OKISHI LTD v. IVI DIGITAL COMPANY LTD AND OTHERS

HCA 798/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 798 OF 2010

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D E C I S I O N

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1.  Applications were taken out by all 4 defendants on 8 May 2014 (“the defendants’ Summons”) for an order to vary or withdraw the interrogatories of the plaintiff dated 24 April 2014.

I.Background

2.  This case concerned an alleged breach of Sourcing Agreement between the plaintiff and the 1^st defendant.  The 2^nd and 3^rd defendants are directors of the 1^st defendant and the 4^th defendant is a large listed company in China. The plaintiff claims that it is not clear at this stage whether the 4^th Defendant, or one of its subsidiaries, has been the ultimate manufacturer of the goods alleged to be sourced under the agreement.

3.  Under the Sourcing Agreement, it was agreed that the plaintiff should received a commission for introducing customers to the 1^st defendant.

4.  In summary :-

a. The plaintiff’s case is that it has introduced a customer which has placed a large order.  It is now suing for commission due, and that the defendants’ various “arrangements” subsequent to the introduction were, in effect, a “sham” to avoid paying commission.

b. The defendants’ case is that the customer found the 1^st defendant “unsatisfactory” and instead placed the order with a subsidiary of the 4^th defendant, and that the customer already had previous dealings with another subsidiary of the 4^th defendant already, so there was no need to pay the “introduction” or “sourcing” commission.

5.  On 24 April 2014, the plaintiff served a list of 36 interrogatories without order on the defendants. The defendants opposed these in the current application.

6.  At this stage, discovery has been completed but witness statements have not been exchanged.

II. Matters in dispute

7.  Interrogatories (1) sought information on the names, place of incorporation and registered office of a list of company names which the plaintiff obtained from various documents discovered from the customer company and other sources.

8.  The plaintiff claimed that this was to identify the company which was the ultimate supplier/manufacturer: the 1^st defendant initially identified the 4^th defendant in its Defence, but subsequently amended the Defence and stated that it was one of the subsidiaries of the 4^th defendant as the “supplier” company, and that the customer had previous dealings with another of the subsidiaries of the 4^th defendant etc.

9.  There was also some confusion over the exact names of these companies in English as they appeared on various documents.

10.  Mr Nip, Counsel for the plaintiff, explained that there was an “inconsistent and evolving” defence and the aim of this interrogatory was to identify the real “supplier” company and so save time and costs.

11.  The defendants’ counsels suggested that the confusion might lie with the fact that companies registered in the PRC might not have a registered name in English.  So, as I understand, some “unofficial” names in English might appear in documents.

12.  I can see how such confusion could arise and my view is that the parties should identify the companies in court documents with their names in Chinese.

13.  As for the alleged “evolving” defence, I think that the identities of the “supplier” company and other companies involved now appear clear.  I also understand there might be an application to add this “supplier” company as a party in the near future.  The defence to be filed and served by this company, I would expect, should further clarify the situation.

14.  As such, I see no necessity, at this stage, to seek further clarification of the identities of various companies.  Further, I do not see how information on the names, place of incorporation and registered office of companies as identified merely by entries in English of their “unofficial” names on a third party’s documents would help identify which company was the supplier.

15.  I would not go into each one of the rest of the interrogatories. In summary, these are questions seeking information and evidence to test the defence of the defendants: the role of the 2^nd and 3^rd defendants in the introduction of the customer, the alleged previous dealing of the customer with the subsidiary company (and whether the 2^nd and 3^rd defendants were involved), the circumstances that the customer found the 1^st defendant “unsatisfactory”, previous dealings with the 1^st defendant and the 4^th defendant, the corporate structure of the 4^th defendant etc.

16.  The legal principles for interrogatories are well established: Order 26 rule of the Rules of High Court provides that:

“A party to any cause or matter may … serve on any party interrogatories relating to any matter in question between the applicant and that other party in the cause or matter which are necessary either-

(a) For disposing fairly of the cause of matter; or

(b) For saving costs”

17.  This is clearly a test requiring “necessity” (Kao Lee & Yip (a firm) v Donald, HCA 8847/1993).  The purpose of interrogatories is not for “enabling a party to indulge in some sort deposition-taking exercise or to enable him to have a “dry run” in cross examination against the other side prior to trial.”

18.  The interrogatories raised by the plaintiff are in effect testing the defence by way of “dry run” cross-examination.

19.  Clearly, it is for the defendants to provide evidence to support their defence.  The plaintiff can test such evidence by way of cross-examination during trial. It is therefore premature and inappropriate for the plaintiff to attempt to do so now, especially when witness statements have not been exchanged, thus the extent of the defendants’ evidence has not been established (Det Danske Hedeselskabet v KDM International plc [1994] 2 Lloyds 534).

20.  This is clearly a correct legal principle: every allegation can be subject to all manners of cross-examination at trial so there will be no end to interrogatories in every case if these are used as a way to cross-examine or test each other’s case prior to trial.  The test for “necessity” is even more important in view of the CJR.

21.  I can envisage how in this case interrogatories may have been appropriate if the situations arise, for example, that the defendants’ allegations are themselves in obvious conflict, or that such allegations are in obvious conflict with the defendants’ own evidence, or that there appears to be illogical or untenable gaps in the pleadings or evidence etc.  In such situations, interrogatories raised would be necessary for disposing fairly of the cause of matter and, indeed, saving costs because, hopefully, it should help the defendants to abandon obviously indefensible positions.  I do not see such a situation in the current case. Instead, in interrogatories (2) to (36), the plaintiff is simply conducting a “fishing exercise” trying to probe for holes in the defence.

22.  It is also inappropriate for the plaintiff to seek discovery of supporting documents by way of interrogatories (e.g. interrogatories (7), (10), (13), (22) and (32)) (Lee Nui Foon v Ocean Park Corporation (No. 2) [1995] 2 HKC 395).

23.  Mr Nip has submitted several cases which showed that it is not an inflexible rule that interrogatories must be made after exchange of witness statements.  I agree: each case should turn on its own facts.  But, for this case, I find that interrogatories at this stage are unnecessary, premature or inappropriate as explained above.

24.  I will therefore give the following orders: -

(i) The plaintiff’s Interrogatories without Order dated 24 April 2014 served on the 1^st, 2^nd, 3^rd and 4^th defendants be withdrawn.

(ii) There be an order nisi for costs of and occasioned by the defendants’ Summons be to the 1^st, 2^nd, 3^rd and 4^th defendants to be summarily assessed (with certificates for counsels) if not agreed: -

a. If no application is made to vary the costs order within 28 days of this order, the 1^st, 2^nd, 3^rd and 4^th defendants shall submit and serve their respective summary statement of costs within 14 days thereafter; and

b. The plaintiff shall submit and serve a summary list of objections within 14 days thereafter for summary assessment of costs.