Making a LPP claim is easy?
In recent years, dawn raids conducted by regulatory authorities have become increasingly common in Hong Kong's financial industry. These raids are often carried out by the Securities and Futures Commission (SFC) to gather evidence to investigate potential breaches of financial laws and/or regulations. However, the handling of legal professional privilege (LPP) claims during these raids has raised concerns about the position of the SFC in safeguarding this fundamental legal right.
Understanding LPP
Simply put, LPP is a fundamental legal principle that protects the confidentiality of communications between a lawyer and their client. It safeguards a client’s ability to seek legal advice without fear of their communications being disclosed without their consent. LPP serves as a cornerstone of the legal system, promoting the administration of justice and maintaining trust between lawyers and clients.
In Hong Kong, LPP is protected by the Basic Law as a fundamental human right. Article.35 of the Basic Law guarantees that:
'Hong Kong residents shall have the right to confidential legal advice, access to the courts, choice of lawyers for timely protection of their lawful rights and interests or for representation in the courts, and to judicial remedies.'
The common law has long recognized the importance of confidential legal advice; it is of such importance to the due administration of justice that, if that right is compromised, then justice itself is undermined.
Current Guidelines for LPP
First and foremost, the SFC has not published any handbooks or guidelines on LPP claim in the context of a search. Nevertheless, it may be useful to draw analogy from the Competition Commission’s publication on ‘Investigation Powers of the Competition Commission and Legal Professional Privilege’, which sets out procedures for handling claims subject to LPP when conducting a search under section 48 of the Competition Ordinance. This publication serves as a guideline on handling claims of LPP made during a search conducted by the Competition Commission. Under the guidelines, the Competition Commission will take measures to avoid reviewing material that is subject to a claim for privilege until the claim is resolved, for instance putting the concerned document or material in an opaque bag or container and sealed.
In comparison, at the moment the SFC does not provide any publication or guideline which outline the procedures to handling claims subject to LPP when conducting a search by SFC. Section 380(4) of the Securities and Futures Ordinance (SFO) provides that “nothing in this Ordinance affects any claims, rights or entitlements which would, apart from this Ordinance, arise on the ground of LPP”, and that is the extent that LPP is mentioned in relation to the SFO. Without a comprehensive publication setting out guidelines similar to the Competition Commission, the SFC’s current approach in handling LPP claims during a search has numerous shortcomings which necessitate clarification, as explained below.
Issues of LPP in a practical situation
In theory, the procedure for asserting LPP appears to be straightforward. However, in the context of a search, this is an area that decidedly calls for further elucidation. The absence of definitive guidelines can frequently give rise to ambiguity and disparate interpretations at the scene.
As a matter of fact, it was only recently in 2020 in the case of Cheung Ka Ho Cyril and others v Securities and Futures Commission (HCAL 2132-4, 2136-7/2018, 14 February 2020, unreported), which confirmed that the SFC has power to seize and require production of digital devices and passwords to digital devices and email accounts. This infers that the power and process of SFC officers acquiring information from electronic device, is still a relatively new concept and therefore further guidance should be required to clarify the process of claiming LPP.
Turning back to the issues relating to LPP in the context of a search, while SFC officers are engaged in their search for documents or materials that may aid their investigation, lawyer(s) acting for the person being searched who are also present at the premises (if any) should, to the best of their abilities, be vigilant for documents or materials that could potentially be subject to LPP. Should such documents come to the awareness of the lawyer(s) during the search, they should notify the pertinent officer(s) forthwith and at this juncture the officer should immediately set aside the relevant document or material and proceed with their search. However, the question arises: what should be the course of action if a dispute arises at this point?
In reality, disputes often arise between the SFC officers and the lawyer(s) on site regarding whether the LPP claims are blanket claims, particularly in relation to electronic devices. For instance, lawyer(s) may assert that they are instructed that certain electronic devices could contain information and/or documents subject to LPP. However, the officers might contend that this assertion would constitute a blanket claim of LPP and therefore, would be invalid, unless the lawyer(s) is able to immediately provide a sufficient basis or particulars to assert LPP, such as providing a description of the LPP materials on the electronic device, i.e., the involved law firm, and the nature of legal advice etc. In practice, the provision of such information to the SFC on site could be very difficult, if not impossible, given electronic devices nowadays often contain massive volumes of data, and the client and/or the lawyer(s) may not be able to immediately identify and analyse the relevant files and/or materials subject to LPP, and provide basis for LPP claims to the SFC at first instance. As a result, a deadlock may occur between the SFC officers and the lawyer(s).
Given the current guidelines, or rather the lack thereof, it remains unclear whether the basis for LPP claims should be provided immediately when the claim is asserted, or subsequently, when the materials are more thoroughly reviewed by the lawyers. What would be the course of action if the officers refuse to seal the items and insist on reviewing them? Would such an action constitute a violation of the public’s basic rights? Would it infringe upon LPP? These are critical questions that underscore the need for more comprehensive and clear guidelines.
In general, when claims of LPP are made upon a particular document or material or electronic device, it would be most prudent if the SFC officers will seal the same and refrain from unsealing them for review until an LPP protocol is agreed upon. Such LPP protocol would contain procedures in relation to, among others, the unsealing and review of the seized items. For instance, proposing the involvement of an independent IT consultant for cloning the materials, thereby enabling lawyers to review the materials first and identify those that are indeed subject to LPP. In instances where LPP claims are disputed, independent lawyers could be called upon to adjudicate. If no consensus can be reached, the matter may then be escalated to the relevant court or tribunal.
By following the above systematic approach, not only the rights of LPP of the person being search would be properly safeguarded, it also saves the SFC from the potential embarrassing situation when it is later found out that the documents and/or information that SFC insisted to review on site (because no basis or particulars for a LPP claim could be provided right away), do contain document and/or information subject to and protected by LPP.
Other issues
The process of asserting LPP is not the sole aspect that requires further clarification. The SFC’s guidance on the conduct of a search, being limited in its scope, results in numerous ambiguities. For instance, in the absence of a legal representative, who is authorized to assert LPP? Should such right be clearly explained by the SFC officers to the personnel on site, before they begin their search? The SFC must appreciate that very often, the person(s) being search are civilians who lack comprehensive understanding of the boundaries of LPP, thus potentially hindering their ability to adequately assert LPP and safeguard their rights.
These are critical questions that underscore the need for more comprehensive guidance on the conduct of search and the assertion of LPP. Addressing these ambiguities would not only ensure the protection of privileged information but also facilitate the smooth execution of search by the SFC.
Looking forward
This practical example underscores that there are still numerous aspects that demand further interpretation. It is in the public’s interest that the SFC issues additional guidance to regulate such occurrences. There has been a rising trend of contention over LPP claims during searches in recent years. Persuading the SFC officers to seal any items subject to LPP claim may increasingly become a complex task in practice. If an officer resists to seal the claimed LPP items on site, what should the subsequent course of action be?
The practicalities of asserting LPP during raids are not currently governed by adequate guidance. Looking ahead, establishing a framework for the application of LPP in the context of a search could prove to be immensely beneficial. It could pave the way for more transparent communication between officers and lawyers in the future and minimise unnecessary disputes, thereby making the process more effective and efficient.
