PAI CHIN MING v. LUO XIAO AND OTHERS

HCA 2693/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2693 OF 2006

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D E C I S I O N

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Application

1. This is an application for specific discovery under Order 24 rule 7 of the Rules of the High Court (“RHC”).

Background

2. Briefly, the Plaintiff commenced the present derivative action against the 1st and 2nd Defendants for, among others, payment of $1.98m, damages and account of profits arising from breach of fiduciary duties.  It was said that the 1st Defendant had sold a company property (“On Ping Property”) to the 2nd Defendant without receiving the purchase price of the said sum of $1.98m.  Further, the 1st Defendant also failed to take steps to protect the interest of the 3rd Defendant in the “Purported 2000 Agreement” and High Court action HCA 654/2006 causing it to suffer loss and damages.

3. The 1st and 2nd Defendants defended the claims.  Parties are at the stage of discovery.

4. On 8 January 2008, the Plaintiff issued a summons for specific discovery against the 1st and 2nd Defendants.  By consent, they agreed to file an affidavit to deal with the same.  Then, by the 4th affirmation of the 1st Defendant filed on 8 March 2008, the 1st Defendant agreed to disclose some documents but deposed that he did not have:

(a)   bank statements and copy cheques showing payment of the purchase price of the On Ping Property, and

(b)   documents relating to the Purported 2000 Agreement and HCA 654/2006.

5. The Plaintiff was not satisfied with such denial.  He further issued the present summons for specific discovery asking for similar documents again.  Ms. Yen, the solicitor acting for the Plaintiff, filed an affidavit to support the application.  Solicitors acting for the 1st and 2nd Defendants made known to the Court that they did not need to file any opposing affidavit.  Apparently, it was their case that, as contained in the 4th Affirmation of the 1st Defendant that they did not have and had never had possession custody or power of those documents.

6. Parties appeared before me on 22 May 2005.  Mr. Wong, solicitor for the 1st and 2nd Defendants conceded the discovery on some items of Ms. Yen’s application but continued to dispute the remaining.  Having heard from them, I adjourned my decision to be handed down.  I now do so.

Ruling

7. Upon consideration of the evidence authorities and submissions, apart from the concession made by Mr. Wong, I have decided to dismiss the application of Ms. Yen.  My reasons appear in below.

The Law

8. To start with, the parties did not have much dispute on the applicable law.  Relevant principles can be located in the HKCP 2008 at page 472-474.  If suffices for our present purpose to recap that:

(a)   3 prerequisites are to be established to give jurisdiction to this Court, namely:

(i)  the documents exist,

(ii)    they are relevant to the issues in the action, and

(iii)  they are also within possession, custody and power of the other party.

(b)   Once the 3 conditions are satisfied, this Court then has the discretion whether or not to order disclosure.  Usually, discovery will be ordered if it is necessary either for disposing fairly of the cause or matter, or for saving costs.

9. Applying the above principles to the discovery regarding payment of the On Ping Property, Ms. Yen fails this Court in a number of aspects.

(a)   On balance, upon the evidence before me, I take the view that there are no bank statements/cheque copies showing the payment of the price of $1.78m at all.

(b)   Further or alternatively, by perusing the Defence of the 1st and 2nd Defendants, they pleaded acknowledgements of receipt, but not payment.  Hence, strictly speaking, the documents sought are not relevant.

(c)   Having said that the documents did not exist at all, I will accept on balance the evidence of the 1st and 2nd Defendants that they have and have never had in possession custody or power of them.

(d)   In the circumstances, I do not even have the jurisdiction to order the discovery at all, not to mention exercise of my discretion.

10. As to documents under the Purported 2000 Agreement and HCA 654/2006, existence and relevancy were not disputed.  However, Ms. Yen was still unable to satisfy me with the 3rd prerequisite.

(a)   The 1st Defendant affirmed on 7 March 2008 that both he and the 2nd Defendant did not then have or had never had in possession custody or power of the documents.

(b)   By the 3rd Affidavit of Ms. Yen filed on 27 March 2008, she deposed that:

“22. … It seems that the 1st Defendant or his solicitors did not make any effort or step to obtain copies of the above documents from Messrs. Tony Kan & Co.  As a director of both the 3rd Defendant and China Main Investment (HK) Co. Ltd., the 1st Defendant is under a duty to obtain copies of the above documents in order to inform the Court the nature of 654 Action.  We took the view that the 1st Defendant did not properly and reasonably discharge his duty to make disclosure of relevant documents related to 654 Action.”

(c)   However, as pointed out by Mr. Wong, the 1st and 2nd Defendants are under no obligation to assist the Plaintiff.

“There is no jurisdiction to make an order against a party to use all reasonable means to obtain possession of documents so that an order for the discovery of those documents, which at the time was not possible, might then be made, see (Dubai Ltd v. Galadari (No. 6), The Times, October 14, 1992, CA).”

(HKCP 2008, at page 449)

(d)   By refusing Ms. Yen’s request, I do not mean that a bare denial by the defendant towards a request of document is a complete answer.  This Court can take the matter further if he is satisfied that the denial is nothing more than a blatant lie.  However each case has to be decided on its own.  Upon the evidence before me, I can only be satisfied of the directorship of the 1st Defendant in China Main Investment (HK) Co. Ltd., but not clear involvement by him in the matter so that he has or has not in possession of the documents sought.

(e)   Probably, the Plaintiff needs to resort to other means to see how the documents could be obtained and disclosed.

Conclusion

11. I will allow paragraph 1 of Ms. Yen’s application to the extent of items 1, 2 and 5 of the schedule thereof.  As to the remaining items, they are dismissed.  There will also be an order nisi that the costs of the applications, including costs reserved on 27 April 2008 and hearing on 22 May 2008 be the costs of the 1st and 2nd Defendants in the cause.