Tse Chun Wai v. Leung Kwok Kin Joseph t/a Joseph Leung & Associates

HCA 1981/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1981 of 2013

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D E C I S I O N

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1.This is the defendant’s appeal from an order of Master Chow dated 20 April 2016 (“the 2016 order”) ordering the defendant, inter alia, to make and serve on the plaintiff a further and better list of documents. Atthe conclusion of the hearing the decision was reserved which I now give.

Background facts

2.This action culminating in the 2016 order has a protracted procedural history which in outline is as follows:

(a)  In October 2013 the plaintiff commenced this action against the defendant, the sole proprietor of a firm of solicitors, suing on a contract said to have been made in 2009, that in return for the plaintiff introducing clients to the firm, the defendant would pay the plaintiff commission at the rate of 50% of the defendant’s profit costs.  The plaintiff alleges thatthe defendant is in breach of contract and seeks an account and payment of the amount unpaid or alternatively the sum of $10 million.

(b)  The defence is that the plaintiff was an employee who was paid a discretionary bonus from time to time for introducing clients to the firm.

(c)  On 20 August 2014 the plaintiff took out a summons (amended on 23 September 2014) (“the discovery summons”) pursuant to Order 24, rules 3, 7 and 10 for a further and better list, specific discovery of six items of documents set outin a schedule to the summons and production for inspection.

(d)  For reasons mentioned below, the discovery summons was not determined until 7 August 2015 when Master Chow made an order for a further and better list and for specific discovery(“the Chow order”).

(e)  For present purposes, it is item 1 of the schedule that is at the heart of the dispute.  The master granted the relief sought but reduced the 6 items listed in the schedule to 4.  Item 1 reads:

“All Commission statements/Bonus calculations showing how muchcommission the plaintiff was entitled to between August 2009 and January 2013.”

(f)  On 21 August 2015, the deadline for compliance with the Chow order, the defendant took out a time summons returnable on 24 September 2015.

(g)  On 1 September 2015, the plaintiff issued a summons for an “unless” order for compliance with the Chow order.

(h)  Master K Lo dealt with both summonses on 8 September 2015 and made an order (“the Lo order”) to the effect that unless the Chow order is complied with by 4 pm on 22 September 2015, the defence would be struck out and the plaintiff would be at liberty to apply for judgment.

(i)  On 18 September 2015, the defendant filed a further and better list of documents as well as the defendant’s 6^th affirmation (“Leung 6”).

(j)  On 25 September 2015 the plaintiff took out a summons (“the strike out summons”) to strike out the defence and to enter judgment for the plaintiff on the basis that the defendant had failed to comply with the Lo order.

(k)  On 9 November 2015 the defendant filed his second further and better list and his 7^th affirmation (“Leung 7”).

(l)  The 2016 order was made on the hearing of the strike out summons on 20 April 2016.

The discovery summons

3.Before setting out the terms of the 2016 order, it is necessary to gain an understanding of the Chow order and the events leading up to it.

4.After the commencement of the action, the defendant made a jurisdictional challenge by summons on 9 December 2013.

5.In exhibit “TCW 1” to the plaintiff’s affirmation dated 8 January 2014 filed in opposition to the defendant’s summons, there is a handwritten statement dated the 30 September 2011 which the plaintiff described as a “commission statement”.  It contained three columns: the middle column was a list of clients introduced to the defendant during that month; the left hand column listed the clients’ reference numbers and the right hand column showed amount of commission.

6.In reply, the defendant denied that it was a “commission statement” but only his “personal calculation of how much discretionary bonus should be given” to the plaintiff: see §8 of the defendant’s2^nd affirmation dated 22 January 2014 (“Leung 2”) where he added the following:

“I have kept such documents with myself all along for my own reference ...”

That evidence was the genesis of item 1 of the schedule in respect of which the plaintiff sought specific discovery.

7.On 26 June 2014, after the parties had provided their respective lists of documents, the defendant took out a summons requiring provisional copies and inspection of the defendant’s documents in the plaintiff’s list which comprised largely of the commission statements: (see Tr. [of the 20 April 2016 hearing] at p 2Q.)

8.The discovery summons came before Master Chow on 11 February 2015 but unfortunately the time allocated was insufficient and it went part heard.  The adjourned hearing did not resume until 30 July 2015.  The decision was delivered on 7 August 2015.

9.The Chow order, inter alia, required the defendant to do the following:

(1)  within 14 days to make and serve on the plaintiff a further and better list of documents which are or have been in his possession, custody or power relating to any matter in questionin the action and make and file an affidavit verifying the same;

(2)  within 14 days to file an affidavit stating whether any documents or any class of documents specified or described in the schedule to the order is or has at any time been in his possession custody or power, and if not then in his possessioncustody or power, when he parted with it and what has become of the same;

(3)  production of the documents referred to in the schedule for inspection.

10.Master Chow declined to strike out the defence and instead made the 2016 order that provided as follows:

(1)  it amended the description of item 2 of the Schedule to the Chow order (which is not material for present purposes);

(2)  the defendant to serve a further and better list of documents which are or have been in his possession, custody or power relating to any matter in question in the action and to make and file an affidavit verifying the list within 14 days;

(3)  the defendant to produce the same for inspection within 14 days.

