2010/4/25
中 信 求 取 回 受 保 護 文
件
( 星 島 日 報 報 道 ) 中 信 泰 富 （ 267 ） 正 式 向 高 等 法 院 提
出 ， 商 業 罪 案 調 查 科 應 將 受 法 律 保 護 的 文 件 歸 還 公 司 。 中 信 泰 富 去 年 四 月 遭 警 方 商 業 罪 案 調
查 科 到 其 總 部 調 查 ， 搜 走 大 批 公 司 文 件 、 電 腦 及 伺 服 器 檔 案 等 ， 事 隔 一 年 後 入 稟 高 院 尋 求 指
示 ， 要 求 取 回 該 公 司 屬 法 律 專 業 特 權 保 護 的 文 件 。
原 訴 中 信 泰 富 有 限 公
司 ， 昨 日 入 稟 控 告 律 政 司 司 長 及 警 務 處 處 長 ， 主 要 針 對 去 年 四 月 三 日 警 務 處 處 長 根 據 《 警 務
條 例 》 第 五 十 條 （ 七 ） 發 出 的 二 十 四 張 由 裁 判 官 簽 署 的 手 令 。
入 稟 狀 中 指 ， 去 年 四
月 三 日 警 員 根 據 手 令 上 門 檢 走 該 些 文 件 ， 原 訴 要 求 法 庭 決 定 是 否 屬 法 律 專 業 特 權 （ Legal Professional Privilege ） ， 若 法 庭 裁 定 不 屬 法 律 專 業 特 權 ， 警 方 及 律 政 司 是 否 可 按
手 令 有 查 封 文 件 權 力 ， 若 屬 法 律 專 業 特 權 ， 對 方 有 否 權 力 繼 續 保 留 。 另 外 原 訴 要 求 警 方 退 回
所 有 屬 法 律 專 業 特 權 的 文 件 以 及 無 合 法 查 封 權 而 不 屬 法 律 專 業 特 權 的 文 件 。
○ 八 年 中 信 泰 富 買 入
澳 元 的 外 匯 累 計 票 據 （ Accumulator ） ， 並 因 看 錯 市 而 勁 蝕 一 百 五 十 五 億 元 ， 導 致 母 公 司 北 京 中
信 集 團 要 出 手 相 救 ， 而 中 信 泰 富 管 理 層 亦 大 執 位 。 去 年 四 月 商 業 罪 案 調 查 科 高 調 搜 查 中 信 泰
富 總 部 ， 帶 走 大 批 公 司 文 件 、 電 腦 和 伺 服 器 檔 案 ， 以 調 查 是 否 涉 及 違 規 和 欺 詐 ， 成 為 近 年 藍
籌 股 之 中 罕 有 遭 商 業 罪 案 調 查 科 搜 查 個 案 。
中 信 泰 富 日 前 表 示 ，
商 罪 科 調 查 有 關 外 匯 合 約 一 事 ， 從 該 公 司 總 部 取 走 大 量 文 件 ， 當 中 差 不 多 記 錄 該 公 司 由 成 立
至 今 的 全 部 資 料 。
中 信 泰 富 為 此 成 立 一
個 由 新 加 入 董 事 會 的 董 事 所 組 成 的 特 別 委 員 會 ， 負 責 處 理 有 關 調 查 的 事 宜 ， 並 於 去 年 五 月 開
始 ， 投 入 大 量 人 力 物 力 ， 來 區 分 甚 麼 資 料 享 有 法 律 專 業 保 密 權 ， 亦 將 商 罪 科 搜 查 令 所 涵 蓋 與
不 涵 蓋 的 資 料 進 行 分 類 ， 而 至 今 警 方 並 沒 有 對 該 公 司 作 出 任 何 檢 控 或 拘 捕 。 中 信 泰 富 表 明 為
了 股 東 最 佳 利 益 ， 希 望 調 查 盡 早 結 束 。
案 件 編 號 ： 高 院 雜 項
七 六 七 — — 二 ○ 一 ○ 。
失去法律專業保密權？
案情
2008年9月7日，香港上市公司中信泰富有限公司（「中信泰富」）發現，公司在全球金融海嘯後面臨外匯虧損風險。《上市規則》第13.09條規定，上市公司「須在合理地切實可行的情況下盡快」公布預期會對其股價有重大影響的消息，因此中信泰富於2008年10月20日發出盈利警告，表示預計虧損近150億港元。盈利警告發出後，中信泰富的股價急跌超過一半，並且被傳媒批評延遲了6星期才發出盈利警告。證券及期貨事務監察委員會（「證監會」）就中信泰富延遲發出盈利警告展開調查，並向中信泰富發出通知，要求提交所有與證監會的調查有關的紀錄。提交給證監會的部分文件，載有中信泰富的律師提供的法律意見。2009年3月，警方亦對中信泰富展開刑事調查。不久，中信泰富得悉證監會把載有法律意見的文件轉交律政司，而警方亦希望就其刑事調查工作查閱該等文件。中信泰富入稟原訟法庭，請求：(1) 基於法律專業保密權（「保密權」）頒令交還該等文件，確認中信泰富僅就證監會的調查放棄保密權，律政司司長並無合法權力繼續管有該等文件，及 (2) 假如律政司司長是合法管有該等文件，則宣布該等文件僅可用於就證監會的調查提供法律意見，律政司司長無權向任何第三方透露該等文件。
韋毅志法官駁回中信泰富的請求，理由如下。第一，中信泰富向證監會交出該等文件時，已完全放棄保密權，因此他無須裁定「局部放棄」的概念是否適用於香港。第二，法官信納，表面證據顯示該等文件是為了達致詐騙計劃而產生的；由於詐騙是保密權的例外情況，該等文件從未享有保密權。
29/03/2012 08:41
中信泰富（００２６７）０８年金融海嘯炒燶外匯損手近１５０億元，證監會及警方相繼介入調查，引發中信向證監提交的公司文件，能否轉交警方跟進調查的法律爭拗。中信上訴獲判其中６份文件涉法律專業保密權，不可轉交警方查閱。
原訟庭去年３月判決中信於０８年底向證監提交的大批公司文件，其中６件文件因有表面證據可能涉及詐騙，因而失去專業保密權。中信申請該批已轉交律政司的文件退回，或只限律政司向證監會提供法律意見用途敗訴。
上訴庭法官則認同中信當日提交文件，放棄專業保密權的基礎是只供證監調查而不涉其他用途。由於尋求法律意見是證監調查的重要部分，證監可將相關文件轉交律政司。至於其他用途（包括供警方進行刑事調查），則中信仍保留專業保密權。《香港經濟日報》
Messrs, ONC
上訴法庭的決定
上訴法庭一致裁定中信泰富上訴得直，並裁定：(i) 中信泰富只是為了令證監會能夠進行調查而放棄該等文件的保密權；(ii) 證監會只可為了徵詢法律意見而非其他目的，將該等文件交給律政司司長；(iii) 中信泰富就所有其他人士及目的保留該等文件的保密權。
香港是否承認局部放棄
法律專業保密權？
上訴庭重申，法律專業保密權背後的信念，是確保律師與客戶之間就法律意見或訴訟事宜（不論正在或考慮進行）的真誠溝通得以保密。如果享有文件保密權的人自願向特定人士披露該文件，則是向該特定人士放棄該文件的保密權。中信泰富向證監會放棄了該等文件的保密權，令證監會能夠調查中信泰富延遲發出盈利警告之事，包括由證監會人員搜證、分析證據及徵詢法律意見。中信泰富已失去對證監會的保密權，不能收回。
上訴法庭討論了關於局部放棄保密權的重要英國案例，並援引B and Others v Auckland District Law Society and another [2003] 2 AC
736一案，指出如果文件只是為了有限目的而披露，便不是向所有人放棄該文件的保密權。據此，局部放棄保密權的概念納入為香港法律的一部分。
上訴法庭進一步承認，保密權是《基本法》保障的基本人權，不應以公眾利益（例如逮捕及檢控罪犯）為理由而被凌駕。因此無論在民事或刑事程序中，除非有證據顯示享有保密權的人是有意地放棄保密權，或者享有保密權的通訊本身是進行詐騙的途徑，否則保密權不得被剝奪。
中信泰富是局部還是完全
放棄了法律專業保密權？
承認「局部放棄」的概念後，法院便要審視中信泰富向證監會交出文件的情況，以判斷中信泰富是否僅就證監會的調查放棄該等文件的保密權。
中信泰富交出首五份文件時，被證監會問及是否已放棄該等文件的所有保密權，中信泰富的律師在2008年11月26日回信表示，中信泰富僅同意就證監會的調查放棄該等文件的保密權（「11月26日的信件」）。而中信泰富向證監會交出其餘保密權文件時，是基於2009年2月達成的協議，其中證監會同意，中信泰富僅為了證監會的調查而局部放棄所交出文件的保密權。
上訴法庭不同意原訟法官指11月26日的信件是中信泰富發現警方對其展開調查後，用來奪回部分保密權的策略。
證據顯示，中信泰富在2008年10月向證監會提供文件時，並沒料到警方會對公司展開刑事調查。據中信泰富董事的理解，證監會的調查屬監管性質，即針對中信泰富沒有依照《上市規則》的規定公布股價敏感資料。事實上，證監會曾於2009年3月致函中信泰富，詢問是否同意就警方的調查放棄該等文件的保密權，當時中信泰富已拒絕就該目的而容許查閱文件。
法院考慮到不能輕率地推斷當事人已完全放棄保密權，而現有的證據亦不足以顯示中信泰富完全放棄了保密權，因此裁斷，中信泰富僅就證監會的調查放棄該等文件的保密權，並無就其他目的放棄該等文件的保密權。
法律專業保密權的
詐騙例外規定是否適用？
關於中信泰富聲稱享有保密權的文件是否為了促成或達致中信泰富主腦的串謀詐騙而設，上訴法庭不同意原訟法官的觀點，並裁定涉及犯罪／詐騙的情況不可享有法律專業保密權的規定，並不適用於本案。
原訟法官相信以下兩件事情構成串謀詐騙的表面證據：中信泰富在發現面臨外匯虧損風險後至發出盈利警告前的期間刊登了一份公告，表示中信泰富並不知悉公司的財務交易狀況有任何重大不利變更，並借入了三筆銀行貸款。法官認為，兩件事情顯示中信泰富的董事蓄意隱瞞公司的真實財務狀況。
上訴法庭不同意原訟法官的裁斷。中信泰富在發現面臨財務風險時，距離修改公告的限期只有兩日，因此並無足夠時間修改公告內容。加上中信泰富在關鍵時間的財務狀況仍屬穩健，要中信泰富準確預測虧損程度、對公司的影響，從而修改公告內容相當困難。此外，法院並無收到關於銀行貸款詳情及如何取得貸款的充分證據。貸款一事未能構成表面證據，證明中信貸泰富的高層不誠實地隱瞞事實。
上訴法庭亦不同意原訟法官認為該等文件是為了促成或達致串謀詐騙而產生的。沒有足夠證據顯示中信泰富徴詢及索取法律意見背後的目的是詐騙。該等文件載有給予該公司而非個別一群董事的法律意見，就如何應對監管行動以最有效地保障公司利益提出建議。有關法律意見的內容性質廣泛，而且是持續提供的意見，在全體董事會議上經過不同背景和專業的董事仔細討論。
總結
上訴法庭在此案中澄清了法律專業保密權在香港的適用範圍。局部放棄法律專業保密權的概念獲法院承認，將會為客戶與律師之間的溝通提供更大保障。
CACV 60/2011
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 60 OF 2011
(ON APPEAL FROM HCMP NO. 767 OF 2010)
________________________
BETWEEN
CITIC PACIFIC LIMITED Plaintiff
And
SECRETARY FOR JUSTICE 1st Defendant
COMMISSIONER OF POLICE 2nd Defendant
