Yu Man Fung Alice v. Chiau Sing Chi Stephen

HCA 1584/2012

[2019] HKCFI 1549

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1584 OF 2012

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DECISION

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Introduction

1.This is the hearing of the Summons dated 24 May 2018 (the “Summons”) taken out by the defendant (“D”) to strike out or expunge certain paragraphs in four court documents filed by the plaintiff (“P”).  The paragraphs concerned are:

(a) the “Disputed Pleadings”:

(i) §26 of the Amended Statement of Claim (“ASOC”),

(ii) §20 of the Amended Reply;

(b) the “Disputed Evidence”:

(i) §28 to §31 of the witness statement (“Hu/WS”) of Raymond Hu Liang-ming (“Hu”), and

(ii) §93 (save for the first sentence) and §94 of P’s witness statement dated 6 January 2017 (“P/WS”).

2.The basis of the application is that the Disputed Pleadings and Disputed Evidence refer impermissibly to without prejudice communications (the “Communications”). The main issues are whether those Communications are protected by without prejudice privilege, whether D is required to show that they are plainly and obviously privileged, and if so, whether D has successfully shown that.

P’s claim

3.D is a well-known film actor and director.  P and D had been in a romantic relationship.  That started in about 1998.

4.P’s case is that round about Christmas 2002, D orally agreed to pay her a 10% share of net profits (the “Agreed Profit Share”) made on all successful investments recommended by her to D (the “Alleged Agreement”). A number of implied terms have been pleaded.  The one most relevant to this application is to this effect, that if D decided to retain an investment for his own use, the Agreed Profit Share was to be calculated by reference of a notional sale at the time when the profit share became payable (the “Alleged Implied Term”). P avers alternatively that an agreement in those same terms was made by reason of the parties’ course of conduct, ie of P having over the years made recommendations to D on a number of successful investments, and D having paid her the Agreed Profit Share on them.

5.At the centre of P’s claim is a property at the Peak called Skyhigh (the “Skyhigh”).  P avers that in around 2004, P came to know from a source that the Skyhigh would be put up for auction.  She says that on her advice, D successfully bid for the same with a winning bid of HK$320 million.

6.After his successful bid, D partnered with Hu for the re‑development of the Skyhigh.  A total of four houses were subsequently built (“Houses Nos 10, 12, 16 and 18”).  Houses Nos 16 and 18 were sold. In about December 2009, D caused P to be paid the Agreed Profit Share in respect of their sales.  Houses Nos 10 and 12 were not sold, but were allocated to Hu and D respectively.  P avers that sometime on about 1 February 2011 (or alternatively between April and June 2011), D decided to retain House No 12.  She further avers that that decision triggered off D’s obligation to pay her the Agreed Profit Share in respect of House No 12 (the “House Profit Share”) under the Alleged Agreement.  D has failed to do so — hence this action.

D’s defence

7.D denies the existence of any legally binding agreement between him and P.  D’s case is that in a discussion with P during one evening in 2002, he, out of his love and affection for P, said to her that he intended in future to gift her 10% of the profits made from property transactions.  He had no intention to create any contractual or legal obligation in favour of P.  He did subsequently make payments to P, but they were made by way of gifts following this discussion.  He avers, in the alternative, that if the Alleged Agreement exists, which he denies, P would only be entitled to receive commission or profit share if P’s recommendation was the effective cause of the investment he eventually made. In this regard, he avers that House No 12 was not an investment recommended by P (hence there was a total failure of consideration), and/or that P’s recommendation was not the effective cause of his eventual acquisition (hence she was not entitled to the House Profit Share).  D further denies the Alleged Implied Term.  He avers that as House No 12 has not been sold, there has been no profit for P to share in.

Communications between the parties

8.Arising out of P’s alleged entitlement to the House Profit Share,P and D had been in communication.  The admissibility of some of those communications is the issue which this Court has to decide.

