TIGER RESORT ASIA LTD v. KAZUO OKADA

DCCJ 1139/2022

[2024] HKDC 1242

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1139 OF 2022

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DECISION

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Introduction and Background

1.  This is an application by the Plaintiff (“P”)  by Summons dated 1 March 2024 against Messrs Seyfarth Shaw, a firm of solicitors (“the Non-Party”), to disclose by way of affidavit and to produce the following documents in their possession, custody or power:

(1)  Any record of communications and/or correspondence between the Defendant (“D”)  and the Non-Party in relation to the granting of the authority to make the offer (as pleaded in paragraph 5 of the Statement of Claim dated 19 April 2022 (“SOC”)  and as defined in paragraph 6 of SOC, “the Offer”)  and to enter into the Agreement (as defined in paragraph 6 of SOC, “the Agreement”);

(2)  Any attendance notes taken by the Non-Party when taking instructions from D to make the Offer and to enter into the Agreement with P; and

(3)  Any other document showing that the Non-Party had the authority from D and/or D had given instructions to the Non-Party to make the Offer and to enter into the Agreement.

2.  P and D were the Plaintiff and the 1^st Defendant respectively in HCA 3017/2017.  In those proceedings, the Hon K Yeung J made a costs order nisi against D requiring him to pay the costs of P’s application against D for an unless order (see [2021] HKCFI 1117).  The costs order nisi was subsequently varied on 16 July 2021 (“the Costs Order”)  to the effect that the costs to be paid by D to P are to be taxed forthwith on an indemnity basis if not agreed, with a certificate for two counsel” (see [2021] HKCFI 2094 §§3 and 5).

3.  On 4 October 2021, P’s solicitors served a bill of costs totaling HK$1,045,998.00 on the Non-Party as D’s solicitors.

4.  On 25 October 2021, the Non-Party replied rejecting P’s claim of HK$1,045,998.00 but counter-offered HK$850,000.00 in full and final settlement of the costs payable to P.  The rejection and counter-offer was expressed to be made by D.

5.  On 4 November 2021, P’s solicitors rejected the counter-offer and offered to accept a sum of HK$950,000.00 in full and final settlement of the costs payable by D.

6.  On 11 November 2021, the Non-Party rejected P’s offer of 4 November 2021 but stated: “Nonetheless, for the purpose of saving time and costs, our Client is prepared to pay a sum of HK$900,000 in full and final settlement of the costs payable to your client under the orders of the Honourable Mr Justice K Yeung dated 22 April 2021 and 16 July 2021 (inclusive of interest)  …  We trust that the above offer is reasonable and reflects our Client’s intention to settle this amicably. …”

7.  On 17 November 2021, the offer of HK$900,000.00 made by D through the Non-Party was accepted by P who also requested payment within 7 days.

8.  On 24 November 2021, the Non-Party requested a payment period of 28 days i.e. on or before 22 December 2021 to make the necessary arrangements for payment.

9.  However, the agreed sum was not paid by 22 December 2021 or thereafter.

10.  On 16 December 2022, by which time the Non-Party had ceased to act for D, P commenced the present proceedings to enforce the agreement between the parties on or about 17 November 2021 (ie the Agreement).

11.  In the Defence dated 4 April 2023, D raised for the first time that he had never instructed the Non-Party to make the offer in their letter dated 11 November 2021 and had never instructed the Non-Party to issue the said letter.

12.  When P’s solicitors drew to the Non-Party’s attention of this allegation on 12 October 2023, by letter dated 10 November 2023, the Non-Party denied that they were never instructed or acted without authority to make an offer or to enter into the settlement of the costs order granted by Mr Justice K Yeung and stated that D had given them instructions to settle.  Furthermore, the Non-Party indicated that they would be prepared to disclose the relevant information and documentary evidence related to this issue provided D provides his express written consent or there is a disclosure order from the Court. 

13.  The Non-Party also disclosed to P that D had written to them on 8 November 2023 opposing the Non-Party to disclose any communication between D and the Non-Party in the absence of any court order.

14.  According to P this is why the present application was made.

15.  The Summons and the supporting affirmation have been served on the Non-Party and D.

16.  D has not filed any affirmation or submissions in opposition to the Summons nor has any consent been given to the disclosure sought. D did not appear at today’s hearing but given there has been service of the relevant documents on him, it appears to me to be expedient to proceed in his absence.

17.  By letter of 2 April 2024, the Non-Party has indicated that they do no oppose the Summons on the condition that the disclosure is restricted to the issue of settlement of costs and that they are to have 42 days to make the disclosure.  The Non-Party’s attendance at today’s hearing has been  excused by the Order of Master Jocelyn Leung on 3 April 2024.

Applicable Principles

18.  This application is made pursuant to s.47B(1)  and (2)  of the District Court Ordinance, Cap.336 (“DCO”)  which provides:

“(1)  A party to proceedings in an action, in which a claim is made, may apply to the Court in accordance with the rules of court for an order for discovery of documents against a person who is not a party to the proceedings and who is likely to have or have had in his possession, custody or power documents relevant to an issue arising out of the claim;

(2)  The Court may order the person, if it appears to it that the person is likely to have or have had in his possession, custody or power any relevant documents –

(a)  to disclosure whether those documents are in his possession, custody or power; and

(b)  to produce the documents in his possession, custody or power to the applicant or, on the conditions specified in the order –

(i)  the applicant’s legal advisers;

  …”

19.  Thus an order for discovery will only be made against a person who is not a party to these proceedings (“the non-party”): (1)  if it appears to the court that the non-party is likely to have or have had in his possession, custody or power the documents sought; and (2)  those documents are relevant.

