Tsang Yiu Cheong and Another v. Chan Hin Wong t/a Three Star Tourist Bus Co. and Another

HCA007760/2000

HCA7760/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. HCA7760 OF 2000

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Coram: Deputy High Court Judge Carlson in Chambers

Date of Hearing: 19 July 2002

Date of Judgment: 19 July 2002

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J U D G M E N T

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1.This is an appeal against an order of Master Mak dated 10 June last, whereunder he directed that the defendants make specific discovery of their tax returns for the financial years ended 1997, 1998 and 1999.

2.The action has something of a background to it. The plaintiffs were the employees of the 1st and 2nd defendants. The 2nd plaintiff is the sister of the 1st defendant. Both defendants operate a bus company. Part of the work of that company is to provide transport for school children but there are also other types of work which are carried on by the defendants in this type of business.

3.The 1st plaintiff was employed as a driver. The 2nd plaintiff did office work of a general nature also including some clerical and accountancy work.

4.The action itself is substantially a claim for unpaid wages and other benefits in lieu. The defendants deny that there is any money owing and indeed there is a counterclaim based, amongst other things, on either overpayment or certainly misappropriation of the defendants' funds by the plaintiffs.

5.The grounds of the appeal essentially are these and they have been put, if I may say so, very persuasively and very strongly by Mr Ng, who appears for the defendants.

6.Firstly, that the application does not pass muster under the requirement of relevance. The second main ground is that the affidavit in support of the application for discovery, which is an affidavit prepared by Mr Edward Chan, the plaintiffs' solicitor, fails the requirements of Order 41 of the Rules of the High Court, and I will return to that aspect of it in a moment. But that having been said, Mr Ng submits that in such circumstances the whole summons is not properly supported by admissible evidence as required by Order 41.

7.Let me first deal with what I regard as the main point, and that is on the question of relevance, and in order to do so perhaps I should say a little bit about the background to this action. As one can see from the writ, it is for a very modest amount of money relatively speaking, although no doubt it is not modest for the plaintiffs who would like to have it paid to them if it is owing.

8.They started by bringing these proceedings in the Labour Tribunal. The 1st defendant then appeared before the tribunal and he by then had issued a writ in the High Court claiming that the plaintiffs had his money and he wanted that back. When the Labour Tribunal officer learnt of that, he took the view that there was clearly an overlap between the issues which were raised in the High Court action and the claim for unpaid salary in the Labour Tribunal and so he transferred the plaintiffs' claim to the High Court. That is how that matter found its way into this court.

9.Subsequently, the defendants' action against the plaintiffs was compromised for reasons which are presently in dispute but which do not really matter. So this is now the only platform for the litigation between the plaintiffs and the defendants and that is how this matter comes to court.

10.The question really is relevance. Mr Ng, in support of the appeal, says that the tax returns will not show very much at all. They will either show that there is profit over these years or the returns will show that there is a loss, but beyond that they will not show anything else. Clearly, they cannot be relevant to an issue of this sort. The way the matter is put on behalf of the plaintiffs, who seek disclosure of these tax returns is this: that very much in the background here is the fact the defendants were operating on the verge of impecuniosity, or at all events their cashflow was so precarious that from time to time the plaintiffs would have to use their own money to pay the defendants' outgoings. What is going to be submitted at the trial, as I understand it, on behalf of the plaintiffs is that these monies are outstanding and one of the reasons why they are outstanding is that there was simply no money there. Mr Ng says this is a point that can be made in the course of the trial, an argument that can be addressed to the trial judge. But where you have got these tax returns, they will provide so little information that it will not assist the judge one way or the other and the argument then goes on with Mr Ng saying there is simply no relevance to the issue of whether this amount of money has been paid or not.

11.His other point, which I think is a good one, and which I can dispose of now in his favour, is that where Mr Chan has suggested in his affidavit in support that this would go to the question of credibility as well, the authorities clearly show that on an application for discovery you cannot obtain discovery if it is merely related to credibility, and I think that is right. But Mr Chan says that that does not matter for the purposes of his summons because these tax returns are clearly relevant. I have come to the conclusion that they are, despite what Mr Ng has said.

12.The issue that arises here is has this amount been paid? One of the points is that the defendants simply could not afford to pay the salaries and that is why the salaries have not been paid. These tax returns, which would give some insight - I appreciate Mr Ng's point that they would not show very much - but they would give some insight as to the financial health of the defendants at the relevant time, is something which is clearly of relevance in the proceedings. And so on this limb of the argument I am very much in favour of Mr Chan's submission.

13.But before I leave it I ought to also deal with Mr Ng's other point which he very strongly relies on, and that is based on the construction of Order 41 of the Rules of the High Court. He says that this affidavit is not in proper form. What Mr Chan should have said is that this is information which he has recorded in the affidavit which he has clearly obtained from his clients and so he is not giving the original evidence. He should have used the appropriate expressions that "I am informed" and "verily believe" and so on. These magic words, as Mr Ng says, are simply not there and therefore the affidavit should not be given any credence.

14.Mr Chan's submission in reply is that he is not giving evidence in the way that one would expect in an affidavit where issues of fact need to be set out. He is merely putting the case in the legal sense. And whilst I think that the affidavit could have been better expressed, I am also of the view that Mr Chan is right and that this is a shortcoming that I am prepared to overlook given the nature of the affidavit and its substance.

15.So for all these reasons I am against Mr Ng and I am going to dismiss his appeal and consequently the order of Master Mak will go and the defendants must make discovery in accordance with his order.

16.It is now agreed, I think I would have made an order anyway, that this matter must now be transferred to the District Court where I think it will be dealt with more quickly than it would in the High Court and, in any event, it is comfortably within the jurisdiction of that court.

17.So far as costs are concerned I will of course hear argument but I take the view - let me just indicate - this is a matter where the argument was not, by any means, hopeless and in an interlocutory matter of this sort I would have thought that the appropriate order would be costs in the cause and whoever wins this actions get these costs.

(Argument on costs)

18.Now I have heard the argument on both sides I think costs will have to follow the event. Usually there is a wide discretion in these matters of course but having got an answer from the Master, the defendants persisted with this appeal, they could have said, "Well, we've tested it in front of the Master. He's against us. We'll reluctantly accept this and give them the documents." But they have come again and they have failed again. No. Costs here and below to the plaintiff in any event, with Legal Aid taxation.

19.The disclosure will have to be made within 14 days of today, please.

(Discussion re application for stay)

20.Case transferred to the District Court.

Representation:

Mr Edward Chan, instructed by Chan, Wong & Lam, for the 1st and 2nd Plaintiffs

Mr Morris Ng, instructed by Chan & Tsu, for the 1st and 2nd Defendants