SAMUEL TAK LEE & ANOTHER v.CHAN KING SHEEN & ANOTHER

CACV 436/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 436 OF 2002

(ON APPEAL FROM HCMP NO. 2936 OF 2002)

____________________

____________________

____________________

J U D G M E N T

____________________

Hon Rogers VP:

1. This is an appeal from a judgment of Deputy High Court Judge Carlson given on 8 November 2002 whereby he ordered that the documents exhibited to the fourth affirmation of Mr K C Tsang affirmed on 14 December 2001 and filed in High Court Action No. 994 of 2001 were to remain in the possession of the solicitors acting for K C Tsang & Co. until further order. Paragraph 2 of the order provided that the plaintiffs and their solicitors and counsel would be at liberty to inspect those documents for the purpose of identifying those in respect of which "privileged" was claimed. The order then went on to provide that the plaintiffs' solicitors should notify the 1st defendant of any documents in which "privileged" was claimed and that if the 1st defendant should contest such claim to privilege the matter should be restored for further hearing. The order then went on to impose the following injunction:

"(6) The 1st defendant will not by herself, her servants, agents or solicitors, deliver, produce, permit access to or in any other way divulge the Documents (ie all the documents in K. C. Tsang's fourth affirmation) or the contents of the Documents to the 2nd defendant or to the Respondents in HCCW No. 958 of 2000 (the 'SKI Petition') or to any servant, agent or assign of the 2nd defendant or the Respondents to the SKI petition until after the determination of the SKI Petition

(7) The 1st defendant will not deliver, produce, permit access to or in any other way divulge the contents of any of the Documents relating to the Petition to any other person until after the determination of the SKI Petition"

2. There then followed an injunction against the 2nd defendant, the 1st defendant's solicitors, to prevent them from gaining access to information relating to the "Documents" and requiring them to inform Messrs K C Tsang & Co. should they ever come into possession of those documents or copies thereof.

3. At the conclusion of the hearing of this appeal this court reserved its judgment which we now give.

4. Before considering the details of this case I would observe that the effect of this order has been to reverse, in a substantial way, the material part of the order of this court in CACV 4039 of 2001. Indeed, Mr Thomas SC, who appeared on behalf of the plaintiffs, when challenged as to this, was unable to provide any satisfactory explanation as to how his clients had sought such orders. Not only, therefore, have the plaintiffs sought to go behind an order and reverse its effect without appealing that order, they have also sought to relitigate matters in a way which is vexatious and contrary to principle.

Background

5. The background to this matter is set out in the judgment of this court given by Le Pichon JA in CACV 4039 of 2001 and handed down on 19 July 2002. For convenience, the salient points will be referred to here. The 1st defendant's late husband, Ng Tai Mun, died in 1964. He was a founding member of a Hong Kong company, Shun Kwong Investment and Trust Company Ltd ("SKI"). That company had been formed by the 1st defendant's husband and the Lee family. When he died there were 576 shares in the company in his name. The 1st defendant is the sole executor and beneficiary of his estate and is also a shareholder in the company in her own right. Her late husband's shares remained registered in his name and have never been transferred into the 1st defendant's name.

6. In April 2000, the 1st plaintiff visited the 1st defendant at her home on Long Island, New York. They had never met before. Discussions ensued culminating in the 1st plaintiff entering into a Voting Agreement with 1st defendant whereby she gave the 1st plaintiff a right of first refusal to purchase the shares and, during the three-year term of the option, the right to exercise her voting rights. The 1st defendant also granted the 1st plaintiff two powers of attorney, granting him power to exercise her voting rights, to pursue on behalf of herself and the deceased's estate the dividends due but unpaid and to cause the estate's shares to become registered in her name, all free of charge to her. The powers of attorney were expressed to be irrevocable for a period of three years.

7. In June 2000, the 1st plaintiff approached K C Tsang, the principal of the firm bearing his name, and instructed Mr Tsang to represent the 1st defendant in getting the estate's shares registered in her name and to pursue unpaid dividends. Sometime after that date, but prior to 16 October 2000, K C Tsang & Co. came to be instructed by three other shareholders of SKI who are members of the Eng family living in the US. One of those three was the 2nd plaintiff. On 16 October 2000, a winding up petition was presented to wind up SKI on their behalf. The 1st defendant was joined as the 4th petitioner. It is the 1st defendant's case that this was done without her consent or approval. By letter dated 8 November 2000 to the 1st plaintiff, the 1st defendant terminated the 1st plaintiff's retainer and directed that her documents should be turned over to her new solicitors, Patrick Chan & Co., who also wrote on 11, 17 and 20 November 2000 to demand the return of the 1st defendant's documents.

