XCHRX SIU PO LUNG AND ANOTHER v. HARVEST FAIR INVESTMENT LTD.

HCA4791/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4791 OF 1999

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J U D G M E N T

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1. There are two summonses before the court. The first is dated 18 May 2001 for specific discovery of six categories of documents, pursuant to Order 24, rule 7, Rules of the High Court. The other is dated 4 October 2001 for leave to file out of time the 2nd affirmation of Ho Pak Ming affirmed on 27 September 2001 ("Ho's 2nd affirmation"). Both applications were opposed. But for the purpose of the hearing before me, Ho's 2nd affirmation was adduced de bene esse.

2. Before going any further, I would first dispose of the second application. Ho's 2nd affirmation sought to elaborate the basis of the discovery application. The evidence contained there should be placed before the court. Any prejudice that the plaintiff may suffer as a result is, I think, minimal. In any event, it can be adequately compensated by costs. I therefore allow this application with costs to the defendant in any event. In order to put the substantive application for discovery in context, I will set out briefly the nature of the dispute below.

Dispute

3. The dispute arose out of a sale and purchase agreement dated 18 June 1997 in connection with Unit E, 37/F, Block 3, Villa Esplanada made between the plaintiffs as purchasers and the defendant as vendor. At the time of the agreement, Villa Esplanada was still under construction. Because of the present dispute, the transaction did not go through. The defendant determined the agreement on 20 October 1998 and sold the property to a third party subsequently. The plaintiffs claimed for return of deposits and damages. The defendant denied liability and counterclaimed for, inter alia, damages.

4. The plaintiffs' primary case is that it is an express or implied term of the agreement that Villa Explanada would be construed in accordance with the approved plans including the approved foundation drawings : see paragraph 4 of the Statement of Claim.

5. The express terms pleaded in the Statement of Claim are Clauses 4(1) and (2) of the agreement. Clause 4(1) provided that the vendor shall, inter alia, comply with requirements of the Building Authority relating to the development and complete the Building in all respects in compliance with the conditions of the Government Grant in so far as they relate to the Building and the Building Plans on or before the 15 May 1998 subject to such extensions of time as may be granted by the authorised person in accordance with sub-clause (5)(a). Clause 4(2) stipulated, inter alia, that the vendor shall complete the development in all respects in accordance with the Building Plans by the expiry date of the building covenant period. The Statement of Claim went on to cite Regulation 4 of the Building (Construction) Regulations which provided for the determination of appropriate limitations for, inter alia, the structure of every building capable for safely sustaining and transmitting to the ground the combined dead loads, imposed loads and wind loads.

6. The implied terms pleaded are that the defendant warranted that the work would be carried out in a good and workmanlike manner; the defendant would supply good and proper materials and the property would be reasonably fit for human habitation.

7. The plaintiffs alleged that defects were found in the foundation of Villa Esplanada, including inconsistencies between the bored pile records and the record drawings in that the actual founding level as recorded is significantly lower than that predicted by the pre-drilling records for the majority of the piles; anomalies in the foundation in that whereas the notes in the approved foundation drawing required that all bored piles and footings shall be founded on grade II/III rock with core recovery greater than 85%, 4 out of the 16 piles tested were founded on less than satisfactory material which are not grade II/III rock. The plaintiffs averred that the defendant breached the express and/or implied terms referred to above. In this respect, the plaintiffs relied on, inter alia, a drawing entitled "Bored Pile and Footing Plan", Drawing Number 3201 Revision G ("the Drawing").

8. The defendant denied that there was any defect in the foundation of Villa Esplanada. In particular, it denied that there was any express or implied term which required the defendant to comply with the Drawing : see paragraph 18 of the defence and counterclaim.

Specific discovery

9. Order 24, rule 7(1) provides:

"Subject to rule 8, the Court may at any time, on the application of any party to a cause or matter, make an order requiring any other party to make an affidavit stating whether any document specified or described in the application or any class of document so specified or described is, or has at any time been, in his possession, custody or power, and if not then in his possession, custody or power when he parted with it and what has become of it."

