CRANE WORLD ASIA PTE LTD v. HOTRADE ENGINEERING LTD

HCA 109/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 109 OF 2014

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D E C I S I O N

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Introduction

1.  The parties’ disputes in these proceedings essentially concern construction tower cranes and parts which the defendant (“D”) hired from the plaintiff (“P”) under rental agreements.

2.  The present application before this court was issued by D on 6 May 2016, to strike out certain parts of a witness statement given by one of P’s witnesses, a Mr Yau Ming (“Yau”). 

3.  P is a company incorporated in Singapore carrying on the business of providing tower cranes and spare parts for hire and sale.  D is a Hong Kong company which provides crane and hoist engineering services for construction projects. 

4.  P has taken out a total of 3 actions against D (collectively “3 Actions”).  Briefly, and among other things, in the 1^st Action, HCA 109/2014, P claims for sums due under 32 rental agreements in respect of 32 cranes; in the 2^nd Action, HCA 256/2014, P seeks delivery up of 6 out of the 32 cranes and parts supplied under rental agreements and 4 cranes and accessories delivered by P to D pursuant to oral contract; and in the 3^rd Action, HCA 462/2014, P claims delivery up of the remaining 26 out of the 32 cranes and parts. 

5.  D denied P’s claims in the 3 Actions.  I understand that since the commencement of the 3 Actions, some of the cranes have already been returned to P, including those in the 2^nd Action.

6.  The 3 Actions have been directed to be heard together and fixed for a speedy trial, which will commence in less than a month’s time   on 13 June 2016 before DHCJ Eugene Fung SC.

HCA 655 of 2014

7.  After the 3 Actions were issued, D has taken out a separate action under HCA 655/2014 (“HCA 655”) against 3 defendants, being Yau,  a Mr Poon Wee San alias Roger Poon (“Poon”), and Crane World (HK) Limited (“CWHK”), alleging conspiracy and collusion between them.

8.  Yau is a 43.75% shareholder of D[1].  The other two shareholders are Mr Leung Ping Wah (43.75%) (“Leung”) and Dr Lee Chun Yu Jimmy (12.5%) (“Lee”).  Yau had said that he was a founding director of D, and according to him, he resigned as a director from D with effect from 31 October 2013.  Yau said there was a common understanding between the 3 of them that Yau was to remain as a director “on paper” or on record only, to avoid banks from calling in loans and/or reducing D’s credit lines.   

9.  Yau remained a director on record until 10 January 2014, but according to Yau, he took no part in the management of D’s business of affairs after 31 October 2013.  

10.  Poon was/is a director of P, and from 22 November 2013, he has been a director of CWHK, a wholly owned subsidiary of P.  CWHK was incorporated in Hong Kong on 22 November 2013.

11.  Briefly, it is D’s case in HCA 655 that in about October 2013, when Poon learnt of D’s decision to end its business dealings with P, he conspired and colluded with Yau in the setting up of CWHK as a competing business of D, and that Yau was in breach of his fiduciary duties to D.  This was in fact also one of D’s defence in the 3 Actions.  Yau has denied all D’s allegations.

12.  On 26 November 2015, D’s solicitors sent a letter marked “Without Prejudice Subject to Contract” to Yau’s solicitors (“26.11.15 Letter”), setting out proposed settlement terms in relation to the sale of Yau’s shares  in D and  discontinuance of HCA 655 against Yau.  Yau’s solicitors replied on 1 December 2015 with their comments (“01.12.15 Letter”).  Thereafter, there was a further letter sent by D’s solicitors dated 22 December 2015 to Yau’s solicitors and marked “Without Prejudice” (“22.12.15 Letter”).  The 3 letters will be collectively referred to as the “3 Letters”[2]. The proposed settlement attempt failed.

Yau’s 2^nd witness statement

13.  Yau has provided two witness statements for P in the 3 Actions.  Yau’s 2^nd witness statement was dated 24 March 2016 and filed in court on 6 April 2016[3].

14.  In paragraph 5 of Yau’s 2^nd witness statement, he referred to a discussion with Leung in 2015 in which Yau had asked Leung to settle the court cases between P and D and to realize Yau’s shareholding but the matter never reached any meaningful conclusion[4].  Then in paragraphs 8-15 under the heading “The Problematic Offer on 26 November 2015”, Yau went on to set out the contents of the 3 Letters and further attached copies of the 3 Letters as part of Appendix [36] to his 2^nd witness statement.

