ANBEST ELECTRONIC LTD v. CGU INTERNATIONAL INSURANCE PLC (formerly GENERAL ACCIDENT INSURANCE ASIA LTD)

cacv 17/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 17 of 2007

(on appeal from HCCL NO. 82 of 2000)

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REASONS FOR JUDGMENT

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Hon Rogers Acting CJHC:

1.  This was an appeal from a judgment of Stone J given on 22 December 2006.  The matters before the judge were two interlocutory applications made by the defendant insurer.  The first application was for security for costs and the second application was for specific discovery.  The judge dismissed both applications and the defendant appeals both decisions.  At the conclusion of the hearing of this appeal, the appeal was dismissed with costs, with reasons to be given in writing.

2.  In paragraphs 7 to 20 of the judgment the judge set out the background to this case and for convenience and to avoid unnecessary repetition it is set out here:

“7.     The writ was issued on 5 September 2000 by the plaintiff, Anbest, in an attempt to recover from the defendant marine insurers, CGU, the value of a cargo of electronic goods sold by Anbest to a Mid-East buyer, one First Star Electronics of Ajman, UAE.

8.      The goods in question were shipped to the port of Khor Fakkan on board the vessel “Al Sabahia” under a bill of lading dated 24 December 1998.

9.     The Consignee was named as Habib Bank (Sharjah Branch), and the Notify Party was First Star.

10.       What apparently happened was that Anbest sold the documents to Commonwealth Finance Corporation (‘CFC’), and CFC in turn forwarded the documents to Habib Bank.

11.    That which occurred thereafter will be the subject of factual determination at the trial.  It is the plaintiff’s case that delivery of the goods was obtained at destination by First Star, absent payment therefor, apparently by means of an original bill of lading obtained from Habib Bank.

12.    It is presently unclear how situation this transpired.

13.    One view of the facts is that Habib Bank endorsed and delivered to First Star an original bill of lading, thereby enabling the buyer to take delivery at Khor Fakkan.

14.    As I understand the position, however, Habib Bank claim to have no knowledge of First Star and to have returned the documents to CFC, although I am told that the documents so returned comprised only two out of the full set of three original bills of lading.

15.    It further appears that in the circumstances CFC, which originally had purchased the documents from Anbest, reversed this document sale, and repayment of the sum earlier received was made to CFC by Thakral Electronics Ltd (‘Thakral’) the parent of Anbest, to whom the funds originally had been paid by CFC.

16.    In turn, this sequence of events caused legal proceedings to be commenced in Sharjah in May 1999 by CFC against Habib Bank, proceedings which also I am told were financed by Thakral.

17.    On 14 December 2004 judgment was given in the courts of Sharjah in favour of Habib Bank.  It appears that the Sharjah court dismissed the claim mounted by CFC on the grounds that (i) the bill of lading used by First Star to obtain delivery of the goods had not come into the hands of the Habib Bank; and (ii) in any event CFC had suffered no loss as it had been reimbursed by Thakral/Anbest, which was not party to the Sharjah action.

18.    There has been no appeal against this judgment.

Progress of the present action

19.    The events in Sharjah, and in particular the failure of the CFC claim, have restimulated interest in the proceedings presently before this court, wherein Anbest pursues its claim for loss of its goods under the marine insurance policy which was issued on and dated 23 December 1998 pursuant to Open Cover No. HK-B1789.

20.    Points of Claim accompanied the writ, and were dated 5 September 2000, the Points of Defence are dated 1 February 2001, with the Points of Reply dated 16 February 2001.”

3.  It is important to note that this is an action brought in the commercial court and the judge himself has dealt with the matter and will be hearing the trial of this action.

Security for costs

4.  On this application the defendant seeks security for costs in the sum of $3,567,000.  The judge dismissed the application because he did not consider that it had been established that there was reason to believe that the plaintiff company will be unable to pay the costs of the defendant if the defendant is successful in its defence.  In reaching his conclusion the judge had reference to the third affidavit of Anil Daryanani where it is explained that not only is the plaintiff suing on its own behalf but it has a turnover which is consistently in the region of $80 million or more per year.  It is a subsidiary of a Hong Kong company which has assets of more than HK$1 billion and a turnover of more than HK$2 billion and a paid-up capital of $303,594,956.  In turn that company is the subsidiary of a Singaporean company which has a group turnover of US$1.4 billion per year.  Coupled with that, it was said that the plaintiff had assets worth at least $5 million.  The judge accepted that evidence, as he was entitled to do.

5.  Mr Smith SC, who appeared on behalf of the defendant on this appeal and in the court below, appears to have reiterated the argument made in the court below that the judge should have disregarded that evidence.

6.  Having reached his conclusion that this was not a case where security for costs should be ordered, the judge went on to observe that the timing of the application for security for costs indicated to him that it was opportunistic if not a tactical ploy.  These are observations which the judge was entitled to make being the judge who is in charge of the case not only at trial but in its preparation.  In such circumstances the judge is clearly likely to form impressions of that nature.