11.On 29 April 2016 the defendant appealed the decision of Master Chow.

This appeal

12.Mr Pang SC who appeared for the defendant submitted that the two issues to be determined by the court are:

(1)  whether the defendant failed to comply with the unless order; and if so,

(2)  how the court should exercise its discretion.

He submitted that the master was wrong to hold the discovery to be “wilfully defective” because the defendant had complied with the Chow order by filing his further and better list of documents verified by Leung 6 and his second further and better list of documents and Leung 7.  His obligations of disclosure were discharged as he has confirmed “that he had the documents but does not now have them”.

13.It was further submitted that the plaintiff is not entitled to go behind or contradict the defendant’s affirmations, citing Re: The Prudential Enterprise, Ltd unreported, HCCW 594/1999, 10 August 2001, at §§3 – 6 and Tai Fook Futures Ltd v Cheung Moon Hoi Jeff [2006] 4 HKC 81 at §§33 – 34.

(1)  Whether the defendant has complied with the Chow order

14.The master obviously considered that he had not, for otherwise she would not have ordered a further and better list to be filed.

15.Tracing the matter from its genesis (see §6 above), the defendant plainly had item 1 documents in his possession on 22 January 2014.  In the defendant’s 5^th affirmation dated 21 October 2014 (“Leung 5”) §§25 – 31 dealt exclusively with his objections to discovery of item 1 documents.  The defendant objected to such discovery on the basis that they were not necessary for disposing of the cause or matter but he did not deny their existence.

16.In her decision delivered on 7 August 2015 when the Chow order was made, the master stated that:

“Save for item 5 [of the schedule], I agree with the plaintiff that there has been no dispute from the defendant that the documents sought to be discovered exist.” (Tr. p 2B–C)

The defendant did not challenge that statement or lodge any appeal.

17.At the hearing on 8 September 2015 before Master K Lo the following exchange took place:

“COURT: So there is undisputedly non‑compliance, and you are asking for time.

MR LEUNG: Yes, that’s correct, yes. The reason is because most of our documents was in the warehouse, which it come to our — about most of the documents ...

COURT: This is a case dated back to 2013. So within the last two and a half years, you should have ample time to take the documents out from your warehouse, well knowing that it is the subject matter of the litigation.

MR LEUNG: No, those documents were — on the discovery, we have opposed that specific discovery. However they did ...

COURT: Now, whether you opposed it or not, the fact that it’s in a warehouse is neither here nor there ...

MR LEUNG: Well, yes.

COURT: So what is the reason for the delay?

MR LEUNG: The reason is because the list of documents provided in the list is more than 2,000 — sorry, 200 clients and we need time to photocopying those documents ...

COURT: So how many documents ... have you copied updated?

MR LEUNG: There is four items, two of the items has already been done. The most of the items need to be covered is the bill of costs, which is 200 clients ...

...

COURT: So what’s the problem with — what’s the difficulty of copying 200 bills.

MR LEUNG: It just need more time, that’s all.” (Tr. p 4P – p 5N)

Importantly, despite ample opportunity, the defendant did not tell the master that no longer had in his possession item 1 documents (which had been in his possession on 7 August 2015 the date of the Chow order).  The Lo order also went unchallenged.

18.Turning to the defendant’s further and better list dated 18 September 2015, Mr Pang submitted that it was “in the prescribed form” ie in accordance with Order 24, rule 5 Form No 26 (see Court Forms of the Hong Kong Civil Procedure 2017, FM–A26).  But was it?

19.Superficially, it might appear to be so but when §§3 and 4 are closely read, a different picture emerges.  The pertinent part of the prescribed form reads:

“    3.  The plaintiff (or defendant) has had, but has not now, in his possession, custody or power the documents relating to the matters in question in this action enumerated in schedule 2 hereto.

4.  Of the documents in the said schedule 2, those numbered‌.......... in that schedule were last in the plaintiff’s (or defendant’s)possession, custody or power on (stating when) and the remainder on (stating when).

(Here state what has become of the said documents and in whose possession they now are.)

...

SCHEDULE 1

...

SCHEDULE 2

(Here enumerate as aforesaid the documents which have been, but at the date of service of the list are not, in the possession,custody or power of the party in question.)” (emphases added)

20.§3 of the defendant’s further and better list reads:

“3.  The Defendant has had, but has not now, in its possession, custody or power the documents relating to the matters in question in this action enumerated in Schedule II hereto.

4.  Of the documents enumerated in the said Schedule II, those numbered 1 in that schedule were last in the Defendant’s possession,custody or power on the respective days when they were producedbut were subsequently disposed of as rubbish or lost on dates whichthe Defendant now cannot recall and the Defendant does not know where they are now.

...

SCHEDULE II

Part 2

...

1.  All commission statements showing how much commissionthe Plaintiff was entitled to/ Bonus calculations between August 2009and January 2013.”

21.It is immediately obvious that there was no “enumeration” at all of documents that was required.

