KENSINGTON INTERNATIONAL LTD v. ICS SECRETARIES LTD

cacv 296/2007 AND CACV 297/2007

CACV 296/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 296 of 2007

(on appeal from HCMP NO. 2261 of 2006)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  These were appeals from orders made by Deputy High Court Judge Carlson on 30 June and 8 August 2007.  The orders were made in two actions both of which had been commenced by originating summons.  On the first occasion the judge held that the applicant had been in breach of an order of the court of 16 November 2006.  On the second occasion the judge made orders dismissing both actions, ordering that the respondent should not be required to comply with the judge’s own order of 31 May 2007, made in the second of the two actions.  He further made an order that “The Applicant be prohibited from making any fresh Norwich Pharmacal applications against the Respondent or the Interveners”.  There was also an order for costs.

2.  On this appeal the applicant was represented but there was no representation from any of the other parties because of agreements which had been reached.  This appeal was, nonetheless, not a purely academic matter, if for no other reason, the applicant had an order outstanding against it preventing it making any new applications.  At the conclusion of the hearing of these appeals it was indicated that they would be allowed with reasons to be given in writing, which we now do.

Background

3.  The background to this matter was set out in the judgment of the judge below dated 31 May 2007.  At the time of the issue of the first originating summons the applicant was a judgment creditor of the Republic of Congo (hereinafter referred to as “the Congo”) for amounts, with interest, in the order of between US$95 and 100 million.  There were 4 judgments that had been obtained between December 2002 and January 2003 in the Commercial Court in London.  There had been no less than 11 separate sets of proceedings brought by the applicant in New York, London, Brussels, Geneva and Bermuda in order to enforce those judgments.  These had taken different forms, appropriate to the particular jurisdictions, against a variety of respondents said to be involved in assisting the Congo to avoid the consequences of the judgments against it.  Those proceedings included asset freezing orders and proceedings in the nature of garnishee proceedings in London, Brussels and Bermuda and a “Rico” action in the United States.

4.  In one such case after a trial in London, Cooke J said in the course of his judgment that the Congo had engaged in a complex scheme to sell its oil with the deliberate object of evading enforcement of its existing liabilities by hiding its assets from view and that those involved on behalf of the Congo in creating and masterminding the scheme had acted dishonestly, creating and using sham companies and transactions which were mere ‘facades’ to avoid enforcement of existing liabilities.

5.  As the judge recorded, Morison and Tomlinson JJs, also in the Commercial Court in London, made similar findings against the Congo, as did Graham J in the Grand Court of the Cayman Islands, as did the Court of Appeal in Paris.

6.  The applicant came to know that there were companies being operated in Hong Kong in respect of which there were strong grounds to believe that they too were part of the web of companies which was being used to hide the assets which should have been used to discharge the judgment debts.  It was in those circumstances that the first originating summons came to be issued.  The day prior to the issue of that summons the applicant applied ex parte for an order for disclosure.  It is unnecessary to set out the full terms of that order.  It suffices to say that it required the respondent to reveal documents the nature of which had been demonstrated by the applicant’s evidence as being likely to exist and being relevant to their pursuit of the unpaid judgment debts.  The orders included a provision that the respondent should have its costs paid on an indemnity basis.  It is necessary to set out one paragraph in the order because its import has been misunderstood thereafter.  Paragraph 4 of the order of 2 November read:

“ The Applicant do have leave to use information and documents obtained as a result of this order for the purpose of :-

(a)    actual or contemplated proceedings against Cotrade Asia, HVL, OIL, PIL or any other connected to Congo in Hong Kong, England and Wales and elsewhere;

(b)   enforcement in Hong Kong, England and Wales and elsewhere of the balance of the judgment debts due under the English Commercial Court Judgments entered against Congo on 20th December 2002 in claim number 1088, 21st January 2003 in claim number 1281, 21st January 2003 in claim number 1282 and 28th January 2003 in claim number 1357; and

(c)    investigating, commencing and or pursuing proceedings whether in Hong Kong, England and Wales or elsewhere against persons or entities implicated in any wrongdoing by such information or documents.”

