Chan King Sheen v. K.C. Tsang & Co., Solicitors (A Firm)
Read the full judgment text of CACV 4039/2001 on BabelCite. This Court of Appeal judgment was delivered on 19 July 2002.
1. This is an appeal by the defendant and the intended defendants from the order dated 22 November 2001 made by Deputy High Court Judge Gill. The defendant is a firm of solicitors who used to act for the plaintiff. On 8 November 2000, the plaintiff wrote to the defendant to terminate her instructions and demanded delivery of her documents to her new solicitors. Despite repeated requests, the defendant refused to do so. Hence these proceedings by the plaintiff for the return of her documents. The
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CACV004039/2001 CACV 4039/2001 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 4039 OF 2001 (ON APPEAL FROM HCA NO. 994 OF 2001) ____________________
____________________ Coram: Hon Rogers VP and Le Pichon JA in Court Date of Hearing: 28 June 2002 Date of Handing Down of Judgment: 19 July 2002 ____________________ J U D G M E N T ____________________ Hon Le Pichon JA: 1.This is an appeal by the defendant and the intended defendants from the order dated 22 November 2001 made by Deputy High Court Judge Gill. The defendant is a firm of solicitors who used to act for the plaintiff. On 8 November 2000, the plaintiff wrote to the defendant to terminate her instructions and demanded delivery of her documents to her new solicitors. Despite repeated requests, the defendant refused to do so. Hence these proceedings by the plaintiff for the return of her documents. There were three summonses before the judge: the plaintiff's summons for summary judgment under Order 14, the defendant's interpleader summons dated 19 April 2001 and the defendant's summons dated 9 July 2001 seeking to strike out paragraphs 5, 10 and 12 of the plaintiff's statement of claim. On the Order 14 summons, the judge granted final judgment against the defendant who was ordered to forthwith deliver and/or return the plaintiff's documents as set out in Part I of the schedule to the interpleader summons (the "interpleader schedule"). The judge also ordered an assessment of damages. The judge dismissed the defendant's application for interpleader relief with costs and on the striking out application, only paragraph 5 of the statement of claim was ordered to be struck out. Background 2.The plaintiff is a widow in her 80's. She and her late husband Ng Tai Mun ("the deceased") emigrated to the US over half a century ago. The deceased died in 1964. He was a founding member of a Hong Kong company called The Shun Kwong Investment & Trust Company Limited (SKI) whose principal activity was to invest in real estate. SKI was formed by the Ng and Lee families with the intention that the shares would be kept 'in the families'. The plaintiff is the sole executor and beneficiary of the deceased's estate which comprised, inter alia, 576 shares in SKI. The plaintiff is also a shareholder in SKI in her own right. The deceased's shares remained registered in his name and have never been transferred into the plaintiff's name despite some steps having been taken some years ago to that end. 3.In April 2000, the plaintiff was visited at her home on Long Island, New York, by one Samuel Tak Lee (S T Lee) whom she had never met before. He told her that he was a member of the Lee family and although not yet a shareholder of SKI, he had a prospective interest deriving from his mother's estate and expressed a wish to acquire the shares of the plaintiff and the deceased in SKI. Discussions ensued culminating in the plaintiff entering into a Voting Agreement with S T Lee whereby she gave him a right of first refusal to purchase the shares and, during the three-year term of the option, the right to exercise her voting rights. She also granted S T Lee two powers of attorney, granting him power to exercise her voting rights, to pursue on behalf of herself and the deceased's estate the dividends due but unpaid and to cause the estate's shares to become registered in her name, all free of charge to her. The powers of attorney were expressed to be irrevocable for a period of three years. 4.In June 2000, S T Lee approached C K Tsang, the principal of the defendant firm and instructed Mr Tsang to represent the plaintiff in getting the estate's shares registered in her name and to pursue unpaid dividends. Some time after that date but prior to 16 October 2000, the defendant came to be instructed by three other shareholders of SKI who are members of the Eng family living in the US. On 16 October 2000, a winding up petition was presented to wind up SKI on their behalf. The plaintiff was joined as the 4th petitioner. It is the plaintiff's case that this was done without her consent or approval. By letter dated 8 November 2000 to the defendant, the plaintiff terminated the defendant's retainer and directed that her documents should be turned over to her new solicitors, Patrick Chan & Co. who also wrote on 11, 17 and 20 November 2000 to demand the return of the plaintiff's documents. 5.On 24 November, the plaintiff applied ex parte to withdraw from the petition. At the adjourned hearing on 25 November, the defendant instructed counsel to oppose the application on behalf of the 1st to 3rd petitioners, counsel also holding a watching brief for S T Lee. On instructions, counsel informed the court that an affidavit was forthcoming from the plaintiff that she did not intend to withdraw and that Patrick Chan & Co. had not been properly instructed. The hearing was further adjourned and directions given for the filing of evidence. Meanwhile, on 27 November 2000, the plaintiff wrote directly to Chu J stating her intention to withdraw from the petition. As no affidavit as had been intimated by counsel for the 1st to 3rd petitioners was forthcoming, nor was there any explanation as to why it was not, on 19 December 2000, Chu J granted the plaintiff leave to withdraw as the 4th petitioner and ordered indemnity costs in her favour as from 25 November against the other petitioners. 