JOYCE T. ONGSIP t/a LT ENTERPRISES CO. v. PIMATRONICS LTD

HCA 611/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 611 OF 2010

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BETWEEN

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REASONS FOR JUDGMENT

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1.  By a summons dated 31 March 2012 (“the summons”), the defendant by original action (“the defendant”) applied against the plaintiff by original action (“the plaintiff”) for an order for specific discovery of document as set out in the summons.

2.  The summons came on for hearing before Registrar Lung on 7 June 2012.  After hearing arguments, the Registrar dismissed the summons with costs to the plaintiff which he summarily assessed at $55,000.

3.  By a notice of appeal dated 12 June 2012, the defendant gave notice that it intended to appeal against the order of Registrar Lung.

4.  The appeal came on for hearing before me on 13 September 2012.

5.  After hearing arguments, I dismissed the appeal with costs to the plaintiff such costs to be taxed if not agreed.  I indicated at the time that reasons in writing would be provided.  This I now do.

6.  In his written Reasons for Decision dated 7 June 2012, the Registrar succinctly set out the facts of the pleaded case which I gratefully adopt.  He said:

“The facts

5. Briefly stated, the facts of this case are that the plaintiff has been operating the business of agent for customers and charges commission for the services rendered. By an agreement dated 13 October 2005 (“the agreement”), she was appointed by the defendant as the exclusive agent for solicitation of orders from certain customers (“the customers”) specified in the agreement for certain products manufactured by the defendant, for which she was entitled to charge 10% of the net sales as commission. Pursuant to the agreement, the defendant had paid the commission as agreed between 2005 and September 2008. Between September 2008 and September 2009, the defendant had failed to pay certain quantities of the products, the commission of which amounted to HK$1,100,860.86, hence this action against the defendant.

6. The defendant admitted that he had not paid the said sum.  The reasons for so doing are that before entering into the agreement, a Mr Ocean Lee, who was an employee of a holding company of which the defendant is a 100% shareholder, had represented to the defendant that the plaintiff was the recognized sales agent of the customers and the defendant must place orders through the plaintiff [Defence – 5][1].  However, the defendant subsequently discovered that the representation was false as the customers denied having recognized agent.  The defendant further discovered that part of the commissions paid to the plaintiff was, in fact, paid to a person called Mr Kevin Pintar, a former Materials Manager of one of the customers, who did not have the permission of the customers to accept the commission, contravening section 9(1) of the Prevention of Bribery Ordinance Cap 201 [Defence – 13].  The defendant also says that the plaintiff had rendered no service to him because it was through Mr Ocean Lee’s connection with the customers that the orders were placed with the customers and that the plaintiff had given no other service such as advice on business to the defendant.  The defendant therefore says that the commissions paid to the plaintiff were paid under mistakes and he counterclaim for their return.”

7.  I would add that the customers referred to in the agreement dated 13 October 2005 are ECCO Electronics Controls Co in the United States of America (“ECCO”) and its United Kingdom subsidiary Vision Alert.

8.  Dennis Lim is the husband of the plaintiff who trades as the sole proprietor as LT Enterprises Co.  In his witness statement, Dennis Lim says that he has always been the one responsible for the business and operation of LT Enterprises Co.

9.  The plaintiff also pleads at paragraph 5 of the amended reply and defence to counterclaim that the agreement was entered into orally in about March or April 2005 with immediate effect.  The agreement was evidenced and reduced in writing and was subsequently signed by the parties in October 2005.

10.  The signed written agreement is dated 13 October 2005 and was signed by Ocean Lee, as General Manager, on behalf of the defendant and by Dennis Lim, as Sales and Marketing Manager of the plaintiff.  The company chops of the defendant and the plaintiff respectively were also placed next to the signatures.

11.  In the Schedule to the summons, the defendant sought specific discovery of 3 Categories of documents as set out therein.  However, shortly before the hearing of the appeal, the defendant’s solicitors informed the plaintiff’s solicitors that it would not be seeking discovery of Category 1(b) and Category 3(f) at the hearing of the appeal.  And as regards Category 2(c), the defendant would narrow down its request for discovery.

