CHINA MEDICAL TECHNOLOGIES, INC. (IN LIQUIDATION) AND OTHERS v. WU XIAODONG AND OTHERS

CAMP 318/2023, [2024] HKCA 77

On An Intended Appeal From [2023] HKCFI 1892

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 318 OF 2023

(ON AN INTENDED APPEAL FROM

HCA NOS 3391 OF 2016 AND 1417 OF 2013)

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HCA 3391/2016

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HCA 1417/2013

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(Consolidated by Order of Master Chow dated the 23^rd day of July 2018)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  This is the 2^nd Defendant’s renewed application for leave to appeal against the order of Ng J dated 26 July 2023 (“the Order”), whereby the Judge dismissed the 2^nd Defendant’s summons dated 24 September 2021 seeking (i) specific discovery of “all documents or correspondence between, or notes of meetings or conversations between, the 3^rd Plaintiffs … and any of the respective 6 experts referred to in paragraph 72.2 of the 3^rd Affidavit of Mr Cosimo Borrelli sworn on 29^th March 2018 in HCA 3391 of 2016 relating to the FISH and/or SPR Technologies” (“the Subject Materials”), and (ii) inspection of the same under Order 24, Rules 3, 7 and 11 of the Rules of the High Court, Cap 4A. Leave to appeal against the Order was refused by the Judge on 22 September 2023.

2.  The basic facts of this case and the Judge’s reasons for his decision have been set out in his written judgment dated 26 July 2023 (“the Judgment”), and will not be repeated here. In summary, the Judge refused to order specific discovery (and hence inspection) of the Subject Materials on the ground that they were protected by litigation privilege and there had not been any waiver of the privilege by the Plaintiffs.

3.  The tests for granting leave to appeal and for the circumstances in which the Court of Appeal will interfere with an exercise of discretion by a judge concerning specific discovery and inspection of documents are well established, and do not have to be set out here.

4.  Having considered the papers before us, we consider that it is appropriate to deal with the present application on paper without an oral hearing, pursuant to Order 59, Rule 2A(5)(a) of the Rules of the High Court.

DISCUSSION

5.  Attached to the Plaintiff’s summons dated 5 October 2023 seeking leave to appeal is a draft Notice of Appeal containing 2 intended grounds of appeal (“Ground 1” and “Ground 2”).

6.  Under Ground 1, referred to as the “Privilege Issue”, Mr Lung on behalf of the 2^nd Defendant makes 2 points.

7.  First, Mr Lung contends that the Judge should have held that the Plaintiffs failed to discharge the onerous burden for establishing litigation privilege, in particular the requirement that the Subject Materials were created for the sole or dominant purpose in connection with litigation (“the 1^st Requirement”).

8.  The question of whether the Subject Materials came into existence for the sole or dominant purpose of obtaining or providing legal advice as to bringing or conducting of legal proceedings was carefully considered by the Judge at §§16-30 of the Judgment. We agree with the Judge’s analysis and conclusion.

9.  We now turn to Mr Lung’s arguments in support of Ground 1:

(1)  Mr Lung argues that Mr Borrelli’s statement at §20 of his 21^st Affidavit filed on 5 December 2022 (namely, that “[a]ll documents, correspondence, and notes of meetings and conversations, between the Liquidators (either by themselves, their team or their lawyers) and these 6 experts were produced and brought into existence for the sole purpose of obtaining or providing legal advice as to bringing or conducting these proceedings and other actions that had been commenced by the Plaintiffs or were in contemplation”) is a bare assertion. It seems to us, however, that in the context and circumstances of the present case, Mr Borrelli’s said statement is entirely credible, and there is no reason to doubt its veracity.

(2)  Mr Lung next argues that where there are self-evidently dual or multiple purposes (eg valuation of assets for sale), the court should not too readily conclude that the 1^st Requirement is satisfied. This argument was considered by the Judge at §§27-28 of the Judgment. The Judge was not impressed by it on the facts of the present case. So are we.

(3)  Lastly, Mr Lung argues that the difficulty is particularly acute when one considers the multi-faceted duties inherent in the nature of the work of a liquidator, and points to the fact that 4 of the experts were engaged in 2013-2015 during the 1^st Plaintiff’s early stage of liquidation. This argument adds nothing of substance to the one mentioned in (2) above.

