William Thomson v. Roland John Jeans and Another

DCCJ 3388/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3388 OF 2005

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DCCJ 3389/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3389 OF 2005

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REASONS FOR DECISIONS

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Introduction

1.In these actions, the plaintiffs, Mr Thomson in DCCJ 3388/2005 (“P1”) and Mr Boewe in DCCJ 3389/2005 (“P2”), claim against the defendants for $500,000 and $250,000 respectively.  These were moneys which they had agreed with the 1^st defendant (“D1”) to invest in a company called Wanchai Bierkeller Ltd (the “Company”).

2.At the requests of D1, P1 and P2 paid their investments to the 2^nd defendant (“D2”), a firm of solicitors acted for D1 and the Company at the material times, on about 24 January 2004 and 8 December 2003 respectively.  There is no dispute that D2 had received the payments.

3.There is also no dispute that D2 had released the plaintiffs’ moneys to D1 or the Company.

4.No shares in the Company had been issued to the plaintiffs.  The Company was put into liquidation by a resolution passed in an extraordinary general meeting of the Company held on 4 January 2005.

5.The plaintiffs claim against the defendants for return of their investments on the grounds of total failure of consideration, money had and received, conversion and breach of trust.  Judgments had been entered against D1.  The remaining claims are claims against D2.  

6.The plaintiffs’ cases were that their moneys paid to D2 were for the sole purpose of acquiring shares in the Company.  I had on 18 July 2013 granted leave for D2 to amend its defences in both actions.  In its amended defences, D2 pleaded that according to its understanding and honest belief the Company was entitled to immediate use of the plaintiffs’ investments (the “Investment Money Arrangement”) and that D2 had acted in accordance with the Investment Money Arrangement.

7.Trials of both actions had been set down to commence on 5 August 2013 with four days reserved.

8.The central issues in dispute between the plaintiffs and D2 are the purposes for the plaintiffs’ payments to D2 and the terms upon which the payments were paid to D2. 

9.D2 took out two applications in each action on 16 May 2013.  The first set of applications is for specific discovery in both actions (the “Discovery Applications”).  The second set of applications is to adjourn the pre-trial reviews and to vacate the scheduled trial dates (the “Adjournment Applications”). Summonses for all these applications were returned before me on 18 July 2013. I dealt with all the summonses together.  The applications were all opposed by the plaintiffs.

10.After hearing the parties’ submissions, I dismissed D2’s all aforesaid applications with costs.  I had reserved my reasons for my said decisions which I now set out below.

The Discovery Applications

11.D2 sought discovery of the following two categories of documents from the plaintiffs in both actions:

(1) “Documents, including but not limited to emails, letters, memorandum, faxes, and attendance notes regarding the meeting of or discussions between the 1^st Defendant and the Plaintiff relating to the investments made by the Plaintiff to the Company in or about [“January 2004” in DCCJ 3388/2005 and “December 2003” in DCCJ 3389/2005].” (the “Class 1 Documents”); and

(2) “Documents, including but not limited to emails, letters, memorandum, faxes, and attendance notes regarding the communications between the Plaintiff and any other shareholders, directors, or managers of the Company from December 2003 to January 2005.” (the “Class 2 Documents”)

12.D2 also sought discovery of the following category of documents from P1:

“Documents, including but not limited to emails, letters, memorandum, faxes, and attendance notes regarding the complaint made by the Plaintiff [P1] against the 1^st Defendant and the Company to the Hong Kong Police in or about November 2004.” (the “Class 3 Documents”).

The legal principles on specific discovery

13.There is no dispute between the parties on the legal principles governing specific discovery.  Both parties referred to Tullett Prebon (Hong Kong) Limited v Chan Yeung Fong Nick & others (unrep., HCA 2197/2009, 9 June 2011, To J) when his Lordship set out the legal principles applicable to inter-parties discovery as follows:

“11. Counsel have no dispute about the legal principles applicable to inter-parties discovery which are well established. It is trite that a partyseeking an order for discovery must make out a prima facie case that: (1) a specified document or class of documents exists; (2) the party against whom the order is sought has or had the documents in his possession, custody or power; (3) the documents relate to a matter in question in the action; and (4) discovery is necessary either for disposing fairly of the cause or matter or for saving costs.

12. For the purpose of discovery, a prima facie case may be based on the probability arising from the surrounding circumstances, or in part on the specific facts deposed to.  The burden is on the party seeking discovery to prove existence of the document, the other party’s possession, custody or power over the document and relevance.  Once a prima facie case is made out, the court has discretion to order disclosure: Berkeley Administration Inc v McClelland [1990] FSR 381 (CA) at 382 per Mustill LJ, as he then was.  It is for the party resisting discovery to satisfy the court that discovery is not necessary for dispoing fairly of the cause or matter or for saving costs: Hong Kong Civil Procedure 2011§ 24/8/1”

14.The relevance of the documents under application is to be determined by pleadings. To J stated in Tullett Prebon that:

“19. Whether the documents sought are relevant, has to be determined against the causes of action pleaded and the issues to be litigated.”