7.  Objection was then taken by the respondent after service of the proceedings that two of its companies which were not connected with the Congo had been included in the order.  There was an application to vary the order of the 2 November 2006 which was heard on 16 November 2006.  Apart from the exclusion of the two companies which were referred to in the order of 16 November 2006 as “A company” and “B company” and there was a change in the wording of paragraph 4(a) to exclude reference to those two companies and to change the wording to “…any other entity the Applicant contends is an emanation of the Congolese state”, the order for disclosure remained the same.  The respondent was given its costs again on an indemnity basis.  In my view that change of wording was undesirable in that it made the order less precise and, to an extent, it rendered the meaning obscure.  The new wording introduced an element of subjective intent on the part of the applicant whereas the original wording was at least not ambivalent.  In addition, paragraph 4(c) of the order of 2 November was deleted.  It is not possible at this stage to discern any rational reason why paragraph 4(c) was deleted.  It would seem that the wording of paragraph 4(c) of the original order reflected precisely the reason for making it.

8.  I would simply mention that the order of 2 November is not in the court file but a photocopy of the sealed order is in the correspondence bundle.  The original order together with court copy of the originating summons was in a sealed envelope.  There are various typed notices on the court file indicating that the file should not be inspected by third parties.  Orders may be set aside or varied but history cannot be rewritten and one of the facets of open justice must be that a proper record of court proceedings must remain.  Furthermore, until varied, set aside or spent, an order remains effective.  There can be no justification for sealing up the originating summons.

9.  I would add that although the application made on 16 November was an application to vary the original order it was unlikely that there would or could be any further proceedings in that action since the court had made an order for disclosure of documents and had made orders for payment of costs which could not conceivably be any more favourable to the respondent.  There was no further relief sought on the originating summons that was not finally granted by the order of 16 November other than that relating to the 2 companies, which seemingly have not featured in these proceeding since then.  In those circumstances, those proceedings were at an end.  That is exemplified by the fact that no further steps were taken, no pleadings were filed and no directions were given until the events in June 2007 detailed below.

10.  As a result of the disclosure consequent upon the orders made in November the applicant considered it necessary to ask for further disclosure.  It was for that reason that a further originating summons was issued on 22 December 2006.  Then on 27 December 2006 an order was made on the application of the respondent and various parties named in the originating summons.  Leave was granted for those named parties to intervene in the proceedings.  A further order was made on that occasion that any affidavits in opposition to the originating summons should be filed within 21 days from the date of that hearing.  The applicant was then given seven days to reply.  The originating summons was adjourned to a date to be fixed before the judge in accordance with the availability of counsel.

11.  The originating summons was heard on 28 May 2007.  All parties including the named interveners were represented.  The first 4named interveners had clearly been represented for 5 months and they elected not to file evidence, instead they adopted a “neutral” stance when the matter was heard.  The fifth and sixth interveners did, however, file evidence.  The judge made an order for disclosure of documents.  The order also included at paragraph 3 an order in terms which was almost identical to paragraph 4 of the order of 2 November save that subparagraph (a) included reference to all the interveners.  That order was drawn up and entered on the 12 June 2007.

12.  During the hearing on 28 May the applicant’s solicitor referred to and read out in court some of the documents which had been disclosed pursuant to the order of 16 November.  Since the hearing on 28 May had been open to the public, the applicant’s legal advisers considered that they were entitled in law to use those documents as they wished as they were no longer the subject of any restrictions.  The documents were passed to an NGO which was concerned with the maintenance of ethical standards.  The contents of the documents were posted on the NGO’s website.  The applicant’s purpose was no doubt to force the persons who had assisted the Congo in evading its debts to have to justify their actions publicly, since it would appear that no amount of enforcement proceedings was likely to bring the desired satisfaction of the judgment debts.  The judge below accepted that there had been legal advice on the matter which was supported by a judgment of Langley J given on 30 October 2006 in the Commercial Court in London in related litigation.  In that case the judge had referred to the rules in the CPR which correspond to Order 24 rule 14A of the Rules of the High Court and said, in my view correctly, that the general restriction on the use of information obtained from disclosed documents does not apply once the disclosed documents have been read to or by the court or referred to at a public hearing.

