BUSINESS FINANCE LTD v. WAI PING SO AND OTHERS

HCA 2269/2016

[2024] HKCFI 2489

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2269 OF 2016

_______________________

BETWEEN

AND BETWEEN

_______________________

________________________

DECISION

________________________

1.  The trial of this action was adjourned on its first day (ie. 21 February 2024) essentially for the reason that the Court and all parties concerned were belatedly informed and provided with the medical report showing that Madam Yeung Yum Tai (“Madam Yeung”, the 2^nd Defendant by Original Action and 1^st Plaintiff by Counterclaim) has been suffering for some time from Major Vascular Neurocognitive Disorder which rendered her mentally unfit, such that she must act by guardian ad litem and next friend. The Legal Aid hitherto granted to Madam Yeung was also discharged around the same time.

2.  Now falls to be determined on paper before the trial resumes on 16 October 2024 are 2 summonses both taken out on 19 January 2024 respectively by Mr Yu Miu Chi (“Yu”) and Mr Wong Tak Luk Kenneth (“Wong”) to set aside the respective subpoena ad testificandum summoning them to attend trial to give evidence, both issued on 8 December 2023 upon application by Madam Yeung (“the 2 Subpoenas”).

3.  Yu and Wong were at the material time respectively an accountant and a legal clerk in the employ of Pang, Kung & Co (“PKC”). The 3 partners then trading as PKC (“the 3 Partners”) were previously sued herein as the 3^rd Defendant by Counterclaim. Yu and Wong have filed their witness statements herein for the 3 Partners.

4.  The Counterclaim by Madam Yeung and Wai Bing Yin (“Bing Yin”, and together “the 2 Counterclaimants”) against the 3 Partners was formally dismissed by consent at the Pre-trial Review held on 21 November 2023 (“the PTR”).

5.  The sole ground for setting aside the 2 Subpoenas is that their application by Madam Yeung was an abuse of process in that Madam Yeung has thereby breached the Settlement Deed dated 15 November 2023 executed between the 2 Counterclaimants and the 3 Partners (“the Settlement Deed”).

6.  That being the sole matter in dispute, which is an isolated one, and one that seems to me does not require setting out by way of background the Claim, and particularly, the rather tangled and complicated Counterclaims, as well as the lengthy and convoluted procedural history. I therefore do not propose to labour to narrate them, suffice just to mention that the 3 Partners were excused from attending the PTR and that the existence of the Settlement Deed was not mentioned to me at the PTR during the discussion the Bench had with Ms Winnie Chan, counsel for Madam Yeung, concerning Madam Yeung’s intention to apply for the issuance of the 2 Subpoenas.

The Settlement Deed

7.  The Settlement Deed includes the following relevant terms :

“ BACKGROUND

…

J. Without admission of liability, the Parties have agreed terms for the full and final settlement of all claims and potential claims by Yeung Yum Tai and Wai Bing Yin against the 3^rd Defendant by Counterclaim inclusive of interest and costs. The Parties wish to record those terms of settlement, on a binding basis, in this deed.

AGREED TERMS

1. DEFINITIONS AND INTERPRETATION

1.1 In this deed, the following words and expressions have the following meanings:

…

‘Related Parties’, in relation to Kung Fan Cheong, Leung Sai Ming, or Cheung Ku Yan Natalia, means PKC or PKC’s current or former partners or employees.

…

3. DISMISSAL OF PROCEEDINGS AGAINST D3(CC)

…

4. RELEASE

4.1 This deed is in full and final settlement of, and each Party hereby irrevocably and unconditionally releases and forever discharges, waives and forgoes, all and/or any actions, claims, rights, demands and set-offs, whether in Hong Kong or any other jurisdiction, whether in existence now or coming into existence at some time in the future, whether or not presently known to the Parties or to the law, whether actual or contingent, and whether in law or equity, that he/she ever had, may have or hereafter can, shall or may have against any of the other Parties or the Related Parties of Kung Fan Cheong, Leung Sai Ming, or Cheung Ku Yan Natalia arising out of or connected with :

(a) the Claims;

(b) the underlying facts relating to the Claims;

(c) the Action (including the counterclaim in the Action);

(d) the Proceedings Against D3(CC);

(e) any matter arising out of or in connection with the Property, the Assent, the Power of Attorney, the Hop Cheong Mortgage, the CKL Legal Charge, the BFL Loan, the Loan Agreement, and the Legal Charge;

(f) any agreement between or act by the Parties, or the Related Parties of Kung Fan Cheong, Leung Sai Ming, or Cheung Ku Yan Natalia, or any of them; and

(g) any other matter arising out of or connected with the relationship between the Parties

(collectively the ‘Released Claims’). For the avoidance of doubt, the Release Claims include any claim for interest and any claim for any part of the legal costs …

5. AGREEMENT NOT TO SUE

5.1 Each Party agrees not to sue, commence, voluntarily aid in any way or cause to be commenced against the other Parties or the Related Parties of Kung Fan Cheong, Leung Sai Ming, or Cheung Ku Yan Natalia any claim, action, suit, arbitration, disciplinary proceedings, complaint or other proceedings concerning the Release Claims, in Hong Kong or any other jurisdiction.