12.  The specific discovery of documents that the defendant was seeking at the hearing of the appeal was therefore :

“Category 1:

tax returns of [the plaintiff ] for the years of 2005-6 (“the Relevant Period”) together with the original supporting documents making up the tax accounts;

Category 2:

(c) Employer’s returns of Dennis Lim filed by [the plaintiff] for the Relevant Period;

(d) MPF records of Dennis Lim for the Relevant Period;

(e) Contract(s) of employment entered into between Dennis Lim and [the plaintiff] at any time;

Category 3:

(g) All correspondence or emails exchanged between [the plaintiff] (whether through Dennis Lim or not) and any employee of ECCO/Vision Alert in the Relevant Period which may be relevant on any alleged service rendered by [the plaintiff] to [the defendant].”

13.  The applicable legal principles as set out by the Registrar at paragraph 4 of his Reasons for Decision are well settled.

14.  A party seeking an order for discovery must make out a prima facie case that:

(1)  the specified document or class of documents exist;

(2)  the party against whom discovery 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.

(per To J at paragraph 11 of his judgment in Tullett Prebon (Hong Kong) Ltd v Chan Yeung Fong Nick & Ors HCA 2197 of 2009, 9 June 2011)

15.  As was held in Deak & Co (Far East) Ltd v NM Rothschild & Sons Ltd & Ors [1981] HKC 78, even if existence, possession etc. and relevancy were established, discovery would only still be granted if it was necessary for fairly disposing of the cause or matter.

16.  It is also useful to bear in mind what Burrell J said in his Decision dated 18 January2002 in Mariner International Hotels Ltd v Atlas Ltd & another (HCA 10714, 10752 and 10821 of 1998).  At paragraph 11, Burrell J said:

“The task of the court will often be to determine when “doing justice to the claim” stops and “fishing” or, to use another analogy “the scatter gun approach” starts.  At that point the onerous nature of the discovery exercise passes from the necessary and permissible to the unnecessary and impermissible”.

17.  The pleadings in an action define the issues to be tried.

18.  I would also refer to what Cheung JA said in Paul’s Model Art Gmbh & Co KG v U.T. Limited & Ors (CACV 139 of 2005; 14 December 2005) at paragraph 25 of his judgment:

“25 The real issue that has been focused at this hearing is whether the documents sought to be disclosed are relevant to the issues in this case between the plaintiff and the 4^th defendant. In this context the issue must be one identified in the pleadings. Sun Yuet Tai Ltd v British American Tobacco Co (HK) Ltd (CACV No 95 of 1999). On the other hand the fact that an issue is raised in the pleadings is not determinative as to whether it relates to a matter. Discovery is not required of documents which relate to irrelevant allegations in pleadings which even if substantiated could not affect the result of the action: Allington Investments Corp & Others v First Pacific Bancshares Holdings Ltd & Another [1995] 2 HKC 139.”

19.  I would also agree with the observations of Deputy Judge Mimmie Chan (as she then was) in Sunny Tadjudin v Bank of America, National Association (HCA 322 of 2008; 22 December 2011) when she said at paragraph 7 of her judgment:

“7. It is also clear that post CJR, the Court should give effect to the underlying objectives of the rules and procedures when it exercises its powers under Order 24 and when it interprets the provisions of Order 24. In deciding whether any document relates to a matter in question in the action, whether any document is or has been in the possession, custody or power of a party, and whether discovery of a document sought is necessary either for disposing fairly of the cause or matter or for saving costs, the Court should always bear in mind the objectives of cost effectiveness, expeditious disposal of cases, proportionality, procedural economy and ensurance of fairness between the parties.”

20.  Mr Peter Ng SC, for the defendant, submitted that the defendant’s cause of action against the plaintiff was based on a breach of fiduciary duty on the part of Ocean Lee, an employee of the defendant and knowing assistance of Ocean Lee’s breach of fiduciary duty and receipt of commissions by the plaintiff. It was his submission that the plaintiff acted as a front to receive commissions from the defendant.

