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DCCJ892/2006
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO. 892 OF 2006
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BETWEEN
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LEI CHON KUN |
Plaintiff |
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and |
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YIP TERESITA PUMARES |
Defendant |
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Coram: H H Judge Marlene Ng in Chambers (Open to the Public)
Date of Hearing: 21st March, 2007
Date of Handing Down Decision: 11th April, 2007
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DECISION
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I. Introduction
1. This is the Plaintiff’s application pursuant to Order 24 rule 7 of the Rules of the District Court (“RDC”) for specific discovery against the Defendant of certain documents set out in the schedule annexed to the Plaintiff’s summons dated 16th February 2007 (“Summons”).
2. The Plaintiff has filed 2 supporting affirmations of her solicitor Mr Gary Tam in support of the application (“Tam’s 1st and 2nd Affirmations”). The Defendant has filed an affirmation by her solicitor Ms Anita Lee in opposition thereto (“Lee’s Affirmation”).Ms Chan and Ms Lai, counsel for the Plaintiff and the Defendant respectively, have also lodged detailed written submissions.
3. On the face of the aforesaid affirmations and written submissions, there appears to be substantial disputes between the parties. But at the hearing of the Summons before me, once counsel were persuaded to focus on the nub of the application, quite a number of such disputes fell away as being of little or marginal relevance to such application. However, in the hope that it will assist in charting the way forward for the present proceedings (which after all has reached the stage of pre-trial review), I will briefly mention below some of the disputes that have been held in abeyance for the purpose of the Summons.
4. It is useful to start with some of the common grounds between the parties.
II. The legal principles
5. There is no dispute over the relevant legal principles. Rather counsel’s differences turn on the application of such principles to the circumstances of the present application.
6. Under Order 24 rule 7 of the RDC, a party may apply for an order requiring any other party to make an affidavit stating whether any document specified or described in the application or any class of document so specified or described is or has at any time been in his possession, custody or power, when he parted with it and what has become of it. By Order 24 rule 8 of the RDC, such order is not to be made unless the court is satisfied that it is necessary for disposing fairly of the cause or matter or for saving costs.
7. Hong Kong Civil Procedure 2007 Vol.1 para.24/7/1 at p.458 states inter alia that :
“[An application for specific discovery] must be supported by an affidavit stating that in the belief of the deponent the other party has or has had certain specific documents which relate to a matter in question. But this is not sufficient unless a prima facie case is made out of (a) possession, custody, or power, and (b) relevance of the specified documents …… This prima facie case may be based merely on the probability arising from the surrounding circumstances or in part on specific facts deposed to. See too Berkeley Administration v. McClelland [1990] F.S.R. 381 where at 382 the court restated the principles as follows: (1) There is no jurisdiction to make an order under RSC, O.24 r.7, for the production of documents unless (a) there is sufficient evidence that documents exist which the other party has not disclosed; (b) the document or documents relate to matters in issue in the action; (c) there is sufficient evidence that the document is in the possession, custody or power of the other party. (2) When it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order disclosure. (3) The order must identify with precision the document or documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing a false affidavit, even though doing his best to give an honest disclosure ……” (my emphasis)
(see also Lee Nui Foon administratrix of the estate of Chiu Yu Fu, deceased v Ocean Park Corporation, an Independent Statutory Corporation HCA6078/1986, P Cheung J (as he then was) (unreported, 29th March 2005)).
8. The well-known test for determining “relevance” is set out in The Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Company (1882) 11 QB 55, 63 :
“…… It seems to me that every document relates to the matters in question in the action, which not only would be evidence on any issue, but also which, it is reasonable to suppose, contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words “either directly or indirectly” because, as it seems to me, a document can properly be said to contain information which may enable a party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of enquiry, which may have either of these two consequences: the question upon a summons for a further affidavit is whether the party issuing it can shew, ……, that the party swearing the first affidavit has not set out all the documents falling within the definition which I have mentioned and being in his possession or control ……”
9. On the aforesaid test of “relevance”, the real question is whether the documents sought to be discovered are relevant to the issues between the parties to the litigation. In this context, the issues must be those identified in the pleadings (Sun Yuet Tai Limited v British American Tobacco Company (HK) Limited CACV 95/1999 (unreported, 4th June 1999)).
10. However, Cheung JA in Paul’s Model Art Gmbh & Co v U T Limited & ors CACV139/2005 (unreported, 14th December 2005) said at para.25 of the judgment as follows :
“…… On the other hand the fact that an issue is raised in the pleadings is not determinative as to whether it relates to a matter. Discovery is not required of documents which relate to irrelevant allegations in pleadings which even if substantiated could not affect the result of the action : Allington Investments Corp & Others v First Pacific Bancshares Holdings Ltd & Another [1995] 2 HKC 139.”
11. This is echoed by Colman J in O Company v M Company [1996] 2 Lloyd’s Rep 347, 350-351 :
“…… The principle was never intended to justify demands for disclosure of documents at the far end of the spectrum of materiality which on the face of it were unrelated to the pleaded case of the plaintiff or defendant and which were required for purely speculative investigation …… On the contrary, the document or class of documents must be shown by the applicant to offer a real probability of evidential materiality in the sense that it must be a document or class of documents which in the ordinary way can be expected to yield information of substantial evidential materiality to the pleaded claim and the defence to it in the broad sense which I have explained. ……”
12. Also in Annabell Kin Yee Lee & ors v Lee Wing Kim (May Lee) & anor HCAP5/203 (unreported, 5th March 2003), Chu J concluded that it was not sufficient for the plaintiff beneficiaries under the will of the deceased, who wished to revoke the appointment of the defendants as executors and who sought estate accounts on the footing of wilful default, to say that because there were on the pleadings allegations of improper conduct against the defendants, they were entitled to test the basis of the estate accounts generally or to check the accuracy of the items presented in the estate accounts irrespective of whether they were in issue.
13. With the above principles in mind, I now turn to the issues in the present pleadings.
III. Issues in the pleadings
14. For the purpose of determining the Summons, the issues arising from the pleadings are not complicated even though each pleading runs to 20-30 odd pages. The central issue is whether the parties were partners of an employment agency for domestic maids known as Riches Employment Centre (“Riches”) or whether the Defendant was the sole proprietor of Riches who employed the Plaintiff as company manager (“Central Issue”).
15. If Riches were found to be a partnership, the next question is whether the Defendant wrongfully expelled the Plaintiff from Riches. On the other hand, if Riches were found to be the Defendant’s sole proprietorship business, the question becomes whether the Plaintiff wrongfully breached her duties and obligations as Riches’ employee.
16. Whilst it is unnecessary to consider the pleaded case of the parties in minute detail for present purpose, I briefly summarise the same below to enable better understanding of some general observations on the further conduct of this litigation.
(a) Central Issue
17. The parties were former colleagues in an employment agency for domestic maids (“Original Employment”).
18. The Plaintiff claims the parties agreed to set up Riches on the basis of equal sharing of work, expenses and profit/loss, and on nominal monthly wages of HK$8,000.00 each plus commission. It was further agreed that the Plaintiff would advance money to Riches (if the Defendant had no money) until there were profits for repayment.