________________________
Before: Hon Hartmann JA, Kwan JA and Harris
J in Court
Dates of Hearing: 6 and 7, 15 and16
December 2011
Date of Handing Down Judgment: 28 March
2012
________________________
J U D G M E N T
________________________
Hon Hartmann JA:
Introduction
1.
In September 2008, as a financial crisis enveloped the world’s markets,
the appellant (‘Citic’), a company listed on the Hong Kong Stock Exchange, found
itself dangerously exposed to fluctuations in the foreign exchange
markets. Over the next few weeks, as its
exposure grew steadily more precarious, the company took steps to try and
protect its position. This included
seeking loans from banks and seeking financial assistance from an associated
company in the Mainland.
2.
It was only six weeks later, on 20 October 2008, that Citic published a
profit warning informing the market of its predicted losses occasioned by its
exposure to foreign exchange markets.
The profit warning was published pursuant to Rule 13.09 of the Listing
Rules of the Hong Kong Stock Exchange which requires public companies “as soon
as is reasonably practicable” to publish information expected to have a
material impact on its share price. In
the notice, Citic estimated that its losses would approach HK$15 billion.
3.
Shareholders reacted sharply.
Citic shares lost more than half their value. There was in addition media criticism of the
six-week delay in publishing the profit warning.
4.
In the days following, acting pursuant to its powers under the
Securities and Futures Ordinance, Cap 571, the Securities and Futures
Commission (‘the SFC’) commenced an investigation into why it was that Citic had
delayed publication of its profit warning.
The SFC did so on the basis that persons involved in the management of
the company may have engaged in “defalcation, fraud, misfeasance or other
misconduct” or may have withheld information from its members that should have
been disclosed to them.
5. A
notice was served on Citic pursuant to s. 179 of the Ordinance requiring it to
produce all records relevant to the SFC investigation. Among the records given by Citic to the SFC
were six documents which Citic asserted were subject to legal professional
privilege on the basis that they contained legal advice or that they recorded
legal advice orally given at board meetings.
6.
It has not been disputed that the six documents (‘the documents’)
contain, or record, legal advice given and prima facie therefore are documents
in respect of which Citic was entitled to claim privilege.
7.
In the course of the present proceedings, it has been Citic’s case that,
when it surrendered the documents, it did so subject to a limited waiver of
privilege; namely, for the single purpose of permitting the SFC to conduct its
investigation. In all other respects
privilege was retained.
8.
In March 2009, the police commenced their own criminal investigation
into the affairs of Citic.
9.
Shortly thereafter, Citic learned that the documents (among other
papers) had been passed by the SFC to the Department of Justice for the purpose
of seeking legal advice. It also learnt
that the police wished to have sight of the documents in order to advance their
own investigation.
10.
In the result Citic instituted proceedings in the Court of First
Instance seeking two principal orders –
(1) An order that the documents be returned
to it on the basis that they were subject to legal professional privilege, that
privilege having been waived for the limited purpose only of the SFC
investigation and that accordingly the Secretary for Justice had no lawful
authority to continue in possession of them.
(2) In the alternative, a declaration that,
if the Secretary for Justice was in lawful possession of the documents, it was
for the purpose only of giving legal advice to the SFC concerning its
investigation and that the Secretary was not therefore entitled to divulge the
contents of the documents to any third party.
11.
The proceedings were resisted on a number of grounds –
(i) That, when the documents were
surrendered to the SFC, Citic waived all privilege in them, any assertion of
partial waiver being made well after the event.
(ii) That in any event a partial waiver of
privilege was not recognised in Hong Kong law; once privilege was waived it was
waived for all purposes in respect of all persons.
(iii) That there was prima facie evidence
that the documents were created by certain of the persons responsible for the
management of Citic for the purposes of a fraud. Accordingly, the fraud exception to the rule
of privilege applied and the documents were admissible into evidence in legal
proceedings.
12.
