Super Worth International Ltd and Others v. Commissioner of the Independent Commission Against Corruption and Another

CACV 168/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 168 OF 2015

(ON APPEAL FROM HCMP 1320 OF 2012)

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REASONS FOR JUDGMENT
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Hon Lam VP, Hon Barma JA and Hon Macrae JA (giving the Reasons for Judgment of the court):

1.After searches conducted pursuant to warrants, officers from the Independent Commission Against Corruption (“ICAC”) seized documents from the offices of Super worth International Limited, the 1^st plaintiff in these proceedings. In respect of some of the documents seized, claims for legal professional privilege (“LPP”) were advanced. The documents subject to such claims were sealed and the parties who claimed privilege brought proceedings in the High Court for the determination of such claims, which were contested by the ICAC.

2.The matter was heard before Deputy High Court JudgeSaunders on 16 and 18 June 2015. On 3 July 2015, the learned judge (“the Judge”) handed down his judgment dismissing the contested claims, primarily on the ground of the Cox and Railton exception[1].

3.The 3^rd and 4^th plaintiffs filed a Notice of Appeal against the decision of the Judge on 15 July 2015 and requested thatthe appeal be heard urgently on the ground that the criminal trial in which these documents might be used was due to start in October. There was no appeal by the 1^st and 2^nd plaintiffs. Having considered the request, directions for an expedited appeal were given and we heard the appeal on 8September 2015.

4.After hearing submissions, we dismissed the appeal with costs to the defendants for reasons to be handed down later. We now give reasons for our judgment. These reasons are those of the court, to which all of its members have contributed.

5.As willbecome clear from what we say below, we determined the appeal on grounds other than the Cox and Railton exception. However, before we come to that, we should identify the scope of the appeal before us.

6.By the time the appeal was heard, Mr Hui (counsel for the 3^rdand 4^th plaintiffs) had confined the appeal to the documents which he identified as Items 4 and 6. There was no appeal in respect of the other documents which had been considered by the Judge. The documents are described in more detail in para38 below. In respect of item 6, though it was transmitted to a solicitor before it was passed onto the 2^ndplaintiff, MrHui properly accepted that the solicitor did not play any role other than an agent passing on emails from the accountant. As such the involvement of the solicitor did not take the matter further[2] and the relevant consideration for deciding whether LPP should attach to the document is whetherthe communication with the accountant for his advice is itself privileged.

7.Further, Mr Hui accepted that only the 4^th plaintiff could be regarded as the client in respect of these documents and thus the 3^rdplaintiff did not have any locus to advance any claim for LPP.

8.In this connection, we would set out what was said in the evidence on how the documents came into the possession of the 2^ndplaintiff. It was asserted generally that the 2^nd plaintiff was engaged by the 3^rd and 4^th plaintiffs as a consultant on a confidential basis so that she could continue to assist them after she ceased to be a director of the 4^thplaintiff[3]. There was, however, nothing in the evidence to show that she was the person who instructed the accountant on behalf of the 4^thplaintiff. In the absence of specific evidence, the court should be slow to infer that the 4^th plaintiff had delegated such authority to her as by then she had been arrested by the ICAC[4], declared bankrupt in New Zealand[5] and was no longer a director of the 4^th plaintiff. Thus, by the time when this correspondence took place, the 2^nd plaintiff should no longer havebeen playing any active managerial role in the 4^th plaintiff. The evidence of Jiang Ping was that she was engaged to assist the 4^th plaintiff in respect ofthe response to the tax authority, and to provide information to the accountant[6]. However, the circumstances under which the documents in question came into the possession of the 1^st plaintiff (at whose office the documents were seized) were not clear. Be that as it may, no point was taken as to the loss of privilege as a result of the documents being passed to the 2^nd or 1^st plaintiffs.

9.Mr Hui’s submissions on behalf of the 4^th plaintiff raised three principal issues before us:

(a) whether this court should apply the lex fori or lex causae in determining whether LPP should attach to a document;

(b) whether this court should adopt the dissenting opinions of Lord Sumption and Lord Clarke in R (Prudential plc and another) v Special Commissioner of Income Tax [2013] 2 AC185 and hold that, as a matter of common law in Hong Kong, legal advice privilege, a limb of LPP, should be extended to communications between accountants and a client where such communications were made for the dominant purpose of legal advice;

(c) whether the Cox and Railton exception applied to the documents in question.