8. On 24 November, the 1st defendant applied ex parte to withdraw from the petition. At the adjourned hearing on 25 November, the 1st plaintiff instructed counsel to oppose the application on behalf of the 1st to 3rd petitioners, counsel also holding a watching brief for 1st plaintiff. On instructions, counsel informed the court that an affidavit was forthcoming from the 1st defendant that she did not intend to withdraw and that Patrick Chan & Co. had not been properly instructed. The hearing was further adjourned and directions given for the filing of evidence. Meanwhile, on 27 November 2000, the 1st defendant wrote directly to Chu J stating her intention to withdraw from the petition. As no affidavit was forthcoming, contrary to the intimation previously given by counsel for the 1st to 3rd petitioners, nor was there any explanation as to why it was not, on 19 December 2000, Chu J granted the 1st defendant leave to withdraw as the 4th petitioner and ordered indemnity costs in her favour as from 25 November against the other petitioners.

9. Following the decision of Chu J, the 1st defendant's solicitors wrote, on 20 December 2000 and 3 January 2001, to the K C Tsang & Co. to demand the return of her documents. On 4 January 2001, K C Tsang & Co. replied to those letters by enclosing a copy of "our client's letter" of even date. The enclosure was a letter from 1st plaintiff to K C Tsang & Co. stating that the 1st plaintiff had no wish for K C Tsang & Co. to release the papers without his specific approval or consent.

10. The 1st defendant instructed new solicitors, Pang & Associates, who, on 20 February 2001, demanded the return of the 1st defendant's documents. K C Tsang & Co. replied to the effect that it had received a letter from Jones, Day, Reavis & Pogue ("Jones Day"), solicitors, acting for the 1st plaintiff also demanding a return of those documents. This led to the commencement of proceedings in HCA 994 of 2001 ("HCA 994") on 2 March 2001 naming K C Tsang & Co. as the defendant in that action for the return of the documents and damages to be assessed. Those proceedings will be referred to as the previous action.

11. In those proceedings the 1st defendant in this action, who was the plaintiff in HCA 994, sought summary judgment. Before that application could be heard, the defendant in HCA 994, K C Tsang & Co., issued an interpleader summons naming the 1st plaintiff in this action and the three other petitioners in the SKI petition as "intended defendants". The purpose of the interpleader summons was that the "intended defendants" could claim that the documents that were listed in the Schedule to the summons were privileged or confidential to themselves. Part I of the Schedule consisted of four main categories of documents. Each of these main categories was broken down into sub-categories. The four main categories of documents in Part I of the Schedule were:

A.	Documents relating to the will and probate of Ng Tai Mun and the transfer of Ng Tai Mun's shares in the Company to the name of Chan King Sheen ("the Will & Probate Issues")
B.	Documents relating to the transmission and registration of Ng Tai Mun's shares in the Company to the name of Chan King Sheen (the "Registration Issues") (insofar as not already comprised in A. above)
C.	Documents relating to Chan King Sheen as a Petitioner in the Winding-Up Proceedings
D.	Documents relating to Chan King Sheen's termination of her retainer and claim for the provision of documents by K C Tsang & Co.

12. Although there does not seem to have been a formal order permitting the plaintiffs in this action and the two remaining petitioners in the SKI petition to take part in those proceedings it is clear that they did so without objection and with the consent, tacit or otherwise, of the court. On 25 April 2001 there was a hearing before Deputy High Court Judge Muttrie. At that hearing Jones Day appeared on behalf of the 1st plaintiff in this action. The judge's note on that occasion records the solicitor from that firm as saying that he wished to see the evidence filed before deciding whether to file any evidence on behalf of his client. By notice dated 16 November 2001 Jones Day gave notice that it was acting in the proceedings on behalf of the 2nd plaintiff in this action and the two remaining petitioners in the SKI petition. On the same day, Deputy High Court Judge Gill heard submissions not only from counsel on behalf of K C Tsang & Co., who as already noted were named as the defendant, but also on behalf of the two plaintiffs in this action together with the two remaining petitioners, who were named as the "intended defendants".

