TRENUS OCEANWAY LTD v. RICHLAND INTERNATIONAL LTD AND ANOTHER

HCCW 352/2014

[2021] HKCFI 3157

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 352 OF 2014

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D E C I S I O N

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1.  On 5 March 2021 I handed down my decision in respect of a number of interlocutory applications including an application by the Petitioner for specific discovery. This is dealt with in [6]–[10]. In [9]–[10] I explain why I dismissed the application:

“9. The difference between the Parties centers on the extent to which Mr Lau’s conduct from January 2014 is capable of being relevant to the clean hands defence. The difficulty it seems to me that the Petitioner faces in maintaining its argument is that it has not pleaded to [44.1] in the Points of Reply. Mr Wong argued that it must follow from the character of the matters that the Petitioner pleads in [39]–[44] of the Points of Claim concerning misappropriation and diversion of business from January 2014 that they are relevant to the question of clean hands even though they were not pleaded to address that issue. It does not seem to me that this is the correct way to construe pleadings with a view to identifying with precision the issues for determination at trial. Self-evidently [39]–[44] were not directed to issues, which had not yet been pleaded. It does not seem to me that a judge coming to this matter for the first time and reading the totality of the pleadings would recognise that the facts and matters pleaded in [39]–[44] were relied on to counter the clean hands defence and how it was intended to argue they did so. If the judge had also been told before reading the pleadings of Mr Joffe concession on behalf of the 1^st Respondent, I think it is highly unlikely that the judge would anticipate the matters pleaded in [39]–[44] having to be explored at all at trial.

10. It seems to me clear that if the Petitioner wishes to advance a case that the determination of the clean hands defence requires certain conduct of the 1^st Respondent to be considered that needs to be pleaded.  Given Mr Joffe’s clear confirmation that the 1^st Respondent accepts that there has been sufficient diversion of business to justify a winding-up order unless the 1^st Respondent establishes its clean hands defence, I do not see any justification for ordering specific discovery of the very substantial quantity of documents sought by [2]–[4] as for the purposes of proving the claim for all practical purposes [39]–[44] are admitted.”

2.  The Petitioner seeks leave to appeal that decision. The principles that apply to leave applications are not controversial.  It is convenient to quote the summary of them in [5]–[7] of the Petitioner’s skeleton.

“5. The relevant principles are trite and were recently considered by this Court in Re Smartplace Limited [2021] HKCFI 1924 at §2. In brief:

(a) Leave to appeal will generally be granted where there is a reasonable prospect of success or some other reason in the interest of justice for permitting an appeal is demonstrated.

(b) Where a decision involves the exercise of discretion, the Court of Appeal will only interfere with the same where it is demonstrated that decision was reached under mistake of law and disregard to principle, or under misapprehension as to facts.

6. To be fair, it has also been held by the Court of Appeal (consisting of Kwan JA, as she then was, and Fok JA, as he then was) in Sunny Tadjudin v. Bank of America, NA (Unrep., HCMP 691/2012, 29 June 2012) at §25, ‘[U]nless very special circumstances are made out, an exercise of the discretion in refusing specific discovery would not be disturbed on appeal’.

7. Regard may also be had to the considerations summarised at §7 in K&L Gates v. Navin Kumar Aggarwal [2019] HKCFI 200, as follows:

(a) Leave to appeal may only be granted if the applicant can demonstrate reasonable prospects of success, meaning that the prospects of succeeding must be reasonable and therefore more than fanciful, without having to be probable. Merely showing that the appeal is arguable and not fanciful is not sufficient.

(b) In specific discovery applications, the scope of the order often requires a judgment call to be made, having regard to all the circumstances. The fact that some irrelevant materials may be caught, of itself, is no basis to say the judge has erred, or that the Court of Appeal should intervene.

(c) It is a misuse of the appellate process to give the litigant (or his counsel) a platform for regurgitating his arguments again in the hope that the appellate judges may come to a different view. The relevant question for the Court of Appeal is whether the judge has fallen into palpable errors which can give rise to grounds for intervention by the appellate court.

(d) Lodging an appeal with ill-considered and unsatisfactory grounds of appeal, particularly those that provide no more than a lengthy critique of the judgment rather than identify a justifiable basis for the Court of Appeal interfering in the decision of the judge below, is not acceptable.

(e) Even if the threshold test of reasonable prospect is satisfied, the court still retains a discretion whether to grant leave, and may refuse leave in the interests of procedural economy and proportionality.

(f) Case management decisions made in the exercise of discretion (which include orders for specific discovery) are only subject to appeal in rare circumstances, and the hurdle faced by the appellant is very high.

(g) In the context of specific discovery, one consideration relevant to the exercise of discretion is the progress (or lack thereof) in the prosecution of the action and whether further arguments over discovery would impede, as opposed to progress, the determination of the real disputes between the parties.”

3.  In short, it is necessary for the Petitioner to demonstrate that I have made not only an error, but an error of sufficient gravity to justify the Court of Appeal interfering in what is a matter of discretion.

4.  Although, the Petitioner has divided its grounds of appeal into four heads, in my view the 2^nd to 3^rd do not add materially to the thrust of the first of them.  The 4^th concerns the period for which discovery of some document are to be given.

5.  So far as the 1^st ground is concerned it is said that as clean hands had already been pleaded by the 1^st Respondent and I accepted “…the plea of clean hands by its nature requires a consideration of the respective relevant behaviour of both parties…”, [7] it was not necessary for the Petitioner to plead the facts and matters that it relies on as relevant to clean hands.  This seems to be plainly wrong.  Of course it is necessary to consider the conduct of both parties in relation to the matters relied on by the 1^st Respondent, which is what [7] is referring to.  There is no dispute that the 1^st Respondent is required to disclose all documents relevant to those matters.  My grounds for objecting to the Petitioner’s application for specific discovery of further documents was that the Petitioner had not pleaded what additional matters it relied on as being relevant to an assessment of clean hands.  The court and the 1^st Respondent are, so the Petitioner would seem to contend, meant to intuit what is relevant.  For the reasons I explain in [9]–[10] in my view this is wrong.  It seems to me that the Petitioner now simply wishes to   re-argue the point.

6.  The 4^th point concerns [13] of the judgment.  It is said that I was wrong to limit the time period to June 2003 to January 2014, and that the end date should be indefinite.  However, again nowhere in the Points of Reply is it pleaded that there are transactions that are relevant to the later period.  Again the reader is apparently meant to intuit this as well.  It does not seem to me that the Petitioner has a realistic prospect of challenging this decision.

7.  As a general observation it is difficult not to feel that it might have been rather more effective in terms of advancing its case if the Petitioner had simply amended its pleadings rather than making the present application, which I dismiss.  The Petitioner shall pay the 1^st Respondent’s costs such costs to be taxed and paid forthwith.