TIME SUPER INTERNATIONAL LTD. & OTHERS v. THE COMMISSIONER OF THE INDEPENDENT COMMISSION AGAINST CORRUPTION

HCAL 87/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 87 OF 2002

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J U D G M E N T

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1. This is an application by a number of companies significantly linked with each other, for judicial review of the exercise by the ICAC of its powers of entry, search and seizure under section 10B of the Independent Commission Against Corruption Ordinance (Cap. 204) at the registered offices of YCLEE Nominee Limited and YCLEE Management Limited being also the offices of the Y C Lee, Pang & Kwok, a firm of solicitors. The two mentioned companies are the sole shareholders and directors as nominees of the 1st Applicant company. One or other or both of these nominee companies also feature as the shareholders and/or directors of the other Applicant companies. A Mr William Kwok, a partner in the said firm of solicitors, is also a director of the two nominee companies. The seizure took place on the 22 November 2001.

The Basis for the Seizure

2. The affirmation of the investigating officer of the ICAC, Mr. Choi Shu-keung is the document setting out the background and the steps taken. No issue has been taken on its content for the purpose of this application and accordingly I rely upon it for immediate purposes.

3. The focus of the investigation is the alleged corrupt and fraudulent behaviour of a manager of a Bank (which I shall refer to as the Bank) whom I shall call "X" and a customer of that bank who I shall call "Y". The period concerned is March 1996 to May 2001 when "X" was dismissed by the Bank.

4. On 9 October 1996 a Receiving Order was made against "Y". He was adjudicated bankrupt on the 26 November 1996 for a period of four years. This was subsequently extended until 26 November 2004. By reason of his bankrupt status, it is an offence by "Y" to act as a director of or be directly concerned in the management of a company, under section 156 of the Companies Ordinance, (Cap. 32), and it is also an offence for an undischarged bankrupt to obtain credit. (section 131 of the Ordinance).

5. Between 9 and 14 March 2000 "X" granted overdraft facilities in the sum of $49,000 ($1,000 below the permitted limit) to 21 account holders. Five of these were personal account holders, one of them being the wife of "Y". Sixteen were joint account holders being a combination of the five individual account holders. Over $1M was withdrawn from the accounts in cash, as soon as the facilities were granted.

6. "X" in granting these facilities did not follow established procedures in processing and approving them. "Y"'s wife had in any event been blacklisted by the Bank and thus banned from having an account. Not long after the facilities had been granted and used, the Bank discovered the position and demanded repayment. The 1st Applicant company discharged the balance due by payments on the 18 and 21 March 2000.

7. The 1st Applicant was incorporated in Hong Kong on 9 July 1996. In early November YCLEE Nominee Limited and YCLEE Management Limited became its only shareholders and directors. Both were nominee companies holding and acting for the benefit of "Y". A receiving order was made against "Y" on 9 October 1996 so it is clear that the nominee interests on his behalf were set up one month after the receiving order against him, the declarations of trust by the two nominee companies being dated 8 November 1996 and signed by William Kwok, a director of both nominee companies and a partner in the firm of solicitors Y C Lee, Pang & Kwok. That firm incorporated the two nominee companies - hence no doubt the first part of the name of both companies.

8. On 24 December 1996 the 1st Applicant opened an account at the Bank and "Y" was the authorized signatory. The resolutions authorizing "Y" were signed by "Y" himself and William Kwok (as the authorized signatory of the two nominee companies). A man whom I shall identify simply by the name Chan, a director of the 2nd Applicant, also became an authorized signatory of the 1st Applicant on 18 March 2000.

9. On 1 April 2000, the 1st Applicant bought two flats in Sham Tseng for $4.25m. The agreements for sale and purchase were originally made by the wife of "Y" as purchaser and she subsequently nominated the 1st Applicant to replace her as the purchaser. The two nominations were signed by her in the presence of William Kwok. "Y" was living in one of the premises when arrested on 21 November 2001.

