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HCA 468/2013

A [2018] HKCFI 552 A

IN THE HIGH COURT OF THE


B B
HONG KONG SPECIAL ADMINISTRATIVE REGION
C COURT OF FIRST INSTANCE C
ACTION NO 468 OF 2013
D ______________ D
BETWEEN
E E
HONG KONG SPACE SHUTTLE LIMITED Plaintiff
F F
and

G WILLIS HONG KONG LIMITED 1st Defendant G

WILLIS LIMITED 2nd Defendant


H H
(Discontinued)
______________
I I
Before: Hon Seagroatt, Deputy High Court Judge in Chambers
J Date of Hearing: 27 February 2018 J

Date of Decision: 27 February 2018


K K
Date of Handing Down of Decision: 13 March 2018
L L

DECISION
M M

N N
1. This matter has come before me for paper decision or resolution
O today, 27 February 2018. It is in the form of an application for leave to O

appeal my decision of 17 October 2017 when I dismissed the 1st defendant’s


P P
application by way of summons, taken out nine months earlier, for specific
Q discovery of 21 classes of documents. A few days before the hearing Q

before me the defendants had abandoned 15 of the classes of documents in


R R
respect of which they originally sought discovery. I was therefore concerned
S with 6 classes of documents. It is to be noted that the present application S

for leave is being advanced some four months after my ex tempore decision
T T
given immediately following the hearing. There is a transcript of that
U decision with exchanges in the course of it. U

V V
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A A

2. The action itself was begun in 2013 with the Statement of


B B
Claim being served in June 2014. The defence was served at the end of
C October 2014. In view of the lapse of time and the fact that I have only a C

D
transcript of my decision of mid-October last year, it may be helpful to D
review the issues between the parties and any other relevant background.
E E

The plaintiff’s claim


F F

3. The plaintiff was the co-organiser (with CSS Worldwide Ltd


G G
(“CSSW”) ) of a proposed event to be known as “Space Shuttle 2007”.
H It had two directors involved with the planning, Karen Loh (Loh Yuk Ying H

Karen) who was also a director of the other co-organiser and Sam Lam,
I I
who was the project manager for both organisers.
J J
4. The 1st defendant was the firm of brokers tasked by the co-
K K
organiser of the plaintiff (CSSW) with advising on the appropriate insurance
L for the event and, of course, as to the possibility of obtaining the necessary L

insurance for the event. The 1st defendant appointed the 2nd defendant
M M
(no doubt linked to it in some way) to act as a sub-broker in respect of any
N insurance sought. N

O 5. The key feature of the event was to be the exhibition of a O

P
Russian space shuttle named Buran. P

Q 6. The 1st defendant advised that CSSW should obtain event Q

cancellation insurance before the exhibition commenced, if cancellation


R R
was necessary for some reason beyond CSSW’s control. The policy was
S to provide reimbursement for loss in the event of necessary cancellation, S

postponement or rescheduling “due to any perils” other than those


T T
specifically excluded.
U U

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A A

7. The 1st defendant confirmed that CSSW could obtain


B B
cancellation insurance to protect against losses including those due to
C non-delivery of the exhibits. C

D D
8. Another business, Mactus Far East, was party to a meeting
E between the 1st defendant and Karen Loh, and also the beneficiary of the E

advice. That advice included confirmation that the cancellation insurance


F F
would cover the failure of Mactus Far East to deliver the exhibits including
G the Buran (Russian space shuttle) being an event beyond the plaintiff’s G

control.
H H

I 9. As a consequence of this advice CSSW did not obtain a I

performance bond or bank guarantee in respect of the obligations of Mactus


J J
Far East to deliver the Buran. A leasing agreement was entered into
K between CSSW and Mactus Far East whereby the latter was to supply all K

exhibits and components for the event including the Buran.


