HEATHER ANNE VOCE v. THE HENLEY GROUP LTD

HCA 1370/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1370 OF 2006

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R U L I N G

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1.  This morning Mr Barlow SC, for the plaintiff, made an application to exclude paragraphs 30 and 36 of the witness statement of Mr Antony Michell and also the witness statement of Mr Nicholas Gall.  Upon clarification by the court, Mr Barlow clarified that his objection to the witness statement of Mr Nicholas Gall was confined only to paragraph 3 of that witness statement.

2.  The paragraphs of the two witness statements relate to what allegedly happened at a meeting on 5 December 2005.  Briefly what is alleged in the relevant paragraphs of the two witness statements was that at the meeting said to be held on 5 December 2005 and attended by Mr Antony Michell, Mr Nicholas Gall and his late father, the late Mr Justice Thomas Gall, and briefly also by Mr Nicholas Gall’s mother, Barbara Gall, and discussions were held at the meeting which relate to the alleged introduction by the late Mr Justice Gall of his son-in-law, Mr Slattery, to the plaintiff in this case.

3.  I think what I need to do is to simply quote two paragraphs from the witness statement of Mr Nicholas Gall and I do not think I need to go into great detail in that regard.  Paragraph 3.6 of the witness statement of Mr Nicholas Gall stated this :

“My father expressed surprise and then explained that he believed that it was him who had made the initial introduction of the ability of Mr Slattery to manage investments in a personal capacity to the Plaintiff.  He said that he had made the introduction in response to the Plaintiff expressing dissatisfaction with her own financial advisers, having suffered losses on various investments.”

4.  In paragraph 3.7, Mr Nicholas Gall goes on to state this :

“My father was unequivocal that he had emphasised to the Plaintiff that Henley did not make direct investments on behalf of individuals or hold clients monies in its accounts and that anything Mr Slattery did for her would be in his personal capacity.  He said that, at the time of describing the management of finances by Mr Slattery, he made it clear that any investments through Mr Slattery would not be the same as investments through Henley as they did not invest in this way.”

5.  As I said earlier, Mr Slattery was the son-in-law of the late Mr Justice Gall, having married to his daughter Elizabeth Gall.  The late Mr Justice Gall had unfortunately passed away on 20 January 2006 and what he allegedly said in the meeting was clearly hearsay.  Indeed it may be said that the same was double-hearsay because the statements made by the late Mr Justice Gall relate to what he had allegedly told the plaintiff in the circumstances that was set out in Mr Nicholas Gall’s witness statement.

6.  Mr Barlow’s submission was that such evidence being evidence in the nature of double-hearsay should be excluded from being admissible as evidence in this trial on a number of grounds.  He submitted to me that the challenged evidence was irrelevant.  He submitted to me that in any event the challenged evidence was of little or negligible probative value.  He also submitted that the challenged evidence is likely to cause unnecessary embarrassment to the reputation of the late Mr Justice Gall who may or may not had partly persuaded the plaintiff to entrust her life-saving to the control of his son-in-law.

7.  Now on the point of irrelevance, Mr Barlow’s submission is that even if the challenged evidence was admitted, it goes to the terms upon which the plaintiff may have been introduced to Mr Slattery by the late Mr Justice Gall in mid-2000.  And whatever were the terms upon which that introduction was made, it was clearly superseded, according to Mr Barlow, by Mr Slattery’s subsequent dealings with the plaintiff.  In this regard, he reminded me what he had pointed out in his opening that a lot of the documents in the bundle clearly bear the letterhead of the defendant, and that the correspondence also suggested that a lot of the meetings were held at the offices of the defendant.  I refer to the meetings between Mr Slattery and the plaintiff, which were held at the offices of the defendant.

8.  I do not think I can accept Mr Barlow’s submission in this regard.  The terms upon which the plaintiff may have been introduced to Mr Slattery may impact upon the plaintiff’s understanding of Mr Slattery’s capacity in his dealings or subsequent dealings with the plaintiff.  If, as a result of what the late Mr Justice Gall had said to her, the plaintiff knew from the start that Mr Slattery was advising her and handling her investments in his own personal capacity, that may, of course, have a very significant bearing on the issues which this court has to decide in this case.

9.  As regards the documents which Mr Barlow has drawn my attention to, clearly the documents cannot be looked at in vacuo.  The factual matrix and the background surrounding the documents are important.  They may cast light on not only the meaning of the documents but also the question as to how the documents were being understood by the parties and the capacity by which the maker of the documents created the same.  At this point I have not heard any evidence and I am not aware of the exact circumstances under which the documents, which Mr Barlow has referred to in his opening, were created or generated.  I can only look at the documents on their face.

10.  As regards the point of negligible probative value, Mr Barlow has drawn my attention to the fact that at the time of the meeting, the health condition of the late Mr Justice Gall was clearly bad.  Mr Barlow asked rhetorically why the late Mr Justice Gall would have made these exculpatory statements in his deathbed, which statements would help the defendant to dissociate itself from Mr Slattery’s dealings with the plaintiff. 

11.  Mr Barlow has also drawn my attention to the fact that some of the monies which were received by Mr Slattery from the plaintiff were actually deposited into Mr Slattery’s joint account with his wife, namely Elizabeth Gall.  The suggestion apparently made is that the late Mr Justice Gall might have some motive to protect his daughter while in his deathbed.  I do not think I need to go into the details of Mr Barlow’s submission in this regard, suffice for me to say firstly that I am not at all sure that at the time of the meeting the late Mr Justice Gall was actually in his deathbed, although it seems clear that his health was bad and probably deteriorating at the time.

12.  Now it may well be that, after hearing evidence in this case, I might come to the view that Mr Barlow’s submission is correct in that little weight should be attached to the challenged evidence for the various reasons that he has given and the points that he has made in his submission.  Given the fact that the challenged evidence is in the nature of hearsay or double-hearsay, the fact that the late Mr Justice Gall’s health condition at the time was clearly bad, the fact that there might well be motive on the part of the late Mr Justice Gall to protect his daughter while he knew that he might be dying soon, it is quite possible that at the end of the day, I might take the view that the weight to be attached to the evidence, even if it is admissible, is negligible.  But at this stage I do not think that I am able to say that.  At this stage I have not heard any evidence at all and I am not prepared, at this stage, to say that the challenged evidence is wholly irrelevant or that its probative value is necessarily negligible.

13.  There is a further point made by Mr Barlow and that is the point that if I allow the evidence to be admitted, very rigorous cross-examination may have to be conducted by him, and I have been told that actually another counsel may be engaged to cross-examine Mr Nicholas Gall, and that such cross-examination may cause embarrassment to the late Mr Justice Gall, and of course we all know that the late Mr Justice Gall will not be available to tell us what actually had happened and his side of the story.

14.  Be that as it may, in my view, if the interest of justice requires such an exercise to be undertaken, so be it.  This court will not resile from the duty to deal with evidence which may potentially be embarrassing to some very respected members of our community if it is in the interest of the justice to do so.

