Asia Television Ltd v. Golden Star Video Berhad

CACV000118/1983

BETWEEN

Coram: Li, Yang & Silke, JJ.A.

Date: 2nd September, 1983

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JUDGMENT

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Li, J. A.:

1. This is an interlocutory appeal from an order of a judge in chambers dated 26th of August, 1983 by the Asia Television Limited, the defendant,. in a civil action (hereinafter referred to as ATV) against the respondent, the Golden Star Video Berhad (the plaintiff of the action) (hereinafter referred to as the Plaintiff).

2. At the conclusion of the hearing, we gave our decision to counsel saying that we will give our reasons at a later stage. We now do so.

3. We are indebted to those who are responsible for putting the papers in order before us for the tidy, complete and legible bundles of documents for the hearing, and to counsel for both parties for their lucid arguments.

Background

4. The matter giving rise to this appeal can be summarised in a concise manner. On the 27th of July, 1982, the Plaintiff and ATV arrived at an agreement reduced into writing whereby ATV granted to the Plaintiff a licence to distribute video cassettes or programmes and telecast produced by ATV for the period of one year plus an option to extend for one more year in the area of Malaysia and Brunei commencing from the 15th of September, 1982. A dispute arose between the Plaintiff and ATV as to the exercise of this option. In the event, the Plaintiff issued a writ against ATV claiming its right pursuant to the licence in 1982. The pleadings were closed by the 1st of August, 1983?No useful purpose will be served by referring to the details of the statement of claim, defence and counterclaim or the reply and defence to the counterclaim. Suffice it to say that the Plaintiff claims that it has the right to exercise the option contained in the 1982 agreement or alternatively such agreement did not represent the true intent of both parties and, therefore, it claims rectification. ATV claims that the right to exercise the option belonged, at all times, to ATV and alternatively, even if the Plaintiff were the party to exercise such an option, the exercise was invalid for breach of conditions precedent in the agreement for constant delay in payment. To this, the Plaintiff replied that there had been waiver.

5. In due course, a summons for direction was issued and an order was made including the discovery of documents. On the 5th of August, 1983, ATV delivered. a list of documents disclosed to the Plaintiff. However, on the 12th of August, the Plaintiff issued another summons under Order 24 rule 7 for further discovery of a supplementary list of documents.   On the 18th of August, one Raymond Huang, an employee of ATV, filed an affidavit disclosing a list of 49 documents in part 1 of the schedule plus another 7 documents in part 2 of the schedule. There was no objection to production for inspection of those documents in part 1, but he objected to the production of the documents in part 2. Stating his grounds for objection in subparagraph 5 in paragraph 6 of his affirmation, inter alia, he said:

"We hereby reiterate that there are in existence 4 memoranda written by Mrs. Eleanor Morris three of which was sent to our managing director Mr. Dennis Chiu and the remaining one was sent to our Chairman Mr. Deacon Chiu all of which concern the running and management of my Company's business but touching upon the contract of 27th July 1982. I have since read those memoranda and have also discussed the contents thereof with Mrs. Morris who informed me, and I verily believe, that where the said contents touch upon the contract of 27th July 1982, the same were expressions merely of  Mrs. Morris' personal opinion. We object to the specific discovery of the same because they concern management matters relating to my Company's business which are highly confidential and disclosure thereof would be highly inconvenient and oppressive and, so I am advised by my Company's legal advisers and verily believe, contrary to the safeguard provisions set out in the Rules of Supreme Court Order 24. Furthermore, I verily believe that the Plaintiff is also the licensee of my Company's main trade rival Television Broadcast Limited or TVB as regards the distribution of video tapes of TVB' s programmes in Malaysia and Singapore and disclosure of .these memoranda would be highly prejudiced and detrimental to my Company's business."

He further said in subparagraph 7 of the same paragraph 6 as follows:

"There is a budget estimate for the period from January 1983 to December 1983 but my Company objects to the specific discovery thereof because the contents of the said estimate are highly confidential and disclosure thereof would seriously prejudice my Company's business and would be highly oppressive. In this regard I bear in mind the fact that the Plaintiff is the licensee of my Company's main trade rival TVB in Malaysia and Singapore and it is absolutely vital for the business survival of my Company that such information be kept strictly within the confines of my Company. I am advised by my legal advisers and verily believe that disclosure of the same would be prescribed under the provisions of the Rules of Supreme Court Order 24."

However, by a letter of an even date, namely the 18th of August, the Plaintiff's solicitors wrote to the solicitors of ATV referring to a previous letter dated the 17th of August by the ATV's solicitors. Part of the letter said that:

"After considering that letter, it seems to us that some matters are capable of resolution and that the matter can be dealt with in three separate categories as follows."

Then it went on to the 3rd category:

6. This summons was heard before Master Barrington-Jones on the 19th of August, 1983. Understandably, ATV had to oppose the application because there was, in addition, an application for production of the disclosed documents. In the event, no order for production was made or sought by the Plaintiff at that stage.

