WALLBANCK BROTHERS SECURITIES (HONG KONG) LTD v. CHENG WAI KONG AND OTHERS

HCSA 38/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO 38 OF 2014

(ON APPEAL FROM SMALL CLAIMS TRIBUNAL

CLAIM NO 47483 OF 2012)

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J U D G M E N T

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1.  This is the applicant’s application for leave to appeal against the learned Adjudicator’s decision refusing to order D2, D3 and D5 (collectively “the defendants”) to make specific discovery of documents.

Background

2.  The applicant and D5 (“Ricoh”) entered into 2 sets of contracts – hire-purchase contracts in respect of 2 photocopying machines and a servicing contract.  D2 was the Manager and D3 the Managing Director of Ricoh.

3.  The applicant’s case against D2 and D3 is that, in breach of various duties of care owed to the applicant, they had failed to properly deal with the applicant’s complaints, including concealing them from the Customer Service Department of Ricoh.  The applicant was misled and deceived into believing that its complaints had been handled properly in full compliance with the internal procedures of Ricoh.  Ricoh was vicariously liable. The applicant terminated the contracts with Ricoh due to the misrepresentation and misconduct of the staff of Ricoh.  Notwithstanding repeated requests of the applicant, Ricoh has failed to remove the photocopying machines from the applicant’s premises.  The applicant thus seeks “custodian fees”, being administrative costs and rental of the area occupied by the 2 machines. 

4.  The documents for which discovery is sought are principally directed at the issue of breach of duties of care.

5.  The learned Adjudicator declined to order specific discovery of all 22 classes of documents as set out in the applicant’s letter dated 26 September 2013, and maintained his decision on review.

6.  The applicant now seeks leave to appeal as regards classes 12-20 and 22 of the documents.

7.  The grounds on which the applicant rely in this leave application are that the learned Adjudicator erred in deciding that:

(i) There are no subjective elements in determining the breach of duty of care, whether general or specific, by the defendants in this claim (“the first ground”) ; and

(ii) The duty of the tribunal to investigate was dependent on whether the applicant has actual knowledge of the existence of the documents sought to be disclosed from the other party (“the second ground”).

The principles for granting leave to appeal

8.  An applicant for leave to appeal under section 28(1) of the Small Claims Tribunal Ordinance, Cap 338, (“the Ordinance”) has to identify a question of law which is arguable.

9.  The Court of First Instance will not interfere with an adjudicator’s exercise of discretion unless he or she has misunderstood the law or the evidence or the exercise of his/her discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible: Mimi Kar Kee Wong Hung v Severn Villa Limited, HCMP 2192/2011, 12 January 2012, §31, Kwan JA.

The principles for ordering specific discovery

10.  There are no rules governing specific discovery in the tribunal.  However, the procedure of the Small Claims Tribunal is informal: section 16 of the Ordinance. The tribunal may require the production of any document which is relevant in any proceedings: section 16(2).  The tribunal shall inquire into any matter which it may consider relevant to a claim: section 16(3).

11.  Under section 23(2) of the Ordinance, the rules of evidence shall not apply to proceedings in the tribunal, which may receive any evidence which it considers relevant.

12.  In discharging its duty of investigation, an adjudicator may in his discretion require a party to produce documents so as to achieve a fair outcome.  The burden, nevertheless, remains on an applicant for discovery to satisfy the court that it is appropriate to make such an order. 

13.  Analogous to the principles applicable to High Court proceedings, an applicant for discovery must make out a prima facie case that: (1) a specified document or class of documents exists; (2) the party against whom the order is sought has or had the documents in his possession, custody or power; (3) the documents relate to a matter in question in the action; and (4) discovery is necessary either for disposing fairly of the cause or matter or for saving costs.  Once a prima facie case is made out, the court has discretion to order disclosure.  See Tullett Prebon (Hong Kong) Ltd v Chan Yeung Fong Nick and others, HCA 2197/2009, 9 June 2011, To J; Berkeley Administration Inc v McClelland [1990] FSR 381 (CA) at 382 per Mustill LJ, as he then was.

