THE KA WAH BANK LTD v. LOW CHUNG SONG AND ANOTHER

IN THE COURT OF APPEAL

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J U D G M E N T

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Fuad, V. -p. :

1. This is an interlocutory appeal from orders made on 23 June 1988 by Judge Cruden sitting as a Deputy Judge in the High Court.

2. The history of the matter is as follows. On 14 July 1987 the Plaintiff, The Ka Wah Bank Ltd. ("the Bank") who now appeals, instituted an action against 16 defendants; three more were added later and one subtracted. The 1st and 2nd Defendants (now the Respondents) were Mr. Low Chung Song and Mr. Low Chang Hian. The other Defendants are not concerned with the present appeal. The bank sought, inter alia, damages for conspiracy, and various declarations and orders. At the material time the 1st Defendant was the Managing Director of the Bank and the 2nd Defendant a non-executive Director. Huge sums of money are involved.

3. On 5 February 1988 Master O'Donnell ordered the Defendants each to file and serve a list of documents with a verifying affirmation within 14 days. This order was not complied with and, on a summons taken out on 23 February 1988 by the Bank, Godfrey, J. made orders that the Defendant of these two Defendants be struck out unless each filed and served a list of documents and a verifying affirmation within 14 days of the date of the orders, which was 4 March 1988. They were given liberty to apply before 18 March 1988 for an extension of time.

4. On 12 March 1988, and therefore within the time allowed, each Defendant purported to comply with Godfrey, J.'s order. I use the word "purported" because of the issues which arose before the Deputy Judge and which now arise before us. The verifying affirmations were taken before a solicitor of the Supreme Court of Hong Kong, but in Taiwan, on 9 March 1988. Both Defendants gave "Room 806, No.50 Sec.1, Hsin Seng South Road, Taipei, Taiwan, R. O. C." as their address.

5. In view of certain submissions which were advanced by the Bank before the Deputy Judge, and which remain relevant, it is necessary to mention (and all this is common ground) that the 1st Defendant was arrested in Singapore and the 2nd Defendant in Malaysia, both on 26 June 1987, at the start of extradition proceedings for their return to Hong Kong on charges such as conspiracy to defraud and false accounting arising out of their conduct of the affairs of the Bank. During the following month they returned voluntarily to Hong Kong and were released on cash bail by the Courts here in the sum of $10 million (1st Defendant) and $11 million (2nd Defendant). The Defendants absconded, their hail money was estreated and, on 21 January 1988, warrants for their arrest were issued. Three of the 81 charges the Defendants were to face concerned credit facilities granted to Compact Investment and Finance Ltd. ("Compact") of $80 million, the subject matter of the present action.

6. On 11 April 1988 the Bank issued a summons seeking orders:

(a) that the Defence of the be Defendants be struck out pursuant to Godfrey, J.'s order of 4 March on the grounds that they had "failed to comply within the time limited thereby or at all" with Master O'Donnell's order of 5 February;

(b) in the alternative, that the Defendant attend before the Master to he cross-examined on their affirmations dated 9 March regarding the addresses they had given in them. Failing due attendance they should not be permitted to rely upon them and their affirmations, as well as their Defendant, should be struck out.

7. On 8 June 1988 the Defendants themselves took out a summons for orders that their affirmations be allowed to be used to verify the lists of documents they had filed despite the fact that they had earlier given an office and not a residential address, or, in the alternative, that Godfrey, J.'s order be varied to allow them to filed new affidavits, within 14 days, identical to the ones they had already filed, except that residential addresses be given.

8. The judge heard both of the summonses together on 15 and 17 June and gave his reserved judgment on 23 June.

9. The judge first dealt with the submission of the Bank that the failure to disclose a residential address by each Defendant in his affirmation was an irregularity which should result in the Court's rejection of both affirmations so that, in effects, there had been no compliance with Godfrey, J.'s unless order. The judge referred to the provisions of RSC 0.41, r.1 (4) which required the Defendants, since they were not giving evidence in a professional etc. capacity, to state their paces of residence, and reviewed the evidence before him on the matter. There was Mr. Wintle's affidavit which stated that when enquiries were made on behalf of the Bank at the Taipei address given by the Defendants, which were office premises, two ladies working there said that they did not know either of the Defendants.

10. There was also an affidavit sworn by Mr. Midgley on behalf of the Defendants saying that he had visited that address on 2 May 1988 and had seen and spoken to the Defendants there. He had also spoken to the two ladies mentioned in Mr. Wintle's affidavit and they had acknowledged that they had lied during the earlier enquiries about not knowing the Defendants and said that they were acting upon general instructions the Defendants had given them. Mr. Midgley went on to say that the address in the affirmations was the one to which his firm had successfully sent correspondence intended for the Defendants. Mr. Midgley's affidavit concluded by giving a separate address for each Defendant, saying that he had been informed and verily believed that those were their residential addresses.

