Zheng Lie Lie and Others v. Prosperfield Ventures Ltd and Others

HCA004572/2002

HCA4572/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4572 OF 2002

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Coram: Deputy High Court Judge Carlson in Court

Dates of Hearing: 24 - 27 February 2003

Date of Judgment (Handed Down): 18 March 2003

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J U D G M E N T

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Introduction

1.This is an action to prevent the defendants from using a 28-page handwritten document ("the Document") written by the 1st plaintiff, who I will refer to as Mr Zheng, in the trial of two related actions which are fixed to start on 31 March. Mr Zheng says that he wrote the Document on 25 and 26 June 1993. The defendants' case is that it was most probably written on 3 March 1993.

2.The basis of the claim is that this Document was prepared by Mr Zheng in order to provide background information to his solicitor Mr Albert Chan in connection with an anticipated action in which Mr Zheng was to be a defendant. Accordingly, the Document is said to be the subject of legal professional privilege and no use can be made of it by the defendants. The writ in that action was issued on 23 June 1993 and is one of the actions that will now be tried on 31 March.

3.Before I descend into some of the background detail to this matter which is closely related to the substance of the two actions, which I will refer to as the main actions, it is helpful to provide a broad outline of how all of this has come about.

4.This judgment can be conveniently read with a judgment, also in this action, which I delivered on 4 February this year. On that occasion, the plaintiffs were applying by means of a summons for an interlocutory injunction for the same injunctive relief that is now sought by them. It had not been anticipated that the action itself could or would be tried before the trial of the main actions. That would have meant that any interlocutory injunction would, in effect, have been dispositive of this action. For reasons which appear in the earlier judgment, I considered that this would have been wholly undesirable when so much of the evidence is in dispute and I directed that there be a speedy trial with affidavits to stand as pleadings, such trial to take place before the trial of the main actions. In the interim, I continued an ex parte injunction made by Burrell J ordering the return of the Document and restraining its use. This, therefore, is the trial of the application for the injunction.

Background to the main actions

5.Without being absolutely precise about it, the plaintiffs in this action are the defendants in the main actions. The factual background to the main actions can be sufficiently understood from the report of an application by the defendants in the main actions to strike out the plaintiffs' claim for want of prosecution that was heard by Stone J, who is the judge nominated to try the main actions. That report is at [2002] 4 HKC 447. I need to say a little about the main actions in order that one should not only have an understanding of them but also to see how the issue on privilege comes about in those actions. For the sake of convenience and consistency in this matter, I will refer to the parties as they are before me in describing what is sought by them in the main actions. It is sufficient for present purposes to borrow from the summary of the background that I gave in my previous judgment.

6.The defendants are companies which had held shares in a Shenzhen company, Shenzhen Champaign Industrial Corporation ("SCIC"), for a person named James Peng ("Mr Peng"). The defendants brought the main actions in 1993 and 1995 to avoid certain transactions which were allegedly intended to acquire this shareholding in SCIC without any consequent commercial benefit accruing to the shareholders of SCIC.

7.There is a degree of factual complexity underlying the main actions and somebody has helpfully set out the various relevant corporate entities and their relationships with one and other in a diagram which appears at page 41 of bundle A. I mention this merely to draw attention to its existence, but fortunately for the purposes of what I am required to decide it will not be necessary for me to descend into this sort of detail.

8.At issue in the main actions is whether there was an agreement between the 1st and 2nd plaintiffs in this matter and Mr Peng whereby it is said that the 1st and 2nd plaintiffs had agreed with Mr Peng that they should be able to deal with the problems that SCIC was then encountering. Suffice it to note that SCIC started operating in 1987. It was listed on the Shenzhen Stock Exchange in 1990. Mr Peng held 50.7% of SCIC's issued share capital on the date of its listing. SCIC entered into loan agreements with mainland Chinese financial institutions, which loans were secured by the 2nd defendant, a nominee company wholly-owned by Mr Peng. That form of security became unacceptable to the Shenzhen financial authorities causing the loans to become unsecured, resulting in the Shenzhen Intermediate People's Court freezing SCIC's assets and the suspension of trading in its shares.

