Konci (1989) Ltd v. Chor Jun Wo David Formerly Known As Chor Ki Kwong David

HCA 346/2018 & HCA 207/2019

(Consolidated)

[2023] HKCFI [2127]

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 346 OF 2018

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(By Original Action)

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AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 207 OF 2019

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(By Counterclaim)

(Consolidated by Order of Master K W Wong dated 17 May 2019)

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D E C I S I O N

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A.  INTRODUCTION

1.This is the appeal by the Plaintiff (by original action) (“Konci”) and the 1^st, 2^nd and 3^rd Defendants (by counterclaim) (together, the “Konci Parties”) by Notice of Appeal dated 13 April 2023 (“Konci Parties’ Appeal”) from the Order of Master Tony Ko dated 31 March 2023 (“2^nd Compliance Order”) by which the learned Master acceded to the Summons of the Defendant (by original action) and the Plaintiff (by counterclaim) (“Mr. Chor”) dated 15 November 2022 (“2^nd Compliance Summons”) and ordered, inter alia, that the Konci Parties do comply with paragraph 1 of the Order of Registrar Ho dated 16 September 2021 (“1^st Discovery Order”) and paragraph 1 of the Order of Master D. To dated 31 March 2022 (“1^st Compliance Order”) (collectively, the “Orders”) by making, filing and serving a further affidavit.

2.The substance of the Orders is the same, namely to require the Konci Parties to make specific discovery of items 1 to 4 and 6 of the Schedule (“Requested Documents”) attached to Mr. Chor’s summons dated 24 August 2021 for specific discovery (“SD Summons”).

3.An appeal from the master to the judge in chambers is dealt with by way of a rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. Fresh points may be raised before the judge which were not raised or taken before the master: see Hong Kong Civil Procedure 2023, §§58/1/2, 58/1/5.

B.  BACKGROUND

4.The background of this case can be briefly summarised as follows.

5.Since around 1992, Mr. Chor acted as the distributor of cigarettes to various duty-free customers (“Duty-Free Customers”) for Konci in Japan and North America (“Distribution Arrangement”) before their relationship was terminated in June 2017.

6.Mr. Chor had to account to Konci for the sale proceeds of cigarettes, less the handling fees/commission to which Mr. Chor is entitled for the services he rendered (“Handling Fees”).

7.According to Mr. Chor, receipts from Duty-Free Customers were transferred into the bank account maintained by Mr. Chor in the name of G&D Management Group Inc (“G&D” and “G&D Account”).

8.By the original action, Konci claims against Mr. Chor for, inter alia, the sum of US$2,934,675.02[1], which is allegedly based on the final account with respect to the sales to Duty-Free Customers, commission payable and other sums to be accounted for between 2016 and 2017, after the parties had terminated their relationship in around June 2017.

9.Mr. Chor denies that he is liable for the claimed sum. It is his case that he was only required to account to Konci for monies actually received from the customer, less the commission withdrawn from the G&D Account.

10.It is also Mr. Chor’s case that:

(1)  before 2012, he would arrange for sums received by G&D to Konci and request for Handling Fees afterwards (“Previous Arrangement”);

(2)  however, since 2012, the parties agreed that Mr. Chor could withdraw Handling Fees from the G&D Account directly, and remit the balance to Konci.

11.The dispute between the parties is in gist, whether Mr. Chor owes Konci any outstanding sums as a matter of final account upon the termination of their Distribution Arrangement in June 2017.

12.Whereas Konci claims that US$2,934,675.02 is due, Mr. Chor’s position is that no sum is due. In gist, the differences in the parties’ respective positions arise from, inter alia:

(1)  disputes over whether Mr. Chor has to account for outstanding payments yet to be received from customers;

(2)  different calculation methods; and

(3)  disputes over accuracy of figures from accounting documents prepared and relied on by Konci.

13.Mr. Chor also counterclaims against the Konci Parties for reasonable service fees for his distribution of cigarettes to locations where Konci was not an authorised distributor. The Konci Parties deny having entered into any agreement with Mr. Chor.

14.In October 2018, Konci applied for summary judgment for its claim based on its calculations of the final account, which was dismissed.

