Consultant Associates (HK) Ltd v. Kingsfaith Engineering Ltd

DCMP 2153/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2153 OF 2009

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BETWEEN

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Coram : Deputy District Judge Edward Shum in Chambers

Date of Hearing  :  25^th November 2009

Date of handing down Judgment :   11^th December 2009

JUDGMENT

1.This is an application for pre-action discovery pursuant to section 47A of the District Court Ordinance, Cap. 336 and Order 24 rule 7A of the Rules of the District Court, Cap. 336H.

2.By an Originating Summons dated 30^th July 2009, the Plaintiff claims against the Defendant for inter alia an order that:-

“(1)  the Defendant do disclose whether a statement of final account of the Main Contract between the Architectural Services Department and New City Construction Co. Ltd. showing the certified amount of the Loss & Expenses Claim for the omission of the Schools P380 and P392 and the Extension of Time Claim respectively for the project entitled “The Conversion and Extension to Existing Aided Schools – Group 6 Under School Improvement Programme Final Phase, Package 6 Contract No AL M301 (Programme 8040EC)” (“The Document”) is in its possession, custody or power by making an affidavit stating whether The Document is or at any time has been in its possession, custody or power and if not then in its possession, custody or power, when it parted with it and what has become of it”

3.It is not in dispute that the Plaintiff was engaged by the Plaintiff to provide consultancy services on the abovementioned school improvement project (“the Project”). The Defendant was a sub-contractor to one New City Construction Co. Ltd. (“New City”), which was in turn the main contractor of the Project.

4.It is also not in dispute that the remuneration of the Plaintiff comprises two parts, namely, lump sum payment and bonus payment. The bonus payment is contingent upon the corresponding payment as certified under the main contract for the specific claims handled by the Plaintiff. But insofar as the present proceedings is concerned, only two types of claims handled by the Plaintiff are of relevance, namely, loss and expenses (“L&E”) claim and extension of time (“EOT”) claim.

5.The Plaintiff’s case is that the Defendant was in breach of its contract with the Plaintiff. The Plaintiff intends to institute legal proceedings against the Defendant upon receipt of the documents in respect of which pre-action discovery is sought. The Plaintiff argues that these documents are directly relevant to an issue arising out of the anticipated proceedings within the meaning of section 47(4) of the District Court Ordinance, Cap. 336 and it is not seriously challenged by the Defendant.

6.In this connection, a draft Statement of Claim has already been prepared and in which the Plaintiff alleges that:-

“8.  By way of the following acts set out hereinbelow, the Defendant was in breach of the Agreements

(1)  The Defendant deliberately prevented the Plaintiff from following up the L&E Claim with the Architect and the Quantity Surveyor of the Main Contract on its behalf;

(2)  The Defendant deliberately negotiated and settled the L&E Claim with the Architect and the Quantity Surveyor of the Main Contract on its own without consent and knowledge of the Plaintiff;

(3)  The Defendant has repeatedly refused and/or failed to settle the bonus payment in relation to the EOT Claim in the sum of $17,972.50 submitted under the Plaintiff’s debit notes ref: 0428/I/3226 and 0428/I/345 dated 26 February 2008 and 17 November 2008 respectively according to the payment terms contained in the Agreements; and

(4)  The Defendant has repeatedly refused and/or failed to assess finalize and settle the bonus payment in relation to the L&E and EOT Claims according to the payment terms contained in the Agreement.”

7.The powers conferred by s.47A of the District Court Ordinance, Cap. 336 are intrusive. Consequently, pre-action discovery orders under Order 24 rule 7A of the Rules of the District Court, Cap. 336H should be confined to no more than is necessary to enable a potential plaintiff to advance a meritorious claim which might not otherwise be brought without the documents sought. It is never intended that such powers be exercised in favour of a potential plaintiff who has already sufficient information to bring an action but who merely wishes to seek further documents from an intended defendant.

8.In this connection, the new Order 24 rule 8(2) also stresses that:-

“No order for the disclosure of documents shall be made under section 47A or 47B of the Ordinance, unless the Court is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

9.Also of relevance are the underlying objectives set out in the new Order 1A rule 1 of the Rules of District Court, Cap. 336H. And I need to remind myself that in giving effect to those underlying objectives, the Court shall always recognize that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties [see: Order 1A rule 2(2) of the Rules of the District Court, Cap. 336H].

10.Counsel for the Plaintiff is constrained to admit that this is not a case where a potential plaintiff is unable to advance a meritorious claim without the documents sought. Instead, he argues that with these documents the Plaintiff can quantify its claims more precisely. This will save costs for proceedings may be averted. Even if proceedings cannot be averted, they may in the light of such disclosure, be settled at an earlier stage than would otherwise be the case. Furthermore, the costs of having to amend the Statement of Claim, if disclosure is given in the normal way after commencement of proceedings, would be saved.