14.  Discovery which solely relates to credit is not allowed: Ngan In Leung v Chu Yuet Wah, 7.12.2012, §25.

15.  Likewise, fishing expedition on the part of the applicant would not be allowed: Ngan In Leung v Chu Yuet Wah, §26; Mariner International Hotels Ltd v Atlas Ltd & another (HCA 10714, 10752 and 10821 of 1998), 18.1.2002, at §9, Burrell J.

16.  Though relevance is established, the order must identify with precision the document or documents or categories of document which are required to be disclosed.  The class must not be defined so widely as to include documents which are not relevant to the issue. The prerequisites of existence, possession and relevance must be established in respect of the class described as a class, not as regards some in the class only: See Ngan In Leng, at §§34-35.

Decision of the Adjudicator

17.  In the present case, the learned Adjudicator clearly had the principles in paragraphs 13 to 16 in mind: §§1, 6, 7, 10 and 17 of his Reasons for Decision (“the Decision”).  He also took the view that if the answers to the tests of relevance and possession were in the affirmative, he would consider whether to exercise his power to investigate.

18.  As a general comment, the learned Adjudicator found that the applicant was embarking on a fishing expedition in “simply relying on a presumption that certain documents might exist that might show certain fraudulent act without knowledge whether the documents or the illegal acts actually existed”.  He then considered, one by one, the classes of documents for which specific discovery was sought.  He found that each class of documents has failed to satisfy one or more of the tests for discovery set out above. 

19.  In my view, that was a perfectly proper approach in accordance with legal principles.  What weight he attached to one factor over another was an exercise of discretion which an appeal court would not interfere with: Mimi Kar Kee Wong Hung v Severn Villa Limited. 

The first ground

20.  The documents sought are said to be relevant to the issue of duties of care and breaches of them.  The applicant asserts that its causes of action were both in contract and in tort.

21.  With regard to contract, the relationship of the applicant and Ricoh was based on the written agreements and there were no express terms giving rise to a contractual duty of care.  D2 and D3 (employees of Ricoh) did not even have any contract with the applicant.  That part of the case on implied duties did not show on what basis duties could be implied.

22.  With regard to tort, the applicant relies on breach of duties in negligence.  To establish negligence there are 4 requirements:

(a) The existence in law of a duty of care situation, ie one in which the law attaches liability to carelessness. There has to be recognition by law that the careless infliction of the kind of damage in question on the class of person to which the claimant belongs by the class of person to which the defendant belongs is actionable;

(b) Breach of the duty of care by the defendant, ie that he failed to measure up to the standard set by law;

(c) A causal connection between the defendant’s careless conduct and the damage;

(d) That the particular kind of damage to the particular claimant is not so unforeseeable as to be too remote.

Clerk and Lindsell on Torts (20^th ed) § 8-04.

23.  The duty of care situation is explained further in §8-05 of the same publication:

“The duty in negligence … is not simply a duty not to act carelessly; it is a duty not to inflict damage carelessly. Since damage is the gist of the action, what is meant by ‘duty of care situation’ is that it has to be shown that the courts recognise as actionable the careless infliction of the kind of damage of which the claimant complains, on the type of person to which he belongs, and by the type of person to which the defendant belongs. It is a preliminary consideration whether liability is even capable of attaching to the defendant in the given type of situation. In the words of Lord Wright:

‘It is essential … that the duty should be established: the mere fact that a man is injured by another’s act gives in itself no cause of action: if the act is deliberate, the party injured will have no claim in law even though the injury is intentional so long as the other party is merely exercising a legal right: if the act involves a lack of due care, again no case of actionable negligence will arise unless the duty to be careful exists.’ ” 

(emphases added)

24.  In the various lengthy and repetitive statements filed with the tribunal, the applicant jumped to requirement (b) of para 22 and made wide ranging allegations of breaches of duties of care of D2 and D3 in failing to eg monitor and supervise the performance of the subordinates of Ricoh, failing to implement or manage the internal control system of Ricoh, failing to effectuate a Client Complaint Handling System, failing to implement independent and impartial investigation against the mistakes and misconduct of D2 and D3 and the subordinates, delegation of power to subordinates to deal with the applicant despite knowing that such subordinates failed to follow the internal complaint procedure of Ricoh and failure to report to the applicant when Ricoh’s staff breached the code of conduct and internal guidelines. There was persistent failure to provide information concerning the applicant in the Advanced System.  The applicant was effectively inviting the tribunal to review the internal complaint handling system of Ricoh and the management of D2 and D3.