15.The governing principle for relevancy as set out in Compagnie Financiere du Pacifique v Peruvain Guano Co (1882) 11 Q.B.D. 55, per Brett L.J. at 63 covers document containing information which may enable the party (applying for discovery) either to advance his own case or to damage that of his adversary, if it is a document which may fairly lead him to a train of inquiry which may have either of these two consequences.

D2’s case

16.D2 filed two affidavits of Ian Roger De Witt (“IDW”) in each action to support the Discovery Applications.  They were the 5^th and 7^th Affidavits of IDW filed on 16 May 2013 and 20 June 2013 respectively in both actions.

17.On existence, IDW stated the following in his 5^th Affidavits:

(1) “The 2^nd Defendant believes that the documents that it seeks exist (or existed).  The Plaintiff claims that he often works abroad.  It would therefore be usual for him to communicate with the 1^st Defendant by way of emails, faxes and letters.” (Para 14 in DCCJ 3388/2005 and para 13 in DCCJ 3389/2005)

(2) “Furthermore, it is the Plaintiff’s [P1’s] case that he had repeatedly asked the 1^st Defendant for a finalised shareholder agreement (paragraph 5 of the Re-Amended Statement of Claim).  It is therefore possible that there are documents to reflect such communications.” (Para 15 in DCCJ 3388/2005)

(3) “During the discovery process, we have seen a couple of emails among the shareholders in which the Plaintiff [P2] was copied in.  However, the emails discovered do not cover the whole period since the date when the Plaintiff [P2] became a shareholder.  It is possible that there are more emails that are relevant to this matter.” (Para 14 in DCCJ 3389/2005)

(4) “As regards the letter from Massie & Clement dated 29 November 2004, it has referred to a complaint made by the Plaintiff [P1].  There should be written record or report of that complaint.” (Para 16 in DCCJ 3388/2005)

18.IDW stated in his 5^th Affidavits filed in both actions that the issues in disputes between the parties are as follows:

“10. The key issues in the dispute between the parties are:

(a) Whether there was a total failure of consideration in the matter;

(b) whether the Plaintiff was aware of or allowed the investment funds be applied by the 2^nd Defendant or the 1^st Defendant immediately after the deposit was made;

(c) whether the 2^nd Defendant is a constructive trustee of the Plaintiff;

(d)  whether the 2^nd Defendant had misapplied or misappropriated the funds of the Plaintiff.”

19.IDW stated in his said 5^th Affidavits that for issues (a) and (c), it would be important to discover the correspondence between the plaintiffs and D1 or other related parties in relation to their investments, to see whether they had given instructions regarding the application of the funds, or whether they had knowledge about the use of the funds.

20.IWD further deposed that correspondence between the plaintiffs and other shareholders would also reveal that they were acting as shareholders after they deposited the moneys to D2’s account.  If that was the case, the plaintiffs’ claims for failure of consideration should not stand.

21.In his 5^th Affidavit filed in DCCJ 3388/2005, IDW said that they had seen a copy of a letter dated 29 November 2004 from Massie & Clement to the police stating that P1 had contacted D1 twice suggesting that if D1 would give up his interest in the business without compensation and allow them to take it over and reopen the Bar, they would cease their complaints.  IWD said that it appeared that P1 intended to take over the bar and the documents related to the complaint might show his dealings with D1.

22.Miss Lee, representing D2, submitted that D2 had established a prima facie case on the existence of the documents sought in view of all surrounding circumstances.

23.She relied on the following matters to support her contention:

(1) The plaintiffs were either residents outside jurisdiction or claimed to often work abroad.  It would therefore be natural for them to communicate with D1 by emails, faxes and letters.

(2) She referred to a few emails produced by D2 which showed that the plaintiffs had email addresses.

(3) Despite repeated requests and demands, the plaintiffs failed or refused to confirm by way of affidavits whether the documents already disclosed by them were the only relevant documents in their possession or custody.

(4) P1 did not deny that he had an email address but only said that his aged computer had been out of order and discarded.

(5) P2 only said that he had no recollection of receiving any alleged emails.

(6) D1 had in his witness statements which D2 sought to adduce in these proceedings said that he had email correspondences with the plaintiffs.

(7) P1 had made a complaint to the police in or about November 2004.  There should be a written record or report concerning the complaint. 

24.Miss Lee submitted that the relevance of a document should not be solely tested against the detailed particulars pleaded by the parties.  It was the pleaded case of the parties in the board sense that one should be concerned with.  She relied on Billion Lead Investment Ltd v Union Joyce Ltd (unrep., HCMP 2145/2011 M Chan J, 14 December 2012) to submit that for the purpose of discovery, the pleadings had to be looked at broadly.

