Socam Development Ltd (Formerly Known As Shui on Construction and Materials Ltd) v. New Pi (Hong Kong) Investment Co., Ltd and Another

HCA 1974/2017

[2025] HKCFI 4017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1974 OF 2017

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D E C I S I O N

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A.  INTRODUCTION

1.This action and HCA 340/2018 have been ordered to be tried before the same judge. The parties in the two actions are the same.

2.On 29 October 2024, the defendants (“New Pi” and “Pi Korea” respectively, and “Ds” or “Pi Group” collectively) issued a summons for specific discovery in each action (“the 340 Summons” and “the 1974 Summons”). The two summonses were heard by Master YW Hew (“the Master”) on 14 April 2025. After hearing the two summonses, the Master dismissed the 340 Summons in its entirety, and dismissed the 1974 Summons save that one class of documents (“the Class III Documents”) set out in that summons was allowed.

3.No appeal has been lodged by Ds against the dismissal of the 340 Summons and the dismissal of the items in the 1974 Summons.

4.The Plaintiff (“P”) lodged an appeal against the order allowing discovery of the Class III Documents. This is the hearing of P’s appeal.

5.In this appeal, P is represented by Mr Derek JY Chan. Ds are represented by Mr Vincent Lung (together with Ms Nicola Ho).

B.  BACKGROUND

6.The background facts are not in dispute and are set out in the following paragraphs in this section.[1]

B1.  The relevant entities

7.P (previously named Shui On Construction Materials Ltd) is and was at all material times a company incorporated in Bermuda with limited liability and its shares are listed on The Stock Exchange of Hong Kong (stock code: 983).

8.China Central Properties (BVI) Limited (“CCP BVI”), a company incorporated under the laws of the British Virgin Islands, was at all material times a wholly-owned subsidiary of China Central Properties Limited (“CCP”). CCP is and was an associated company of P.

9.New Pi is a limited company incorporated in Hong Kong and a subsidiary of Pi Korea, a South Korean company.

10.Beijing ZhongTian HongYe Real Estate Consulting Co Ltd (北京中天宏业房地产咨询有限责任公司) (“Zhongtian”) is and was at all material times a company incorporated in the Mainland as a wholly foreign-owned enterprise with its sole owner being Mountain Breeze (Barbados) SRL (“MB”), a Barbados company. Zhongtian holds a substantial real estate development in the Mainland called Huapu Building (“the Property”).

B2.  Loan from BEA to Zhongtian

11.Prior to the execution of the Acquisition Agreement on 4 February 2008 (see subsection B3 below), CCP BVI held the entire issued share capital of MB.

12.On 2 June 2006, The Bank of East Asia Limited, Beijing Branch (“BEA”) entered into a loan agreement with Zhongtian (“BEA Loan Agreement”), pursuant to which BEA made a loan to Zhongtian in an aggregate principal amount of RMB730,000,000 ( “BEA Loan”).

13.Among other loans securities, BEA held a first charge over the Property pursuant to a Mortgage of Real Property dated 2 June 2006 and was entitled to first priority on the proceeds of any sale of the Property.

14.On 2 April 2007, a guarantee was executed by P (being CCP BVI’s associated company) as guarantor in favour of BEA in respect of Zhongtian’s obligations as principal debtor under the BEA Loan Agreement (“Guarantee”).

B3.  Sale of the shares in MB by CCP BVI to the Pi Group in 2008

15.On 4 February 2008, an acquisition agreement was executed between CCP BVI as the seller, CCP as the seller guarantor, New Pi as the buyer and Pi Korea as the buyer guarantor, pursuant to which CCP BVI agreed to sell the entire issued share capital of MB (then held by CCP BVI) to New Pi (“Acquisition Agreement”).

16.At the time of the Acquisition Agreement, the Pi Group was under the control and management of Mr Min Fengzhen (“Min”) and Ms Kim Hongying (“Kim”), who represented the Pi Group in their dealings with P, CCP and CCP BVI in relation to the Acquisition Agreement.

17.Concurrently with the Acquisition Agreement and on the same date, New Pi and Pi Korea executed and delivered a Deed of Undertaking and Indemnification (“the Deed”) in favour of P as a condition precedent of the closing of the Acquisition Agreement (“Closing”).

18.By Clause 1.1 of the Deed, New Pi and Pi Korea expressly acknowledged and agreed that:

(1)  upon Closing, P will no longer be affiliated with either MB or Zhongtian;

(2)  the intention of the relevant parties (including New Pi and Pi Korea) is that, simultaneously with Closing, the Guarantee will be terminated or replaced and P will be released from any and all of its obligations under the BEA Guarantee (“the Guaranteed Obligations”);

(3)  such termination and release would require the consent of BEA;

(4)  BEA has refused to provide such consent; and

(5)  the relevant parties (including New Pi and Pi Korea) intend to proceed with the Closing notwithstanding the absence of such consent and, as a result, the Guarantee will survive the Closing.

