FACV No.5 & 6 / 2014

IpsofactoJ.com: International Cases [2014] Part 11 Case 6 [CFA]


COURT OF FINAL APPEAL, HKSAR

Coram

Samuel L. Tak

- vs -

Florence C.W. Tsang

CHIEF JUSTICE GEOFFREY MA

JUSTICE R.A.V. RIBEIRO PJ

JUSTICE ROBERT TANG PJ

JUSTICE JOSEPH FOK PN

JUSTICE JAMES SPIGELMAN NPJ

6 NOVEMBER 2014


Judgment

Justice Ribeiro PJ

  1. This appeal concerns an application by a litigant in matrimonial proceedings to be allowed to disclose to the Director of Public Prosecutions (“the DPP”) documents obtained by her on discovery, against objections based on legal professional privilege (“LPP”) raised by the parties who had given the discovery. At the hearing, the Court allowed the appeals by the parties objecting, with reasons to be given later. These are our reasons.

    A. The course of events

  2. Florence Tsang Chiu-wing (“the Wife” or “W”) and Samarthur Li Kin-Kan (“the Husband” or “H”)[1] were married on 8 January 2000. The proceedings with which we are concerned ensued after their marriage broke down in 2008.

  3. Samuel Tak Lee (“STL”) is H’s father and a man of great wealth with vast property holdings. STL assisted H, both financially and by using his business expertise, to acquire a portfolio of valuable real estate developments in Tokyo. The first property, known as the V28 building, was acquired by H on 19 March 1999, funded by a gift of ¥3.6 billion from STL, but the gift was made subject to an agreement referred to below as “the Framework Agreement” which gave STL the option to acquire the shares in the companies holding the property for a nominal sum. The Framework Agreement also required “Special Articles” to be written into the corporate constitutions restricting disposals, borrowings and other dealings with the corporate assets without STL’s prior written consent. Between 1999 and 2008, a total of 13 Tokyo properties were acquired by H with STL’s help.

  4. H and W separated in January 2008 and, on W’s petition, they were divorced with the decree nisi issued on 25 August 2008 and the decree absolute granted on 5 April 2013.

  5. In the ancillary relief proceedings which followed, a major issue between them concerned the extent of H’s assets available for distribution. This raised questions regarding the nature and extent of STL’s interest in the Japanese assets acquired by H.

  6. On 4 November 2009, H and STL executed certain documents prepared by solicitors for STL, purporting to transfer the legal and beneficial interest in the Japanese assets from H to STL which, if valid, would have depleted the matrimonial assets available for distribution in the ancillary relief proceedings. The November 4 transactions were purportedly effected pursuant to the Framework Agreement and a convertible loan agreement dated 9 February 2006 (referred to below as “the 2006 CLA”).

    B. The relevant proceedings below

  7. W, however, alleged that the 2006 CLA was a recent forgery. She instituted proceedings under section 17 of the Matrimonial Proceedings and Property Ordinance[2] to set aside the dispositions effected by the November 4 transactions.

  8. It was in aid of those section 17 proceedings that, on 20 December 2010, W obtained orders for discovery from Saunders J in relation to the November 4 transactions and the 2006 CLA. H and STL resisted disclosure of some of those documents on the basis that they were protected by LPP but, after hearing full argument, Saunders J held that they fell within the rule in Cox and Railton[3] and were therefore not so protected.

  9. The rule in Cox and Railton, as Stephen J put it, is that communications protected by legal professional privilege “cannot include the case of communications, criminal in themselves, or intended to further any criminal purpose”.[4] Explaining the principle that “confidential communications involving fraud are not privileged from disclosure”, Stephen J cited Lord Hatherley in Gartside v Outram[5] who stated:

    The true doctrine is, that there is no confidence as to the disclosure of iniquity. You cannot make me the confidant of a crime or a fraud and be entitled to close up my lips upon any secret which you have the audacity to disclose to me relating to any fraudulent intention on your part; such a confidence cannot exist.

