DAVID JOHN KENNEDY v. KELLY CHENG AND ANOTHER

FACV No. 30 of 2008

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 30 OF 2008 (CIVIL)

(ON APPEAL FROM CACV NO. 244 OF 2004)

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J U D G M E N T

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Mr Justice Bokhary PJ :

1.  The main questions of law in this appeal are these.  Is a liquidator free to disclose to the police transcripts of private examinations conducted pursuant to s.221 of the Companies Ordinance, Cap.32?  Or does disclosure require the court’s leave?  What if leave is required but a liquidator makes disclosure without leave?  In particular, under what circumstances then would disclosure without leave amount to contempt of court on his part?  These questions arise because a liquidator disclosed, without leave, the transcripts of the private examination of two former directors of the company in liquidation, and they seek to have him committed for contempt because he did that.

2.  Section 221 provides as follows :

“(1)      The court may, at any time after the appointment of a provisional liquidator or the making of a winding-up order, summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or any person whom the court deems capable of giving information concerning the promotion, formation, trade, dealings, affairs, or property of the company.

(2)        The court may examine him on oath concerning the matters aforesaid, either by word of mouth or on written interrogatories, and may reduce his answers to writing and require him to sign them.

(3)        The court may require him to produce any books and papers in his custody or power relating to the company, but, where be claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the court shall have jurisdiction in the winding up to determine all questions relating to that lien.

(4)     If any person so summoned, after being tendered a reasonable sum for his expenses, refuses to come before the court at the time appointed, not having a lawful impediment (made known to the court at the time of its sitting, and allowed by it), the court may cause him to be apprehended and brought before the court for examination.”

3.  The purpose and scope of s.221 are dealt with very clearly and fully in Lord Millett NPJ’s judgment in Joint & Several Liquidators of Kong Wah Holdings Ltd v. Grande Holdings Ltd (2006) 9 HKCFAR 766 at pp 780A-782A.  To that judgment Mr Justice Chan PJ and I added certain observations in a joint judgment in which we said this at p.774H-J :

“The broad purpose of provisions like s.221 … is to help liquidators to carry out their duties as effectively, quickly and economically as possible.  To that end, liquidators need to identify, at an early stage, what promising paths they can pursue and, let it never be forgotten, what blind alleys they had best avoid so as not to throw good money after bad.”

As to what a liquidator’s duties are, one must go to Lord Millett NPJ’s judgment where he said this at p.780D-F :

“Section 221 and corresponding provisions overseas are designed to enable a liquidator to carry out his functions. These are twofold: (i) to collect the assets of the company, settle its liabilities and distribute its surplus funds amongst its creditors; and (ii) to investigate the causes of the company’s failure and the conduct of those concerned in its dealings and affairs: see Re Pantmaenog Timber Co Ltd [2004] 1 AC 158 at pp. 164, 172-173, 177.  The first of these functions is primarily of concern to the company’s creditors and shareholders; the second serves a wider public interest in enabling the authorities to take appropriate action against those guilty of misconduct in relation to the company.  The appellants have never challenged the bona fides of the Liquidators in making the present applications or alleged that they have done so for an ulterior purpose.”

4.  Wing Fai Construction Company Limited (“Wing Fai”) is the company in liquidation, an order for its winding-up having been made on a creditor’s petition.  Mr David John Kennedy is the liquidator concerned.  He is the appellant.  Ms Kelly Cheng and Mr Robert Yip are the former directors concerned.  They are the respondents.  While he was a joint and several liquidator of Wing Fai, Mr Kennedy, without seeking the court’s leave to do so, (i) made use in civil proceedings of the transcripts of Ms Cheng and Mr Yip’s private examinations and (ii) disclosed those transcripts to the police.  He maintained that it was proper for him to do so.  They maintained that such use and disclosure required the court’s leave and that such use and disclosure without leave amounted to contempt on his part.  Eventually they confined their complaint of contempt to disclosure alone.