5.2 Clause 4.1 and 5.1 shall not apply to, and the Released Claims shall not include, any claims in respect of any breach of this deed.

…

15. CONTRACTS (RIGHTS OF THIRD PARTIES) ORDINANCE

15.1 PKC and PKC's current and former partners and employees (together, the “Third Parties”) may enforce the terms of this deed.”

Discussion

8.  Yu and Wong said that they are plainly the Related Parties within the definition of the Settlement Deed which they are entitled to enforce. This was not disputed.

9.  They contended that by applying for the issuance of the 2 Subpoenas and serving them, Madam Yeung was pursuing a right or claim to compel Yu and Wong against their wishes to be her witnesses, which right or claim Madam Yeung have released Yu and Wong from under Clause 4.1, and which right or claim Madam Yeung has agreed under Clause 5.1 not to sue.

10.  They drew attention to the fact that Clauses 4.1 and 5.1 deliberately adopted very wide and all-embracing language in describing the act of releasing as “unconditionally releases and forever discharges, waives and forgoes”, the subject matters being released as “any actions, claims, rights, demands and set-offs, whether in Hong Kong or any other jurisdiction, whether in existence now or coming into existence at some time in the future, whether or not presently known to the Parties or to the law, whether actual or contingent, and whether in law or equity, that he/she ever had, may have or hereafter can, shall or may have…”, and the subject matters agreed not to sue on as “any claim, action, suit, arbitration, disciplinary proceedings, complaint or other proceedings concerning the Release Claims”.

11.  Yu and Wong relied heavily on the UK Court of Appeal case of Alphasteel Ltd (In Liquidation) v Shirkhani [2013] EWCA Civ 1272 and [2014] C.P Rep 1. There, the UK CA was concerned with the application by the liquidators of Alphasteel for leave to use certain documents disclosed by Shirkhani and a related company (“Summit”) in a prior action (that was already settled) against third party interest in intended legal proceedings in Switzerland, which application was opposed by Shirkhani and Summit based on the Settlement Agreement concluded between them and Alphasteel. The Settlement Agreement in that case adopted wide and all-embracing language which is similar to Clauses 4.1 and 5.1 of the Settlement Deed.

12.  The UK CA there allowed the appeal and refused permission to use those documents.

13.  Ms Chan sought to distinguish Alphasteel by reading the decision as one primarily concerned with property right of a party to the documents.

14.  I do not agree. As a matter of fact, the UK CA did not agree with the reasoning of the first instance judge and the submissions of Alphasteel in approaching the matter by analysing minutely the strict legal and equitable rights of the parties in considering whether Alphasteel could be said to be pursuing a claim or right, and whether the claim or right was pursued as against Skirthani and Summit, and therefore within the ambit of the Settlement Agreement.

15.  Tomlinson LJ (whose judgment the other LJJ agreed) there did discuss CPR r31.22 and whether the party giving discovery retained right of confidence over the documents disclosed as opposed to his such right have upon disclosure been replaced by a right to be heard under CPR r31.22 regarding the further use of those documents. However, and in my view, the learned LJ’s views on those matters were not his ratio. Rather and pertinently, the learned LJ made the following observations and holdings :

(a) The learned LJ opined that the question for decision turned on the true construction of the Settlement Agreement.

(b) He observed at §11 that

“ … The question therefore is what was the parties’ intention, ascertained objectively in the context of the circumstances in which the parties entered into the agreement. Lord Nicholls in BCCI v Ali at 264, para 23, pointed out that a general release such as that with which we are here concerned is often entered into when parties are settling a dispute which has arisen between them, and that typically the parties “want to wipe the slate clean” …”

(c) The learned LJ held at §18 that

“ In my view the proper approach to clauses 9 and 10 of the Settlement Agreement does not require an analysis in terms of the strict legal and equitable rights of the parties. Clause 9 and 10 adopt deliberately imprecise and all-embracing language in speaking of “all or any claims or rights or complaints of whatever nature … whether known or unknown to … law”.  Mr Kitchener submitted that the proper approach is to regard Alphasteel’s application as involving a contest between two competing interests, in which Alphasteel is seeking a right at the expense of Mr Skirthani and Summit. I accept that this is so, and in my judgment this approach is itself appropriate in the light of the obvious aim of the Settlement Agreement to wipe the slate clean as between Alphasteel and Mr Skirthani and Summit. There is I consider great force in Mr Kitchener's submission that what Alphasteel has done is to involve Mr Skirthani and Summit in further litigation related to the underlying proceedings and that that is precisely what the Settlement Agreement was intended to prevent.” (my emphasis)

