CAC BRAKE CO. LTD. ZHUHAI v. LIANG JIN WEN AND OTHERS

HCA004666A/1997

HCA 4666/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4666 OF 1997

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J U D G M E N T

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1. This is an application by the Plaintiff for specific discovery under O.24, r.7, Rules of the High Court.

2. The 2nd Defendant was charged and convicted in the District Court in January of this year in respect of four charges of furnishing false information under the Theft Ordinance. He was sentenced to four years' imprisonment on 8th February 1999. The subject-matter of the criminal charges is relevant to the civil proceedings brought by the Plaintiff against the 2nd, 3rd and the 4th Defendants and the other Defendants in this action.

3. The Plaintiff brings this action against the Defendants for conspiracy to defraud and for fraud in respect of monies obtained under letters of credit issued against production of false contracts. It is alleged that the 2nd, 3rd and 4th Defendants with other Defendants conspired and arranged for the false documents to be produced to prove the bona fides of the underlying transactions under which letters of credit were issued and monies obtained thereunder.

4. In his plea in mitigation on behalf of the 2nd Defendant at the sentencing in the District Court, counsel then appearing for the 2nd Defendant read out a statement which he informed the court had been prepared by the 2nd Defendant in conjunction with his solicitors. The evidence shows that counsel appeared to paraphrase some parts of the statement and commented on occasions.

In the statement that was read out to the court, the 2nd Defendant admitted inter alia:

5. Parts of the statement having been read out in open court, it is well established that, even if the document had been confidential up to then, by reading it out in open courtconfidentiality is lost once and for all. No further question of privilege arises. (Style and Hollander on Documentary Evidence 6th Ed. (1997) at p.223-4)

6. As privilege in respect of part of the document has been waived, it appears to me that the whole document is discoverable. It relates to the subject-matter of the action and is discoverable. I am satisfied that the document is necessary for production under O.24, r.7 and I make an order in terms of the summons dated 15th February 1999.

7. I order that the 2nd, 3rd and 4th Defendants pay the Plaintiff costs of the application to be taxed on a party and party basis and to be paid forthwith.

Representation:

HCA004666B/1997

HCA 4666/97

HEADNOTE

Application by Plaintiff against some of the defendants for an order that they do by their solicitors' affirmation provide information giving full details of payments made to their solicitors in relation to legal fees. Allegation made that such payments were received by solicitors with knowledge of breach of Mareva injunction on the part of a defendant.

Held, This was not an application for discovery in aid of a Mareva injunction to discover the whereabouts of assets. The solicitors should not be compelled to make an affirmation to provide information to the Plaintiff for contempt proceedings. Application dismissed.

HCA 4666/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4666 OF 1997

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J U D G M E N T

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1. This is an unusual application. It is an application by the Plaintiff for an order that pursuant to the order of Patrick Chan J. (as he then was) dated 1st May 1997, the 2nd, 3rd and 4th Defendants do within 7 days from the date hereof each by their solicitors Messrs. Peter W. K. Lo & Co. provide on affirmation the information set out in the schedule to the summons dated 15th February 1999. The information that is sought in the schedule relates to full details of all payments made in relation to legal fees and expenses of the 2nd, 3rd and 4th Defendants in this action and the legal fees and expenses of the 2nd Defendant in connection with the criminal proceedings in District Court Criminal Case 771 of 1998 where the 2nd Defendant was the Defendant with another person. The details that are sought are to include the date when each payment was made, the amount of each payment, the name of the persons making each payment and the details of the bank account or accounts from which each payment was made, and copies of all documents evidencing the matters referred to are also sought.

2. The Plaintiff obtained a Mareva injunction in this case on 1st May 1997 which was granted by Patrick Chan J. (as he then was). Para. 6 of his order provided, inter alia, as follows:

3. The 2nd, 3rd and 4th Defendants have deposed on affirmation that they have no assets. That was done in compliance with the order of Patrick Chan J. but I am told that that was not done immediately.

4. The 2nd Defendant is also a director of the 3rd and 4th Defendants. The 2nd Defendant was charged and convicted in the District Court on 22nd January 1999 in respect of four charges of furnishing false information under the Theft Ordinance. These relate to the subject-matter of the civil action brought by the Plaintiff against these and other Defendants and on 8th February 1999, the 2nd Defendant was sentenced to four years' imprisonment. He was represented by counsel and solicitors at his criminal trial, and indeed, has been represented by counsel and solicitors in these proceedings.

