YUSUF ABDULLA YUSUF AKBAR ALIREZA v. FLEET OVERSEAS (NEW ZEALAND) LTD AND ANOTHER

HCA 1381/2017

[2020] HKCFI 2802

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1381 OF 2017

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J U D G M E N T

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Introduction

1.  In compliance with an Order for discovery made by Master Phoebe Man on 28 March 2019, the Plaintiff filed his 1st Affidavit on 29 April 2019 (“P1”) listing 25 documents in Schedule A thereto (“Schedule A”) which are or have been in his possession, custody or power but claimed legal advice privilege over them. 

2.  By summons dated 8 January 2020, the 2nd Defendant applied for an Order against the Plaintiff to produce the Schedule A documents for inspection (“Inspection Summons”). 

3.  The Inspection Summons was dismissed by Master Cruden on 25 May 2020.  The Master’s ground for dismissing the Inspection Summons was said to be that the 3 Affidavits filed by the Plaintiff since Master Phoebe Man’s Order had adequately made out his claim of legal advice privilege. 

4.  This is the 2nd Defendant’s appeal against Master Cruden’s decision.

5.  In the notice of appeal dated 5 June 2020, the 2nd Defendant confines his appeal to the following documents (“Appeal Documents”):

(1)  Documents 22 to 25 set out in Schedule A (“Group 1 Documents”);

(2)  All attachments to Documents 10 to 15 set out in Schedule A (“Group 2 Documents”); and

(3)  Any other attachments to the documents set out in Schedule A (if any) (“Group 3 Documents”).

6.  According to an Updated Schedule of Disputed Documents handed up by Mr Morrison at the hearing and orally modified by him, the ambit of the Appeal Documents is further reduced, as far as Group 2 is concerned, to attachments to Documents 10, 12 and 14 only. 

7.  In a nutshell, Group 1 Documents are earlier drafts of a Deed of Agreement executed on 20 November 2011 and signed by the Plaintiff on the one hand and by the 2nd Defendant on behalf of the 1st Defendant and himself on the other (“Deed of Agreement”).  Group 2 Documents are attachments to emails exchanged between the Plaintiff and his solicitors dated 1, 3 and 7 November 2011.  The attachments were described by the Plaintiff in P1, his 2nd Affidavit filed on 20 September 2019 (“P2”) and his 3rd Affidavit filed on 9 March 2020 (“P3”) as a draft Deed of Agreement, certain documents with handwritten amendments made by the Plaintiff’s solicitors or certain contractual documents to be entered into with Noble Executive Services Limited with handwritten amendments made by the Plaintiff’s solicitors. 

8.  In other words, all the documents that the 2nd Defendant seeks in this appeal are drafts of contractual documents.

Background

9.  In this Action, the Plaintiff claims against the Defendants for inter alia breaches of the Deed of Agreement and seeks in essence specific performance of certain clauses in it, alternatively, damages in lieu of specific performance. 

10.  For the present purpose, the relevant parts of the 2nd Defendant’s Defence are that:

(1)  The Deed of Agreement was never executed nor delivered by the 2nd Defendant as a Deed and is therefore a nullity and of no effect or otherwise unenforceable.  This is because the Deed of Agreement relied upon by the Plaintiff did not reflect any final agreement between the parties and/or was substantially incomplete and/or there was no intention on the part of the 2nd Defendant to create legal relations. 

(2)  The 2nd Defendant considered the Deed of Agreement to be a draft because inter alia (i) it was incomplete on its face and (ii) it did not reflect the crux of the intended agreement between the parties.

11.  Thus, as set out in Mr Morrison’s skeleton argument, the issues for adjudication in this Action include:

(1)  Was any agreement reached between the parties?

(2)  If yes, is the Deed of Agreement reflective of the agreement reached between the parties?

(3)  Whether there was intention on the part of the 2nd Defendant to enter into binding legal relationship with the Plaintiff?