The defects in the evidence

10.Before we discuss these issues, we find it necessary to reiterate what had recently been said by this court (differently constituted) in Citic Pacific Limited v Secretary for Justice (No 2) CACV7/2012, 29June 2015 concerning the evidential burden on the party asserting a claim of LPP (at paras 14 and 76(1)(c) of the judgment). We also take this opportunity to mention that, by the same token, insofar as the respondent(s) to a claim of LPP relies upon any particularground to resist the claim, like the reliance by the defendants on the Cox and Railton exception in the present case, the respondent(s) should also set out the full evidential basis for advancing that ground in their evidence filed in the proceedings for the determination of the LPP claims. Thus, in the course of the appeal, we have indicated to Ms Draycott SC (appearing for the defendants in this appeal) that it is not appropriate for counsel to attach transcripts taken in the criminal proceedings to her submissions (which had not been produced as evidence by way of affidavit filed in the present proceedings) and then refer us to variousparts of such transcript as evidence supporting her case on the Cox and Railton exception. Unless the necessary evidence for claiming LPP and the evidence for resisting such claim have been properly and clearly set out in the evidence filed in the proceedings, it would not be fair to require the opposite party and the court to deal with the same.

11.In the present case, though several affirmations and affidavits were filed in the proceedings below (HCMP1320/2012), there are serious evidential inadequacies in respect of the claims for LPP as well as the resistance of those claims based on the Cox and Railton exception. In the evidence filed on behalf of the plaintiffs, there is no evidence setting out the context in which legal advice came to be sought from the accountants in question and how it is said that the advice sought was in the nature of legal advice as opposed to advice on mattersof accountancy. Even if one were to follow the dissenting opinions of Lord Sumption and Lord Clarke, LPP would still beconfined to legal advice as opposed to other types of confidential professional advice. In the present instance, the evidential basis to support such a claim is lacking.

Lex fori or lex causae?

12.The documents in question emanated from accountants in New Zealand. The traditional view has been that the proper law for determining whether privilege attached to a document is governed by the lex fori: Lawrence v Campbell (1859) 4 Drew 485; Re Duncan [1968] P306; Dicey, Morris & Collins, The Conflict of Laws 15^th Edn Vol1 §7-022. Mr Hui submitted that with the recognition of LPP as a fundamental human right, the rationale for applying lex fori (on the basis that privilege is a matter of procedure) has gone. Counsel submitted that the existence of LPP should be treated as a matter of substance and it should be determined by reference to the lex causae. He further submitted that as the advice came from accountants in New Zealand, this court should apply New Zealand law as the lex causae in deciding whether LPP attaches to these documents.

13.With respect, on aproper reading of the evidence on New Zealand law before us, there is no difference between Hong Kong law (as discussed below) and New Zealand law. The statute which Mr Hui relied on is the Tax Administration Act 1994 (“the Act”) of New Zealand. It is clear from the expert evidence adduced by the parties that as far as LPP is concerned, New Zealand law only restricts it to communication between client and legal practitioner. Though Section 20B of the Act provides for the non-disclosure of tax advice by a tax advisor, it is a specific protection in respect of discovery sought by the Commissioner of Inland Revenue[7]. Further, it gives no protection to tax contextual information, viz a taxpayer must disclose factual elements in the instructions given to the tax advisor[8]. It is thus not a general privilege and there is nothing to suggest that it could afford protection to communication with tax advisors or accountants from discovery in ordinary civil proceedings.

14.Hence, the debate on lex fori versus lex causae is academic in the present case. However, in deference to the submissions of counsel, we shall briefly consider the arguments on this issue. The principal authority Mr Hui relied on was Phipson on Evidence, 18Edn paras23-26. However in that commentary, the learned editors only suggested that the traditional rule should be reconsidered without any definite alternative formulation being proffered.

15.By now, it is well established in Hong Kongthat LPP is a fundamental right. It is a right which is constitutionally entrenched by Article 35 of the Basic Law: Solicitor v Law Society of Hong Kong (2006)9 HKCFAR 175; Akai Holdings Ltd v Ernst & Young (2009) 12 HKCFAR 649; Secretary for Justice v Florence Tsang Chiu Wing (2014) 17 HKCFAR 739.

