CHINACHEM FINANCIAL SERVICES LTD v. CENTURY VENTURE HOLDINGS LTD

HCA 410/2013 & HCMP 2299/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 410 OF 2013

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J U D G M E N T

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INTRODUCTION

1. By a writ issued on 7 March 2013 in HCA 410/2013, the plaintiff sought the following declarations against the defendant, namely:

(a)   that a contract entered into by them dated 25 August 2009 had expired by effluxion of time on 28 February 2012 and in any event was terminated and came to an end no later than 30 June 2012;

(b)   that the defendant was not entitled to any remuneration from the plaintiff pursuant to the contract.

2. The Statement of Claim was issued on 2 April 2013 fleshing out the basis of the claim.  The defendant then issued a summons on 18 June 2013 to stay the proceedings.  The summons was supported by an affirmation of Mr Lam Yee Hung (“Lam”), a director of the defendant company dated the same date as the summons.  Paragraph 53 of Lam’s affirmation made reference, amongst other things, to the defendant being given by Mr David Hui (“Hui”) in mid April 2012 a copy of a draft “Memorandum of Advice” with a Postscript prepared by Norton Rose for the plaintiff.  A copy the draft Memorandum of Advice and Postscript was exhibited to the Lam affirmation as LYH‑65.  Mr Hui was at that material time the Chief Executive Officer of the plaintiff.

3. This revelation then triggered the plaintiff to issue a summons on 20 August 2013 in HCA 410/2013 (A/18) seeking the following relief:

(i)  that paragraph 53 of Lam’s affirmation and exhibit LYH‑65 (“the Privileged Materials”) be struck out on the grounds that they disclose information, materials and matters which attract legal professional privilege and that the defendant received the materials from David Hui, the plaintiff’s former CEO in circumstances whereby the defendant knew or ought to have known that the disclosure by David Hui was in breach of his fiduciary duties and/or duties of confidence owed to (inter alia) the plaintiff;

(ii)  that the defendant be restrained whether by itself or through its agents, employees or servants or otherwise howsoever from using or relying on the Privileged Materials or information contained therein in the current action or for any other purposes, or disclosing, publishing, disposing or dealing with in any other way any of the Privileged Materials or information contained therein;

(iii)  that the defendant deliver up within seven days to the plaintiff’s solicitors   the original of the exhibit LYH‑65 received by the defendant together with any copies of the same or any part thereof.

4. This summons came before Godfrey Lam J on 23 August 2013.  He ordered that the matter be adjourned for a speedy trial with two days reserved.  He further ordered that no further evidence was to be filed apart from the evidence which had been filed before him without leave of the court and that reliance on any affidavit evidence was subject to the deponent being tendered for cross-examination with the costs of the hearing before him being reserved with certificate for two counsel for both parties (A/20A).

5. I have been provided with a copy of the transcript of the hearing before Godfrey Lam J and note that there were concerns raised by him as to whether the relief being sought by the plaintiff by their summons was interim in nature or by way of final relief as the relief sought in HCA 410/2013 was very different to that being sought by the summons.  It was perhaps to avoid any technical arguments being raised on this score, the plaintiff’s solicitors have, I suspect out of an abundance of caution, issued on 9 September 2013 an originating summons under HCMP 2299/2013 (A/17A) seeking in essence and substance the identical relief as in the summons issued under HCA 410/2013.

6. By a letter dated 27 September 2013, Haldanes, the defendant’s solicitors which was faxed to my clerk seeking leave to issue a writ of subpoena ad testificandum against Hui requiring him to attend the hearing of the both the summons and the originating summonses on 2 and 3 October 2013 before me.  I gave leave for the writ to be issued but directed that the question of whether Hui should be called as a witness was to be argued on 2 October 2013.

7. Both summonses were heard before me on 2 October and instead of the original two days the hearing lasted six days.  Both the plaintiff and defendant were represented by leading counsel with their respective juniors.  Mr David Hui also attended the first day in answer to the subpoena represented by his solicitor Mr Andrew Lam, who had instructions to apply for the discharge of the subpoena.  Given this state of affairs the question of the subpoena issued against Hui was logically the matter that had to be addressed and disposed of first.

THE SUBPOENA ISSUE

8. Mr Edward Chan SC pursued the defendant’s application to call Hui as a witness identifying two areas which he submitted it was hoped Hui would be able to provide relevant evidence, namely,

(i)   in relation to the meetings in March and April 2012 and

(ii)   as to the reason(s) why he handed over the Norton Rose Memorandum of Advice to Mr Pang Chun Sing (“Pang”) of the defendant. Mr Chan SC frankly admitted that the defendant had not as yet any proof of evidence of Hui but suggested that if the court was to grant the defendant’s application to call Hui to give evidence then he would ask for the solicitors of Hui to provide a statement in that regard.

9. When asked by the court as to why this application by the defendant was being made at this late stage given the order of Godfrey Lam J had been made on 23 August 2013, Mr Chan SC’s response was that it was only after receiving and reading the plaintiff’s skeleton submissions for this hearing on 26 September 2013, and in particular paragraph 30 thereof, that the defendant and their legal advisers realised that, as he put it “the court would be better assisted if Mr Hui could be asked to give evidence.”(T1/4:2‑6)  He argued that if Hui was allowed to give evidence then the hearing could in the meantime proceed with the plaintiff calling their witnesses in the interim until a witness statement was procured.

10. On behalf of Hui, Mr Lam submitted by that as regards topic (i) there would be little difficulty in providing the information.  However as regards topic (ii) he submitted that this was controversial as in the interim the plaintiff had issued an indorsed writ in HCA 1486/2013 in August 2013 against his client for breaches of fiduciary duties and have obtained an interlocutory injunction.  They have yet to be served with the full Statement of Claim which was apparently expected to be filed and served by 4 October 2013.

11. He argued that his client would in effect be placed in an invidious position of being subject to cross‑examination by the plaintiff’s lawyers when he is not even fully aware of the nature and extent of the allegations against him.  He argued that this would be both oppressive and prejudicial.  He submitted that this was tantamount to an abuse of process by the defendant.  He further submitted that in the event the subpoena was not discharged then he invited the court to limit the ambit of cross‑examination so that Mr Hui’s interests are not prejudiced in HCA 1486/2013.

12. Mr Huggins SC, leading counsel for the plaintiff essentially took a neutral position as to whether the subpoena should or should not be discharged on the basis that this was a matter entirely between the defendant and Mr Hui and his legal advisers.  He however took exception to any suggestion that if Hui was to be called as a witness that his cross‑examination of Hui should be in anyway be circumscribed.

13. He also took issue with the belated application by the defendant to adduce this evidence when he argued that it must have been plain and obvious from the affirmations already filed by the parties in August 2013 before the hearing before Godfrey Lam J that Hui was a central figure to the defence being raised by the defendant.  He argued that for the defendant’s lawyers to now say that the importance of Hui only became obvious after sight of paragraph 30 of the plaintiff’s skeleton submission simple defies logic or belief.  He also took exception to the suggestion the plaintiff should open its case and call its witnesses before seeing what, if anything Hui was expected to say.  To allow such a situation to develop he argued was procedurally unfair.

14. Having carefully considered the submissions of all the parties I ruled that I would discharge the subpoena against Mr Hui.  In my short reasons given at the time I found that application by the defendant at this stage was belated. I was of the view that it must have been clear as a pikestaff that Hui was a central figure to the defendant’s case and his evidence would be invaluable both to the defendant’s defence and the Court.  Mr Lam asked for costs and Mr Chan SC quite properly made no submissions to oppose the same, I accordingly awarded Hui the costs of the discharge application (T1/22:7-24).

BACKGROUND

15. In 2001 there was litigation in the PRC between the plaintiff, a member of the Chinachem Group, and a Mainland company called China SME Investment and Development Co Ltd (“China SME”) over a block of shares in the China Minsheng Bank.  In 2002 the Beijing Court of First Instance awarded the plaintiff the sum of US$10,940,000 and compensation in the sum of RMB 45,914,912.  The plaintiff was unhappy with this result and immediately lodged an appeal.  Due to various factors which were not fully canvassed before me, the appeal process to the Supreme People’s Court became a slow and tortuous one with little progress being achieved.

16. By a document entitled Authorised Claims Recovery Service Agreement dated 25 August 2009 the plaintiff and the defendant entered into an agreement whereby the latter undertook, inter alia, to procure a favourable outcome for the plaintiff in the appeal within a period of 18 months from the date of the signing of the Agreement (B/146).  This Agreement was amended by a Supplemental Agreement on or about 12 January 2011.  There was so‑called further draft supplemental agreements apparently sent by the defendant to the plaintiff to extend the time but none of these were signed by the plaintiff.  For the purposes of the present hearing I am not concerned with them.