9.§26 of the ASOC is preceded by a heading.  The heading reads “Acknowledgement by [D] of his liability to pay the Agreed Profit Share in respect of House No.12”.

10.In §26 of the ASOC, certain suggestions (the “Suggestions”) said to have been made on 28 July 2011 by D through Hu to P are pleaded [1].

11.In §44 of the Amended Defence (“ADef”), D pleads that:

“ The matters pleaded in paragraph 26 are matters that were conducted on a without prejudice basis and [D] does not plead thereto. Alternatively, no admissions is made in respect of paragraph 26.”

12.In §20 of the Amended Reply, the averment that §26 of the ASOC were without prejudice is denied [2].

13.In §§28 to 31 of Hu/WS, Hu described how he said he communicated the Suggestions to P, how she rejected them, how he communicated the rejection to D, and how certain further exchanges ensued between him and P[3].

14.In §§93 to 94 of P/WS, P referred to the dinner she had with Hu on 28 July 2011.  She then set out how Hu communicated the Suggestions to her and how she rejected them.  She also referred to the further communications she had with Hu on 3 August 2011 [4].

The Summons

15.The Summons was taken out on 24 May 2018.  It was taken out pursuant to Order 18 rule 19(1), Order 38 rule 2A(7) and (8) and the inherent jurisdiction of the Court.  It was supported by D’s 2^nd affirmation filed on 26 June 2018 (“D/Aff”).  P filed her affirmation in opposition on 17 September 2018 (“P/Aff”).  She had also asked Hu to file one affirmation to explain the circumstances surrounding the Communications, who did so also on 17 September 2018 (“Hu/Aff”).  I have considered their contents.  I have also considered the contents of the witness statements filed by the parties for the purpose of the action [5].  I will come back when necessary to the relevant parts of those affirmations and witness statements.  

The parties’ submissions

16.Mr Man SC (who together with Mr Keith Lam appeared for D) submitted that the Communications were not expressly stated to be made openly, that a dispute existed at the time between the parties, that the parties might reasonably have contemplated litigation, and that the Communications were made in an attempt to further negotiations to settle that dispute.  He submitted therefore that the Communications “were clearly made without prejudice”. 

17.Mr Yuen SC (who together with Mr Thomas Wong appeared for P) submitted:

(a) that the Communications were clearly not protected by without prejudice because they: (i) were no more than discussions of repayment of an admitted liability, (ii) were made when legal proceedings were not yet contemplated (let alone commenced), and (iii) were not made with the intention that they could not be disclosed without the consent of the parties;

(b) alternatively, that D has failed to show that the Communications are plainly and obviously privileged, so that the issue of admissibility should best be left to the trial judge. 

Without prejudice—the applicable legal principles

18.The applicable legal principles may be summarized as follows.

19.For a claim of “without prejudice” privilege to succeed, the party claiming it must show that the communication was made:

(a) in a bona fide attempt to settle a dispute between the parties; and

(b) with the intention that, if negotiations failed, the communication could not be disclosed without the consent of the parties making the communication [6].

Bona fide attempt to settle a dispute (§19(a) above)

20.In establishing that there was a bona fide attempt to settle a dispute (§19(a) above), the asserting party must show that, at the time of the communication concerned:

(a) a dispute existed between the parties;

(b) that dispute was one in respect of which legal proceedings had commenced or were contemplated; and

(c) the communication was made in an attempt to further negotiations to settle that dispute [7].

