Deloitte Touche Tohmatsu (A Firm) and Another v. Lai Derek Kar Yan and Others

HCCL 7/2024

[2026] HKCFI 43

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 7 OF 2024

____________________

____________________

____________________

D E C I S I O N

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A.  Introduction

1.There is a dispute between the parties as to whether the Plaintiffs are entitled to refer to and produce certain materials that are said to be subject to legal professional privilege (the “Disputed Materials”)[1].

2.By summons dated 6 May 2025, the Defendants seek the following substantive reliefs against the Plaintiffs: -  

(1)  the pleas in the Plaintiffs’ points of claim and indorsement of claim that refer to the Disputed Materials be struck out and expunged[2];

(2)  the references and exhibits in respect of the Disputed Materials in the 1^st affidavit of Mr James Jamison filed on 6 December 2024 be struck out and expunged[3];

(3)  the references to the Disputed Materials in the Plaintiffs’ skeleton submissions dated 11 December 2024 be struck out and expunged[4];

(4)  the 1^st and 2^nd Plaintiffs do deliver up all physical and electronic copies of the Disputed Materials within 7 days and file an affirmation to confirm that this has been done within 7 days thereafter[5]; and

(5)  there be an injunction restraining the 1^st and 2^nd Plaintiffs from (i) using, copying, extracting, releasing, or disclosing the Disputed Materials and (ii) engaging, instructing, and/or soliciting their internal and external legal advisors, who have received, reviewed, or are otherwise privy to the Disputed Materials[6].

2A  On 7 January 2026, I handed down my Decision. Since I concluded that the Defendants are entitled to claim legal professional privilege, I directed that the Decision should not be published without the Defendants’ consent. By letter dated 14 January 2026, the Defendants’ solicitors confirmed that the Defendants were contented that the Decision be published; however, the contents that touch upon sensitive information should be redacted. I am of the view that this is the appropriate course to take. In the premises, in this version of the Decision, I redacted the paragraphs and passages in respect of which the Defendants take issue.

B.  Material Background

3.The 1^st and 2^nd Plaintiffs (collectively “Deloitte”) are well-known accounting firms that operate a business of providing insolvency, liquidation, advisory, and restructuring services.

4.Ernest & Young (hereinafter “EY”) is Deloitte’s competitor.

5.The 1^st Defendant, namely Mr Derek Lai, was an equity partner of Deloitte. He held various leadership positions at Deloitte and was the face of the organization.

6.The 2^nd and 3^rd Defendants, namely Mr Adrian Chan and Mr Forrest Kam, were partners of Deloitte. They worked with the 1^st Defendant and had been under his supervision.

7.According to the 1^st Defendant:-

(1)  As early as January 2024, he informed Deloitte’s senior management that EY approached him and other partners with a view to persuading them to join EY.

(2)  He made it clear to Deloitte’s senior management that the partners were concerned about the unsustainable pressure, and if the situation did not improve, many partners would leave.

(3)  He was willing to defer his resignation in the hope that Deloitte’s senior management could resolve the partners’ concerns. However, the frustration and concerns of the partners were not adequately addressed.

8.It transpired that in October and November 2024, Deloitte received a coordinated wave of resignation notices from 9 partners, including the 1^st, 2^nd, and 3^rd Defendants.

9.Eventually, 4 partners withdrew their resignations, and 1 partner accepted a settlement to resign based on the conditions stipulated by Deloitte.

10.On 2 December 2024, the 1^st, 2^nd, and 3^rd Defendants terminated their employment with Deloitte by making payments in lieu of notice.

11.On the next day (ie 3 December 2024), Deloitte commenced the present proceedings.

12.It appears that as of the time when Deloitte commenced these proceedings, the Defendants had (i) informed Deloitte that they agreed to handover their personal appointments or court appointments to Deloitte; and (ii) signed 103 sets of resignation letters indicating that they were willing to relinquish their personal appointments and/or court appointments.

13.In the present action, it is Deloitte’s case that in breach of their duties under the terms of their employment contracts as well as their fiduciary duties, duties of fidelity and duties of confidentiality at common law, the 1^st, 2^nd, and 3^rd Defendants wrongfully (i) solicited and enticed Deloitte’s partners to join EY, (ii) used, copied, and divulged Deloitte’s confidential information, and (iii) appropriated Deloitte’s insolvency and restructuring business. It is also alleged that the 1^st, 2^nd, and 3^rd Defendants conspired together to injure Deloitte.