25.  In its ground in support of this leave application, the applicant further stated that D2 and D3 privately handled the applicant’s complaints and concealed them from the Customer Service Department.  The applicant was misled into thinking that its complaints had been properly handled in full compliance with internal rules of Ricoh.  Therefore it was fair and reasonable to infer that D2 and D3 voluntarily assumed a duty of care to the applicant.

26.  Again, it was completely unclear how, as employees of Ricoh, D2 and D3 could have owed such tortious duties of care to a customer.  That they had voluntarily assumed a duty of care was not the case before the tribunal.  Likewise for Ricoh, it is questionable whether such duties of care ever existed and are recognized as actionable by the courts under requirement (a) in para 22.  The cause of action in tort was dubious.  

27.  In such circumstances, it was not surprising and indeed correct for the learned Adjudicator to state that “the reasonable duty of care is an objective test.  The court was concerned whether the defendants’ action fell below this objective standard.  What was the internal code of conduct and complaint procedure would not affect the objective standard of reasonableness.”  (§§16, 20 of the Decision). 

28.  The applicant is unable to show an arguable ground that the learned Adjudicator has erred in law in applying the test of relevance.  This applies to classes 15 – 20 and 22.  Additionally for class 15, the learned Adjudicator rightly applied the principle in paragraph 14 above.

The second ground of appeal

29.  It is the applicant’s case that the duty of the learned Adjudicator to investigate shall not be solely dependent on the knowledge of the applicant as to the specific documents and information possessed by the defendants.  The documents were not fishing but highly relevant.  Further, Ricoh’s employee on different occasions had confirmed such documents to exist and it was wrong for the learned Adjudicator to say that the applicant had a “presumption” that documents might exist.   

30.  In coming to his decision, the learned Adjudicator has stated that it was important for the applicant to ascertain the specific document sought.  However, the applicant suggested that certain documents might show certain fraudulent/illegal acts. The applicant did not know exactly what documents it was seeking, nor which fraudulent/illegal act it was referring to but simply relying on a presumption that certain documents might exist that might show certain fraudulent act without knowledge whether the documents or the illegal acts actually existed. It amounted to fishing.  (§7 of the Decision)

31.  In my view, the learned Adjudicator clearly had in mind the burden of proof in the application From the appeal bundle given to me, fraud, illegality and forgery were not part of the applicant’s case before the tribunal.  Yet, specifically, the applicant sought classes 17 and 22 as they might show forgery, concealment.  Hence, even if the applicant was correct in showing that the documents existed and were in the defendants’ possession, the learned Adjudicator ’s remarks aimed at curbing fishing expedition was most appropriate in the circumstances of this case.

32.  The applicant also complains that the learned Adjudicator has failed to investigate if the defendants were in possession of certain categories of documents.  This applies to classes 12 – 14, 17 – 20 and 22.

33.  This complaint is unjustified.  The learned Adjudicator had taken into account the defendant’s denial that they were in possession of documents (classes 12 – 14, 17 and 20).  He is entitled to take into receive any evidence he considers relevant: section 23(2) of the Ordinance.  He also explains that for classes 17 and 22, the request lacked specificity, properly applying the principle in para 16 above.  For classes 18 – 19, the learned Adjudicator had not rejected them on the ground of possession but relevance. 

34.  No error or law was identified.  The learned Adjudicator  was not shown to have misunderstood the evidence or plainly wrong in the exercise of his discretion: Mimi Kar Kee Wong Hung v Severn Villa Limited.

Conclusion

35.  The learned Adjudicator has adopted correct legal principles and the right approach to this application but the applicant has failed to pass the tests for discovery.  The learned Adjudicator has not failed in his duty to investigate.  No arguable grounds of appeal have been put forth.  I therefore dismiss the application for leave to appeal.

(Queeny Au-Yeung) Judge of the Court of First Instance High Court