(6)  the obligations set out in the Deed were undertaken by New Pi and Pi Korea in order to give effect to the intention of the parties above notwithstanding that P’s obligations under the Guarantee (as may be amended from time to time) would survive the Closing.

19.By virtue of Clause 1.3 of the Deed, New Pi and Pi Korea undertook to indemnify, inter alia, P from all losses which may be incurred by P and all payments made in relation to the Guarantee.

20.By virtue of Clause 2.2 of the Deed, New Pi and Pi Korea are each obliged to perform their obligation under the Acquisition Agreement, which includes their obligation under Clause 2.01(c)(i)(A) of the Acquisition Agreement to procure Zhongtian to repay the outstanding BEA Loan.

21.The commercial purpose of the Deed is to ensure that despite the continued validity of the Guarantee due to BEA’s unwillingness to release P from the same after CCP BVI’s sale of MB, the Pi Group (as the new owners of MB) would procure the repayment of the BEA Loan (thus releasing P from its obligations under the Guarantee) and to indemnify P for losses arising from its failure to do so.

B4.  BEA’s assignment of the BEA Loan to the Cinda Group

22.On 31 August 2011, BEA issued a letter of demand to Zhongtian copied to P and MB declaring Zhongtian’s breach of the BEA Loan Agreement and demanded Zhongtian to make immediate repayment of the outstanding sums due to BEA in the amount of RMB542,405,616.58 on or before 15 September 2011.

23.On 23 September 2011, P paid the sum of RMB11,250,315.92 to BEA pursuant to the Guarantee, being penalty interest payable to BEA as a result of Zhongtian’s default in fully repaying the BEA Loan.

24.On 27 September 2011, P entered into a Memorandum of Understanding (諒解備忘錄) (“MOU”) with Zhongtian, whereby it was acknowledged, inter alia, that P would arrange an onshore entity to take up the BEA Loan.

25.In light of pressure from BEA for repayment of the whole of the outstanding BEA Loan by P under the Guarantee, P looked for other financiers who may be interested in buying out the BEA Loan and be agreeable to allow more time for repayment pending the sale of the Property, and engaged in negotiations with China Cinda Asset Management Company Limited, Beijing Branch (“Cinda Beijing”) and its associated companies (collectively, the “Cinda Group”) for that purpose.

26.On 19 October 2011, BEA entered into an assignment of loan (“Assignment”) with Cinda Beijing assigning the outstanding BEA Loan together with all related securities held by BEA in respect of the BEA Loan, including the Guarantee, to Cinda Beijing. A written notice of the Assignment was issued by BEA to P on 24 October 2011.

27.Concurrently with and subsequent to the Assignment, P further entered into a series of financial advisory agreements and guarantee restructuring agreements with the Cinda Group from time to time (generally on an annual basis) for the purpose of deferring the enforcement of the full repayment of the BEA Loan (then held by Cinda Beijing) in exchange for payments of fees which were in effect interest payments made to the Cinda Group in exchange for deferral of P’s obligations under the Guarantee.

28.P’s case is that the payments made to the Cinda Group constitute losses resulting from the Pi Group’s failure to comply with its obligation to procure repayment of the BEA Loan which the Pi Group are liable to indemnify under the Deed which forms the subject matter of this action.

B5.  “Entrenchment Obligation” and alleged inappropriate interference with management and control of Zhongtian

29.Ds’ case is that there have been successive changes in management and control over New Pi, Pi Korea and MB since mid-2011:

(1)  In around 2010, as security for a loan of around 380 billion Korean Won advanced to Pi Korea (then under Min and Kim’s control) by Woori Bank of South Korea (“Woori Bank”), Woori Bank obtained charges over all the shares in New Pi, Pi Korea and MB.

(2)  In around August 2011, after Pi Korea defaulted in repayment, Woori Bank has taken steps to replace Min and Kim as directors of New Pi, Pi Korea and MB.

(3)  On around 6 September 2011, Woori Bank caused MB to remove the then directors of Zhongtian, ie Min, Kim and 閔財星 (“Min CS”).

(4)  In around January 2015, Woori Bank transferred all of its shares in Pi Korea to Manner International Trading Limited (“Manner”) and the boards of New Pi, Pi Korea, and MB were gradually replaced by Manner’s appointees who now claim to manage Ds (and handle the present litigation on their behalf).

(5)  However, MB (under Woori Bank’s and later Manner’s management) has so far been unable to change the directorship registration of Zhongtian in the Mainland and hence could not in practice obtain management of and control over Zhongtian which remain under the control of Min and Kim.

