HCCW299/2011 THE JOINT AND SEVERAL LIQUIDATORS OF DAYS IMPEX LTD (IN LIQUIDATION) v. MAHESH NANIK DAYARAM - LawHero
HCCW299/2011
高等法院（公司清盤）Harris J22/4/2020[2020] HKCFI 549
合併案件：HCCW299/2011HCCW298/2011
HCCW299/2011
A A
HCCW 298/2011 & HCCW 299/2011
B (HEARD TOGETHER) B
[2020] HKCFI 549
C C
HCCW 298/2011
D
IN THE HIGH COURT OF THE D
HONG KONG SPECIAL ADMINISTRATIVE REGION
E E
COURT OF FIRST INSTANCE
F COMPANIES WINDING-UP PROCEEDINGS NO 298 OF 2011 F
____________________
G G
IN THE MATTER of the
H Companies (Winding Up H
and Miscellaneous Provisions)
I Ordinance (Cap 32) I
J and J
K
IN THE MATTER of Days
K
Impex Limited
L ____________________ L
M BETWEEN
M
THE JOINT AND SEVERAL LIQUIDATORS OF Applicants
N DAYS IMPEX LIMITED (IN LIQUIDATION) N
O and O
P
MAHESH NANIK DAYARAM Respondent
P
Q ____________________ Q
R AND HCCW 299/2011 R
IN THE HIGH COURT OF THE
S S
HONG KONG SPECIAL ADMINISTRATIVE REGION
T COURT OF FIRST INSTANCE T
COMPANIES WINDING-UP PROCEEDINGS NO 299 OF 2011
U U
V V
- 2 -
A A
IN THE MATTER of the
B B
Companies (Winding Up
and Miscellaneous Provisions)
C C
Ordinance (Cap 32)
D and D
E IN THE MATTER of Days E
International Limited
F F
____________________
BETWEEN
G G
THE JOINT AND SEVERAL LIQUIDATORS OF Applicants
H DAYS INTERNATIONAL LIMITED (IN LIQUIDATION) H
I
and I
MAHESH NANIK DAYARAM Respondent
J ____________________ J
(HEARD TOGETHER)
K K
Before: Hon Harris J in Chambers
L L
Dates of Hearing: 17 December 2019
M Date of Decision: 23 April 2020 M
_____________________
N N
DECISION
O _____________________ O
P Introduction P
Q 1. The Respondent in these two misfeasance proceedings, Q
Mahesh Dayaram, has issued two summonses in identical terms seeking
R R
discovery from the Applicants, the Liquidators of Days Impex Limited
S S
and Days International Limited, pursuant to RHC O24 r7.
T T
U U
V V
- 3 -
A A
2. In August 2015 Mr Dayaram and his Father, Nanik Dayaram,
B B
were convicted of nine counts of conspiracy to defraud following a
C trial in HCCC 2/2014 and sentenced to 10 years imprisonment C
(“Convictions”). Their appeals against the Convictions to both the Court
D D
of Appeal and the Court of Final Appeal were unsuccessful.
E E
3. Mr Dayaram is acting for himself 1. He has appeared before
F F
me at a number of case management hearings. He is clearly an intelligent
G man. Mr Dayaram has been able to produce a clear and comprehensive G
skeleton argument running to some 50 pages despite the restrictions he is
H H
under in Stanley Prison. Although not a lawyer my impression is that
I Mr Dayaram has sufficient understanding of the court process to present I
the present applications and manage the civil proceedings he faces
J J
competently. I have made allowances in the directions I have made for
K K
the progress of the proceedings generally, and this application in
L
particular, to take into account that Mr Dayaram is not a lawyer and is in L
prison. The Liquidators have cooperated by generally agreeing to the
M M
directions Mr Dayaram has proposed and preparing hearing bundles,
N although Mr Dayaram is the applicant in the present summonses. N
O O
4. The style and contents of this decision are aimed at ensuring
P that so far as possible Mr Dayaram understands both the decision and my P
reasoning. I have endeavoured to keep it as brief and simple as possible.
Q Q
R R
S S
T T
1
U The Liquidators were represented by David Chen. U
V V
- 4 -
A A
Background
B B
5. The background to the misfeasance proceedings is as follows.
C C
Much of this section is taken from Mr Chen’s useful summary in his
D skeleton argument: D
E (1) The Convictions concerned false invoices and false bills of E
lading submitted to various banks for a total of 174 import
F F
and export loan applications.
G (i) The funds from the import loans were purportedly G
used to fund the purchase of goods by the Group from
H H
Oscoda Electronics Ltd (“Oscoda”). In support of the
I applications for import loans, sales invoices from I
Oscoda were submitted to the defrauded banks and,
J after each successful application, the funds were J
released to Oscoda.
