28 November 2017

Lawyers, Wait Outside Please

To our knowledge, neither the Hong Kong Monetary Authority (HKMA) or the Securities and Futures Commission (SFC) have yet prohibited chosen counsel from attending a statutory interview. Nevertheless, it is increasingly common for regulators to raise questions as to independence of counsel, conflicts of interest and the ability to abide by statutory secrecy rules. What position should be taken when an interviewee’s choice of counsel in a compulsory statutory interview is challenged? English and recent New Zealand case law may provide some helpful guidance.

Prejudicing the enquiry

In R (Lord and others) v Director of the Serious Fraud Office,[1] the English High Court upheld a decision by the United Kingdom’s Serious Fraud Office (SFO) to exclude from interview the interviewee’s counsel of choice.

A corporate was under investigation by the SFO. Three senior employees were compelled to attend the SFO’s offices for an interview under the Criminal Justice Act 1987 (UK). The interviewees wished to have a legal representative attend from the same firm that was representing the corporate. The SFO objected to the chosen lawyers’ presence. According to the SFO, because the law firm was acting for the corporate:

  • it was very likely that information gleaned from the SFO’s investigation might be shared with the corporate who was the subject of the investigation;
  • the lawyers might, as a matter of professional obligation, be obliged to share content of the interviews with their corporate client;[2] and
  • the interviewees’ candour might therefore be damaged, negatively affecting the quality of the evidence the SFO sought to secure.

The interviewees challenged that decision.

The English High Court first observed that the Criminal Justice Act 1987 does not confer an interviewee the right to have a lawyer present. By extension, a lawyer of the interviewee’s choice was not guaranteed. As to the SFO’s objection to the presence of the chosen lawyers, the Court considered it was “beyond argument” that the SFO may operate an exclusion policy to exclude lawyers whom they reasonably thought would prejudice their investigation. Having reviewed the SFO’s reasons to exclude, the Court noted that “there might well be a debate about these points. But the question is whether these are points which are reasonably open to the SFO to adopt. In my view, self-evidently they are.” The interviewees’ challenge failed.

Right to representation at interview is not absolute

A similar issue recently arose before the New Zealand High Court in John Loughlin v The Director of the Serious Fraud Office.[3]

A challenge was brought against the New Zealand SFO Director for having excluded Mr L’s preferred choice of counsel, who, although he did not represent the corporate which was subject of the enquiry, did represent other employees.

Mr L was a former director and Board chairman of a corporate under SFO investigation. The Director required Mr L to attend an SFO interview in relation to its investigation under the Serious Fraud Office Act 1990 (NZ). The SFO informed Mr L that while he was entitled to have counsel attend, his preferred counsel would be excluded because:

  • counsel had attended SFO interviews during the SFO’s investigation into the affairs of the corporate with other persons (including a Mr Z, whom the SFO regarded as an important witness);
  • although counsel was not acting for the corporate, he had been briefed by the corporate’s own lawyers; and
  • counsel was also instructed to act for four board members of the corporate.

The Director was concerned that there may be a conflict of interest between Mr C’s clients and inadvertent disclosure of protected information by Mr C as a result of his multiple instructions. There was a clear need to preserve the integrity of the SFO’s investigation.

Although the relevant N.Z. statute provided that an interviewee may be represented by legal counsel upon interview, the New Zealand High Court held that the right to representation was not absolute. An implied power to exclude may be exercised if the Director concluded on reasonable grounds and in good faith that to allow the chosen counsel would or would likely prejudice the investigation.[4]

However, the Court held that there was no legal basis for the Director to exercise that discretion on the facts. In particular:

  • The investigation’s integrity is achieved by ensuring that the investigation is carried out in accordance with relevant statutory provisions and respecting the constitutional rights of those affected by the investigations. The concept of integrity of the investigation did not assist the Director or justify the decision made to exclude counsel of choice.
  • In the absence of contrary evidence, lawyers can be assumed to fulfil their professional duties and obligations, to identify conflict, and, where appropriate, decline to act. On the facts, the Director had accepted that the chosen counsel would comply with his professional obligations. Having done so, it was difficult to identify the practical reality of the Director’s concerns.
  • The Director was not able to prevent the chosen counsel from acting for Mr L and giving him general advice, even though he had obtained information during the course of prior interviews. There was little logical difference between advising Mr L generally (which the counsel was permitted to do) and attending the interview with him. The risk of inadvertent disclosure existed independently of counsel’s attendance at the interview.

The Hong Kong perspective

While there is no express right provided in either the Banking Ordinance or the Securities and Futures Ordinance that attendees at interviews conducted by the HKMA or the SFC can be accompanied by legal counsel, Article 35 of the Hong Kong Basic Law states:

“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.”

A compelled interview before a SFC and/or HKMA investigator is clearly a situation where one would require a lawyer for the “timely protection of … lawful rights and interests”.

There is however no specific Hong Kong authority on the issue and the courts are unlikely to pronounce any right absolute, even constitutional ones.[5] It is therefore likely that the SFC and HKMA would contend that they have an implied power to exclude an interviewee’s choice of counsel at interviews in appropriate circumstances.

No guidance has been issued as to when either the HKMA or SFC may seek to restrict the choice of legal representation.[6] Any future debate in Hong Kong would therefore likely focus on the determination of the appropriate threshold test, and when the relevant conditions for restrictions of an interviewee’s choice of counsel arise.

Those conditions should, however, be very limited. As noted in The Law Society of Ireland v The Competition Authority,[7] there is a “strong presumption of a freedom of choice of legal representation” between the constitutional freedom in the choice of legal representative and the regulator’s duty to discharge its statutory function. Moreover:

“[w]ere a tribunal empowered to veto a choice of lawyer made by a party appearing before it, invariably this would give rise to a perception of unfairness, on the part of the person denied freedom of choice. Where the tribunal was in effect the adversary as in the position of the [Competition Authority], that perception will be very strong indeed.…

“It would have to be observed that in all types of proceedings and in particular proceedings of a civil nature, the likelihood of a choice of legal representative being an obstacle of the proper conduct of the proceedings, will be rare indeed.”

 

[1] [2015] EWHC 865.

[2] There is no statutory secrecy provision similar to that under the SFO under the Criminal Justice Act 1987 (UK).

[3] [2017] NZHC 1847.

[4] Applying the test in Australian Securities Commission v Bell (1991) 32 FCR 517, and rejecting other tests including that in Law Society of Ireland v The Competition Authority [2005] IEHC 455 (see below).

[5] See, for example, Zhi Charles v Stock Exchange of Hong Kong Ltd [2017] HKEC 1025.

[6] Following the decision in Lord, the SFO, United Kingdom, issued new Operational Guidance. Under the guidance, in order to attend an interview an interviewee’s chosen counsel must provide a number of undertakings in writing including that: (a) the lawyer’s firm does not represent any individual or legal person who is a suspect in the investigation; and (b) the content of the interview and any other relevant documents will be kept confidential between the lawyer’s firm and the interviewee, and they will not disclose or discuss these with anyone other than the interviewee. The guidance specifically states that it would be unlikely for the SFO to allow a lawyer’s attendance if he or she is retained by a party who may come under suspicion during the course of the SFO’s investigation, including an interviewee’s employer.

[7] [2005] IEHC 455.

Matt Bower
City matt.bower@allenovery.com
Fai Hung Cheung +852 2974 7207
Partner, Hong Kong faihung.cheung@allenovery.com

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© Allen & Overy LLP 2019. This document is for general guidance only and does not constitute definitive advice.

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© Allen & Overy LLP 2019 This document is for general guidance only and does not constitute definitive advice.
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