9.At this time the Shenzhen regulatory authorities established a restructuring committee (also referred to as the restructuring group) to, as its name suggests, restructure SCIC. This was done under Government Directive 117 of 1993 which announced the decision to restructure SCIC on the ground that Panco Industrial Holdings Ltd, the 2nd defendant, had "allegedly stolen" SCIC's share equity and to appoint the restructuring group for this purpose.

10.The restructuring group was given the task of enquiring into the activities of SCIC, of Mr Peng and the other companies and individuals concerned in its operations. Mr Zheng and the 2nd plaintiff, who is a niece of the late Mr Deng Xiao Ping, became closely involved in the restructuring of SCIC. By a letter dated 27 June 1993 written by the 2nd plaintiff to the mayor and deputy mayor of Shenzhen, it was said that SCIC had agreed to sell its ownership of a company called Hark Herald to Pacific Innovest Holdings Ltd which was owned as a quasi-partnership by Mr Peng, Mr Zheng and the 2nd plaintiff and two others for the purpose of solving the problems which SCIC and Mr Peng had been having with the Shenzhen Government. According to the letter, the 2nd plaintiff was the chairman and president of the two defendants, of Hark Herald and Pacific Innovest Holdings Ltd, whilst Mr Zheng became a director and vice-president. Their appointments and particularly that of the 2nd plaintiff, given her good connections, were made for the purpose of resolving SCIC's problems and in order to enter into a dialogue with the restructuring group which, according to this letter, they did.

11.There was then a falling out between Mr Peng on the one hand and these two plaintiffs on the other. This falling out comes about from the agreements which the defendants now seek to avoid by bringing the main actions against the plaintiffs. The gravamen of the complaint by Mr Peng, who is the main witness on behalf of the defendants, is that Mr Zheng and the 2nd plaintiff have tried to exploit their connections with the Shenzhen Government by secretly collaborating with them to gain control of SCIC. The mechanics by which it is said they tried to achieve this can be left over for the trial of these main actions.

How the claim of privilege comes about

12.Although much is in sharp dispute, the following is not. In the main actions, which by then were already very stale, an order by consent was made on 22 November 2002 whereby the parties were to exchange witness statements on or before 17 December 2002. On 18 November the defendants' solicitors, Messrs Herbert Smith, under their continuing duty to make discovery served two supplemental lists of documents on the plaintiffs' solicitors. I should observe that the original order for discovery in the actions had been made as long ago as 1996 some six years earlier. One of those supplemental lists contained the Document which is entitled "Background Information". It also had an English translation. On 20 November, Herbert Smith served copies of all the documents on the plaintiffs' solicitors Messrs Wong, Poon, Chan, Law & Co. ("WPCL"). It was then discovered that this 28-page handwritten document was what Mr Zheng had provided his solicitor Mr Albert Chan, at Mr Chan's suggestion, as background information in connection with an anticipated action to be brought by the defendants. I say "anticipated" because there already had been correspondence from the defendants' solicitors informing Mr Zheng that a writ was on its way. That writ is the subject matter of the 1993 action naming Mr Zheng, amongst others, as a defendant. I will need to consider Mr Zheng's account of how, why, when and where he wrote that document presently. Suffice it to observe now that WPCL wrote to Herbert Smith on 25, 27 and 30 November demanding to know how this document came to be in their possession, to return it together with any copies that they had and to undertake that they would not use it in the main actions. Herbert Smith replied on 2 December to say that it had been provided to them by a Mr Deng Lui Gen who is a former director of the defendants and that he had been given the Document together with the letter dated 27 June 1993, to which I have already made reference, by Mr Zhang Hon Zhi a senior member of the Shenzhen restructuring committee. The undertaking sought was not forthcoming with the result that this action has now been brought.

The approach

13.I have received much assistance from Mr Chua, who appears for the plaintiffs, and Mr Burns, for the defendants, as to the legal principles which apply to a situation such as this and they have addressed me on the cases that are said to cover the various possible factual situations raised by the evidence. Inevitably, I will be required to refer to some of these myself but before I do so it would be better if I were to narrow down the matter to the factual basis that I will have to apply to the relevant principles. A prior discussion of the legal principles would require consideration of case law which may not be relevant where the facts as found by me may simply not apply to the principle established by any particular case which counsel may have referred to out of an abundance of caution in their wholly commendable wish to address me on a comprehensive basis.

