obtained the funds that the Plaintiff says she invested through him, and given that all of these transactions and payments took place before Mr Slattery’s departure from the Defendant and his sale of his shares in it to Mr Michell, I cannot see that documentation relating to that transaction can be said to have any relevance to any of the issues in these proceedings.  I would accordingly decline to order discovery of those documents.

30. So far as the fourth category is concerned, this consists of the Defendant’s board minutes and minutes of annual general meetings from 2003 to 2005.  Initially, discovery of these documents was sought on the basis that the Defendant had not admitted that Mr Slattery was in fact a director and substantial shareholder of the Defendant as had been pleaded by the Plaintiff in paragraph 2(e) of her statement of claim. 

31. In fact, the matter was addressed in further and better particulars which were subsequently filed by the Defendant, in which the Defendant accepted that Mr Slattery had been a director of the Defendant between the dates which I have stated earlier in my judgment, and also indicated that Mr Slattery had been a 50 per cent shareholder in the Defendant between September 2002 and September 2005.  To that extent, therefore, there does not appear to be any issue between the parties as to Mr Slattery’s status as either a director or shareholder of the Defendant. 

32. At the hearing today, Mr Chan suggested that the documents in question might throw light on, as he put it, Mr Slattery’s role within the Defendant and perhaps also on the way in which Mr Slattery dealt with clients of the Defendant.  With respect, it seems to me that that is, at best, purely speculative and, in any event, there is no reason to suppose that the class of documents that is described, i.e., the Defendant’s board minutes and minutes of annual general meetings, would be likely to throw light on any matter relevant to these proceedings.  It seems to me that the class of documents is too widely stated and, in any event, the precise role of Mr Slattery within the Defendant does not appear to me to be, in truth, a matter that is in issue in these proceedings.  For those reasons, I would therefore refuse to make any order in respect of this item in the Plaintiff’s application.

33. The fifth class of documents sought was the Defendant’s audited accounts for the years 2003 to 2005.  The reason given for seeking disclosure of these documents was that they were said to be relevant to the same issue as the fourth set of documents and I would refuse disclosure of them for the same reasons as I have given in relation to that class of documents. 

34. It was also suggested that the Defendant’s audited accounts might disclose whether or not the Defendant had in fact received moneys from the Plaintiff in this case.  It was said that the Defendant had put in issue the question of whether or not it had received any moneys by making a positive averment that it had not received any moneys directly from the Plaintiff. 

35. With respect, even if that was an issue that was raised by the Defendant on which the Defendant bore the burden of proof - as to which I have some doubt, as it is the Plaintiff’s case that she has paid moneys effectively to the Defendant and it is therefore for her to prove that - it seems to me that there is no real basis for thinking that the annual audited accounts of the Defendant would be likely to show what funds it has received from particular clients.  I cannot, therefore, see that the disclosure of these documents is likely to be either necessary for the fair disposal of the proceedings, or for the saving of costs.  I therefore decline to order discovery of this category of documents either.

36. The final category of documents for which discovery was sought related to the Defendant’s appointment book and Mr Slattery’s personal diaries from 2003 to 2005.  This item was not pursued by Mr Chan at the hearing in the light of the statement in the affidavits filed in opposition to the application which made it clear that, as far as Mr Slattery’s personal diaries were concerned, these had never been in the possession, custody or power of the Defendant, and as far as the Defendant’s appointment books were concerned, while these would have been in the Defendant’s possession, custody or power, the practice of the Defendant was to destroy such appointment books, or dispose of them, at the end of the year to which the book related and that they therefore were no longer in existence.

37. In the circumstances, therefore, it seems to me that the Plaintiff has not made out any case for discovery of any of the categories of documents sought and it follows that the application is dismissed.