Cheung Ting Kau, Vincent v. Koo Siu Ying and Another

HCAP 4/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO 4 OF 2011

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BETWEEN

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D E C I S I O N
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Introduction

1.There are three applications for the discovery of documents (all taken out by the defendants):

(a) (two of the said applications) specific discovery of documents against the plaintiff;

(b) discovery of documents against non-parties.

2.To understand how the said applications came to be made, a few words need to be spent on the background leading to them (and to this probate action).

Background

3.The plaintiff commenced this action in February 2011 (claiming to be the executor of a will dated 3 December 2004 of the late Mr Lim (“the dec’d” and “the 2004 will”)) against the defendants, respectively the dec’d’s concubine and daughter, who have earlier entered caveats against the 2004 will.  He seeks the 2004 will to be pronounced in solemn form.

4.The defendants deny the claim on the following grounds:

(1) the dec’d lacked testamentary capacity at the time of the 2004 will;

(2) the dec’d was acting under the undue influence of his other concubine (“Mdm U”) and his son (“Peter Lam”);

(3) the dec’d did not know or approve of the contents of the 2004 will (he having in late 2003 expressed a wish inconsistent with the 2004 will);

(4) the dec’d’s signature on the 2004 will was different from his other signatures;

(5) the righteousness of the 2004 will is not admitted by reason of the above matters.

Further, the defendants counterclaim based on a Chinese will dated 2 February 1973, a Chinese codicil dated 20 January 1974 and/or an English will dated 23 September 1967.

5.Among the matters averred to in the defence pleading are:

(a) (as has in effect been so stated in the 2004 will) a gift of  the dec’d’s “A” shares in a Wisdoman Ltd (“Wisdoman”) to Peter Lam;

(b) (as has in effect been so stated in the 2004 will) a gift of the dec’d’s Wisdoman “B” shares to Mdm U;

(c) Wisdoman was the owner of about 484 million shares in Lai Sun Garment (International) Ltd (“Lai Sun”), a company publicly listed in Hong Kong;

(d) inconsistent with the said testamentary gifts:

(1) on 8 December 2004 (a few days after the 2004 will) the dec’d purportedly transferred all his interest in Lai Sun to Wisdoman;

(2) on 14 December 2004 the dec’d purportedly transferred all of his Wisdoman shares to Mdm U and Peter Lam.

6.Further to the said averments (and related thereto), in an affidavit filed in support of the defendants’ applications, it was deposed that:

(1) on 6 December 2004, the Securities and Futures Commission (“SFC”) granted a waiver to Peter Lam, Mdm U and Wisdoman from having to make a general offer for the shares of Lai Sun (as a result of the transfers summarized in para 5(d) above) (“the SFC waiver”);

(2) in an announcement dated 16 December 2004, Lai Sun stated that the transfers of the Wisdoman shares were purely a family arrangement between the dec’d and his family members (“the said family arrangement”).

7.In another affidavit filed in support of the defendants’ applications, it was deposed that the plaintiff, a practising solicitor, prepared attendance notes concerning the events of 3 December 2004 (when the 2004 will was executed) (“the plaintiff’s attendance notes”), but the plaintiff’s attendance notes had been lost.

The Specific Discovery Applications

8.The specific discovery applications against the plaintiff concern the following documents:

(a) those relating to the application for, and granting of, the SFC waiver;

(b) those relating to the transfers summarized in para 5(d) above;

(c) those relating to the said family arrangement;

(d) the plaintiff’s attendance notes.

(the documents set out in sub-para (a) to (c) are collectively called “the ‘transfer’ documents” below)

9.The relevant legal principles are settled; in short, the documents sought by the applicant:

(1) must exist;

(2) are or have been in the respondent’s possession, custody or power;

(3) relate to the matters in issue in the action; that is, they are relevant to the same;

(4) are necessary to dispose fairly of the matter or to save costs.

10.The application relating to the plaintiff’s attendance notes can be dealt with briefly.  The plaintiff has deposed that the same had earlier been lost. The application therefore does not satisfy para 9(1) above.

11.I turn now to deal with the “transfer” documents.

12.It cannot be disputed the “transfer” documents must exist (the said family arrangement will be discussed further in para 19 to 20 below).  The transfers of shares (publicly-listed shares in one instance) of such substantial value (in terms of tens of millions of dollars) are highly likely to be documented (even more so when one of the transfers involved a regulatory body).  That Lai Sun appears to be a fairly sizeable publicly-listed company (para 20(c) below) is also important here.

13.The plaintiff also accepts he has possession of at least some of the “transfer” documents.  As regards the others of the “transfer” documents, the plaintiff has not denied that they exist, or are within his possession, custody or power (see also para 20 and 26 below). 