K K
(ii) The funds from the export loans were purportedly
L L
used to fund the sale of products by Days Impex to
Priya International LLC (“Priya”) and Sadrudin
M M
Sumar (“Sadrudin Sumar”). Bills of lading were
N issued by Opus Container Lines S. A. (“Opus”) and N
sales invoices between Days Impex and Priya or
O O
Sadrudin Sumar were submitted to the banks in
P support of the export loan applications. P
(2) The companies obtained over US$50 million in loan
Q Q
proceeds from the 174 loan applications. The Commercial
R Crime Bureau analysed the fund flow arising from 161 loan R
applications and observed a circular fund flow pattern. The
S Liquidators also carried out an independent analysis of the S
fund flow arising from 161 loan applications and similarly
T T
observed a circular fund flow pattern.
U U
V V
- 5 -
A A
B
(3) In the criminal proceedings, the prosecution’s case was that B
the underlying sale and purchase transactions giving rise to
C the 174 loan applications were fictitious, and the invoices, C
bills of lading and other documents submitted to the banks in
D D
support of the loan applications were false. As regards the
E trading entities, the prosecutions’ case was that Oscoda was E
not a genuine supplier, Priya and Sadrudin Sumar were not
F F
genuine purchasers, and that Opus did not exist and the
related bills of Opus were false.
G G
(4) The misfeasance proceedings concern 161 import loan
H H
applications (“Loan Applications”). The Liquidators’ case
is that Mr Dayaram acted in breach of his fiduciary duties
I I
owed to the companies by submitting or procuring the
J companies to submit false invoices and false bills of lading J
to various banks in support of the Loan Applications. The
K K
scope of the misfeasance proceedings largely overlap with
L the scope of the criminal proceedings: 156 out of 161 Loan L
Applications formed part of the 174 loan applications being
M M
the subject matter of the Convictions.
N HCCW 298 (Days Impex) HCCW 299 (Days International) N
Bank No. of Loans Charge No. of Loans Charge
O HSBC 46 import loans 1 and 2 11 import loans 1 and 2 O
HSB 22 import loans 3 and 4 45 import loans 3 and 4
P BOB 15 import loans 5 and 6 17 import loans 5 and 6 P
DBS 4 import loans Not charged
Q Citibank 1 import loan Not charged Q
Total: 88 import loans 73 import loans
R R
S
(5) The principal issue that arises for determination in the S
misfeasance proceedings is whether the transactions
T underlying the Loan Applications were genuine. Various T
sub-issues arise, including the fund flow pattern of the
U U
V V
- 6 -
A A
B
proceeds from the Loan Applications, and if the fund flow B
was circular, whether the circular fund flow could be
C justified. C
D D
6. Mr Dayaram does not accept that the transactions underlying
E the Loan Applications are false. His application for discovery is directed E
to producing documents that he believes will demonstrate this.
F F
Necessarily he suggests that the transactions were not adequately or
G competently explored by his counsel during the criminal trial. G
H H
The Relevant Legal Principles
I I
7. Mr Dayaram’s skeleton argument contained extensive
J
citation of authorities explaining the principles that govern discovery J
applications and how those principles in practice are applied by the courts.
K K
As I explained to Mr Dayaram judges are very familiar with the
L principles and it is not necessary to delve into them in any depth. I L
summarise them in the following paragraphs by using Mr Chen’s
M M
summary of the principles in his skeleton argument, with the exception of
N [8], which refers to an authority relied on by Mr Dayaram, which neatly N
sets out my approach to the application, which to use layman’s language,
O O
has been to give Mr Dayaram the benefit of the doubt:
P P
(1) The Summonses are issued under RHC O24 r7 and the
Q inherent jurisdiction of the court. The principles governing Q
RHC O24 r7 are as follows (see Hong Kong Civil Procedure
R 2020 §24/7/2): R
S (i) There is no jurisdiction to make an order for specific S
discovery under RHC O24 r7 unless there is sufficient
T evidence or prima facie case that: (a) the documents T
or classes of documents exist which the other party
U U
V V
- 7 -
A A
B
has not disclosed; (b) the documents relate to a matter B
in issue in the action; and (c) the documents are in the
C possession, custody or power of the other party. C
D
(ii) Once it is established that those three prerequisites for D
jurisdiction do exist, the court has a discretion whether
E or not to order discovery. E
F (iii) The Court will not make an order unless the discovery F
sought is necessary either for disposing fairly of the
G cause or matter or for saving costs. G
H (iv) The Peruvian Guano test remains the test of relevance. H
A document is relevant if:
I I
(a) it is reasonable to suppose that it contains
J information which may, not must, either directly J
or indirectly enable the party requiring the same
K K
either to advance his own case or to damage the
case of his adversary; or
L L
(b) it is a document which may fairly lead the party
M M
to a train of inquiry which may have either of
N
those two consequences. N
(v) For the purpose of discovery, the pleadings have to be
O O
looked at broadly.