10. The principles in this area of the law are well-established. They are helpfully summarised at paragraph 24/7/2, Hong Kong Civil Procedure 2001 at pp.400-1 :

(1) There is no jurisdiction to make an order under Order 24, rule 7 for the production of documents unless (a) there is sufficient evidence that the documents exist which the other party has not disclosed; (b) the document or documents relate to matters in issue in the action; (c) there is sufficient evidence that the documents is in the possession, custody or power of the other party.

(2) When it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order disclosure.

(3) The order must identify with precision the document or documents or categories which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.

11. With these propositions in mind, I now turn to consider the plaintiffs' application in detail. The six categories of documents in question are :

(1) Contract between the defendant and the main contractor in relation to the piling works ("the piling contract");

(2) Pre-drilling records, including loggings of the pre-drilling cores, the cores themselves and the report prepared by the party who carried out such pre-drilling works ("the pre-drilling records");

(3) Comments, if any, from the defendant or the defendant's agents, servants or employees, including the consultants, on such pre-drilling records and report and correspondence between the defendant, its servants or agents with the contractor on pre-drilling works and records ("the comments on pre-drilling works and records");

(4) Site records showing the depths to which the bored piles were excavated and the actual quantity of concrete case to show the volume of the bored pile filled, including records of the testing laboratory and invoices from the concrete plant ("site records");

(5) All documents, correspondences sent to or received from the Buildings Department by the defendant or its agents, servants or employees including its solicitors and architects in relation to the piling works after the date of the piling contract and onwards, in particular after discovery of the problems of B + B (Asia) Limited ("the piling work correspondence"); and

(6) All the notes, minutes or such other records of meetings held between the Buildings Department and the defendant and/or its registered structural engineer in relation to the piling works, commencing from 10 June 1998 onwards ("the meeting documents").

I will deal with them in turn.

Category 1 - the piling contract

12. Relevance is the only issue in connection with this document.

13. Mr Ho in his 1st affirmation said that one of the issues and matters in question is whether or not Villa Esplanada was construed in accordance with the approved plans including the approved foundation drawings. As one of the important issues is whether the piles were properly constructed, the piling contract that governed the piling works is therefore relevant. It will reveal what works that defendant asked the contractor to construct and whether the works as constructed was in compliance with what was required. In his 2nd affirmation, Mr Ho referred to the advice of the plaintiffs' expert that the piling contract would normally include terms and conditions which stipulate : (1) that the piles have to be constructed in compliance with the Building (Construction) Regulations; the reporting and records that the contractor had to provide the architect; and (3) the testing and other matters that have to be carried out during construction of the piles. Thus, the piling contract is relevant to the issues of ascertaining what was contracted to be works which have to be constructed and which by reason of the Building Ordinance would have to be in compliance with the Buildings Ordinance. This would then form the basis of comparison for what had been constructed to see if the works as constructed were indeed in compliance with the Buildings Ordinance and relevant Regulations. Ms Cheng, SC, for the plaintiffs, submitted that in this respect, the piling contract and the plans have to be considered as a whole. She also pointed out that the term "Building Plans" in the agreement, pursuant to the definition in Clause 1(c) of the agreement, means the general building plans and specifications prepared by the authorised person and approved by the building authority under Reference No.BD2/9123/95 and includes any approved amendments thereto. The piling contract contained specifications by the authorised person for piling works.

14. It is the defendant's primary contention that the term "Building Plans" in the agreement is specifically defined to refer only to plans under Reference No.BD2/9123/95. Hence the term "Building Plans" in Clauses 4(1) and (2) do not include any structural plans or foundation plans of the development. The defendant is accordingly not obligated to construct the development in accordance with "the approved foundation drawings". Mr Ho, SC, for the defendant, submitted that even if compliance or otherwise with "the approved foundation drawings" were in issue, clearly the only relevant evidence on that issue is evidence of the as-built foundation of the building and evidence of the approved drawings. Neither of such evidence requires an examination of the provisions of the piling contract. Evidence of compliance or otherwise of the piling contract could not possibly be relevant. A fortiori, no such evidence could possibly be necessary for the fair disposal of this action.

