PANG PO KING CANNIE v. CELESTIAL SECURITIES LTD

HCA3319/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3319 OF 2002

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D E C I S I O N

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Application

1. By summons dated 26 November 2004, as amended by subsequent summons dated 20 December 2004, the plaintiff applies to strike out the defence and enter judgment against the defendant on the ground that there is a serious or substantial risk that there can no longer be a fair trial by reason of the defendant’s suppression of documents and failure to make proper discovery; alternately for an order that the defence be struck out and judgment be entered unless the defendant complies with paragraphs (a) and (b) of the schedule to Master Woolley’s order made (by consent) on 5 January 2004 (“Master Woolley’s Order”). 

Background

2. The defendant is a securities broker in Hong Kong.  On 28 November 2001, the plaintiff opened a cash and share trading account with the defendant for the purpose of trading in shares of listed companies.  The plaintiff’s case is that between 16 January 2002 and 8 February 2002, the defendant concluded 22 transactions for the purchase and sale of shares in Texon Holdings Limited (“the 918 shares”) without the plaintiff’s knowledge, authority or consent. 

3. The defendant’s case is that the first 19 of the 22 transactions were effected with the plaintiff’s knowledge and authority.  The remaining 3 transactions were forced sales effected pursuant to the defendant’s contractual right to liquidate the shares in the plaintiff’s account because she had failed to provide sufficient funds to cover the debit balance in her account.  No consent or authority from her was required. 

4. The main issue in this case is whether or not the plaintiff knew of, authorised or consented to the disputed transactions. 

Master Woolley’s Order

5. It is common ground that if orders placed by a client were made through the central telephone system of the defendant, there would be an audio record of those orders.  The system is called the NiceLog system.  It is apparent that if the defendant is in possession of those NiceLog records or any form of records, evidencing the plaintiff’s consent, knowledge or authority of a sale, it is only in its interest to disclose such records in order to make good its defence. 

6. In its supplemental list of documents dated 18 November 2003, the defendant disclosed, under item 20, a cassette tape of telephone conversations between the plaintiff and the defendant’s staff between 3 December 2001 and 22 January 2002.  Item 21 on the same list is a transcript of the telephone conversations. 

7. The plaintiff maintains that she had had more conversations with the defendant’s staff than those telephone conversations listed in the defendant’s supplemental list.  She therefore took out a summons dated 17 December 2003 for specific discovery of, among other things, audiotapes recording the conversations between the plaintiff and the defendant’s staff during the period between 28 November 2001 and 8 February 2002. 

8. That summons was disposed of by Master Woolley’s Order, requiring the defendant to make an affidavit stating whether it had in its possession, custody or power :

(a)	the daily dealing sheets of the defendant for 7 February 2002; and
(b)	the audiotapes recording the conversation between the plaintiff and the staff of the defendant during the period between 28 November 2001 and 8 February 2002.

9. In compliance of Master Woolley’s Order, Toni Yiu, a director of the defendant, made an affirmation dated 16 January 2004 deposing that :

(a)	the defendant had lost the daily dealing sheets for 7 February 2002; and
(b)	the audiotapes recording the conversation between the plaintiff and the staff of the defendant by the central recording system of the defendant during the period 28 November 2001 to 8 February 2002 had been disclosed as item 20 of the supplemental list of the defendant’s list of documents.

10. In the 4^th affirmation of Toni Yiu dated 17 February 2005, she deposed that the defendant has no knowledge when they parted with the daily dealing sheets. 

Burrell J’s Order

11. The plaintiff was not satisfied with the discovery by the defendant.  She took out another summons on 23 March 2004 for specific discovery of all or any audiotapes recording the conversations to the defendant’s telephone recording system on 31 specified dates between 28 November 2001 and 31 January 2002, whether or not the tapes have recorded the conversations between the plaintiff and any of the staff of the defendant.  These 31 dates were the trading days, according to Mr Leung, counsel appearing for the plaintiff in this application before me.

12. The application was refused by Master de Sousa on 2 September 2004.  The appeal against Master de Sousa’s Order was heard by Burrell J on 10 December 2004.  The defendant undertook to further comply with paragraph (b) of Master Woolley’s Order as follows :

“The audiotapes recorded with the NiceLog system which recorded the conversation between the plaintiff and Howard Ting, Douglas Yiu, and Gavin Ko on the days referred to in the schedule to the summons filed on 23 March 2004 which related to any matters concerning the shares of Texon Holdings Limited regardless of the defendant’s opinion as to relevance”

Upon that undertaking, the plaintiff’s appeal was ordered to be withdrawn.  The plaintiff was further ordered to pay the costs of the appeal to the defendant, to be taxed if not agreed. 

13. In fulfilment of the undertaking given to Burrell J, the defendant filed three affirmations.  They are the first affirmation of Bonnie Tse dated 30 December 2004, the fifth affirmation of Kitty Tang dated 11 January 2005, and the affirmation of Wong Yi Man dated 30 December 2004. 

