HKSAR v. SADLER SIMON PETER AND OTHERS

DCCC 731/2024

[2026] HKDC 720

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 731 OF 2024

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RULING

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Background

1.  There are two charges and three defendants (D1- D3)  in the criminal trial coming up on 4 May 2026.

2.  Both counts are “insider dealing”.  Count 1 is against D1 and D2; Count 2 is against D3.

3.  D1 and D2 are natural persons; D3 is a Hong Kong incorporated company licensed by the Securities and Futures Commission (the “SFC”).

4.  D3 managed some investments including the Segantii Asia Pacific Equity Multi-Strategy Fund (the “Fund”).

5.  D1 was the Director and Chief Investment Officer of D3.  He was responsible for making decisions of D3 and he monitored the overall risk portfolio of the Fund; D2 was a trader employed by D3.

6.  On 15 June 2017, Merrill Lynch Far East Limited (“MLFE”)  was instructed by a client Lone Pine Capital LLC (“Lone Pine”)  to carry out a block trade (the “Block Trade”)  of the shares of Esprit, a company listed on the Main Board of the Stock Exchange of Hong Kong.  As a result, Lone Pine sold 195,644,005 shares at HK$4.68 per share to 9 institutions.  D3 was one of them, acquiring 8 million shares on 15 June 2017.

7.  D3 and five of the nine institutions sold their acquired interests in Esprit on 15 June 2017.  The shares closed at HK$4.51 in the market that day.

8.  MLFE later made a self-report to the SFC, alleging its employees might have mishandled the Block Trade.

9.  The SFC found out Mr. Trivedi (the then Director of Global Markets of MLFE)  had told Mr Psarianos (the then Director of Equity Sales Trading Team of MLFE)  about the Block Trade. Before the market opened on the previous day of the Block Trade, i.e. 14 June 2017, Mr Psarianos approached D1 and D2 to discuss the Block Trade. At 0728 hr that day, Mr Psarianos made a phone call to D2 telling him that they had a potential block situation involving 190 million Esprit shares with a target price “minus 5” (meaning a discount of 5 % off).  Mr Psarianos did not mention the identity of Lone Pine.  He asked if D2’s colleagues would like to further discuss the matter.

10.  Nine minutes later (0737 hr), D2 called Mr Psarianos who confirmed the full size of the Block Trade was 195 million and the seller had not been selling Esprit shares in the market prior to the Block Trade.

11.  The above two telephone calls comprise what the Prosecution calls “Information A”.

12.  At 0742 hr on the same day (14 June 2017), D2 emailed D1 and three other staff of D3 informing them that “… a seller in Esprit (330 HK)  who is looking to sell 190m shares or USD131m worth and are looking for a bid. Seller appears to be lonepine#3 holder with 10.06% of the company.  Indicatively they mentioned a 5% discount… and this is their full size and do not have appeared to be in the market prior”.  This email is what the Prosecution calls “Information B”.

13.  Between 1 Jan 2017 and 15 June 2017, there were no news or rumours relating to the Block Trade in the public domain.  The Prosecution says “Information A” and “Information B” were inside information.

14.  On 14 June 2017, between 1021 hr and 1604 hr, D1 long-sold three lots of Esprit shares (187,300 shares at $5.35; 200,000 shares at $5.30; 500,000 shares at $5.25); D2 long-sold three lots (28,600 shares at $5.30; 500,000 shares at $5.20; 155,600 shares at $5.20). The total long-sold quantity by D1 and D2 that day was 1,571,500 shares.

15.  On 14 June 2017, D2 also short-sold 132,000 shares at $5.23.  He made arrangement for stock borrowing at 1044 hr that day but the shares were not eventually used for trade settlement.

16.  The next day (15 June 2017), before the market opened, D1 informed Mr Psarianos that D3 would take up 8 million Esprit shares at $4.68 from the Block Trade. MLFE then allocated the shares to D3.

17.  On the same day, D3 sold 5,962,100 Esprit shares at an average price of $4.72, representing 20.1% of the market sale volume of the day in that share.

18.  The Prosecution alleges that D1 and D2 sold the Esprit shares for the Fund operated by D3 on 14 June 2017, making use of the inside information they had acquired from MLFE to trade in those shares.

