AXA CHINA REGION INSURANCE CO LTD AND ANOTHER v. PACIFIC CENTURY INSURANCE CO LTD AND OTHERS

HCA 9093/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9093 OF 2000

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D E C I S I O N

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The applications

1.  There are three applications before the court as follows:

(1)	The plaintiffs’ summons dated 19 August 2003 (“the Questionnaires application”) under Order 24 rules 10, 11 & 11A of Rules of the High Court and the inherent jurisdiction of the Court for an order that the 1st defendant (“PCI”) produces to the plaintiffs (“AXA”) copies of all the questionnaires and responses thereto, references to which were said to have been made in the 5th and 6th affirmations of Ralph Lau Kim Ming (“RL(5A)” and “RL(6A”) respectively) and in exhibits “RLKM-15” and “RLKM-16” to the 8th and 9th affirmations of Ralph Lau Kim Ming.  The discovery sought includes any amendments and supplements to the original responses.
(2)	The plaintiffs’ summons dated 17 December 2003 (“the Non-compliance application”) under Order 42 rule 2, Order 45 rule 6 and the inherent jurisdiction of the Court for an order that PCI should fully and properly comply with its delivery up obligations under its undertaking (“the Undertaking”) to the Court under the Order of Beeson J dated 29 September 2000 (“Beeson J’s Order”), and the Order of Deputy Judge To’s Order dated 24 July 2001 as amended on 10 January 2002 and re-amended on 7 February 2003 (collectively referred to as “DJ To’s Order”) together with ancillary orders.
(3)	The 1st defendant’s summons dated 13 May 2004 under Order 20 rule 11, Order 42 rule 3 and the inherent jurisdiction of the Court for (a) the amendment of Beeson J’s Order and DJ To’s Order by inserting the usual cross undertaking as to damages,  (b) the discharge of the Undertakings, to the extent that they exceed the scope of DJ To’s Order, and (c) release from further compliance with DJ To’s Order.

Background

(1)  The claim

2.  The background leading to the present action had been set out in the Decision of Deputy Judge To dated 24 July 2001. I do not repeat them here.

3.  In this action, AXA claim against PCI injunctions, damages and other relief for breach of confidence in receiving and using confidential information provided by the individual defendants in breach of their duty of fidelity and for unlawful interference with AXA’s business.

4.  The confidential information in question relates to information contained in a computer database of AXA called Sales and Marketing System (“SAMS”) and 21 types of documents listed out in Schedule C to the Amended Statement of Claim (“Schedule C documents”).   The unlawful interference complained of relates to PCI’s activities in marketing a Plan Matching Scheme (“PMS”).

(2)  The Undertaking

5.  By a summons issued on 21 September 2000, AXA applied against PCI and several other defendants for an interlocutory injunction and consequential relief, including delivery up of “Client Data” and disclosure of various information.  At the first hearing of the summons, PCI through leading counsel gave the Undertaking to the Court.  The undertaking as set out in Beeson J’s Order are in these terms:

(1)	Within 7 days of the date of the Order, PCI shall deliver up to AXA or their solicitors all printouts from the SAMS and copies thereof, if any, in his, her or its possession, custody or power; and
(2)	Within 5 days of the expiry of the 7 days referred to in (1) above, PCI shall make and file an affidavit or affirmation verifying compliance with the undertaking given under (1) above.
(3)	DJ To’s Order

6.  The substantive hearing took place before Deputy Judge To.  By his Decision handed down on 24 July 2001, Deputy Judge To granted the relief sought in AXA’s summons subject to revising the definition of “Client Data”.   Paragraph (1)(a) of DJ To’s Order as amended restrained PCI from disclosing, divulging or otherwise making use for the purposes of PCI’s business of, Client Data.  Client Data is defined to cover:

(1)	Any information obtained or derived by an agent in the course of his agency with AXA, not being information known to the agent prior to such obtaining or derivation, and contained in the system SAMS, and any documents whether in hard copy or electronic form containing such information; and
(2)	Any of the Schedule C documents, whether in hard copy or electronic form, and any information contained therein obtained or derived by an agent in the course of his agency with AXA not being information known to the agent prior to such obtaining or derivation.

7.  Under paragraph (3) of the Order, PCI had to deliver up to AXA “all documents containing Client Data, including copies, in its possession, custody, power or control which came into possession, custody, power or control on or after 21 July 2000”, except for “documents containing Client Data of policyholders who have been issued with policy for life insurance by [PCI] on or before 24 July 2001, but only in so far as those documents are required by [PCI] for the purpose of servicing such policies”.

8.  Under paragraph 4(b) to (e) of the Order, PCI had to make disclosure of various matters, including its receipt and divulging of documents containing Client Data and the names and addresses of policyholders and insured persons of AXA whose persons appear in any of the Client Data who have been approached by agents of PCI at a time when such agents were in possession, custody, power or control of Client Data relating to that person.

The Questionnaire application

(1)  The questionnaires and responses

9.  The questionnaires and responses that give rise to the Questionnaire application came about as a result of PCI’s obligations under paragraphs (3) and (4) of DJ To’s Order.   They were first mentioned in RL(5A), which was to give an estimate of the time PCI required to comply with the delivery up and disclosure obligations.  The affirmation mentioned three types of questionnaires and responses, which were designed to enable PCI to search for documents that contain Client Data and to ascertain the nature of solicitation its agents made to holders of AXA policies.  They are:

(1)	Schedule C Questionnaire for agents who had submitted Schedule C Documents to PCI, to ascertaining the source of the documents, namely, whether they were provided by the policyholders or removed/detained by the agent upon leaving AXA;
(2)	Agents Questionnaire to identify those August 2000 PMS policies where the agents had used Client Data, and/or in respect of the 9 pairs of AXA/PCI policies complained of by AXA in these proceedings, where they made representations that the policies are matching or comparable; and
(3)	Solicitation Questionnaire to ascertain the nature of the agents’ solicitation, which was required to be disclosed under paragraph 4(d) of DJ To’s Order.