  10. Thus, the documents for which LPP had been claimed by H and STL came into W’s hands as a result of Saunders J’s Cox and Railton ruling, enabling her to use them for the purposes of the section 17 proceedings. On 23 February 2011, the section 17 proceedings (and certain other proceedings) were settled. While not admitting forgery, H and STL essentially capitulated. They did not oppose an order setting aside the documents executed on 4 November as well as the 2006 CLA. W was awarded indemnity costs.

  11. W then applied to Saunders J to be allowed to use the discovered documents at the substantive ancillary relief hearing with a view to contending that the 2006 CLA was a forgery and that H’s reliance on it amounted to “conduct” to be taken into account by the Court in exercising its ancillary relief powers under MPPO section 7. Her application was refused, but Saunders J ruled that:

    .... the conduct of the husband and the father leading to, and including, the execution of the 2006 CLA was relevant to their credibility in the trial of the ancillary relief proceedings and that the husband and the father could be cross-examined on those matters ‘with the usual limitations that are imposed upon cross-examination on credit’.[6]

  12. In what has been referred to as his “Main Judgment” dated 1 December 2011[7], Saunders J made financial provision awards, subsequently varied on appeal, which do not presently concern us.[8] However, despite his earlier ruling limiting the use of the relevant documents to cross-examination as to credit, Saunders J in his judgment:

    .... relied on and drew inferences from contemporaneous documents in Attachment 2 and bundle SP1 in reaching his conclusion on the allegation of forgery . He found on the civil standard of proof that the husband and the father had forged the 2006 CLA which they had then used to attempt to defeat the wife’s claim for ancillary relief. He held that this document, which was dated 9 February 2006, was not signed by them on that day but was executed on a date subsequent to the breakdown in the marriage and was backdated and used as though it were executed on that day. He further held that the husband and the father were likely to have committed perjury in relation to the 2006 CLA in numerous affidavits in the ancillary relief proceedings.[9]

  13. Saunders J held that for the purposes of the ancillary relief proceedings, H and STL were persons whose evidence was not capable of belief. He directed the Registrar to forward a copy of his Main Judgment to the DPP.[10]

  14. Following issue of the Main Judgment, H and STL applied to Saunders J to alter that judgment pursuant to what was called the Barrell jurisdiction whereby the court in exceptional circumstances, may agree to reconsider and reverse its own conclusions before its order is perfected.[11] They applied to the Judge to delete his findings of forgery against H and STL and to rescind his direction that the judgment be forwarded to the DPP. In what has been referred to as his Barrell Judgment,[12] Saunders J refused that application.

  15. In the light of the findings his Lordship had made as to forgery, perverting the course of justice and perjury, the Secretary for Justice (“the SJ”) issued an Originating Summons applying to the Court[13] for the DPP to be given access to the relevant documents in aid of a criminal investigation. On 7 June 2012, on the application of STL and H, Saunders J recused himself from hearing the SJ’s application and the hearing proceeded before Ng J who, on 14 May 2013, granted the SJ access to the documents sought and released W from her implied undertaking in relation to the relevant documents for the purpose of:

    (a)

    disclosing to the [SJ] and the Hong Kong Police such of the Documents as may be required in the course of the criminal investigation, and, specifically, all documents and correspondence relating to the [2006 CLA]; and

    (b)

    discussing [those] documents .... with the [SJ] and the Hong Kong Police in the course of the criminal investigation.

  16. Those orders were stayed pending appeal and on 10 January 2014, the Court of Appeal handed down two judgments, one regarding Saunders J’s ancillary relief orders[14] and the other on the disclosure orders made by Ng J.[15] In the ancillary relief judgment, the Court of Appeal set aside the Judge’s findings on forgery and perjury, holding that they had not been properly made since the documents that he had relied on were not in evidence before him.[16]

  17. Relevantly for present purposes, the Court of Appeal reversed Ng J’s order granting the SJ access to the documents and held that, in respect of documents in respect of which LPP was being claimed by H and STL, the DPP could not simply rely on Saunders J’s Cox and Railton ruling obtained by W, but would himself have to establish the applicability of the rule before he could be granted access to such documents. The question of LPP was accordingly remitted to be decided by a Judge of the Court of First Instance. That order has not been appealed and the remitter will be heard in due course.