7. The next stage was that ATV filed a supplementary list of documents verified by an affirmation by Raymond Huang on 22nd of August, 1983. The list disclosed 49 documents as it was before plus 7 documents of which ATV objected to the production set out in part 2 of schedule 1 on the ground that their disclosure would be "unduly oppressive to ATV and contrary to the provisions of Order 14 of the rules of the Supreme Court, because such documents concern the running and management of the defendant's business and interest if such information therein contained were obtained by ATV's trade rival with which the Plaintiff also had business relations."

8. The documents ATV refused to produce are as follows:

9. On the same day, namely the 22nd August, 1983, the Plaintiff took out a summons under Order 24 rule 11 for production and inspection of these 7 documents. The matter was heard by Mr. Justice Mayo on the 26th of August, 1983 who ordered their production for inspection and made an order for costs both for the hearing before himself and that before Master Barrington-Jones to the Plaintiff in any event. Hence, this appeal.

10. As I said before, the main issue between the parties as ascertained from the pleadings are as follows:

11. In making the order as he did, Mayo, J. gave no written reason nor did he view any of the 7 documents before he made the order. We are further told that he was asked by counsel for both parties to, himself, inspect the said documents before he made this order. That offer he declined. As such, we were deprived of the opportunity to know why he made the order or why he declined to view any of the documents in question.

12. It is not in dispute that the judge has a discretion to make an order he did. Nor can it be disputed that he has a discretion to inspect or not the documents sought to be produced. Since he did make the order, he must not have been satisfied as to the justification of the objections raised by ATV.

13. In order to interfere with Mayo, J's order, this court must be persuaded that the judge either failed to exercise his undoubted discretion or that he exercised them on the wrong principle or without regard to principles to which he should have had regard.

14. Mr. Fung divides his argument before us into two. The first limb concerns relevancy and admissibility. He submits that the 7 documents are simply inadmissible evidence in aid of construction of the 1982 agreement. Even if an ambiguity does exist in that agreement the contents of such documents are extrinsic evidence. The said agreement must be construed within its own four walls. He cited in support of his contention the case of L. Schuler AG v. Wickman Machine Tool Sales Ltd. ⁽¹⁾ and James Miller & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd. ⁽²⁾.   These principles apply to construction of written contracts and include subsequent action of the parties as well as to statements made during negotiations. They may apply to resolutions of corporations. However, Lord Simon made it clear, in the Schuler's Case ⁽¹⁾ that he did not have in contemplation a claim for rectification.

15. The general principle urged upon us by Mr. Fung regarding construction is one we will not hesitate to accept. However, we have our reservations when we come to consider a claim for rectification. Such a claim goes to the root of the written agreement whether it represent the true intent of the parties on the ground of a mutual mistake in the signing of such an agreement.

16. Indeed, in the affirmation of Mr. Raymond Huang for ATV, said to the effect that there were 4 memoranda from Mrs. Eleanor Morris to the management touched upon the 1982 agreement. I shall not repeat his own words in the affirmation which had been set out before.

17. Mr. Ching for the Plaintiff cites, in support of his contention, paragraph 3 of r. 7 in Order 24 that the application maybe made of documents "that it relates to one or more of the matters in question in the cause or matter". He argues that as the documents in question, particularly the memoranda, touched upon the 1982 agreement and rectification has been claimed, the documents relate to one or more of the matters in question in the cause or matter. That was for discovery.

18. In Order 24 rule 11 paragraph 3, it refers again "an application for an order under paragraph (2) must be supported by affidavit specifying or describing the documents of which inspection is sought and stating the belief of the deponent that they are in possession, custody or power of the other party and that they relate to a matter in question in the cause or matter".

19. Thus the rule regarding discovery and the rule regarding production for inspection use exactly the same terms. He contends that whatever is discoverable are subject matters of production for inspection. This refutes Mr. Fung' s contention that what may be discoverable may not be  matter of production and inspection. The cases cited by Mr. Fung in support of that contention, upon consideration, are clearly distinguishable. We do not have to refer to them in detail.

20. Mr. Ching goes on to cite rule 13 of Order 24 which provides:

Here again, Mr. Ching contends that the judge has his discretion whether he inspects the documents himself.

21. In the present case, the judge declined to inspect the documents. He-clearly has a discretion. In order to succeed, it is for Mr. Fung to show this court that the refusal to inspect such document was a wrong exercise of the judge's discretion.

22. It is also Mr. Ching' s contention that one of the issue involved in the pleadings is a question of waiver. As such, the other 3 documents, namely, the 1983 budgets, are relevant to show whether, despite any delay in payment on the part of the Plaintiff, ATV still budgetted for future payments in respect of the year 1983 by the Plaintiff in performance of the 1982 agreement. Such knowledge or information contained in any of the documents would be vital for the purposes of cross-examination if not for any other purpose.