15.  The above paragraphs of Yau’s 2^nd witness statement and Appendix [36] enclosing the 3 Letters are the parts objected to by D (“Objected Contents”).

16.  So far as I could gather, the essential terms of the proposed settlement by D as set out in the 26.11.14 Letter were:

(1)  Yau was to sell his 43.75% shareholding in D to Leung and Lee at a consideration of HK$12m (“Consideration”), to be paid as follows:

(i)    Yau to assign his director loan of HK$7,957,920.63 (as at June 2015) to Leung and Lee, and this sum to be set off from the Consideration, and the assignment was to be executed at the same time as the bought and sold notes for the transfer of the shares;

(ii)   The balance of the Consideration (ie HK$4,042,079.37) to be held by the solicitors for Leung and Lee as stakeholders pending the conclusion of the 3 Actions, and in the event of any adverse judgment and/or costs orders against D in the 3 Actions, Yau was to be responsible for 43.75% thereof and such sums would be deducted from the balance of the Consideration before release to Yau.

(2)  There were then three “Additional Matters” (“Additional Matters”) set out, namely:

(i)    Yau not to prepare any witness statements for P in the 3 Actions (“1^st Additional Matter”);

(ii)   Leung and Lee to procure D to release Yau’s two properties from the banking facilities with DBS Bank within 2 months from date of execution of the bought and sole notes for the transfer of the shares (“2^nd Additional Matter”);

(iii)  D to discontinue HCA 655 against Yau within 14 days of the conclusion of the 3 Actions (“3^rd Additional Matters”).

The parties’ respective case

17.  D’s present application is based on the ground that the Objected Contents contained and/or related to “without prejudice” settlement negotiations and were subject to privilege (“WPP”).

18.  D opposed P’s application on the ground that WPP does not apply to the Objected Contents because:

(i)    There was unambiguous impropriety on the part of D in the proposed terms of the 26.11.15 Letter; and/or

(ii)   There was no genuine or bona fide attempt on the part of D to settle the dispute between D and Yau.

General Legal Principles on WPP

19.  Mr Richard Khaw and Mr Adrian Leung appeared for D, and Mr Derek Chan and Mr Michael Lok appeared for P at the hearing before this court.

20.  On the basic principles concerning WPP, Mr Khaw has referred this court to Re Jinro (HK) International Ltd [2002] 4HKC 90, (unrep, 18.07.02) where Kwan J, as she then was, held as follows on WPP:

“(1)  A party claiming without prejudice privilege on communication would have to show that the communication was made (i) at a time when there was an existing dispute between the parties; (ii) legal proceedings in relation to the dispute had commenced or were contemplated; (iii) the communication was made in a genuine attempt to settle the dispute and (iv) the communication was made with the intention that, if negotiations failed, it could not be disclosed without the consent of the parties.

(2)  It was not necessary for a ‘without prejudice’ stamp to be expressly applied to the negotiation if it was clear from the surrounding circumstances that the parties were genuinely seeking to compromise the dispute...”

(3)  ...

(4)  ...

(5)  In exceptional circumstances, evidence that would otherwise be protected by without prejudice privilege would be rendered admissible if the exclusion of the evidence would act as a cloak for perjury or other unambiguous impropriety.  This exception would be applied to the clearest of cases so as not to impair the value of the without prejudice rule.  ....”

21.  Mr Chan has also referred this court to what were said by Reyes J in Standard Chartered Bank (Hong Kong) Limited v Ma Lit Kin, Cary HCA 62/2006 (unrep, 22 January 2007), as follows:-

“(1)  For a claim of ‘without prejudice’ privilege to succeed, the party claiming it must show that the communication was made:-

(a)  in a bona fide attempt to settle a dispute between the parties; and,

(b)  with the intention that, if negotiations failed, the communication could not be disclosed without the consent of the party making the communication.

(2)  In establishing that there was a bona fide attempt to settle a dispute, the party seeking to assert privilege must show that, at the time of his communication:-

(a)  a dispute existed between the parties in respect of which legal proceedings had commenced or were contemplated; and,

(b)  the communication was made in an attempt to further negotiations to settle that dispute.

(3)  The mere fact that a communication concerns a dispute between the parties is not sufficient to confer privilege.

(4)  The communication need not be expressed to be ‘without prejudice’, if it is clear from the surrounding circumstances that the parties were generally seeking to compromise their dispute.

(5)  But there is an exception to the ‘without prejudice’ privilege.  This exception applies where the exclusion of the evidence would act as a cloak for perjury or other ‘unambiguous impropriety’.  This exception should only apply in the clearest of cases, since otherwise it could undermine the ‘without prejudice’ privilege altogether.”