  18. However, the Court of Appeal considered W to be in a different position since:

    .... vis-à-vis [W], [H] and STL are bound by the rulings of Saunders J and they could no longer assert any LPP against her in respect of documents disclosed pursuant to the order of Saunders J.[17]

  19. Taking the view

    1. that the public interest in upholding the integrity of the administration of justice was a discretionary factor of great weight;

    2. that release from the undertaking would not deter litigants from giving full and frank discovery since there is “no nexus between the duty to give full and frank discovery and the commission of perjury and using forged documents for the purpose of legal proceedings”; and

    3. that there was no injustice to H and STL since they had fully been able to argue for LPP before Saunders J; the Court of Appeal concluded that the balance overwhelmingly favoured upholding Ng J’s order releasing W from her implied undertaking.[18]

    C. Leave to appeal

  20. The Court of Appeal having refused leave, the Appeal Committee granted leave to appeal confined to the following question:

    Whether the documents in relation to which the [SJ] was granted access and in respect of which [W] was released from her implied undertaking by Order of Ng J dated 14 May 2013, to the extent of the documents for which legal professional privilege is claimed as identified by [H] and STL in affidavits to be filed within 21 days of today pursuant to the direction in paragraph 121(b) of the Court of Appeal’s Disclosure judgment dated 10 January 2014, may be disclosed to the [SJ] in accordance with the Order of Ng J without first determining the question whether they are protected by legal professional privilege.

    D. Determination of this appeal

  21. It was common ground at the hearing that as between W on the one hand and H and STL on the other, LPP could not be asserted in respect of the disputed documents since Saunders J had held that they were not privileged and his Cox and Railton ruling was not subject to any appeal.

  22. However, that did not mean that W was free to use those documents as she wished. It has long been established that a party who obtains documents on discovery gives an implied undertaking to the Court “that he will make use of them only for the purposes of that action, and no other purpose.”[19] In Crest Homes PLC v Marks,[20] Lord Oliver of Aylmerton, speaking in the context of materials obtained by solicitors in Anton Piller raids, explained the scope of the rule in the following terms:

    It is clearly established and has recently been affirmed in this House that a solicitor who, in the course of discovery in an action, obtains possession of copies of documents belonging to his client's adversary gives an implied undertaking to the court not to use that material nor to allow it to be used for any purpose other than the proper conduct of that action on behalf of his client: see Home Office v Harman [1983] 1 AC 280. It must not be used for any ‘collateral or ulterior’ purpose, to use the words of Jenkins J in Alterskye v Scott [1948] 1 All ER 469, approved and adopted by Lord Diplock in Harman's case, at p 302. Thus, for instance, to use a document obtained on discovery in one action as the foundation for a claim in a different and wholly unrelated proceeding would be a clear breach of the implied undertaking: see Riddick v Thames Board Mills Ltd [1977] QB 881. It has recently been held by Scott J in Sybron Corporation v Barclays Bank Plc [1985] Ch 299 – and this must, in my judgment, clearly be right – that the implied undertaking applies not merely to the documents discovered themselves but also to information derived from those documents whether it be embodied in a copy or stored in the mind. But the implied undertaking is one which is given to the court ordering discovery and it is clear and is not disputed by the appellants that it can, in appropriate circumstances, be released or modified by the court.

  23. Where release from the undertaking is sought, it is for the person who obtained the documents “to demonstrate cogent and persuasive reasons why it should be released.”[21] Each case turns on its own facts and no general principle can be formulated beyond stating: “....that the court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery.”[22]

  24. W argued that in the present case, a cogent and persuasive reason to release her from her implied undertaking is the public interest in facilitating the reporting of crime by an alleged victim and the public interest in the proper investigation of suspected crime. Mr Charles Howard QC,[23] submitted that her position was quite separate from that of the SJ so that she should be permitted independently to supply the DPP with the documents and to discuss them with him without further delay. He submitted that the SJ’s application was irrelevant so far as his client’s undertaking was concerned.