5.  Mr Kennedy had made two reports to the police : one on 20 January 2004 and the other on 31 March that year.  In those reports he expressed his belief that Ms Cheng and Mr Yip had : (i) misappropriated monies from Wing Fai’s bank accounts; (ii) manipulated documents; (iii) committed perjury; and (iv) withheld, concealed and/or destroyed documents.  The transcripts of Ms Cheng and Mr Yip’s private examinations were among the six lever-arch files of documents which Mr Kennedy supplied to the police in support of his allegations against Ms Cheng and Mr Yip.

6.  Their motion to have him committed for contempt came before Kwan J (as she then was) in the High Court.  It was heard on 6-8 and 13 July 2004.  On the 23rd of that month, Kwan J found that Mr Kennedy had no case to answer, and dismissed the motion to commit him.  Then on 23 September 2004 Kwan J (i) awarded Mr Kennedy costs against Ms Cheng and Mr Yip on an indemnity basis and (ii) ordered that Mr Kennedy may recover any shortfall in costs out of Wing Fai’s assets.

7.  Ms Cheng and Mr Yip then appealed to the Court of Appeal.  On 18 August 2006, after a hearing on 22-24 June the previous year, the Court of Appeal (Yeung, Yuen and Tang JJA) dismissed the appeal.  But, the order not having been sealed, Ms Cheng and Mr Yip applied to the Court of Appeal for a variation amounting to a reversal.  The application was heard on 3 October 2007.  It succeeded.  On the 12th of that month, the Court of Appeal (Tang VP and Yeung and Yuen JJA) allowed the appeal so as to : (i) set aside Kwan J’s order that there is no case to answer; (ii) remit the motion for committal to Kwan J for her to resume the hearing thereof; and (iii) make an order nisi that Mr Kennedy pay Ms Cheng and Mr Yip’s costs and the Official Receiver’s costs.

8.  On 28 November 2007 a consent order was made (i) setting aside Kwan J’s award of costs and (ii) providing for the repayment of $2,046,900 by Mr Kennedy to Ms Cheng and Mr Yip.  Then on 13 May 2008, after a hearing on the 6th of that month, the Court of Appeal made absolute the order nisi as to costs which they had made on 12 October 2007.  At the same time ie on 13 May 2008 the Court of Appeal made a order nisi for the payment by Mr Kennedy to Ms Cheng and Mr Yip and to the Official Receiver of the costs of the hearing on the 6th of that month.

9.  With leave granted by the Appeal Committee on 31 October 2008, Mr Kennedy now appeals to this Court, seeking the restoration of the first instance decision that there is no case for him to answer.  His appeal is supported by the Official Receiver and opposed by Ms Cheng and Mr Yip.

High Court’s reasons for finding no case to answer

10.  Six points, each sufficient on its own if correct, were put forward in support of the submission made to Kwan J on Mr Kennedy’s behalf that he had no case to answer.  Outlining those six points, Kwan J said that they were as follows :

“(1)      On a proper construction of [rule 62], no leave of the court is required in respect of the various uses and disclosure of the transcripts of evidence by [Mr Kennedy].

(2)        On a proper construction of [the relevant provisions of the Companies Ordinance], [Mr Kennedy] is not prohibited from reporting possible criminal conduct directly to the police without first applying to the court for leave.

(3)        If contrary to (1) and (2), there should be any doubt as to the legal position on these matters, the benefit of the doubt should go to [Mr Kennedy].

(4)        There is no basis on which the court may be satisfied beyond reasonable doubt as to the actus reus and mens rea of interference with the administration of justice, which is necessary in a criminal contempt.

(5)        In any event, contempt proceedings should be the last resort.  Even if [Ms Cheng and Mr Yip’s] complaints were justified, they should have resorted to other measures instead of seeking to commit the respondent for contempt.

(6)        [Ms Cheng and Mr Yip] have no locus to bring proceedings to commit [Mr Kennedy] for criminal contempt.  The Secretary for Justice is the appropriate person to bring such proceedings.”

11.  Accepting the first of those points, Kwan J expressed herself of the view that “on a proper construction of [rule 62 of the Companies (Winding-up) Rules], no leave of the court is required in respect of the uses and disclosures of the transcripts of the examination by [Mr Kennedy] for the discharge of his duties in the liquidation”.  Rule 62 reads :

“(1)      The Official Receiver or liquidator may attend in person, or by counsel or by solicitors employed for the purpose, any examination of a witness under section 221 of the Ordinance, on whosesoever application the same has been ordered, and may take notes of the examination for his own use, and put such question to the persons examined as the court may allow.