22.  To summarise, from what was said by Kwan J and Reyes J above, a person asserting WWP over his communication must show that at the time of his communication :

(i)    a dispute existed between the parties in respect of which legal proceedings had commenced or were contemplated;

(ii)   the communication made was a genuine or bona fide attempt to further negotiations to settle that dispute; and

(iii)  the communication was made with the intention that, if negotiations failed, the communication could not be disclosed without the consent of the party making the communication.

23.  The issue of whether without prejudice communications between parties to litigation are protected from disclosure to other parties in the litigation has also been considered in Rush & Tompkins Ltd and Greater London Council [1988] 3 WLR 939 HL.  In that case, the plaintiff had entered into a building contract with the 1^st defendant for a housing development and had engaged the 2^nd defendant as subcontractors for certain of the works. Correspondence marked “without prejudice” between the plaintiffs and the 1^st defendant resulted in their reaching a compromise agreement, and the plaintiff discontinued their action against the 1^st defendant. The 2^nd defendant sought disclosure by the plaintiff of the “without prejudice” correspondence, and when refused, applied for an order for specific discovery.  The 2^nd defendant’s application was refused by the judge at first instance, but allowed by the Court of Appeal.  The plaintiff’s appeal to the House of Lords was then allowed.

24.  It was held by the House of Lords that (1) in general the “without prejudice” rule made inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made with a genuine intention to reach a settlement; and that admissions made to reach settlement with a different party within the same litigation were also inadmissible whether or not settlement was reached with that party; and (2) the general public policy that applied to protect genuine negotiations from being admissible in evidence also applied to protect those negotiations from being disclosed to third parties; and that accordingly the judge’s decision dismissing the application for discovery should be restored[5].

25.  There was no real dispute between the parties on the above general basic principles on WPP.

Whether WPP applies to the Objected Contents

26.  Mr Chan’s submissions placed much emphasis on the issue of “unambiguous impropriety”.  I accept, however, Mr Khaw’s submissions, that the correct approach should be for this court to decide whether WPP applies in the first place to the Objected Contents, before considering whether the exception of “unambiguous impropriety” applies.

27.  Mr Chan has argued that the Objected Contents were not part of a bona fide attempt to settle ongoing disputes between D and Yau, and further the condition in the 1^st Additional Matter, namely requiring Yau not to prepare any witness statement for P in the 3 Actions was clearly intended to “sabotage” the presentation of P’s case, with a view of “short-circuiting” the 3 Actions.

28.  Mr Chan has further submitted that it is almost central to D’s defence in the 3 Actions that it was P’s wrongdoing (involving a conspiracy with Yau) which had prevented D from performing the rental agreements and leasing out of the tower cranes, and thus Yau would clearly be a relevant witness for P.  Further, the absence of Yau would bring about two possible repercussions for the trial of the 3 Actions:

(i)    The burden of proof would rest squarely on P and the absence of a key witness would very likely undermine P’s ability to prove its case;

(ii)   In the absence of a relevant witness, adverse inferences could be drawn by the trial judge against P.

29.  However, on (i) above, even if Yau is a relevant and/or key witness for P, Yau will still have to be subjected to cross examination during the trial, and ultimately whether Yau’s evidence will be accepted by the trial judge or indeed whether his evidence will assist P’s case is a matter which awaits to be seen.  Further, P will be calling 3 other witnesses who had dealt with D including Poon.  In any event, the burden of proving that it was P’s wrongdoing that had prevented D from performing the rental agreements should fall on D.  Even if the presence of Yau and his evidence would assist P’s case, I see no sufficient evidence that his absence would very likely undermine P’s ability to prove its case, as submitted by Mr Chan.  As regards (ii), whether the absence of a relevant witness would attract adverse inferences being drawn would depend on a number of factors including whether there was a reasonable explanation for the absence of the witness, and the absence of a witness would not necessarily mean that an adverse inference would be drawn.

30.  Mr Chan has also submitted that the offer contained in the 26.11.15 Letter was not a genuine/bona fide offer to effect a settlement, but an “instrument” to “sabotage” P’s case and that this was reinforced by the following indicia:

(i)    The 26.11.15 Letter emerged after a summary judgment application was made and settled on the day of the hearing itself (as seen from the order dated 25 August 2015[6]). In addition to the pleadings filed, there were affirmation and affidavit evidence filed in that application which would have made clear to D as to what the issues at trial would be, as well as the relative strengths and weaknesses of the parties’ cases.  The 26.11.15 Letter was therefore made after D was fully informed of the significance of Yau’s evidence to P’s case.

