Allied Arab Bank Limited v. Taj El Arefin Hajjar and Others

Case No.

Court

Date—

Judge—

Case Document

100%Judiciary

HCCL000009C/1987

1987 No. CL-9

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMMERCIAL LIST

BETWEEN

	ALLIED ARAB BANK LIMITED	Plaintiffs
	and
	TAJ EL AREFIN HAJJAR (Male)	1st Defendant
	UTG INVESTMENTS (FAR EAST) LTD.	3rd Defendant
	UTG PROJECTS (CHINA) LTD.	4th Defendant
	UTG INDUSTRIAL (H.K.) LTD.	5th Defendant
	UTG FUJIAN HOTELS LTD.	6th Defendant
	UTG XIAMEN INVESTMENTS LTD.	7th Defendant

Coram: Deputy Judge Litton Q.C. in Chambers

Date of Hearing: 25th June 1987 and 30th June 1987

Date of Delivery of Decision: 30th June 1987

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DECISION

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1. This Decision concsrns on application made under Order 24 Rule 11 of the Rules of the Supreme court by the Defendants, for an Order requiring the Plaintiff, the Allied Arab Bank Limited, to produce for inspection certain documents referred to in an affidavit sworn by Mr. D.A. Stokes, Solicitor for the Plaintiff.

2. The affidavit was filed in Court on 3 June 1987 and was made for the purposes of a number of interlocutory matters then before the Court. Two of these are of relevance:

	1)	An application to join Barclays Bank plc as a plaintiff to the action, and
	2)	An application brought by the defendants to strike-out the Points of Claim, the summons of which was taken out on the 20 March 1987.

3. There was exhibited to Mr. Stokes' affidavit, marked as "DAS-1", a proposed amended Points of Claim showing Barclays Bank plc as a new plaintiff. Paragraphs 1.2 and 1.3 of the amended Points of Claim plead a number of documents as follows:

	i)	A written agreement dated 1 November 1984 whereby Barclays Bank and Sheik Adham gave an option permitting the Allied Arab Bank to require them to purchase "the indebtedness the subject of this action".
	ii)	A variation of the option agreement of no particular relevance.
	iii)	Letters dated 21 December 1984 whereby the option was exercised by the Allied Arab Bank, and
	iv)	Written assignments dated 27 December 1984.

4. It is specifically these documents which the Defendants now require to inspect, and seek an order to do so.

5. It is necessary for me to examine briefly the history and background of the various matters which have come before the court.

6. The day after Mr. Stokes' affidavit was filed and served, the Defendants' solicitors wrote to the Plaintiff asking for a copy of the assignment referred to in paragraph 10" of Mr. Stokes' affidavit. The request was repeated by letter dated 5 June 1987 which also asked for the specific documents which I have just enumerated.

7. On Monday 8 June 1987 the strike-out summons came before me. In opening the application for the Defendants, Mr. Lindsay QC mentioned the fact that there was reference in Mr. Stokes' affidavit to an assignment and that the Defendants had asked to see the assignments, but that up to that point, the assignments had not been produced for inspection. Mr. Lindsay said that the assignments were relevant to show whether the Allied Arab Bank had suffered any loss consequent upon the fraudulent misrepresentations and conspiracies as pleaded. Mr. Lindsay also told the Court that he did not wish to delay the proceedings, and therefore would proceed with his application to strike out the Points of Claim without having had sight of the assignments.

8. The application to strike out took several days of argument. In the course of the hearing Mr. Lindsay QC mentioned the fact that he had been told by leading counsel for the plaintiff that the assignments were ready for handing over, and apparently at one point Mr. Lindsay thought that the assignments had been handed over to the solicitors for the defendants. That, at any rate, is what Mr. Lindsay said he was led to believe. But that turned out later to have been wrong. In the outcome the documents were not handed over, and I proceeded to give judgment on 12 June on the strike-out summons without the matter of the production of the assignments having been resolved.

9. The effect of my decision on the strike-out summons is relevant to the matter now before me. My decision on the strike-out summons was this, that of the four causes of action as pleaded, the two which survived were:

	1)	The conspiracy as particularized on page 93 of the pleading, which then had reference back to paragraphs 28 and 40(20): to paraphrase the pleading, it was to the effect that the defendant companies were operated for "the purpose of receiving assets which included the proceeds of the fraud pleaded .............. and then holding such assets as if such assets were not assets of the UTG Group Companies and holding them for members of the families of the relevant individuals".
	2)	The other cause of action which survived was the claim for an accounting based on constructive trusteeship.

