Super Worth International Ltd and Others v. Commissioner of the Independent Commission Against Corruption and Another
Read the full judgment text of HCMP 1320/2012 on BabelCite. This High Court CFI judgment was delivered on 3 July 2015.
2. It is convenient to refer to the 2 nd plaintiff as May Wang as that is the name she used during the course of the factual circumstances leading to the criminal charges she now faces.
Cited by 2 cases · Cites 5 cases
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HCMP 1320/2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 1320 OF 2012 ________________________
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________________ JUDGMENT ________________ Introduction 1. On 3 May 2012, the Independent Commission Against Corruption (ICAC) conducted a search, pursuant to a warrant, at the offices of Super Worth International Ltd (Super Worth) in Hong Kong. A number of documents were seized. Arrangements had been made to enable the sealing of any documents for which legal professional privilege (LPP) might be claimed. 2.It is convenient to refer to the 2nd plaintiff as May Wang as that is the name she used during the course of the factual circumstances leading to the criminal charges she now faces. 3.LPP is claimed in respect of six documents or groups of documents[1]:
4.A claim for LPP was made in respect of an exhibit to an affirmation of Hau Pak Sun, filed in the proceedings by way of the 2nd affirmation of Jiang Ping. It was agreed that if the claims to LPP in respect of items 1-6 are not upheld, this claim would fall away. 5.Initially, both Super Worth and May Wang (represented by Mr Tang) and NZ Dairy Trustee and New Zealand Dairy Processing, (represented by Mr Hui), claimed LPP in respect of each of the six groups of documents. 6.By the conclusion of the trial Mr Tang claimed privilege in respect of item 1, and made no submissions, but no concession in respect of items 2 and 3. In respect of items 4-6, the claim for LPP was abandoned by Mr Tang. Mr Hui claimed LPP in respect of items 1, and 4-6. Mr Hui abandoned the claim in respect of items 2 and 3. The appointment of a special advocate: 7.Neither side was concerned about me seeing the documents, (the bundle contained only 62 pages). I understand however that the Commissioner was anxious that appropriate submissions should be able to be made in respect of the content of the documents, but recognised that those submissions could only be made by counsel who had seen the documents. At the same time, understandably, the plaintiffs were concerned that prosecuting counsel, Ms Draycott, should not see the content of the documents in case the claim of privilege was upheld. 8.By a consent order, Mr Newman Wong was appointed Special Advocate to make submissions on behalf of the Commissioner and the Secretary for Justice. Mr Wong was given full access to the documents on a confidential basis, with both the Commissioner and the Secretary acknowledging that that access did not constitute a waiver of any privilege. Mr Wong made submissions on the documents to assist me. Both those submissions, and the reply from Mr Tang and Mr Hui to those submissions, were heard in camera. This procedure broadly adhered to the procedure subsequently proposed by the Court of Appeal in CITIC Pacific Ltd v Secretary for Justice & Anor (unreported, 29 June 2015, CACV 7/2012). 9.It was Mr Wong’s submission that in the context of this case the documents were not protected by LPP by reason of the fraud exception. The extension of legal professional privilege to accountants: 10.One of the documents in respect of which privilege was claimed was a draft letter prepared by a partner in a worldwide network of public accounting firms, in which taxation advice of a legal nature is given. Mr Hui sought to extend LPP to accountants who gave legal advice. In support of his submission Mr Hui relied upon a dissenting judgment of Lord Sumption in the decision of the United Kingdom Supreme Court in R (Prudential plc & Anor) v Special Commissioner of Income Tax & Anor [2013] 2 AC 185. The majority of the Court rejected the extension of privilege to accountants giving legal advice, holding that the matter appeared to be one that was appropriately dealt with by the legislature. 