The Secretary for Justice v. James Henry Ting

HCCW 49/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 49 OF 2000

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BETWEEN

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AND

HCCW 50/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 50 OF 2000

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______________________

BETWEEN

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(Heard Together)

Before : Hon. Kwan J in Chambers (not open to public)

Date of Hearing : 25 September 2007

Date of Judgment : 25 September 2007

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J U D G M E N T

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1.This is an appeal from the decision of Master de Souza given on 4 May 2007.  The decision was made on an application by the Secretary for Justice for the release of the transcript of the private examination of James Henry Ting (“the respondent”), conducted pursuant to the order I made on 7 September 2004 under section 221 of the Companies Ordinance, Cap. 32.

2.The Master granted the application in the exercise of his discretion under rule 62(2) of the Companies (Winding-up) Rules.  He ordered the transcript be made available to the Secretary for Justice in the full knowledge it would be passed on to the Commercial Crimes Bureau (“the CCB”).  He noted that the information obtained in the depositions of the respondent is solely to assist the CCB in its investigations and not be released to any other party whether within or outside Hong Kong, to address the respondent’s concern that overseas authorities might come into possession of the information.  And he ordered that the costs of the application, including the costs reserved, be in favour of the Secretary against the respondent, with certificate for counsel, to be taxed if not agreed.

3.The respondent lodged an appeal against the decision on the same day it was handed down.  By an order by consent made by the Master on 9 May 2007, his decision was stayed pending the determination of this appeal.

4.I do not propose to repeat the background that gave rise to the order for examination against the respondent, they are set out in paragraphs 6 to 19 of my decision on 7 September 2004.  Nor is it necessary to repeat the background of the companies, Akai Holdings Limited and Kong Wah Holdings Limited (collectively “the Companies”), and the respondent’s substantial involvement in their affairs.  I refused the respondent’s application to stay the section 221 examination until the delivery of the verdict in his criminal proceedings.  He lodged an appeal to the Court of Appeal.  On 13 April 2005, his appeal was dismissed by the Court of Appeal (Re Kong Wah Holdings Limited & Another [2005] 1 HKLRD 847).

5.The respondent stood trial between 3 May 2005 and 24 June 2005 on two counts of false accounting, contrary to section 19(1)(a) of the Theft Ordinance, Cap. 210.  He was convicted on 29 June 2005 and sentenced to six years’ imprisonment on both counts.

6.On 10 to 12, 15 to 19 August 2005, he was examined for 8 days before Master de Souza, pursuant to my order which was upheld by the Court of Appeal.

7.The liquidators were permitted to use LiveNote to take down the evidence of the respondent during examination, and the respondent was ordered to review the LiveNote transcript provided by the liquidators on a daily basis and sign the transcript within 21 days of completion of the hearing.  So his depositions in the examination were transcribed by LiveNote (“the LiveNote transcript”) and the court’s transcription service (“the court transcript”).

8.The respondent appealed against his conviction to the Court of Appeal.  His appeal was allowed on 22 September 2006 but a re-trial was ordered (HKSAR v Ting James Henry [2006] 4 HKC 494).  On 5 December 2006, he applied to the Court of Appeal for certification to appeal to the Court of Final Appeal against the order for re-trial, and his application was refused.  On 16 March 2007, he sought and obtained leave from the Court of Final Appeal to appeal against the order for re-trial, and leave was granted on the basis of three questions indicating points of law of great and general importance.  The hearing of this appeal will take place on 17 and 18 October 2007.

9.Two months after the conclusion of the respondent’s private examination, on 13 October 2005, the Department of Justice wrote to the Master’s clerk seeking a copy of the transcript of the respondent’s examination “for the purpose of [their] on-going criminal enquiries”.  It was further stated that the Department of Justice is aware that nothing the respondent said in his examination can be used against the respondent in any criminal charges laid against him.

10.Between October 2005 to December 2005, correspondence was exchanged between the court, the Department of Justice, the respondent and the respondent’s solicitors on the request of the Department of Justice for the transcript.

