BRISILVER INVESTMENT LTD. v. WONG FAT TSO AND ANOTHER

H.C.M.P. 1997, No. 2038

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2038 OF 1997

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REASONS FOR DECISION

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Introduction

1. In this action, the Plaintiff asked for an order for partitioning the suit property, alternatively, for the sale thereof. This was later amended and the Plaintiff now only asks for an order for the sale of the suit property. The Plaintiff is the two-thirds co-owner and the 1st Defendant is the one-third co-owner. The application was brought pursuant to the provisions of the Partition Ordinance, Cap. 352.

2. In the supporting affirmation, the Plaintiff disclosed the suit property was acquired with the intention that its related company or companies would use it for real property development. The Defendants contended that a Light Time Investments Limited ("Light Time") is such a company.

3. On 30 November, 1998, the Defendants issued a subpoena duces tecum addressed to the Secretary to the Town Planning Board requiring him to attend court on the day fixed for the trial of this action and to bring with him a number of documents. The Plaintiff applies to set aside this subpoena and an order was made in terms on 6 August, 1999. These are the reasons for the decision.

The Subpoena

4. The documents which the Secretary to the Town Planning Board is required to bring to court under the subpoena are:-

(a) the application documents for permission under s. 16 of the Town Planning Ordinance (Cap. 131) by Light Time which led to the permission granted by the Town Planning Board in the meeting on 3 October, 1997 as set forth in the letter attached to the subpoena;

(b) the Town Planning Board paper in relation to the application referred to in (a) above;

(c) minutes of the Town Planning Board meeting on 3 October, 1997 in relation to the application referred to in (a) above;

(d) all application documents for permission (including but not limited to Ref: TPB/LM/A/NE-SSH/010) submitted by Light Time subsequent to the application referred to in (a) above together with the Town Planning Board paper(s) and the minutes of the Town Planning Board in relation to such subsequent applications.

5. Mr. Yau stated although the phrase "Town Planning Board paper" in (b) above appears to be wide-ranging, this is intended to refer to the "discussion paper" or "meeting paper" placed before the members of the Board for the meeting on 3 October, 1997.

The Relevant Legal Principles

6. The relevant legal principles are not disputed. In To Kan Chi v. Pui Man Yan [1983] 3 H.K.C. 371, the Court of Appeal said:-

"In his judgment, Yam J set out the general principles applicable to the issue of subpoena duces tecum with extensive supporting citations ...

1. There shall be no discovery from a non-party to an action [subject to certain exceptions ... ] ... ;

2. A subpoena should not be used for making discovery only [and the Court of Appeal observed that the reference to the word "only" can be misleading] ... ;

3. A subpoena should not be used as a fishing exercise for documents nor speculative ... ;

4. A subpoena should not be oppressive to the witness when, say for example, the terms are too wide. The party issuing the subpoena ... has to show that these witnesses are required to produce relevant and admissible evidence for trial and that those documents to be produced must be required and are necessary for the fair disposal of the case ... " (at pp. 377-379);

"... I turn then to Mr. Barlow's submission on relevance. This he founds upon the following words of Steyn J ... in The Lorenzo Halcoussi [1988] 1 Ll. Rep. 180 at 184:

'... the document or documents to be produced must be required or relevant and admissible evidence or must at least arguably and on reasonable grounds come in that category ...

And ... the burden is on the party defending the subpoena to show that it is not a mere fishing or speculative expedition, but that the subpoena relates to documents which are likely to exist ... '

There can be no doubt, Mr. Barlow submitted, that the files in question are known to be in existence. However, I do not read the latter words of Steyn J as a proposition that if documents are known to exist, then the relevant subpoena cannot be a mere fishing or speculative expedition. That may be so where there is no question of relevance or admissibility. But here both matters are very much in issue since the contents of most of the documents in the files are not actually known. Accordingly, in the particular circumstances, it would be in the nature of fishing or speculation to require all those documents to be produced, in effect to see which, if any, documents would be material evidence required, or relevant and admissible evidence (and in effect which would not). That, incidentally, is what discovery entails." (at p. 383) (italics and bold type supplied).