15.  For these reasons I will exercise my discretion under section 47(2) of the Evidence Ordinance to defer my decision on the admissibility of the challenged evidence until the conclusion of the trial.  So this is my ruling.

HCA 1370/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1370 OF 2006

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RULING   ON   COSTS

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1.  This Ruling deals with the costs of the hearing before me on 14 May 2008, in respect of which judgment was given on 28 August 2008.  That hearing related to the assessment of the costs of an unsuccessful application for discovery that had been made by the Plaintiff, in respect of which I had ordered that the Defendant’s costs should be paid by the Plaintiff.

2.  The Defendant had sought to have its costs of the discovery application assessed on a gross sum basis, but as the information as to its costs that it could provide at the conclusion of the discovery hearing was, in my view, insufficient, I directed that the Defendant should provide a statement of its costs in respect of which the Plaintiff could make such submissions as she thought appropriate.

3.  That statement disclosed that a significant portion of the time spent by the Defendant’s solicitors in dealing with the matter had been spent by a registered foreign lawyer employed by those solicitors.

4.  The Plaintiff raised a number of objections to the costs claimed by the Defendant.  One point of principle that was raised related to the recoverability of the costs referable to the involvement of the registered foreign lawyer, Mr Ian Johnston.  It was the Plaintiff’s contention that such costs were irrecoverable, because Mr Johnston’s involvement amounted to the practising by him of Hong Kong law in contravention of rule 12 of the Foreign Lawyers Registration Rules made under the Legal Practitioners Ordinance (Cap. 159 and 159S).  I thought that this point merited fuller argument, and therefore directed that the assessment of the Defendant’s costs be dealt with at an oral hearing (this was the hearing that took place on 14 May 2008).  In view of the fact that the point seemed to be one of general importance to the solicitors’ profession, I invited the Law Society of Hong Kong to attend and make submissions as well.

5.  In the event, at the hearing on 14 May 2008, the parties addressed their argument exclusively to the recoverability of the costs relating to Mr Johnston’s involvement, leaving the other objections that had been raised to be resolved on the basis of the written submissions that had been provided to me.

6.  I came to the conclusion that the costs of Mr Johnston’s involvement were recoverable by the Defendant.  The detailed reasons for my view are set out in my judgment on costs dated 28 August 2008.  Although I held, disagreeing with Waung J in The Magway (unreported, CFI, HCAJ 14 and 246/1999, 23 June 2002) that Mr Johnston, and not the Defendant’s solicitors, by whom he was employed, should be regarded as the provider of any legal services which he undertook on behalf of the Defendant, I concluded that there had not in fact been any breach of the relevant rule, or of section 50 of the Ordinance, as Mr Johnston was not, by reason of his having been closely supervised in all that he did by the partner in charge of this matter, providing legal services customarily provided by a solicitor in his capacity as such, or otherwise acting as a solicitor.  I also agreed with Waung J’s other ground for decision in The Magway that a breach of Rule 12 did not lead to the irrecoverability of the costs attributable to the involvement of the registered foreign lawyer.

7.  The Law Society has made it clear, by its letter of 24 October 2008, that it does not seek any order of costs in its favour in respect of the 14 May 2008 hearing.

8.  The Defendant contends that as it was successful in recovering the costs attributable to Mr Johnston’s involvement, which was the only point of contention dealt with at the hearing, it should be awarded the costs of and associated with the hearing, which it invited me to assess on a gross sum basis, providing a statement of its costs in similar form to that provided in respect of the substantive discovery application.

9.  The Plaintiff submits that this would not be the right order to make.  Her solicitors suggest instead that she should be awarded her costs up to 5 March 2008, and that thereafter, there should be no order as to costs as between herself and the Defendant.

10.  The Plaintiff’s argument runs as follows:-

(1) The Defendant’s submission that The Magway was rightly decided was not accepted, as I accepted the Plaintiff’s criticisms of that case.

(2) My decision was based on my conclusion that Mr Johnston had been closely supervised in his work, a matter which turned on information that was not provided until a letter from the Defendant’s solicitors dated 5 March 2008 set this out.  On this basis, the costs up to that date should, it was said, be awarded to the Plaintiff.

(3) As to the costs thereafter, including the costs of the hearing, these should not be visited on the Plaintiff, as the Plaintiff’s view of The Magway had been preferred to that put forward by the Defendant, and the court’s “primary motivation in calling for oral argument was the point of general importance to the solicitor’s profession”.

(4) Further, as the Defendant’s costs were taxed down by a substantial amount, this provided a further reason for awarding the Plaintiff her costs up to 5 March 2008.

11.  The Plaintiff has also raised a number of points as to the quantum of the costs claimed:-

(1) The statement of such costs is so inadequate that it should be disregarded.

(2) In any event, it does not enable the court to distinguish between the work done by the respective fee earners, so that it does not enable a proper estimate of the work done to be made.

(3) Further, the failure to distinguish the work done means that there may well have been duplication of work, which should be disallowed.

(4) The time spent by the Defendant’s solicitors on preparation and research should be irrecoverable as this would have been done by counsel in any event, and even if something might be recoverable for this, the amounts claimed are excessive.

(5) Part of the costs claimed in respect of the preparation of the statement of costs (i.e. in relation to Part A of the statement) had already been claimed at the last hearing and awarded in the 28 August 2008 judgment.

(6) Counsel’s fee was excessive, having regard to the length of the skeleton prepared and the fact that the hearing lasted one hour.

12.  I shall deal first with the question of the incidence of costs.  As to this:-

(1) It is not correct to say that the Plaintiff’s submissions as to The Magway were accepted in preference to those of the Defendant.  As will be clear from my judgment of 28 August 2008, although I rejected one element of the Plaintiff’s submissions as to that authority, I accepted that it was rightly decided in respect of the question of the recoverability of fees charged in respect of a registered foreign lawyer notwithstanding any breach of Rule 12.  Neither party’s submissions as to this authority were accepted in their entirety.  However, ultimately, the effect of my decision so far as that case was concerned was that even if their had been a breach of Rule 12, this would not have affected the Defendant’s entitlement to recover its costs arising from Mr Johnston’s involvement on its behalf.

(2) While it is correct to say that my decision was based on my conclusion that Mr Johnston was closely supervised in his work, a matter which may not have been very clear until the Defendant’s solicitors’ letter of 5 March 2008 provided more information as to this, I do not see that this assists the Plaintiff, given that the Plaintiff continued, even after that date and with that information available to it, to insist that the costs referable to Mr Johnston’s involvement should be disallowed.  The position might have been different had the Plaintiff dropped this point on receipt of the letter of 5 March 2008, but it did not do so.  Had it not been for the Plaintiff’s insistence that the fees referable to Mr Johnston’s involvement were irrecoverable by the Defendant, the hearing on 14 May 2008 would almost certainly have been rendered unnecessary.  I therefore do not think that it would be right to award the Plaintiff its costs up to this point.