  25. We do not accept that the two applications can or should be viewed as wholly separate. They both concern the DPP’s access to documents originating from the same source: from discovery by H and STL. The DPP has had sight of Saunders J’s Main Judgment[24] but he has not got the documents referred to, although some excerpts from them appear in the body of the judgment. The Court of Appeal has held and the DPP rightly recognizes that some of the documents sought are prima facie protected by LPP and that the DPP must therefore bring himself within the Cox and Railton principle at the pending remitter hearing if he is to gain access to them. It makes no difference that the DPP may have read extracts from the documents said to be protected. As Lord Millett pointed out in B v Auckland District Law Society: “.... unless waived ‘once privileged, always privileged’”. [25] Rejecting the Law Society’s metaphor of losing LPP because of “letting the cat out of the bag”, Lord Millett stated:

    .... The policy which protected them from unauthorised disclosure is the same. The cat is still a cat. It can be put back in the bag.”[26]

  26. It is impossible to give proper consideration to the Court’s exercise of discretion regarding release of W from her implied undertaking without taking into account what the effect of doing so would be on H’s and STL’s claim to LPP as against the DPP.

  27. It has repeatedly been stressed that LPP is a fundamental right which the courts will jealously protect. As Lord Hoffmann reiterated in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax:[27]

    .... LPP is a fundamental human right long established in the common law. It is a necessary corollary of the right of any person to obtain skilled advice about the law. Such advice cannot be effectively obtained unless the client is able to put all the facts before the adviser without fear that they may afterwards be disclosed and used to his prejudice. The cases establishing this principle are collected in the speech of Lord Taylor of Gosforth CJ in R v Derby Magistrates' Court, Ex p B [1996] AC 487. It has been held by the European Court of Human Rights to be part of the right of privacy guaranteed by article 8 of the Convention (Campbell v United Kingdom (1992) 15 EHRR 137; Foxley v United Kingdom (2000) 31 EHRR 637) and held by the European Court of Justice to be a part of Community law: A M & S Europe Ltd v Commission of the European Communities (Case 155/79) [1983] QB 878.

  28. In Hong Kong, LPP is constitutionally guaranteed by the confidential legal advice clause in Article 35 of the Basic Law,[28] as this Court noted in Akai Holdings Ltd v Ernst & Young (a Hong Kong firm).[29]

  29. While an exercise of balancing competing interests is required in deciding whether someone should be released from the implied undertaking, it is well established that “LPP does not involve such a balancing of interests. It is absolute and is based not merely upon the general right to privacy but also upon the right of access to justice”.[30]

  30. As between the SJ and H and STL, the issue of whether the documents sought are protected by LPP has not yet been determined. As Viscount Findlay made plain in O’Rourke v Darbishire:[31]

    .... it is not enough to allege fraud. If the communications to the solicitor were for the purpose of obtaining professional advice, there must be, in order to get rid of privilege, not merely an allegation that they were made for the purpose of getting advice for the commission of a fraud, but there must be something to give colour to the charge. The statement must be made in clear and definite terms, and there must further be some prima facie evidence that it has some foundation in fact.

  31. In our view, it would be wrong in principle to release W from her implied undertaking with the consequence of enabling her to provide to the SJ and DPP, documents for which LPP is claimed and not yet ruled upon by the Court. But it is not simply a question of directing W to await the final outcome of the SJ’s application for access to the disputed documents. Of course, if the SJ were to succeed in obtaining access to the same documents as W obtained, no practical difficulty would arise. However, it is plainly possible that the outcome of his pending application might involve the DPP failing to obtain access at all or obtaining a narrower range of documents than those obtained by W. In such a case, it would be highly incongruous for W to be released from her undertaking and thus permitted to provide to the DPP documents which the Court has held were protected as against him by LPP. To allow the Court’s ruling to be side-stepped in this way would be to undermine the Court’s decision and to bring the administration of justice into disrepute.