L L

M 10. The 1st defendant confirmed that in the event of Mactus Far M

East being in breach of its obligations the insurer will have the right of
N N
subrogation to proceed against Mactus Far East after making any payment
O under the policy to CSSW and any other losing insured. O

P P
st
11. The following day Karen Loh made it clear to the 1 defendant
Q that CSSW required insurance cover, if the event had to be cancelled for any Q

reason, up to US$6 million being the cost of the event, and, if cancellation
R R
was due to failure on the part of Mactus Far East, for whatever reason,
S cover up to the amount of US$12 million being the loss of potential revenue. S

Her e-mail also included the possibility of Mactus sharing in the policy and
T T
needing extra policy cover to meet the provision for extra revenue loss.
U U

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A A

12. The 1st defendant failed to respond to this or to inform CSSW of


B B
any reaction from the proposed underwriters on this aspect. In due course
C the 2nd defendant issued a cover note in which the limit of the indemnity C

D
under the policy was “USD 6 million and in all being Expenses”. D

E 13. The policy was subsequently amended on a number of occasions E

for a variety of reasons but not until July 2007 in respect of the limit of the
F F
indemnity. CSSW remained the insured under the policy with the plaintiff
G G
as one of the specified payees or beneficiaries under the policy.

H H
14. However the plaintiff or CSSW pursued the matter of cancellation
I cover for the extra revenue loss, being quantified up to US$12 million in I

J
total and with effect from 25 July 2007. “The change in the basis of coverage J
results in an increase in the Limit of Indemnity from USD 6 million and in
K K
all being Expenses, to USD 12 million in all being Gross Revenue.” This

L
was communicated to the plaintiff by the 1st defendant on 2 August 2007. L

M M
15. The defendant failed to inform the plaintiff that if Mactus Far

N
East failed to deliver for any reason the Buran for the event in Hong Kong N
there was no insurance coverage and that the plaintiff should obtain
O O
alternative insurance or seek a performance bond or bank guarantee to

P cover that consequence. P

Q Q
16. In due course it became apparent that Mactus Far East was

R
experiencing difficulties in securing delivery of the Buran for the plaintiff’s R
event and the plaintiff endeavoured to obtain a bank guarantee or a
S S
performance bond but Mactus Far East could not provide either.
T T

U U

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17. Concerning a further meeting between the plaintiff (Karen Loh)


B B
st st
and the 1 defendant on 16 August 2007, the 1 defendant confirmed that
C the Event Cancellation Policy would cover, inter alia, default by Mactus C

D
Far East in failing to deliver the Buran, provided the plaintiff had fulfilled D
its obligations under the policy. Mactus would not be able to make any
E E
claim itself under the policy as a loss payee by reason of its own default.

F F
st
18. The 1 defendant confirmed in an e-mail this advice on
G G
17 August 2007. The plaintiff then ceased to require from Mactus Far

H
East any bank guarantee or performance bond, or pursue the possibility of H
alternative event cancellation insurance to cover the risk of default by
I I
Mactus Far East.

J J
19. Mactus Far East failed to deliver the Buran. The event was
K K
postponed and eventually had to be cancelled. The claim brought by the

L
plaintiff under the policy was rejected by the underwriters who elected to L
avoid the Event Cancellation Policy ab initio.
M M

N
The crux of the allegations against the 1st defendant N

20. These are easily identified from the factual exchanges between
O O
the parties identified by the documentation with specific reference to the
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e-mails which passed between the parties’ representatives. They are in

Q
essence negligence and breach of duty of care. Q

R 21. The 1st defendant’s failure consisted of: R

S (1) representation that the policy would and did provide insurance S

cover for the failure of Mactus Far East to deliver the Buran
T T
for the event;
U U

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B (2) a failure to communicate to the plaintiff (or CSSW) the B


contents of an e-mail communication of 2 April 2007 from
C C
HCC Speciality Underwriters (UK) Ltd representing the
underwriters in which was stated, inter alia, “it cannot provide
D D
cover for non-performance for Mactus.”
E E
(3) a failure to investigate properly with the underwriters whether
the policy would provide insurance cover for the failure of
F F
Mactus to deliver the Buran, or for the loss of revenue before
G the plaintiff had made any advance sales of tickets for the event; G

and
H H
(4) other failures which were repetitions of the principal
I shortcomings set out above. I

J J
22. The quantification of the claim amounted to a net figure of
K HK$126,034,785 being largely lost revenue in one form or another. K

L L
The defence of the 1st defendant
M M
23. In answer to the 25-page statement of claim the defence
N consisted of 21 pages, filed on 31 October 2014. N