19. The Plaintiff pleads that since the Defendant resigned from her Original Employment before the Plaintiff did so, some of Riches’ formal documents (eg business registration, employment agency licence and bank account mandate) were in the Defendant’s sole name. Although it was agreed that the Plaintiff would be added as partner in these formal documents in due course, the Defendant failed to do so. Nevertheless, the Plaintiff made capital contributions, signed various contractual documents (eg advertising contracts and lease documents) and paid various business expenses that evidenced her role as a partner of Riches. Commission income from various overseas sourcing agents was remitted to the personal bank accounts of the Plaintiff and the Defendant, and income from local customers was deposited in Riches’ bank account.
20. On the other hand, the Defendant claims she resigned from her Original Employment to start her own business as sole proprietor of Riches. She funded the establishment of Riches and carried on business on her own until she employed the Plaintiff as company manager out of gratitude for the Plaintiff’s loan (not capital contribution) on quite favourable terms ostensibly in favour of Riches but actually intended for the Defendant’ sister-in-law. Commission income was remitted to the Defendant except during a period when she instructed a sourcing agent to make remittances directly to the Plaintiff for (a) repayment of the loan, (b) payment of salary and commission, and (c) reimbursement of business expenses paid by the Plaintiff, but the Defendant cancelled such instructions upon full repayment. The Defendant opened Riches’ bank account to receive cheque payments from local customers. The Defendant only became aware of the advertising contract after the Plaintiff had entered into the same, and she warned the Plaintiff not to further commit Riches financially without her consent.
(b) Office operations
21. There is no dispute that Riches initially leased an office at Lik Sang Plaza, and later moved to and commenced business at an office in Causeway Bay (“CB Office”), and still later established another office in Tsuen Wan (“TW Office”). Eventually Riches employed a few full-time staff. Riches and the Plaintiff made MPF contributions. In January 2006 the Plaintiff lodged a complaint to the Labour Department against Riches as employer in respect of her emoluments.
22. The Plaintiff claims the Defendant retained use of the office at Lik Sang Plaza for her private business of selling lunch boxes. At first both parties worked at the CB Office. The parties discussed Riches’ business affairs and agreed to lease the TW Office whereupon it was arranged that the Defendant and the Plaintiff would respectively be in charge of the CB and TW Offices. But the Plaintiff had to work at both offices when the Defendant was on maternity leave. The Plaintiff further claims that she participated in the MPF arrangements because she was under the mistaken impression that such arrangements were necessary prior to having her name added to the business registration as a partner of Riches, and that she complained to the Labour Department because she did not have proper legal advice.
23. On the other hand, the Defendant claims the Plaintiff helped the Defendant with Riches’ affairs on a friendly basis before she resigned from her Original Employment. Upon her resignation, the Defendant employed the Plaintiff as Riches’ company manager on a monthly salary of HK$8,000.00 plus commission. The Defendant shared the workload and discussed Riches’ business affairs and development with the Plaintiff, but the Plaintiff had to report to the Defendant who ultimately controlled Riches, made business decisions, dealt with the sourcing agents, and hired/instructed employees.
24. The Defendant further claims her status as the sole proprietor of Riches was reflected in the formal documents, including those for the CB Office. She herself made the business decision of expanding Riches’ operations to the TW Office and of posting the Plaintiff to work there as branch manager whilst she managed the CB Office, and she remained in charge of the overall operations of both offices. When the Defendant went on maternity leave, she assigned another staff to take charge of the CB Office.
(c) Books and accounts
25. The Plaintiff claims the parties agreed that (a) all income should be recorded, (b) they should regularly exchange/inspect Riches’ books and accounts, and (c) all income should be pooled/combined on a monthly basis first to pay for expenses and then to share the net profits equally between them.
26. The Plaintiff further claims she had prepared the books and accounts for the TW Office, but despite requests by the Plaintiff the Defendant failed to prepare or allow exchange/inspection of Riches’ partnership books and accounts or to record Riches’ customer contracts and business income. Instead, the Defendant wrongfully caused a sourcing agent to cease remitting commission to the Plaintiff, and failed to account for (a) the monies in Riches’ bank account, (b) the commission she received via her personal bank account and (c) the cash received by Riches.
27. On the other hand, the Defendant claims it was part of the Plaintiff’s duties to prepare Riches’ books and accounts on a monthly basis, but she failed to do so. Whilst on maternity leave, the Defendant asked the Plaintiff time and again for Riches’ business accounts, including an account of the remittances from the sourcing agent (ie commission payments) to the Plaintiff’s personal bank account and of the repayments for the Plaintiff’s loan, to no avail. The Defendant was dissatisfied with the Plaintiff’s work performance, so when she returned from maternity leave, she relieved the Plaintiff of her duties as branch manager and from handling money matters.
(d) Competition
28. The Plaintiff claims that without her knowledge and consent, the Defendant established another employment agency with the same name as Riches (“2nd Riches”) at another office in the same building as the TW Office (“New TW Office”) and at another office in Shatin, removed office equipment from the TW Office, and closed down and ceased to pay rent for the CB Office without notifying the landlord or the Plaintiff (which resulted in the landlord distraining the CB Office). Since the Defendant cancelled the employment agency licence for the TW Office and failed to make appropriate arrangements with the landlord, the Plaintiff had to continue to pay rent/utilities even though Riches could not operate its business at the TW Office. Consequently, the Plaintiff was forced to establish Sanrich Employment Centre (“Sanrich”) to earn income to pay the rent/utilities of the TW Office. However, at the beginning Sanrich was non-operational pending the granting of its employment agency licence. It could not provide Filipino domestic maids pending its application for a licence from the Consulate General of the Philippines. The Plaintiff denied she solicited Riches’ customers through Sanrich. After all, Riches’ business was largely due to her own business goodwill, skill, experience and reputation.
29. The Plaintiff further claims that in the meantime, the Defendant wrongfully (a) procured 2 staff to leave Riches and join 2nd Riches, (b) solicited Riches’ existing customers to patronise 2nd Riches, (c) informed Riches’ customers of the relocation to the New TW Office, (d) caused a sourcing agent to terminate its internet service for Riches and to set up such service for 2nd Riches, (e) caused another sourcing agent to provide internet service for 2nd Riches, (f) transferred all telephone calls from Riches’ TW Office to 2nd Riches’ Shatin office, and (g) removed office equipment purchased by the Plaintiff for Riches.
30. On the other hand, the Defendant claims she decided to expand Riches’ business by leasing the New TW Office. When the Plaintiff resigned from Riches, she changed the lock and failed to return the keys of the TW Office. The Defendant could not gain access to the TW Office, so she commenced business at the New TW Office and opened branches in Shatin and Tsuen Fung. 2 staff voluntarily continued to work for Riches.
31. The Defendant further claims she later discovered that whilst still employed by Riches and without her consent the Plaintiff established Sanrich by using Riches’ TW Office and staff and by wrongfully soliciting Riches’ customers for Sanrich without proper accounting of the commission earned therefrom. Consequently, to secure the TW Office, the Defendant terminated the supply of utilities for the TW Office, attempted to terminate the lease, informed local and overseas customers, terminated remittances of commission to the Plaintiff’s personal bank account, and took steps to contain the damage caused by the Plaintiff. The Defendant also removed office equipment that belonged to her/Riches from the TW Office. But the Plaintiff continued to carry on the business of Sanrich at the TW Office by misrepresenting that she was doing business for Riches. Due to the business problems caused by the Plaintiff’s bad faith and breach of her employment agreement, the Defendant also had to make the difficult business decision to close down the CB Office which resulted in distraint action by the landlord.