21.Not all disagreements, no matter what their natures are, qualify as a “dispute” for the purpose of the without prejudice principle.  In Bradford & Bingley plc v Rashid[2006] 1 WLR 2066, where a mortgagor in default wrote to his unpaid mortgagee, not seeking to dispute liability (nor even the amounts repayable), but only seeking time to pay the shortfall after the sale of the mortgaged property by the mortgagee, the House of Lords held that the without prejudice rule did not apply:

“ … [the debtor’s] acknowledgment was not protected [by the without prejudice rule] for two reasons: …, and there was no dispute as to liability to be compromised, the only element of negotiation being directed to obtaining time for payment (any reduction in the amount to be paid, as suggested in the agent’s second letter, would have been a matter of pure indulgence on the part of the lender).” (per Lord Walker at §39, emphasis added)

“ The existence of a dispute and of an attempt to compromise it are at the heart of the rule whereby evidence may be excluded (or disclosure of material precluded) as ‘without prejudice’. … The rule does not of course depend upon disputants already being engaged in litigation. But there must as a matter of law be a real dispute capable of settlement in the sense of compromise (rather than in the sense of simple payment or satisfaction).”

( per Lord Mance at §81, emphasis added)

22.This aspect of Bradford has been clearly explained by David Richards J in Avonwick Holdings Ltd v Webinvest Ltd [2014] EWHC 3322 (Ch), where the learned judge observed at §19 that:

“ For a document to be inadmissible on the grounds that it is ‘without prejudice’, it must form part of a genuine attempt to resolve a dispute.There needs to be both a genuine dispute to be resolved and a genuine attempt to resolve it. If there is no dispute about a liability, but only a negotiation as to how and when it should be discharged, the negotiations, and documents produced in the course of them, are not covered by the ‘without prejudice’ exception to the admissibility of relevant evidence. That was the situation in Bradford & Bingley plc v Rashid[2006] 1 WLR 2066, [2006] UKHL 37. Lord Mance said at [81] …”

( emphasis added)

23.Whereas a negotiation as to how and when a liability should be discharged only would not by itself qualify as a “dispute” to trigger the without prejudice principle, the dispute does not have to be on liability, and one on quantum qualifies.  This has been made clear by Lord Brown in §§75 – 76 of Bradford, that:

“ 75 As I have explained, acknowledgments may well leave issues of quantum outstanding and negotiations designed to resolve these to my mind should qualify for without prejudice protection. In these cases the policy underlying the without prejudice rule seems to me to outweigh the countervailing policy reason for lengthening the period in which the creditor must issue proceedings. There are, after all, sound policy reasons for having limitation periods in the first place: disputes, if eventually they need to be litigated, should be litigated before they become too stale.

76  In short, therefore, some acknowledgments will indeed attract without privilege protection.  But these will be cases where the extent of the liability is genuinely in dispute and the parties are attempting to settle that difference.  Had Mr Rashid [8], for example, in fact been seeking to question the sufficiency of the sum obtained from the mortgagee’s sale of the property and had the correspondence been devoted to resolving that particular issue, without prejudice protection might well have applied.  But that simply was not the case.  The correspondence treated the debt as an undisputed liability and dealt only with whether, when and to what extent Mr Rashid could meet that liability.  The question before your Lordships is whether in those circumstances the without prejudice rule should be extended at the expense of the statutory provision for acknowledgments.  For the reasons given I would hold not.”

24.When legal proceedings are on foot, whether a dispute was in respect of those proceedings is normally clear-cut.  Less so is whether, in the context of pre-action communications, a dispute was “in respect of which legal proceedings were contemplated”.  In deciding that question, Auld LJ in Barnetson v Framlington Group Ltd [2007] 1 WLR 2443 commended the approach of whether the parties “contemplated or might reasonably have contemplated litigation if they could not agree.” The learned judge explained at §§32 and 34 that:

“ 32. … If the privilege were confined to settlement communications once litigation had been threatened or shortly before it is begun, there would be an incentive on both sides to escalate their dispute with threats of litigation and/or to move quickly to it, before they could safely start talking sensibly to each other. That would be a slippery slope to mutual hardening of positions and commencement of litigation—hardly the encouragement to settle their disputes without resort to litigation that Oliver LJ had in mind in Cutts v Head [1984] Ch 290, 306.