14.The defendants argue that the “transfer” documents are relevant to this action (in the discovery of document sense):

(a) the testamentary capacity of, and undue influence of Mdm U and Peter Lam over, the dec’d are two of the main issues, and will be hotly disputed;

(b) the time proximity, and the “overlapped” subject-matter, between the 2004 will and the transfers summarized in para 5(d) above reasonably gives rise to a need for investigating the underlying background;

(c) some of the “transfer” documents may bear the dec’d’s signature, and can be made use of for handwriting comparison.

15.Further, the defendants contend that the requested documents may shed light on, for example, who initiated the transfers summarized in para 5(d) above, and the involvement (or lack of involvement) of the concerned individuals in the process leading to the actual transfers.  These matters are relevant to the issues set out in para 4(1) and (2) and 14(a) to (c) above.

16.The plaintiff opposes this application on the grounds of lack of relevance and necessity.  However, his skeleton submissions have not set out separate reasons in support of the alleged lack of necessity (in addition to those in support of the alleged lack of relevance). 

17.In relation to the lack of relevance, the plaintiff submits:

(1) a mere possibility that the “transfer” documents bear the dec’d’s signature is inadequate;

(2) even if there be such documents, they have not been properly identified in the related summons;

(3) the time proximity between the 2004 will and the transfers summarized in para 5(d) above is irrelevant because, first, this factual phenomenon is undisputed, and secondly, the defendants have already been able to advance a case based on this.

18.The objections summarized in para 17(1) and (2) above concern para 14(c) above, but not the other matters in para 14 above.  As regards para 17(3) above, I agree with the defendants that “relevance” as defined in The Compagnie Financiere Et Commerciale Du Pacifique v The Peruvian Guano Company (1882) 11 QB 55, 63, only requires:

“… 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 … ”.

In conclusion, by reason of the matters set out in para 14 (especially para 14(a) and (b)) and 15 above, I am satisfied that relevance of the “transfer” document has been established (for the same reason, necessity has also been established). 

19.In relation to the said family arrangement, the plaintiff also argues that the defendants have not discharged the burden of showing a prima facie case the related documents must exist, and are, or have been, in the plaintiff’s possession, custody or power.

20.It cannot be validly disputed that the burden can be discharged by primary, as well as secondary, facts.  In this application, the burden has been discharged by drawing an inference of the “transfer” documents’ existence based on the following undisputed circumstances:

(a) as stated above, the share transfers involved properties of quite substantial value;

(b) the SFC waiver shows that at least one regulatory body has been involved in, and has examined, the share transfers;

(c) Lai Sun appears to be a fairly sizeable publicly-listed company.  There are documents which show that its board of directors (which reportedly has been notified of the said family arrangement) consisted of more than a few individuals.

Further to sub-para (a) to (c) above, the affirmation filed on behalf of Mdm U and Peter Lam has used careful language in relation to documents relating to the said family arrangement (instead of simply and directly denying that any such documents exist):

“… the term [the said family arrangement] was used to explain the nature of the arrangement … rather than a reference to any document called ‘family arrangement’ or a deed of family arrangement”;

“… the Defendants are unable to show that the Plaintiff has such documents in his possession, custody and power”

(para 26 and 27, Kaung affirmation dated 6 July 2015).

Similar to that noted in para 13 above, the plaintiff himself has not denied having possession, custody or power of the documents relating to the said family arrangement.

The Non-party Disclosure

21.The documents sought are the same as those set out in para 8(a) to (c) above; namely, the “transfer” documents.

22.The respondents to this application are Mdm U, Peter Lam, Lai Sun, Wisdoman and the SFC.  The defendants and the SFC have been able to reach agreement about the part of this application concerning the SFC.  Only the part of this application concerning the other 4 respondents (collectively “the opposing parties”) is discussed below.

23.The plaintiff’s objections summarized in para 12 and 16 above have in effect been repeated by the opposing parties (see also para 25 to 27 below).

24.In addition, the opposing parties:

(1) emphasis that this is a non-party disclosure of documents, and relies on the related legal principles (s 42(1), High Court Ordinance (Cap 4); RHC Ord 24 r 7A(2) and (3));

(2) contend that the requested documents have not been identified with sufficient particularity, which renders this application oppressive,

as additional grounds of objection (respectively “the non-party ground” and “oppression ground”).

25.Because the following grounds of the opposing parties’ objection have in effect been discussed in some of the earlier paragraphs above, they will not be repeated; in short:

(a) there is insufficient evidence the requested documents exist (see para 12 and 19 to 20 above);

(b) there is insufficient evidence the requested documents are, and/or have been, in their possession, custody or power (see para 13 and 20 above (see also para 26 below));

(c) the requested documents are not relevant (see para 14 to 15 and 17 to 18 above);

(d) the requested documents are not necessary (see para 14 to 15 and 17 to 18 above).