(ii)   The 26.11.15 Letter referred to “the conclusion”of the 3 Actions as the yardstick, after which HCA 655 would be discontinued.  D thus had in mind the disposal of the 3 Actions when setting out the terms of the 26.11.15 Letter, and this reinforced the fact that D intended to use the offer in the 26.11.15 Letter as an instrument to sabotage P’s case in the 3 Actions – with the discontinuance of HCA 655 held back until it was confirmed that Yau had indeed not provided a witness statement and that the 3 Actions had ended. This is particularly so, given that Yau would merely be a witness in the 3 Actions, and not any one who could bona fide reach a settlement with D on behalf of P.

(iii)  When Yau’s solicitors queried the relevance of the 1^st Additional Matter, D’s solicitors’ response was simply to assert that (i) it was relevant; and that (ii) it was Yau’s actions which had led to the proliferation of disputes between D and P.  D’s solicitors’ response did not justify the relevancy between (i) the sale of Yau’s shares in the context of negotiations in the HCA 655 and (ii) Yau giving of evidence in the 3 Actions.

31.  First of all, I note P’s application for summary judgment was made on 20 March 2015, and the matter came before this court on 25 August 2015 when the parties agreed that the 3 Actions should go to a speedy trial, rather than the parties incurring time and costs arguing about summary judgment.

32.  Whether D would have known from the affirmations filed in connection with the summary judgment the significance of Yau’s evidence to P’s case by the summary judgment hearing on 25 August 2015 or not, the fact is that the 26.11.15 Letter did not “emerge” immediately after the hearing, but was sent 3 months afterwards.

33.  Further, to put it in proper context, what can be seen from the evidence is that after the hearing on 25 August 2015, (i) D had served a statutory demand on Yau on 27 October 2015 over Yau’s outstanding director’s loans to D of some HK$7.9m[7]; (ii) Yau’s solicitors had written to the DBS Bank on 2 November 2015 to try to release Yau, his wife and/or their company Tat Ming Engineering Limited from their respective guarantees and to release their two properties from legal charges/mortgages provided to the bank as security for D’s general banking facilities; (iii) DBS Bank replied to Yau’s solicitors on 12 November 2014 refusing to release Yau and/or his wife and/or their company and their properties and informing them that the outstanding loan balance of D was about HK$8.6m as at 11 November 2015[8]; (iv) notwithstanding all the litigations, Yau remained a 43.75% shareholder of D.

34.  In the above circumstances, it would appear to be as much in Yau’s interest as well as D’s interest for all their differences to be resolved.

35.  Yau said in his 2^nd witness statement that in 2015 Leung had discussed with him in person and that Yau had asked Leung to settle the court cases and to realize Yau’s shareholding, but the matter never reached any meaningful conclusion[9]. The 26.11.15 Letter had referred to “recent discussions” between D and Yau concerning the sale of Yau’s shareholding.  From the evidence, there had clearly been some discussions between D’s side and Yau and these had not been disclosed to the court.  It was thus not quite clear as to how or why the 26.11.15 Letter, or the proposals therein “emerged”.  In any event, I do see that there was sufficient basis to say that the fact that the letter emerged 3 months after the summary judgment hearing was any indication that it was sent to sabotage P’s case in the 3 Actions.

36.  The 3^rd Additional Matter set out by D in the 26.11.15 Letter was that HCA 655 would only be discontinued by D against Yau 14 after the conclusion of the 3 Actions.  First of all, I cannot see any sufficient evidence that D was trying to “dispose of” the 3 Actions by the 26.11.15 Letter.  Also, this condition in the 3^rd Additional Matter should be read in connection with the other proposed terms, in particular, the proposal in relation to the payment of the balance of the Consideration.  It was D’s condition that the balance of the Consideration was to be held by stakeholders pending the conclusion of the 3 Actions, and that Yau should be 43.75% responsible for any adverse judgement sum and/or costs against D.  Thus, in my view, the discontinuance would appear to be timed and linked to Yau’s liability for 43.75% of any adverse judgment and/or costs against D in the 3 Actions and the payment of the balance of the Consideration. 

37.  I therefore do not see the condition in the 3^rd Additional Matter any indication that the letter was an instrument to sabotage P’s case in the 3 Actions.