In respect of this third ground, Ms Draycott SC, leading counsel for the
defendants (the Secretary for Justice and Commissioner of Police) said that the
fraud alleged was to delay the disclosure that Citic was obliged to make of its
financial situation. She submitted that
those directors of the company who engineered the delay knew that it put at
risk the economic interests of all those who were entitled to know the true
situation. Specifically, during the
period of the delay loans were obtained from three banks, it being the
overwhelming inference on the evidence available, said Ms Draycott, that the
banks were not informed of Citic’s foreign currency exposure, an exposure that
increasingly undermined the viability of the company. It was her submission that the loans would
not have been granted if the banks had known the true situation or, if granted,
would only have been granted subject to more stringent conditions. In addition to the banks, said Ms Draycott,
those who were entitled to know the true position and who were denied that
knowledge included trading counterparties, joint-venture partners, banks with
existing lines of credit open to the company, existing shareholders, those
interested in buying shares and the market regulators who were prevented from
performing their public duty to ensure a stable market.
13.
In his judgment of 18 March 2011, Wright J dismissed Citic’s
claims. He did so on the following
grounds.
14.
First, he was satisfied on the evidence that, when the privileged
documents were surrendered to the SFC, there was no express or implied
condition attached to the surrender and that there had been a full waiver of
privilege. In the circumstances, it was
not necessary for him to determine whether partial waiver was a concept known
to Hong Kong law.
15.
Second, he was satisfied on the evidence that a prima facie case existed
to demonstrate that the documents had been created to further a fraudulent
scheme and that accordingly they had never been privileged.
16.
It is from that judgment that the present appeal lies.
Partial waiver of privilege
17.
It is fundamental to Citic’s claim that, in surrendering the privileged
documents to the SFC, it did so subject to the condition that privilege in them
was waived only to the extent necessary to enable the SFC to carry out its
investigation and no other purpose. That
being the case, it was entitled to invoke legal professional privilege against
all third parties who sought access to the documents.
18.
On behalf of the defendants, it was submitted that the concept of
partial waiver of legal professional privilege was not known to Hong Kong
law. Accordingly, once privilege was
waived in favour of one party it was waived for all purposes in respect of all
parties.
19.
On behalf of the defendants, it was further submitted that, even if
partial waiver of privilege was a concept known to Hong Kong law, if a
prosecuting authority, in respect of criminal proceedings, came into possession
of privileged material, no matter how it did so, public policy dictated that it
was entitled to use the material in proceedings against the person who claimed
privilege in them. The issue then was
not one of privilege, for privilege had been lost; it was whether, having
regard to all relevant circumstances, the court should rule the material
admissible.
20.
As I have said, the judge at first instance concluded that it was not
necessary for him to determine whether partial waiver of legal professional
privilege was a concept known to Hong Kong law.
This was because he was satisfied on the evidence that, when Citic
surrendered the documents to the SFC, it did so without reservation, express or
implied. It was his finding that it was
only later, after the horse had bolted that Citic attempted to close the stable
door by imposing conditions on its waiver.
21.
For reasons to which I shall refer later in this judgment, I have been
drawn to a different conclusion. I have
reached the view that the probabilities point to Citic, when it surrendered the
documents, doing so on the basis that it gave up privilege to enable the SFC to
carry out its investigation but for no other purpose. What must therefore be determined is whether
Hong Kong law recognises such a partial waiver of privilege.
22.
To determine this issue, it is first necessary to look to the principles
that, as the law has now developed, define the nature and extent of legal
professional privilege.
23.
Broadly stated – without in any way attempting an exact definition – it
may be said that legal professional privilege protects the confidentiality of
bona fide communications between lawyer and client concerning matters of legal
advice or in reference to litigation, be it on-going or in contemplation. The privilege conveys the right to resist the
compulsory disclosure of those communications.
The rationale of the privilege is to be found in the often cited speech
of Lord Taylor CJ in R v Derby Magistrates’ Court, Ex p B [1996] AC 487:
“The principle which runs through all these cases, and the many other
cases which were cited, is that a man must be able to consult his lawyer in
confidence, since otherwise he might hold back half the truth. The client must
be sure that what he tells his lawyer in confidence will never be revealed
without his consent. Legal professional privilege is thus much more than an
ordinary rule of evidence, limited in its application to the facts of a
particular case. It is a fundamental condition on which the administration of
justice as a whole rests ... it is not for the sake of the applicant alone that
the privilege must be upheld. It is in the wider interests of those hereafter
who might otherwise be deterred from telling the whole truth to their
solicitors.”
24.
In giving the judgment of the Privy Council in B and Others v Auckland
District Law Society and Another [2003] 2 AC 736, at 756, Lord Millett spoke of
the defining aspects of the privilege:
“First, the privilege remains after the occasion for it has passed:
unless waived “once privileged, always privileged”. Secondly, the privilege is the same whether
the documents are sought for the purpose of civil or criminal proceedings and
whether by the prosecution or the defence.
Thirdly, the refusal of the claimant to waive his privilege for any
reason or none cannot be questioned or investigated by the court. Fourthly, save in cases where the privileged
communication is itself the means of carrying out a fraud, the privilege is
absolute.”
25.
Privilege may have its origins as a rule of evidence; today, however, it
is viewed as a substantive legal right: Phipson on Evidence 17th ed.
[23-02]. It is today in Hong Kong a
constitutionally protected right, art. 35 of the Basic Law providing that
residents “shall have the right to confidential legal advice”.
26.
What then of the issue of partial waiver? Does the law permit the holder of the
privilege to waive it for a limited purpose or is the consequence: waived in
favour of one, waived in favour of all?
27.
Keith JA, in his judgment in Rockefeller & Co Inc v Secretary for
Justice [2000] 3 HKC 48, at 67B, a judgment to which I shall return, was of the
view that the latter was the consequence.
In this regard, he commented:
“I note that in its solicitors letter of 10 December 1996 Rockefeller
expressly purported to reserve its right to assert that the production of the
documents to the SFC did not constitute a waiver of its privilege. In my view,
that stance was conceptually unsound. If a document is privileged, the person
who enjoys the benefit of that privilege can refuse to produce it. Privilege
renders lawful a refusal to produce which would otherwise be unlawful. Thus I
do not see how it is possible to produce documents which are privileged while
at the same time claiming that the privilege which attaches to them is not
being waived.”
28.
Logic and authority dictate that, if the holder of privilege in a
document voluntarily discloses that document to a specific party then, in
respect of that specific party at least, privilege in the document must be lost. As Hoffmann J observed in Black & Decker
Inc v Flymo Limited [1991] 1 WLR 753, at 755 –
“It is not possible to assert a right to refuse to disclose in
respect of a document which has already been disclosed. Once the document has
passed into the hands of the other party the question is no longer one of
privilege but of admissibility.” [My emphasis]
29.
On that basis, I am satisfied that it must follow that, in providing the
documents to the SFC, Citic surrendered privilege in those documents. That privilege, vis-à-vis the SFC, cannot be
regained. The extent to which the SFC
may make use of the documents in court proceedings is, of course, a different
issue; as was said by Hoffmann J, an issue going to admissibility.
30.
Citic surrendered privilege to enable the SFC to conduct its
investigation. That investigation, in my
view, must include not only the gathering of evidence and its analysis by
officers of the SFC but must also include taking legal advice. Legal advice is integral to any such investigation;
it is artificial to think that the one can be successfully concluded without
the other. The SFC may have its own
in-house lawyers but it is a matter for them if they deem it proper to seek
outside legal advice. That too I would
consider integral to its investigation.
31.
The question of course remains whether voluntary disclosure to one party
constitutes disclosure to the whole world.
32.
As I have observed, in Rockefeller & Co Inc v Secretary for Justice
(cited above), Keith JA expressed the view that it would be conceptually
unsound to hold other than that once privilege is waived in favour of one it is
thereby waived in favour of all. That,
however, was not the English approach at the time nor is it the approach today.
33.