17. By the terms of the Agreement, the defendant undertook to procure the services of a legal firm DiShi to act as lawyers for the plaintiff in the appeal, and to use their best endeavours to procure the legal firm to maximise the benefits to the plaintiff in the result of the appeal.  The defendant also undertook to pay the first instalment of legal fees to DiShi of RMB 3 million.  There were also other terms which spelt out the basis of division of the proceeds of a successful and favourable judgment being secured.  Again the details of this division are not of any great moment to the matters that I have to resolve at this speedy trial of the summonses before me.

18. At an Exco meeting of the plaintiff on 2 November 2011 representatives of the defendant had been invited.  It is common ground that these representatives were present during part of that meeting, and apparently an issue was raised as to the legality of the Agreement entered into by the plaintiff and the defendant.  This occasioned the appointment and engagement of Norton Rose to provide a legal opinion on the legality of the Agreement as well as to advise on topics such as whether the plaintiff should retain the services of the defendant and therefore sign another agreement with the defendant and if so, what the terms of the new agreement should be, whether DiShi’s services should be retained and a host of a range of other issues to tie up loose ends.

19. In about March/April 2012 Norton Rose produced a draft Memorandum of Advice for the plaintiff giving their opinion on a range of legal issues that they had been invited to address.  It is common ground that a copy of the draft Memorandum of Advice together with attachments was handed over by Hui, the CEO of the plaintiff, to Pang of the defendant.  I say common although the plaintiff says they were to aware of this handing over till more than a year later when they saw Lam’s affirmation dated 18 June 2013.  But the plaintiff has not sought to challenge that such handing over occurred sometime in April 2012.

20. No new agreement had been signed between the plaintiff and the defendant and it would appear that they were negotiating on a revision of the terms of division of the proceeds in the event of a favourable appeal judgment.  Whilst the parties were negotiating and before any new agreement had been signed, it would appear that a favourable result was achieved from the Supreme People’s Court.  No details of when such a result was handed down or the details of the same were placed before me, and again this is another one of the many matters in this case that the court has not been informed of and I will place no importance to it as it does not impact on my decision in this matter.

21. In early 2013 it transpires that the defendant commenced legal proceedings at the Beijing High People’s Court against the plaintiff for payment of the remuneration under the Agreement and DiShi also claimed for payment under a separate agreement that they had with the plaintiff.  As stated earlier, on 7 March 2013, the plaintiff commenced the present proceedings in HCA 410/2013.

PRELIMINARY RULING ON PANG CHUN SING’S AFFIDAVIT

22. As a preliminary point, Mr Huggins SC took exception to various passages in the affidavit of Pang which he complained were inadmissible as they were expressing views and impressions of Pang as to the belief of third parties or their motives for their actions which he complained Pang cannot be in a position to speak to or be allowed to give evidence upon.  He argued that he should not be expected to cross‑examine Pang on such inadmissible matters.  These were fully identified in paragraph 41 of the Skeleton Argument of the plaintiff filed on 26 September 2013, and I do not intend to repeat them here.

23. Mr Chan SC’s response was that this was nothing more than Pang on behalf of the defendant explaining why they viewed various matters in the way they did and why they acted in the light of the view formed at the time.

24. Having carefully considered the submissions advanced before me and after carefully reviewing the passages complained of, I indicated that I would take a broad brush approach to the matter and allow the matters stated in the affidavit of Pang to stand for the present.  I indicated to Mr Huggins SC that he would not expected to cross examine on matters which relate to the background matters which Pang does not specifically advert to himself but which he purported to adopt by reference to Lam’s affirmation.  I further indicated that to the extent Pang was expressing opinion or impressionist evidence, unless they were supported by the facts, I would not be minded to place much, if any, weight to them.

PLAINTIFF’S EVIDENCE

25. The plaintiff called two witnesses, Mr David Parker, the Chief Operating Officer and the secretary to the Exco of the Chinachem Group (“Parker”) and Mr Chan Kam Por, a director of the plaintiff (“Chan”).

26. Parker had filed two affidavits in these proceedings which were adopted by him to be as his evidence in chief.  The first affidavit (A/97N) was filed in support of the plaintiff’s summons dated 20 August 2013 seeking the relief which has been set out in paragraph 3 above.

27. He drew particular attention to paragraphs 6‑10 of Pang’s affidavit (A/97E-G) which described three meetings that Pang claimed took place on 12 March, 16 March and towards the last week of April 2012.  The first and third meetings were alleged to have taken place at the offices of the Chinachem Group in Tsuen Wan, whilst the second meeting was alleged to have taken place at Hotel Nikko in Tsim Sha Tsui.  Pang claimed that Hui attended these meetings and that Parker was also present.  Pang alleged that it was at the third meeting towards the end of April 2012 that Hui handed over a copy of the draft Memorandum of Advice of Norton Rose to him in the presence of Parker.

28. Parker categorically denied that he attended any of these meetings as alleged (A/97Q: paragraph 8).  His evidence was that there were only three occasions that he remembered when he had met Pang and these were

(i)   on 2 November 2011 during a Chinachem Group Exco meeting

(ii)   a meeting in May 2012 after the meeting of the Chinachem Group Exco during which the Norton Rose Advice was circulated amongst those attending; and

(iii)   a without prejudice meeting with the representatives of the defendant and DiShi in Beijing in June 2012 and at the dinner subsequent to that (A/97Q: paragraph 9).

29. His evidence was that the meeting in May 2012 was after the Exco of the Chinachem Group had been provided with the finalised Memorandum of Advice from Norton Rose and to his recollection this would have to be after 22 May 2012 and not the last week of April 2012 as alleged by Pang.  He explained that he attended the meeting at the invitation of Hui who wanted him to explain to Pang the Exco’s decision with respect to the legal and commercial relationship with the defendant.

30. Parker stated that he clearly told Pang at this meeting in May 2012 that based on the legal advice that they had received, the Exco had come to the view that the Agreement with the defendant had expired and was no longer valid, but that the Exco were in principle prepared to negotiate a new agreement with the defendant based on the condition that certain drafting issues that were in the original Agreement would need to be clarified and that there should be a substantial revision of the “revenue sharing ratio”(A/97R: paragraph 12).

31. He also stated that he did not witness Hui handing over any copy of the Norton Rose advice to Pang, and that he became aware that a copy had been handed over to Pang by Hui when he was informed of the same by a partner of the accounting firm who were acting as Administrators of the Chinachem Group in August 2013.

32. The 2^nd affidavit was filed to deal with Parker’s conviction in September 1996 in respect of 5 charges involving the giving of false or misleading testimony before a Royal Commission in Western Australia relating to events that occurred between 1984 ‑1986 (A/97V).  He was sentenced to five concurrent terms of 18 months imprisonment. He was apparently released on parole after having served six months and thereafter the balance of the sentence was remitted.  He also drew attention to the fact that under the Australian Commonwealth Law (Crimes Act 1914 s 85ZM) that the convictions were considered to be spent with the lapse of 10 years since the date of conviction.

33. Mr Chan SC cross-examined Parker about these convictions using them as a fountainhead to mount an attack on his credibility on the basis that he had not fully and frankly told the court about the circumstances of his convictions, that it was not just a misdemeanour as Parker chose to term it, but that it was a charge of ‘knowingly’ giving false evidence on oath.

34. I have carefully considered the thrust and ambit of the cross-examination of Parker on this issue as well as read the various judgments pertaining to his case that were drawn to my attention.  The Supreme Court of Western Australia set aside Parker’s convictions on the basis of errors in the trial judge’s summing amounting to a miscarriage of justice but ordered a retrial (Exhibit D1). The High Court of Australia set aside the retrial order (Exhibit D2).

35. In my view, the relevance of these convictions and the matters that they pertain to are of marginal, if any, relevance to the issues that I am being asked to address. They do not help to throw any light on whether or not Parker was present at the three meetings that Pang alleges he was or whether Parker was present when the Norton Rose advice was allegedly handed over to Pang.

36. In my view, apart from the forensic advantage of attempting to and perhaps partially succeeding to publicly embarrass Parker about events that transpired almost 18 years ago, this evidence had no or no discernible relevance to the issues before this court.  It is unfortunate that the defendant and its legal advisers felt it necessary to canvass this matter at all.  As Parker himself put it, as most other people, he has made mistakes in his life and that he has learnt from his mistakes.  In my view, that is the sum total of the effect and relevance of this issue.  I do not find it relevant or helpful in arriving at a decision on the issues that I am asked to address.  I certainly do not see it as in any way providing any illumination on the issue of credibility of Parker on the more germane issues before me.

37. Under cross‑examination in relation to the to the pertinent issues before me, Parker confirmed that he was present at a meeting of the Exco of the Chinachem Group in November 2011 to which representatives of the defendant were invited.  He agreed that Dr Kan Fook Yee, a member of the Exco raised questions as to the legality of the Agreement between the plaintiff and the defendant.