Summary of the 2nd Defendant’s case

12.  The 2nd Defendant’s case in this appeal can be summarized as follows.

The Plaintiff’s claim to legal advice privilege not made out (“Ground 1”)

13.  As far as Group 1 Documents are concerned, their description in the Plaintiff’s Affidavits contains no or insufficient evidence as to the purpose of their creation.  Further, being drafts of an agreement, prima facie, their dominant purpose was to record the agreement between the parties and/or to set out the terms proposed by the Plaintiff to the 2nd Defendant.  The Plaintiff has provided insufficient evidence to show that their dominant purpose was anything else. 

14.  Further, the description of the Appeal Documents in P2 and P3 refers to “advice” rather than “legal advice”.  Given the commercial nature of the documents, the term “advice” could plainly refer to commercial advice.  To the extent that “legal advice” is referred to in P1 in respect of drafts, it is a merely generic assertion for all documents in the category. 

15.  Lastly, there is no evidence on the specific legal issue or subject matter which called for advice. 

16.  As far as Group 2 Documents are concerned, even if the relevant emails are privileged, their attachments are not exempt from production unless the Plaintiff can establish they are also covered by legal advice privilege.  The points made above in relation to Group 1 documents apply equally to this Group. 

Waiver of legal advice privilege (Ground 2)

17.  In the Plaintiff’s email to the 2nd Defendant on 9 November 2011, the Plaintiff had disclosed the legal advice given by his solicitors in relation to a number of amendments to the draft Deed of Agreement and has therefore waived the legal advice privilege in that email and its attachment ie a draft Deed of Agreement.  In determining the scope of waiver, the transaction covered by it must include communications setting out all legal advice on the Deed of Agreement as well as any subsequent qualification or amplification by the Plaintiff’s lawyers.  Thus, any legal advice privilege over the Appeal Documents has been waived. 

Redaction (Ground 3)

18.  If any parts of the Appeal Documents are covered by legal advice privilege which have not been waived, the proper course would be for the Plaintiff to redact those parts and produce the rest to the 2nd Defendant for inspection.

Production necessary for fair disposal of the cause or for saving costs (Ground 4)

19.  It is highly likely the Appeal Documents contain material evidence demonstrating (i) whether the Deed of Agreement has recorded the terms being negotiated between the Plaintiff and the 2nd Defendant and the status of negotiations between the two, (ii) whether the Plaintiff and the 2nd Defendant were prepared to execute the Deed of Agreement, and (iii) whether any effective agreement was ever executed.

Deliberation

20.  This court shall set out the uncontroversial legal propositions which are germane to the present appeal. 

21.  The starting point is that legal advice privilege applies to confidential communications passing between lawyers and their clients whereby legal advice is sought or given.  It applies to advice about non-litigious business as it does to advice about litigation: Hong Kong Civil Procedure 2021 Vol 1 para 24/5/8. 

22.  Legal advice privilege does not embrace all communications between solicitors and clients.  It only covers communications which form part of the necessary exchange of information of which the object is the giving of legal advice as and when appropriate: Citic Pacific Ltd v Secretary for Justice (No 2) [2015] 4 HKLRD 20 at [44]. 

23.  In Balabel v Air India [1988] 1 Ch 317, at 330 D-G, Taylor LJ observed that:

“ … In my judgment, therefore, the test is whether the communication or other document was made confidentially for the purposes of legal advice. Those purposes have to be construed broadly. Privilege obviously attaches to a document conveying legal advice from solicitor to client and to a specific request from the client for such advice. But it does not follow that all other communications between them lack privilege. In most solicitor and client relationships, especially where a transaction involves protracted dealings, advice may be required or appropriate on matters great or small at various stages. There will be a continuum of communication and meetings between the solicitor and client. The negotiations for a lease such as occurred in the present case are only one example. Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach. A letter from the client containing information may end with such words as ‘please advise me what I should do.’ But, even if it does not, there will usually be implied in the relationship an overall expectation that the solicitor will at each stage, whether asked specifically or not, tender appropriate advice. Moreover, legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context.” (emphasis added)