P (vi) The order must identify with precision the documents P
or categories of documents which are required to be
Q Q
disclosed, for otherwise the person giving discovery
R may find himself in serious trouble for swearing to a R
false affidavit, even though doing his best to give an
S honest disclosure. S
T (vii) Notwithstanding the Peruvian Guano test, “fishing” is T
not allowed, and discovery should not be oppressive.
U U
V V
- 8 -
A A
B
(viii) The respondent may answer an application for specific B
discovery by an affidavit stating that he does not have
C the documents, and this will be conclusive at the C
interlocutory stage.
D D
(2) It is insufficient for an applicant to allege that the respondent
E has or had documents: a prima facie case must be made out E
for (1) existence, (2) possession, custody or power, and (3)
F F
relevance of the specified documents.
G (3) Where a request for a class of documents is made, the class G
must not be defined or described so widely so as to include
H H
documents which are not relevant to the issue. The
I prerequisites for the invocation of RHC O24 r7 must be I
established in respect of the class described as a class, not as
J J
regards some in the class only. Further, a party applying for
K
discovery cannot simply seek “all documents bearing upon K
an issue or showing a particular thing”, for such documents
L merely bear on an issue but do not form a class L
of documents which is discoverable under RHC O24 r7:
M M
Li Tak Yee Samuel v Societe Generale Bank and Trust
N (unreported, HCA 2478/2009, 16 April 2013) at §§36–39 per N
Anthony Chan J.
O O
8. Mr Dayaram referred me to the decision of Stone J in
P P
Vashdev Essardas Mahbubani t/a Vashi's Export Co v Motis Exports Ltd
Q and Others 2 in which the judge says this: Q
R “… As no doubt will become known by commercial R
practitioners, my attitude, as Judge presently in charge of the
Commercial List, is that in general discovery is a good thing,
S S
and that in cases of doubt I am more likely to lean in favour of
discovery than against it. In this connection I am reminded of
T one of the broad principles of the common law as expressed by T
2
U Unrep, HCA 9124/1992, 26 March 1997, at §6. U
V V
- 9 -
A A
Lord Justice Bingham (as he then was) in the case of Ventouris
B v. Mountain [1991] 1 WLR 607 at 611H, where the learned B
Lord Justice observed as follows:
C C
‘Our system of civil procedure is founded on the rule
that the interests of justice are best served if parties to
D litigation are obliged to disclose and produce for the D
other party’s inspection all documents in their
possession, custody or power relating to the issues in the
E action. This is not of course a necessary rule but it is E
firmly established here. It is not however an absolute
F rule, as exceptions such as legal professional privilege F
and public interest immunity demonstrate. Nonetheless,
disclosure being generally regarded as beneficial, any
G exception has to be justified as serving the public G
interest which gives rise to the exception ...’”
H H
9. As I noted in [7] this reflects my own approach, which
I means that I have tended to lean in Mr Dayaram’s favour. I now turn to I
consider the specific categories of documents that have been sought.
J J
K Banking documents — [1(a)] K
L 10. The Liquidators agree to give discovery of the documents L
sought in this paragraph.
M M
N Communications concerning fraud insurance policies — [1(b)] N
O 11. Mr Dayaram seeks: O
P “(b) Any and all documents (including letters, faxes, email P
communications, meeting attendance notes and phone
call records) in respect to Fraud Insurance Policies
Q and/or Fraud Insurance Claims by HSBC, HASE, BOBI, Q
DBSB, CITI and UCOB, including but not limited to:
R R
(i) HSBC and HASE (‘HSBC Group’) Fraud
Insurance Policy;
S S
(ii) HSBC Group Fraud Insurance Submitted
Claims; and
T T
(iii) HSBC Group Fraud Insurance Payments
U
Received.” U
V V
- 10 -
A A
B 12. Mr Dayaram seeks these documents, because he assumes B
that the criminal prosecutions were in some way procured by HSBC in
C C
order to enable them to make a claim under fraud insurance that HSBC
D has. It would appear to be a central feature of Mr Dayaram’s defence that D
E
the case against him and his Father, which led to the Convictions and the E
present proceedings, are a consequence of dishonesty on the part of those
F F
advancing the claims. So by way of example in [16] of his 1 st affirmation
G
Mr Dayaram says this when dealing with the application for discovery of G
the fraud insurance policies: “As this was the PL’s first assignment for
H H
HSBC, FHY [Mr Fok] promised HSBC a criminal conviction and
I therefore had to obtain the conviction at any cost, including but not I
limited to lying under oath and/or withholding material information.”.