13.  Despite these matters being drawn to the judge’s attention, the judge came to the conclusion in his judgment of 30 June 2007 that the applicant had been in breach of the order of 16 November.  The matter then came back before the judge on 27 July 2007 at which point the judge had before him and not only the judgment of Langley J but also a judgment of Stanley Burnton J given on 13 July 2007.  That latter judgment had been in respect of an application by two of the interveners in the Hong Kong action to restrain Global Witness Ltd from allowing the material to be displayed on its website.  Stanley Burnton J acknowledged that comity required him to treat judgments and orders of the Hong Kong courts with due respect and even deference.  That I might say he did.  Nevertheless, he felt constrained to say at paragraph 29:

“It is not for me to say whether the Hong Kong judgment of 30 June 2007 and the order of 6 July 2007 are correct as a matter of Hong Kong law.  I can say that the issues addressed in the judgment of 30 June 2007 would, in my judgment, have been decided differently under our law.  The terms of Order 24 rule 14A of the Rules of the High Court of Hong Kong, set out below, are identical to the same rule in our old Rules of the Supreme Court…… Judge Carlson held that Order 24 rule 14A did not apply to the Norwich Pharmacal orders made by the court in Hong Kong.  In fact, there was no express restriction on Kensington contained in those orders.  It seems to me that leave was given to it to use the documents and information for identified purposes by way of exception to the normal implied undertaking.  More importantly perhaps, in my judgment, the Judge’s approach to the issue raised concerning the conduct of the Claimants arguably shown by the documents would not be that of an English court, for reasons that appear below.”

14.  The reasons which were “referred to below” were that the particular documents, unless explained, frankly suggested that the claimants were “unsavoury or corrupt ”.  As the judgment went on, it was pointed out that once there was good reason to doubt the propriety of the financial affairs of a public official, there was a public interest in those affairs being open to public scrutiny.  Furthermore as a general principle courts will not enforce an obligation of confidentiality in relation to material that is alleged to show misconduct: see paragraph 52 of Stanley Burnton J’s judgment.

15.  Despite the careful and clear judgment of Stanley Burnton J, the judge below made the orders which have been referred to at the beginning of this judgment.  Before dealing with other matters, I would say at once that it is quite clear that in relation to the second originating summons the proceedings had already been concluded by the judgment of 31 May 2007 and the sealing and filing of the order on 12 June.  It was simply not open to the judge to dismiss those proceedings.  As already indicated the same is true in respect of the first originating summons.  I consider that the judge was wrong to say in paragraph 21 of the judgment of 31 May that the applicant should have restored the first originating summons for a further order to be made.  There was no further order to be obtained under the first originating summons and A company and B company did not feature in the second originating summons.

16.  The question then arises as to whether, even if a party had been in breach of an order, or indeed contempt, it was appropriate to make an order that the action be dismissed.  That is not something which this court has ever come across whether in the reports or in practice and counsel was unable to direct our attention to any authority that such a course had been taken.  The court has adequate powers to deal with contempt, other than by making orders which give carte blanche to those who have been demonstrated to be unsavoury and corrupt to continue their activities unhindered by legal proceedings.

17.  The next most obvious point was that the order made prohibiting the applicant from making any fresh Norwich Pharmacal applications against the respondent or the interveners would appear to be an extraordinary order.  I do not consider that the court has the power to make such an order.  It is an order which bars the party from bringing such proceedings in any circumstances whatever.  Even when a restricted application order is made in respect of vexatious litigants it is always subject to the vexatious litigant being able to apply for leave to bring new proceedings.  These are, however, side issues.  The applicant brought this appeal because there was no basis for the judge to have held that the applicant had been in breach of the order of 16 November.