15. For present purposes alone and without pre-empting the final determination of the issues concerning the proper meaning of the term "Building Plans" at trial, I accept the plaintiffs' contentions and I rule that the piling contract is a relevant document and ought to be disclosed.

Category 2 - the pre-drilling records

16. This category includes pre-drilling records, the cores and the reports on the drilling works. I first deal with the pre-drilling records.

17. On 22 February 2001, the defendant filed and served a supplemental list of documents which included one item of original pre-drilling records in relation to Block 1 of the development and three items of copy pre-drilling records in relation to Block 2, Block 3 and other areas respectively. Originally, the application was put on the basis that the defendant did not make a distinction between original and copy documents. But the plaintiffs now contend that the documents disclosed are secondary evidence and they want the source materials. Mr Ho in his 2nd affirmation explained thus. It is the advice of the plaintiffs' expert that prior to the preparation of these records, it would be essential to have prepared manuscript logging of the pre-drilled cores which are prepared on a daily basis as the drilling is carried out. These are sometimes known as daily or field reports. Such records are usually required to be submitted to the resident engineer so that he can check the pre-drilling records against the field reports. The documents disclosed in the supplementary list are compiled and typed up from the manuscript logging. The manuscript logging are not disclosed. Ms Cheng submitted that the documents disclosed are not the best evidence. The first hand evidence is that transposed to the typewritten version.

18. Mr Ho submitted that by a letter dated 20 April 2000, the defendant's solicitors had already stated that loggings of the pre-drilling cores form part of the pre-drilling records. The letter from the plaintiffs' solicitors dated 13 June 2000 in reply did not dissent from that. There is also no suggestion that the pre-drilling records disclosed did not contain the loggings. The application for manuscript logging of the pre-drilled cores is new and should not be entertained. In any event, the defendant's solicitors had already explained in a letter dated 10 October 2001 that such manuscript loggings were no longer in existence; that according to the defendant's site engineer, the draft records or manuscripts were superseded by formal records; that the manuscripts were subject to change and amendment; and that when formal records were prepared, manuscripts served no further purpose and were disposed of.

19. I respectfully agree with Mr Ho that the request for manuscript is a new request. Nevertheless, as the evidence is already before the court and full submissions have been made, I will entertain it. There is little doubt that the manuscripts are relevant to the pre-drilling matters and the defendant had at some time been in possession, custody or power of them. But I still retain a discretion whether to order discovery : see proposition (2) at paragraph 10 above. There is no evidence to suggest that the pre-drilling records disclosed did not contain the manuscripts or that what the defendant's solicitors said about how the manuscripts were liable to be amended and how they had been superseded by the formal records in its letter dated 10 October 2001 was not correct. In the circumstances, I will exercise my discretion not to order discovery. In my view, the pre-drilling records produced, which are the formal records, are clearly sufficient evidence on the issues concerned. Manuscripts which are liable to be amended from time to time and had already been incorporated in the formal records, even if produced, would not take the matter any further.

20. I next consider the application for production of the cores. It is clearly outside the scope of Order 24, rule 7. I accordingly refuse it.

21. The outstanding item under this category is "report prepared by the party who carried out such pre-drilling works". Mr Ho complained that no ground for the belief that such report was in the defendant's possession, custody or power had been stated in Ho's 1st affirmation. I agree. Mr Ho went on to submit that in response to the allegation in Ho's 2nd affirmation that it would be normal to submit the records to the resident engineer, the defendant's solicitors had already pointed out in the letter dated 20 April 2000 that the only report prepared by the piling contractor which was in the defendant's possession was the pre-drilling records. What is contained in Ho's 2nd affirmation is not sufficient to justify a belief that there are such reports. Thus counsel submitted that there is no basis for the plaintiffs to seek an order for such report. I also agree. The application for this category is therefore refused.

