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02 July 2019
In A Law Firm v Au,(1) the High Court allowed the plaintiff's application for an order that (among other things) the first defendant and a representative of the second defendant attend a court hearing to be cross-examined on affirmations made by them in the proceedings. The court also ordered that both defendants produce to the plaintiff a settlement agreement (suitably redacted to mask irrelevant parts) arising out of underlying proceedings involving the defendants. The fact of a settlement had been referred to by (or on behalf of) the defendants in some of their affirmations. While the cross-examination of a deponent on an affidavit or affirmation (a sworn or affirmed statement) prior to trial and the early disclosure of a confidential settlement agreement are not the norm, these can be ordered where a court considers that they are necessary and there is good reason to do so on the facts. The case is a timely reminder of the seriousness of making affidavits or affirmations and of the need to be mindful of the documents to which they refer.
The plaintiff (a law firm) had previously acted for the two defendants in some interesting litigation that eventually appears to have settled. However, the plaintiff later had to sue the defendants for outstanding legal fees. The plaintiff eventually obtained judgments against both defendants and the second defendant (a company) appears to have paid up. For good measure, the plaintiff appears to have obtained a Mareva (freezing) order against the first defendant restraining him from disposing of certain assets up to certain amount.
Having obtained judgment, the plaintiff sought to enforce it by (among other things) a charging order over the first defendant's alleged interest in funds in the second defendant's bank accounts (with a particular bank) and in shares of the second defendant. At the same time, the second defendant sought to vary the Mareva injunction. Both matters were due to be heard together at the same hearing (the combined hearing).
The plaintiff argued that in the underlying proceedings the defendants (which it had at one time represented) had filed certain affirmations confirming (among other things) that the first defendant had a beneficial interest in the funds in the second defendant's bank accounts and in the shares of the second defendant. However, in the proceedings between the plaintiff and the defendants, and in the course of attempting to discharge the injunction, it appears that the first defendant's position began to change and that he called into question his interest in the funds and in the shares.
An issue arose as to whether this change of position was the result of (for example) a genuine change of circumstances or more to do with an alleged attempt to hinder the plaintiff's enforcement of its judgment. Therefore, the plaintiff sought an order for cross-examination of the first defendant and a representative of the second defendant with respect to certain affirmations made by them, in which they had allegedly put in issue the first defendant's interest in the funds or the shares or both.
The plaintiff also applied for production of a settlement agreement apparently arising out of the underlying proceedings.(2) Both deponents had made a reference to the fact of a settlement in some of their affirmations but not to a settlement agreement itself. There appears to have been little doubt that a settlement agreement existed in the underlying proceedings. The settlement agreement is stated to have contributed to the discharge by consent of one of the injunctions in the underlying proceedings. On one view, it appears that the settlement may have called into question the first defendant's interest (or lack of it) in the shares of the second defendant.
Order for cross-examination
In a robust judgment, the court ordered that both deponents (of the respective sworn statements in issue) attend before the court at the combined hearing to be cross-examined. Referring to relevant legal authorities, the court acknowledged that such cross-examination was not the norm and was not an entitlement. However, where good reason could be shown the court had an unfettered discretion to permit cross-examination of a deponent on a sworn statement. Good reason did not include an attempt to simply discredit a deponent or a witness before trial. Where the cross-examination was sought with respect to obtaining a final court order (as opposed to an interlocutory one) the court was more likely to exercise its discretion to allow cross-examination.
In this case, the plaintiff's application for a charging order (to be heard at the combined hearing) was, in effect, an application for a final order – it would determine the first defendant's interest in the second defendant and in the funds in the bank accounts. Therefore, an order for cross-examination was justified on the basis that it should yield a productive outcome in the context of the proceedings as a whole.
Production of settlement agreement
The court also ordered that the defendants produce the settlement agreement to the plaintiff. The court acknowledged that in their affirmations the deponents had not made a direct reference to the agreement itself – however, something less than a direct reference could justify an order for production depending on the facts. According to the court, the deponents had made more than a passing reference to the settlement and in doing so had relied on it in evidence. The settlement was also relevant to the issues to be determined at the combined hearing (including, the first defendant's interest in the second defendant) and production was necessary and justified according to the overriding test – namely, to dispose of the proceedings fairly.
An order for production of the settlement agreement did not infringe on the confidentiality or the without prejudice nature of any settlement communications in the underlying proceedings. Further, confidentiality was (of itself) no bar to an order for production or disclosure because an order of the court could override confidentiality. Those parts of the settlement agreement that were irrelevant to the issue of the first defendant's interest in the bank accounts or the shares could be redacted in accordance with the usual practice with which practitioners should be familiar.
Therefore, in large part, the plaintiff's applications were successful.
The case is a useful illustration of the importance of sworn statements in civil litigation in Hong Kong. Affidavits and affirmations are common in interlocutory proceedings. Inconsistencies in such statements can cause difficulties later on where those inconsistencies cannot be explained by a credible change of circumstances – in hard-fought or complex litigation, this sometimes occurs years later (when recollections might fade) and can give an opponent an important tactical initiative. Where a deponent is evasive as to the issues in dispute this only adds to the problem.
There is also the point that material inconsistencies or evasiveness can adversely affect a party's credibility before the court and one sometimes detects an element of judicial 'reverse engineering' – for example, once a party's credibility is successfully called into question an order for cross-examination of a deponent (and the like) is less objectionable.
The case is, perhaps, also a salutary reminder of the need to review a sworn statement carefully for inadvertent references to documents that might justify an application by an opponent for early disclosure or production – such a review should be done before the statement is served. What constitutes a 'reference' is fact specific but would usually include a deponent or a maker of a statement referring to a document in order to place reliance on it.
For further information on this topic please contact Antony Sassi or Warren Ganesh at RPC by telephone (+852 2216 7000) or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.
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