7.  Mr Smith argued that it would not cause the plaintiff’s parent company any undue difficulty if it were to give a guarantee in respect of the costs.  In my view, Mr Sussex SC’s reply was correct.  Unless it be established security should be given, the question of giving a guarantee by some other company did not arise.

Discovery

8.  It is in this respect that the fact that this case is to be heard before the commercial court and that the interlocutory matters are handled by the judge who will hear the case is of considerable importance.  It is a feature of the commercial court that an effort is made to restrict discovery to that which is essential.  Discovery has become more and more extensive.  It is often extremely onerous.  Sometimes, it would appear that it is used as a means of frustrating the progress of a case by deliberate excessive demands for discovery.  It is for that reason that in specialist lists an effort is made to contain discovery.  The matters decided in this application were, essentially, case management decisions.  This court is naturally reluctant to interfere with case management decisions.

9.  In this court, as in the court below, Mr Smith relied on five main categories of documents.  The first was copies of documents evidencing the cost of goods to the plaintiff’s parent company.  It is the plaintiff’s case that these documents need not be discovered because the plaintiff was selling the goods on its own behalf and the contract of insurance itself provided that it was agreed that the basis of valuation for the purposes of the Open Cover should be the value declared for insurance.  It is the defendant’s case, apparently, that the plaintiff may not succeed in that submission.  If that be the case it is for the judge to handle the matter if there is a possibility that the plaintiff might fail in its claim.

10.  Although it was submitted that the defendant sought discovery of book entries on the basis that it was not clear whether the plaintiff had received any reimbursement from its customer, when the pleadings were drawn to counsel’s attention the point was shifted to whether the plaintiff had been reimbursed by its own parent company.

11.  The judge dealt with the point generally in paragraph 74 and 75 of his judgment which I set out here:

“74.   This is the Commercial Court, which generally is not attracted to, nor greatly interested in, nice questions of discovery, of which this is one.  It is unclear how the manner of entry of this transaction within the company’s books has much relevance to the issue whether this loss, as asserted, falls within the risk underwritten by this marine policy, although this perhaps is a borderline area.

75.   No allegation of fraud is asserted by the defendant insurer in terms of the making of this claim by Anbest – it is currently not suggested, I think, that in fact Anbest has been paid for these goods – and I am attracted by the argument that discovery is not to be made in aid of credibility alone, which is what in substance I consider this request represents.  Accordingly, I reject this also.”

Documents relating to the Sharjah proceedings

12.  As already noted, the judge dismissed the claim on the basis that the bill of lading used by First Star to obtain delivery had not come into the hands of the Habib Bank and was a forgery.  Although the plaintiff does not consider that that finding is correct, the witness statement by Mr Daryanani makes it clear that the plaintiff had no means of producing evidence to rebut that finding of fact and in those circumstances it mattered not whether an appeal was brought or whether the plaintiff itself had become a party of the Sharjah proceedings.  The matter remained one where the plaintiff had no means of disproving a case which had been found against it.  Furthermore, as the judge below observed and accepted, the issue of the viability of the Sharjah proceedings and in particular the issue of an appeal from the first instance decision was to be the subject of expert evidence on both sides.  The judge below accepted the argument that the decision for the court to make at trial was whether the plaintiff had failed to ensure that the rights available against the third party had been properly preserved and exercised, and, if not, whether the defendant had thereby suffered loss.

13.  The judge went on to indicate that many of the documents sought were sought in an effort to discover a case on behalf of the defendant rather than to prove it.  In those circumstances it appeared to be a “fishing expedition of the first water”.  Again, it seems to me that the judge was entitled to form this view.

14.  A separate point was sought to be made in respect of documents showing detailed work which had been conducted by the solicitors and lawyers involved in relation to the Sharjah proceedings.  This does not appear to me to arise on the pleadings, as they stand at the moment.  At the moment, the point that seems to be taken is that no admission was made as to the amount of the legal fees or the disbursements allegedly incurred.  That matter is covered simply by the payment of the fees.  Then the defendant went on to allege that the plaintiffs had not acted properly or reasonably in relation to the Sharjah proceedings.  Those pleas were in relation to not being joined as a party and not pursuing an appeal.  They were not in relation to a question as to whether detailed amounts in those bills were properly charged.

15.  In my view the judge dealt with the matter of the privileged documents and the plaintiff’s investigations at Khor Fakkan correctly.  In relation to the latter the plaintiff has sworn that there are no further documents.  That in itself would be an end to the matter.  The judge referred to the argument on behalf of the plaintiff that what seemed to be behind this request was some un-articulated and un-pleaded suspicion that there was fraud involved.  That has not been pleaded.  The judge clearly has full control of these proceedings and it is not for this court to interfere with his handling of the case.

Hon Burrell J:

16.  I agree and have nothing to add.