38.  Yau’s solicitors had queried in their 01.12.15 Letter the relevancy of the 1^st Additional Matter to the sale of Yau’s shares. In reply, D’s solicitors had explained in the 22.12.15 Letter that the sale of Yau’s shares had every relevance with the 3 Actions, as D took the view that it was Yau’s actions which had led to the proliferation of disputes between P and D in the 3 Actions[10].  Mr Chan had submitted this explanation did not justify the relevancy.

39.  Such explanation again had to be read in the context of what D’s solicitors had said earlier in the 22.12.15 Letter, namely the Consideration of HK$12m was based on a valuation when Yau left the company and since then the valuation had been affected by the ensuing litigations/3 Actions, and as Yau was the causation of all the disputes between P and D, Yau should be responsible for 43.75% of any adverse judgment and/or costs in the 3 Actions, and thus D insisted on the balance of the Consideration to be withheld until conclusion of the 3 Actions and D also insisted on only discontinuing HCA 655 against Yau 14 days after conclusion of the 3 Actions.

40.  It was not in fact clear from the 22.12.15 Letter whether D was still insisting on the condition in the 1^st Additional Matter.  However, the reality is if Yau indeed were to agree to D’s proposal that he would be 43.75% responsible for any adverse judgment/costs against D in the 3 Actions, it would probably follow that he would not give any witness statement in the 3 Actions on behalf of P.

41.  P’s claims in the 1^st Action alone were for sums over HK$10m.  D’s proposals meant that if an adverse judgment and costs were awarded against D, apart from him and his wife and their company being released from their guarantees and liabilities and their two properties released from the legal charges, Yau could end up with receiving nothing out of the balance of the Consideration for the sale of his shares.  It was further not made clear by D in the 26.11.15 Letter or the 22.12.15 Letter whether Yau would need to make up any shortfall. 

42.  The proposals may not be attractive to Yau, but it does not mean that the proposals made by D were not genuine or bona fide proposals to settle the dispute between D and Yau.  I do not see sufficient evidence that the imposition of the condition in the 1^st Additional Matter, or the other conditions, meant that the 26.11.15 Letter was only an instrument to sabotage P’s case at the trial of the 3 Actions.  Even if Yau does not give evidence, this does not mean P’s case will be sabotaged.

43.  There was no complaint by Yau’s solicitors in the 01.12.15 Letter about D’s offer not being a genuine or bona fide attempt to settle the dispute between D and Yau.  In fact, if Yau had felt so strongly about D’s offer was meant to ask him to tell lies as he had said in his witness statement[11], there was no reason why he could not instruct his solicitors to say so in the 01.12.15 Letter, instead of only saying whether he gave any witness statement for P in the 3 Actions had no relevancy to the sale of his shares.

44.  Having considered all the above, I am of the view that the proposals made by D in the 26.11.15 Letter ,and also the 22.12.15 Letter, were part and parcel of a genuine or bona fide attempt to settle the dispute between Yau and D.

45.  The 3 Letters were sent at a time when there was an existing dispute between D and Yau and D’s letters were marked “without prejudice save as to costs” or “without prejudice”, and the letters were clearly sent with the intention that, if negotiations failed, they and any response from Yau, could not be disclosed without the consent of D, until when it comes to any argument on costs.

46.  I am thus satisfied that WPP applies to the 3 Letters and the Objected Contents.  The next issue is whether P can rely on the exception, namely whether there was “unambiguous impropriety”.

Unambiguous impropriety

The Law

47.  It has been stated in paragraph 19-39 of Foskett on Compromise, 8^th Edition, that the expression “unambiguous impropriety” is a convenient generic description applied to a variety of things said or done during without prejudice negotiations which may, in certain circumstances, be admitted in evidence.  The learned author then went on to set out a brief review of cases which illustrated how impropriety perpetrated under the cover of without prejudice discussions may properly be revealed at a subsequent trial, and the learned author then concluded in paragraph 19-46 that “There is, however, a clear trend in the authorities reflecting the desirability of restricting the occasions when this is permissible to clear cases of “unambiguous impropriety”[12].

48.  Mr Chan has referred this court to Unilever Plc v The Procter & Gamble Co [2000] 1 WLR 2436.  In this case, Robert Walker LJ had set out some of the most important instances when, despite the existence of without prejudice negotiations, the without prejudice rule would not prevent the admission into evidence of what one or both of the parties said or wrote.  One of these instances set out is that one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as “a cloak for perjury, blackmail or other unambiguous impropriety”[13].  Walker LJ however had also pointed out that the Court of Appeal had in an earlier case warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion[14].

