Joe Zhixiong Zhou v. Saif Partners Ii L P and Anothers

Case No.HCA 1551/2010

Court

High Court CFI

Date31 Oct 2014

Judge—

Case Document

100%

HCA 1551/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1551 OF 2010

____________

BETWEEN

	JOE ZHIXIONG ZHOU	Plaintiff
	and
	SAIF PARTNERS II L P	1^st Defendant
	SAIF II GP CAPITAL LIMITED	2^nd Defendant

____________

Before: Mr Recorder Patrick Fung SC in Chambers

Date of Hearing: 24 July 2014

Date of Handing Down Decision: 31 October 2014

________________________

D E C I S I O N

________________________

1.This is an application by the plaintiff by Summons issued on 27 February 2014 (“the Summons”) against the defendants for specific discovery of documents and for a consequential direction to extend the time for the parties to exchange witness statements.

BACKGROUND

2.The 1^stdefendant (“D1”) is and was at all material times an exempted limited partnership registered under the partnership law of the Cayman Islands. The 2^nd defendant (“D2”) is the general partner of D1. The plaintiff was formerly a limited partner of D1.

3.The person in control of D2 was and is someone by the name of Andrew Yan (“Yan”). He is the sole director and shareholder of D2.

4.D1 is itself the sole general partner of another exempted limited partnership in the Cayman Islands by the name of SAIF II GP L P (“SAIF II Partnership”).

5.SAIF II Partnership is in turn the sole general partner of yet another exempted limited partnership in the Cayman Islands by the name of SB Asia Investment Fund II L P (“Fund II”). Fund II is a private equity fund which has invested over US$640 million in companies mainly in China, India and Korea. There seems to be some argument by the defendants as to whether the plaintiff was a former principal of Fund II as opposed to being just a limited partner.

6.In or around 2001, the plaintiff first met Yan. He later worked for companies controlled by Yan.

7.Subsequently, a Partnership Agreement dated 9 December 2004 (“the Partnership Agreement”) was entered into between the plaintiff and D2 in relation to D1.

8.After about 6 months, the plaintiff and D2 entered into another agreement to amend the terms of the Partnership Agreement. This was the Amended and Restated Limited Partnership Agreement dated 29 June 2005 (“the Amended LPA”).

9.In or around mid‑2006, Yan was contemplating starting a new private equity fund (“Fund III”) with D1. The plaintiff informed Yan that he was not interested in Fund III. Eventually, the plaintiff, D1 and D2 entered into a Separation Agreement dated 11 December 2006 (“the Separation Agreement”) providing for the plaintiff’s departure from D1 for the purposes of forming a new fund and for his non‑participation in D1’s Fund III.

10.Under Clause 6 of the Amended LPA, the plaintiff was entitled to Capital Distributions and Other Non‑Carry Distributions as well as Carried Interest Distributions.

11.Clause 8 of the Separation Agreement which refers to the plaintiff as “Joe” provides as follows:

“8) Vesting: Joe will have an additional nine months of vesting from November 1, 2006 with respect to his carry interest or points in SAIF Partners II L.P.. With this additional vesting Joe’s final vested percentage will be 51.78%. The non‑vested portion of the additional nine months vesting shall continue to be vested as long as Joe has compliant with the provisions and obligations under the this separation agreements. For the avoidance of doubt, there shall be no recourse or reduction once the carry interest is vested.”

12.It is the plaintiff’s case that:

(i) The “carry interest” to which he is entitled under Clause 8 of the Separation Agreement became vested on 1 August 2007.