10.  Second, Mr Lung contends that the Judge incorrectly reversed the burden of proof by requiring the 2^nd Defendant to suggest an alternative purpose for the creation of the Subject Materials other than one in connection with the litigation. This contention is completely without merits. The Judge alluded to the fact that Mr Lung was unable to suggest any other purpose of the Liquidators’ investigation and communications with the 6 experts if it were not for the purpose of obtaining or providing legal advice in relation to bringing or conducting legal proceedings[1]. The Judge was entitled to take this matter into account in coming to the “confident” conclusion that the Subject Materials were protected by litigation privilege[2]. There is no basis whatsoever to contend that the Judge reversed the burden of proof as contended by Mr Lung.

11.  Under Ground 2, referred to as the “Waiver Issue”, Mr Lung makes 3 points.

12.  First, Mr Lung contends that the Judge erred in holding that the 3 passages cited in §§36, 39 and 42 of the Judgment only concerned the effect of the Subject Materials but not their contents. We have considered the 3 passages, and agree with the Judge that Mr Borrelli was merely stating the Liquidators’ conclusions on the nature and value of the FISH and SPR Technologies. The fact that Mr Borrelli might have come to those conclusions with the benefit of, or in reliance upon, the opinion or advice given by the experts did not mean that the Liquidators “deployed” the contents of the Subject Materials thereby waiving the privilege. The applicable approach can be found in the judgment of the Court of Appeal in Goldlion Properties Limited v Regent National Enterprises Limited [2006] 1 HKLRD 794, at §36 (citing with approval Matthews and Malek on Disclosure §10.17):

“The key word here is ‘deploying’. A mere reference to a privileged document in an affidavit does not of itself amount to a waiver of privilege, and this is so even if the document 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 has 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 contents, or summarise them, but simply refers to the document’s effect, there is apparently no waiver of privilege.”

13.  Second, Mr Lung contends that in considering the issue of waiver, the Judge held, incorrectly, that it was immaterial that the Plaintiffs utilized the Subject Materials “for merits purposes”. Mr Lung says that the Judge failed to grapple with the concept of fairness altogether. If, as we consider it to be the position, the Subject Materials are, as a matter of law, protected by litigation privilege, and the Plaintiffs have not waived the privilege attached to the Subject Materials, we do not see how their non-disclosure to the 2^nd Defendants can be said to give rise to any unfairness. Further and in any event, Mr Lung has failed to demonstrate any unfairness arising out of the non-disclosure of the Subject Materials.

14.  Third, Mr Lung contends that the Judge wrongly failed to consider the unfairness inherent in the Plaintiffs’ fundamental shift in their stance on the value of the FISH and SPR Technologies. The 2^nd Defendant’s complaint about the Liquidators’ change of stance is based on what the Liquidators are alleged to have represented to the Beijing Court in some other proceedings in China[3]. The Plaintiffs deny that there has been any change of stance as alleged. Mr Lung has failed to show, and we are not satisfied, that without the Subject Materials, the 2^nd Defendant will be unable to pursue the said complaint at the trial.

15.  In all, neither Ground 1 nor Ground 2 is reasonably arguable. We do not consider that the 2^nd Defendant’s intended appeal has any reasonable prospect of success. Neither do we see that there is any other reason in the interests of justice why the appeal should be heard.

DISPOSITION

16.  The 2^nd Defendant’s summons dated 5 October 2023 is dismissed with costs to the Plaintiffs, to be summarily assessed. The Plaintiffs shall have leave to file and serve a statement of costs (limited to 2 pages) within 14 days from the date of this judgment, and the 2^nd Defendant shall have leave to file and serve a statement of objection (limited 2 pages) within 14 days thereafter. Subject to such further directions as may be given, the Court will assess the Plaintiffs’ costs summarily without further notice to the parties. The above orders as to costs is an order nisi, and shall become absolute unless an application is made to vary the same within 14 days from the date of this judgment.

17.  As the 2^nd Defendant’s application is totally without merit, we make an order that no party may request the present determination to be reconsidered at an oral hearing inter partes pursuant to Order 59, rule 2A(8) of the Rules of the High Court.