SUPER WORTH INTERNATIONAL LTD AND OTHERS v. COMISSIONER OF THE INDEPENDENT COMMISSION AGAINST CORRUPTION AND ANOTHER

HCMP 1320/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1320 OF 2012

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D E C I S I O N

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1.  On 3 July 2015, I handed down a judgment in which I rejected the Plaintiffs’ claim for legal professional privilege (LPP) in respect of 6 sets of documents.  Mr Hui, for the 3^rd and 4^th plaintiffs, who claimed privilege in respect of items 1, and 4-6, now seeks a stay of the release of the documents to the defendants pending an appeal to the Court of Appeal. 

2.  The 1^st and 2^nd plaintiffs do not seek a stay.  In those circumstances, items 2(b), 2(c), 2(d), 2(e), and 2(f), all of which have been found not in any way to involve solicitors or legal advice, must be available for disclosure to the defendants.

3.  Ms Draycott having learned, through my judgment, that items 2(a)(i), 2(a)(ii), 2(a)(iii) and 3 are documents involving legal advice in respect of parties who are not parties to these proceedings reminds me that those documents may still be subject to a claim for privilege.  The parties who may be entitled to claim privilege are undoubtedly aware of their right to claim, but no claim has been made. I think it appropriate to leave it to those advising the defendants to give such advice as they may in relation to the inspection of those documents.

4.  Mr Hui seeks to pursue an appeal in respect of items 1, 4, 5, and 6, all of which were found not to carry LPP.

5.  If the appeal is arguable, it seems clear that a case such as this would be the classic case in which a refusal of a stay would render an appeal nugatory, and that a stay should be granted.  Plainly, if a stay is refused the documents will be exposed to the defendants and the appeal rendered immediately nugatory.  This case is quite different to the usual money case, and is similar to the factual circumstances in Star Play Development Ltd v Bess Fashion Management Co Ltd, (unreported, 7 June 2002, HCA 4726/2001), where, if the stay had been refused the appellant would have lost access to the premises it was seeking to keep.

6.  Mr Hui grounds the appeal in part on the grounds, rejected by me, that LPP in Hong Kong ought to be extended to accountants (the R (Prudential plc & another) v Special Commissioner of Income Tax & another [2013] 2 AC 185 argument), and that the appropriate law to be applied in determining LPP should be the lex causae, and not the lex fori.  If either of those arguments succeed, it is arguable that the claim for LPP in respect of items 4 and 6 might succeed.

7.  In the light of the powerful dissent by Lord Sumption in Prudential, I cannot say that the Prudential ground is unarguable.  The argument is certainly open, and constitutes a matter of policy which is appropriate for consideration by the Court of Appeal.

8.  In the light of my findings on the fraud exception I did not explore the question of the lex causae and the lex fori.  The documents contained within items 4 and 6 are matters involving accountants and questions of Goods & Services Tax in New Zealand.  The expert advice seems clear that in New Zealand a form of privilege may attach to those documents by virtue of the fact that they involve accountants.

9.  It is sufficient if I say that had I proceeded to deal with the question of lex causae and lex fori, it is likely that I would have found that in Hong Kong the lex fori is the appropriate law under which to determine the question of privilege.  But I cannot say that the question of the appropriate law to be applied is unarguable.  It is clear from the academic arguments to which Mr Hui referred, that the matter is least, arguable.  Again, the matter raises issues of policy which are appropriate for consideration by the Court of Appeal.

10.  The only prejudice there is to the defendants from a stay is the delay that may potentially arise in respect of the forthcoming trial, which I understand is due to start sometime in October.  Mr Hui informs me that he intends to lodge a certificate of urgency with the Court of Appeal and he is confident that arrangements will be able to be made to hear an appeal before the October commencement of the trial.

11.  In those circumstances I am satisfied that I should order a stay pending appeal in respect of items 4 and 6.

12.  Items 1 and 5 did not involve either accountants or differences in the lex causae and lex fori.  In respect of those documents, Mr Hui sought to argue that there was an arguable case that there was an insufficient causal link between the creation of those documents and the circumstances in which I have found there to be a strong prima facie case of fraud for those documents to carry LPP. 

13.  It is quite right that, viewed on their own, both of those documents could stand as perfectly innocent documents.  However it completely clear that any activities involving the network of companies established or used by May Wang in dealing with the proceeds of the fundamental fraud, the falsification of the CraFarms accounts, were directed at the release of the proceeds of that fraud. 

14.  An essential part of any fraud designed to obtain money is the means by which the money comes into the hands of the fraudster, or moves, for example through the banking system, under the fraudsters direction.  Where documents are created in the course of the movement of money those documents become part of the machinery of the fraud.  As part of the machinery of the fraud LPP cannot attach to those documents.

15.  I am quite satisfied that it is not arguable that the activities reflected by documents 1 and 5 are so removed from the fraudulent activities of May Wang, that they can stand on their own, and attract legal professional privilege.  They both constitute part of the machinery of the fraud.  As such they lose any LPP that might otherwise attach to them by virtue of the fraud exception.  There is no arguable appeal in respect of documents 1 and 5.

16.  I accordingly reject the application to stay in relation to documents 1 and 5.

17.  Mr Hui sought a short stay to enable application to be made to the Court of Appeal for a stay in respect of documents 1 and 5.  I allow until 5 PM on Monday, 27 July 2015.

18.  The application for stay has succeeded in part.  Having heard counsel on the question of costs, there will be an order that the defendants are entitled to 50% of the costs of this application, with 50% in the cause in the appeal.