Chow Luen Fat v. Wong Yat Kong

DCCJ 6688/2020

[2024] HKDC 1103

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6688 OF 2020

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DECISION

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A.  INTRODUCTION

1.This is the defendant’s appeal against a Master’s decision dated 30 June 2023 which dismissed (amongst others) the defendant’s application for (i) specific discovery of documents; (ii) production of unredacted version of documents already produced; and (iii) leave to serve interrogatories on the plaintiff (the “Application”).

B.  BACKGROUND

2.The present action concerns a claim for repayment of a debt.

3.In short, the plaintiff’s pleaded case is that:-

(1)  In or about July 2014, the plaintiff (in his personal capacity) entered into an oral loan agreement with the defendant for a loan to be made in the sum of HK$1,500,000;

(2)  Pursuant to the said loan agreement, the plaintiff procured Tak Lee Machinery Company Limited (the “Company”) to advance a sum of $1,500,000 to the defendant on his behalf (the “Loan Amount”);

(3)  Other than a partial repayment in the sum of $1,000,000 (the “Repaid Amount”) made by the defendant to the Company (receiving the same on behalf of the plaintiff) on 1 December 2014, the defendant has failed to repay the remainder of the Loan Amount, being HK$500,000 which is the subject of the claim in this action;

(4)  The Loan Amount and the Repaid Amount were “duly settled” between the plaintiff (who was a director and 50% shareholder of the Company at the material time) and the Company internally.

4.The defendant’s pleaded case is as follows:-

(1)  The defendant does not dispute having entered into a loan agreement as borrower and that he was advanced the Loan Amount thereunder on 15 July 2014;

(2)  However, the defendant claims that it was the Company rather than the plaintiff which was acting as the lender and the Loan Amount was advanced by the Company (as principal) from the Company’s bank account to the defendant;

(3)  The Repaid Amount was made by the defendant to the Company (as principal) but not to the plaintiff;

(4)  The defendant does not admit that the Loan Amount and the Repaid Amount were settled between the plaintiff and the Company and averred that there was never any transfer of the Repaid Amount from the Company to the plaintiff.

5.Accordingly, the main issue to be determined at trial is the identity of the lender under the loan agreement, ie whether it was the plaintiff (as alleged by him) or the Company (as alleged by the defendant) (the “Identity Issue”).

C.  Events leading to the Application and thereafter

6.Upon the plaintiff’s application, on 17 September 2023, Master Jacqueline Lee granted a summary judgment against the defendant. In a judgment dated 25 May 2022 (“25/05/22 Judgment”), Deputy District Judge Joseph Vaughan allowed the defendant’s appeal, set aside the summary judgment and gave the defendant conditional leave to defend: [2022] HKDC 453.

7.By letter dated 20 July 2022 from the defendant’s solicitors, Messrs Fung, Wong, Ng & Lam (“FWNL”) to the plaintiff’s solicitors, Messrs Loeb & Loeb LLP (“L&L”), the plaintiff was requested to provide copies of:

(1)  the Company’s audited financial statements for the years 2013-2014, 2014-2015 and 2015-2016;

(2)  board/shareholders’ resolutions, loan agreements, transfer records, ledger entries concerning the alleged debt of $92,135,001.98 owed by the Company to the plaintiff as at 15 July 2014[1] (the “Debt”);

(3)  board/shareholders’ resolutions which authorised the payment of the Loan Amount from the Company to the defendant on 15 July 2014 as a partial repayment of Debt allegedly owed by the Company to the plaintiff; and

(4)  bank transfer records and ledger entries evidencing a further transfer of the Repaid Amount from the Company to the plaintiff.

8.By letter from L&L dated 20 September 2022 in response, the plaintiff agreed to provide the following documents:-

(1)  the Company’s audited financial statements for 2013-2014 and 2014-2015 (the “13/14 Statements” and the “14/15 Statements” respectively) which were largely redacted save as to show the figures for line item “Amount due to a director[2]” under the section “Trade and other payables” as at 31 July 2013, 2014 and 2015 respectively;

(2)  an internal transfer voucher dated 1 December 2014 of the Company (the “1/12/2014 Voucher”) which shows a debit entry of $1,000,000 from the Company’s current account with the Bank of China (“BOC”) and a corresponding credit entry of the same amount as a temporary payment concerning the defendant (with the following notation “15/7 – 周生私人借” (English translation: 15/7 – Private loan from Mr. Chow)) together with a deposit slip issued by BOC showing the transfer of the Repaid Amount from the defendant to the Company’s bank account; and

(3)  redacted bank statements of the Company’s account with BOC showing: (i) the withdrawal of the Loan Amount on 15 July 2014; and (ii) the deposit of the Repaid Amount on 1 December 2014.