11. The judge noted that in this averment there had been a failure to comply with the requirements of 0.41, r.1(4), and held that the relevant paragraph in Mr. Midgley's affidavit was inadmissible since he had failed to state the source of his information and belief. As a matter of law, he said, the affirmations were irregular, but he observed that the Court had power to issue appropriate directions under 0.41, r.1(4) or to grant leave under 0.41, r.4 to allow the affirmations to be used.

12. The next issue dealt with by the judge was the question whether a Hong Kong solicitor is empowered to take an affirmation outside Hong Kong. In view of the conduct of this appeal I need only record that he held that upon the proper construction of the relevant statutory provisions a Hong Kong solicitor was not permitted to take an affirmation outside Hone Kong, even for use in Hong Kong.

13. The judge then turned to consider the exercise of his discretion to allow fresh, duly taken, affirmations to be filed. In his view, the Defendants had substantially complied with two out of the three elements of Godfrey, J.'s unless order within the time limited. He would accept that the Defendants and their solicitors believed, in good faith, that the affirmations had been duly taken. He added that in the absence of any other adverse factors he would be inclined to extend the time under the unless order for the further 14 days sought.

14. The judge next addressed further submissions made to him of the Bank that discovery was incomplete. On the evidence before him he said that he was only able to find that Schedule 2 of each list of documents was incomplete; but this did not affect Part I of Schedule 1 of each list. Moreover, specific remedies remained available to the Bank to seek further discovery under 0.24. These factors, in his opinion, considerably mitigated the gravity of what he called "the limited default as to discovery." He concluded that the Defendants had made a real effect to comply with all three elements of the unless order within the time limited.

15. The judge went on to discuss another submission advanced on behalf of the Bank, that the undisputed stains of the Defendants as fugitives from justice was a relevant factor to be taken into account in the exercise of the Court's discretion. In summary, he said, counsel for the Bank had contended that the Court should not assist the Defendants having regard to the following facts: they had unlawfully fled the jurisdiction; they had given illusory addresses; they had instructed two ladies in Taiwan to lie about their whereabouts; they had filed Defences to massive charges of conspiracy and fraud, which, in effect, merely put the Bank to proof, and they had failed to make full and frank discovery.

16. The judge said having regard to all the circumstances, which included their fugitive status, the consequences to the Defendants of not allowing an extension of time would be out of all proportion to their failure to comply with the RSC. Had their failure to come been more serious, or if lack of good faith had been shown in making and filling the affirmations, be would unhesitatingly have rejected their applications.

17. As to the Bank's application that if leave were given, the Defendants should be ordered to attend for cross-examination, the judge said that quite apart from the exceptional nature of the order sought in relation to interlocutory applications, he was satisfied that any such order would be premature. The Bank could reconsider their position once the new affirmations had been filed

18. The judge made a stringent order for costs against the Defendants. They were ordered to pay the Bank's costs of and occasioned by both summonses.

19. I mention as a postscript to this account of the background, that the Defendants have complied with the judge's order. They have each filed affirmations (with lists of documents) giving their residential addresses, taken before a legal authority in Taiwan.

20. I will interpolate here to say that the Bank had filed a Respondent's Notice by which they had sought to challenge the judge's ruling that the affirmations were not valid for use in Hong Kong on the ground that they had been taken before a Hong Kong solicitor but outside Hong Kong, however, when the appeal was opened, we were told that the Notices would not be proceeded with. The Defendants therefore conceded that there was no effective compliance with Godfrey, J.'s unless order and the indulgence of the Court, on this ground alone, was necessary for fresh, properly taken, affirmations to by filed. While I abide by this concession for the purposes of this appeal, I do not wish to be understood to have accepted that it embodies the true views of the law.

21. I will say no more about the matter save to observe that I do not consider that a court could properly have exercised its discretion to refuse the relief sought the Defendants in their summons for this reason alone. The Defendants could not possibly have been blamed for what happened.

22. The Bank's case on this appeal is, that the judge erred in the exercise of his discretion. All the cases show that an appellate court has severely limited function in appeals of this kind, for, of course, the discretion is that of the judge and cannot be interfered with except upon well-known principles : see for example, per Lord Diplock in Hadmor Productions Ltd. v. Hamilton [1983] AC 191 at p. 220 a case cited to us by Mr. Charles Ching, who did not appear in the Court below.