38. As he put it there were a whole host of issues that were raised at that meeting including whether the Agreement between the plaintiff and the defendant was still valid and in force, concerns were expressed as to whether some of the activities of the defendant in China were legal.  He explained that he and Hui were deputised to select from one of three nominated legal firms to provide an advice to the Exco of a wide range of issues that they were then concerned with and he was to prepare a detailed brief to procure such an advice.

39. He denied attending a meeting on either 11 or 12 March with Hui and Pang where questions as to the distribution ratio were raised.  He agreed he was present at a meeting with Hui and Pang where there were discussions about the distribution ratio of the profit from the China SME litigation.  He however stated that this meeting and discussion was after the Exco meeting of 22 May 2012 when the finalised advice of Norton Rose was tabled and discussed.  So he believed this meeting would probably have been in late May or early June 2012.

40. He went on to explain that he joined the meeting at the invitation of Hui to explain to Pang the decision of the Exco in the light of the Norton Rose advice, and this included negotiating a new agreement with the defendant with some new clauses to be added and for variation of the distribution ratio.  Parker also claimed that at the 22 May 2012 Exco meeting Hui, one William Lee and he were deputised to take the negotiations with the defendant forward subject to reporting back to Exco.

41. When pressed as to whether it was right for Hui to be talking with the defendant’s representatives, Parker explained that he did not know whether Hui had talked with the defendant’s representatives as Hui was entitled to speak with anyone that he wished to, bearing in mind that Hui had a relationship with them and he had had carriage of the matter with them for two years or more before the Exco decision in November 2011 to seek legal advice.  After that decision and until the advice had been obtained and Exco had decided how to proceed in the future, it was uncertain what that decision would be.  He claimed that Mr Kan Fook Yee was particularly opposed to any renewal of agreement with the defendant.

42. From Parker’s perspective, if Hui was talking with the defendant in order to ascertain what their position or thinking was, Parker had no problems with that.  However as far as Parker was concerned, Hui did not have the authority to negotiate as such any terms with the defendant until Exco had made a decision and authorised such negotiations.  He stated that his own view was that subject to a proper new contract with proper terms and proper distribution ratios being drawn up, it would be to the plaintiff’s advantage for the agreement with the defendant to be continued.  He candidly accepted that it was clearly in the plaintiff’s interest if the defendant could be persuaded to take a “less than a 50‑50 cut”.

43. He was of the view that if all that Hui was doing was softening up the defendant and sounding them out to the idea of their accepting a lesser distribution ratio he could see and accept the commercial reasoning behind that.  However he was categorical that after the appointment of the “negotiating team” comprising of Hui, William Lee and himself, they only had a limited remit to negotiate, and thereafter they had to report back to Exco and could not sign anything without Exco’s approval.

44. Under re‑examination he was specifically asked whether it was ever the intention of the plaintiff at anytime after getting the Norton Rose advice to hand it over to the defendant.  Parker responded no, but rather exactly the contrary.  Upon further re-examination, Parker stated that the word champerty was not specifically raised by Dr Kan during the 2 November 2011 Exco meeting. To his recollection Dr Kan raised questions as to what exactly the defendant had been doing in the PRC and as to the advice that they had been giving.  Parker’s impression was that Dr Kan was sceptical of some of the points that were being made by the defendant (T2/36:7-16).

45. PW2 was Chan Kam Por, a director of the plaintiff and also a member of the Exco of the Chinachem Group.  He filed two affirmations in these proceedings, one to deal with the defendant’s stay application (A/65) and the other in support of the plaintiff’s summons for the relief being sought as identified in paragraph 3 above (A/88) Although he adopted both affirmations as his evidence in chief, it is really the 2^nd affirmation that is germane to the issues between the parties at this stage of the proceedings, and quite properly he was only cross‑examined in respect of the matters stated in the latter affirmation.

46. Chan stated in his 2^nd affirmation that on 13 August 2013, the plaintiff and another company within the Chinachem group commenced proceedings against Hui for breaches of fiduciary duties and duties of confidence in relation to his handing over the Norton Rose Advice to Pang.  An interlocutory injunction was sought and obtained by consent on 16 August 2013 restraining him from disclosing and using identified confidential documents as enumerated in the schedule to the order of Deputy High Court Judge Leung (B/183).

47. Chan also confirmed that Hui played a central role on behalf of the plaintiff with respect of the conduct of the China SME litigation as well as with dealings with the defendant, as he was the one who introduced the defendant to the plaintiff.  He went to explain that:

“David Hui also played a significant role in liaising with the defendant and Dishi Law firm in relation to the performance of the Agreement, and reported back to the Chinachem Group Exco in respect of the Agreement. David Hui’s responsibilities included the handling of matters relating to the China SME Litigation appeal and as the conduit for reports to the Chinachem Group” (A/92: paragraph 12).

48. Under cross-examination when asked as to the basis of his assertion that he was duly authorised to file an affirmation on behalf of the plaintiff, Chan produced the minutes of the Exco meeting of the Chinachem group dated 5 March 2013 (Exhibit D3). He was then challenged as to the fact he disclosed in his 1^st affirmation as CKP-2 a legal opinion provided by PRC law firm Jun He without an Exco authorisation.  His answer was that he was duly authorised to do so as the affirmation and exhibits were seen by Norton Rose, the Administrators of the Chinachem Group PwC, and the Audit Committee members.

49. He was then asked by Mr Chan SC that if he could disclose a legal opinion because it was thought to be in the interests of the plaintiff to do so, then why was it that Hui could not equally do so if he thought that it was in the plaintiff’s interests as well.  Chan’s response was that:

“Because it’s very obvious it’s not useful. It’s to the disadvantage of Chinachem.” (T1/129: 24‑130:5)

50. Chan also confirmed that he had been asked by Pang on 2 November 2011 to provide a copy of the tax advice that the plaintiff had received.  He explained that he then arranged for a copy to be given to Pang a few days later.  He explained that he did so because there was a general consensus at that Exco meeting for the tax opinion to be given to Pang.

51. Chan also confirmed that it was part of the Agreement between the plaintiff and the defendant that DiShi Law firm would be used to help prosecute the appeal.  He confirmed that at the meeting on 2 November 2011 various issues relating to the legality of the Agreement were also raised.

52. Chan indicated that if there were discussions between the defendant and representatives of the plaintiff he was not aware of them as he was not involved with the details of the China SME Litigation.  He however agreed with Mr Chan SC that the plaintiff had not given any formal notice terminating the relationship with the defendant and that the actual notice was only given in November 2012 after the Supreme People’s Court had handed down its decision.

DEFENDANT’S EVIDENCE

53. Mr Lam Yee Hung and Mr Pang Chun Sing both directors of the defendant gave evidence on its behalf.

54. Lam’s evidence was contained in his affirmation dated 18 June 2013 filed in support of the stay application made by the defendant of the plaintiff’s claim against it on the basis of forum non conveniens.  Although the original Chinese version of his affirmation consisted of 43 pages and comprised 106 paragraphs, for the purposes of the hearing before me, the defendant’s legal advisers were content to have just paragraphs 39‑53 translated.  Accordingly, although he adopted the entire affirmation as being true, as far as the court was concerned, his evidence in chief was limited to the matters set out in the translated paragraphs.  Although Mr Chan SC did not expressly ask him to adopt the affirmation as his evidence in chief, I will work on the premise that that was the basis of the defendant’s case.

55. A careful reading of the affirmation evidence of Lam clearly indicates that he neither attended the meeting on 2 November 2011, nor any of the meetings on 12 March, 16 March and in late April 2012.  It would therefore appear that he had no personal knowledge of what occurred, what was discussed or who were present at any of these meetings.  He was depending principally on what Pang is said to have informed and conveyed to him after the meetings as to who attended these meetings and what transpired in them.  He confirmed under cross-examination that he was not present at any of these meetings that he speaks about in his Affirmation.

56. He also confirmed that what he sets out in paragraphs 39‑41 of his Affirmation (A/64A-B) were based on what had been reported back to him by his elder brother Lam Yee Gong and Pang.  He also came to understand that the Exco Board of Chinachem had been expanded from five members to eight.  He also agreed that he later came to know that the Exco of Chinachem had authorised three persons, namely Hui, Parker and William Lee to be responsible to handle the Minsheng Bank litigation.

57. When asked directly as to what was his understanding as to the authority of this sub-committee of three persons, he deflected the question and stated that

“They appointed three members to handle the matter, so we would only communicate with the three they had appointed. How could we communicate with the whole board?” (T2/46:7‑12)

58. Both in his affirmation and in his evidence in court Lam was adamant that the meeting was held on 3 November and not 2 November 2011 as claimed by the plaintiff’s witnesses. This was despite the fact that he himself did not attend the meeting.