(3) Further, while this point was, in my view, one of general importance to the solicitors’ profession, this does not justify depriving the Defendant of its costs in respect of the argument.  The point was raised by the Plaintiff in an attempt to escape having to bear the Defendant’s costs.  Having taken the point, and argued it all the way to the hearing, I see no reason why the Plaintiff should not have to bear the costs of the argument now that it has failed, simply because the point might be regarded as one of general importance.  The hearing was necessitated because the point seemed to me to be one which merited fuller ventilation than might have occurred had it been dealt with on paper.  But that does not make it any the less a point which was raised by the Plaintiff, on which the Plaintiff failed.

(4) Although it is right to say that the amount of costs claimed by the Defendant was reduced (by about one third), I do not think that this merits the making of the order proposed by the Plaintiff in this case, particularly since the hearing was necessitated by the Plaintiff’s insistence on the irrecoverability of any amount in respect of Mr Johnston’s involvement in the matter.

13.  For all of these reasons, I am satisfied that, subject to any objections as to the quantum of the costs claimed, the Plaintiff should pay the Defendant’s costs of and relating to the hearing of 14 May 2008, on a party and party basis.

14.  I turn, therefore, to deal with the objections to the amount of the costs claimed:-

(1) As to the format of the statement, I remain of the view expressed in paragraph 31 of my judgment of 28 August 2008, that the statement is sufficient for the purpose of a gross sum assessment, bearing in mind the summary nature of the determination of costs under this procedure, and the fact that the court dealing with the assessment will have more than a passing familiarity with the matter.

(2) Nor do I agree with the suggestion that the failure to distinguish between the work done by the different fee earners means that the court should disregard the statement.  I do not think that the amount of detail that might reasonably be expected to be provided for a full-scale taxation should be expected in the context of a gross sum assessment.

(3) As to the suggestion that there has been duplication, it seems to me that this requires the court to look at the statement, and see whether there might be any basis for the complaint.  At the end of the day, however, the court should be able to come to a broad assessment of the allowable costs, based on the information provided as to time spent, and its knowledge of the case.  Here, the total amount of time spent by the partner, solicitor and paralegal on communication (with the client, the opposing party and the court) came to some 18.89 hours.  This seems to be on the high side, having regard to the nature of the issues that were raised, although I would recognise that there was a fair amount of correspondence between the parties, and between the parties and the court.  I would therefore reduce the amount claimed under this heading by about one-third, and will allow a total of HK$30,000 in respect of this item.

(4) So far as time spent on research is concerned, I think that while one might expect a party’s solicitors to spend some time on research, it is also necessary to have regard to the fact that counsel was engaged, and (having been engaged from the outset) could have been expected to do most of the necessary research.  In the circumstances of this case, it seems to me that to have spent some 14.81 hours on research in total was excessive.  I would allow instead the whole of the time spent by the partner (0.6 hours accounting for HK$2,400), two hours in respect of the solicitor (or HK$4,000) and four hours in respect of the paralegal (or HK$5,200), giving a total of HK$11,600 for this item.

(5) As for the time spent on preparation of the statement of costs, the Plaintiff is right to point out that the part referable to part A of the statement has already been claimed and awarded (see paragraph 36 of my earlier judgment).  That leaves a claim for HK$1,650 for the preparation of part B, which I shall allow in full, as this is in line with the amount allowed for the preparation of part A in my earlier judgment.

(6) As to counsel’s fees, I shall allow HK$25,000 in respect of counsel’s brief fee for the hearing on 14 May 2008.  This seems to me to be reasonable, having regard to the fact that it will include all necessary preparation and research for the hearing.  Moreover, although the hearing lasted for one hour, it had been set down for three hours hearing, an estimate based (in part at least) on the view of the Plaintiff’s solicitors.

(7) Finally, so far as the item for photocopying is concerned, this was not objected to and will be allowed in full, at HK$966.

15.  I shall therefore order that the Plaintiff is to pay the Defendant’s costs of the hearing of 14 May 2008, which I have assessed in the gross sum of HK$69,216.  I shall also make a costs order nisi that the Plaintiff is to pay the Defendant’s costs referable to the written submissions by the Defendant dated 18 and 25 September 2008.  It is to be hoped that the amount of those further costs can be agreed between the parties without the need to come back to the court.

HCA 1370/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1370 OF 2006

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JUDGMENT  ON  COSTS

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1.  On 13 November 2007, I dismissed an application for further discovery made by the Plaintiff by summons dated 13 July 2007, and ordered that the Plaintiff should pay the Defendant’s costs of the application.  At the Defendant’s request, I agreed to make a gross sum assessment of such costs pursuant to RHC Order 62 rule 9(4)(b).  However, the information that the Defendant was in a position to provide in respect of such costs at the hearing appeared to be insufficient, and I therefore directed that the Defendant should provide a statement setting out the costs that it said it had incurred, on which the Plaintiff could comment.  The Defendant would then have an opportunity to respond, after which I would assess the amount of costs recoverable by the Defendant.

2.  The Defendant provided a statement of its costs the following day, 14 November 2007.  According to this statement, its costs of the application amounted to HK$151,812.

3.  It appeared from the statement that, apart from having instructed counsel to appear for the Defendant (at both the hearing before me and at an earlier call-over hearing before a Master), four persons from the Defendant’s solicitors (Messrs Simmons & Simmons) were involved in the application – Mr Gareth Hughes, a partner, Mr Wong Wai Keung, a newly admitted assistant solicitor, a trainee solicitor, and Mr Ian Johnston, an English solicitor, who had qualified in England in 2006, and who had become a registered foreign lawyer in Hong Kong in 2007.  Mr Hughes’ services were claimed for at the rate of HK$4,000 per hour, while those of Mr Wong and the trainee were claimed for at HK$2,000 and HK$1,300 per hour respectively.  Mr Johnston was described in the statement as a paralegal, and the cost of his services was sought to be recovered at a rate of HK$1,300 per hour, the same rate as was applicable to the trainee solicitor.  Their respective standard hourly rates were substantially higher – HK$5,900 for Mr Hughes, HK$3,000 for Mr Wong, HK$2,000 for the trainee and HK$3,400 for Mr Johnston.

4.  The statement indicated that between them, these four individuals had spent some 63.8 hours dealing with the application – 6.5 hours for Mr Hughes, 18.6 hours for Mr Wong, 1 hour for the trainee, and 37.7 hours for Mr Johnston.

5.  On 19 November 2007, the Plaintiff’s solicitors (Messrs Horvath & Giles) responded to the statement.  They did not dispute the rates sought to be charged in respect of Mr Hughes, Mr Wong or the trainee.  However, they did raise a number of other points, which were as follows:-

(1)     Costs relating to the earlier call-over hearing before the Master had been included, but these had not been the subject of any order.

(2)     The costs referable to Mr Johnston’s involvement were irrecoverable on the grounds that Mr Johnston was prohibited from practising Hong Kong law by rule 12 of the Foreign Lawyers Registration Rules made under the Legal Practitioners Ordinance (Caps. 159S and 159 respectively).