(2)        The notes of the depositions of a person examined under section 221 of the Ordinance, or under any order of the court before the court, or before any officer of the court, or person appointed to take such an examination (other than the notes of the depositions of a person examined at a public examination under section 222 of the Ordinance) shall not be filed, or be open to the inspection of any creditor, contributory, or other person, except the Official Receiver or liquidator, or any provisional liquidator other than the Official Receiver, while he is acting as provisional liquidator, unless and until the court shall so direct, and the court may from time to time give such general or special directions as it shall think expedient as to the custody and inspection of such notes and the furnishing of copies of or extracts therefrom.”

12.  The second point appears to have been made in response to Ms Cheng and Mr Yip’s contention that Mr Kennedy had, by making a report to the police without seeking directions from the court, circumvented the procedures laid down by sections 191(2), 222 and 277(1) of the Companies Ordinance and thus deprived them of an opportunity to be heard.  Section 191(2) reads :

“The Official Receiver or liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any officer of the company in relation to the company since the formation thereof, and any other matters which in his opinion it is desirable to bring to the notice of the court.”

There is no need to set out s.222.  It contains the further powers which, by virtue of s.191(3), the court shall have in the event of fraud being reported under s.191(2).  Section 277(1) reads :

“If it appears to the court in the course of a winding up by the court that any past or present officer or member of the company has been guilty of any offence in relation to the company for which he is criminally liable, the court may, either on the application of any person interested in the winding up or of its own motion, direct the liquidator to refer the matter to the Secretary for Justice.”

13.  Accepting the second point and rejecting the contention to which it was a response, Kwan J said this :

“… it is quite impossible to spell out from [the provision concerned] an implied prohibition that the liquidator in a compulsory winding up is not allowed to report a possible criminal act to the police.  I also agree with [counsel for Mr Kennedy] the reason for the different provisions in section 277(1) and 277(2) (which imposes on the liquidator in a voluntary winding up a mandatory obligation to report to the Secretary for Justice) is to ensure that in a voluntary winding up, where the liquidator would be acting under the control of the members or creditors, possible criminal conduct would be brought to the attention of the court or the relevant authority.”

She then cited Lord Browne-Wilkinson’s statement in Hamilton v. Naviede [1995] 2 AC 75 at p.102G that

“… where information has been obtained under statutory powers the duty of confidence owed on the Marcel principle cannot operate so as to prevent the person obtaining the information from disclosing it to those persons to whom the statutory provisions either require or authorise him to make disclosure.”

In speaking of “the Marcel principle”, Lord Browne-Wilkinson was of course referring to the principle in Marcel v. Commissioner of Police of the Metropolis [1992] Ch 225.  For present purposes, this principle can be stated thus.  Information obtained under compulsory powers can only be used for the purposes for which those powers were conferred.  This restriction is enforceable under a duty of confidence not to disclose such information to others unless the court exercises its discretion to override that duty in the public interest.

14.  On the third point, Kwan J said this :

“If I were wrong about the proper construction of the relevant statutory provisions, there is real doubt whether these provisions should be construed in the manner as contended by the applicants.  The nature and scope of the prohibition allegedly contained in the statutory provisions are obviously open to dispute.  In the circumstances, I should apply the principle against doubtful penalisation and give the benefit of the doubt to the respondent.”

I take that to mean that she was confident in her view that the first two points were correct but would have resolved them in Mr Kennedy’s favour even if she was in a state of doubt as to whether or not they were correct.

15.  The fourth point concerns, as we have seen, both actus reus and mens rea.  As to actus reus, Kwan J said that she was “inclined” to agree with Mr Kennedy’s counsel’s submission that the court could not be satisfied that any of the disclosures made by [Mr Kennedy] would amount to a significant interference with the administration of justice, even if one were to assume against [Mr Kennedy] that the disclosures complained of were prohibited by statute.  And as to mens rea, Kwan J took the view that even if disclosure to the police were prohibited, there was no evidence that Mr Kennedy was aware of any such prohibition or that he intended to circumvent any statutory procedure.

16.  On the fifth point, Kwan J (citing a number of decisions including that of this Court in G v. S (2000) 4 HKCFAR 419) said that “contempt proceedings should only be brought as a last resort when no alternative powers of the court could be invoked”.  She was of the view that even if Ms Cheng and Mr Yip’s complaints were justified, it is clear that there were other steps that they could have taken.  There was, she said, “simply no need to resort to contempt proceedings”.

17.  The sixth point was left open.  As to why she did not decide the question of locus on this occasion, Kwan J gave an explanation to the following effect.  The question was an important and difficult one which it was undesirable to decide without hearing the Secretary of Justice.  And deciding it was unnecessary since Mr Kennedy would win however it was decided.

Court of Appeal’s reasons for holding that there is a case to answer

18.  Both for dismissing Ms Cheng and Mr Yip’s appeal and then for allowing it, the Court of Appeal’s reasons were given by Yuen JA.  On the occasion when that appeal was dismissed, Yuen JA, having said that there was no objection to Mr Kennedy’s use of the transcripts in civil proceedings, then turned to the question of the supply of the transcripts to the police.  After discussing the relevant legislation and a number of cases, she concluded that Mr Kennedy should not have supplied the transcripts to the police without the court’s leave.

19.  Having said that (in para.107 of her judgment of 18 August 2006), Yuen JA went on (in paras 108 to 111 of that judgment ) to say as follows :

“However that is not to say that in this case, the judge was wrong in finding that there was no case to answer on the application for an order of committal.  It is well-established that to constitute contempt, the act in question had to have a significant and adverse effect on the administration of justice (AG v Newspaper Publishing plc [1997] 1 WLR 926), in thwarting the purpose of the court (AG v Punch Ltd [2003] 1 AC 1046).

Here assuming that the purpose of the court is the protection of the integrity of its process under s.221 and rule 62 so as to preserve the confidentiality of examinees' depositions, there was no adverse effect on the administration of justice because as events transpired; subsequent to Kwan J giving leave to issue the Examinees’ application, the court (Barma J) actually gave leave to [Mr Kennedy] to disclose part of the depositions to the police. Whilst that would mean that [Mr Kennedy] had no leave to disclose the balance of the depositions, it was not contended that the disclosure of those parts had a significant and adverse effect on the administration of justice.

The judge found that no evidence had been led by [Ms Cheng and Mr Yip] to demonstrate any significant and adverse impact on the administration of justice as a result of the acts complained of (para.98).  [Mr Kennedy] argued before this court that that was because it was thought that the arguments before the judge at that stage were restricted to points of law only.  However, para.5 of the judgment shows that the submission was ‘primarily’ based on the arguments of law, in other words that other arguments were also advanced - as was indeed the case as shown in para.4 of the judgment.

Accordingly it cannot be said that the judge erred in her conclusion that there was no prima facie case of a significant and adverse impact on the administration of justice as a result of the acts complained of.”

20.  In the final paragraph of that judgment (para.112) Yuen J said this :

“In the circumstances, I would dismiss the appeal with an order nisi that the [Mr Kennedy] bear [Ms Cheng and Mr Yip’s] costs and the Official Receiver’s costs (if any) of the application for the period before Barma J’s order and that [Mr Kennedy’s] and the Official Receiver’s costs thereafter be paid by [Ms Cheng and Mr Yip].  The parties have liberty to apply for directions consequential upon the amendment of the Notice of Appeal.”

21.  When the Court of Appeal subsequently held that there was a case to answer, it did so for reasons which may be taken from paras 15 and 24 to 26 of Yuen JA’s judgment of 12 October 2007.  In para. 15 Yuen JA said that the reason why she had earlier considered that there was no case to answer was because she had thought that “ex post facto, in June 2004 [Mr Kennedy] had obtained leave ex parte from [Barma J] to make the same (or at least a similar) statement to [the police] as he had done in March 2004 which had enclosed the transcripts of the private examinations.”

22.  And then in paras 24 to 26 Yuen JA said as follows :

“It was on that mistaken assumption that the Barma Order covered the same (or similar) subject-matter as the non-approved disclosures that I took the view that no substantial harm had been done to the administration of justice, which was necessary to constitute the actus reus for contempt. Had I not been labouring under that mistaken premise, I for one would have found that the judge was in error in finding that there was no case to answer.

In my view the actus reus comprised of the supply by [Mr Kennedy] of the transcripts of the private examinations to [the police] without first obtaining leave of the Court, contrary to [rule 62] (which has effect as if enacted by the Ordinance). The integrity of the Court's process under s.221 and rule 62 was compromised by that conduct. That was sufficient evidence of a substantial interference with the administration of justice, there having been no mitigation of its effect because (as we now know) no leave was obtained at any stage and [Mr Kennedy] did not attempt to argue that leave would have been obtained if sought.

As for the mens rea, there is at least prima facie evidence in that [Mr Kennedy] had twice referred to his intention to approach the Court but eventually failed to do so. An intention to interfere with the administration of justice (to be distinguished from a motive or desire to do so) can be inferred from all the circumstances including the foreseeability of the consequences of the conduct (Attorney General v Newspaper Publishing Plc [1988] Ch 333, 374H-375A).In supplying the transcripts to [the police], [Mr Kennedy] must have known that he was destroying the confidentiality of the depositions which rule 62 was intended to prevent (Attorney-General v Punch Ltd [2003] 1 AC 1046 para.52). It is inappropriate to comment any further at this stage.”

Submissions made on Mr Kennedy’s behalf 

23.  Mr Robin Dicker QC for Mr Kennedy began by stressing that liquidations concerned not only with the collection and distribution of assets, but are also meant to serve a wider public interest.  As to this wider public interest, Mr Dicker deployed able arguments in support of these propositions :-

(a)      A liquidator’s functions include investigating wrongdoing and reporting any such wrongdoing to the authorities, to enable them to take appropriate action.

(b)     For that purpose, a liquidator is entitled to apply for an order for private examinations.

(c)     He may use any information obtained by such means for the performance of his functions, including that of reporting wrongdoing to the authorities.  

(d)     The authorities may use such information for their own investigations and even as evidence against any wrongdoer.

24.  Turning to section 168I of the Companies Ordinance (dealing with the matters that liquidators must report to the Official Receiver who may report the same to the Financial Secretary) and sections 191 and 277 (referred to earlier in this judgment), Mr Dicker made the point that the Companies Ordinance contains various provisions designed to ensure that wrongdoing is reported to the appropriate authorities.  Mr Dicker then dealt with the position of the Official Receiver.

25.  And then Mr Dicker submitted that the following conclusions can be drawn in regard to reporting :-

(a) There is a patchwork of reporting provisions designed to serve the public interest in potential wrongdoing being investigated and reported to the appropriate authorities.

(b) Contrary to Ms Cheng and Mr Yip’s contention, these provisions are not to be regarded as “gateways” through which a liquidator or the Official Receiver needs to thread himself.  That contention of theirs is not consistent with how these provisions are drafted.  Nor is it consistent with how the courts have interpreted them.

(c) There is nothing in these provisions to suggest that a compulsory liquidator has to obtain the court’s leave when he reports to the appropriate authorities – no more than does a liquidator in a voluntary liquidation.

(d) Nothing in s.277(2) suggests that a report involving information obtained from a private examination is in a special category such that leave is required (but required only) in that situation.

(e) If s.277(1) were construed to require leave, there is nothing to suggest that leave would not be required whenever a report is made regardless of the source of the information that is being reported.

(f) So if a liquidator requires leave before disclosing material obtained from a private examination, that cannot be because s.277 says so.

26.  Having made the foregoing submissions, Mr Dicker turned to rule 62.  The starting position for understanding rule 62 is, Mr Dicker submitted, that information obtained on compulsion should not be generally available, but should be used only for the purposes for which the powers of compulsion were conferred.  That, Mr Dicker submitted, is the only restriction on the use that a liquidator is entitled to make of s.221 transcripts.  As to that Mr Dicker cited what Sir Nicolas Browne-Wilkinson V-C (as he then was) said in Marcel’s case at p.237C, what Lord Browne-Wilkinson (as he had become) said in Hamilton v. Navide at p.102E-G and what I said (at para.55) Akai Holdings Ltd v. Ernst & Young [2009] 2 HKC 245, a recent decision of this Court on s.221 transcripts.

27.  Mr Dicker’s submissions as to what rule 62 operates to do are these.  The rule is intended to secure compliance with the requirement that s.221 transcripts be used only for the purposes of the liquidation.  To this end, it operates to prevent third parties from obtaining access to such transcripts without the court’s leave.  But the rule also operates for the benefit of the liquidation.  As a result, such information as a liquidator obtains through a private examination remains private in his hands unless and until he discloses it in the course of performing his functions.  The rule does not restrict the ways in which he may use s.221 transcripts in accordance with his functions.

28.  As to a liquidator being subject to the control of the court, Mr Dicker’s points are these.  It is accepted that a liquidator, at least in a compulsory liquidation, is an officer of the court and is subject to the control of the court.  In other words, the court can give a liquidator directions, either on an application by the liquidator or a third party or, indeed, of the court’s own motion.  Such directions serve two different purposes.  One is to regulate how the liquidator carries out his functions, given that ultimately it is the court which is conducting the liquidation, through its own officers.  The other purpose is that of deciding difficult points. 

29.  Mr Dicker also accepted that one can say that the liquidator holds the transcripts “to the order of the court”.  But that does not mean that a liquidator must ask the court for permission before he ever uses the transcripts.  All that it means is that a court can give directions as to what should or should not be done with the transcripts.

30.  Finally, Mr Dicker submitted that even if the disclosure which Mr Kennedy made without leave required leave, his making such disclosure without leave would not amount to contempt unless he had acted in the knowledge that leave was required and had made disclosure intending to circumvent such requirement.

Official Receiver’s stance

31.  The Official Receiver’s stance may be summarised thus.  One of a liquidator’s functions, which exists in the wider public interest, is to investigate suspected criminal conduct and report the same to the prosecuting authorities.  There is therefore nothing to prevent a liquidator from disclosing private examination transcripts in the exercise of that function.  In any event, committal being a remedy of last resort, it would not be an appropriate remedy in the present case even if the disclosure made by Mr Kennedy required leave.

Ms Cheng and Mr Yip’s points

32.  Mr John Jarvis QC for Ms Cheng and Mr Yip skilfully contended on their behalf (i) that the disclosure which Mr Kennedy made required the court’s leave and (ii) that his having made such disclosure without leave has given rise of a case of contempt for him to answer.  The points put forward in support of those contentions are these :-

(1)     Section 221 compels answers in relating to companies, abrogating the rule against self-incrimination.

(2)     The Companies Court always maintains a discretion as to the use which can be made of compulsorily obtained evidence.  Simply because a liquidation’s purposes includes investigating the causes of the company’s failure or whether any crime has been committed does not mean that there should be unfettered reporting of all the evidence obtained under compulsion.

(3)     The court controls the use to which such evidence can be put.

(4)     Where the abrogation of a fundamental right is implied in a statute, the court should assume that counterbalancing protection will be put in place. This was indeed the assumption of the courts in Hong Kong until the decision of Kwan J in the instant case.

(5)     The only proper safeguard for persons giving evidence under compulsion pursuant to s.221 is that the court controls the transcripts of such evidence and that liquidators hold the transcripts to the court’s order, so that the court can perform the judicial function of deciding whether a liquidator should be directed to refer a matter to the Secretary for Justice. Such control by the court will not result in a flood of applications since it will be in limited circumstances where liquidators will consider it necessary to refer a case to the prosecuting authority.

(6)     Voluntary referral by a liquidator through the court to the prosecuting authority is entirely different from a case where the prosecuting authority has embarked on an investigation and requires the liquidator to provide evidence. In some jurisdictions liquidators may be statutorily obliged to provide such information. In other cases a liquidator should seek the court’s directions.