6.Following the decision of Chu J, the plaintiff's solicitors wrote on 20 December 2000 and 3 January 2001 to the defendant to demand the return of the plaintiff's documents. On 4 January 2001, the defendant replied to those letters by enclosing a copy of "our client's letter" of even date. The enclosure was a letter from S T Lee to the defendant stating that he (S T Lee) had no wish for the defendant to release the papers without his specific approval or consent. 7.The plaintiff instructed new solicitors Pang & Associates who, on 20 February 2001, demanded the return of the plaintiff's documents. The defendant replied to the effect that it had received a letter from Jones, Day, Reavis & Pogue ("Jones Day"), solicitors, acting for S T Lee also demanding a return of those documents. This led to the commencement of the present proceedings against the defendant on 2 March 2001 for the return of the documents and damages to be assessed. The proceedings below 8.As noted above, there were three applications before the judge. All three summonses were heard together and at the conclusion of the hearing, the judge granted a mandatory injunction ordering the defendant to deliver up the documents and dismissed the interpleader summons which, inter alia, sought an order that S T Lee and the 1st to 3rd petitioners (collectively, "the intended defendants") be made defendants to the plaintiff's action in lieu of C K Tsang & Co. He also struck out paragraph 5 of the statement of claim. 9.Very simply stated, the judge made the order he did on the basis that the documents belonged to the plaintiff: she was therefore entitled to them. The defendant was solely representing the plaintiff when it came to dealing with SKI in respect of the registration of the shares. The plaintiff was the principal: S T Lee was but her agent. The fact that instructions came from S T Lee and that he was picking up the bill made no difference. S T Lee did not have the status to direct whether or not any documents should be released. So far as the plaintiff's position as one of the petitioners was concerned, her sole grievance as petitioner was that SKI was being unnecessarily obstructive in registering the estate's shares into her name. The judge expressed himself satisfied that it was in the course of representing the plaintiff alone that the defendant acted on instructions to join her as a petitioner: the plaintiff was not a member of a group, acting as one, which gave joint instructions for the petition. 10.In considering whether or not a mandatory injunction should be granted, the judge reviewed the interpleader schedule which had been prepared by the defendant. It is to be noted that the documents which formed the subject matter of Part I of the interpleader schedule were not made available to the judge at the hearing. The interpleader schedule bore the following description: "SCHEDULE
This was followed by Part I consisting of four main categories of documents. Each of these main categories was broken down into sub-categories. In reviewing the interpleader schedule, the judge was conscious of the fact that as the plaintiff was a petitioner in the winding up petition, there might be amongst her documents certain information the release of which might breach the intended defendants' rights of confidentiality and privilege. Nevertheless, the judge could see nothing on the face of the interpleader schedule which would prejudice the rights of the intended defendants if they were to be released to the plaintiff. It was in these circumstances that the mandatory injunction was granted. 11.By summons dated 10 December 2001, the intended defendants applied for a stay of execution. On 18 December 2001, the judge granted a stay pending the determination of the appeal save for the documents already relinquished. Those relinquished are listed in a schedule dated 14 December 2001 ("the December schedule"). The December schedule followed the categorisation adopted in the interpleader schedule and according to Herbert Smith, the defendant's solicitors, it contained a list of the documents which "the [i]ntended [d]efendants have agreed to release". The documents not released to the plaintiff ("the disputed documents") were exhibited to Mr Tsang's fourth confidential affirmation and filed with the court. Regrettably, the confidential exhibits consisting of four box files had gone missing from the Registry with the result that this court did not have the opportunity of reviewing the same prior to the hearing of the appeal. They have now been located and, in any event, in the course of the hearing, the defendant lodged a copy with the court. 12.The order which the intended defendants now seek on appeal is not that the order below be set aside; rather, it would appear that they are now pursuing the alternative reliefs set out in the notice of appeal, namely, that the order below be restricted so as to exclude items A7, 8; B14, 15 and all items in C and D (other than 16) of Part I of the interpleader schedule and, in the alternative, that the order be varied so that prior to delivering up the documents, any material therein referring or pertaining to the intended defendants be redacted. It therefore becomes necessary to set out the categories of documents the intended defendants now seek to exclude from the order:
This appeal