20.  As for the test for relevance in an application made under s  47B of DCO, the classic Peruvian Guano test is applicable: see Chan Tam Sze v Hip Hing Construction Co Ltd [1990] 1 HKLRD 473 at 476A-D.

Analysis and Disposition

21.  I am satisfied given the position stated by the Non-Party in their letter dated 10 November 2023, that the Non-Party is likely to have or have had the documents sought in their possession, custody or power.

22.  I am also satisfied that it is reasonable to suppose the documents sought contains information which may either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, ie the documents are relevant in the Peruvian Guano sense.

23.  In the Defence, D has squarely put into issue the question of whether he instructed the Non-Party to make the Offer which resulted in the Agreement.  It is plain that the documents sought may either directly or indirectly enable P to advance its own case or to damage the case of D.

24.  The only real issue is whether the documents sought, which P appears to accept on the face of it are covered by legal professional privilege, are lost by reason of an implied waiver of the same.

25.  In Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow (a firm)  and others [1995] 1 All ER 976, Colman J at 986c explained that in the cases of so-called implied waiver of privilege, what the courts are doing is to prevent the unfairness which would arise if the plaintiff was entitled to exclude from the court’s consideration evidence relevant to a defence by relying upon the privilege arising from the solicitor’s duty of confidence. See further at 986d-f:

“The client is thus precluded from both asserting that the solicitor has acted in breach of duty and thereby caused the client loss, and to make good that claim, opening up the confidential relationship between them and at the same time seeking to enforce against the same solicitor a duty of confidence arising from the professional relationship in circumstances where such enforcement would deprive the solicitor of the means of defending the claim. It is fundamental to this principle that the confidence which privilege would otherwise protect arises by reason of the same professional relationship between the parties to the litigation. The underlying unfairness which the principle aims to avoid arises because the claim is asserted and the professional relationship opened for investigation against the very party whose duty of confidence is the basis of the privilege. It is against the unfairness of both opening the relationship by asserting the claim and seeking to enforce the duty of confidence owed by the defendant that the principles is directed.”

26.  This dicta was approved by the English Court of Appeal in Paragon Finance v Freshfields [1999] 1 WLR 1183 at 1191B-F as the correct explanation of the principle on which implied waiver of legal professional privilege rest and was adopted by the Hong Kong Court of Appeal in Goldlion Properties Ltd & Others v Regent National Enterprises [2006] 1 HKLRD 793 per Woo V-P (see §§33-35). 

27.  In Goldlion Properties Ltd at §48, Woo V-P held (with Burrell J agreeing)  that fairness to the opposing party has been the basis for the courts to hold a waiver of the privilege and cited cases including Wing Fai Construction Co Ltd v Benefit Holdings (unrep)  HCA 810/2003, 16 September 2004. 

28.  In Wing Fai Construction Co Ltd, Wing Fai’s liquidators claimed that the defendants breached the Companies Ordinance which forbids a company from providing financial assistance for the acquisition of its own shares.  In support of their case, the liquidators relied upon a letter to them from the defendants’ former solicitors (JSM).  The letter was admitted in the Defence but its relevance was denied.  The defendants in their witness statement said that the letter cannot be taken at face value and alleged that there has been defective communication with JSM and they disavowed that JSM was entitled to write what JSM purported to write on their behalf.  At §§10 and 12, Reyes J held:

“10 … the defendants squarely raise the issue whether the letter truly reflected their instructions. In raising such issue the defendants must be deemed to have waived [legal professional privilege]. The issue cannot be fairly explored at trial unless the liquidators are allowed access to relevant material to enable them to deal in cross-examination with the defendants’ case of an alleged mismatch between instructions and the contents of the letter. The defendants cannot both assert that JSM did not act on instructions and refuse discovery of those instructions …

12  … The defendants are expressly challenging the obvious meaning of their own agent’s letter.  The defendants are saying that the letter should be ignored because it is written in error.  They may be right that there is a perfectly innocent explanation for how the alleged error came about.  That explanation needs to be tested at trial and fairness demands that the liquidators should be given discovery in relation to the defendants’ contentions.”

29.  In that case, Reyes J held there had been a waiver of legal professional privilege and ordered discovery of the defendants’ instructions to JSM.

30.  In the present case, in the Defence, D has expressly raised the issue whether the Non-Party were authorized or instructed to offer and agree HK$900,000.00 in full and final settlement of the Costs Order.  Fairness demands that in opening up the professional relationship between D and the Non-Party, D ought not be allowed to seek to enforce the duty of confidence between D and the Non-Party. 

31.  Accordingly, I am of the view that any legal professional privilege has been impliedly waived and I would order disclosure and production of the documents sought. 

32.  Furthermore, I am of the view that disclosure and production of those documents is necessary for the fair disposal of this action or for saving costs.

33.  As for the timing for disclosure by way of affidavit, it is agreed to allow the Non-Party 42 days and, subject to P’s undertaking to pay to the Non-Party their reasonable costs and charges, 14 days thereafter for production of the disclosed documents in the affidavit.

34.  P should pay to the Non-Party the costs of and occasioned by this application including costs of compliance with the order made by this Court on an indemnity basis to be taxed if not agreed.  As for P’s costs of this application, these should be in the cause.

35.  I therefore will make an order in terms of the draft Order as amended by me.