5. In June 1998, the Plaintiff's solicitors wrote to the solicitors for these Defendants requesting, inter alia, details of the account or accounts from which funds had been drawn to pay the reasonable legal fees incurred in this action and the amount of those payments. There did not appear to be any reply to that letter and the matter was taken up again on 17th December 1998 by a letter from the solicitors for the Plaintiff to the solicitors for these Defendants. Attention was drawn to the relevant parts of para. 6 of the order made by Patrick Chan J., which was wrongly described as para. 5 in the letter. By para. 4 of the letter, it was stated as follows:

And in the para. numbered 5 of the letter it was stated as follows:

The reference to para. 5 should, of course, have been a reference of para. 6 of the order. The letter went on to ask for full particulars of all payments that had been received by the solicitors from Mr. Lam or on behalf of Mr. Lam, on account of legal costs, including details of when all such payments were made, the amount of each payment and the bank account(s) from which and/or persons from whom the payments were received.

6. It is clear from that letter that the solicitors for the Plaintiff was alleging that the 2nd Defendant was in breach of the Mareva injunction and in contempt of court. It is also clear that an allegation was made that the solicitors' firm, Messrs. Peter W. K. Lo & Co., had accepted funds in the knowledge of Mr. Lam's contempt; in effect, alleging that they were aiding and abetting a breach of the Mareva injunction on the part of Mr. Lam. Those are serious allegations especially made against a solicitor.

7. On 23rd December 1998, the solicitors for these Defendants wrote to the solicitors for the Plaintiff stating, inter alia:

8. This led to the response from the solicitors of the Plaintiff on 23rd December which stated, inter alia:

9. On 2nd January 1999, solicitors for these Defendants replied as follows stating, inter alia:

10. Understandably, as these Defendants had been represented by solicitors and counsel in these proceedings and the 2nd Defendant had been represented by counsel in his criminal proceedings, the solicitors for the Plaintiff were not happy with that response and wrote on 5th January 1999, pointing out in effect that in the skeleton bill of costs which had been used in the application for security for costs by these Defendants legal costs had been incurred and that counsel had already been paid certain sums of money. Furthermore, two counsel had been employed in the criminal proceedings with the same solicitors instructing them as the solicitors for these Defendants. So, not unreasonably, the solicitors asked for the solicitors to reconsider their position and to provide the full and complete detail of the matters for which they had requested.

11. No substantive reply was received on these matters until 15th February 1999 and by a letter from the solicitors for these Defendants to the solicitors for the Plaintiff, they stated, inter alia, as follows:

Again, the reference to para. 5 of the order should be to para. 6 of the order. This letter seems to suggest that the solicitors had been funded from funds which do not come from the assets of Mr. Lam or any of the other Defendants that the solicitors were acting for and at first blush, it seems to be contradictory to an earlier letter that they had written which I have set out above. The solicitors for the Plaintiff were not happy with that response and they issued the summons.

12. The Plaintiff relies on the authority of A and another v. C and another [1981] 2 WLR 629 in support of this application. That, in my view, was a very different situation. In that case, Goff J. (as he then was) was dealing with an application for discovery in aid of a Mareva injunction. The discovery that was being sought was an order that the defendants disclose sums at present standing in the accounts in the name of the defendants. It is one thing to ask for discovery in aid of a Mareva injunction to discover the whereabouts of assets. It is quite another thing to ask for discovery where allegations have been made that the Defendant is in breach of the Mareva injunction as well as the solicitors acting on his behalf. The discovery that is being sought is, in my view, being sought for the purpose of trying to bolster up a case for contempt proceedings against the Defendant. It is not to discover the whereabouts of assets.

13. In my judgment, the case of A and another v. C and another is no authority for the type of order that the Plaintiff wishes to seek. I do not consider that in the exercise of my discretion I ought to compel the Defendants' solicitors to make an affirmation to provide information to the Plaintiff so that they can bring contempt proceedings against the 2nd Defendant which I have said, an allegation that there has been a breach of the Mareva injunction has already been made against the 2nd, 3rd and 4th Defendants, and indeed, against the solicitors as well for assisting the allegedbreach.

14. In the circumstances, the summons is dismissed. Costs to these Defendants in any event.

Representation:

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 4666 OF 1997 AND 3041 OF 1998

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HCA4666/97

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(HEARD TOGETHER)

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REASONS FOR JUDGMENT

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1. In High Court Action No.4666 of 1997, by summons dated 7th December 1998, the plaintiff made the following application :

2. On 15th December 1998, I made an order in terms of the application. I now give my reasons.

3. On 1st May 1997, the Plaintiff obtained a world-wide Mareva injunction against the Defendants, with a disclosure order. The Plaintiff gave an undertaking which included the following :

4. In compliance with the disclosure order the 2nd Defendant, by himself and on behalf of the 2nd and 3rd Defendants, filed certain affirmations. Mr Mak Shing, as director of the 3rd and 4th Defendants, also filed an affirmation, as did Mr Liu Wai-hung, the 5th Defendant.