21.  In the course of his submissions, Mr Ng summarized the gist of the defendant’s case as follows:

Ocean Lee was an employee of the defendant under a fiduciary duty to the defendant. He made certain representations to the defendant to induce it to enter into the agreement with the plaintiff.  The plaintiff assisted Ocean Lee to keep collecting commissions as if she were acting as the exclusive sales agent under the agreement but what has been discovered is that the plaintiff did nothing.  The plaintiff assisted Ocean Lee in pretending to be acting as the exclusive sales agent and pretending to be soliciting business from ECCO and Vision Alert when in fact that was not the case.

22.  Despite Mr Ng’s submissions to the contrary, it seems to me that what the defendant is, in fact, alleging (without pleading) is a conspiracy to defraud on the part of Ocean Lee and the plaintiff. If the defendant is relying on a conspiracy, then that must be specifically and distinctly pleaded with full particulars.

23.  Mr Ng in support of the appeal made it plain that he was not relying on any illegality for the purpose of the specific discovery application although that was relied on before the Registrar by another counsel then appearing for the defendant.

24.  In respect of the Category 1 documents sought, namely, the tax returns of the plaintiff for the Relevant period with supporting documents making up the tax accounts, Mr Ng submitted that these would shed light on the issue of the genuineness or otherwise of the plaintiff’s business.

25.  This alleged issue was never part of the issues identified by the defendant’s solicitors in the listing questionnaire filed on 2 February 2012.

26.  Nowhere has it been pleaded by the defendant that the plaintiff’s business was not genuine.  There is no issue raised on the pleadings as to the genuineness or otherwise of the plaintiff’s business.

27.  The discovery sought order Category 1 is simple a fishing exercise in my view. There is no merit in the application for discovery of this Category 1 document.

28.  As regards the Category 2 documents, namely, the employer’s returns, MPF records and employment contract, Mr Ng submitted that these would shed light on the issue of the genuineness or otherwise of Dennis Lim’s employment.

29.  Again, this issue was also never part of the issue identified by the defendant’s solicitors in the said listing questionnaire.

30.  Nowhere has it been pleaded by the defendant that Dennis Lim was not employed by the plaintiff.

31.  The issue of the genuineness or otherwise of Dennis Lim’s employment simply does not arise on the pleadings.

32.  The agreement was signed on 13 October 2005 by Dennis Lim as the Sales and Marketing Manager of the plaintiff.  There is no plea by the defendant that Dennis Lim was not authorized to sign agreements on behalf of the plaintiff or, indeed, that he was not employed by the plaintiff.

33.  I would also observe that although the defendant’s case is that the agreement between the plaintiff and the defendant is “illegal, void and unenforceable” (paragraph 14 amended defence and counterclaim) there is no plea that Dennis Lim was not employed by the plaintiff or that he was not authorized to enter into the agreement with the defendant.  Rather, the defendant relies on certain provisions of the agreement and seeks to refer to the agreement for its full terms and effect at trial (paragraphs 7 and 8 amended defence and counterclaim).

34.  In my view, the application for the Category 2 documents is also a fishing exercise.

35.  The discovery sought under the Category 1 and Category 2 documents is not relevant to the issues in the action.  The discovery sought is also not necessary for fairly disposing of the cause.

36.  As regards the Category 3 documents, it is accepted that these are relevant documents.

37.  Dennis Lim has already confirmed that there are no written contracts as requested.

38.  As regards the other documents under Category 3, all these have already been disclosed and supplied.

39.  Ms So, for the plaintiff, confirmed that all the documents under Category 3 have been disclosed as exhibit LFP-2 to the affirmation of Dennis Lim filed on 7 May 2012  .Mr Ng was content with counsel’s confirmation.

40.  For the above reasons, I dismissed the appeal with costs to the plaintiff to be taxed if not agreed.