18.  The judge had interpreted his own order of 16 November as restricting the use to which the information which would be revealed to that which fell within paragraph 3 of the order.  Whereas the reasoning of the judge in paragraphs 12 and 13 of the judgment of 30 June, which interprets a positive leave granted by the court as a negative restriction, is simply a distortion of language and thus a clear error, it is also, in my view, important to consider the issue from a fundamental point of view.  Unless otherwise said, what is contained in the following paragraphs relates to Norwich Pharmacal actions where the relevant order is made inter partes.  I will not be dealing with types of ex parte order, such as Anton Piller orders, which can be made based on the Norwich Pharmacal cause of action, except where it is specifically stated.

19.  The order of 16 November was a Norwich Pharmacal order pure and simple.  Although the order of 2 November had been granted ex parte, the order made on 16 November was made inter partes.  As already pointed out, that was the final order made in that case and there was never going to be any further proceedings in that action because the whole of the relief sought in the originating summons had been granted.  It is necessary to appreciate the basis of the Norwich Pharmacal orders.

20.  The obtaining of Norwich Pharmacal relief is a matter of enforcing a duty owed by a person who, wittingly or unwittingly, has become involved in a wrong against the person seeking the order to the extent that he has facilitated the wrongdoing.  The basis of the jurisdiction was considered by the House of Lords in Norwich Pharmacal Co. v Customs & Excise Commissioners [1974] AC 133.   Lord Reid described it thus at page 175B-E:

“They seem to me to point to a very reasonable principle that if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers.  I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did.  It may be that if this causes him expense the person seeking the information ought to reimburse him. But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration.

I am the more inclined to reach this result because it is clear that if the person mixed up in the affair has to any extent incurred any liability to the person wronged, he must make full disclosure even though the person wronged has no intention of proceeding against him.  It would I think be quite illogical to make his obligation to disclose the identity of the real offenders depend on whether or not he has himself incurred some minor liability.  I would therefore hold that the respondents must disclose the information now sought unless there is some consideration of public policy which prevents that.”

21.  The Norwich Pharmacal case was an intellectual property case: it related to infringement of a patent.  Many of the succeeding cases have been intellectual property cases.  However, the principle has been applied to many other types of situations.  Whereas it is sometimes suggested that the right of the applicant, or plaintiff, is to names and addresses, it is clear that it is not so limited.  If the plaintiff establishes that it is a defendant’s duty to provide the information, it can be “full information” as was said by Lord Reid.  Certainly in the more than 30 years since the decision of the House of Lords there have been many cases where the information sought and ordered to be given was more than mere names and addresses.  The information has been sought and the courts have accepted that the information could be sought on the grounds that it would be used for many other purposes than the bringing of a civil claim within the court’s jurisdiction.  Those purposes have included the bringing of criminal prosecutions both within the jurisdiction and outside, as well as using the information as a basis for dismissing an erring employee.

22.  Whereas those who are erudite in the intricacies of legal history will be cognisant of the distinction between a bill of discovery and a bill of relief in the courts of Chancery prior to the reforms in the second half of the 19^th century in England, such intricacies are of no more than a matter of historical curiosity and interest.  The fact remains that relief by way of a Norwich Pharmacal order is something which a party may claim provided the basis can be established.  The party that proves a right to the information without claiming any other substantive relief generally has to pay the costs, as Lord Reid said.  As any other equitable relief it is discretionary, but that discretion is exercised on settled principles.

23.  Discovery as part of an action gives no right to a party to use documents disclosed other than for the purposes of the action in which discovery is given.  The question has been raised as to whether there is any restriction on the use of the information supplied by a Norwich Pharmacal order.  As indicated above, the very purpose of Norwich Pharmacal orders is that the information will be used to protect the plaintiff in respect of the wrongs that it has suffered.  The way in which the plaintiff might seek to protect itself in respect of relevant wrongs varies.  Indeed, in so far as the information has been used as evidence in criminal proceedings, it might legitimately be said that any use goes beyond the protection of the plaintiff’s rights.  One of the more obvious uses of the information is to pass it on to investigators both within and beyond the jurisdiction, so that suppliers and dealers in offending articles may be stopped.