(d) The learned LJ did not accept Alphasteel’s submission that Alphasteel was not claiming a “right” nor is it requiring Mr Skirthani and/or Summit to do something or asking to be granted relief against either, in these words in §22

“ I do not accept that this is the proper approach to an agreement of this nature. It is in my judgment unrealistic. … . [Alphasteel] seeks therefore to deprive Mr Skirthani and Summit of their right. In other words, it seeks its right or entitlement at the expense of the right of Mr Skirthani and/or Summit. In my view, it does not greatly matter whether Alphasteel is regarded as pursuing a claim or a right. … Alphasteel is, on any showing, pursuing a claim to be entitled, or to be permitted, to use the documents in a manner which is not currently open to it because of a restriction imposed by the court in part to protect the rights of Mr Skirthani and/or Summit. It is not unlike a claim for costs … . In both of those cases there is no present or actual entitlement until the court has exercised its discretion in favour of the applicant party. But it is nonetheless a claim such as is comprehended within the meaning of the Settlement Agreement.”

16.  I respectfully agree with the learned LJ’s analysis concerning the aim and intention of the parties and take a similar view that, in the present case, the aim and intention of the parties to the Settlement Deed, objectively ascertained by the wide and all-embracing language and the scheme of the Settlement Deed, clearly was to achieve a general release in that the parties “want to wipe the slate clean”.

17.  Ms Chan cited Harmony Shipping v Saudi Europer Line (1979) 1 WLR 1380 and pray in aid the plain law, as livelily explained by Lord Denning there, that there is no property in a witness, and that

“ If there was a contract by which a witness bound himself not to give evidence before the court on a matter on which the judge said he ought to give evidence, then I say that any such contract would be contrary to public policy and would not be enforced by the court. It is the primary duty of the courts to ascertain the truth: and when a witness is subpoenaed, he must answer such questions as the court properly asks him. This duty is not to be taken away by some private arrangement or contract by him with one side or the other.” (p.1386D-E)

18.  The above principle of course is a cardinal rule serving the due and proper administration of justice, and is not disputed.

19.  However, one must not confuse that with the question we are presently concerned, which is a very different matter. The above principle concerns the duty of a witness who has been subpoenaed. What we are presently concerned is the contractual promise made by a party in an action in settlement with another party promising that other party that he/she would be released from certain claims and that he/she would not be sued on or be claimed against by the promisor party, and the court holding the promisor party to his/her promise and not letting him/her breach it.

20.  In my judgment therefore, as in Alphasteel, the question for decision turns on the proper construction of the Settlement Deed. It does not involve matter of public policy that arises because the duty of a witness is constricted, nor does it concern the innate right of Madam Yeung to call her witnesses being taken away, as Ms Chan seemed to be suggesting. Rather, it is a question of whether Madam Yeung has herself promised in the Settlement Deed to release and no longer enforce her right to subpoena Yu and Wong.

21.  Once the above matters are clarified and established, the answer is straightforward.

22.  There is really little dispute that what Madam Yeung presently exercising was her general right to apply for subpoena to call Yu and Wong as her witnesses.

23.  It also cannot be disputed that the right is connected with “the Action”, with “the underlying facts relating to the Claims” and with “the Property, the Assent, the Power of Attorney, the Hop Cheong Mortgage, the CKL Legal Charge, the BFL Loan, the Loan Agreement, and the Legal Charge” as stipulated in Clause 4.1.

24.  Moreover, following one of the ratio in Alphasteel, with which I respectfully agree and apply here, that it is not a proper approach to ask whether, and to have to establish that, Madam Yeung was claiming certain property from, or relief against, Yu and Wong before one concludes that Madam Yeung was enforcing a “right” within the meaning of and released by the Settlement Deed, as Ms Chan contended.

25.  In my judgment, the right that Madam Yeung pursued by applying for the 2 Subpoenas and serving them onto Yu and Wong, compelling them to attend trial as witnessed for her, is a right that Madam Yeung released Yu and Wong from by Clause 4.1 and a right she promised not to sue on by Clause 5.1.

26.  It was therefore an abuse of process by Madam Yeung to have the 2 Subpoenas issued and served.

Disposal

27.  In the premises, I will make the orders in terms of the respective paragraph 1 of the 2 Summonses setting aside the 2 Subpoenas.

28.  Costs should normally follow the event, and I thus make an order, but on nisi basis to be made absolute within 14 days unless any party applies by summons, that the costs of the 2 Summonses be paid to Yu and Wong respectively by Madam Yeung, to be summarily assessed on paper after the costs order becomes absolute. For that purpose, Yu and Wong is to lodge and serve their updated Statement of Costs within 7 days after it becomes absolute, Madam Yeung her List of Objections 7 days after, and Yu and Wong’s Reply, if any, within the next 4 days.