CITIC PACIFIC LTD v. SECRETARY FOR JUSTICE AND ANOTHER

HCMP767/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 760 OF 2010

---------------------

BETWEEN

---------------------

---------------------

JUDGMENT

---------------------

1.  On 20 October 2008 the plaintiff revealed, by way of a profit warning announcement pursuant to Rule 13.09 of the Listing Rules of the Hong Kong Stock Exchange, that it previously had entered into various forward contracts in respect of three foreign currencies which had resulted in it sustaining a “Mark to Market” potential estimated loss of some $14.7 billion.

2.  According to that profit warning announcement, CITIC had become aware of its financial exposure on 7 September 2008. Although there is no evidence as to the date when it began to seek legal advice from Mayer Brown JSM it must have been prior to 23 September 2008 for one of its partners attended a meeting of the Board of Directors of the plaintiff on that date.

THE BACKGROUND

3.  On 22 October 2008 the Securities and Future Commission issued a ‘Direction to Investigate’ pursuant to s. 182(1) of the Securities and Futures Ordinance, Cap. 571 (the Ordinance), concerning suspected offences by the plaintiff, or persons connected with it, in breach of s. 384 of the Ordinance.

4.  On 23 October 2008 the SFC commenced an enquiry into whether :

2.1 persons involved in the management of the affairs of the plaintiff had engaged in defalcation, fraud, misfeasance or other misconduct towards it or its members or any part of its members; and/or

2.2 members or any part of the members of the plaintiff had not been given all the information with respect to its affairs that they might reasonably expect.

On the same day it issued an ‘Authority to require production of records and documents’, pursuant to s.179 of the Ordinance.

5.  On 24 October 2008 a letter was addressed to the plaintiff enclosing, inter alia, a copy of the Authority as well as a ‘Direction to produce records and documents’ detailing the documents which it required, which were categorized as having "reference to" the profit warning.

6.  On 27 October 2008 staff of the SFC attended at the plaintiff’s offices to obtain copies of the required documents. Present at that meeting were, inter alia, a Ms Patricia Shih, the plaintiff’s Group General Counsel, and a Mr. Martin Rogers, a partner of the plaintiff’s then solicitors, Clifford Chance. It will be necessary to return to events at this meeting as affirmed by Mr. Luk King Yip, a Director of the Enforcement Division of the SFC, in his affirmation.

7.  On that same day, the SFC issued an ‘Additional direction to investigate’ this time concerning suspected offences in breach of s.277 and/or s.298 of the Ordinance. On 28 October 2008 a further letter was addressed to the plaintiff enclosing, inter alia, a copy of the Additional direction as well as a ‘Notice to produce records and documents’ which related to certain specified computers and electronic devices.

8.  On 29 October 2008 documents and records were handed to the SFC by one Ricky Choy of the plaintiff. Amongst them were five documents, which had been inspected on 27 October 2008. Those five are asserted to be subject to legal professional privilege. The documents are:

8.1 a note dd. 18 September 2008 prepared by Ms Shih;

8.2 Minutes of a Board Meeting of the plaintiff held on 23 September 2008;

8.3 two letters from another firm of solicitors acting on behalf of the plaintiff, Mayer Brown JSM, which are dated 26 September 2008 and 6 October 2008; and

8.4 Minutes of a Board Meeting of the plaintiff held on 20 October 2008

9.  Correspondence commenced almost a month later between the SFC and Clifford Chance - who subsequently were replaced by a third firm, Robertsons, as the plaintiff’s solicitors - concerning the basis upon which those five documents had been handed over to the SFC.

10.  Later, in an email dated 8 December 2008 Mr. Rogers informed Mr. Luk of the fact that he had seen a further note, dated 9 October 2008, prepared by Ms. Shih, which contained advice based upon a discussion between her and Mayer Brown JSM. It was his assertion that the advice had been furnished to two directors of the plaintiff  “...in their individual, personal capacity and was not advice being given to the board of directors or the company.”

11.  Be that as it may, in the ongoing exchange of correspondence between the SFC and Clifford Chance regarding the basis of the release of the earlier five documents, there were also negotiations over the use to which the note dated 9 October 2008 may be put by the SFC if the plaintiff were to surrender a copy of it. Terms were arrived at in respect of that document which, the parties accept, place it in a different position from the earlier five documents. I shall refer to these six documents collectively as “the surrendered material”.

