RICH IDEA INTERNATIONAL INVESTMENT CO. LTD. v. LAW MAN CHAK

IN THE COURT OF APPEAL

1995, No. 93
(Civil)

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J U D G M E N T

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Litton, V.-P.:

1. This is an interlocutory appeal.

2. The appellant is the defendant in an action commenced by writ issued in August last year. The appeal relates to one paragraph in an affirmation filed by the plaintiff in support of an Order 14 summons for summary judgment.

3. The defendant, it seems, wanted the offending paragraph - para 23 of Mr Cheung Sing Yeung's affirmation - to be struck out. Mr Cheung Sing Yeung is the plaintiff's managing director. The defendant took out a summons under Order 41 rule 6 of the Rules of the Supreme Court which, on its face, asked for the whole of Mr Cheung's affirmation to be struck out under that order and rule. The Master refused the application. She was upheld in her decision by Sears J. So the matter comes before us, nearly eight months after the application for summary judgment was first taken out. That application has yet to be heard.

History of litigation to-date

4. Briefly the history of the litigation leading up to this appeal is as follows. On 8 August 1994 the plaintiff commenced proceedings against the defendant, seeking repayment of a sum of $1.05m and damages. The cause of action arises from alleged breaches by the defendant of an agreement whereby the defendant was engaged by the plaintiff to arrange and promote a hot air balloon festival in Shanghai. This was to serve as part of the promotion activity for an international film festival to be held this year. The $1.05m claim in the writ represented the total of fees paid by the plaintiff the consideration for which has, as the plaintiff alleges, totally failed.

5. On 12 October 1994 the plaintiff took out the O14 summons which was to be heard on 21 November. This was supported by Mr Cheung's affirmation in which he related at length the history of the preparations for the hot air balloon festival and the total failure of performance on the defendant's part. Mr Cheung exhibited a letter dated 28 May 1994 marked "CSY-5" in which the defendant asked for the discharge of the agreement and promised to return the fees before 8 June 1994. There was however doubt as to the authenticity of that letter and the defendant's denials in that regard have been exhibited in the plaintiff's affirmation. Then comes para 23 of the affirmation which is the subject-matter of the present appeal.

6. Paragraph 23 reads:

"On or about 6th July 1994 the Plaintiff received a letter dated 4th July 1994 (hereinafter referred to as the "July letter") from the Defendant who admitted his liability under the 2nd Agreement and promised to return the said sum of $1,050,000.00 to the Plaintiff. Further the Defendant stated in the July letter that because of his extreme financial hardship, he could only repay the said sum by 4 instalments from 1994 to 1997. I considered the proposed instalment payments was a joke and therefore did not respond to the July letter nor did I ask Eric Ng or other staff of the Plaintiff to take follow up action. There is now produced and shown to be me marked 'CSY-9', a copy of the July letter dated 4th July 1994 together with English translation."

7. The Order 14 summons was, as I have mentioned, due to be heard on 21 November 1994. On 11 November 1994 the defendant took out his summons under O41 r6 asking that the whole of Mr Cheung's affirmation be struck out. This was supported by an affirmation of Mr Simon Kit Man Lo, the defendant's solicitor who says:

"3. I am duly authorized by the Defendant to depose this affirmation in support of the application herein to strike out the said Affirmation. [The said Affirmation is Mr Cheung's affirmation of 12 October 1994.]

4. I further crave leave to refer to paragraph 23 of the said Affirmation and the letter dated 4th July 1994 referred thereto as the exhibit marked 'CSY-9'. I am informed by the Defendant and verily believe that the alleged letter was not written or sent out by the Defendant or with his permission. Indeed, the alleged letter purported to be part of a negotiation for settlement out of Court. I submit that in the circumstances, the content of paragraph 23 and the alleged letter in any event are not admissible evidence; further or alternatively, the materials contained therein are irrelevant or oppressive.

5. In the premises, I respectful pray this Honourable Court to grant an order in terms of the Summons herein."

8. It is curious that at that stage the defendant was content to make the allegation in effect of forgery through the mouth of his solicitor. On what basis the solicitor deposed as to his belief is not clear: except perhaps that he thought his client an honourable man.

