LAM SIU LEUNG AND ANOTHER v. KOOVER WOOLLEN KNITTING FACTORY LTD. AND OTHERS

HCMP 6321/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 6321 OF 1998

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R U L I N G

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1. There has been argument between the Petitioners and the Respondents in this case as to the scope of the waiver of without prejudice negotiations.

2. The matter arises in this way: the Petitioners' case is that there has been delay by the Respondents in respect of what the Petitioners say was an agreement for one party to buy out the other. The Respondents say that the proceedings had been taken for an ulterior motive of increasing the price of the shares in question.

3. The witness called for the Petitioners has just referred in evidence to there being two to three offers from the Respondents, and has referred to a first offer of $3 m. Now, clearly in my view, there has been waiver by him of the contents of the first offer. When I say waiver by "him", it is really a waiver by the Petitioners (the witness not being one of the Petitioners) by allowing him to give evidence as to the contents of the first offer, and Mr. Rimsky Yuen, counsel for the Petitioners, has not really sought to argue that there has been no waiver of the contents of the first offer.

4. The question is whether that waiver extends to the terms of the second or third offers.

5. In considering this aspect, one must return to first principles. As I understand it, the policy of without prejudice privilege is that parties to litigation should be free to negotiate with a view to settling the matter. Negotiations obviously entail the giving up by one party, or the other, or both, of any particular positions held by them. There may be many reasons for one party or other to give up any particular position. Clearly, negotiations are undertaken with a view to save time and costs, and of course, with a view to the uncertainties of litigation. So the fact that there were without prejudice negotiations is admissible in evidence, and it is sometimes necessary to be adduced, for example, to answer allegations of delay.

6. Now, when the evidence of the fact of without prejudice negotiations is admitted, in my view, that is not equivalent to waiving the privilege that attaches to the contents of those negotiations. So when one party or one witness in a case accepts that there were without prejudice negotiations, without more, in my view, that does not enable the other party to open up the contents of those negotiations. The logical inference from that understanding, in my view, is that when one party or witness refers to there being two or three offers in without prejudice negotiations and stops at that, in my view, that fact that there were two or offers in without prejudice negotiations does not waive the privilege that attaches to the contents of those two to three offers.

7. Mr. Hung suggests that the judge may be prejudiced in learning that one party has made two or three offers to the other side. But in my view, no prejudice attaches to that situation. The fact that one party may have made one, or two, or three offers does not, in my view, take it any further than simply saying that there were without prejudice negotiations over a period of time.

8. In my view, therefore, the scope of the waiver is limited to the contents of the first offer. Of course, in so far as any correspondence has been exchanged between the parties on that first offer, the privilege attaching to those parts of the documents would similarly have been waived.