10.  RL(6A) reveals that the responses received were analyzed and the information obtained was compiled into spreadsheets.  They form the basis upon which decisions on what documents should be delivered up were taken.  RLKM-15 and RLKM-19 are two spreadsheets compiled from the responses to the questionnaires and they were relied upon by PCI for complying with paragraph (4) of DJ To’s Order.  

(2)  The issues

11.  Four questions arise for consideration under the Questionnaire application.  They are:

(1)	Whether the questionnaires and the responses had been referred to in RL(5A), RL(6A) and Exhibits RLKM-15 and RLKM-16 within the meaning of Order 24 rule 10A;
(2)	Whether the questionnaires and responses are relevant to these proceedings;
(3)	Whether the questionnaires and responses are subject to litigation privilege and, if so, whether the privilege had been waived by PCI; and
(4)	Whether the disclosure of the questionnaires and responses is necessary for the fair disposal of the cause or matter in these proceedings.

(3)  Reference

12.  On the first question of “reference”, what is required is a direct

allusion in the pleadings or affidavits to the documents in issue: Dubai Bank v. Galadari [1990] 1 WLR 731 at 738-9.  Given that an exhibit is also part of an affidavit: In re Hinchcliffe [1895] 1 Ch 117, at 120, reference to documents for the purpose of Order 24 rule 10 can include reference contained in an exhibit to an affidavit: Shun Kai Finance Co Ltd v. Japan Leasing (HK) Ltd (In liquidation) [2001] 1 HKC 636, at 641.  Order 24 rule 10 had been applied to cover affidavits made under compulsion and by way of interrogatories: Moore v. Peachey [1891] 2QB 707; the purpose of the affidavit is therefore irrelevant: see the discussions in Zida Technologies Ltd v. Tiga Technologies Ltd [2001] 3HKLRD 698 at 713-4 para. 35.

13.  There can be no doubt that the questionnaires had been referred to in RL(5A) and RL(6A), within the meaning of Order 24 rule 10.  As to the responses to the questionnaires, upon a fair reading of paragraph 5 of RL(6A) and reading it in the context, the deponent must be referring to the replies PCI received from the agents consequential upon being sent the questionnaires. I do not agree with the argument that it is not a reference to documents, but is a reference to an event or conduct.  In my view, there are direct allusions to the questionnaires and responses in the affirmations.  That being the case, whether the direct allusions or references could have been avoided by alternative drafting is irrelevant.

(4)  Relevance

14.  As to the second question of relevance, it is not in dispute that PCI had resorted to the questionnaires and responses in carrying out its delivery up and disclosure obligations under DJ To’s Order, and that RLKM-15 and RLKM-19 were compiled with the aid of the responses to the questionnaires.  The documents sought are clearly relevant to the subject matter of the disputes between the parties in these proceedings.

(5)  Litigation privilege        

15.  The third question of privilege forms the main thrust of PCI’s opposition to the Questionnaire application.  It is PCI’s contention that the responses to the questionnaires are covered either by litigation privilege or common interest privilege.  AXA, while disputing that the documents are privileged, says that even if privilege subsisted, the privilege has been waived through the deployment of the documents in the affirmations of Ralph Lau.  These issues will be dealt with in turns.

16.  An explanation of the doctrine of litigation privilege is to be found in the dissenting judgment of Barwick CJ in Grant v. Downs (1976) 135 CLR 674 at 677, which was approved by the House of Lords in Waugh v. British Railways Board [1980] AC 521 at 532G-533D, 537G-H & 543H-544B as follows:

“[A] document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of  litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.”

17.  The burden is on the party asserting privilege to establish that the documents or information in issue is privileged.  It is not necessary that they should have come into existence at the instance of the lawyer.  It is sufficient if they came into existence at the instance of the party himself: Buttes Oil v. Hammer [1981] 1 QB 223 at 234H.  Litigation privilege will attach to confidential communication between a party to a litigation or his legal adviser and third parties: Ventouris v. Mountain [1991] 1 WLR 607 at 611F, per Bingham LJ, and may cover information given by an employee to an employer or by an agent to a principal: Three Rivers District Council v. Bank of England (No.5) [2003] QB 1556 at 1568D. 

18.  The bone of contention is whether the responses can be said to have been brought into existence for the dominant purpose of the conduct or aiding in the conduct of the litigation.  For AXA, it is argued that the rationale behind the doctrine of litigation privilege is the inviolability of the confidential communications between a party and his legal advisers, so that documents that might cast light on the instructions to lawyer or legal advice given to the party regarding the conduct of the case will be privileged from production.  There is thus no general privilege over documents created for the purpose of litigation and the privilege is limited to the furtherance and preparation of a party’s own case.  It is said that the responses to the questionnaires were for the dominant purpose of giving disclosure to the AXA in compliance with DJ To’s Order.  Production of the responses will not violate the confidence between PCI and its legal advisers nor will it reveal any legal advice given to PCI.

19.   AXA draws support from the judgment of Sir Richard Scott VC in Re Barings plc, Secretary of State for Trade and Industry v. Baker [1998] CH 356 at 366C, where it is stated that:

“These citations make clear, in my opinion, that documents brought into being by solicitors for the purposes of litigation were afforded privilege because of the light they might cast  on the client’s instructions to the solicitor or the solicitors’ advice to the client regarding the conduct of the case or on client’s prospects.  There was no general privilege that attached to documents brought into existence for the purposes of litigation independent of the need to keep inviolate communications between client and legal adviser.  If documents for which privilege was sought did not relate in some fashion to communications between client and legal adviser, there was no element of public interest that could override the ordinary rights of discovery and no privilege.”