49.  Walker LJ had cited the following passage from Lord Griffiths in Rush & Topkins :

“... more recent decisions illustrate, that even in situations to which the without prejudice rule undoubtedly applies, the veil imposed by public policy may have to be pulled aside, even so as to disclose admissions, in cases where the protection afforded by the rule has been unequivocally abused[15].”

50.  However, Walker LJ had then continued on to say that the expansion of exceptions should not be encouraged when an important ingredient of Lord Woolf’s reforms of civil justice is to encourage those who are in dispute to engage in frank discussions before they resort to litigation[16].

51.  In Hong Kong, it has also been held by Recorder Jat Sew Tong SC in Re Estate of Joachim Thomas [2011] 5 HKLRD 538, HCMP 209/2011, 30.09.11, following Unilever, Re Jinro, and other cases that the rule is designed to encourage frank exchanges and the exception of “unambiguous impropriety” to pierce the veil of WPP should only be applied in the clearest cases of abuse of a privileged occasion[17].  (emphasis added).

P’s case

52.  P’s case is that the Objected Contents revealed unambiguous impropriety, namely they revealed a clear and blatant attempt to pervert the course of justice and/or to act in contempt of court by improperly interfering with a potential witness in the 3 Actions, namely Yau.

Attempting to pervert the course of justice

53.  Mr Chan has referred this court to a number of cases on the offence of attempting to pervert the course of justice.  As seen from HKSAR v Wong Shing Yim [2002] 3 HKLRD 1046, the common law offence of perverting the course of justice was committed when a person: (a) acted or embarked on a course of conduct; (b) which had a tendency to; and (c) was intended to pervert; (d) the course of public justice[18].  The course of justice is perverted if the capacity of a court to do justice is impaired[19]; there does not need to be an actual interference with the administration of justice, as the fact that the defendant’s action(s) has a tendency to have that effect is sufficient to comprise the offence[20].

54.  In particular, Mr Chan referred the court to two Court of Final Appeal cases, both involving lawyers making approaches to a witness or prospective witness.  In HKSAR v Egan (2010) 13 HKCFAR 314, Ribeiro PJ stated that :

“The act of approaching a witness (a term I use to include a prospective witness) may or may not have a tendency to pervert the course of justice depending on the circumstances. In most cases where the offence is charged, the position is straightforward. Thus, where the accused seeks to induce a witness to give false evidence or not to give evidence by using force, bribery or improper pressure, there is no doubt that the act is culpable as an attempt to pervert the course of justice[21].

...an approach to a witness would obviously be unlawful if its object were, for example, to persuade the witness to give false or perjured evidence or to refrain from telling the truth. In such cases, it is unnecessary to consider the means used. It is no defence to say that the accused merely threatened the witness with the exercise of a legal right. The unlawfulness of the object is sufficient to found the offence[22].”

55.  In HKSAR v Wong Chi Wai (2013) 16 HKCFAR 539, Ribeiro PJ stated that what conduct constitutes “improper pressure” on a witness is a matter of fact and degree; “in some cases, in deciding whether the pressure acquired the prohibited tendency, it may be useful to ask whether it had the tendency to prevent the witness making a free and voluntary choice as to whether to give evidence and what evidence to give”[23].

56.  Mr Chan has also referred this court to Connolly v Dale [1996] QB 120 where it was held, among other things, that interference with witnesses, actual or potential, by threat, promise or subsequent punishment amounted to a contempt of court, and extended to interference with proper and reasonable attempts by a party’s legal advisers to identify and interview potential witnesses; that interference with a solicitor in the discharge of his duties could also constitute contempt[24].

57.  As Lord Denning MR had said in Harmony Shipping Company SA v Saudi Europe Line Limited [1979] 1 WLR 1380:

“So far as witnesses of fact are concerned, the law is as plain as can be. There is no property in a witness. The reason is because the court has a right to every man’s evidence. Its primary duty is to ascertain the truth. Neither one side nor the other can debar the court from ascertaining the truth either by seeing a witness beforehand or by purchasing his evidence or by making communication to him. In no way can one side prohibit the other side from seeing a witness of fact, from getting the facts from him and from calling him to give evidence or from issuing him with a subpoena. That was laid down by the Law Society in 1944 and published in the “Short Guide to Professional Conduct and Etiquette” [25]....”