J J
Mr Dayaram provides nothing remotely approaching direct evidence for
K these serious allegations. Much of his application seems premised on his K
(prospective) ability to construct from information that may be gleaned
L L
from facts contained in the documents that he seeks facts and matters
M from which the inference of a dishonest conspiracy to obtain the M
Convictions can be made.
N N
O 13. The Liquidators, through the affirmation evidence of Mr Fok, O
deny Mr Dayaram’s allegations. Mr Fok says on oath that the
P P
Liquidators have not seen any such insurance policies and I cannot see
Q why one would expect them to do so. It is well established that a Q
statement on oath that a party does not have in their possession, custody
R R
or power a document is conclusive 3. That disposes of the application in
S [1(b)]. S
T T
3
U Li Tak Yee Samuel, supra [43]–[46]. U
V V
- 11 -
A A
Communications with former clients or vendors of the companies —
B B
[1(c) & (d)]
C 14. This paragraph seeks disclosure of all documents with C
former clients and vendors of the Companies. Their relevance is said to
D D
be that they will help show whether the underlying transactions were
E E
genuine. Although Mr Dayaram does not demonstrate what in such of
F
these documents as exist might contain information that shows the F
transactions were relevant, as the genuineness of the transactions are in
G G
issue I will make an order for discovery of these documents.
H H
Documents relating to recovery actions in respect of the Companies
I assets — [1(e)] I
J 15. If Mr Dayaram caused or permitted the companies to enter J
into bogus trade finance with HSBC thus causing loss, the fact that the
K K
Liquidators recovered monies on behalf of the companies from genuine
L debtors of the companies in itself is irrelevant to either an assessment of L
Mr Dayaram’s breach of duty or the loss it caused. I note that
M M
Mr Dayaram has not adduced any evidence to suggest that anything was
N recovered from entities said to be customers under the impugned N
transactions.
O O
P Documents relating to the proceeds of the sale of carparks — [1(f)] P
Q 16. Mr Dayaram is seeking documents which show how the Q
proceeds of the sale of carparks not paid to creditor banks under the
R R
mortgages that they had over some of the 112 carparks apparently owned
S by Days International Hong Kong were dealt with. This simply has S
nothing to do with the issues that arise in the misfeasance proceedings.
T T
U U
V V
- 12 -
A A
All documents seized by the Liquidators from the offices of the companies
B
after their appointment — [1(g)] B
C 17. Clearly Mr Dayaram is not entitled to an order in these terms. C
He is only (at its widest) entitled to all documents that have been seized
D D
that are relevant (in the sense explained in [7] and [8]) to the issues in the
E E
proceedings. Mr Dayaram frames his application for these documents in
F
his 1st affirmation in terms of an entitlement to look at the documents and F
assess whether any are relevant. The Liquidators could, if it was practical,
G G
give Mr Dayaram access to the documents and let him get on with
H checking them, but this is not the criteria for assessing whether an order H
under RCH O24 r7 should be made. Under rule 7 a party is entitled to
I I
discovery of a class of documents defined with adequate precision by its
J nature 4. A party cannot simply ask for everything the other party may J
have on the basis that amongst the documents there may be, or even
K K
likely be, some relevant documents. Mr Dayaram has not made any
L effort to identify what classes of documents within the 600 boxes of files L
he suggests have been seized he wishes disclosed.
M M
N Conclusion N
O 18. In respect of the summons in each winding up proceeding I O
will make an order in the terms of paragraph 1(a), (c) and (d). I will not
P P
deal with inspection in this decision. I invite the Liquidators in the first
Q instance to write informing me and Mr Dayaram of the approximate Q
quantity of documents they will disclose (in the case of class 1(a) I
R R
understand Mr Dayaram has already been provided access to the
S documents) and how long it will take to compile them. Mr Dayaram can S
T T
4
U Deak & Co (Far East) Ltd v NM Rothschild & Sons Ltd [1981] HKC 78, 82C. U
V V
- 13 -
A A
then write informing me of how he wishes inspection to be dealt with
B B
bearing in mind he is in Stanley.
C C
19. Given my decision and the reality of Mr Dayaram’s position
D D
I will make a costs order nisi that there be no order as to costs.