14.What I can safely observe at this stage is that where the plaintiffs are claiming privilege they bear the burden of showing that the Document and the circumstances are such that legal professional privilege attaches to it. A number of other issues have been raised by the defence such as whether the privilege, if it ever attached to the Document, has been waived, which I can leave over to after I have reviewed the evidence and indicated how and why I find on the evidence.

Overview of the evidence and the witnesses

15.I have heard evidence from four witnesses. One of them is Mr Albert Chan, Mr Zheng's solicitor in 1993 and now in this and in the main actions. His evidence which is substantially contained in his affirmation of 18 February this year (A68) was confirmed by him in the witness box. There has been no real challenge to what he says which is that in June 1993, Mr Zheng had told him that an action was to be, or had just been, brought against him and others in Hong Kong. At his request, Mr Zheng showed him the relevant papers including "the court documents served on him in that action". He read them and, having done so, he asked Mr Zheng to provide him with "... some background information in writing in respect of the 1993 action." As a result Mr Zheng sent him the Document which he faxed in five instalments on 25 and 26 June 1993. I accept that evidence unreservedly and as will become apparent in due course this is the only evidence that I feel able to accept with that degree of conviction. The other witnesses are Mr Zheng, Mr Deng Lui Gen and Mr Wang Jiansheng ("Mr Wang"), the latter two having been called for the defendants. Their evidence, which as will become clear from my review of it, is to be approached with caution.

16.The main challenges to the plaintiffs' case relate to when the Document was written by Mr Zheng, why he wrote it (it is not accepted that its purpose when it was originally written was to inform Mr Chan about the 1993 action) and it is also disputed that he had not released it to the restructuring committee in Shenzhen which was looking into the affairs of SCIC. The defendants contend and seek to make out a positive case through Mr Deng and Mr Wang that it must have been released to the committee either by Mr Zheng or by somebody connected to him such as Ms Ding, the 2nd plaintiff.

17.As to the defendants' case, there is a strong challenge by the plaintiffs to the circumstances in which it is said that it was obtained. There is also much controversy as to when it was obtained and why it had not been disclosed earlier than November 2002, the defendants' case being that it had been passed to Mr Deng in 1994 or 1995. He says that it was probably at the end of 1994 which is the best that he can now recollect. If that is right the defendants have kept secret the fact that they had the Document for almost eight years, and for as long as six years after the order for discovery had been made which, as I have already noted, was in 1996. This last aspect has given rise to an issue as to whether, quite aside from matters of privilege or confidentiality, the defendants should now be allowed to profit from their wrongdoing in this respect and retain and make use of the Document in the main actions. These being the main areas of dispute I now turn to the evidence itself.

Mr Zheng's evidence

18.He has been required to recount in some detail the circumstances in which this document was written by him and his motives for doing so. He is the only witness who can speak to that other than Mr Chan's evidence that he asked Mr Zheng to provide him with background information. This being the case the defendants are at something of a disadvantage in not being able to call positive evidence to contradict what Mr Zheng has had to say. Mr Burns has therefore been required to examine the surrounding circumstances and any inconsistencies in the witnesses' evidence with which to impugn the reliability and indeed the truthfulness of Mr Zheng's account.

19.His evidence is, on the face of it, straightforward enough. He wrote out this document on 25 and 26 June 1993, two to three days after the 1993 action had been instituted which he then faxed in five instalments to his solicitor over those two days. So much appears at A28(11) and A29(12)(13). Other than that he never gave the original, nor a copy, to anybody which he kept in his desk drawer at his office at Windsor House. By virtue of the pink marks made on the original copy of the Document by his facsimile machine when he transmitted it to his solicitors, which marks also appear on the copy produced by Herbert Smith, he is able to say that the defendants' copy had been made from the original as faxed by him to his solicitors. What he cannot say is how somebody had obtained access to the original, made a copy of it and then returned the original to his desk, and kept the copy. Having regard to the facsimile markings on the original it is plain that the copying of the Document was done after he had completed and transmitted it to Mr Zheng. As to that, he says, that it was kept under lock and key in a folder in his desk drawer, although as to that his evidence changed as he gave it because he also indicated that he kept the Document in a folder in a drawer of a filing cabinet in his office. When Mr Chua came to re-examine him he sought to rescue that somewhat. Mr Zheng then said that this filing cabinet had been placed next to his desk, trying perhaps to assimilate the two pieces of furniture or at least blur the distinction between them. Nevertheless, the evidence is quite clear that when first describing this, the Document had been kept in the desk drawer and subsequently that changed to the filing cabinet drawer. Not surprisingly, Mr Burns draws attention to this difference as a matter casting doubt on Mr Zheng's general account of how the Document was prepared and kept once it had been completed.