(ii) D1 and/or D2 breached the Separation Agreement and, in particular Clause 8 thereof, in the following manner:

“(1) by a letter on the 2^nd Defendant’s letterhead dated 15 October 2008, informing the Plaintiff that:

(a) He had allegedly committed “Cause” under the Amended LPA by conducting himself in a manner which adversely affected one or more of the 1^st Defendant, the Fund II, and the Fund II’s portfolio companies; and

(b) As a result of this “Cause”, the number of points allocated to the Plaintiff for the purposes of calculating the distributions attributable to Carried Interest would be reduced to 0.05 multiplied by the Plaintiff’s applicable percentage for the corresponding trigger event provided under the Amended LPA;

(2) by failing to pay to the Plaintiff his contractual entitlement to distributions attributable to Carried Interest under the provisions of the Amended LPA.”

[paragraph 11 of the Statement of Claim]

13.The plaintiff claims damages, all necessary accounts and inquiries, interest and costs against the defendants.

14.The defendants have filed a very substantial Amended Defence and Counterclaim (“AD & C”).

15.Paragraph 30 of the AD & C gives a summary of the case of D1 and D2 as follows:

“A summary of the 1^st and 2^nd Defendants’ case

30. For the reasons pleaded below, the 1^st and 2^nd Defendants say as follows:

30.1 Prior to the Separation Agreement, the Plaintiff committed breaches of the Amended LPA and/or committed “Cause” within the meaning of the Amended LPA and/or committed breaches of his fiduciary duties owed to the 1^st and 2^nd Defendants and Fund II.

30.2 The 1^st and 2^nd Defendants entered into the Separation Agreement with the Plaintiff on the basis of a fundamental mistake, being the mistaken belief that the Plaintiff had at all times acted in accordance with his fiduciary duties owed to the 1^st and 2^nd Defendants and Fund II, and in accordance with his obligations under the Amended LPA, with the result that the Separation Agreement is void ab initio;

30.3 Alternatively, the Plaintiff was under an obligation, before the Separation Agreement was entered into to disclose the said breaches to the 1^st and 2^nd Defendants and his failure to do so constituted a misrepresentation which enables the 1^st and 2^nd Defendants to rescind the Separation Agreement and/or to claim damages.

30.4 In the premises, the Plaintiff is not entitled to the Carried Interest in the claimed percentage of 51.78%. By reason of the letter dated 15 October 2008 to which reference is made in paragraph 11(1) of the Statement of Claim, his percentage was reduced accordingly, but, in any event, by reason of the 1^st and 2^nd Defendants’ counterclaims for damages and/or equitable compensation by reason of the breaches of the Amended LPA and/or breaches of fiduciary duties, the Plaintiff’s claim to Carried Interest is extinguished and/or reduced by the amount of these counterclaims.

30.5 If, contrary to the 1^st and 2^nd Defendants’ primary contention, the Separation Agreement is not void ab initio and/or cannot be set aside for misrepresentation, then on the date that the Plaintiff committed each of the acts constituting “Cause” which are complained of and set out in paragraphs 41 to 53 below, he became an Inactive Partner in accordance with article 7.1 of the Amended LPA. Accordingly, on the date the Plaintiff committed “Cause” his Points Allocation became subject to adjustment in accordance with the provisions of article 7.1 of the Amended LPA and in line with the consequences stipulated in circumstances where a Limited Partner becomes an Inactive Partner by reason of acts constituting “Cause”. Furthermore, there has in any event, been a breach of its terms by the Plaintiff which has the consequence that the Plaintiff is unable to claim the said increased Carried Interest, or any increased Carried Interest, which would otherwise have been due to him under its terms.

30.6 Moreover, the 1^stDefendant, as general partner of the Fund General Partner which is in turn a general partner of Fund II, is entitled to claim damages and/or equitable compensation on behalf of Fund II as pleaded in paragraphs 60 to 61 below.”

16.I will refer to the specific allegations when I come to deal with each category of documents the specific discovery of which is sought.