13. It is clear on reading the transcript of the proceedings on 16 November 2001 before Deputy High Court Judge Gill that counsel appearing on behalf of K C Tsang and counsel appearing on behalf of the "intended defendants" were taking the same stance and were seemingly acting in cooperation. The submissions of both counsel were to the effect that the plaintiff in HCA 994, namely the 1st defendant in the present proceedings, was not entitled to the judgment which was sought for the return of the documents listed in Part I of the Schedule to the interpleader summons because the "intended defendants" were entitled to claim joint privilege and in addition or in alternative, common interest privilege and in addition or in alternative that the documents contained information confidential to their clients. There are a number of passages in the transcript which make that clear and it is also clear that counsel on behalf of the plaintiff, the 1st defendant in this action, replied on all those points. It should be noted that summary judgment was only sought in respect of the documents in Part I of the Schedule. The documents in Part II were not the subject of the application on that day.

14. Deputy High Court Judge Gill analysed the various issues. He considered that the matter was beyond argument in relation to the documents listed under categories A and B in that they related to the will and the transmission of the shares from the 1st defendant's late husband. He considered that the 1st plaintiff in this action was acting as an agent and could not have any claim or right to the documents. Furthermore he said that his claim to common interest privilege failed for the same reasons. In paragraph 44 of its judgment he said:

"44. I turn now to consider the list of documents in the defendant's schedule. It follows from the above that I am disposed to grant the plaintiff her O.14 relief as to the part I documents. Before I do so however, I bear in mind that notwithstanding my ruling that, on the facts, the defendant represented the plaintiff solely on the instructions which led to her being a petitioner in the winding up petition there might be amongst her documents certain information the release of which might breach the new defendants' rights of confidentiality and privilege. However, having reviewed the list (which was prepared not by the plaintiff but by the defendant) I see nothing which on the face of it would prejudice the rights of the new defendants or anyone else if they were to be released to the rightful owner, the plaintiff."

15. Thus, although the judge considered that there was a possibility of privilege or confidential information in relation to the C and D documents, what he held was that such a case had not been made out and that in the absence of it being made out the plaintiff, the 1st defendant in this action, was entitled to judgment. The material part of that judgment was:

"AND UPON hearing Senior Counsel for the Plaintiff, Counsel for the Defendant and Counsel for the Intended Defendants.

IT IS ORDERED that: --

1. Final judgment be entered against the Defendant on the following terms: --

(a)	A mandatory injunction be granted to the Plaintiff against the Defendant to forthwith deliver and/or return to the Plaintiff's documents, records and papers as set out in Part 1 of the Schedule attached to the Defendant's Summons dated 19 April 2001
(b)	An assessment of damages in respect of the Plaintiff's loss and damages.
(c)	Costs (nisi at first instance) of the Plaintiff's Summons dated 20 March 2001 to the plaintiff, to be taxed if not agreed;

2. The Defendant has unconditional leave to defend the proceedings in so far as the Plaintiff's claim relates to the documents referred to in Part II of the Schedule attached to the Defendant's Summons dated 19 April 2001;"

16. The appeals, CACV 4039 of 2001, by the defendant in that action, K C Tsang, and by the so termed "intended defendants" against that judgment were dismissed by order of this court dated 19 July 2002. The same points were taken on behalf of those parties as had been taken in the court below. In giving the judgment of this court, Le Pichon JA said at paragraph 14:

"There is nothing on the face of the interpleader schedule (which after all was a document authored by the defendant,) that could conceivably relate to documents to which any of the intended defendants could assert privilege or confidentiality. ... So far as S T Lee is concerned, the documents in question relate to a period when he was either acting or purporting to act as the plaintiff's agent i.e. prior to the order of 19 December 2000 when the plaintiff was granted leave to withdraw as petitioner in the winding-up proceedings. It is not apparent what interest S T Lee can have in those documents which could defeat or otherwise override that of his principal. Whether or not he had actual authority to act as agent is irrelevant."

17. Later on, referring to an answer given by counsel on behalf of the "intended defendants" as to what right his clients had to the disputed documents, the judgment at paragraph 17 dealt first with the argument as to joint privilege in the following terms:

"So far as the 2nd to 4th intended defendants are concerned, what is being asserted on their behalf appears to be 'common interest privilege or joint privilege' inasmuch as the plaintiff was one of the petitioners until her withdrawal as such on 19 December 2000. But the claim to joint privilege is palpably bad..."