12.  On 16 March 2009, upon informations being laid before him by a number of police officers, a magistrate issued 27 search warrants pursuant to the provisions of s. 50(7) of the Police Force Ordinance, Cap. 232, authorising the seizure, at different premises, of specified documents and electronic devices and storage systems which were asserted as:

...likely to be of value... to the investigation of an (sic) offences, namely, (i) False Statements by Company Directors etc., under s. 21 of the Theft Ordinance, Cap. 210,...; and/or (ii) Conspiracy to Defraud under the Common Law and punishable under s.159C of Crimes Ordinance, Cap. 200,... that has been committed or that is reasonably suspected to have been committed...

13.  In addition to the stipulated  documents and devices there was a catch-all category expressed as:

...and any records which relate to (i) CITIC Pacific Limited Forex contracts entered into in 2007 and 2008, (ii) any announcements made or published by CITIC Pacific Limited relating to the companies’ (sic) business activities including internal decision making of CITIC Pacific Limited from 1st July 2007 to 16th March 2009...

14.  The search warrants were executed at various premises on 3 April 2009. What was seized was described, without exaggeration, by the plaintiff as:

“...(a) hundreds of thousands of pages of hard copy documents/materials; (b)...a total of 106 computer hard drives (52 removed and 54 clones created from computer servers)... [and] 32 items of computer hardware, including hard drives, computers, laptops and PDAs...”.

I shall refer to these items as “the seized material”.

15.  A blanket claim was made asserting that both the surrendered and the seized materials are subject to LPP. There is a further claim by the plaintiff that a portion of the seized material also falls without the scope of the search warrants. There were discussions between the plaintiff and the defendants as best how to resolve the issues. They were only partly fruitful. As a consequence, the plaintiff instituted these proceedings in which it seeks, inter alia, in its latest re-amended form, the return by the 2nd defendant of both the surrendered and the seized materials; and the return by the 1st defendant of the surrendered material, alternatively a declaration that the 1st defendant was only entitled to use it for the purpose of advising the SFC and is not entitled to deliver it or to divulge its contents to any third party.

The hearing

16.  The matter was set down to be heard on 9 March 2011. In the event, the hearing in respect of the seized materials was adjourned to a later date to enable the task of categorization to be completed: by agreement, this hearing dealt solely with the relief claimed in respect of the surrendered documents. That relief is set out at §§1 (iv)(a), (v) and (vi) and 1A of the re-amended originating summons.

17.  At issue, at first, was whether the court should inspect the surrendered documents to ascertain their contents. The defendants contended that it was necessary to follow that course given the fact that they asserted that the surrendered material was not privileged also by virtue of the operation of the crime/fraud exception. The plaintiff resisted any such inspection. On the first day of the hearing, the defendants foreshadowed introducing further evidence, either by way of affirmations or by oral evidence pursuant to the provisions of  Ord. 28 r. 4(3) and (4).

18.  Upon resumption the following day, the plaintiff indicated that it no longer objected to such inspection and, indeed, itself advocated such an approach with the caveat that argument on the content be heard in chambers. The plaintiff also indicated that it did not object to the filing of an affirmation by Mr Luk and a further affirmation by DSI Wong Yiu Sum, the police officer in charge of the investigations and indicated that it saw “no need” to file any further affirmations. As a consequence it is unnecessary for me to deal with the plaintiff’s arguments on the question of a court’s power of inspection of documents said to be privileged and the circumstances in which it is appropriate to inspect. I have inspected the documents: that part of the proceedings heard in chambers is referred to in a separate judgment to maintain the aspect of confidentiality of the documents at this stage.

LEGAL PROFESSIONAL PRIVILEGE

19.  Discussions concerning the concept, nature and purpose of legal professional privilege occupy such a prodigious number of pages of law reports in this and other jurisdictions as to render any further detailed recitation superfluous. It is a long-established rule in the common law which today is recognised as a fundamental human right, protected in various covenants and enactments including Article 35 of the Basic Law. It was described by Lord Taylor CJ in R v Derby Magistrates Court ex p. B [1996]1 AC 487 at 507:

The principle... is that a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests.

cited with approval in Solicitor v Law Society of Hong Kong (2006) 9 HKCFAR 175 §14.