…

34.   … the claim to privilege cannot, in my view, turn on purely temporal considerations.The critical feature of proximity for this purpose, it seems to me, is one of the subject matter of the dispute rather than how long before the threat, or start, of litigation it was aired in negotiations between the parties.  Would they have respectively lowered their guards at that time and in the circumstances if they had not thought or hoped or contemplated that, by doing so, they could avoid the need to go to court over the very same dispute?  On that approach, which I would commend, the crucial consideration would be whether in the course of negotiations the parties contemplated or might reasonably have contemplated litigation if they could not agree.  Confining the operation of the rule, as the judge did, to negotiations of a dispute in the course of, or after threat of litigation on it, or by reference to some time limit set close before litigation, does not, with respect, fully serve the public policy interest underlying it of discouraging recourse to litigation and encouraging genuine attempts to settle whenever made.”

25.That approach of “might reasonably have contemplated litigation”is an objective one.  It is consistent with the view expressed by Crane J in Pearson Education Ltd v Prentice Hall India Private Ltd [2006] FSR 8, that the test for deciding whether a document was intended by a party to be without prejudice is objective—see §§15 – 22.  It is also consistent with the observations of Flaux J in Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd [2016] 4 WLR 59, in §23, that:

“ The questions of fact, whether there was an extant dispute and whether a particular communication was indeed an attempt to resolve that dispute, are to be determined objectively (the subjective intention of the party in question being irrelevant) having regard to all the circumstances:

‘In my view, in so far as such question turns on the meaning of any particular passage in the September letter, it is to be answered by reference to what a reasonable person, in the position of the recipient of the letter, with its knowledge of all the relevant circumstances as at the date the letter was written, would have understood the writer of the passage to have intended, when read in the context of the letter as a whole’ (per Lord Neuberger of Abbotsbury MR in Best Buy Co Inc v Worldwide Sales Corpn España SL [2011] EWCA Civ 618; [2011] BusLR 1166, para 18).”

26.It does not matter that the “without prejudice” stamp was not expressly applied to the negotiations, if it is clear from the surrounding circumstances that the parties were genuinely seeking to compromise their dispute [9].

27.Citing Phipson on Evidence (19^th ed) §24-19, Mr Yuen submitted that “The use of the words ‘without prejudice’, or the lack thereof, is ‘hugely important’ in the Court’s determination of the issue.”  In my view, by the use of the term “hugely important”, the learned author does not mean that the use or absence of the “without prejudice” stamp is conclusive one way or the other.  What is meant is that in case of doubt, the use of the words may assist the court in determining the issue.  The approach suggested by the learned author at §24-19 of Phipson is:

“ … The correct position is, it is suggested, as follows:

(a) The starting point is to determine whether the ‘without prejudice’ principle is engaged at all: is the communication in the course of bona fide negotiations with a view to settlement of a dispute, or have the parties otherwise impliedly agreed that their correspondence should be inadmissible in court proceedings between them;

(b) If so, the court will expect to treat communications marked ‘without prejudice’ as being inadmissible in subsequent court proceedings between the parties.

(c) If there is doubt as to whether the without prejudice principle is engaged, the use of the words may assist the court in determining whether there is an attempt to settle an existing dispute.

(d)  However, even if the words ‘without prejudice’ were not used, the without prejudice principle will still apply if the circumstances judged objectively were such that it can be assumed to have been intended that the communications in question, being made with a view to settlement, be not admitted in evidence.”

That approach is in my view no different from what have been discussed above.

Intention that the communication could not be disclosed (§19(b) above)

28.The existence of the intention that the communication could not be disclosed can be a matter of inference once the other elements which trigger the operation of the without prejudice principle are established—see the passage from Phipson cited above (point (d)).  In Chocoladefabriken Lindt v Nestlé Co Ltd [1978] RPC 287, Megarry VC observed at pages 288 – 289 that:

“ From the authorities put before me …, it seems plain that the courts favour the protection of discussions which take place between actual or prospective litigants with a view to avoiding the expense and burden of litigation, and are very ready to hold that discussions made with this purpose are inadmissible in evidence. … The mere failure to use the expression ‘without prejudice’ does not conclude the matter. The question is whether there is an attempt to compromise actual or impending litigation, and whether from the circumstances the court can infer that the attempt was in fact to be covered by the ‘without prejudice’ doctrine. … Where there is some dispute and an attempt is being made to settle it, I think that the courts should be ready indeed to draw the inference that the attempt is to be ‘without prejudice’.