23. Mr. Fung's second limb of the argument is based on prejudice and oppression. In this respect, he relies upon paragraph 2 of rule 13 which I have cited. This is a contention completely different from the question of relevance and admissibility. He contends that the memoranda from Mrs. Morris to the management are confidential matters of internal management. To produce such documents and the budgets at large means making bare the whole of the internal management and financial condition of ATV. This is clearly oppressive and at the same time detrimental to the defendant if these leak out to the trade rival of ATV, namely the TVB. However, Mr. Ching argues to the contrary the order sought for was that ATV should produce such part of the documents relating to the matter or cause in issue. He relies on the case of Thornett v. Barclays Bank (France) Ltd. ⁽³⁾ which was cited by Mr. Fung in his contention that whatever document which is discoverable under Order 24 rule 7 is at the same time subject matter of production for inspection. Mr. Fung relies on the headnote of this case which said:

"The decision of a judge upon an application under Order XXXI., r. 19A, sub-r. 3, that a party shall make an affidavit stating whether a particular document specified in the application is in his possession, does not prejudice the right of the party making the affidavit to object subsequently to the production of certain entries in the document as being irrelevant. The question as to the relevance of the document must be decided on a summons for inspection under Order XXXI., r. 18."

At the first sight, it appears that the subject matter of the proceedings in the Thornett 's Case⁽³⁾ concern the question of relevance which we have decided. The documents required to be produced are relevant, because they touched upon the cause is relating to the matter and issue.

24. However, Mr. Ching cites another dictum from Scott L.J. at page 683 which reads as follows:

"I want to say quite clearly that, in my opinion, the decision of a judge upon an application under Order XXXI., r. 19A, for an order requiring another party  to state by affidavit whether any particular document or class of document specified in the application is or has been in his possession, does not prejudge any 'detailed' question of relevance. By detailed' I mean that it does not prejudge the question as to the right of the party making the affidavit to seal up certain entries as being irrelevant. That conclusion must follow if r. 19A is, as I have said, nothing more than a means of compelling a party to perfect the affidavit which was made originally in a defective form by making it complete; the supplementary affidavit equally with the original will leave open the right of the other party to give notice to inspect under r. 15. Then on the claim to inspect the question of relevance in regard to the contents of a document can, in my view, be raised. It follows that there is no question of any exercise of discretion by the judge below limiting the jurisdiction of this Court to make whatever order it thinks right. There is a question of principle involved."

Thus, despite the order for production, ATV is at liberty to seal off whatever part of the 7 documents which they contend is irrelevant or not related to the cause or matter to be disposed of.  Further, they can seal off whichever part of such documents which they feel that is prejudicial to ATV but not relevant to the issue. It may be a matter of negotiation or agreement between counsel. That does not give ATV a blanket protection from refusing to produce any of these documents for inspection.

25. We are not completely oblivious to the interests of ATV. In fact, we are told that when making the order, the judge in chambers did, mention the question of ATV having the right to seal off irrelevant matters before production. If such a course were followed, there would have been no risk to ATV's interests and therefore no oppression. We feel that a claim of privilege on the communication between Mr. Morris and the management has not been made out that it is a privilege in the narrow sense. The course of sealing off commends itself to us.

26. It has not been suggested by Mr. Fung that the judge did not exercise his discretion. Nor do we find that the judge has exercised his discretion upon wrong principle either by declining to inspect the documents or in making the order. We feel that it might have been better had the judge inspected the documents himself first and added a proviso in his order that ATV be allowed to seal off irrelevant materials in those documents. However, as we were told that he did mention this course to counsel on behalf of ATV, we cannot say that such a refusal or failure to add the said proviso amount to a wrong exercise of his discretion - bearing in mind that the defendant has that right to seal off irrelevant matters at all times.

27. We also bear in mind that the summons asked for the production and costs simpliciter. The order was granted practically in terms. We do not think we are pointing out the obvious by allowing the appeal to the extent by adding a proviso that ATV may seal off irrelevant materials by agreement between counsel with liberty to apply. We have absolute confidence in the integrity of counsel for both parties. Such a course had been suggested in the court below. Indeed, Mr. Fung assures us that he also has absolute confidence in the integrity of Mr. Ching, and I am certain Mr. Ching would reciprocate the compliments.

28. We further varied the order by setting aside the order as to cysts in the hearing before Master Barrington-Jones. But for the fact that the Plaintiff insisted on production which was not in the summons dated the 12th of August, 1983 by sending its letter dated the 18th of August. The hearing before Master Barrington-Jones would have been much shorter or even a consent order could be made. For this reason, that part of Mayo J's order should be varied to the extent that there will be no order as to costs in the hearing before Master Barrington-Jones.

29. The order of costs had been argued before us. Each party ask for costs of this appeal. We feel that, in so far as the variation is concerned, the.variation as to costs is a minimal variation. The costs should follow the events and cost of this appeal must go to the Plaintiff/ Respondent.

(1) (1974) A. C. 235

(2) (1970) A. C. 583

(1) (1974) A. C. 235

(3) (1939) 1 K.B. 675

Representation:

Mr. Daniel Fung & Mrs. Clement Shum (K.K. & Winston Chu) for appellant/ defendant

Mr. Charles Ching, Q.C. & Miss Bridges (Deacons) for respondent/plaintiff