China Energy Reserve and Chemicals Group Overseas Co Ltd v. Bank of Communications (Hong Kong) Ltd

HCMP 384/2021

[2021] HKCFI 2367

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 384 OF 2021

_______________________

_______________________

BETWEEN

_______________________

Before: Hon B Chu J in Chambers (Open to Public)

Date of Hearing: 17 June 2021

Date of Judgment: 31 August 2021

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JUDGMENT

(On Pre-Action Discovery)

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INTRODUCTION

1.P issued the originating summons herein on 23 March 2021 against the defendant bank (“Bank”) for pre-action discovery of various documents set out in a (“Schedule”) attached to the originating summons (“Requested Documents”).

2.P is seeking pre-action discovery of the Requested Documents in support of an intended action against the Bank for breach of confidence, namely that the Bank, being P’s banker, has disclosed confidential information belonging to P to third parties in breach of its duties of confidence, good faith and fidelity, which has resulted in loss and damage to P (“Intended Action”). 

3.The Requested Documents consist of:

(1) all communications and correspondence between any or all of the Bank, Bank of Communications Trustee Limited (“BoCom Trustee”) and/or China Life Trustees Limited (“China Life ”) in relation to two accounts ending “6319” and “7185” (including HKD and USD sub accounts) held with the Bank in the name of P (collectively “Account”) for the period between 4 December 2019 up to the date of the order to be made (“Requested Period”) including but not limited to communications and correspondence discussing:

(a) The Account and/or funds held in the Account;

(b) Any instructions given by P to the Bank in relation to the Account; and

(c) the proceedings brought by BoCom Trustee against P and China Energy Reserve and Chemicals Group Company Limited (“CERCG”) in HCA 146/2020 (“HCA 146/2020”)

(2) Internal records of the Bank (including but not limited to file notes, notes of meeting, audio-recording) containing details of the communications and correspondence between any or all of the Bank, BoCom Trustee and/or China Life in relation to the Account;

(3) All documents sent by the Bank or received by the Bank from BoCom Trustee and/or China Life (including any of their employees, officers, directors, legal representatives or agents including for the avoidance of doubt King & Wood Mallesons (“KWM”), Eversheds Sutherland (“Eversheds”) and/or Linklaters (“Linklaters”)) during the Requested Period, in relation to and/or containing details of:

(a) the Account and/or funds held in the Account;

(b) any instructions given by P to the Bank in relation to the Account; and

(c) the proceedings brought by BoCom Trustee against P and CERCG in HCA 146/2020;

(4) Without prejudice to the generality of paragraphs (1), (2) and (3) above, (i) the letter from KWM to Linklaters dated 16 June 2020; and (ii) the other “correspondences between Linklaters and KWM” referred to in the letter from KWM to Linklaters dated 16 February 2021 (“16.02.21 Letter”).

4.KWM are solicitors acting for BoCom Trustee in HCA 146/2020. Linklaters were former solicitors acting for the Bank and Eversheds are solicitors presently acting for the Bank. Debevoise and Plimpton (“D&P”) are solicitors presently acting for P, having replaced P’s former solicitors Ashurst.

5.There are two affirmations filed in support of the originating summons by Mr Norman Lin (“Mr Lin”), the CEO of Energy Reserve and Chemicals Group (HK) Company Limited (“HK HoldCo”), the sole shareholder of P, respectively dated 23 March 2021 and 26 May 2021 (respectively his “1^st Affirmation” and “2^nd Affirmation”). In opposition thereto, there is an affirmation filed on 12 May 2021 by an officer of the Bank Mr Goh Sin Yin (“Mr Goh”).

6.Counsel Mr Paul Shieh SC and Ms Sara Tong appeared for P, and Mr Ambrose Ho SC, Mr Christopher Chain and Mr Terrace Tai appeared for the Bank.

BRIEF BACKGROUND

7.CERCG is the indirect parent company of P. P is a company incorporated in British Virgin Islands.

8.The Bank is a Hong Kong company incorporated in Hong Kong and is a Tier 1 licensed bank.

9.P is one of the Bank’s customers and has maintained the Account with the Bank.

10.According to Mr Lin’s 1^st Affirmation, it was on 24 March 2015 that P opened the Account with the Bank, namely (i) the savings account ending with “6319” with USD and HKD sub-accounts (“Savings Account”) and the time deposit account ending with “7185”) also with USD and HKD sub-accounts (“Time Deposit Account”)[1].

11.Mr Lin has produced a copy of the Agreement for General Banking Services dated 10 March 2015 entered into between P and the Bank for the opening of the Account. The purpose(s) and reason(s) of opening the Account were stated to be for the issue of bonds[2]. Mr Lin has also produced a copy of the Bank’s “General Terms and Conditions for Banking Services (“T&Cs”) and a copy of the “Notice to Customers relating to Personal Data (Privacy) Ordinance issued by the Bank.

12.On 27 April 2015, P issued certain guaranteed bonds for HKD 2,000,000,000 with 6.30% coupon which were due to mature in 2022 (“2022 Bonds”).

13.The 2022 Bonds are part of a series of 8 bonds (collectively “CERCG Bonds”) all guaranteed by CERCG (“Guarantor”) and issued by indirectly owned BVI subsidiaries of CERCG (“Issuers”). BoCom Trustee is the common bond trustee of all the CERCG Bonds which have been subscribed by different bondholders. The sole bondholder of the 2022 Bonds is China Life.