(e) Reliefs sought by the Plaintiff
32. The reliefs sought by the Plaintiff premised on her plea that Riches was a partnership can be grouped as follows :
(a) a declaration that the Plaintiff was wrongfully expelled from the partnership;
(b) an order that the partnership be dissolved with all necessary accounts and inquiries taken;
(c) an order that the Defendant should purchase the Plaintiff’s share of the partnership;
(d) alternatively, an order that the partnership be wound up after the aforesaid accounts and inquiries are taken, and all losses and damages suffered by the Plaintiff have been taken into account;
(e) an order that the Defendant do account to the Plaintiff the profits of Riches, and to pay such sums as may be found due to the Plaintiff;
(f) an order that the Defendant do account to the Plaintiff the profits of 2nd Riches, and to pay such sums as may be found due to the Plaintiff;
(g) an order that the Defendant do indemnify the Plaintiff against the existing liabilities of Riches, and to pay such sums as may be found due to the Plaintiff;
(h) permanent injunctions to retrain the Defendant from (i) using the trade name of Riches for any business of domestic maids employment agency, (ii) further canvassing any customers of Riches for business, and (iii) doing acts calculated to cause loss/damages to the trade name of Riches.
33. It is not easy to identify any material difference between the reliefs sought in (b) and (d) above, or how the relief sought in (e) adds to those reliefs. Since the Plaintiff has already claimed that an overall account should be taken in respect of the partnership dealings upon dissolution or winding up of Riches, even if one partner seeks to withhold some private profits in which the other partner is interested, ascertaining any profits or losses will be part and parcel of the overall exercise.
34. As I indicated to the parties’ legal representatives at an earlier hearing before me on 4th September 2006 (see paragraphs 52 and 53 below), I do not understand the basis for the relief sought in (c) above as it has not been made clear in the Plaintiff’s pleadings. When a partnership is dissolved or wound up, an account is normally required between the partners (Lindley & Banks on Partnership, 18th ed, para.23-75 at pp.612-613). Each partner can force a sale of all partnership assets which are capable of being sold whereupon the proceeds as well as the value of any unsaleable asset retained by any partner will be taken into account in settlement of the partnership accounts. In the absence of any provision in the partnership agreement to the contrary, no partner can insist that the other partner(s) purchase his share of the partnership (Lindley & Banks on Partnership (supra), paras.19-11 – 19-14 at pp.521-523).
35. As regards the reliefs sought in (f) to (h) above, again the relevant cause(s) of action have not been clearly pleaded. Undoubtedly there are extensive averments of myriad factual matters in the Plaintiff’s pleadings, but such pleadings remain short on (i) what duties (fiduciary or otherwise) owed by the Defendant to the Plaintiff that justify the Defendant’s alleged obligations to account for the profits of 2nd Riches in the absence of any plea of express restriction against competition (Lindley & Banks on Partnership (supra), para.10-217 at p.254), to indemnify the Plaintiff against the existing liabilities of Riches beyond overall partnership accounts and inquiries (Lindley & Banks on Partnership (supra), paras.20-09 – 20-15 at pp.551-556), to desist from using the trade name of Riches, and/or to stop canvassing business from the customers of Riches (which is to be wound up or dissolved), (ii) whether there has been any breach of such duties, and (iii) if so, whether such breaches justify the reliefs sought. Whilst I will not without hearing arguments go so far as to say that the Plaintiff’s present pleadings are deficient, greater clarity is plainly desirable. It is fundamental for a litigant to plead sufficient cause(s) of action for the reliefs he seek.
36. I should also point out that the relief sought in (g) above is for an indemnity in favour of the Plaintiff against the existing liabilities of Riches, which is quite different from a claim for “full indemnification of the Plaintiff’s capital contribution to the Partnership” referred to in paragraph 3 of Ms Chan’s written submissions.
(f) Reliefs sought by the Defendant
37. The Defendant counterclaims for declarations that the Plaintiff was merely an employee of Riches and that Sanrich was “an unauthorised company”. I pause here to say that it is not easy to understand what is meant by an “unauthorised company”. Even if (according to the Defendant’s pleadings) the Plaintiff established Sanrich without the Defendant’s knowledge or consent, it still does not make such company or business “unauthorised”.
38. The Defendant further counterclaims for the following reliefs :
(a) permanent injunctions to restrain Sanrich from soliciting the existing business of the Defendant/Riches, using the trade name of Riches to cause confusion that she was carrying on business as Riches, dealing with the obligations/monies of the Defendant/Riches, dealing with the assets of Riches or assets of Riches mixed with other assets, and/or doing acts deliberately calculated to cause loss or damage to Riches;
(b) an order that the Plaintiff be required to prepare books and accounts of Riches and Sanrich, and to answer all necessary inquiries;
(c) an order that the Plaintiff do account to the Defendant the profits of Sanrich, and to pay such sums as may be found due to the Defendant/Riches;
(d) an order that the Plaintiff do account to the Defendant the profits of Riches whilst the Plaintiff was Riches’ manager and at all times thereafter, and to pay such sums as may be due to the Defendant/Riches;
(e) an order that the Plaintiff do indemnify the Defendant against the existing liabilities of Riches created by the Plaintiff/Sanrich conducting business at Riches’ premises;
(f) an order that the Plaintiff do surrender to the Defendant the keys and “all furniture, fixtures, equipments of the company and all assets and effects” at the TW Office.
39. The Defendant’s pleadings, like those of the Plaintiff, are long on factual assertions and short on the elements of the relevant cause(s) of action. For example, in respect of the reliefs sought in (a) to (c) above, it is unclear from the Defendant’s pleadings what duties were owed by the Plaintiff to the Defendant or Riches after her resignation to justify a permanent restraint of trade and an account of the profits of Sanrich in the absence of any plea of express restrictive covenant.
(g) Accounts and inquiries
40. It is plain from the above discussion that the parties should carefully consider their respective cause(s) of action and pleadings prior to the adjourned hearing of the Pre-Trial Review before the Listing Master on 15th May 2007. No doubt at such adjourned hearing the learned Listing Master will consider the pleadings in light of the above observations to ascertain whether they are in a ready state for trial.
41. I need to say a few words about the “accounts and inquiries” that are being sought by both parties since they affect the scope of the issues in the present proceedings and are therefore relevant to consideration of the Summons.
42. Ms Chan submitted that it was the Plaintiff’s intention to proceed with the determination of the Central Issue as well as the taking of the “accounts and inquiries” at the trial in order to save time and costs. Although not referred to in her oral submissions, Ms Chan cited Taipao Resins Chemical Company Limited v Yin Mark & ors HCA16246/1998, Yuen J (as she then was) (unreported, 4th September 2000) in her written submissions. In that case, the company claimed its former director (a) made profits through the sale of goods and materials to the company through the companies he controlled, and (b) failed to inform the company there was a cheaper source for such goods and materials, ie the former director was in breach of his fiduciary duty to the company. The defence was that the majority shareholders of the company knew of the dealings and of the former director’s interests, but had not raised any objection. Yuen J (as she then was) granted specific discovery of certain accounting records against the defendants as being relevant to an account of profits claimed by the company. The learned judge noted that the company also wanted at trial an order for payment upon taking of that account. Since no order was made for split trial of the issues of liability and quantum, she held that documents relevant to quantum only could be made the subject of discovery.