17.The Counterclaim by the defendants against the plaintiff is very sizeable as can be seen from paragraphs 61.4 and 61.5 of the AD & C:

“61.4 Accordingly, pending further assessment at trial:

61.4.1 Fund II has suffered a loss in the range between USD84 million and USD166.7 million (based on an investment of USD5 million) (which loss the 1^st Defendant claims on Fund II’s behalf); and

61.4.2 the 1^st and 2^nd Defendants have suffered, in their own name, a loss in the range between USD21 million and USD41.6 million (based on an investment of USD5 million).

61.5 Further or in the alternative, the Plaintiff is liable to account to the 1^st and 2^nd Defendants for all benefits which he has received by reason of the said breaches of fiduciary duties owed to the 1^stand 2^nd Defendants and Fund II.”

18.With the above background, I now proceed to deal with the application.

THE LAW

19.I do not discern that there is very much controversy between Mr Lo, counsel for the plaintiff, and Mr Harry, counsel for the defendants, on the legal principles applicable to an application such as the present. Both sides have referred to one of most recent authorities on the topic which is the case of Lee Sai Nam v Li Shu Chung (unreported Decision of DHCJ Marlene Ng in HCA 1711/2009 handed down on 10 January 2014).

20.In that case, the learned deputy judge carefully reviewed and analysed a number of the well‑known authorities on the topic of specific discovery and set out the relevant principles in paragraphs 30 – 57 of her Decision. I respectfully take guidance from that part of the Decision.

21.For present purposes, it suffices for me to refer to paragraphs 30 and 31 of the learned Deputy Judge’s Decision which set out the general principles and approach as follows:

“V. LEGAL PRINCIPLES: ORDER 24 RULE 7 OF THE RHC

30. There is no essential dispute between Mr Joffe and Mr Wong SC over the principles of discovery. Under Order 24 rule 7 of the RHC, a party may apply for an order requiring any other party to make an affidavit stating whether any document or any class of document specified or described in the application is or has at any time been in his possession, custody or power, when he parted with it and what has become of it. But if the court is satisfied that discovery is not necessary, or not necessary at that stage of the cause or matter, it may dismiss or adjourn the application, and shall in any case refuse to make such an order if and so far as it is of opinion that discovery is not necessary either for disposing fairly of the cause or matter or for saving costs (see Order 24 rule 8 of the RHC).

(a) Court’s approach

31. Hong Kong Civil Procedure 2014 states inter alia as follows:

‘…… But this is not sufficient unless a prima facie case is made out of (a) possession, custody, or power, and (b) relevance of the specified documents …… This prima facie case may be based merely on the probability arising from the surrounding circumstances or in part on specific facts deposed to. …… See too Berkeley Administration v. McCelland [1990] F.S.R. 381 where at 382 the court restated the principles as follows: (1) There is no jurisdiction to make an order under RSC, O.24 r.7, for the production of documents unless (a) there is sufficient evidence that documents exist which the other party has not disclosed; (b) the document or documents relate to matters in issue in the action; (c) there is sufficient evidence that the document is in the possession, custody or power of the other party. (2) When it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order disclosure. (3) The order must identify with precision the document or documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure……’² ”

THE APPLICATION

22.I now proceed to deal with the various categories of documents sought under the nine paragraphs in the Schedule to the Summons.

Paragraph 1

23.Paragraph 1 reads as follows:

“1. All documents relating to and/or evidencing the amount of Carried Interest distributions made or to be made to the partners of the 1^st Defendant for the period from March 2007 to the present day, such records to include but not limited to:

(a) Minutes of directors, shareholders and/or partnership meetings;

(b) Resolutions passed at directors, shareholders and/or partnership meetings;

(c) Audited and management accounts of the 1^st Defendant; and

(d) Distribution Notices to all partners of the 1^st Defendant.”

24.Since the main claim of the plaintiff is for damages for breach of contract as a result of the defendants’ failure to make Carried Interest distributions to him under the Amended LPA and the Separation Agreement, the documents asked for must be relevant to the issues between the parties. Furthermore, there ought to be such documents in the possession, custody or power of the defendants.