14.According to Mr Lin, the proceeds from the CERCG Bonds were intended for use by the group of entities owned or controlled by the Guarantor (CERCG) (“Group”) and that the proceeds of each of the CERCG Bonds were directly placed in a bank account held at the Bank by China Energy Reserve and Chemicals Trading Company Limited (“CERC Trading”), a Hong Kong company indirectly owned by CERCG[3], and that CERC Trading served a general treasury function for the Group for disbursement of funds to and use by entities within the Group.

15.It is not disputed that there was an event of default on 11 May 2018 under one of the CERCG Bonds (“2018 Bonds”), such that cross-defaults were triggered in the other 7 CERCG Bonds including the 2022 Bonds[4]. A default notice was issued to the bondholders of the 2018 Bonds by P and CERCG on 25 May 2018 and on the same day, a default notice was also given by the Issuers to all the bondholders of the CERCG Bonds of the default of the 2018 Bonds[5] (“Default Announcements”).

16.After the Default Announcements, the Issuers and the Guarantor of the CERCG Bonds appointed FTI Consulting Inc (“FTI”) as their independent financial advisors for a review of the financial condition of the Guarantor and its subsidiaries and/or the Group. There was a meeting with FTI on 16 July 2018 and it was indicated in the minutes of that meeting that there was cash of “1.2億美元” (sic) available for use[6].

17.On 14 August 2018, Ashurst (then solicitors acting for CERGC and P) sent an email to BoCom Trustee setting out the bank account opened by CERCG with the Bank as “Account Bank”, giving P as the name of beneficiary, the account number of the Savings Account at the Bank, stating as part of the debt restructuring proposal in relation to CERCG’s liabilities, CERCG was considering a proposal to transfer cash balances standing in the Savings Account (opened in name of P) to a consolidated cash account which would be used among other purposes to fund repayment to its creditors, including the holders of its outstanding bonds (“14.08.18 Email”). It was stated in the 14.08.18 Email that P, as the beneficiary of the Savings Account, had the right to make such withdrawals without the need for consent from the Bank acting as the “Account Bank” or in other capacity and Ashurst had asked BoCom Trustee to confirm P’s understanding and that P would confirm its withdrawal instructions in due course[7].

18.Shortly thereafter, FTI issued a report on 17 August 2018[8] (“FTI Report”). As seen in the FTI Report, FTI was appointed on 6 June 2018 to assist CERCG with reviewing its financial position and outlining available restructuring options to bondholders. A restructuring proposal and a timetable were set out in the FTI Report[9].

19.There was a subsequent notice to bondholders dated 8 October 2018 in which CERCG and the Issuers stated among other things, that the timetable or providing terms and conditions of the restructuring proposal for the Group would need to be extended. This was referred to in a notice sent by email dated 24 October 2018 from BoCom Trustee to P and CERCG in relation to the 2018 Bonds issued by P (“24.10.18 Notice”). In the 24.10.18 Notice, BoCom Trustee referred to its understanding that an account of P was put in funds in order to make payments on those 2018 Bonds and BoCom Trustee sought an agreement from P and CERCG not to transfer any funds out of such account without providing BoCom Trustee with prior notice as stated therein[10].

20.However, on 30 October 2018, Ashurst replied to the 24.10.18 Notice stating that BoCom Trustee’s understanding was incorrect and that P was not the holder of the account referred to, and stating that it was their clients’ intention to treat all bondholders equally and fairly without preference to any particular series of bondholders, and that their clients would commit certain assets, including any funds held in certain of their bank account held with the Bank or otherwise, for the proposed restructuring. Further, they stated that CERCG and the Issuers noted the BoCom Trustee’s request in the 24.10.18 Notice in relation to transfer of funds[11].

21.It would appear that on 29 October 2018, a day before Ashurst’s above reply, a further event of default occurred as P and/or CERCG did not pay the bondholders the accrued interest in respect of the 2022 Bonds[12].

22.According to Mr Lin’s 1^st Affirmation herein in May 2019, CERC Trading transferred a total of USD 120m to the USD sub-account of the Savings Account. According to Mr Lin’s 7^th Affirmation in HCA 146/2020, the sum of USD120m was transferred on or around 29 May 2019 from the Savings Account to the Time Deposit Account (“Deposit”). It is however not quite clear as to when the sum of USD 120m was first paid into the Savings Account[13]. It is P’s contention that the Deposit is beneficially owned by CERC Trading, but this is disputed by BoCom Trustee (acting on behalf of China Life)[14].

23.According to Mr Lin, as part of the discussions between members of the Group, BoCom Trustee and the bondholders regarding the proposed restructuring, the Group had informed BoCom Trustee and the bondholders of the Group’s intention to use the Deposit as a source of funds for the proposed restructuring[15].

24.As at 29 November 2019, there was a total sum of USD 121,132,916.76 including the Deposit held in the Account (being HKD 52,537 in the Savings Account and USD 121,132,916.76 in the Time Deposit Account )[16]. On 4 December 2019, P sent an instruction to the Bank with (i) a disposal instruction for the principal and interest of the fixed deposit in the Time Deposit Account to be transferred into the Savings Account and (ii) a chats transfer instruction for the amount of USD 121,323,000 in the Savings Account to be transferred to an account held by CERC Trading with the China Construction Bank (Asia) Corporation Ltd (collectively “2019 Instruction”)[17]. The Bank acknowledged receipt of the 2019 Instruction by an email dated 5 December 2019 stating that the 2019 Instruction was being processed in accordance with the terms and conditions that applied to Ps’ accounts with the Bank.

