TREASURE SPOT FINANCE CO LTD v. LI CHIK MING AND ANOTHER

HCA5387/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.5387 OF 2001

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J U D G M E N T

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1. This appeal against the master’s decision out of time raises the question whether legal professional privilege attached to an expert report prepared for a party is waived when it is referred to in another expert report prepared for the same party for the purpose of trial.

2. The background circumstances leading to this appeal are summarized below.

The claim

3. The plaintiff is a licensed money lender.  In 2001, it granted three loans secured by mortgage to the defendants as borrowers, particulars of which are as follows :

Loan	Date	Mortgagor	Amount (HK$)
1st Loan	3/7/01	1st defendant	$550,000
2nd Loan	23/7/01	1st defendant	$1,100,000
3rd Loan	22/8/01	2nd defendant	$150,000

4. The defendants subsequently defaulted.

5. On 15 December 2001, the plaintiff commenced the present action.

The defence

6. The 1^st defendant raised two points of defence.  First, at the material times, he did not have the mental capacity to execute the loan agreements.  Alternatively, he executed the loan agreements under undue influence exerted on him by the 2^nd defendant and the plaintiff had notice of the same.

Appointment of guardian ad litem

7. On 13 March 2002, the 1^st defendant’s daughter applied to be appointed as her father’s guardian ad litem.  She relied on a medical report prepared by Dr Benjamin Lai dated 23 November 2001 (“the Lai Report”).  There, Dr Lai referred to two psychiatric reports prepared by Dr H.K. Cheung of Castle Peak Hospital dated 22 October 2001 and 10 November 2001 (“the 10/11/01 Report”) (collectively “the Cheung Reports”).  The application was allowed on 28 March 2002.

Discovery

8. At the checklist review hearing on 18 May 2005, the 1^st defendant’s solicitors indicated for the first time that at trial the 1^st defendant would be relying on the Lai Report to prove his mental incapacity at the time when the loan agreements were executed.

9. On 14 July 2005, the 1^st defendant attended an examination conducted by the plaintiff’s medical expert, Dr Peter Wu.  Dr Wu subsequently prepared a report dated 16 August 2005 (“the Wu Report”).

10. On 29 August 2005, the parties exchanged witness statements, the Lai Report and the Wu Report.  By correspondence, the plaintiff’s solicitors sought discovery of the Cheung Reports.  The 1^st defendant’s solicitors refused on the ground that they were privileged.

11. By summons dated 21 January 2006 (“the Summons”), the plaintiff applied for specific discovery of the Cheung Reports, which was refused by the master on 23 March 2006.

Appeal out of time

12. The plaintiff then appealed.  But the notice of appeal was not filed until 12 April 2006 whereas pursuant to Order 58 rule 1, Rules of the High Court, it should have been filed on or before 6 April 2006.

13. Mr Jackie Cheung Yick Hung, the handling solicitor, put forward this reason for the delay.  After losing the application before the master, the possibility of engaging a senior counsel to argue the appeal was canvassed.  On or about 11 April 2006, the plaintiff decided against it because of costs.  At the same time, Mr Cheung was laboured under the mistaken view that the time for filing the notice of appeal did not run until after the master’s order had been sealed.  His view was corrected only on or about 11 April 2006.  The notice of appeal was then issued on the following day.

14. Counsel for both parties agreed that the most important factor that I should consider in deciding whether to extend the time for this appeal is its merits.  I agree and now turn to examine them.

Discussion on merits

15. Ms Chow, counsel for the plaintiff, accepted that for present purposes the Cheung Reports enjoy legal professional privilege.  Thus the issue that requires my determination is whether the reference to the Cheung Reports in the Lai Report constituted a waiver of the privilege.

16. It is trite that a mere reference to privileged material in a witness statement, be it a statement of expert or a witness fact, will not constitute a waiver of privilege unless there is a reference to the contents of that privileged material and reliance on it : Bourns Inc v. Raychem Corp. & Another [1999] 3 All ER 154, per Aldous LJ at p.166j-177a.

17. Ms Chow submitted that in the Lai Report, there was both reference to the contents of the Cheung Reports and reliance on the same.  Ms Li, counsel for the 1^st defendant, readily accepted that the Lai Report did refer to the contents of the Cheung Reports.  But she argued that there was no reliance.  The question is therefore whether Dr Lai relied on the Cheung Reports in coming to his opinions on the 1^st defendant’s mental condition in his Report.  If he did, then the privilege attached to the Cheung Reports would have been waived.

18. In paragraphs 5 and 6 of the Lai Report, Dr Lai stated :

“5.   According to [the Cheung Reports], [the 1^st defendant] had eight previous admissions to Castle Peak hospital from 1975 to 1989.  His diagnosis is schizophrenia.  He had symptoms including delusions, hallucinations and mildly aggressive behaviors.

