RMBSA CORPORATE SERVICES LTD AND OTHERS v. SECRETARY FOR JUSTICE AND ANOTHER

HCMP1412/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1412 OF 2008

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BETWEEN

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DETERMINATION ON COSTS

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1.  The first plaintiff is, as its name suggests, a company offering corporate services to third parties. As at April 2006 it had premises in common with the second plaintiff, which is a registered foreign law firm in Hong Kong, its principal practice being located in the Philippines. The third plaintiff is a client of the second plaintiff in the Philippines.

2.  In January 2006 the Hong Kong government received a request for assistance under the Mutual Legal Assistance in Criminal Matters Ordinance, Cap. 525, (the Ordinance) from the government of the Philippines in connection with a criminal investigation into alleged corruption involving public officials in the Philippines said to be in connection with the construction and operation of a new terminal at the Ninoy Aquino International Airport in Manila. That request related to five criminal cases in the Philippines: the third plaintiff was an accused in but one of those five.

3.  The Philippines government sought the issue of a warrant pursuant to the Ordinance in order to seize materials thought to be in the possession of the first plaintiff. A search warrant was applied for and granted on the 7 April 2006 which was executed by officers of the ICAC on 12 April 2006. Materials were seized: it appears that the third plaintiff was the sole beneficiary of two companies to which the material related. The assertion was made that all of those materials were subject to legal professional privilege. They were sealed without being inspected by the ICAC.

4.  In May 2006 the first and second plaintiffs instituted judicial review proceedings seeking to quash the search warrant and obtain return of the materials. That application was dismissed on 10 August 2006 (HCAL 57/2006). In the course of those proceedings the Court was asked to inspect the materials to determine whether they were privileged: that request understandably was declined. An appeal against those decisions (CACV 327/2006) was dismissed on 14 February 2008. On 17 June 2008 the Appeals Committee of the Court of Final Appeal refused leave to appeal to that Court (FAMC 14/2008).

5.  The Department of Justice, acting on behalf of the defendants, then placed the first and second plaintiffs on terms as to the institution of these proceedings. The originating summons was issued on 28 July 2008.

6.  An issue arose as to whether the question of privilege fell to be determined pursuant to Hong Kong law or to the law of the Philippines, it being asserted that the law of the Philippines afforded wider protection than does Hong Kong law. The first and second plaintiffs contended that Philippines law should apply whilst the defendants contended for the application Hong Kong.

7.  On 16 December 2008 it was directed that this issue should be tried as part of the trial and other directions for the proceedings were given, including directions in regard to proposed expert witnesses. The matter was listed for trial in June 2009. Those trial dates were vacated and fresh dates fixed for November 2009.

8.  The first and second plaintiffs sought and obtained a variation of the order of 16 December 2008 so that the issue as to which law of privilege applied to the material would be determined first in the upcoming trial. This issue was argued.  In a judgment handed down on 11 December 2009 I held that the Hong Kong law relating to legal professional privilege would be the determining law and, by way of an order nisi, ordered the first and second plaintiffs to pay the defendants’ costs in regard to this issue.

9.  The remaining issue, the inspection of the materials to determine whether or not legal professional privilege applied to any of them, was then listed for hearing on 31 May 2010. By a summons dated 26 May 2010 the third plaintiff made application to be joined as a party to the action and also sought orders ensuring his anonymity. That application was heard on 31 May 2010: the hearing of it was adjourned to 18 June 2010, with costs reserved. The hearing of the single remaining issue was adjourned on the same basis.

10.  On 18 June 2010 the third plaintiff's application was granted and he was ordered to pay the costs of that application to the first and second plaintiffs and to the defendants. Also on that day the originating summons was dealt with with 15 July 2010 being fixed for the inspection of the material and whatever submissions may be appropriate: costs were reserved.

11.  By letter dated 14 July 2010 the Department of Justice indicated that it had been informed by way of a letter dated 13 July 2010 from the Philippines government "... for the first time that there are no more proceedings or investigations in the Philippines used as a basis for the request..." under the Ordinance. That letter continued:

We therefore propose that all parties concerned attend the scheduled hearing tomorrow at 10 AM in Chambers for the discontinuance of the proceedings and argument on costs, if any.

12.  On 15 July 2010 the seized materials were returned to the plaintiffs and the defendants were directed to file and serve an affidavit by 14 August 2010 setting out the date upon which there ceased to exist any such proceedings in the Philippines and directions were given for written submissions in respect of costs. Subsequently, a number of extensions of time for the filing of those submissions were granted.

13.  The affidavit of Mr. Walsh filed on behalf the Department of Justice and the defendants attaches a copy of the letter of 13 August 2010 received from the Office of the Ombudsman in the Philippines. That letter asserts, unequivocally:

Please be informed that there are no more proceedings or investigations in the Philippines used as a basis for the request for mutual legal assistance in 2006.