(3)     The statement did not contain sufficient information to enable the Defendant’s costs to be assessed.

(4)     In relation to the items of costs claimed, there was no differentiation between the work done by the different persons within Simmons & Simmons, and there appeared to be duplication of work, or unnecessary work, or excessive time spent on some matters.

(5)     Subject to point (1) above, Counsel’s attendance at the call-over hearing had not been the subject of a certificate for counsel, nor was it necessary.

(6)     Counsel’s brief fee was excessive.

6.  Simmons & Simmons responded on 21 November 2007, rejecting these contentions.  Thereafter, further submissions were made by both sides in further correspondence which was copied to the court.  Having considered the correspondence, I was of the view that the point relating to the recoverability of the costs of Mr Johnston’s involvement involved called for fuller argument, and directed that this should be dealt with by a further oral hearing.  As the point seemed also to be one of general importance to the solicitors’ profession, I invited the Law Society of Hong Kong to attend and make submissions at the further hearing.

7.  The Law Society put forward a skeleton argument and appeared at the hearing through Mr Jamison.  I am grateful to him for his assistance.  The Plaintiff and Defendant were represented, as they had been at the discovery hearing, by Mr Chan Pat Lun and Mr Maurellet.

8.  Prior to the hearing, the Defendant put forward a further statement of Mr Johnston’s involvement in the matter, under cover of a letter from Simmons & Simmons dated 5 March 2008.  This stated that Mr Johnston was throughout his involvement in the matter subject to the direct supervision of Mr Hughes.  So far as communication with the client and the Plaintiff was concerned, his involvement was in drafting letters and e-mails, which were reviewed by Mr Hughes, with the e-mails being sent out only on Mr Hughes specific instructions.  In all communications, other than those with the client on matters not requiring an opinion as to Hong Kong law, he acted together with Mr Hughes or on his specific instructions.  So far as preparation of documents was concerned, Mr Johnston drafted the affidavits used at the hearing under the direction of Mr Hughes, who reviewed and amended them where necessary.  Mr Johnston’s perusal of documents (which was for a relatively small amount of time) was done to enable him to discuss matters with Mr Hughes, and the preparation for hearing was in relation to the documents he had drafted, with a view to assisting Mr Hughes in relation to the hearing bundles.  Finally, the time spent on producing the statement of costs was done under the supervision of Mr Hughes, and in association with Mr Wong.

9.  At the hearing, the argument was limited to the question of the recoverability of the costs relating to Mr Johnston, the parties indicating that they were otherwise content to leave the quantum of costs to my determination.

10.  Mr Chan submitted that the costs of Mr Johnston’s involvement were irrecoverable, because he, as a registered foreign lawyer, was prohibited from practising Hong Kong law by rule 12 of the Foreign Lawyers Registration Rules, and had given an undertaking to the Law Society in the same terms as that rule.

11.  Rule 12 of the Foreign Lawyers Registration Rules is in the following terms:-

“12.   Prohibition on the practice of Hong Kong law

(1)     Except as provided in subsection (2), a foreign lawyer shall not provide or offer any legal service which, having regard to all the circumstances of the case, can properly be regarded as a service customarily provided by a solicitor in his capacity as such.

(2)     A foreign lawyer may give advice on or handle any matter which –

(a)     is expected to be subject to the law of a jurisdiction other than Hong Kong; or

(b)     involves private or public international law or conflict of laws.”

12.  Mr Chan contended that in doing what he did in relation to the discovery application, Mr Johnston was guilty of a breach of this rule, and that, in consequence, none of the costs associated with his involvement should be recoverable by the Defendant.  He submitted that Mr Johnston had clearly been involved in the drafting of documentation for use at the hearing and in drafting letters and other communications with his client and the Plaintiff, and that these matters amounted to the provision of legal services, and given that solicitors frequently communicated with their clients and opposite numbers, and drafted correspondence and court documentation, these were legal services which were customarily provided by a solicitor in his capacity as such.

13.  Mr Chan also submitted that I should not follow the decision of Waung J in The Magway (unreported, CFI, HCAJ 14 & 246/1999, 23 June 2002), in which it was held that a registered foreign lawyer employed by a firm of Hong Kong solicitors did not himself provide any legal services so as to contravene this rule, as the services provided through him should be regarded as having been provided by the firm.

14.  Mr Maurellet, however, submitted that The Magway was correctly decided.  He also submitted that even if I did not follow Waung J in holding that the services were provided by the firm rather than the registered foreign lawyer, the actions of Mr Johnston did not in fact involve a breach of rule 12, and even if they did, I should follow the decision of Waung J in relation to an alternative basis for his decision, namely that a breach of rule 12 did not prevent recovery of the costs of the registered foreign lawyer in question.

15.  For the Law Society, Mr Jamison submitted that insofar as Waung J held that rule 12 did not apply to foreign lawyers employed by Hong Kong firms, this went too far, but that there was a legitimate distinction to be drawn between a person providing a legal service, and someone who assists in the provision of legal services, so that a registered foreign lawyer employed by a local firm could properly do clerical and administrative work, and a range of work (such as the drafting or preparation of court documents and correspondence) under the supervision and control of a Hong Kong solicitor, but not things that can only be done by a Hong Kong solicitor, such as the giving of advice on Hong Kong law, or appearing in court.

16.  In my view, the work done by Mr Johnston did not involve a breach of rule 12.  What rule 12 prohibits is the provision by a foreign lawyer of any legal service which, having regard to all the circumstances of the case, can properly be regarded as a service customarily provided by a solicitor in his capacity as such.

17.  The first question is whether Mr Johnston was providing a legal service.  As to this, I would agree with Mr Chan and Mr Jamison that in suggesting, in The Magway, that a foreign lawyer employed by a local firm should not be regarded as a provider of legal services, since the client’s contract was with the firm and not the individual doing the work, Waung J would appear to have gone too far.  If Waung J were right, rule 12 would not in fact prevent a foreign lawyer from practising Hong Kong law, as an employed foreign lawyer could (theoretically, at least) advise on matters of Hong Kong law, or perhaps appear in court on behalf of a client, without being in breach of rule 12 or the undertaking he gives to the Law Society.  So long as he was employed by a local firm, he would not, on this basis, be the provider of the legal services in question.  Such an approach would, I think, create a very substantial hole in rule 12, by limiting it to foreign lawyers practising on their own account.

18.  The principal policy consideration behind rule 12 would appear, as Mr Jamison submitted, to be to ensure that only persons qualified to advise on Hong Kong law, or provide Hong Kong legal services, do so.  A secondary purpose may be to foster a strong local legal profession.  The first of these objectives would not be promoted, and would indeed be undermined, by the approach taken in The Magway.

19.  I would therefore, with respect, disagree with Waung J in his view that an employed foreign lawyer does not himself provide legal services, so as to fall outside the purview of rule 12.