59. Lam’s attention was drawn to a memorandum dated 19 July 2010 (Exhibit D4) that the defendant apparently sent to the plaintiff reporting on a meeting that had taken place on 15 July 2010 with China SME, the plaintiff’s opponent in the PRC litigation.  The thrust of the Memorandum recorded the views expressed by Lam Yee Gong to the effect that there was a metamorphosis in the Chinachem Group from a private company into a charitable organisation, that due to the litigation that the Group had with one Tony Chan in Hong Kong at that time the Group was under administration and that “substantial decisions must be jointly decided by the board of directors of Chinachem Group and the administrator.”

60. It was also pointed out to him that the memorandum recorded that when his brother Lam Yee Gong was asked to convey a message and persuade Hui to accept a particular proposal, the brother is reported to have said that with the huge number of people attending the negotiations from the Chinachem Group, “not a single person can make the decision” not even Hui.  When pressed whether he appreciated from what his own brother was saying that no one person could make the decision on behalf of the Chinachem Group, he again deflected the question and gave a non‑responsive answer.

61. He was questioned about the circumstances under which the defendant was given a copy of the Norton Rose advice, and he confirmed that the matters set out in paragraph 53 of his Affirmation were again based on what Pang had recounted to him about the meeting in April 2012.  He explained that as the advice was in a language he did not have a clue about, he asked for it to be translated.  To his recollection he was only given a translation of the advice towards the end of 2012.

62. He was asked as to what his understanding of the contents of the advice was and he responded that he only knew the concise main points and not the whole document.  According to him these main points were that Norton Rose commented that the defendant had done a good job, that the plaintiff should extend the term of the agreement with the defendant and that if that was not done, this would amount to dereliction of duties on the part of the directors of the Chinachem Group.  He was unable to remember the other details because, as he put it, his main concern was “whether there is a guarantee for us to continue with our work.” (T2/ 66:13-25)

63. He confirmed that his understanding of what the advice contained was based on what somebody else told him was in it until he read it later in the year 2012.  He supplemented this by adding that the most important thing as far as he was concerned was that there was no question of any champerty on the defendant’s part, and even after they had been provided with a copy of the Memorandum, they did not think this document was paramount in deciding on the matter as the defendant had been repeatedly told and assured by Hui and Dr Kung that there was no problem at all and that the defendant should simply carry on with their work.  When specifically asked being the head of the defendant company whether he was ever bothered as to what the rest of the Norton Rose advice contained, he answered elliptically “One can have such an understanding, yes.” (T2/69: 14-18)

64. In answer to questions from the court Lam indicated that he was the only shareholder of the defendant and also one of its two directors.  His elder brother was an employee of the defendant, almost in the role of a manager.

65. Pang Chun Sing was the second witness called by the defendant.  He agreed that the second and third supplemental agreements were not signed by the parties.  He claimed that he was told by his secretary that the agreements had been signed at a time when he was in hospital.

66. He stated that as the relationship between the parties at the time was good it never occurred to him that the plaintiff would not sign the agreement.  He then blurted out that he had asked Hui about the matter who then apparently told him that it had been signed.  When pressed in cross-examination that the answer was never mentioned in his affidavit and was not true, he then gave the answer that “I suspected that Dr Kung had already affixed his signature on the agreement.  However that agreement had never been sent out, not mailed.”(T2/79:4 – 80: 19)

67. Although Pang initially maintained that the meeting in November 2010 was on 3^rd, eventually during cross examination and after sight of a document he produced as Exhibit D6, he accepted that the meeting probably took place on 2 November 2011.  This was a document that he claimed had been produced by Lam Yee Gong after the meeting with the Exco of Chinachem. By his reasoning given the length of the document he believed that it could not have been completed on the same day as the meeting, which was why he accepted the meeting was probably on 2 November 2011.

68. He acknowledged that he heard Lam give evidence in court that Lam’s primary concern was champerty. He however claimed that as far as he was concerned he had very little concern about the issue of champerty because the agreement between the plaintiff and the defendant had been drafted and vetted by 4‑5 lawyers, including that of the Administrators.  If there was any question about champerty, it was not the defendant’s problem, but rather that of Chinachem, as the defendant had not engaged any lawyers in the drafting of the agreement.

69. When asked about when it was when he first heard concerns regarding the issue of champerty, he explained that about a week after the Exco meeting he spoke to Hui on the telephone and asked what should be done.  He was informed that Hui and Parker had been assigned by the Board to deal with the matter.

70. According to Pang, back in August 2011 the defendant had been pressing the plaintiff to call a meeting of the Exco but this was only convened in November.  It was then that he was told that Chinachem had decided to refer the matter for Norton Rose’s advice.  According to him, Chinachem dragged their feet for another three months until March 2012, when they asked to see lawyer Loong from DiShi.

71. As more than eight months had elapsed, the defendant’s concern was whether they should continue or discontinue with their work.  As far as he was concerned, it was the plaintiff’ stalling in signing the 4^th agreement which was the problem.  If the agreement was not going to be signed, then there was no reason why the defendant should continue working.

72. On the third day of the hearing he produced a document which he said was a report by the defendant to the plaintiff after the Exco meeting on 2 November 2011 (Exhibit D6).  He acknowledged that the document did not touch upon any issue of illegality or champerty being raised at the Exco meeting on 2 November 2011.Rather it was report to the plaintiff of what the defendant had been doing in respect of the PRC litigation.

73. It was suggested to him that he was mistaken as to how and when he heard that champerty was a concern of Dr Kan, which he disagreed with.  He however agreed that this was something that he learnt from Hui, and not something he heard at the meeting on 2 November 2011.

74. Pang claimed that he came to know Hui when they were colleagues working together in the same company in 1996 and that they used to meet from time to time.  He agreed that when Hui informed him that Norton Rose had advised that there was no problem with champerty he had no reason to disbelieve him.  The key issue for him was whether the defendant should continue their work for the plaintiff and this was related to the signing of the 4^th supplementary agreement.  He himself had only a small concern regarding champerty.  Pang stated that in his view the plaintiff would ultimately be successful in the appeal.

75. He explained that it was during the third meeting with Hui about 2‑3 days before the end of April that he was informed about the advice given by Norton Rose that there no champerty.  He was asked if he believed what David Hui had told him about the Norton Rose advice regarding champerty why would he then need to have a copy of the advice.  Instead of answering that direct question Pang indicated that he instead wanted to say what else Hui had told him.  He stated that there were four important matters that were mentioned by Hui: (a) champerty; (b) that the agreement with the defendant had expired and/or was void and that the defendant would loose in any litigation; (c) that the defendant had done a good job; and (d) that the directors of Chinachem were reminded of their fiduciary duties.  He was adamant that Parker was present at this meeting.  Pang denied that the meeting with Parker was after 22 May 2012.

76. He was categorical that after the meeting at end April and until a meeting in Beijing in June 2012 he did not see Parker in that interim period.  He however agreed in cross‑examination that there was a meeting during which Parker made it clear that there had to be a new agreement as the earlier agreement had expired, that the proportion of sharing had to be renegotiated with a new ratio of 60/40, instead of the original 50/50.  When asked when this was said to him by Parker he initially stated that this was said during all three meetings on 12 and 16 March and towards the end of April.  He later corrected his evidence to say that at the first two meetings only the change in ratios was mentioned and that it was at the last meeting in April 2012 was it mentioned that the agreement had expired/void.

77. Pang sought to explain the reason this was mentioned on those occasions was because Parker and Hui were under tremendous pressure from the board of Chinachem to renegotiate the ratio with the defendant.  Apparently Norton Rose had advised a 70/30 revised ratio, but that Hui was apparently fighting for the interests of the defendant as he wanted the defendant to continue with the work on the appeal on behalf of the Chinachem Group.

78. When pressed to explain why in the light of that answer he would require a copy of the Norton Rose advice, he responded that “He needed to give me confidence” (T3/30: 3 – 31:7).  His attention was then drawn to paragraph 9 of his affidavit (A/97F) whereupon he agreed that the paragraph was directed towards explaining the reason why Hui gave him the Norton Rose advice, which was said to be to give him reassurance about the champerty issue.  He agreed that he himself did not need any comforting about that issue.

79. Pang was further pressed on whether he was now saying that the advice was given to him for comfort and reassurance when being told that the agreement had expired or was void.  He claimed Hui gave him the document to “to scare me off.”  When reminded that the defendant’s case was that the advice was given for comfort and reassurance whereas now the explanation he was putting forward was that it was a scare tactic, Pang responded “Both elements, comforting and scaring” (T3/35: 6-13).