23. In their grounds of appeal, the Bank says that the judge failed "to determine explicitly or at all" whether the address given by the Defendants in their original affirmations was illusory. It is said that on the material before him the judge should have found that the common address given was indeed illusory and, based on such a finding, he should either have:

(i) declined to accept the affirmations as constituting compliance with the unless order and held that there had, on this additional ground been a failure to comply with the order; or

(ii) found that their purported compliance with the order had not been made in good faith and did not constitute "a real effort" to comply, and thus constituted material adverse to the exercise of any discretion in their favour.

24. The judge devoted several pages of his long judgment to this issue. He reviewed all the material facts and rehearsed all the arguments. He referred to Hyde v. Hyde (1888) 59 LT 523. In that case a wife had removed her children out of the jurisdiction in defiance of a custody order in favour of her husband. In contempt proceedings filed against her she sought to rely on certain affidavits she had sworn. In one, no address was given, in another only her mother's address wars stated. The Divorce Court Rules then in force required the "true place of abode" of the deponent to be inserted in every affidavit. The report merely states that the President of the PDA Division "said that he would not receive the affidavits of the respondent, because she at first gave no address, and afterwards only an illusory address."

25. Mr. Ribeiro submits that it was perfectly plain on the evidence that the address given by the Defendants in their original affirmations was illusory and deliberately so. It demonstrated their determination to do all they could to defeat the ends of justice and was an extension of their decision to abscond from the jurisdiction of the courts. I think that Mr. Ribeiro is right. The Defendants themselves have given no explanation for giving that address. On their behalf, in one of their letters to the Bank's solicitors, the Defendants' solicitors explained that, as persons who had fled to avoid criminal proceedings, they were naturally sensitive about enquiries which might be made about them. However, the fact remains that they instructed the two ladies who were working at the address they had given to deny knowing them. The whole purpose of giving any address at all was therefore defeated.

26. Of course, the judge was not construing and applying a statutory expression but, on any view, it seems to me that the address was illusory and the Defendants could hardly have been said to have been acting honestly when they supplied it. With great respect, I do not think that the judge gave sufficient weight to the seriousness of the matter in the context of the nature of the action instituted against the Defendants by the Rank. To my mind this was much more than a matter of mere irregularity on the ground that a residential address had not been given contrary to the requirements of 0.41 r.1(4) and should, itself, have caused the judge to hesitate long before granting the Defendants any indulgence at all. They had gone on affirmation to give an address at which instructions had been given to deny knowledge of their existence of their existence or whereabouts.

27. It was strongly urged upon the judge on behalf of the Bank that the status of the Defendants as fugitives from justice was a matter which weighed heavily against them when they were seeking an indulgence which was in the discretion of the Court. Reliance was placed on the decision of this Court in The Attorney General v. Lui Lok alias Lui Mo-lok [1982] HKLR 413. There a former Hong Kong police officer who was normally resident in Hong Kong went to live in Taiwan. An action was instituted against him to recover monies he was said to have received as bribes or secret commissions while he was serving in the police force. He applied to have his evidence in defendant of the claim taken before special examiner in Taiwan. He did not want to come to Hong Kong to give evidence because there was a warrant out for his arrest in connection with an offence under the Prevention of Bribery Ordinance.

28. The Court of Appeal reversed the decision of the judge who had granted the application. In the course of his judgment Cons, J. A. (as the then was) said this at p.417:

"I agree with Mr. Lee that the defendant is entitled to defend himself with all the means normally available in the courts. But as I see it, he is asking now for something that is not normal. The established form of trial is for parties who wish to give evidence to be examined viva voce in court before the judge who has to determine the issues. The defendant is asking us to depart from that norm, and the only reason he nuts forward in support is that he is fleeing from the justice administered by the same court to whom he makes his request. For my part that does not appear to me to be something that is 'necessary for the purpose of justice', rather the contrary. Even in civil matters justice is comprised of something more than the mere settlement of disputes between individuals. It is something in which the whole of the community has a general, if usually only residual, interest. It would in my view be quite wrong for the courts of this colony to make such an order in favour of a person who could rightly be said to be ordinarily resident here, yet by his own choice and action has deliberately put himself beyond their jurisdiction."

And Leonard V -P observed:

"The trial judge regarded as the 'nub of the matter' the question 'Is justice best served by the defendant effectively being precluded from giving any evidence or by his evidence being made available by way of deposition'. If this is the test would allow of only one answer but with respect I do not consider it is the correct test to apply. The nub of the matter is as I see it 'Has the defendant established that it 'appears necessary for the purposes of justice' that an order should be made?' It is the defendant's application and be has to support it. The defendant is out of the jurisdiction not because he has any ties with Taiwan and not because he is there in the course of his life and business but, as his solicitors acknowledge in their letter to the Legal Department of the 5th March 1982, 'because a warrant of arrest has been issued against him for an alleged offence contrary to section 10(1)(b) of the Prevention of Bribery Ordinance, Cap.201.' No other reason is given for his not coming here to give evidence in the ordinary way. Although he must be regarded as an innocent pan, he must also be regarded as a fugitive from the justice of our courts."