20.  But that is not the end of the matter.  Even if Mr Johnston might have been providing legal services (and in drafting correspondence and documentation for use in court proceedings, he would appear to have been doing so), it is still necessary to ask whether the services he provided were those customarily provided by a solicitor in his capacity as such.

21.  As to this, while it might well be said that all services related to the giving of legal advice or provision of legal services, when provided by a solicitor, would be provided in his capacity as such, it is still necessary to consider whether they are services of a nature “customarily” provided by a solicitor.

22.  Mr Chan submitted that what Mr Johnston had done was to draft letters and other correspondence related to the case, and to draft affidavits for use in the discovery application, and that drafting of such documents was clearly a service that would customarily be provided by a solicitor in his capacity as such.

23.  However, I think that this is to describe what Mr Johnston did in terms that are over-broad.  On the basis of the material before me, Mr Johnston was closely supervised in his work, acting on the instructions of Mr Hughes, supervised by him, and with his work product being reviewed and amended by Mr Hughes before it was eventually used.  He did not take any action, or do anything of substance, without such supervision.  In those circumstances, it seems to me that what Mr Johnston did was to draft correspondence and affidavits under the supervision of, and for review by, Mr Hughes.  So stated, I do not think that what he did should be regarded as something “customarily” done by a solicitor in his capacity as such.  A qualified Hong Kong solicitor does not require supervision and review of his work (although there may be circumstances in which it might be prudent for this to be done – for example, where the solicitor in question is newly qualified, or inexperienced in the area of practice in question).  Thus, I think that the doing of such work under supervision should not be regarded as work that is “customarily” done by a Hong Kong solicitor, and therefore falls outside the ambit of rule 12.

24.  Such an approach to rule 12, which was broadly that advocated by Mr Jamison, would promote both the policy objectives that might be thought to underlie it.  The legal services provided as a result would be subject to the supervision of a qualified Hong Kong solicitor (thus meeting the first policy objective), and by enabling a foreign lawyer to gain experience of Hong Kong legal practice and ultimately to qualify as a solicitor here (as I understand Mr Johnston has now done), the pool of qualified solicitors would be expanded and strengthened (thus promoting the second).

25.  I am therefore of the view that the work undertaken by Mr Johnston did not breach the provisions of rule 12.

26.  However, even if I am wrong in this conclusion, I do not think that this would make any difference.  This is because I am of the view that while a breach of rule 12 would give rise to disciplinary consequences for the foreign lawyer concerned, it would not lead to the costs of the work done being rendered irrecoverable.

27.  In this regard, it is necessary to have regard to the provisions of section 50 of the Legal Practitioners Ordinance.  This provides that “a person cannot in any legal proceedings recover costs for anything done by an unqualified person who acts as a solicitor or solicitor corporation”.  This appears to be the only provision in the Ordinance that renders costs of work done by an unqualified person irrecoverable.  Its existence shows that the legislature has provided expressly for this consequence, but has done so to this extent only.  That being so, I do not think that it would be right to impose the consequence of non-recoverability of costs in other situations where this has not been expressly provided for.  Moreover, and in any event, the terms of section 50 would appear to be wide enough to cover all cases in which there would be good reason to impose this sanction.

28.  I do not think that section 50 would bite in this case.  While Mr Johnston was clearly an unqualified person for the purposes of section 50 (since he was not, at the time, qualified to be admitted as a solicitor), I do not think that it can be said that he was acting “as a solicitor”.  Given that all of the work that he did was supervised and reviewed, I would not characterise what he did as amounting to acting as a solicitor.  As Litton JA (as he then was) pointed out in Hong Kong Bar Association v City West Investment Limited [1994] 2 HKLR 39, at p.45:-

“... Clearly a person, be he a financial advisor or even a foreign lawyer, may perform some of the everyday functions of a qualified barrister without “acting as a barrister” within the meaning of section 44(a). ...”

29.  Here, even if the drafting and other work done by Mr Johnston might be regarded as work which a solicitor might do, he did not do so on his own, without supervision.  Had he done so, the position might possibly have been different.  However, the fact that he was throughout under Mr Hughes’ supervision means, in my view, that he was not himself “acting as a solicitor” so as to bring the situation within the terms of section 50.

30.  For the foregoing reasons, I am satisfied that the costs sought to be recovered in respect of Mr Johnston’s work are in principle recoverable.  I therefore turn to consider the amount claimed in the light of the other objections that have been raised.

31.  As to the general complaint as to the insufficiency of the information provided, I do not think that the statement provided was insufficient.  It is largely in the form suggested by the Registrar’s Note on Assessment of Costs (which is set out at paragraphs 62/9/10A-D of the Hong Kong Civil Procedure, 2008 edition) which provides guidance on the procedure to be adopted and information to be provided for the purposes of a gross sum assessment.  Although the information provided will be much less detailed than that which would be provided for a full taxation, the courts will nonetheless be able to make an assessment of the costs to be allowed on a broad principle basis, having regard to the nature of the hearing, its complexity, and the amount of time and documentation involved.

32.  So far as counsel’s attendance at the call over hearing before the Master is concerned, while it is correct that no order was made in relation to the reserved costs of that hearing, it seems to me that it is still open to me to deal with those costs, as the formal order in relation to the discovery summons has not yet been drawn up, pending the assessment of the costs.  Simmons & Simmons suggested in correspondence that it would be appropriate to deal with the costs of that hearing as well.  In my view, there would be little to be gained by not dealing with those costs now, as the call-over hearing was clearly related only to the discovery application, and I therefore propose to deal with those costs also, particularly as they appear to be limited to the costs of attendance by counsel and a trainee solicitor.

33.  As to the quantum of such costs, it does not seem to me that it was necessary to instruct counsel to attend what was clearly only a call-over hearing.  I would therefore disallow counsel’s fees in relation to that hearing.  However, I shall allow the costs of the trainee solicitor in the amount claimed (HK$650).

34.  Turning to the other costs claimed, I think that it is necessary to have in mind the nature of the application, and the quantity of documentation that was generated in relation to it.  The application was a straightforward discovery application that involved six specified categories of documents, and the affirmations in support and in opposition were, for the most part, fairly short and to the point, the longest being Mr Hughes’ affidavit in opposition to the application, setting out the background to the application and dealing with each category of documents of which discovery was sought.  This ran to some nine pages.  Each of the other three affidavits filed for the Defendant was just over one page long.  The correspondence prior to the application appears to have consisted of some two or three letters from each side, with those from the Defendant’s side each running to about two to three pages.

35.  Against that background, the total time spent by the Defendant’s solicitors on communications with their client, counsel and the other side, which totals 20.5 hours, seems on the high side.  Bearing in mind the nature of the application, and the correspondence which was exhibited to the various affidavits filed in support and in opposition to it, I would allow the 0.3 hours claimed for Mr Hughes, but would reduce the other amounts claimed by 40% – having regard to the length of the letters written and received, it seems to me that to have spent close to 20 hours dealing with them was excessive.  On this basis the amount recoverable under part B of the statement of costs would be HK$1,200 plus 60% of HK$31,440, i.e. HK$18,864, giving a sub-total of HK$20,864.