14.The Disputed Materials show that:-

(1)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[7]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(a)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(b)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXX

(c)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(2)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXX[8]X

(a)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(b)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXX

(c)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXX XXXXXXXXXXXXXX XXX

(d)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXX

(3)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXX[9]X

(a)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(b)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XX

(c)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[10]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(4)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXX[11]

(5)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXXX[12]

(6)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXX[13]XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXX

(7)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXX[14]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[15]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[16] XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[17] XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(8)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXX[18]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(9)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[19]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(10)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXX[20]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(11)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXX[21]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

15.It is curious as to how Deloitte would have access to the Disputed Materials. In this connection:-

(1)  It is the 1^st Defendant’s evidence that he and the 2^nd and 3^rd Defendants had never provided the Disputed Materials to Deloitte and/or downloaded the Disputed Materials onto the Deloitte’s computer system. They merely disclosed the Disputed Materials to some of the partners who intended to resign from Deloitte on the mutual understanding that the same would be kept confidential[22].

(2)  Whilst the 1^st Defendant’s evidence is neither disputed nor contradicted, Mr James Jamison of Deloitte said that some partners who intended to leave Deloitte but were convinced to stay downloaded the Disputed Materials onto Deloitte’s computer system. Thus, when Deloitte’s chief ethics officer reviewed the activity of Deloitte’s computer system, he discovered the Disputed Materials[23].

16.In the circumstances, Deloitte:-

(1)   referred to the Disputed Materials in their indorsement of claim and points of claim;

(2)  referred to and produced the Disputed Materials in the 1^st Affidavit of Mr James Jamison filed on 6 December 2024 in support of their application for an interlocutory injunction against the 1^st, 2^nd, and 3^rd Defendants pursuant to the summons dated 5 December 2024; and

(3)  referred to the Disputed Materials in their skeleton submissions dated 11 December 2024.

C.  Legal Principles on Protection of Legal Professional Privilege

17.The right to confidential legal advice is a fundamental right that is protected by Article 35 of the Basic Law, which provides that:-

“Hong Kong residents shall have the right to confidential legal advice…”

18.There are two categories of legal professional privilege:- (i) legal advice privilege; and (ii) litigation privilege.

C1.  Legal Advice Privilege

19.In A v Commission of Police [2021] 3 HKLRD 300 at para 9(1), Alex Lee J, citing Passmore on Privilege (4^th Ed) at para 2-003, pointed out that:-

“Legal advice privilege attaches to communications between a client and his lawyer, where the lawyer is acting in the course of his professional relationship and within the scope of the lawyer’s professional duties, under conditions of confidentiality, and for the purpose of enabling the client to seek, or the lawyer to give, legal advice or assistance in a relevant context…”

20.In Citic Pacific Ltd v Secretary for Justice (No 2) [2015] 4 HKLRD 20 at para 53, the Court of Appeal[24] held that:-

“If such document comes into existence as part of a process in the communication with a lawyer with a dominant purpose of getting legal advice, the compulsory disclosure of the same would impinge on the confidential communication between a client and his lawyer. Prima facie, the right to confidential legal advice under art.35 of the Bsic Law is engaged.” (emphasis added)

21.As pointed out by the learned authors of Passmore on Privilege (5^th Ed) at para 2-175:-

“It is now clear that, in line with other common law jurisdiction, especially Australia, but also Hong Kong, Ireland and Singapore, English law requires a dominant purpose test to be satisfied for legal advice privilege to be available. This means that it must now be shown that the communication over which the claim for advice privilege is asserted is made for the dominant purpose of seeking or giving legal advice.” (emphasis added)

22.As to the scope of the privilege, the learned authors of Passmore on Privilege (5^th Ed) at paras 2-015 and 2-203 stated:-

“Documents can also attract the protection of the privilege because they are capable of revealing the content of the lawyer-client communication. The case law is full of decisions which demonstrate that documents that record or evidence legal advice, or which reproduce or otherwise reveal the legal advice, will be as protected by the privilege as the original client-lawyer communications from which they derive. This protection is particularly pertinent for records of legal advice that a client may prepare for their internal use, whether in summary or extracted from and irrespective of whether the summary is prepared by the lawyer or the client. ” (emphasis added)

…

“All communications, in whatever form and through whatever medium, whereby a client expressly seeks legal advice or assistance, or a lawyer provides it, will be privileged no matter what the subject matter of the request for advice. This applies as much to oral communications, as to documentary or electronic communications. There is no restriction on the mode of communication that can qualify under either head of privilege.”

