Read the full judgment text of CACV 172/2011 on BabelCite. This Court of Appeal judgment was delivered on 3 May 2012 before Fok JA, Chu JA.
Civil procedure – Mareva injunction – damages undertaking – inquiry as to damages – unless order – interrogatories – legal professional privilege – waiver of privilege – relief from sanction – proportionality – striking out as last resort – appeal against exercise of discretion. The plaintiff obtained a Mareva injunction in 1994 against the defendants alleging misappropriation of US$20 million and use of US$6 million to discharge the 2nd defendant's loan, which allegation proved unfounded. The injunction was discharged by consent, and the 2nd defendant agreed not to claim damages under the plaintiff's undertaking. In 2007 the defendants sought an inquiry as to damages, alleging that the agreement not to claim was vitiated by fraud – the 'Lefort fraud' (alleged bribery of the Monaco Investigating Magistrate by a new Mercedes-Benz car) and the 'Yip fraud' (alleged inducement of a shareholder by promises of future business). The defendants served interrogatories concerning paragraph 17 of the plaintiff's affirmation, and after a contested history, the Court of Appeal ordered the plaintiff to answer them. Master Ko's Unless Order required answers by 4pm on 4 January 2011, failing which the Points of Defence re Fraud would be struck out. The answers were sworn in time but filed and served a few hours late. The Deputy Judge held that the answers were so insufficient as to amount to no answers at all, found LPP not engaged in respect of interrogatory (b) and deemed waived in respect of the others, and dismissed the plaintiff's application for relief. Held, allowing the appeal, that (1) the Deputy Judge's exercise of discretion was vitiated because the answers to interrogatories (d) and (f) were not so contradictory as to be no answers at all, paragraph 17 of the affirmation being genuinely ambiguous and resolvable only at trial after cross-examination; and the answers to interrogatories (a), (b), (c) and (e) were not no answers at all because, under O.26 r.5(1) and authority (Reuben Import Export; A.T. & T. Istel; Kennedy v Lyell), a party is entitled to invoke privilege, including legal professional privilege, by way of answer to interrogatories. (2) On the basis of the plaintiff's evidence that the misunderstanding was that of M. Lefort and not the Paris solicitors, LPP was not engaged in respect of interrogatories (a), (b), (c) or (e) because the communications at issue were purely factual conveyances of findings. (3) On a fresh exercise of discretion under O.2 r.5(1), relief from the sanction of the Unless Order should be granted, conditional upon the plaintiff providing further answers to interrogatories (a), (b), (c) and (e) without invocation of LPP within 14 days, with the Points of Defence re Fraud to be reinstated upon compliance, in the interests of justice and because striking out is a remedy of last resort (per Wing Fai Construction), and a serious fraud allegation should not go by way of default without trial. Consent to answer the interrogatories did not amount to a clear and unequivocal waiver of LPP, there was no intentional or contumelious disregard of the order, and the defendants' prejudice was compensable in costs. The plaintiff's costs of the appeal and below were ordered to be paid to the defendants on a party and party basis with a certificate for two counsel, but not on an indemnity basis because the invocation of LPP was not in bad faith.
Legal issues: Whether the Deputy Judge's exercise of discretion was vitiated by error of law · Whether legal professional privilege was engaged in respect of the interrogatories · Whether relief from the Unless Order sanction should be granted on a fresh exercise of discretion
Outcome: Appeal allowed; the Deputy Judge's decision was set aside, and on a fresh exercise of discretion relief from the sanction of the Unless Order was granted to the plaintiff, conditional upon the provision of further answers to the interrogatories without invocation of legal professional privilege.
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