36.  So far as the professional work is concerned, again, having regard to the nature and extent of the affidavits filed by the Defendant, while the time spent by Mr Hughes is again, in my view, reasonable, the time spent by Mr Wong and Mr Johnston once again appears on the high side (particularly having regard to the fact that three of the four affidavits filed were very short), and I would also reduce these amounts by 40%.  This means that the costs recoverable will be HK$4,000 plus 60% of HK$30,140, i.e. HK$18,084, giving a total of HK$22,084 for item C1.  In relation to item C2, I think that this item is reasonable, and will allow it in full, in the amount of HK$7,040.  As for item C3, it is not clear what work, other than the suggestion as to what correspondence should be included in a correspondence file, was done on the Defendant’s side.  That being so, I would be prepared only to allow 50% of the amount claimed, or HK$5,570 for item C3.  In relation to item C4, I do not think that it was necessary for both Mr Hughes and Mr Wong to have attended the hearing, although I would accept that it was appropriate for Mr Hughes to have attended.  I will therefore allow the HK$12,000 claimed for Mr Hughes, along with the HK$650 claimed for the trainee in relation to the call-over hearing, for a total of HK$12,650 under this heading.  Finally, under item C5, while I am prepared to allow something for this item, it seems to me that the time claimed is very much on the high side, and I would be prepared to allow only 50% of this item also, or HK$3,450.

37.  So far as counsel’s fees are concerned, I have already indicated that I will not allow the fees for attendance at the call-over.  So far as the brief fee is concerned, doing the best that I can, I shall allow HK$25,000 for this item.

38.  Finally, the photocopying charges of HK$5,302 do seem very high, and I shall reduce these to HK$2,400.

39.  This gives a total amount of costs for the Defendant of HK$99,058.  I shall therefore order that the Plaintiff is to pay the Defendant its costs of the discovery application, including the reserved costs of the call-over hearing, which are assessed in the amount of HK$99,058.

40.  It remains necessary to deal with the costs of this hearing.  The Defendant has succeeded on the main point that was argued, and has recovered about two-thirds of the amount it has claimed.  As I have not heard submissions as to the appropriate costs order in relation to this hearing, I shall direct that the parties should file submissions in relation to the costs of this hearing within 21 days, accompanied by a statement setting out the costs that they seek to recover, and respond to the other party’s submissions and statement within 7 days thereafter.  I shall then rule on the matter, making a gross sum assessment of the costs in question, in writing.

HCA1370/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1370 OF 2006

______________________

______________________

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D E C I S I O N

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1. This is an application by the Plaintiff, Heather Anne Voce, for further discovery in this action which she has brought against the Defendant, The Henley Group Limited.  Although the application was, in form, an application for a further and better list of documents pursuant to RHC Order 24 rule 3, it seems that what the Plaintiff is really seeking is an order for specific discovery under RHC Order 24 rule 7.  However, I do not think that anything really turns on the form of the summons as the Defendant responded to the application on the basis that it was, in fact, an application for specific discovery.

2. The Plaintiff is a schoolteacher.  The Defendant is a firm of independent financial advisers.  Mr Kevin Slattery was a financial adviser who was formerly employed by the Defendant from about 1995 until he was dismissed on 10 June 2005.  Mr Slattery was also, for a period of time, a director and shareholder of the Defendant.  According to further and better particulars filed by the Defendant, Mr Slattery was one of its directors from 31 August 2002 until 24 March 2005, and also a 50 per cent shareholder in the Defendant from 5 September 2002 until 15 September 2005.

3. The Plaintiff and Mr Slattery were also personally acquainted as he was the son-in-law of Mrs Barbara Gall and the late Mr Justice Gall, and Mrs Barbara Gall was the headmistress of the school at which the Plaintiff taught.  She and the Plaintiff were on friendly terms and it seems that the Plaintiff had met Mr Slattery socially through Mrs Gall, or members of her family, on a number of occasions. 

4. According to the Plaintiff, she was recommended to consult Mr Slattery as to her financial affairs by Mrs Gall and, following that recommendation, she says that she did consult Mr Slattery and, as a result, invested various sums of money through him.  The Plaintiff says that the investments which she made through Mr Slattery were, in fact, made by her with the Defendant, and that the Defendant is accordingly responsible for the return to her of such investments or their value.  She says that, on various occasions between December 2002 and April 2005, she invested sums totalling some US$568,993 with the Defendant, through Mr Slattery, and that by May 2005, the investments made with these sums had grown to some US$903,252.56, as appears from a statement provided to her by Mr Slattery at about that time, the statement being one which was printed on the Defendant’s letterhead.

5. The Plaintiff’s case is that the terms of the investment were that she could withdraw all or part of her investment on three months’ notice being given and that she has given such notice to the Defendant, but the Defendant has failed to repay any part of such investment to her.

6. The Defendant’s case is that none of the sums paid by the Plaintiff to Mr Slattery were investments made with or through the Defendant, rather they were moneys paid to Mr Slattery to invest for the Plaintiff pursuant to an arrangement between the Plaintiff and Mr Slattery in his personal capacity, which had nothing to do with the Defendant.  The Defendant points to various pieces of evidence in support of its position.  It points first to the fact that it is not in fact licensed by the Securities and Futures Commission to handle client moneys and that it makes this clear to clients and potential clients in its publicity materials and in various documents provided to, and forms filled in by, clients when they engage the Defendant as their financial advisers.  The Defendants rely, in particular, on one such form filled in by the Plaintiff in this case in which that does appear to be stated.

7. The Defendant relies also on other matters to show that the Plaintiff knew that she was dealing with Mr Slattery in his personal capacity, including a hearsay statement made by the late Mr Justice Gall to the other shareholder and director of the Defendant, Mr Anthony Michell, to the effect that it was he who had introduced the services of Mr Slattery as a financial adviser and as someone who could make investments on behalf of the Plaintiff, to the Plaintiff, but that he had indicated to the Plaintiff that in dealing with Mr Slattery in that way, she would be dealing with him in his personal capacity and not as a representative of the Defendant.

8. Other evidence on which the Plaintiff relies includes evidence such as bank paying-in slips in relation to the sums paid over by way of the alleged investment with the Defendant, which appear to show that the moneys were paid not into any bank account of the Defendant, but into personal accounts of either Mr Slattery or his wife, or himself and his wife jointly.

9. The Defendant denies having ever received any part of the US$568,993 that the Plaintiff claims to have invested with it.

10. For her part, the Plaintiff responds that she does not agree that she was dealing with Mr Slattery in his personal capacity, or that she knew, or should have known, that this was the case.  She relies on various matters such as the fact that she had meetings with Mr Slattery at the Defendant’s offices, and was provided by Mr Slattery with statements showing the value of her investments at different times on the letterhead of the Defendant, in support of her position.