Mr. Watson contended that the burden of proof in this matter lay upon the plaintiffs.  I doubt if the question is one of a burden of proof at all.  However, if it is right to express it in those terms, then in my judgment the burden lies the other way as soon as it appears that the discussions are part of an attempt to compromise a dispute. …”

29.To similar effect is Sampson v John Boddy Timber Ltd (unreported, English Court of Appeal, 17 May 1995), where Sir Thomas Bingham MR observed at page 6 of the judgment that:

“ … it seems to me clear that the letter was a bona fide offer by the insurers to explore the possibilities of settlement on a compromise basis, and the rule is clear that unless a party makes plain its intention that such an offer should be treated as an open offer it is covered, for public policy reasons, by the cloak of privilege.”

30.In an article entitled ‘Without prejudice privilege’ by Declan McGrath in International Journal of Evidence & Proof, Vol 5(4), 2001, 213 [10], it was stated at page 217 that:

“ A court will generally be willing to infer the existence of such an intention where it finds that a communication was in furtherance of settlement negotiations unless it finds evidence that it was intended to be open.”

“Plain and obvious”

31.Relying upon Hong Kong Civil Procedure 2019 Vol 1 §18/19/4, Mr Yuen submitted that the Court’s summary power to strike out a pleading should only be exercised in “plain and obvious” cases, that there should be no trial upon affidavit, that disputed facts are to be taken in favour of the party sought to be struck out, that the Court should not decide difficult points of law in striking proceedings, and that the matter must be “clear beyond doubt”, and the pleading “unarguably bad” or “obviously unsustainable”.  When I use the term “the plain and obvious test” below, I mean a test which encompasses the above-mentioned principles.

32.Unilever Plc v Procter & Gamble [2000] 1 WLR 2436 is one example in which paragraphs in the pleadings which referred to without prejudice materials were struck out as being an abuse of process — see 2449G–H.

33.In the context of striking out, those principles are not in dispute. The complication in the present application is whether the same approach should be adopted when it comes to the expunging of the Disputed Evidence on the basis that they offend the without prejudice rule.

34.Mr Man submitted that in relation to the Disputed Evidence, the question is simply whether this Court is capable of deciding their admissibility summarily.  He submitted that there is no need for the Court to pose any plain and obvious test.  He submitted further that once the Disputed Evidence has been expunged, the Disputed Pleadings would also have to be consequentially struck out on the basis that no admissible evidence would be capable of being adduced in their support.

35.Mr Yuen argued that the same test of “plain and obvious” should be adopted.  He relied on Redifusion Simulation Ltd v Link Miles Ltd [1992] FSR 195. Redifusion was a patent infringement action in which the plaintiff applied to amend the patent in suit.  It filed evidence on certain alternative dispute resolution communications conducted on a without prejudice basis to, inter alia, counter certain anticipated objection on the basis of delay.  A pre-trial application was made to have the references of those communications struck out.  Mummery J refused to do so.  He was of the view that the application was premature, and that the trial judge would be in a better positon to hear the application.  He further observed that if he were convinced that that was a “plain and obvious case of inadmissible evidence”, he could see the sense of striking the relevant evidence out pre‑trial rather than postponing the decision.  He however was not.  He was of the view that it was reasonably arguable that the evidence concerned might be held by the trial judge to be admissible for the purposes of answering a charge of unexplained delay—see pages 198 – 200 of the judgment.