29. The judge distinguished the Lui Lok case on the grounds that there the defendant's application for his evidence to be taken in Taiwan had been necessitated by his fugitive status. Without leave, he pointed out, they could have their affirmations taken in Taiwan by an authorised person. Further, in that case the defendant had sought a major indulgence - that his oral evidence should be dispensed with at the trial. In this case affirmations at an interlocutory stage were involved, and a refusal to extend time would result in final judgment having entered against the Defendants without trial, which was not the position of Mr Lui Lok.

30. I respectfully agree that the Lui Lok case can be distinguished in its full application. It certainly did not bind the Judge, as seems to have been suggested to him at the hearing, to decline to exercise discretion in the Defendants' favour. I agree with Mr. Ching that as a matter of principle it cannot be right to deny a person an indulgence in civil proceedings which the merits of the matter otherwise justifies simply be he has absconded from the jurisdiction. Only if the case went to trial, and the Defendants remained out of Hong Kong as fugitives from Justice, would they face the problems which confronted Mr. Lui Lok.

31. Mr. Ribeiro suggests that an application by a fugitive defendant for an extension to comply with an unless order is one which goes far beyond the limits of anything the Court should contenance, and that it was of particular significance here that the illusory address was given by the Defendants in an attempt to conceal their whereabouts and was linked with their fugitive status. Everything must depend on particular circumstances of the case. Of course, if a party who is subject to an unless order fails to comply with it, he would no doubt rightly get short shrift from the Court if be were to put forward, as in excuse for his non-compliance, the difficulties he encountered by reason of his chosen fugitive status. And if a party is a fugitive and makes a patently spurious compliance, using his difficulties as a fugitive from justice as an excuse, he would be most unlikely to receive any indulgence from the Court.

32. However the Court should be slow to condone the giving of an illusory address, in the circumstances we have here, where the excuse given is that the defendant was anxious, having absconded, to conceal his whereabouts.

33. I would say two things about the Lui Lok case. Firstly Lui Lok had not been charged and released on bail, as the Defendants were, when he filed to Taiwan and secondly I respectfully endorse what Cons, J. A. had to say in the passage I have read about public interest considerations. In connection with what we have all called "the illusory address" point, the fact that the Defendants had fled the jurisdiction when they were on bail on such serious charges, some of which were connected with the allegations made in the Bank's action, was something the judge should have attached considerably more weight to when reaching his conclusions as to the exercise of his discretion.

34. The Bank contends that the judge ought to have approached the exercise of his discretion (suggesting that he did not) by applying the following principles:

(i) the unless order should be enforced unless cogent material was placed before the Court by the Defendants upon which a discretion could be exercised by granting them an indulgence, despite the fact that they had failed to comply with the order.

(ii) the order should be enforced unless the Defendants satisfied the Court that they had made a real effort in good faith, to comply with it, rather than making an illusory, purported compliance; and,

(iii) since they were fugitives from justice, the Court should refuse them any indulgence beyond directions normally given to parties to facilitate the conduct of litigation.

35. Mr Ribeiro on behalf of the Bank referred us to a number of authorities on the proper exercise of discretion in this kind of case. In Samuels v. Linzi Dresses [1981] QB 115 the defendants failed to comply with a request for further and better particulars, whereupon an order was made that unless the particulars were delived by a specified date, their defence and counterclaim would be struck out. The particulars were served three days late. The Court of Appeal overruled the authorities which held that the Court had no power to extend time when an unless order had not been complied with, treating the action as dead. As to the exercise of the discretion which the Court had to extend time, Roskill, L. J. (as he then was) said at pp. 126-7:

"    To say that there is jurisdiction to extend the time where an 'unless' order has peen made and not complied with is not to suggest - let this be absolutely plain - that relief should be automatically granted to parties who have failed to comply with the orders of the court or otherwise than upon stringent terms either as to payment of costs or as to bringing money into court or the like. Orders as to time, and in particular as to the time for delivery of pleadings and particulars are made not to be ignored but to be complied with. In the present case, long before the problem caused by the Christmas holidays last year arose, there had been serious delay in complying with various orders, and the before defendants were at mercy when they came before Judge Hawser. They had not done which they ought to have done. They were not, save perhaps at the very last moment, deserving of any sympathy. But at the last moment they had made a real effort to comply with the order and they were perhaps unlucky that their efforts did not meet with success.