7. Upon application being made for leave to appeal to the Court of Final Appeal, the application was refused and Litton, P.J. said:-

"... there can be no doubt that the five Government departments are strangers to the litigation. What is sought by the subpoenas is wide ranging discovery relating to the contents of 32 files, without any attempt to identify what documents within those files might be relevant to the issues to be tried. This is clearly too wide." (at pp. 390-91) (italics and bold type supplied).

8. Other judgments relating to the proper use of a subpoena duces tecum referred to at the hearing included:-

(a) OTB v. Coopers & Lybrand and others, H.C.A. No. A5764 of 1986;

(b) Computer Personnel Ltd. V. Digital Equipment (HK) Ltd. [1987] 1 H.K.C. 140;

(c) Hsin Chong Construction Co. Ltd. v. Hong Kong & Kowloon Wharf & Godown Ltd. [1986] H.K.L.R. 987;

(d) Morgan v. Morgan [1977] Family Law Report 123;

(e) Marcel v. Commissioner of Police of the Metropolis [1992] Ch. 225.

The reasoning adopted in these decisions was inter alia that a party cannot use a subpoena duces tecum for the purpose of general discovery of documents. This is especially so if the subpoena relates to documents possessed by a stranger to the proceedings.

The Issues in this Action

9. The Defendants objected the Plaintiff's application for a sale order under the Partition Ordinance. By the time of the hearing before me, the issues raised by them were:-

"(a) whether the Plaintiff is entitled to an Order for Sale ... (as opposed to an Order for Partition), regard having had to the fact that the Subject Properties consist of Tso land and the disinclination of the Tso to alienate such land;

(b) If a sale were, whether in relation to all or part of the Subject Properties, to be ordered, what should be the terms and method of sale; and

(c) In the event of a sale, who should be appointed as trustee under Section 6 of the Ordinance to receive and deal with the proceeds of sale.".

Relevance of the "Requested" documents

10. Mr. Yau for the defence argued that the documents to be produced under the subpoena are relevant in two ways. First, if the court should decide to make an order for partitioning the suit property (wholly or partly), they are relevant to how the suit property is to be partitioned. Secondly, they are relevant to the determination of the reserved price to be included in the order for sale (if made).

11. As regards Mr. Yau's first argument, he said Light Time must have a layout plan (or some other plan(s)) relating to how the suit property would be used in the proposed development. For example, if there is a golf course, the plan will show the locations of the course and its entrance, the same will apply to any carpark to be built there and so on. He said while his clients will invite the court to retain at least portion(s) of the suit property for the "Tso", his clients are prepared to cooperate with the developer. Thus, the defence will invite the court to partition the suit property in such a way that the portion(s) to be retained will not interfere with important developments such as entrances or buildings. I pause here to note that the defence expert has already made a proposal as to how to partition the suit property. Further, the defence did not contend that it experienced any difficulty in deciding how to do so in the absence of the "requested" documents.

12. Moreover, this argument assumes that the Plaintiff will participate in arguing the defendant's application for a partition order, for example, which part(s) of the suit property should be retained. However, this is not true as a matter of fact. At least up to the conclusion of the hearing before me, the Plaintiff's only application is for an order for sale and Mr. Mok confirmed the Plaintiff has no intention to ask for any other order under the Partition Ordinance. The only party who will ask for a partition order is the defence. If the Plaintiff objects to this course, it is for the Plaintiff to state the reasons why such an order should not be made, whether as regards the whole or any particular part(s) of the suit property. The documents requested are therefore irrelevant to the issues between the parties.

13. As regards Mr. Yau's second argument, he submitted that the disclosure of the "requested" documents will better assist his clients' expert to determine the value of the suit property and its reserved price. I do not agree with this argument for the following reasons.

14. The Plaintiff produced three reports from its valuer: a report dated October, 1997, a further report dated October, 1998 and a supplemental report dated December, 1998. The October, 1997 report recommended a reserved price of HK$400 per square foot while the October, 1998 report recommended one of HK$240. In short, both reports fixed these prices using the "direct comparison method" to arrive at an "open market value" of the suit property.