24.  It took some time after the Norwich Pharmacal decision in the House of Lords for the use of the principles established to become of frequent recourse.  It was not until the decision in RCA Corporation and others v Reddingtons Rare Records, [1974] 1 WLR 1445 that it was established that interlocutory relief on the basis of the Norwich Pharmacal principle could be ordered, for example, on motion.

25.  Because of the difficulty in dealing with infringers who were likely to destroy evidence, the relief began to be sought ex parte as opposed to inter partes.  But even that was soon found to be insufficient to ensure that relevant documents and information were not destroyed before the order could be complied with.  It was thus that orders were developed that combined Norwich Pharmcal relief with an ex parte mandatory injunction requiring the defendant to permit entry to its premises.  This form of order was eventually sanctioned by the Court of Appeal in Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55.  That has often been described by the often used and abused expression Draconian.  The reason for that is that the Anton Piller form of order is tantamount to a search warrant granted ex parte.  That is very different from an inter partes Norwich Pharmacal order.

26.  Since more often than not the defendant in such an action was an infringer rather than somebody who had merely facilitated an infringement, it became the practice to include provisions to the effect that:  “The plaintiff may use the information obtained as a result of this order in any manner that should be required whether within the jurisdiction or beyond the jurisdiction for the protection or better protection of the rights of the plaintiff the subject of this action” in order to make clear that the order had been obtained as part of Norwich Pharmacal relief as opposed to early discovery under the provisions of Order 24 of the Rules of the High Court in order to preserve evidence.

27.  After a time it began to be recognised that there might be a problem that an order for compulsory disclosure of information might infringe a litigant’s right of silence in respect of any criminal liability on the litigant’s part.  That matter was relevant in the case of Rank Film Distributors Ltd. and others v Video Information Centre (a firm) and others [1982] AC 380.  In that case the House of Lords had to consider whether an order could be made that would entail the defendant revealing that it had infringed copyright and, thus, committed a criminal offence as well as a civil wrong.  The answer was that such an order could not be made and that it was not sufficient for there to be any order or undertaking that the information disclosed would not be used in a criminal prosecution because that would not bind a prosecutor.  The situation is now regulated by statute.  In that case it was not suggested that there was any limitation on the use of the material that was disclosed as a result of the order.

28.  Naturally the use of any information is subject to the law generally, for example the laws of libel and those relating to the misuse of confidential information belonging to another party.  Other than that, once a party has a final order by which information is passed over, there is no reason why that information cannot be used.  The only case in which it has been suggested that there may be a limitation on the use of material revealed in pursuance of a Norwich Pharmacal order or in which it was suggested that there might be some restriction flowing from the order itself was Ashworth Hospital Authority v MGN Ltd [2002] UKHL 29.  In that case the House of Lords considered whether it was appropriate for an order to be made when the information was likely to be used to take disciplinary action against an errant employee as opposed to civil proceedings.  It was held that it was not a necessary precondition of the exercise of the jurisdiction that the applicant should have begun, or had an intention to begin, legal proceedings in respect of the allegedly wrongful act.  Lord Woolf CJ in referring to that aspect said at paragraph 60 of his speech:

“However, this concern will be met if an order for disclosure is not made unless a claimant has identified clearly the wrongdoing on which he relies in general terms and identifies the purposes for which the disclosure will be used when it is made.  The use of the material will then be restricted expressly or implicitly to the disclosed purposes unless and until the court permits it to be used for another purpose.”