25.She submitted that the main factual issues in these actions were, inter alia, as follows:

(1) whether the plaintiffs obtained beneficial interest in the Company or were otherwise recognized or treated as “shareholders” of the Company;

(2) whether the payment of the investment moneys was subjected to any limitation or restrictions or was otherwise to be used for the Company’s business according to its instruction and/or whether the plaintiffs had knowledge of the same.

26.Miss Lee submitted that the Class 1 Documents were relevant to the issue on whether the use of the plaintiffs’ investment moneys was subjected to the restrictions claimed by the plaintiffs.  They would lead to a train of inquiry on whether the plaintiffs and D1 had agreed on how the plaintiffs’ investment moneys would be used and whether the plaintiffs had permitted their moneys to be used by the Company or had knowledge of their moneys being used in that way.

27.She said that the Class 2 Documents were relevant to whether the plaintiffs had acquired beneficial interest in the shareholdings of the Company or had been treated as shareholders of the Company.

28.Miss Lee said that P1 pleaded in para 5(b) of its re-amended statement of claim that D1 told P1 in late November 2004 that the Company would soon be liquidated and P1 made complaint to the police in November 2004.  She submitted that the Class 3 Documents would show the dealings between P1 and D1 on matters related to the Company and they might help to contradict P1’s case.

29.Miss Lee submitted that against the aforesaid identified factual issues in dispute, the documents sought were prima facie relevant and the plaintiffs had not showed that the documents sought were not necessary for fairly disposing of the cause or matter or for saving costs.

The plaintiffs’ case

30.Miss Chan, representing the plaintiffs, confirmed that the plaintiffs did not take issue on the scope or description of the discovery sought.  The plaintiffs also did not take issue on the delay point.  The plaintiffs would only take issues on the existence, relevancy and necessity for fair disposal or saving costs.

31.She submitted that the question of whether or not the documents or class of documents sought was relevant to matters in issue was resolved via an examination by the court of the pleaded case of the parties.

32.Miss Chan submitted that the matters deposed to by IDW were incapable of proving that the Class 1 Documents existed and that the plaintiffs were in possession, custody, or had power over the documents.  She submitted that D2’s basis for discovery was highly speculative in nature.  She referred to the following paragraphs of IWD’s Affidavits to support her said contention:

“However, as stated in my 5^th Affidavit, it is highly likely that there are written emails or correspondence between the Plaintiff [P1] and the 1^st Defendant in relation to the investment made by him, not least as the Plaintiff [P1] worked abroad very often and it is common for people to communicate via email in such circumstances.” (Para 8 in IDW’s 7^th Affidavit in DCCJ 3388/2005)

“The 2^nd Defendant believes that the documents that it seeks exist (or existed). The Plaintiff [P2] claims that he often works abroad. It would therefore be usual for him to communicate with the 1^st Defendant by way of emails, faxes and letters.” (Para 13 in IDW’s 5^th Affidavit in DCCJ 3389/2005)

33.Miss Chan said that D2 relied on an email dated 27 April 2005 which was sent by D1 to a number of persons on subject matter unrelated to the plaintiffs’ investments in the Company and the said email did not fall within the time specified for the Class 1 Documents.  She submitted that the main issue in dispute between the plaintiffs and D2 was D2’s knowledge on how the plaintiffs’ investment moneys would be used.  The type of emails as the one dated 27 April 2005 had little probative value for the issues in dispute between the plaintiffs and D2.  She submitted that D2 failed to provide sufficient evidence on the existence and the plaintiffs’ possession of the Class 1 Documents.

34.Miss Chan said that the plaintiffs pleaded that D1 had made oral representations to them regarding investment in the Company and P1 pleaded that he had orally requested D1 and D2 to amend the draft shareholders’ agreement on 21 January 2004.  D2 had denied knowledge of the said oral representations.  Miss Chan submitted that there was no factual basis to assert that there were documents evidencing discussion between the plaintiffs and D1 relating to the plaintiffs’ investments.

35.She further submitted that the Class 1 Documents had no relevance to the real pleaded issue between the plaintiffs and D2.  She submitted that the real issue was whether D2 in the course of acting qua D1 and the Company’s solicitors/agent acquired any knowledge which would render the subsequent remittance of the plaintiffs’ moneys out of D2’s bank account a wrongful act. The documents were unlikely to be material to the pleaded issues between the plaintiffs and D2 and were not necessary for the fair determination of the issues in the actions.

36.Miss Chan said that D2 could obtain the Class 1 Documents (if they existed) from D1 and seeking discovery from the plaintiffs was not a costs-saving way of obtaining the information sought.