14. Taking some technical objections to those affirmations, the plaintiff brought the matter back to Burrell J on 7 February 2005 where he gave further directions requiring a director of the defendant to confirm whether the defendant had the NiceLog records of conversations between the plaintiff and Howard Ting, Douglas Yiu and Gavin Ko relating to the 918 shares.  That resulted in the 4^th affirmation of Toni Yiu dated 17 February 2005.

15. Toni Yiu in her 4^th affirmation confirmed that the defendant does not have the NiceLog records of conversations between the plaintiff and Howard Ting or Douglas Yiu relating to the 918 shares on any days other than those listed in the table; and that the defendant has never had any NiceLog records of conversations between the plaintiff and Gavin Ko relating to the 918 shares on any dates. 

16. Toni Yiu made a 5^th affirmation which arose out of certain allegations raised by the plaintiff regarding the so-called problem record.  The plaintiff was making allegations of forgery relating to a certain telephone record of an outgoing call to telephone number 91402856.  I shall not go into details relating to these allegations and the evidence.  What is of interest to the present application is that by her fifth affirmation, Toni Yiu disclosed all 24 NiceLog entries involving the plaintiff, although only nine of them involved the 918 shares. 

Refusing the application

17. Earlier on 26 November 2004 and before Burrell J made the order on 10 December 2004, the plaintiff took out the present summons to strike out.  As noted, it was subsequently amended to include the prayer for the unless order. 

18. The basis for this application to strike out is that there has been a non-compliance of Master Woolley’s Order.  The plaintiff’s conduct amounts to an abuse of process with an ulterior motive to drain the plaintiff’s resources.  In the course of his submissions, Mr Leung, appearing for the plaintiff accused the legal representative of the defendant of doing something which obstructed the course of justice.  These are all serious allegations indeed.  Mr Leung submits that it is a plain and obvious case for the court to invoke Order 24, rule 16 to strike out the defence. 

19. It is only in rare and exceptional circumstances that the court would exercise its discretion under Order 24, rule 16 to strike out a defence on the ground of failure to comply with discovery orders.  The court will have to consider whether or not there’s a real, substantial, or serious risk that a fair trial of the plaintiff’s claim is no longer possible and that the court would be prevented from doing justice between the parties as a result of the breach of the order; and whether or not the defendant has deliberately suppressed discovery of documents in circumstances amounting to abuse of process. 

20. I will first examine if there is a breach of Master Woolley’s Order in the circumstances of this case.  As rightly pointed out by Mr Sussex, SC, appearing for the defendant, paragraph (b) of the Master’s Order, on the face of it, does not limit discovery to the conversations relating to the 918 shares.  That is perhaps why the plaintiff was not satisfied with the affirmation filed in purported compliance of Master Woolley’s Order in the first place and that’s why she filed the summons dated 23 March 2004 (which was heard by Master de Souza). 

21. As noted, that application for wider discovery was dismissed by the Master.  On appeal, an undertaking was given to the court.  In my view, looking at how the matter relating to discovery of those audiotapes developed from Master Woolley’s Order up to the time when the undertaking was given to Burrell J, the plaintiff is obviously only interested in those audiotapes referred to in the undertakings. 

22. As a result of the further affirmations made by the defendant, including the 5^th affirmation of Toni Yiu, Master Woolley’s Order, as understood in the circumstances, has been fully complied with in so far as paragraph (b) is concerned.  As to paragraph (a), the 1^st and 4^th affirmations of Toni Yiu has already stated the defendant is no longer in possession of those daily dealing sheets and has no knowledge as to when they parted with them.  It is also a full compliance of Master Woolley’s Order. 

23. The complaint that the defendant has not complied with Master Woolley’s Order is not justified in the circumstances. 

24. Even if there is such a breach, I am not satisfied that there is a real, serious or substantial risk that a fair trial would not be possible for a number of reasons.  First, as I observed in the beginning, it is only in the interest of the defendant to disclose those telephone conversation records.  If it does not, it will only prejudice its interest when the trial comes along.  Second, there is no evidence before me to justify the allegation that the defendant has suppressed relevant documents.  Third, there is certainly no evidence to substantiate the wild allegation that the defendant has been lying on affirmations relating to discovery.  One would have to stretch the evidence to the extreme and enlarge the so-called discrepancies in the affirmations to the extreme to come to such a conclusion.  Finally, I find that there is no evidence to substantiate the serious and wild allegations that the defendant is trying to drain the resources of the plaintiff or to obstruct the course of justice.  Quite contrary to Mr Leung’s submissions, this is a clear case for the court to refuse to exercise the discretion under Order 24, rule 16. 

25. This application, in my view, is totally misconceived.  To complete, there is no basis whatsoever to make an unless order as prayed for in the amended summons to strike out either.  The entire summons must be dismissed. 

26. Finally, I note that the plaintiff has spent considerable resources in pursuing interlocutory applications mainly relating to discovery.  In my view, she should have applied her resources to more useful purposes, namely, to expedite the proceedings and to bring the matter to trial as soon as possible especially if her resources are, according to her counsel, limited. 

27. I will hear the parties on the questions of costs.