20.In about May 1994, Mr Zheng says that he moved his office to Queen's Road Central taking his office furniture with him, assuming that all was well so far as the Document was concerned, until November last year when he discovered that a copy had been made and had come into the other side's possession.

21.Mr Burns has sought to break down this version. Firstly, as to the purpose of its preparation, and this will be become clear later, the defendants say that this document was really (and originally) prepared in March 1993 for the exclusive purpose of providing information to the restructuring committee in Shenzhen that was inquiring into the affairs of SCIC. The fact that it subsequently became of use in the litigation in June 1993 is irrelevant. If that is so, then the protection of privilege cannot attach to the Document because it had not been prepared for the purpose of contemplated or current litigation. That is the primary contention but even if that fails and some notion of dual purpose can be ascribed to the Document the law is clear that the plaintiffs must show that the dominant purpose for the preparation of the Document was for litigation or the seeking of advice in respect of that litigation. If the dual purpose is only of equal weight then that will fail to protect the Document from disclosure. See Waugh v. British Railways Board [1980] AC 521.

22.In relation to this aspect Mr Zheng is adamant that the Document was only prepared for the sole purpose of informing Mr Chan (his solicitor) of the facts that he needed to assist Mr Chan in advising him on the 1993 action. In view of the absence of any witness from the defendants who can speak of the making of the Document, Mr Burns has to look, amongst other things, to the Document itself and from that invite inferences to be drawn which support his client's case. As to the date on which the Document was written, the first page has 3.11 in the top right corner from which it is suggested that 3 March is when the document was drafted or possibly 3 November, but not, on any view, the 25 and 26 June. Mr Zheng's answer to this is that 3.11 is not in his handwriting. The paper that he used had that on it when he began writing on the page. The paper relates to a company called Accent Industries Ltd of which a Miss Lai Kit was a director. Mr Zheng thinks that this paper was left in his car by Miss Lai Kit and he picked it up and went on to use it to draft these instructions to his solicitor. If this is right, it should also be observed that the reverse side of the fifth page of the Document has in manuscript the words "Attn - Gao Jianmin From Yang Fan" to which I must return shortly in view of the fact that Mr Burns also attaches considerable importance to this notation. The first five pages of the Document are written in the same colour ink and pen. Mr Burns suggests that this is the same pen that was used to write 3.11 on the first page. Apart from his own evidence that he did not write 3.11, Mr Zheng challenges the prospect that he drafted this on 3 March by reference to the contents of the first five pages which he says only contain matters which post-date 3 March and which therefore could not have been written on an occasion as early as 3 March. The first eight pages were faxed as a first instalment on 25 June starting at 10.07 a.m. So much is clear from the fax header on the Document itself. Mr Burns has questioned why there would have been a need to change pen after the first five pages. He has submitted that this is entirely consistent with the first five pages, at the very least, being written on 3 March as the date on page 1 suggests, and that the remainder, in different ink, was done sometime later, even as late as 25 June. If Mr Burns can get that version home, then, quite apart from dealing an almost fatal blow to Mr Zheng's credibility, it would indicate that the document could not have been prepared for the 1993 action as early as 3 March which was before the service of the writ in that action, or at the very least that it had a dual purpose of no more than equal weight as between the litigation and the restructuring committee's investigation into SCIC, which would also have the effect of defeating the claim.