24.  At 332 D-E, Taylor LJ concluded his deliberation in these words:

“ … Accordingly, I agree with the formulation made by Master Munrow in the present case, subject to the additional words which I have placed in brackets. He said:

‘Once solicitors are embarked on a conveyancing transaction they are employed to ensure that the client steers clear of legal difficulties, and communications passing in the handling of that transaction are privileged (if their aim is the obtaining of appropriate legal advice) since the whole handling is experience and legal skill in action and a document uttered during the transaction does not have to incorporate a specific piece of legal advice to obtain that privilege.’” (emphasis added)

25.  While the concept of legal advice is fairly wide, it does not extend to advice that is purely commercial: AWB Ltd v Cole & Another (No 5) (2006) 155 FCR 30 at [44(7)].

26.  The “dominant purpose” test, ie whether a document comes into existence as part of a process in the communication with a lawyer with a dominant purpose of getting legal advice, is appropriate in setting the proper limits on legal advice privilege and should be adopted as the test in Hong Kong: Citic Pacific Ltd supra at [53] and [63].

27.  The party claiming privilege carries the onus of proving that the communication was undertaken, or the document was brought into existence, for the dominant purpose of giving or obtaining legal advice.  The onus might be discharged by evidence as to the circumstances and context in which the communications occurred or the documents were brought into existence, or by evidence as to the purposes of the person who made the communication, or authored the document, or procured its creation: AWB Ltd v Cole & Another (No 5) supra at [44(1)].

28.  The affidavits claiming privilege should be specific enough to show something of the deponent’s analysis of the documents. They should be as specific as possible without disclosing the very matters that the claim for privilege is designed to protect: West London Pipeline and Storage Ltd & Anor v Total UK Ltd & Ors [2008] 2 CLC 258 at [53] and [86(1)].  The person claiming privilege should support the claim by an affirmation setting out the special basis and the full factual context upon which privilege is claimed: Citic Pacific Ltd supra at [76(1)(c)].

29.  Unless it can be reasonably certain that (i) the deponent has erroneously represented or misconceived the character of the documents, (ii) the evidence of the claimant that the affidavit is incorrect, or (iii) other evidence before the court shows that the affidavit is incorrect or incomplete on the material points, statements in the claimant’s affidavit are generally conclusive as to the grounds stated in support of a claim for privilege from production: Jade’s Realm Ltd v Director of Lands unrep, HCA 1509 of 2012, 10 June 2014, Ng J at [21(7)]; Hong Kong Yin Hing Monastery Limited v Secretary for Justice unrep, HCMP 118 of 2011, 16 April 2020, Lok J at [32] and [40].

Ground 1

30.  In the present case, the Plaintiff has supported his claim to privilege by 3 Affidavits setting out his claim and the grounds in support. 

31.  In P1 at paragraph 7, the Plaintiff has set out his claim to privilege over inter alia the Appeal Documents in these general terms:

“7. To the extent drafts of the Deed of Agreement are referred to in Schedule A, they are the subject of a claim of legal advice privilege having been prepared, amended or otherwise marked pursuant to and thereby incorporating legal advice from my solicitors.”

32.  In P2, the Plaintiff has set out the grounds in support of his claim with some details.  

“15. Document 10 is an email from my solicitor dated 1 November 2011 and includes legal advice provided by my solicitor and attaches a draft Deed of Agreement, the terms of which encompass my solicitor’s advice on the appropriate terms. …

17. Document 12 is an email from my solicitor to me dated 3 November 2011 providing advice on amendments to certain documents, with handwritten amendments made by my solicitor to those documents reflecting advised changes. ...

19. Document 14 is an email from my solicitor dated 7 November 2011 and provides legal advice on an attached draft of the Deed of Agreement the terms of which reflect my solicitor’s advice on the appropriate terms. …

27. Document 22 is a Deed of Agreement marked with my solicitor’s handwritten amendments and comments which constitute her advice to me on how the Deed of Agreement should be amended and is privileged.

28. Documents 23 and 24 are ‘draft 1’ and ‘draft 3’ of the Deed of Agreement respectively. Each of the drafts feature some recommended amendments that represent my solicitor’s advice to me on how the Deed of Agreement should be amended and each are therefore privileged.