11.The judgment of Lord Sumption is powerful, and is, to an extent, supported by Lord Neuberger who recognised that the argument for extending the privilege is strong both in terms of principle and logic. 12.Compelling though the argument is, I am not persuaded that this is an appropriate case to consider such a change. As Mr Hui was obliged to concede, even if privilege did attach to accountants giving legal advice, the fraud exception would still apply. If the fraud exception is established in this case, the argument becomes entirely academic. Lex fori or lex causae: 13.The usual rule is that the law applied to determine an issue of privilege is the lex fori, that is Hong Kong law: Lawrence v Campbell (1859) 4 Drew 485, 62 ER 186, and Re Duncan [1968] P 306. Mr Hui sought to argue that as the documents emanated from New Zealand the law to determine the issue of privilege should not be the lex fori, but the lex causae, New Zealand law. I acknowledge that academic writers[3] record that there are strong grounds for the reconsideration of the principle in Re Duncan. But for the reasons set out in §15 below, it is not necessary for me to resolve this issue in these proceedings. 14.Before the court was an erudite opinion from a specialist tax counsel in New Zealand, Mr G D Clews, who demonstrated that in New Zealand there is a statutory right of Tax Advice Non-Disclosure which may result in documents containing legal advice which are prepared by an accountant, being clothed with a level of privilege. The defendants’ expert advice did not dispute Mr Clews’ advice in this respect. 15.Again however, Mr Hui was obliged to concede that even if that privilege existed, the fraud exception would still apply. If the fraud exception is established in this case the argument becomes academic, and it is simply not necessary for me to examine the issue in the context of this set of facts. 16.Consequently I do not propose to give any further detailed consideration to Mr Hui’s well researched and well presented arguments, but to consider first whether the fraud exception applies in this case. The fraud exception: 17.LPP is a basic right under Article 35 of the Basic Law, and consequently constitutionally entrenched. The Court of Final Appeal has reiterated repeatedly that LPP is a fundamental right which the courts will jealously protect: see Solicitor v Law Society of Hong Kong (2006) 9 HKCFAR 175 [14-17]; Akai Holdings Ltd v Ernst & Young (2009) 12 HKCFARE 649 [66-69]; Secretary for Justice v Florence Tsang Chiu Wing (2014) 17 HKCFAR 739 [27-29]. 18.In so far as any document seized may be subject to LPP, the case for the Commissioner, advanced by Ms Draycott, was that by virtue of what is commonly known as the fraud exception, LPP had been lost. The classic statement of the fraud exception, cited with approval by the Court of Appeal in Citic Pacific Ltd v Secretary for Justice [2012] 2 HKLRD 701 at 721, §77, comes from R v Cox and Railton (1884) 14 QBD 153 at 165 per Stephen J:
19.A further passage from the judgment of Stephen J, at p 167, is equally instructive:
20.The discretion to order disclosure of legally professionally privileged documents by way of the fraud exception is one which is to be exercised with considerable caution: see Citic Pacific, p 721 §78, citing O’Rourke v Darbishire [1920] AC 581 at 604. 21.It is now clear from Citic Pacific, (see §§77-79), that there must be a clear prima facie case that the offence existed and that the documents concerned came into existence as part of the offence. In Citic Pacific the offence was fraud. In the present case the allegation is that there are, inter alia, offences of fraud and money-laundering. The evidence as to the offences: 22.The defendants in the criminal proceedings, who include May Wang, face two counts. The factual circumstances surrounding the charges is complex and so it is convenient to set those charges out in full.