5. The 2nd Defendant Mr Lam Choi-lan is presently on trial with one Mr Lo Jock-huen and the 6th Defendant in this action before the District Court on various counts of false accounting and conspiracy to defraud arising out of the same matters as this action. The Plaintiff seeks to be released from its undertakings so that it can disclose the leave of the Court to disclose information obtained in this action to the Secretary for Justice, in order to assist the Prosecution in the District Court case.

6. The 2nd Defendant complains that among the document bundle provided to him by the Prosecution, he found his affirmation dated 22nd May 1997, the affirmation of Mr Mak Shing dated 14th May 1997, and an affirmation by the 5th Defendant. Mr Mak Shing and the 5th Defendant appear on the list of witnesses which he says he received from the Prosecution. He infers that the Plaintiff or its solicitors must have disclosed this information to the Police and the Prosecuting Counsel, which he says is in breach of the undertaking shown above.

7. Mr Rattigan and Mr Lamplough of Herbert Smith, the Plaintiff's solicitors, have filed affirmations denying such disclosure. Correspondence with the Commercial Crime Bureau, also denying such disclosure, has been exhibited. Mr Lamplough affirms that the police officer in charge of the case and the Prosecuting Counsel, Mr McLanachan, have been shown the front pages of the affirmations and have confirmed to him that they are not in possession of copies of the affirmations.

8. There is no explanation as to how these affirmations got into the bundle of witness statements, if indeed they did. It is curious that the 2nd Defendant himself appears as a witness on the list of witnesses which he has exhibited. He is not a witness for the Prosecution, obviously. One would not have expected his name to appear as a witness on the basis that he had given a cautioned statement; normally one would expect the statement taker's name to appear, and the statement itself to be shown as an exhibit. In any event there is no evidence as to how this list came into being, or who is its author.

9. In any event it seems to me that I have to take the present position to be as it appears from Mr Lamplough's affirmation, namely that however the documents may have come into the possession of the 2nd Defendant, neither the Police nor the Prosecuting Counsel is now in possession of them.

10. I can see no reason why these documents should not be made available to the prosecuting authority for use in criminal proceedings. This is obviously what the House of Lords had in mind when it held in Rank Film Ltd. v. Video Information Centre [1982] 1 WLR 380 that the Defendants were entitled to rely on the privilege against self-incrimination by discovery or by answering interrogatories since if they complied with orders of that nature there was in the circumstances, a real and appreciable risk of criminal proceedings for conspiracy to defraud being taken against them. See the dicta of Lord Fraser of Tullybelton at p.446E :

And at p.447F :

11. The criteria for the exercise of the Court's discretion to release relevant documents from hub into satellite proceedings are set out in the judgment of Laddie J. in Cobra Golf Inc. and Anr. v. Rata & Ors., [1996] FSR 819 at p.830-831. It seems to me that, applying those criteria, it is proper for the Plaintiff to be released from its undertaking so that the criminal authorities may see the papers and make such use of them in the criminal proceedings as they may.

12. Paragraph 11 of Laddie J's criteria states :

13. Mr So for the 2nd Defendant argues that this order should not in any event be made because there has already been disclosure.

14. The answer to this must be that there is insufficient evidence of disclosure. If there had been, the Police and the Prosecuting Counsel in the District Court action would have these documents and I accept that they have not.

15. Paragraph 11(d)(1) of the criteria states :

16. The 2nd Defendant did not seek to rely on this privilege in relation to the affirmations which he filed this action, as presumably he could have done, if he wished, in reliance on Rank Film Ltd. Nor indeed does it appear that there is any self-incrimination in his affirmations which are exculpatory. In any event, it will be for the District Judge to consider whether the use of any of the information contained in the documents is admissible, and if it is, whether or not it is prejudicial.

17. For these reasons, I allowed the application.

18. In High Court Action No.3041 of 1998, by a summons dated 7th December 1998, the Plaintiff made a similar application in respect of an undertaking given on 27th February 1998, for the purposes of an injunction made on the same date. The 2nd Defendant in this case, Mr Lo Jock-huen, is jointly charged in the District Court with Mr Lam Choi-lan. The Plaintiff seeks to be released from its undertakings so that it can disclose information obtained in this action to the Secretary for Justice, in order to assist the Prosecution in the District Court case.

19. There was no appearance by or on behalf of any of the Defendants in this action. For the same reasons as those given above, in their absence, I allowed the application.

Representation: