Hong Kong Court revisits principles of release from the implied undertaking

Background

The Plaintiffs were successful in obtaining multiple urgent interlocutory injunctions and disclosure orders in the Court of First Instance against the Defendant (as a former senior officer) for misuse and misappropriation of the Plaintiffs’ confidential information and trade secrets in August and October 2023.

In compliance with the disclosure orders, the Defendant delivered to us work laptops and USB sticks containing such confidential information and trade secrets, and filed affirmations accordingly.

It is accepted law that a party who has obtained documents on discovery gives an implied undertaking to the court that he or she will make use of them only for the purpose of that action and not for any other purpose. The Plaintiffs intend to bring satellite proceedings in Hong Kong and the PRC against the Defendant and/or other third parties, and documents produced pursuant to the disclosure orders will be critical in facilitating these proceedings. The Plaintiffs thereby sought leave for release from the implied undertaking in December 2023 (“Leave Application”). 

Legal principles revisited

At §§29-34 of the decision, the Court revisited the legal principles on release from the implied undertaking which are summarised below:-

• It is for the person obtaining the documents to demonstrate cogent and persuasive reasons why it should be released.
• The court will not release the implied undertaking, save in special circumstances and where the release will not occasion injustice to the person giving discovery.
• Relevant factors to be considered by the court include:
  (a) the nature of the documents
  (b) the nature of the information
  (c) the nature of the proposed collateral use
  (c) any prejudice the author of the document may sustain
  (d) the likely contribution of the document to achieving justice in the second proceedings
  (e) (where applicable) the seriousness of the fraud involved, and public interests in the prosecution of such serious fraud
• If the collateral use is in aid of satellite criminal proceedings, the Court would also consider the following:-
  (i) (for local proceedings) whether the release from implied undertaking is a method of bypassing the privilege against self-incrimination (“PSI”)
  (ii) (for proceedings abroad) whether it would subject the disclosing party to an unfair disadvantage in those proceedings abroad
  (iii) whether there is prima facie evidence of fraud, embezzlement or perjury etc.
• Overall, it is a balancing exercise for the Court to achieve justice on the basis of all circumstances of the case.

Having considered the evidence of the Plaintiffs’ civil case against the Defendant for breach of his contractual and fiduciary duties, prima facie evidence on the Plaintiffs’ criminal case against the Defendant in Hong Kong, expert evidence on the PRC civil and criminal law and the overall justice, the Court was satisfied that there were cogent, persuasive reasons and special circumstances in this case, justifying the release of the Plaintiffs’ implied undertaking.

PSI as a ground of opposition

The Defendant opposed the Leave Application mainly on the ground that allowing the application would infringe the Defendant’s PSI.

According to the Defendant’s submission in reliance on Lim Suk Ling Priscilla v Amber Compounding Pharmacy Pte Ltd [2020] SGCA 76, whether the PSI is compromised once the potentially incriminating document is produced depends upon the objective circumstances of the case. In the circumstances of this case, the Defendant contended that it was not too late for him to claim PSI on documents produced pursuant to the disclosure orders in opposition to the Leave Application.

The Court distinguished the facts in the Lim Suk Ling Priscilla case. In that case, the plaintiff’s conduct and submissions in support of the applications were found to be misleading because the plaintiff represented to the defendants that the documents seized would be returned to the defendants without any further use or retention of copies. Such peculiar features were not present in the present case.

The Court considered itself to be bound by the Court of Appeal’s decision in SJ v FTCW [2014] 1 HKLRD 849 that PSI must be claimed at the time of the disclosure and cannot be claimed thereafter. As the Defendant had never claimed PSI at the time of making disclosures, it could not be claimed retrospectively and thus, the Court rejected PSI as a ground to resist the Leave Application. 

Commentary

The decision provides a helpful overview of the legal principles set out in several authorities, including raising PSI as a basis to oppose a release application.

From a practical perspective, this decision demonstrates the care which parties should take in producing potentially self-incriminating documents, even under compulsion of court orders. As the Court noted, if one does not have sufficient time to prepare his or her claim for PSI before making potentially incriminating disclosures, he or she should make an urgent time extension application to the court for considering PSI. The consequence of a delay in asserting PSI over a document produced is likely to be that one will no longer able to raise PSI to resist an application for release from the implied undertaking over that particular document.

For further information, please contact Daniel Ng or your usual Norton Rose Fulbright contacts.