23.As to the contents of the first five pages by themselves disproving that the Document could not have been written as early as 3 March reliance has been placed on a reference to a meeting at the Conrad Hotel, which Mr Zheng says, occurred on 20 March. Mr Burns submits that this meeting which was concerned with the setting up of Pacific Innovest (see above) and which eventually purchased Hark Herald, one of the plaintiffs in the 1993 action, must have occurred well before 20 March. The significance of this date is that it is the date when Pacific Innovest purchased Hark Herald and that therefore the setting up of Pacific Innovest, which was decided upon at the Conrad Hotel, must have occurred before 20 March. It is convenient to dispose of this point now. Whilst the reference to the Conrad Hotel meeting being on 20 March is probably wrong for the reasons supplied by Mr Burns and, therefore, Mr Zheng's point on this must go, it does not follow that the discussions which set up Pacific Innovest necessarily predate 3 March or, even occurred on 3 March, which would have been sufficient for Mr Burns purposes. It seems to me that the contents of the first five pages of the Document must remain neutral as to whether they were written on a date before or after 3 March and therefore neither party can be assisted by the contents of these pages.

24.Mr Burns then seeks to draw some strength from the note on the reverse of page 5 of the Document which I have already referred to. Of the two people named there, Mr Zheng says he does not know who Mr Gao Jiammin ("Mr Gao") is and the other Mr Yan Fang ("Mr Yan") is only known to him as a friend of Miss Lai Kit. Some late detective work by Mr Burns' solicitors has produced an affirmation, close to the end of the trial, from Mr Kwok Wing Hang which exhibits a number of company returns showing connections between Miss Lai Kit, Mr Gao, Mr Yan and companies which they are directors of. This is all done to demonstrate the closeness of these individuals and their companies to the restructuring committee at Shenzhen, which in turn is said to incline the Document written by Mr Zheng more towards the work of the committee than to the 1993 action. The admission of this affirmation is objected to by Mr Chua largely due to its lateness. I have decided to defer ruling on its admissibility until the close of the trial and have taken its contents de bene esse to see whether in practice the admission of this evidence would in fact cause any real prejudice. As the matter has panned out and having heard counsel's speeches including their submissions on this evidence, I have not been able to discern any procedural prejudice which might be caused to the plaintiffs by admitting the affirmation. Mr Chua has been able to deal with it, effectively submitting that the information in the affirmation is too nebulous or uncertain to make any difference to the outcome of the case. Accordingly, I have decided to admit the evidence and I will have regard to it. I will leave over its value, if any, to the defendants' case to when I come to make my findings on the evidence as a whole.

25.Mr Burns, as I have already said, relies on its contents as showing a real connection to the Shenzhen committee and he submits that it is highly significant that these names should appear on the very paper that Mr Zheng used to draft the Document. If I were to accept that view of the evidence then this might be another reason to doubt Mr Zheng's evidence about the Document having been drafted for his solicitor in late June rather than for the purpose of the Shenzhen investigations.

26.Another matter, about which there has been extensive cross-examination of Mr Zheng, has been the fact that he used a facsimile machine belonging to Bornkind International to send the Document to his solicitor. Bornkind is a company with offices at North Point and not at Windsor House in Causeway Bay. It is a company which Mr Zheng has also had a close association with. Mr Burns has demanded to know from Mr Zheng how it is that when he says he drafted the Document at his office in Windsor House, he should be using a fax machine belonging to a company at North Point. Mr Zheng has not been especially impressive in his explanation about this but what it comes to is that he says that whilst the fax machine may well, at one time have been connected to Bornkind's fax number and premises, the machine itself was highly portable. He recollected using it when he worked from his home in Happy Valley and it could just as easily have been moved by him to Windsor House and used to transmit the Document from there. He was using the machine for his general business purposes. This matter is relied on by Mr Burns as a point going to Mr Zheng's general credit and thus calling into question the overall reliability of his account that this was all done in late June at Windsor House solely for the purpose of telling his solicitors about the 1993 action.

27.These are the main points raised by Mr Burns against Mr Zheng's evidence. Mr Burns' difficulties are plain to see, given the absence of anything positive or direct from the defendants to contradict Mr Zheng's account.