25.On 12 December 2019, P sent a further email to inquire as to why the Bank had not yet processed the 2019 Instruction. By a reply letter of the same date, the Bank stated that subsequent to its receipt of the 2019 Instruction, it had received notice of a claim by BoCom Trustee against P and “the funds currently placed in the USD Account” as a result of which the Bank was “not in a position” to carry out the 2019 Instruction pursuant to its T&Cs until the Bank received notification from P as to the resolution of the continuing conflict between, on the one hand, the 2019 Instruction, and on the other, the conflicting claim of BoCom Trustee[18].

26.P wrote to the Bank on 17 December 2019 protesting against its refusal to comply with the 2019 Instruction.

27.On 30 December 2019, KWM (acting for BoCom Trustee) wrote to Ashurst to demand an immediate withdrawal by P of the 2019 Instruction[19].

28.It is P’s case as P never informed KWM or BoCom Trustee of the 2019 Instruction, it can only be inferred that the information was disclosed by the Bank to BoCom Trustee.

29.According to P, at that time, P did not press the Bank for breach of confidence in light of discussions relating to the broader aspects of the commercial relationship and that in response to the Bank’s offer of a higher interest rate on the Deposit, P withdrew the 2019 Instruction on 22 January 2020 and renewed the fixed term deposit.

30.Two days later, on 24 January 2020, BoCom Trustee (as trustee for China Life, the holder of the 2022 Bonds) commenced HCA 146/2020 against P and CERCG for repayment of sums on the basis of cross-default.

31.Apparently, later on 21 September 2020, BoCom Trustee (acting as trustee for another bondholder) commenced HCA 1607/2020 against the Issuer and CECRG as the Guarantor.

32.On 29 October 2020, BoCom Trustee (as trustee for China Life) obtained summary judgment against P and CERCG for the sum of HKD 2 billion plus interests, costs and expenses in the sum of HKD 258,537.24 before Master Rebecca Lee (“Summary Judgment”)[20].

33.On 30 October 2020, P and CERCG appealed against the Summary Judgment and the appeal was due to be heard on 23 and 24 August 2021. In the meantime, P and CERCG applied for a stay of execution pending appeal but this was rejected by Master Rebecca Lee on 21 December 2020.

34.On 30 December 2020, P and CERCG renewed their application for a stay of execution pending appeal.

35.In the meantime, negotiations over the restructuring proposal appeared to have continued into January 2021[21].

36.On Thursday 11 February 2021, which was the day before the Chinese New Year holidays, P’s present solicitors, D&P sent a letter to the Bank and amongst other things, gave renewed instruction to the Bank for the transfer of funds in the Account, of not less than USD 122,999,208.68 (a sum which was placed on a 31 day time deposit due to expire on 25 January 2021), within 6 days, to an account belonging to P’s sole shareholder, ie HK HoldCo, also held with the Bank (“2021 Instruction”)[22]. According to the letter, the purpose of such intended transfer was so that the funds would continue to be held by HK HoldCo on trust for the benefit of all of the bondholders.

37.On Tuesday 16 February 2021, the day after the Chinese New Year holidays, KWM wrote to D&P asserting among other things that BoCom Trustee was entitled to enforce the Summary Judgment against the Deposit in the Account and demanded an undertaking from P by close of business on 18 February 2021 not to transfer the Deposit out of the Account, failing which BoCom Trustee reserved the right to seek injunctive relief against P[23]. On Thursday 18 February 2021, D&P wrote to KWM a short reply, declining to comply with the demand and indicating they would send a fuller response early in the following week[24].

38.On 16 February 2021, KWM also wrote to Linklaters (then solicitors acting for the Bank) referring to correspondences between Linklaters and KWM (including the letter dated 16 June 2020) and amongst other things that KWM understood from CERCG that funds in its bank account allegedly amounted to around USD 120m which fell far short of satisfying the judgment debt and urging the Bank amongst other things to refrain from allowing any transfer of any amount from CERCG’s bank account[25] (“16.02.21 Letter”).

39.On Monday 22 February 2021, BoCom Trustee applied for a post-judgment Mareva injunction restraining P from amongst other things disposing of,dealing with or diminishing the funds in the Account and KWM served the application on P on 23 February 2021.

40.On 23 February 2021, D&P wrote to Eversheds (present solicitors for the Bank) pointing out that BoCom Trustee had made the demand for the undertaking just one working day after the 2021 Instruction, followed by the application for injunction, which gave rise to serious concerns that BoCom Trustee might have been made aware of the 2021 Instruction which the Bank had a duty to keep confidential and requesting the Bank to confirm whether it had disclosed the 2021 Instruction to any third parties including BoCom Trustee.

41.On 25 February 2021, Eversheds sent 2 letters to D&P, the 1^st one to inform P that pursuant to the Bank’s T&Cs in particular clauses 17.1(d) of Part B, the Account has been suspended with immediate effect, and the 2^nd one to say amongst other things, the Bank took P’s allegation of breach of confidentiality seriously and that Eversheds would require more time to take detailed instructions[26].

42.On 26 February 2021, the renewed application by P and CERCG for stay of execution of the Summary Judgment was refused by Au-Yeung J pursuant to her decision handed down on 26 February 2021[27] (“Decision”).

43.On the same day, 26 February 2021, Bocom Trustee obtained the interim post-judgment Mareva injunction against P which had the effect of covering P’s assets in Hong Kong up to the value of HKD 2 billion or its equivalent including all P’s assets in the Account (“Post Judgment Mareva”)[28].

44.On 9 March 2021, BoCom Trustee applied for and obtained a garnishee order nisi in respect of the funds in the Account to enforce the Summary Judgment with a return date on 16 April 2021. P has applied to set aside the order nisi on the basis of material non-disclosure and to oppose any order absolute being granted on grounds including that P is not the beneficial owner of the funds and is merely a bare trustee thereof.

45.Thereafter, on 23 March 2021, P issued the originating summons herein for pre-action discovery against the Bank.

46.On 29 March 2021, the Post-Judgment Mareva was discharged by consent upon the joint application of P and BoCom Trustee, on terms unknown to the Bank. From what was submitted by Mr Shieh during the hearing, it appears that as the Account was frozen by reason of the garnishee order nisi the parties then consented to the discharge of the Post-Judgment Mavera.

47.On 1 April 2021, the Bank’s solicitors Eversheds, after being sent a copy of the garnishee order nisi in HCA 146/2020 by KWM, sent a letter in reply copied to the Court and P’s solicitors D&P indicating that the Bank would take a neutral position in the garnishee proceedings and would abide by any order made by the Court. In that letter, Eversheds had enclosed copies of 5 letters received by the Bank respectively from 5 separate third parties asserting amongst other things to be bondholders of the 2018 Bonds and putting the Bank on notice their claim that the funds in the Account were held by P on trust for the bondholders of the 2018 Bonds as part of restructuring, and not for the bondholders of the 2022 Bonds[29].

48.At the time of the hearing before this Court, there appeared to have been no substantive hearing date fixed yet for the garnishee proceedings.

49.For the purpose of the present proceedings, P has prepared a draft statement of claim in the Intended Action (“Draft SoC”)[30]. As said earlier, P’s case is essentially based on breach of confidence of the Bank, that the Bank had passed information to BoCom Trustee in relation to 2 instructions given by P, ie the 2019 Instruction and the 2021 Instruction.

THE LEGAL PRINCIPLES

50.Section. 41 of the High Court Ordinance provides as follows:

“(1) On the application, in accordance with rules of court, of a person who appears to the Court of First Instance to be likely to be a party to subsequent proceedings in that Court in which a claim is likely to be made, the Court of First Instance shall, in such circumstances as may be specified in the rules, have power to order a person who appears to the Court of First Instance to be likely to be a party to the proceedings and to be likely to have or to have had in his possession, custody or power any documents which are directly relevant to an issue arising or likely to arise out of that claim-

(a) to disclose whether those documents are in his possession, custody or power; and

(b) to produce such of those documents as are in his possession, custody or power to the applicant or, on such conditions as may be specified in the order-

(i) to the applicant’s legal advisers;

(ii) to the applicant’s legal advisers and any medical or other professional adviser of the applicant; or

(iii) if the applicant has no legal adviser, to any medical or other professional adviser of the applicant.

(2) For the purposes of subsection (1), a document is only to be regarded as directly relevant to an issue arising or likely to arise out of a claim in the anticipated proceedings if—

(a) the document would be likely to be relied on in evidence by any party in the proceedings; or

(b) the document supports or adversely affects any party’s case.”

51.RHC Order 24 rule 7A then sets out the procedure for an application for an order under the above section 41 which must be supported by an affidavit and the supporting affidavit must contain the information set out in rule 7A(3) and (3A). Order 24 rule 8(2) further provides:

“No order for the disclosure of documents shall be made under section 41 or 42 of the Ordinance, unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

52.G Lam J, as he then was, has in Zhang Shoufen v Standard Chartered Bank (Hong Kong ) Limited, HCMP 682/2015, unrep, 15.10.15 referred to the judgment of Zervos J in VTB Debt Centre LLC v Top Fuel Corporation Ltd, HCMP 1543/2013, unrep 16.04.14 and set out 5 requirements for exercising the court’s power to order pre-action discovery[31] (“5 Requirements”). They are:

“(1) The applicant appears to be likely to be a party to subsequent proceedings in the court in which a claim is likely to be made. In order to satisfy the requirement that a claim is likely to be made, the applicant must show a claim “may” or “may well” be made if discovery is granted.

(2) The respondent appears likely to be a party to such proceedings.

(3) The respondent appears likely to have or to have had in his possession, custody or power the document requested.

(4) The requested document is “directly relevant” to an issue arising or likely to arise out of that claim. “Direct relevance” is shown only if:

(a) the document would be likely to be relied on in evidence by any party in the proceedings; or

(b) the document supports or adversely affects any party’s case.

(5) The applicant must satisfy the court that the order for pre-action discovery is necessary either for disposing fairly of the cause or matter or for saving costs.”

53.As explained by G Lam J, the first 4 Requirements above are jurisdictional conditions and unless they are satisfied, the jurisdiction to order pre-action discovery does not arise. If they are satisfied, the court has a “power” – in his view a discretionary power – to order pre-action discovery of the document in question. Requirement (5) means that the court will not exercise its power to make an order unless discovery is necessary either for disposing fairly of the cause or matter or for saving costs. G Lam J has further said that the discretion seems to be an unfettered one to be exercised in all the circumstances of the case.

54.G Lam J has also pointed out two significant differences between specific discovery pursuant to rule 7 and pre-action discovery pursuant to s 41 and rule 7A, apart from the stage at which the application may be made, and the two significant differences are in relation to (i) the test of relevance and (ii) of the burden of proof.

55.As pointed out by G Lam J[32], for specific discovery, the document or class of document “relates to one or more of the matters in question in the cause of matter” has been taken to mean that a document is relevant if it “contained information either directly or indirectly enabling the party seeking discovery either to advance his own case or to damage that of his adversary, or which might fairly lead to a train of injury which might have either of those consequences”[33].

56.In contrast, in the case of pre-action discovery under s 41 and rule 7A, the legislation has made a deliberate departure from that generous test of relevance for specific discovery in that the documents sought have to be “directly relevant to an issue arising or likely to arise out of [the] claim”, and it is only to be so regarded if “(a) the document would be likely to be relied on in evidence by any party in the proceedings; or (b) the document supports or adversely affects any party’s case”[34].

57.The 1^st limb (a) imports a condition of likelihood and the applicant has to show that the document may well be relied upon in evidence by a party in the proceedings whereas in contrast, the 2^nd limb (b) is that the document supports or adversely affects a party’s case not merely that it is likely to do so, but that said, G Lam J has also pointed out that in a case where the applicant has not seen the document in question, he can only reasonably be expected to prove this on a balance of probabilities[35].

58.As for the burden of proof, G Lam J pointed out that in an application for specific discovery, under rule 8(1), the burden lies on the party resisting discovery (as opposed to production) to show that discovery is not so necessary[36]; in the case of pre-action discovery, the onus is reversed. The wording of Order 24 rule 8(2) “unless the Court if of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs” places the burden squarely on the applicant to satisfy the court that the order is necessary in the manner described, not only the document is relevant or that discovery is desirable[37].

59.With the above principles in mind, I now turn to the present application.

REQUIREMENTS (1), (2) AND (3)

60.There is no dispute in relation to Requirements (1) and (2) in that it has not been suggested by Mr Goh/the Bank that P has no arguable claim or that it is not P’s intention to issue the Intended Action against the Bank if discovery is granted.

61.As for Requirement (3), Mr Lin has stated in paragraph 58 of his 1^st Affirmation that he verily believes that the Bank has in its possession, custody or power the Requested Documents[38]. There has been no denial in Mr Goh’s affirmation.

62.Having considered the above, I am of the view that Requirements (1), (2) and (3) are satisfied.

REQUIREMENT (4)

63.Mr Goh has pointed out in his affirmation that P has been unable to demonstrate that each and every of the Requested Documents is directly relevant to the issues of the Intended Action[39]. In particular, the Bank challenges the relevance of the Requested Documents in respect of two aspects, namely (1) the request for disclosure for the entire Requested Period, namely from 4 December 2019 to the date of the order to be made herein, is not justified; and (2) the Requested Documents in relation to HCA 146/2020 are irrelevant.

The Requested Period

64.The Bank pointed out that P’s complaints relate only to two periods: (i) the period between the giving of the 2019 Instruction (on 4 December 2019) to the commencement of HCA 146/2020 (on 24 January 2020); and (ii) the period between the giving of the 2021 Instruction (11 February 2021) and the BoCom Trustee’s application for the Post Judgment Mareva (22 February 2021).

65.Mr Shieh however submits that this is a mischaracterisation of P’s complaints and it is without basis in that:

(1) The fact that there is circumstantial evidence to suggest that D had disclosed the 2019 Instruction and the 2021 Instruction to BoCom Trustee/China Life does not mean those were the only instances of breach of confidence by the Bank in relation to the Account.

(2) Although the 2019 Instruction and 2021 Instruction were given more than one year apart, the effect of the Bank’s action (or inaction) on both occasions had been to serve BoCom Trustee and/or China Life’s interests and objective, which is to ensure that the funds remained in the Account to facilitate intended enforcement action to be taken by BoCom Trustee for the benefit of China Life. Therefore, taking into account the relationship between the Bank and BoCom Trustee (being affiliated companies) and their past conduct, there are legitimate reasons for P to suspect that unauthorised disclosure of information concerning the Account between the Bank and BoCom Trustee began to occur from the time the 2019 Instruction was issued, and has been continuing to date[40].

66.In particular, P relies on:

(1) The 16.02.21 Letter from KWM to Linklaters had referred to a letter between them dated 16 June 2020 and “correspondences” between them, which shows that the Bank and BoCom Trustee are likely to have corresponded in relation to the Account during the period between the 2019 Instruction and 2021 Instruction; and

(2) The fact that P’s requests for the Bank to cease its communications with BoCom Trustee in relation to the Account have been ignored.

67.It is thus submitted on behalf of P that there is evidence that there were communications between the Bank and BoCom Trustee between the 2019 Instruction and 2021 Instruction and further there is no reason to assume that the unauthorised communications would come to an end upon the issuance of the application for the Post Judgment Mareva in February 2021. It is further pointed out by P that there has not been any suggestion that P’s request for disclosure of the Requested Documents over the Requested Period is in any way oppressive or onerous.

68.On Mr Lin’s own evidence, there had been discussions between members of the Group, the bondholders (including China Life) and BoCom Trustee and that as seen earlier in the 14.08.18 Email, BoCom Trustee was informed by P’s then solicitors that the Bank was the “Account Bank” and giving P as the name of the beneficiary and the account number of the Savings Account held with the Bank and seeking BoCom Trustee’s confirmation that P could make withdrawal instructions from the Savings Account in due course. Further, as mentioned earlier, it was Mr Lin’s evidence that it was the Group’s intention to use the Deposit as a source of funds for the proposed restructuring.

69.Thus, BoCom Trustee and China Life knew of the details of the Savings Account and also the Deposit from P and/or CERCG as early as at least August 2018.

70.P complained of having written to the Bank on 5 occasions seeking disclosure of all directly relevant communications between the Bank and BoCom Trustee and requesting that the Bank to cease such communications with BoCom Trustee[41] and the Bank had refused to provide such disclosure and had refused to cease such communications.