9.The plaintiff refused to provide the remaining documents on various grounds. In relation to the request for bank and accounting records evidencing the Debt, the plaintiff’s response was that:-

“This request merely goes to the credit of the Plaintiff. Without prejudice to the foregoing, we are instructed that the debt owed by the Company to the Plaintiff was incurred, accumulated, and dealt with over the years through divers of transactions on a rolling basis. Further, the existence and extent of the debt owed by the Company to the Plaintiff has been shown in the audited financial statements in Enclosure 1. The production of all such bank transfer records and ledger entries would be disproportionate in terms of time and costs.”

10.Not satisfied with the disclosure from the plaintiff, by letter dated 6 October 2022, FWNL sought removal of the redactions in the 13/14 and the 14/15 Statements, provisions of further transaction records of the Company concerning settlement of amounts owed to the plaintiff and answers to proposed interrogatories. The further requests were rejected by a letter from L&L dated 24 October 2022.

11.In the summons issued for the Application dated 24 November 2022 (the “Summons”), the defendant seeks (amongst others) the following orders:-

(1)  specific discovery of the documents set out in Schedule 2 to the Summons, namely, bank accounts/transaction records of the Company and/or the plaintiff and/or relevant ledger entries in the Company’s accounting records showing:-

(i)  payment(s) from the Company to the plaintiff totalling not less than or around $84,258,061.98[3]; and

(ii)  payment(s) from the Company to the plaintiff totalling $1,000,000.00 between December 2014 and July 2015;

(2)  production of the unredacted texts and figures of the additional sections of the 13/14 and the 14/15 Statements (set out in Schedule 1 to the Summons) concerning the sums due between the plaintiff and the Company;

(3)  leave to serve interrogatories set out in Schedule 3 to the Summons (the “Interrogatories”) which were mainly related to the settlement of sums owed between the plaintiff and the Company.

12.At a hearing before Master Ebony Ling on 30 June 2023, the Application was dismissed save that leave was given to the defendant to serve Interrogatories 1 and 2 which relate to the identity of the director mentioned in the line item “Amount due to a director” in the 13/14 Statements and the 14/15 Statements. The plaintiff has since confirmed on affirmation that the above references to a director were references to him.

13.Prior to the hearing of this appeal, parties have filed and exchanged witness statements. The plaintiff affirmed in his witness statement what was said on his behalf as quoted in §9 above. He also explained that:-

“48 Since it is on a rolling basis, the Accounting Department of [the Company] made records of any payments out made by [the Company] on my behalf and vice versa whenever such payments were made in and out. The balance due from [the Company] to me or vice versa will change from time to time along with payments made in and out and their net off. That said, as I stated in paragraph 9 above, it had been [the Company] which owed me money instead of me owing [the Company] for most of the times.

49 There is hence no bank statement or transfer record available between [the Company] and myself in that setting of rolling mechanism.”

D.  GENERAL APPROACH – APPEALS FROM MASTER’S DECISIONS

14.It is well-established that appeals from Masters’ decisions are dealt with by way of rehearing. The application is treated as though it came before the Court for the first time, see: Hong Kong Civil Procedure 2024, vol.1, §58/1/2.

E.  APPLICATION FOR SPECIFIC DISCOVERY

E1.  General principles

15.The general principles on the Court’s power to order discovery were summarised by Cheng J in her recent decision in Kwok Wai Fung v China Gas Holdings Ltd [2023] HKCFI 83 at §9:-

(1)  On an application for specific discovery under O.24 r.7, the applicant needs to put forward sufficient evidence or a prima facie case that (a) the documents or classes of documents exist which the other party has not disclosed, (b) the documents relate to a matter in issue in the action, and (c) the documents are in the possession, custody or power of the other party;

(2)  Once it is established that these three jurisdictional prerequisites exist, the court has a discretion whether or not to order discovery;

(3)  In exercising that discretion, the court will not make an order unless the discovery sought is necessary either for disposing fairly of the cause or matter, or for saving costs;

(4)  For the purpose of discovery, the pleadings have to be looked at broadly.