13.By juxtaposing the December schedule with the interpleader schedule, it is immediately apparent that the December schedule (which listed the documents relinquished) is not restricted to categories in the interpleader schedule not sought to be excluded from the order. For example, there are entries listed under A8, B14, C17, 18, 20, 21, 22, D25 and 26. In other words, the documents already relinquished include documents which fall within the categories which the intended defendants now maintain ought to be excluded from the order although, according to the solicitors for the defendant, they are documents the intended defendants have agreed to release. There is no explanation for this apparent inconsistency. More importantly, the process whereby the documents relinquished came to be selected and the identity of the decision-maker(s) have not been explained. One is driven to infer from the fact of the intended defendants' agreement to the release of the documents that the intended defendants were consulted prior to their release. It is difficult to envisage any other basis upon which their agreement would have been obtained. This would suggest, at a minimum, a degree of communication and cooperation between the defendant and the intended defendants or their respective solicitors. 14.There is nothing on the face of the interpleader schedule (which after all was a document authored by the defendant,) that could conceivably relate to documents to which any of the intended defendants could assert privilege or confidentiality. In the circumstances, the need for the court to examine the contents of the disputed documents does not arise. As Miss Eu has pointed out, the 2nd to 4th intended defendants have not filed any evidence stating or claiming any interest in the documents. So far as S T Lee is concerned, the documents in question relate to a period when he was either acting or purporting to act as the plaintiff's agent i.e. prior to the order of 19 December 2000 when the plaintiff was granted leave to withdraw as petitioner in the winding-up proceedings. It is not apparent what interest S T Lee can have in those documents which could defeat or otherwise override that of his principal. Whether or not he had actual authority to act as agent is irrelevant. 15.The 2nd to 4th intended defendants are the 1st to 3rd petitioners. They, like the plaintiff, are shareholders of SKI. The 1st intended defendant has been described as a "prospective shareholder" of SKI. It may well be that S T Lee has aspirations regarding SKI but until he becomes and is registered as a shareholder, he has no interest in the company maintainable at law. Therefore, his position is very different from, and should not be regarded as identical with, that of the 2nd to 4th intended defendants. Whilst they are represented by the same firm of solicitors and have retained the same counsel, they do not share a common interest. 16.When asked what right his clients had to the disputed documents, Mr Carolan who appeared for the intended defendants relied on the following passage from the letter of Herbert Smith (solicitors for the defendant) dated 14 December 2001 to the plaintiff's solicitors:
"Jones Day's clients" was a reference to all the intended defendants. But as noted above, S T Lee's position is fundamentally different inasmuch as he is not a shareholder of SKI. It would not appear that either the author of that letter or counsel for the intended defendants was alive to the difference and this needs to be borne in mind. 17.So far as the 2nd to 4th intended defendants are concerned, what is being asserted on their behalf appears to be "common interest privilege or joint privilege" inasmuch as the plaintiff was one of the petitioners until her withdrawal as such on 19 December 2000. But the claim to joint privilege is palpably bad. First, as noted in [10] above this was never a case of all four petitioners giving joint instructions for the petition. In any event, as stated in Phipson on Evidence, 15th Edition, at 21-01,
So far as common interest privilege is concerned, Mr Carolan was unable to cite a single authority for the proposition that his clients or, at any rate, the 2nd to 4th intended defendants are entitled to assert such a privilege against the plaintiff in respect of documents held by the defendant as the plaintiff's solicitor. A right to a document and the right to use it in a particular manner are separate and distinct rights. So even assuming that the intended defendants or some of them have a valid basis for objecting to a particular use to which the plaintiff may put the documents, that is a matter for separate injunctive proceedings and cannot of itself disentitle the plaintiff to her own documents. 18.Ms Eu SC, who appeared for the plaintiff, submitted that no common interest privilege could be invoked by the intended defendants since legal professional privilege cannot be invoked against the party who has a proprietary right in the documents in question. There is a distinction between a right to discovery which is a right to see someone else's documents and a proprietary right which is a right to access documents which are your own. In the latter case, no question of professional privilege arises. See O'Rourke v Darbishire [1920] AC 581, 626-627. That ground alone is sufficient to dispose of the claim of the intended defendants without the need to consider Miss Eu's further submission which, prima facie, appears to have merit, to the effect that common interest privilege is a privilege in relation to a claim by third parties and is not meant to be invoked against the person who is one of the co-parties sharing the same solicitor. 19.In short, the intended defendants have failed to establish any valid basis for their alleged entitlement to the disputed documents.