16.At the same time, it is equally clear that the rationale for LPP does not stem from the expectation of confidentiality of a client in respect of the communication with his advisers. There are many professional relationships in which confidential advice is given without the protection of LPP: e.g.those withdoctors, spiritual and psychological counselors, bankers, financial consultants, engineers, surveyors and architects. They are all compellable to give evidence on what was communicated in confidence between them and their clients. A client’s expectation of confidence is not enough to attract LPP.

17.Modern jurisprudence has pinpointed the public interest in the promotion of rule of law with uninhibited access to proper legal advice as the rationale for LPP: see AM & S Europe Ltd v Commission or the European Communities [1983] QB 878 at 913; Baker v Campbell (1983)153 CLR 52 at 95; Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 at 127 and 161; Three Rivers DC v Bank of England (No 6) [2005] 1 AC 610 at paras30-34; 55-56; 103-115 and R (Prudential plc) v Special Commissioner of Income Tax [2013] 2 AC 185 at paras 117 and 120.

18.Though the underlying rationale is the same, different jurisdictions have different rules on the scope of LPP which may give rise to problems in conflict of laws. The different scopes of LPP according to the laws of different places reflect differences in the assessment by domestic courts or legislatures on the necessary extent of the privilege for the promotion of the rule of law in the particular jurisdiction in question. There is no uniform international standard in setting the limits of LPP and there is scope for reasonable differences in opinion. To take a recent example, in Citic Pacific Limited v Secretary for Justice (No 2) CACV7/2012, 29 June 2015, this court (Lam V-P, Barma JA and Poon J) decided to adopt a different approach from the English Court of Appeal in Three Rivers DC v Bank of England (No 5) [2003] QB 1556 in respect ofthe scope of legal advice privilege for companies. That decision was based on the court’s assessment of what is necessary to give effect to the underlying rationale for LPP in the context of Hong Kong.

19.It must therefore be appreciated that though LPP is a substantive right, it is a right originating in the public interest and its limits are informed by the domestic considerations pertaining to such public interest. In this connection, we respectfully find the following observations of Besanko J in the Federal Court of Australia in Steward v Australian Crime Commission (2012) 294 ALR 505 at para53 illuminating:

“… although legal professional privilege is linked to the contract of retainer between the client and his or her lawyer, it is not a ‘transaction’ in the same sense as the formation of a contract or the commission of a tort. It is an immunity from what would otherwise be a coercive process dictated or mandated by, in the majority of cases, a statute or piece of delegated legislation of the forum where, to the extent that Parliament has not by express words or necessary intendment made its intention clear, the policy in the statue or piece of delegated legislation gives way to an important common law immunity based on consideration relevant to the administration of justice. Put another way, in the case of legal professional privilege, there are important connecting factors with the forum, namely, the production of documents or a request for their production and a claim or assertion of privilege. These matters considered together lead me to the conclusion that the governing choice of law rule in the case of legal professional privilege is the lex fori.”

20.We thereforereject the submission of Mr Hui that one must give effect to the expectation of the client when the advice was sought and obtained and thatthe governing law must therefore be the law of the place where the advice was given. As explained above, the rationale for LPP is not the expectation of the client. It is a facet of the rule of law and in Hong Kong the relevant legalpolicy for determining the limits of LPP when documents are seized or discovery is sought for proceedings in Hong Kong is Hong Kong law.

21.Having said that, like Allsop J in Kennedy v Wallace (2004)213 ALR 108 at para 204, we can see that there is room for flexibility. One example raised in the course of the hearing of this appeal is a case where the documents are sought for legal proceedings elsewhere.

22.We need not give a definitive answer in respect of those exceptional cases. Nor is it necessary for us to decide whether the usual adoption of the law of the place where the issue of LPP has become relevant due to its nexus with the question as governing law should be characterized as lex fori or lex causae. It is sufficient for us to hold that in the present context, we do not regard the fact that the accountants in question were consulted by the 4^th plaintiff in New Zealand to be sufficient reason for holding that Hong Kong law should not be applied in determining the scope of LLP in respect of the documents in question.

Extending LPP to legal advice by accountants

23.Mr Hui went on to submit that if, as we have held, the applicable law to determine whether or not the two documents are privileged from production is Hong Kong law, we should prefer the view of the minority of the United Kingdom Supreme Court (Lord Sumption and Lord Clarke) in R (Prudential plc) v Special Commissioner of Income Tax to that of the majority, and hold that in Hong Kong, unlike the United Kingdom, legal advice privilege is available in respect of legal advice given by accountants to their clients in relation to matters of tax law.

