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17 July 2020 | by LexisNexis Hong Kong

Introduction

In Poon v Poon [2019] HKCFI 3003, the defendant applied to have certain paragraphs of the plaintiff’s witness statements (the “WP Paragraphs”) and certain items of disclosure in the plaintiff’s List of Documents (the “WP Documents”) to be excluded or expunged on the basis that they were subject to without prejudice privilege and was therefore inadmissible.

Facts

This was a family dispute case between two brothers with regards to the estate of their deceased father, Poon Nuen (the “Father”) who passed away in 2016. At the time of his death, the father jointly held two bank accounts in his name and the name of the defendant. In this action, both parties agreed that the money in the bank accounts included the proceeds of the sale of a property that was previously held in the father’s name (the “Sale Proceeds”).

Upon the father’s death, the plaintiff claimed the monies in the bank accounts were his. In contrast, the defendant apparently claimed the sale proceeds in the bank accounts were gifted to him by the father. There were six siblings in the family (including the plaintiff and defendant).

Before the commencement of litigation by the plaintiff in December 2016, there were several discussions and meetings between the siblings that lasted a few months. The conversations and meetings discussed on the settlement and distribution of the monies in the bank accounts were referred in WP Paragraphs and WP Documents.

The relevant discussions and meetings referred from WP Paragraphs and WP Documents include:

  • telephone conversations between the defendant and some of the siblings between September and October 2016, which the defendant had put forwarded proposals for a settlement;
  • two meetings later held between some of the siblings on 17 and 31 October 2016 where the conversations were carried out, attempting to resolve their disputes; and
  • after the two meetings, certain communications (including WhatsApp messages) between the siblings regarding the proposals for the distribution of the sale proceeds by way of a Draft Settlement Agreement.

The plaintiff secretly recorded the communications during the two meetings and sought to admit those as evidence. The plaintiff argued that the without prejudice exclusionary rule did not apply to the defendant and the defendant showed inconsistencies between his position during the negotiations and the plaintiff’s contentions in the legal proceedings. In response, the defendant applied to the court to exclude the disputed paragraphs from WP Paragraphs and to expunge certain items from WP Documents as the discussions referred to in the WP Paragraphs and the WP Documents were bona fide attempts to settle the dispute and subject to without prejudice privilege.

The Law

It was set out in Re Jinro (HK) International Ltd on what constitutes without prejudice privileged negotiations for settlement.

  1. A party claiming without prejudice privilege on communication would have to show that the communication was made:
    1. at a time when there was an existing dispute between the parties;
    2. legal proceedings in relation to the dispute had commenced or were contemplated;
    3. the communication was made in a genuine attempt to further negotiations to settle the dispute; and
    4. the communication was made with the intention that, if negotiations failed, it could not be disclosed without the consent of the parties.
  2. It was unnecessary for a “without prejudice” stamp to be expressly applied to the negotiations if it was clear from the surrounding circumstances that the parties were genuinely seeking to compromise the dispute.

The court cited various case principles regarding communications aimed at settlement may be indications of intentions that the negotiations should be conducted without prejudice unless the court concludes that the conversations were in fact intended to be open. The standard for determining whether communications were indeed an attempt to settle disputes was to be assessed by an objective standard.

If certain conversations and negotiations were deemed to be caught by without prejudice privilege, then the court could exclude or expunge evidence, which is inadmissible.

Judgment

It was not difficult for the court in finding that the disputed paragraphs in WP Paragraphs were without prejudice communications. That being said, the witness statements were inadmissible and should be excluded.

During the earlier telephone communications, it was clear for the court to ascertain that there were existing disputes between the parties regarding the Sale Proceeds with the bona fide attempt to settle. Further, the parties contemplated or might reasonably have contemplated that legal proceedings would follow if they could not come to an agreement. Given the existing circumstances, the court held that the communications had been intended to be without prejudice due to the encouraged negotiations for settlement relating to the Sale Proceeds.

The court also held that the two meetings were without prejudice communications. It did not matter whether the parties were unable to reach a compromise, it was sufficient that the parties sought to negotiate for a settlement.

Further, referring to Unilever Plc v Proctor & Gamble Co, the court held that in an attempt by the plaintiff to cherry pick certain extracts from the meetings and suggested that they were not part of the negotiations, was “futile”. Rather, the court would treat the discussions to be completely protected. This would include a mixture of statements of different natures, including confident assertions of party’s case or statements, which might in itself be characterized as threats.  The underlying rationale for this privilege was to give protection to the parties to speak with freedom during negotiations.

Also, the fact that the defendant had not expressly stated that the meetings were without prejudice was immaterial, as the court was concerned with the substance of the conversations. Therefore, the relevant passages in WP Paragraphs referring to the meetings were inadmissible. The references to transcripts or recordings of the two meetings in WP Documents should be excluded.

The parties’ communications and negotiations (including WhatsApp messages and the circulation of a draft settlement agreement) fell within the without prejudice rule because they were part of the continuation of the conversations from the earlier meetings.

Alternatively, the plaintiff argued that the defendants should lose their privilege on the grounds that the statements made in the discussions of their meetings, were inconsistent, compared to his pleaded case in formal proceedings. Arguing, the privilege was being used as a cloak for perjury.

The court, following the principle in Savings & Investment Bank v Finken, held that the plaintiff did not prevail for his mere complaint on the defendant in respect of acting improperly for seeking without prejudice privilege and said a party would only lose their privilege where there was a clear evidence for a party in attempting to act improperly or abuse the privilege.

This was not the case between the parties in these circumstances as minimal inconsistent discussions during negotiations compared to subsequent formal proceedings did not establish that a party was abusing the without prejudice privilege.


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