43. In my view, the circumstances of Taipao Resins Chemical Company Limited’s case (supra) are a far cry from the present situation. In that case, the defendants did not dispute the transactions, so once the court decided whether there was knowing acquiescence of the dealings by the majority shareholders of the company, the ambit of the claimed account of profits and any consequential order for payment upon taking such account (which essentially amount to a claim for depriving the defendants of the profits which they made as a result of the alleged wrongful activity) would have been a simple exercise. I am unable to draw assistance from Taipao Resins Chemical Company Limited’s case (supra), which after all dealt with a corporate scenario.
44. Here, there are extensive and fundamental disputes between the parties that directly affect the scope and manner of taking the “accounts and inquiries”. Ms Chan did not address on the grave practical difficulty that stood in the way of her suggestion that the “accounts and inquiries” be dealt with at the trial, ie the fact that the scope and nature of such “accounts and enquiries” necessarily depend on a determination of the Central Issue. In my view, the natural and logical conclusion is that the “accounts and inquiries” must be taken after the trial.
45. Should the trial judge eventually find in favour of a partnership in the present proceedings, he/she will normally give judgment for partnership accounts to be taken and directions as to the manner in which such accounts and inquiries as between partners are to be conducted (see Lindley & Banks on Partnership17th ed, para.23-75at pp.612-613, para.23-119at pp.30-631and paras.23-124– 23-133at pp.633-637).
46. In coming to the above conclusion, I draw comfort from Godfrey JA’s observation in Sun Yuet Tai Limited’s case (supra) in which he said inter alia as follows :
“In contrast, “liberty to apply” may need to be included in an order made …… in an action for the winding-up of a partnership, or something of that sort. After the trial of the action, accounts and inquiries will probably need to be taken and made.” (my emphasis)
47. An analogy can also be drawn with Order 43 rule 1(1) and (3) of the RDC which provides that the court may order an account to be taken summarily “unless satisfied that there is some preliminary question to be tried”. The rationale appears to be that if there are some preliminary facts to be tried, then it is inappropriate to make a summary order for account. Reyes J in Kids World Limited v XL Machine Limited HCA125/2002 (unreported, 18th September 2003) explained inter alia as follows in para.3 of his judgment :
“Order 43 is not appropriate where the parties are engaged in substantial disputes of fact which are fundamental to the manner in which any proposed account is to be taken. Such disputes of fact first need to be resolved by trial. The person conducting the account or inquiry would need guidance on how to resolve such fundamental factual disputes if the account or inquiry is to proceed smoothly. Such guidance could effectively only come after a trial judge has fully heard the parties and decided their fundamental disputes, not before.”
In my view, such reasoning is applicable mutatis mutandis to the present circumstances because the scope and nature of the “accounts and inquiries” to be taken cannot be determined unless there is a decision on the Central Issue.
48. On the other hand, should the trial judge find in favour of the Defendant’s contentions on the Central Issue, he/she still has to give directions as to the manner in which “accounts and inquiries” on any profits made by the Plaintiff as a result of the alleged wrongful activities are to be conducted pursuant to the Defendant’s counterclaim.
49. On the basis of the aforesaid issues arising from the pleadings, I now turn to the Summons before me.
IV. Matters not argued for the purpose of the Summons
(a) Accounts and inquiries
50. In both parties’ affirmation evidence and both counsel’s written submissions, there are copious references to the Order of Deputy District Judge Wesley Wong dated 1st June 2006 (“Joint Accountant Order”) whereby it was ordered by consent inter alia as follows :
“1. Both parties jointly appoint an Accountant to oversee the accounts of both [Riches] and [Sanrich] from 27th September 2004 onwards within 21 days from the date hereof;
……
7. The costs …… of the joint appointment of an Accountant be costs in the cause ……”
51. Much correspondence passed between the parties’ respective solicitors on the interpretation of the Joint Accountant Order as well as on the choice of and terms of reference for the joint accountant contemplated by such order. Such correspondence essentially shows that the parties have been unable to come to any agreement on these matters.
52. Matters came to a head on 30th August 2006 when the Plaintiff issued a summons for (a) an extension of time for appointment of the joint accountant under the Joint Accountant Order, (b) the appointment of Mr Pius Lee as such joint accountant, (c) directions on the terms of reference for such joint accountant, and (d) the production of accounting-related documents by both parties to such joint accountant.
53. At the hearing of such summons before me on 4th September 2006, I raised queries with the parties’ legal representatives on the absence of (a) any mechanism for the appointment of the joint accountant, (b) any definition of the meaning of “overseeing” the accounts (eg whether the order contemplated preparation of an expert accounting report), and (c) any clarification as to whether Riches included 2nd Riches and all branches thereof, in the Joint Accountant Order.
54. At that stage, the parties have not yet even made discovery of documents in their possession, custody or power. Without any idea of the available primary accounting-related documents, it seemed to me it was then not possible to resolve the serious disputes between the parties as to the scope of the accounting exercise to be done by the joint accountant.
55. In the circumstances, I gave directions for discovery and witness statements, and adjourned the summons sine die with liberty to restore. Given that both parties wished to seek expert assistance of a professional accountant to present the accounting-related information in a helpful, effective and cost-saving manner, I also urged their legal representatives to confer constructively on such case management matter as soon as possible upon completion of proper discovery.
56. In the meantime, the parties sought clarification of the Joint Accountant Order from Deputy District Judge Wesley Wong. On 11th September 2006, the learned Deputy District Judge gave the following clarification (“Clarification Order”) :
“1. The accounts should be the trading P/L accounts of both companies excluding the preliminary expenses.
2. Riches from 28/9/04 to include all branches.
3. Sanrich from date of establishment.
4. All accounts up to 30 days before trial.”
57. Unfortunately, notwithstanding the Clarification Order, the parties continued to dispute over the appointment of the joint accountant and his terms of reference. I also note that the Clarification Order did not address the queries I raised in paragraph 53(a) and (b) above.
58. Such disputes and uncertainties continued unabated up to the hearing of the Pre-Trial Review before the Listing Master on 20th March 2007, ie a day prior to the hearing of the Summons before me. At such hearing, the learned Listing Master made inter alia the following directions :
“1. Parties do file and serve expert report(s) in accounting field (if any) on or before 30th April 2007.
2. Unless the expert evidence is agreed, the parties shall be at liberty to call as expert witness those witnesses the substance of whose evidence has been disclosed, except that the number of expert witnesses shall be limited to one for each party.”
59. The learned Listing Master did not clarify how the above directions sit together with the Joint Accountant and Clarification Orders, especially when the tenor of his directions contemplates separate accountant’s report by the parties’ respective accounting experts whilst the Joint Accountant Order contemplates the appointment of a joint accountant. At the hearing of the Summons before me, neither Ms Chan nor Ms Lai (who also appeared before the learned Listing Master at the hearing of the Pre-Trial Review) was able to assist me on the subject.
60. Further, although the learned Listing Master directed the parties to file expert report(s) in the accounting field (if any) on or before 30th April 2007, his directions are wholly silent on the scope and purpose of the such expert report(s) despite the long-standing disputes between the parties on the subject, which are plain and apparent from the various affirmations filed by both parties with the court.