36.In this regard, I accept Mr Yuen’s submission that the same test of plain and obvious should be adopted.  His submission is supported by Redifusion, which was the only direct authority cited to me.  I also find it difficult to accept, should it be otherwise, and should Mr Man be correct in this regard, that pleadings could in effect be struck out indirectly through the expunging of evidence, and hence indirectly through the application of a possibly lower test.

No disputed liability?

37.Mr Yuen’s first main argument is that there was at the time of the Communications no disputed liability by D.  He relied on Bradford and Avonwick Holdings.  In an attempt to make good this point, he also took me extensively through the evidence.

38.In my view, and for the following reasons, there was at the time of the Communications plainly and obviously a dispute between the parties that was of the nature which, together with other necessary elements, could trigger the without prejudice principle:

(a) P first demanded D to pay the House Profit Share in mid May 2011;

(b) According to the SMS messages between P and D, in June 2011,P demanded HK$61 million[11];

(c) Mr Yuen referred me to §3 of P/Aff [12] and §93 of P/WS.  He submitted that it was P’s case, supported by contemporaneous documents, that “D did not dispute his liability to pay the Agreed Profit Share in respect of House 12 when the Communications were made”[13].  The contemporaneous documents Mr Yuen referred to was a payment advice recording that a certain sum was paid to P as “10% commission” in respect of Houses Nos 16 and 18, a number of spreadsheets prepared by Brenda Cheung (who was D’s assistant) and certain SMS messages between P and D;

(d) The first point to note is that Mr Yuen, in making his submissions on this point, was referring to P’s case.  D’s case was very different.  Liability is very much in dispute.  I have summarized D’s defence above at §7.  He disputes in particular the nature of his promise to P (a promise out of his love and affection for P as opposed to a legally binding agreement).  He disputes in any event the existence of the Alleged Implied Term;

(e) In one thread of emails exchanged between Hu and P on 3 August 2011 (the “3/8 Email Thread”), Hu wrote to P:

[Reference to without prejudice materials redacted]

(f) The contents of the 3/8 Email Thread show that both the existence of a legally binding agreement and the Alleged Implied Term remained in dispute as at 3 August 2011;

(g) Another point to note is that Mr Yuen was focusing upon “the Agreed Profit Share”.  The Agreed Profit Share was expressed in terms of a percentage of the notional sales price (10%) of House No 12.  Even if that numerical percentage were not in dispute, the concept of and the amount of the notional sales price, and hence what its 10% represented in terms of monetary value, had all along continued to be in dispute;

(h) [Reference to without prejudice materials redacted]

(i) P asked for HK$61 million.  D had never agreed to pay that sum.  This is another obvious fact;

(j) [Reference to without prejudice materials redacted]

(k) Even with P’s contention in this regard put at its highest, the issue of quantum remained very much in dispute during the course of the Communications;

(l) I have discussed Braford above.  A dispute on quantum can trigger the without prejudice principle.  That principle was not triggered in Braford because the mortgagor in default was only asking for time to pay.  That is clearly not the case here.

39.I therefore reject Mr Yuen’s submission that there was no disputed liability here.

No legal proceedings contemplated?

40.The approach commended by Auld LJ in Barnetson is worth repeating: the crucial consideration would be whether in the course of negotiations the parties:

(a) contemplated, or

(b) might reasonably have contemplated litigation,

if they could not agree.

41.The resolution of the issue at (a) above (of whether the parties contemplated litigation) involves a finding of fact as to what the parties’ actual contemplations were, which is principally a subjective matter.  The resolution of (b) above (of whether the parties might reasonably have contemplated litigation) however involves very different considerations.  It involves an objective analysis.  The parties’ subjective intentions are of little assistance here, if not entirely irrelevant.  Approached as such, a subjective assertion that a party did or did not contemplate proceedings, which conclusion should be the result of an objective assessment of the evidence, does not in my view need to be assumed in favour of the parties seeking to be stuck out.  The negotiations on the whole have to be looked at to see objectively whether the parties might have contemplated litigation.