58.  Mr Chan has submitted that if a party is improperly prevented from taking a witness statement from a prospective witness, the fact that a witness may nonetheless be subpoenaed to testify later on at trial (such the Court is technically not “deprived” of the witness’ evidence) does not amount to a valid defence and in this respect, he has referred to Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2013] EWHC 581.

59.  What Christopher Clarke J said in Versloot, after referring to the Connolly v Dale and the Harmony Shipping cases was as follows[26]:

“19.  I accept, as I have already said, that the facts of these cases are different, but they seem to me to embody a wider principle. That principle is that it may be a contempt to interfere with attempts to interview a potential witness, or to prohibit the other side from getting the facts from him. Whether or not there is a contempt depends on whether interference is improper. If it is, it does not cease to be so because the witness in question is scheduled to appear the trial at the behest of the opposing party and may be subject to cross-examination thereat.

20.  It is, therefore, in my judgment, no answer in the present case to the claimants’ application to say that Mr Garvendeel’s evidence will be available at trials. Improper interference with access to a witness may mean that, although the witness is called at trial, the entirety of the evidence that he could give is not in fact elicited, because it has not been elicited by the party who called him, and because the opposing party was not aware, or not fully aware, that that witness had such evidence to give, with the result that the best evidence is not available to the court.  That seems to me good reason for not confining the dicta in these cases to circumstances in which the witness in question is not to give evidence at trial.”

60.  Clarke J then went on to say that whether there has been improper interference with a witness or the evidence-gathering process is fact sensitive, and because it is fact sensitive, it is not possible to be prescriptive as to what circumstances will, and what circumstances will not, constitute improper interference. He then said[27]:

“21.  Some matters can, however, be specified. Threats or promises made in order to persuade a witness to decline to be interviewed would be improper ...”

22.  What a solicitor is not entitled to do, or indeed a party, is to order or instruct a witness or a potential witness not to attend an interview with the opposing solicitor or to tell him that he has no real choice in the matter, or to put pressure on him not to comply ...”

61.  It was Mr Chan’s submissions that the 26.11.15 Letter , in particular the condition in the 1^st Additional Matter unambiguously amounted to an attempt to prevent Yau from preparing a witness statement for P and was clearly unlawful in that[28]:

(a)  The letter was a clear attempt to interfere with P’s proper and reasonable attempt to elicit and rely on Yau’s evidence in the 3 Actions.  If successful, the trial judge in the 3 Actions would very likely be deprived of the evidence of Yau, which would clearly be of key relevance to the resolution of the issues arising in those actions, and the capacity of this court to do justice between the parties to the 3 Actions would likely be impaired.

(b)  There was no proper basis (eg confidentiality agreements/undertakings, privilege etc) on which D could lawfully or properly prohibit Yau from providing a witness statement to P.

(c)  The settlement terms offered to Yau were clearly in the nature of a bribe and/or improper pressure.  Yau was offered financial incentive (in terms of a buy out of his shares and settlement of HCA 655) if he was not to provide a witness statement to P, which effectively prevented him from testifying in the 3 Actions.  At the very least the settlement terms served to impose improper pressure on Yau, particularly in light of D’s proposal that the discontinuance of HCA 655 be held back until after the conclusion of the 3 Actions – ie until it was confirmed that Yau had indeed not provided a witness statement and that the 3 Actions had ended.

(d)  The 26.11.15 Letter “had the tendency to prevent the witness making a free and voluntary choice as to whether to give evidence and what evidence to give”.

(e)  Even if the proposed terms did not amount to a bribe or improper pressure, the object of the condition imposed on Yau not to provide a witness statement to P as part of the settlement terms in itself was sufficient to amount to an offence regardless of the means used to achieve that object, as stated in paragraph 137 of Egan.

62.  On (a) above, I do not see that the 26.11.15 Letter was “a clear attempt to interfere” with P’s proper and reasonable attempt to elicit and rely on Yau’s evidence.  As I have found earlier, the letter was a genuine/bona fide attempt by D to settle its disputes with Yau, namely to buy out Yau’s shares/ interests in D at the Consideration, to release Yau from his outstanding loans to D, to release Yau and his wife and their company from their guarantees, to release their properties from legal charges, and to discontinue HCA 655 against Yau.  In return, the essential condition was that Yau was to be 43.75% responsible for any adverse judgment and/or costs against D in the 3 Actions and the balance of the Consideration thus withheld.

63.  As I have said earlier, the evidence showed that the parties had already had some discussions prior to the 26.11.15 Letter.  In any event, even on Yau’s own evidence in his 2^nd witness statement, the letter came after the statutory demand, and after Yau’s solicitors had written to DBS Bank and the reply from the bank.