(7)     The absence of any statutory protection is a compelling reason for a need for intervention by the court.  Rule 62 is in clear terms in providing that documents on the court file, which includes the transcripts held by the liquidators, cannot be inspected by any other person.  The liquidator is clearly bound unless it falls within any established exceptions. The fact that there are established excepted classes does not mean that the present case should fall within such classes.

(8)     In short, the Court of Appeal was correct in holding that supplying the transcripts to the police required leave.

(9)     The evidence shows that Mr Kennedy knew of the contents of rule 62, was prepared to make a report under s.277 and was aware of the established Hong Kong practice that rule 62 was for the protection of the examinee. Notwithstanding this, he provided the transcripts to the police without leave by way of a tit-for-tat reaction to defamation proceedings brought against him by Ms Cheng.  This was a collateral purpose as distinct from the proper purpose of the liquidation.  By disclosing the transcripts Mr Kennedy deliberately destroyed their confidentiality.  He thus interfered with the administration of justice by setting at naught rule 62.  The result is Ms Cheng and Mr Yip have been subjected to investigation by the police since 2004.

(10)         Having initially wrongly believed that Mr Kennedy had obtained the leave of Barma J to supply the s.221 transcripts to the police, the Court of Appeal was entirely correct to conclude in the 2007 judgment that there was a case for Mr Kennedy to answer.

No constitutional challenge involved in the present case

33.  It is to be noted that the present case does not involve any challenge to the constitutionality of s.221’s effect of requiring persons to answer questions even if their answers would be self-incriminatory.

Leave not required : therefore no case to answer

34.  On the question of whether a liquidator is free to disclose private examination transcripts to the police, I accept at least the general drift of Mr Dicker’s submissions.  In my own way, I would put it as follows.

35.  A liquidator’s functions include serving the wider public interest by investigating wrongdoing and reporting the same to the authorities so as to enable them to take appropriate action.  For the purposes of his function of conducting such investigations (as well as for the purposes of his other functions), a liquidator is entitled to apply for an order for private examinations.  He may use any information obtained through such examinations to perform his functions, including that of reporting wrongdoing to the authorities.  In so reporting, he may disclose such information.  And he may make such disclosure by supplying the transcripts of private examinations to the authorities.  In doing that, he would not be violating any confidence.  No restriction against the disclosure of information obtained under compulsory powers would arise unless making such disclosure would put the information to a use beyond the purposes for which those powers were conferred.  Section 62 is not for the protection of the examinee, but of the liquidation.

36.  The statements in Hamilton v. Naviede are, for the purposes of the present case, to be read in the context of the following material differences between the circumstances of that case and those of this one.  In that case the judge who made the order for a private examination had made it clear by his order that the examination was to be conducted on the basis that the court would decide what (if any) access to the record should be afforded to the Serious Fraud Office (“the SFO”).  And when the SFO eventually requested copies of the transcripts of the private examination, the liquidators applied to the court for directions, leaving it to the SFO to persuade the court, if it could, to direct release to it of the transcripts.  In those circumstances, the court had of course to exercise its discretion as to whether or not to direct such release.  The circumstances of the present case are wholly different.  Mr Kennedy considered it right to report the matter to the police and supply them with the transcripts of Ms Cheng and Mr Yip’s private examinations.  He could have sought, but was not bound to seek, the court’s directions before doing so.  It was his discretion as the relevant officer of the court.

37.  Having been supplied with those transcripts, the police were free to make derivative use of them in investigating this matter.  That is so for the reasons given in HKSAR v. Lee Ming Tee (2001) 4 HKCFAR 133 at pp 156D-179F by Mr Justice Ribeiro PJ with whom the other members of this Court agreed.  In a context like the present, “derivative evidence” means, as Chief Justice Mason neatly put it in Hamilton v. Oades (1989) 166 CLR 486 at p.496, “evidence which is obtained from other sources in consequence of answers given by the witness in his examination”.