37.Miss Chan said that D2 only offered scanty particulars in support of its assertion that the Class 2 Documents existed and were in the plaintiffs’ possession. Miss Chan referred to the following paragraphs of IWD’s Affidavits:

“I have seen an email sent by the 1^st Defendant to the shareholders of the Company in which the Plaintiff [P1] was copied in. So clearly there was communication and correspondence.” (Para 10 of IDW’s 7^th Affidavit in DCCJ 3388/2005)

“During the discovery process, we have seen a couple of emails among the shareholders in which the Plaintiff [P2] was copied in.” (Para 14 of IDW’s 5^th Affidavit in DCCJ 3389/2005)

38.The emails exhibited to the Affidavits of IDW were an email dated 28 September 2004 from a Brian Anderson to a group of recipients including P2 and emails exchanged between a Patrick Sherriff and the said Brian Anderson on 4 and 6 October 2004 to which P2 was named as one of the recipients.  IDW also exhibited the email dated 27 April 2005 sent by D1 to various people including the plaintiffs.

39.Miss Chan submitted that none of the emails served to advance D2’s case that the plaintiffs acted as shareholders of the Company.  It was unlikely that the Class 2 Documents would give a litigious advantage to D2 or would contain information of such evidential materiality to D2’s defence as to make discovery necessary for the fair determination of the issues.  This type of emails as exhibited had slight probative value for these cases.

40.Miss Chan further submitted that D2’s plea of the plaintiffs acted as or were being treated by the Company as shareholders had already been struck out by the order dated 17 May 2006.  If D2’s proposed amendments to its defences were not allowed, D2’s alleging the plaintiffs having beneficial interest in the shareholdings of the Company was not an issue in dispute between the plaintiffs and D2 in these actions.

41.In respect of the Class 3 Documents, Miss Chan said that the matters deposed to by IDW again offered scant support as proof of existence of the documents and P1 having possession, custody or power over the same.  She submitted that the letter issued by Massie & Clement referred to in IDW’s Affidavits was incapable of amounting to any proof that the Class 3 Documents existed.  The 5^th Affidavit of IDW identified the issue related to the complaint of P1 was whether P1 intended to take over the business.  Such issue was wholly irrelevant to the pleaded issues.  Miss Chan submitted that it was likely that the probative value of the Class 3 Documents (if they existed) would be so insignificant that the ordering of discovery would not be justified.

Discussion and rulings

42.By the nature of the Class 1 Documents and the Class 2 Documents being documents produced or received by the plaintiffs, I am satisfied that if they existed, they would be in the possession, custody or power of the plaintiffs.

43.What I had to determine were whether they were in existence; relevant to the issues in dispute and were necessary for fair disposal of the cause or matter or saving costs.

Class 1 Documents

44.The plaintiffs’ claims are for return of their investment moneys paid to the account of D2.  The issues in dispute are whether the moneys paid to D2 were for specific purpose for allotment of shares in the Company or for immediate use by the Company for its business.  The Class 1 Documents are documents regarding the meetings of or discussions between D1 and the plaintiffs relating to the investments to the Company made by P1 in about January 2004 or by P2 in about December 2003.  These documents, if exist, are prima facie relevant to the issues in dispute.

45.D2 produced certain emails to support its applications.  The emails showed that the plaintiffs had email addresses.  However, none of the emails were regarding the meeting of or discussion between D1 and the plaintiffs relating to the plaintiffs’ investments.

46.The facts relied on by D2 to show a prima facie case of the existence of the Class 1 Documents were as follows:

(1) The plaintiffs claimed that they often worked abroad therefore it would be usual for them to communicate with D1 by way of emails, faxes and letters. (Para 13 of IDW’s 5^th Affidavit in DCCJ 3388/2005 and Para 14 of IDW’s 5^th Affidavit in DCCJ 3389/2005)

(2) P1’s case was that he had repeatedly asked D1 for a finalised shareholder agreement therefore it was possible that there were documents to reflect such communications.  For this contention IDW referred to paragraph 5 of P1’s re-amended statement of claim. (Para 15 of IDW’s 5^th Affidavit in DCCJ 3389/2005)

47.Miss Lee submitted that D2 had established a prima facie case of existence in view of all surrounding circumstances.  With respect, I do not agree.

48.Para 5 of P1’s re-amended statement of claim pleaded as follows:

“5 (a) On 21 January 2004, the Plaintiff [P1] orally requested the 1^st Defendant and the 2^nd Defendant to make several amendments to the said draft. However, at no time thereafter, was the said draft of the shareholders’ agreement finalized by the 2^nd Defendant or signed by the group or the Plaintiff. Nor were any shares in the Company ever allotted to, or any share certificates of the Company issued to the Plaintiff [P1], despite his repeated requests to the 1^st Defendant who repeatedly put him off,

(b) Eventually, in late November 2004, the 1^st Defendant told the Plaintiff [P1] that the Company had incurred big losses and would soon be “liquidated” and investments made in the Company as well as the subscription was lost and irrecoverable.”