11.Despite the difference in wordings between CPR Part 31.16 in England and section 47A of our District Court Ordinance, English case law on how the Court’s discretion should be exercised is nevertheless helpful [see especially: Black v Sumitomo Corporation [2002] 1 WLR 1562 and Moresfield v Banners [2003] EWHC 1602 (Ch)]. Whilst the discretion is not confined and will depend upon all the facts of the case, I find the following considerations are of particular importance to the facts of our present case [see also: Matthews & Malek: Disclosure (3^rd ed.) para. 3.34], namely:-

(1)  What documents are already in the hands of the applicant?

(2)  The opportunity the applicant has to make its case without pre-action disclosure.

(3)  Is there a real prospect that pre-action disclosure can assist the parties to avoid litigation, or of saving costs in any event?

(4)  Looking at the matter in the round, does the request for pre-action disclosure further the underlying objectives of the Rules of the District Court?

12.It is common ground that the Plaintiff has issued a separate proceedings against New City [DCMP No.2154 of 2009 refers] and obtained pre-action discovery of the Final Account settled between New City and C.S Toh & Sons & Asscoiates Ltd., which represented the Architectural Services Department in the Project (“the Final Account”).

13.Counsel for the Plaintiff firstly submits that the Final Account is not a complete one. In particular, it does not contain the relevant information upon which the Plaintiff’s claim for EOT can be ascertained. Frankly, I find this submission rather puzzling. The purpose of the Final Account is to settle all accounts so that the retention money can be released to New City. All EOT Claims must have been dealt with before the accounts are settled. In any case, I am unable to accept in the absence of concrete evidence the Plaintiff’s suggestion that the “prolongation cost for reimbursable extensions of time granted for variation works” mentioned in the Final Accounts is of a different nature to the documents sought in the present application.

14.Counsel for the Plaintiff also raises the point that the Plaintiff is under an implied obligation not to make use of the Final Account for purposes other than its proceedings with New City. In my opinion, this argument is misconceived.

15.First of all, compulsion is the bedrock for the implied undertaking. And in deciding whether the compulsion principle applies, one needs to consider how the document was introduced: that is the point at which the voluntariness or otherwise of the disclosure is to be determined [see: Shun Kai Finance Co. Ltd. & Others v Japan Leasing (HK) Ltd. (No.2) [2000] 3 HKLRD 539 at 546]. It is clear from the evidence that New City voluntarily provided the Final Account to the Plaintiff on 1^st September 2009. The fact that an order by consent was subsequently made by the Court on 11^th September 2009 requiring New City to verify it on oath cannot render the discovery a compulsive one.

16.Be that as it may, the implied undertaking is only an undertaking not to use for any collateral purpose without the consent of the party who gave discovery [see: EMI Records Ltd. v Spillane [1986] 1 WLR 967]. The mere fact that the Defendant has been able to obtain a copy of the Final Account and exhibited it to its affirmation in opposition to the Plaintiff’s application for pre-action discovery is sufficient to prove in the absence of evidence to the contrary that New City has consented to the production of the documents in the present proceedings.

17.It is important to note that Order 24 rule 8 of the Rules of the District Court, Cap. 336H involves not only consideration of whether discovery is necessary at all but also whether it is necessary to order discovery “at that stage of the cause or matter”. As I have said, this is not a case where a potential plaintiff will be unable to advance a meritorious claim without pre-action discovery. The Plaintiff’s argument that pre-action discovery may assist the dispute to be resolved without litigation is more apparent than real. The reality of the present case appears to me to be that there is very little prospect of its being disposed of without pleadings and standard disclosure being given by both sides in the ordinary way.

18.There seems to me equally little prospect that the giving of the disclosure sought before an action is brought is likely to produce a significant saving in costs. Moreover, any saving that will arise because pre-action disclosure may avoid the need to amend the pleadings subsequently appears to me to be negligible. Indeed, all that the Plaintiff may have to amend is to substitute the time-honoured phrase of “damages to be assessed” by specific figures.

19.Looking the matter in the round, I am not persuaded that discovery is necessary at this stage. I am equally not persuaded that pre-action discovery will further the underlying objectives set out in Order 1A Rule 1A of the Rules of the District Court, Cap. 336H.

20.For these reasons I decline to make the order sought. I can see no reason why costs should not follow the event. Accordingly, I also make an order nisi that the Plaintiff do pay to the Defendant costs of this application to be taxed if not agreed. There be certificate for counsel.

The Plaintiff : represented by Mr. Yan Kwok Wing, instructed by M/S. Leung, Chan & Pang, Solicitors

The Defendant : represented by Ms. Man Yu Wing, instructed by M/S. Terry Yeung & Lai, Solicitors