18. Insofar as the matter of common interest privilege was raised that was dealt with in the succeeding paragraphs and at paragraph 18 it is said:

"Ms Eu SC, who appeared for the plaintiff, submitted that no common interest privilege could be invoked by the intended defendants since legal professional privilege cannot be invoked against the party who has a proprietary right in the documents in question. There is a distinction between a right to discovery which is a right to see someone else's documents and a proprietary right which is a right to access documents which are your own. In the latter case, no question of professional privilege arises. See O'Rourke v Darbishire [1920] AC 581, 626-627. That ground alone is sufficient to dispose of the claim of the intended defendants without the need to consider Miss Eu's further submission which, prima facie, appears to have merit, to the effect that common interest privilege is a privilege in relation to a claim by third parties and is not meant to be invoked against the person who is one of the co-parties sharing the same solicitor."

19. Hence, it is quite clear that it was argued on behalf of both the defendant in that action, K C Tsang, and the "intended defendants" that joint privilege and in addition or alternatively common interest privilege existed and that those arguments were rejected. The rejection of those arguments was the basis upon which judgment was given for the plaintiff in that action, the 1st defendant in this action.

20. Insofar as the defendant and the "intended defendants" in the previous action had sought to rely on confidentiality in respect of the contents of any of the documents, they had singularly failed to adduce any evidence in that regard. In that respect all that was said by this court that was in paragraph 17:

"A right to a document and the right to use it in a particular manner are separate and distinct rights. So even assuming that the intended defendants or some of them have a valid basis for objecting to a particular use to which the plaintiff may put the documents, that is a matter for separate injunctive proceedings and cannot of itself disentitle the plaintiff to her own documents."

21. It can only, therefore, be of some surprise that the plaintiffs in this action, who were two of the "intended defendants" in HCA 994, should cause an originating summons to be issued on 27 July 2002 which sought as relief first a declaration that the documents contained in Part I of the Schedule were "privileged and/or confidential and or otherwise of such a nature that the Defendants are not entitled to put them to any use, ...." The second order sought by the originating summons was an order that the defendants in this action should forthwith withdraw their opposition to the release to the plaintiffs of those documents.

22. It is equally incomprehensible how the plaintiffs in this action, having not appealed the order of this court in CACV 4039 of 2001, could seek and then obtain an order from the Court of First Instance that the documents, which had been ordered in the previous action to be released "forthwith" to the plaintiff in HCA 994, the 1st defendant in this action, should remain in the possession of solicitors acting for the defendant in HCA 994 against whom the order had been made. As already referred to, Mr Thomas on behalf of the plaintiffs, was asked on what basis an order preventing implementation of this court's order in CACV 4039 of 2001 could have been made. His only answer, after ample time for reflection over the lunch adjournment, was to refer obliquely to some correspondence between the solicitors. That correspondence is no support for a suggestion that the 1st defendant had waived her rights. All that correspondence showed was that the plaintiff in HCA 994, the 1st defendant in these proceedings, was prepared to wait for delivery of the documents until after disposal of the originating summons.

23. The attempt by the plaintiffs in this action to prevent the 1st defendant from having copies of the documents which this court had ordered should be provided to her "forthwith" was unsupportable. It is an attempt to circumvent the order of this court in CACV 4039 of 2001. It was against the background of threats to obtain ex parte orders, which in itself appears to have been on a contrived basis, that the 1st defendant had been prepared not to take any steps if the order had not been carried out until after disposal of the originating summons for delivery of the documents. But the correspondence is no support for the suggestion that the 1st defendant had in any way agreed to the sort of order which was obtained in the court below in this action. This court had made abundantly clear that that privilege, whether it be joint privilege or common interest privilege could be no bar to the plaintiff in HCA 994 being given her documents. This court had confirmed the order that she should be given them. The attempt to circumvent that order by obtaining an order from a first instance court is wrong in principle and in law.

24. Paragraphs (2) and (3) of the order in the court below give the plaintiffs the right to inspect all the documents listed in the Schedule to identify which documents "privileged" is claimed. As already said, it is quite clear from the judgment of this court in the previous action that no claim for privilege, whether it be joint or common interest, could be made in respect of those documents in Part I of the Schedule. In respect of the documents in categories A and B the position was doubly clear. It was made clear in the judgments, nobody other than the 1st defendant in this action had any right or interest in any documents relating to the 1st defendant's late husband's estate or the transfer of his shares to the 1st defendant.