E2.  Analysis

16.The submissions of Mr. Law (appearing for the defendant) are summarised as follows:-

(1)  As the issue of whether the plaintiff had settled the Loan Amount and the Repaid Amount with the Company was expressly pleaded, it is argued that whether such settlement existed is a “core issue”;

(2)  Reliance was placed on the learned Deputy Judge’s observations at §25 of the 25/05/22 Judgment on the lack of records evidencing (i) the Debt of HK$92,135,001.98 from the plaintiff to the Company which was said to be outstanding at the material time; and (ii) authorisation to advance the Loan Amount to the defendant on behalf of the plaintiff in reduction of the director’s loan;

(3)  It is said that discovery of the documents sought would prove or contradict the following matters, namely:

(i)  whether the amount of HK$92,135,001.98 said to be owed by the Company to the plaintiff as at 30 June 2014 as stated in P’s Payment Instruction Letter is correct;

(ii)  whether there was a repayment of the Repaid Amount by the Company to the plaintiff from 1 December 2014 onwards (and if so whether such repayment was evidenced by documents).

17.The contention boils down to 2 matters, namely relevance and necessity.

18.On the question of relevance, I am prepared to accept that the documents sought are relevant in the Peruvian Guano sense, i.e. they may lead to a train of enquiry which may support the defendant’s case or undermine the plaintiff’s case.

19.However, that is not the end of the matter. To exercise its discretion to order discovery, the Court has to be satisfied that disclosure is necessary for disposing fairly of the cause or matter or for saving costs.

20.In considering necessity:-

(1)  The determination involves a triangulation of interests of the plaintiff, the defendant and the judge. The judge accommodates all these interests by a balancing exercise in which he takes into account the likely value of the materials to the person seeking discovery by assessing what information it is reasonable to suppose the documents contain and determining whether such information may enable the party seeking them to advance its own case or damage that of its opponent;

(2)  The judge must take into account the likely degree of inconvenience and cost to which the party against whom discovery is sought would be put if discovery is granted; the likely volume of irrelevant material that might have to be discovered because of the width with which the class is described and whether the discovery process would only lengthen the pre-trial process for little discernible gain;

(3)  In ensuring a fair trial, the focus will be on the role of discovery in equipping each party properly for trial so that they are both in the best possible position to advance their respective cases before the trial judge;

(4)  However, it will not be just the interests of the parties that the judge will have to consider. The efficient disposal of the litigation is a matter which must be of concern to the trial judge. Whilst the court should pro-actively maximise the case management benefits, the court must also be guarded against discovery being used as tactical weapon to achieve delay in, or increase the costs of the litigation.

See: Toeca National Resources B V Baron Capital Limited HCA 1913/2009 (unreported, 31 May 2011) at §§29-34 per McWalters J (as he then was).

21.In Chan Hung v Yung Kwong Chun HCA 216&217/2004 (unreported, 15 January 2009), DHCJ Horace Wong SC said at §32:-

“In any given case, there is likely to be a spectrum of evidential materiality within which documents may fall. There may be documents which are central to the pleaded issues; but there may also be documents which fall at the other end of the spectrum in that though they may “fall within the letter of Lord Justice Brett’s formulation of relevance for discovery purposes”, they are documents which are unlikely to contain or yield information of such evidential materiality to the pleaded case (in the broad sense mentioned above) of the parties as to make their disclosure necessary for the fair disposal of the proceedings or to save costs…”

22.To begin with, I am of the view that at best, these documents only amount to “background” documents[4] at the lower end of the spectrum of probative value for the purpose of resolving the Identity Issue:-

(1)  The real focus should be on contemporaneous documents and records showing how the transactions were characterised between the plaintiff and the Company on the two material dates, namely (i) 15 July 2014 when the Loan Amount was transferred from the Company’s account; and (ii) 1 December 2015 when the defendant transferred the Repaid Amount to the Company’s account;

(2)  I disagree with Mr. Law on whether the Repaid Amount was further repaid to the plaintiff was “central” to the Identity Issue. In comparison to (1) above, the transactions between the Company and the plaintiff in settlement of the Loan Amount and the Repaid Amount allegedly paid or received by the Company on behalf of the plaintiff are only of lesser (if not marginal) importance. As I explored with Mr. Law during the hearing, there could be numerous explanations (eg set-off or a waiver of sums owed) which are consistent with the plaintiff’s case that the Loan Amount and the Repaid Amount were internally “settled” between the plaintiff and the Company without involving actual cash payments. Although the existence of some form of settlement might have some bearing on determining the Identity Issue, I cannot see the necessity of finding out the exact circumstances in which such settlement took place;