(6)  Ds complain that the MOU which P entered into with Zhongtian on 27 September 2011 contains a contractual obligation on P’s part to use its reasonable endeavours to ensure that the management of Zhongtian would remain unchanged, thereby assisting Min and Kim to remain in control of Zhongtian. In the Amended Defence, it is pleaded:

“7. It emerged that [P] had interfered with the management and control of Zhongtian by playing a significant role in assisting Min and Kim to remain in unlawful control of Zhongtian and entrench such control.

8. By way of particulars, at around the time when Woori Bank failed to obtain control over Zhongtian, the Plaintiff entered into [the MOU]. Part VI Clause 1 of the MOU provided that:

(a) Before the disposal of [the Property], [P] would exercise reasonable endeavors in ensuring that the legal representative, board members and general manager of Zhongtian would remain unchanged, and to prevent any persons from changing the said officers.

(b) [P] would procure that BEA issue a letter to Woori Bank stating that as a creditor under the BEA Loan and security-holder of the Zhongtian shares, BEA disagreed with any attempts to change the legal representative and board members of Zhongtian, and no attempt to replace the said officers should be made without its consent.

9. [P]’s obligation under Part VI Clause 1 of the MOU is referred to hereinbelow as the "Entrenchment Obligation". Pending discovery, disclosure and interrogatories, New Pi and Pi Korea reserve the right to plead further to the nature and extent of [P]’s Interference.”

(7)  Ds assert that it was prevented from carrying out its obligation to procure Zhongtian to make repayment of the BEA Loan by virtue of its inability to obtain control of Zhongtian, and that it is not liable to P for indemnity under the Deed where P’s act(s) prevents Ds from performing its obligations. In the Amended Defence, it is pleaded:

“16(c)(iv) Furthermore, by virtue of [P] entering into the MOU with Zhongtian and undertaking the Entrenchment Obligation, and/or performing the Entrenchment Obligation (“[P]’s Interference), [P], in bad faith, played an active and/or significant role in preventing and/or rendering it impracticable or impossible for New Pi, Pi Korea and/or Mountain Breeze to obtain control over Zhongtian and to procure it to raise funds and repay the Balance.

……

23. Even if (which is denied) that New Pi and/or Pi Korea is in breach of the terms of the Deed by failing to procure Zhongtian to repay the Balance and interest, it is denied that New Pi or Pi Korea caused and/or are liable for the alleged loss and damage …… It is averred that

……

(g) … [P] is not entitled to rely on any alleged failure by New Pi and Pi Korea to procure Zhongtian to repay the Balance and interest under the BEA Loan to make its present claims against New Pi and Pi Korea under the Deed. In particular:

(i) It is implied in the Deed that New Pi and Pi Korea shall indemnify [P] against all losses, liabilities, damages, costs and expenses whatsoever in relation to or arising out of any failure by any of them to duly and punctually perform its obligations under the Deed, on the basis that the Plaintiff does not do any act(s) which would prevent New Pi and Pi Korea from performing its obligations under the Deed.

(ii) However, by virtue of [P]’s Interference, [P] had taken steps to prevent and/or prevented New Pi and Pi Korea from performing any alleged obligation to procure Zhongtian to repay the BEA Loan under Clause 2.2 of the Deed and/or Clause 2.01(c)(i)(A) of the Acquisition Agreement. Indeed, as pleaded above, New Pi and Pi Korea have been unable to, through [MB], obtain control over Zhongtian and procure it to pay the Balance and interest.” (Emphasis added)

30.As shown in the Amended Defence and confirmed by Mr Lung, Ds have not pleaded a conspiracy case against P. In other words, there is no allegation in the Amended Defence that P has conspired with Min and/or Kim, and/or others to injure Ds.

31.P’s reply is that P did not in fact interfere with (and had no capability to interfere) with the management and control of Zhongtian, and did not assist (or have any capability to assist) Min and/or Kim to remain in control of Zhongtian.

C.  THE MASTER’S DECISION CONCERNING CLASS III DOCUMENTS

32.In the 1974 Summons, Ds sought specific discovery of 3 types of documents, namely (a) type 1 (written correspondence, written records of oral communications, board minutes and other internal memoranda, notes, circulars and notices), (b) type 2 (written documents and records made available to P) and (c) type 3 (all agreements, deed, memorandums of undertakings entered into by P or its directors, employees, representatives or agents), “in relation to or arising out of ” four issues which Ds refer to as Class I to Class IV, which are as follows:

(1)  Class I: P’s joint control and use of Zhongtian’s company chop and finance chop with Zhongtian;

(2)  Class II: the involvement of the P and/or its directors or representatives (including but not limited to Vincent Lo Hong Sui[2]) in the Mainland Court and/or arbitral proceedings in respect of the Property;

(3)  Class III: the meeting(s) or discussion(s) between Zhang Yi[3] and Kim in respect of (a) the BEA Loan and/or (b) payments made by P to Cinda entities; and

(4)  Class IV: the meeting(s) or discussion(s) between Wong Yuet Leung[4] and Kim in respect of the PRC court proceedings in relation to the Property.