61. In such circumstances, notwithstanding the learned Listing Master’s directions, the parties remain in the unhappy state of continued disagreement over the appointment of accounting expert(s), his/their terms of reference, and the ambit of the expert accounting report(s). It is therefore little wonder that such long-standing disputes spilled over with some abandon to the hearing of the Summons before me.
62. In this respect, I make two general observations.
63. First, I do not see the relevance of such disputes to the application under the Summons for specific discovery pursuant to Order 24 rule 7 of the RDC. “Relevance” is guided by the issues raised in the pleadings and not by any need for production of accounting-related information for the preparation of expert accounting report(s). In the end, both counsel conceded that these disputes were not relevant for the purpose of the Summons.
64. Secondly, on a broader consideration, the torrents of bickering correspondence between the parties’ respective solicitors and affirmation evidence from both parties in relation to expert accounting evidence in the present proceedings are disquieting. Whilst I have no doubt that efforts have made by the learned Listing Master to alleviate the problem, it is plain from the above that the time is ripe for exercising a firm controlling hand in formulating the purpose and ambit of the expert accounting evidence (including the companies/businesses and time period to be covered by, the scope/nature of and the form of presentation of the results of the expert accounting exercise contemplated by the court directions referred to above) for efficient case management. These matters will naturally depend on speedy and effective decision based on (a) the issues identified in the pleadings, (b) the primary accounts, books, work sheets and other accounting-related documents available from discovery, and (c) opinion from the parties’ legal/accounting advisors (if any) on how best to present the available and relevant accounting-related information for use at the trial in a helpful, efficient and cost-saving manner.
65. It requires no flight of imagination to picture the difficulty at trial for all concerned if both parties are allowed to indiscriminately obtain expert accounting report(s) that are prepared along different ambits, scope, periods and/or presentation that defy meaningful comparison or that require an enormous amount of time to be spent to appreciate to what extent their contents are relevant. If such sorry situation comes to pass, a significant amount of time, effort and costs will be wasted.
66. In the District Court where the jurisdictional limit is only HK$1 million, the commissioning of expert accounting report(s), particularly separate reports, is not a light matter. It is incumbent upon the parties’ legal representatives to exercise practical judgment (and the court to uphold firm case management) when it comes to deciding what areas actually require expert evidence and to ensuring that the ambit of the expert evidence to be obtained is relevant, necessary and of probative value.
67. It appears from counsel’s submissions at the hearing of the Summons before me that once it is understood the “accounts and inquiries” can only be realistically determined after resolution of the Central Issue and/or other preliminary factual disputes, the parties’ disagreements over the expert accounting report(s) should be reduced if not eliminated.
68. On the question of whether joint or separate expert(s) should be engaged, Ms Chan at first submitted that the Joint Accountant Order had been superseded by the directions by the learned Listing Master whilst Ms Lai submitted that the Defendant still wanted to appoint a joint accountant. At the hearing of the Summons before me, I urged that once the ambit of the expert accounting report(s) were resolved, the parties should try to see their way towards the appointment of a single joint expert so as to the save time and costs.
69. After discussing the above matters with counsel and standing down the hearing for them to confer together, both counsel informed me that it was likely that the parties would reach consensus on the appointment of a joint accounting expert and on the ambit of the expert accounting report. Since the matter of expert accounting evidence is not directly in issue at the hearing of the Summons before me, I asked the parties to (a) further confer constructively on the above matters, (b) carefully consider the continued usefulness (if any) of the Joint Accountant and Clarification Orders, and (c) bring up before the learned Listing Master at the adjourned hearing of the Pre-Trial Review or earlier (as appropriate) any consensus reached or any need for court determination of their differences before rushing into preparation of the expert accounting report(s) based on unresolved differences as to their purpose and ambit.
70. Lastly, I wish to emphasise that in modern civil litigation, particularly at the eve of the Civil Justice Reform, it is necessary for judges and masters to assert greater control over the preparation for trial to overcome “the deleterious effects of unbridled adversarial practices” (Civil Justice Reform : Interim Report and Consultative Paper (2001) para.250 at p.980). Where practitioners fail to conduct cases effectively and economically, the court should exercise its discretion to determine what is relevant, helpful and persuasive. Indeed, there is no need to await the implementation of the Civil Justice Reform to take these bold steps for the RDC has armed the judges and masters of the District Court with relevant powers (eg Order 23A rule 9 of the RDC, Order 18 rule 22 of the RDC and para.7.11 of Practice Direction 27.1).
(b) Delaying tactics
71. Tam’s 2nd Affirmation states that the Plaintiff (a) informed him recently that on a date unknown to her the Defendant closed down 2nd Riches’ Shatin office, and (b) informed him on 15th March 2007 that the Defendant’s New TW Office also closed down. Tam’s 2nd Affirmation went on to say that “I therefore have reason to believe that the Defendant has been adopting a delaying tactic and that the assets of [Riches] are being dissipated or had already been dissipated by the Defendant. There is a real risk that the Plaintiff would have an empty judgment should she win this action. Time is of the essence. I am of the view that the case is best served by expediting the trial process and by discovery of the specific documents by the Defendant pursuant to this application.”
72. On 23rd February 2007, Master C P Pang ordered that no further affirmation be filed by the parties for the purpose of the Summons without leave of the court, so the Defendant is unable to respond to such allegations unless she obtains leave to file/serve further affirmation. But instead of seeking leave to do so, Ms Lai simply set out the Defendant’s factual response in her written submissions.
73. Ms Lai’s written submissions suggested that the Defendant (a) made the business decision to close down the business operations of Riches in Shatin and Tsuen Wan in December 2006 due to mounting business losses and staff resignation with no replacement found, (b) surrendered the leases of the relevant offices in December 2006 and February 2007 respectively, and (c) told a staff of Sanrich who informed the Plaintiff of the above matters.
74. I make two observations. First, it is plain that the court cannot receive factual evidence from written submissions of counsel. But since the Defendant disputes the Plaintiff’s assertions, I cannot attempt to resolve factual disputes without at least giving the Defendant an opportunity to reply to the matters that were only raised for the first time in Tam’s 2nd Affirmation.
75. Secondly, I doubt in any event whether the aforesaid factual matters and/or disputes are relevant to or probative of the Summons before me. If the Defendant were adopting delaying tactics or dissipating assets, the court has a wide range of powers to expedite timely progress of litigation and/or to preserve or restrain dissipation of assets. But it does not appear to me that specific discovery of documents fall within that wide armoury. Irrespective of whether there is any delay or dissipation of assets, an applicant for specific discovery still has to satisfy the relevant criteria for specific discovery of the requested document or class of documents and to establish that such discovery is necessary for disposing fairly of the cause or matter or for saving costs.
76. In the end, both counsel agreed they would not rely on the factual matters on this subject for the purpose of the Summons.
(c) Submission of documents to the joint accountant
77. Lee’s Affirmation claims the Defendant had in her possession the tax return of Riches as of 31st March 2006 which was “ready for submission to joint accountant upon the appointment”. Lee’s Affirmation went on to say that “the accounts of Riches when available would be handed over to the joint accountant upon appointment” and that all the documents sought by the Plaintiff under the Summons “are …… not required should a joint accountant been appointed”.