C2.  Litigation Privilege

23.In Angela Chen v Wai Wai Chen [2024] HKCFI 962 at para 48(1), Wilson Chan J, citing Passmore on Privilege (4^th Ed) at para 3-006, pointed out that: -

“Litigation privilege attaches to confidential communications between a client or his lawyer and a third party for the dominant purpose of use in litigation that, at the time the communication is made, is either proceeding or pending, or reasonably anticipated in contemplation, and to which the client is or reasonably anticipates becoming a party, for the purpose of either (1) enabling legal advice to be sought or given or (2) seeking or obtaining evidence or information to be used or in connection with the litigation concerned.

24.In line with the legal principles on legal advice privilege, the test for determining whether litigation privilege is engaged is the “dominant purpose” test. In Orient Finance Holdings (Hong Kong) Ltd v China Vered Asset Management (Hong Kong) Ltd & Anor [2024] HKCFI 649 at para 18(c), DHCJ Le Pichon stated:-

“a party claiming privilege must show that the relevant communications were for the dominant purposes of either (i) enabling legal advice to be sought or given, and/or (ii) seeking or obtaining any evidence or information to be used in connection with such anticipated or contemplated proceedings. Where communications may have taken place for a number of purposes, it is incumbent on the part claiming privilege to establish that the dominant purpose is litigation.”

D.  Entitlement to Claim Legal Professional Privilege

25.Applying the legal principles set out in Section C above, I have no hesitation in finding that the Disputed Materials are prima facie subject to both legal advice privilege and litigation privilege.

26.I have carefully reviewed the Disputed Materials. There is no question that the purpose of the communications amongst XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX was to enable the Defendants to receive advice as to the legal position of themselves[25] (as well as the partners who resigned (or intended to resign) from Deloitte), and it was envisaged that they might be sued by Deloitte (which eventually did happen).

27.As evidenced by XXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX, they did provide legal advice and engage in meaningful discussions on, inter alios,:-

(1)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXX

(2)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXX

(3)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(4)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

(5)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXX

28.I have no hesitation in finding that the predominant purpose of the communications was seeking and providing legal advice in relation to the rights and obligations on the part of the Defendants (as well as the partners who resigned or intended to resign) upon their departure from Deloitte. At the material times, it was envisaged that litigation was an imminent possibility. As such, the purpose of seeking and providing legal advice was to enable the Defendants (as well as the partners who resigned) to ascertain their legal position and to adopt a course of action that would (hopefully) not expose themselves to potential legal liability.

29.It would be unfortunate and undesirable if Deloitte (being the counterparty) were in a position to make use of the Dispute Materials against the Defendants in these proceedings. This would flout a fundamental right, which is guaranteed constitutionally.

E.  Deloitte’s Contentions

30.I now address the contentions raised on behalf of Deloitte.

E1.  The Crime-Fraud Exception?

31.Mr Charles Hollander, together with Mr Duncan McCombe, (for Deloitte) sought to rely on the “crime-fraud exception” or the “iniquity exception” to contend that the Disputed Materials were never privileged.

Legal Principles

32.As pointed out by the learned authors of Passmore on Privilege (5^th Ed) at para 8-001:-

“Legal professional privilege cannot be claimed for communications in respect of which the so-called “crime-fraud exception” applies. This shorthand description, now frequently further to the “iniquity exception, refers to the line of authority which usually starts with the 1884 decision in R v Cox and Railton, which decided that communications between a client and his legal advisor do not qualify as privilege- and so can be admissible in evidence against the client against his will- where they seek or give legal advice which is required by the client to facilitate or to guide him in the commission of a crime or a fraud, or its concealment. Subsequently, this exception has been extended to cover communications between a client and his lawyer where the client is the innocent tool of (or mechanism for) another’s criminal or fraudulent purpose ” (emphasis added)

33.The party seeking disclosure or production of the materials in question has to show that not only a fraud exists, but also the materials in question came into existence as part of the fraud. In R v Gibbins [2004] EWCA Crim 311 at para 44, it was suggested that:-

“Neither policy nor practicality requires more than that the judge should be satisfied that a prima facie case of fraud exists and that, considered in the context, a prima facie case also exists that the document concerned came into existence as part of the fraud” (emphasis added)

34.Whilst there are cases suggesting that only a prima facie case has to be shown, our Court of Appeal suggested that the burden on the party seeking disclosure is not a light one, and at least a clear or strong prima facie case has to be shown. In this connection, in Citic Pacific Ltd v Secretary for Justice [2012] 2 HKLRD 701 at paras 94 to 96, Hartmann JA stated:-