15.On 24 August 2021, Mr. Chor took out the SD Summons seeking specific discovery of 6 categories of documents identified in the schedule attached to the summons (“Schedule”). Save and except for Item 5 of the Schedule (which was adjourned for substantive argument), the Konci Parties consented to provide specific discovery of the Requested Documents, which led to the 1^st Discovery Order being made on 16 September 2021 by consent. Paragraph 1 of the 1^st Discovery Order provides that the Konci Parties shall, within 28 days, file and serve an affidavit stating whether they:

“… have in their possession, custody or power or have at any time had in their possession, custody or power, the documents or either of the documents as particularised as Items 1 to 4 and 6 of the Schedule (“Requested Documents”) attached to the Summons, and if the Requested Documents have been but are not now in their possession, custody or power, stating when they part with, and what has become of, the same;”

16.In summary, items 1 to 6 of the Schedule comprise the following:

Item	Description
1(a)	All documents relating to the sales and payments of Duty-Free Customers (including but not limited to invoices and credit/debit notes issued to the Duty-Free Customers).
1(b)	Purchase orders issued by G&D to Konci as pleaded at §5.3 of Konci’s SOC.
2	Records of all payments made by G&D to Konci.
3	Records of all payments of Handling Fee(s) by Konci to Mr. Chor under the Previous Arrangement.
4	All accounting documents prepared by Konci for the purposes of reconciliation of accounts between Konci and G&D (including but not limited to Daily Sales Report; Payment Schedules; Sales, Receivables & Outstanding Balance Report).
5	Calculation of Handling Fees payable by Konci to G&D/ Mr. Chor from 1989 to 2017 together with supporting documents (amended to 1992 to 2017 pursuant to the order of Master Kenneth Lee dated 21 December 2021).
6	All (internal or external) emails and correspondence exchanged in relation to the documents set out in 1 to 5 above.

17.On 8 November 2021, the Konci Parties filed the 3^rd Affirmation of Cheng Ying Yim (“Cheng” and “Cheng 3^rd”) in purported compliance with the 1^st Discovery Order. Cheng 3^rd disclosed the documents listed in Parts I and II of Schedule 1 in paragraph 12 of Cheng 3^rd, and confirmed that:

(1)  for item 1(a), save for the documents disclosed, they “do not have or have ever had” other documents falling within the description of such item; and

(2)  for items 2 to 4 and 6, they “do not have in their possession, custody or power” other documents falling within such description.

18.On 17 December 2021, just before the substantive argument of the SD Summons fixed for 21 December 2021, Mr. Chor took out a summons for an order that the Konci Parties do comply with the 1^st Discovery Order (“1^st Compliance Summons”), having taken the view that Cheng 3^rd fell short of what was required by the 1^st Discovery Order.

19.On 21 December 2021, after hearing arguments from parties, Master Kenneth Lee ordered specific discovery in respect of Item 5 on slightly amended terms (“2^nd Discovery Order”), and adjourned the 1^st Compliance Summons for argument.

20.On 17 February 2022, a Consent Summons was filed whereby the Konci Parties consented to the 1^st Compliance Summons. The 1^st Compliance Order was formally made on 31 March 2022 after certain requisitions as to costs were dealt with.

21.According to the evidence filed by the Konci Parties:

(1)  Subsequent to the substantive hearing of the SD Summons, Konci conducted a further search of all of the computer records of Konci’s Hong Kong office, which revealed that a backup copy of the hard drive (“Hard Drive”) of the work computer of Mr. Chor’s secretary, Ms. Kitty Siu (“Kitty”), was saved in one of the computers at Konci’s Hong Kong office (the “Backup”).

(2)  By reason of the discovery of the Backup, the Konci Parties agreed to disclose the documents stored in the Backup by making a further affirmation, which led to the 1^st Compliance Order being made by consent.

22.On 14 March 2022, the Konci Parties filed the 4^th Affirmation of Cheng (“Cheng 4^th”), disclosing a number of additional documents. In summary:

(1)  Cheng 4^th reproduced Parts I and II of Schedule 1 in Cheng 3^rd.

(2)  Cheng 4^th further purported to give discovery pursuant to the 1^st Compliance Summons and the 2^nd Discovery Order by listing additional documents in a new Part III of Schedule 1. These include:

(i)  documents newly retrieved from the Backup after filtering a voluminous amount of documents therein; and

(ii)  further emails between Ms. Ema Wang (the financial controller of Konci) and Mr. Chor between 2009 and 2015 falling within Item 6 which were “revealed from the email system” when Konci searched for documents to comply with Item 5 under the 2^nd Discovery Order.

(3)  Paragraph 10 of Cheng 4^th further deposed that upon the discovery of the Backup, save for the documents disclosed in Schedule 1 (all Parts I, II and III) of Cheng 4^th:

(i)  The Konci Parties “do not have in our possession, custody or power other documents as specified in the Schedule attached to the [SD Summons]” (emphasis added);

(ii)  None of the Konci Parties or any other person on their behalf “has now in their possession, custody or control any other document(s) other than and except the documents set out in Schedule 1 hereto” (emphasis added).