20.Mr Burns for the defendant maintained that his client's position was neutral. In practical terms, the defendant's appeal was said to be essentially one of costs inasmuch as the interpleader summons had been dismissed with costs. Mr Burns submitted that the judge was wrong in dealing with the Order 14 summons before the interpleader summons. He submitted that the court should have dealt with the interpleader summons first and since the pre-requisites for interpleader relief had been established, interpleader relief ought to have been granted. 21.There is no merit in the submission. What is apparent from a perusal of the transcript is that all three summonses were heard together. There was never any request made to the judge by the defendant's counsel that the interpleader summons should be dealt with first. The order made merely reflected the conclusions reached after the hearing of all three summonses. Even assuming that there were merit in Mr Burns's submission that the interpleader summons ought to have been heard and disposed of first, it does not follow that interpleader relief must have been granted. Interpleader relief is not a substantive right: rather, it is procedural relief which is discretionary in nature. 22.I now turn to consider the prerequisites of interpleader relief which arise in the present case.
23.Order 17 rule 3(4) of the Rules of the High Court requires an applicant for interpleader relief to satisfy the court by evidence that he, inter alia, does not collude with any of the claimants to the subject matter. It is well established that collusion for this purpose does not necessary involve anything morally wrong. Colluding may be said to be an equivalent for "playing the same game." See per Wills J in Murietta v South American etc Co Ltd (1893) 62 LJQB 396 at 397 who also observed that one of the things intended when the rules were drawn up was that the stakeholder seeking relief should have been in a real position of impartiality between the parties. This was remarked upon in Famous Zone Electronics Ltd v Hongkong and Shanghai Banking Corp Ltd [1998] 3 HKC 723 at 727H. 24.A lack of impartiality might well support and justify an inference of collusion. As Miss Eu SC submitted, here there was abundant evidence to indicate "collusion" between the defendant and S T Lee:
When all these matters are viewed against the backdrop of family ties that exist between S T Lee and C K Tsang, the defendant's principal in that Mr Tsang's daughter who is herself an assistant solicitor with the defendant is married to S T Lee's son, it is obvious that the defendant was not in a real position of impartiality between the plaintiff and the intended defendants.
25.It is axiomatic that there must be a real foundation for the applicant's expectation to be sued by two or more rival claimants. See NYK (Hong Kong) Limited v Wilfond Limited [1997] 3 HKC 127, 135H-136C. In the present case, there is no clear evidence that either the 2nd to 4th intended defendants or S T Lee will sue the defendant in respect of the disputed documents. In their letter of 23 February 2001, Jones Day who at that time was then only acting for S T Lee, requested the delivery of all documents in the defendant's possession generated as a result of the powers of the attorney and Voting Agreement in respect of shares registered in SKI in both the plaintiffs and the deceased's name and all documents generated in respect of the winding-up petition, but there was never any threat of legal proceedings. The last letter that can be found in the hearing bundles from Jones Day is their letter dated 11 April 2001 to the defendant's solicitors. This was also written prior to their acting for the 2nd to 4th intended defendants. Again, there was no suggestion of any legal proceedings against the defendant. 26.More importantly, there can be no real foundation for any expectation to be sued unless a prima facie case exists. For reasons already stated, the intended defendants have not succeeded in doing so. The only fair and reasonable conclusion is that the defendant does not have any real foundation for its expectation to be sued by the intended defendants.
27.So, contrary to Mr Burns's submission, it is clear that the prerequisites of interpleader relief have not been established. Although the judge did not specifically allude to these prerequisites in his judgment, his dismissal of the interpleader summons was fully justified.
28.The defendant submitted that the order for assessment of damages should not have been made inasmuch as no particulars of loss and damage had been pleaded and there was no or no credible evidence that the plaintiff had suffered any loss. It was submitted that paragraphs 10 and 12 of the statement of claim should have been struck out as being frivolous and vexatious. 29.It is a fact that the plaintiff's documents have been wrongfully retained by the defendant. The plaintiff has thus suffered a wrong and, in the normal way, once an injunction is granted the plaintiff is entitled to an order for an enquiry as to damages. It is for the plaintiff to prove that she has suffered loss and damage in the same way as any other fact. If she does not succeed in establishing any loss and damage, she would be at risk as to costs on an inquiry as to damages in the normal way. Prima facie, she will have sustained some loss by reason of fact that she has had to instruct other solicitors and so incur costs which otherwise she need not have incurred. That being so, I see no reason why she should not be allowed to establish that fact. Order 30.I would dismiss the appeals by the intended defendants as well as the defendant. I would also make an order nisi as to costs in favour of the plaintiff. Hon Rogers VP: 31.I agree. There will be an order in the terms of paragraph 30.
Representation: Ms Audrey Eu SC and Mr Alfred Liang, instructed by Messrs Pang & Associates, for the Plaintiff/1st Respondent Mr Ashley Burns, instructed by Messrs Herbert Smith, for the Defendant/2nd Respondent Mr Paul Carolan, instructed by Messrs Jones, Day, Reavis & Pogue, for the Intended Defendants/Appellants |
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