24.We think it is fair to say that in Hong Kong, as in the United Kingdom, it has long been assumed that legal advice privilege is only available in respect of legal advice provided by qualified lawyers (whether solicitors or barristers) to their clients, and that it is not available in respect of legal advice given by other persons, who are not qualified lawyers.

25.In the United Kingdom, the question of whether or not this limitation should be relaxed so as to make the protection of legal advice privilege available in respect of legal advice provided by certain other (non-lawyer) advisers, was considered by the Supreme Court in the Prudential case. The Supreme Court held that legal advice privilege should not be extended so as to be available in respect of legal advice given by non-lawyers. While recognising that it was odd, and perhaps difficult to see why, documentation of the same nature produced in connection with the obtaining of essentially the same legal advice on the same subject matter would be privileged where the adviser was a qualified lawyer but not where the adviser was not a lawyer but a qualified tax accountant, who would generally be accepted as being in as good (if not better) a position to give advice on matters of tax law, the majority concluded that there were a number of reasons why the law as presently understood should not be extended by the courts, but should be left for the legislature to consider. These were:

(1) The ramifications of extending the ambit of legal advice privilege as contended for by Prudential were hard to ascertain and thus to assess, and would likely result in a clear and readily understood principle becoming much less clear and uncertain in its ambit. Confining the availability of the privilege to communications with lawyers provided a clear definition of the scope and extent of the privilege, whereas the proposed formulations would make it difficult to predict whether or not the privilege would arise in particular cases.

(2) Whether or not privilege should attach to legal advice from other professionals, who are not qualified lawyers, raises questions of policy which are best left to the legislature.

(3) In the United Kingdom, Parliament had in fact enacted legislation relating to legal advice privilege, extending it by statute to particular professions, and declining to do so in other situations–this suggested that it would not be appropriate for the courts now to take it upon themselves to extend the ambit of legal advice privilege beyond its commonly understood bounds.

26.Lord Sumption and Lord Clarke (the minority) took the contrary view, and considered that legal advice privilege should be extended to, at least, tax accountants. They did so on the basis that legal advice privilege should, as a matter of principle, be extended to cover all communications between a client and a legal adviser for the purpose of obtaining legal advice, in the course of a professional relationship, and in the exercise by the adviser of a profession which has as an ordinary part of its function the giving of legal advice on the subject in question, and that it mattered not whether the adviser was a qualified lawyer. They considered that this represented a principled approach to the question of the proper ambit of legal advice privilege, which recognised that the privilege was that of the client (not the adviser) and was consonant with the public policy underlying the privilege–namely, that people should be able to obtain sound legal advice in order to enable them to order their affairs appropriately, and that it was desirable for communications between them and their advisers to be protected by confidentiality so as to promote this objective.

27.Mr Hui submitted that Hong Kong should follow the approach of the minority in Prudential in preference to that of the majority, as it represented the more principled and logical approach to the issue of the proper ambit of legal advice privilege. He contended that the view of the majority in Prudential, as exemplified by the judgment of LordNeuberger, was based principally on the proposition that any extension of legal advice privilege beyond communications relating to advice received from qualified lawyers should be left to Parliament, as it had made its views on the subject known through the enactment of statutory extensions to legal advice privilege in certain cases (patent attorneys, trade mark agents and licensed conveyancers: see section 280 of the Copyright, Designs & Patents Act 1988, section 87 of the Trade Marks Act 1994 and section33 of the Administration of Justice Act 1985 respectively), and by its rejection of any extension in other cases, including tax advice from qualified tax accountants.

28.He suggested that the position in Hong Kong was different, in that the legislature here has not made any similar enactments (other than by recognising by section 39A of the Legal Practitioners Ordinance (Cap159) that legal advice privilege should also attach to advice on foreign law by registered foreign lawyers, a matter which he suggested merely reflected the common law position). He also pointed out that (unlike in the United Kingdom) the matter has not been considered by the Law Reform Commission.

29.With due respect, we do not agree with Mr Hui. In our view, the approach of the majority of the United Kingdom Supreme Court in Prudential (with which we respectfully agree) is to be preferred to that of the minority.

30.We would point out, first, that the fact that Parliament had legislated on the matter is not the only basis on which the majority came to the conclusion that it would not be appropriate for the courts to extend the ambit of legal professional privilege as proposed by Lord Sumption and Lord Clarke. This was but the third of the three reasons mentioned in para25 above. In our view, the first and second reasons provide good grounds for declining to accept the invitation proffered to us by MrHui.