71.The 1^st of those 5 occasions, namely an email sent by P/CERCG on 17 December 2019, was in relation to the 2019 Instruction and was in response to the Bank’s letter of 12 December 2019 notifying P of the Bank’s receipt of a claim by BoCom Trustee against P and P’s funds in the USD account of the Savings Account. Although there was no written response from the Bank to P’s request for information including whether the Bank had notified BoCom Trustee of the 2019 Instruction, as said earlier, the 2019 Instruction was later withdrawn by P 2 days prior to the issue of HCA 146/2020 when the Bank agreed to offer a higher interest rate, as was proposed by P in its email of 17 December 2019. There was no evidence of any withdrawal instructions having been given by P to the Bank after issue of HCA 146/2020 until the 2021 Instruction.

72.As for the other 4 occasions being letters/emails sent by P’s solicitors D&P on 23 February 2021, 24 February 2021, 3 March 2021 and 10 March 2021, they were sent after the 2021 Instruction and those sent in February 2021 were in relation to the application for injunction. In the letters of 23 and 24 February 2021[42], D&P had informed the Bank of BoCom Trustee’s threat to apply for the Post Judgment Mareva, reminding the Bank of their duty not to disclose to any third parties confidential information of the 2021 Instruction and demanding information as to whether the Bank (including any of its employees, officers, directors or agent) had disclosed the 2021 Instruction to any one including BoCom Trustee, whether directly or indirectly. Eversheds had sent a reply on behalf of the Bank on 25 February 2021[43] indicating amongst other things that P’s allegation against the Bank for breach of confidentiality was taken seriously and that Eversheds would require more time to take detailed instructions from the Bank. By 25 February 2021, the day before the granting of the Post Judgment Mareva, P had voluntarily disclosed to BoCom Trustee of its 2019 Instruction and 2021 Instruction. The Account[44] had also been suspended on that day by the Bank. On 3 March 2021, D&P wrote to Eversheds expressing P’s concern in the Bank’s suspension of its account and further complaining again the Bank had chosen to correspond with a third party about matters relating to P’s account[45]. Eversheds had replied on 5 March 2021 stating again that they were taking instructions and would let D&P have a substantive response as soon as they had taken instructions.

73.D&P wrote on 10 March 2021[46], pointing out that on 4 separate occasions, they had requested from the Bank copies of materials relating communications between the Bank and agent/s on the one hand and BoCom Trustee and its agent/s on the other and on each occasion, P had expressed its serious concerns as to the Bank’s apparent breach of confidentiality to its affiliate BoCom Trustee and imposed a deadline for the Bank to reply failing which P would make an application for pre-action discovery.

74.There was no evidence of any instructions given by P to the Bank apart from the 2019 Instruction and the 2021 Instruction of which any unauthorised disclosure would result in loss and damage to P. Having considered the evidence, I find there was no sufficient evidence to support P’s allegation that whatever communications or correspondence which the Bank had, if any, with BoCom Trustee and/or China Life would be a breach of its duty of confidence towards P. The fact that there was evidence of correspondence between the Bank and BoCom Trustee (as seen in the 16.02.21 Letter), and/or the fact that the Bank did not provide a substantive reply or the information sought by P in P’s 5 letters/emails would not be in my view sufficient to satisfy this Court of the direct relevance of the Requested Documents for the period after the commencement of HCA 146/2020 to the giving of the 2021 Instruction and for the period after the granting of the Post Judgment Mareva. Further, the fact the Bank and BoCom Trustee have a common shareholder does not mean that there had been improper sharing of information throughout the entire Requested Period.

Requested Documents in relation to HCA 146/2020

75.As for the Requested Documents in relation to the Bank’s communications and correspondence with BoCom Trustee discussing HCA 146/2020, Mr Goh has referred to a letter sent on 26 April 2021 by the Bank’s solicitors to P’s solicitors requesting for various exhibits in “NL-1” in the Mr Lin’s 1^st Affirmation, pursuant to Order 24 rule 10 of RHC[47]. In reply on 27 April 2021[48], D&P had said those documents sought by the Bank comprised solely of documents (such as affirmations, written submissions, summons and court orders) filed in HCA 146/2020 which had no relevance to the issues in question in the present proceedings.

76.In light of the above, Mr Goh has said in his affirmation that “it is [P’s] own case that documents in relation to HCA 146/2020 are irrelevant”[49].

77.Mr Shieh submits that this is again a mischaracterisation of P’s position, as P’s position in D&P’s reply of 27 April 2021 had been taken by P in a very different context, namely in response to Bank’s request under O.24 r.10 RHC for the production of various documents filed in HCA 146/2020 for the purpose of contesting P’s application for pre-action discovery in these proceedings.

78.However, all Mr Lin had said in his 2^nd Affirmation was that as the Bank was not a party to HCA 146/2020, there was no apparent reason why it would communicate with BoCom Trustee and/or China Life in relation to matters relating to HCA 146/2020, save for the purpose of disclosing confidential information relating to the Account to BoCom Trustee/China Life to advance their interests.

79.This seems to be a rather sweeping statement as there could have been legitimate reasons why the Bank and BoCom Trustee would have communicated with each other in relation to HCA 146/2020, and the Account, such as over the Post Judgment Injunction and the garnishee proceedings, as seen in the letter dated 18 March 2021 sent by KWM to the Bank and the letter dated 1 April 2021 from Eversheds to KWM[50]. P has not satisfied this Court that communications the Bank had with BoCom Trustee and/or China Life in relation to or discussing HCA 146/2020 would be directly relevant.