80. Pang initially stated that he did not read that part of the advice which dealt with whether the agreement between the plaintiff and DiShi was void or voidable.  Then later he said that he forgot about this.  He then claimed that it did not occur to him as to why he had been given the advice dealing with the validity of the agreement between the plaintiff and DiShi.  When it was suggested to him the fact that he was being given such advice should have raised alarm bells in his head, his response was that he just ignored it.  He then sought to justify being given this aspect of the advice on the basis that David Hui wanted to “express his sincerity in retaining us to continue with the work…  This is only a draft, after all.” (T3/40:15‑42:8)

81. He deflected answering whether he understood the concept of legal professional privilege (LPP) although he conceded that he understood the concept of confidentiality provisions.  He was repeatedly pressed by Mr Huggins SC as to why he felt that the Chinachem board would ever have wanted the defendant to have possession of a document that touches on whether the plaintiff would be liable to pay the defendant and associated legal issues.  Again his response was that it just did not occur to him at all and that his only concern was whether or not to continue with the work.

82. He was questioned as to why he thought the defendant was being given the Norton Rose advice dealing with need for and the advantages of having an entirely new supplemental agreement.  His answer was that Hui was the only one in the entire board of Chinachem who had over 20 years’ experience of working in China and who wanted the defendant to continue working as “this job is extremely difficult.” He then sought to further justify the defendant being given the advice by proffering three reasons: firstly, that the advice was only a draft which could be altered at any time; secondly, that the memorandum of advice had not gone through the board of directors as yet and have their approval as yet; and thirdly, the advice contained “things that are most disadvantageous to me.” (T3/46:8 – 47:5)

83. When pressed as to why the defendant should be concerned about those various other matters that were the subject matter of the Norton Rose advice, Pang’s retort was that: “He gave the document to me.  The meaning to me is he had the authority to do so, so he did.” (T3/49:24‑5)

84. Pang’s attention was drawn to paragraph 14 of his affidavit (A/97H) where he states that on or about 21 December 2012 Lam gave a copy of the Norton Rose advice to the law firm DiShi.  He was pressed as to what were the grounds that he had for believing that Chinachem would have wanted details of any advice regarding Chinachem’s agreement with DiShi to be given to that firm.  Pang’s response was that Norton Rose had fired the defendant and Norton Rose was acting for Chinachem and that “I need to make a lot of preparations.” (T4/2:13-3:4)

85. Pang conceded that the only reason why DiShi had a copy of the Norton Rose advice was because the defendant had chosen to give it to them.  He further accepted that he had no grounds for thinking that Chinachem would have wanted him to give a copy of the advice to DiShi.  He however denied that the handing over of the document was a breach of confidence because according to him, the document in question was not confidential at all and that the contents were “just nonsense”. (T4/8: 18 – 9:8)

86. Pang went on to echo the lawyer Loong’s complaint that Chinachem were trying to persuade DiShi to work directly with them and to discard the defendant from the picture.  He asserted that if the defendant was not going to be provided with a copy of the advice, they would not continue with the work.  Pang explained that Hui had told him that Chinachem had sincerity in wanting the defendant to carry on with the work and that they had spent a lot of money in obtaining the Norton Rose advice with the purpose of wanting the work to be continued by the defendant.  Pang claimed that his response to Hui was: “If you did not provide such proof to me, how could I be accountable to the lawyer Mr Loong and the others? This is your sincerity in the matter.”(T4/10: 8‑11:21)

87. He went on to allude to the fact that the appeal matter was not something that could be handled by just three men ‑that there were many people working behind the scenes, including the entire Law Faculty of the Renmin University.  Pang explained that he became a director of the defendant in December 2012 and that at the time the Norton Rose advice was handed over to the defendant, he was its manager.

88. Pang’s attention was drawn to paragraph 19 of his affidavit (A/97) where he appeared to suggest that it was not unusual for him to be provided with confidential documents of Chinachem and that he had been provided with a copy of a tax advice by Deloitte Touche Tohmatsu CPA Limited rendered to Chinachem a copy of which he exhibited as “PCS‑2”.  When it was pointed out to him that he must have understood that the tax advice was being given to him for his eyes only and not for the world at large, his response was that he only gave it to his lawyers DiShi.

89. In re‑examination, Pang stated that it was the defendant who bore all the expenses from the time they entered into the agreement with Chinachem and DiShi, including the latter’s fees.  He went on to explain that without the involvement of DiShi, they would not have been able to solicit the help of the law faculty of Renmin University and also risk the forfeiture of the Chinachem investment by the authorities.

90. According to Pang, because the Chinachem investment involved foreign capital investment and the approval of the Banking Regulatory Commission had not been sought, there were contraventions by both Chinachem and China SME of PRC laws.  This was why the PRC’s Supreme People’s Court wanted the matter to be settled by mediation.

91. Pang elaborated that insofar as the work of the defendant was concerned, there was no question of any contravention of Hong Kong laws because the subject matter of the case involved shares of a bank in the PRC, the defendant was a PRC company and the appeal was in the PRC as well.

92. He went on to add that if Norton Rose’s advice was that the agreement between the plaintiff and the defendant was champertous, he believed that in that event the plaintiff would not go on with the agreement.  He claimed that this was why Dr Kung, the Chairman of Chinachem Group and Hui, as its CEO, told him that they knew that being able to execute on any favourable result was the more difficult task and that was why they wanted the defendant to continue with its work.

93. Pang also reiterated that at the end of April 2012 meeting it was he who pressed David Hui to give him a copy of the Norton Rose advice.  His explanation on this occasion for seeking a copy of the advice was: “We could not continue with our work if they did not provide us with some proof of their sincerity.” (T4/44:1-9)

94. Mr Chan SC then sought to clarify with Pang what interest that the defendant may have had in knowing the position of Chinachem and their relationship with DiShi.  Pang’s answer was “No interest to know...  Because DiShi definitely expressed that they would not work with these guys.” (T4/49:7-16).  He went on to expand this to say that Norton Rose wanted to get rid of the defendant so that there would then be a direct relationship between Chinachem and DiShi.

95. Pang asserted that when Hui gave him a copy of the advice, he did not tell him how he might use the document nor told him what he should not do with it.  According to Pang, Hui simply gave it to him.

96. In response to a question from the court as to why he still needed a copy of the advice if David Hui, as CEO of Chinachem, had given him the assurance that there was no issue of champerty and the further assurance that the defendant should continue with its work and that the supplemental agreement would be signed, Pang’s answer was:

“Because you have to show me your sincerity, because even DiShi lawyer Loong said he was pulling out, so how would I be able to convince them to continue with the ongoing work ... I trusted his words and the man has sincerity … it’s not only winning the appeal, it’s also, after winning the appeal, to put the order of the court in execution, in obtaining the target income, the results … Mr Hui himself fully understands that the execution of the judgment is more important than getting the appeal, winning the appeal.” (T4/565)

THE ISSUES

97. The parties relied on the submissions they had filed for the hearing before Godfrey Lam J on 23 August 2013 supplemented by both final written and oral submissions filed before me.  The following were identified as the issues that required resolution by the court:

(a)  there was no confidentiality issue involved in the Norton Rose advice vis-à-vis the defendant;

(b)  David Hui had actual or ostensible authority to waive privilege;

(c)  there was no breach of fiduciary duty by David Hui;

(d)  the giving of the advice was part of a material allegation in the litigation; and

(e)  delay in the plaintiff’s application.

98. I turn now to address each of these issues in turn.

(a)  No confidentiality issue vis-à-vis the defendant

99. As I understand it, the defendant’s argument on this issue runs along the following lines:

(i) the issue of the legality of the agreement between the plaintiff and the defendant was raised at the Exco meeting of Chinachem on 2 November 2011 in the presence of  representatives of the defendant;

(ii) it was important at that point in time to resolve the question of whether the plaintiff will sign the further supplemental agreement with the defendant;

(iii) it was material to know whether the defendant will continue to work on behalf of the plaintiff to secure a successful outcome in the appeal;

(iv) it was ‘inconceivable’ that any opinion that the Exco of Chinachem commissioned on the legality issue was to be kept away from the defendant as “the legality of the agreement must be a material concern for every reasonable businessman”; and

(v) that the natural inference was that the plaintiff would disclose such advice to the defendant once it became available, and therefore any privilege in respect of such advice was waived by the plaintiff.

100. I should point out at the outset that I find this argument of the defendant runs contrary to the evidence of Pang that the defendant was only ‘little concerned’ about the issue of champerty.  The defendant’s real concern, according to Pang, was that the plaintiff was stalling in signing the further supplemental agreement and as to whether the plaintiff would in fact sign it so that the defendant could continue their work to secure a favourable result in the appeal. 