33.As said in the above, the Master only allowed Ds’ application for specific discovery in relation to the Class III Documents. The Master also directed that “[P] do have liberty to claim privilege from production in the affidavit/affirmation”[5] making the discovery pursuant to the order. Mr Chan submits that in the hearing before the Master, P told the Court that P had not ascertained to what extent the Class III Documents exists, and P therefore proposed that if the Master would allow the discovery application, the Master might order an affidavit to be made with liberty to P to claim privilege from production in such affidavit if so advised. The proposal was accepted by the Master and hence the Master gave the aforesaid direction in the Order. Since there is no cross-appeal by Ds against that direction, the issue of privilege does not arise in this appeal. I agree with Mr Chan.

D.  PRINCIPLES

34.It is trite that an appeal from a master’s decision to a judge in chambers is a de novo hearing. Subject to the restriction in Order 58 rule 1(5), the hearing before me is an actual rehearing as if the application came before me for the first time.[6]

35.The Court may make an order for specific discovery of a document under the Rules of the High Court (“RHC”), Order 24 rule 7 if:

(1)  the document exists which the other party has not disclosed;

(2)  the document is in or has been in the respondent’s possession, custody, or power; and

(3)  the document is relevant to a matter in question between the parties.

The burden is on the applicant to demonstrate a prima facie case on each of these prerequisites.

36.On the hearing of an application under Order 24 rule 7, if the Court is satisfied that discovery is not necessary, or not necessary at that stage of the cause or matter, it may dismiss or adjourn the application, and shall in any case refuse to make such an order if and so far as it is of opinion that discovery is not necessary either for disposing fairly of the cause or matter or for saving costs.[7]

37.In Li Tak Yee Samuel v Sociéte Générale Bank & Trust[8], Anthony Chan J has comprehensively summarized the principles concerning discovery at §§24 to 54 of that judgment. For the purpose of P’s appeal, the principles contained in the judgment quoted below are relevant:

“General principles applicable to specific discovery

24. As a starting point, a party seeking an order for discovery must make out a prima facie case that:

(1) a specified document or class of documents exists and has not been disclosed;

(2) the party against whom the order is sought has or had the documents in his possession, custody or power;

(3) the documents relate to a matter in question in the action; and

(4) discovery is necessary either for disposing fairly of the cause or matter or for saving costs.

See: Tullett Prebon (HK) Ltd v Chan Yeung Fong Nick (HCA 2197/2009, 9 June 2011), §11 per To J; and Hong Kong Civil Procedure 2013, §24/7/1.

25. The discovery order sought must identify with precision the documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself having made a false affidavit notwithstanding his genuine compliance with the order.

The test of relevance

26. The Peruvian Guano test remains the test of relevance – a document is relevant if:

(1) it is reasonable to suppose that it contains information which may, not must, either directly or indirectly enable the party requiring the same either to advance his own case or to damage the case of his adversary; or

(2) it is a document which may fairly lead the party to a train of inquiry which may have either of those two consequences.

See: Tullet Prebon (HK) Ltd v Chan Yeung Fong Nick, §13 per To J.

27. Relevance will primarily be determined by reference to the pleadings. However, the relevance of an issue cannot be dictated by a party unilaterally simply by importing it in the pleadings. Even if the opposing party had not applied to strike out the irrelevant allegation, he can resist an application for specific discovery on the ground that the allegation is irrelevant to the subject matter of the action: Hong Kong Civil Procedure 2013 §24/2/10.

28. On the other hand, the relevance of a document should not be solely tested against the detailed particulars pleaded by the parties. It is the pleaded case of the parties in the broad sense that one should be concerned with. A document may be generally relevant to a party’s case as pleaded (many so-called “background documents” are of this nature) although its relevance cannot be specifically pinned to some pleaded particulars. For discovery purpose, the pleadings have to be looked at broadly: Billion Lead Investment Ltd v Union Joyce Ltd (HCMP 2145/2011, 14 December 2012), §16 per Mimmie Chan J.

……

Class request

36. Where a request for a class of documents is made, the class must not be defined or described so widely so as to include documents which are not relevant to the issue: Molnlycke AB, p 502, line 15.

37. Further, the prerequisites for the invocation of O 24 r 7 mentioned in para 24 above must be established in respect of the class described as a class, not as regards some in the class only: Hong Kong Civil Procedure 2013, §24/7/1. See also Teresa Holladay v Fred Kan & Co (HCA 12723/1996, 7 May 1999), p 3.

