Akai Holdings Ltd (in Compulsory Liquidation) v. Ernst & Young (A Hong Kong Firm)

CACV 233/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 233 OF 2008

(ON APPEAL FROM HCCL NO. 29 OF 2004)

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BETWEEN

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Before: Hon Rogers VP and Le Pichon JA in Court

Date of Hearing: 9 October 2008

Date of Handing Down Judgment: 20 November 2008

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J U D G M E N T

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Hon Rogers VP:

1.These were two applications made by the plaintiff in this action.  The first was an application for leave to appeal to the Court of Final Appeal from the judgment of this court given on 23 September 2008.  The second was that “there be a continuation of the stay of the order of Madam Justice Kwan dated 30 July 2008 as provided for in paragraph 1 of the order made by the Honourable Madam Justice Kwan dated 1 August 2008” pending the hearing of this application for leave to appeal to the Court of Final Appeal and, if leave be granted pending the determination of the said appeal.

2.The appeal before this court related to an order for discovery in the course of an action which has been set down to be heard next September.  The judge ordered that the plaintiff should disclose documents consisting of transcripts or notes of interviews conducted pursuant to section 221 of the Companies Ordinance, Cap. 32 in respect of some 10 named individuals, as well as other interviewees, who had provided relevant evidence pursuant to section 221 procedures.

3.As recorded in the judgment of this court, the judge came to the conclusion that the documents sought on discovery were relevant and necessary for the fair disposal of the action.  The judge decided it was correct to exercise the court’s discretion to order the production of the transcripts and other documents.  In doing so the judge considered the evidence from the plaintiff and reached the conclusion that the evidence did not show that the dominant purpose of the examination was in relation to existing or contemplated litigation.  This court agreed with the judge’s analysis of that evidence and noted that nowhere had the plaintiff revealed how it had put its applications for the examinations when those applications had been made.

4.This court agreed with the approach of the judge that where the plaintiff had not established that the examinations had been conducted in circumstances which would otherwise have attracted legal professional privilege, it was open to the court, in control of what were documents created as part of its own inquisitorial process, to order release of the documents for the purpose of discovery.

5.On this application the plaintiff has put forward no less than seven questions which are said to raise issues of great or general public importance or which otherwise ought to be the subject of determination by the Court of Final Appeal.  When the submissions were made it became apparent that the argument on behalf of the liquidators really amounted to the proposition that transcripts obtained under section 221 should never be disclosed without liquidator’s consent.  Mr Scott SC who appeared on behalf of the plaintiff put the matter in the form:

“Are the notes and transcripts of private examinations obtained by the liquidator discoverable documents when the liquidator subsequently becomes a party to civil proceedings?”

6.Mr Scott relied for that proposition upon the decision of Vinelott J in Dubai Bank Ltd v Galadari [1990] BCLC 90.  In my view the decision in that case is no authority for that proposition.  It is clear from the passage commencing at page 95h that the decision was based on the fact that the liquidators had established by evidence that the relevant examination was sought for the purposes of litigation.  The judge said:

“In the instant case the liquidators claim that the examination of the second defendant was sought in order that they might be advised whether to institute the proceedings which they in fact instituted.  On the evidence before me, therefore, I am bound by the authorities to hold that the transcripts are privileged.”

7.In my view Mr Lam was correct in his submission that not only was the decision in that case not authority for the proposition put forward by Mr Scott but it is clear from the decision in re Arrows (No. 4) [1993] Ch. 452 that there was no overriding principle which empowered the liquidators to prevent disclosure.

8.In those circumstances I would not be disposed to grant leave to appeal on the basis of there being any question of great or general public importance.

9.During the hearing there was a discussion of the procedural difficulties that would be presented should this court refuse leave to appeal and in the light of the fact that the order of this court on the appeal had already been drawn up.  In the event it was considered open to this court to extend time for compliance with the discovery obligations.

10.In my view it would not be appropriate for this court to extend time any further.  The trial of this action is fixed for next September.  Due to its complexity and estimated length it was evidently necessary to fix it well in advance.  It would be most undesirable to risk any further delay of these proceedings which are already fixed to take place a long time after the relevant events.

11.It has to be borne in mind that disclosure on discovery is covered by strict rules as to confidentiality.  The party seeking discovery is itself a professional body and there is no cause to consider that there would be any breach of the obligations of confidentiality.  In my view, consideration of the efficient conduct of litigation dictates that there should be no further delay in this litigation.  Should this court’s decision be set aside, any further use or misuse of the discovery obtained would constitute contempt of court.  Thus the balance in this case is between wholly undesirable procedural delay as against a hypothetical possibility of some unspecified and, hence, speculative misuse of information by professional persons in circumstances which would be a contempt of court.

12.In those circumstances, I consider that these applications should be refused with an order nisi of costs in favour of the defendant.

Hon Le Pichon JA:

13.I agree.

Mr John Scott SC & Ms Linda Chan, instructed by Messrs Lovells, for the Plaintiff/Applicant

Mr Godfrey Lam SC, instructed by Messrs Barlow Lyde & Gilbert, for the Defendant/Respondent