10. Between May and September 2001, "X" approved loans of $100,000 each to the five Applicant companies. He also approved credit facilities to them and to six other companies controlled by directors of the Applicants. At 10 April 2001 the total amount outstanding was $1.6m of which $700,000 was attributed to the Applicants. At the time of these facilities being granted the two nominee companies owned 100 per cent of the shares of the 1st Applicant; the 1st Applicant owned 70 per cent of the shares of the 2nd Applicant; the wife of "Y" owned 99% of the shares of the 3rd Applicant; the two nominee companies owned 100 per cent of the shares of the 4th Applicant; and one of the nominee companies owned 95% of the shares of the 5th Applicant. In short either by himself or by his wife, "Y" had the controlling shareholding in all the Applicant companies by 19 April 2001.

11. The foregoing information gave rise to a reasonable belief on the part of ICAC investigating officers that "X", "Y" and others, conspired to defraud the Bank, "X" being given advantages for the benefits he made available to "Y" and the various companies associated with him.

12. At the same time as "Y" was arrested on the 21 November 2001, "X" and others were also arrested. The ICAC also applied for a search warrant in respect of the premises at 21st Floor, Regent Centre, 88 Queen's Road Central being the registered offices of the two nominee companies, and of the firm of Solicitors referred to earlier.

13. "Y" admitted that he set up the first three Applicant companies, and he instructed the Solicitors to set up the fourth and fifth Applicant companies. He appointed the Solicitors to register all the companies. In relation to "X", he said that he dealt with the auction of "Y"'s property consequent upon his bankruptcy.

14. "X" admitted that he breached the Bank's procedure in allowing the credit facilities to the various companies. He knew the money was to be used to settle payment for "Y"'s investments. He admitted receiving some advantage from "Y" (albeit of a minor nature). The ICAC executed the warrants obtained. The Solicitors asserted legal professional privilege in respect of all the documents seized. They were all sealed pending an application to the court, which the Solicitors concerned Lee Pang & Kwok said that they would make.

15. Another warrant was obtained and executed in respect of other company files disclosed by the Solicitors which were stored in a warehouse, for which legal professional privilege was also claimed.

The Legal Proceedings

16. The ICAC were concerned that an application to the court should proceed expeditiously and inquired of the Solicitors on 7 December 2001. Lee Pang & Kwok then replied that they were ceasing to act. Their successors, John Ku, Tam & Ho wrote notifying their interest as such on 8 December 2001, maintaining the same objection to the ICAC's actions.

17. On the 20 December an originating summons was issued by those Solicitors. On 4 January 2001 yet another firm of Solicitors appeared on the scene, Remus Wong, Pang, Kung & Co. with the same handling Solicitor. The form of process initiated was inappropriate. The Department of Justice on behalf of the ICAC began to exert some pressure in order to expedite matters. Remus Wong & Co. finally took out an application for judicial review and an interlocutory injunction on 31 January 2001.

18. The Affirmation sworn and filed by the Solicitors for the applicants in support was not from the original Solicitors who purportedly asserted legal professional privilege in respect of the documents they held and which, at least in part, were expected to have been generated by them i.e. advice, correspondence, actions as a consequence of such advice. Instead the deponent, Mr Brian Leu, asserted at paragraph 15 that:

"I am told and verily believe that the documents seized consist of inter alia ...

he then goes on to identify several groups of documents by general headings including Solicitors' attendance notes, correspondence between Solicitors and Applicants and advices from Solicitors. Some of the groups of documents do not on the face of it appear to be covered by legal professional privilege. It is therefore a "blanket claim."

19. More importantly it is clear that the deponent, a Solicitor, had not even examined the documents in respect of which he asserted such an all-embracing claim. He was relying solely on what he was told by his clients, the Applicants, as the basis for what he "verily believed", an assertion of somewhat dubious value. There was no affirmation from the Solicitors directly concerned, nor was there any correspondence or catalogue of documents exhibited.

20. Eventually, on 22 April 2002, after leave to apply for judicial review had been granted by Hartmann, J (on 27 March 2002) Mr Brian Leu was sworn to a further affirmation. On the 3 and 4 April he had inspected the documents and set them out in two schedules. There was a much more detailed categorization. Again it is clear that a number of categories of documents cannot be protected by the claim of legal professional privilege even though such claim has been persisted in.

21. It was on the basis of these affirmations that the matter came before me and was argued by Mr Simon Westbrook S. C. for the applicants and Mr Kevin Zervos for the Department of Justice. It is clear that as to the law and its application there is very little in dispute between them in their respective arguments, and I have been aided by the breadth and synthesis of their submissions.

The Law

22. It may be helpful if I start with the approach of Taylor LJ as he then was, in Balabel & Anor v. Air India 1988 1 Ch 317. Taylor LJ reviewed a number of authorities. Starting with "the broad scope of privilege" in Carpmael v. Powis 1846 1 Ph 687 citing Lord Lyndhurst at page 692:

"I am of the opinion that the privilege extends to all communications between a Solicitor, as such, and his client, relating to matters within the ordinary scope of a Solicitor's duty."

In Minter v. Priest 1929 1 K. B. 655 and 1930 A. C. 658 both the Court of Appeal and The House of Lords touched upon the extent of legal professional privilege where the relationship of solicitors and client existed, though it was not essential to their determination. Taylor LJ regarded their dicta as of strong persuasive authority.

23. Lawrence LJ (in the Court of Appeal) at page 675 had said:

"It has long been established that it is not necessary for the purpose of obtaining protection from disclosure that the communications should be made either during or relating to an actual or expected litigation, and that it is sufficient that they pass as professional communications in a professional capacity."

Greer LJ at page 683-684 added:

" ... It has been established that the privilege is not confined to the conduct of litigation, or to advice obtained for the purposes of existing or contemplated litigation. It applies to communications between client and solicitor in respect of all matters that come within the ordinary scope of professional employment"

Lord Buckmaster at page 568 of his speech in the House of Lords said:

"The relationship of solicitor and client being once established, it is not a necessary conclusion that whatever conversation ensured was protected from disclosure. The conversation to secure this privilege must be such as, within a very wide and generous ambit of interpretation, must be fairly referable to the relationship, but outside that boundary the mere fact that a person speaking is a solicitor and the person to whom he speaks is his client affords no protection." (my underlining)

This indicates the existence of a more restrictive approach in given circumstances and Lord Atkin's speech added a degree of precision to the restrictive test (at page 581)

"As to this it is necessary to avoid misapprehension lest the protection be too limited. It is, I think, apparent that if the communication passes for the purpose of getting legal advice it must be deemed confidential. The protection of course attaches to the communications made by the solicitor as well as by the client. If therefore the phrase is expanded to professional communications passing for the purpose of getting or giving professional advice, and it is understood that the profession is the legal profession, the nature of the protection is I think correctly defined. One exception to this protection is established. If communications which otherwise would be protected, pass for the purpose of enabling either party to commit a crime or a fraud the protection will be withheld."

In Committee of Receivers of Galadari v. Zealcastle Ltd. 6 October 1986, Scott J (as he then was) approached the issue before him by applying the principle expressed by Lord Atkin:

"With that principle in mind I must I think look at the documents which are in issue in the case and come to a conclusion whether they can fairly be regarded as a request ... for legal advice or whether the documents represent the giving of legal advice either to [the client] or to an agent of his. These documents would be privileged. But none of the documents which simply record the transaction which [he] had instructed his Solicitors to implement, or document the putting into effect of the transaction, or the formation of the ... company, or which passed between [his Solicitors] and the vendor's solicitors on the acquisition [of the property] of the conveyancing documents, would in my view, be documents in respect of which [he] could claim protection on the grounds of legal professional privilege."

Despite the extension of the privilege to cover non-litigious business, Taylor LJ restated that the purpose and scope of the privilege was to enable legal advice to be sought and given in confidence:

" ... the test is whether the communication or other document was made confidentially for the purpose of legal advice. Those purposes have to be construed broadly."

He went on to consider a number of circumstances relating to a "continuum of communication and meetings between the solicitor and client"

"Where information is passed by the solicitor or client to the other or part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach ...