E E
F F
G
(Jonathan Harris) G
Judge of the Court of First Instance
H High Court H
I Mr David Chen, instructed by Stephenson Harwood, for the liquidators I
(in both cases)
J J
The respondent appeared in person (in both cases)
K K
L L
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
V V
THE JOINT AND SEVERAL LIQUIDATORS OF DAYS IMPEX LTD (IN LIQUIDATION) v. MAHESH NANIK DAYARAM
A A
HCCW 298/2011 & HCCW 299/2011
B (HEARD TOGETHER) B
[2020] HKCFI 549
C C
HCCW 298/2011
D
IN THE HIGH COURT OF THE D
HONG KONG SPECIAL ADMINISTRATIVE REGION
E E
COURT OF FIRST INSTANCE
F COMPANIES WINDING-UP PROCEEDINGS NO 298 OF 2011 F
____________________
G G
IN THE MATTER of the
H Companies (Winding Up H
and Miscellaneous Provisions)
I Ordinance (Cap 32) I
J and J
K
IN THE MATTER of Days
K
Impex Limited
L ____________________ L
M BETWEEN
M
THE JOINT AND SEVERAL LIQUIDATORS OF Applicants
N DAYS IMPEX LIMITED (IN LIQUIDATION) N
O and O
P
MAHESH NANIK DAYARAM Respondent
P
Q ____________________ Q
R AND HCCW 299/2011 R
IN THE HIGH COURT OF THE
S S
HONG KONG SPECIAL ADMINISTRATIVE REGION
T COURT OF FIRST INSTANCE T
COMPANIES WINDING-UP PROCEEDINGS NO 299 OF 2011
U U
V V
- 2 -
A A
IN THE MATTER of the
B B
Companies (Winding Up
and Miscellaneous Provisions)
C C
Ordinance (Cap 32)
D and D
E IN THE MATTER of Days E
International Limited
F F
____________________
BETWEEN
G G
THE JOINT AND SEVERAL LIQUIDATORS OF Applicants
H DAYS INTERNATIONAL LIMITED (IN LIQUIDATION) H
I
and I
MAHESH NANIK DAYARAM Respondent
J ____________________ J
(HEARD TOGETHER)
K K
Before: Hon Harris J in Chambers
L L
Dates of Hearing: 17 December 2019
M Date of Decision: 23 April 2020 M
_____________________
N N
DECISION
O _____________________ O
P Introduction P
Q 1. The Respondent in these two misfeasance proceedings, Q
Mahesh Dayaram, has issued two summonses in identical terms seeking
R R
discovery from the Applicants, the Liquidators of Days Impex Limited
S S
and Days International Limited, pursuant to RHC O24 r7.
T T
U U
V V
- 3 -
A A
2. In August 2015 Mr Dayaram and his Father, Nanik Dayaram,
B B
were convicted of nine counts of conspiracy to defraud following a
C trial in HCCC 2/2014 and sentenced to 10 years imprisonment C
(“Convictions”). Their appeals against the Convictions to both the Court
D D
of Appeal and the Court of Final Appeal were unsuccessful.
E E
3. Mr Dayaram is acting for himself 1. He has appeared before
F F
me at a number of case management hearings. He is clearly an intelligent
G man. Mr Dayaram has been able to produce a clear and comprehensive G
skeleton argument running to some 50 pages despite the restrictions he is
H H
under in Stanley Prison. Although not a lawyer my impression is that
I Mr Dayaram has sufficient understanding of the court process to present I
the present applications and manage the civil proceedings he faces
J J
competently. I have made allowances in the directions I have made for
K K
the progress of the proceedings generally, and this application in
L
particular, to take into account that Mr Dayaram is not a lawyer and is in L
prison. The Liquidators have cooperated by generally agreeing to the
M M
directions Mr Dayaram has proposed and preparing hearing bundles,
N although Mr Dayaram is the applicant in the present summonses. N
O O
4. The style and contents of this decision are aimed at ensuring
P that so far as possible Mr Dayaram understands both the decision and my P
reasoning. I have endeavoured to keep it as brief and simple as possible.
Q Q
R R
S S
T T
1
U The Liquidators were represented by David Chen. U
V V
- 4 -
A A
Background
B B
5. The background to the misfeasance proceedings is as follows.
C C
Much of this section is taken from Mr Chen’s useful summary in his
D skeleton argument: D
E (1) The Convictions concerned false invoices and false bills of E
lading submitted to various banks for a total of 174 import
F F
and export loan applications.
G (i) The funds from the import loans were purportedly G
used to fund the purchase of goods by the Group from
H H
Oscoda Electronics Ltd (“Oscoda”). In support of the
I applications for import loans, sales invoices from I
Oscoda were submitted to the defrauded banks and,
J after each successful application, the funds were J
released to Oscoda.