23.May Wang established a number of companies in the course of her activities. These include New Zealand Dairy Processing Limited (New Zealand Dairy Processing, the 4th plaintiff); NZ Dairy Trustee Ltd (NZ Dairy Trustee, the 3rd plaintiff); UBNZ Assets Holdings Ltd (UBNZAH); UBNZ Funds Management Ltd (UBNZFM); UBNZ Trustee Ltd (UBNZT); and Super Worth International Ltd (Super Worth, the 1st plaintiff). All of these companies, at different times and for different purposes, were vehicles used by May Wang in the course of the activities described below. 24.Ms Draycott set out in her skeleton the following factual background to the charges[4]:
25.There is no argument from Mr Tang or Mr Hui that the falsification of the CraFarms accounts did not constitute a criminal offence in Hong Kong. Neither did they attempt to suggest that it was not as a result of that falsification that China Jin Hui Mining Corporation Ltd (CJHM) was persuaded to enter into agreements to purchase the farms from UBNZT. Discussion: 26.I am satisfied from the foregoing description of the prosecution case that there is a strong prima facie case that the activities of May Wang in the formation of the various companies, the movement of funds around those companies, the various steps were taken by those companies to give effect to the acquisition of the farms by UBNZT, the ultimate sale of four of the farms to CJHM, and the attempted sale of the remainder of the farms, (not approved by the OIO), were all part and parcel of the steps that were necessary to take in order to release to May Wang and her accomplices the proceeds of sale. Those proceeds of sale had been obtained through fraud. The “laundering” exercise undertaken by the companies was an essential step in the commission of her crimes. 27.I accept Ms Draycott’s submission that although some of the steps, particularly the changes of directors of the companies, with the assistance of legal advice, took place after the period that is the subject of the charges, there is a prima facie case that those steps were integral steps in the process of May Wang releasing the funds from those companies. Indeed, any steps taken to enable the release of funds from companies following the sale of the farms would be a step undertaken in the commission of the crime. 28.The mere fact that those steps do not form part of the charges pending in Hong Kong does not detract from the fact that they are steps in a criminal activity, and accordingly that legal advice given in respect of those steps would be subject to examination under the fraud exception. 29.Mr Tang and Mr Hui briefly raised what might best be described as future jury points by way of criticism of the submission by Ms Draycott that there was a strong prima facie case of fraud in the circumstances. But they did not, and indeed could not at this stage, seriously dispute the existence of a strong prima facie case of fraud, particularly in relation to the falsification of the accounts. 30.There is a clear and very strong prima facie case of fraud in relation to May Wang’s alteration of the CraFarms accounts. The activities that she undertook following her bankruptcy, using Super Worth, NZ Dairy Trustee and New Zealand Dairy Processing and other companies, were activities which, prima facie, appear to be designed solely to conceal her involvement with the farms that she had acquired as a result of the fraud, and to release the funds from the sale of those farms from companies used by her as vehicles in the purchase and sale. 31.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 companies, 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. 32.Mr Tang and Mr Hui suggest that there is an insufficient causal link between the fraud, and the activities in relation to company documents because of the lapse of time between the actual fraud itself, (the falsification of the accounts), and the documents for which LPP is claimed. I accept Ms Draycott’s submission that there is a strong prima facie case that the lapse of time between the two events is irrelevant, as advice concerning the administration of the assets of NZ Dairy Trustee particularly, and other companies generally, must be advice given in furtherance of dealing with the proceeds of crime. The review of the documents[10]: 33.Item 1: I accept that a solicitor’s fee note may carry with it LPP. Any LPP that there may have been with this fee note is lost by reason of the fraud exception. The note covers attendances prior to 30 June 2011, including advice in respect of “director issues”. The manipulation of directors following May Wang’s bankruptcy was a necessary step in keeping the companies going, thereby enabling her to release the funds. The fee note must be disclosed. 34.Item 2(a)(i): this document is a solicitor’s letter addressed to Natural Dairy giving legal advice on the acquisition of UBNZAH. Both of these companies played central roles in the fraudulent transaction. The letter relates to steps taken in the transaction. Accordingly by reason of the fraud exception, LPP is lost. The letter must be disclosed. 35.Item 2(a)(ii): this is a further solicitor’s letter giving legal advice to Natural Dairy on the acquisition of UBNZAH. The same reasons as above, by reason of the fraud exception, LPP is lost. The letter must be disclosed. 