Moreover, legal advice is not confined to telling the client the law; it must include advice as to what should prudently and seriously be done in the relevant legal context."

The broad extension of privilege without limit to solicitor and client communications on matters within the ordinary business of a solicitor, as illustrated by a number of decided cases, should now be reconsidered in the light of the current business activities of solicitors which in many cases go beyond the role of lawyer which was the narrow confine of earlier decisions.

... "The range of assistance given by solicitors to their clients and of activities carried out on their behalf has greatly broadened in recent times and is still developing. Hence the need to re-examine the scope of legal professional practice and keep it within justifiable bounds." (my underlining).

In relation to documents which do not specifically seek or contain advice, the decision as to whether they should be regarded as privileged or not must depend on whether "they are part of that necessary exchange of information of which the object is the giving of legal advice as and when appropriate."

24. It is therefore against this background of careful and considered judicial opinion, which has taken into account changing circumstances and put rational but limited constraints upon the breadth of the privilege, that I proceeded to examine the documents at the entirely reasonable suggestion of Counsel concerned. Following the results of that examination, I propose to deal with the documents or the categories, depending upon how many I find and consequently have to consider, in the context of the law as enunciated and developed.

The examination

25. The documents were contained in two sealed cardboard boxes each measuring 24" x 14" x 15".

26. In the first box were three files, two of normal thickness, one approximately twice as thick as the others. The first related to Yan Chai Tong (Health Food) Ltd, formerly Cyber Bright Ltd. The file was marked WK/C52/2000. Although in my notes I have separately recorded the contents of the sections it will suffice for these purposes if I identify the contents on a composite basis. The file consisted of company registration forms, annual returns, copy declarations of trust, certificates and the usual paperwork associated with the running of a company in compliance with the provisions of the Ordinance, though I am not saying that they necessarily constitute full compliance. That was not the purpose of my examination.

27. The second file - WK/M15/95 - related to Master Jade Investment Ltd and contained similar material.

28. The third - WK/T21/96 - in respect of Time Super International Ltd was headed Company Incorporation. It was the thickest of the three files swollen by duplicated documents and some Writs and Statements of Claim.

29. None of the files contained any documents or correspondence which could, on the broadest basis, be described as being advice, consequent upon advice or even approaching material which could properly be categorized as subject to legal professional privilege.

30. Inside each folder are invoices from the Solicitors relating to the formation of the company - or rather the purchase of a "shelf" company - and nominee services provided, together with vouchers for expenses and extracts from the ledger. None of these makes any reference to advice directly or indirectly. All the documents indicate that the Solicitors were providing company formation and general services in the running of the companies on a secretarial or administrative basis.

31. The second box contained three green box files. They were embossed with the titles of American Man Nin Chun Co., American Man Nin Chun Lifewater Ltd and Master Jade Investment Co. They are the usual box files created on the incorporation of companies with copies of the Articles and Memorandum of Association, company seal and spare forms. None of them contains any communication, advice, attendance note in relation to any matter passing between solicitor and client.

32. Also in that box were two yellow files appearing similar in form and content to those files in the first box. File WK/A7/99 was marked American Man Nin Chun Lifewater. Its contents were of the same nature as the yellow files in that first box. The invoices and vouchers were also in respect of services for the incorporation of the company itself. The second file - WK/A6/99 was marked American Man Nin Chun Ltd. The contents are identical. The invoice and vouchers relate to company incorporation.

Conclusion

33. There are some printed documents in Chinese which I have not been able to read but they appear to be copies of English documents. In sum but subject to the above, there is not one document, note or entry in any file which could even remotely be described as confidential communication for the purposes of legal advice. It now appears particularly significant that the original Solicitors, whose documents they are or in whose possession they were, did not affirm to assert such a claim of privilege. In my view they would not, exercising proper professional judgment, have been able to do so. They held the position as best they could and as they were entitled to do in preliminary correspondence.

34. The application is dismissed with costs. If the parties wish to make any submissions as to the basis of costs they should notify the court.