26.In addition, in relation to para 25(a) and (b) above, as the court has observed in relation to the non-party in Tullett Prebon (Hong Kong) Limited v Chan Yeung Fong Nick and Others HCA 2197/2009 (9 June 2011) (para 89 thereof), the opposing parties do not expressly deny that the requested documents exist, or are within their possession, custody or power.

27.Ord 24 r 7A(6)(b) imposes a requirement in addition to the grounds prayed in aid by the plaintiff in the specific discovery application (para 25 above).  The relevant parts of that provision are:

“No person shall be compelled by virtue of such an order to produce any documents which he could not be compelled to produce … if he had been served with a writ of subpoena duces tecum to produce the documents at the trial”.

Despite the above “requirement”, the court in the Tullett Prebon decision held in essence that the Peruvian Guano test is nonetheless still applicable, and in that sense does not constitute an additional ingredient (para 74 and 76 thereof).  This seems to have been accepted by the opposing parties (albeit with qualifications) (para 8, opposing parties’ skeleton submissions).

28.In relation to the non-party ground, the opposing parties submit:

(1) s 42, Cap 4 only empowers the court to order a non-party to disclose and produce the requested documents, but not to compel the non-party to state on oath the whereabouts of those documents;

(2) the requested documents must be sufficiently identified.  Even though the Peruvian Guano test is applicable, it is improper to request for a class of documents, some members of which are relevant but the others may not be.

(para 28(1) above will be dealt with in the latter part of this decision)

29.The submission at para 28(2) above is similar to that raised by the non-party in the Tullett Prebon decision.  Suffice it to say, even without regard to authorities, there appears no justification for a total prohibition for a non-party disclosure application to seek a class of documents (the Tullett Prebon decision came to the same conclusion having reviewed the authorities: para 79, 82 and 83 thereof).

30.What is important in this regard is:

“In determining relevance of a document in a class of documents, each document must be read in the context as a member of the class of documents and not just in isolation. A document considered as irrelevant when viewed individually may nevertheless be regarded as relevant if viewed as a member of the class of documents. So long as each document thus read, individually or as a member of the class, meet the Peruvian Guano test, then it is immaterial that some of the documents in the event do not support the case of the [applicant] or adversely affect the case of his opponent” (the Tullett Prebon decision, para 83).

31.Finally, in relation to discretion, the factors which the court will have to take into account include those set out in SMSE v KL (No 2) HCMC 2/2006 (9 April 2009), para 63 (quoted in the Tullett Prebon decision (para 85 thereof)):

(a) the importance of the information to the issues in the main proceedings;

(b) whether appropriate steps to obtain the information within the proceedings have been taken before the non-party disclosure application was made;

(c) whether adverse inference can be drawn from the failure of the party within the proceedings to supply the information;

(d) the nature of the relationship, if any, between the parties to the main proceedings and the non-party respondent;

(e) whether the editing of documents is necessary or appropriate to protect private information if non-party disclosure is ordered.

Having included these further matters in my consideration, I conclude that the discretion should be exercised in the defendants’ favour. The reasons appear below.

32.Despite this application seeks three classes of documents (that is, the “transfer” documents (para 8(a) to (c) above)), they have been sufficiently identified:

(1) all three classes of document effectively refer to the same share transfer transaction (para 5(d) and 6(1) above);

(2) the concerned events were about a discrete transaction (para 5(d) above; see also the Tullett Prebon decision, para 92 to 93);

(3) those events took place within a relatively short time span (probably beginning from sometime around the time of the 2004 will (the date of which was 3 December 2004) to the end of 2004 (the SFC waiver was dated 6 December 2004 whereas the Lai Sun announcement was dated 16 December 2004));

(4) because the share transfers (and the related SFC waiver and Lai Sun announcement) do not appear to be opposed at the time, the number of concerned documents should not be so burdensome as to constitute oppression.

33.Relevance of the “transfer” documents has already been discussed (para 25(c) above).  Similar to the court’s observation in the Tullett Prebon decision (para 93 thereof), the issues raised in this action also revolve within a narrow compass.  Bearing these in mind, there is no substance in the oppression ground.

34.In relation to the matter set out in para 31(a) above (importance of the requested information), the “transfer” documents may shed light on the individual(s) who instigated and/or controlled and/or dominated the share transfers (and the related SFC waiver and Lai Sun announcement).  Any such information is highly important to the issues raised by the pleadings (para 4(1) to 4(3) above).