101. It appears to me that this argument of the defendant does not also sit well with the fact that Mr Chan SC chose not to put on behalf of the defendant (if it remained its case) to either Parker or Chan that it was always the intention of Chinachem to provide a copy of the advice they received from Norton Rose to the defendant and therefore there was waiver of both confidentiality and privilege in respect of the same whether expressly or by implication. 

102. To the extent there may have been left any lingering doubts or any insinuation that it was always the intention of Chinachem to provide a copy of the Norton rose advice to the defendant, the following question of and answer by Parker during re‑examination is relevant and revealing:

“Q: Was it or was it not, according to your understanding, the intention of Chinachem at any time after they sought and obtained advice from Norton Rose to hand over the contents of that written advice to Century Venture?

A: No, Not at all. Quite the contrary.” (T1/116:4-9)

103. It is noteworthy that neither of the defendant’s witnesses, Lam or Pang, themselves ever alluded to the fact that it was all along the intention of Chinachem to give a copy of the Norton Rose advice to the defendant.  If anything, Pang gave contradictory evidence by first asserting that he was given a copy of the advice as a form of comfort and reassurance and to give him confidence.  He shifted his ground by next saying that it was given to “scare him off” and finally asserting that it was a combination of both—reassurance and scare tactics.  He later claimed it was to show the sincerity of Hui (see paras 78‑79 above).  To further muddy the waters, Pang then went on to assert that he wanted David Hui to provide him with a copy of the advice to show their sincerity (para 86 above) and further that if they would not pay the defendant, then they would stop their work on the appeal, ie “down their tools” (para 5(4) of Pang’s affidavit A/97D).

104. The constantly shifting reasons that Pang proffered as to why the defendant should be given a copy of the Norton Rose advice gave me the distinct impression that these were post facto rationalisations by him as to why the defendant was in possession of that advice.  They certainly came across as knee‑jerk reactions/responses by Pang when pressed to explain the rationale of why the defendant required physical possession of a copy of the Norton Rose advice.  Given that his acknowledged primary concern was the signing of the supplemental agreement by the plaintiff, having possession of the advice would provide little assurance or comfort to Pang that the plaintiff would actually sign the supplemental agreement. 

105. One could readily understand if what the defendant wanted to know was the nature of the advice given by Norton Rose as to whether there was any element of champerty in the agreement between the plaintiff and the defendant and/or whether the Exco of Chinachem were being advised that they should continue to use the services of the defendant and/or to sign the supplemental agreement with the defendant and/or whether any such new agreement was to be on the same terms or new terms.  Similarly, it would be understandable if Pang told Hui that unless the supplemental agreement was signed the defendant would stop working. 

106. The closer I analyse the evidence before me and the submissions advanced by the defendant the more compelling is the conclusion that this argument of the defendant that there was no confidentiality attached to the advice and that it was understood that the defendant would be given copy of the advice is an untenable one.  I am satisfied that there was never any understanding, express or implicit, that the plaintiff intended to provide the defendant with a copy of any advice they would receive from Norton Rose in this regard.  I find that it defies commercial logic and common sense that the plaintiff would have intended such a consequence from the outset when the Exco of Chinachem was itself uncertain as to what would be the advice that Norton Rose would come back with on the wide range of issues they were asked to express an opinion on.  Furthermore, the advice was intended to cover the tactical positions and approaches might or should be adopted by the plaintiff in respect of its future dealings vis-à-vis the defendant and DiShi. 

107. I find it difficult to accept that even before receiving such advice and assimilating the import of it that the plaintiff would have intended or agreed that the defendant and/or DiShi would automatically be given a copy of the advice, rather than simply informing the latter two entities of the nature of the advice that had been rendered. 

108. Upon a careful review of the evidence I have heard, I find that this issue is nothing more than a legal construct argument propounded lawyers on behalf of the defendant but which has no foundation or support in the evidence given by Lam or Pang.  I accordingly reject this argument of the defendant.

(b)  Actual or ostensible authority of David Hui to waive privilege

(i)  Actual Authority

109. The defendant’s case on actual authority was that as Hui was appointed as CEO of the Chinachem Group he must and was delegated with a high level of authority and was so held out by the Exco of the whole Chinachem Group.  It was argued that this is further reinforced by the fact that even Chan in his 2^nd affirmation states that Hui:

“played a central role on behalf of the plaintiff with respect to the conduct of the China SME Litigation and dealings with the defendant… David Hui also played a significant role in liaising with the defendant and DiShi Law firm in relation to the performance of the Agreement, and reported to the Chinachem Group Exco in respect of the Agreement. David Hui’s responsibilities included the handling of matters relating to the China SME Litigation appeal before the SPC and three sets of mediation negotiations with China SME and as the conduit for reports to the Chinachem Group.” (A/91-2 para 12)

110. In his final submissions Mr Chan SC contended that there was no limit to the authority of Hui and that he therefore must have had the actual authority to make use of the advice document that he bona fide believed was useful for carrying out his task.  This bold submission was described as being “unreal’ by Mr Huggins SC and I am inclined to agree.  Whatever may have been the reasons or motives for Hui to act in the manner he did, there is no evidence before me in this regard.  In such circumstances I am of the view that it would be both unnecessary and wrong for me to make any findings as to the bona fides or otherwise of Hui’s actions, particularly when he is not a party to these proceedings and I have not heard from him.

111. I would also observe that the bold submission of Mr Chan SC runs contrary to the evidence of Parker that even in respect of a matter such as the application for the continuation of the freezing order in respect of the Minsheng Bank shares the subject matter of the PRC appeal, both he and Hui had to revert to the Exco for its approval. Although this was a routine matter, Parker stated that “neither of us had any authority to do anything without taking it back to Exco, so we did.” (T1/105 12-18)

112. I also note that even as far back as 15 July 2010, in the Memorandum prepared by Lam Yee Gong (Exhibit D4) there was tacit acknowledgement by the defendant that important decisions relating to the Chinachem Group required the approval of its Exco and the Administrator (see para 59 above).  This again flies in the face of any suggestion that Hui had actual and unlimited authority to act on his own on important matters by virtue simply of the fact he was the CEO.

113. I am satisfied on the evidence that Hui did not have any actual authority to waive legal professional privilege in respect of the Norton Rose advice.  I also find that there was no basis on the evidence for Pang to believe that he had such actual authority.  A careful examination of Pang’s evidence does not lend itself to the conclusion that Pang ever considered the question of whether or not David Hui had such actual authority.

(ii)  Ostensible Authority

114. The defendant’s alternative stance was that even if Hui did not have actual authority to waive legal professional privilege, then he must have had apparent authority to do so by reason of his position as CEO of the Chinachem Group and by reason of the fact that he had been appointed to be fully in charge of the negotiations with the defendant from the outset.  Mr Chan SC submitted that in the absence of any suggestion of any collusion or conspiracy between Hui and the defendant, the former’s act of handing over a copy of the Norton Rose advice must have been a deliberate one and not due to any mistake or oversight.

115. In response, Mr Huggins SC pointed out that neither Lam nor Pang in their evidence suggested that they relied on the apparent authority of David Hui in giving the defendant a copy of the advice.  Lam in fact never mentioned anything about legal professional privilege and stated that he did not even read the advice until almost eight months later when he was given a translation of the document.

116. In the case of Pang, it became even more patently clear that he was not relying on or even suggesting of any apparent authority of Hui to waive legal professional privilege on behalf of the Chinachem Group in respect of the Norton Rose advice.  The following exchange starkly bears this out (T3/44:13-21):

“A: If he gave me that, that meant he had authority to do so.

Q: Are you saying you thought he waived privilege?

A: I don’t even think about it.

Q: Ah, you didn’t even [think about it?]

A: Nothing that concerned me.

Q: It didn’t even cross your mind that he was waiving privilege in relation to the contents of the document?

A: No, no, no”

117. In his final submissions, Mr Huggins SC fairly and properly conceded that the plaintiff’s earlier skeleton submission contending that on the affirmation/affidavit evidence of Lam and Pang the defendant was clearly aware that three persons had been delegated by the Exco of Chinachem with the authority of dealing with the issues related to the PRC litigation and the agreement with the defendant, and that it therefore would be aware that Hui would not have the authority to act on his own (para 21 of the plaintiff’s skeleton submission) will not be pursued.  There was no time frame placed by them as to when they became so aware of this committee of three.

118. This concession was dictated by Parker’s evidence in court that it was only after 22 May 2012 meeting that the Exco of Chinachem Group appointed him, David Hui and William Lee to be the committee of three who were delegated with that authority, subject with a requirement to report back to Exco.  It was argued by Mr Huggins SC that this concession did not detract from the primary submission of the plaintiff that on the evidence there could be no basis for the defendant to believe that Hui had any apparent authority to waive legal professional privilege in respect of the Norton Rose advice. 