25.Mr Lo on behalf of the plaintiff also makes the point that, although by the time of the Summons the defendants had made disclosure of some Distribution Notices, the figures contained therein are only asserted figures. Furthermore, documents relating to some 10 historical distributions were disclosed by the defendants only after the plaintiff had taken legal proceedings against them in October 2009. The plaintiff is justifiably sceptical of such documents.

26.I agree with Mr Lo that the plaintiff is entitled to such discovery and that there should be no difficulty on the part of the defendants in making such discovery.

27.I take the view, however, that asking for “all documents” is slightly too wide a request. At this stage, I am only prepared to order discovery of all the documents as specified under sub‑paragraphs (a) – (d) in paragraph 1. This would of course not preclude the plaintiff from making an application for further discovery in future should the same be justified.

28.Hence, the order for discovery which I will make in relation to paragraph 1 of the Schedule to the Summons is for:

“All the documents as specified under (a) to (d) below which relate to and/or evidence the amount of Carried Interest distributions made or to be made to the partners of the 1^st Defendant for the period from March 2007 to the present day : -

(a) Minutes of directors, shareholders and/or partnership meetings;

(b) Resolutions passed at directors, shareholders and/or partnership meetings;

(c) Audited and management accounts of the 1^st Defendant; and

(d) Distribution Notices to all partners of the 1^stDefendant.”

Paragraph 2

29.Paragraph 2 reads as follows:

“2. All documents relating to and/or evidencing the direct and beneficial ownership of each of 7 entities or class of entities, namely (i) the 1^st Defendant, (ii) the 2^nd Defendant, (iii) SAIF II GP L.P., (iv) the Principal Limited Partners and limited partners of the 1^st Defendant; (v) SAIF Management II Ltd, (vi) SAIF Advisors (Beijing) Limited and (vii) Sunstep Co, Ltd, and the legal and commercial relationship (if any) between the said entities, such documents to include but not limited to: -

(a) Statutory registers or other records of members, partners and directors for the period from 9 December 2004 to 15 October 2008 inclusive; and

(b) Agreements governing matters of operation, control and/or management between these entities and/or class of entities that were in force in the period from 9 December 2004 to 15 October 2008 inclusive.”

30.Paragraphs 24 – 26 of the AD & C allege that the plaintiff owed fiduciary duties to “SAIF Partners (including the 1^st and 2^nd Defendants and Fund II)” and had breached such fiduciary duties. Paragraph 3 of the AD & C pleads that “SAIF Partners, being a reference to the group of entities (which includes the Defendants and Fund II) trading under the name of “SAIF Partners”, as opposed to any specific entities within the SAIF Partners Group, currently manages approximately US$4 billion in capital through a number of funds.”

31.The defendants clarified by further and better particulars of the AD & C that “SAIF Partners” comprise of the seven entities listed in paragraph 2 of the Schedule to the Summons.

32.The plaintiff’s case is that those entities are all separate and distinct entities with disparate interests and that there is no basis for treating them as a group.

33.In such circumstances and bearing in mind that the counterclaim by the defendants against the plaintiff is to the tune of between US$105 million and US$208.3 million, I take the view that the discovery sought in paragraph 2 is justified except for its scope.

34.At this stage, I am only prepared to order discovery in relation to paragraph 2 of the Schedule to the Summons for:

“All the documents as specified under (a) and (b) below which may show the direct and beneficial ownership of each of 7 entities or class of entities, namely (i) the 1^st Defendant, (ii) the 2^nd Defendant, (iii) SAIF II GP L.P., (iv) the Principal Limited Partners and limited partners of the 1^st Defendant; (v) SAIF Management II Ltd, (vi) SAIF Advisors (Beijing) Limited and (vii) Sunstep Co, Ltd, and the legal and commercial relationship (if any) between the said entities:

(a) Statutory registers or other records of members, partners and directors for the period from 9 December 2004 to 15 October 2008 inclusive; and

(b) Agreements governing matters of operation, control and/or management between these entities and/or class of entities that were in force in the period from 9 December 2004 to 15 October 2008 inclusive.”