The defendants' evidence

28.Mr Deng Liu Gen has said the Document and the letter of 27 June, which had been written by the 2nd plaintiff, were given to him by Mr Zhang Hongzhi, a senior member of the restructuring committee in about 1994 (see his affirmation at A37). Just as the defendants are not in a position to directly gainsay Mr Zheng's account as to when and why he wrote the Document, the plaintiffs are unable to call any direct evidence to contradict what Mr Deng has had to say. Mr Zhang Hongzhi, who could have confirmed or contradicted Mr Deng's account is no longer alive. He died in May 2000. Mr Deng then says that a meeting was arranged at the Excelsior Hotel with other persons who were concerned and interested in the restructuring of SCIC, including Mr Wang, and it was on this occasion that he handed the Documents to Mr Wang. This is corroborated by Mr Wang.

29.Mr Chua has taken a number of points against these two witnesses. Firstly, he draws attention to a report of an action in the High Court in which Mr Deng was the main witness for the plaintiff company. That matter was quite unrelated to these proceedings but what emerges from the report is that at first instance the trial judge found Mr Deng to be an untruthful witness and that finding was roundly upheld by a unanimous Court of Appeal who described his evidence as "absurd" and "failing to attract any ring of truth" amongst other uncomplimentary descriptions. Notwithstanding those findings Mr Deng has told me that both courts were not correct in coming to that view of his evidence and that he had, in fact, been telling the truth at that trial. Mr Chua, not surprisingly submits that I should be very slow to accept anything that Mr Deng says on the matter before me. Further, he is a defendant in the 1995 action in which Panco International are suing him for breach of his fiduciary duty as a director where by their nature those proceedings call his honesty into question. That may be so, but it seems to me that I cannot begin to form a view about those allegations. To do so would in effect be to pre-judge the outcome of that trial. What is rather strange though, is that in this action before me he is giving evidence on behalf of Panco, who are one of the defendants, and who at the trial of the main actions at the end of March will be suing him for breach of fiduciary duty. In this action, he is therefore seeking to assist Panco to make use of the Document said to be privileged by fellow defendants (the plaintiffs in this action) in what is a related action which will be heard at the same time. This all serves to add to a curious twist to all of these actions.

30.As to Mr Wang, Mr Chua has taken a number of points against him which appear at pages 24 and 25 of his closing written submission. The matter that I have found most troubling and which Mr Burns has rightly conceded was reprehensible is that Mr Wang, once he got the Document, took the positive decision of not disclosing its existence until the opposition had shown its hand when he would seek to somehow trump them by then disclosing that he had the Document, thereby reducing the rules on discovery to the level of a game of poker. Of course Mr Burns is quite right to describe this conduct as reprehensible. Mr Chua says that this has now deprived the plaintiffs of the opportunity of calling Mr Zhang Hongzhi during his lifetime in order to contradict, if that would have been his evidence, the account given by Mr Deng as to how he had received these documents in the first place. By deliberately not disclosing the Document for some six years after the order for discovery had been made and over two years after Mr Zheng's death, the plaintiffs have been put at a forensic disadvantage which they can now do nothing about. Two points arise from that, says Mr Chua. Firstly, Mr Wang is not the sort of individual that the court should feel able to trust and secondly, a more substantial legal point, which is that I should not allow the defence to profit from this wrongful conduct by allowing them to now use the Document.

My findings on the evidence

31.Having regard to the way that the evidential contest has developed, it seems to me that this gives rise to a situation where whilst the persuasive burden is on the plaintiffs to show that the Document is privileged, there is also an evidential burden on the defendants which would come about once, and if, Mr Zheng has put forward a credible prima facie case in support of his assertion that the Document is privileged in this case that he wrote it in response to his solicitor's request for information about the 1993 action and that he did it in the way that he says on 25 and 26 June at Windsor House - this would then give rise to an evidential burden on the defendants to undermine that account to the extent that when I look at the evidence as a whole, I cannot say that the plaintiff has discharged the ultimate persuasive burden of showing that the document is privileged. That is how I intend to approach the matter.

32.Going through that exercise, I am satisfied that Mr Zheng has passed that test on a balance of probabilities.