38. A party applying for discovery cannot simply seek “all documents bearing upon an issue or showing a particular thing”. As Barker JA explained in Deak & Co (Far East) Ltd v NM Rothschild & Sons Ltd [1981] HKC 78, 82B:

‘What is meant by ‘a class of document’? There is no definition in the Rules of the Supreme Court. It was argued on behalf of the appellant that the word ‘class’ is used to enable the court to order discovery of a group of documents which go to a particular issue. We disagree. In our judgment, ‘a class of documents’ must be classified by its nature. Thus, for example, in Seabrook v British Transport Commission [1959] 1 WLR 509, it was held that the description of the documents of which discovery was required as ‘correspondence between and reports made by the defendant’s officers and servants relating to the accident’ was a sufficient identification so as to form a class.

With the foregoing principles in mind, we turn to consider the various items in respect of which discovery is claimed. We can conveniently take items 1, 5 and 6 together. They are as follows:

Item 1 All documents that bear upon the knowledge of the plaintiffs of the identity of clients introduced by Ross.

Item 5 Any documents showing the extent to which clients introduced by Ross made payments into any bank account maintained by the plaintiffs in Hong Kong including relevant statements of accounts.

Item 6 Any documents showing the extent to which clients introduced by Ross made payments into accounts maintained by the plaintiffs outside Hong Kong including statements of accounts.

These items are all tainted with the same vice. They do not form a class. They merely bear on an issue. Therefore, they do not fall within O 24 r 7 and we accordingly decline to order discovery in respect of them.’

See also Teresa Holladay, p 3, where it was said by Waung J that “when you have a general description of class of documents bearing on an issue, it is not a class of documents…”.

39. I believe that the ratio of Deak & Co (Fast East) Ltd is two-fold. Firstly, one cannot simply identify an issue and ask for all documents relating thereto. Secondly, the class request must be adequately specific. Hence the example referred to by the Court of Appeal and the description of documents in the example was “a sufficient identification”.

……

The blue pencil test

42. If the Court is of the view that a request is oppressive, too wide or imprecise, where such request contains within it a proper request which can be revealed without prejudice to the other side, the blue pencil test can be applied to limit the scope of the order: China Man-Made Fiber Corporation v Goldman Sachs (Asia) LLC (HCA 2756/2008, 30 March 2012), §35 per DHCJ Burrell; see also Man Cheung International Traders Ltd v CLSA Ltd (CACV 97/2007, 25 September 2007), §41 per Stone J.”

Discovery affidavits are conclusive

43. It is a general rule that “discovery affidavits are invariably taken at face value”: Tsoi Kay v Wu John Baptist [1992] 1 HKC 475, 479B (Kaplan J). Accordingly, subject to limited exceptions, affidavits of documents are conclusive as to relevance and existence or otherwise of documents. See Hong Kong Civil Procedure 2013 §24/7/1; Matthews & Malek: Disclosure (4^th edn), §6.43.

……

45. Such affidavit is not regarded as conclusive only where it can be shown that there has been insufficiency of discovery. The insufficiency can be demonstrated by (a) the pleadings, the list and affidavit of documents themselves, or documents referred to therein; (b) any other source that constitutes an admission of the existence of a discoverable document not so far discovered; (c) an apparent exclusion of documents from discovery by a party under a misconception of the case: Matthews & Malek, §6.43. ……” (Emphasis added)

38.With these principles in mind, I turn to consider the respective arguments advanced concerning P’s appeal.

E.  DISCUSSION

39.Mr Lung drew my attention to the fact that there was a previous discovery application made by P in April 2019, and upon that application Master Gary CC Lam (as he then was) made a discovery order against P on 10 June 2020 (“the 2020 Order”). Subsequently, for the purpose of complying the 2020 Order, on 7 July 2020, P filed an affirmation stating that it was unable to locate further documents other than those already disclosed. Mr Lung submits that however, when witness statements were exchanged in 2024, through P’s 3^rd List of Documents, P disclosed a significant number of additional documents, many of which come under the scope of the 2020 Order. Mr Lung submits that this is an important background leading to the discovery application made by the 1974 Summons.

40.Whether P has duly complied with the 2020 Order is not the issue to be determined in this appeal. The issue in this appeal is whether Ds are entitled to have a discovery order concerning the Class III Documents based upon the pleadings and the evidence now before the Court.

41.Mr Chan submits that the scope of discovery sought by Ds in the 1974 Summons is unduly wide and improperly defined. Such a request for all 3 types of documents for all 4 classes of documents plainly cannot satisfy the requirements of prima facie existence and relevance of each class as a whole. It is improper and oppressive for Ds to cast the net so widely so that some documents falling within the class might exist and might be relevant. Mr Chan submits that:

(1)  For type 1, Ds have essentially asked for all internal and external correspondence or records of oral communications between every conceivable person from P bearing on or in relation to certain issues.

