XCHRX CAC BRAKE CO. LTD. ZHUHAI v. BENE MANUFACTURING COMPANY LTD. AND OTHERS

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 4666 OF 1997 AND 3041 OF 1998

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HCA4666/97

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(HEARD TOGETHER)

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REASONS FOR JUDGMENT

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1. In High Court Action No.4666 of 1997, by summons dated 7th December 1998, the plaintiff made the following application :

1. The Plaintiff be granted leave to disclose to the Department of Justice all pleadings, affirmations and exhibits filed and served by the 2nd, 3rd and 4th Defendants in this action together with all orders of the Court made therein and for this purpose the Plaintiff be granted leave to disclose to the Department of Justice all pleadings, the Plaintiff be released from

(a) its implied undertaking not to disclose to any person not a party to these proceedings copies of the said documents, and

(b) its express undertaking given to the Court on 1st May 1997 not to make use (save in connection with this action) of any information obtained as a result of the operation of paragraphs 2 and 3 of the order of the Honourable Mr Justice Patrick Chan dated 1st May 1997.

2. The costs of this application be to the Plaintiff in any event.

2. On 15th December 1998, I made an order in terms of the application. I now give my reasons.

3. On 1st May 1997, the Plaintiff obtained a world-wide Mareva injunction against the Defendants, with a disclosure order. The Plaintiff gave an undertaking which included the following :

"H. Not to make use (save in connection with this action) of any information obtained as a result of the operation of paragraph 2 of this Order or to commence any proceedings in other jurisdictions against the defendants without the leave of the Court;

I. Not to make use without the leave of the court of any information obtained as a result of the operation of paragraphs 3 or 4 of this Order other than in connection with

(a) following and tracing the proceeds of the frauds, and

(b) bringing proceedings against any person or persons in relation to the frauds."

4. In compliance with the disclosure order the 2nd Defendant, by himself and on behalf of the 2nd and 3rd Defendants, filed certain affirmations. Mr Mak Shing, as director of the 3rd and 4th Defendants, also filed an affirmation, as did Mr Liu Wai-hung, the 5th Defendant.

5. The 2nd Defendant Mr Lam Choi-lan is presently on trial with one Mr Lo Jock-huen and the 6th Defendant in this action before the District Court on various counts of false accounting and conspiracy to defraud arising out of the same matters as this action. The Plaintiff seeks to be released from its undertakings so that it can disclose the leave of the Court to disclose information obtained in this action to the Secretary for Justice, in order to assist the Prosecution in the District Court case.

6. The 2nd Defendant complains that among the document bundle provided to him by the Prosecution, he found his affirmation dated 22nd May 1997, the affirmation of Mr Mak Shing dated 14th May 1997, and an affirmation by the 5th Defendant. Mr Mak Shing and the 5th Defendant appear on the list of witnesses which he says he received from the Prosecution. He infers that the Plaintiff or its solicitors must have disclosed this information to the Police and the Prosecuting Counsel, which he says is in breach of the undertaking shown above.

7. Mr Rattigan and Mr Lamplough of Herbert Smith, the Plaintiff's solicitors, have filed affirmations denying such disclosure. Correspondence with the Commercial Crime Bureau, also denying such disclosure, has been exhibited. Mr Lamplough affirms that the police officer in charge of the case and the Prosecuting Counsel, Mr McLanachan, have been shown the front pages of the affirmations and have confirmed to him that they are not in possession of copies of the affirmations.

8. There is no explanation as to how these affirmations got into the bundle of witness statements, if indeed they did. It is curious that the 2nd Defendant himself appears as a witness on the list of witnesses which he has exhibited. He is not a witness for the Prosecution, obviously. One would not have expected his name to appear as a witness on the basis that he had given a cautioned statement; normally one would expect the statement taker's name to appear, and the statement itself to be shown as an exhibit. In any event there is no evidence as to how this list came into being, or who is its author.

9. In any event it seems to me that I have to take the present position to be as it appears from Mr Lamplough's affirmation, namely that however the documents may have come into the possession of the 2nd Defendant, neither the Police nor the Prosecuting Counsel is now in possession of them.

10. I can see no reason why these documents should not be made available to the prosecuting authority for use in criminal proceedings. This is obviously what the House of Lords had in mind when it held in Rank Film Ltd. v. Video Information Centre [1982] 1 WLR 380 that the Defendants were entitled to rely on the privilege against self-incrimination by discovery or by answering interrogatories since if they complied with orders of that nature there was in the circumstances, a real and appreciable risk of criminal proceedings for conspiracy to defraud being taken against them. See the dicta of Lord Fraser of Tullybelton at p.446E :

" A restriction by the court making the order would, no doubt, be effective to bind the party who obtained the order, but it can hardly be suggested that it would be effective to prevent a prosecutor in the public interest from using, or an English criminal court (a fortiori a Scottish criminal court if a conspiracy were prosecuted in Scotland) from admitting the information in evidence at a trial."

And at p.447F :

" If a defendant's answers to interrogatories tend to show that he has been guilty of a serious offence I cannot think that there would be anything improper in his opponent reporting the matter to the criminal authorities with a view to prosecution, certainly if he had first obtained leave from the court which ordered the interrogatories, and probably without such leave."

11. The criteria for the exercise of the Court's discretion to release relevant documents from hub into satellite proceedings are set out in the judgment of Laddie J. in Cobra Golf Inc. and Anr. v. Rata & Ors., [1996] FSR 819 at p.830-831. It seems to me that, applying those criteria, it is proper for the Plaintiff to be released from its undertaking so that the criminal authorities may see the papers and make such use of them in the criminal proceedings as they may.

12. Paragraph 11 of Laddie J's criteria states :

" The existence of the implied undertaking means that an application to release the party from restraint must be made before there is collateral use."

13. Mr So for the 2nd Defendant argues that this order should not in any event be made because there has already been disclosure.

14. The answer to this must be that there is insufficient evidence of disclosure. If there had been, the Police and the Prosecuting Counsel in the District Court action would have these documents and I accept that they have not.

15. Paragraph 11(d)(1) of the criteria states :

" If they [the satellite proceedings] are criminal proceedings the court must take into account the possibility of the application being a method of by-passing the privilege against self-incrimination."

16. The 2nd Defendant did not seek to rely on this privilege in relation to the affirmations which he filed this action, as presumably he could have done, if he wished, in reliance on Rank Film Ltd. Nor indeed does it appear that there is any self-incrimination in his affirmations which are exculpatory. In any event, it will be for the District Judge to consider whether the use of any of the information contained in the documents is admissible, and if it is, whether or not it is prejudicial.

17. For these reasons, I allowed the application.

18. In High Court Action No.3041 of 1998, by a summons dated 7th December 1998, the Plaintiff made a similar application in respect of an undertaking given on 27th February 1998, for the purposes of an injunction made on the same date. The 2nd Defendant in this case, Mr Lo Jock-huen, is jointly charged in the District Court with Mr Lam Choi-lan. The Plaintiff seeks to be released from its undertakings so that it can disclose information obtained in this action to the Secretary for Justice, in order to assist the Prosecution in the District Court case.

19. There was no appearance by or on behalf of any of the Defendants in this action. For the same reasons as those given above, in their absence, I allowed the application.