    In my judgment, therefore, the law today is that a court has power to extend the time where an 'unless' order has been made but not been complied with; but that is a power which should be exercised cautiously and with due regard to the necessity for maintaining the principle that orders are made to be complied with and not to be ignored. Primarily, it is a question for the discretion of the master or the judge in chambers whether the necessary relief should be granted or not."

36. The dictum in the second paragraph I have read has been approved in several cases and was applied by way by Dunn, L. J. in Janov v. Morris [1981] 1 WLR 1389.

37. Mr Ribeirn also cited Myers v. Elman [1940] AC 282 which was not referred to the judge. That was a case concerning the responsibility of a solicitor, in connection with discovery, to see that the Court's orders are complied with by careful investigation and supervision, and the circumstances in which a solicitor should withdraw from the case (where for example, his client insists on swearing an affidavit which he knows to be imperfect). But their Lordships discussed the importance of proper discovery in the trial process, particularly where fraud is alleged. Mr. Ribeiro read us passages from the speeches of Viscount Maugham, Lord Atkin, Lord Wright and Lord Porter which I will not read again.

38. The judge himself cited Samuels v. Linzi Dresses v. Ltd. and the decision of the Privy Council in Thamboo Ratnam Thamboo Cumarasamy and Another [1965] P WLR 8 which held, (I read from the head-note) that:

"the rules of court must prima facie be obeyed, and that to justify an extension of time for the filing of the record there must be material upon which the court could exercise it jurisdiction, for otherwise a party would have an unqualified right to an extension which would defeat the purpose of the rules, which was to provide a timetable for litigation."

In his careful judgment he demonstrated that he was well aware of the principles to be applied to the facts and circumstances of the case.

39. The Bank acknowledges, in their grounds of appeal, that the judge recognised that the burden was upon the Defendants to satisfy him that they ought to be given another opportunity of complying properly with the unless order and that a discretion to allow this could only properly be exercised upon adequate material, but contends that his conclusion that there was such material and that the Defendants had made a "real effort" to comply with the order was unsupported by evidence. It is submitted that the judge should have held that the Defendants had made no effort that could properly be called such to comply with the order and that their purported complaince had not been made in good faith and was illusory, because they had deliberately used an illusory address and the discovery made by them in their list of document was, in each case, palpably inadequate.

40. As to incomplete discovery, it seems to me that Reiss v. Woolf [1952] 2 OB 557 is helpful. This case, too, was not cited to the judge. That was an action for money alleged to be due under an agreement to settle previous claims. By his Defendant the defendant had denied that his own letters which were relied upon by the plaintiff constituted an enforceable agreement. The plaintiff was not able to obtain satisfactory particulars of the Defence and, on a summons before a Master, obtained an order in these terms:

"That the defendant do, not later than ....., deliver to the plaintiff's solicitors the undermentioned further and better particulars of his default and that, in default thereof, paragraphs 2 and 3 of the defendant be struck out."

41. The defendant delivered particulars within the time stipulated, however, in respect of many, he said that he was unable to give dates or details until after discovery or possibly not at all. The plaintiff thereupon applied to the Master for an order that the defendant, not having complied with the order, and paragraphs 2 and 3 of the Defendant having automatically been struck out, the action should be transferred to the short cause list. The master refused the application, as did alter the Judge in Chambers.

42. Somervell, L.J., who gave the leading judgment on appeal to the Court of Appeal, approved the following passage from the judgment of Devlin, J. as to the construction of the master's order, at pp. 559-560:

"If 'default' means default in the sufficiency of one or more of the answers I should not consider that the event was defined with precision; whether or not it had taken place might be the subject of a genuine conflict of opinion which could only be resolved by further adjudication. If I thought this to be the right construction of the order I should follow Abalian v. Innous [1936] 2 All ER 834, 838 and treat it as inoperative. The order can conform with the principle in that case only if it is treated as an order that is dealing with the time of compliance rather than with the mode of compliance. The order does fix a time very precisely, and I think it can and should fairly be construed as a time order. So construed, 'default' refers to default in the delivery of a document within the specified time. I do not, of course, mean that any document with writing on it will do. It must be a document made in good faith and which can fairly be entitled 'particulars.' It must not be illusory; that is the word used by Mr. Bankes in argument in Davey v. Bentinck [1893] 1 QB 185, 186. That is the test, in my judgment, and not, as the plaintiff contends, whether each demand for particulars has been substantially met. Applying that test, I think there has been no default."