(2)  For type 2, there is no evidential basis for Ds to even raise a prima facie case that there are any documents that were “made available” to P by Min, Kim, Min CS or Zhongtian. None has been identified in Ds’ supporting affirmation.

(3)  For type 3, it is unclear on what basis it can possibly be said that apart from the various agreements already disclosed and described in the parties’ respective pleaded case, P had entered into other agreements or deeds in relation to any of the 4 classes. It is unclear why it is said that there is a prima facie case that any other deeds or agreements were entered at all.

42.Mr Lung submits that when considering the width of a discovery request, the principles of proportionality, cost effectiveness and fairness between the parties are relevant. In the context of “big ticket” litigation being conducted by well-funded and resourceful parties, alleged prejudice or oppression may carry less weight in the overall consideration of proportionality.[9] P is a resourceful party, being a well-known blue-chip listed company. It has not provided particulars of any additional strain on it to obtain, list and copy further documents, and in any case it is de minimis in the scheme of these proceedings with a substantial quantum at stake. The practical reality of this case being “big ticket” is a highly relevant consideration.

43.With respect, as submitted by Mr Chan, whether this case can be described as a “big ticket” litigation or whether resourceful parties are involved would not relax the requirement that Ds have to demonstrate a prima facie case on each of the 3 prerequisites in Order 24 rule 7, including existence and relevance. If a class of documents requested is too widely drafted so as there is no prima facie evidence showing the existence or relevance of some documents in the class, the discovery request must be refused before the question of proportionality even comes into play.

44.As stated in the above, Ds bear the burden to demonstrate a prima facie case on the three prerequisites in Order 24 rule 7 in respect of the whole Class III, not as regards some of the documents in the class only. For the reasons set out below, I am of the view that Ds have failed to discharge this burden.

E1.  Existence

45.Mr Lung submits that there is a prima facie case that the Class III Documents exist. That is particularly so in respect of the type 1 documents. Mr Lung submits that:

(1)  In Chinaculture.com Ltd v Lam Ting Ball, Paul[10], Harris J said:

“……[i]t might be thought that a listed company would have quite extensive internal records of management meetings, emails, reports, budgets and the like recording the Company’s affairs”.

(2)  On the documentary evidence disclosed, there is evidential basis to consider that P had/has a practice or habit of writing up and circulating internal decisions. The email sent by Raymond Wong (P’s then Managing Director and CFO) on 14 October 2011 to P’s board of directors is telling, as it (a) confirms that “various Board and Investment, Audit and Finance Committees meetings” were held in late August 2011 to keep the Board updated “with the development of Beijing Huapu case”, (b) recaps and summarises what was discussed in those August meetings, and (c) outlines the executive directors’ proposed steps in relation to the matter.

(3)  In Re The Prudential Enterprise Ltd.[11], Chu J (as she then was) accepted that evidence to show “the habit of taking notes, writing attendance notes and records and making out memoranda of meetings and discussions, whether formal or purely personal ones” may ground the belief as to the existence of documents.

(4)  As to the specific request for written correspondences (particularly emails and instant messages), this request must be understood in the context of Ds’ pleaded defence. A crucial limb of Ds’ case is that P played a significant role in preventing Ds from taking proper control of Zhongtian. The nature of this allegation thus impinges on, inter alia, what P’s management (a) “really thought” or (b) “really were intending to achieve” which are matters that “might not have been revealed in many tens of thousands of other documents in the trial bundles” but “may only take one revealing statement in a document, perhaps in an e-mail”. It would be necessary to bear in mind that “people say things in e-mails which they would not dream of putting into a letter or a minute or a formal note”.[12]

(5)  By a letter dated 3 March 2025 from the solicitors acting for Ds at that time to P’s solicitors (“Ds’ Letter dated 3 March 2025”), P was asked to unequivocally confirm its position on existence of the documents. The confirmation was however not forthcoming. P should therefore be taken to have agreed that there are in existence documents within Class III.

46.With respect, I am not satisfied that Ds have demonstrated a prima facie case on existence in respect of the whole Class III Documents.

(1)  There can be no doubt that a listed company would have extensive internal records. However, the issue here is on what basis it could be reasonably said that the whole Class III Documents (not some of the documents in the class) exists.

(2)  As to the fact that P did not give a response to Ds’ Letter dated 3 March 2025, I agree with Mr Chan that by that letter, Ds were effectively seeking a discovery affidavit from P prior to the determination of the 1974 Summons. P is entitled to refuse to accede to the request before Ds could demonstrate that they should be able to obtain a discovery order based upon the 1974 Summons. The non-response from P to the Ds’ Letter dated 3 March 2025 could not be treated as P’s admission or concession on the existence of the Class III Documents.