19.  D1-D3 were indicted on 6 June 2024 and the charges were slightly amended on 12 February 2026.

20.  The trial is to start on 4 May this year. D1-D3 are separately represented.  Their counsel have been seeking disclosure from the SFC and the DOJ.

21.  The SFC and the DOJ had provided materials to the Defendants including what MLFE gave the SFC, among which was a report prepared by MLFE’s external counsel Freshfields LLC (the “Report”) and some related materials including email-chains/communication records.

22.  However, D1-D3 want more, saying even if the Prosecution does not have the disclosable materials in its possession or control, it should get them from their custodian.  The Defendants particularly want the 25 sets of Interview Notes associated with the Report which Freshfields and/or MLFE in-house lawyers made after speaking to various witnesses in the Block Trade. They also complain some contents of the served documents have been redacted due to MLFE’s claim of legal privilege protection (LPP).

23.  MLFE contends the Report and certain materials now in the hands of the Defendants actually have LPP, and the undisclosed Interview Notes too.  MLFE says the Report was provided to the SFC under a limited waiver. It says the Report and the submitted materials were for the Commission and should not be passed on to the Defendants.

24.  Before MLFE knew about any disclosure, the SFC had provided the Report and materials to the Defendants as unused materials for their preparation of the trial. The Commission had not sought  consent from MLFE. MLFE was only first informed on 29 September 2025 by the SFC.  The Commission’s email started with “We regret to inform you that certain materials…have been disclosed as unused materials in the criminal proceedings…”.

25.  Freshfields subsequently contacted the Defendants’ lawyers, asking them to destroy the materials and not to make any use of them.  The Defendants refused, saying the materials were not under LPP and were disclosable.

26.  MLFE now becomes an intervener and wants the Court to hear its LPP claim.  

27.  The Prosecution at first held the view the materials were not disclosable due to MLFE’s LPP claim.  But it changed its stance before the first preliminary hearing on 20 February 2026.  By then, Ms Clarke KC has just taken up the lead role for the Prosecution.  She says people (of the SFC and/or the DOJ)  made mistakes.

Two arguments

28.  There are two issues to be resolved before the trial is to start on 4 May 2026.

29.  First, the Prosecution says that in Hong Kong, unlike UK, the duty to disclose is limited to materials in the possession or control of the Prosecution.  The Defendants however contend the Prosecution has duty to dig up materials which are disclosable.

30.  There is no argument on what disclosable materials mean.  The question is whether the Prosecution only need to disclose what it has got, or there is a wider duty as claimed by the Defendants.

31.  Second, can MLFE claim LPP over the materials in dispute?

Seven categories: CAT-01 to CAT-07

32.  The materials under disclosure/LPP dispute have been jointly classified by the Prosecution and the Defendants into seven categories: CAT-01 to CAT-07. Some documents have been identified and given a “DOC-x” reference.  For example, the Report is DOC-26 of CAT-02 and the 25 sets of Interview Notes are DOC-01 to DOC-25 of CAT-01.

33.  Mr Walsh SC for MLFE has prepared a very clear Scott Schedule of what materials the Company is claiming LPP or not claiming. 

34.  CAT-01: DOC-01 to DOC-25 are 25 sets of Interview Notes created in the course of Freshfields’ preparing the Report (DOC-26); MLFE has not yet submitted the Interview Notes to the SFC and claims LPP over DOC-01 to DOC-25.

35.  CAT-02: DOC-26 is the Report (DOC-26); DOC-27 to DOC-29 are correspondence between MLFE and the SFC; DOC-30 is a letter dated 19 July 2022 from Freshfields responding to the Commission’s  s.183 Notice with an email-chain and attachments; DOC-31 is a letter dated 20 September 2022 from Freshfields responding to s.183 Notice with enclosures; MLFE claims LPP over the whole of DOC-26 to DOC-29, partly on DOC-30 (see MLFE’s Scott Schedule/Item A10), and partly on DOC-31(see MLFE’s Scott Schedule/Item B1).

36.  CAT-03A: DOC-32 to DOC-37 are generally described as MLFE’s Internal Materials; MLFE does not claim LPP over DOC-32 to DOC-36; DOC-37 has been provided to the SFC with redactions and MLFE refuses to un-redact (see MLFE’s Scott Schedule/Item C2).