It is also pointed out that Scott VC’s views had been approved by the English Court of Appeal in Visx Inc v. Nidex Co [1999] FSR 91 at 104-6, 109-111 and also by Lawrence Collin J in ISTIL Group Inc. v. Zahoor [2003] 2 All ER 252 at 262. 

20.  PCI on the other hand argues that the law and authorities are settled in favour of a wider doctrine so that litigation privilege exists if communications or documents are brought into existence for the purpose of litigation.    Reliance is placed on authorities in which the claim of privilege was upheld in circumstances in which there was no suggestion that disclosure would impinge on confidential communications between client and lawyers: Re Highgrade Traders [1984] BCLC 151, Guinness Peat Properties Ltd v. Fitzroy Robinson Partnership [1987] 1 WLR 1027 and Robert Hichins Ltd v. International Computers Ltd (unreported) 10.12.1996 Lexis Transcript.   Reference is also made to several academic writings which point out the other authorities do not support Scott VC’s view in Re Barings and have not limited the privilege to cases where there is a need to protect lawyer/client communication: Matthews & Malek, Disclosure (2001) para.9.028, Hollander on Documentary Evidence (8^th ed) para.13-37 & 13-38 and Passmore, Privilege, p.86.

21.  It is also pointed out that a litigant in person is in principle also entitled to privilege for communication between himself and third parties that are made for the purpose of obtaining factual information for the preparation of his case in pending or contemplated litigation: see 16^th Report of Law Reform Committee, Cmnd 3472, para.17.  It is argued that this shows that the doctrine of litigation privilege is not necessarily connected to the inviolability of client/ lawyer communications: see also Phipson on Evidence (15^th ed) para.20-32.

22.  Having considered the various authorities cited by counsel for both sides, I agree that the early cases on litigation privilege stemmed from concerns to protect confidential communications between a party and his lawyer.  It was the public interest associated with the inviolability of lawyer/client communication that gave rise to the exception to the ordinary rights of discovery.  Subsequent and modern cases on the topic, however, had not restricted the application of the doctrine to cases where there was a need to protect lawyer/ client communication.  The rationale as developed is that a litigant or prospective litigant should be able to prepare properly for the litigation in the confidence that others thereafter will not be entitled to examine and perhaps profit from the preparatory documentation: Robert Hichins Ltd v. International Computers Ltd, op cit. p.5, per Simon Brown LJ.  This will also explain why litigants in person may also claim privilege over communications with third parties.  While human rights considerations and the increasing emphasis on openness in civil litigation may provide cause for reconsidering and challenging the wider doctrine that has developed, the common law position remains that litigation privilege can be claimed in litigation where the inviolability of lawyer/ client communications are not threatened. 

23.  It follows that in the present case, it is not necessary to show that the responses may impinge upon lawyer/client communication in order that PCI can successfully claim privilege over the responses.  That aside, there is little doubt that the responses were intended to be presented to PCI’s legal advisers for advice on compliance with DJ To’s Order.  Thus viewed, they ought to be covered by the privilege even on a narrow application of the doctrine.

24.  As to AXA’s argument that the dominant purpose for which the documents were brought into existence must be to further the party’s claim or the preparation, it is taking too narrow a view of the doctrine and is not supported by the authorities.  The argument is also incompatible with AXA’s submission that litigation privilege is to uphold the inviolability of lawyer/client communication.  This is because the argument will result in confidential communications with third party with a view to complying with a court order, not being protected by privilege. 

25.  In my view, it is immaterial that the responses were brought into existence for the purpose of complying with the delivery up and disclosure obligations under DJ To’s Order.  The questionnaires and responses were to provide information to enable PCI to determine, with legal advice, what should be done to meet the obligations under the Order.  Deliberations over what to do to comply with an order clearly form part of the conduct of litigation. The questionnaires and responses are therefore aids to conduct of litigation.  Even though the objective underlying the design and issuance of the questionnaires is to make discovery and disclosure pursuant to DJ To’s Order, it does not follow that the questionnaires and responses are not confidential communications.   The fact that PCI had indicated in the affirmations of Ralph Lau the use proposed to be made of the questionnaires and responses does not mean that the confidentiality, which is a matter between PCI and its agents, is lost. In short, there can be little doubt that the dominant, if not the sole, purpose of the questionnaires, and in turn the responses to them, are for the conduct or aiding in the conduct of this litigation.  The questionnaires and responses are therefore subject to litigation privilege.

(6)  Common interest privilege

26.  I turn next to common interest privilege.  In Buttes gas and Oil Co. v. Hammer (No. 3) op cit ,at 267, Brightman LJ said:

“There is a privilege which may be called a ‘common interest’ privilege.  That is a privilege in aid of anticipated litigation in which several persons have a common interest.”  -- per Lord Denning MR at 234

“ … if two parties with a common interest and a common solicitor exchanges information for the dominant purpose of informing each other of the facts, or of the issues, or advice received, or of obtaining legal advice in respect of contemplated or pending litigation, the documents or copies containing that information are privileged from production in the hands of each.” 

27.  Cases decided since Buttes suggests that for common interest privilege to arise, it matters not whether the parties share a common solicitor constitutes common interest: The World Era [1993] 1 Lloyds Rep 363, 366 and Phipson, op cit, para.21-05.

28.  AXA submits that common interest privilege is inapplicable.  It points out only documents that are otherwise by themselves confidential and privileged materials, will be privileged when sent to and are in the hands of a party with a common interest: see Commercial Union Assurance Co plc v. Mander [1996] 2 Lloyd’s Rep 640, and Hollander, op cit, para. 14-09.   In AXA’s contention, the questionnaires, when created in the hands of PCI, and the responses, when created in the hands of the agents, were not privileged for reasons discussed above, they cannot attract common interest privilege.  In view of my conclusion that the questionnaires and responses are covered by litigation privilege, notwithstanding they were created for the purpose of assisting PCI to make discovery and disclosure to AXA pursuant to DJ To’s Order, this argument must fail.  There is further no dispute that PCI and the agents have a common interest in the questionnaires and responses.       