10. Now, at the time of the strike-out summons, there were two other matters outstanding before me of relevance:

	1)	An application to stay the Hong Kong action in favour of the English proceedings, on the basis of the doctrine of forum conveniens, and
	2)	An application to enlarge the order of Mr. Justice. Mortimer dated 13 February 1987 regarding the use of documents in the English proceedings.

11. As to (1), I disposed of the matter on the afternoon of Friday 12 June after I had given judgment in the strike-out application. And as to (2), it was disposed of by my decision delivered on 17 June 1987.

12. As regards the stay of the Hong Kong action, the order contained an express reservation to this effect, that the stay was "without prejudice to any further application for striking-out if the assignments reveal that the Allied Arab Bank had no contractual claims against the customers or guarantors and therefore suffered no loss".

13. Now the present summons before me requiring the plaintiff Allied Arab Bank to produce the assignments was taken out on 23 June 1987, following receipt of a letter dated 20 June from the plaintiffs' solicitor to this effect: it is of relevance so I shall read it into the record:

"Dear Sirs,

Allied Arab Bank Ltd -v- Hajjar and Others

	We thank you for your recent letters regarding the provision of documents pursuant to Ordere 24 Rule 10 of the Rules of the Supreme Court, ending with that dated 18 June.
	We have the following comments:

	(i)	The 6th affidavit of David Adrian Stokes sworn on 3 June to the effect that "an assignment .... has been made" refers to an event and not to a document.
	(ii)	The entitlement under Order 24 Rule 10 relates to any documents referred to in the body of the affidavit. It includes exhibits to an affidavit, but does not include documents referred to in an exhibit. The relevant note in the Supreme Court Practice 1985 cites the case of Re Hinchcliffe [1895] 1 Ch 117.
		That case was authority for the principle that exhibits to affidavits are discoverable pursuant to Order 24 Rule 10. It does not provide authority for the proposition that documents referred to in an exhibit must produced.

	Accordingly we take the view that you are not entitled to receive the documents under Order 24 Rule 10. We apologise for the fact that we may previously have given the impression that those documents would be supplied but a proper consideration of the point has led us to the conclusion that you have no right to the documents requested at this stage of the litigation.
	If you feel that the conclusion we have reached is incorrect we invite you to direct us to the grounds of authority on which you rely to support your application for the documents. We undertake to consider your authorities and arguments on an urgent basis with counsel and to advise you of our decision in the light of such authorities within 48 hours of receipt."

14. The defendants' riposte to that letter is the present summons.

15. Now, as regards the point taken in the letter of 20 June 1987 which I have just read, based allegedly upon the construction of Order 24 Rule 10, it is in my judgment totally untenable. The words in Order 24 Rule 10 "in whose pleadings or affidavits reference is made to any document are very wide. Mr. Stokes referred in paragraph 10 of his affidavit to "an assignment of the debts". And when one looks at the first exhibit to the same affidavit, one sees a reference to written assignments dated 27 December 1984. In these circumstances it would be extraordinary to suggest that Mr. Stokes in paragraph 10 of his affidavit was not referring to a document. An assignment is a legal act and in this case Mr. Stokes was saying that the act was achieved by a written instrument.

16. But this is not the end of the matter. What Order 24 Rule 11 contemplates is that before an application is made to the Court there should be service of a notice requiring the other party to produce for inspection the document in question, giving the other party an opportunity to state, within 7 days after service of the notice, the grounds of objection if the other party objects to the production of the document. Now in this case no formal notice was served. The fax of 4 June 1987 says "We require a copy of this document forthwith", and in the letter of 5 June 1987 the defendants' solicitors say:

"Finally we again confirm our request for a copy of the assignment mentioned in paragraph 10 of the 6th affidavit of David Stokes. We also require copies of the documents referred to in paragraph 1.2 of the draft document entitled 'Amended Points of Claim' annexed to your client's summons for joinder of Barclays Bank plc."

17. It is true, as Mr. Winston Poon, counsel for the defendants, contends: the rules do not require any particular form of notice. I am prepared to hold, as I do, that the fax of 4 June and the letter of 5 June constituted sufficient notice.

18. But if formal notice had been served in this case, it would have focused attention upon the crucial issue of this application as it has developed in the course of the argument before me. It is this. What is the "cause or matter" for which production of the documents is now required? Order 24 Rule 13 states as follows:

Paragraph (1):

"No do 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 thast the order is necessary either for disposing fairly of the cause or matter or for saving costs".