31.As to the first reason, it seems to us that the present clearly defined limitation of the advisers whose legal advice will attract legal advice privilege to qualified lawyers provides a clear, readily understood and easily applied guideline to enable those who wish to seek confidential legal advice to do so. To expand the range of advisers in the way proposed by the minority in Prudential and suggested here by Mr Hui would, we think, remove that clarity, and leave the law in a state of real uncertainty. As Lord Neuberger pointed out, it is not necessarily easy to define what constitutes a profession for the purpose of ascertaining whether a professional relationship exists between adviser and client, nor will it usually be straightforward to determine whether or not the giving of legal advice is an ordinary part of the function of the profession in question. The examples given by Lord Neuberger in para58 of his judgment, of a town planner, a pension consultant and a valuation surveyor, all provide good examples of the difficulties with which these questions are beset. Moreover, it may well be difficult to determine whether a given piece of advice from such a professional was to be regarded as legal advice, or as advice on other matters not strictly legal.

32.We do not think that it would be desirable to open the way for such uncertainties to enter into the picture when considering whether or not communications are subject to legal advice privilege. As things stand, the position is clear, and those in need of legal advice can readily ensure that the advice they obtain, and the communications arising in the course of obtaining it, are subject to the protection of privilege by obtaining the advice from qualified lawyers. Were the wider test proposed by the minority to be adopted, persons seeking legal advice from professionals who are not qualified lawyers, or persons whose professional status might be open to debate, would not know for certain whether or not their communications with the adviser would be protected.

33.As to the second reason, it also seems to us that it provides a sound basis for leaving the question of expansion of the scope of legal advice privilege to the legislature. Any such expansion does raise questions of policy which are, in our view, more appropriately considered by the legislature after appropriate public consultation, than by the courts on a case by case basis. We would note in this regard that quite apart from the United Kingdom, there do not appear to be any jurisdictions in which legal advice privilege has been expanded by judicial decision as the minority in Prudential suggest it should be. On the contrary, as the New Zealand and Australian experience discussed in the previous section shows, in those jurisdictions the matter has also been the subject of express statutory provision, and limitations have often been placed on the scope of the confidentiality protection that has been provided in respect of communications relating to matters such as tax advice.

34.As to the third reason, while we would accept that there has been less extensive legislation or consideration by the law reform or legislative process of the appropriate scope of legal advice privilege, it does seem to us that section 39A(2) of the Legal Practitioners Ordinance embodies an assumption by the legislature here that legal advice privilege is limited to legal advice obtained from qualified lawyers. We therefore do not think that the distinction that Mr Hui sought to draw between the position in Hong Kong and that in the United Kingdom is justified.

35.We would also add that we respectfully disagree with the view expressed by the minority in Prudential that as LPP, of which legal advice privilege is one aspect, is a creature of the common law, it is therefore open to the courts to determine its bounds, adapting such boundaries to changing circumstances, and leaving it to the legislature to intervene to cut down the scope of the privilege if necessary. Essentially for the reasons explained above, we are of the firm view that the matter is one more appropriately left to be determined and dealt with by the legislature, rather than the courts.

36.We would, therefore, respectfully agree with and follow the decision of the majority in Prudential and hold that we should not expand the scope of legal advice privilege to tax legal advice given by accountants, or to attempt any general restatement and expansion of that scope as suggested by the minority.

The Cox & Railton exception

37.Mr Hui, on behalf of the 3^rd and 4^th plaintiffs, challenges the Judge’s finding that two documents (referred to as Item 4 and Item 6 at the hearing and the appeal) are disclosable since, even if privilege attaches to the documents, such privilege would in the Judge’s view be lost by reason of the fraud exception. Ms Draycott, for the 1^st and 2^nd defendants, as well MrWong, as special counsel, submit that the documents are not privileged on ordinary principles but that, even if they are somehow protected, the fraud exception would apply so as to make them disclosable to the defendants for the purposes of the criminal investigation.