36.Item 2(a)(iii): this document is a solicitor’s letter, together with attachments, in which the solicitors set out the terms upon which they will hold certain documents in escrow pending an arrangement made between UBNZ, UBNZFM, Natural Dairy and a fourth company. The attachments constitute a review of the documentation involved in the various transactions between the various companies. Again, the companies that I have named are companies which played central roles in the fraudulent transaction. Part of the arrangement referred to relates to a central step in the fraudulent transaction. Accordingly by reason of the fraud exception, LPP is lost. The documents must be disclosed. 37.Item 2(b): this is an simple document constituting a letter from NZ Dairy Trustee to Natural Dairy. It does not in any way involve solicitors or legal advice, although it relates to a vital legal step in the procedure. It does not carry any LPP, and must be disclosed. 38.Item 2(c): this is an instruction from Natural Dairy to a central share registry. It does not in any way involve solicitors or legal advice. It does not carry any LPP, and must be disclosed. 39.Item 2(d): the occupations of the person sending the e-mail and the person receiving the e-mail are not identified. Neither Mr Tang nor Mr Hui suggest that either is a solicitor. In those circumstances cannot be said that the matter could possibly carry any LPP. It must be disclosed. 40.Item 2(e): this is a letter from Computershare Hong Kong Investor Services Ltd to Natural Dairy. It does not in any way involve solicitors or legal advice. It does not carry any LPP. It must be disclosed. 41.Item 2(f): this is a formal notification on the part of a bank in relation to convertible shares. It does not in any way involve solicitors or legal advice, although it may be an important legal step in a process. It does not carry any LPP. It must be disclosed. 42.Item 3: Mr Tang did not abandon the claim, but made no submissions in respect of this document. The writer, believed to be a solicitor, (no evidence of this was identified to me), gives advice as to how UBNZAH might go about purchasing and owning long-term up to 30,000 head of cattle. 43.The fraud for which charges are laid relates to the purchase of dairy farms. Any advice from a solicitor as to how the fraudulently obtained farms might be operated must lose any LPP protection that advice might have had when the farms were obtained by fraud. Whether the cattle were acquired or not is irrelevant. The document came into existence in the course of legal advice in relation to a fraudulent acquisition of property. Any LPP the document might have had is lost by reason of the fraud exception. The document must be disclosed. 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 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. 45.Item 5: this e-mail appears to constitute a list of “to do” items, with attachments, prepared by the solicitor, Kerry Knight, and sent to himself with a copy to May Wang. It refers, amongst other matters, to steps that needed to be taken during and following the acquisition of the farms. It does not appear to specifically constitute legal advice, although there are steps in the list which might be undertaken by a lawyer. In any event, by reason of the fraud exception any privilege that might have attached to the document has been lost. The document must be disclosed. 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 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 seeks instructions. By reason of the fraud exception no LPP attaches to this document. The document must be disclosed. Costs: 47.The claim for LPP has comprehensively failed. There will be an order nisi that the plaintiffs must pay the defendants costs of and incidental to the proceedings, to be taxed if not agreed, together with a certificate for two counsel.
Mr Alexander Tang, instructed by May Cheng & Co, for the 1st & 2nd plaintiffs Mr John Hui, instructed by Charles Chu & Kenneth Sit, for the 3rd & 4th plaintiffs Ms Charlotte Draycott SC leading Ms Joycelyn Ng Senior Public Prosecutor (Ag), instructed by the Department of Justice, for the defendants Mr Newman Wong, as Special Advocate, instructed by the Department of Justice, for the defendants. [1] The page numbers refer to the page numbers of Bundle C, containing the documents for inspection by the Judge and the Special Advocate, not to be disclosed to the Defendants prior to this judgment. [2] The “A-E” pages are uncertified translations of Chinese documents. [3] See e.g. Phipson on Evidence, 18th Edn §23-26. [4] I have adapted Ms Draycott’s description of the various entities somewhat for the purposes of this judgment, in order that the description of those entities may be consistent throughout this judgment. The paragraph numbers of the description reflect the paragraph numbers in Ms Draycott’s skeleton argument. Those numbers were used to identify various steps in the diagram that formed part of the evidence. [5] In her skeleton Ms Draycott described this company as“Listco”or“462,”the stock code number allocated to it on the SEHK. In a diagram showing the movement of funds it was identified as Natural Dairy (NZ) Ltd. [6] Identified in the charges as “UCTL”. [7] The evidence demonstrating the falsification is set out in the deposition of Mr Reid Panaho who is a forensic accountant with the Serious Fraud Office, New Zealand. The deposition formed part of the evidence before me. [8] Ms Draycott submits that such an independent financial advisor would have wished to see the original accounts. [9] This part of the transaction did not require OIO approval. [10] The ‘Items’ in the following paragraphs refer to the list of items in §3 above. |
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