43. The Lord Justice concluded his judgment at p.560:

"The judge also went on to deal with a question which was argued before him, namely, whether under an order of this kind the paragraphs are struck out automatically or whether there has to her a fresh application. On that matter he accepted the contention for the plaintiff. So far, at any rate, as a complete failure to comply is concerned, I would agree with that, that is to say, if no document which could possibly be described as particulars were delivered. But if a document was delivered about which the argument would be 'Is it illusory?' then I think it might be the subject of a further application. In my opinion this appeal should be dismissed."

I think that Reiss v. Woolf [1952] 2 QB 115 demonstrates that in all the circumstances the Bank was right to make the further application it did rather than attempting to treat the Defendant as having been struck out for failure to comply with the unless order and seeking to enter judgment in default of defendant.

44. Mr. Ching has criticised the Statement of Claim and submitted that the lack of particularity regarding the parts in the alleged conspiracy played by each of the Defendants is so apparent, that no more could have been expected of them in discovery than the lists they had supplied, and in time, despite the technical defects of a lack of a residential address and the affirmations having been taken before a unqualified person. As to the illusory address, the Bank had not been able to point to any prejudice they had suffered. The Defendants' action in giving the office address and issuing instructions to the ladies there to lie about knowing them was perfectly understandable the circumstance. He suggested that it was not a case of the Defendants playing games with the Court - rather the Bank were doing so because upon such technical and minor defects they had sought to pray in aid the full might of the Courts to prevent the Defendants from defending grave charges of fraud, and obtaining judgement without a trial.

45. Mr. Ching relied on the fact that the judge had given a long and careful judgment fully considering all the opposing contentions and submitted that he had reached a conclusion in the proper exercise of his discretion that no appellate court should disturb. He court that there was ample material before the Court upon which the judge could find that the Defendants have made a real effort and in good faith to comply with the unless order.

46. He suggested that it was not possible to say that discovery had been inadequate, when the Defendants had no way of knowing what the true issues were. If there were any deficiencies, the ordinary rules about further discovery etc. could be utilised by the Bank.

47. In view of the seriousness of the allegations and the enormous size of the claim, Mr. Ching submitted, the judge was perfectly right not to accede to the Bank's application to strike out the Defendant when all the circumstances are taken into account.

48. Mr. Ribeiro also took us through the pleadings and drew our attention to certain salient features of the Defendant filed by the two Defendants (and one other). The 1st Defendant admitted signing approval forms but only "in respect of certain facilities." He averred that records were not available and complained of the lack of particularity in the Statement of Claim, a complaint, as we have seen, renewed on his behalf before us by Mr. Ching. Mr. Ribeiro points out that conies of the complete record of approvals for the loan to Compact which is the subject matter of the action had been exhibited to the affidavit of Mr. Paul Banner, prepared for Mareva application, an affidavit which was relied upon before the judge in the present application.

49. One of the important issues was the extent to which the Defendants were controlling major decisions to lend money and grant facilities at the Bank. The documents exhibited to Mr. Banner's affidavit included some apparently expressly emanating from the 1st Defendant and signed by him. Many of the other documents appeared to have been initialled by him. Mr. Ribeiro suggests that they must all have been circulated to both the Defendants in the light of the positions they held at the Bank.

50. As to the issue whether the had authorised loans to Compact, we were shown many documents with some approvals signed by the 1st Defendant and the relevant signature book bore the apparent signatures of both the Defendants.

51. Another issue was whether the Defendants had shares in the Taiwan Hotal and whether they had participated in the sale of its assets, and in its liquidation, before approval was given to allow shares in the hotel to be used as security for the loans to Compact. The Defendants were shown to have been present at important meetings in connection with this matter. In the Defendants they had filed the Defendants admitted owning and controlling the Taiwan Hotel but said that this was before any time material to the action. Mr. Ribeiro must surely be right when he submits that if this were so, there must be relevant documents which are now, or which were at some time, in their possession, custody or power. They had specifically averred that the shares they had owned in the Taiwan Hotel "were sold before the first loan application". Mr. Ribeiro is also in sure ground when he says that discovery must be expected which bears on this crucial issue. It is also submitted that these matters involved transactions in Taiwan and it could not legitimately be suggested that they were precluded from getting the relevant documents, whether from private or public sources.

52. Mr. Ribeiro then took us through the lists of documents which the Defendants supplied. He asked us to note the striking feature that each list was identical despite the fact that their respective roles in the relevant transactions were not the same - and, indeed, the 2nd Defendant had become a non-executive director in 1984. It is suggested that the fact that the lists are identical indicates that the Defendants were not addressing themselves seriously to the duties they owed to the Bank on discovery.