Conclusion on Requirement (4)

80.As G Lam J, as he then was, has said in paragraph 24 of his judgment in the Zhang Shouen case:

“24. While s. 41 and rule 7A both refer simply to “document” without express mention of “class of document” (as there is in Order 24 rule 7 which concerns specific discovery), I do not think this precludes the court from compendiously ordering pre-action discovery of a class of documents as such (see by analogy Cheung Kai Wing v Mok Sheung Shum t/a Mok Sum Kee [1993] 2 HKC 113, 120), provided it is shown that all the documents in the class meet the jurisdictional requirements including, in particular, that of direct relevance. As Mr Man SC accepted, it is not enough to show that some only of the documents in the class meet the threshold condition, for the court has no jurisdiction to order discovery of documents only because some other documents belonging to the same class fall within the statutory provisions. The applicant has to show that each document in the class is a document that falls within s. 41 and rule 7A. The wider the class is drawn, the more difficult it will be for the applicant to show that the documents within it all pass the threshold. A similar principle applies in relation to specific discovery, in that where a claim for specific discovery of a class of documents is made, the class must not be described so widely as to include documents which are not relevant to the issue: Molnlycke AB v Procter & Gamble Ltd (No. 3) [1990] RPC 498; see also Tullett Prebon (Hong Kong) Ltd v Chan Yeung Fong Nick (unreported, HCA 2197/2009, 9 June 2011) at §§77-84 in the context of discovery from third parties.”

(emphasis added)

81.The burden is on P to demonstrate to this Court under section 41(2) of the High Court Ordinance that each and every of the Requested Documents for the entirety of the Requested Period is directly relevant to an issue arising or likely to arise out of P’s claim in the Intended Action. As Mr Ho has submitted, either P is basing its claim on the 2 incidents of the 2019 Instruction and the 2021 Instruction, or P is “fishing” in seeking the Requested Documents for the entire Requested Period and in relation to HCA 146/2020. I agree.

82.In any event I find P has not been able to satisfy this Court that each and every of the Requested Documents for the entirety of the Requested Period or in relation to communications and correspondence discussing HCA 146/2020 are directly relevant under section 41(2) save those allowed by this Court as seen later in this Judgment.

REQUIREMENT (5)

83.The main focus of the submissions on behalf of the Bank is that the Requested Documents are not necessary either for disposing fairly of the cause or matter or for saving costs.

84.It is submitted on behalf of P that the pre-action discovery of the Requested Documents is plainly necessary for the fair disposal of the cause or matter as well as the saving of costs for the following reasons:

(1) P has a duty to plead its case in the Intended Action with sufficient particularity failing which its claim is potentially liable to be struck out;

(2) given that the Bank has so far refused to admit or deny that it had disclosed confidential information in relation to the Account to BoCom Trustee/China Life, pre-action discovery of the Requested Documents is necessary for, or conducive to, saving costs in that they could potentially prove or disprove the inference to be drawn from the circumstantial evidence currently available that the Bank had divulged confidential information in relation to the Account to BoCom Trustee/China Life in breach of its duties of confidence (which the Bank has so far neither denied nor confirmed);

(3) disclosure of the Requested Documents prior to the commencement of the Intended Action would save costs in a further respect, namely by obviating the need for the parties to amend their pleadings following discovery of the Requested Documents in the Intended Action.

85.Mr Shieh has referred this Court to paragraphs 47-26 and 47- 28 of Bullen & Leake & Jacob Hong Kong: Precedents of Pleadings (19^th Ed) and submitted that it is well-established that claims involving the misuse of confidential information must be pleaded with proper particulars, failing which they are liable to be struck-out and Mr Shieh has also referred to the precedent at paragraph 47-P1 at pages 1223-1225 of Bullen & Leake & Jacob Hong Kong.

86.It is submitted on behalf of P that the Intended Action as currently formulated in the Draft SoC is incomplete in that without the Requested Documents, P is unable to plead full and complete particulars of:

(1) all items of confidential information in relation to the Account which the Bank had disclosed to BoCom Trustee/China Life: see paragraph 8 of the Draft SoC where only the 2019 Instruction and the 2021 Instruction have currently been pleaded;

(2) precise instances of the Bank’s disclosure of confidential information in relation to the Account to BoCom Trustee/China Life in breach of its duties of confidence, good faith and fidelity: see paragraph 11 Draft SoC where P is at present unable to plead any particulars of the precise instances of breach; and

(3) full and complete particulars of loss and damage suffered by P as a result of the instances of unauthorised disclosure by the Bank.

87.Therefore it is submitted by Mr Shieh that the Requested Documents sought are necessary in order for P to “properly plead a potentially good claim” in the sense that a proper plea of breach of confidentiality must include particulars of the confidential information and particulars of the instances of breach.

88.On the other hand, Mr Ho has referred the Court to Bullen & Leake on Precedents of Pleadings (19^th ed) at paragraph 74-01 in relation to 4 requirements for a claim based on breach of confidence:

(1) P must identify clearly the information which is alleged to be confidential;

(2) the information in question has “the necessary quality of confidence”;

(3) the information has been imparted in circumstances importing an obligation of confidence; and

(4) there must have been an unauthorised use of that information to the detriment of the party communicating it.

89.Mr Ho has submitted that from the Draft SoC, it is clear that P can formulate its case in full and (save its bald assertion of detriment and loss) can pleaded all the necessary elements in support of a claim based on breach of confidence.

90.Paragraph 47-26 in Bullen & Leake & Jacob Hong Kong states that:-

“Plaintiffs in breach of confidence cases are required to plead with specificity the information that is alleged to be confidential.”

(emphasis added)

91.This is also seen in what was explained by DHCJ Lam, as he then was, in Oriental Machinery Ltd v Choi Kin On (unrep., HCA 1719/2000, 21.11.2001) in paragraph 27 as follows:

“… the particulars of confidential information … are essential part of the claim and they must be pleaded as material facts and essential particulars pursuant to Order 18 Rules 7 and 12. A pleading lacking those particulars is liable to be struck out as embarrassing or failing to disclose a reasonable cause of action.”