(3)  As noted by Cheung JA in Paul’s Model Art GMBH v UT Ltd [2006] 1 HKC 238 at §25, the fact that an issue is raised in the pleadings is not determinative as to its relevance. A fortiori, the fact that the subsequent settlement of the Loan Amount and the Repaid Amount were pleaded by the parties does not thereby increase the probative value of the matter vis-a-vis the crucial Identity Issue;

(4)  For the purpose of resolving the Identity Issue, a full reconstruction of whether and how the Company’s debt (which will likely involve looking into the accounting treatment of each transaction) to the plaintiff reduced between 30 June 2014 and 15 July 2014 is of relatively limited probative value and would likely involve a large proportion of irrelevant transactions where the settlement of the Loan Amount of HK$1.5 million between the Company and the plaintiff was only a small part of the aggregate sum of the reduction;

(5)  Similarly, it is difficult to see how the disclosure of all the records of payments totalling HK$1,000,000 from the Company to the plaintiff (which may or may not be related to the Repaid Amount) between December 2014 and July 2015 is proportionate. The plaintiff’s evidence as set out in his witness statement is that the sums owed between the plaintiff and the Company were settled on a rolling basis which involve payments made in and out or netting off of payments;

(6)  Further, it was also said on the plaintiff’s behalf[5] that there was no bank transfer record evidencing a further transfer of the $1,000,000 from the Company to the plaintiff. One way or the other, the mere examination of the records of payments of HK$1,000,000 is not particularly helpful in determining whether and how the Repaid Amount was accounted for:-

(i)  Given the plaintiff’s stance, if there were records of such payments, then it is likely that these records are irrelevant as they are in relation to transactions other than the Repaid Amount;

(ii)  If there was no record of such payments, then it is not inconsistent with the plaintiff’s stance (because this is what plaintiff has alleged).

(7)  For completeness, I do not regard the observations made by the learned Deputy Judge[6] to be relevant for present purposes:-

(i)  Those observations were made in the different context of a summary judgment application where the court was making a preliminary assessment of the merits of the plaintiff’s claim for the purpose of determining whether there was any triable issue or arguable defence;

(ii)  In any event, the state of evidence has since changed following disclosure of the 13/14 Statements, the 14/15 Statements and the 1/12/2014 Voucher in discovery and exchange of witness statements.

23.Having regard to the limited probative value of the documents sought, I am of the view that no unfair advantage will be suffered by the defendant even if I were to refuse to order discovery. At trial, it is open to the defendant to attack the plaintiff’s evidence that there was no bank statement or transfer record of the rolling mechanism in which sums owed between the Company and the plaintiff were settled and to test the same in cross-examination.

24.Further, I find that the discovery requests as formulated in the Application are hardly conducive to saving costs or the efficient disposal of the case:-

(1)  As mentioned above, the key direct evidence that one would naturally focus on is how the Company would book the payment of the Loan Amount and the Repaid Amount between the Company and the defendant in the Company’s accounts and ledgers rather than how the payments were subsequently settled between the plaintiff and the Company. Yet no such request was made in the Application. During the hearing, I specifically raised the matter with Mr Law. His response was that it was unlikely that the plaintiff was able to provide such records, which I do not think that satisfactorily explains why the present requests are formulated in the manner set out in the Application;

(2)  Rather than taking the direct approach of focusing on the more crucial evidence (or the lack thereof if they are not in existence), it seems to me that the tortuous manner in which the discovery requests are formulated in the Application would only unnecessarily add to the costs and length of the trial when the trial judge would have to go through various transactions (a large proportion of which are irrelevant) in the subject periods which are of marginal utility for determining the central Identity Issue;

(3)  The discovery requests are particularly disproportionate having regard to the amount in dispute which is only $500,000. The costs that the parties have incurred so far on the Application are likely to amount to a substantial proportion of the sum at stake.

25.Accordingly, I do not find it necessary for discovery to be ordered with respect to the documents requested.

