GOLDEN SCREEN LTD v. VILLAGE CINEMAS AUSTRALIA PTY LTD AND ANOTHER

HCCW 368/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 368 OF 2005

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D E C I S I O N

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1.  This is an application of the petitioner, Golden Screen Limited, under Order 41 rule 6 of the Rules of the High Court.  The petitioner asks the court to strike out certain parts of two of the affidavits filed by the 1^st respondent, Village Cinemas Australia Pty Limited, pursuant to an order I made on 6 November 2006, on the grounds that such evidence is of without prejudice communications, and/or it is irrelevant to the proceedings.

2.  The company that is the subject of these proceedings, Dartina Development Limited, is a joint venture formed between the petitioner and the 1^st respondent.  The petitioner is a subsidiary of Golden Harvest Entertainment (Holdings) Limited (“Golden Harvest”), a listed company on the Hong Kong Stock Exchange.  The 1^st respondent is a subsidiary of Village Roadshow Limited (“Village Roadshow”), a listed company on the Australian Stock Exchange.

3.  The parts of the affidavits complained of are as follows:

(1)     the 2^nd affidavit of Robert Kirby dated 17 November 2006 – paragraph 10, the 2^nd and 3^rd sentences; paragraph 11, the last sentence; the exhibit marked “RGK-1”, pages 11, 12, 13 (in part), 14 (in part), 15 (in part) and 17 (in part); and

(2)     the 6^th affidavit of Kirk Senior dated 20 November 2006 – the exhibit marked “KS-18”, page 9 (in part).

The parts of the evidence the petitioner wishes to redact are annexed to the skeleton submission of the petitioner. 

4.  I would like to say first of all that I do not accept the ground of irrelevance advanced by the petitioner.  The communications in question are relevant for the purpose that they would appear to demonstrate that the parties were still trying to work together in 2006 and so the Company should not be wound up on the just and equitable ground.  That leaves the ground of the without prejudice privilege.

5.  Affidavits dealing with negotiations for settlement may be struck out under Order 41 rule 6 as inadmissible in evidence.  There are two jurisdictional bases for this without prejudice privilege, as stated by Hoffmann LJ in Muller v Linsley & Mortimer [1996] 1 PNLR 74 at 77B to C:

“Firstly, the public policy of encouraging parties to negotiate and settle their disputes out of court and, secondly, an implied agreement arising out of what is commonly understood to be the consequences of offering or agreeing to negotiate without prejudice.  In some cases both of these justifications are present, in others, only one or the other.”

6.  Miss Chow submitted for the 1^st respondent that in this case, neither of the jurisdictional bases is present, so there is no justification to exclude the evidence.  Mr Hassell for the petitioner contended that both jurisdictional bases are found.

7.  The relevant exhibits in Mr Kirby’s affidavit are a series of e-mail exchanges between him and Mr Raymond Chow of Golden Harvest from 16 August 2006 to 8 September 2006.

8.  The relevant exhibit to Mr Senior’s affidavit is an internal e-mail of Village Roadshow dated 16 March 2005 from Mr Senior to Mr Kirby.

9.  For the e-mail exchanges in August and September 2006, Mr Hassell submitted that they should be viewed as part of an ongoing chain of correspondence between Mr Kirby, Mr Chow and in some cases Phoon Chiong Kit, also of Golden Harvest, which began on 29 June 2006.  To make good his point, he exhibited the full chain of the e-mail correspondence to his affidavit for the purpose of this application.  This full chain of e-mail should also be read in the light of the without prejudice mediation on 11 and 12 May 2006, in which representatives of the ultimate parent companies of the petitioner and the 1^st respondent, namely Golden Harvest and Village Roadshow, and lawyers for the parties, took part.  On that occasion, they discussed global resolutions of the proceedings in Hong Kong and of two proceedings in Singapore, which are called “the Imax writ” and “the GVM writ”.  Further, at or about the time of these e-mail exchanges, both parties’ lawyers took part in three days of without prejudice meetings in September 2006, again in an attempt to achieve a global settlement of all these disputes.  So the e-mail exchanges should also be read in the light of the subsequent attempts at global settlement.

10.  I agree with Mr Hassell that the e-mail exchanges exhibited to Mr Kirby’s affidavit should be read in this light.  I do not accept Miss Chow’s submission that I should view the e-email exchanges merely as attempts to resolve the Singapore proceedings and had nothing to do with the Hong Kong petition; or that Mr Kirby was wearing a different hat in those exchanges, that he was not acting for Village Roadshow or for the 1^st respondent, but merely for the entity that was the plaintiff in the Singapore proceedings; or that there is a cut or break in the chain when the e-mail exchanges carried on in August 2006, in that the parties had abandoned the idea of a global resolution and focused on settlement of the Singapore proceedings.

11.  I do not think the court should dissect and identify the communications to sort out which part of the communications relates to which particular dispute, when it is apparent that the parties taking part in the settlement discussions did so with the objective of bringing about a global solution.  It is important to bear in mind that two camps are involved in these disputes, Golden Harvest and Village Roadshow.  That a particular entity in the many companies in which one or both of the camps hold an interest is not a party to a particular dispute does not detract from the overall picture that the settlement discussions were between these two camps, and that an objective of the discussions was to resolve disputes on an overall basis.  Nor do I think it should be approached on the basis whether certain individuals taking part in the communications did or did not hold a position in a particular entity.  This case is distinguishable from the situation involving two parties to the settlement discussion and a wholly unrelated third party, as in Rush & Tompkins Limited v Greater London Council [1989] 1 AC 1280, where the settlement discussion was between the employer and the contractor, and the sub-contractor took no part in the communication.

12.  For the above reasons, I do not think it right to approach the question of implied agreement for the jurisdictional basis of without prejudice privilege in a mechanical fashion and hold that there was no implied agreement between the parties seeking the documents (i.e. the party against whom the privilege is claimed) and the parties to the correspondence in question.

13.  Miss Chow has drawn my attention to the dicta of Oliver LJ in Cutts v Head [1984] Ch 290 at 306C to G, which was approved by Lord Griffiths in Rush & Tompkins at 1299D, on the rationale for public policy justification for without prejudice communication, which read as follows: “The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of the negotiations for settlement being brought before the court of trial as admissions on the question of liability.”  She submitted that the public policy justification cannot be invoked here, as there was no admission of liability in respect of the Singapore proceedings in the e-mail exchanges, leaving aside the question that the Singapore proceedings are distinct from the Hong Kong petition.

14.  Mr Hassell submitted that the tenor of these e-mail exchanges may indicate that the relationship between the parties has not broken down, so to that extent there was an admission from Mr Raymond Chow on the petitioner’s behalf and for that reason it might be contended that the Company should not be wound up.

15.  Miss Chow may well be right that there was no admission of liability in the e-mail exchanges, but it is not necessary to establish both bases for without prejudice privilege, one would be sufficient.  I find that the basis of implied agreement is established, that the e-mail exchanges were part of the communications between the two camps, Golden Harvest and Village Roadshow, to achieve a global resolution and that exchanges were made on the express or implied agreement that the communications would remain without prejudice and should not be admitted into evidence.  In the earlier part of the chain of communications, several e-mails were marked “without prejudice”.

16.  As for the e-mail in the exhibit to Mr Senior’s affidavit, this was in relation to communication on the Imax dispute and that dispute is part of the global settlement, so I will also uphold the without prejudice privilege on the implied agreement justification.

17.  I make the following orders on the summons:

(1)     the 1^st respondent does have leave to rely at the hearing on the 2^nd affidavit of Mr Kenneth Tan Chih Sien dated 24 November 2006;

(2)     the time for filing a summons seeking an order in paragraph 3 of the summons be extended to 19 December 2006;

(3)     the evidence as redacted in the 2^nd affidavit of Mr Kirby and the exhibits thereto, and the exhibit to the 6^th affidavit of Mr Senior, annexed to the petitioner’s skeleton submission be struck out on the basis it is scandalous and/or oppressive pursuant to Order 41 rule 6.

18.  Subject to what the parties have to say on costs, I would address the costs in respect of the earlier orders I make on an overall basis.  I further give leave to the petitioner to file and serve evidence within 42 days hereof, and direct that draft directions are to be submitted by the parties 3 days before the restored hearing of the petition. 

19.  Costs should follow the event, the petitioner is to have the costs of this summons and of the hearing today in any event.