78. Ms Lai in her written submissions suggested that “[documents] of financial nature or unaudited books of accounts and other schedules were actually for the purposes of the Joint Accountant” and that since the Plaintiff failed to proceed with the appointment of the joint accountant pursuant to the Joint Accountant Order, the “Defendant is of the opinion that Plaintiff is not willing to make similar disclosure of the financial situation of Sanrich and refused to account for business transactions Plaintiff did under Riches”.
79. In my view (and Ms Lai eventually conceded), it is no answer to an application for specific discovery to say that the requested documents will be submitted to experts yet to be appointed for the purpose of the relevant litigation. So long as the documents are relevant to the issues identified in the pleadings under the Peruvian Guano test and are in the possession, custody and power of a party to the litigation, they ought to be discovered under such party’s continuing obligation of discovery. The fact that such documents can and are expected to be disclosed to the expert(s) to be appointed for the litigation only adds (rather than diminishes) weight to the contention that they should be discovered.
(d) Requests by the Defendant for discovery of similar documentsof Sanrich
80. Lee’s Affirmation claims that the Plaintiff failed to discover inter alia Sanrich’s tax returns, financial profit and loss accounts, balance sheets, all sets of employment contracts and client’s records (ie documents or classes of documents similar to those sought by the Plaintiff against the Defendant under the Summons in relation to Riches).
81. On 26th October 2006, the Defendant’s solicitors wrote to the Plaintiff’s solicitors requesting for inter alia copies of documents giving details of Riches’ and Sanrich’s cash sales receipts at the CB and TW Offices.
82. On 15th November 2006, the Plaintiff’s solicitors replied saying that the request was too general and that the Plaintiff did not have any information concerning details of the cash receipts of the CB Office. The Plaintiff’s solicitors asked the Defendant’s solicitors to particularise the request properly to enable them to take instructions.
83. On 22nd February 2007, the Defendant’s solicitors again wrote to the Plaintiff’s solicitors seeking discovery of inter alia Sanrich’s tax returns, financial statements, audited accounts (or if not available, unaudited accounts) and any documents relating to Riches’ and Sanrich’s cash sales receipts at the CB and TW Offices. There was no substantive or positive reply up to 7th March 2007.
84. I refer to paragraph 78 above and note that Ms Lai submitted the Defendant made similar request for discovery of Sanrich’s documents against the Plaintiff on the basis of parity of approach between the parties. In paragraph 12 of her written submissions, Ms Lai argued that “the Plaintiff had material non-disclosure of similar documents. There is a pending Defendant’s request for discovery of similar documents and the Plaintiff has not complied, which justify a dismissal of this current application” (my emphasis).
85. But in the end Ms Lai conceded that the Plaintiff’s failure to respond to the Defendant’s request for further discovery was not an answer to the Summons, which should be determined according to the criteria under Order 24 rules 7 and 8 of the RDC. In my view, this must be correct. Should the Defendant consider the Plaintiff ought to make specific discovery of the Sanrich documents which her solicitors requested in their correspondence, it is up to the Defendant to apply for specific discovery if she thinks appropriate.
86. At the hearing of the Pre-Trial Review the learned Listing Master directed the parties to file further and better lists of documents. Ms Chan informed me that certain documents from Sanrich would be disclosed in the Plaintiff’s further and better list. In those circumstances, the Defendant may wish re-consider her position on seeking further discovery from the Plaintiff upon inspection of the documents to be disclosed in the Plaintiff’s further and better list.
V. Summons
87. By the Summons, the Plaintiff sought specific discovery of the following categories of documents :
(a) the tax returns of Riches for the period from 27th September 2004 to 31st December 2006 (“Period”) (“Tax Returns”);
(b) the financial statements of Riches for the Period (“Financial Statements”);
(c) copies of all audited accounts of Riches for the Period (“Audited Accounts”), or alternatively if audited accounts are not available, copies of all unaudited books and accounts of Riches for the Period (“Unaudited Books and Accounts”);
(d) copies of all sets of employment contracts entered into between Riches’ customers and its existing (local) domestic maids, including, but not exhaustively, all duly signed “Terms and Conditions for Employment of Existing Domestic Maids from the Philippines, Thailand and Indonesia (聘請現成菲、泰、印尼女傭章程)” (“Local Terms”) and “Particulars of Employer (僱主資料)” (“Employer Particulars”) form adopted by Riches for the Period (collectively, “Local Contracts”);
(e) copies of all sets of employment contracts entered into between Riches’ customers and its overseas domestic maids, including, but not exhaustively, all duly signed “Terms and Conditions for Employment of Overseas Domestic Maids from the Philippines, Thailand and Indonesia (聘請海外菲、泰、印尼女傭章程)” (“Overseas Terms”) and the Employer Particulars form adopted by Riches for the Period (collectively, “Overseas Contracts”).
88. Ms Chan submitted that the above documents or classes of documents were relevant to the Central Issue and also to the matter of quantum (ie “as to how much profits/loss the Plaintiff is entitled to under the Partnership”). However, as explained above, the matter of “accounts and inquiries” in the present proceedings should naturally and logically be dealt with after trial. So the essential question on “relevance” is whether the above documents or classes of documents are pertinent to the Central Issue and other preliminary disputes associated therewith.
89. On the other hand, Ms Lai submitted that the Summons was a fishing expedition and the above documents or classes of documents were irrelevant to the issues. “The real issues in dispute are already identified and could be resolved during trial without the above documents” (see paragraph 21 of Ms Lai’s written submissions). However, the criteria for specific discovery do not turn on whether the trial can be conducted without the requested documents but on whether the relevant factors identified in paragraph 7 above have been established.
90. I now turn to the specific requested documents or classes of documents.
(a) Tax Returns
91. On 29th December 2006 and 30th January 2007, the Plaintiff’s solicitors wrote to the Defendant’s solicitors claiming that the Defendant failed to disclose the Tax Returns even though Riches had been in operation for over 2 years and the Defendant must have received tax returns from the Inland Revenue Department (“IRD”). There was no reply from the Defendant’s solicitors. Tam’s 1st and 2nd Affirmations claim that the Tax Returns, which had to be filed with the IRD, were highly relevant.
92. Lee’s Affirmation claims that the Defendant had in her possession the tax return for Riches as of 31st March 2006 (“31/3/06 Tax Return”). Ms Lai acknowledged the Defendant had in her possession the working schedules that supported the 31/3/06 Tax Return, but submitted the Defendant did not have in her possession the tax return for Riches for the period ending 31st December 2006. In my view, irrespective of whether the Defendant has any tax return for Riches for the period ending 31st December 2006, the 31/3/06 Tax Return is plainly within the meaning of the Tax Returns since the period covered by the 31/3/06 Tax Return fell within the Period.
93. At the hearing before me, Ms Lai confirmed that the Defendant would discover Riches’ tax returns for the period from 27th September 2004 to 31st March 2006 and the working schedules in support thereof that are in her possession, custody or power (if any) in her further and better list of documents to be filed/served pursuant to the directions made by the learned Listing Master at the hearing of the Pre-Trial Review. Ms Chan conceded that since each tax year ended on the 31st day of March, it would be unlikely for the Defendant to have any tax return for the period from 1st April 2006 up to 31st December 2006. In light of Ms Lai’s indications above, Ms Chan decided not to seek any order for specific discovery of the Tax Returns.