49.D2 in its defence filed in DCCJ 3388/2005 did not admit the aforesaid matters pleaded by P1.  D1 in para 5 of his defence filed in DCCJ 3388/2005 averred that there were no requests to make “several amendments to the draft.”

50.P1 stated that he had made oral request to D1 and D2 for amendments to draft shareholders’ agreement.  D2 did not admit such request.  D1 averred that there was no such request.  I do not see the basis for IDW to depose in his 5^th Affidavit in DCCJ 3389/2005 that it was possible that there were documents to reflect such communications.

51.The fact that the plaintiffs often worked abroad does not mean that they had communicated with D1 in writing on their investments to the Company.  In the plaintiffs’ re-amended statements of claim and D1’s defences filed in both actions, none of them mentioned any written communications between them regarding their meetings or discussions relating to the plaintiffs’ investments to the Company.

52.In the 7^th Affidavits of IDW filed in both actions, he stated as follows:

“The 2^nd Defendant has only been in touch with the 1^st Defendant in March this year (which gave rise to other documents being disclosed). From the 1^st Defendant’sstatements and our correspondence, there were more documents and information to be discovered.” (Para 19 of IDW’s 7^th Affidavit in DCCJ 3388/2005 and para 15 of IDW’s 7^th Affidavit in DCCJ 3389/2005)

53.Miss Lee in her submission referred to paras 32 and 33 of a proposed witness statement signed by D1 in DCCJ 3389/2005.  These paragraphs stated as follows:

“32. Mr. Boewe [P2] was copied in the emails among shareholders and therefore he knew about the development of the matter. I have seen two emails dated 28 September 2004 and 16 April 2005 from the discovered documents and noticedthat he was copied in them. The emails related to the operating of the business. This evidence the fact that he acted as an investor and a shareholder and was treated as such.

33. I did not meet him that often after the bar was opened. However, we maintained contact by way of emails. Copies of the emails in which Mr. Boewe [P2] was copied in are exhibited at “RJJ-6”.”

54.In IDW’s 7^th Affidavit filed in DCCJ 3388/2005 as set out in para 52 above, IDW also referred to D1’s statement prepared for DCCJ 3388/2005.  In that statement, D1 had also mentioned emails received by P1.  D1 stated as follows:

“33. I noticed that Mr. Thomson [P1] was copied in some of the emails among the shareholders and therefore he knew about the development of the matter. I have seen an email dated 27 April 2005 from the discovered documents and noticed that he was copied in it. This evidenced the fact that he acted as an investor and was treated as one. A copy of that email is exhibited to this Statement as “RJJ-6”.

34. I did not meet him that often after the bar was opened.”

55.If there were emails, letters and faxes between the plaintiffs and D1 regarding meetings and discussions relating to the plaintiffs’ investments to the Company, D1 would have copies of such emails, letters or faxes.  Not only did D1 not produce any copy of such documents to his proposed witness statements, he in fact did not even mention that there were such documents.

56.In “RJJ-6” referred to in D1’s proposed witness statements in both actions, D1 had only exhibited one email dated 27 April 2005 sent by him to a few people including the plaintiffs.  The email read as follows:

“Gentleman,

Received a call today (27^th April 2005) from Bruno Arboit of Baker Tilly,

who advised me they were trying to trackdown Brian Anderson, with regard to

a lot of items that appear to have gone missing from the Wanchai Bierkellar.

Roland Jeans.”

57.IDW had produced the email dated 16 April 2005 as “IRDW–23” to his 5^th Affidavit in DCCJ 3389/2005.  This was an email sent by a Brian Anderson to a few people including P2.  It read as follows:

“Hi all

Is there any news yet on re-capitalizing the bar. The reasons that I bring this to your attention is because we are getting very close to the end of the month. If there is no injection in the next two day then there will be no money to pay Staff Salaries and Suppliers. I have been paying off the outstandind suppliers to give them confidence to keep supplying to us. I mess Stress that if 70% of recapitilisation is not in place by the end of the month or the first couple of days into the month. Then you run the risk of everyone foreclosing on the bar. Im sure that no-one wants this option.

Sincerly

Brian Anderson”

[sic]

58.The 2^nd Defendant’s List of Documents filed in DCCJ 3389/2005 listed the email dated 28 September 2004 as item 143 being an email from Brian Anderson to various persons including P2.