(7)  Waiver of privilege

29.  I deal finally with the issue of waiver.  The general principle is as stated by Mustill J in Nea Karteria Maritime Co Ltd v. Atlantic and Great Lakes Steamship Corp (No.2) [1981]Com LR 138 at 139:

“… where a party is deploying in court materials which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question.  To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood.”

30.  The key to the issue is whether the questionnaires and responses had been deployed in the affirmations of Ralph Lau.  Although I have found that references had been made to the questionnaires and responses in RL(5A) and RL(6A) for the purpose of Order 24 rule 10, it is not determinative of the issue of waiver.  This is because mere reference is insufficient o waive privilege: Marubeni Corp v. Alafouzos (unreported) 6.11.1986 Lexis Transcript and Bourns Inc v. Ravchem Corp [1999] 3 All ER 154.

31.  The position is as stated in Matthews & Malek, op cit, para.10.17:

“The key word here is ‘deploying’. A mere reference to a privileged document on an affidavit does not of itself amount to a waiver of privilege, and this is so even if the documents referred to is being relied on for some purpose, for reliance in itself is said not to be the test.  Instead, the test is whether the contents of the document are being relied on, rather than its effect.  The problem is acute in cases where the maker of an affidavit or witness statement had to give details of the source of his information and belief, in order to comply with the rules of admissibility of such affidavit or witness statement.  Provided that the maker does not quote the content, or summarise them, but simply refers to the document’s effect, there is apparently no waiver of privilege”:

approved in Dunlop Slazengor v. Joe Bloggs [2003] EWCA Civ.901 at para.11, and Lucas v. Barking, Havering and Redbridge NHS Trust [2004] 1 WLR 220, 226H-228B. 

The important point is whether it is the effect or the contents of the privileged materials that has been referred to or relied upon.  The privilege will be waived if there is reference to and reliance on the contents of the privileged materials.

32.  In the present case, the reference to the questionnaires and the responses in Ralph Lau’s affirmations, in particular RL(5A), are in the context of explaining the steps PCI would take and had taken to comply with DJ To’s Order.   There is no deployment of the questionnaires and responses in the sense intended by law.  In paragraph 5 of  RL(6A), it refers to upon analyzing the responses and non-responses to the Agents’ Questionnaire, it was discovered that there were 47 policy applications by AXA policyholders in which the agents had failed to indicate whether Client Data had been used, and that out of abundance of caution, PCI had decided to deliver up these policy applications.  In my view, this does not amount to a reference or use of the contents of the responses.  As for the exhibits to Ralph Lau’s affirmations, notably RLKM-15, RLKM 16 and RLKM-19, they contain no reference at all to the responses.  There is, however, no doubt that they were compiled with the assistance of the information disclosed in the responses.   But that is not the same as a reference to or reliance on the contents of the responses so as to give rise to a waiver of the privilege.

(8)  Fair disposal of the cause or matter

33.  In view of my conclusion on the third question of issue, the fourth question of whether the discovery sought is required for a fair disposal of the cause or matter in issue can be dealt with briefly.

34.  In summary, AXA says that PCI had made a number of retractions and corrections in the process of complying with DJ To’s Order and they were not properly or fully explained.  They demonstrate that PCI has misinterpreted the meaning of Client Data in that it regards user as a necessary condition, and had also committed errors in reading, classifying and handling the responses.   AXA therefore has cause to believe that PCI has not fully or adequately complied with DJ To’s Order.  The questionnaires and responses are therefore required to ascertain whether there been full and proper compliance of the Order.   

35.  For reasons that will be explained below, the concerns of AXA over PCI’s understanding of the scope of its disclosure obligations under the Order are not unfounded.  I am in agreement that the questionnaires and responses, subject to their being privileged, are required to be disclosed for     the fair disposal of the issue as to whether PCI had complied with DJ To’s Order. 

36.  For the reasons that the questionnaires and responses are subject to privilege that has not been waived, the Questionnaires application fails.  Accordingly, AXA’s summons dated 19 August 2003 is dismissed.

The Non-compliance application and PCI’s application for release

37.  It is convenient to deal with AXA’s summons for an unless order to enforce the Undertaking and paragraphs (3) and (4) of DJ To’s Order and PCI’s applications under its summons for release from further compliance with the Undertaking and DJ To’s Order together. 

The Undertaking applications

38.   AXA’s and PCI’s applications insofar as they relate to the Undertaking raise two broad issues, namely,

(1)	What is the scope of the Undertaking and whether PCI have any further obligations under the Undertaking, and
(2)	If PCI has not fully complied with the Undertaking, whether it should be enforced by an unless order or in a reduced manner, or whether PCI should be released from further compliance with the Undertaking.

(1)  The scope of the Undertaking

39.  On the scope of the Undertaking, PCI’s case is that the Undertaking should be confined to SAMS printouts taken away by the 2^nd to 10^th defendants and were used or intended to be used for the PMS implemented by PCI in August 2000.  PCI argues that this is the proper construction of the Undertaking since AXA’s pleaded claim was confined to the PMS and the Undertaking was to give AXA interim protection pending the adjourned hearing of the interlocutory injunction application.  It is also said that it could not have been intended that PCI was to search all the polices files given that PCI started business in 1994 and it must be that only the “recent documents” were contemplated.  AXA’s view is that PCI’s construction is incompatible with the clear terms of the Undertaking and inconsistent with the conduct of PCI in not raising the distinction before Beeson J or Deputy Judge To, in making no reference to the restriction in its memos to agents and staff and in directing enquiries to agents other than the 2^nd to 10^th defendants and searching non-PMS polices.

