CHUNG OI SIM v. APLEICHAU MAXICAB SERVICE CO LTD AND OTHERS

HCMP 3017/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3017 OF 2003

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D E C I S I O N

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1.  There are two applications by the petitioner.  One is for discovery against two banks for bank statements under section 21 of the Evidence Ordinance, Cap. 8.  The other summons is for an unless order.

2.  The bank statements sought in respect of various account holders are set out in the second schedule to the amended summons and they are as follows:

(1)	Bank statements of Ap Lei Chau Maxicab Service Company in its own name or jointly from 1 January 1997 to 25 June 1997.
	This entity was a sole proprietorship of Kwok Ka Ming, I shall refer to this entity as “Kwok’s Sole Proprietorship”.
(2)	Bank statements of Chow Kei Chung, the 2nd respondent herein, and his wife, Cheng Hoi Yin, in the own name of the 2nd respondent or jointly with Madam Cheng, or for which the 2nd respondent was an authorized signatory from 25 March 1997 to 25 June 2000.
	I wish to point out that Madam Cheng is not a respondent to these proceedings.
(3)	Bank statements of Apleichau Maxicab Service Company Limited in its own name or jointly from 25 June 1997 to 11 July 2003.
	This company is the subject company in these proceedings brought under section 168A, and is the 1st respondent herein, I shall refer to this as  “the Company”.
(4)	Bank statements of Ap Lei Chau Maxicab Service Company Limited in its own name or jointly from 1 January 1997 to 8 August 1998.
	This is a limited company established by Mr Kwok and was struck off on 3 January 1997.  I shall refer to this as “Kwok’s Previous Company”.  The Company, which has a similar name, was incorporated on 25 June 1997 after Kwok’s Previous Company was struck off.

3.  The petitioner has alleged unfairly prejudicial conduct in the affairs of the Company.  For present purpose, it is necessary to focus only on two.  It was alleged that there was an agreement among the shareholders that the shareholding of the Company should be proportional to their capital contributions, and it was also agreed that the capital contributions should comprise partly the repayments made by the shareholders towards the debts of Kwok’s Sole Proprietorship.  The 2^nd respondent has produced spreadsheets giving details of the monies he had paid, of which the amount of HK$228,680.00 was alleged by the 2^nd respondent as his loan to Mr Kwok and this was denied by Mr Kwok, who claimed he had never received the sum.  The petitioner complained that the registered shareholding does not, in fact, reflect the capital contributions actually made by the various shareholders.  The other relevant allegation is that there was the practice of withholding HK$1,500.00 daily from the takings of the public light bus business of the Company from May 1999 onwards and that this cash was not recorded in the accounts of the Company.

4.  The petitioner took out a summons for discovery under Order 24 rule 7 of the Rules of the High Court on 2 June 2004.  I made an order on 1 September 2004 requiring the respondents to file and serve an affidavit stating if they have in their possession, power or custody, the documents set out in the schedule to the order, which included these bank statements under three items:

(1) copies of all the bank statements in respect of all the capital investments contributed by the shareholders of the Company from the incorporation of the Company on 25 June 1997 to 25 June 2000;

(2) copies of all the bank statements in respect of all those expenses, debts and/or other payments of the Company which are fully settled to the creditors or former employees of Mr Kwok’s Sole Proprietorship as well as to Mr Kwok from the said capital investments, including but not limited to those expenses, debts and/or other payments as listed in the schedule of payments exhibited as “CKC-21” from the incorporation of the Company to 25 June 2000; and

(3) copies of all the bank statements of the Company showing the daily cash received by the Company after counting for the period from 25 June 1997 to 11 July 2003 being the date of presentation of the petition, save for the period of 1 October 1997 to 31 October 1997.

5.  The 2^ndand 4^th respondents have made affirmations on 14 October 2004 pursuant to the order for discovery.  The petitioner was of the view that there was no compliance with that order so she took out a summons on 18 May 2005 for specific discovery and production of documents.

6.  I made an order on 9 June 2005 requiring the 2^nd respondent to file and serve within a specified time a further affirmation in compliance with the order on 1 September 2004.  Of the documents covered by the order I made on 9 June 2005, they included the bank statements in the three items mentioned earlier.