119. I find on the evidence that there is no basis for the defendant to argue that they relied on the apparent authority of David Hui to waive legal professional privilege on behalf of the Chinachem Group.  This is particularly so in the light of the extract of the evidence set out in para 116 above. 

120. A second string to the bow of the plaintiff’s argument was that even assuming it could be said that the defendant believed that Hui had the apparent authority to waive legal professional privilege in respect of the advice, that such belief or reliance would be unjustified and irrational.  My attention was drawn to the case of Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings (No 2) (2010) 13 HKCFAR 479 in support of that proposition.

121. In giving the judgment of the court, Lord Neuberger NPJ made the following observations:

“Given that apparent authority is a species of estoppels by representation, it follows that, as Diplock LJ said in his third proposition in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd p506, the third party must establish that it relied on the apparent authority of the alleged agent before it can succeed in establishing its case. (para 72)

In my view, once a third party has established that the alleged agent had apparent authority i.e. that the principal held out the alleged agent as having authority to bind the principal, and that the third party has entered into a contract with the alleged agent on behalf of the principal, then in the absence of any evidence to the contrary, it would be an unusual case where reliance was not presumed. (para 75)

It is clear that, as executive chairman and chief executive officer of Akai, Mr Ting would have had a large measure of apparent authority – indeed no doubt he would have a large measure of actual authority. That authority would, no doubt, extend to entering into many contracts which might involve Akai incurring US$30 million liability. However, the question which has to be faced is whether the nature and circumstances of the Switch Transaction were so peculiar as to preclude the Bank contending that his apparent authority extended as far as committing Akai to it. (para 81)

Subject to any good reason to the contrary, for the reasons I have attempted to give, I would accordingly conclude that:

(a) Despite his wide powers of management, Mr Ting did not have any apparent authority to commit Akai to the Switch Transaction, in the sense that he was not clothed with authority; and

(b) Even of otherwise he had been clothed with such authority, the Bank was simply irrational in its belief that it relied on that authority.” (para 94)

122. If I am wrong in my view that the defendant did not rely on the apparent authority of Hui to waive legal professional privilege, I am satisfied that even if there was such reliance, that it would on the facts and in the circumstances of this case have been irrational for the defendant to have done so.  No reasonable person appraised of all the relevant facts would have reasonably or rationally thought or believed that the Exco of the Chinachem Group would have authorised Hui to impart a copy of the Norton Rose advice which would disclose the tactics that Chinachem group were being advised to adopt in their dealings with the defendant and DiShi law firm and reveal the strengths and weaknesses of Chinachem’s position on various matters as well as a host of other issues.  It is one thing for the defendant to be told of the nature of the advice that Chinachem had received, but quite a different matter to be given the entire document which was covered by legal professional privilege. 

123. In this regard I find the argument in para 22 of Mr Chan SC’s final submissions that the asking of legal advice from the other side and the giving of the legal advice to the other party is “rather normal” is rather too glib an embellishment of the evidence particularly given the nature and content of the Norton Rose advice.

(c)  No breach of fiduciary duties by David Hui

124. The defendant’s argument here was that there must be a purpose in Hui handing over a copy of the Norton Rose advice to Pang.  Accordingly, in the absence of any suggestion of mala fides or collusion or corrupt motives, the court should infer he did so bona fide and purely in the interests of the Chinachem Group.

125. I have earlier in this judgment (para 110 above) indicated that I did not think it either necessary or proper for me to make any findings on the reasons or motives of Hui in handing over a copy of the Norton Rose advice to Pang.  Hui is not a party to these proceedings and I have heard no evidence from him as to why he acted in the manner he did.  He is being separately pursued by the plaintiff and another company within the Chinachem Group who was his actual employer in HCA 1486 of 2013 for, inter alia, breaches of fiduciary duties. 

126. I am of the view that it is not necessary to make any findings on the issue of breach of fiduciary duties on his part in the context of the issues enjoined between the plaintiff and the defendant in this action and I decline to do so.  Whether or not Hui was in breach of his fiduciary duties is, in my view, a matter that should properly and more appropriately be canvassed and adjudicated upon in those other proceedings and not the present one. 

(d)  Material allegation in the litigation

127. The defendant’s argument here was that the giving of the Norton Rose advice by Hui was an act indicating that the plaintiff did not want to terminate the relationship with the defendant and was therefore evidence of extension of time of the contract by conduct.  It was argued that the giving of a copy of the legal advice was part of the material facts in support of an estoppel as raised by Pang in parags 9‑11 of his affidavit (A/97 F-G).

128. It was also the defendant’s case that the advice in itself and the fact that it was given to the defendant as reassurance “are key evidence to D’s case that it was the mutual understanding between P and D that the agreement between them was not terminated, and therefore D is still entitled to remuneration.” (para 32 of the defendant’s skeleton submissions before Godfrey Lam J).

129. It was further argued that when one party gives to the other a legally privileged document as part of a representation made to induce the other party to act in a particular manner, there would then be waiver of privilege.  In this regard it was contended by Mr Chan SC that the court’s fact finding task would be “seriously compromised if the Advice itself was not produced before the court in deciding whether CC (the plaintiff) had made the representation by this Advice itself.” (para 35 of the defendant’s Final Submissions).

130. There would appear to be a difference in the approach to the question of waiver of privilege in respect of a material allegation in the litigation by the courts in Australia and the United States on the one hand and United Kingdom on the other.  This divergence was succinctly pointed out by Woo VP in Goldlion Properties Ltd & Others v Regent National Enterprises Ltd [2006] 1 HKLRD 793 in giving the judgment of the Court of Appeal when he observed:

“The Australian and New Zealand courts generally adopted the ‘putting in issue’ approach whereas the English approach was based on unfairness caused by the conduct of a party attempting to use privileged evidence to advance his position but at the same time claiming privilege against the opponent… my tentative view is that the English authorities should be followed because their approach prohibits an easy inroad into this fundamental right to legal professional privilege that may be provided by the employment of the ‘putting in issue’ approach.” (p 805 J-806 C)

131. Mr Chan SC invited the court to adopt the Australian approach as exemplified by the following cases: Hong Kong Bank of Australia v Murphy[1993] 2 VR 419; Wardrope v Dunne [1996] 1 QD R 224; BP Australia Ltd v Stallwood [2000] WASC 75.  These were all cases where the privileged communications were relevant to an issue in the case such as the state of mind of a party or their knowledge or to an issue of inducement.

132. The law in relation to implied waiver of legal professional privilege was authoritatively reviewed by the English Court of Appeal in Paragon Finance v Freshfields [1999] 1 WLR 1183, where Lord Bingham CJ (as he then was) delivered the judgment of the Court of Appeal and expressly overruled the case of Hayes v Dowling[1996] PNLR 578, in which the judge relied on United States and Australian authority (particularly Wardrope’s case) in ruling there was implied waiver of privilege with the underlying rationale being that of fairness.  He went on to state:

“Fairness is an important part of the reason why a solicitor who is sued cannot be required to respect confidentiality of his relationship with the client who is suing him,; but, save as between the client and the solicitor he is suing, fairness is not the touchstone by which it is determined whether a client has or has not impliedly waived his privilege.” (p 1194)

133. Since the decisions in the Paragon case and the Goldlion case, the English courts have further clarified the law of implied waiver of privilege and the context in which it may apply.  In Farm Assist Ltd v Secretary of State [2009] PNLR 16 Ramsey J comprehensively reviewed the US, Australian and English case on the question of implied waiver of legal professional privilege and stated as follows:

“51. English law does not follow the approach in the United States decision in Hearn v Rhay and in the Australian decisions such as Wardrope v Dunne which impose a wider implied waiver based on fairness. The approach of Neill CJ Hearn v Rhay was to say that there was implied waiver where it would be unfair to for a party to assert privilege and out in issue information protected by privilege through some affirmative act for his own benefit.

52. In Wardrope v Dunne Derrington J said that where a state of mind, such as whether a person was induced by a misrepresentation, is in issue and that state of mind may or may not have been influenced by the privileged material, it is necessary to investigate all relevant matters in that persons mind at the time, including privileged information, in order to determine whether he was induced by the alleged representations. The reason is that it would be ‘grossly unjust’ to deny a party to the privileged information in order that the party may investigate and test the claim.

53. Rather, English law maintains the right of a party to maintain legal privilege. Whilst a person’s state of mind and also that person’s actions may well have been influenced by legal advice, there is no general implied waiver of privileged material merely because a state of mind or certain actions are in issue. This means that, in the absence of the disclosure of the privileged legal advice, the other party is precluded from being able to put that legal advice to a person to show that the advice influenced the state of mind or actions of that person. In many cases it could be said that privileged legal advice might be relevant to establishing and issue and that, in this way, the privileged material can be said to be put in issue. That is not the approach taken in English law. Rather, the underlying policy considerations for creating privilege to protect communications between a client and solicitor are treated as paramount even if some potential unfairness might occur.