29. Document 25 is a Deed of Agreement marked with my solicitor’s handwritten amendments and comments which constitute her advice to me on how the Deed of Agreement should be amended and is privileged.”

33.  In P3, the Plaintiff has not only set out the grounds in support of his claim which echo those in P2, he has gone one step further in stating the context in which he sought and received legal advice from his solicitors.  For ease of reference, the material paragraphs are set out below.

“8. In about September 2011, I started negotiations principally with the 2nd Defendant (‘Mr. Elman’) who was interested in hiring me to take over as the new Chief Executive Officer (‘CEO’) of the Noble Group Limited (the ‘Company’). Our discussions concerned three principal areas viz.

(1) The terms on which I would be employed by the Company, such as salary, housing and other benefits (Area 1);

(2) The terms on which I would be given share options and bonus payments by the Company (Area 2); and

(3) A personal agreement with Mr. Elman in which he agreed to transfer to me around 1% to 1.5% of his personal shareholding in the Company (which then stood at about 22%) if certain conditions were met, notably that I remain employed by the Company for certain periods of time (Area 3).

Only Area 3 should be relevant to this application.

9. As the negotiations with Mr. Elman progressed, I retained Gall as my solicitors from about October 2011 to seek and receive confidential legal advice, both orally and in writing on Areas 1, 2 and 3.

10. According to Mr. Elman’s Affirmation, he apparently seeks disclosure of the documents containing such advice on the basis that he imagines they will show the status of negotiations and the terms, whether negotiations were concluded or whether certain steps remained to be taken before agreement on Area 3 became binding.

11. As to the status of negotiations, this is quite clear from the documents openly disclosed in my previous Lists of Documents at PLOD 6 to 16 and PSLOD 1 to 12. Mr. Elman’s original proposal dated 7 October 2011 (see PLOD 13 and earlier PSLOD 2) was to record the agreement on Area 3 in a letter which we would both sign to confirm our agreement to the terms.

12. Following legal advice which I received, my counter proposal was to incorporate our agreement into a Deed, which my lawyers drafted and which I sent to Mr. Elman (via his secretary Edwina Chan) on 9 November 2011 (see PSLOD 11) for his approval.” (emphasis added)

34.  This court has carefully considered the 3 Affidavits. In this court view, it is reasonably clear, especially from P3, that (i) the Plaintiff had retained his solicitors in an employment context involving advice on and the preparation of a side agreement between him and the 2nd Defendant ie the Deed of Agreement, as well as certain other contractual documents, (ii) specifically, the Plaintiff sought legal advice from his solicitors on the 2nd Defendant’s original proposal, as evidenced in his letter dated 7 October 2011 to the Plaintiff, which was to simply record the commercial terms agreed between them in the said letter, (iii) in the course of the client/solicitors relationship, the Plaintiff had received from his solicitors inter alia advice as set out in emails and various drafts of the Deed of Agreement prepared by them, (iv) each draft had incorporated legal advice from his solicitors as to its appropriate terms, not just in the form of handwritten amendments to or comments on it but also in the drafting itself which embodied and was reflective of his solicitors’ advice to him, and (v) it was only after going through a number of drafts that the final version of the Deed of Agreement was ready to be sent and was sent to the 2nd Defendant on 9 November 2011 as the Plaintiff’s counter proposal.

35.  Anyone conducting a comparison between the 2nd Defendant’s letter dated 7 October 2011 and the Deed of Agreement could hardly fail to notice the difference between the two: the letter recorded the commercial terms whereas the Deed of Agreement contained not just the commercial terms—it contained additional terms, most notably the warranties of the Defendants set out in Clause 5, and was couched in appropriate legal language. 