92.As seen in paragraphs 8-10 of the Draft SoC, and as pointed out by Mr Ho, P is able to plead the particulars of the confidential information and that P is able to identify and particularise the alleged confidential information which the Bank is alleged to have communicated to BoCom Trustee in breach of the Bank’s duty of confidential, namely the 2019 Instruction and the 2021 Instruction.

93.Further, as seen in paragraphs 4-6 of the Draft SoC P is also able to plead why the said information is confidential by reference to the Bank’s T&Cs and further in paragraph 9 of the Draft SoC, P has asserted that the information must be confidential because it was received by the Bank by reason of it being P’s banker and in circumstances where the Bank was obliged to and was fully aware that the same must be dealt with in strict confidence.

94.Mr Ho has also pointed out that in paragraph 11 of the Draft SoC that P is able to confidently conclude that the Bank had breached its duty by communicating the alleged confidential information to BoCom Trustee and that although P has not pleaded the timing upon which the alleged breach of confidence took place, P could do so by way of inference based on the materials raised in Mr Lin’s 1^st Affirmation.

95.However, I accept that P is unable to provide particulars of communications in relation to the 2019 Instruction and the 2021 Instruction. P’s case is based on circumstantial inference drawn from other evidence. Mr Shieh has referred the Court to Yau Ling Chee v Chan Fai [2017] 3 HKLRD 362, in which DCHJ Marlene Ng (as she then was) allowed an application for pre-action discovery on the ground that the document sought to be disclosed would either confirm or rebut the inference drawn by the intended plaintiff from other evidence, and hence held to be necessary to prevent costs from being incurred in what might eventually turn out to be an unmeritorious claim, to facilitate the fair disposal of the matter and to enable the applicant to make an informed decision as to whether to commence the intended proceedings[51].

96.Mr Ho has pointed out that the Yau Ling Chee case is a case involving involved a potential application for making of a statutory will on behalf of a mentally incapacitated person (MIP), and that the necessity and a material consideration for a statutory will significantly depended on the contents of the 2008 Will of the MIP and whether it conflicted with an earlier 2001 Will. The plaintiff in the Yau Ling Chee case had not seen the 2008 Will. Further the likely inference that needed to be drawn was as to the contents of the unseen 2008 Will.

97.However, I find in the present case, as in the Yau Ling Chee case, P has not had sight of any communications or correspondences between the Bank and BoCom Trustee and/or China Life, and has no knowledge as to the contents of any of such communications and/or correspondences and I accept what is submitted by Mr Shieh, that having sight of those documents, subject to the scope set out below, and knowledge of their contents for the relevant periods would enable P to make an informed decision as to whether or not the Bank had breached any duty of confidence and/or to commence the Intended Action; otherwise, whether there was any breach on the part of the Bank would remain a matter of inference. I am of the view that if P issues the Intended Action without sight of the Requested Documents allowed below there may be a risk of wasting time and money if the inference turns out to be wrong and P has to withdraw such proceedings.

98.Having considered the respective submissions from both sides, I have come to the view that pre-action discovery of the Requested Documents (subject to the scope as allowed and set out below) is necessary either for disposing fairly of the cause or matter or for saving costs.

SCOPE

99.Mr Ho has proposed certain amendments to the Schedule on a fall back position. Further, as Mr Ho has pointed out, which I agree, such discovery should exclude documents subject to claims of privilege.

100.Mr Ho had objected to the communications and correspondence in paragraph 1 of the Schedule to include those “received” by the Bank. In this respect, I am of the view that in order to place the communications and correspondence “sent” by the Bank in proper context, those “received” by the Bank should also be included. For the Requested Period, for reasons set out earlier, I find the periods for which the Requested Documents are directly relevant would be (i) between 4 December 2019 (giving of the 2019 Instructions) to 24 January 2020 (the issue of HCA 146/2020) and (ii) between 11 February 2021 (the giving of the 2021 Instruction) and 26 February 2021 (the granting of the Post Judgment Mareva). I find sub-paragraph (a), and (b) under paragraph 1 are not necessary as communications in relation to the Account cover those in relation to the funds in the Account and any instructions given by P in relation to the Account. In relation to sub-paragraph (c), as said earlier, the Court is not satisfied that communications discussing HCA 146/2020 are directly relevant. Unless otherwise indicated herein, I accept the Bank’s proposed amendments.

101.As for paragraph 2, I am prepared to accept that there could have been oral communications between the Bank and BoCom Trustee and/or China Life and in the circumstances, paragraph 1 (as amended) should include the documents in paragraph 2 subject to the same amendments allowed by this Court. Similarly, paragraph 3 should also be included subject to same amendments allowed. For reasons set out earlier, paragraph 4 is not allowed.

102.The Bank has sought 35 days to provide the disclosure. I find this to be reasonable. Further, I accept the Bank’s proposed amendments that P should only have leave to use the Requested Documents obtained for the purpose of commencing and pursing new legal proceedings against the Bank, whether in Hong Kong or elsewhere.

103.As for costs, I will direct the parties to submit their respective written submissions on costs (limited to 15 pages) within 14 days hereof and their reply to each other’s submissions (limited to 15 pages) within 14 days thereafter. The matter of costs will be dealt with on paper.

Mr Paul Shieh SC and Ms Sara Tong, instructed by Debevoise & Plimpton, for the Plaintiff

Mr Ambrose Ho SC, Mr Christopher Chain and Mr Terrence Tai, instructed by Eversheds Sutherland, for the Defendant