38.Before examining the respective arguments of the parties, it is necessary to say something about the documents themselves and their provenance. For this purpose, we may adopt the description of each document used by the Judge himself. However, for reasons we shall explain, we shall reverse the order in which they were considered. He described them as follows:

“46. Item 6: this is an e-mail in which Kerry Knight, solicitor, forwards an e-mail he has received from an employee of the accounting firm in relation to the movement of funds between the various companies involved in the fraudulent transaction. Instructions are being sought to assist it in dealing with New Zealand Goods and Services Tax matters. The e-mail does not give legal advice, but nearly (?merely) seeks instructions. By reason of the fraud exception no LPP attaches to this document. The document must be disclosed.”

and

“44. Item 4: this is a draft fax in which the author, a partner/employee in a worldwide network of accounting firms gives consideration to Goods & Services Tax (GST) issues arising for New Zealand Dairy Processing (the 4^th plaintiff). The letter is addressed to an officer of the Inland Revenue Department in New Zealand. The letter refers to the movement of funds surrounding the various companies involved in the fraudulent transaction. Even if some sort of privilege were attached to it, that privilege is lost by reason of the fraud exception. The document must be disclosed.”

39.We have inverted the order of the documents because that is the sequence in which they came into being. Item 6 was the request for information by the accounting firm in relation to the 2^nd plaintiff through the solicitor dated 31 August 2011, as a result of which the accounting firm was then in a position to furnish the information to the Inland Revenue Department in New Zealand by draft fax dated 13 September 2011. Both documents were retrieved by the ICAC from the possession of the 2^ndplaintiff in Hong Kong.

40.It is worth noting in relation to Item 6 that the Judge himself considered that the email which the solicitor was forwarding to the 2^ndplaintiff did not purport to give any legal advice but merely sought instructions.[9] Moreover, the evidence of Jiang Ping, a director of the 3^rdplaintiff was that the reason for the accounting firm putting the request for information through the solicitor was because[10]

“… Kerry Knight (the solicitor) has held some money for NZDPL (the 4^th plaintiff) in some of its transactions in the capacity as NZDPL’s trustee. BDO (the accounting firm) therefore treated Kerry Knight (the solicitor) as the agent of NZDPL through which information was obtained for the purpose of rendering tax law advice.”

41.Ms Draycott and Mr Wong argue in respect of Item 6 that, on ordinary principles of legal professional privilege, the solicitor was on the plaintiff appellants’ own case no more than a conduit between the accounting firm and its client and that, in any event, legal advice, which is what would have attracted the privilege, was not in fact being given to the 3^rd or 4^th plaintiff or to the 2^nd plaintiff (accepting that the 3^rd and 4^thplaintiffs were effectively the 2^nd plaintiff’s companies).

42.In relation to Item 4, they argue that no solicitor was involved in the drafting, dispatch or receipt of the document; and, furthermore, the document had nothing to do with any request for legal advice from, or the giving of legal advice by, the solicitor. Therefore, legal professional privilege would not attach to the communication.

43.Mr Hui argues that the solicitor was involved in the process of gathering information so that legal advice as to tax affairs could be given by the accountant, and that ultimately legal advice was given by the accountant to the client in the draft fax to the Inland Revenue Department in New Zealand. Legal advice in such circumstances cannot be viewed in isolation or reduced to the advice per se, devoid of the exchange of information and communication which leads to the advice being given, all of which would be privileged, whether by ordinary principles of legal professional privilege or under the extended principles of legal advice privilege advocated by the minority in the Prudential case.

44.We have already dealt with the question of whether legal advice privilege can attach to legal advice rendered by accountants or tax specialists. However, in deference to the arguments of counsel as to whether either Item 4 or 6 may still be covered by legal professional privilege on ordinary principles, or whether the fraud exception applies to uncloak the privilege, we shall consider the questions in the context of the present case.

45.Legal professional privilege has been memorably described by Lord Taylor CJ in R v Derby Magistrates’ Court, Ex p B [1996] AC487, at 507, as:

“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.”

46.In Hong Kong, access to confidential legal advice is a constitutional right “which our courts will always be vigilant to accord proper protection”.[11] Such a constitutional cornerstone of our legal system cannot, therefore, be lightly disregarded.

47.The starting point for any consideration of the circumstances in which the privilege may be displaced under the fraud exception is R v Cox and Railton (1884) 14 QBD 153, per Stephen J at 168:

“In order that the rule (as to legal professional privilege) may apply there must be both professional confidence and professional employment, but if the client has a criminal object in view in his communications with his solicitor one of these elements must necessarily be absent. The client must either conspire with his solicitor or deceive him. If his criminal object is avowed, the client does not consult his advisor professionally, because it cannot be the 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.”