36.  It goes without saying that drafts of a commercial agreement must record the commercial terms.  But in this case, the commercial terms were largely those set out in the letter of 7 October 2011.  The draft Deed of Agreement contained something more.  In these circumstances, it seems to this court the predominant purpose of the creation of the drafts was not so much the recording of the commercial terms, as submitted by the 2nd Defendant, but the giving of legal advice by the Plaintiff’s solicitors as to how best to protect the Plaintiff’s interests and to “steer clear of legal difficulties” which might subsequently arise. 

37.  After all, that is the whole point of retaining an employment lawyer.  If anyone wishes to seek purely commercial advice, one should think going to an employment consultant with no legal background would be fit for purpose.  In this regard, the Plaintiff has stated on oath in no uncertain terms that he went to his lawyers for legal advice, rather than commercial advice.  It is difficult to see how the 2nd Defendant would be in a position to challenge that statement, given the context in which the drafts were procured and prepared.  Legal advice, according to Taylor LJ’s observation in Balabel v Air India, must include “advice as to what should prudently and sensibly be done in the relevant legal context”.

38.  To conclude, this court is of the view that the dominant purpose of the creation of the drafts was the giving of legal advice to the Plaintiff, the description of the Appeal Documents in the 3 Affidavits was sufficiently clear that it was legal advice, rather than purely commercial advice, which was given, and that the subject matter which called for legal advice was the manner in which the 2nd Defendant’s proposal of recording the commercial terms in his letter dated 7 October 2011 should be improved.

39.  For these reasons, this court rejects Ground 1.

Ground 2

40.  Regarding Ground 2, the simple answer is that waiver of legal advice privilege only covers what has actually been disclosed by the Plaintiff to the 2nd Defendant ie the email dated 9 November 2011 which contained his solicitors’ advice and the draft attached thereto.  The waiver does not cover other advices and drafts which have not been disclosed: Hong Kong Civil Procedure 2021 Vol 1 para 24/5/29; Lyell v Kennedy (1884) 27 Ch D 1, 24; Fulham Leisure Holdings Ltd v Nicholson Graham & Jones [2006] 2 All ER 599 at [12]-[13].

41.  As recognized by Mr Morrison in his executive summary at [10], where an advice is identified as the transaction, such as the case with the email dated 9 November 2011 and the draft attached, the transaction should extend to any later qualifications, extensions or amplification of that advice in the relevant period which can fairly be treated as part of the same advice: Fulham Leisure Holdings Ltd at [22].

42.  In the present case, as the Plaintiff made clear in P3 at paragraphs 12 and 13, the draft attached to the email of 9 November 2011 was in essence the final draft ready to be shown to the 2nd Defendant for his approval.  There is no evidence that there were any later qualifications, extensions or amplification of the advice contained in the 9 November 2011 email and the attached draft which can fairly be treated as part of the same advice.  This is supported by (i) the email dated 8 November 2011 in which a draft Deed of Agreement was sent to the Plaintiff by his solicitors and (ii) the email dated 12 November 2011 in which the Plaintiff indicated that there was no need for further discussion.  Further, in the email of 9 November 2011, the Plaintiff described the advice given by his solicitors in the 8 November 2011 email as “final comments from lawyers on Deed between you and I”.

43.  For these reasons, this court also rejects Ground 2.

Ground 3

44.  Given this court’s ruling that the Plaintiff has made out his claim to legal advice privilege over the Appeal Documents which has not been waived, it is difficult to see why this court should nonetheless order the production of them to the 2nd Defendant.  After all, legal advice privilege is a fundamental right enshrined in Article 35 of the Basic Law: Solicitor v Law Society of Hong Kong (2006) 9 HKCFAR 175.  No authorities have been cited which support the proposition that, in such a scenario, redaction is the answer to the Plaintiff’s claim to legal advice privilege. 

45.  As the learned editor of Documentary Evidence 13th Ed points out at para 10-12, the circumstances in which redaction might arise are where only part of the document is privileged or if part of the document contains irrelevant material.  In fact, the 2 authorities relied upon by the 2nd Defendant ie Hong Kong Civil Procedure 2020 Vol 1 para 24/2/11 and Hong Kong Yin Hing Monastery Limited supra at [45] also only support the propositions that (i) parts of documents disclosed on discovery may be redacted as irrelevant and (ii) legal advice privilege can be claimed for a privileged part of an otherwise unprivileged document so that the legal advice may be redacted. 