11. It is clear, I think, from the pleadings, that this is the main, and, indeed, perhaps the only real issue in the dispute between the parties, so that the main issue for determination in these proceedings will be: what was the status of the investments that the Plaintiff made with Mr Slattery?  Were they, as the Plaintiff suggests, investments made through Mr Slattery but with the Defendant?  Or were they, as the Defendant suggests, investments made with Mr Slattery in his personal capacity, which had nothing to do with them?

12. There was no real dispute as to the principles applicable to this application.  It is for the Plaintiff to make out a prima facie case that: first, there was in existence a specific document, or class of documents, of which discovery is sought; second, that the Defendant has, or has had, the document in its possession, custody or power; third, that the document, or class of documents, relates to a matter in question in the action; and finally, that the discovery sought is necessary either for disposing fairly of the cause or matter or for saving costs.

13. As I have said, the central issue in these proceedings relates to the nature of the investment made by the Plaintiff through Mr Slattery.  By this application, the Plaintiff seeks discovery of six classes of documents and I shall deal with each of these in turn.

14. The first document sought is described as an unredacted copy of a letter to the Defendant’s clients dated 10 June 2005, as referred to in paragraph 21 of Mr Anthony Michell’s witness statement. 

15. By way of background, it is necessary to say that in Mr Michell’s witness statement, he dealt with, among other things, the circumstances in which Mr Slattery’s employment with the Defendant came to be terminated and how he ceased to be a director of, or shareholder in, the Defendant.  In essence, it appears that Mr Slattery’s services were terminated because it was considered that he had been in breach of his obligations under the consultancy agreement under which he was employed, and also in breach of his obligations as a director of the Defendant.  The particular matters complained of were that, among other things, he had borrowed money from clients of the Defendant in contravention of its compliance manual and his consultancy agreement, thus bringing the Defendant into disrepute; that he had misused his company credit card by using it to withdraw money for his personal use; that he had failed to repay the company for the cost of personal travel which he had caused it to pay on his behalf; and that, notwithstanding having had ample opportunity to do so, he had failed to pass the necessary qualifying examinations to obtain a licence as a registered independent financial adviser.

16. In his statement, Mr Michell describes these matters and then goes on, in paragraph 21, to say that the Defendant had written to four of the clients who had made loans to Mr Slattery and whose loans were, apparently, at that point still outstanding, to explain to them that the Defendant had come to know of these loans that had been made, to explain that the obtaining of these loans by Mr Slattery was in breach of the Defendant’s compliance manual and Mr Slattery’s employment contract, to indicate that, as far as they were aware and as far as they were concerned, the loans in question were a personal matter between Mr Slattery and the clients concerned, but offering to provide any information or assistance that they could if that was desired by the clients.  Mr Michel went on to say that, out of the four clients, three had responded to the Defendant by getting in contact with them and indicating that, as far as they, the clients, were concerned, the loans were a personal matter between Mr Slattery and themselves.

17. Initially, although this document was referred to in Mr Michel’s witness statement, it seems that discovery was not made of it in the list of documents filed by the Defendant.  However, on request for its disclosure being made, it was indicated that a copy of the letter would be sent - or rather, a copy of the template for the letter would be provided.  This was duly done.  However, the template did not identify the clients to whom it was sent and discovery is therefore sought, in effect, of documents that would enable those clients to be identified.  It is not, I think, suggested by the Defendants that some such documents do not exist.  The Defendant says, however, that they are not relevant to any issue in the proceedings.

18. Mr Chan, appearing for the Plaintiff, submitted that the documents were relevant in that they might put the Plaintiff on a train of inquiry by identifying potential witnesses who could give evidence on behalf of the Plaintiff in these proceedings.  When asked as to the nature of the evidence that the witnesses concerned might be able to give, he suggested that the evidence might be of a similar fact nature relating to other situations in which clients had dealings with Mr Slattery which were said by the Defendant to be personal in nature.  Mr Chan said that the main interest was in the one client who had, as he understood it, indicated that he or she did not agree with the Defendant’s position that the loans were a personal matter between the client and Mr Slattery.  He suggested that such similar fact evidence was admissible and that to seek to adduce it would be justified, not least because, he said, the Defendant itself had sought to rely on similar fact evidence in the form of a statement to be made by Mr Nicholas Gall, the son of the late Mr Justice Gall, in which he speaks of a meeting between himself, his late father and Mr Michell, in which Mr Justice Gall informed Mr Michel, among other things, that the Gall family had invested sums of money through Mr Slattery but that this was understood by them to be on a personal basis and nothing to do with the Defendant.  Mr Justice Gall had, it was said, also indicated that, to his recollection, it was he who had introduced the Plaintiff to Mr Slattery as a potential investment adviser, although he says that he made it clear to the Plaintiff that in dealing with Mr Slattery, she would be dealing with him personally, in his personal capacity, and not as an agent or representative of the Defendant.

19. With respect to Mr Chan, I find it difficult to accept his submission that the documents sought would in some way relate to any matter in issue in these proceedings.  As I have indicated, the only real matter in issue in these proceedings relates to the capacity in which Mr Slattery acted when he received moneys from the Plaintiff for investment.  I do not see that any information that could be obtained from any of the four clients who had made loans to Mr Slattery as opposed to making investments with him, could have any bearing on that issue.

20. Further, it seems to me that whatever may be the merits of relying on similar fact evidence, it does seem to me that, read fairly, the evidence that has been put forward in relation to dealings between the Gall family and Mr Slattery are, if relevant at all, of more of a background nature.  It seems to me that the main point that is relied upon by the Defendant in the evidence of Mr Nicholas Gall relates to the suggestion that the Plaintiff was in fact informed of, and was therefore aware of, the fact that, in dealing with Mr Slattery, she would be dealing with him personally, rather than with the Defendant.

21. Of course, whether or not that evidence is ultimately accepted is a matter for the trial judge at the end of the day, and I do not, at this stage, express any views one way or another as to whose evidence is to be preferred on this critical issue.  But it does seem to me that the nature of the transactions that are dealt with in the letters concerned are very different in nature from those which are at the heart of these proceedings and, for that reason, I do not see that any such evidence would be relevant to these proceedings, or that any of those clients, in giving evidence as to the loans which they had made to Mr Slattery, could in any way be giving evidence that would relate to any matter in issue in these proceedings.

22. I would also point out that, to the extent that Mr Chan understood Mr Michell as saying that one of the clients in question had disputed the personal nature of the loan transaction with Mr Slattery, this would appear to be a misreading of the relevant part of Mr Michell’s statement which states simply that three clients made contact with the Defendant.  The fact that one client did not do so, does not indicate, one way or another, that any particular attitude to the nature of the loans having having been expressed by that client.