K K
(ii) The funds from the export loans were purportedly
L L
used to fund the sale of products by Days Impex to
Priya International LLC (“Priya”) and Sadrudin
M M
Sumar (“Sadrudin Sumar”). Bills of lading were
N issued by Opus Container Lines S. A. (“Opus”) and N
sales invoices between Days Impex and Priya or
O O
Sadrudin Sumar were submitted to the banks in
P support of the export loan applications. P
(2) The companies obtained over US$50 million in loan
Q Q
proceeds from the 174 loan applications. The Commercial
R Crime Bureau analysed the fund flow arising from 161 loan R
applications and observed a circular fund flow pattern. The
S Liquidators also carried out an independent analysis of the S
fund flow arising from 161 loan applications and similarly
T T
observed a circular fund flow pattern.
U U
V V
- 5 -
A A
B
(3) In the criminal proceedings, the prosecution’s case was that B
the underlying sale and purchase transactions giving rise to
C the 174 loan applications were fictitious, and the invoices, C
bills of lading and other documents submitted to the banks in
D D
support of the loan applications were false. As regards the
E trading entities, the prosecutions’ case was that Oscoda was E
not a genuine supplier, Priya and Sadrudin Sumar were not
F F
genuine purchasers, and that Opus did not exist and the
related bills of Opus were false.
G G
(4) The misfeasance proceedings concern 161 import loan
H H
applications (“Loan Applications”). The Liquidators’ case
is that Mr Dayaram acted in breach of his fiduciary duties
I I
owed to the companies by submitting or procuring the
J companies to submit false invoices and false bills of lading J
to various banks in support of the Loan Applications. The
K K
scope of the misfeasance proceedings largely overlap with
L the scope of the criminal proceedings: 156 out of 161 Loan L
Applications formed part of the 174 loan applications being
M M
the subject matter of the Convictions.
N HCCW 298 (Days Impex) HCCW 299 (Days International) N
Bank No. of Loans Charge No. of Loans Charge
O HSBC 46 import loans 1 and 2 11 import loans 1 and 2 O
HSB 22 import loans 3 and 4 45 import loans 3 and 4
P BOB 15 import loans 5 and 6 17 import loans 5 and 6 P
DBS 4 import loans Not charged
Q Citibank 1 import loan Not charged Q
Total: 88 import loans 73 import loans
R R
S
(5) The principal issue that arises for determination in the S
misfeasance proceedings is whether the transactions
T underlying the Loan Applications were genuine. Various T
sub-issues arise, including the fund flow pattern of the
U U
V V
- 6 -
A A
B
proceeds from the Loan Applications, and if the fund flow B
was circular, whether the circular fund flow could be
C justified. C
D D
6. Mr Dayaram does not accept that the transactions underlying
E the Loan Applications are false. His application for discovery is directed E
to producing documents that he believes will demonstrate this.
F F
Necessarily he suggests that the transactions were not adequately or
G competently explored by his counsel during the criminal trial. G
H H
The Relevant Legal Principles
I I
7. Mr Dayaram’s skeleton argument contained extensive
J
citation of authorities explaining the principles that govern discovery J
applications and how those principles in practice are applied by the courts.
K K
As I explained to Mr Dayaram judges are very familiar with the
L principles and it is not necessary to delve into them in any depth. I L
summarise them in the following paragraphs by using Mr Chen’s
M M
summary of the principles in his skeleton argument, with the exception of
N [8], which refers to an authority relied on by Mr Dayaram, which neatly N
sets out my approach to the application, which to use layman’s language,
O O
has been to give Mr Dayaram the benefit of the doubt:
P P
(1) The Summonses are issued under RHC O24 r7 and the
Q inherent jurisdiction of the court. The principles governing Q
RHC O24 r7 are as follows (see Hong Kong Civil Procedure
R 2020 §24/7/2): R
S (i) There is no jurisdiction to make an order for specific S
discovery under RHC O24 r7 unless there is sufficient
T evidence or prima facie case that: (a) the documents T
or classes of documents exist which the other party
U U
V V
- 7 -
A A
B
has not disclosed; (b) the documents relate to a matter B
in issue in the action; and (c) the documents are in the
C possession, custody or power of the other party. C
D
(ii) Once it is established that those three prerequisites for D
jurisdiction do exist, the court has a discretion whether
E or not to order discovery. E
F (iii) The Court will not make an order unless the discovery F
sought is necessary either for disposing fairly of the
G cause or matter or for saving costs. G
H (iv) The Peruvian Guano test remains the test of relevance. H
A document is relevant if:
I I
(a) it is reasonable to suppose that it contains
J information which may, not must, either directly J
or indirectly enable the party requiring the same
K K
either to advance his own case or to damage the
case of his adversary; or
L L
(b) it is a document which may fairly lead the party
M M
to a train of inquiry which may have either of
N
those two consequences. N
(v) For the purpose of discovery, the pleadings have to be
O O
looked at broadly.