20.  The plaintiff enjoys the benefit of the privilege: it has the right to forego the benefit of that privilege. The privilege is that of the client, not of the legal practitioner (A-G v Mulholland & Ano. [1963] 2 QB 477) although, in the ordinary course of events, it is the legal practitioner who claims it on behalf of the client. It falls into two categories: litigation privilege which covers all documents brought into being for the purposes of litigation and legal advice privilege which covers communications between lawyers and their clients through which legal advice is sought or given(per Lord Scott of Foscote in Three Rivers DC v Bank of England (No. 6) [2005] 1 AC 610 §10). It is not disputed by the defendants that the surrendered material is of a nature that may render it subject to LPP.

21.  It is the defendants’ case that, in respect of the earlier five documents, the plaintiff surrendered the documents unconditionally to the SFC, the result being that any privilege was lost in its entirety. This in addition to the defendants’ contention that the surrendered material is all subject to the crime/fraud exception.

(A) Loss/waiver of LPP

22.  The plaintiff asserts that it has the power to forego LPP in part and not only in whole: the plaintiff asserts that it is able to make an otherwise privileged document available to a third party with limitations placed on it as to the use to which the document may be put without losing the right to invoke LPP against others or as against the third party to whom it was released in respect of any usage outside of the stipulated conditions. Moreover, says the plaintiff, the circumstances in which the earlier five documents were handed over must be considered objectively from which the inevitable conclusion would be that there was, at least implicitly, only a partial waiver of LPP at the time of the surrender of the material, use of the surrendered material being limited only to the investigation by the SFC.

23.  The plaintiff asserts that the principle of disclosure of documents for a limited purpose is "well-established". Whether or not that is so in other jurisdictions, it does not appear to be settled in Hong Kong. In this connection the only Hong Kong authority to which the parties have been able to make reference is that of  Rockefeller and Co Inc v Secretary for Justice & Another [2000] 3 HKLRD 351. In that matter the SFC had sent documents to the Secretary for Justice, which documents had been obtained under a production order issued by the SFO. In a letter with which the documents were handed over, the company purported to impose a condition as to the extent to which it was prepared to waive LPP. It became necessary for the documents to be disclosed as unused material in the course of criminal proceedings.

24.  The plaintiffs rely upon the judgment of Godfrey VP who states, in express terms, that that plaintiff’s claim to confidentiality was waived only to a limited extent as expressly set out in a letter dated 10 December 1996. The plaintiff also seeks to find support for that view in the judgment of Rogers JA. It is to be noted, as the plaintiff accepted, that each of Godfrey VP and Rogers JA referred to the documents as being "confidential" and appears to have reached his conclusion, rather than on LPP, on the basis of a breach of confidentiality.

25.  As LPP is a complete answer to the disclosure of privileged documents, no balancing exercise involving the public interest can be involved - yet the decisions of both Godfrey VP and Rogers JA, as well as that of Keith JA, turned on such a balancing exercise concerning the disclosure of unusual materials in the framework of a fair (criminal) trial.

... the modern law on legal professional privilege is that the determination of whether legal professional privilege attaches to a particular document does not depend upon a balancing exercise. If the privilege attaches to a document, then it is immune from production however strong the countervailing arguments may be.

per Keith JA at 371I.

26.  The defendants’ position is contrary to that of the plaintiff. The defendant contends that it is not possible partially to waive LPP, that once a document is exposed to a third party then LPP is lost in its entirety. They rely upon the judgment of Keith JA who took the view that a partial waiver of LPP is “conceptually unsound”: a person who enjoys the benefit of a privileged document may refuse to produce it, the privilege rendering lawful such refusal. Keith JA continued that he did not see how it would be possible to produce documents which are privileged whilst at the same time claiming that the privilege which attaches to them is not being waived.

27.  On the view which I take of the factual basis in this matter, it is not necessary for me to decide, in respect of the earlier five documents, whether or not it is possible to partially relinquish one's right to invoke LPP.