46.  In GE Capital Group Ltd v Bankers Trust Co [1995] 1 WLR 172, the following observation of Hoffmann LJ (as he then was) at 174B-D also supports the view that redaction is an entitlement of the party who seeks to redact (if he could come within either of the aforesaid 2 propositions), rather than a means to protect documents covered by legal advice privilege.

“ … It has long been the practice that a party is entitled to seal up or cover up parts of a document which he claims to be irrelevant. Bray’s Digest of the Law of Discovery, 2nd ed. (1910), pp. 55-56 puts the matter succinctly:

‘Generally speaking, any part of a document may be sealed up or otherwise concealed under the same conditions as a whole document may be withheld from production; the party’s oath for this purpose is as valid in the one case as in the other. The practice is either to schedule to the affidavit of documents those parts only which are relevant, or to schedule the whole document and to seal up those parts which are sworn to be irrelevant; . . .’”(emphasis added)

47.  Finally, this court agrees with Mr Brown that the redaction process is fairly pointless and can only lead to further challenge by the 2nd Defendant to the propriety of the redaction, unless he accepts an affidavit by the Plaintiff that what has been redacted is indeed privileged. 

48.  For these reasons, this court also rejects Ground 3.

Ground 4

49.  Under RHC O 24 r 13(1), the burden is on the 2nd Defendant to satisfy the court that the order for production and inspection is necessary for disposing fairly of the cause or matter or for saving costs.  In requiring the Court to consider the necessity of such an order, this rule confers a broad discretion: Hong Kong Civil Procedure 2021 Vol 1 para 24/13/1.  An application which amounts to a fishing expedition is not permissible: Vo Thi Do v The Director of Immigration [1998] 1 HKLRD 729, 749F.

50.  Given this court’s ruling on Grounds 1 to 3, it is strictly speaking unnecessary to deal with Ground 4.  Suffice it to say that this court cannot see how the drafts can shed light on the issues raised in the 2nd Defendant’s Defence outlined above.  In this regard, one must bear in mind the fact that the Deed of Agreement was signed by the 2nd Defendant and the legal principle that a person is bound by his signature to a document.

51.  Further, as evident from paragraphs 19 and 20 of the 2nd Defendant’s affirmation dated 16 January 2020, this application is but a fishing exercise in the mere hope that the Appeal Documents would somehow

(1)  contain evidence of the status of the negotiations between the Plaintiff and the 2nd Defendant and the basis upon which the two were prepared to enter binding legal relations;

(2)  demonstrate the further steps that the Plaintiff and his lawyers intended to take at the time in order to enter into a binding relationship;

(3)  contain communications between the Plaintiff and his lawyers confirming whether the terms of the Deed of Agreement adequately and properly set out the terms intended by the parties and indicating that the parties intended to execute and deliver it; and

(4)  contain communications between the Plaintiff and his lawyers which would reflect the Plaintiff and the 2nd Defendant had not entered into any binding agreement and did not have the intention to enter into binding legal relations. 

52.  For these reasons, this court rejects Ground 4.

Group 3 documents

53.  There is no evidence from the 2nd Defendant that there are other undisclosed attachments.  In any event, the Plaintiff has stated on oath in P1 that his 2 lists of documents, including all documents listed in Schedule A, contain all known discoverable documents in his possession, custody or control.  That is the end of the matter unless there is evidence from the 2nd Defendant that P1 is factually incorrect.

Disposition and costs order nisi

54.  The 2nd Defendant’s appeal is hereby dismissed.

55.  There shall be an order nisi that costs of the appeal be to the Plaintiff, to be summarily assessed on paper and paid by the 2nd Defendant forthwith, certificate for counsel.  The Plaintiff is directed to file and serve his Statement of Costs for Summary Assessment within 3 working days and the 2nd Defendant is directed to file and serve his comments, if any, within 3 working days thereafter.