(3)  Taking Ds’ case at its highest, Ds may have demonstrated the prima facie existence of documents in type 1 in Class III. However, as to type 2 and type 3 in Class III, I do not think that Ds have put forward any satisfactory answer to the points made by Mr Chan as set out in §41(2) and (3) above. In the circumstances, I do not think that Ds have demonstrated a prima facie case on the existence of the whole Class III Documents, which are constituted by all the documents in type 1, all the documents in type 2, and all the documents in type 3.

(4)  The point made by Mr Lung concerning type 1 documents as summarized in §45(4) above concerns the relevance of type 1 documents, and that point will be dealt with in the below.

E2.  Relevance

47.I am not satisfied that Ds have demonstrated a prima facie case on the relevance of the whole Class III Documents.

48.I would first deal with the point made by Mr Lung based upon Digicel as set out in §45(4) above. Mr Chan submits that Ds would not be able to derive any assistance from that case. Mr Chan submits that:

(1)  Digicel is a case in which the cause of action relied upon by the claimants therein is conspiracy to injure by unlawful means and the unlawful means are said to be breaches of statutory duty, and it is alleged that “the relevant Defendant deliberately delayed interconnection with its network by the relevant Claimant”.[13]

(2)  In a conspiracy claim, an essential element is intent (or predominant intent) to injure, which is a state of mind. Accordingly, it is not surprising that Morgan J said that e-mails may reveal what the defendants “really thought” or “really were intending to achieve”.

(3)  As said in the above, Ds have not pleaded any allegation of conspiracy against P. Ds’ case against P is the alleged interference. Ds’ case is not that P intended to interfere with Ds’ attempt to take control of Zhongtian. What matters is not what P (or its board and employees) intended or “really thought”, but what P actually did to achieve the alleged interference with Ds’ attempt to take control of Zhongtian. On the latter issue, Ds simply have no positive case at all.

49.Mr Lung submits that “bad faith” is pleaded in §16(c)(iv) of the Amended Defence, and hence documents which may shed light on P’s motive or intent are relevant and should be subject to discovery.

50.With respect, I am unable to accept Mr Lung’s submissions. In my view, Ds’ pleaded case viewed in the broad sense is that Ds are relying upon the “prevention principle”, ie no one shall take advantage of his own wrong.[14] However, in order to invoke the prevention principle, what is important is whether what P did is a wrong, not what P intended. Looking at Ds’ pleaded case broadly, I do not see the relevance of P’s motive in Ds’ pleaded case. The issue of P’s motive would not become relevant just because of the insertion of the two words “bad faith” in §16(c)(iv) of the Amended Defence.

51.Mr Lung submits that:

(1)  The discovery request originated from a specific email chain dated 17 June 2015 between Zhang Yi and P’s key management personnel (“17 June 2015 Email Chain”) already disclosed by P, being a circulation of a draft email to Kim (“the Draft Email”).

(2)  It is entirely proper to seek specific discovery where a document disclosed by one party fairly leads to a train of enquiry about the existence of further documents.

(3)  The 17 June 2015 Email Chain itself strongly indicates that there are additional documents within Class III. For one, Zhang Yi’s final email in the 17 June 2015 Email Chain (“Thanks. Will send it out.”) makes out at least a prima facie case that further correspondences between Zhang Yi and Kim exist.

52.While the disclosure of one document may lead to an enquiry about the existence of further documents, the question is whether, and if so how, the further documents can be relevant to the issues in dispute. I agree with Mr Chan that Ds have not articulated how the 17 June 2015 Email Chain or correspondence generated therefrom is relevant to the issues in dispute in the Peruvian Guano sense (ie it somehow advances Ds’ own case or damages P’s case). As submitted by Mr Chan, that there may be further correspondences between Zhang Yi and Kim does not ipso facto mean that those documents are thereby relevant.

53.According to Ds, the Class III Documents are relevant for these documents may cast light on the following:[15]

(1)  whether P had participated or featured in any Mainland proceedings in respect of the Property;

(2)  whether P had assisted or had any capability to assist Min and/or Kim to remain in control of Zhongtian; and

(3)  whether P had played any active and/or significant role in preventing and/or rendering impracticable or impossible for New Pi, Pi Korea and/or MB to obtain control over Zhongtian and to procure it to raise funds and repay the balance of the BEA Loan.

54.As to §53(1), the simple answer provided by Mr Chan is that this point is unrelated to any pleaded issue at all. It is not Ds’ pleaded case that P had interfered with the management and control of Zhongtian through its participation or involvement in any particular legal proceedings in the Mainland. Mr Chan rightly pointed out that Class II and Class IV were dismissed by the Master on the ground of irrelevance to the pleaded issues. There is no basis upon which it can be said that Class III (which does not even concern Mainland court proceedings) can still be regarded as “relevant” when Classes II and IV have been rejected.