38.  What about direct use?  In Koon Wing Yee v. Insider Dealing Tribunal (2008) 11 HKCFAR 170 this Court deprived the Insider Dealing Tribunal’s proceedings of its criminal character by (i) declaring invalid a statutory provision which empowered the tribunal to impose a penalty amounting to a fine and (ii) setting aside the fine which the tribunal had imposed.  That preserved the disqualification, disgorgement and costs orders which, under other provisions of the statute, the tribunal had made on the basis of its findings of insider dealing.  Those findings could not have stood if the tribunal’s proceedings had not been deprived of its criminal character.  One of the reasons why those findings could not have stood if the tribunal’s proceedings were of a criminal character is because those findings were reached on evidence which included compulsorily obtained evidence. 

39.  If in any given case an examinee is prosecuted and the prosecution seeks to make direct use of his or her transcripts supplied to the authorities, it would be for the criminal court to rule on whether that is to be permitted.  It might be held that any admission made by the examinee would be involuntary and therefore inadmissible.  Moreover, as was pointed out in Secretary for Justice v. Lam Tat Ming (2000) 3 HKCFAR 168 at pp 178J-179A by Chief Justice Li with whom the other members of this Court agreed, a court’s overriding duty to ensure a fair trial invests the court with a judicial discretion to exclude even admissible evidence, including a voluntary confession, if doing so is necessary in order to secure a fair trial.  In Hong Kong the right to a fair trial is guaranteed by art.87 of our constitution the Basic Law as well as by art.10 of the Bill of Rights entrenched through art.39 of the Basic Law.

40.  Those are the safeguards in the circumstances of cases such as the present one.  They are clear, focused, real and effective safeguards.  The safeguards in such circumstances do not lie in rule 62.

41.  In my view, a liquidator who reports wrongdoing to the police may supply them with the transcripts of private examinations, and does not need the court’s leave to do so.  Mr Kennedy was entitled to do what he did.  It cannot be contempt on his part.  On that basis, his appeal must succeed.

No case to answer even if leave were required

42.  Nevertheless, it should be made clear that Mr Kennedy would not have had a case of contempt to answer even if the disclosure which he made without leave had required leave.  Mr Jarvis submitted that Mr Kennedy’s point to that effect was not open because such leave to appeal as the Appeal Committee had given did not cover it.  I think that the point should be addressed.  All the arguments on the point have been heard, and if the leave to appeal granted does not cover the point, it should be enlarged to do so.

43.  On the merits, I accept the point.  All that has to be said in accepting it is this.  Contrary to what Mr Jarvis suggested, such a situation as the one in question is not to be equated with the breaching of an order of the court.  If leave had been required, disclosure without leave would still not have been contempt unless the person making such disclosure without leave had acted in the knowledge that the court’s leave was required and had made the disclosure intending to circumvent such requirement and pre-empt a decision by the court on disclosure.  Contempt, as this Court recognised in Solicitor (24/07) v. Law Society (2008) 11 HKCFAR 117 at p.151A-D, has to be proved beyond reasonable doubt.  And there is no evidence capable of supporting a sure conclusion that Mr Kennedy had the requisite knowledge or intent for contempt.

Redaction

44.  Before concluding this judgment, I would mention that there may be instances in which it would be appropriate for private examination transcripts to be disclosed, at least initially, only after they have been redacted to excise irrelevant, scurrilous or defamatory matters.  The question of redaction is of course one on which liquidators may but are not bound to seek directions from the Companies Court.  So is the question of any subsequent supply of initially excised portions.

Conclusion

45.  For the foregoing reasons, I hold that Mr Kennedy has no case of contempt to answer.  Accordingly, I would allow the appeal to set aside the Court of Appeal’s judgment and dismiss Ms Cheng and Mr Yip’s motion to commit Mr Kennedy for contempt.  Subject to any agreement thereon, costs here and below should be dealt with on written submissions in respect of which the parties should seek procedural directions from the Registrar.

Mr Justice Chan PJ :

46.  I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Ribeiro PJ :

47.  I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Mortimer NPJ :

48.  I agree with the judgment of Mr Justice Bokhary PJ.

Lord Millett NPJ :

49.  I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Bokhary PJ :

50.  The Court unanimously allows the appeal in the terms set out in paragraph 45 above, costs to be dealt with as stated therein.