Bank of India v. Mr. Gobindram Naraindas Sadhwani and Anohter

HCA004939/1983

1983 No. 4939

TN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Kempster, J.

Date of Hearing: 5th December, 1983

Date of Delivery: 5th December, 1983

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JUDGMENT

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1. On the 5th June 1978 the two defendants to the present action together with two further guarantors, all apparently being members of the same family, guaranteed the indebtedness of Messers Sadhwanis and Sadhwanis Japan Ltd. to the Bank of India, Osaka Branch, in Japan. The terms of the guarantee allowed the Bank of India a very wide discretion in releasing debtors or co-guarantors and in relation to the continued liability of one or more of the guarantors.

2. On the 4th December 1981 the plaintiff applied for and obtained in the Osaka District Court a provisional attachment order covering property in Japan belonging to the principal debtor or debtors and all four guarantors. Those proceedings involved an action in that Court called Y05025 which is, and this is common ground, to be distinguished from substantive proceedings claiming relief either from principal debtor, guarantors or both. From the evidence before me there is nothing to suggest that substantive proceedings have ever been commenced by the Bank against any relevant party in Japan. However, on the 10th June 1982 the plaintiff Bank commenced an action in this jurisdiction against the present defendants as guarantors under the document of guarantee to which I have referred. Shortly afterwards, on the 6th July, the Bank applied, again successfully, to the Osaka District Court to release the attachment order obtained in December 1981. The ground for release was expressed in these words:

"Since the applicant (being the bank), and the obligor (being the principal debtor called Sadhwanis (Japan) Ltd. and the 'two further guarantors') have settled the case outside of court, and there is no need to maintain the preattachment."

This application and consequential order left the property of the defendants here subject to the earlier order of preattachment,

3. On the 26th July 1983 the manager of the Osaka Branch of the plaintiff's, Mr. Abraham by name, swore an affidavit obviously for use in Hong Kong on Order 14 proceedings. He swore, after setting out chapter and verse, that in his belief there was no defence to the present pro-ceedings. The Order 14 summons was issued on the 15th August and that was followed on the 23rd August by an application on the part of the defendants to stay substantially, I would think, on the grounds of "forum conveniens". Somewhat, it would appear, as an afterthought, on the 24th November 1983 the defendants issued a summons pursuant to Order 24 rules 7 and 8 of the Rules of the Supreme Court for the discovery of specific documents. And so by some agreement, contrivance or otherwise this Court is seized with the application for specific discovery before the hearing either of the Order 14 summons or of the summons to stay.

4. The specific discovery required is described as follows:

"The document or documents containing and/or evidencing the settlement affected in Japan between the plaintiff on the one part and Sadhwanis (Japan) Ltd., K.N. Sadhwani and Radhika Sadhwani of the other part to which settlement the plaintiff referred in an application for the release of the pre-attachment real estate which application was filed in the Osaka District Court on the 6th July 1982."

5. The provisions of the material rule are strict. Order 24 rule 7 provides that the court may at any time on the application of any party to a cause or matter make an order requiring any other party to make an affidavit stating whether any document specified or described in the application is or has at any time been in his possession, custody or power. And such an order may be made whether or not the party has already made a list of documents in the normal way. But section 8 further provides that on an application for specific discovery the court "if satisfied that the discovery is not necessary or not necessary at that stage of the cause or matter may dismiss it or, as the case may be, 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".

6. In the present context albeit the Statement of Claim was served on or about the 10th June 1982 and amended quite substantially on the 15th July 1983 the defendants have at no stage elected to file a Defence. No more by today have they filed evidence disclosing a Defence. It is therefore reasonably apparent that this application made, as I have already commented, at a late stage, is really for the purpose of finding a Defence or, further or alternatively, material assisting in the application for a stay.

7. These rules were quite recently considered in the case of R.H.M. Foods Ltd. v. Borril Ltd. ⁽¹⁾ where Lord Justice Lawton at page 677 used these words:

"I am willing to accept that the affidavits to which I have referred have reasonably given-the plaintiffs cause for suspicion; but at present there is not, in my judgment, any satisfactory evidence of fraud or, indeed, of disreputable conduct short of fraud. In my judgment, it would be unfair to the defendants to allow the plaintiffs to have discovery before they have set out in a statement of claim such allegations of deliberate deception as they feel justified in-making. Discovery under order 24, rule 1 has to relate 'to matters in question in the action' and so does discovery under rule 7. Until at least a statement of claim has been delivered the court can seldom know what are the matters in question in the action".

8. Those words can be applied mutatis mutandis to the absence of a Defence and, indeed, my attention has been drawn to paragraph 27 of Volume 13 of Halsbury's laws of England, 4th Edition, where the editors have written:

"Although a plaintiff was seldom allowed discovery in any form until service of his statement of claim in order to prevent 'fishing' discovery, and for a like reason it was not usually granted to a defendant before defence. The modern practice in both divisions is to refuse discovery before close of pleadings save in the most exceptional circumstances, but in many cases the severity of this rule is mitigated by postponing the service of particulars until after discovery."

9. The question of particulars does not as yet arise. I have to decide on the evidence available to me whether the matters disclosed denote most exceptional circumstances.

10. An issue may arise and probably will arise as to whether the obligations arising under the document of guarantee are obligations governed by Hong Kong or by Japanese law. An issue may arise as to whether those obligations, so interpreted, result in the construction of the document as one of guarantee or as one of indemnity. There may be consequential consideration as to whether or not the liability of a principal debtor can be less than the liability of a guarantor. But all these are matters, it seems to me, properly the subject of a Defence and matters which, in the initial stages, need not be set out   with full particulars. Further, as already observed, the delivery or service of particulars may be postponed until after discovery.

11. In circumstances where summary judgment is sought and a summons is also issued to stay it is incumbent upon the person making an application for specific discovery to show exceptional circumstances or exceptional need to inspect the relevant documents. In my view the party applying must also show that he has taken all reasonable steps to secure the relevant information from other sources before seeking an order for what is prima facie premature discovery. The evidence filed on behalf of the defendants does not indicate to me that exhaustive enquiries had been made in Japan. Certainly letters have been written without success to the other persons concerned but there is nothing in evidence to indicate that the Register, and the Japanese apparently have a Land Register somewhat similar to that with which we are familiar, has been inspected. In the exercise of my discretion I propose to adjourn this application sine die as premature.

(1)    (1982) 1 All E.R. 673

Representation:

Anthony Dicks (Wilkinson & Grist) for plaintiff

William Stone (Baker & McKenzie) for defendants