Roger Chu v. Dah Sing Bank Ltd

HCA000008/1969

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 8 OF 1969

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Coram: Mr. Registrar Jones in Chambers.

Date of Judgment: 28th June, 1973.

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DECISION

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1. This is an application by the defendant for specific discovery of documents pursuant to Order 24 rule 7 of the Rules of the Supreme Court.

2. A previous application by the defendant for specific discovery that had been allowed by the Registrar was refused on appeal by a judge in Chambers on the grounds that it was too wide. The application as it was then framed amounted to one for unlimited access to the books of the Dragon Transportation Company, of which company the plaintiff was formerly a partner, over a period of four years. The decision of the judge was upheld by the Full Court. Although it was held that the order requested was burdensome and not necessary either for disposing fairly of the action or for saving costs the Court indicated that an order in a more limited form and based upon more specific information could be made under Order 24 rule 7. As a result the present summons has been issued whereby the defendant applies for an order for specific discovery of all copy invoices and receipts of the Dragon Transportation Company relating to the 86 cheques the subject matter of the plaintiff's claim and all vouchers, books of record, ledgers, cheque books and other papers of the company for the period October 1964 - April 1967 relating to various payments said to have been made during this time on account of the company. The payments alleged to have been made are specified in an affidavit of Yen Shih Ling the defendant's Chief Accountant filed on the 29th March 1973.

3. In order to succeed the applicant must establish a prima facie case that the documents are in the custody, possession or power of the plaintiff and that they may be relevant to the issue or issues to be tried.

4. I shall first deal with the argument as to whether the documents are in the custody, possession or power of the plaintiff.

5. The plaintiff's solicitor Mr. Ip has filed an affidavit in which he says that at all material times the partnership documents and papers including copy invoices and bills were kept by Chen Kai Yung, the plaintiff's former partner, at his residence and were under his sole custody and control. He claims that the receipts for payment of the 86 cheques were signed by Chen Kai Yung, and if there were any in existence, they were kept in his sole possession and custody but have not been traced. Mr. Ip said that transactions could not be traced or understood as the account books and records were not kept in any adequate or proper chronological order. Following a complaint made by the plaintiff Mr. Ip says that the Commercial Crime Office took possession of a lot of books, documents and vouchers of the firm from Chen Kai Yung's residence in 1967. A great proportion of these documents were later handed to Messrs. G. Ian McCabe & Co. Certified Accountants for an investigation and report. Messrs. G. Ian McCabe & Co. informed the plaintiff in a letter dated the 16th November 1967 that they had returned the documents to the Commercial Crime Office as potential exhibits in the criminal investigation. However, in a letter dated the 26th February 1972 they informed the defendant's solicitors that they returned all the vouchers, books of record, ledgers and cheque books to the plaintiff. According to Mr. Ip the documents were passed on by the Commercial Crime Office to Messrs. John T.O. Wong & Co. authorised auditors for the purposes of an audit. However, Messrs. John T.O. Wong & Co. in a letter to the plaintiff dated the 16th March 1968 stated that they were unable to do the audit as the records were incomplete, inadequate and had been kept in a most unsatisfactory manner. Mr. Ip states that according to the plaintiff's recollection the documents were afterwards returned to the Commercial Crime Office but provides no other details. On the other hand the Commercial Crime Office informed the defendant's solicitors by their letter of the 6th June 1973 that they were never in possession of the account books and documents belonging to the Dragon Transportation Company and that the records were handed over for auditing to Messrs. G. Ian McCabe & Co. on the 13th June 1967 by the plaintiff and Chen Kai-yung. The Commercial Crime Office added that the documents were in the possession of Messrs. John T.O. Wong & Co. in March 1968 but since that date they have had no record of the whereabouts of the documents. Whether or not the Commercial Crime Office ever had possession of the documents it is clear that they no longer have them today. On the evidence before me I am quite satisfied that the plaintiff has either possession of the documents or alternatively custody or power over them within the meaning of the rule.

6. As to relevance it is necessary to consider whether the documents may be relevant to the issues between the parties leaving the trial judge at the hearing to determine whether they are in fact relevant.

