CHAN WAI SUN AND ANOTHER v. LAW SHIU KAI ANDREW

HCA44/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.44 OF 2002

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D E C I S I O N

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1. This is the plaintiffs' application for discovery against a bank, which is not a party to the action.

Background

2. In this action, the plaintiffs claim against the defendant for repayment of two loans. The plaintiffs' case is that at the defendant's request, five cheques for the loans were made out in favour of a company called General Profits Asia Limited ("General Profits"). The defendant denies liability for the loans and states that he has no relationship nor dealing with General Asia and that he is neither a director, shareholder, nor officer-bearer of it or in any way related to it.

3. General Profits is not incorporated in Hong Kong, nor is it registered in Hong Kong. Accordingly, nothing about it can be found from the company registry records. However, from the records provided by the 1st plaintiff's bank, it appears that General Profits maintains an account with Hongkong Bank and the five cheques were paid into this account.

4. By summons filed on 2 May 2003, the plaintiffs applied under Order 38, rule 13, Rules of the High Court, for an order, inter alia :

(1)	the 1st plaintiff by himself or his authorised agent, on giving due notice, be allowed to enter the premises of Hongkong Bank for the purpose of inspecting and photocopying the bank records in relation to the identities of the directors, shareholders, office bearers and signatories of the account held in the name of General Profits, and
(2)	alternatively, Hongkong Bank do produce the said documents for the purpose of this proceeding.

5. Hongkong Bank does not oppose the application. The defendant, however, opposes on the basis that, firstly, Order 38, rule 13 is inapplicable and, secondly, there are insufficient grounds for the exercise of the court's discretion in favour of the application.

6. Order 38, rule 13(1), Rules of the High Court provides :

"At any stage in a cause or matter, the Court may order any person to attend any proceeding in the cause or matter and to produce any document, to be specified or described in the order, the production of which appears to the Court to be necessary for the purpose of that proceeding."

Prima facie, there is power under the Rules to order a non-party to attend court to produce documents.

7. At the same time, section 21(1) of the Evidence Ordinance provides :

"On the application of any party to any proceedings, the court or a judge may order that such party be at liberty to inspect and take copies of any entries in a banker's record for any of the purposes of such proceedings."

8. From authorities such as Elder v. Carter (1890) 25 QBD 184 and also from Hong Kong Civil Procedure 2002, para.38/13/1-8, it is clear that Order 38, rule 13 is directed at production of documents for a particular proceeding in the cause or matter. It is not intended to create a general right to discovery against third party in the absence of a pending proceeding in the cause or matter. The wording of the plaintiffs' summons is therefore inapt and the reliance upon Order 38, rule 13 is also inappropriate. The application should be made under section 21 of the Evidence Ordinance.

9. The authorities have stated that the power for inspection under section 21 of the Evidence Ordinance should be exercised with great caution. In my view, that must be right especially if the inspection is directed at an account held in the name of party who is not a party to a proceeding. It has been said that the power should only be exercised where it is clearly established that the account is really that of the party to the proceedings or that the party is so closely connected with it that it would be evidence against him : South Straffordshire Tramsways Company v. Ebbsmith [1895] 2 QB 669 at 675.

10. In Assets Investment PT Limited v. The United Islamic Investments Foundation (unreported), HCA No.4392 of 1993, Barnett J held that in a section 21 application, it must be shown that there is a probability that the account will contain materials germane to an issue to be tried between the parties. In short, the test is one of relevance. This in fact echoed what Lord Esher, MR said in South Staffordshire Tramways Company at 675, namely, "the party asking for the inspection ought to be able to show the court very strong grounds for suspicion, almost amounting to certainty that there are items in the account which would be material evidence against the defendant upon the matters in issue."

11. In the present case, the plaintiff's case is that the cheques for the loans were at the defendant's request made out in favour of General Profits, and the cheques were paid into the account with Hongkong Bank. On that basis, the plaintiffs believe that the account and General Profits are closely related to the defendant. It must be borne in mind that at this interlocutory stage, the court is not in a position to adjudicate on the veracity of the plaintiffs' averments or allegations but has to proceed on the assumption that the plaintiffs will be able to make good its case that the cheques were paid into the account at the defendant's request.

12. On that assumption, there are good reasons for the plaintiff's belief that the account-opening record of the account will shed light on the relationship between the defendant and General Profits and also between the defendant and this account, which may turn out either to strengthen or support the plaintiff's case, or to discredit the defendant's case.

13. For my part, I consider Mr Wan may well have overstated the plaintiff's position when he said the inspection will determine the ultimate outcome of the case. This may or may not be so, depending on what information is revealed from the account-opening record. But what is certain is that the inspection applied for is not a fishing expedition. There is clear evidence that the cheques have been cleared and paid through this account of General Profits. The identity and information of the person or persons controlling or operating the account must be relevant to the question of to whose benefit were the loans made and, in turn, whether the defendant was in any way involved in these loans.

14. In the normal course of events, a company search of the account-holder would have been the proper thing to do and the information reviewed will be most relevant. What takes the present case out of the ordinary is that General Profits is not a Hong Kong company and is not registered under the Companies Ordinance so that the usual modes of inquiry cannot be undertaken and that alternative modes of inquiry have to be undertaken. The inspection sought if viewed from this perspective must be a proper train of inquiry that the plaintiff should be permitted to pursue.

15. On the question of notice of this application, the authorities had considered that it is necessary to give notice of the application to both the bank and the holder of the account. In the present case, the summons and the affirmation had been served on Hongkong Bank, and it has no objection to it. In the case of General Profits, the difficulty is that no information about it can be obtained from the public records. It is simply not possible to serve on General Profits or to give due notice of the present application, a fact that the court has to bear in mind when deciding in what way it should exercise its discretion.

16. Having regard to the circumstances of this case and of the considerations that I have outlined, I consider that the court's discretion under section 21 of the Evidence Ordinance ought to be exercised in favour of granting the order. Accordingly, I make an order in terms of paragraph (1) of the summons. It is not necessary to make any order under paragraph (2).

Costs

17. The plaintiffs accept that the costs of Hongkong Bank in complying with this order should be borne by them in the first instance and may be recoverable against the defendant as an item of disbursement in the event they succeed on the claim.

18. As to the costs of the summons, as a matter of general principle, the plaintiffs having succeeded in the application should be awarded the costs of the application and of the hearing for argument. However, before the summons came to be heard by me, it had on three occasions gone before a master. Those were unnecessary had the plaintiffs made the application returnable before a judge in the first instance. The action had already been set down such that all further interlocutory applications should be made before a judge. The defendant should not bear the costs of the appearances before the masters. I therefore order that the costs of this application be costs in the cause. As to the costs of today, it would be to the plaintiffs against the defendant in any event.

19. The plaintiffs ask that a gross sum costs order be made. I do not consider this is an appropriate case to do so. Firstly, the schedule of costs that the plaintiffs had prepared had included a number of items that, by the present order, the plaintiff is not entitled to and it is not for this court to recast the schedule to work out the plaintiffs' entitlement. Secondly and more fundamentally, the plaintiffs' schedule of costs is not a schedule suitable for a gross sum assessment. Items such as mechanical preparation, scale costs for filing of bundles and service of documents and so on should not be included for a gross sum assessment schedule. On the other hand, there is no summary of the time spent on a particular task or document, for example, the drafting of an affirmation. The plaintiffs' schedule is casted in a chronological order and in a manner more appropriate for a full-scale costs taxation. Thirdly, some of the time said to have been spent on the items are rather excessive and it will require some scrutiny to scale them down to an appropriate level. These tasks are more appropriately left to the taxing master on a taxation.