Mayer Brown, on behalf of its gaming clients, successfully resisted an application for specific discovery in K&L Gates v. Navin Kumar Aggarwal and Others  HKCFI 702 ("Decision"). In this long-standing litigation between K&L Gates (the "Plaintiff") and a number of gaming entities relating to monies misappropriated by a former partner of the Plaintiff, the Plaintiff applied for specific discovery on a wide range of documents. In the Decision, which was recently handed down, the Court dismissed the applicant's applications in their entirety for the reasons that it was "a classic case of a fishing expedition" and some requests for documents were "formulated too wide".
The Decision serves as a reminder to litigants that, when seeking specific discovery of a class of documents, the applicant should ensure that the class is not defined too widely with the hope that some relevant documents must be caught. If a request for specific discovery is defective in such way, the Court cannot salvage the application by applying the blue pencil test even if the request may have covered some relevant documents. On a separate note, the Decision also provides useful guidance on the Hong Kong Courts' approach in dealing with requests for discovery of documents which are prohibited from disclosure under foreign law.
The 1st Defendant was formerly a solicitor and partner of the Plaintiff. He was alleged to have misappropriated amounts of money belonging to the Plaintiff's clients and other entities which have deposited funds with the Plaintiff's client account, and gambled the money at various casinos. It is against this background that the Plaintiff firm tried to recover money from the various casinos and made other claims based on breach of reporting and regulatory duties.
In this application, the classes of documents sought by the Plaintiff from certain groups of casinos were mainly the following:
- Intra-Group Relationship Documents – "Documents pertaining to the [casinos'] business and/or the casino entities related to the [casinos] and relationship between these entities";
- Communication Documents – "Communications and documents [including internal documents] pertaining to approval processes, policies, regulations, rules and applications and/or bank documents of each of the [casinos] in relation to the remittances of money …";
- Gambling Activities Documents – "Communications and documents of each of the [casinos] in relation to and/or arising out of the gambling activities of the 1st Defendant, internally, between themselves and with 3rd parties";
- Compliance Documents – "Communications and documents (including internal documents) relating to regulatory /statutory compliance, AML compliance, policies and procedures on the part of each of the [casinos] and their related entities … "
The Court dismissed the application in its entirety.
In so doing, the Court affirmed and applied the well-established legal principles on applications for discovery which provide, where the application relates to a class of documents, the class should not be defined or described too widely and should not be defined in a way which includes documents which are irrelevant. The class of documents must also be classified by their nature, rather than described as documents going to a particular issue. Further, discovery is not required if the documents are only relevant to allegations in the pleadings, which, even if substantiated, cannot affect the outcome of the action.
The Court's reasons can be summarised as follows:-
- Many of the requests were too widely and vaguely formulated and many documents covered by the classes of documents were plainly irrelevant. For instance, the Intra-Group Relationship Documents would include even the tax returns and promotional materials of the casinos. In some cases, the unreasonable width of the requests was reinforced by the identification of specific documents in the supporting affidavits.
- At the hearing, the Plaintiff's leading counsel attempted to narrow down the scope of documents sought, but the Court found that the reformulated classes of documents were in some cases totally different from the original requests. The Court would not allow a party to seek discovery of a sweeping class of documents without regard to whether all documents in the class would be relevant and then say that at least some relevant documents would be caught.
- Given the advanced stage of the proceedings (witness statements have been exchanged), the Court would only focus on the main issues and refuse unnecessary discovery. Therefore, even if some of the Intra-Group Relationship Documents might be marginally relevant to the relationships between the different defendants, the Court would still exercise its discretion to refuse discovery as the matters were immaterial to the overall scheme of the litigation.
- In the face of substantial discovery already made by the casinos, the Plaintiff failed to prove the existence of additional documents which it asserted had not been disclosed. Indeed, certain requests were inconsistent with the Plaintiff's own pleaded case – the Plaintiff pleaded that the casinos had not filed suspicious transaction reports to the Macau authorities but sought specific discovery of the very same reports.
- In respect of reports filed to the Macau authorities, all sides had adduced experts' opinion on the prohibition under Macanese law in relation to their disclosure, and the likelihood of prosecution if such prohibition was violated. While the fact that disclosure may entail breach of foreign law is not an absolute bar to disclosure, the Court held that the risk of sanction in a foreign jurisdiction is an important factor in determining whether disclosure should be ordered as a matter of discretion. Upon considering the experts' evidence and a letter from the Macau gaming regulator which disapproved of disclosure, the Court saw a real risk of prosecution and great prejudice to the casinos should they be compelled to disclose, and accordingly refused disclosure.
The Decision serves as a reminder that requests for documents in an application for specific discovery must be drafted properly and limited to documents which are relevant to the contested issues. While the Court acknowledges that some allowance to an applicant may be warranted where the nature of the case makes it difficult to formulate a class of documents with great precision, the Court would not allow parties to "cast the net widely" with the hope that something must be caught.
Attempts to subsequently narrow down the scope of the documents requested through affidavits or submissions may not be entertained by the Court. While the Court may in some cases be prepared to apply the "blue pencil test" to revise the request, applicants making broad requests for documents without considering the relevance of each document requested take the risk of having the application completely denied.
The advanced stage of the proceedings also plays a role in discovery applications. Applicants are advised to consider taking out discovery applications at an earlier stage of proceedings if possible.
Further, the principles in relation to the risk of foreign prosecution applied in the Decision are broadly in line with the recent English Court of Appeal decision in Bank Mellat v. Her Majesty’s Treasury  EWCA Civ 449 (see the recent Legal Update). The Decision highlights the importance of obtaining persuasive evidence of foreign law in showing a real risk of prosecution by foreign authorities and the weight placed by the Court on the view expressed by foreign authorities. A party opposing disclosure should try to get both expert opinion on foreign law and evidence directly from the foreign authority, as in this case.
Nonetheless, litigants should be reminded that a real risk of prosecution is only one of the factors for the Court to consider whether or not to order disclosure. Bank Mellat is an example where the Court, having considered the actual risk of prosecution and the importance of production of the documents to the fair disposal of the trial, still ruled in favour of disclosure.