MAN WON CO. LTD. AND ANOTHER v. TAY VI BING AND OTHERS

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HEADNOTE

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Where a plaintiff has an arguable case of misappropriation of its property by a number of defendants acting in concert, documents pertaining to those defendants' finances, such as their bank statements over a material period, are relevant for the purpose of discovery if and in so far as it is reasonable to suppose that such documents might show, or lead to the piecing together of, a pattern of dealings between such defendants which might shed useful light on the correctness or otherwise of the allegation of misappropriation in concert made against them by the plaintiff.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff company's main complaint is of loss arising out of its having been caused - by the defendants, who are former directors of its and alleged nominees of theirs - to purchase properties at prices grossly inflated by the interposition of bogus intermediaries and to pay bogus commissions on such purchases.

2. This is an application by the plaintiff for discovery of documents under Order 24, rule 7. The application is bitterly opposed, particularly by the 1st and 5th defendants. The plaintiffs' whole approach is challenged; and a point of some importance has emerged for resolution. As the application now stands, the order for discovery sought is in these terms : each defendant do within 14 days from the date of the order make and file an affidavit or affirmation stating whether the documents referred to and specified in the schedule are or have at any time been in his, her or its possession, custody or power; and if the said documents or any of them are not within his, her or its possession, custody or power, stating when they parted with them and what has become of them. The documents referred to and specified in the schedule are all his, her or its bank statements for the period September 26, 1985, to April 30, 1986.

3. Reliance is placed by the plaintiffs on Brett, L.J.'s classic statement in Compagnie Financiere du Pacifique v. Peruvian Guano Co. [1882] 11 QB 55 at 63, where the learned Lord Justice said this:-

"It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon 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 the 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 inquiry, which may have either of these two consequences ..."

4. The allegations made against them are denied by the defendants. What, if anything, there is in those allegations will be determined when this matter comes on for trial on January 28, 1992, with another 27 days set aside. The relevance of the documents sought is challenged by the defendants. Hence, the discussion by reference to Brett, L.J.'s statement.

5. My attention has been drawn to what was said by Walton J. in George Ballantine & Son v. F E R Dixon & Son [1974] 2 All ER 503. After considering Kennedy v. Dodson [1895] 1 Ch 334, Walton, J. continued thus at p.509 f to g:-

"From that case I think one extracts the two principles: (i) that discovery which relates solely to credit is not allowed; and (ii) that discovery is confined to matters which are in question in the action.

 

Of course, I entirely accept in relation to (ii) what was said by Brett LJ in Compagnie Financiere du Pacifique v Peruvian Guano Co as to this extending to any document containing information which might - not which must - enable the party requiring the discovery either to advance his own case or to damage the case of his adversary.

 

It appears to me, however, that if the present application for discovery is not a pure fishing expedition - as was asserted by counsel for the defendants but denied by counsel for the plaintiffs - then it is really one which is directed exclusively to credit, since it is simply and solely directed towards putting the plaintiffs in a position to say: 'You did a wicked act in Ecuador (or wherever), ergo you are a person who would do a dirty deed in the five countries with which the action is specifically concerned.' In other words, give a dog a bad name and hang him."

6. It seems to me that what Walton, J. said there only goes to illustrate the wide, albeit not unlimited, ambit of Brett, L.J.'s formulation.

7. The present case is not one in which the plaintiffs are fishing. They are not trying to unearth other breaches of the fiduciary duty owed to them to allege against the defendants. Nor are they trying to obtain material to show that the defendants have done to others what they say the defendants have done to them.

8. At one stage, I was inclined to wonder whether the plaintiffs' stance was in effect that where you have some sustainable allegation of misappropriation against someone, it is right that he should be required to, as it were, turn out his pockets. But whether or not there is anything in that approach, I am now satisfied that it is not in fact the plaintiffs' approach here. The plaintiffs have an arguable case of misappropriation of their property by a number of persons acting in concert. And in my view it is reasonable to suppose that the discovery sought by the plaintiffs might show, or lead to the piecing together of, a pattern of dealings between the defendants which might shed a flood of light on the issue of whether or not they are guilty of the misappropriation in concert alleged against them.

9. I do not have to decide whether, as a matter of general approach, it is legitimate to require a defendant who is faced with an arguable case of dishonesty against him to turn out his pockets. Here, there is something special. It is legitimate and reasonable to look for the pattern to which I have referred. The documents might show such a pattern. And that brings them within the ambit of Brett L.J.'s formulation. The principle may be stated thus. Where a plaintiff has an arguable case of misappropriation of its property by a number of defendants acting in concert, documents pertaining to those defendants' finances, such as their bank statements over a material period, are relevant for the purpose of discovery if and in so far as it is reasonable to suppose that such documents might show, or lead to the piecing together of, a pattern of dealings between such defendants which might shed useful light on the correctness or otherwise of the allegations of misappropriation in concert made against them by the plaintiff.

10. One must of course be very careful in regard to ordering discovery since discovery can sometimes be very oppressive. On the other hand, the court is not lightly to deprive itself of every legitimate means to hand in discharging its duty to decide whether or not the serious allegations which it is investigating are true. All things considered, it seems to me that the discovery which the plaintiffs seek is discovery to which they are entitled. They are not fishing. The documents are relevant in the way which 1 have indicated. No oppression would arise by ordering discovery of the same. The defendants would be inconvenienced. But inconvenience alone falls short of oppression. I make an order for the discovery sought accordingly.

11. Before parting with the case I would like to say this : the application comes very late; and that is a great pity. Discovery is meant to come at an early stage of the action. After all, discovery as permitted by the rules is not only of documents but also of facts - in other word, interrogatories. Interrogatories can sometimes usefully augment discovery of documents. The present case might have been such an instance. But there may now be insufficient time even to consider such a course. It would have been far better if the discovery of documents now to be made had been made a long time ago. Be that as it may, it is, I think, a case of better late than never.

12. As far as I am aware, it remains only to thank counsel for their assistance, and to hear them on costs and on any other ancillary matters which may arise.

[Submissions on Costs]

13. As far as the costs of and incidental to this application are concerned, it seems to me that, in all the circumstances, the right course is to order that such costs be the plaintiff's costs in the cause; and that is what I order.