The surrender of the documents and loss of LPP

28.  It is necessary now to look at the evidence as to what occurred when staff of the SFC attended at the offices of the plaintiff on 27 October 2008. The only, unchallenged, evidence in this regard is to be found in the affirmation of Mr. Luk who, after referring to the various preliminary steps taken by staff of the SFC, records the following:

10. On 27 October 2008, I, together with my colleagues visited the office premises of CITIC.... Prior to this visit, Natalie Ho had telephoned Ms Patricia Shih, group general counsel of CITIC informing her of our visit and inspection ....

11. When we arrived at CITIC’s offers... we met with Ms Shih and a Mr. Martin Rogers, a partner at Messrs Clifford Chance and two other persons in a meeting room. There were approximately 30 lever arch files and some DVDs containing copies and originals of the records and documents required to be produced under the direction, made available for our inspection in the meeting room. Ms Shih told us that the records and documents to be produced under the direction were in the meeting room. The company had prepared a list of documents to be inspected... Legal documents are listed there at 12 but there is no mention of legal professional privilege. She told us that CITIC would fully cooperate with the commission in its investigations. She said that CITIC would produce to the commission legal advices provided to CITIC by Messrs Mayer Brown JSM in this matter and would waive legal professional privilege in respect of these advices. I now do not recall whether Ms Shih mentioned any terms regarding the waiver and I left the meeting believing that privilege had been waived....

12. Ms Shih and Mr. Rogers together with the other two persons then left the room and we began to inspect the said records and documents. In the course of inspection, we found the following documents containing legal advices provided to CITIC by Mayer Brown JSM: [the five documents]. I read the documents...

...

14. The said records and documents including [the five documents] were handed to us by Ricky Choy of CITIC on 29 October 2008.

29.  It is, in simple terms, the plaintiff's position that because the SFC had informed the plaintiff that it was conducting an investigation in regard to the matters set out in the original and additional directions to investigate and because the evidence of Mr. Luk is that Ms Shih had said that the plaintiff would fully co-operate with the commission in its investigations, the necessary implication is that those earlier five documents were surrendered subject to the limitation that they may be used only within the scope of those investigations. The plaintiff was only dealing with the SFC, ran the argument, thus that was the only entity which could “use” the documents.

30.  That, in my judgment, is an overly-simplistic approach and ignores a number of important factors which militate against that conclusion.

31.  The plaintiff relies in support of its contention on the decision in British Coal Corporation v Dennis Rye Ltd and Another (No. 2) [1988] 1 W.L.R. 1113. In that matter the plaintiff had instituted proceedings against the defendants for return of moneys which had been overpaid on invoices issued by the defendants and/or damages for fraudulent, alternatively negligent, misrepresentation and conspiracy to defraud. Documents were created for the express purpose of the civil proceedings. They were handed to the police to assist in an investigation which resulted in criminal charges being brought against the defendants. The documents were supplied to the defendants by the police prior to the criminal trial: during the trial the plaintiff was ordered to disclose further documents relevant to the criminal proceedings which it duly did, together with others which were not directly relevant. All the documents disclosed in the course of the trial had been created for the purpose of the civil proceedings. After the defendants had been acquitted the plaintiff applied, in the civil proceedings, for the return of all the documents. An order, in wide terms, was granted to the plaintiff. The defendants appealed, one of the grounds being that plaintiff’s privilege had been lost because the documents had properly come into the defendants’ possession with the approval or acquiescence of the plaintiff or that the plaintiff should have foreseen that the documents would be disclosed to the defendants and had failed to reserve its privilege.

32.  Neil LJ, with whom both other judges agreed, observed that it was common ground that the privilege would have applied to the documents in question, and continued, at 1121A:

The issue is whether this privilege has been waived or is otherwise no longer available to plaintiff. Thus it is said on behalf of the defendants that the privilege has been lost because these copy documents have come into their hands quite properly and in circumstances in which the plaintiff either gave its approval or acquiescence, or at any rate (in the case of the Category A documents) where the plaintiff ought to have foreseen that by making the documents available to the police copies might reach the defendants in accordance with the practice authorised by the Attorney-General's guidelines. It is further argued that if the plaintiff had wished to preserve its privilege it should have declined to make any documents available in criminal proceedings, except pursuant to an order of the court, and even then only on the basis that it expressly reserved its privilege.