37.  CAT-03B: MLFE does not claim LPP.

38.  CAT-03C: MLFE does not claim LPP.

39.  CAT-03D: MLFE does not claim LPP.

40.  CAT-03E: MLFE does not claim LPP.

41.  CAT-04: MLFE shows no concern.

42.  CAT-05: includes DOC-46 to DOC-48; MLFE does not claim LPP over DOC-47 and DOC-48; for DOC-46, MLFE raises a similar claim as that for DOC-31 of CAT-02 (see MLFE’s Scott Schedule/Item B1).

43.  CAT-06: MLFE shows no concern.

44.  CAT-07: contact records between the SFC and the Prosecution witnesses, and those between the SFC and MLFE or their representatives; MLFE shows no concern.

MLFE’s LPP claim

45.  MLFE is a Hong Kong incorporated affiliate of the Bank of America Corporation. Mr. Tan Seng Hin is the Bank’s Asia-Pacific General Counsel.  For this LPP hearing, he has made an affirmation where he collectively calls the Bank and its affiliates including MLFE as the “Bank”.  

46.  MLFE claims Freshfields was engaged by the Bank to provide advice.

47.  The Defendants, with the Prosecution now joining in their stance, say Freshfields was merely engaged to prepare a self-report for MLFE to send to the SFC under Paragraph 12.5 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.  As such, there was no dominant purpose of seeking advice (legal advice or litigation advice)  in Freshfields’ engagement. The Report so produced and the associated materials/email-chains /communication records could not have LPP.

Freshfields’ engagement

48.  On or around 16 June 2017, following a review of relevant internal correspondence, the Bank’s compliance teams had concerns of some staff’s mishandling “Material Non-public Information (MNPI)” in relation to the Block Trade.

49.  On 21 June 2017 external counsel Freshfields was engaged by the Bank to investigate in the matter.  

50.  MLFE says the purpose of the internal investigation was to obtain a sufficient understanding of the relevant facts and evidence to advise the management on various issues including the risk of regulatory, criminal or other adversarial proceedings, and the appropriate way forward for the company in light of the findings (including whether, when and how to notify the SFC of the issues that could be identified).

51.  MLFE says it made the first call to the SFC on 22 June 2017 of the Bank’s concerns about the Block Trade.  It notified the Commission that external counsel had been engaged to assist with fact-gathering and to investigate compliance with internal policies and procedures, etc. and that MLFE would provide updates on its internal review to the Commission.

52.  Freshfields and the Bank’s in-house lawyers subsequently conducted a total of 25 interviews with 17 relevant people.  The records were not verbatim records or the interviewees’ own writing.  They were summaries or reports made by the lawyers doing the interviews.  Those 25 sets of Interview Notes are DOC-01 to DOC-25.

53.  After 22 June 2017, MLFE provided updates to the SFC and the Commission requested the Bank to keep it apprised of the developments.

54.  On 4 August 2017, MLFE sent to the SFC an 18-page report compiled by Freshfields with a covering letter.  The Report was titled “Internal Investigation Report - Project Palm”. The covering letter contained a limited waiver:

“The Report is subject to legal professional privilege and is provided to the Commission on the basis of a limited waiver of privilege in the course of the Commission’s exercise of its supervisory and regulatory authority. By providing this Report to the commission, the Bank is not waiving, and should not be deemed to have waived, legal professional privilege in the Report, any materials referred to in the Report or in any documents, notes, memoranda, or other records created during or arising from the review conducted by external counsel against any person other than the Commission. For the avoidance of doubt, pursuing to 12 USC §1828 (x)  and all applicable Hong Kong laws, the submission of the Report should not be construed as waiving, destroying, or otherwise affecting any privilege that the Bank or its affiliates may claim with respect to such information under United States Federal or State law or Hong Kong law.

The Report and all documents referred to there in contain confidential and proprietary information of the Bank, its affiliates, and their advisors or representatives, and may not be disclosed, used or duplicated in whole or in part without the Bank’s expressed prior written consent.”  

Disclosure by the SFC to the Defendants

55.  Despite the limited waiver, the SFC without asking for MLFE’s consent or alerting it at the time, provided to the Defendants the Report and some associated materials from MLFE (not including the 25 sets of Interview Notes, which the SFC never has).  The Commission only informed Freshfields of the disclosure with “regret” many months later, first time ever in September 2025 (see para 24 above).