  32. We should add that although Mr Howard QC submitted that there was nothing objectionable about W supplying the DPP with the documents and discussing them with him whatever the outcome of the pending Cox and Railton application, Mr Keith Yeung SC, the DPP, dissociated himself from that submission. He told the Court that he would have to think long and hard before accepting any documents from W to which the Court had denied him access, but he did not altogether rule out the possibility that he might do so.

  33. In our view, it would not be proper for the DPP to gain access to any documents denied him by the Court by the simple expedient of receiving them from W. There can be no question of releasing W from her implied undertaking to enable her to achieve that purpose. Nor is there any question of the DPP being permitted to make derivative use of documents which are protected by LPP in his hands, the privilege being absolute.

  34. In our view, no cogent argument has been advanced for releasing W from her undertaking at all. Holding W to her undertaking in the present case does not mean that the reporting of an alleged crime will be stifled. The Judge has made such a report by passing a copy of the Main Judgment to the DPP. If and to the extent that the DPP succeeds in bringing the documents concerned within the Cox and Railton rule, there would be no impediment to him using those documents in the criminal investigation. He could discuss them with W without her having to be released from her undertaking. It is appropriate that the availability of such documents for use in a criminal investigation should depend on the DPP establishing his entitlement to such use and not on W being relieved of her implied undertaking, regardless of the outcome of the DPP’s application.

  35. For the foregoing reasons, we allowed the appeal. We make the following orders (those relating to continued stays being made at the parties’ requests), namely:

    1. That the stay imposed by paragraph 9 of the Order of the Appeal Committee dated 23 April 2014 regarding implementation of the directions of the Court of Appeal in paragraph 121 of their judgment in CACV 101 and 107/2013 dated 10 January 2014, be continued until 14 days after the date of the handing down of this judgment or further order, such continued stay to expire unless otherwise directed.

    2. That paragraph 2 of the Order of Ng J dated 14 May 2013 releasing W from her implied undertaking generally and paragraph 2 of the Order of the Court of Appeal in CACV 101/2013 dated 10 January 2014 dismissing the appeal against Ng J’s aforesaid Order be set aside.

    3. That, subject to sub-paragraph (d) below, W be released from her implied undertaking only in respect of those documents obtained by her on discovery other than those referred to in the affidavits claiming LPP filed by H (exhibited as an undated affidavit to the affidavits of Por Keng Guan Catherine dated 14 May 2014 and 26 May 2014); and by STL dated 12 May 2014 (exhibited to the Affidavit of Jamie John Stranger dated 26 May 2014) in accordance with paragraph 1 b. of the Order of the Court of Appeal in CACV 101/2013 dated 10 January 2014 and paragraph 9 of the Order of the Appeal Committee dated 23 April 2014.

    4. That the stay imposed by paragraph 10 of the Order of the Appeal Committee dated 23 April 2014 on implementation of paragraph 2 of Ng J’s aforesaid order in relation to the release of W from her implied undertaking be continued until 14 days after the date of the handing down of this judgment or further order, such continued stay to expire unless otherwise directed.

    5. The stay granted by the Appeal Committee by paragraph 11 of their aforesaid Order dated 23 April 2014 be continued until 14 days after the date of the handing down of this judgment or further order, such continued stay to expire unless otherwise directed.

  36. We make the following order nisi as to costs, namely, That W pay to H and STL :-

    1. the costs of and occasioned by this appeal and by the application for leave to appeal; and

    2. the costs in the Courts below in relation to W’s application to be released from her implied undertaking in respect of documents for which LPP is claimed and which are subject to determination by the Court of First Instance.

    3. That there be no Order as to costs in relation to the SJ.

  37. The parties have liberty to make submissions in writing, within 14 days from the handing down of this judgment, in relation to the terms and implementation of the aforesaid orders. In the absence of any such submissions, the order nisi as to costs shall stand as an order absolute without further direction. In the event that a hearing is required in respect of the aforesaid orders, we direct that such hearing be before a single Permanent Judge.