55.Suffice for me to say that I have carefully considered both the written and oral submissions made by Mr Lung. With respect, I do not find any satisfactory answer from Ds to the point made by Mr Chan as stated in the above.

56.As to §53(2) and (3), having considered the parties’ respective submissions, I am also unable to agree with Ds on these points.

(1)  It is indisputable that on the interference issue, there is no positive averment as to what steps P took to assist Kim and Min to remain in control of Zhongtian.

(2)  Mr Lung submits that where the nature of the allegation is that the other side has engaged in “a clandestine affair the extent of which is not known to the [alleging party]”, then some recognition will be given to the fact that full details cannot be given in pleadings until after discovery is sought.[16]

(3)  With respect, having considered the evidence, I do not regard that there is any prima facie case that P is involved in any clandestine affair.

(4)  The Draft Email only shows that Zhang Yi of Gibson Dunn & Crutcher (who was P’s legal representative at the material time) set out the amounts of debts owed by Zhongtian to P and proposed which parts of the debts should be settled in full and which parts could be repaid with discount subject to further negotiation. As submitted by Mr Chan, the fact that P was in negotiation with Zhongtian for repayment of debts owed to P bears no logical relevance to Ds’ inability to take over control of Zhongtian. In fact, Ds have not pleaded that P’s negotiations with Zhongtian for repayment of debts were part of any alleged act of interference.

(5)  As submitted by Mr Chan, in any event, it is unclear how any meetings or discussions between Zhang Yi and Kim in relation to the BEA Loan or the payments made to the Cinda Group would have any logical relevance to the interference issue. Even if P (as a guarantor of the BEA Loan and the subrogated creditor of Zhongtian in respect of any sums already paid in respect of the BEA Loan) instructed Zhang Yi as its lawyer to discuss those payments and negotiating potential discounts with Zhongtian in the hopes of achieving a clean break, this would not affect Kim or Min’s ability to remain in management or control of Zhongtian at all.

(6)  Further, as shown in the evidence, Ds’ inability to obtain control of Zhongtian appears to be caused by the pending legal proceedings in Barbados commenced and pursued by Min in respect of the control of MB, in which P is not a party. As said in the above, there is no allegation in Ds’ pleaded case that there is any conspiracy between P and Min. Further, there is also no allegation that P has procured or incited Min to institute or to continue the proceedings in Barbados. New Pi have tried to obtain control of Zhongtian by commencing legal proceedings in the Mainland (P is also not a party in the Mainland proceedings), but New Pi failed in those proceedings for the reason that New Pi is not the direct shareholder of Zhongtian. Thus, in order to have the control of Zhongtian, New Pi must obtain the control of MB in Barbados first. In other words, even putting aside the pleadings and just considering the evidence, I do not see in what way it can be said that P has taken any step to interfere with the management and control of Zhongtian.

(7)  Both on the pleadings and on the evidence, Ds have failed to show a case to which the Class III Documents are relevant in the Peruvian Guano sense.

E3.  Blue pencil

57.Mr Lung submits, as a fallback position, that even if there is any problem concerning type 2 and type 3 in Class III, the Court should apply the blue pencil and allow the discovery of type 1 documents in Class III. However, for the reasons as stated above, I am of the view that Ds have not established a prima facie case on the relevance of the type 1 documents. In my view, Ds’ discovery application cannot be salvaged by applying the blue pencil.

F.  DISPOSITION

58.For the reasons above, I allow P’s appeal and set aside the Master’s order concerning the Class III Documents. Ds’ application for discovery of the Class III Documents is dismissed.

59.Costs should follow the event.

(a)  In the costs order made by the Master concerning the 1974 Summons, the Master awarded 75% of the costs of the summons (with a certificate for counsel) to P. The total of P’s costs in the hearing below has been assessed by the Master at HK$335,000. Based upon this figure, the Master awarded 75%, ie HK$251,250, to P as the costs of the hearing before him. I vary the costs order made by the Master, so that 100% of the costs of the 1974 Summons in the hearing below (with a certificate for counsel) should be paid by Ds to P forthwith. I adopt the figure determined by the Master. Accordingly, in respect of the costs of the hearing below, those costs are to be paid by Ds to P forthwith, and the quantum of which is HK$335,000.

(b)  Costs of P’s appeal be to P forthwith, and those costs be summarily assessed. There be leave to P to lodge and serve a statement of costs for summary assessment (limited to 2 pages) within 7 days, and leave to Ds to lodge and serve a list of objections (limited to 2 pages) within 7 days thereafter.

60.Lastly, it remains for me to thank all counsel for the helpful assistance rendered to the Court.

Mr Derek Chan, instructed by Johnson Stokes & Master, for the Plaintiff

Mr Vincent Lung and Ms Nicola Ho, instructed by Simmons & Simmons, for the 1^st and 2^nd Defendants