(b) Financial Statements, Audited Accounts and Unaudited Books and Accounts
94. On 18th December 2006, the Plaintiff’s solicitors wrote to the Defendant’s solicitors requesting for a further and better list of documents that would disclose the trading profits and loss accounts of Riches from 28th September 2004 including all branches.
95. On 28th December 2006, the Defendant’s solicitors replied saying that the Defendant had already disclosed all the financial information of Riches such as cheques, invoices, salary records and bank statements in her List of Documents.
96. By a letter dated 29th December 2006 to the Defendant’s solicitors, the Plaintiff’s solicitors pointed out that if the Defendant had received/filed tax return for Riches, she must have the full financial statements of Riches that were required to be lodged together with the tax returns to the IRD, including the balance sheets and the profits and loss accounts.
97. The Plaintiff’s solicitors reiterated the above request in their letter of 30th January 2007 to the Defendant’s solicitors.
98. Tam’s 1st and 2nd Affirmations claim that these documents were highly relevant to the present proceedings and that the documents disclosed in the Defendant’s List of Documents and Supplementary List of Documents were merely disorganised bundles of expense-related documents (eg invoices, copies of cheques, receipts etc) and not documentary records (eg accounts, books or ledgers) of Riches’ income. Tam’s 2nd Affirmation further claims that the Defendant being the person presently in control of Riches should have the requested documents in her possession, custody or power.
99. Lee’s Affirmation claims that the Defendant had already discovered all financial information of Riches such as cheques, invoices, salary records and bank statements, and that there were no profits and loss accounts of Riches as at the respective dates of the Defendant’s List of Documents and Supplementary List of Documents and no financial statements or audited accounts of Riches as of 31 December 2006. Lee’s Affirmation further claims that since Riches was the Defendant’s sole proprietorship business, she was not obliged to prepare financial statements and audited accounts.
100. The Defendant objects to discovery of the requested documents as irrelevant, unnecessary, a waste of time and costs, and not conducive for effective case management. Ms Lai submitted it was premature to gather evidence on quantum before the Plaintiff succeeded on the Central Issue.
101. I bear in mind that it is only necessary for the Plaintiff to establish a prima facie case of possession, custody or power on the part of the Defendant, which may be based on the probability arising from the surrounding circumstances (see paragraph 7 above). After all, such matter must be largely within the Defendant’s knowledge.
102. Section 51C of the Inland Revenue Ordinance Cap.112 provides inter alia as follows :
“(1) …… every person carrying on a trade, profession or business in Hong Kong shall keep sufficient records …… of his income and expenditure to enable the assessable profits of such trade, profession or business to be readily ascertained and shall retain such records for a period of not less than 7 years after the completion of the transactions, acts or operations to which they relate.
……
(3) For the purposes of this section, “records” (紀錄) includes –
(a) books of account (whether kept in a legible form, or in a non-legible form by means of a computer or otherwise) recording receipts and payments, or income and expenditure; and
(b) vouchers, bank statements, invoices, receipts, and such other documents as are necessary to verify the entries in the books of account referred to in paragraph (a).
……” (my emphasis)
103. Since the Defendant admits that she has filed the 31/3/06 Tax Return with the IRD, I accept that the Plaintiff has established a prima facie case that the Defendant has in her possession, custody or power financial records and books of account for Riches for the Period.
104. In this respect, I draw assistance from Taipao Resins Chemical Company Limited’s case (supra) although it deals with a corporate scenario. In that case, Yuen J (as she then was) granted specific discovery of certain accounting records. “It is obvious that since the Defendant companies are Hong Kong companies, they would be obliged by law to keep proper accounting records. …… It is also obvious that accounting records of this nature would be in the possession, custody and power of the Defendant companies. Therefore, the first 2 requirements of an application for specific discovery have been made out by the Plaintiff” (see paras.25-26 of the judgment).
105. It is disingenuous for the Defendant to say that she did not have the financial statements and books and accounts of Riches made up to the respective dates of her List of Documents and her Supplementary List of Documents and/or made up to 31st December 2006. The requested documents include any such documents dealing with financial information within any part of the Period.
106. In the course of her oral submissions before me, Ms Lai took instructions and confirmed that the Defendant had in her possession a summary list of financial transactions of Riches. It is unclear whether such summary list has been discovered or not. If not, such summary list plainly falls within the description of books of account that record income and expenditure.
107. Ms Chan fairly acknowledged that unlike a corporation there was no legal requirement for Riches to prepare audited accounts, but she argued that even if the Audited Accounts were not available, the Defendant ought at least to have in her possession, custody or power the Unaudited Books and Accounts. In my view, there is no really no need to distinguish between audited or unaudited books and accounts for present purpose. It will be sufficiently clear and specific for the Plaintiff to ask for the financial statements as well as the books and accounts of Riches for the Period (“Financial Documents”), which encompass any audited and/or unaudited books and accounts in the Defendant’s possession, custody or power.
108. On the question of “relevance”, I have no hesitation in concluding that the Financial Documents are relevant to the issues in the present proceedings. First, it does not lie in the Defendant’s mouth to deny relevance when through her solicitors she herself requested the Plaintiff to discover similar documents of Sanrich for the Period. In making such request for “discovery” (see paragraph 84 above), the Defendant presumably accepts that such documents satisfy the criterion of being relevant to the issues in the present proceedings.
109. Secondly, I agree with Ms Chan that the Financial Documents are relevant to whether the Plaintiff and/or the Defendant made capital or financial contributions to Riches, how commission income of Riches was received, who paid Riches’ expenses, and whether and if so how such payee(s) received reimbursements, all of which enable inferences to be drawn for the Central Issue.
110. Whilst I agree that the Defendant should not be compelled to discover documents which will not throw any light on the question of partnership or no partnership and which can only be material after the Central Issue has been decided, the Defendant must give all such discovery as bears on that question even if she denies that any partnership exists. In the circumstances, the Defendant should give specific discovery of the Financial Documents.
(c) Local and Overseas Contracts
111. On 30th January 2007, the Plaintiff’s solicitors by letter to the Defendant’s solicitors requested discovery of the Local and Overseas Contracts. Tam’s 1st Affirmation claims that such classes of documents were in the Defendant’s possession, custody or power and highly relevant to the issues in the present proceedings.
112. Tam’s 2nd Affirmation explains that since commencement of business Riches as an employment agency providing local or overseas domestic maids to Hong Kong customers (ie employers of domestic maids)adopted standard form Local and Overseas Terms and Employer Particulars. Tam’s 2nd Affirmation further explains that the Local and Overseas Terms were contracts between Riches and its customers for the hiring of domestic maids, so Riches should have copies of such documents which served as underlying proof of one of its sources of income (ie commission payments from such customers).
113. However, the wide and uncertain description of the Local and Overseas Contracts, which refers to all sets of “employment contracts between Riches’ customers and its …… domestic maids” (my emphasis) including “but not exhaustively” the Local and Overseas Terms and Employer Particulars, has caused some confusion.
114. Lee’s Affirmation assumes that the Plaintiff was seeking discovery of the employment contracts made between the domestic maids and their employers (who were Riches’ customers) (“Employer-Domestic Maid Contracts”) instead of the contracts between Riches and its customers (ie the Local and Overseas Terms). Lee’s Affirmation explains that since Riches would not be a party to (and therefore was not obliged to make copies of) such Employer-Domestic Maid Contracts, the Defendant did not have such contracts in her possession, custody or power.