53. We were also asked to notice how short the lists were and to note that the many of the documents listed (of which copies were obtained by the Bank) were wholly irrelevent to any issue arising in the action. We have been taken through them and it seems to me that Mr. Ribeiro is right when he says that only a few were apparently relevant. It is perhaps putting the matter too high when Mr. Ribeiro submits that it is an abuse of the process of the Court to "pad out" a list with useless documents, but when this happens deliberately it will influence (though not, of course, govern) the exercise of the Court's discretion.

54. On examining the second Schedule of each list, in my view, Mr. Ribeiro is fully justified in his contention that they display no effort on the part of either Defendant to reconstruct, on the basis of the Taiwan records, or of the material made available via Mr. Banner's affidavit, or otherwise, what documents they once had but no longer have as we have seen no document is mentioned in connection with the loans in question nor is there a reference to any documents concerning the previous ownership of the alleged shares in the Taiwan Hotel. We have been shown the only Taiwan Hotel document disclosed, and this showed the sale by the Hotel of its land in 1982.

55. It is, I think right to say that there is no evidence of a conscientious effort by either Defendant to meet his obligations on discovery, obligations, as Myers v. Elman shows, which are of particular importance where fraud is the foundation of an action. Indeed, the response of the Defendants could almost be described as contumelious.

56. Earlier in my judgment I summarised what the learned judge had said about the discovery which he found to have been "incomplete" to a certain extent. With every respect to him, he did not, in my view, sufficiently appreciate that the lists in relation to Schedule 2, with their verifying affirmations, fell far short of being merely incomplete, and therefore only subject to criticism, and that each was in reality a "mere travesty of discovery" to adopt the language of Lord Wright in Myers v. Elman, or "illusory" to use the epithet employed by Devlin, J., and approved by Somerwell, L.J., in Reiss v. Woolf.

57. Since this was so, and since the Defendants had been subject to an unless order, in my respectful opinion, the judge was not right when he, in effect, sought to console the Bank by observing that further remedies in discovery were available to them under 0.24. More importantly, I do not think that on the material before him he was justified in his conclusion that they had made a "real effort" to comply with the unless order. I may say that there was no evidence whatever that the Defendants had acted in good faith over the matter of the deliberately misleading address they had given or in meeting their obligations in discovery. There has been no suggestion that they prepared their lists without the benefit of legal advice. No explanation has been offered for what I am constrained go conclude was wilfully defective discovery, other than a submission that it was not so.

58. I would mention here that we have been referred by Mr. Ching to Further and Better Lists filed by the Defendants on 5 July 1988. They are in identical terms and I read Schedule 2, paragraphs 2 and 3 from one of them:

"2. Documents relating to the Taiwan Hotel such as Shares Transfer Forms, which were disposed of over 5½ years ago as to which the 1st Defendant has no precise recollection.

3. Bank documents of which the 1st Defendant may have had temporary possession when he was director of the Bank for the purpose of singing or reading them, but did not regain control of them and has no records now, and no means of specifying them."

One has only to read them go see how glaringly evasive they are, particularly paragraph 2. I think that Mr. Ribeiro is fully entitled to maintain that they tend to demonstrate the Defendants' cynical attitude to discovery.

59. With every respect to the learned judge who heard and determined applications before him with anxious care, and to Mr. Ching's forceful, yet courteous, submissions, I have been persuaded that this is, indeed, a case where an appellate court is justified in interfering with the judge's discretion. Had the judge approached the matter of the illusory address and the patently inadequate discovery in the way I suggest he should have done, and given proper weight to their significance and importance, I have little doubt that he would have exercised his discretion differently since, as we know, he was well aware of the difficulties a litigant faces when once he has failed properly to comply with an unless order. It will also be recalled that the judge had observed:

"I would record that I have given full consideration to Counsel for the plaintiffs submission that the time has now come for this Court to deal firmly with the defendants. If their failure to comply had been more serious, or if their had been any lack of good faith in completing and filing the purported affirmations, I certainly without hesitation would have rejected their application.

60. In my judgment, the orders made resulted in an injustice to the Bank and cannot be allowed to stand.

61. I would, therefore, allow the Bank's appeal, set aside the orders made on 23 June 1988, and order that the Defendants to the action by the 1st and 2nd Defendants be struck out.

Hunter, J.A. :

62. I agree that this appeal should be allowed. The defendants are defaulters under the Unless Order. It is for them to show good reason for the grant of some indulgence to them by the court. In my view, they have shown themselves entitled to no such indulgence. I only add some words of my own because we are reversing the trial judge on an issue of discretion.