56.  On 15 October 2025, Freshfields wrote to the Defendants telling them of the limited waiver to the SFC and that MLFE would not waive its privilege or confidentiality. It asked the Defendants not to use the privileged materials and to have them destroyed.

57.  The Defendants continually disputed MLFE’s claim of LPP.

58.  The DOJ at first held the stance that the disputed materials were not disclosable but some had been disclosed to the Defendants by mistake. However, shortly before the first disclosure hearing on 20 February 2026, the Prosecution changed its stance to say MLFE’s LPP claim was not sustainable.

59.  The Defendants always, and the Prosecution now, deem the Report submitted by MLFE to the SFC on 4 August 2017 as a self-report under Code 12.5.  They say Freshfields was not engaged to provide legal advice to MLFE but merely to compile a report for submission to the SFC for compliance.  They also say even if Freshfields had been asked to advise MLFE, that was only one of its tasks and it could not be a dominant purpose of Freshfields’ work and the Report. As such, MLFE cannot claim LPP.  

60.  The Defendants ask for MLFE’s submission to the SFC of the materials they are after for their proper understanding of the Report and the Block Trade handling.

61.  As the Report and some other materials had already been disclosed to them by the SFC/the DOJ, the Defendants ask the court to declare there is no LPP for those materials so they can make use of them in the trial coming up.

62.  There are certain contents redacted in some of the MLFE’s materials, which are already in the hands of the Defendants.  The Defendants ask MLFE to remove the redactions since there is no sustainable LPP.

Code 12.5

63.  The Court is now asked to decide for what purpose Freshfields was engaged by the Bank.  Was it for advice? If so, was it a dominant purpose?  Or was Freshfields merely or mainly engaged by the Bank to prepare a report to send to the SFC to serve as self-report under Code 12.5?

64.  The SFC is the supervisory and regulatory body of the equities and futures trade.  It has issued the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

65.  Code 12.5 is titled “Notifications to the Commission”.  It says “A licensed or registered person, as a firm, should report to the Commission immediately upon the happening of any one or more of the following…” It makes reference, among other things, to any material breach, infringement of or non-compliance, etc.  Sub-paragraphs (a)  and (f)  require the firm to give “particulars… and relevant information and documents”.

66.  MLFE points out that according to the SFC’s Circular to intermediaries-Compliance with notification requirement, the Commission requires a report of breach to be made “as soon as practicable upon identification, not after the intermediary has already completed his investigation, obtained legal advice or taken remedial actions.”  Mr Walsh SC argues Code 12.5 emphasizes immediacy and does not require any written report to be made, let alone a full investigation report.  He says the Report was a product of Freshfields’ giving advice to MLFE and a copy was provided to the SFC for openness and goodwill for the latter’s understanding. That was to respect the SFC’s Guidance Note on Cooperation.

67.  MLFE maintains that the dominant purpose of Freshfields’ preparing the Report was to advise MLFE, so the document and the related materials should be protected by legal advice privilege, as well as litigation privilege because at that time, it was reasonably anticipated that adversarial proceedings against the Bank and/or its staff would be forthcoming.Mr Walsh SC says the limited waiver was given to the SFC only. It can be extended to the DOJ but cannot be further extended to others.

Inter-related issues

68.  There are two issues here, which are inter-related:

(i)  The Prosecution’s duty to disclose (“Issue I”; argument between the Defendants and the Prosecution); and

(ii)  MLFE’s LPP claim (“Issue II”; argument among the Defendants and the Prosecution on one side and MLFE on the other as Intervener).

69.  The Prosecution do not have all the materials that the Defendants want. Some are still with MLFE, which insists not to produce to the SFC due to LPP despite the Commission has issued s.183 Notice to ask for them.

70.  The Defendants maintain that the Prosecution’s duty to disclose is not confined to materials in its possession or control but includes digging out disclosable materials for the Defendants.  They refer to the UK regime.

71.  The Prosecution disagrees.  It says that according to Hong Kong Law, disclosure is limited to materials in the possession or control of the Prosecution or the investigation body (the SFC in the present case), though in some circumstances it would be extended to government departments or public bodies. The Prosecution says it nevertheless, out of pragmatic consideration to resolve the current disclosure dispute so as not to hamper the imminent trial, has asked the SFC to issue another s.183 Notice on 25 February 2026 to demand MLFE to produce the concerned materials still in its possession.