25. Whether what the plaintiffs have sought to do could be categorised as a collateral attack on the decisions in HCA 994 and CACV 4039 of 2001 or would constitute a matter in respect of which there is issue estoppel is, in my view, a matter of semantics. The fact is that the plaintiffs in the present action were parties who were fully represented in the previous action. They took the points of privilege as a matter of defence to the plaintiff's claim in that action. The points of privilege were decided against them and there was no appeal. In my view, they cannot take the same points again in these proceedings. The matter falls within the way Diplock LJ expressed it in the case of Mills v Cooper [1967] 2 QB 459 at page 468 F:

"The doctrine of issue of estoppel in civil proceedings is of fairly recent and sporadic development, though none the worse for that. Although Hoysted v. Taxation Commissioner did not purport to break new ground, it can be regarded as the starting point of the modern common law doctrine, the application of which to different kinds of civil actions is currently being worked out in the courts. That doctrine, so far as it affects civil proceedings, may be stated thus: a party to civil proceedings is not entitled to make, as against the other party, an assertion, whether of fact or of the legal consequences of facts, the correctness of which is an essential element in his cause of action or defence, if the same assertion was an essential element in his previous cause of action or defence in previous civil proceedings between the same parties or their predecessors in title and was found by a court of competent jurisdiction in such previous civil proceedings to be incorrect, unless further material which is relevant to the correctness or incorrectness of the assertion and could not by a reasonable diligence have been adduced by that party in the previous proceedings has since become available to him."

26. I would only add in this regard, that the order sought and obtained in the court below smacks, on the face of it, of a "fishing expedition". It was not sought on the basis that it could be shown that any of the documents were privileged or contained privileged material. The order reads on the basis that the plaintiffs were hoping that something would turn up and in the meantime they intended to frustrate the order made by this court and the court below.

27. Whilst the order obtained in the court below related to privileged materials, in argument in this court Mr Thomas put emphasis on the question of confidentiality. The matter of confidentiality was raised in the previous action. Both courts held that no case had been made out. Insofar as the passage in paragraph 17 of this court's judgment in CACV 4039 of 2001 leaves open the possibility of proceedings in relation to restricting use of documents because they are confidential, that was clearly on the basis that nothing had been shown to date upon which any such claim could be made. The evidence in these proceedings is certainly no better so far as establishing that the documents contained confidential information than it had been in HCA 994. The 1st plaintiff gave no evidence in this regard at all. If any documents had contained information confidential either to himself or the remaining petitioners in the SKI petition he might be expected to have known about it. The 2nd plaintiff's evidence, insofar as it attempts to deal with the question of confidence, is entirely speculative and does not even attempt to identify any documents let alone precise information which is alleged to be confidential. The founding affidavit in HCA 994 was an affidavit from the plaintiff's solicitor, Ms Lam. That took the matter no further. She only said that "it is suspected that the Documents may include copies of legal advice given on behalf of the Petitioners in relation to the SKI petition generally." (emphasis added) The only other matter to which reference was made was a letter of 14 December 2001 from Messrs Herbert Smith, the solicitors acting on behalf of K C Tsang & Co., which again, makes reference to unspecified documents in Part I of the Schedule containing unspecified confidential information. Whilst that letter is of course exhibited as part of the correspondence it does not form an affidavit in itself and had been before this court in CACV 4039 of 2001.

28. The sum total of what can be relied upon by the plaintiffs as regards confidential information cannot in my view, support any claim for an interlocutory injunction. Indeed, as already pointed out, not only was the injunction granted in the court below directed to privileged information but the whole order was drafted on the basis that the plaintiffs wanted to delve through all the documents which belonged to the 1st defendant in the hope that somewhere or somehow they would be able to come up with something which would give them grounds for an argument. Just as leave to defend in summary judgment proceedings cannot, as Megarry J so clearly put it, be secured on the basis of surmise and Micawberism, so an interlocutory injunction to prevent misuse of confidential information cannot be granted on a undefined, not to say conjectural and hypothetical, basis.

29. No separate evidence has been filed as regards any misconduct or likely misuse of the documents by the 2nd defendant. The 2nd defendant's position is merely as a solicitor. There is nothing in the documents filed which would indicate that the 2nd defendant would misuse any information which came into its possession by using information gained as a result of acting on behalf of the 1st defendant in the purposes of other persons in other proceedings. The action against the 2nd defendant is again, purely speculative. It is founded upon the speculation that the 2nd defendant would misuse documents that came into its possession a professional capacity. There is nothing to support such an allegation. No more need be said about the matter.

Conclusion

30. I have no hesitation in saying that the order of below must be set aside. I would therefore discharge the injunctions granted and make an order nisi that the costs here and below be to the defendants.

Hon Le Pichon JA:

31. I agree.