She also called for a law to be passed as soon as possible to establish a legal framework regulating the ICAC's covert surveillance so that judges would not be left as the sole arbiter of future legal challenges.

The judge's decision to order a permanent stay of proceedings came after counsel for the four, accused of offering $1.9 million in bribes to Housing Department officers to obtain government contracts, had argued that the secret taping was an 'affront to public conscience, with severe consequences'.

Judge Livesey said the taping of the meeting between defendant Yu Chi-wai, 45, and lawyer Louis Fung at a restaurant in November 2002 was a cynical disregard of Yu's rights. She also said the three co-defendants, Shum Chiu, 68, Wong Hung-ki, 53, and Ann Wong Tin-sum, 37, would not be able to have a fair trial as a result of the taping.

The judge acknowledged the ICAC's record of graft-busting. 'It is an agency admired in many countries ... However they must make sure they do not overstep the bounds of what is right in their enthusiasm for ridding Hong Kong of corruption.'

She noted that covert surveillance in the case was not only unnecessary but deliberate and intentional because the ICAC knew that Mr Fung would be at the meeting.

It is the second time in recent months that ICAC covert surveillance has come under close public scrutiny and been challenged in court.

In April, District Court Judge Fergal Sweeney ruled in another corruption trial, involving manipulation of shares in publicly listed company Kwong Hing International Holdings, that evidence the ICAC gathered by covert surveillance was inadmissible as it breached the right to privacy of communication.

Judge Livesey heard that the taped meeting between Yu and Mr Fung, during which the lawyer had given legal advice, was held with the help of an ICAC undercover agent, Tang Hop-sing, who was also present.

The judge said that as well as breaching Yu's right under Article 29 and 30 of the Basic Law, the taping infringed Yu's right to confidential legal advice as guaranteed by Article 35 of the Basic Law.

Article 30 guarantees Hong Kong residents' rights to freedom and privacy of communication, while Article 29 prescribes that arbitrary or unlawful search and intrusion into the home and other premises shall be prohibited.

The judge said the conversation between Yu and his solicitor was clearly protected by lawyer-client privilege. She said the other three defendants would be denied a fair trial because their lawyers would be barred from questioning Mr Tang, a prosecution witness, on the privileged content of the conversation at the meeting.

Judge Livesey urged swift action in putting adequate laws in place. 'Legislators need to introduce the regulations required for lawful covert recordings as was originally envisaged under the Basic Law with all due haste so that the guarding of the guard is not left to the judiciary.'

After the Kwong Hing case, legislators called on the government to introduce legislation covering all types of covert surveillance.

A bill to regulate the use of telephone tapping was passed by the Legislative Council days before the 1997 handover but was never signed into law by former chief executive Tung Chee-hwa.

An ICAC spokesman said the anti-graft body was very concerned with yesterday's ruling and, with the Department of Justice, would study it to decide whether to launch an appeal.

'We always conduct our investigations in accordance with the law to maintain justice in the interest of the public,' the spokesman said.