64.  In my view, the purpose of the 26.11.15 Letter was to propose settlement terms to resolve all outstanding matters/disputes between D and Yau, and not with the purpose to interfere with P’s attempt to elicit and rely on Yau’s evidence, nor to induce Yau not to give evidence or to give false evidence, nor to influence Yau’s anticipated evidence.

65.  As for (b), it was up to Yau whether to accept the proposed terms of settlement.  He was not “prohibited” from giving a witness statement to P.  In fact he did give a witness statement for P. 

66.  In relation to (c), what Mr Chan said was the “financial incentive” was D’s offer to buy out Yau’s shares and discontinuance of HCA 655.  As the “financial incentive” came with the condition that Yau would have to be responsible for 43.75% of any adverse judgment/costs against D in the 3 Actions, I cannot see how this can be said to be a “bribe”.  As for “improper pressure”, Mr Chan submitted that the settlement terms at the very least imposed improper pressure on Yau, particularly in light of D’s proposal that the discontinuance of HCA 655 was to be “held back” until after the confirmation that Yau had indeed not provided a witness statement and that 3 Actions had concluded.  Again, there was no sufficient evidence to indicate what was submitted by Mr Chan, namely that the discontinuance of HCA 655 was “held back” until it was confirmed that Yau had indeed not provided a witness statement.  As I have said earlier, the discontinuance would appear to be timed and linked to Yau’s liability for 43.75% of any adverse judgment and/or costs and the payment of the balance of the Consideration.

67.  As for (d), I do not see that the 26.11.15 Letter had any tendency to prevent the witness making a free and voluntary choice as to whether to give evidence and what evidence to give.  As I have said earlier, there was nothing to prevent Yau from giving evidence.

68.  Lastly, in respect of (e), what was in fact said by Ribeiro PJ in paragraph 137 in HKSAR v Egan was that an approach to a witness would obviously be unlawful if its object were, for example, to persuade the witness to give false or perjured evidence or to refrain from telling the truth, then in such cases, it is unnecessary to consider the means used.  I have said earlier that the object or purpose of the approach by D to Yau was to settle the various outstanding disputes between them, and not for the object/purpose to persuade Yau to give false/perjured evidence or to refrain from telling the truth.

Conclusion on attempt to pervert the course of justice

69.  In light of what I have said above, I do not find that the 26.11.15 Letter revealed a clear and blatant attempt to pervert the course of justice, or was unlawful, as submitted by Mr Chan.

Contempt of Court

70.  A contempt of court is an act or omission calculated to interfere with the due administration of justice^[29].  Conduct is calculated to prejudice the due administration of justice if there is a real risk as opposed to a remote possibility that prejudice will result^[30].

71.  Mr Chan submitted that in the area of improper interference with witnesses, there is little distinction between the offence of perversion and a contempt of court, and that both offences depend on whether the act has a tendency to interfere (or a real risk of interference) with the administration of justice. 

72.  In light of my conclusion that there was no attempt to pervert the course of justice, it is also my view that there was no contempt of court, in that the 26.11.15 Letter did not have a tendency to interfere with the administration of justice.

Relevance of the Objected Contents 

73.  Mr Chan has submitted that the Objected Contents would be relevant at the trial of the 3 Actions at least towards (a) the credibility of D’s witnesses; and (b) the reason for attempting to prevent Yau from giving a witness statement to P effectively depriving the trial court of his testimony could possibly be portrayed as a view taken by D’s witnesses themselves of the strength of Yau’s case against their case.

74.  Having considered the Objected Contents, I do not see how they could be of relevance at the trial of the 3 Actions, and the effect of disclosing the 3 Letters and referring to the contents thereof was only to achieve prejudicial effect on D’s case.

Conclusion

75.  Having considered all the above, I am not satisfied that there was a clear case of unambiguous impropriety or any other abuse for the veil of the WPP to the 3 Letters and the Objected Contents to be uplifted.  

Order

76.  I therefore grant an order in terms of paragraph 1 of D’s summons issued on 6 May 2016, namely that the Objected Contents be struck out and/or expunged.  I direct that the parties to submit an agreed redacted copy of Yau’s 2^nd witness statement on or before 1 pm on 24 May 2016.

77.  As costs normally follow the event, I order costs of the application be to D.  This is an order nisi which shall be made final after 21 days.

78.  This judgment is to be handed down in chambers not open to public and it is not to be published until after the determination of the 3 Actions.