“94. When, as is the case here, the alleged fraudulent conduct is inextricably bound up with the legal advice received, there is a body of authority to say that this is a factor which must be taken into account, one that places a heavier burden on the party seeking disclosure on the basis of the fraud exception. In this regard, see, for example, Kuwait Airways Corporation v Iraqi Airways Company (No 6) (CA) [2005] 1 WLR 2734 at 2748 per Longmore LJ (paras 37 and 38):

‘If all one has is disputed versions of events, it will be difficult to say that there is even a prima facie case of fraud. This will be particularly so if the disputed version of events is the very same issue that is to be tried in the proceedings. If, however, the evidence of crime or fraud is freestanding and independent and particularly if its evaluation “does not require any judgment to be reached in relation to the issues to be tried” (per Rose LJ in the Hallinan case [2005] 1 WLR 766,771), it may be perfectly possible, and even on prima facie case basis, to decide whether the fraud exception applies.

It is significant that in Chandler v Church 137 NLJ 451 where there was only prima facie evidence of fraud and the fraud was alleged in relation to the issues that had to be tried, Hoffmann J refused to order disclosure. By contrast, in Dubai Aluminium Co. Ltd v Al-Alawi [1999] 1 WLR 1964, 1968, where the alleged fraud did relate to issues to be tried on the application to discharge the search and seizure order and the freezing injunction, Rix J (following Barclays Bank v Eustice [1995] 1 WLR 1238, 1249)) thought that before disclosure was ordered there should be a strong prima facie case of criminal or fraudulent conduct; he held that, on the facts, there was. He therefore ordered disclosure.’” (emphasis added)

95. In my judgment, at this time and in light of the nature and breadth of the evidence as it presently stands, bearing in mind that the evidence inevitably will be disputed should the issue go to trial, it is not possible to say that there is a strong (or clear) prima facie case of the existence of a conspiracy to defraud, or even of fraudulent conduct on the part of some of Citic’s directors.

96. In these circumstances, following the dictum of Longmore LJ in Kuwait Airways Corporation (para 36) I believe that it would be unfair to make an order that the fraud exception applies on the basis of what, as I see it, is at this time at best a bare prima facie case, but certainly not a clear or strong one, and which may on full investigation – when all the relevant evidence is tested – turn out to be in no case at all.”

(emphasis added)

35.The fundamental question to ask is whether the advice was sought and given in good faith. If the advice was sought and given in good faith, a relationship of confidentiality would be created, and the facts that the person receiving the advice does not heed it and subsequently follow some dishonest course of conduct would not retroactively destroy the earlier privileged relationship. In this regard, Hartmann JA had this to say in Citic Pacific Ltd (supra) at para 104: -

“96. As I understand the law concerning legal advice privilege, the integrity of the privilege does not depend on the person receiving the legal advice then following it. The relationship of confidentiality is created when advice is sought in good faith and given in good faith. That thereafter the person who has received the advice seeks not to heed it but to follow some independent dishonest course of conduct does not act retroactively to strip away the earlier privileged relationship. There must be a direct causal relationship between the advice received and the fraudulent conduct. Put simply, there must be evidence of a fraudulent purpose behind the seeking and obtaining of the advice.” (emphasis added)

36.In Al Sadeq v Dechert LLP [2024] 3 WLR 403 at para 58, Popplewell LJ suggested that the touchstone is whether the iniquity puts the conduct outside the normal scope of a professional engagement or is an abuse of the relationship. His Lordship stated:-

“Communications between a lawyer and client, or with third parties, are confidential if they take place in the usual course of the professional engagement of such a lawyer, notwithstanding that the engagement may concern an iniquity. This is why the iniquity exception does not apply to what Glidewell LJ referred to as the “ordinary run of cases” in R v Snaresbrook Crown Court, Ex p Director of Public Prosecutions [1988] QB 532, 537-538. Such privilege is not prevented from attaching merely because the solicitor is engaged to conduct litigation by putting forward an account of events which the client knows to be untrue, and which therefore involves a deliberate strategy to mislead the other party and the court, and to commit perjury, as is clear from that case and Ex p Francis & Francis. Accordingly, the touchstone in distinguishing such cases from those where the exception applies is whether the iniquity puts the conduct outside the normal scope of such professional engagement or is an abuse of the relationship which falls within the ordinary course of such engagement….” (emphasis added)

Deliberation

37.In the points of claim, Deloitte averred that:-

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[26]

XX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[27]

38.Relying heftily on Gamlen Chemical Co (UK) Ltd v Rochem Ltd (unreported, Court of Appeal of England and Wales, 7 December 1979)[28], Mr Hollander stressed that where a defendant consulted his legal advisors before the commission of the fraud for the purpose of being guided and helped in committing the fraud, he is not entitled to claim privilege, and his communication with the legal advisors should be disclosed[29].

39.In response, Mr Charles Sussex SC, leading Mr Sim Jing En[30], (for the Defendants) emphasized that whilst the Defendants might have an alleged iniquity in mind, they were entitled to seek legal advice from lawyers, and the lawyers engaged by the Defendants were, within the normal scope of their engagement, entitled to explore the grey areas and suggest strategies for bargaining with Deloitte to achieve the best plausible settlement terms: see Al Sadeq (supra) at para 58.

40.I accept Mr Sussex’s submissions. Having holistically examined the Disputed Materials XXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX, I am of the view that:-

(1)  The Defendants genuinely and bona fide sought legal advice from XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXX for the purpose of ascertaining their legal position.

(2)  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX genuinely provided bona fide legal advice regarding the legal position of the Defendants (as well as other partners who resigned (or intended to resign) from Deloitte).

41.Since the Defendants and their legal representatives envisaged that Deloitte might commence legal proceedings (which eventually happened), the legal advice and the consequential discussions addressed issues relating to XXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. These matters fall squarely within the ambit of the usual professional engagement of lawyers, and it cannot be said that there was any abuse of the professional relationship.

42.It is hardly controvertible that there were coordinated efforts on the part of the partners in resigning from Deloitte. The Defendants’ conduct might or might not constitute an unlawful conspiracy against Deloitte. In my view, this is a dispute to be resolved at trial. In this connection, I accept Mr Sussex’s submissions that as Deloitte’s application for an interlocutory injunction pursuant to the summons dated 5 December 2024 was effectively disposed of by the undertakings that the Defendants voluntarily provided, the Defendants did not see the need to adduce detail evidence to rebut Deloitte’s accusations. This was proportionate and understandable. I am not of the view that the Defendants were evasive.

43.Be that as it may, I have no quarrel with the suggestion that the lawyers engaged by the Defendants were aware of the fact that the Defendants and other partners intended to resign from Deloitte collectively and join EY subsequently. Nonetheless, on the totality of the evidence available to the court: -

(1)  It is, to say the least, not clear that what the Defendants and their lawyers did were to seek and provide advice for the malicious and dishonest purposes of (i) structuring or designing a fraud or some wrongdoings to be perpetrated against Deloitte; (ii) devising methods to implement a fraud or some wrongdoing against Deloitte; and (iii) devising methods to conceal any fraud or wrongdoings committed or to be committed against Deloitte.

(2)  It appears to me that what the Defendants and the lawyers did was to ascertain the position of the partners, such that the Defendants could (i) minimize the risks of being exposed to potential liability and (ii) be in an ideal position to negotiate with Deloitte. XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. The Defendants obviously adopted this course of action upon seeking legal advice from their lawyers, and this was done bona fide with a view to avoiding potential liability.

44.XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX[31].

45.XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

46.For the above reasons:-

(1)  I am not persuaded there is a strong or clear prima facie case that the engagement of XXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX as well as the legal advice that they provided were part of the alleged fraud or wrongdoings against Deloitte.

(2)   I am not convinced that the professional relationship between the Defendants and their lawyers had been abused.

(3)  I am unable to conclude that there is a strong or clear prima facie case that the lawyers were maliciously involved in orchestrating, perpetrating, or furthering the alleged fraud or wrongdoings against Deloitte.

(4)  I am also unable to conclude there is a strong or clear prima facie case that the Defendants maliciously instrumentalized their lawyers as a tool in furtherance of the alleged fraud or wrongdoings against Deloitte.

47.In the premises, I conclude that the “crime-fraud exception” or the “iniquity exception” is not engaged.

E2.  No Confidentiality against Deloitte?

48.In his written submissions, Mr Sussex extensively addressed me on questions relating to waiver. However, Mr Charles Hollander submitted that there is no issue of waiver at all as the question is whether there was an obligation of confidence. Mr Hollander suggested that the answer is in the negative. He contended that since Disputed Materials were uploaded onto Deloitte’s computer system, the Defendants could not have a reasonable expectation of confidentiality and the Deloitte was entitled to use the Disputed Materials.

Legal Principles

49.In BBGP Ltd v Babcock & Brown Global Partners  [2011] Ch 296, at para 48 EWHC 2856 (Comm) at para 48, Norris J stated:-

“…The starting point is the nature of the matter communicated not the manner of the communication. Legal professional privilege is a substantive right found on an important public policy, namely that a client should be able to communicate freely with his legal adviser without fear that what passes between them will be used against him.” (emphasis added)

50.In Taylor v Evans [2023] EWHC 935(KB) at para 49, Chamberlain J stated:-

“(a) Confidentiality is an essential prerequisite of a claim to privilege

(b) There is a presumption that a communication between client and lawyer will be confidential, but if the communication is shared with a third party, the confidence may be lost as against that [third] party.

(c) The critical question is whether the information has been imparted “in circumstances importing an obligation of confidence”. This depends on whether “any reasonable man standing in the shoes of the recipient of the information would have realized that upon reasonable grounds the information was being given to him in confidence”: CoCo v AN Clark (Engineers) Ltd [1968] FSR 415, 419 and 420-421 (Megarry J).

(d) …

(e) The question whether the information was imparted in circumstances importing an obligation of confidence requires an intensive focus on the facts to assess what a reasonable person in the position of the party seeking to use the information (or in a three party situation the person from whom that party obtained the information) would have understood from all the circumstances in which the information was received.

(f) The principle that information can be confidential as against certain persons, and in relation to certain uses of it, as opposed to having to be absolutely secret or else unrestricted, is important in the law of privilege. This means, first, that privilege is not lost merely because its owner shows the privileged document to one or more third parties: Gotha City v Sotheby’s [1998] 1 WLR 114 at 118H to 120B; USP Strategies Plc v London General Holdings Limited [2004] EWHC 373(Ch) at [18]-[21]. Secondly, privilege in a document is not lost against even one of the persons to whom it is shown or given if it was disclosed for a limited purpose only: Berezovsky v Hine [2011] EWCA Civ 1089, at [28]-[29].”

(emphasis added)  

51.In Jinix INC v Aser Media Pte Ltd [2022] EWHC 2856 (Comm) at para 45, Deputy Judge Simon Salzedo KC stated:-

“45….confidentiality itself is not simply a quality which information either has or does not have, but may be viewed as relationship between the information, persons and uses. The relationship must be identified from all the circumstances, which indicate to a reasonable person what, if any, kinds of use that person is or is not entitled to make of the information.”

(emphasis added) 

Deliberation

52.The starting point is that the Disputed Materials (which concern communications between lawyers and their clients) are confidential: see BBGP Ltd (supra) at para 48; Taylor (supra) at para 49(b).

53.The crucial question to determine is whether a reasonable person in the position of Deloitte would have realized that the Disputed Materials are confidential and that the same should not be used against the Defendants: Taylor (supra) at paras 49(d)-(e).

54.It is important to bear in mind that the notion of confidentiality is not merely about the quality of the information in question, and it has to be viewed as the relationship between the information, the persons involved and the use of the information: Jinix INC at para 45.

55.Thus, in considering whether the Disputed Materials are confidential, the court will have to take into account the circumstances in which Deloitte obtained the Disputed Materials. In this connection:-

(1)  There is no suggestion that the Defendants knowingly and/or voluntarily disclosed the Disputed Materials to Deloitte; nor is there any suggestion that the Defendants were even aware of the fact that Deloitte had electronic access to the Disputed Materials. According to the 1^st Defendant (whose evidence[32] is neither disputed nor contradicted), the Defendants merely disclosed the Disputed Materials to some other partners who also intended to leave Deloitte (the “Other Resigning Partners”) for limited purposes and on the mutual understanding that the same should be kept confidential (certainly as against Deloitte).

(2)  There is no suggestion that Other Resigning Partners deliberately downloaded the Disputed Materials onto the Deloitte’s computer system with a view to sharing the information therein with Deloitte and/or jeopardizing the Defendants’ interests.

56.On the evidence before the court, what was most likely to have happened was that the Other Resigning Partners used devices linked to Deloitte’s computer system to access the Disputed Materials. This was how the Disputed Materials found their ways to Deloitte’s computer system. There are no other explanations as to how the Disputed Materials were uploaded onto Deloitte’s computer system.

57.In the premises, I am of the view that:-

(1)  There is no room to suggest that the Defendants objectively or subjectively intended that the Disputed Materials should not be treated as confidential viz-a-viz Deloitte. It is apparent that the Defendants merely shared the Disputed Materials with the Other Resigning Partners, but not Deloitte.

(2)  Whilst some of the Other Resigning Partners might not be vigilant in handling the Disputed Materials, it was not the case that they objectively or subjectively intended that the Disputed Materials should be used by Deloitte and/or not treated as confidential.

58.However, in his submissions, Mr Hollander extensively referred to Deloitte’s internal IT policy.

59.I am not of the view that the internal IT policy would avail Deloitte at all. In this connection, Mr Sussex and Mr Sim helpfully referred me to Shepherd v Fox Williams LLP & Ors [2014] EWHC 1224 (QB). In that case:-

(1)  The claimant sent privileged documents to the personal email account of a person named Ms Liebling, who was a former employee of the defendants. In order to access the privileged documents, Ms Liebling forwarded the privileged documents to her work email account, as a result of which the defendants obtained electronic copies of the same via their work server. (see para 53)

(2)  The defendants argued that in light of their work policy, employees have no expectation of privacy in relation to documents sent to their employers’ computer system, and as such the claimant must be treated as having waived the privilege or confidentiality. (see para 57)

(3)  Simler J rejected the defendants’ argument. At para 58, Her Ladyship stated:-

“I cannot accept [the defendant]’s argument…It is equivalent to an argument that if Ms Liebling accidentally left copies of the Privileged Documents on her office desk, and another employee or partner [of the defendants] looked through papers on her desk and found them there, the claimant would be treated as having consented to this and to have waived his privilege in his documents. Neither argument can be sustained. It would be contrary to the interests of the administration of justice if privilege is regarded as waived in these circumstances or treated as waived generally because a privileged document is disclosed for a limited purpose by a party who plainly would not contemplate doing anything which might cause his privilege to be lost.”

60.The scenario in the present case is akin to the scenario in Shepherd (supra). With respect, I am of the view that the analogy used by Simler J is apposite, and her analysis is sound. The mere fact that the Disputed Materials happen to be on Deloitte’s computer system is not ipso facto a reason why Deloitte is entitled to use the same against the Defendants. It is true that some of the Other Resigning Partners might not be vigilant in handling the Disputed Materials. However, there is no evidence showing that they had the intention to share the Disputed Materials with Deloitte. I accept Mr Sussex’s submissions that Deloitte’s access to the Disputed Materials was entirely inadvertent or accidental. It appears that this was merely ascribed to the oversight on the part of some of the Other Resigning Partners.

61.As pointed out by the learned authors of Toulson and Phipps on Confidentiality (4^th Ed) at para 18-077:-

“Where privileged information has been accidentally disclosed in the course of litigation by a person entitled to the benefit of it (or by his agent) to another party, and the recipient is aware of the mistake before digesting the information, it is unconscionable conduct for the recipient knowingly to take advantage of the mistake.” (emphasis added)

62.In Shenzhen Futaihong Precision Industry Co Ltd & Ors v BYD Co Ltd [2018] HKCA 408 at para 99, our Court of Appeal[33] stated:-

“The law imposes a duty of confidence whenever a person receives information he knows or ought to know is fairly and reasonably to be regarded as confidential, such that the recipient’s conscience is affected in a way which should be recognized by equity…Whether a person has notice is to be objectively assessed by reference to a reasonable person standing in the position of the recipient…” (emphasis added)

63.With no disrespect, I cannot see how Deloitte might conscionably and/or honestly seek to capitalize on the mistake or lack of vigilance on the part of the some of the Other Resigning Partners.

64.More fundamentally, insofar as the position of the Defendants is concerned, it is important to stress that they could not have contemplated that by sharing the Disputed Materials with the Other Resigning Partners, Deloitte would have access to the same. Obviously, the Defendants had no intention to share the Dispute Materials with Deloitte and/or to destroy the confidentiality in respect of the Disputed Materials viz-a-viz Deloitte. This is one of the last things that the Defendants would do.

65.In my view, any reasonable person standing in the shoes of Deloitte would have appreciated that the Defendants (as well as the Other Resigning Partners) had no intention to waive or destroy the confidentiality in respect of the Disputed Materials viz-a-viz himself. As pointed out, the Disputed Materials contained legal advice and discussions on XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. The notional reasonable person in Deloitte’s position (who is the counterparty to the dispute) must know it was intended that the Disputed Materials be kept confidential viz-a-viz himself. Thus, he should not have made use of the same against the Defendants.

66.In the premises, I am unable to accept Mr Hollander’s submissions. I find that the Defendants (as well as the Other Resigning Partners) had and still have a reasonable expectation of confidentiality.

F.  Disposition

F1  Striking Out

67.For all the above reasons, I will strike out all the references to the Disputed Materials in (i) Deloitte’s indorsement of claims and points of claims; (ii) the 1^st affidavit of Mr James Jamison filed on 6 December 2024; and (iii) Deloitte’s skeleton submissions dated 11 December 2024. I make an order in terms of paragraphs 1, 2, and 3 of the Defendants’ summons dated 6 May 2025.