40.  The starting point in construing the Undertaking must be the fair meaning of the words used.  The Undertaking is couched in general terms and admits no ambiguity.  It refers to “all printouts from the plaintiffs’ Sales and Marketing System (SAMS) and copies thereof, if any…”.   There is no qualification and is not confined to SAMS used or to be used for the PMS.  Indeed, I do not understand from the submissions made on its behalf that PCI is disputing that by its plain wordings, the Undertaking is not confined to the August 2000 PMS.   The question is whether there are circumstances justifying looking beyond the narrow confines of syntax and grammar to give the Undertaking a limited scope.

41.  The first matter PCI refers to is the pleaded claim of AXA.  But it is clear from the Statement of Claim that was before Beeson J that AXA makes a general claim of ownership of the SAMS information and documents and also the Schedule C documents.  AXA’s claim of breach of confidence is also not restricted to use or misuse of the materials for the PMS.

42.  PCI also refers to the opening submissions of AXA’s leading counsel before Beeson J in which reference was made to the August 2000 PMA and the use of the confidential information in connection with it.  When read in context, however, the reference was made in the context of explaining the urgency and necessity of seeking interim protection from the court.  It cannot be said that AXA was only complaining about the PMS or their claim was so confined.

43.  As to the circumstances under which the Undertaking came to be offered and accepted, there can be no dispute that the relief sought by AXA under the interlocutory application is wider than the Undertaking in terms of the documents and information covered.  The Undertaking only relates to SAMS documents.  It is plain from the submissions made on behalf of PCI as well as those on behalf of the other defendants that they disputed AXA’s entitlement to the wider relief, but they were prepared to accept and did acknowledge AXA’s ownership of the SAMS printouts and to return them to AXA.   Leading counsel for PCI had drawn a clear distinction between the physical documents and the information or data contained in them.  The Undertaking was therefore offered on the basis that PCI and the other defendants had no right to retain the SAMS printouts.   In this connection, it matters not that leading counsel for AXA in his written submissions made a claim on breach of confidence.   The Undertaking was not based on an acceptance of a misuse of the SAMS documents and information. 

44.  Thus viewed, the Undertaking is not in the nature of an interim measure to hold the ring until the adjourned hearing of the interlocutory application.  The point is made plain by the fact that at the adjourned hearing before Deputy Judge To, no argument was raised by PCI to dispute AXA’s rights to the SAMS documents.  On the contrary, leading counsel for PCI informed the Deputy Judge that the Undertaking had been fully complied with, a proposition subsequently shown to be incorrect.   In the circumstances, there is no necessary connection between the Undertaking and the August 2000 PMS.

45.  It is true that at the hearing before Beeson J, the Norwich Pharmacal principle was not a relevant consideration and the Undertaking was not offered and accepted on this basis.  PCI’s argument that even on the Norwich Pharmacal principle, a roving inquiry would not be permissible is in my view irrelevant in view of the basis on which the Undertaking was offered.   The fact that PCI might have to plough through voluminous files does not necessarily mean that AXA was undertaking a roving inquiry.

46.  As to the fact that a seven days’ compliance period was stipulated in the Undertaking, that is not necessarily indicative, and certainly not conclusive, of whether the Undertaking is restricted in scope.  It is to be noted that the basis for the seven days’ period was not apparent from reading the transcript of the hearing.   In any event, the subjective belief and expectation of PCI as to whether it had any SAMS documents is irrelevant to the construction of the Undertaking: Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896, at 913B.

47.  On the other hand, PCI’s conduct was inconsistent with a belief or understanding that the Undertaking had a limited scope.  As pointed out by AXA, PCI had not confined its enquiries and search to the 2^nd to 10^th defendants or to only PMS policies files.  More importantly, when faced with AXA’s complaints of non-compliance of the Undertaking in November 2002, PCI responded by undertaking in the course of 2003 a sampling search of 122,950 non-PMS policies that were issued between 1994 and 2001.  This does not sit well with the suggestion that PCI, when offering the Undertaking, only contemplated recent documents and dealing with August 2000 PMS.  The conduct of PCI is indicative of the views PCI took on the scope of the Undertaking.  In the circumstances, the court would hesitate to attribute a different meaning to it: Intergulf Express HK Ltd v. Delta Asia Ltd [1998] 2HKLRD 929, 935G-H per Litton PJ.

48.  In light of the matters discussed above, there is no room for the submission that on a contextual reading, the Undertaking is limited to PMS policies.  As said by Lord Mustill in Charter reinsurance Co Ltd v. Fagan [1997] AC 313, 388B-C:

“There comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said, and that to force upon the words a meaning which they cannot fairly bear is to substitute for the bargain actually made one which the court believes could better have been made.  This is an illegitimate role for the court.”

49.  As to whether there is any outstanding obligation under the Undertaking.  PCI’s argument is that, having regard to the objective and purpose of the Undertaking, it had done all that was reasonable.  It is also said that the fact that SAMS documents were missed in the Original Search should not be regarded as a breach of the Undertaking in that trifling things done or omitted which do not cause any mischief should not be treated as a breach, relying on a passage in Halsbury Laws of England (4^th Edition Reissue) vol. 24 para. 1009.  In any case, PCI says that the Undertaking had been superseded by DJ To’s Order.  The main thrust of PCI’s argument is that the Undertaking was an interim relief to protect AXA pending the adjourned hearing of the interlocutory application such that the Undertaking became lapsed upon the making of the interlocutory order providing for wider reliefs.