42.I have considered the negotiations on the whole.  I highlight the following facts and matters, which point plainly and obviously to the conclusion that P might reasonably have contemplated litigation:

(a) I begin with the same starting point, that P first demanded payment of the House Profit Share in respect in mid May 2011;

(b) The amount P claimed was HK$61 million.  It was a substantial amount;

(c) In the SMS messages exchanged between P and D in late June 2011, P:

(i) described the HK$61 million as “what I rightfully deserve”[14];

(ii) said “if u walk away and do nothing, I believe the consequence to u will be quite horrifying”[15];

(iii) referred the HK$61 million as a “debt”, when she said that “Do not think u can talk your way out of a debt”[16].

(d) In another SMS message from P to D on 5 July 2011, P raised the suggestion of having a face-to-face discussion towards the end of July at a neutral place, and that both sides could take their lawyers (though they would only sit outside without participating.) In that same message, P said further that she had “a share of $61m in the property”[17];

(e) Viewed objectively, if P and D ultimately could not agree, P’s choice would be between taking legal action, and simply forgetting about the whole thing.  She did not objectively have another option to fall back to, unlike the parties in Barnetson [18] ;

(f) Objectively, there was no reason why P would have contemplated that she would simply forget about a substantial sum of HK$61 million which she said she rightfully deserved,which she described as a debt that D could not talk his way out,and which represented a share in House No 12;

(g) In the 3/8 Email Thread; Hu said contemporaneously that:

[Reference to without prejudice materials redacted]

(h) As things turned out, on 9 December 2011, a letter of demand was issued by solicitors engaged by P to D.  The concluding paragraphs of that letter are as follows:

“ House number 12 is now worth in excess of $800 million and 10% on its profit amounts to HK$80 million. On top of this lucrative investment, there is another investment … awaiting maturity. Ms Yu is entitled to share 10% after tax (if any) profit in due course.

For the time being, we are instructed to demand you for the payment of the said HK$80 million deriving from the profit on the Skyhigh Project within the next 7 days, or agree to do so within the reasonable time, failing which we have instructions to commence legal proceedings against you without further notice.”  

(i) On 3 September 2012, the Writ in this action was issued.

43.Mr Yuen, relying on the following matters, submitted otherwise.  Mr Yuen first highlighted P’s evidence.  He referred me to §§11 – 12 of P/Aff.  Therein, P said that in around July and August 2011, the idea of suing D did not cross her mind at all.  She said she was wary of the substantial legal costs that would have involved.  She said that she did not wish to be in the limelight and preferred to avoid publicity.  By around that time, she had started seeing someone else and did not want any negative publicity affecting her new relationship. She also said that even during early to mid-2012, she remained reluctant to start legal proceedings against D.  She said that what sparked her decision to sue was that she found out from the newspapers that D had made a significant investment, which news angered her[19].

44.As has been discussed above, P’s subjective intentions are of little assistance, if not outright irrelevant, when it comes to the objective assessment of the evidence on the issue as to whether the parties might reasonably have contemplated proceedings.  Mr Yuen submitted that certain matters stated by P in P/Aff (whether she enjoyed the limelight or the fact that she had started a new relationship) were in fact objective in nature. Even assuming those assertions in her favour, they are at best indirect circumstantial evidence on the issue.  I have nonetheless considered them together with all the evidence as a whole.

45.Mr Yuen then referred to Hu’s evidence:

(a) In §6 of Hu/Aff, Hu said that:

“ As pointed out in paragraph 22 of my Witness Statement, [P] approached me in around July 2011 and told me that [D] promised her 10% of the profits arising from investments that [P] had introduced to [D] and [D] owed her money in respect of House 12 and the Skyhigh Property. At that time, [P] did not mention to me that she had any intention to take legal action against [D]. [P] believed [D] will honor his commitment but hope I will assist her when necessary …”

(b) [Reference to without prejudice materials redacted]

(c) I note further that Hu in §6 of Hu/Aff dealt only with a specific period, namely around July 2011;

(d) It should also be noted that a person may have harbored an intention without mentioning to anyone;

(e) Hence, even assuming in D’s favour what he has said, the fact that P at that time did not mention to Hu that she had any intention to take legal action against D is of little value when considering whether the parties might reasonably have contemplated litigation.

