WONG CHUN KEUNG AND ANOTHER v. LEE TAK KUEN KENNY AND ANOTHER

HCA 831/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 831 OF 2002

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J U D G M E N T

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1. This is an application by the Plaintiffs for an unless order: unless the 1^st Defendant complies with an order made by me on 4 May 2005 within 14 days, the 1^st Defendant’s defence be struck off and the Plaintiffs be at liberty to enter judgment.

2. In my order of 4 May 2005, I directed the 1^st and 2^nd Defendants to file and serve on the Plaintiffs within 7 days further and better list of documents and to make and file an affirmation pursuant to Order 24 rule 16 stating whether the 1^st Defendant has the updated accounts of the Hong Kong 5-S Kindergarten Limited including but not limited to the Reports and Financial Statements of the Kindergarten for the years ending 31 July 2002, 31 July 2003, and 31 July 2004 or any and which of them are or have at any time been in their possession, custody or power; and if the same or any of them, having at any time been, but not now in their possession, custody or power, stating when they parted therewith or what has become thereof.

3.  At that hearing, the 1^st Defendant appeared in person and agreed to the order being made.  The 2^nd Defendant did not appear I made the order accordingly.

4.  On 10 May 2005 the 1^st Defendant filed and served an affirmation with the following contents:

“ 1)   沒有報告。

2)   已寫信給五常法幼稚園有限公司要求報告。

3)   附上信件。

4)   原告人亦可直接向五常法幼稚園取有關財務年報/核數司報告。”

5. On 28 November 2005, more than six months after the filing, the Plaintiffs took out the present application.  Ms. Chu for the Plaintiffs submitted that the 1^st Defendant had failed to comply with my Order of 4 May 2005.

6. She pointed out that the Kindergarten is owned by the company called “Hong Kong 5-S Kindergarten Limited” which has only two directors viz. the 1^st Defendant and the 2^nd Defendant.  They are in control of the Company and the Kindergarten.  The Company is a limited company still in operation.  The directors have the duty to prepare and file audited reports with the Inland Revenue Department every year.

7. At the hearing the 1^st Defendant told me that he had never received the reports in question.  He had asked for it but no one gave them to him.  He took the trouble of going to an accountant and make enquiry.  The accountant informed him that one director could sign and submit the accounts to the Inland Revenue Department.

8. As exhibited in his affirmation the 1^st Defendant had written a letter to the Kindergarten but he received no reply.  At the hearing before me, he offered to authorize the Plaintiffs’ solicitor to take steps and to enforce his right for him.

9. At the hearing, I pointed out to Ms. Chu a passage in page 426 of Hong Kong Civil Procedure 2006 which states:

“He may not be ordered to give discovery if his control of the documents is in another capacity, e.g. as a director of a company.”

Ms. Chu was totally unprepared for the legal argument and I asked her whether she wanted to consider her position.

10. She indicated she needed time to do so.  I adjourned the hearing and gave her 7 days to make a written submission.

11.  On 16 February 2006 I received a letter from the Plaintiffs’ solicitors enclosing an 8-page submission settled by counsel with authorities in support.  I note that the letter with enclosures has not been served on the 1^st Defendant.  At the hearing I did indicate that the 1^st Defendant needed not reply to the submission as he was not legally represented and might not be able to make any reply on point of law.  It is misunderstood that service was not required.  That was not my intention.  For the time being it does not matter but I direct that the Plaintiffs’ solicitors shall upon receipt of this judgment serve on the 1^st Defendant the letter with all enclosures for the purpose of record and completeness.

12. All the arguments and authorities put forward can be briefly summarized as follows:

(a)   A party has the obligation to disclose all relevant documents which are or have been in his custody or power, even if he is not the owner.

(b)   In case of a director, if they are or have been in his custody or physical possession of the documents, he must produce.

(c)   Whether or not documents of a company are in the power of a director who is a party to the litigation is a question of fact in each case.

13. In this case the 1^st Defendant by affirmation confirmed he did not have the documents and he had tried to obtain them.  He offered to authorize the Plaintiffs’ solicitors to obtain the documents for him.  Unfortunately, Ms. Chu declined the offer.  Ms. Chu never indicated any challenge or raised any objection to the above facts.  I am bound to accept them in total.

14. I find that it is not within the reasonable power of the 1^st Defendant to obtain the documents.  I rule that the 1^st Defendant had complied with my order made on 4 May 2005.  I dismiss the Plaintiffs’ application.

15. There is no reason why costs should not follow the event.  The 1^st Defendant has attended Court twice.  He has been very cooperative and helpful.  He is very reasonable and sensible.  I make the following order nisi in respect of costs:

(a)   That I assess the 1^st Defendant’s costs in respect of this application including the appearances in Court on 19 December 2005 and 10 February 2006 in the sum of $500.00 to be paid upon this order being made absolute.

(b)   That pursuant to Order 42 rule 5B(6) this order shall become absolute 14 days after this judgment is handed down unless an application in writing has been made to vary this order.