48.However, Stephen J sounded a warning at the conclusion of his judgment, at 176, when he cautioned that:

“the power (to order disclosure) ought to be used with the greatest care not to hamper prisoners in making their defence, and not to enable unscrupulous persons to acquire knowledge to which they have no right, and every precaution should be taken against compelling unnecessary disclosures.”

49.Of the principle in Cox and Railton, and the dangers of interpreting it too widely and applying it too indiscriminately to the giving of false instructions to a legal adviser, the court in Secretary for Justice v Shum Chiu [2008] 1 HKLRD 155 held, at 179:

“48. That said, such cases, in other words cases where a client uses his solicitor to further a criminal purpose, must be distinguished from cases in which a client uses a solicitor as the innocent vehicle for putting forward a bogus defence. It can hardly be asserted that every time a client consults a solicitor and puts to him an account, whether in civil or in criminal proceedings, that is ultimately found to be untrue, that the consultation was, for that reason, not a protected one:

… the common law principle of legal professional privilege cannot be excluded, by the exception established in R v Cox Railton (1884) 14 QB 153, in cases where a communication is made by a client to his legal adviser regarding the conduct of his case in criminal or civil proceedings, merely because such communication is untrue and would, if acted upon, lead to the commission of the crime of perjury in such proceedings.

per Lord Goff of Chieveley in R v Central Criminal Court, ex p Francis & Francis [1989] 1 AC 346 at p. 397.

49. And, to the same effect, Glidewell LJ said in R v Snaresbrook Crown Court, ex p Director of Public Prosecutions [1988] QB 532 at pp. 537-538:

Obviously, not infrequently persons allege that accidents have happened in ways other than the ways in which they in fact happened, or that they were on the correct side of the road when driving when actually they were on the wrong side of the road, and matters of that sort. Again, litigants in civil litigation may not be believed when their cases come to trial, but that is not to say that the statements they had made to their solicitors pending the trial, much less the applications which they made if they applied for legal aid, are not subject to legal privilege. The principle to be derived from R v Cox and Railton (1884) 14 QB 153 applies in my view to circumstances which do not cover the ordinary run of case such as this is.”

50.In distinguishing between using a legal representative to further a criminal purpose and using him as a vehicle to put forward a bogus defence, in both of which circumstances the legal representative may be entirely innocent, one must be careful that in attempting to show the former one does not intrude too far into the issues at trial which may determine the latter. As Rose LJ explained in R (Hallinan Blackburn Gittings & Nott) v Crown Court at Middlesex Guildhall [2005] 1 WLR766, at 771:

“It is a truism that whether material is legally privileged depends on the circumstances of the particular case. In order to defeat a claim to legal professional privilege, it will not be appropriate, for example in a case where an alibi has been raised, to seek to analyse the issues which are likely to arise in the criminal investigation or trial which gives rise to the initial privilege. To do so, as it seems to me, would be to put the cart, in the form of analysis of the issues, before the horse, that is the trial. Where, however, there is evidence of specific agreement to pervert the course of justice, which is a freestanding and independent, in the sense that it does not require any judgment to be reached in relation to the issues to be tried, the court may well be in a position to evaluate whether what has occurred falls within or outwith the protection of legal professional privilege as explained in R v Cox and Railton 14 QBD 153.”

51.We acknowledge, as Ms Draycott has pointed out, that this particular passage was considered in Kuwait Airways Corpn v Iraqi Airways Co (No 6) [2005] 1 WLR 2734 at 2749E-F, where the court said of an argument in that particular case that the fraud alleged was not “freestanding and independent” of the issues at trial:

“Here, (counsel) said, the fraud was indeed one of the issues to be tried. I do not consider that Rose LJ was intending to lay down any precondition (for the purpose of reliance on the fraud exception) that the fraud should not relate to the issues to be tried. He was merely pointing out that it is easier to evaluate whether facts justifying the fraud exception have come into existence if the fraud does not relate to the very issue which is to be tried…”

52.Nevertheless, we are in some doubt as to what the connection is, if any, between the material disclosed in Items 4 and 6 and the criminal case against the 2^nd plaintiff (among others). Although Ms Draycott is to some extent handicapped because she is not, of course, privy to the information contained in the documents, we have seen them in the context of the prosecution case as we understand it to be, and as the Judge understood it to be. Yet we cannot on the information properly available to us see how the contents of the documents have any relation to, or connection with, the charges alleging fraud and money-laundering in the criminal case. Nor do they appear to promote any other criminal purpose. The Judge held:[12]

“I am accordingly satisfied that any legal advice given in respect of the activities involved in the incorporation of the various companies, the appointment or resignation of directors of those companies, the changing of shareholding in the company’s, and the movement of funds are activities which by reason of the fraud exception cannot be protected by LPP by reason of the fraud exception (sic).”