O O
24. It is a prolix document containing a large amount of irrelevant

P content and assertions, with a bald contention (at paragraph 3) that the P
Statement of Claim “fails to set out fully or adequately the case that the
Q Q
first defendant has to meet.”
R R
25. I do not find it necessary to review all the material pleaded in
S S
the defence or enumerate the many admissions as to facts. Essentially the
T pleading contains, at paragraph 50, its primary case that alleged losses were T

U U

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A A

caused by the plaintiff’s own breaches of warranty or of conditions precedent


B B
or of breaches of the Event Cancellation Policy or of non-disclosures as
C identified in paragraph 46. C

D D
26. The High Court action commenced by the plaintiff against
E specified underwriting consortia and two other defendants claiming E

indemnity under the Event Cancellation Policy features in both pleadings,


F F
the plaintiff giving credit for the amount it received under a confidential
G settlement, the sum of US$1,162,000, with each side bearing their own costs. G

The plaintiff in this action against the 1st defendant brokers also seeks to
H H
recover the costs of the settled action.
I I

27. It is not necessary, or relevant for me to consider the contending


J J
allegations in that settled action.
K K

Discovery / disclosure
L L

28. The plaintiff and the 1st defendant gave substantial discovery in
M M
December 2015. On 20 March 2017 the 1st defendant took out a summons
N for further discovery by the plaintiff which was initially returnable on N

7 April 2017 before the Master. This came before me on 17 October 2017.
O O

P
29. Initially the application was in respect of 21 classes of documents P
but this was reduced to 6 classes on the date of the hearing. The skeleton
Q Q
argument submitted on behalf of the 1st defendant at this hearing consisted

R of 34 pages, the first page of which at §3 clarified that the 1st defendant R
sought an order for specific discovery only in respect of 6 categories being
S S
1 – 4, 13 and 21.
T T

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A A

30. The plaintiff’s skeleton submissions in reply consisted of


B B
17 pages.
C C

31. Before the hearing on 17 October I had read all the relevant
D D
papers and had regard to Ms Eleanor Yeung’s supplementary oral argument.
E I did not call upon the plaintiff’s counsel Mr Charles Sussex SC, having E

concluded that there was no merit in the 1st defendant’s application. My


F F
decision was ex tempore but for the purposes of this application for leave to
G G
appeal against my decision, and in view of the lapse of time referred hitherto

H
I will continue to give a fuller account of my original decision as well as H
reasons for my decision in this application.
I I

J
The original categories pursued on 17 October 2017 J

32. Although referred to as categories 1 to 4 inclusive they are


K K
related to documents concerning the plaintiff’s action against the
L underwriters (HCA 2611/2008) which was compromised with the brokers L

M
paying the sum of US$1,162,000 to the plaintiff, leaving each side to pay M
its own costs. They cover the pleadings, witness statements and affidavits,
N N
lists of documents and the documents disclosed therein, all witness

O
statements (this is mere repetition of part of category 1) and correspondence O
and documents relating to the compromise settlement reached with the
P P
underwriters. In short the plaintiff asked for complete disclosure of all
Q material in that action which was terminated by a confidential agreement Q

between the parties to it. It is difficult from the outset to see how the
R R
1st defendant could be entitled to such material unless both parties to the
S settlement agreed to suspend or set aside the mutual confidentiality clause. S

It is quite impossible for the plaintiff to act unilaterally and, of course, for a
T T
court to act similarly. Such agreements reached by parties at arm’s length,
U U

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reinforced by mutual undertakings as to confidentiality, are to be honoured


B B
as such and not lightly to be set aside or opened up by a court unless there is
C an overwhelming interest of justice. It will not be appropriate for such a C

D
decision to be made on an application for discovery. At trial there may— D
and I stress the word may — be considerations which the trial judge could
E E
entertain but from this standpoint I would not give any grain of comfort in

F
that regard to the 1st defendant. F

G G
33. The 1st defendant’s argument proceeded along these lines:

H  The settlement with the brokers is not privileged. H

I  The documents are relevant to the action against it. I

 There is in the public interest no justification for a claim of


J J
confidentiality.
K  The settlement sum may not only have been in respect of the K

dispute with the brokers, and it may not have been a reasonable
L L
sum so as to raise an argument that the credit or deduction
M pleaded in the Statement of Claim may not be adequate. M

N N
34. I find the whole of this argument fallacious and in parts illogical.