7. The defence alleges inter alia that there was an arrangement between the plaintiff and Chen Kai-yung as partners of the Dragon Transportation Company and the defendant whereby Chen Kai-yung was allowed to pay into his personal account cheques drawn by Sentab-Gammon in favour of the company and to credit the account with cash before payment was received. The defendant claims that the arrangement was confirmed by the plaintiff with Yen Shih Ling. The defence further alleges that the proceeds of the cheques or their equivalent were paid to or applied for the benefit of the partnership. Both of these defences are referred to by Yen Shih Ling in his affirmation of the 29th March 1973 in which he describes various matters from information given to him by Chen Kai-yung.

8. Criticism by Mr. Mills-Owens for the plaintiff was directed against Mr. Yen's affidavit on the grounds that it was not made from his personal knowledge. However, although Chen Kai Yung can be subpoenaed to give evidence he clearly cannot be compelled to make an affidavit, and I find that there is no merit to this objection.

9. A more damning criticism can be levelled at the plaintiff who has chosen not to file an affidavit but relies upon that filed by his solicitor.

10. In paragraph 2(3) of the affirmation Yen Shih Ling says he was informed by Chen Kai-yung that the 86 cheques were paid during the period from October 1964 to April 1967 by Sentab-Gammon to the firm for work carried out and described in the firm's invoices. Most of the invoices were signed by the plaintiff and receipts issued for the cheques in the name of the firm were signed by Chen Kai Yung on behalf of the firm. Copies of these invoices and receipts are said to have been kept by the firm. Paragraph 2(5) describes how the proceeds of the cheques were paid or applied for the benefit of the firm. These payments inter alia included instalment payments under hire purchase agreements with Wayfoong Finance Limited in respect of lorries and loaders hired by the firm, salaries and wages of employees, payments to sub-contractors for providing additional lorries and loaders and payments to suppliers and repairers. The payments were made during the period from October 1964 to April 1967 inclusive and were entered into the account books of the firm. Several of the cheques were endorsed on the back with the name of the Dragon Transportation Company.

11. Mr. Ip in his affidavit says that he has been informed by the plaintiff that no payments as alleged and specified in Mr. Yen's affirmation were made out of the proceeds of the 86 cheques nor can any payments be traced to them. However, I accept Mr. Wei's submission for the defendant that such a statement made without any evidence to support it is a bare assertion upon which no reliance can be placed.

12. Mr. Mills-Owens submitted that this action is a straight forward claim for conversion relating to the unauthorised operation of Chen Kai-yung's personal account. He maintains that if the application is granted the defendant will be able to investigate the affairs of the company during the four years in question. Mr. Mills-Owens referred to Order 24 rule 13(1) which provides what 'No order for the production of any documents for inspection or to the Court shall be made under any of the foregoing rules unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.' He then drew my attention to marginal note 24/2/4 on page 390 of Volume 1 of the Supreme Court Practice 1973 'Nevertheless, the Court will not make an order for discovery or inspection which is burdensome and not necessary either for disposing fairly of the cause or matter or for saving costs (rr. 8, 13), even where the rule for automatic discovery applies (r. 2(5)).' Mr. Mills-Owens further cited Kahn (David) Inc. v. Conway Stewart & Co. Ltd. (1972) F.S.R. 174 which related to an application for discovery of a specific class of documents which was refused upon the grounds that the probative value of the documents if they existed, would be so slight as not to justify the inconvenience of giving discovery and such discovery was not in the circumstances necessary for determining the issue to which it was said to relate.

13. Having regard to the two allegations set out in the defence to which I have referred and the affirmation of Yen Shih Ling I am of the opinion that the documents in respect of which the defendants seek an order for specific discovery are in all probability relevant to the issues in dispute between the parties. Although it may be inconvenient, difficult and troublesome to produce the documents the plaintiff has only himself to blame for this situation. The documents are necessary to enable the defence to be properly presented.

14. I do not consider that there is any validity to Mr. Mills-Owens argument that this application has been made too late nor to his contention that the defendant should have made an application that an account be taken of the partnership assets.

15. There will therefore be an order in the terms of the summons. The defendant is entitled to the costs of this application with a certificate for one counsel.

16. Dated the 28th day of June, 1973.

Representation: