CHOW HOW YEEN MARGARET AND OTHERS v. WEX PHARMACEUTICALS INC. AND ANOTHER

bjbj HCA 537/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 537 OF 2013 ____________ BETWEEN CHOW HOW YEEN MARGARET 1st Plaintiff GAO CHENG (XIE LI) COMPANY LIMITED 2nd Plaintiff MUSCULAR INVESTMENT COMPANY LIMITED 3rd Plaintiff and WEX PHARMACEUTICALS INC. 1st Defendant WEX MEDICAL LIMITED 2nd Defendant and FRANK HAY KONG SHUM 1st Third Party GRACE WAI LAN LEONG 2nd Third Party ____________ Before: Hon Au-Yeung J in Court Date of Hearing: 27 September 2016 Date of Decision: 28 September 2016 _____________ D E C I S I O N _____________ The application Shortly after each of the two third parties (Grace and Shum, respectively) has filed a witness statement, the defendants withdrew the third party proceedings against them. The plaintiffs now seek discovery of documents, agreements, correspondence or communications which led to Grace and Shum agreeing to become defence witnesses and/or discontinuance of the third party proceedings against them. Procedural history The third party notice dated 12 February 2014 (subsequently amended) was served on Grace in about 2014. She made a witness statement for the defendants in December 2014. Proceedings were discontinued against her a month later. In respect of Shum, attempts have been made to effect service out of jurisdiction on him. It was not until March 2016 that he was served with the third party notice. By the time of the pre-trial review on 13 June 2016, his witness statement was still in draft form. The third party proceedings against him were discontinued on 28 June 2016 and his witness statement was served on the plaintiffs on 5 July 2016. By a letter dated 15 September 2016, the defendants solicitors informed the plaintiffs solicitors that the terms of discontinuance of the third party proceedings were that: Grace and Shum would be compensated for their legal costs incurred therein in return for their undertaking to cooperate as witnesses for the defendants. (ii) In giving their evidence, the only payments they are entitled to are reimbursement of travel and in the case of Shum, accommodation costs when attending trial. At the hearing, Mr Carolan, counsel for the defendants, also confirmed that the written agreements between the defendants and Grace/Shum have set out all the terms of the agreement(s) to cooperate as witnesses. The plaintiffs are still concerned to know what, if any, were the consequences of Grace and Shum not cooperating or not attending trial. The defendants refused to provide the discovery. They claimed that the discovery was covered by litigation privilege and is confidential. Disclosure was also not necessary. The defendants are only willing to disclose the agreements for the sight of the court but not of the plaintiffs. Mr Carolan described this application as a fishing expedition. Legal principles Discovery solely for the purpose of impeaching the credit of witnesses is generally not permitted as it does not relate to a matter in question: Hong Kong Civil Procedure 2016, Vol 1, 24/8/2. However, payment of a not insubstantial sum to a non-expert witness is a matter that the trial judge should be aware of before he was to make findings on the credibility of the witnesses. This may or may not affect his assessment but clearly it was a relevant factor to be considered by him. A solicitor who is faced with a request by a non-expert witness to be reimbursed for the loss of income for attendance in court must inform him that the reimbursement is subject to the approval of the court and must disclose this fact to the court before the witness gives evidence. Kwan Yim Kwan Peggy v Namkung Promotions (Worldwide) Ltd [2007] 3 HKC 314, Cheung JA, at 10 and 12. Mr Remedios, counsel for the plaintiffs, relies on a case of the US District Court of New York for the proposition that where the discontinuance of any action is used as a means of securing witnesses testimony, the matter should be brought to the attention of the court: State v Solvent Chemical Company, Inc 166 FRD 284, pages 5-7. The rationale behind appears to be directed at maintaining the integrity of the adversarial process. The New York authority is not binding on this court, especially since this court has not been informed about its system of discovery. Application of the legal principles The present discovery fell within the principle of discovery for the purpose of impeaching credit. However, Peggy Kwan has laid down an exception to this principle. I am of the view that the test for discovery is not whether a witness has been paid any money or whether the amount was substantial. The pertinent question to ask is whether any benefit was promised or given to him to secure his cooperation as a witness or whether any sanction would be imposed if he breaches his promise to give evidence. The rationale is to maintain the integrity of the litigation process, so as to ensure that witnesses do give evidence truthfully and voluntarily without fear of retaliation by the party who called him. In the present case, the cause of action is based on fraudulent misrepresentation by the defendants, of which Shum was the main protagonist on their side. He was the President, CEO and director of D1 until 2005 and was removed as a director in January 2006. He was also the chairman and director of D2 until December 2005. Grace was his assistant and employee of D2 until her employment was terminated in 2006. If the matters alleged against him were established, the defendants may be liable. The defendants had no knowledge as to whether or not the fraudulent misrepresentation was made and in any event had not authorized the same. The matters happened over 10 years ago. It would be fair to say that without the evidence of Grace and Shum, the defendants (with it new management since Shum left) may have an uphill fight. Grace and Shum were not nominal third parties. Damages may be recovered against them. They had a stake in seeing that the defendants would not lose in this case. Discontinuance of proceedings in exchange for cooperation as witnesses is in itself a benefit in kind to the witnesses, in terms of their being spared from potential civil liability for contribution and indemnity, and costs of litigation. There was payment of money in the form of reimbursement of legal costs incurred and accommodation or travel expenses in this case, the amount of which is unknown. What conditions or undertakings were imposed by the defendants on the witnesses are also unknown. All of these may affect the integrity of the litigation process. All of these are, in turn, relevant to the assessment of the credibility of Grace and Shum by the trial judge. There is no litigation privilege as the agreements between the defendants and the witnesses would not be communication for the purpose of seeking legal advice or communication made in contemplation of litigation. In any case, the privilege would have been lost since the defendants have referred to the contents of the agreements. I am of the view that the defendants should make discovery as sought. In terms of scope of discovery, the use of the word documents in the plaintiffs request is too vague and would have been covered by other classes of documents in the same request. That word can be removed. As for communications , I specify that to be communications that are recorded in audio record or written form . I reserve the question of costs till the end of the trial. 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