(4)  Cheng 4^th also explained that when Cheng 3^rd was prepared, Cheng “had instructed the accounting department of Konci to retrieve all relevant company records and sought to disclose whatever we could find at the time. I was not aware of the existence of the Backup and therefore I verily believed that there were no other relevant documents apart from those disclosed in Schedule 1 (both Part I and Part II) of [Cheng 3^rd]…”.

23.On 15 November 2022, Mr. Chor took out the 2^nd Compliance Summons, having taken the view that Cheng 4^th fell short of what was required by the Orders.

24.The substantive hearing of the 2^nd Compliance Summons took place before Master Tony Ko on 31 March 2023 at which the 2^nd Compliance Order was made.

C.  THE PARTIES’ RESPECTIVE POSITIONS

25.Konci Parties do not dispute that they are required to comply with the Orders. Their position, as stated in the written submissions of their Counsel[2], is that:

(1)  They have fully complied with the Orders by filing Cheng 4^th, where Mr. Cheng stated on oath that save as to the documents disclosed therein, the Konci parties do not have in their possession, custody or power other documents which fall within the scope of the Requested Documents;

(2)  It is trite that the oath of the party giving discovery is conclusive at the interlocutory stage. To succeed in the application under the 2^nd Compliance Summons, Mr. Chor has to demonstrate, not by a conflict of affidavits, that Cheng 4^th is untrue or a lie, in that the Konci Parties in fact have possession, custody and power of more than what has been disclosed.

(3)  Mr. Chor has put forth nothing to demonstrate that Cheng 4^th is untrue or a lie and hence the 2^nd Compliance Summons should be dismissed.

(4)  What Mr. Chor seeks now is a further affidavit on how the Backup came to be or came to only contain what it now contains, hence beyond the scope of the Orders and should meet the necessity requirement afresh.

26.On the other hand, Mr. Chor’s position is that Cheng 4^th fell short of proper compliance with the Orders, and hence the 2^nd Compliance Order was justifiably made. The position of Mr. Chor as summarised in the written submissions of his counsel[3] is as follows:

(1)  Cheng 4^th is completely silent on whether there are any documents falling within the Orders which the Konci Parties “have at any time had in their possession, custody or power”, and if the documents “have been but are not now in their possession, custody or power, stating when they part with, and what has become of, the same”. Such omissions are, in themselves, sufficient to justify the making of 2^nd Compliance Order.

(2)  In any event, given what is stated in Cheng 4^th and the circumstances of the case, it is inconceivable that Konci does not or did not once have possession, custody, power of further documents beyond what has been disclosed in Cheng 4^th.

D.  LEGAL PRINCIPLES

27.There is no dispute between the parties as to the trite principle that the oath of the party giving discovery is conclusive at the interlocutory stage of the action, unless the court can be satisfied, not on a conflict of affidavits, but either from the documents produced or from anything in the affidavit made by him, or any admission by him in the pleadings, or necessarily from the circumstances of the case, that the affidavit does not truly state that which it ought to state (“Conclusiveness Principle”): see Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at §51.

28.The Konci Parties go further to contend that in the context of an application under Order 24 rule 16 of the Rules of the High Court (Cap. 4A) (“RHC”) (being relied on by Mr. Chor in the 2^nd Compliance Summons), the Conclusiveness Principle applies in a “more stringent manner” – referring to the following commentary in Hong Kong Civil Procedure 2023 at §24/16/2 which states as follows:

“The usual rule as to the conclusiveness of the affidavit applies here unless it is evident from the material before the court that the affidavit is a lie (Wu John Baptist v Tsoi Kay [1992] 1 HKC 475; Ka Wah Bank Ltd v Low Chung Song [1989] 1 HKLR 451 (CA)”

29.I agree with the submissions of Ms. Yuen (for Mr. Chor) that neither of the two cases cited in support of the aforesaid commentary supports the Konci Parties’ argument that the Conclusiveness Principle applies in a more stringent manner for applications under Order 24 rule 16 RHC:

(1)  In Ka Wah Bank Ltd v Low Chung-song [1989] 1 HKLR 451, the Court of Appeal struck out a defence for failure to comply with an unless order to file a list of documents with a verifying affirmation, after taking into account that there was “no evidence of a conscientious effort” to meet discovery obligations (at 461H-I), and “the patently inadequate discovery” given (at 462F-J). This case does not support the proposition that the Conclusiveness Principle should apply more stringently for applications under Order 24 rule 16 RHC.

