CHUNG MEI INDUSTRIES LTD v. SO KWOK KEUNG

HCA 2604/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2604 OF 2005

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J U D G M E N T

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1.  This is an appeal from a decision of the Master who refused the interrogatories which are sought in this case.  This case involves a claim by the plaintiff Company against a former employee.  The claim arises because the Company says that it paid commission in advance and, since the Company involved did not make a profit, that commission has to be returned.  The amount claimed is $2.925 million.  If employers wish to claim back sums of that nature from their former employees, that is a matter for them.  If they can establish their claim to it, so be it.

2.  The issue in this case appears to me to be quite a simple one and that is whether or not the plaintiff has to take into account the profits made by subsidiaries of the plaintiff.  The plaintiff says, no.  It admits it has BVI companies, which are subsidiaries, and other companies and there is enough in this case to suggest that those companies did make profits.  The defendant says that the plaintiff should take into account the profits of the subsidiaries.  So that is where the battle lines are drawn.

3.  Now, the plaintiff's case is based upon the audited reports and, as drawn to the parties' attention over the course of argument, those accounts are heavily qualified, primarily because the profits of the subsidiaries have not been taken into account.  That is where the case is at the moment. 

4.  The interrogatories which are sought are, first of all, did any of the subsidiaries of the plaintiff stated in paragraph 8(b) of the amended defence, make any profits either by way of investment, etc?  The second interrogatory is, if the answer to the first interrogatory is yes, what are the amounts of the profits made by such subsidiaries?  The plaintiff objects to answering that, partly because accounts have not been prepared for the subsidiaries.

5.  Taking that at its face value, it seems to me that the answers to those questions are unnecessary and will not lead to any benefit whatsoever, because if the plaintiff wins on a construction, the profits that the subsidiary makes are irrelevant.  If the defendant wins on construction, the plaintiff fails, because it would not have shown what the profits of the plaintiff are because if the construction is that they should have taken into account the profits of the subsidiaries, that is the end of the matter.

6.  The third interrogatory is as to the sum of HK$4,931,348, stated to be due from a fellow subsidiary under the balance sheet of the plaintiff as at 31 December 2004: 

(i)       Which subsidiary was it?

(ii)      Why was such sum owed by that subsidiary?

(iii)     Did that sum relate directly or indirectly to the profits or income of that subsidiary? 

7.  I am not wholly convinced that the answers to those interrogatories would be totally irrelevant.  They may well be relevant.  On the other hand, in the event, they may well not affect the result of the case.  Nevertheless, I do not see why the plaintiff should not answer those.  Those are simple questions and they may lead on a chain of inquiry and may well be relevant.  I propose to allow the third interrogatory but not the first two.

Submission re costs

8.  I will make costs herein below costs in the cause.  Certificate for counsel.