11.Eventually, on 14 December 2005, the respondent responded through his solicitors that he opposes the application as the Department of Justice appears to be on a fishing expedition, that he wishes to exercise his rights of privilege against self-incrimination and under the Hong Kong Bill of Rights, and there is substantial risk that information gained during his examination may be used by third parties, e.g. criminal authorities in other jurisdictions.

12.The Master directed a hearing to resolve the dispute, and handed down his decision on 4 May 2007.

13.The liquidators appeared before the Master and in this appeal but made no substantive submissions.  Their stance, as stated in their letters to the court dated 30 May 2006 and 6 October 2006, is that they are opposed to providing the Secretary for Justice with a copy of the LiveNote transcript; as for release of the court transcript, that is a matter for the sole discretion of the Master, so the liquidators make no comment and raise no objection.  In the event any order for the release of the court transcript is made, the liquidators submitted that the court should also make these orders:

(1)	the transcript be kept confidential and not be provided to any third party or department outside of the Department of Justice;
(2)	it be not disclosed in any other proceedings; and
(3)	its use be restricted to solely assisting the Department of Justice in the investigations of the respondent.

14.I understand from Mr Turnbull, who appeared for the Department of Justice, that subject to certain changes, he would not be opposed to the orders sought by the liquidators, in the event that the appeal is dismissed and the court should authorise the release of the court transcript.

15.I should also say at the outset the Department of Justice has confirmed its stance, as it had done before the Master, that the court transcript would not be used against the respondent, whether in his re-trial, if this should take place, or in any other proceedings against the respondent, if the respondent is subsequently charged of other offences, and that the only use of the depositions is a derivative one, namely, to further the investigations of the CCB, such as by using this to acquire evidence from other sources.

16.It is provided in rule 62(2) that the court has discretion whether to direct the notes of the depositions of a person examined under section 221 be open to the inspection of any creditor, contributory or other person, and the court may from time to time give such general or specific directions as it shall think expedient as to the custody and inspection of such notes and the furnishing of copies of or extracts therefrom.

17.It was decided by the Court of Appeal in Re Wing Fai Construction Co Ltd [2006] 4 HKLRD 58 that leave is required under rule 62(2) for the liquidators to supply a copy of the depositions in a section 221 examination to the police; if the liquidators should consider the depositions revealed criminal conduct that should be reported to the authorities, it is for the court to decide, in the exercise of its discretion under rule 62, whether to order disclosure to the police.  As stated by Yuen JA, rule 62 is wide enough to give protection to the individual compelled to give self-incriminating answers in private examination which are admissible in evidence against him; he has a right to ask the court to consider whether to protect him, and whether the court would do so would depend on the facts of each case, such as the availability of other evidence, the seriousness of the criminal conduct, the extent of the individual’s involvement, etc.  The court has to carry out a balancing exercise, balancing the demand of furthering the public interest with that of safeguarding the right of the individual and this would simply be an extension of the balancing exercise which the court undertakes when it considers whether to order a private examination (at 79I to 80F, paragraphs 95, 96 and 99).

18.For similar statements about the need to balance the right of the individual and the public interest in the context of a private examination, I refer to the judgment of Lord Millett NPJ in Joint & Several Liquidators of Kong Wah Holdings Limited v Grande Holdings Limited (2006) 9 HKCFAR 766 at 780J to 781C, 782B to 783A, paragraphs 26, 29 & 30.

19.The Master’s reasons for allowing the release of the transcript to the Department of Justice for onward transmission to the CCB may be summarised as follows.

20.Firstly, he bore in mind the abrogation of the privilege against self-incrimination in an examination under section 221.  He then considered the Court of Appeal judgment in Wing Fai Construction and the restriction on the use of depositions in private examinations, citing the relevant passages in the judgment that I have mentioned earlier.  He looked at the derivative use of the depositions, with reference to the judgment of the Court of Final Appeal in HKSAR v Lee Ming Tee [2001] 1 HKLRD 599, in which it was held that whereas section 145(3A) of Cap. 32 abrogated the privilege against self-incrimination and replaced it with a direct use prohibition (i.e. prohibiting the use of questions and answers obtained in the course of an inspection as evidence in criminal proceedings against the person giving the answers), this section inferentially permitted derivative use of questions and answers and, as a matter of statute and common law, the prosecution was entitled to make derivative use of materials handed to the police.  The Court of Final Appeal concluded that derivative use of compulsorily obtained self-incriminating materials could be justified if it was not a disproportionate response, and it was a question of striking a fair balance between the general interest of the community in realising the legislative purpose and the protection of fundamental rights of an individual.