22.Not only did the defendant fail to enumerate item 1 documents in his further and better list and in Schedule 2, he also failed to explain or account for what had become of item 1 documents that were in his possession and ‘kept’ by him for his personal use, a state of affairs that lasted at least until 8 September 2015.

23.It must follow that the defendant has not complied with the requirements of §§3 – 4 and Schedule II of the prescribed form. For that matter, it cannot be said that the defendant has complied with (2) of the Chow order either.

24.The statement in §6 of The Prudential case as to the conclusiveness of the affidavit in answer at the interlocutory stage is based on Brett LJ’s observations in Jones v Monte Video Gas Co (1880) 5 QBD 556 at 558:

“... when the affidavit has been sworn, if from the affidavit itself, or from the documents therein referred to, or from an admission in the pleadings of the party from whom discovery is sought, the master or judge is of opinion that the affidavit is insufficient, he ought to make an order for a further affidavit; but except in cases of this description no right to a further affidavit exists in favour of the party seeking production.”

In my view, that passage is not to be read and applied in the abstract regardless of context and relevant circumstances.  In the present case it must be interpreted in the context of the defendant’s own evidence in Leung 2 and subsequent admissions.

25.The defendant cannot derive assistance from that passage because having admitted that he had item 1 documents in his possession, it was incumbent on him to enumerate such item 1 documents and to account for what had become of each of them between 22 January 2014 and 8 September 2015.  As earlier explained, the defendant accepted that item 1 documents existed as late as 8 September 2015.  Further, he has admitted in his further and better list on 18 September 2015 that he has had possession of item 1 documents.

26.For those reasons, I agree that the defendant has not complied with the Chow order.

(2)  Exercise of the court’s discretion

27.In Leung 7 the defendant affirmed again that §4 of his further and better list to be true.  But there are problems with what is stated in §4 of the further and better list of 18 September 2015.  In my view, to enumerate the documents means to list them out individually so that they can be identified.

28.Schedule II of the further and better list related to a class of documents falling within a particular description: it failed to enumerate the documents individually so one is none the wiser as to the particular document(s) to which reference was being made.  Accordingly, there is no basis for the assertion made in the first phrase as to “the documents enumerated in the said Schedule II”.

29.Whatever explanation follows (in §§4 – 5 of the further and better list) is rendered meaningless since Schedule II has but a single paragraph, namely, that numbered 1.

30.The plaintiff’s list of documents identified 19 commission statements, 10 of which were dated.  The earliest is dated June 2011 and the latest 4 October 2012, the remaining 9 being undated.

31.On 22 January 2014, the date of Leung 2, the defendant had those records in his possession.  In other words, 15 – 30 months later he still had them.  That is hardly surprising as one would expect such documents to be retained for tax purposes.

32.In October 2014 when Leung 5 was affirmed the defendant did not deny the existence of any commission statements in his possession.  As the master noted, in Leung 5 “the defendant was very particular about the grounds he relied on to oppose discovery in respect of each category of documents in question.” (Tr. 20 April 2016 p 2T)  Rather, in Leung 5, §30, the defendant disingenuously tried to shift the onus of production to the plaintiff and side‑stepped any enumeration or disclosure of the item 1 documents.

33.The hearings in August and September 2015 were further opportunities when he could have stated that he no longer had any item 1 documents in his possession, yet he did not do so.  In fact, on 18 September 2015, the defendant acknowledged that “he has had” possession of “the documents” except that contrary to his assertion, nowhere have those documents been enumerated (see §3 of the further and better list and §1 of Leung 6).

34.In §6 of Leung 7 affirmed on 9 November 2015, through the use of the phrase “since”, he reiterated that they were no longer in his possession and that those notes are not in his possession, custody or power.  But it begs the question which notes formed the subject matter of the statement since he has never identified/enumerated them.  While the distinctions might seem fine to a layman, they can hardly be lost on the defendant who is a practising solicitor.

35.Mr Tang who appeared for the plaintiff submitted that the master was fully entitled to find that the discovery made by the defendant to be “wilfully defective” and made reference to the Court of Appeal’s decision in Ka Wah Bank Ltd v Low Chung‑song [1989] 1 HKLR 451 as an example of a case where such a finding was made.  Hunter JA found (at 464B–C) that the formula the defendants used “to be words of studied ambiguity, which were designed to tell the reader nothing, and to give no material which might expose either deponent to any successful future cross‑examination.” The same could almost apply to the asserted “enumeration” in the present case.

36.The implication of fraud against a professional man plainly is not to be made lightly given the serious repercussions it may have on the defendant’s professional reputation.  Equally, what would appear to be conduct verging on an intentional flouting of a court order is not to be condoned.

37.In those circumstances, balancing the various considerations, in exercising the court’s discretion afresh I, too, would accord the defendant one last chance.

38.Accordingly, the appeal is dismissed. There is to be an order nisi of costs in favour of the plaintiff.

Mr Ronald Tang, instructed by Day & Chan, for the plaintiff

Mr Robert Pang SC, leading Mr Michael Chai, instructed by Joseph Leung & Associates, for the defendant