F.  REMOVAL OF REDACTION IN THE 13/14 STATEMENTS AND THE 14/15 STATEMENTS

26.In short, the defendant seeks the disclosure of the following sections in the 13/14 Statements and the 14/15 Statements which have been redacted: “Related Party Transactions”, “Directors’ Material Interests in Transactions, Arrangements and Contracts that are Significant in relation to the Company’s Business”, “Statement of Cash Flow”, “Statement of Profit or Loss and Other Comprehensive Income” and “Statement of Financial Position” (together, the “Redacted Sections”).

F1.  The general principles

27.The relevant principles on redaction of documents were set out by Cheng J in Kwok Wai Fung (supra) at §§10-15:-

(1)  A party is entitled to seal up or cover up parts of a document which he claims to be irrelevant. The test for whether, on discovery, part of a document can be withheld on grounds of irrelevance is simply whether that part is irrelevant;

(2)  Similar to discovery of documents, the burden lies on an applicant for discovery to show a prima facie case of relevance. The burden lies on the respondent to satisfy the court that discovery is not necessary for fairly disposing of the cause of matter or for saving costs;

(3)  The oath of the party giving discovery is conclusive, including on the question of relevance, 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. A heavy burden lies on a party who seeks to challenge the veracity of the other party's oath regarding redaction;

(4)  Whilst Peruvian Guano is the test for relevance, fishing is not allowed. Fishing arises where what is sought is not evidence but information which may lead to a line of inquiry which would disclose evidence; it is the search for material in the hope of being able to raise allegations of fact, as opposed to the solicitation of evidence to support allegations of fact, which have been raised bona fide with adequate particularisation. It is not the purpose of discovery to give an applicant an opportunity to hunt around the documents in the hope that they will reveal some improprieties on the respondent's part or will provide more information for him to pursue more enquiries.

F2.  Analysis

28.In this case, it was affirmed on behalf of the plaintiff that the Redacted Sections are irrelevant[7].

29.Mr Law argues that the Redacted Sections should be disclosed for the following reasons:-

(1)  The defendant is entitled to see if the plaintiff’s substantial loan to the Company and the setting off of the Loan Amount and the Repaid Amount were recorded in the Redacted Sections. It is said that such information (or the lack of it) would either have the effect of strengthening or weakening the plaintiff’s case one way or the other;

(2)  The disclosure of the figures of the line items in the Redacted Sections would shed light on the payment of the difference between the Debt owed by the Company to the plaintiff as at 30 June 2014 and the financial year-end balance as at 31 July 2014;

(3)  Mr. Law also raised questions as to: (i) the so-called “Inconsistent Debt Balances” in the line item “Amount due to a director” which show different figures in the 13/14 Statement and the 14/15 Statement for the same date of 31 July 2014; and (ii) the commercial reasonableness of the loans from the plaintiff to the Company as at 30 June 2014 when comparing against the revenue, trading volume and net current assets of the Company.

30.With respect, I do not agree that the text and figures in the Redacted Sections add anything material to what has already been disclosed in the unredacted parts:-

(1)  The financial statements are not a comprehensive record of all the transactions of the Company during the relevant financial years. As I have canvassed with Mr Law during the hearing, each line item in the financial statements (including those in the Redacted Sections) could only show the total amount for particular line items either as at each of the year-end dates (i.e. 31 July 2013, 2014 and 2015 respectively) or the total amount over each of the financial years (from 1 August to 31 July in 2013, 2014 and 2015 respectively);

(2)  This can be illustrated from the line item “Amount due to a director” which has been disclosed. The figures in this item only state the amounts due from the plaintiff as at 31 July 2013, 2014 and 2015 respectively. Within each line item, these figures only show the aggregate position and do not differentiate between the Loan Amount or the Repaid Amount and other transactions within the same category (e.g. other amounts owed between the Company and the plaintiff). These figures also do not show the balance at any particular point in time between the year-end dates (e.g. the position as at 30 June 2014 as stated in P’s Instruction Letter);

(3)  Therefore, even for the sections titled “Related Party Transactions” and “Directors’ Material Interests in Transactions, Arrangement and Contracts that are Significant in relation to the Company’s Business” which would conceivably contain information as to the amounts owed between the plaintiff and the Company, I am unable to see how disclosing those line items would have the effect of strengthening or weakening the plaintiff’s case on the Identity Issue;

(4)  By looking at the title of the line items in the Statement of Financial Position, the Statement of Cash Flow and the Statement of Profit or Loss and Other Comprehensive Income (which are not redacted), given their nature, it is difficult to see how the disclosure of the redacted figures would reveal any information relevant to the Loan Amount, the Repaid Amount or their settlement (let alone the Identity Issue);

(5)  My view above is further confirmed upon inspection of the unredacted version of the 13/14 Statements and the 14/15 Statements at the hearing as I have been invited to do so by Mr. Law.

