Asia-pac Infrastructure Development Ltd and Others v. Shearman & Sterling (A Firm) and Others

HCA 806/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 806 OF 2006

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D E C I S I O N

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Shearman Defendants’ application for specific discovery

1.This is the 1^st of 4 applications this morning.  I deal firstly with the Shearman Defendants’ application for specific discovery in respect of the documents relevant to the assignment on which the 1^st Plaintiff relies (Assignment) as giving rise to its rights to sue for causes of action which did not originally belong to it.

2.The main argument of the 1^st Plaintiff is that the documents are irrelevant because the issue should have been raised and decided in a strike out application instead of the trial.   

3.Having been taken by the parties to the relevant authorities: see in particular Liquidation Committee of Foshan Hongda Development Ltd v East Legend Investment Ltd [2009] 1 HKLRD 169, I am satisfied that the 1^st Plaintiff’s argument is incorrect.  The authorities establish the principle that challenges to a litigant’s authority to sue are to be determined by way of a strike out or preliminary issue in order to avoid unnecessary costs.  It is clear that authority to sue is to be distinguished from a case, as here, where the 1^st Plaintiff is suing in its own name as an assignee: see Laurent v Sale [1963] 1 WLR 829.

4.Although it may be said that deciding on the legality of the Assignment by way of a striking out or preliminary issue may serve the purpose of saving unnecessary costs, I am satisfied that on a proper understanding of the authorities, there is no impediment for the Sherman Defendants in challenging the Assignment in their pleadings.  I therefore disagree with the 1^st Plaintiff on its primary argument.

5.I am satisfied that on the evidence before the court, which must of cause be considered with common sense, the 7 classes of documents in issue are relevant and that there is at least a prima facie case that they exist and are within the possession, custody or power of the 1^st Plaintiff.  In particular, I bear in mind that the 1^st Plaintiff has access to the documents of the other Plaintiffs pursuant to the various assignments between them.

6.In the premises, I make an order in terms of paragraphs 1 and 2 of the Summons filed on 6 October 2015 subject to the deletion of class 5 from the Schedule to the Summons, and I allow 42 days for the discovery exercise.

7.I shall hear the parties on costs.

Herbert Smith’s application for specific discovery

8.This 2^nd application is made by Herbert Smith for specific discovery involving, potentially, a huge volume of documents.

9.The 1^st Plaintiff’s position is that the Liquidators have done all that they reasonably could in answering the discovery requests of Herbert Smith and that there is nothing more which they can reasonably do.

10.There is a very detailed body of submissions made on behalf of Herbert Smith as to the history of the discovery exercise and how the Liquidators had allegedly failed to properly discharge their obligations.

11.In my view, the court must not lose sight of the fact that discovery should not be treated as a trial.  Further, the relevant events took place nearly 20 years ago and it would be quite extraordinary if the relevant documents are all kept intact and readily available.  Furthermore, Liquidators normally have to rely on the cooperation of other people in the discharge of their function.  Finally, the exercise of discovery must be considered with an eye on proportionality.

12.I accept that some of the criticisms made of the discovery by the 1^st Plaintiff, and the efforts made in answer to Herbert Smith’s specific discovery application by the same, may be valid.  On the other hand, I am not satisfied that the efforts made were not genuine or the best which the Liquidators could do given their constraints.

13.In the premises, subject to: (i) the verification by way of an affirmation of the 1^st Plaintiff’s 2^nd Supplemental List of Documents; (ii) the filing and verification by affirmation of a 3^rd Supplemental List of Documents to disclose the additional documents which have been obtained since the 2^nd Supplemental List; and (iii) verification on affirmation of the fact that the Liquidators have continued to obtain the assistance of Mr David Yuk Wah Ho, Herbert Smith’s specific discovery application is dismissed.

14.All 3 affirmations are to be filed and served within 42 days from today.

Herbert Smith’s application for further security for costs

15.This 3^rd application is also one of Hebert Smith’s for further security to be provided by the 1^st Plaintiff for their costs of these proceedings.  It is in fact an application for topping up of the security already paid into court by the 1^st Plaintiff, which was partially paid out by way of a consent application.  The reason for the payment out was that the 1^st Plaintiff had failed to meet its obligation to pay the taxed costs of Herbert Smith in respect of 2 security for costs applications despite the orders of the court so to do.

16.Quite fairly, Mr Carolan, appearing with Mr Kwok for the 1^st Plaintiff, accepts that this court has the discretion to make another order for security for costs if there is sufficient change of circumstances.

17.I am of the view that there is adequate justification made out by Herbert Smith for the security to be replenished.  It appears to me that it is wrong for the 1^st Plaintiff to try to profit from its refusal to meet the costs obligations imposed by the court, to have agreed to the payment out of the existing security to meet such obligations and then resist the application to have the security replenished.

18.It is not entirely clear what the taxed costs of the 2^nd security for costs application are because the Allocatur in question covered other interlocutory applications.  I am informed that a reasonable assessment of the taxed costs of the 2^nd security for costs application is one half of the total taxed costs.  I am happy to accept the suggestion subject to it being verified on affirmation.  Ms Cheung, appearing on behalf of Herbert Smith, has agreed to provide the affirmation.

19.In the premises, I make an order in terms of paragraphs 1 to 3 of the Summons filed on 3 April 2017 save that: (i) the payment be in the sum of HK$1,300,000 and (ii) the 1^st Plaintiff be allowed 28 days to make the payment.  I grant liberty to apply.

Mr Paul Carolan and Mr Eugene Kwok, instructed by ONC Lawyers, for the 1^st to 4^th Plaintiffs

Mr Bernard Man SC, instructed by Reed Smith Richards Butler, for the 1^st to 8^th Defendants

Ms Elizabeth Cheung, instructed by Reynolds Porter Chamberlain, for the 9^th Defendant