The English case in question is a 1988 judgment of the Court of Appeal:
British Coal Corporation v Dennis Rye Ltd (No 2) [1988] 1 WLR 1113. In that case, the plaintiff, which had
instituted civil proceedings against the defendant claiming damages for fraud,
gave certain privileged documents created for the purposes of that litigation
to the prosecuting authorities for the purposes of collateral criminal
proceedings. In due course, those
documents were given to the defendant.
At the conclusion of the criminal proceedings, it was ordered that the
defendant return the documents to the plaintiff and be injuncted from making
any use of them for the purposes of the civil proceedings. The defendant appealed on the basis that
privilege in the documents had been lost.
In dismissing the appeal, the Court of Appeal, per Neill LJ, said (at
1121):
“In my judgment, the action of the plaintiff in making documents
available for the purpose of the criminal trial did not constitute a waiver of
the privilege to which it was entitled in the present civil proceedings. Its
action in regard to [the documents] was in accordance with its duty to assist
in the conduct of the criminal proceedings, and could not properly be construed
as an express or implied waiver of its rights in its own civil litigation.
Indeed, it would in my view be contrary to public policy if the plaintiff’s
action in making the documents available in the criminal proceedings had the
effect of automatically removing the cloak of privilege which would otherwise
be available to it in the civil litigation for which the cloak was designed.”
34.
In 2003, giving judgment in the Privy Council in B and Others v Auckland
District Law Society and another (cited above), Lord Millet cited that judgment
with approval (at 761):
“It does not follow that privilege is waived generally because a
privileged document has been disclosed for a limited purpose only: see British
Coal Corporation v Dennis Rye Ltd (No 2) [1988] 1 WLR 1113 and Bourns Inc v
Raychem Corporation [1999] 3 All ER 154. The question is not whether privilege
has been waived, but whether it has been lost. It would be unfortunate if it
were. It must often be in the interests of the administration of justice that a
partial or limited waiver of privilege should be made by a party who would not
contemplate anything which might cause privilege to be lost, and it would be
most undesirable if the law could not accommodate it.”
35.
In a recent (2011) judgment, that of Berezovsky v Hine and others (EWCA)
Civ 1089, the English Court of Appeal, referring to this dictum of Lord Millet,
said that it sets out what is today the applicable principle.
36.
But what of Rockefeller & Co Inc v Secretary for Justice, the
judgment of this Court in 2000 in which Keith JA concluded that it would be
“conceptually unsound” to hold other than that once privilege is waived in
favour of one it is thereby waived in favour of all?
37.
While respecting the force of that observation, I am satisfied that I am
not bound by it. Although the Court in Rockefeller came to a unanimous
conclusion, it did so by different routes, there being three judgments. The majority of the Court (Godfrey VP and
Rogers JA) proceeded on the assumption that privilege in the documents which
were the subject of the appeal had been lost and that the issue to be
determined was whether, there being an agreement that the documents should
remain confidential, an injunction to prevent a threatened breach of that
confidentiality should be granted. They
determined the matter on the basis that compelling reasons of public policy
outweighed the plaintiff’s right to confidentiality. Keith JA also came to the issue of confidentiality,
agreeing with the majority but, en route to that issue, made the observations
cited in paragraph 27 of this judgment, making those observations without
reference to authority. In summary, I am
satisfied that the ratio of the court in Rockefeller was focused on the issue
of confidentiality and not privilege.
38.
In my judgment, therefore, on the basis of the authorities which I have
cited, I am satisfied that Hong Kong law incorporates the concept of partial
waiver of privilege.
39.
Before us, Ms Draycott submitted that, even if the concept of partial
waiver of privilege was recognised to be part of Hong Kong law, in respect of
criminal proceedings it was subject to the well-established rule that, if
privileged information came into the hands of the prosecuting authorities,
whether through inadvertence, mistake or even surreptitious conduct by a third
party, then privilege was lost and it was open to use by the authorities
subject only to the question of whether the court, in the exercise of its
discretion, would rule it to be admissible.
The rule, she submitted, was founded on the dictates of public policy,
namely, the common interest in apprehending and prosecuting criminals.
40.
Ms Draycott’s submission is supported by a line of English authorities,
the principal ones being: Calcraft v Guest [1898] 1 QB 759, Butler v Board of
Trade [1971] 1 Ch 680 and R v Tompkins (1977) 67 Cr App R 181.
41.
The last of these cases (Tompkins), a decision of the criminal division
of the English Court of Appeal, defines in clear terms the extent to which the
rule applies. The accused had passed a
note to his counsel during the course of the trial. Certain things said in it were against
interest. The note was inadvertently
mislaid and recovered from the courtroom floor by a member of the prosecution
team. The prosecution did not produce
the note but used it in cross-examining the accused. He was convicted and appealed on the grounds
that the note had been privileged and that its use constituted a breach of
natural justice. In giving the judgment
of the court, Ormrod LJ held (at 184):
“The note, though clearly privileged from production, was admissible
in evidence once it was in the possession of the prosecution: Butler v Board of
Trade.”
42.
In 1982, in R v Uljee [1982] 1 NZLR 561, the New Zealand Court of Appeal
looked to the same issue, namely, whether in criminal proceedings privilege
could be lost by accident or mere inadvertence or whether, having regard to the
development of the law of privilege, it was not lost unless waived. The facts of the case were as follows. The appellant visited the home of his
solicitor to take advice concerning a violent incident which had occurred
between himself and his wife. While he
was there the police arrived. The
appellant wished to discuss matters privately with his solicitor and did so in
a room. Although the door to the room
was shut, a police officer who was there to prevent anybody leaving the
premises overheard what was said. The
prosecution wished to lead evidence of what the officer overheard. It accepted that the conversation itself was
privileged but argued that, in light of the English authorities (set out
above), once the privileged information was in its hands, even though brought
about by accident or mere inadvertence on the part of the appellant and his
solicitor, it could employ that information in the prosecution.
43.
The Court of Appeal, in a unanimous decision, declined to follow the
English authorities, holding that the conversation remained privileged and that
the officer’s evidence was thereby inadmissible.
44.
In his judgment, Cooke J, having examined the development of
jurisprudence in England and the United States, concluded (page 570):
“[Privilege] relates to communications for the purpose of obtaining
or giving legal advice or assistance. The client cannot be compelled to
disclose what was said at any stage for such a purpose to or by his
professional legal adviser in intended confidence. The legal adviser must not
do so without the client’s consent. It seems to me that the law should not
shrink from the fair and natural consequence. A third party who has overheard
such communication, if oral, or come into possession of it or a copy of it, if
written, should not be allowed to give evidence of it unless the client waives
the privilege.”
45.
Richardson J, looking to matters of public policy, said (page 572):
“If society sets store on the right to legal services for persons
under investigation or charged with offending it must undertake to ensure the
confidentiality of discussions between lawyer and client. It is an invasion of
their expectations of privacy if that confidence is violated by a third party
who listens into the interview unknown to them whether it is done deliberately
or accidentally.”
46.
Richardson J concluded by saying (page 572) :
“The exclusion of overheard communications is in my view a logical
extension of the privilege as it applies to solicitors and clients.”
47.
In my judgment, R v Uljee correctly reflects the law in Hong Kong. In so finding I would adopt the reasoning of
the three judges in that judgment. I
would in addition add the following.
48.
While privilege may have had its origins as a rule of evidence founded
in public policy, today it is recognised as a substantive legal right of
particular importance to the due and just administration of justice. Lord Hoffmann has described it as “a
fundamental human right”: R (Morgan Grenfell & Co Ltd) v Special
Commissioner of Income Tax [2003] 1 AC 563 at 606, a description cited with
approval in a number of subsequent cases: see Phipson on Evidence 17 ed.,
[23-06]. That it is regarded as a
fundamental human right in Hong Kong is witnessed by art. 35 of the Basic Law.
49.
As a fundamental human right, privilege must, and does, guarantee the
same measure of protection in criminal as well as civil matters; art. 35 makes
no differentiation.
50.
In B and Others v Auckland District Law Society and Another (cited in
para 24 above), Lord Millett not only stated that the privilege is the same
whether the proceedings are civil or criminal but said that, save in cases
where the privileged communication is itself a means of carrying out a fraud,
privilege is ‘absolute’. It is therefore
the position that privilege is not to be balanced against competing public
interests no matter how compelling they may be: one such interest being the
apprehension and prosecution of criminals.
51.
That being the case, it seems to me to be inherently contradictory to
say that privilege, although a fundamental human right unassailable to
competing issues of public interest, may nevertheless be lost in criminal
matters without any intention on the part of the holder, indeed on no more than
a whim of fate; that is, by accident or inadvertence, or even (at the outer
extreme) by the surreptitious conduct of a third party. I do not accept that
the Basic Law affords such frail protection.
I am satisfied that, in both civil and criminal matters, privilege is
not lost unless there is evidence that it has been intentionally waived by the
holder of that privilege.
52.
Evidence of the intention to waive privilege may be inferred from all
the circumstances. However, as a
constitutionally guaranteed right, a “condition on which the administration of
justice as a whole rests”: R v Derby Magistrates’ Court, ex parte B (cited
above), that waiver will not lightly be inferred.
53.
By way of a footnote, for the avoidance of doubt, nothing that I have said
should be taken as seeking to influence existing jurisprudence on attempts to
abuse privilege by making partial or selective disclosure in order to achieve a
tactical advantage in civil or criminal proceedings. No such issue has arisen in this appeal.
The present case: was the waiver absolute
or partial?
54.
As I have earlier indicated, the judge at first instance concluded that,
while the documents were originally privileged, the privilege being vested in
Citic alone, the circumstances in which they were surrendered to the SFC
operated as a blanket waiver of that privilege.
However, the conclusion I have reached is that, on a consideration of
all the evidence, the probabilities support Citic’s contention that privilege
was waived in favour of the SFC for the purpose of its investigation only and
for no other purpose. In short, that
there was no blanket waiver.
55.
I have of course paid due regard to the findings of the judge at first
instance, findings that were clear and considered. However, this was not a case in which the
judge at first instance had the benefit of hearing oral evidence. He had no advantage in respect of the
evidence (all of which was presented to him on paper) which we do not share. It is also to be said that I have approached
the matter on the express basis that, privilege being a constitutionally
guaranteed right in Hong Kong, its waiver is not lightly to be inferred.
56.
As to the consideration of the evidence itself, appropriate guidance is
provided in the judgment of the English Court of Appeal in Berezovsky v Hine
and Others (cited in para 35 above). In
determining if there has been a blanket or limited waiver, the Court said (para
29):
“… where privilege is waived, the question whether the waiver was
limited, and, if so, the parameters of the limitation, must be determined by
reference to all the circumstances of the alleged waiver, and, in particular,
what was expressly or impliedly communicated between the person sending, and
the person receiving, the documents in question, and what they must or ought
reasonably to have understood – cf. per Hoffmann LJ in Brown v Guardian Royal
Exchange plc [1994] 2 Lloyd’s Rep 325,328, as discussed by Aikens J in
Winterthur Swiss Insurance Company v AG (Manchester) Ltd (in liquidation)
[2006] EWHC 839 Comm, para 74.”
57.
As to the circumstances in which the documents were surrendered to the
SFC, it is to be noted that, at the time of the surrender itself, Citic’s
solicitors provided no written document setting out specific terms as to
limitation of the waiver of privilege.
It was only several weeks later, in response to an enquiry from the SFC,
that CITIC stated in writing what it considered the terms of limitation to have
been.
58.
It is not disputed that the documents were among many other papers and
records surrendered to the SFC pursuant to demands for production issued
pursuant to s. 179 of the Ordinance.
Five of the six documents were surrendered to the SFC at the offices of
Citic on 27 October 2008 while the remaining document was later surrendered as
a result of correspondence between Citic’s solicitors and the SFC.
59.
As to the circumstances in which the first five documents were
surrendered, Mr Luk King Yip, a Director of the SFC Enforcement Division,
affirmed as follows:
“When we arrived at Citic’s office … we met with Ms Shih and a Mr
Martin Rogers, a partner of Messrs Clifford Chance and two other persons in a
meeting room. There were approximately 30 lever arch files and some DVDs
containing copies and originals of the records and documents required to be
produced under the direction, made available for our inspection in the meeting
room. Ms Shih told us that the records and documents to be produced under the
direction were in the meeting room. The company had prepared a list of
documents to be inspected… Legal documents are listed there at 12 but there is
no mention of legal professional privilege. She told us that Citic would fully
cooperate with the Commission in its investigations. She said that Citic would
produce to the Commission legal advices provided to Citic by Messrs Mayer Brown
JSM in this matter and would waive legal professional privilege in respect of
these legal advices. I now do not recall whether Ms Shih mentioned any terms
regarding the waiver ...”
60. It
was only a month or so later that the issue of whether there had been a full or
partial waiver of privilege arose. Mr
Luk of the SFC made a telephone enquiry, seeking confirmation that Citic had
waived all privilege in the documents then in the possession of the SFC. In response, by letter dated 26 November
2008, Citic’s solicitors stated the following:
“For the purposes of the Commission’s investigation only (the scope
of which is set out in the Commission’s Direction to Investigate dated 22
October 2008, the Additional Direction to Investigate dated 27 October 2008 and
the Authority to require production of records and documents dated 23 October
2008), Citic Pacific Limited (‘the company’) confirms its agreement to waive
privilege in relation to legal advice provided to the company by Mayer Brown
JSM as contained in the documents handed to the Securities and Futures
Commission on 29 October 2008.”
61.
Fairly extensive correspondence ensued during which, under Citic’s
obligation to make disclosure, the existence of one further privileged document
was made known to the SFC. In respect of
that remaining document, it was initially the contention of the SFC that, in
handing over the first five documents, Citic had (somehow) waived privilege in
respect of all communications between the company and its lawyers in relation
to the SFC’s investigation whether surrendered or retained. That contention (understandably) was
rejected.
62.
As it was, by February 2009 an agreement had been reached in terms of
which “for the time being” the SFC agreed that there had only been partial
waiver of privilege in the documents surrendered to it, that is, for the
purposes of its investigation. In terms
of that understanding the sixth document was handed to the SFC.
63.
In the latter part of April 2009, when Citic learnt that the documents
(together with other papers and records) had been given over to the Department
of Justice, it expressed concern that there had been a breach of the
arrangement reached respecting its asserted privilege in the documents. The SFC’s Senior Legal Counsel replied by
letter dated 30 April 2009 to the following effect:
“There was no breach of LPP [privilege] on the part of the
Commission. We did not give any of the materials to the police. When we
provided the materials to the DOJ [Department of Justice], we brought to their
attention that (i) the materials were subject to LPP and that Citic waived LPP
for the purposes of the Commission’s investigation only; and (ii) Citic did not
waive LPP in the materials for the purpose of the police inquiry. Recently DOJ
confirmed to us that the materials had not been disclosed to anyone outside of
the DOJ.
We acknowledge and respect Citic’s
assertion of LPP in respect of the materials.
We confirm that the materials were and are being used only for the
purpose of the Commission’s investigation.”
64.
That explanation appears not to have resolved matters.
65.
In light of this evidence, the judge at first instance was satisfied
that there had been a full waiver of privilege in the documents. He gave little weight to the letter of 26
November 2008 from Citic’s solicitors to the SFC stating that the waiver of
privilege had been “for the purposes of the Commission’s investigation only”,
describing that letter as an attempt to close the stable door after the horse
had bolted.
66.
The judge further took into account that on 27 October 2008, when the
first five documents were surrendered, Citic was represented not by rank and
file but by its own general counsel as well as by a partner in the firm of
solicitors then acting for it. He was
satisfied that those two persons would have been aware of two matters. First, that, pursuant to s. 378 and s. 380 of
the Ordinance, the SFC had the power to hand over the documents to others (for
example, the police) to enable them to investigate other possible
offences. Second, that, the documents
being privileged, while their existence would have to be disclosed, their
contents were immune from disclosure unless, for whatever perceived advantage,
the decision was made to waive that privilege.
