China: To see or not to see: The question of disclosing documents without losing privilege answered in Hong Kong

Last Updated: 21 July 2012
Article by Jill Wong

The concept of partial waiver of privilege has been recognised in Hong Kong in a recent landmark decision of the Hong Kong Court of Appeal in Citic Pacific Limited v Secretary for Justice and Commissioner of Police1. Click here for the judgment.

Background

The case concerned six legally privileged documents ("Documents") which Citic Pacific Limited ("Citic") had voluntarily provided to the Securities and Futures Commission ("SFC") in connection with an October 2008 investigation into Citic's delay in publishing information which would have a material impact on its share price ("Investigation"). The Documents had been passed from the SFC to the Department of Justice ("DoJ") in the course of seeking legal advice on them. The police subsequently sought access to these documents in relation to their own criminal investigation. Citic objected and applied to the Court of First Instance for relief. In its application, Citic sought the return of the Documents, claiming that it had only partially waived privilege in releasing the Documents to the SFC in the course of its Investigation. Citic contended that the DoJ was not in lawful possession of them and, even if they were in lawful possession, that the DoJ was not entitled to disclose them to any third party.

First Instance – privilege fully waived

Mr Justice Wright in the Court of First Instance dismissed Citic's claim. He found that Citic had waived all privilege in the Documents when it surrendered them to the SFC as there was no express or implied condition to the waiver. Accordingly, the court determined that it was not necessary to consider whether the concept of partial waiver was recognised in Hong Kong. The court further found that there was a prima facie case that the Documents had been created in order to further a fraudulent scheme and that, because of this exception, Citic could not claim privilege over the Documents.

Appeal – partial waiver recognised

Citic appealed to the Court of Appeal who examined the issues of the partial waiver of privilege and the fraud exception.

Partial waiver of privilege

The Court of Appeal found as a matter of fact that Citic had only waived privilege in the Documents for the purpose for which they had initially been disclosed, namely the SFC investigation. The court took a holistic approach and recognised legal privilege even though at the time of disclosure of the documents, Citic's solicitors did not provide any written document setting out the terms as to the limitation of the waiver of privilege. The court made clear it would not lightly infer a full waiver of privilege but what reasonably ought to have been understood from the facts was that Citic intended to waive privilege only for the purpose of the SFC investigation.

Accordingly, the court then had to consider whether such a partial waiver of privilege in fact existed in Hong Kong. Overturning the decision in Rockefeller & Co Inc v Secretary for Justice [2003] 3 HKC 48, the court found that partial waiver of privilege did exist in Hong Kong, noting that the earlier decision did not reflect the position in English law nor the right to confidential legal advice enshrined in Hong Kong's Basic Law.

Fraud exception

As to the fraud exception to privilege, the Court of Appeal further disagreed with the decision of Mr Justice Wright at first instance. The court held that the correct test of whether or not fraud would apply as an exception to privilege was whether the legal advice was sought in good faith and given in good faith. The integrity of the privilege did not depend on the person receiving the legal advice then following it. The court did not think that there was a clear prima facie case that the Documents had been produced to further a fraudulent scheme.

The court therefore decided that Citic had only partially waived privilege in the Documents for the purpose of enabling the SFC to conduct its investigation (including forwarding them to DoJ for seeking legal advice) and for no other purpose, and that Citic retained privilege for all other purposes. Citic could therefore claim privilege against the police's request to access the Documents.

Conclusion

This case brings welcome clarity that the concept of partial waiver of privilege is recognised under Hong Kong law. Any person who is considering the disclosure of privileged documents to a regulator or government authority and wishes to limit onward disclosure can now partially waive privilege. This judgement is welcome news for financial institutions and listed companies who are obliged to provide information or documents for regulatory inquiries or investigations. In particular, this decision should be a key consideration for financial institutions who are obliged to self-report under the SFC Code of Conduct.

What do you need to do?

If you have been asked to provide documents for a regulatory inquiry or investigation:

  • Identify those which may be subject to privilege;
  • Decide if you wish to claim privilege;
  • If you do, but wish nevertheless to disclose the privileged documents (say, to show full co-operation with the regulators) clearly state in writing at the time of disclosure that any waiver of privilege is limited to the purposes of the inquiry or investigation of that regulator or authority;
  • If you do not wish to disclose, keep in mind that legal privilege is a fundamental right and enshrined in Article 35 of the Basic Law; and
  • If you are obliged to self-report under the SFC Code of Conduct, the same considerations apply. For more commentary on the SFC's powers, the Code, and the very recent amendments to the self-reporting obligations effective December 2012, please refer to our Client Alert here

Footnote

1 [2012] 2 HKLRD 701 (28 March 2012).

to the subject matter. Specialist advice should be sought about your specific circumstances.

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