P (vi) The order must identify with precision the documents P
or categories of documents which are required to be
Q Q
disclosed, for otherwise the person giving discovery
R may find himself in serious trouble for swearing to a R
false affidavit, even though doing his best to give an
S honest disclosure. S
T (vii) Notwithstanding the Peruvian Guano test, “fishing” is T
not allowed, and discovery should not be oppressive.
U U
V V
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A A
B
(viii) The respondent may answer an application for specific B
discovery by an affidavit stating that he does not have
C the documents, and this will be conclusive at the C
interlocutory stage.
D D
(2) It is insufficient for an applicant to allege that the respondent
E has or had documents: a prima facie case must be made out E
for (1) existence, (2) possession, custody or power, and (3)
F F
relevance of the specified documents.
G (3) Where a request for a class of documents is made, the class G
must not be defined or described so widely so as to include
H H
documents which are not relevant to the issue. The
I prerequisites for the invocation of RHC O24 r7 must be I
established in respect of the class described as a class, not as
J J
regards some in the class only. Further, a party applying for
K
discovery cannot simply seek “all documents bearing upon K
an issue or showing a particular thing”, for such documents
L merely bear on an issue but do not form a class L
of documents which is discoverable under RHC O24 r7:
M M
Li Tak Yee Samuel v Societe Generale Bank and Trust
N (unreported, HCA 2478/2009, 16 April 2013) at §§36–39 per N
Anthony Chan J.
O O
8. Mr Dayaram referred me to the decision of Stone J in
P P
Vashdev Essardas Mahbubani t/a Vashi's Export Co v Motis Exports Ltd
Q and Others 2 in which the judge says this: Q
R “… As no doubt will become known by commercial R
practitioners, my attitude, as Judge presently in charge of the
Commercial List, is that in general discovery is a good thing,
S S
and that in cases of doubt I am more likely to lean in favour of
discovery than against it. In this connection I am reminded of
T one of the broad principles of the common law as expressed by T
2
U Unrep, HCA 9124/1992, 26 March 1997, at §6. U
V V
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A A
Lord Justice Bingham (as he then was) in the case of Ventouris
B v. Mountain [1991] 1 WLR 607 at 611H, where the learned B
Lord Justice observed as follows:
C C
‘Our system of civil procedure is founded on the rule
that the interests of justice are best served if parties to
D litigation are obliged to disclose and produce for the D
other party’s inspection all documents in their
possession, custody or power relating to the issues in the
E action. This is not of course a necessary rule but it is E
firmly established here. It is not however an absolute
F rule, as exceptions such as legal professional privilege F
and public interest immunity demonstrate. Nonetheless,
disclosure being generally regarded as beneficial, any
G exception has to be justified as serving the public G
interest which gives rise to the exception ...’”
H H
9. As I noted in [7] this reflects my own approach, which
I means that I have tended to lean in Mr Dayaram’s favour. I now turn to I
consider the specific categories of documents that have been sought.
J J
K Banking documents — [1(a)] K
L 10. The Liquidators agree to give discovery of the documents L
sought in this paragraph.
M M
N Communications concerning fraud insurance policies — [1(b)] N
O 11. Mr Dayaram seeks: O
P “(b) Any and all documents (including letters, faxes, email P
communications, meeting attendance notes and phone
call records) in respect to Fraud Insurance Policies
Q and/or Fraud Insurance Claims by HSBC, HASE, BOBI, Q
DBSB, CITI and UCOB, including but not limited to:
R R
(i) HSBC and HASE (‘HSBC Group’) Fraud
Insurance Policy;
S S
(ii) HSBC Group Fraud Insurance Submitted
Claims; and
T T
(iii) HSBC Group Fraud Insurance Payments
U
Received.” U
V V
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A A
B 12. Mr Dayaram seeks these documents, because he assumes B
that the criminal prosecutions were in some way procured by HSBC in
C C
order to enable them to make a claim under fraud insurance that HSBC
D has. It would appear to be a central feature of Mr Dayaram’s defence that D
E
the case against him and his Father, which led to the Convictions and the E
present proceedings, are a consequence of dishonesty on the part of those
F F
advancing the claims. So by way of example in [16] of his 1 st affirmation
G
Mr Dayaram says this when dealing with the application for discovery of G
the fraud insurance policies: “As this was the PL’s first assignment for
H H
HSBC, FHY [Mr Fok] promised HSBC a criminal conviction and
I therefore had to obtain the conviction at any cost, including but not I
limited to lying under oath and/or withholding material information.”.