59.All the aforesaid emails were not on meetings or discussions between the plaintiffs and D1 (in about January 2004 in the case of P1 and in about December 2003 in the case of P2) on the plaintiffs’ investments to the Company.  The emails dated 28 September 2004 and 16 April 2005 were not even emails sent by either the plaintiffs or D1.  I fail to see how the aforesaid emails could help to show a prima facie case of existence of “emails, letters, memorandum, faxes, and attendances notes regarding the meeting of or discussion between the 1^st Defendant and the Plaintiff relating to the investment made by the Plaintiff to the Company in or about (“January 2004” in DCCJ 3388/2005 and “December 2003” in DCCJ 3389/2005)”

60.D2 produced nothing to suggest that there were memorandum or attendance notes regarding the meetings of or discussions between D1 and the plaintiffs relating to the plaintiffs’ investments to the Company.

61.I agree that a prima facie case on existence may be established on showing the probability arising from the surrounding circumstances or on specific facts deposed to such as business practice for a certain type of documents to exist. (See Union Bank of India v General Nice Resources (Hong Kong) Ltd (unrep., HCA 299/2007, 10 May 2010, Bharwaney J))  However, this does not extend to speculation.  The grounds put forward by D2 in support of the existence of the Class 1 Documents were mere speculation and D2’s application for discovery of the Class 1 Documents was nothing more than a fishing expedition.  Such discovery application was not allowed.

62.However, I do not agree to Miss Chan’s submission that D2 could obtain the Class 1 Documents (if they existed) from D1 instead of seeking discovery from the plaintiffs for costs saving.  If relevant documents to a cause or matter are in the possession, custody or power of a party, such party is obligated to disclose the documents under Order 24 of the Rules of the District Court (the “Rules”). The fact that other parties to the proceedings may also have possession of such documents does not relieve a party from its discovery obligation and is not ground for resisting a specific discovery application.

Class 2 Documents

63.In this class, D2 sought discovery of documents regarding communications between the plaintiffs and “any other shareholders, directors, or managers of the Company from December 2003 to January 2005.”

64.From the emails produced and set out above, I am satisfied that the plaintiffs had received some emails from shareholders or directors or managers of the Company.  However, I do not see how these mails were relevant to the issues in dispute between the plaintiffs and D2.

65.IDW in his 5^th Affidavits filed in both actions deposed that:

“Correspondence between the Plaintiff and other shareholders would also reveal that he was acting as a shareholder after he deposited the money to TDW’s [D2’s] account. If that was the case, the Plaintiff’s claim that failure of consideration shall not stand.” (Para 12 of IDW’s 5^th Affidavits filed in both actions)

66.Miss Chan rightly pointed out that D2’s defences relying on the plaintiffs having acquired beneficial interest in the shareholdings of the Company and having been treated as shareholders of the Company had been struck out by the order dated 17 May 2006.

67.D2 had attempted to resurrect the same pleas through amendments to its defences. I had earlier refused such amendments.

68.Whether the plaintiffs had acquired beneficial interest in the shareholdings of the Company or had been treated as shareholders of the Company are not issues in dispute between the plaintiffs and D2.

69.The emails referred to by D2 only showed that the plaintiffs had received emails from shareholders or directors or managers of the Company but this is not sufficient.  The communications had to be relevant before they will be subjects of specific discovery.  

70.I agree that for discovery purposes, one is not concerned with the detailed particulars of the parties’ pleaded case.  Instead one is concerned with the pleaded claims or defence in the board sense.  Even on such premise, the documents sought still should offer a real probability of evidential materiality to the pleaded claim and the defence to it in the broad sense. (See O Company v M Company [1996] 2 Lloyd’s Law Rep 347 and Chan Hung v Yung Kwong Chung (unrep., HCA 216/2004 and 217/2004, 15 January 2009, Deputy High Court Judge H Wong SC))  “The real issues in the case should remain at the forefront of one’s mind when deciding each application for the discovery of a particular class of document.” (Per Deputy High Court Judge Burrell in China Man-Made Fiber Corporation v Goldman Sachs (Asia) LLC (unrep., HCA 2756/2008, 30 March 2012) at para 5)  The said emails did not show or suggest that there were other communications between the plaintiffs and other shareholders or directors or managers of the Company on matters relating to the pleaded claims or defence of the plaintiffs and D2.

71.D2 failed to prove a prima facie case of existence of documents on communications between the plaintiffs and other shareholders or directors or managers of the Company on matters relating to the issues in dispute between the plaintiffs and D2.  D2’s application for specific discovery of the Class 2 Documents was not allowed. 

Class 3 Documents

72.The Class 3 Documents are documents regarding the complaint made by P1 against D1 and the Company to the police in about November 2004.  D2 relied on a letter dated 29 November 2004 issued by Massie & Clement to the police to support this application.  Massie & Clement stated in the said letter that they acted for D1.  They further stated that:

“On another matter, our client instructs us that Mr. William Thompson [P1] who is according to you a complainant contacted our client both last night and again today suggesting that if our client would give up his interest in the business without compensation and allow them to take it over and reopen the Bar that they would cease their complaints.”

