Aachen (Asia Pacific) Consultants Ltd v. Khoo Ee Liam

HCA 4354/2003

IN THE HIGH COURT OF THE

HONG KONG ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4354 OF 2003

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BETWEEN

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Coram: Madam Registrar Queeny Au-Yeung in Chambers (Open to Public)

Date of Hearing:   18 October 2007

Date of Decision:  24 October 2007

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D E C I S I O N

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1.Legal principles applicable to specific discovery are not in dispute.  I will first consider the question of relevance, possession and existence of each class of documents, and then decide whether the order should be made in view of the draft fifth affirmation of the defendant.  In the following analysis I will follow the categorisation of the classes of documents by Mr Lam for the plaintiff and Miss Ip for the defendant.

Classes 2, 12 and 17

2.The defendant says that everything has been disclosed.  This is tantamount to not challenging the relevance, possession and existence of these documents.

Classes 3, 5, 6 and 7

3.Relevance is not in dispute, but possession or control is.  The defendant claims that the documents sought belong to IAL and he is not in control of those documents.

4.With respect, I agree with the analysis of Mr Lam for the plaintiff.  The defendant and his wife beneficially own the great majority of shares in HCK, IAL and Badaling.  The defendant has been making discovery of documents of IAL and Badaling.  There is no reason why he should suddenly challenge the issue of possession and control in the context of discovery.  He has not explained why, as a major shareholder, he needs the consent of his joint venture partner to disclose the documents and why, having disclosed some documents in the past, his joint venture partner suddenly does not want to consent.

5.The defendant claims that he does not know whether or not IAL has such documents.  This is no defence to an application of this sort.  The duty precisely is on a party to search his papers and find out if these documents considered relevant are still in his possession, custody and control.

Class 4

6.The defendant has already disclosed annual reports up to 2002.  In my view, those annual reports of and after 2003 are relevant to the counterclaim.  The defendant has pleaded diminution in value of the shares, and the plaintiff was allegedly responsible.  As pointed out by Mr Lam, the counterclaim for damages is premised on the difference in value of the shares pre-acquisition and the current value.

7.“Current” will have a connotation of the year 2004, when the counterclaim was put forward.  The annual reports sought are clearly relevant to the issue.  It is difficult to accept that as a public limited company, IAL has not prepared annual reports from 2003 onwards.  Of course, if this is the truth, the defendant can say so in his verifying affirmation.  I will come back to this point later on.

Class 8

8.The listing status of IAL, why it failed to relist, and why it withdrew its listing status are all issues in dispute.  Expert reports may help in the quantum of damages, but the cost of listing or not listing has to be given by way of evidence through the defendant as a party.  I accept counsel’s submission as to why it was considered such documents should exist.  If they do, these documents should be in IAL’s control.

Classes 9, 10 and 13

9.The plaintiff is not asking for documents of WNG but, in substance, the correspondence between, amongst others, the defendant and WNG or its liquidators.  A fair reading of the counterclaim and reply will show clearly that these documents are pertinent to the counterclaim and reply of the plaintiff.

Classes 14 and 15

10.These documents are relevant to show the quantum of counterclaim in relation to expenses for enforcing promissory notes and wasted expenses.  The defendant accepts the need to disclose them and in fact has disclosed a few documents.

11.In summary, I am of the view that all the classes of documents sought are relevant and within the possession or control of the defendant.  They are necessary for disposing fairly of the cause of defence in the present action.

12.This case is a clear example where, apart from oral evidence, documents will play a significant role.  It would thus be cost saving if the relevant documents are disclosed now than having to adjourn the trial to make discovery.

13.The next question is: should an order be made?  The defendant suggests that a fifth affirmation is forthcoming and it would be conclusive on the issue of specific discovery.  Therefore, no order needs to be made by me.  Mr Lam suggests that there must be a court order before an affirmation will be conclusive on the issue of discovery.

14.I am not inclined to agree with the broad statement of Mr Lam.  However, in the context of this case, it is not necessary for me to come to a firm conclusion on this point.  What is important here is that the fifth affirmation remains a draft and cannot in any way fall within the principle of its being conclusive on a question of discovery.

15.The plaintiff has first issued the summons for specific discovery 22 months ago.  I accept the defendant has been trying to be co-operative in disclosing further documents.  The amendment to the discovery summons reflects some of the efforts of the defendant.  The latest version of amendment summons was put forward about two months ago.  Despite this lapse of 22 months, or even two months, the fifth affirmation remains a draft. It is not satisfactory.  As Mr Lam says, the rights afforded to the plaintiff to seek an unless order and committal proceedings are all premised on an affirmation of discovery having been filed.

16.The question of the affirmation being in proper form and being filed aside, it is, in my view, not conclusive, because the reasons given in the draft affirmation for stating that the affirmation was conclusive were on a false premise.

17.Amongst other matters raised, the fifth affirmation tends to show that the defendant was not in possession of the documents sought.  In my view, it was a wrong perception both as a matter of law and evidence.

18.As stated in the analysis above, the defendant did have possession and control over the documents sought and has in fact made some discovery of those documents.  If he once had possession and control, he has not explained why he subsequently lost it; and if he had previously discovered some documents of certain classes, he has not explained why further discovery of relevant documents of the same class should not be done.

19.In summary, I am of the view that the application is justly taken out, and the draft fifth affirmation is no answer to the present application.

20.I therefore make an order for specific discovery of those classes of documents set out in the amended summons of the plaintiff filed on 27 August 2007.

(Discussion re time required for discovery)

21.I grant three calendar months from today for filing and serving the verifying affidavit and a further list of documents.

(Discussion re time required for inspection)

22.Inspection within 14 days thereafter.  It is actually an order in terms of your summons, provided we change the 14 days to three calendar months.

(Submissions re costs)

23.I am of the view that costs ought to be to the plaintiff in the present case.  The application is rightly taken out.  There will be costs to the plaintiff with certificate for counsel.

(Discussion re costs of previous hearing)

24.Costs reserved on 11 May 2006 be to the plaintiff as well with certificate for counsel.  This, of course, Ms Li and Ms Wu, does not prevent the parties from arguing any additional costs as a result of a change of counsel.

On 18 October 2007:

Mr Paul Lam, instructed by Messrs David Lo & Partners, for the Plaintiff

Ms Chyvette Ip, instructed by Messrs Liau, Ho & Chan, for the Defendant

On 24 October 2007:

Ms V Li, instructed by Messrs David Lo & Partners, for the Plaintiff

Ms M Wu, instructed by Messrs Liau, Ho & Chan, for the Defendant