53.With respect, these documents deal with GST issues arising out of various payments to or from the 2^nd plaintiff for the purpose of answering enquiries from the Inland Revenue Department in New Zealand about the 4^th plaintiff’s GST return. We cannot, at this stage, see how they should be caught by the fraud exception, although we are alive to the possibility that seemingly unconnected statements to third parties in documents may be designed to enhance, or perpetuate, or give legitimacy to a fraud, sometimes well after the coming into being of the conspiracy. As the court in the Kuwait Airways case stated, at 2746E-F:

“In the course of litigation, the conspiracy has to continue and may well, indeed, be ‘improved’ by the concealment of evidence that does exist or the invention of evidence that does not exist. That is all in furtherance of the conspiracy that constitutes the antecedent transaction.”

54.Furthermore, even if it be that the truth of the explanations in respect of certain payments in the proposed answers to the Inland Revenue enquiries are somehow indirectly connected with the very issues at trial, then there is no warrant for uncloaking the privilege attaching to the documents under the Hallinan principle. As Viscount Finlay put it in O’Rourke v Darbishire [1920] 581, at 604:

“… it is not enough to allege fraud. If the communications to the solicitor were for the purpose of obtaining professional advice, there must be, in order to get rid of privilege, not merely an allegation that they were made for the purpose of getting advice for the commission of a fraud, but there must be something to give colour to the charge. The statement must be made in clear and definite terms, and there must further be some prima facie evidence that it has some foundation in fact.”

55.Similarly, in R v Gibbins [2004] EWCACrim 311, the court held, at para50:

“In this respect, bearing in mind the nature of the proceedings, the importance of the doctrine of LDP [privilege], 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 v Weldon[13]) that a ‘strong’ prima facie case is required …. 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.”

56.Accordingly, we do not accept that there is strong (or clear) prima facie evidence that the advice (assuming it to be such) was either sought or received for a fraudulent purpose so as to uncloak the communication of privilege. On the face of it, and contrary to the Judge’s findings, we do not accept that the fraud exception would apply to either document.

57.However, that does not resolve the matter in favour of the plaintiff appellants. For we are also of the view that by no stretch of the imagination can the contents of either Item 4 or Item 6 be described as legal advice rendered by a lawyer. Indeed, we cannot see the solicitor’s imprint on the substance or content of either document at all: it would appear from the face of the documents, and the affirmation of Jiang Ping to which we have earlier referred does not suggest otherwise, that the solicitor Kerry Knight was merely being used as a conduit for enquiries from the accounting firm for the purpose of making a GST return on behalf of the 4^th plaintiff. In short, the solicitor was not being asked to advise and did not in fact offer or endorse any advice. If it be contended that the “recommendations” of the accounting firm in Item 4 amount to the rendering of advice, then it is clearly accounting advice and not legal advice. And even if it were legal advice, it would not have been rendered by a lawyer so as to attract privilege.

58.Accordingly, in our judgment, the documents are not covered by legal professional privilege on ordinary principles and the respondents are entitled to inspect them for the purposes of the criminal investigation.

Conclusion

59.For the reasons explained above, we concluded that the appropriate law to apply in determining whether or not the documents were privileged from production was Hong Kong law, under which the documents in question were not privileged from production as they did not contain or relate to the seeking of legal advice, and even if they did, such advice would have been from the plaintiff's accountants, and in Hong Kong, legal advice privilege does not extend to documents generated in the course of seeking and obtaining legal advice from accountants or other non-lawyers. As a result of this, the question of the applicability of the Cox v Railton exception did not arise, but had it done so, we would have held that it would not have applied here.

60.For all of the foregoing reasons, the appeal was dismissed.

Mr John Hui, instructed by Charles Chu & Kenneth Sit, for the 3^rd and 4^thplaintiffs / appellants

Ms Charlotte Draycott SC, leading Ms Joycelyn Ng, instructed by Department of Justice, for the defendants / respondents

Mr Newman Wong (Special Counsel), instructed by Department of Justice, for the defendants / respondents