O The action against the underwriters was based on the policy itself including O
the construction of the terms and the extent of the cover. This is wholly
P P
different from the cause of action against the brokers which is premised
Q upon negligence, misrepresentation and breach of duty of care. Q

R R
35. The plaintiff has unequivocally stated the amount of the
S settlement and that the 1st defendant is to be given credit for it as it represents S

a portion of the loss suffered by the plaintiff consequent upon the cancellation
T T
of the event. There is no basis for the 1st defendant raising a suggestion
U U

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A A

that the settlement sum may not be adequate, or that it may have gone
B B
beyond the ambit of the dispute with the underwriters. This is tantamount
C to ventilating the causation and settlement as to damages, two issues which C

D
concerned the compromised action against the underwriters. There can be D
st
no justification for such a course. The authorities cited in the 1 defendant’s
E E
counsel’s skeleton argument are not apposite to the confidential agreement

F
which terminated the action against the brokers. F

G G
36. The plaintiff is under no obligation to seek from the brokers the

H
latter’s agreement to disclose to the 1st defendant any of the material it seeks. H
st
The 1 defendant is of course at liberty to approach the underwriters to that
I I
end, and if it deems it wise or appropriate to subpoena the representative

J of the underwriters to produce documents at trial or give evidence on that J


occasion. The 1st defendant would still have to satisfy the trial judge of
K K
the relevance of this course quite apart from any other consideration. It
L is a misnomer to describe the action against the brokers as the “Underlying L

Action” to the one against the 1st defendant. It is, or was, a discrete action
M M
with its distinctive cause of action.
N N

37. As far as the plaintiff’s key witness, Karen Loh, is concerned,


O O
the 1st defendant’s counsel will have the opportunity to cross-examine her
P fully at trial. The trial judge will then have to decide, on the basis of P

relevance, what other statements in other proceedings which she has made,
Q Q
should be disclosed. The same position applies to the affidavits. The
R reference to “cherry-picking” is not appropriate. R

S S
38. I gave the defendants’ argument on these four categories short-
T shrift. It was not necessary to descend into particulars. I have done so T

U U

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in this exercise simply to repeat what I took into account at the hearing
B B
having read the voluminous paper submissions.
C C

39. Category 13 is not strictly disclosure of documents. The


D D
st
1 defendant if so advised can proceed by way of interrogatories but it will
E have to lay a clear basis for relevance and its entitlement. I recall that the E

plaintiff in its counsel’s argument raised the matter of the request being in
F F
effect an unauthorised interrogatory. There is no valid argument that it is
G G
relevant or that the potential witness Karen Loh has custody or control of

H
the e-mail. I do not consider that, in the light of Ms Loh’s statement in H
st
relation to this matter, that it can be properly pursued by the 1 defendant.
I I

J
40. Finally, category 21 calls for copies of e-mail threads for items J
st
already disclosed by the plaintiff. The 1 defendant had already excluded
K K
item 215. I am satisfied that the plaintiff has already provided sufficient

L
discovery / disclosure within the ambit of relevance (and power). It seems L
to me overall that this has been “fishing” exercise with no apparent relevant
M M
justification and is well wide of the substance of the issues in this case.
N N
41. In my ex tempore decision and exchanges with counsel, I set
O O
out my decision regarding the remaining six contentious categories.

P P
42. The brevity of my expression is of concern to the 1st defendant.
Q Q
It has to be understood that after considering 51 pages of submissions and

R
counter-submissions it is quite unnecessary to regurgitate every argument R
and counter-argument as a background to the decision in an interlocutory
S S
matter. Such applications are not to be turned into a trial of the substantive
T issues or a wide-ranging forensic foray. T

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43. Having reviewed the material and arguments set out in this
B B
latest application, I am satisfied that there is no merit. Leave to appeal is
C refused with costs. C

D D

E E

F F

(Conrad Seagroatt)
G G
Deputy High Court Judge

H H
Ms. Frances Lok, instructed by Shum & Co., for the Plaintiff
I I
Ms. Eleanor Yeung, instructed by Clyde & Co., for the 1st Defendant

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K K

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M M

N N

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T T

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