73.IDW deposed in his 5^th Affidavit in DCCJ 3388/2005 that as Massie & Clement’s letter referred to a complaint made by P1, there should be written record or report of that complaint.  There was nothing to suggest that P1 made a written complaint to the police.  I do not see the logic that P1 being a complainant should have written record or report of the complaint.  It will be more logical to say that the police should have written record or report of the complaint.

74.I agree that the police should have kept record or report of P1’s complaint which might be in the form of memorandum or attendance notes.  However, such record or report would be internal documents of the police.  There was no evidence to show that they were in the possession, custody or power of P1.  There was no evidence to show that there were emails, letters and faxes regarding P1’s said complaint to the police.

75.Furthermore, no evidence was adduced to show the nature or content of P1’s complaint.  IDW in his 5^th Affidavit filed in DCCJ 3388/2005 stated in para 13 that:

“It appears that the Plaintiff intended to take over the bar and the documents that relate to the complaint might show his dealing with the 1^st Defendant.”

76.If the complaint was related to P1’s intended take-over of the bar, it had nothing to do with the issues in dispute between P1 and D2.  Chu J (as she then was) stated in Re Estate of Ng Chan Wah (unrep., HCAP 5/2003, 5 March 2003) at para 16 that:

“It is not the purpose of discovery to give the plaintiffs an opportunity to hunt around the documents in the hope that they will reveal some improprieties on the defendants’ part or will provide information for them to pursue more enquiries.”

77.Burrell J also stated in Mariner International Hotels Ltd v Atlas Ltd and Anor (unrep., HCA 10714/1998, 10752/1998 and 10821/1998, 18 January 2002) at para 9 that:

“The task of the court will often be to determine when “doing justice to the claim” stops and “fishing” or, to use another analogy “the scatter gun approach” starts.  At that point the onerous nature of the discovery exercise passes from the necessary and permissible to the unnecessary and impermissible.”

78.D2’s discovery application for the Class 3 Documents was plainly a fishing expedition.  I refused D2’s application at the hearing on 18 July 2013.

The Adjournment Applications

79.By the Adjournment Applications, D2 sought to re-fix the pre-trial reviews for both actions and to vacate the trials for both actions scheduled to commence on 5 August 2013.  D2 filed two affidavits of IDW in each action, namely his 4^th and 8^th Affidavits, to support these applications.

D2’s case

80.In IDW’s 4^th Affidavits filed in both actions on 16 May 2013, IDW referred to four interlocutory applications taken out by D2 in each action after the case management conference hearing in which the trial dates were fixed to support the Adjournment Applications.  These interlocutory applications were applications to amend defences, to file and serve further or supplemental witness statements, for specific discovery and for security for costs.

81.Miss Lee submitted that pursuant to Order 35, rule 3 of the Rules, the court had power to adjourn a trial upon terms in the interest of justice.

82.She referred to Hong Kong Civil Procedure 2008 to submit that the court should take into account the following matters when deciding whether to grant an adjournment application:

“(1) The importance of the proceedings and their likely adverse consequences to the party seeking the adjournment.

(2) The risk of the party being prejudiced in the conduct of the proceedings if the application were refused.

(3) The risk of prejudice or other disadvantage to the other party if the adjournment were granted.

(4) The convenience of the court.

(5) The interests of justice generally in the efficient despatch of court business.

(6) The desirability of not delaying future litigants by adjourning early and thus leaving the court empty.

(7)  The extent to which the party applying for the adjournment had been responsible for creating the difficulty which had led to the application.”

(See 35/3/1 of Hong Kong Civil Procedure 2008 vol 1 at p 620)

83.Miss Lee agreed that the aforesaid principles were principles applied before the implementation of the Civil Justice Reform (the “CJR”) but submitted that they were still relevant albeit not decisive.

84.She accepted that after the CJR, the court had to take into account the underlying objectives set out in Order 1A rule 1 of the Rules and the party seeking to vary the trial date, which was one of the milestone dates, was required to show exceptional circumstances.

85.She submitted that D2 had demonstrated exceptional circumstances existed which justified the adjournment sought.  The exceptional circumstances relied on by Miss Lee including D2 was caught by surprise when the actions were set down with trial dates fixed without consultation of counsel’s diary and when D2 had indicated that it still had further interlocutory applications to make.

86.She further submitted that if no adjournment was granted, D2 was at risk of being gravely prejudiced as the outcome of the actions was of paramount importance to D2.  D2 wished to call D1 and the Liquidator of the Company to give evidence at trial.  With new witnesses being added, the four days reserved for the trials might not be adequate.