23. The second document that is sought was described as the unredacted police statement of Mr Michell.  The circumstances in which this document came into existence are that Mr Michell made a statement to the police, perhaps following a complaint made by the Gall family to the police in respect of Mr Slattery and his mishandling or misappropriation of funds which they had invested with him.  The police statement of Mr Michell deals with, among other things, the position of the Plaintiff and her investments with the Defendant firm.  However, when the document was disclosed, it was made clear to the Plaintiff that the Defendant would blank out from it certain parts that contained information relating to other clients that was, they said, irrelevant to these proceedings.  The version of the document that has been disclosed is, in fact, blanked out, in that two paragraphs, one longer and one shorter, have been obliterated in the copy that was produced for inspection and made available to the Plaintiff.

24. It is, I think, open to a party in proceedings who is making discovery to seal up or cover parts of documents which are irrelevant to matters in issue in the proceedings.  I do not think that this was disputed by Mr Chan.  Mr Chan, however, suggested that what had been blanked out went further than simply concealing the names of the clients concerned in respect of whom there might be legitimate confidentiality concerns.  However, Mr Hughes, the solicitor acting for the Defendant has gone on affidavit in these proceedings to say that the matters which have been blanked out are, first, matters that relate to other clients and, second, matters which are irrelevant to these proceedings. 

25. In general, unless some good reason is shown for going behind it, the oath of a party, or of his representative, as to the relevance or otherwise of documents which are disclosed on discovery is conclusive.  With respect to Mr Chan, I do not think that there is anything in the manner in which the blanking out was carried out that suggests that Mr Hughes may have mistaken himself or misapplied his mind to the question of whether or not the matters blanked out were in fact relevant to these proceedings.  In the circumstances, it seems to me that there is nothing that I can rely on to suggest that the blanking out was carried out otherwise than properly and, in the circumstances, I cannot see that there is any basis on which the unredacted police statement of Mr Michel should be made available.

26. The third category of documents of which discovery is sought has been described as all documents relating to the exchange of Mr Slattery’s 50 per cent shares in the Defendant with Mr Michell, as referred to in paragraph 23 of Mr Michell’s witness statement.  It is true that Mr Michell mentions, in paragraph 23 of his witness statement, that following the dismissal of Mr Slattery, negotiations took place and arrangements were made for Mr Michell to acquire Mr Slattery’s shareholding in the Defendant.  However, this is mentioned in passing in Mr Michell’s statement which provides a description of the background to Mr Slattery’s departure in all his various capacities from the Defendant, whether as an employee, a director or a shareholder. 

27. Despite Mr Chan’s submissions to the effect that there might be material in documentation relating to the share transfer that might throw light on the possible claims that might arise, in that there might have been, for example, a term of the agreement relating to potential claims against the Defendant arising as a result of Mr Slattery’s conduct, it seems to me that the precise terms on which Mr Slattery departed from the Defendant and the precise details of the terms on which he transferred his shares in the Defendant to Mr Michell are not matters that could in any way throw light on the key issue in these proceedings.

28. In this respect, I think it is important to bear in mind that the issues in these proceedings are defined by the pleadings and not by what the parties have to say in their witness statements.  Although it will often be the case that parties will raise matters in their witness statements which are matters of background or of peripheral importance, whether or not the matters that they speak to in their witness statements are relevant to the issues in the proceedings is a matter that has to be judged by reference to the pleadings.

29. As I have said, given that the issue in these proceedings relates to the capacity in which Mr Slattery obtained the funds that the Plaintiff says she invested through him, and given that all of these transactions and payments took place before Mr Slattery’s departure from the Defendant and his sale of his shares in it to Mr Michell, I cannot see that documentation relating to that transaction can be said to have any relevance to any of the issues in these proceedings.  I would accordingly decline to order discovery of those documents.

30. So far as the fourth category is concerned, this consists of the Defendant’s board minutes and minutes of annual general meetings from 2003 to 2005.  Initially, discovery of these documents was sought on the basis that the Defendant had not admitted that Mr Slattery was in fact a director and substantial shareholder of the Defendant as had been pleaded by the Plaintiff in paragraph 2(e) of her statement of claim. 

31. In fact, the matter was addressed in further and better particulars which were subsequently filed by the Defendant, in which the Defendant accepted that Mr Slattery had been a director of the Defendant between the dates which I have stated earlier in my judgment, and also indicated that Mr Slattery had been a 50 per cent shareholder in the Defendant between September 2002 and September 2005.  To that extent, therefore, there does not appear to be any issue between the parties as to Mr Slattery’s status as either a director or shareholder of the Defendant. 

32. At the hearing today, Mr Chan suggested that the documents in question might throw light on, as he put it, Mr Slattery’s role within the Defendant and perhaps also on the way in which Mr Slattery dealt with clients of the Defendant.  With respect, it seems to me that that is, at best, purely speculative and, in any event, there is no reason to suppose that the class of documents that is described, i.e., the Defendant’s board minutes and minutes of annual general meetings, would be likely to throw light on any matter relevant to these proceedings.  It seems to me that the class of documents is too widely stated and, in any event, the precise role of Mr Slattery within the Defendant does not appear to me to be, in truth, a matter that is in issue in these proceedings.  For those reasons, I would therefore refuse to make any order in respect of this item in the Plaintiff’s application.

33. The fifth class of documents sought was the Defendant’s audited accounts for the years 2003 to 2005.  The reason given for seeking disclosure of these documents was that they were said to be relevant to the same issue as the fourth set of documents and I would refuse disclosure of them for the same reasons as I have given in relation to that class of documents. 

34. It was also suggested that the Defendant’s audited accounts might disclose whether or not the Defendant had in fact received moneys from the Plaintiff in this case.  It was said that the Defendant had put in issue the question of whether or not it had received any moneys by making a positive averment that it had not received any moneys directly from the Plaintiff. 

35. With respect, even if that was an issue that was raised by the Defendant on which the Defendant bore the burden of proof - as to which I have some doubt, as it is the Plaintiff’s case that she has paid moneys effectively to the Defendant and it is therefore for her to prove that - it seems to me that there is no real basis for thinking that the annual audited accounts of the Defendant would be likely to show what funds it has received from particular clients.  I cannot, therefore, see that the disclosure of these documents is likely to be either necessary for the fair disposal of the proceedings, or for the saving of costs.  I therefore decline to order discovery of this category of documents either.

36. The final category of documents for which discovery was sought related to the Defendant’s appointment book and Mr Slattery’s personal diaries from 2003 to 2005.  This item was not pursued by Mr Chan at the hearing in the light of the statement in the affidavits filed in opposition to the application which made it clear that, as far as Mr Slattery’s personal diaries were concerned, these had never been in the possession, custody or power of the Defendant, and as far as the Defendant’s appointment books were concerned, while these would have been in the Defendant’s possession, custody or power, the practice of the Defendant was to destroy such appointment books, or dispose of them, at the end of the year to which the book related and that they therefore were no longer in existence.

37. In the circumstances, therefore, it seems to me that the Plaintiff has not made out any case for discovery of any of the categories of documents sought and it follows that the application is dismissed.