15. On the other hand, the defence produced two reports from its valuer: a report dated 24 August, 1998 and a supplemental report dated 5 December, 1998. The August, 1998 report recommended a reserved price of about HK$3,000 per square foot. The defence valuer did not use the "direct comparison method" but adopted the "residue value" method. This method was stated in the August, 1998 report as:-

"The value of a site under development can be assessed as the residue figure that can be arrived at by deducting from the projected sales proceeds of the designed and programmed development project the various costs such as construction costs, professional fees, interest costs, land premium chargeable by the government, as well as the developer's profit expected. ' ... The value, which in these cases is latent in the property, can only be released by development and in all cases is subject to the necessary planning permission being granted.' (1st paragraph, page 151, Chapter 12, 'Modern Methods of Valuation of Land, Houses and Buildings' by David M. Lawrence, W.H. Rees and W. Britton)".

16. From the reports produced by the parties, their respective valuers disagreed over which of the two valuation methods should be adopted. The Plaintiff did not argue that a different reserved price should be recommended even if the "residue value method" is adopted. The issue to be decided at the trial of this action in relation to the amount of reserved price is which of the two valuation methods is more appropriate. Further, within a given set of factual circumstance, the potential value of a piece of land after development is only limited by one's creativity as to how to make the best use of that piece of land. Thus, theoretically at least, it is possible to generate a "residue value" of the suit property (or part(s) thereof) of a much higher value than that recommended by the Plaintiff's valuer, or even that of the Defendants' valuer. I therefore do not find that the defence expert would require the "requested" documents in order to arrive at a reserved price he regards appropriate. Indeed, he was already able to do so in the two reports referred to above.

17. I am therefore of the view that:-

(a) the "requested" documents are not relevant to the dispute relating to the methodology to be used to arrive at the recommended reserved price;

(b) in any event, the potential "residue value" of the suit property and its reserved price can be determined without the need for the "requested" documents.

18. I came to such conclusion bearing in mind that this application is related to the setting aside of a subpoena and is not related to the discovery of documents.

19. Mr. Yau also argued that the information in the "requested" documents is relevant to what information should be included in the advertisement if a sale by public auction is ordered, for example, potential bidders can have full knowledge of the development potential of the suit property. My reasoning regarding the "residue value" of the suit property also applies to this argument, namely, the potential development value of a piece of land is only limited by one's imagination. This argument is therefore also rejected.

20. At the adjourned hearing on 6 August, 1999, the defence relied on a written "Further Submissions". The defence contended that the court needs to consider the issue of partitioning the suit property (to be raised by the defence) at the hearing of this action. This is obvious. However, I do not consider the defence has been able to establish the relevance of the "requested" documents in relation to this issue. The defence argued that they would show whether the defence proposal for partition is feasible and reasonable. As observed herein earlier, the defence expert has already made such a proposal (without the "requested" documents).

21. The "Further Submissions" also (in essence) repeated the point relating to determining a reserved price of the suit property (if a sale order is made). A new valuation method is now proposed by the defence expert based on what is called the "ransom strip" principle (see Stokes v. Cambridge Corporation (1961) 13 P. & C.R. 77). I do not see the need to deal with this further save to repeat what has already been stated earlier herein regarding this issue.

The "Further Submissions" further stated that the Town Planning Board raised no objection to the subpoena and the role of the Town Planning Board (as perceived by the defence). I do not find it necessary to consider these matters since the primary consideration in this application is the relevance (or irrelevance) of the "requested" documents to this action.

Was the Subpoena Speculative or Oppressive?

22. Further, although the "requested" documents are known to exist, their exact contents are unknown to the defence. In these circumstances, the subpoena is in the nature of a speculative discovery exercise and should be set aside. It is unnecessary to decide if Light Time is a separate legal entity. Even if it were necessary to do so, I do not consider there is justification for lifting the corporate veil in this action.

Conclusion

23. For the above reasons, the subpoena was set aside.

Costs

24. Costs of this application are to be paid by the Defendants to the Plaintiff in any event and to Light Time (as the Intervener) forthwith.