14.  Subsequent to the hearing on 15 July 2010 a further letter was received, apparently, by the Department of Justice from the Office of the Ombudsman which sought to qualify the response set out in the preceding paragraph by limiting its application to proceedings or investigations being contemplated against the third plaintiff. The letter asserted that there remained one pending criminal case against others named in the original request for mutual legal assistance, as a result of which the documents originally sought might still be needed.

15.  It is clear from Mr. Walsh's affidavit that the proceedings involving the third plaintiff were dismissed by the specialist anticorruption court on 7 September 2006 which decision, in effect, was confirmed by the Supreme Court on 26 December 2007. It follows, therefore, that in respect of the third plaintiff at least there were no pending criminal proceedings against him at the time of the issue of this originating summons. Of course, that does not mean to say that the materials seized would not have been required in respect of the other pending actions.

16.  That affidavit goes on to record the dates of confirmation by the Supreme Court of the dismissal of proceedings in two of those other proceedings; the fact that in a fourth set of proceedings, there was a dismissal by the specialist anticorruption court in June 2005 which is still awaiting a decision by the Supreme Court; and that the fifth set of proceedings, presumably those referred to in the letter received by the defendants subsequent to the hearing on the 15th July, are still pending before the specialist anti-corruption court.

17.  Having set out the history of these proceedings, and those which preceded them, in such detail the two issues of costs which are to be determined may be dealt with, it seems to me, in fairly short compass. They are, first, whether there should be any variation, out of time, of the order nisi made on 16 December 2008 and, second, what order should be made in respect of the costs of the action.

18.  As to the first issue, no point is taken by the defendants that the application to revisit the order nisi is hopelessly out of time. In any event, I see no merit in the plaintiffs’ contentions that, given the subsequent events, the order should be reversed and they should now be awarded the costs in respect of that specific issue.

19.  The point which was taken was one which, from inception, stood no prospects of success. It failed on every basis advanced by the plaintiffs. The costs which were occasioned as a result of the point being taken should not have been incurred. The subsequent discontinuance of these proceedings, for whatever reason, cannot begin to validate the arguments then advanced by the plaintiffs.

20.  As to the second issue, it is regrettable that, if as now appears to be the case, the defendants and the Department of Justice were misled by the Office of the Ombudsman in the Philippines: it may be that if accurate information had been furnished to the Department of Justice, the proceedings would have taken a different course on 15 July 2010. That did not happen: it is not up to me to speculate.

21.  It is clear from the papers that the Department of Justice was well aware of the necessity to ensure that the underlying proceedings in the Philippines were extant. It is equally clear that it did not receive replies to a number of enquiries which it made and that when it was given a reply at the eleventh hour, the information provided was subsequently said to have been accurate.

22.  The fact remains that the proceedings were instituted against the defendants upon their insistence that the matter be brought to a head. Just as the remaining issue was about to be determined by the court the defendants returned the seized materials to the plaintiffs, abandoning any suggestion that the materials should be returned to the Philippines authorities. That would have been precisely the effect if the plaintiffs had succeeded in the action.

23.  It was the transmission of the seized materials to the Philippines which the defendants intended to effect. The institution of proceedings by the first and second plaintiffs was intended to prevent that happening or, at least, to ensure that only those materials which passed judicial scrutiny be transmitted. The reality of the situation is that the proceedings became unnecessary solely as a result of the changed position of the defendants - the basis for the seizure and transmission of the materials had fallen away, or was thought to have done so. That the defendants themselves appreciated this to be the position is clear from the quotation from their letter referred to in §11 above.

24.  It is perhaps unfortunate that the third plaintiff only joined in these proceedings, or decided that he wished to be separately represented, at such a late stage. At the end of the day, that has not added significantly to the costs as the first and second plaintiffs indicated that they would play no further role in the proceedings, save as to the question of costs, once he had been joined as a party.

25.  I have had regard to the numerous authorities to which I have been referred on the question of costs. I am unable to see any justification for depriving the plaintiffs of the costs of the action. I do not find any support for such an approach in the changes wrought by the recent civil justice reform.

26.  In summary I order that:

the defendants pay the costs of the first and second plaintiffs up to and including 18 June 2010, those costs to include the costs referred to in the orders of 16 December 2008, 31 March 2009, 22 June 2009 and 4 November 2009, and, in addition, their costs incurred in connection with this determination;

the first and second plaintiffs pay the defendant’s costs in regard to the issue of applicability of Hong Kong law, as ordered on 11 December 2009;

the defendants pay the costs of the third plaintiff in the action, such costs to include the costs reserved on 15 July 2010 and the costs incurred in connection with this determination;

the third plaintiff pay the costs of the first and second plaintiffs and of the defendants as ordered on 18 June 2010; and

all costs are to be taxed, if not agreed.