33.He has put forward a plausible account. There is, of course, no doubt as I have already found that Mr Chan had asked him to provide information of the sort that appears in the Document itself in order that he might advise him on the merits of the 1993 action. I have been careful to look at the contents of the Document itself and I am bound to say that there is nothing there which would cast any doubt on the evidence that he has put forward. I do not consider the points raised by Mr Burns, which I have already drawn attention to, as being sufficiently powerful either individually or in combination to damage the credibility of Mr Zheng to the extent that I might feel unable to accept on a balance of probabilities what he has told me. Mr Burns is in the unenviable position of, in effect, having to make bricks without straw. I have listened to all of Mr Zheng's explanations in relation to the various matters on which he has been tested by Mr Burns. I do not think that one can approach the question of the paper on which the Document was written, which relates to a company owned by Miss Lai Kit who in turn undoubtedly has associations with Mr Gao and Mr Yan whose names appear at the back of page 5 of the Document, as being in any way inherently damaging to the basic version put forward by Mr Zheng. The same goes for the date 3.11, which appears on the first page. Mr Zheng has given an explanation that this had already been written by someone else, he having picked up these papers at random. That was his explanation and it seems to me to be a perfectly plausible one. Similarly, the question of the change of ink after the first five pages is perfectly consistent with his having changed pen during the course of writing the first instalment; I do not think that of itself is anything particularly significant.

34.As to how he kept the Document which he says was under lock and key, I am bound to say that I was troubled by the fact that at first he appeared to be saying that it was kept in a locked drawer in his desk and then he changed that to a filing cabinet. Whilst there was a clear difference, the general account of the Document being kept under lock and key in his office remained. I do not think one can properly seize on that difference and then say that the whole of the case stands to be disbelieved. The same reasoning can also apply in my view to the explanations that he gave about the use of Bornkind International's fax machine. There was nothing inherently suspicious or unbelievable about that explanation. I have failed to mention when I reviewed the evidence that the heading at the top of page 1, which is marked "attention lawyer Mr Chan", is in fact written in a different colour ink. Mr Burns invites me to say that this is yet another indication that the Document was probably prepared for the Shenzhen committee and subsequently when it became clear that it could be used to serve the purpose of informing the solicitor he marked it in this way using a different coloured ink. Nevertheless, it is, of course, equally believable that this was written when the Document had been completed on 25 and 26 June and before the various pages were faxed to Mr Chan.

35.There is a gap in the evidence by virtue of the failure by Mr Zheng to provide any explanation of how the original document was copied and how that copy somehow made its way into the possession of people who were not authorised to have it. Whilst this is undoubtedly an unexplained gap in the chain of events, it is not necessarily fatal to the main account provided by Mr Zheng. This after all is to be expected where these acts must have been done clandestinely.

36.In testing his evidence I have not lost sight of the fact that about this time the committee in Shenzhen was doing its work and that the matters contained in the Document undoubtedly relate to what that committee was looking into which, of course, is the starting point for the defendants' evidence. Mr Deng, if he is to believed, says that Mr Zhang Hongzhi, a prominent member of the committee, gave him a copy. I have come to the view that Mr Deng and Mr Wang are not witnesses whose evidence I can safely rely on unless it is confirmed by other independent evidence which I am prepared to accept. Both have real motives for being less than frank and both have real interests to serve. Mr Deng himself is someone who quite clearly is prepared to give untruthful evidence on oath and he was prepared to be quite unrepentant about that, insisting, notwithstanding the concurrent findings of the trial court and the Court of Appeal, that he had in fact told the truth at that trial. I am also troubled by the fact that he somehow feels able to give evidence in support of a party who, at the trial of the main actions, will be alleging that he has been dishonest in the conduct of his duties as a director. That is something that makes me unsure about his bona fides. Accordingly, I am not prepared to accept any of Mr Deng's evidence in the absence of any independent corroboration of it. As to Mr Wang, he has also come over as a wholly unsatisfactory witness and his capacity for sharp practice in relation to his use of the Document once it came into his possession by sitting on it for eight years and only disclosing it last November makes me sure that he is not a witness who I can trust in the absence of any independent corroborative evidence and in this case where there is none, I am not able to accept his evidence in any material respect save that he somehow got hold of this document and decided to suppress it.