87.She further submitted that the plaintiffs were to some extent also responsible for the delay and there was no prejudice caused by the adjournment which could not be compensated by costs.

88.Miss Lee said that the court might order the plaintiffs to put up further security for costs and the plaintiffs might not be able to do so before the trials commenced.

89.Miss Lee further submitted that there might also be appeals against the rulings on the aforesaid interlocutory applications.  Such appeals would not be disposed of before the commencement of the scheduled trials.

90.She submitted that the adjournment sought was not contrary to the underlying objectives of the CJR.

The plaintiffs’ case

91.Miss Chan submitted that in the post-CJR era, the courts were not pre-disposed to delay trials and exceptional circumstances were required to justify any variation under Order 25 rule 3(3) of the Rules.  She pointed out that the absence of prejudice to the other party which could not be compensated for by costs was not considered as an exceptional circumstance.

92.Miss Chan said that the plaintiffs were ready for the trials.  She submitted that D2 failed to show exceptional circumstances justifying the variation of the trial dates and that an adjournment of the trials per se posed a serious prejudice to the plaintiffs who had endeavoured to prepare their cases for trial.

Discussion and ruling

93.I had disposed of D2’s applications for amendment of defences, adducing further or supplemental witness statements and specific discovery before dealing with the Adjournment Applications.  The results of the aforesaid interlocutory applications did not affect the trial dates.

94.To do fairness to counsel, I have to point out that their skeleton submissions were prepared and lodged before my rulings on the aforesaid interlocutory applications were known.

95.I was told that there were pending applications for security for costs.  In considering the Adjournment Applications, I had not taken into account these pending security for costs applications.  I was of the view that it was up to the judge hearing the security for costs applications to make appropriate directions. Whether the trial dates would be affected by such directions was a matter to be considered by the judge when he/she made the directions.  

96.When I dealt with D2’s applications for amendment of defences and adducing further or supplemental witness statements, I had dealt with the submissions raised by D2’s counsel (who was not Miss Lee) on fixing trial dates when D2 had indicated that it had further interlocutory applications to make and without consulting counsel’s diary as well as delay on the part of the plaintiffs.  My views were set out in paras 104 to 115 of my decision dated 18 July 2013.  I do not propose to repeat myself here.  Suffice it to say that I did not agree to D2’s submissions on the aforesaid matters.

97.Under Order 35, rule 3 and Order 25, rule 3(2) of the Rules, the court has power to vary the trial date or to adjourn a trial.  The discretion to adjourn trial is to be exercised in accordance with the underlying objectives of the CJR.

98.Order 1A, rule 1 of the Rules provides that:

“1. The underlying objectives of these rules are ─

(a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;

(b) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c) to promote a sense of reasonable proportion and procedural economy in conduct of proceedings;

(d)  to ensure fairness between the parties; …”

99.Adjourning the trials of these actions which are due to commence in two weeks’ time will certainly lead to waste of preparation costs and delay in the proceedings.

100.To do fairness to the parties requires the position of both parties to be considered.  All outstanding interlocutory applications, except D2’s security for costs applications, had been disposed of.  The plaintiffs are ready for the trials.  If D2 is not ready for the trials, it is caused by D2’s poor case management and leisured attitude towards these proceedings.  To adjourn the trials in such circumstances will not be fair.  What D2 shall do is to catch up with its preparation works for the trials.

101.Order 25, rule 3(8) of the Rules provides that a date which the court has fixed for the trial is a milestone date.  Order 25, rule 3(3) further provides that the court shall not grant an application to vary a milestone date unless there are exceptional circumstances justifying the variation.

102.Para 42 of Practice Direction 5.2 provides that:

“42. Milestone dates will be immovable save in the most exceptional circumstances and for that purpose, for instance, late instructions from client, change in the team of lawyers, the absence of prejudices to the other party which cannot be compensated for by costs, will not be treated as exceptional circumstances.”

103.I was not satisfied that D2 had showed exceptional circumstances justifying variation of the trial dates.  “It must be anticipated that the court will not be pre-disposed to delaying the trial and very cogent arguments and reasons will be required in order to achieve any variation.” (See 25/1B/1 of Hong Kong Civil Procedure 2013 vol 1 at 586)  The arguments and reasons put forward by D2 in support of the Adjournment Applications were far from very cogent and I dismissed the Adjournment Applications at the hearing on 18 July 2013.

Costs

104.I had dismissed D2’s Discovery Applications and Adjournment Applications.  I saw no reasons why D2 should not bear the costs.  I ordered D2 to pay the plaintiffs’ costs for both applications with counsel certificate.  I had assessed such costs by summary assessment and ordered D2 to pay the same to the plaintiffs forthwith.

Miss Joyce Chan, instructed by John Ip & Co, for the plaintiffs

Miss Connie Lee, instructed by the 2^nd Defendant acting in person