Decision (I)

72.  I agree with the Prosecution that the duty to disclose in Hong Kong is limited to materials in the possession or control of the Prosecution, and if there are circumstances suggesting that any other government department or agency has disclosable materials, the duty will be extended accordingly: HKSAR and Lee Ming Tee and Securities and Futures Commission(2003)  6 HKCFAR 336.

73.  I also agree with the Prosecution that such ruling is academic now as it has endeavoured to ask the SFC to issue the latest s.183 Notice to MLFE for the materials sought by the Defendants. Whether MLFE would comply with the SFC’s request is beyond the control of the Prosecution.

Costs order (I)

74.  The Prosecution and the Defendants are parties to the criminal trial upcoming. There would be no separate costs order at this stage for Issue I.

Engaging Freshfields

75.  The crux of MLFE’s LPP claim is the Freshfields Report. MLFE says the external counsel was engaged to advise the Bank. Freshfields’s work included fact-finding, internal review and recommendations. The 25 sets of Interview Notes were created by Freshfields and MLFE’s in-house lawyers at the fact-finding stage and the Report does contain advice. Those materials and related emails/communication records would all enjoy LPP. The Report was provided to the SFC under a limited waiver (see para. 54 above)  and the 25 sets of Interview Notes had never been given to the SFC.

76.  The Defendants and the Prosecution say Freshfields was not engaged for any dominant purpose to advise the Bank but only to compile a self-report under Code 12.5. The Report submitted to the SFC on 4 August 2017 was basically a fact-finding document, and if Freshfields ever gave advice, that was just one of the tasks of its engagement and not a dominant purpose.

77.  There is no written mandate of Freshfields’ engagement as proof.  Mr Tan for the Bank says in his affirmation “The Interviews and the resulting Interview Notes formed part of a continuous process by which Freshfields gathered and analysed factual material to advise MLFE.  They were not created for any separate or independent purpose.”

78.  The Defendants and the Prosecution say Mr. Tan’s words are less than clear and are unconvincing. They comment on MLFE’s lack of written instructions to Freshfields.

The Report and the 25 sets of Interview Notes

79.  I have carefully read the Report (which the Defendants and the Prosecution also have).

80.  MLFE gives me the 25 sets of Interview Notes (which the Defendants and the Prosecution do not have)  for my own reading. I have carefully studied them.

81.  Since the materials are under MLFE’s privilege dispute, I shall not descend into their details.  But where necessary, I would make reference to the Report’s title, headings, relevant paragraph numbers and certain sentences.

82.  The 18-page Report with annexes was titled “Internal Investigation Report; Project Palm”.

83.  Part I of the Report was “Introduction”.

84.  Part II of the Report was “Summary of facts”.

85.  Part III was “Issues”, dealing with (i)  “Internal policies regarding material non-public information (MNPI)  ”; para. 26 comments on what the Bank’s employees should have considered and what they should do if they were unsure [one sentence]; (ii)  “Internal policy regarding recording of communications”; (iii)  “Internal policy regarding equity aggregation”; and (iv)  “Internal policy regarding client complaints”; para. 39 comments that the clients’ complaints in the present case should have been escalated to Business Management and Legal and Compliance [one sentence].

86.  Part IV was “Remediation and Next Steps”.  It says the Bank will take the following steps to prevent recurrence: (i)  “Development of Framework” [one point], (ii)  “Training” [four points]; and (iii)  “Complaints” [one point].

87.  The last two paragraphs of the Report read:

47. The Bank is currently evaluating the conduct of employees involved in this Trade.

48.The Bank will keep the Hong Kong Securities and Futures Commission apprised of its evaluations and any subsequent action that may arise from them.

Dominant purpose

88.  There is no argument of the dominant purpose requirement for LPP.  If documents or information are to enjoy LPP, the dominant purpose of their creation must be for seeking legal advice (legal advice privilege)  or for use in the conduct of or in relation to existing or contemplated adversarial litigation (litigation privilege): Citic Pacific Ltd v Secretary for Justice (No 2) [2015] 4 HKLRD 20.

89.  The court should not accept blanket claims of LPP. It must view the matter from an objective standpoint with anxious scrutiny. The dominant purpose must be of clear paramountcy.  It does not have to be the sole purpose but it must be clearly dominant.  If there exist other purposes equally significant, there is no dominant purpose.