Paragraph 3

35.Paragraph 3 reads as follows:

“3. All documents relating to and/or evidencing the Plaintiff’s departure from Fund II, including but not limited to (a) the transition of the Plaintiff’s role within the Defendants and/or Fund II in the period from August 2006 to March 2007; and (b) the Plaintiff’s appointments to and vacation from directorships and other offices and/or other positions in all portfolio companies of Fund II, including but not limited to My Show Group Limited, Beijing Show World Science Technology Co Ltd and Beijing Show World Information Technology Co Ltd;”

36.The discovery sought relates to the counterclaim.

37.The defendants allege that plaintiff had been in breach of his duties (including fiduciary duties) owed to the defendants and Fund II in relation to Xinrui, My Show Ad, Mobile Winks and My Show Loans. Mr Lo has pointed out that three of the alleged wrongdoings were alleged to have been committed or continued until after the date when the Separation Agreement was signed on 11 December 2006 and the month of March 2007 in which the plaintiff severed his relationship with the defendants.

38.There is no dispute between the parties regarding the last‑mentioned two dates.

39.In such circumstances, I do not see the relevance of the discovery sought under paragraph 3.

40.If the defendants wish to advance their case on the basis that somehow the duties or fiduciary duties owed by the plaintiff to them continued beyond March 2007 after the severance of relationship between the plaintiff and them, they will have to justify it. If they do not produce the necessary documentation to prove that such duties continued beyond March 2007, it is their own lookout and their claim may be much weakened.

41.I therefore do not make any order for discovery under paragraph 3 of the Schedule to the Summons.

Paragraph 4

42.Paragraph 4 reads as follows:

“4. All documents relating to and/or evidencing the marketing of the investment fund held by SAIF Partners III L.P. (also known as “Fund III”) from June 2006 to its second closing, including but not limited to the timing of the second closing of Fund III and the circumstances leading to such second closing;”

43.The Separation Agreement contains the following provisions:

“2) Marketing of Newco: Joe will not solicit LPs for investment in Newco before the earlier of the second closing or April 1, 2007 (the “Marketing Date”). Joe shall be free to solicit LPs after the Marketing Date including SAIF II and SAIF III LPs, for Investment in Newco.

3) Transition: SAIF will, whenever it determines, make announcement that Joe has become a Venture Partner and will remain a Venture Partner until the Marketing Date. As a Venture Partner, Joe will provide services to SAIF and will serve on behalf of SAIF as a director of existing boards or resign from existing board responsibilities (and help transition those responsibilities) at the reasonable direction of SAIF until the Marketing Date. Upon the Marketing Date, Joe shall no longer be a Venture Partner and shall resign from all board responsibilities in his capacity as a SAIF representative.

7) Other Provisions. SAIF and Joe will agree to a mutual non‑disparagement and cooperation provision. As requested, Joe will not solicit any SAIF professional staff prior to October 31, 2007. Except as explicitly amended by the provisions above, Joe remains subject to the obligations in previous agreements entered into between Joe and SAIF that are related to confidentiality, return of materials, etc. For the avoidance of doubt it is hereby acknowledged and agreed that as of the Marketing Date Joe shall not be subject to any non‑compete or similar restriction (including any provision that would reduce Joe’s vested interests) by reason of forming Newco or joining another fund. The provisions in this memo supersede any previous agreements entered into between Joe and SAIF.”

44.It is obvious that the “Marketing Date” is very important for the purpose of regulating the rights and duties of the parties under the Separation Agreement.

45.Under paragraph 68.1 of the AD & C, the defendants plead as follows:

“68.1 Notwithstanding that the Plaintiff was under an obligation thereunder not to solicit “LPs” (meaning potential investors) for investment in Newco before the earlier of the Second Closing or 1 April 2007 the Plaintiff breached such obligation and, in this regard, the 1^st and 2^nd Defendants repeat paragraphs 47 and 53 above.”

