High Wealth International Ltd. v. China United Holdings Ltd.

HCA000456/2000

HCA456/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.456 OF 2000

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Coram: Hon Suffiad J in Chambers

Date of Hearing: 29 November 2000

Date of Judgment: 19 December 2000

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J U D G M E N T

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1. This is an application by the plaintiff by a summons dated 18 September 2000 for an injunction under Order 29, and the inherent jurisdiction of the court to restrain the defendant from obtaining and using legally privileged documents of the plaintiff in the present action, and also for the delivery up of all legally privileged documents of the plaintiff in the defendant's possession to the plaintiff.

Background facts

2. Both parties are limited companies. The plaintiff's claim is based on a Subscription Agreement between the parties dated 24 June 1999 by which the defendant agreed to issue and the plaintiff agreed to subscribe HK$10,000,000.00 convertible debentures. Pursuant thereto the plaintiff pleaded in paragraph 10 of its Statement of Claim that the plaintiff duly paid the defendant the said sum of HK$10,000,000.00 through its then solicitors Messrs C.C. Ip & Co.

3. Paragraph 5 of the Defence pleads as follows:-

"Paragraph 10 of the Statement of Claim is denied. The Defendant further avers that on 30th November, 1999, the Solicitors for the Defendant (sic) Messrs. Ivan Tang & Co. enquired with the Plaintiff's then Solicitors Messrs. Robert C.C. Ip & Co. and on 2nd December, 1999, Messrs. Robert C.C. Ip & Co. confirmed that the sum of HK$10 million had not been paid to the Defendant"

4. It is agreed between the parties that the reference in the above pleading to Messrs Ivan Tang & Co. being the solicitors for the defendant is a typographical error in the Defence and should correctly be the solicitors for the plaintiff.

5. As a result of what is pleaded in paragraph 5 of the Defence, the plaintiff's present solicitors wrote to the defendant's solicitors by letter of 30 May 2000 (by which time the plaintiff was, and still is, represented by Messrs Joseph S.C. Chan & Co.) to the effect that the communication referred to in that paragraph of the Defence, being communication between the plaintiff's former legal advisers and made in connection with and in contemplation of legal proceedings, is protected by legal privilege and cannot be used by the defendant. At the same time, they demanded from the defendant the delivery of all records of such communication, the deletion from paragraph 5 of the Defence reference to that communication and the identity of the person who had divulged such communication to the defendant.

6. This started a flood of correspondence between the respective solicitors for the two parties, but the plaintiff's demands were not acceded to by the defendant.

7. On 15 August 2000, the plaintiff's solicitors wrote to Messrs Robert C.C. Ip & Co. asking whether they had divulged the communication between them and Messrs Ivan Tang & Co., the subject matter of this application, to the defendant or to other third party, or whether they know how the defendant had obtained such communication. Messrs Robert C.C. Ip replied by letter of 16 August 2000 stating firstly that their records show that they had received enquiries in a letter from Messrs Ivan Tang & Co. on 30 November 1999 as the solicitors for the plaintiff, and that they had answered those enquiries by letter dated 2 December 1999 confirming their position regarding the alleged payment of HK$10 million. Copies of both those letters were enclosed by Messrs Robert C.C. Ip & Co. in their reply which further stated that they had never divulged such communication to the defendant or to any other third party and have no knowledge how the defendant came to know of such communication. (However, copies of those two letters, although enclosed in the reply by Messrs Robert C.C. Ip & Co., were not exhibited in evidence in this application.)

Plaintiff's Application

8. Upon the background facts stated above, the plaintiff applied by summons dated 18 September 2000 for :

(a) an injunction to restrain the defendant from obtaining and using legally privileged documents of the plaintiff in the present action;

(b) an order that the defendant deliver up all legally privileged documents of the plaintiff in the possession of the defendant to the plaintiff; and

(c) an order that the defendant filed an affidavit stating how it obtained the legally privileged documents and what other legally privilege documents of the plaintiff the defendant has in its possession.

9. This application of the plaintiff was supported by an affirmation of Charles Man Kwok Kuen, a solicitor having the conduct of this case on behalf of the plaintiff, in which the facts as stated above were set out. Furthermore, Mr Man also deposed to the fact that the communication in question, being exchanges between two firms of solicitors both acting for the plaintiff in contemplation and/or in the process of litigation, he verily believes that the communication is protected by legal privilege.

10. After this application was taken out by the plaintiff, by a Consent Summons dated 21 September 2000, the parties consented to the defendant having 21 days from the date of the Consent Summons to file an affidavit in opposition to the plaintiff's application. No such affirmation however was filed by the defendant and, as a result, there is no evidence from the defendant as to how it came into possession of the letters between Messrs Robert C.C. Ip & Co. to Messrs Ivan Tang & Co dated 30 November and 2 December 2000, the subject matter of this application.