The law

37.On this view of the facts, the legal position becomes, relatively speaking, uncomplicated. I have found as a fact, where I am disposed to accept Mr Zheng's evidence, that the Document was prepared for the sole purpose of providing information to his legal advisor in relation to litigation which was expected or, I think this is probably the evidence, had just been initiated. At all events, it was prepared in circumstances where legal professional privilege would attach to it. The position is described in Phipson, 15th Edition, at paragraph 20-01 as follows :

"Once privilege is established, the right to withhold the document or refuse to answer the question is absolute. There is no balancing act to be performed by the court. The rules which constitute the law of privilege themselves constitute the balancing act between the public policy in favour of protecting professional confidences and the public policy in favour of ensuring that materials relevant to the conduct of litigation are disclosed."

38.There is no dispute between counsel as to the principle itself which has been described by Lord Taylor of Gosforth LCJ in the House of Lords' decision in R. v. Derby Justices [1996] 1 AC 487 at 507D-E as follows :

"The principle which runs through all these cases and the many other cases which were cited is that a man must be able to consult his lawyer in confidence since otherwise he might hold back half the truth. A client must be sure that what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests."

39.A point has arisen in this case because the defendants have a copy of the privileged document and as such would prima facie be able to make use of it as secondary evidence. This having been said, that situation is covered by the court's willingness to exercise an equitable jurisdiction in aid of privilege and confidential information. This has been described at page 203 of Passmore's Privilege (1998 Edition) :

"But on occasions the loss of confidentiality is unintended, perhaps the result of a mistake by a legal advisor or a trick by the adversary or his agents, in which case injunctive relief can be granted to restrain the use of the information by a third party. In such case it is not the privilege which entitles the applicant to this relief, but this is a mere evidential rule. Rather, it is the court's equitable jurisdiction to restrain the publication of confidential information improperly obtained or otherwise wrongly divulged which comes to the aid of the privilege. The position which the law has now reached is that in most cases the following conditions need to be satisfied in order to restrain the use of privilege and therefore confidential information which has got into the hands of third parties. If the disclosure must have been inadvertent in the sense that there was no intention to waive privilege and either was procured through fraud or was the result of an obvious mistake and the application is made to recover privileged information before it is deployed in the evidence at trial."

40.In this regard, the decision of Sir Nicholas Browne-Wilkinson VC (as he then was) in English American Insurance Company Limited v. Herbert Smith [1988] FSR 232 at 236 is in point :

"The position therefore depends following the decision in the Nationwide case on whether proceedings are taken before the document is tendered in evidence or not. If such proceedings are taken before the document is tendered, then the person entitled to the legal professional privilege is entitled to (i) delivery up of the documents and the copies and (ii) an injunction restraining the other side from making any use of them, including the use of them in the proceedings which are pending."

It seems to me that all of these conditions apply here. I have found that the possession of this document by the defendants is an unauthorised possession. I have found that when the Document was written by Mr Zheng, it was for the sole purpose of obtaining legal advice in pending or current litigation and that, accordingly, legal professional privilege attaches to it. This is not a situation where it might have been prepared for another concurrent purpose so that I am not required to decide which purpose was the dominant one. The application for the injunction has been made at the earliest opportunity and certainly before the Document has been deployed in evidence at the trial. In such circumstances, the plaintiffs are entitled to the relief sought in the Writ and an order will therefore go to require the defendants to hand over the Document together with all copies in their possession to the plaintiffs and they will be enjoined from making use of any of the information contained in the Document in the trial of the main actions. It must follow therefore, I would have thought, that the costs of this action should be to the plaintiffs but as this judgment is being handed down the order for costs must in the usual way be an order nisi.

41.Before I leave this matter, I wish to express my gratitude to both counsel for the very great assistance that they have given me, not only as to the evidence but in particular for the numerous authorities which they have referred me to, which save for a limited number, I have not found necessary to refer to having regard to the factual basis upon which I have been able to decide the case

Representation:

Mr Chua Guan Hock, instructed by Messrs Wong, Poon, Chan, Law & Co., for the 1st, 2nd, 3rd and 4th Plaintiffs

Mr Ashley Burns, instructed by Messrs Herbert Smith, for the 1st and 2nd Defendants