Citic wins bid to bar police from files
For the first time in its lengthy legal battle, Citic Pacific won a round yesterday when the Court of Appeal said police should not access six documents deemed confidential.
There is no evidence that the documents - including advice from Citic Pacific's law firm Mayer Brown JSM that it submitted to the Securities and Futures Commission - were produced to facilitate dishonest conduct, Mr Justice Michael Hartmann wrote in a ruling.
On its face, the steelmaker and property developer's 2008 case on raising loans from three banks without immediately disclosing its losses did not constitute dishonest concealment, Hartmann said in a 34-page judgment.
Even if there was evidence of dishonesty by any of Citic Pacific's directors, that doesn't 'indicate a dishonest purpose in obtaining the advice' from their lawyers, Hartmann said.
The Hong Kong-listed company failed to report a HK$15.5 billion loss from derivatives in September 2008 - the result of a wrong-way bet on the future price of the Australian currency.
The company announced the loss only six weeks later on October 20. By then it had raised HK$1.75 billion from three lenders - Bank of China, Industrial Bank of China and Bank of Tokyo-Mitsubishi UFJ.
In the days following Citic Pacific's profit warning, the Securities and Futures Commission initiated a probe into why Citic had delayed the disclosure.
Citic Pacific, part of state-owned Citic conglomerate, gave records relevant to the investigation to the SFC, including six documents that it said contained confidential legal advice.
In March 2009, Hong Kong police started their own criminal investigation into Citic Pacific, accusing the company of defrauding the three banks. The next month police raided the company's Hong Kong office and seized boxes of files.
The company sought to prevent the police from accessing the six documents, saying the legal advice contained in the documents was private information. It also said police seized many documents that fell outside the scope of the warrant.
Mr Justice Alan Wright of the Court of First Instance had ruled that based on the evidence, this was a case of conspiracy to defraud.
He said that the documents should be passed to police because legal advice used to facilitate fraudulent acts was not protected.
In their appeal, Citic lawyers said Wright had erred in ruling that the documents had lost legal professional privilege - a right protecting communications between a legal adviser and its client from disclosure without the client's permission.
The company had said in a stock exchange filing on September 12, 2008, that its directors were not aware of any material adverse change in the group's financial position.
Citic Pacific shares fell 1.35 per cent yesterday, closing at HK$13.20, on a day the Hang Seng Index dropped 0.77 per cent.
The number of days Citic Pacific delayed publishing a profit warning