(2)  In Tsoy Kai v Wu John Baptist [1992] 1 HKC 475, while Kaplan J accepted at 479B-C that “[d]iscovery affidavits are invariably to be taken at face value”, he went on to acknowledge the qualifications to the Conclusiveness Principle - that “if the plaintiff in this case was able to show that the first defendant’s affidavit was a lie because of other evidence filed by him or by reason of documents exhibited by the defendants themselves, then the plaintiff could still proceed under O 24 r 16…” (at 479C-D). As pointed out by Ms. Yuen, such qualifications are consistent with the general qualifications to the Conclusiveness Principle set out in Wong Kar Gee Mimi (supra): see paragraph 27 above.

E.  DISCUSSION

E1.  Whether Cheng 4^th complies with the 1^st Discovery Order

30.I agree with the submissions of Ms. Yuen that Cheng 4^th does not fully comply with the 1^st Discovery Order.

31.It is trite that an affidavit made under an order for specific discovery must state the facts of “when the party parted” and “what has become” of the documents sought. A mere statement of the circumstances from which it can be implied or inferred what has become of the documents is insufficient: see Hong Kong Civil Procedure 2023 at §24/7/5.

32.The 1^st Discovery Order itself specifically requires the Konci Parties to file an affidavit deposing to whether they “… have in their possession, custody or power or have at any time had in their possession, custody or power” the Requested Documents, and if the Requested Documents “have been but are not now in their possession, custody or power, stating when they part with, and what has become of, the same” (emphasis added).

33.However, Cheng 4^th has not complied with the 1^st Discovery Order as it is silent on:

(1)  whether there are any documents falling within the 1^st Discovery Order which they have at any time had in their possession, custody or power; and

(2)  if the documents have been but are not now in their possession, custody or power, stating when they part with, and what has become of, the same.

34.The aforesaid deficiencies in Cheng 4^th were specifically pointed out by Mr. Chor in his 3^rd Affirmation made in support of the 2^nd Compliance Summons.

35.However, the Konci Parties have not provided any explanation for the aforesaid deficiencies. Rather, in the 5^th Affirmation of Cheng Ying Yim (“Cheng 5^th”) filed on behalf of the Konci Parties in opposition to the 2^nd Compliance Summons, Cheng simply reiterated (at paragraph 8) that save for the documents already disclosed, the Konci Parties “do not have in their possession, custody or power” any other documents specified in the Schedule, and that they have been advised that “an affirmation stating that a party does not have the documents should be conclusive at the interlocutory stage” (emphasis added).

36.Counsel for the Konci Parties raised the following contentions in their written skeleton submissions:

(1)  it is not “feasible” for the Konci Parties to know and say on oath what else, at what point and if any at all, was in existence beyond what is now found in the Backup, much less parting or what has become of the same (if any);

(2)  Kitty was employed for the sole purpose of assisting Mr. Chor in all paperwork as his secretary, who was independently and directly answerable to Mr. Chor, and that the Konci Parties did not in any way arrange for or monitor Kitty’s work with Mr. Chor; and

(3)  by reason of the nature of Kitty’s role, the Konci Parties have no information beyond the content of the Backup as they found it. All that the Konci Parties could do was to filter documents falling with the scope of Requested Documents from the voluminous documents stored in the Backup “as is”, i.e. when the Backup was retrieved, and disclose the same by making, filing and serving Cheng 4^th.

37.I cannot accept the aforesaid contentions.

38.First, the 1^st Discovery Order was made by consent. It is not open for the Konci Parties now to take the position that they cannot comply with its full terms.

39.Second, there is no evidence provided by the Konci Parties (whether in Cheng 4^th or Cheng 5^th) to the effect that it is not “feasible” for them to comply with paragraph 1 of the 1^st Discovery Order, whether for the reasons submitted by their counsel or otherwise.

40.Third, at least from the evidence filed by the parties so far, I do not consider it to be credible for counsel to suggest (let alone without proper evidence) that the Konci Parties are unable to depose to whether there are any documents falling within the 1^st Discovery Order which they have at any time had in their possession, custody or power; and if the documents have been but are not now in their possession, custody or power, stating when they part with, and what has become of, the same.

41.It is not in dispute that (i) the Distribution Agreement was in place at least from 1992 to 2017; (ii) Kitty was, at the material times until June 2017, employed by Konci to assist Mr. Chor in matters in relation to the Distribution Arrangement; and (iii) Kitty maintained an email account “[email protected]” registered with Konci’s email domain. Given these circumstances, there is no reason to suppose that the Konci Parties are not in a position to fully comply with the 1^st Discovery Order.