6.    According to [10/11/01 Report], [the 1^st defendant] was a man of normal intelligence and had schooling up to Primary 5.  Dr Cheung wrote on page 2 of his second report that he found the intellectual functioning of [the 1^st defendant] quite satisfactory.  He quoted the example that [the 1^st defendant] could do arithmetic and his memory and orientation were quite okay.  (It so happened that I saw [the 1^st defendant] on 31 October, just the day before Dr Cheung saw [the 1^st defendant].  I had also administered to [the 1^st defendant] the serial subtraction test on 31 October 2001.  It was thus possible that [the 1^st defendant] was asked to repeat the same subtraction by Dr Cheung the day after he had done the subtraction in my clinic.)”

19. Dr Lai then summarized the information provided by the family members of the 1^st defendant.  He went on to describe in details the mental state examination that he conducted on the 1^st defendant.  Finally, he set out his opinions and comments on the 1^st defendant’s mental condition.  In paragraph 22, he said :

“In my opinion [the 1^st defendant] is suffering from a chronic psychiatric illness with multiple relapses and history of aggressive behavior.  He requires long term medication.  Currently he is suffering from symptoms of chronic schizophrenia.  These include flattening of emotion, poverty of thoughts, poor self care, poor volition for work and restriction of social life.  I think his chronic schizophrenia has also affected his cognitive functioning and his interpersonal skills.”

20. Ms Li contended that Dr Lai based his opinions and comments on the 1^st defendant’s mental condition solely on the medical examination that he conducted on the 1^st defendant.  He did not rely on the Cheung Reports at all.  With respect, I disagree.  As noted, in paragraph 22 of his Report, Dr Lai concluded that the 1^st defendant is suffering from chronic psychiatric illness with multiple relapses and history of aggressive behaviour and that he is currently suffering from chronic schizophrenia.  Plainly, Dr Lai could not have come to those opinions without consulting and relying on the Cheung Reports, which apparently contained particulars of the 1^st defendant’s medical history.  Given the reliance by Dr Lai, the legal professional privilege attached to the Cheung Reports must have been waived.

21. Ms Chow further relied on Chan Mun Kui v. Lau Yuk Lai, HCPI301/1998, unreported, Seagroatt J, 8 October 1999, for the proposition that discovery should be given of the documentary material when an expert has considered in reaching that opinion and that any legal professional privilege in that material has thus been waived.  (Chan Mun Kui was referred to in Ma Man Wan Helen v. Hong Kong Land Group Limited, HCPI381/2005, unreported, Deputy High Court Judge Muttrie, 10 January 2006 and Chau Ka Chik Tso & Others v. Secretary for Justice, HAC10670/2000, unreported, Deputy High Court Judge Muttrie, 21 November 2005).  Ms Chow also sought to draw support from Clough v. Tameside & Glossop Health Authority [1998] 1 WLR 1478 (which was doubted in Bourns Inc. v. Raychem Corp. & Another, above and referred to in Lucas v. Barking, Havering and Redbridge Hospitals NHS Trust [2004] 1 WLR 220).

22. I do not propose to discuss these cases for two reasons.  First, I have already decided the question of waiver without reference to them.  Secondly, without any disrespect to counsel, I think fuller submissions are necessary for a proper analysis of the propositions that one may derive from them.

Other considerations

23. I now turn to the other considerations pertaining to the question of extending the time for appeal.

24. Ms Li submitted that the plaintiff had been supplied with the Lai Report at the time when the application for appointment of guardian ad litem was made.  It should have taken out the application for specific discovery of the Cheung Reports there and then.  But as rightly pointed out by Ms Chow, the 1^st defendant did not seek to rely on the Lai Report for the purpose of trial until the checklist review hearing.  The plaintiff then sought discovery by correspondence and when that failed took out the present application.  I cannot see any inordinate delay on the part of the plaintiff at all.

25. Ms Li further submitted that the plaintiff could rely on the Wu Report without the Cheung Reports.  But that is hardly a ground for refusing discovery.  Plainly, the plaintiff is entitled to know how Dr Lai had come to his opinions on the 1^st defendant’s mental condition and be able to test in evidence the materials the contents of which his Report referred to and relied on in coming to those opinions, including the Cheung Reports.

26. I accept that the delay for filing of the notice of appeal (6 days) is short and that it was caused by inadvertence on the part of the handling solicitor.  And I do not think the 1^st defendant has suffered any prejudice because of the delay.

27. It follows that time should be extended for this appeal.

Conclusion

28. For the above reasons, I will extend the time for this appeal, allow the appeal, set aside the master’s order and order that the 1^st defendant do make discovery of the Cheung Reports within 7 days from the handing down of this judgment.  I also make an order nisi that the plaintiff shall have the costs of this appeal and the costs of the Summons, including the costs of the hearing before the master, to be taxed if not agreed.