Category 3 - the comments on pre-drilling works and records

22. The plaintiffs seek discovery on the pre-drilling works. They contend that there are likely to have been several copies of most project correspondence and reports kept in different offices. I agree with Mr Ho's submission that comments on pre-drilling works and records are irrelevant to the issues and unnecessary. The piling contract, the pre-drilling records and the as-built foundation are all relevant. But the comments made on the pre-drilling works while the same were being carried out are clearly not. The application for this category fails.

Category 4 - site records

23. In Ho's 1st affirmation, the basis of this particular application is stated thus. It would be normal for the contractor's records for each pile to be submitted to the resident engineer by the contractor. These records would normally contain substantial amounts of information on each bored pile. Reliance in this regard is placed on a typical pro forma for such records. These records are the source documents for the summarised pile records and usually indicated the delivery note/truck load number for each load of concrete delivered to the pile concerned. This enables the concrete to be traced to its source and it also enables the quantity of concrete placed with the pile to be compared with the theoretical quantity. The defendant had disclosed in its supplemental list a copy summary of bored pile records for Blocks 1, 2, and 3 dated April 1999. The summary was obviously prepared based on some source data which would have been taken at the time of the works. The veracity of the entries under the as-built founding level could only be ascertained from those source records.

24. Mr Ho first submitted that the typical pro forma site record was not used here. The records actually used contained no information or details such as delivery note of concrete or truck load number, etc. And this was not disputed by the plaintiffs. Secondly, Mr Ho submitted that the plaintiffs had already been provided with all the available records as early as 10 October 2000. They had been disclosed already in the supplemental list. The plaintiffs' reliance on the pro forma records is groundless. There is simply no ground to support the belief that there might exist some other site records. I again respectfully agree.

25. As to the source data for the preparation of the summary, Mr Ho submitted that the request had already been dealt with by correspondence and the plaintiffs' solicitors did not purse the matter further. Having read the relevant correspondence, I share Mr Ho's view. The plaintiffs should not be allowed now to revive this particular request when back in October 2000 they had already accepted the defendant's position on the matter.

26. I also agree with Mr Ho's submission that the plaintiffs have in any event failed to establish that the site records which are in possession of persons other than the main contractor or the registered structural engineer are within the possession custody or power of the defendant.

27. For the above reasons, the application for this particular category of documents fails.

Category 5 - the piling work correspondence

28. The defendant had already disclosed five letters in this connection. According to the registered structural engineer, the search for those documents had been exhaustive. Further correspondence purportedly pertaining to the piling works had been retrieved. There were grouped in two categories. Ms Cheng was concerned with the second category only. They were related to technical submissions. It is the defendant's contention that they were routine covering letters under which respective technical submission were made by the registered structural engineer or the architect to the Building Authority during the construction. Copy of the correspondence had been exhibited as "LPS-6" in the affirmation of Lau Pak Shing dated 23 July 2001.

29. While I agree with Mr Ho that the time frame pertaining to the request is too wide, the letters in exhibit "LPS-6" together with their enclosure should be disclosed. They are relevant and are in the defendant's possession. I will order specific discovery for these documents.

Category 6 - the meeting documents

30. Mr Lau in his affirmation said that neither the defendant nor the registered structural engineer has ever had in their possession any such notes, minutes or other records of the meetings in question. Apparently the veracity of this statement is not being challenged. In the premises, the application for this category of documents must fail.

Conclusion

31. For the foregoing reasons, I will allow the application in respect of the piling contract under Category 1 and those letters in exhibit "LPS-6" and enclosures under Category 5. The rest of the application is dismissed. I will give the defendant 14 days to make the requisite affidavit.

32. On the question of costs, in light of my ruling, I will make an order nisi that the defendant is to have two third of its costs against the plaintiffs, to be taxed if not agreed. The order nisi is to be made absolute within 14 days after handing down. The plaintiffs' own costs are to be taxed in accordance with Legal Aid Regulations.