9. On 14 January 1995, two days before the defendant's summons was due to be heard by the Master, the defendant himself lodged an affirmation in para 2 of which he says:

"2. I am advised by my solicitors that even if the July letter was written and issued with my authority, it was in any event an attempt to compromise with a view to avoiding litigation and to reach a settlement out of court and that the July letter was plainly inadmissible in evidence. I am told by my solicitor that it was under those circumstances, an affidavit has been filed on my behalf."

10. He then goes on in paragraph 3 to say:

"3. For avoidance of doubt, I reiterate that the July letter was not written or sent out with my authority at all. I verily believe the letter is a forged document."

11. The defendant then goes on to explain how a person called Ms Lai had obtained from him blank letter papers of his company "Jade Creations Production Company" endorsed with his signature and stamped with the Company's chop. He seems to suggest in his affirmation that the July letter was fabricated by somebody else by using such a blank letter form previously signed and chopped by him.

The defendant's complaint

12. We are not concerned in this court with whether the defendant's suspicions are well-founded or not. Nor was Sears J. On the defendant's own admission exhibit "CSY-9" bears his signature and is on its face an admission of liability to the plaintiff for $1.05m. There is, on the other hand, the defendant's denial of its authenticity. Mr Hung, counsel for the defendant, complains that para 23 of Mr Cheung's affirmation will prejudice the fair determination of the Order 14 proceedings. This is unfounded. We cannot pre-empt the Master's exercise of judgment in the Order 14 proceedings (which are still to be heard). How he will deal with the defendant's denial of authenticity is a matter for him.

"Without prejudice"

13. In this court counsel for the defendant submits that we should treat exhibit "CSY-9" as if it had been in effect marked "without prejudice" and constituted a communication from the defendant to the plaintiff made in the course of negotiations to compromise the defendant's liability to the plaintiff. As such, he says, the letter is not admissible in evidence, and he cites authority in support of the proposition that public policy requires that communications made in the course of negotiations should be protected from disclosure. This is all very interesting, but the argument is advanced against the thrust of the defendant's own case made on affidavit that he never communicated with the plaintiff at all.

14. There are, as I see it, two matters raised by counsel: (1) The authenticity of "CSY-9" and (2) if authentic, whether the communication was nevertheless inadmissible in evidence because it was made by the defendant to the plaintiff without prejudice.

15. As to (1) this is not something that can be finally resolved on affidavit. As to (2) if "CSY-9" be held indeed to be authentic, it would seem on its face to be an open communication and as such would constitute an admission of liability; but it is no part of the court's function to formally so rule at this stage.

Conclusion

16. It should be recalled that an affirmation or part of an affirmation can only be struck out under O41 r6 if it is "scandalous, irrelevant or otherwise oppressive".

17. In my judgment the defendant has made out no case for para 23 of Mr Cheung's affirmation to be struck out and I would dismiss this appeal.

Godfrey, J.A. :

18. I agree.

19. On an application under O41, r.6, the court has a "complete discretion" whether or not to strike out from an affirmation references to communications made "without prejudice" and therefore inadmissible in evidence : see In re J. [1960]1 WLR 253 (especially at p.257). The issue of admissibility can be raised at the substantive hearing of the matter and dealt with then, as it was in Chocoladefabriken Lindt & Sprungli A.G. and Another v. The Nestlé Co. Ltd. [1978] RPC 287. We were pressed with this case in argument, but it does no more than to affirm the general rule that the court will refuse to admit evidence of communications made "without prejudice". The present case is covered by what Cozens-Hardy M.R. said in In re Jessopp [1910] WN 128 :

"For many purposes letters written without prejudice might be read, and the proper time for objecting that they were inadmissible in evidence was when the summons came on for hearing when all the facts were before the Court. It would be a very bad example to decide the question of admissibility at this preliminary stage."

Sears J. was therefore wrong to rule the evidence "admissible" here, as he did; he should simply have refused to accede to the appellant's application under O41, r.6, which was misconceived. But it makes no difference; this appeal must anyway be dismissed.

Liu, J.A.:

20. In its clear terms, the letter of 4 July 1994 has not otherwise been shown to be one written without prejudice. I also agree that this appeal should be dismissed.