54.  The test in English law in therefore based neither on general principles of fairness nor on relevance.  Implied waiver arising from particular proceedings or pleading allegations in those proceedings is, in my judgment, limited to proceedings between solicitor and client as set out in Lillicrap v Nalder[1]and Paragon Finance.[2]”

134. My attention was drawn to the case of Digicell (St. Lucia) Ltd v Cable & Wireless [2009] EWHC 1437 where Morgan J followed the approach of Ramsey J in the Farm Assist case.  He rejected the argument that Ramsey J had gone too far in his statement of principle set out in paras 53‑54 of his judgment (as quoted in para 133 above).  Morgan J went on to make the following statement of principle, which in my view is equally apposite to the arguments addressed to me:

“52. The fact that legal advice is relevant to an issue does not result in waiver of privilege. Relevance is a necessary precondition for disclosure but it is not a sufficient condition for a finding of waiver. The position is the same even where the legal advice is ‘highly relevant,’ rather than relevant to a lesser extent, and even where an investigation of the issue may be hampered by the absence of privileged material. The position is the same again even when the issue is to a person’s state of mind. Equally, in my judgment, it makes no difference that the alleged state of mind relates to a matter of law rather than to a matter of fact.

53.  There will of course be waiver of privilege if a party deploys the contents of the legal advice in the litigation.  In the absence of such deployment, there is no rule of law which allows the court to override the claim to privilege just because the court thinks it would be fair to do so.  The court will simply have to do the best that it can to what it hopes will be right conclusion on all the evidence presented, even where evidence that would be relevant has been withheld by a party, who is entitled in law to withhold that evidence.”

135. In my view, the approach adopted and the principles enunciated in the English cases is the correct approach to follow and I do so in this case, as it avoids any inroad into the right of legal professional privilege in Hong Kong.  This is a right recognised by the Court of Appeal as a fundamental human right and given paramount importance by Hong Kong’s constitutional document under Article 35 of the Basic Law (see Citic Pacific Ltd v Secretary for Justice[2012] HKLRD 701, at 715).

136. As I see it, on the issues enjoined between the plaintiff and the defendant whether in these present proceedings or the PRC proceedings, the question of whether the agreement between the plaintiff and the defendant was subsisting or whether it had expired by effluxion of time and/or whether the defendant is entitled to be paid for the work they had carried out for the plaintiff are not matters in respect of which the Norton Rose advice is relevant.

137. In my view the advice given by Norton Rose to the Chinachem Group remains just that—advice given to a client.  It cannot direct or fashion the decision of the court hearing and adjudicating to resolve those issues which would be dependent on construing the terms of the agreement itself as to its subsistence and deciding whether the defendant is entitled to a quantum meruit claim or a claim for damages for any alleged breach of contract, amongst other things. 

138. The plaintiff is not seeking to use the Norton Rose advice which has legal professional privilege attached to it to advance any case against the defendant.  It is the defendant who wants to make use of the privileged document to advance its case against the plaintiff in the PRC proceedings.  I find that there has not been any implied waiver of legal professional privilege by the plaintiff in this case. 

139. I would also observe that although Mr Chan SC argued that the Norton Rose advice was relevant because it induced the defendant to continue working for the plaintiff to secure a favourable result in the appeal, neither of the defendant’s witnesses, Lam or Pang, ever said anything to that effect.  In fact the thrust of Pang’s evidence was that the most important issue was the plaintiff signing the supplemental agreement, because if they did not do so, then the defendant and DiShi would “down tools,” meaning they would stop their work. 

140. Accordingly, from a purely evidential point of view, the defendant’s case on this point simply does not get off the ground. I have no alternative but to reject it as being untenable both in principle in the light of the English authorities as well as being contrary to its own evidence.

(e)  Delay

141. This was an argument that was raised in the defendant’s skeleton submissions before Godfrey Lam J.  The defendant’s argument ran along the lines that the plaintiff’s application for an injunction should be dismissed due to the substantial delay between the filing of the Lam affirmation on 18 June 2013 and the summons taken out by the plaintiff in HCA 410 of 2013 for an injunction on 20 August 2013 (A/18).

142. After the hearing before Godfrey Lam J the plaintiff then issued an originating summons under HCMP 2299 of 2013 (A/17A‑C) seeking almost the identical relief. I heard both summonses together.  The plaintiff was no longer seeking interim relief but a final determination.  As Mr Chan SC put it, in the light of this development, the defendant was not pursuing the issue of delay in their final submissions, as the question of delay “pales into insignificance”.

143. As this is no longer a live issue between the parties, it is unnecessary for me to make a ruling on the matter.

CREDIBILITY

144. The only major area where the issue of credibility loomed in the evidence was as to whether Parker was present at the two meetings on 12 and 16 March and in particular, the meeting towards the end of April 2012, which was the occasion when Hui apparently handed over a copy of the Norton Rose advice to Pang.  Pang was insistent that Parker was present at all three meetings whilst Parker was equally adamant that he was not.

145. Having seen and heard Parker and Pang give their evidence I find that Parker’s account of events and actions to be clear, consistent and credible.  He gave frank and forthright answers as evidenced by his admission that after the Exco meeting of 22 May 2012, he met Pang together with David Hui, when he explained the decision of Exco after being circulated and appraised of the Norton Rose advice. 

146. In contrast, I found that Pang was a highly emotional witness who gave answers which were sometimes just knee‑jerk responses without any consideration as to accuracy or truthfulness.  I can certainly understand and sympathise with the sense of betrayal and grievance that Pang, and for that matter, also Lam may have felt towards the plaintiff and the Chinachem Group for sidelining them after they had worked very hard to secure a favourable result in the appeal for them.  Wherever and whatever the justice of the breakdown in their relationship may lie is not a matter that I am concerned with at this stage – that is a matter that would have to be resolved in the trial of HCA 410 of 2013 or in the proceedings in the Beijing courts.

147. Pang often gave confusing and contradictory answers particularly as to the reason why he claimed David Hui gave him a copy of the Norton Rose advice (see paras 76‑86 above).  He came across as a witness who wanted to give answers that would be advantageous to the defendant’s case irrespective of the question being asked and at times refusing to answer simple, relevant and straightforward questions but would instead simply blurt out answers which were completely tangential and unrelated to the question being put.

148. Where the evidence of Parker and Pang differed, particularly as regards whether Parker was present at the three meetings and saw Hui hand over a copy of the Norton Rose advice to Pang, I prefer and accept the evidence of Parker on the basis that it was consistent, reliable and truthful.  I reject Pang’s evidence that Parker was present at these meetings or that Parker witnessed the advice being handed over.  In this regard I accept Parker’s evidence that the first time he became aware of the fact that David Hui had given a copy of the advice to the defendant was when he was so informed in August 2012 by a partner of Pricewaterhouse which he described as being a “bolt from the blue”(T1/108: 16‑20).

ORDERS

149. Mr Huggins SC fairly conceded that given Parker’s evidence as to what he had told Pang after the 22 May 2012 Exco meeting, there was no basis to seek to strike out that part of para 53 of Lam’s affirmation which recites that Pang was told that the Norton Rose advice indicated there was no champerty involved in the agreement between the plaintiff and the defendant.  But, he argued, the plaintiff was still entitled to the injunction sought in respect of the document itself. 

150. I am satisfied that the plaintiff is entitled to the injunction that it seeks against the defendant and also for delivery up of the original copy of the advice received by the defendant from Hui as well as all copies of the same.

151. I would therefore make the following orders in respect of the disposal of the two summonses before me:

(1)  the last two sentences of para 53 of Lam Yee Hung’s affirmation dated 18 June 2013 be struck out, including all references to exhibit LYH‑65 and translations thereof;

(2)  the defendant be restrained, whether by itself or through its agents, employees or servants or otherwise howsoever from using or relying on exhibit LYH‑65 in the Lam affirmation (collectively “the Privileged Materials”) or information contained therein in HCA 410 of 2013 or in proceedings between the plaintiff and the defendant in Beijing Municipal People’s High Court (2013) Gao Min Chu Zi No 1476 or for any other purposes, or disclosing, publishing, disposing of or dealing with in any way any of the Privileged Materials or information contained therein;

(3)  Order in terms of para 2 of the originating summons dated 9 September 2013;

(4)  Costs order nisi that the defendant pays the plaintiff the costs of the hearing before me and also the costs of the hearing before Godfrey Lam J on 23 August 2013 with certificate for two counsel.  If any party wishes to seek any variation of this costs order that they do so in writing within 14 days, after which this costs order will become absolute.

(5)  Parties have liberty to apply.

152. It remains for me to thank both leading counsel and their respective juniors for the comprehensive submissions and unfailing assistance they have given me.