90.  The Report was titled “Internal Investigation Report; Project Palm”.  Mr Walsh SC says Freshfields was engaged to advise the Bank.

91.  The Report indeed has a bit of advice but a holistic reading of the document would only give the impression that it was basically a review of the Block Trade.  Freshfields in the Report referred to some of MLFE‘s policies. There was only brief advice in para. 26 and para. 39 (see para. 85 above).  The “Remediations and Next Steps” were about what the Bank would do to prevent recurrence (see para. 86 above)but it was not clear who formulated them.  After all, they were brief.

92.  Objectively, the Report cannot be regarded as a document of legal advice even with those small bits in paras. 26 and 39 there. And there is no litigation advice at all. The Report really gives the impression that it was a report prepared to tell the SFC that the Bank had got some policies for safeguard and it would be more vigilant to prevent recurrence.

93.  It is not unusual for an established institution like the Bank to engage external counsel to prepare such a report to send to the SFC. According to Mr. Tan’s affirmation, the Bank’s legal team was of compact size.  It is obvious external counsel could provide more manpower and they also would appear to the SFC to be more objective and reliable.  The Bank certainly want to sound serious to appease the Commission, which was putting the Bank under investigation at the time.

94.  Mr Walsh SC submits the Bank had no duty to file an investigation report under Code 12.5 and it had already discharged its obligation to notify the SFC of any breach or suspected breach by its first call to the Commission on 22 June 2017, or at last concluding the obligation with its fourth call on 28 July 2017.

95.  The Bank really had no duty to file a written investigation report under Code 12.5.  But its notification obligation to the SFC would not be just a one-off effort.  Very often, it must be ongoing for the subject intermediary to provide enough information to the Commission for investigation.

96.  That was exactly what the Bank did and expressed in many of its exchanges with the SFC. As the Defendants point out, contemporaneous communication between the Bank and the SFC supports the view that the Bank was doing compliance with the Commission, which duty was continual rather than one-off. For example. Mr. Tim Li, Assistant Vice-president of the Bank’s APAC Compliance in his 23 April 2018 email to the SFC said “We have discussed and agreed that the items requested in your email shall be treated as continuations of the self-report which the Bank filed in respect of the matter on 4 August 2017…”

97.  Mr Walsh SC says Mr Li is not a lawyer and the gentleman in a later email on 7 May 2018 changed to call the Report by its proper name “Internal Investigation Report”.

98.  Mr Li is not a lawyer but he was Assistant Vice President of Asia Pacific Equities Compliance of the Bank at the time. He certainly knew what the Bank was doing and what he was saying on behalf of the Bank in his 23 April 2018 email.  The Report sent to the SFC on 4 August 2017 was regarded as a self-report as part of the Bank’s continual compliance.  I am sure it was not the personal view of Mr Li but indeed that of the Bank at that time.

99.  The last two paragraphs of the Report reflect that view(see para. 87 above).

100.  Despite there was a bit of simple advice in the Report (see para. 85 above), the Bank’s engaging Freshfields was really not for any dominant purpose of seeking legal advice or litigation advice.  The Report and associated materials (including the 25 sets of Interview Notes and emails/phone records)  were not created with a dominant purpose of seeking legal advice or litigation advice.  They cannot enjoy LPP.

Waiver

101.  There are arguments of waiver (limited waiver and collateral waiver)  between MLFE and the Defendants.  Ms Clarke KC for the Prosecution says she remains neutral on the waiver issues.

Collateral waiver

102.  Mr Walsh SC says some of the materials were only provided to the SFC, some (including the 25 sets of Interview Notes)  had never been submitted and some submitted contents had been redacted. All had not been deployed in court for collateral waiver to apply.

103.  The Defendants argue that the correct test should be whether “the information is deployed for forensic and commercial advantage”: MK and the Registrar of High Court (No 2) [2024] HKCFA 6. They say the Report submitted to the SFC by the Bank during investigation was certainly such a document and the Interview Notes are closely associated with the Report. When the Report becomes disclosable, the Interview Notes and related emails/phone records would also be disclosable by collateral waiver.  Only then can the Report be fairly and properly understood.

104.  I agree with the Defendants that there is no requirement of actual deployment in court. It would be sufficient if the “the information is deployed for forensic and commercial advantage”.The materials submitted to the SFC for investigation have been so deployed.