[1] The parties informed the Court that they have no objection to being referred to by their names. W was referred to below as the 1st defendant or “FTCW”, while H was referred to as the 2nd defendant or “SLKK”. H’s father was referred to as the 3rd defendant or “STL”.

[2] “MPPO” Cap 192. Section 17(1)(b): Where proceedings for relief under any of the relevant provisions of this Ordinance .... are brought by a person .... against any other person ...., the court may, on an application by the applicant- if it is satisfied that the other party has, with the intention [of defeating the claim for financial provision], made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property).

[3] (1884) 14 QBD 153.

[4] At 167.

[5] 26 L J (Ch) 113, cited at (1884) 14 QBD 153, 169.

[6] Court of Appeal Lam VP, Kwan and Barma JJ (ancillary relief judgment) CACV 154 and 166/2012 (10 January 2014), §26, referring to Saunders J, Main Judgment §§76 and 77.

[7] Saunders J, Main Judgment, HCMC 5/2008 (1 December 2011).

[8] We were informed that applications for leave to appeal to this Court are pending.

[9] Court of Appeal (ancillary relief judgment) §27, referring to Saunders J, Main Judgment §§87, 90-127, 130-33, 136 and 137.

[10] Saunders J, Main Judgment, §514.

[11] Referring to Re Barrell Enterprises [1972] 3 All ER 631; considered in Stewart v Engel [2000] 3 All ER 518; and applied in Hong Kong Sun Jianqiang v Trans-Island Limousine Service Ltd [2004] 1 HKC 533.

[12] Saunders J, Barrell Judgment, HCMC 5/2008 (6 July 2012) §§37-92.

[13] HCMP No 188 of 2012.

[14] Lam VP, Kwan and Barma JJ, CACV 154 & 166/2012 (10 January 2014).

[15] Lam VP, Kwan and Barma JJ, CACV 101 & 107/2013 (10 January 2014).

[16] At §§71-77.

[17] CACV 101 & 107/2013 (10 January 2014), §139.

[18] Ibid, §§141-146.

[19] Riddick v Thames Board Mills Ltd [1977] QB 881 at 896.

[20] [1987] 1 AC 829 at 853-854.

[21] Ibid at 859.

[22] Ibid at 860.

[23] Appearing with Ms Lorinda Lau for W.

[24] We were informed that a challenge has been mounted to the correctness of an un-redacted version having been provided to the DPP.

[25] [2003] 2 AC 736 at §44.

[26] Ibid at §69.

[27] [2003] 1 AC 563 at §7.

[28] Basic Law Article 35: “Hong Kong residents shall have the right to confidential legal advice, access to the courts, choice of lawyers for timely protection of their lawful rights and interests or for representation in the courts, and to judicial remedies. ....”

[29] [2009] 12 HKCFA 649 at §67.

[30] Lord Hoffmann in R (Morgan Grenfell & Co Ltd) at §16, citing R v Derby Magistrates' Court, Ex p B [1996] AC 487. See also Lord Millett in B v Auckland District Law Society [2003] 2 AC 736 at §§48 and 50, referring also to New Zealand and Australian authority: R v Uljee [1982] 1 NZLR 561, 576; and Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 at 128.

[31] [1920] AC 581 at 604.


Representations

Edward Fitzgerald QC, Peter Duncan SC and Derek C.L. Chan, instructed by Stephenson Harwood for the appellants in FACV 5/2014 (3rd and 4th defendants).

Collingwood Thompson QC, Russell Coleman SC and Jeremy S.K. Chan, instructed by Stevenson, Wong & Co., for the appellant in FACV 6/2014 (2nd defendant).

Charles Howard QC and Lorinda Lau, instructed by Florence Tsang & Co. for the 1st respondent in FACV5/2014, 2nd respondent in FACV 6/2014 (1st defendant).

Keith Yeung SC, DPP, and Derek Wong, SPP, of Department of Justice for the 2nd respondent in FACV5/2014, 1st respondent in FACV 6/2014 (plaintiff).


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