In my opinion this part of the case can be dealt with quite shortly. The documents, when they came into existence, were plainly protected by legal professional privilege... The privilege was a privilege from discovery in the action in which they were prepared that is the present action. Has anything happened which has caused that privilege to be waived or otherwise lost?

In my judgment the answer to this question his plainly "no"...

Nevertheless it is clear that the plaintiff made the documents available for a limited purpose only, namely to assist in the conduct first of a criminal investigation and then of a criminal trial. This action of the plaintiff, looked at objectively as it must be, cannot be construed as a waiver of any rights available to them in the present civil action for the purpose of which the privilege exists.

...

In my judgment the action of the plaintiff in making documents available for the purpose of the criminal charge did not constitute a waiver of the privilege to which it was entitled in the present civil proceedings. Its action in regard to both the Category A and the Category B documents was in accordance with its duty to assist in the conduct of the [1122] criminal proceedings, and could not properly be construed as an express or implied waiver of its rights in its own civil litigation. Indeed, it would in my view be contrary to public policy if the plaintiff's action in making the documents available in criminal proceedings had the effect of automatically removing the cloak of privilege which would otherwise be available to it in the civil litigation for which the cloak was designed. [Emphasis supplied]

33.  The facts upon which that decision was based are clearly distinguishable from the instant matter. It would have been surprising, indeed, had the result been any different once the court had found that the documents in question had been generated expressly for the purpose of  discrete civil proceedings and had found their way to the defendants only as a result of the application of the Attorney-General’s procedural guidelines.

34.  Albeit that the SFC’s investigations related to potential offences committed in breach of the provisions of the Ordinance, it is a fact that from 24 October 2008 the plaintiff had been aware that it and persons associated with it were being investigated in connection with, amongst other things, allegations of fraud against its own members (see §4 above).

35.  S. 378(1) of the Ordinance prohibits the communication of any matter coming to a person's knowledge by virtue of his appointment and allowing any third person to have access to any record or document which comes into his possession by virtue of the Ordinance. That prohibition, however, is specifically qualified in s.378(2) which provides:

(2) Nothing in subsection (1) applies to

(a)...

(b) the disclosure of information with a view to the institution of, or otherwise the purposes of, any criminal proceedings or any investigation carried out under the laws of Hong Kong, in Hong Kong.

36.  Moreover, s.380 of the Ordinance provides, subject to the obligation preserved, by subsection (5), to disclose the name and address of a client of a legal practitioner:

(4) Subject to subsection (5), nothing in this Ordinance affects any claims, rights or entitlements which would, apart from this Ordinance, arise on the ground of legal professional privilege.

thereby specifically providing the mechanism by which the plaintiff could have declined to surrender the earlier five documents.

37.  At the meeting in the plaintiff's own offices on 27 October 2008, when the arrangements made to surrender the earlier five documents, the plaintiff was represented not simply by rank and file staff members but by its own general counsel as well as by a partner in the firm of solicitors by then acting on its behalf. I do not accept that both of these persons would have been ignorant of the provisions of s.378 and s.380, that the SFC was empowered to hand over those documents to others for the purpose of investigating other offences and that the plaintiff had an absolute right not to the documents if they were subject to LPP.

38.  It is important to note that the plaintiff would not have been obliged to produce the documents to the SFC that meeting. It would have been open to the plaintiff, there and then, to decline to hand over the earlier five documents on the grounds that they were privileged. It clearly made a conscious decision not to exercise that right.

39.  Mr. Luk says, quite frankly, in his affirmation that he does not recall whether Ms Shih mentioned any conditions attaching to that waiver. I am satisfied that she did not: first, this is a matter which I have no doubt would have impressed itself on Mr. Luk’s memory as it would have been central to the exercise of obtaining the documents - that he would have overlooked or or forgotten it is beyond improbable; secondly, had there been any such discussions it is inevitable that Mr. Rogers would have been involved in those discussions - a matter which not only would have added to Mr. Luk’s impression of this aspect but rendered it inconceivable, not to use too strong a word, that Mr. Rogers would have failed to confirm any restrictions on the release of the documents in writing either there and then or immediately afterwards. There is, of course, no affirmation from Ms. Shih or Mr. Rogers concerning this issue which in any way challenges what Mr. Luk says.