31.In any event, it is also not necessary for the Redacted Sections to be disclosed for the purpose of fair disposal of the Identity Issue or for saving costs. In substance, even if I accede to the defendant’s request for revealing the Redacted Sections, this will not be the end of the matter but is only a prelude to what is likely to be an extensive investigation of the financial accounts and business of the Company. For the reasons already set out in Section E above, with respect to a dispute involving $500,000, it will be wholly disproportionate to engage in an extensive forensic investigation of the financial accounts and affairs of the Company in order to investigate the “reasonableness” of the Debt. Even if the Redacted Sections are disclosed, it is likely that further applications will be made for production of the accounts and business records of the Company and it is also not unlikely that expert evidence will be required for the purpose of such investigation (e.g. in relation to the accounting treatment of transactions). This would in turn lead to even greater delay for the action which was commenced in 2020[8].

32.Further, I am of the view that the alleged need to look into the so-called Inconsistent Debt Balances and also to compare the Company’s debt to the plaintiff against the revenue and trading volume or net asset of the Company is a fishing exercise:-

(1)  Fishing arises where what is sought is not evidence but information which may lead to a line of inquiry which would disclose evidence; it is the search for material in the hope of being able to raise allegations of fact, as opposed to the solicitation of evidence to support allegations of fact, which have been raised bona fide with adequate particularisation, see: Kwok Wai Fung (supra)[9];

(2)  As observed by Chu J (as she then was) in In the Estate of Ng Chan Wah HCAP5/2003 (unreported, 5 March 2003), in rejecting an attempt by the beneficiaries to seek discovery for a sweeping investigation of the estate accounts prepared by the executors at §16:-

“It is not sufficient for the plaintiffs to say that because there is on the pleading allegation of improper conduct against the defendants as executors, they are entitled to test the basis of the estate accounts generally or to check the accuracy of the items presented in the estate accounts, irrespective of whether they are in issue. It is not the purpose of discovery to give the plaintiffs an opportunity to hunt around the documents in the hope that they will reveal some improprieties on the defendants' part or will provide information for them to pursue more enquiries.”

(3)  I bear in mind that the 13/14 Statements and the 14/15 Statements have been audited by certified public accountants. Each of the auditors were able to opine that the accounts represent a “true and fair view” of the Company’s affairs as at the end of the financial years and the profit and cashflows during the financial years in accordance with the relevant financial reporting standards and statutory requirements. As accepted by Mr Law during the hearing, at present he is not seeking to re-audit the 13/14 Statements and the 14/15 Statements or to challenge their accuracy;

(4)  In the absence of any challenge to the accuracy of the financial accounts (let alone a properly particularised challenge), any need to look into the so-called Inconsistent Debt Balances is at best speculative. In any event, it is already stated in the 14/15 Statements that some of the comparative figures were reclassified;

(5)  Similarly, in the present case and based on the materials before me, I also do not see how there is necessarily any logical connection between the size of a loan from a director and the controlling shareholder[10] to the Company and the revenue or trading volume or net current assets of the Company. The use of such comparison to question the size of the loan is again highly speculative.

33.Accordingly, I respectfully agree with the learned Master’s decision to refuse to order the disclosure of the Redacted Sections.

G.  INTERROGATORIES

34.The Interrogatories which are the subject of the present appeal are as follows:-

“3. Why was the closing balance of “Amount due to a director” for the year ended 31 July 2014 as stated in the 1314 Statement (HK$7,876,940 – see page 28 thereof) different from the opening balance of the same item as stated in the 1415 Statement (HK$11,179,534 – see page 6 thereof)?

4. If the answer to the 1^st question above is yes, did the Company repay HK$84,258,061.98 to you in July 2014?”

In answering this 4^th question, you should make reference to (a) exhibit “CLF-2” to your 1^st Affirmation dated 13 July 2021 in this action, i.e. a copy of a purported payment instruction letter dated 15 July 2014, in which it was said the Company owed you HK$92,135,001.98 as at 30 June 2014 by way of a director’s loan; (b) the 1314 Statement, which stated at page 28 thereof that the “Amount due to a director of the Company as at 31 July 2014 was HK$7,876,940.