29.  That statement was made in answer to a subsidiary argument raised by the party required to give disclosure namely, that there would be no means of the court protecting him against misuse of the material disclosed.  Whereas, of course, in interlocutory matters the court will be concerned to limit any possible misuse of material disclosed lest it should transpire that an order never should have been made, once information is passed pursuant to a final order, it is information in the possession of the plaintiff.  It is difficult to see how there could be any implicit restriction which would amount to little short of an injunction.  If a court wishes to impose a restriction on a party it must do so in clear and explicit terms.  Furthermore as Browne-Wilkinson J (as he then was) pointed out in Sony Corporation v Anand [1981] FSR 398, one of the purposes of an Anton Piller order (it might be noted that it is was not merely a Norwich Pharmacal order) is, self-evidently, to obtain information from the defendant upon which claims can be pursued against other parties.  In that case, there were more correctly two cases, the respective plaintiffs sought the leave of the court to use the information obtained on an Anton Piller order against the suppliers of the infringing goods in Hong Kong and Taiwan.   Browne-Wilkinson J held that the application for leave to use the information had been unnecessary as, although there was no specific reference to other proceedings in the order, even use in foreign proceedings was a natural way of a plaintiff protecting its rights which were the subject of the action.

30.  Turning to the present case, as already indicated, the statement of permission to use the material obtained was just that.  In my view it was unnecessary but it is a form of order that has been in common use since orders based on the Norwich Pharmacal principle have been granted.  Its purpose is to make clear beyond doubt that the order was based on the Norwich Pharmacal principle.  As a matter of linguistic construction I fail to see how it can be said that a positive permission can be construed as a negative restriction.  In the present case there is a further reason why the positive permission should not be construed as a negative injunction preventing the plaintiff doing anything other than that which came within paragraph 3 of the order of 16 November.  As already indicated, paragraph 4(c) of the order of 2 November was removed when the order of 16 November was made.  If it be right to say that anything done outside the purview of paragraph 3 of the order of 16 November would be a breach of the order, then “investigating, commencing or pursuing proceedings whether in Hong Kong, England and Wales or elsewhere against persons or entities implicated in any wrongdoing by such documents” would likewise constitute a breach of the order.  If that be right, the order itself would be stultified.

31.  There is a further reason why the applicant’s action in revealing the contents of the documents to the NGO should not be regarded as something which the court should not permit.  That reason was explained by Stanley Burnton J in paragraph 52 of his judgment.

32.  It is right to say, however, that Mr Fok SC put his argument on the basis that he accepted that there was an implied undertaking.  The parameters of that undertaking were not defined.  As I have endeavoured to explain, it is my view that the suggestion that there should be an implied undertaking results from a confusion between the discovery orders which are granted because a defendant has come under a duty as described in the Norwich Pharmacal case in distinction to the very different form of discovery namely that in the course of an action which is governed by Order 24 of the Rules of the High Court.

33.  Be that as it may, it is clear that the restrictions on the use of disclosed material cannot be any more stringent in respect of material disclosed as a result of a Norwich Pharmacal order than they are in respect of discovery given under Order 24.  As Mr Fok pointed out, is quite clear that once a document has been read out or referred to in court or read by the court in preparation for the hearing any undertaking not to use the document for a collateral purpose terminates and it is permissible to use the document for any purpose.  To hold otherwise would mean that the successful applicant for the Norwich Pharmacal order would be the only person who could not use the documents.  The law, and in particular the law of confidential information, does not go so far.  Since the only documents provided to the NGO were those referred to in the hearing on 28 May, there was for that reason also no breach of the order of 16 November.  No doubt this judgment would have been a great deal shorter had it been confined to that simple point but for the reasons which I have endeavoured to explain, there are other and more fundamental reasons why what has been done in this case does not constitute a breach of the order.

34.  Whilst it can be appreciated that those involved in providing secretarial services in Hong Kong would wish to maintain the confidentiality of their clients, there are limits beyond which that cannot happen.  It remains, however, that the criticisms which have levelled against the applicant and its legal advisers was wrong and unjustified.

Hon Le Pichon JA:

35.  I agree.

Hon Barma J:

36.  I agree that the appeal should be allowed for the reasons given in paragraphs 32 and 33 of the judgment of Rogers VP.  I also agree with his observations in paragraphs 15 to 18 of his judgment.  However, although I see the force of the points made by Rogers VP as to whether or not documents or information supplied to a party under a final Norwich Pharmacal order are subject to any restriction on use by way of implied undertaking as this point was not relied upon by Mr Fok, and thus has not been full argument on it, I would, for my part, prefer to leave the point open for further argument when the occasion arises.