It was the judge’s view that a conscious decision to waive all privilege
in the documents must have been made.
67.
Matters would have been put beyond doubt if Citic’s legal advisors had
seen fit to state in specific terms the basis upon which the documents were
surrendered to the SFC. Their failure to
do so is troubling. That being said, I
have nevertheless been drawn to the finding that the inherent probabilities do
not justify the conclusion reached by the judge at first instance.
68.
On 27 October 2008 when the first five documents were surrendered, there
was no evidence that any agency other than the SFC had instituted
investigations or were contemplating doing so.
As it was, the police only initiated their independent investigation in
the new year, several months later.
69.
At that time, the matter in issue was a regulatory one, namely, the
alleged failure of Citic to inform the market “as soon as reasonably
practicable” of information reasonably expected to materially affect the price
of its shares. The Listing Rules,
however, did not set any specific timeframe within which such information had
to be divulged to the market. Note 4 to
Rule 13.09 of the Listing Rules states that:
“The question of timing of the release of an announcement to the
market is crucial, having regard to its possible effect on the market price of
the issuer’s listed securities. The overriding principle is that information
which is expected to be price-sensitive should be announced immediately it is
the subject of a decision…” [my emphasis]
70.
In my view, it is understandable that Citic, a publicly listed company
of very considerable substance actively trading its shares on the market, would
wish to co-operate with the SFC, more especially by way of providing
information on how it was that there had been a perceived delay in making the
“decision” to publish its profit warning.
The SFC was the regulatory body responsible for maintaining the orderly
and transparent conduct of the securities and futures industry: see s 5(1)(a)
of the Ordinance. It is clear that, from
the point of view of Citic, the continued trading of its shares and the hoped
for recovery in the value of those shares was essential to its continued
viability.
71.
It is correct, as the judge at first instance noted, that the SFC
investigation canvassed the possibility of serious misconduct, of “defalcation,
fraud, misfeasance”. The SFC also
possessed certain criminal powers. The
weight of evidence, however, indicates that in late October 2008 when the SFC
commenced its investigation that investigation was certainly understood by the
directors of Citic to be focused on a failure to publish price sensitive
information in accordance with the Listing Rules, a grave enough matter but
essentially a regulatory one.
72.
In my judgment, the evidence indicates that in October 2008 Citic’s
general counsel and its advising solicitors would have viewed a criminal
investigation by the police into the conduct of the company (and its individual
directors and officers) in a markedly different light. An indication of this is to be found in the
fact that, when the SFC wrote to Citic in March 2009 to ask whether the company
would be prepared to waive privilege in the documents for the purposes of a
police investigation, a far more cautious approach was adopted: the company
seeking first to ascertain the scope of the investigation and thereafter
declining to permit inspection.
73.
On this basis, bearing in mind that a full waiver of privilege by Citic
is not lightly to be inferred, the probabilities, in my view, indicate that
what reasonably ought to have been understood on 27 October 2008 when the first
five documents were given to the SFC for inspection was that Citic was prepared
to waive its privilege in those documents for the only purpose then known to
Citic, namely, the SFC investigation, but would inevitably have adopted a very
different approach in respect of the issue of privilege if faced with a criminal
investigation.
74.
As to the events on 27 October 2008, in his affirmation (cited in para
59) Mr Luk said that Citic’s general counsel informed him that that the company
was willing to cooperate fully with the SFC in its investigation and would
produce the documents (containing legal advice) for that purpose. No broader statement was made, there was no
statement, for example, indicating that Citic was prepared to waive privilege
in the documents to the whole world.
75.
That privilege had been waived in respect of the SFC’s investigation was
manifest: the first five documents had been surrendered to the SFC pursuant to
demands and directions issued under the Ordinance confirming the commencement
of the investigation. However, that
there was at the very least some uncertainty on the part of the SFC as to the
exact terms on which privilege had been waived is supported by the fact that
several weeks after surrender of the documents, the SFC (quite properly)
contacted Citic concerning the issue of waiver.
In response, the solicitors for the company replied in writing that the
documents had been waived for the sole purpose of the SFC investigation.
76.
The solicitors’ letter of 26 November 2008 was afforded little weight at
first instance. On the evidence,
however, there appears to be nothing to suggest that at about the time the
letter was drafted Citic knew of any police investigation or had reason to
believe that one was about to be launched and, regretting its earlier full
waiver of privilege, was seeking to claw back at least some partial privilege
in the documents in order to avoid them falling into the hands of the
police. Citic’s general counsel and the
company’s legal advisers may of course have had a change of heart concerning
surrender of the documents to the SFC but there is nothing to suggest
that. Accordingly, I must disagree with
the judge at first instance. I am
satisfied on the probabilities that the letter is not to be seen as a tactical
device but as a simple statement of what Citic had always considered to be the
basis upon which privilege in the documents had been waived several weeks
earlier. As such, I am satisfied that
the contents of the letter stating Citic’s understanding that waiver of privilege
had not been absolute must be given due weight.
The fraud exception
77.
It has long been settled that privilege does not attach to
communications between lawyer and client if the purpose of the client in
seeking legal advice is to facilitate criminal or fraudulent conduct, certainly
conduct of the kind in respect of which in the present case Wright J found
there to be a prima facie case. The
principle was authoritatively laid down in R v Cox and Railton [1884] 14 QBD
153, Stephen J saying (at 165):
“The question, therefore, is whether, if a client applies to a legal
adviser for advice intended to facilitate or to guide the client in the
commission of a crime or fraud, the legal adviser being ignorant of the purpose
for which his advice is wanted, the communication between the two is
privileged? We expressed our opinion at the end of the argument that no such
privilege existed. If it did, the result would be that the man intending to
commit treason or murder might safely take legal advice for the purpose of
enabling himself to do so with impunity, and that the solicitor to whom the
application was made would not be at liberty to give information against his
client for the purpose of frustrating his criminal purpose. Consequences so
monstrous reduce to an absurdity any principle or rule in which they are
involved.”
78.
It has equally been long settled that the power vested in the courts to
order disclosure of what are claimed to be privileged documents by way of what
has become known as ‘the fraud (or crime/fraud) exception’ is to be exercised
with the considerable caution. In this
regard, see, for example, O’Rourke v Darbishire [1920] AC 581, per the speech
of Viscount Findlay (at 604):
“But 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. It is with reference to cases of this kind that it
can be correctly said that the court has a discretion as to ordering inspection
of documents. It is obvious that it would be absurd to say that the privilege
could be got rid of merely by making a charge of fraud. The court will exercise
its discretion, not merely as to the terms in which the allegation is made, but
also as to the surrounding circumstances, for the purpose of seeing whether the
charge is made honestly and with sufficient probability of its truth to make it
right to disallow the privilege of professional communications.”
79.
A more recent authority, one to which the judge at first instance had
regard, is R v Gibbins [2004] EWCA Crim 311 (paras 49 and 50):
“In the context of a civil or criminal case, where the cause of
action pleaded or the charge to be determined at trial is that of fraud, the
existence of which is in issue and will only be finally determined at trial,
the judge who is required at the interlocutory stage to determine the question
whether or not a document is disclosable for the purpose of admission in
evidence at trial under the fraud exception, is in no position finally to
determine that question. Such a final determination will only be possible at
trial in the light of all the evidence, including the oral evidence of the
parties and, in particular, that of the defendant if called. Meanwhile, the
judge can only realistically cope with the matter on the basis of the prima
facie position i.e. that which appears to be the position at the time of
consideration in the absence of further explanation. Neither policy nor
practicality require more than that the judge should be satisfied that a prima
facie case of fraud exists and that, considered in that context, a prima facie
case also exists that the document concerned came into existence as part of the
fraud.
In this respect, bearing in mind the nature
of the proceedings, the importance of the doctrine of LPP [privilege], the room
for ambiguity and the possibility of innocent explanation, it has been stated
(in Cox and Railton) that the judge should consider it ‘probable’ that the
document was part of the fraud and (in Derby v Weldon) that a ‘strong’ prima
facie case is required (the standard adopted by the judge in this case). We
consider that these observations rightly emphasise the need for the judge to be
clear in his view that a prima facie case of fraudulent purpose exists. However
we do not think that any gloss upon the requirement of a prima facie case is
desirable either in respect of the charge contained in the indictment or in
respect of the purpose behind the document of which disclosure is sought.” [my
emphasis]
80.
Following Gibbins, Wright J applied a two-stage approach, asking
himself: first, was a prima facie case of conspiracy to defraud or to make
false statements made out on the papers and, second, if yes, were the documents
(containing legal advice) prima facie produced to facilitate or further that
conduct? He concluded that –
(i)
a prima facie case had been demonstrated of the existence of a
conspiracy on the part of certain of those controlling the affairs of Citic to
defraud and/or to make false statements as to the affairs of the company,
contrary to s. 21 of the Theft Ordinance, Cap 210, and
(ii)
the documents, that is, the documents in respect of which privilege was
claimed, had been produced to facilitate or further the conspiracy.
81.
The judge was clear in his view that a prima facie case existed of the
following conspiracy.
82.
First, the aim was to delay disclosure of the company’s increasingly
parlous financial position brought about by its continuing foreign exchange
losses in order, first, to prevent a precipitous reaction on the part of all
those whose economic interests would be affected by Citic’s weakened position;
in common parlance, to prevent panic in the market, and, second, to afford
sufficient time to enable the company to raise money from its ‘parent’ company
in the Mainland as well as from banks.
The essence of the conspiracy therefore was to delay for as long as necessary
making public disclosure of the true financial position of the company.
83.
Second, this constituted a conspiracy to defraud because its members
used dishonest means to bring about the delay with the realisation that the use
of such means may cause economic loss to others or put their economic interests
at risk.
84.
Third, the legal advice requested (and thereafter exploited) to
facilitate this conspiracy was to ask to what extent the inevitable public
disclosure of the company’s true financial position could be delayed while the
company sought some way to rescue its position.
85.
In setting out how he had come to his findings, the judge had regard to
two matters which he said suggested the wilful concealment on the part of the
directors of Citic (or, more accurately, certain delinquent directors, for
there was no evidence the full Board was involved), the concealment being
related to Citic’s increasing exposure to foreign exchange losses, and thus to
the existence of the conspiracy to defraud.
86.
When Citic had published its profit warning on 20 October 2008, it had
said that it had first become aware of its exposure to foreign exchange losses
on 7 September 2008, some six weeks earlier.
87.
The first matter to which the judge had regard was an announcement
published on 16 September 2008 concerning Citic’s acquisition of a financial
interest in two motor companies. Within
the body of the announcement it was said that the latest date prior to printing
by which it had been practical to make any changes to the document had been 9
September 2008. That was two days after
Citic had first become aware of its exposure to foreign exchange losses. Despite the two-day leeway, the announcement
said that the directors were not aware of any material adverse change in the
financial trading position of the company since the publication of the last
audited accounts. It was the finding of
the judge that this was “a clear, and public, demonstration of an intention to
conceal the knowledge of the abnormal losses already sustained or anticipated”.
88.
For myself, bearing in mind that Citic’s exposure to losses on the
foreign exchange markets had (on the evidence) only come to light two days
before the deadline for amending the announcement, and bearing in mind, on the
information available, that at that time the company’s financial position was a
strong one and that it was not in a position at that early juncture to predict
the full extent of its losses, I have difficulty in coming to the same
finding. First, on the evidence, it is
uncertain whether at that very early stage Citic appreciated that its exposure
constituted a material adverse change in the company’s financial trading
position. Second – oversight not
equating to intention – it is uncertain, having regard to the narrow timeframe,
whether the senior officers of the company were even alive to the issue of
amending the announcement.
89.
The second matter to which the judge had regard was the evidence that
between 25 September and 14 October 2008 – after Citic had become aware of its
financial difficulties but before its profit warning – the company had raised
three bank loans, the necessary authorisations being signed by the Finance
Committee of the Board of Directors. In
respect of the loans, the judge said (at para 60):
“It is the defendants’ case that at the time of negotiating and
obtaining the loans no disclosure of the financial risk exposure was made by
the plaintiff to any of the potential lenders. Taking this to be so, for on the
evidence before me there is nothing to gainsay it, it amounts to a further
demonstration of an intention to conceal the plaintiff’s true state of
knowledge regarding its financial position.”
90.
During the course of the appeal hearing, when we commented that there
was only the thinnest evidence of the exact nature and terms of the bank loans
and importantly whether and, if so, the degree to which, and the manner in
which, the loans were secured, Ms Draycott made an application for an
adjournment to enable the respondents to adduce further evidence concerning the
bank loans. Having heard submissions on
the matter, we declined to grant the adjournment. We did so for two principal reasons. First, nothing was put before us to suggest
that this further evidence could not, with reasonable diligence, have been
obtained for the first instance hearing.
In this regard, it is a fundamental principle that it is the duty of
each party to litigation to “bring forward his whole case at once and not to
bring it forward piecemeal” as he discovers the objections in his way: see Re
New York Exchange Ltd (1888) 39 Ch.D, 415, at 420. Second, for the reasons which follow in this
judgment, we were of the view that, even if it could be shown that certain
directors did withhold information from the banks, that itself was not capable
when considered in context, of demonstrating that they had sought legal advice
as to Citic’s financial troubles to facilitate a conspiracy to delay disclosure
of those troubles.
91.
In the result, the evidence before us was the evidence before the judge
at first instance, that and no more. On
that evidence, I hesitate to conclude that the fact of the loans clearly
demonstrates a prima facie case of dishonest concealment. It was Ms Draycott’s submission that, there
being no contrary evidence filed by Citic or any of its directors, it would be
naïve to think otherwise. I do not
agree. Remembering that a prima facie
case must be clearly demonstrated, there was, as I have said, only the thinnest
evidence of the exact nature in terms of the bank loans and, of central
importance, of such issues as the manner in which, if at all, formally or
informally, the loans were secured.
92.
As to the existence of a conspiracy to defraud, the judge said (at para
61):
“It is stating the obvious to say that to conceal the plaintiff’s
financial risk exposure, known as it was at that time, from investors in the
plaintiff; from those who might invest in the plaintiff, the shares in which
were freely traded on the Hong Kong stock exchange; and from its creditors
would put at risk the economic interest of those groups, a fact which could not
have escaped the notice of the plaintiff or those controlling it.”
93.
As I see it, however, that conclusion begs a central question, namely,
was such failure to disclose dishonest?
That is an issue very much in dispute, one that will have to be resolved
at trial. The legal advice contained in
the documents, is integral to that issue in that, without in any way invading
the asserted privilege in the documents, it has been accepted in open court
that the advice was related to the manner in which, generally, the Listing
Rules permitted Citic – the advice being to the company, not an isolated group
of directors – a measure of discretion in how best to protect the interests of
the company in the face of the crisis and, more specifically, it set out the
imperatives governing the issue of a profit warning.
94.
When, as is the case here, the alleged fraudulent conduct is
inextricably bound up with the legal advice received, there is a body of
authority to say that this is a factor which must be taken into account, one
that places a heavier burden on the party seeking disclosure on the basis of
the fraud exception. In this regard,
see, for example, Kuwait Airways Corporation v Iraqi Airways Company (No 6)
(CA) [2005] 1 WLR 2734 at 2748 per Longmore LJ (paras 37 and 38):
“If all one has is disputed versions of events, it will be difficult
to say that there is even a prima facie case of fraud. This will be
particularly so if the disputed version of events is the very same issue that
is to be tried in the proceedings. If, however, the evidence of crime or fraud
is freestanding and independent and particularly if its evaluation “does not
require any judgment to be reached in relation to the issues to be tried” (per
Rose LJ in the Hallinan case [2005] 1 WLR 766,771), it may be perfectly
possible, and even on prima facie case basis, to decide whether the fraud
exception applies.
It is significant that in Chandler v Church
137 NLJ 451 where there was only prima facie evidence of fraud and the fraud
was alleged in relation to the issues that had to be tried, Hoffmann J refused
to order disclosure. By contrast, in
Dubai Aluminium Co. Ltd v Al-Alawi [1999] 1 WLR 1964, 1968, where the alleged
fraud did relate to issues to be tried on the application to discharge the
search and seizure order and the freezing injunction, Rix J (following Barclays
Bank v Eustice [1995] 1 WLR 1238, 1249)) thought that before disclosure was
ordered there should be a strong prima facie case of criminal or fraudulent
conduct; he held that, on the facts, there was.
He therefore ordered disclosure.”
95.
In my judgment, at this time and in light of the nature and breadth of
the evidence as it presently stands, bearing in mind that the evidence
inevitably will be disputed should the issue go to trial, it is not possible to
say that there is a strong (or clear) prima facie case of the existence of a
conspiracy to defraud, or even of fraudulent conduct on the part of some of
Citic’s directors.
96.
In these circumstances, following the dictum of Longmore LJ in Kuwait
Airways Corporation (para 36) I believe that it would be unfair to make an
order that the fraud exception applies on the basis of what, as I see it, is at
this time at best a bare prima facie case, but certainly not a clear or strong
one, and which may on full investigation – when all the relevant evidence is
tested – turn out to be in no case at all.
97.
I regret to say that I must also differ from the judge at first instance
in respect of his finding that there is prima facie evidence that the documents
(containing legal advice) were produced to facilitate or further some form of
fraudulent conduct.
98.
The suggestion that certain directors took legal advice to facilitate a
conspiracy to delay disclosure of the foreign exchange losses necessarily
involves a number of assumptions. First,
that the Listing Rules required immediate disclosure of such losses. Second, that this was sufficiently obvious
that the directors must be assumed to have known this – indeed this is what Ms
Draycott argued. Third, that the
directors took the decision to instruct a solicitor knowing that it was likely
that they would be told to make immediate disclosure (which necessarily follows
if the second assumption is correct), but hoping to get advice that was wrong,
namely, that they did not need to make immediate disclosure. It is relevant that it is not suggested that
the solicitor who was chosen to give advice lacked relevant expertise or
experience. On the contrary he was a
very senior and experienced partner in one of Hong Kong’s major commercial law
firms. Neither is it suggested that he
was acting in collusion with the delinquent directors. It is not suggested, for example, that there
is any evidence that either Citic’s general counsel or the solicitor was told
what advice the relevant directors were looking for. I note at this juncture that during her
address Ms Draycott suggested that it was odd that advice was sought at all on
such a straightforward point. I
disagree. Given the magnitude of the
problem facing the company, in my view it is entirely unsurprising that legal
advice was sought on the ambit of the company’s disclosure obligations.
99.
It seems to me to be inherently unlikely in these circumstances that the
advice was sought in the hope that it would provide some justification for
delaying disclosure. It necessarily
follows that I have difficulty seeing how it can fairly be concluded that there
is a prima facie case, let alone, a clear prima facie case, that the advice was
sought to facilitate the alleged conspiracy.
On the contrary it seems to me to be inconsistent with it.
100.
Further the advice was not given on a single occasion but was
essentially on-going and, as would expect, was debated at some length by the
full Board consisting of some 16 or 17 directors of different backgrounds and
professions.
101.
The probabilities further suggest that, with the full Board engaged, the
opportunity on the part of the delinquent directors to distort matters in order
to obtain the advice necessary to facilitate their fraudulent scheme was
limited.
102.
Similarly, although criticism was made of the extent of the disclosure
to the solicitor in instructions to him, and assuming, for the moment that
there is something in the criticism, it can be said, without in any way
invading the privilege of the documents, that the advice given was broad in
nature, advice of that kind being almost inevitable when the Board was faced
with a series of management options, options that differed in significance as
events unfurled. It is difficult, in
these circumstances, to read into any of the alleged inadequacies in the
instructions the inference that they demonstrate that the advice was sought to
facilitate the alleged conspiracy.
103.
It was asserted before us that certain of the directors were selective
in what aspects of the legal advice they chose to follow; it was further
asserted that they ignored the advice when it suited their purpose, indeed that
they acted contrary to such advice.
104.
As I understand the law concerning legal advice privilege, the integrity
of the privilege does not depend on the person receiving the legal advice then
following it. The relationship of
confidentiality is created when advice is sought in good faith and given in
good faith. That thereafter the person
who has received the advice seeks not to heed it but to follow some independent
dishonest course of conduct does not act retroactively to strip away the
earlier privileged relationship. There
must be a direct causal relationship between the advice received and the
fraudulent conduct. Put simply, there
must be evidence of a fraudulent purpose behind the seeking and obtaining of
the advice.
105.
It may well be, of course, that dishonest actions subsequent to the
taking of legal advice will prove the state of mind of the person at the time
he took the advice. In a very full set
of submissions strongly argued by Ms Draycott she conducted an analysis of the
legal advice contained in the documents in order to illustrate this exact
point, namely, that the manner in which, as she put it, the advice was
exploited for a dishonest purpose, was clear demonstration of the fact that
there had been a dishonest attempt in obtaining the advice in the first place.
106.
I do not consider that there is any need, in a separate confidential
judgment, to look to all the issues raised by her. It suffices to say that even if, without
finding it to be so, there was prima facie evidence of any dishonest conduct on
the part of one or more directors, I am satisfied that it does not indicate a
dishonest purpose in obtaining the advice in the first place – advice, it is to
be remembered obtained by the company and given to the full Board – but
indicates rather subsequent dishonest conduct essentially independent of the
advice earlier given.
107.
I am therefore satisfied that there is not, on the evidence available,
including the contents of the documents, evidence that the documents were
produced to facilitate or further a conspiracy to defraud or some other form of
dishonest conduct on the part of one or more of the directors.
Conclusion
108.
For the reasons given, I would allow the appeal on the basis of a
declaration to the following effect:
(i)
that Citic has waived privilege in the documents for the purpose of
enabling the SFC to conduct its investigation and for no other purpose;
(ii)
that the taking of legal advice is integral to the conduct of the
investigation and, in giving such advice, for that purpose and no other, the
SFC may deliver the documents to the Secretary for Justice;
(iii)
that for all other purposes, and in respect of all other persons, Citic
retains privilege in the documents.
109.
In respect of costs, bearing in mind that the parties have not had an
opportunity to make submissions in that respect, I am of the view that there
should be an order nisi awarding both the costs of this appeal and at first
instance to Citic. Should the parties
seek an order to different effect, an application is to be made within 21 days
of the date of this judgment.
Hon Kwan JA:
110.
I have had the benefit of reading in draft the judgment of Hartmann
JA. I respectfully agree with his
judgment and the orders he proposes to make.
Hon Harris J:
111.
I too have had the benefit of reading in draft the judgment of Hartmann
JA. I agree with his judgment and the
orders he proposes to make.
Hon Hartmann JA:
112.
Accordingly, the appeal is allowed on the basis set out in paragraphs
108 and 109 of this judgment.
(M.J. Hartmann)
Justice of Appeal
(Susan Kwan)
Justice of Appeal
(J. Harris) Judge of the Court of First Instance
Mr Collingwood Thompson, QC, Mr Paul Shieh,
SC and Mr Victor Dawes, instructed by Robertsons, for the Plaintiff/Appellant
Ms Charlotte Draycott, SC, and Mr R G
Turnbull, SGC of the Department of Justice, for the Defendants/Respondent
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