50.  As already noted, the Undertaking is not an interim protective measure to tie over the period before the adjourned hearing.  It is also important to note that the Undertaking requires the performance of an act once and for all.  It contemplates the delivery up of all SAMS printouts and copies to be accomplished within seven days.  In the normal course of events, by the time of the adjourned hearing, the delivery up process should and would have been completed.  There is therefore no question of a lapse of the Undertaking, and it is inapt to view the Undertaking as being superseded by an order made at the adjourned hearing.  The fact that if PCI were to discover further SAMS printouts after the seven days’ period, it would be obliged by the Undertaking to deliver up to AXA does not alter the position and the nature of the Undertaking.  The delivery up in such instance is not so much because of PCI being under a continuous obligation to deliver up SAMS documents, but rather because the Undertaking has not been fully performed and PCI had to remedy the position.  To the extent that DJ To’s Order has granted wider reliefs, it only means that PCI is put to obligations additional to or beyond those under the Undertaking.

51.  On the submission that PCI had done all that was reasonable and it should not be regarded as being in breach of the Undertaking, PCI has produced a summary of the policies searched for SAMS documents.  It suggests that some 200,000 policies, involving about 2,000,000 pages of documents, had been gone into.  All the policies had been searched except the Non-PMS policies.  Out of the Non-PMS policies, all the WWP NB policies had been searched.  In respect of the Non-WWP NB policies, all those issued between 21 July and 16 October 2000 had been searched.  As for the pre-21 July 2000 Non-WWP NB policies, they had been searched on a sampling basis and some 122,950 policies had been covered.  As from 16 October 2000, PCI had set up procedure to screen out SAMS documents in relation to the Non-WWP NB policies.  AXA’s has commented that for the AXA PMS policies issued up to 31 July 2000, the soft copy of 169 policies had not been given to AXA.  The soft copy of SAMS found in the sampling search of Non-WWP NB policies have also not been handed in.  AXA further points out that the screening procedure for post-October 2000 Non-WWP NB policies has proved to be unreliable. 

52.  In my view, although PCI had incurred considerable time and resources to search for SAMS documents, it remains a fact that the delivery up has not been completed.  The failing cannot be said to be trifling and/or had caused no mischief to AXA who have a proprietary claim over the documents.  It is not open to PCI to contend that there is no further obligation under the Undertaking.         

53.   This brings me to the second issue of whether PCI should be released from the Undertaking or whether the Undertaking should be enforced. On the relevant principles, there is no dispute that the court does have jurisdiction to release a party from his undertaking which was proved to have been given under mistake: Mullins v. Howell (1879) 1 Ch D 763, 766 and Cutler v. Wandsworth Stadium Ltd [1945] 1 All ER 103.  The court also has power to refrain from enforcing an undertaking against the party who has given it: Purcell v. Trigell [1971] 1 QB 358, 363-4 & 366-7. 

54.  In contending that it should be released from the Undertaking, PCI relies on the purpose of the Undertaking and the circumstances under which it came to be given, its belief and expectation of the scope of the Undertaking and the substantial efforts taken to comply with the Undertaking.  It is said that any further actions would be disproportionately onerous and unlikely to yield any substantial benefits.

55.  For the discussions and reasons mentioned above, it cannot be said that the Undertaking was to allay the concern over the implementation of the August 2000 PMS and that its purpose had been served with the suspension of the August 2000 PMS.  The suggestion that PCI was under a mistaken appreciation of the scope of the Undertaking and the tasks entailed by it is also not borne out by the evidence before the court and PCI’s conduct.  I accept that PCI must have put in considerable time and resources to search for SAMS documents, but as pointed out by AXA, the events since the giving of the Undertaking do show that the compliance has not been satisfactory.   For instance, contrary to Mr Ralph Lau’s expectation, SAMS documents were found in Non-PMS policies.  There is force in AXA’s criticism of PCI’s methodology for and approach towards identifying SAMS documents.

56.  That said, however, the question of whether to enforce or discharge an undertaking ultimately is a matter of judicial discretion, designed to achieve a fair result: Shepherd Homes Ltd. v. Sandham [1971] 1 Ch 341. In my view, in a case like the present, the court ought not to lose sight of the fact that the action is at an interlocutory stage whereas the primary objective of the parties and the court must be the final adjudication and resolution of the claim.  Plainly on the evidence, both PCI and AXA had devoted substantial time and resources on issues of compliance with the Undertaking and DJ To’s Order.   Mr Yu SC has argued forcefully on the risks of the Undertaking and the interlocutory orders turning into a monster taking over the real disputes between the parties.  Quite apart from the fact that protracted interlocutory proceedings is never in the parties’ best interest, what needs to be considered is whether dwelling further on the issues of compliance will bring any substantial benefits to the parties in terms of the final resolution of the disputes in this litigation.  In my view, it will not, given that there has been considerable, though not complete, compliance by PCI.  It should also be noted that events have obviously moved on since 2000 when the PMS was to be implemented. 

57.  AXA has submitted that they should not be left without a remedy in view of the non-compliance of the Undertaking.  It is pointed out that in Jordan v. Norfolk County Council [1994] 1 WLR 1353 and Charrington v. Simons Ltd [1970] 1WLR 732, the courts did not leave the plaintiffs without a remedy when granting the release sought and substituted orders were made.  As accepted by Mr Yu SC, it is open to the court to impose a restricted undertaking in replacement of the Undertaking. 

58.  In my view, having regard to the reasons of Deputy Judge To and the adoption of the cut-off date of 21 July 2000 by him and the developments since the hearing before Beeson J, it will now be fair and appropriate to similarly limit the scope of PCI’s obligations with regard to the SAMS documents to the date of 21 July 2000.   PCI should therefore be required to further comply with the Undertaking by conducting a search of all the non-PMS policies issued on or after 21 July 2000, to the extent this was hitherto not done, with a view to delivering up to AXA’s solicitors printouts from SAMS and copies thereof, if any, that are in its possession, custody or power, and that had hitherto not been delivered up to AXA.