46.Mr Yuen has also pointed to me other evidence, like the absence of any threat to sue in the SMS messages, and the continual process of negotiations between the parties.  He submitted that given the negotiations, there was no reason for P to have contemplated litigation.  I have also taken them into account.

47.I have considered the evidence in the entirety.  I come back to the test—whether the parties might reasonably have contemplated litigation if they could not agree.  It is not a high threshold.  It is an objective analysis.  Subjective declarations of intention are of little assistance.  Once these are recognized, the evidence relied upon by Mr Yuen pales into insignificance when considered with and against the considerations and the contemporaneous communication and conduct discussed in paragraphs 38 and 42 above.  In my view, the totality of the evidence reveals a plain and obvious case that the parties might reasonably have contemplated litigation if they could not agree. In my view, the Communications were also made in an attempt to further negotiations to settle their dispute.

48.I add for completeness that in Redifusion, Mummery J observed that the case before him was not a plain and obvious one as it was reasonably arguable that the evidence concerned might be held by the trial judge to be admissible for the purposes of answering a charge of unexplained delay.  This is not the case here.  In this case, the Communications are specifically relied upon in the ASOC to show acknowledgement by D of his liability.  The without prejudice principle is very much engaged.

No intention the Communications cannot be disclosed?

49.This element was in fact dealt with by Mr Yuen in his written submissions together with the last element.  Having considered the evidence, and for similar reasons, I reject Mr Yuen’s submission that the parties had no intention that the Communications could not be disclosed.  In my view, and consistent with the authorities cited and discussed above, the existence of the intention can clearly be inferred.

Left to the Trial Judge?

50.I repeat Mr Yuen’s alternative submission summarized in paragraph 17(b) above.  In the light of my ruling above, that alternative submission is not engaged.  I say nothing further in that regard, save expressing my grave concern, on the facts of this case, about adjourning the resolution of the matter to the Trial Judge. If having read the Disputed Pleadings and Disputed Evidence, the Trial Judge is to agree with D that they are privileged, the Trial Judge may have to recuse himself —see Tang Yau Keung v Tang Choi Yau [2014] 2 HKLRD 940.  Had my assessment of the evidence been different, and had I seen any need, I would have seriously considered the giving of directions on examination of witnesses to deal with the issue before trial.  However, in the end, it is not necessary for me to do so.

Disposition

51.For the reasons set out above, I expunge and strike out the Disputed Evidence.  I also strike out the Disputed Pleadings as being an abuse of process—see Unilever.

Costs

52.I make a costs order nisi that D shall have the costs of and occasioned by this Summons, with certificate for two counsel, to be taxed if not agreed.  Any party who seeks any variation or summary assessment should file its submissions (and/or statement of costs) within 14 days from the date hereof, submissions in opposition within 14 days of receipt, and reply within 7 days thereafter.

Possible redaction of this Decision and its publication

53.In the light of the nature of this application, parties have requested me to offer them the opportunity to make submissions on possible redactions of this Decision before its publication.  I accede to that request.  I direct that parties should give me their joint views on redactions and publication within 7 days from the date hereof.  Should parties fail to reach agreement on either or both of those matters, each party should file their submissions within 7 days from the date hereof.  Publication of this Decision is embargoed until further order.

Mr Rimsky Yuen SC, leading Mr Thomas Wong, instructed by Clifford Chance, for the plaintiff

Mr Bernard Man SC, leading Mr Keith Lam, instructed by Anthony Siu & Co, for the defendant