7.  Pursuant to the order made on 9 June 2005, the 2^nd respondent made his third affirmation on 7 July 2005.  This is a lengthy affirmation running to 20 pages.  He also filed two further affirmations to oppose the discovery sought against the banks on 21 July 2005 and 3 November 2005.  In essence, the 2^nd respondent’s stance is that discovery from the banks is not necessary, particularly in relation to the personal bank accounts of himself and his joint account with his wife, as he has already disclosed the relevant bank statements in his possession, power or custody.

8.  Section 21(1) of Cap. 8 is substantially the same as section 7 of the Bankers’ Books Evidence Act 1879 in the United Kingdom, and provides as follows:

“On the application of any party to any proceedings, the court or a judge may order that such party be at liberty to inspect and take copies of any entries in a banker’s record for any of the purposes of such proceedings.”

9.  Mr Man for the petitioner referred me to a decision of Barnett J in Assets Investments PT Limited v The United Islamic Investments Foundation and Others, HCA No. A4392 of 1993, 21 January 1994, in which this provision was considered.  It was noted by the judge after considering the English authorities that the basic principle of this provision “does not permit a litigant to embark upon a wholesale search of bank accounts in the hope of turning up something to his advantage” (at paragraph 6).  The judge quoted the dictum of Lord Widgery CJ in Williams v Summerfield [1972] 2 QB 512:

“The courts have set their face against section 7 being used on a kind of searching enquiry or fishing expedition beyond the usual rules of discovery.”

His analysis of the cases showed that the English courts were “anxious to prevent a litigant obtaining by the back door that which he could not obtain through the front”, and the position was summed up as follows in paragraph 8 of the judgment:

“In my judgment, the matters which must be demonstrated to a court before it can consider making an order under section 21 of the Evidence Ordinance are that the party has a bank account and that there is a probability that that account will contain material germane to an issue which is to be tried between the parties.  Put shortly, perhaps, the test is relevance.”

10.  Mr Man also fairly accepted that where inspection of bank accounts is sought against third parties who are not parties to the proceedings, the power to order discovery by a bank will only be exercised with the “greatest caution” (Phipson on Evidence, 16^th ed, para 32-112; Pollock v Garle [1898] 1 Ch 1 at 5 to 6).

11.  I have already set out the bank statements sought in the present summons.  Mr Man submitted that the bank statements sought are clearly of relevance, in view of my previous orders for discovery on 1 September 2004 and 9 June 2005.  This is correct only up to a point.  I cannot disregard the discovery that has been given by the respondents after 9 June 2005.  More pertinently, the question I ask is whether the bank statements sought would throw any light on the issues in contention and whether they would help in determining the issues, bearing in mind the discovery that has already been given.

12.  Of the bank statements sought in respect of the Company, it would appear that the documents made available by the respondents for the petitioner’s inspection on 16 August 2005 are not complete, although I note that the banks do not have the records sought in respect of 1997 as records are kept for 7 years only, and that the bank account with the China and South Sea Bank was not opened until 1998.  I think some purpose would be served in ordering disclosure by the banks of this item.  The respondents do not oppose disclosure by the banks of item 3 in the second schedule.  I will order the two banks in question, the Bank of China (Hong Kong) Limited, as successor to the China and South Sea Bank, and the Hang Seng Bank Limited, to give disclosure of this item.

13.  Of the bank statements sought in respect of Kwok’s Sole Proprietorship, the respondents do not oppose this, subject to the court being satisfied as to the relevance of the bank statements of this entity.  I think the bank statements of Kwok’s Sole Proprietorship may well be relevant to the allegations of the petitioner outlined earlier concerning capital contributions made by the shareholders, the settlement of debts owed by Kwok’s Sole Proprietorship and the withholding of daily cash receipts.  I order the banks to give disclosure of item 1 in the second schedule to the amended summons.