21.The Master noted that here the Department of Justice does not seek to use the respondent’s depositions in the re-trial.  This would not be permissible by virtue of section 33(1), Cap 210, and what is sought is the release of the transcript for transmission to the CCB, so that information may be used derivatively in furthering on-going investigations into the collapse of the Companies.

22.The Master then embarked on the balancing exercise set out in paragraphs 19 to 24 of his decision.  He was of the view that where there are appropriate circumstances, a departure from preserving the confidentiality of private examination may be warranted, after a proper balancing of the competing interests of the private individual with public interests.

23.He had regard to the respondent’s interest, that his constitutional privileges should not be unfairly stripped away, and nothing should be done to prejudice his re-trial.  He balanced that with the public interest in the fair administration of justice, and this demands that fraud bringing down listed companies should be fully investigated and identified culprits brought to book with the full force of the law. There was “more than a whiff of fraudulent misconduct” behind the collapse of the Companies, and “the massive insolvency did not result from mere financial incompetence”.  He came to the view that the balancing of conflicting claims and interests clearly favours the release of the transcripts to the Secretary for Justice to enable further and continuing investigations be made, the depositions cannot and will not be used in the re-trial and the respondent’s right will be adequately safeguarded by his legal representatives and the trial judge.

24.As this appeal from the Master’s decision is a hearing de novo, I look at the exercise of the court’s discretion under rule 62 and carry out the balancing exercise afresh.

25.Mr Ismail for the respondent laid great emphasis on the need to preserve confidentiality in private examination, owing to the abrogation of the privilege against self-incrimination.  He said there is an element of oppression in releasing the transcript which exposes the respondent to potential criminal liability.

26.He has no quarrel with the Master that the need to preserve confidentiality of the depositions is not absolute.  He also accepted that wider public interest in the fair administration of justice and in fully investigating the fraud that brought down listed companies and bringing identified culprits to book are capable of amounting to good and clear reasons for not preserving the confidentiality of the depositions.

27.He submitted that here the liquidators have adopted a neutral stance.  The liquidators are aware of what the respondent said in the depositions, it is significant that they have not applied to court to disclose the depositions to the CCB.  Hence, it should be inferred that the liquidators do not consider the respondent’s depositions have revealed any criminal conduct or fraudulent misconduct worth investigating.

28.Mr Ismail stressed that the liquidators, who have the function of investigating the causes of the Companies’ failure and the conduct of those concerned in their affairs, and have been charged with the duty of reporting misconduct to the authorities for the latter to take appropriate action, have not considered it appropriate in this instance to make any report at all. The liquidators are still charged with this responsibility even though they have adopted a neutral stance in the present application.  It may be that if at a later stage the liquidators should form the view that the respondent’s conduct should be investigated by the CCB when the liquidators have more information, they could then apply to the court for disclosure of the respondent’s depositions.  In the meantime, public interest has been and is being looked after in that the liquidators have been entrusted with this role as described above.  Mr Ismail also submitted there is no urgency in any investigation by the CCB.

29.I do not agree with the above submissions.

30.The liquidators, who appeared by Mr Gall, although making no substantive submissions, did say that no inference should be drawn from the fact that they have adopted a neutral stance and leaving it to the court to decide.

31.I do not think it right to draw the inference suggested by Mr Ismail from the mere fact that the liquidators have not supported affirmatively the application by the Department of Justice.  Had the liquidators supported the application, this would of course be a weighty factor in favour of the Department of Justice.  The fact that the liquidators have indicated neither support nor opposition cannot possibly be turned into an adverse factor against the applicant.  The court has no idea why the liquidators have taken a neutral stance.