59.  It follows that it is not necessary to consider the making of an Unless order.  For completeness however, I will deal with it briefly.  As the authorities show, Unless order is an order of last resort and should not be made unless there is a history of failure to comply.  It is a party’s last chance to put his case in order: Hytech Information Systems Ltd v. Coventry City Council [1977] 1 WLR 1666 cited with approval in Lessy SARL v. Pacific Star Development Ltd [1997] 3 HKC 306 at 311-2.  I accept that in principle, an Unless order can be imposed where the default is in relation to a matter that would not deprive the other side of a fair trial.  I am however of the view that the sanction that accompanies an Unless order must be commensurate with the default in question and meet the justice of the case: see for example the approach in Kai Yip Air-conditioning Engineering Co v. Ma Hei Sun [2001] 3 HKC 458. 

60.  In the present case, although the process of compliance has been a lengthy and dilapidated one, I am not prepared to conclude that PCI has been guilty of contumelious and wilful breach of the Undertaking.  Further, the sanction of striking out the Defence appears to me to be inappropriate.  In this regard, it is open to AXA to bring committal proceedings on the breach and even if PCI were found guilty of contempt, it would not necessarily be denied the opportunity and right to defend the claim.   In short, I do not consider it is a fair exercise of the discretion to impose an Unless order as proposed by AXA, based upon PCI’s failure to fully comply with the Undertaking.             

Paragraphs (3) and (4) of DJ To’s Order

61.  I move on to the applications for the enforcement or release of paragraphs (3) and (4) of DJ To’s Order.  Broadly speaking, two issues fall to be determined. They are:

(1)	The meaning of Client Data; and
(2)	Whether the discovery and disclosure obligations under the Order should be further enforced by an Unless order or whether PCI should be released from further compliance with them.

62.  The main contention on the meaning of Client Data is whether it embodies the concept of user.  No issue arises as to the need to search for and deliver up the non-SAMS documents of white cards, underwriting notifications and daily consolidated reports as PCI accepts its obligations extend to these documents and that the failure to search for and deliver them was an error on its part.  On the other hand, AXA does not dispute that documents and information, if provided by the policyholders themselves, do not come within the scope of disclosable Client Data under DJ To’s Order.  Thus the only dispute is whether the use of the documents or information is a requirement for Client Data. 

63.  It is apparent from the questionnaires issued by PCI to the agents that PCI had been focusing on the use of the information and documents by the agents.  Further, the 8^th and 9^th affirmations of Mr Ralph Lau also show that user is a determinative factor when PCI decided on what policy files should be disclosed.  For instance, it was said that where PCI was unable to decide if an agent had used Client Data in relation to a policy, the policy files would be disclosed “out of abundance of caution”.  It was also said that 6 policy files had been disclosed by mistake because the agents involved denied having used Client Data. 

64.  PCI argues that in view of AXA’s claim being based on misuse of confidential information and that the purpose of the Order is to identify wrongdoings, use must be a relevant and important factor.  AXA on the other hand argues that user is not a requirement.  AXA also says that even if use is relevant, the requirement will be fulfilled whenever a document if found on PCI policy files, at least for the purpose of policy application to PCI.  It will have to be disclosed unless it was supplied by the policyholder to the agent or PCI. 

65.  In my view, it is plain from the definition of Client Data in DJ To’s Order that use of the information or documents containing the information is not a necessary ingredient.  Although AXA have made a claim for misuse of confidential information, AXA have also claimed proprietary rights over Client Data.  Further, even though at the hearing before Deputy Judge To, submissions had been made on the question of user, they were in the context of the interlocutory injunction restraining the use of Client Data.

66.  I am inclined to agree with AXA’s point that for document not provided by the policyholder, their inclusion in PCI policy files is indicative of the documents being used by the agent.  In this regard, Mr Yu SC argues that it will not come within the scope of the Order if the policyholder had consented to the agent using the information or document.  I do not agree.  While it is correct that information or document supplied by a policyholder or obtained from AXA with the policyholder’s consent is not caught by the Order, a document that was wrongfully retained and removed by an agent upon leaving AXA remains to be Client Data and falls within the Order notwithstanding the consent of the policyholder to use the document or the information in it. 

67.  As put by Mr Kotewell SC in his reply submissions, the focus is on the identification of Client Data and not the identification of wrongful act.  Thus, the fact that AXA’s interlocutory application was based on the Norwich Pharmacal principle and the purpose of the Order is to enable AXA to identify the wrongdoers does not support reading the concept of user into the meaning of Client Data.

68.    In short, I take the view that PCI’s reference to the use of the information or documents in the identification of Client Data is not justified by the definition of Client Data.  PCI, however, says that the concept of user had not been applied in the search for SAMS and Non-SAMS documents.  In Mr Yu SC’s submission, even if the reference to user is wrongful, AXA has not shown PCI had failed to comply with the Order and the consequences of the breach.  AXA’s case of breach and non-compliance is primarily a matter of inference.  It is argued that with the incorrect understanding of the meaning of Client Data, the test, approach and methodology adopted by PCI for identification of relevant materials must necessarily be flawed, so that the delivery up and disclosure made must be incomplete and inadequate.  I agree with this argument.  It should also not be overlooked that the concept of user had clearly featured in the questionnaires sent to the agents.  It is also evident from the affirmations of Ralph Lau that the admission or denial of use by the agents involved was an influencing factor in PCI’s decision to disclose a document.  I am therefore unable to agree with PCI’s submission that AXA has not shown PCI to have failed to comply with the Order.