14.  I am not persuaded of the relevance of the bank statements of Kwok’s Previous Company.  This entity was struck off in January 1997 and has hardly featured in the evidence filed by the parties, and voluminous evidence has been filed.  Mr Man submitted that the bank statements of this entity might show that particular sums of money from the 2^nd respondent had or had not been paid into the accounts of this entity.  I think this is a fishing exercise.  I will not allow the petitioner to obtain from the banks what she would not have been able to obtain in a usual discovery application.  I refuse the application for disclosure of item 4 of the second schedule to the amended summons.

15.  Lastly, there are the personal bank accounts of the 2^nd respondent and his joint accounts with his wife.  This part of the application is opposed by the 2^nd respondent, and I think for good reason.

16.  I am not persuaded that disclosure of the bank statements of these accounts would help resolve the allegations made by the petitioner regarding the capital contributions and the withholding of daily cash receipts.  The mere fact that deposits had been made into the 2^nd respondent’s accounts or his joint accounts with his wife would not help to establish the petitioner’s allegations.  The petitioner would not be able to tell from the bank statements what part of the money belonged to the 2^nd respondent personally, or to the other businesses of the 2^nd respondent, or to the Company, nor would the petitioner be able to tell which were the funds of the Company where they had been mixed up with the other business transactions undertaken by the 2^nd respondent.  The 2^nd respondent had already disclosed ledger accounts in respect of his account with the Company showing cash paid to him out of the cash receipts in 1999. Sufficient discovery has been made by the 2^nd respondent as explained in his fourth affirmation, which I accept.  There is even less reason to order disclosure in respect of the joint accounts with his wife.  I think it would be oppressive to order discovery against the 2^nd respondent of his personal bank accounts, in view of the discovery already made, and I am not going to do so via the back door by requiring the banks to give disclosure. I refuse the application insofar as item 2 of the second schedule to the summons is concerned.

17.  I turn to the summons for an unless order.  This was issued on 7 November 2005.  The summons seeks an order that unless the 2^nd, 3^rd and 4^th respondents do within 7 days from the date of the order supply copy of daily cash counting records from 25 June 1997 to April 2001 and coin machine counting records from October 2000 to July 2003, these respondents be precluded from adducing evidence, and the petitioner shall enter judgment as against them, as prayed in the petition.

18.  As I have mentioned, the 2^nd respondent filed his third affirmation on 7 July 2005 to comply with the order for discovery I made on 9 June 2005.

19.  By a letter dated 11 August 2005 of the respondents’ solicitors, the petitioner was informed of the documents available for her inspection at the office of the respondents’ solicitors.  These documents included the daily cash counting records from April 1997 to April 2001 and the daily coin machine counting records from October 1999 to July 2003, being the documents which form the subject of the summons for the unless order.

20.  On 16 August 2005, the 2^nd respondent produced the documents for the petitioner’s inspection.

21.  On 4 October 2005, nearly two months after the inspection, the petitioner’s solicitors wrote to the respondents’ solicitors referring to the inspection on 16 August 2005 and requesting for copies to be provided of these documents:

(1) daily cash receipts of “the Old Company” from 25 March 1997 to July 1997;

(2) daily cash counting records and coin machine counting records of “the Old Company” from 25 March 1997 to July 1997;

(3) daily cash receipts of the Company from 25 June 1997 to 11 July 2003; and

(4) daily cash counting records and coin machine counting records of the Company from 25 June 1997 to July 2003, except the period of January 2000 to July 2000.

It was stated in the letter that the documents involved are “numerous”, and the petitioner’s solicitors enquired if the respondents would provide the documents to the solicitors of the petitioner for the latter to make copies.

22.  The respondents would clearly require time to make copies of these voluminous documents as requested by the petitioner’s solicitors.  There is nothing to suggest that the respondents have no intention to comply or were deliberately dilatory.  The summons for the unless order would seem to me unwarranted, so I dismiss the application.

23.  The petitioner is to pay the costs of the 2^nd, 3^rd and 4^th respondents of the application for the unless order in any event.

24.  As for the costs of the summons for discovery against the banks, I order the banks’ costs in complying with the order to be costs in the cause of the petition.  As the petitioner has succeeded only in part in this application, I think it would be appropriate to order the petitioner’s costs in the application, including the costs reserved on 24 June 2005, to be costs in the cause of the petition.