115. At the hearing of the Summons before me, Ms Chan confirmed that in fact the Plaintiff was only seeking discovery of the Local and Overseas Terms and Employer Particulars, and not the Employer-Domestic Maid Contracts or any other “employment contracts”. However, I consider the Defendant can be forgiven for her misunderstanding in light of the unhappy description of the requested documents (see paragraph 113 above). But upon Ms Chan’s clarification, I do not consider the request for specific discovery of the Local and Overseas Terms and Employer Particulars too wide or too non-specific.
116. Samples of the Local Terms and Employer Particulars have been exhibited to Tam’s 2nd Affirmation to illustrate the Defendant’s possession, custody or power of such documents. The Defendant has not in Lee’s Affirmation specifically denied she has such documents. Indeed, the Defendant by Lee’s Affirmation admits she has in her possession some particulars of employers and employees.
117. But the Defendant refuses to discover the Local and Overseas Terms and Employer Particulars. Ms Lai submitted that the Plaintiff’s request was a fishing expedition irrelevant to the issues in the present proceedings.
118. Bearing in mind the true nature of the issues between the parties summarised above, I agree that the Plaintiff has failed to demonstrate that the Local and Overseas Terms and Employer Particulars are clearly connected to the issues raised in the pleadings.
119. First, such conclusion is self-evident from the nature of the requested documents. The Local and Overseas Terms are dated and signed by local employers of domestic helpers who retained the agency services of Riches. Such documents prescribe the printed standard terms of the agency arrangement as well as the amount and time for payment of the discounted commission fee. The Employer Particulars are again dated and signed by the employers to confirm the accuracy of their personal particulars and household information set out therein.
120. Whilst these documents may arguably have some relevance to the “accounts and inquiries” to be taken after trial (see paragraphs 41 to 48 above), it is difficult to identify any pertinence to the Central Issue and other preliminary factual disputes.
121. Ms Chan submitted that the Local and Overseas Terms and Employer Particulars were relevant to the Central Issue because the Plaintiff (a) averred in her pleadings that Riches’ business and goodwill was built up through her own business reputation and skill/experience in the trade, (b) had in her possession a record of her customer contacts (ie employers of domestic maids) (“Contact Record”) which had yet to be discovered in the Plaintiff’s further and better list of documents to be filed/served pursuant to the directions by the learned Listing Master, (c) wished to cross-reference the Contact Record against the Local and Overseas Terms and Employer Particulars to find out which employers (if any) named in the Local and Overseas Terms and Employer Particulars were her customer contacts, and (d) wished to establish (if possible) from such cross-reference her degree of contribution to the business of Riches.
122. Order 24 rule 7(3) of the RDC requires that an application for specific discovery must be supported by an affidavit stating inter alia the belief that the documents relate to one or more of the matters in question in the cause or matter. Yet none of the matters referred to in (b) to (d) in the above paragraph has been deposed to in Tam’s 1st and 2nd Affirmations. Further, the Contact Record has not been exhibited thereto. Indeed, Ms Chan’s explanation is not even found in her written submissions. This alone is sufficient to dismiss the Plaintiff’s request.
123. But even if one gives consideration to Ms Chan’s explanation, such explanation only serves to reinforce the conclusion that specific discovery of the Local and Overseas Terms and Employer Particulars is unnecessary for disposing fairly of the present proceedings or for saving costs. There is no signature by Riches on such documents, so on their face such documents do not show which person on behalf of Riches dealt with the customers (ie the employers of domestic maids). There is also no dispute that Plaintiff has been in charge of the TW Office, so it should come as no surprise on either party’s case that she has dealt with various customers on behalf of Riches. There is a strong flavour of speculative investigation in the cross-referencing exercise suggested by Ms Chan (see paragraph 121 above). As Chu J said in Annabell Kin Yee Lee’s case (supra), “[it] is not the purpose of discovery to give the plaintiffs an opportunity to hunt around the documents in the hope that they will reveal some improprieties on the defendants’ part or will provide information for them to pursue more enquiries.” I am not persuaded that the requested documents have sufficient evidential materiality to the issues ordinarily expected to be raised in the course of the trial in the present proceedings. In any event, the probative value of such documents will be so slight as not to justify specific discovery.
124. In the circumstances, it is unnecessary to consider Ms Lai’s submissions that (a) the Local and Overseas Terms and Employer Particulars were Riches’ business assets and therefore highly confidential, (b) discovery of such documents in light of the Defendant’s averment that Sanrich was an “unauthorised company” that competed directly against Riches would be tantamount to disclosure of Riches’ trade and commercial secrets to its trade competitor, and (c) there was justifiable fear that Sanrich would use such trade and commercial secrets for its own business purpose, and thereby in practical terms obtain judgment without trial.
125. However, there is by law an implied undertaking by a party who obtains discovery of documents not to use them for any collateral or ulterior purpose and the court has inherent jurisdiction to restrain misuse of the documents or to take precautions against abuse or possible abuse of discovery. Had the requested documents been relevant and the above concerns justifiable, the court has powers in appropriate cases to impose conditions or safeguards as to inspection of documents ordered to be discovered (eg to permit inspection subject to undertakings against misuse/disclosure) (Hong Kong Civil Procedure 2007 (supra) para.24/7/1 at p.459 and para.24/14A/1 at pp.468-469).
126. There is also no need to consider the Defendant’s contentions that the particulars of employers in the Local and Overseas Terms and Employer Particulars were subject to the Personal Date (Privacy) Ordinance Cap.486 and that the Defendant was not authorised by the data subjects (ie the employers named in such documents) to disclose their personal particulars other than for authorised purposes.
127. However, had the requested documents been relevant and the above concerns justifiable, subject to satisfaction of the criteria for exemption from the relevant data protection principle(s), the court has power in appropriate cases to order discovery despite the statutory data protection provisions (see Tse Lai Yin Lily v. Incorporated Owners of Albert House [1999] 1 HKC 386 and Cinepoly Records Company Limited & ors v Hong Kong Broadband Network Limited & ors [2006] 1 HKLRD 255).
VI. Conclusion
128. In the circumstances, I grant an order that the Defendant do within 7 days from the date hereof file an affidavit stating whether the Financial Documents referred to in paragraph 107 above (ie the financial statements as well as books and accounts of Riches in respect of the Period) and which of them are or is or have or has at any time been in her possession, custody or power, and if the same or any of them, having at any time been, be not now in her possession, custody or power, stating when she parted therewith and what has become thereof.
129. As regards costs of the Summons, the Plaintiff was only partially successful in her application. Although no order has been made in respect of the Tax Returns, the Defendant only conceded that further discovery would be made in her further and better list of documents at the hearing of the Summons before me. At the same time, I have refused the request for specific discovery of the Local and Overseas Contracts, so the Defendant’s resistance was therefore reasonable. In the circumstances, I consider that a fair order on costs would be for each party to bear her own costs of the Summons (including all costs reserved if any). I make a costs order nisi to such effect.
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(Marlene Ng)
District Court Judge |
Representation:
Ms Sheena Chan instructed by Messrs Gary K W Tam & Co for the Plaintiff.
Ms Ody Lai instructed by Messrs Shea and Company for the Defendant.
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