69.  I turn next to the second issue of whether the obligations under the Order should be enforced by an Unless order or whether PCI should be released from further compliance with them.  In the course of the hearing, PCI accepted that the terms of its summons, particularly paragraph 6, were too wide.  Mr Yu SC clarified that the release application is confined only to paragraphs (3) and (4) of DJ To’s Order.         An amendment to paragraph 6 of PCI’s summons was proposed.  By the amendment, PCI, accepting that it should carry out further search and make delivery up and disclosure in relation to the white cards, underwriting notifications and daily consolidated reports as well as the 7 policies and 169 policies respectively referred to in Geoff Wong’s 4th affirmation and Ralph Lau’s 13^th affirmation, applies to be released from further compliance with paragraphs (3) and (4) of DJ To’s Order subject to the further search and delivery up and disclosure mentioned above.

70.  At the hearing, PCI also requested AXA to identify and specify documents that, it says should be, but have not been disclosed.  AXA, while not accepting it is under any duty, indicated that it was prepared to do so.  Subsequent to the hearing, AXA had by the affirmation of Ho Wai Shing Steven provided a list of: (a) documents that AXA would not give to policyholders as a matter of course, and (b) documents that are not given to AXA policyholders unless requested for.  The list was provided without prejudice to AXA’s contention that PCI should have delivered up and disclosed all documents containing Client Data. 

71.  As noted above, an Unless order is an order of last resort and should only be made where there is a history of failure to comply with the Rules or court orders.  There is at the same time no dispute that the court has a discretion not to enforce strict compliance of an order.  Hence in deciding whether to compel further compliance of the Order, including the imposition of an unless order, or to release PCI from further compliance of the Order, the court has to look at all the circumstances of the case so as to arrive at a fair and just decision.

72.  In the present case, PCI relies principally on the following matters as negating an Unless order and justifying a release from further compliance with the Order:

(1)	DJ To’s Order was to protect AXA in the interim period before trial and the merits of the claim have yet to be adjudicated upon,
(2)	There had been substantial compliance by PCI and the non-compliance was not contumelious and there was no intention to flout the Order, and
(3)	AXA had delayed in making the complaint about PCI’s misunderstanding of the term Client Data.

73.  As previously observed, PCI had devoted considerable time and resources to the discovery and disclosure obligations.  I am also not prepared to conclude on the evidence that PCI had deliberately flouted its obligations to make delivery and disclosure.  Although the process has taken a very long time, that is not necessarily equated with a history of failure to comply with court orders.  On the contrary, it appears from the correspondence that PCI had been responsive on occasions when failings and non-compliance were identified by AXA.  It is not to be overlooked that the scope of search under DJ To’s Order is not insubstantial.  The mistaken view PCI took on the meaning of Client Data is regrettable.  However, PCI is correct to point out that it must be apparent to AXA since as early as November 2001 that PCI was focusing on user, but AXA only complained in June 2003.  No doubt, compliance with court order is a matter for PCI and the duty must be on PCI to see to it that it fully and properly complies with its obligations under the Order.  But in considering whether to impose an Unless order, the fact that the objection was raised late and after considerable time and resources had already been spent on complying with the Order is a relevant consideration. 

74.  Having regard to the considerations mentioned above, it will not be a fair exercise of the court’s discretion to impose an Unless order that carries the sanction of striking out the Defence.  It also cannot be said that without strict compliance with the Order, AXA runs the risk of being deprived a fair trial.  In my view, the appropriate course is to order further compliance of the delivery up and disclosure obligations by PCI, but restricted only to the aspects set out in the amended paragraph 6 of PCI’s summons.  With the completion of these further searches, discovery and disclosure, the objectives and purposes underlying paragraphs (3) and (4) of the Order should have been substantially achieved.  After all, DJ To’s Order is an interlocutory order and the parties’ ultimate objective must be the final resolution of the claim.  The engagement in protracted interlocutory proceedings will only divert the parties’ attention, energy and resources from the resolution of the real disputes between them.

Cross-Undertaking as to damages

75.  Turning finally to PCI’s application under paragraphs 1 and 2(a) of its summons to amend Beeson J’s Order and DJ To’s Order by inserting a cross- undertaking as to damages.  AXA is prepared to give the usual undertaking as to damages.  In my view, that is sufficient.  The addition of a reference to costs for complying with the Undertaking or the Order, as sought by PCI in the summons, is not called for. 

Conclusion

76.  For the reasons indicated, 

(A)	AXA’s summons dated 19August 2003 is dismissed.
(B)	On AXA’s summons dated 17 December 2003:
	(1)	PCI is to further comply with the Undertaking by conducting a search of all the non-PMS policies issued on or after 21 July 2000, to the extent this was hitherto  not done, with a view to delivering up to AXA’s solicitors printouts from SAMS and copies thereof, if any, that are in its possession, custody or power, and that had hitherto not been delivered up to AXA.
	(2)	PCI is to further to comply with paragraphs (3) and (4) of DJ To’s Order by carrying out further search, delivering up and disclosure of (a) white cards, underwriting notifications and daily consolidated reports, (b) the 7 policies and 169 policies respectively referred to in Geoff Wong’s 4th affirmation and Ralph Lau’s 13th affirmation, and (c) the list of documents set out in the affirmation of Ho Wai Shing Steven.
(C)	On PCI’s summons dated 13 May 2004, Beeson J’s Order and DJ To’s Order be further amended by inserting the usual undertaking as to damages.  The further amended orders are to be filed and served within 14 days from the date of this Decision being handed down.

67. I will invite the parties to endeavour to agree on: (1) the timetable for the further searches, delivery up and disclosure to be made pursuant to the Undertaking and DJ To’s Order, (2) the costs of the summonses, and (3) the precise terms of the Order.  In the event agreement cannot be reached on one or more of these matters, the parties are at liberty to apply for further directions either by way of a short hearing or if both parties agree, by way of written submissions.