5. If the answer to the 4^th question is yes, please state (i) when and (ii) in what form did the Company repay you?

6. If the answer to the 4^th question is no, (i) state the amount the Company owed you as at 31 July 2021 and (ii) explain the difference between the figures stated in CLF-2 and the 1314 Statement, if any.

7. When and in what form did the Company transfer to you a sum of HK$1,000,000 received from the Defendant on 1 December 2014?”

G1.  General Principles

35.Under RDC O. 26, r. 1, leave is required for a party to serve interrogatories. Interrogatories must be necessary either for disposing fairly of the cause or matter or for saving costs. Fishing or oppressive interrogatories should not be allowed. Ultimately, the matter is for the court's discretion to determine what order is "just", having taken into account all the circumstances of the case, see: Lau Suk Han Loretta v Li Fung Ming Krizia [2024] HKCFI 188 at §15 referring to Ascoba Company Limited v Safco Express Services (HK) Limited DCCJ 6161/2003 (unreported, 3 August 2005) and Khan Mirawas v Chan Kam Moon t/a Sei Luen Transportation Co DCEC 130/2006 (unreported, 15 September 2006).

36.In deciding whether to give leave the court shall take into account any offer made by the party to be interrogated or to give particulars, make admissions or produce documents relating to any matter in question, see: RDC O. 26 r. 1(2A).

G2.  Analysis

37.In light of my findings on the application for discovery and disclosure of the Redacted Sections, I do not consider Interrogatories 3 to 6 to be justified:-

(1)  Interrogatory 3 relates to the Inconsistent Debt Balances. As already explained, the inquiry sought is irrelevant, unnecessary and amounts to fishing;

(2)  Interrogatories 4 to 6 are in effect a probing investigation into the historical changes in the amounts owed by the Company to the plaintiff. Based on the same reasons for rejecting the discovery of documents for this line of inquiry[11], I do not consider Interrogatories 4 to 6 to be justified.

38.It remains for me to deal with Interrogatory 7:-

(1)  The Court may refuse leave to serve interrogatories where the answers to them were already provided in affidavits, witness statements or documents previously filed or provided, see: Hong Kong Civil Procedure 2024, vol 1 at §26/4/11; Re Ma On Shan Whitehead Golf Centre Ltd HCMP 1363/2001 (unreported, 10 September 2002) at §§11-13 per Kwan J (as she then was); Kao Lee & Yip (a firm) v Donald Koo Hoi-yan & ors HCA 8847/1993 (unreported, 23 April 2002) at §8(4) per Ma J (as he then was);

(2)  I agree with the submission of Ms. Leung for the plaintiff that, in substance, the plaintiff has already provided sufficient answers for Interrogatory 7 by explaining that settlement of sums between the plaintiff and the Company (which includes the settlement of the Repaid Amount) were conducted through the rolling mechanism and there was no bank statement or transfer record of the settlement of the Repaid Amount available[12];

(3)  I note that technically contents of witness statements are not admitted into evidence until they are verified by the witness at trial[13]. However, the principle as noted in (1) above is not limited to affidavit evidence. Further, the relevant provisions in RDC O. 38 r. 2A are without prejudice to the witness statement being adduced as hearsay evidence[14];

(4)  Even if the plaintiff is unable to confirm the contents of his witness statement at trial, it remains that the witness statement is a document from him which is verified by a statement of truth he signed. It is a document that the court can properly take into account for present purposes. It is also open to the defendant to make use of the plaintiff’s answer in his witness statement in cross-examination and/or submission at trial. Hence, I do see any clear litigious purpose being served by ordering Interrogatory 7;

(5)  In exercising my discretion on the necessity of Interrogatory 7, I have also taken into account the considerations canvassed in Section E above;

(6)  In light of the above, I do not find it necessary to serve Interrogatory 7. Leave is accordingly refused.

H.  DISPOSITION

39.Accordingly, the appeal is dismissed.

40.I make an order nisi that the defendant do pay to the plaintiff the costs of the appeal (with certificate for counsel), to be taxed if not agreed.

41.It remains for me to thank counsel for their helpful assistance.

Ms Pauline Leung, instructed by Loeb & Loeb LLP, for the plaintiff

Mr Lewis Law, instructed by Fung, Wong, Ng & Lam LLP Solicitors, for the defendant