105.  The Interview Notes/emails/phone records are not independent of the Report.  They were created by Freshfields and/or MLFE’s in-house lawyers for the preparation of the Report. Although the Report does not specifically refer to the interview contents, its Annex A (titled “Investigation steps taken to date”)  clearly states what interviews/emails/phone records took place with who and when.

106.  The creation of the Report and the interviews/emails/phone records was one whole process.  Now the Report without any LPP is disclosable to the Defendants. The Interview Notes/emails/phone records would also be disclosable due to collateral waiver.

Limited waiver

107.  What is the limited waiver which MLFE gave the SFC on 4 August 2017?

108.  MLFE gave the Report to the SFC under a limited waiver (see para. 54 above).  The Report was given to the Commission “on the basis of a limited waiver of privilege in the course of the Commission’s exercise of its supervisory and regulatory authority”.  In simple terms, it means the Report was given to the SFC for it to carry out its supervisory and regulatory duties.

109.  The SFC in discharge of its supervisory and regulatory authority very often would consult the DOJ for advice on the appropriateness of the accusations and the venue of trial.  By necessary implication, the limited waiver would be against the DOJ too.  Mr Walsh SC accepts that.

110.  But what about others like the Defendants?

111.  Mr Walsh SC says no, relying on Citic Pacific Ltd and Secretary for Justice [2012] 2 HKLRD 701, where the Court of Appeal ruled the company’s limited waiver for the SFC’s investigation could not be extended to third parties, even though the police wanted to have access to the documents for criminal investigation.  The Court said waiver of privilege could not be lightly inferred.

112.  In the present case, the Bank stated in that covering letter clearly that it “is not waiving, and should not be deemed to have waived, legal professional privilege in the Report, any materials referred to in the Report or in any documents, notes, memoranda, or other records created during or arising from the review conducted by external counsel against any person other than the Commission”.

113.  If the police in the Citic case could not have the privileged documents, I do not see how the Defendants here can argue for a stronger case to get hold of the sought materials if, and only if, the materials had LPP.

114.  The Defendants comment the limited waiver was not mentioned in all the exchanges between MLFE and the SFC.

115.  MLFE need not repeat to the SFC the limited waiver every time it made reference to the Report. It had been raised to the Commission clearly enough, and if it were really privileged information then “once privileged, always privileged”unless there was substantial change of circumstances.

116.  I rule that the Report and associated materials, while disclosable to the SFC and the DOJ due to the limited waiver, cannot be disclosed to the Defendants if, and only if, the dominant purpose of their creation was for legal advice or litigation advice.  However, there is no such dominant purpose so the materials can be disclosed by the SFC/the DOJ to the Defendants as ordinary disclosable materials for their conduct of the trial.

Decision (II)

117.  MLFE fails in its LPP claim and collateral waiver argument.

118.  I have studied the concerned materials and come to the following decision:

(a)  CAT-01: DOC-01 to DOC-25 all disclosable;

(b)  CAT-02: DOC-26 to DOC-31 all disclosable;

(c)  CAT-03A: DOC-32 to DOC-37 all disclosable;

(d)  CAT-03B: all disclosable;

(e)  CAT-03C: all disclosable;

(f)  CAT-03D: all disclosable;

(g)  CAT-03E: all disclosable;

(h)  CAT-04: all disclosable;

(i)  CAT-05: DOC-46 to DOC-48 all disclosable;;

(j)  CAT-06: all disclosable;

(k)  CAT-07: all disclosable.

119.  Some of the disclosable materials had not been submitted to the SFC or had been submitted with redaction.

120.  MLFE is not a party to the criminal trial.  This court has no jurisdiction to compel it to un-redact the submitted materials or to submit disclosable materials still in its possession.If the wanting materials/contents have been sought by the SFC under s.183 Notice, it is open to MLFE to decide whether to surrender them to the Commission for compliance.  If MLFE would not do that, it is up to the Commission to apply to the Court of First Instance for an enforcement order under s.185 of the Securities and Futures Ordinance, Cap 571.

121.  The Prosecution and the Defendants may use the disclosable materials in the coming criminal trial.

Costs order (II)

122.  On Issue II, there would be no order as to costs unless any party would apply within 14 days from the date of this Ruling with submission in writing, and any objection/reply be in writing within the next 14 days.