46.There can therefore be no doubt as to the relevance of documents relating to the “second closing” and the “Marketing Date” under the Separation Agreement.

47.As Mr Lo has pointed out, the defendants originally pleaded that the second closing of Fund III occurred on “7 February 2007”. It was subsequently amended to read “16 February 2007”.

48.The defendant’s answer is basically that there is no need for discovery to be made because they “have already clarified that the second closing of Fund II (sic) in fact took place on 16 February 2007.” They also say that it is a fishing expedition by the plaintiff.

49.I do not agree with the defendants’ submission. Furthermore, they must have in their possession, custody or power the relevant documents.

50.On the other hand, I think that the application is couched in terms which are wider than necessary. I do not think that documents relating to and/or evidencing the marketing of Fund III other than for the purpose of showing the time of the second closing are strictly necessary.

51.I therefore make an order for discovery of the documents under paragraph 4 of the Schedule to the Summons in the following terms:

“All documents relating to and/or evidencing the timing of the second closing of the marketing of the investment fund held by SAIF Partners III L.P. (also known as “Fund III”).”

Paragraphs 5 and 6

52.The parties have chosen to deal with paragraphs 5 and 6 together. I agree with such approach. They read as follows:

“5. All documents relating to and/or evidencing the Defendants’ investigation or audit (and the results or findings of any such investigation or audit) of the business and financial affairs of My Show Group Limited, Beijing Show World Science Technology Co Ltd and Beijing Show World Information Technology Co Ltd for the period from 5 April 2006 up to the present day;

6. All documents relating to and/or evidencing the Defendants’ investigation or audit, together with the results or findings or any such investigation or audit, into the allegations involving Xinruiguangmang Sci & Tech Co Ltd, Beijing Wu Xian Wei Ke Sci & Tech Co Ltd and Beijing My Show Advertising Co Ltd as pleaded in paragraphs 41, 42 and 44 of the Defence and Counterclaim filed herein by the Defendants on 15 November 2012;”

53.Basically, the position is as follows: The plaintiff is seeking discovery of the primary documents. The defendants answer by saying they have already delivered five lever‑arch files of documents and two audit reports and therefore no more should be disclosed. Furthermore, they have no more relevant documents.

54.The defendants have made very serious allegations of wrongdoing by the plaintiff in relation to the companies in question. Such allegations are contained in a lengthy pleading, the AD & C. They claim very substantial sums in damages and/or equitable compensation and also an order for an account against the plaintiff. In such circumstances, in my judgment, it is fair for the plaintiff to be given every opportunity to check the veracity of the defendants’ allegations.

55.If the defendants really do not have the documents asked for by the plaintiff, they can simply swear an affidavit deposing to that fact.

56.I think, however, that the scope of the discovery sought is wider than necessary. Since the wrongdoings alleged against the plaintiff go up to August 2008, I propose to limit the scope of the discovery to up to 4 April 2009.

57.I therefore make an order for discovery in the terms of paragraphs 5 and 6 of the Schedule to the Summons but limited to the period between 5 April 2006 and 4 April 2009 under both paragraphs.

Paragraph 7

58.Paragraph 7 reads as follows:

“7. All documents relating to and/or evidencing the business operations, financial position and future profitability of My Show Group Limited, Beijing Show World Science Technology Co Ltd and Beijing Show World Information Technology Co Ltd for the period from 5 April 2006 up to the present day, such documents to include but not limited to:

(a) Director’s reports;

(b) Audited financial statements and management accounts; and

(c) Reports to the limited partners of the 1^stDefendant and SB Asia Investment Fund II L.P. concerning My Show, WOFE and/or Show World;”

59.In light of the nature and size of the counterclaim, I am of the view that some of the documents asked for are clearly relevant to the issues between the parties.