35.In relation to the matter set out in para 31(b) above (discovery within the proceedings), it is true the defendants have not sought the “transfer” documents from the plaintiff beforehand.  But, similar to the Tullett Prebon decision (para 91 thereof), because of the circumstances discussed below, this matter should not be given as heavy weight as those circumstances.

36.In relation to the matter set out in para 31(c) above (supply of information within the proceedings), the plaintiff has adopted a more active approach in his opposition to discovery than that commonly adopted by someone in his position in other legal proceedings.  Besides the plaintiff’s attendance notes (where he adduced a positive case of the document having been lost), the plaintiff has in effect put the defendants to strict proof on practically all points in the specific discovery application.

37.It is true the opposing parties have not been sued (hence the need for a non-party disclosure application) (para 31(d) above (relationship of parties)).  But, as the defendants correctly point out, this does not mean the opposing parties have no interest in the outcome of this action.  On the contrary, as beneficiaries named in the 2004 will, the opposing parties’ financial interests will obviously be affected by the outcome of this action (it is quite conceivably they do not wish the defendants to succeed (which will mean the 2004 will becoming invalid)).  To this extent, this is similar to what was concluded in the Tullett Prebon decision (para 91 thereof).

38.The defendants also rely on the following passages in Tristram and Coote’s Probate Practice (2015) 31^st Ed:

“The traditional approach to disclosure in probate claims is that the court exercises a wider latitude in ordering disclosure in these claims than is exercised in other proceedings. This is because of the peculiar nature of the enquiry in probate claims. This approach, whilst still valid in principle, must now be regarded as subject to the overriding objective and to the court’s responsibility to manage cases and costs in a way that is proportionate to the amount of money involved” (para 36.09 thereof).

By reason of the matters set out above, I consider ordering the disclosure is consistent with the underlying objectives of the Rules of the High Court (Cap 4A), taking into account (among other things) the value of the dec’d’s estate (see para 12 above) and the likely quantity of the requested documents (see para 32 above).

39.Nothing has been raised regarding para 31(e) above (editing disclosed documents).  I do not find anything of importance either.

40.The opposing parties also argue that there may be “overlaps” of the “transfer” documents in that (i) one or more of the respondents (including the SFC) may have possession, custody or power of the same, and/or (ii) one or more of the same may cover one or more of the categories set out in the schedule to the summons.  The opposing parties have adduced no evidence concerning the details of these possible “overlaps”, nor have they argued that they would make the disclosure oppressive.  On the contrary, the “overlaps” would tend to reduce the quantity of the documents which need to be disclosed.  To permit the opposing parties to argue that, because of the possible “overlaps”, the defendants have failed to show the disclosure is necessary vis-à-vis each of them, would tend to make the non-party disclosure provisions unduly ineffective (an applicant who seeks non-party disclosure usually has no precise (or detailed) information as to which of a number of non-party is likely to have (or have had) the requested documents).

41.The summons seeks in gist:

(a) the opposing parties to each file an affidavit stating whether they have (or have had) possession, custody or power the requested documents;

(b) the opposing parties to produce the “transfer” documents for inspection and permit copies to be taken.

As the opposing parties correctly point out, s 42(1), Cap 4 only empowers the court to order a non-party to disclose and produce the requested documents (para 28(1) above).  For this reason, as between the defendants and the opposing parties, no order will be made as regards the relief summarized in sub-para (a) above.

42.Among the documents set out in the schedule to the summons, the documents “with … any other person” are also requested.  The defendants sensibly accept that those words should be deleted (on the ground the phrase may make the extent of the disclosure ambiguous and thus oppressive).

Conclusion

43.In relation to the specific discovery applications between the plaintiff and the defendants:

(1) an order will be made in terms of the application relating to the documents concerning the share transfers, the SFC waiver and the said family arrangement (subject to the same deletion mentioned in para 42 above);

(2) the application relating to the plaintiff’s attendance notes is dismissed.

44.In relation to the non-party disclosure application, an order will be made in terms of the summons subject to para 41 to 42 above.

Other Matters

45.The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the decision and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Costs Order Nisi

46.The costs of the specific discovery applications against the plaintiff are to be paid by the defendants to the plaintiff, to be taxed if not agreed.

47.Similarly, the costs of the non-party disclosure application are to be paid by the defendants to the respective respondents, to be taxed if not agreed. 

Mr Wilson Leung, instructed by Reed Smith Richards Butler, for the plaintiff

Mr Jose Maurellet, instructed by Stephenson Harwood, for the 1^st and 2^nd defendants

Mr Michael Yin, instructed by Woo, Kwan Lee & Lo, for Mr Lam Kin Ngok, Peter, Madam U Po Chu, Lai Sun Garment (International) Limited and Wisdoman Limited

Attendance of the Securities and Futures Commission, unrepresented, was excused