42.In the premises, given the obvious omissions and deficiencies set out in paragraph 33 above, I consider that the 2^nd Compliance Order should be granted on this basis alone.

E2.  Whether given what is stated in Cheng 4^th and circumstances of the case, it is inconceivable that Cheng 4^th has made complete discovery

43.Ms. Yuen further submits that given what is stated in Cheng 4^th and the circumstances of the case, it is inconceivable that Konci does not or did not once have possession, custody, power of further documents beyond what is disclosed in Cheng 4^th.

44.First, Ms. Yuen argues that it is inconceivable that Konci does not have in its possession, custody or power emails sent from or received at “[email protected]” between 2005 and 2011 relating to the Distribution Arrangement (i.e. Item 6 of the Schedule), by reason that:

(1)  It is undisputed that Kitty maintained an email account “[email protected]” registered with Konci’s email domain.

(2)  In Cheng 4^th, the Konci Parties disclosed “emails sent from and received in “[email protected]” relating to the Distribution Arrangement” in 2004, then from 2012 to 2017.

(3)  It is also undisputed that the Distribution Arrangement was in place between 2005 and 2012.

(4)  It is unclear why Konci would not have power to retrieve such emails from its email server.

45.I do not consider that the above circumstances and evidence are sufficient to suggest that the Konci Parties must currently have possession, custody, power emails sent from or received at “[email protected]” between 2005 and 2011 relating to the Distribution Arrangement (especially given the long lapse of time since that period) so as to displace the Conclusiveness Principle.

46.However, based on the evidence currently filed and since the Distribution Arrangement undisputedly remained in place between 2005 and 2012, there is at least a prima facie case that the Konci Parties have once had possession, custody or power of the emails between 2005 and 2011. This fortifies the need for a proper affidavit to be filed to explain “when they parted with” and “what has become” of such documents if they no longer but once had them, in compliance with the 1^st Discovery Order.

47.Second, Ms. Yuen further argues that it is inconceivable that Konci does not have documents relating to the sales to and payments from Duty-Free Customers prior to 2010 (i.e. covered by Items 1(a) & 4 of the Schedule) by reason that:

(1)  Based on the description of Items 1 to 8 of Part III, Schedule 1 in Cheng 4^th, only documents relating to the sales to and payments from Duty-Free Customers between 2010 and 2017 have been disclosed.

(2)  However, it is undisputed that the Distribution Arrangement was in place at least from 1992 to 2017.

(3)  It is also apparent from the emails of Ms. Ema Wang of Konci that Konci has sales reports dating back to 2004.

48.I do not consider that the above circumstances and evidence is sufficient to suggest that the Konci Parties must currently have possession, custody, power documents relating to the sales to and payments from Duty-Free Customers prior to 2010 (especially given the long lapse of time since that period) so as to displace the Conclusiveness Principle.

49.However, at least based on the evidence currently filed and since the Distribution Arrangement remained in place from 1992 to 2017, there is at least a prima facie case that the Konci Parties have once had possession, custody or power documents relating to the sales to and payments from Duty-Free Customers prior to 2010. This again fortifies the need for a proper affidavit to be filed to explain “when they parted with” and “what has become” of such documents if they no longer but once had them, in compliance with the 1^st Discovery Order.

50.For the reasons above, I am of the view that the Konci Parties have not fully complied with the 1^st Discovery Order, and thus the 2^nd Compliance Order is justified.

51.Insofar as the Konci Parties seek to rely on Order 24 rule 8(1) RHC to suggest that any further discovery sought by Mr. Chor is “not necessary for disposing fairly of the cause or matter or for saving costs”, such argument is obviously misplaced:

(1)  The 2^nd Compliance Summons is an application to compel the Konci Parties to comply with the Orders already made by consent (there being no application is made to vary or set aside the Orders).

(2)  For the reasons set out in above, Cheng 4^th does not fully comply with the Orders.

(3)  It is thus not open to the Konci Parties to re-argue that discovery which they had consented to provide is unnecessary.

F.  DISPOSITION

52.For the reasons above, I dismiss the Konci Parties’ Appeal, with costs to Mr. Chor, which I have summarily assessed at HK$100,296[4], to be paid forthwith.

Mr Martin Wong and Mr Lok Ho, instructed by Kenneth CC Man & Co for the Plaintiff (by original action) and the 1^st, 2^nd and 3^rd Defendants (by counterclaim)

Ms Sharon Yuen, instructed by Wellington Legal, for the Defendant (by original action) and the Plaintiff (by counterclaim)