60.The defendants say that no directors’ reports and annual reports were created or kept by them. This, however, has only been said by the solicitor acting for them, Mr Yuen Po Kwong, Peter, who has deposed in paragraph 98 of his Affirmation filed on 17 April 2014 that he “is instructed by the Defendants that no directors’ reports were created or kept by the Defendants in relation to My Show, WOFE and Show World.” I take the view that the non‑existence of any document asked for should be sworn to by the lay clients rather than the solicitor.

61.At this juncture, I also think that the scope of the application is wider than necessary.

62.I am only prepared at this stage to make an order for discovery under paragraph 7 of the Schedule to the Summons in the following terms:

“The following documents of My Show Group Limited, Beijing Show World Science Technology Co Ltd and Beijing Show World Information Technology Co Ltd for the period from 5 April 2006 to 4 April 2009 :

(a) Directors’ reports;

(b) Audited financial statements and management accounts and

(c) Reports to the limited partners of the 1^st defendant and SB Asia Investment Fund II L.P. concerning My Show, WOFE and/or Show World.”

Paragraph 8

63.Paragraph 8 reads as follows:

“8. All documents relating to an arbitration commenced by My Show Group Limited by a Notice of Arbitration dated 11 February 2009 seeking recovery of a US$2.5 million loan from Mr. Zhou Yang, including but not limited to (a) pleadings, (b) written submissions, and (c) witness statements and hearing transcripts recording the testimony given by all witnesses tendered by the parties to the arbitration;”

64.One of the defendants’ complaints against the plaintiff is that he had acted in breach of his duty in approving the third of the three loans by My Show to Mr Zhou Yang, namely, a loan of US$2.5 million.

65.The plaintiff’s defence is that the said loan as well as the two earlier loans were made for the sole purpose of providing working capital to Show World and related entities in the Show World transaction and that the relevant loan agreement was entered into on the advice of My Show’s lawyer and approved by its board of directors.

66.In the above circumstances, I agree with Mr Lo that what happened in the arbitration between My Show and Mr Zhou Yang in which the former was claiming for repayment of the said loan of US$2.5 million would be relevant to the issues between the parties.

67.I think, however, that the terms of the request are wider than necessary.

68.I therefore grant an order for discovery under paragraph 8 of the Schedule to the Summons in the following terms:

“The following documents relating to an arbitration commenced by My Show Group Limited by a Notice of Arbitration dated 11 February 2009 seeking recovery of a US$2.5 million loan from Mr Zhou Yang :

(a) the pleadings;

(b) the written submissions;

(c) the witness statements and

(d) the transcript of the proceedings recording the testimony given by all the witnesses at the arbitration hearing.”

Paragraph 9

69.Paragraph 9 reads as follows:

“9. All documents relating to and/or evidencing the grant of a US$300,000 loan by My Show Group Limited to Mr. Zhou Yang under a promissory note dated 30 March 2006.”

70.In view of the matters set out in relation to paragraph 8 of the Schedule to the Summons above, I am of the view that the documents asked for are relevant to the issues between the parties.

71.The defendants oppose the application on the basis that the matter has been covered by the witness statement of Lydia Lau. In my judgment, the plaintiff is entitled to ask for discovery of the primary documents. I do not think that requiring the discovery of the documents relating to this single loan would in any way be oppressive to the defendants.

72.I therefore make an order for discovery in the terms of paragraph 9 of the Schedule to the Summons.

Conclusion

73.The parties ask for consequential directions for an extension of time for them to exchange witness statements. I direct that the parties should consult with each other and produce a draft order for my approval within 14 days from the date of handing down of this Decision.

74.The plaintiff has largely succeeded on his application. I see no reason why costs should not follow the event. I therefore make an order nisi that the defendants do pay to the plaintiff the costs of and incidental to the Summons.

75.Lastly, I am indebted to counsel on both sides for their able assistance.