32.The liquidators are not the only ones charged with the responsibility of bringing to book culprits in a liquidation, nor are they vested with the primary duty or an initiating role in this respect.  There has been a police investigation all this time when the liquidators were charged with the administration of the liquidation.  As submitted by Mr Turnbull, the information in the hands of police and the information available to the liquidators are not the same.  The information in the liquidator’s hands may not reveal criminal conduct when looked at in isolation, and the lines of enquiry adopted by the police and the liquidators do not coincide.  The Department of Justice is not saying at the moment there is a case of criminal conduct against the respondent (other than the charges that the respondent is faced with at the re-trial) or any one else.  Investigations are continuing into other aspects relating to the collapse of the Companies and, depending on the results of investigations, further criminal charges may be laid against the respondent and other persons.  Releasing the depositions of the respondent to the police would be of use to other lines of investigation which the CCB is currently undertaking. 

33.Mr Ismail submitted the Department of Justice has not shown that the depositions are reasonably required by the CCB to carry out its functions, in that no area of investigation has been identified and it has not been demonstrated how the court transcript would help in its investigation, so this is merely a fishing expedition in the hope that something may turn up.

34.I do not accept this either.  There is no reason why the Department of Justice should disclose the avenues that the CCB would wish to pursue, to ensure that no attempts would be made to impede the gathering of evidence relating to the enquiries.  The submission of Mr Ismail that there is no urgency in providing information to the CCB to assist with investigation is not a realistic one.

35.Mr Ismail further submitted that since 2004, the liquidators have obtained orders for examination and inspection of documents from a number of other sources, including the Companies’ former auditors and the Grande Group of companies, so the state of knowledge of the liquidators as of today should be different from the position in 2004.  If by this Mr Ismail is contending that the Department of Justice could have access to other documents or information owing to the further orders obtained by the liquidators under section 221, this has not been made clear to me.

36.I have considered the possible prejudice to the respondent.  As indicated earlier, the sole use to which his depositions would be put is a derivative one.  The respondent would suffer no prejudice in that his right not to have the depositions used against him in any proceedings is safeguarded.  He is intimately involved in the affairs of the Companies, his examination before Master de Souza took 8 days.  This court has no knowledge of the answers he gave, but the Master does have knowledge, having been seized of the examination.  The Master would not make an order authorising the release of the court transcript if he considered that the depositions would be of no value in assisting the CCB in further investigations.

37.Mr Ismail raised in his submission that section 296(2A) of Cap 32 contravenes article 11(2)(g) of the Bill of Rights.  Section 296(2A) provides as follows:

“	An answer given by a person to a question put to him in exercise of powers conferred by rules made under this section may be used in evidence against him.”

38.The Court of Appeal mentioned in Wing Fai Construction that by virtue of this provision, there is no limit to the type of proceedings in which evidence obtained in private examination may be used, and the answers given may be used in civil and criminal proceedings (supra. at 64F, paragraph 10)

39.Mr Ismail said he would reserve the right to challenge in a higher court that a private examination under section 221, with abrogation of the privilege against self-incrimination, when read with section 296(2A), contravenes article 11(2)(g).

40.Article 11(2)(g) is not relevant in the present context.  The immunity in that article is a testimonial immunity, it does not prohibit derivative use of materials compulsorily obtained.

41.For above reasons, I see no reason why the Master’s decision should be faulted.  I would have come to the same decision myself.  On dismissing the appeal, I make these additional orders:

(1)	the court transcript is to be kept confidential and other than the CCB, the Department of Justice is not to provide a copy of this to any third party;
(2)	the transcript is not to be disclosed by the Department of Justice in any other proceedings; and
(3)	the use of the transcript is to be restricted to assisting the CCB in its investigation in matters connected with or arising out of the collapse of the Companies.

42.I order the respondent to pay the costs of the Department of Justice in this appeal, including the costs reserved.  I also order the respondent to pay the costs of the liquidators in the hearing before the Master and on this appeal.

Mr Anthony Ismail, instructed by Messrs Andrew W Y Ng & Co, for the Respondent

Mr R G Turnbull, Senior Assistant Director of Public Prosecution, for the Applicant

Mr Nick Gall of Messrs Laracy Gall, for the Joint and Several Liquidators