68.I further order that:-

(1)  The Plaintiff’s revised indorsement of claim and revised points of claim (with all references to the Disputed Materials deleted and expunged) be filed and served within 14 days; and

(2)  The Defendant’s points of defence and counterclaim (if any) be filed and served within 28 days thereafter.

F2  Other Substantive Relief sought by the Defendants  

Mandatory Order for Delivering Up and Permanent Injunction

69.Following my findings and conclusion set out hereinabove, it appears that the Defendants are, in principle, entitled to seek (i) a mandatory order compelling Deloitte to deliver up the Disputed Materials and (ii) an injunction restraining Deloitte from using, copying, and/or disclosing the Disputed Materials.

70.Since the Defendants have not yet pursued any substantive underlying claims, I initially had some reservation as to whether it would be procedurally appropriate to grant the proposed mandatory order and injunction based on the Defendants’ summons dated 6 May 2025.

71.However, Mr Sussex and Mr Sim pertinently referred me to High Wealth International Ltd v China United Holdings Ltd (HCA 456/2000, 19 December 2000). In that case, the plaintiff sued the defendant based on a subscription agreement. The defendant referred to various privileged materials in its defence, and as such the plaintiff took out a summons seeking to restrain the defendant from using the privileged materials and to compel the defendant to deliver the privileged materials[34]. Suffiad J took the view that the plaintiff was entitled to part of the relief sought[35]. In rejecting the defendant’s procedural objection that the plaintiff’s application should have been pursued in a different action, Suffiad J stated:-

“One further procedural point taken by the defendant in this case is that such an application as the present one by the plaintiff should not have been made in the same action but should have been made in a different action. I do not agree with that submission put forward by the defendant. It was clear from Goddard's case that in such circumstances, a plaintiff could, apart from obtaining injunctive relief, also have struck out that part of the defendant's pleadings referring to the privileged material as being embarrassing and being an abuse of court's process. That being the case, it would only be right that such an application should be made in the action itself. If further authority is needed on this, then footnote 90 at page 587 of Phipson on Evidence (15th edition), after referring to the case of ITC Film Distributor v. Video Exchange Ltd and others [1982] Ch 431 gives the following comment: ‘There seems no reason why the application should not be made in the proceedings to which the document is relevant.’”

72.In the premises, I am satisfied that it would be appropriate for the Defendants to seek the relief under paragraphs 4 to 6 of their summons dated 6 May 2025. Obviously, it would be cumbersome and inconvenient to require the Defendants to start a fresh action for seeking the relief in question. In my view, the approach adopted by Suffiad J in High Wealth International Ltd is perfectly consistent with the underlying objectives of the Rules of High Court, which include (i) increasing the costs-effectiveness of any practice and procedure to be followed; and (ii) promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings: see Order 1A, rule 1(a) and (c).

73.In the premises, I will make an order in terms of paragraphs 4, 5, and 6 of the Defendant’s summons dated 6 May 2025, save that Deloitte should (i) deliver up the Disputed Materials within 21 days (not 7 days) and (ii) filed and serve an affirmation confirming that this has been done within 14 days thereafter (not 7 days).

Permanent Injunction restraining Deloitte from continuing to instruct their Current Legal Representatives

74.As regards the Defendants’ application for an injunction that Deloitte be restrained from continuing to engage their current legal representatives, Mr Hollander submitted that the relief sought is practically futile.

75.I see the force of Mr Hollander’s submissions. In my view, Mr Hollander was correct in pointing out that the purpose of the injunction sought is to prevent the current legal representatives from passing on their knowledge regarding the Disputed Materials to Deloitte. However, the reality is that Deloitte had acquired the knowledge already, and the process could not be undone.

76.In any event, it appears to me that justice will be adequately served by restraining Deloitte from using and/or disclosing the Disputed Materials.

77.In the premises, I will not make an order in terms of paragraph 7 of the Defendant’s summons dated 6 May 2025.

F3  Costs

78.Costs should follow the event.

79.I make a costs order nisi that Deloitte should pay the Defendants’ costs in respect of their summons dated 6 May 2025, to be taxed forthwith if not agreed (with certificate for 2 counsel). Any application to vary my costs order nisi should be taken out within 14 days.

F4  Other Matters

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81.Lastly, I express my gratitude to Mr Charles Sussex SC, Mr Sim Jing En, Mr Charles Hollander, and Mr Duncan McCombe for their most able and helpful assistance.

Mr Charles HOLLANDER and Mr Duncan McCombe, instructed by O’Melveny & Myers, for the 1^st and 2^nd Plaintiffs

Mr Charles SUSSEX SC and Mr. SIM Jing En, instructed by Minterellison LLP, for the 1^st to 3^rd Defendants