19. Now on Monday 8 June 1987 when the strike-out summons was opened before me by Mr. Lindsay QC, there were a number of causes or matters before me including, of course, the strike-out summons. At that time the assignments could well have been necessary for me to dispose fairly of the strike-out summons and, perhaps, for the saving of costs. One of the causes of action then pleaded against the defendants was damages for fraudulent misrepresentation. What was alleged in the pleading was that the bank was induced by lies to (here I quote from paragraph 35 of the pleading):

"continue to offer and/or extend overdraft and other banking facilities to the Customers and/or to refrain from calling upon the Customers and/or the Guarantors to repay the monies owed to the Plaintiffs".

20. If the bank had by December 1984 already assigned the claims, (that is to say, assigned the monies owed) to Barclays Bank plc and Sheik Adham, then arguably the bank suffered no loss arising from the fraudulent misrepresentations. It might then have been possible for me to have disposed of that matter on the strike-out summons without the elaborate analysis which was in fact conducted. It was possibly open to the defendants to say: "Look at these written assignments which have been produced: the bank's pleading in paragraph 35 is totally misconceived; the action is frivolous and vexatious".

21. Other examples can be produced with reference to the pleadings to illustrate the same point.

22. But as things have transpired, the point regarding the production of the documents was not pressed. The defendants did not, prior to the present summons dated 23 June 1987, ask for a formal order for production. In so far as there was a "cause or matter" between the parties arising from the strike-out summons, that has been disposed of by my judgment of 12 June 1987.

23. Now, can the "cause or matter", for which the production of the documents be now required, be the main Action itself? That is to say, such causes of action as survived the strike-out. Mr. Ronny Wong, counsel for the plaintiff provides two answers:

	1)	The assignment of debts can no longer be relevant to the surviving causes of action which are now based purely upon misappropriations. The only part of the conspiracy claim which survived relates to the operation of the Defendant Companies for the purposes of receiving the proceeds of fraud (that's the paragraph 28 claim), and the constructive trusteeship claim, which is a proprietory claim. It is the very opposite of a debt claim. The very reason for equitable tracing is because there was no debt lawfully created.
	2)	Mr. Wong also argues: in any case, for reasons good or bad, the Hong Kong Action is now stayed. Upon terms, it is true, but nevertheless, stayed. So in Hong Kong there can be no "cause or matter" for which an order for production under Order 24 Rule 11 could be relevant.

24. Now Mr. Winston Poon, counsel for the Defendants, answers Mr. Wong's points as follows:

	1)	As to the surviving causes of action, one of them is conspiracy, which sounds in damages. The documents may be relevant to the claim for damages. The documents may show that no damage has been suffered; and
	2)	Even though the action is stayed, there was an express reservation in the Order, which is without prejudice to an application to strike-out based upon the assignment of the debts.

25. Now in my judgment Mr. Wong's contentions are correct. I cannot at present see the relevance of the debt claims against the customers and/or guarantors, when all that survives are actions based upon misappropriations by Hajjar and others to which the Defendant Companies might be parties. But the main point which in my judgment is decisive is this: the main Action in Hong Kong is stayed. If the defendants had good grounds for striking out based upon the written assignments they can, despite the order for stay, make application to do so. When order 24 discovery has taken place in England in the English Action the defendants undoubtedly would have sight of the written assignments. They are parties to the English Action. It is for them, at that time, to decide whether they should 'chance their arms' again in Hong Kong. But at the present time in Hong Kong, there is simply no cause or matter to which an application under Order 24 Rule 11 could relate. I cannot therefore see what costs could be saved in terms of Order 24 Rule 13 if an order for production be made; and a fortiori there is no cause or matter in terms of Rule 13 which could be "fairly disposed of" by my ordering production of the documents for inspection.

26. Now I have some sympathy for the defendants on this application. Maybe they were led along by the nose. They might even have been misled by what they were told, but ultimately I must judge the issue in terms of Order 24 Rule 13. The defendants have failed to convince me that the conditions of Rule 13 are satisfied. Accordingly this application is dismissed. I will hear Counsel on the question of costs.

27. And as to costs, having heard counsel, the order I make is that there should be no order as to costs.

	(Henry Litton)
	Deputy High Court Judge

Representation:

Mr. Ronny Wong instructed by Messrs. Richard Butler for the Plaintiff

Mr. Winston Poon instructed by Messrs. McKenna & Co. for 3rd to 7th Defendants.