J J
Mr Dayaram provides nothing remotely approaching direct evidence for
K these serious allegations. Much of his application seems premised on his K
(prospective) ability to construct from information that may be gleaned
L L
from facts contained in the documents that he seeks facts and matters
M from which the inference of a dishonest conspiracy to obtain the M
Convictions can be made.
N N
O 13. The Liquidators, through the affirmation evidence of Mr Fok, O
deny Mr Dayaram’s allegations. Mr Fok says on oath that the
P P
Liquidators have not seen any such insurance policies and I cannot see
Q why one would expect them to do so. It is well established that a Q
statement on oath that a party does not have in their possession, custody
R R
or power a document is conclusive 3. That disposes of the application in
S [1(b)]. S
T T
3
U Li Tak Yee Samuel, supra [43]–[46]. U
V V
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A A
Communications with former clients or vendors of the companies —
B B
[1(c) & (d)]
C 14. This paragraph seeks disclosure of all documents with C
former clients and vendors of the Companies. Their relevance is said to
D D
be that they will help show whether the underlying transactions were
E E
genuine. Although Mr Dayaram does not demonstrate what in such of
F
these documents as exist might contain information that shows the F
transactions were relevant, as the genuineness of the transactions are in
G G
issue I will make an order for discovery of these documents.
H H
Documents relating to recovery actions in respect of the Companies
I assets — [1(e)] I
J 15. If Mr Dayaram caused or permitted the companies to enter J
into bogus trade finance with HSBC thus causing loss, the fact that the
K K
Liquidators recovered monies on behalf of the companies from genuine
L debtors of the companies in itself is irrelevant to either an assessment of L
Mr Dayaram’s breach of duty or the loss it caused. I note that
M M
Mr Dayaram has not adduced any evidence to suggest that anything was
N recovered from entities said to be customers under the impugned N
transactions.
O O
P Documents relating to the proceeds of the sale of carparks — [1(f)] P
Q 16. Mr Dayaram is seeking documents which show how the Q
proceeds of the sale of carparks not paid to creditor banks under the
R R
mortgages that they had over some of the 112 carparks apparently owned
S by Days International Hong Kong were dealt with. This simply has S
nothing to do with the issues that arise in the misfeasance proceedings.
T T
U U
V V
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A A
All documents seized by the Liquidators from the offices of the companies
B
after their appointment — [1(g)] B
C 17. Clearly Mr Dayaram is not entitled to an order in these terms. C
He is only (at its widest) entitled to all documents that have been seized
D D
that are relevant (in the sense explained in [7] and [8]) to the issues in the
E E
proceedings. Mr Dayaram frames his application for these documents in
F
his 1st affirmation in terms of an entitlement to look at the documents and F
assess whether any are relevant. The Liquidators could, if it was practical,
G G
give Mr Dayaram access to the documents and let him get on with
H checking them, but this is not the criteria for assessing whether an order H
under RCH O24 r7 should be made. Under rule 7 a party is entitled to
I I
discovery of a class of documents defined with adequate precision by its
J nature 4. A party cannot simply ask for everything the other party may J
have on the basis that amongst the documents there may be, or even
K K
likely be, some relevant documents. Mr Dayaram has not made any
L effort to identify what classes of documents within the 600 boxes of files L
he suggests have been seized he wishes disclosed.
M M
N Conclusion N
O 18. In respect of the summons in each winding up proceeding I O
will make an order in the terms of paragraph 1(a), (c) and (d). I will not
P P
deal with inspection in this decision. I invite the Liquidators in the first
Q instance to write informing me and Mr Dayaram of the approximate Q
quantity of documents they will disclose (in the case of class 1(a) I
R R
understand Mr Dayaram has already been provided access to the
S documents) and how long it will take to compile them. Mr Dayaram can S
T T
4
U Deak & Co (Far East) Ltd v NM Rothschild & Sons Ltd [1981] HKC 78, 82C. U
V V
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A A
then write informing me of how he wishes inspection to be dealt with
B B
bearing in mind he is in Stanley.
C C
19. Given my decision and the reality of Mr Dayaram’s position
D D
I will make a costs order nisi that there be no order as to costs.
E E
F F
G
(Jonathan Harris) G
Judge of the Court of First Instance
H High Court H
I Mr David Chen, instructed by Stephenson Harwood, for the liquidators I
(in both cases)
J J
The respondent appeared in person (in both cases)
K K
L L
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
V V