NAM TAI ELECTRONICS, INC. v. PRICEWATERHOUSE COOPERS

cacv 99/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 99 of 2005

(on appeal from HCA NO. 6783 of 2000)

__________________________

REASONS FOR JUDGMENT

__________________________

Hon Rogers VP:

1.  This was an application for leave to appeal to the Court of Final Appeal from the judgment of this court dated 25 May 2006.  At the conclusion of the hearing of this application leave was refused with reasons to be given in writing.

2.  The background to this case can be gleaned from the judgment of this court and from the judgment in the court below.  The action was one for defamation and breach of confidence.  At the hearing of this appeal, this court had little difficulty in dismissing the appeal and, indeed, did not call upon the defendant, the respondent in the appeal, other than to enquire as to whether there were any additional points which counsel would wish to make.  In relation to the claim in respect of breach of confidence this court had the greatest difficulty in comprehending the submissions made on behalf of the plaintiff.  In paragraph 21 of her judgement Mrs Justice Le Pichon JA said:

“When asked to articulate what was said to give rise to the alleged conflict of interest, Mr Griffiths’s response was along the following lines: PwC having fulfilled its status as adviser to Nam Tai about Albatronics was seeking a different status, namely that of liquidator, in a case where Nam Tai would be a potential creditor.  It was said that the two statuses are inimical because PwC having advised Nam Tai in relation to the financial health of Albatronics, for it then to go into the very subject of that inquiry in a different role would create a conflict with its previous role.  I confess that I have considerable difficulty understanding the submission which I find opaque.”

3.  In the light of the otherwise unarticulated accusation of conflict of interest, this court went on to consider the matter of what confidential information had been disclosed and whether it was justifiable.  In view of the necessary implication which would arise from the plaintiff’s assertions of a conflict of interest that the defendant had not performed its due diligence work properly, this court considered that the defendant was entitled to respond to the accusations of conflict of interest by disclosing that it had advised negatively in respect of the purchase.  The fact that it had advised was already published by the plaintiff itself and therefore not confidential.  The only matter that was disclosed which might not have been known was the simple fact that the advice had been negative.  This court agreed with the judge below that disclosure of that fact was proper, given the circumstances.

4.  On this application, the plaintiff was faced with the first difficulty that in view of decisions binding on this court the application for leave to appeal was launched out of time.  Although Sir John Swaine SC, who appeared on this application but not on the appeal or in the court below, conceded that the application was made out of time he reserved the right to argue otherwise should the matter go further.  In those circumstances the onus on the applicant was clearly to show substantial merits of the proposed appeal, particularly as the reason proffered for the lateness was an error by the solicitors.

5.  As regards the claim in defamation, Sir John Swaine was content to rely upon the written submissions and did not address this court further.  The matters sought to be raised were dealt with in the judgment in this court and, as already indicated, on the hearing of the appeal this court considered that the points had no merit.  In any event in so far as the argument relates to the judge’s conclusion as to the natural and ordinary meaning of the words complained of, it remains a challenge to a finding of fact.  There does not appear to be any question of great general public importance involved.

6.  Turning to the matter of breach of confidential information, the points initially sought to be raised on the proposed appeal were seemingly the same as those raised on the appeal.  However, in a draft amended notice of motion the plaintiff sought to raise a rather more convoluted point in paragraphs 14A and 14B of the notice of motion.  Those paragraphs read as follows:

“14A. Further or in the alternative, the conflict of interest inherent in the Defendant becoming Liquidator of Albatronics in the circumstances above described was that, while owing the Plaintiff a duty of confidentiality as to the contents of its due diligence report, the Defendant as Liquidator of Albatronics would have owed Albatronics and its creditors the duty to act in their best interests, which would or might require the Liquidator to use and/or disclose the very information which was confidential to the Plaintiff, which was now the new controlling shareholder of Albatronics in charge of its management.  That dilemma could only properly be resolved by the Defendant withdrawing its candidacy for the office of Liquidator; not by the disclosure of the confidential information.

14B. The failure to appreciate this aspect of the conflict of interest sufficient to debar a potential candidate from being appointed a Liquidator or to a similar post likewise raises a point of great general or public importance which ought to be submitted to the Court of Final Appeal for decision.”

7.  The reference to the liquidator being required to use or disclose information was, on the face of it, a reference to information other than simply the fact that a negative recommendation had been given to the plaintiff.  Indeed this was elaborated by Sir John Swaine in the course of argument.  He put the matter on the basis that the defendant, if appointed liquidator, would be in a position to challenge the new management of Albatronics on the basis of facts which the defendant, by reason of having conducted the due diligence, was well aware that the new management, i.e. the plaintiff, knew at all times.  When questioned about this Sir John Swaine stated the information referred to was confined to the defendant’s negative recommendation as to the purchase of Albatronics.  However, within a few short sentences it became clear that the argument he was addressing was not confined to that but to other information which had been gathered and communicated in the course of the due diligence exercise.

8.  The difficulty with this is not merely that it seeks to raise a totally new argument, but that any information which is now said to be the subject of the confidence and the potential breach of the duties of confidence has not been identified.  It is fundamental in any confidential information action that the pleadings identify the information, establish that it is confidential and plead any breach of duty of confidence: see for example the clear statement of Megarry J in Coco v A.N. Clark (Engineers) Ltd [1969] RPC 41 at p.47 lines 12-18.  The matter is not one of lack of particulars.  It is one of lack of material averments necessary for the establishment of a right.

9.  In those circumstances, it was clear that this application fell to be dismissed.

Hon Le Pichon JA:

10.  I agree.

Hon Cheung JA:

11.  I agree.