40.  No effort was made by Mr. Rogers or his firm, Clifford Chance, to do so until the 26 November 2008 and then, apparently, only in response to a communication by Mr. Luk in which he asked for written confirmation of the waiver of LPP in order that he could obtain what could only have been further documents from Mayer Brown JSM which might otherwise be privileged. Only in response to that direct request was there an attempt by the plaintiff’s then solicitors to the bolt the stable door by confirming the waiver but prefaced by the observation "For the purposes of the Commission's investigation only...”. This provoked an exchange of correspondence over the ensuing weeks with the SFC making it clear that it took the view that the surrender of the documents had been a general, unconditional surrender.

41.  In the circumstances, I am satisfied that at the meeting on the 27 October 2008 the plaintiff agreed to hand over the earlier five documents unconditionally to the SFC free of any claim of legal professional privilege. In the event that I am in error as to the existence of a specific agreement, I am satisfied that, viewed objectively, there were no implied conditions attached to the surrender of documents.

(B) Revival of LPP by subsequent agreement

42.  Mr. Shieh, on behalf of the plaintiff, suggested that there may have been a "revival" of  LPP as a consequence of the subsequent correspondence initiated by the letter of 26 November 2008 from Clifford Chance. A proper reading of the correspondence simply demonstrates that the parties disagreed over the consequences of the surrender of the documents, an issue which was to be litigated subsequently as it now is. The idea that there could have been a voluntary surrender of the documents subject to LPP and that LPP could then be said to be partially reinstated by way of agreement seems to me to be contrary to the fundamental concept of the nature of the privilege.

43.  Whether agreement as to confidentiality in respect of those same documents could be negotiated subsequent to the surrender of LPP is another matter but not one that was argued before me: it is consequently unnecessary for me to consider that matter.

(C) Delivery of the surrendered material to the Department of Justice

The plaintiff submits that the SFC was not entitled to pass on the surrendered material to the Department of Justice for the purpose of obtaining legal advice, because it is only entitled to engage services of solicitors and barristers and not legal officers. The argument continues that once a solicitor or barrister is employed by the Department of Justice he falls within the definition of a legal officer contained in the Legal Officers Ordinance, Cap. 87. Thus, it is submitted, that in transmitting the documents to the Department of Justice where advice would be given by a "legal officer" the SFC breached the provisions of s. 378(1) of the Ordinance, referred to in §35 above, which provides an additional reason for returning documents to the plaintiff.

44.  There is no merit in this argument. Once a solicitor or barrister is employed by the Department of Justice he does not lose his professional status: the fact that he also falls within the definition of a Legal Officer contained in another ordinance simply means that he is both a solicitor or barrister and a legal officer.

(D) The crime/fraud exception

45.  The leading English authority in regard to privilege of legal advisers is Greenough v Gaskell 1 My. & K. 98 which was revisited in The Queen v Cox and Railton 1884 QBD 153 specifically in the context of whether privilege existed where a solicitor had been consulted for advice in contemplation of the commission of an offence. The Court said, at 165:

We must take it, after the verdict of the jury, that so far as the two defendants, Railton and Cox, were concerned, their communication with Mr. Goodman was a step preparatory to the commission of the criminal offence, namely, a conspiracy to defraud. The conduct of Mr. Goodman, the solicitor, appears to have been unobjectionable. He was consulted in the common course of business and gave a proper opinion in good faith. The question therefore is, whether, if a client applies to legal adviser for advice intended to facilitate or to guide the client in the commission of a crime or fraud, the legal adviser being ignorant of the purpose for which his advice is wanted, the communication between the two is privileged? We expressed our opinion at the end of the argument that no such privilege existed.

46.  The Court further found that in order for privilege to apply to a communication:

... there must be both professional confidence and professional employment, but if the client has a criminal object in view in his communications with the solicitor one of these elements must necessarily be absent. The client must either conspire with his solicitor or deceive him. If he is criminal object is avowed, the client does not consult his adviser professionally, because it cannot be a solicitor’s business to further any criminal object. If the client does not avow his object he reposes no confidence, for the state of facts, which is the foundation of the supposed confidence, does not exist. The solicitor's advice is obtained by fraud.

47.  The principle continues to apply in this jurisdiction: see, for example, HKSAR v WONG Hung Ki and Anor. [2011] 1 HKLRD183; China Light & Power co Ltd and Anor. v Michael Edward Ashton Ford  [1998] 1 HKLRD 382.

48.  The defendants do not contend, at this stage, that the solicitor's consulted by on behalf of the plaintiff necessarily were complicit in any fraud. Understandably, whether that allegation arises in due course will be dependent upon the outcome of the investigations. However, for the purposes of this decision, Cox and Railton makes it quite clear that their complicity is not an essential feature required to negate LPP.

49.  Whilst I have had regard to the other judgments brought to my attention, what is required to displace the confidentiality afforded LPP, was considered at some length in R v Gibbins [2004] EWCA Crim 311. It indicated a two-stage approach as appropriate, which I propose to apply in this matter, being:

a. Was there a prima facie case of fraud made out on the papers? If yes,

b. Was the disputed document prima facie produced to facilitate or further the fraudulent process?

50.  The Court held that both questions should be decided upon the basis of probability, in the sense of a prima facie case, rather than the overall criminal standard of proof. In order to reach that decision the Court found that it was proper, for the purpose of determining the answers, to look at the contents of the documents themselves and that the court should look at the position “in the round”.

51.  The Court said:

47. While the question for determination by the judge is whether a particular document ostensibly seeking advice was or was not created as part, or for the purposes, of a fraud, the answer is unlikely to be immediately apparent from the terms of the document alone and its admissibility will frequently (indeed usually) require consideration of its contents in the wider context of the fraud of which it is itself alleged to be evidence. When a judge, prior to the trial of the issue of whether that fraud has in fact been established (which in criminal proceedings will ultimately be a question for the jury on the basis of proof beyond reasonable doubt) is faced with the question whether or not to require production of the disputed document with a view to its being used in evidence, his decision is one which has to be reached upon the facts as they then appear i.e. prior to the trial at which the nature and existence of the fraud and the probative value of the document will finally be determined by a jury. Effectively, the judge is only in a position to reach a conclusion upon a provisional or ‘prima facie’ basis rather than one of certainty.

continuing:

49. We return to the practicalities of the matter... the judge can only realistically cope with the matter on the basis of the prima facie position i.e. that which appears to be the position at the time of consideration in the absence of further explanation. Neither policy nor practicality require more than that the judge should be satisfied (i) that a prima facie case of fraud exists and (ii) that, considered in that context, a prima facie case also exists that the document concerned came into existence as part of the fraud.

50. In this respect, bearing in mind the nature of the proceedings, the importance of the doctrine of LPP, the room for ambiguity and the possibility of innocent explanation, it has been stated (in Cox and Railton) that the judge should consider it ‘probable’ that the document was part of the fraud and (in Derby & Co Ltd v Weldon (No. 7)[1990]3 All E R 161) that a ‘strong’ prima facie case is required (the standard adopted by the judge in this case). We consider that these observations rightly emphasise the need for the judge to be clear in his view that a prima facie case of fraudulent purpose exists. However, we do not think that any gloss upon the requirement of a prima facie case is desirable either in respect of the charge contained in the indictment or in respect of the purpose behind the document of which disclosure is sought. [Emphasis supplied]

52.  Returning to the instant matter, a chronology incorporating the dates and identity of the surrendered material as well as other significant dates affords an efficient overview of the interrelationship of events thus:

Date	Event
07.09.08	Company becomes aware of financial risk exposure
16.09.08	DCH Circular containing “no material adverse change” statement
18.09.08*	Internal note of advice by Ms. Shih
23.09.08*	CITIC Board Meeting
25.09.08	Loan by Bank of Tokyo-Mitsubishi: $250 million.
26.09.08*	Letter from JSM
06.10.08*	Letter from JSM
09.10.08*	Second Internal note of advice by Ms. Shih
10.10.08	Loan by Bank of China (HK) Ltd: $1 billion
14.10.08	Loan by Industrial and Commercial Bank of China: $500 million
20.10.08*	CITIC Board Meeting
20.10.08	Profit Warning Announcement
20.10.08	Statement by chairman of CITIC

* The surrendered material

53.  As to the event on 7 September 2008, that the "company" became aware of its financial exposure appears from the profit warning announcement made on 20 October 2008. The press statement issued the same day by the plaintiff's chairman, Mr. Larry Yung, refers to "the problem" having been discovered by "senior management... last month". In the circumstances it is not unrealistic to take it that the directors of the plaintiff were aware of the financial risk exposure on 7 September 2008.

