KWONG HING KNITTING FABRIC TRADING CO LTD v. WELFIT TEXTILES CO LTD

DCCJ729/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 729 OF 2005

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R U L I N G

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1.  At today’s hearing the defendant applies by summons for the discovery of all records and documents in the plaintiff’s possession, custody or power relating to Wangli Lung Hing Knitting Factory and United Arts Knitting Factory perused by the plaintiff’s witness, Mr Fung, as admitted by him in paragraph 20 of his witness statement of 15 August 2005.  This application was made under Order 24 rules 7 and 10 of the Rules of District Court.

2.  The defendant claims that those documents are relevant to the matters in issue and in this action under Order 24 rule 7 and that the production is necessary for the fair disposal of the action and would save costs under Order 24 rule 13. 

3.  On the issue of relevancy, the defendant claims that the documents which show the plaintiff knew one of its customers, sold goods it purchased from the plaintiff to a company called Wangli Lung Hing Knitting Factory.  It is the defendant’s pleaded defence that the plaintiff knew one of the defendant’s customers was Wangli.

4.  Mr Li, counsel for the defendant, therefore argues that these disclosures would assist the defendant in proving its case against the plaintiff on a breach of fiduciary duty for selling to the defendant’s customer through another of the plaintiff’s customer.  Furthermore, it is the defence case as pleaded and contained in the defendant’s witness statement, that the plaintiff has been touting customers away from the defendant and that the plaintiff was selling directly to Wangli.

5.  From the documents shown to me and from Mr Li’s submission, I cannot see the logic in Mr Li’s argument.  As the plaintiff’s witness denied any knowledge of Wangli being one of the defendant’s customers, it does not follow that there was a breach of fiduciary if the plaintiff had no knowledge who the defendant’s customer was.  The disclosure of documents in the plaintiff’s possession, requested in the summons, would show the plaintiff’s customer, United Arts, was selling the goods ordered to Wangli, a fact already admitted by the plaintiff.  How would that assist the defendant?  Because there was already an admission of knowledge?  It would not further the defence case on the issue of  the plaintiff selling to Wangli directly.  It is a matter for the defendant to prove that the plaintiff had knowledge, firstly, that the plaintiff knew the defendant’s customer was Wangli and it is also for the defendant to show that the plaintiff was selling directly to Wangli.

6.  Mr Li also submitted the documents would help the defendant in his cross-examination of Mr Fung, the witness for the plaintiff on the plaintiff’s dealings with United Arts and Wangli.  That may be so but it would not advance the defendant’s case, vis-à-vis the plaintiff’s knowledge of the identity of the defendant’s customer(s).  Based on the aforesaid I cannot see any relevance these documents would have on the plaintiff’s liability to the defendant. 

7.  On the issue of these documents being the necessary documents to dispose of the case fairly.  The question is, would the production of these documents dispose of the case fairly and expeditiously.  Mr Li admitted it would for they would provide information between the plaintiff and United Arts which was selling to Wangli.

8.  Based on the plaintiff’s pleadings and witness statement of Mr Ng Yau who, according to the defendant’s pleading, will be the defendant’s witness, the plaintiff was selling directly to Wangli, who is the defendant’s customer.  This constitutes a direct breach of fiduciary duty, according to the defendant.  This issue would have to be decided at the trial.  However, the documents requested are not documents that would show a direct sale from the plaintiff to Wangli because the defendant’s request here is only for documents possessed by the plaintiff and perused by Fung relating to United Arts selling to Wangli.  Therefore, clearly, these are not documents that would dispose of the case fairly, I do not find they are relevant documents, neither am I convinced their disclosure would fairly dispose of the action.

9.  Even if I were wrong and they are relevant documents, in the case of Dolling-Baker v Merrett, Parker LJ said at page 899H:

“But in reaching a conclusion a court should consider whether there are other and possibly less costly ways of obtaining the information which is sought and which do not involve any breach of the implied undertaking.”

10.  The plaintiff objected to the production of these documents on the basis that they are confidential trade documents between the plaintiff and its customer, United Arts and United Arts customer, Wangli.  United Arts and Wangli are unwilling to disclose such information.  Although confidential documents are not necessarily beyond disclosure in the exceptional cases, I do not see this is one such situation and I have not been persuaded that the plaintiff should disclose these documents for the simple purpose of allowing the defendant material to cross-examine Mr Fung on when these documents are not connected to the issue, claimed by the defendant that the plaintiff has been selling directly to the defendant’s customer, Wangli. 

11.  For the aforesaid reasons I dismiss the defendant’s application with costs.  Costs of application and hearing be to the Plaintiff to be taxed if not agreed and taxable forthwith.