63. With respect to him, it seems to me that he fell into error in two specific respects; first in the way he dealt with the false address, and secondly in the way he dealt with the sufficiency of the discovery.

64. As far as the false address is concerned, my Lord has said everything that needs to be said about it. I would simply add that in my view the use of that address is plainly connected with the fugitive status, which the judge appears to have denied. Secondly it was part and parcel of a deliberate policy of concealment and evasion.

65. As far as discovery is concerned, it is I think significant to bear in mind the speech of Viscount Maugham in Myers v Elman [1940] Ac 282 at n 293, where he says that particularly in the context of actions fur fraud and conspiracy:

"It is essential in the interests of justice that defendant should be compelled to make full disclosure of all the documents bearing on the alleged fraud in the form of proper affidavits of documents".

Central to the issues raised in this Statement of Claim was the control of a company Compact to which the bank afforded very considerable loan and credit facilities starting in December 1982 on the apparent security of its shares and the fact that it owned property.

66. The sequence of events pleaded in 1982, and we have seen that that sequence is drawn from what are called "public documents" available from the Taiwanese equivalent of the Company's Court, goes like this. On 30th January 1982, it is said that there was shareholder's meeting allegedly attended by these defendants, but denied by them in the Defendant, at which this company resolved to put itself into liquidation and to sell its land. On 1st February 1982 it is said that the land was sold. That seems to be common ground. The document is one of the few that has been discovered by these defendants. Its discovery by them might raise the inference that they were at that time still connected with the company. On 11th October 1982, there is said to be another resolution passed at a shareholder's meeting in Hong Kong, again allegedly attended by these defendants (but that is also denied by them) in which it is recorded that the liquidation of the company had been connected in September. The first loan was in December of that year. In their Defendant, the defendants plead that although at one time they controlled this company, they had sold all their shares before the first loan was made, ie before December.

67. It seems to me transparent that the date and particulars of that sale are of crucial importance. Any court investigating this matter in the future would want to know first of all the precise date; in what parcels these shares were sold; who was the purchaser; what was the consideration; and (unless there are some "do it yourself" means of selling shares in Taiwan) who was the broker concerned. These matters would have generated share certificates, bought and sold documents, and as far as the consideration is concerned, entries in hooks of account, bank accounts and so on. Those are documents which should have been dealt with, whether they exist or not, in either the first or the second schedules in these lists and affirmations with considerable care. They go to the root of this defendants and the root of this claim. But as my Lord has pointed out, in the first list which was said to have been provided in time, nothing was said at all. In the further and better list, supplied at the same time as the corrected affirmations, the two formulae which he has read were used.

68. In my judgment the formula in respect of the Taiwan shares is quite insufficient. It simply tells you nothing. That is the kindest thing that can be said. But the truth is in fact, I believe, worse than that. Because the words used seem to me to be words of studied ambiguity, which were designed to tell the reader nothing, and to give no material which might expose either deponent to any successful future cross-examination. It looks to me as though having been criticised before the trial judge for their failure to deal with these shares, someone said we have to devise a formula to remedy this omission, but it must be such a formula that gives nothing away. The same comments and criticisms can be made of the formula in paragraph 3 when both deponents said that they had no means of specifying the documents which were once in their possession. As my Lord has pointed out already, the defendants had in their possession copies of all the relevant records which would have enabled them very readily to specify, if they wished. They had the means. What was lacking was the will. One can only conceive this to be a deliberate refusal.

69. The judge more or less dismissed these imperfections in discovery. He said it was incomplete, that the failure was "only" in the second schedule, and he referred to the other remedies available to the plaintiffs.

70. In my judgment, first, the sufficiency of an affidavit of documents filed under an unless order is not to be judged by the existence of any other remedies. For this purpose the existence of those remedies is irrelevant. Secondly, until there is a satisfactory account, and by that I mean a sworn coherent account in Schedule 2 of the of the loss or destruction of the documents which I have enumerated in relation to the shares which must at some time have existed, one cannot even be sure that the omission is confined to the second schedule. Thirdly even if it is, this is a fundamental omission in the second schedule, which goes to the root of this discovery. In the old days, blunter practitioners used to describe documents in this form as :"best read by holding them up to the light". A more polite way is to describe them as "illusory".

71. Finally in my judgment at least, the formulae used in the further and better last manifest a determination not to give proper discovery in this case at all.

72. In those circumstances, these defendants bas demonstrated that they are not entitled to any indulgence from this court.

Power. J. A :

73. I, too, am satisfied that there was a Clear and deliberate failure to give proper discovery. I agree with all that has fallen from the learned Vice-President and with my brother Hunter, J.A. and can usefully and nothing thereto.