54.  The reference to the DCH circular dated 16 September 2008 is a reference to a document which appears to lend support to the suggested wilful concealment of the company’s financial risk exposure and, thus, to the existence of a conspiracy to defraud.

55.  The circular related to a disclosable and connected transaction concerning the acquisition by the plaintiff of a 49% interest in FAW Toyota 4S Company and a 50% interest in Lexus 4S Company and the related shareholders’ loan accounts. The date of the sale and purchase agreement is shown to be 26 August 2008.

56.  The definitions contained in the circular define the latest practicable date prior to the printing of the circular for the purpose of ascertaining certain information therein as being 9 September 2008, a date after the "company" became aware of its financial risk exposure.

57.  The circular contains, in an appendix containing general information, a specific representation in the following terms:

MATERIAL ADVERSE CHANGE
Save as disclosed in this circular, the directors are not aware of any material adverse change in the financial trading position of the group since 31 December 2007, the date to which the latest published audited accounts of the company were made up.

58.  There was, as a matter of fact, no disclosure in the circular of the financial risk exposure which had become apparent on or about 7 September 2008. It is the defendants’ contention, in which I find substantial force, that this is a clear, and public, demonstration of an intention to conceal the knowledge of the abnormal losses already sustained or anticipated.

59.  A further feature of significance is that the plaintiff obtained, according to the unchallenged evidence of DSI Wong, the three bank loans on 25 September and 10 and 14 October 2008, all at a time prior to the public disclosure by the plaintiff of the financial risk exposure which was known to it. The board resolutions authorising the borrowing were signed by the Finance Committee of the Board of Directors of the plaintiff which included Larry Yung, Henry Fan, Peter Lee and Leslie Chang. The agreements in respect of the loans were signed by Leslie Chang in all three instances and also by Peter Lee in one instance. It must be self-evident that prior to the date of the granting of the three loans an application would have been made to the respective lender.

60.  It is the defendants’ case that at the time of negotiating and obtaining the loans no disclosure of the financial risk exposure was made by the plaintiff to any of the potential lenders. Taking this to be so, for on the evidence before me there is nothing to gainsay it, it amounts to a further demonstration of an intention to conceal the plaintiff’s true state of knowledge regarding its financial position.

61.  It is stating the obvious to say that to conceal the plaintiff’s financial risk exposure, known as it was at that time, from investors in the plaintiff; from those who might invest in the plaintiff, the shares in which were freely traded on the Hong Kong stock exchange; and from its creditors would put at risk the economic interests of those groups, a fact which could not have escaped the notice of the plaintiff or those controlling it.

62.  Insofar as is necessary for the defendants to demonstrate, at this stage, the dishonesty element of the offence of fraud, in my judgment the inference of dishonesty based on the well-known test in R v Gosh [1982] 1 QB 1053, [1982] 2 All ER 689 would be open to be drawn from the conduct of the plaintiff in concealing the knowledge which was available to it on or about 7 September 2008.

(E) The contents of the surrendered material

63.  Such other matters as need to be addressed flow from the contents of the surrendered material and are dealt with in §§65 - 77 in the accompanying judgment relating to the proceedings in Chambers.

CONCLUSION

78.  In the circumstances, I am satisfied that:

78.1 when the plaintiff surrendered the five documents on 29 October 2008 it did so intending to, and in circumstances which did, relinquish any rights it had to exercise legal professional privilege over those documents for all purposes;

78.2 in respect of all of the surrendered material, there is a prima facie case of the existence of both a conspiracy to defraud as well as offences pursuant to s. 21 of the Theft Ordinance, Cap. 210 made out on the papers; and

78.3 that the documents comprising the surrendered material were produced to facilitate or further those processes.

79.  Accordingly, the plaintiff’s claim as set out at §§1 (iv)(a), (v) and (vi) and 1A of the re-amended originating summons is dismissed.