The Law

11. The principles of law applicable to the present application can be found in the decisions in Goddard v. Nationwide Building Society [1987] 1 QB 670 and in Webster v. James Chapman & Co. [1989] 3 All ER 939 and are as follows :

(a) If a litigant has in his possession copies of documents to which legal professional privilege attaches, he may nevertheless use such copies as secondary evidence in his litigation : however, he has not yet used the documents in that way, the mere fact that he intends to do so is no answer to a claim against him by the person in whom the privilege is vested for delivery up of the copies or to restrain him from disclosing or making any use of any information contained in them;

(b) Once a privileged document or a copy of it passed into the hands of another party to the action, prima facie the benefit of the privilege was lost and the party who had obtained the document then had in his hands evidence which could be used at trial;

(c) However, if the privileged document was also a confidential document, it was as such eligible for protection against unauthorised disclosure or use;

(d) Where protection of confidential information was sought, the court was required to exercise its discretion by balancing the legitimate interests of the plaintiff in seeking to keep the confidential information suppressed and the legitimate interests of the defendant in seeking to make use of it. In carrying out the balancing exercise, the circumstances in which the information came into the hands of the defendant, the issues in the action, the relevance of the document and whether the document would in one way or another have to be disclosed, together with the privileged nature of the document were all highly relevant.

Decision

12. Before applying the above principles to the present case, there are a couple of observations which I should make. Firstly, it seems clear enough to me that the communications in question, namely the two letters dated 30 November and 2 December 2000, between Messrs Robert C.C. Ip & Co. and Messrs Ivan Tang & Co are clearly privileged as well as confidential information in so far as their contents are concerned, since both firms of solicitors were communicating with each other in their capacity as the former or present (at that time) solicitors of the plaintiff. I also accept that the queries, and therefore the answer contained in that communication, were made either with a view to or in the course of litigation.

13. Applying the legal principles above, once those letters came into the hands of the defendant or its solicitors, the privilege attaching to those letters were lost prima facie and the defendant was entitled to use the letters as evidence in the trial.

14. However, the confidentiality of the contents of the letter nevertheless made it eligible for protection against unauthorised disclosure or use. In deciding whether or not protection of such confidentiality should be granted to the plaintiff, I have to balance the interests of the plaintiff against that of the defendant in this case.

15. In this regard, I must look at the circumstances under which the two letters came into the hands of the defendant or its solicitors. This is a matter which the plaintiff is totally in the dark. The defendant or its solicitors are the only ones who can provide that answer. However, they have chosen to keep silent as to how the two letters came into their hands. In so doing, the only inference that I can properly draw is that the letters came into the hands of the defendant through improper means.

16. Secondly, I have to consider the issues in the case and the relevance of the two letters to those issues. As already indicated above, one of the issue in the case is the plaintiff pleading, as part of its claim, that HK$10 million was paid by the plaintiff to the defendant. However, this has taken on a very different complexion now as it has been pointed out to me that the plaintiff, in answer to the defendant's request for particulars, has stated in those further and better particulars that the HK$10 million was paid by the plaintiff to China United Technology Ltd. In the light of this answer for particulars by the plaintiff, the relevance of the contents of the two letters, on the assumption that the letters state what has been pleaded by way of defence, pales significantly as a piece of evidence relied upon by the defendant.

17. Therefore, balancing all that there is to balance in the present case, I have come to the conclusion that it would not be wrong for me to grant to the plaintiff the injunction sought by the plaintiff in respect of these two letters.

18. However, the plaintiff's application goes further than just the two letters. The plaintiff is also asking for the disclosure by the defendant of any other privileged documents of the plaintiff which is in the hands of the defendant. I am not prepared to accede to this further application by the plaintiff for the following two reasons.

19. Firstly, I take the view that the plaintiff, being the party asking for protection of its confidential information, the onus must be on the plaintiff to prove that it is entitled to such protection. One of the matters that the plaintiff will have to prove is that the defendant has obtained or has in its possession confidential information belonging to the plaintiff. Apart from the two letters, there is no evidence before me that the defendant is in possession of any other information or document of the plaintiff's to which confidentiality attaches to the contents or is otherwise privileged. Suspicious though it may seem, given the unknown circumstances in which the defendant could have gotten hold of correspondences exchanged between two former firms of solicitors of the plaintiff, which may lead one to ponder as to what other documents of the plaintiff may also have ended up with the defendant, even should that be the case (and I am not prepared to draw the inference that it is in the absence of any evidence apart from the two letters), that situation is covered by the second reason which I now come to.

20. Secondly, the further order sought by the plaintiff puts an impossible burden upon the defendant since effectively it put upon the defendant having to identify which of the plaintiff's documents is privileged or contains confidential information. Whether any documents of the plaintiff's are privileged or contain confidential information are matters for the plaintiff to identify and not for the defendant to say.

21. 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."

Order

22. Accordingly, for the reasons given, the orders that I shall make are as follows :

(a) the defendant be restrained whether acting by itself, its servants or agents or any of them or howsoever otherwise from using in the present action documents of the plaintiff, namely, a letter dated 30 November 2000 from Messrs Ivan Tang & Co. to Messrs Robert C.C. Ip & Co. and a letter in reply thereto dated 2 December 2000 from Messrs Robert C.C. Ip & Co. to Messrs Ivan Tang & Co.;

(b) the defendant do within 7 days from the service of this Order upon it, deliver up to the plaintiff the said two letters or copies thereof in the possession, custody or control of the defendant.

Costs

23. There will be a costs order nisi that the defendant pay to the plaintiff the costs of this application in any event.

Representation:

Mr William Wong, instructed by Messrs Joseph S.C. Chan & Co., for the Plaintiff

Mr Allen Lam, instructed by Messrs C.L. Chow & Lam, for the Defendant