A Trustees’ Right to Obtain Information from Solicitors Firms under Section 29 of the Bankruptcy Ordinance
Section 29 of the Bankruptcy Ordinance (Cap. 6) (BO) allows a trustee in bankruptcy to apply to the Courts for orders compelling disclosure of material documents and/or information of the bankrupt in order for the trustee to carry out his/her duties under the bankruptcy. For the authors’ previous article on Section 29, please see here.
Section 29 provides that:
"The court may, on the application of the Official Receiver or trustee, at any time after a bankruptcy order has been made against a bankrupt summon before it the bankrupt or his spouse, or any person known or suspected to have in his possession any of the estate or effects belonging to the bankrupt or supposed to be indebted to the bankrupt, or any person whom the court may deem capable of giving information respecting the bankrupt, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the bankrupt, his dealings or property."
Section 29 was recently considered and applied by the Honourable Mr Justice G Lam in Yuen Tsz Chun Frank and Chan Hoi Yan v Ho Sing Wai [2020] HKCFI 566 (Yuen v Ho).Trustees sought an order from the Court under section 29 of the BO to compel the Respondent, the bankrupt’s former solicitor, to make an affidavit disclosing (a) full particulars of all means of contacting the bankrupt including, inter alia, mobile or fixed phone numbers, WhatsApp, WeChat identity and any other form of instant messaging service; (b) full particulars of her current last known whereabouts; and (c) a copy of the client ledger of the solicitor’s firm relating to the bankrupt.
The application was bought because the Respondent had initially resisted production of the requested information on the basis that the information was:
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confidential,
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privileged, and
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protected by the Personal Data (Privacy) Ordinance, Cap. 486 (PDPO).
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The Court of First Instance granted the application in favour of the trustees on the basis that the bankrupt’s whereabouts and her contact details are information that the trustees reasonably require for the performance of their functions. The Court also noted that the trustees have the duty to identify and collect the assets of the bankrupt, which are now vested in the trustees, and which prima facie include monies held by a solicitors firm on its clients’ account on behalf of the bankrupt. The Court also found that there was reason to believe that the Respondent was in possession of the information sought. In dealing with the Respondent’s initial objections to producing the information (although the Respondent had taken a neutral position by the time the hearing took place), the Court ruled as follows:
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On confidentiality: whilst the contact details of the bankrupt may be confidential, it was trite law that a court order for disclosure may trump a mere duty of confidentiality;
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On privilege: although the protection of legal professional privilege may be an absolute bar to disclosure subject to certain limited exceptions, those exceptions are not said to be applicable to every case, and certainly the Court did not see the exception to be applicable in this case.
In quoting R (Miller Gardner Solicitors) v Crown Court at Minshull Street, Manchester [2002] EWHC 3077 (Admin), the Court noted that not every communication between solicitor and client attracts such privilege. In particular, the provision of an individual’s name, address and contact number cannot, without more, be regarded as made in connection with legal advice. There was no basis to think that the contact details of the bankrupt were provided to the Respondent in confidence for the purposes of obtaining legal advice. Accordingly, no privilege had prima facie arisen. The Court also noted that the bankrupt has not claimed the privilege herself or through the Respondent.
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On PDPO: the Court acknowledged that whilst data protection principle 3 in the PDPO provides that personal data shall not without consent be used for a new purpose, section 60B of the PDPO states that personal data is exempt from this principle if the use of the data is required or authorised by any order of a court in Hong Kong or required in connection with any legal proceedings in Hong Kong.
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Specifically on the client ledger, the Court ruled that since the property of the bankrupt vests in the trustees upon their appointment by virtue of section 58(2) of the Ordinance, the trustee should be entitled to a copy of this document.
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It is interesting to compare this decision with the decision in Re Lee Priscilla Hwang & Re Lee Raymond Cho Min [2012] HKCU 1536 (the Lee Case), which dealt with a similar factual scenario.
In the Lee Case, Mr Recorder A Chow (as he then was) considered Section 29 applications made by the trustees of two estates for discovery of various documents from three different parties. One of the documents which the trustee sought discovery of was a copy of a settlement agreement to which one of the bankrupts was a party.
The trustees had requested the bankrupt’s solicitor to provide them with a copy of this document. The solicitor tried to resist production of the document on the basis that (a) he asserted that the bankrupt was not entitled to be paid anything under the settlement agreement and (b) whilst the bankrupt had received payments of money derived from the settlement agreement, such payments were made under a scheme set up by those who had contributed to the underlying litigation and negotiation process. Unlike in the Yuen v Ho case, privilege was not at issue, and the PDPO argument was not put forward by the bankrupt’s solicitor.
The Court ordered the solicitor to provide the trustee with a copy of the settlement agreement. In coming to this decision, the Court found that since the bankrupt himself was a party to the settlement agreement, he was entitled to receive a copy of the document. It was further noted that a person acting in the capacity of a trustee in bankruptcy had essentially stepped into the shoes of the bankrupt by virtue of their appointment, and thus there could be no question of any breach of confidentiality arising from the production of the settlement agreement to the trustee. The Court also added that the trustees were not bound to accept the explanations provided by the solicitor and were entitled to ascertain for themselves what rights (if any) the bankrupt had under the settlement agreement by examining the provisions in that agreement.
The Court in the Lee Case and the Yuen v Ho Case came to the same result regarding access to information held by solicitors who had acted for a bankrupt. The Trustee “steps into the shoes” of the bankrupt (Lee Case), or is entitled to see property vesting in them as a result of the operation of Section 58(2) of the Ordinance (Yuen v Ho). This may be a distinction without a difference. So far as privilege is concerned, the authors would submit that, in addition to the reasoning put forward to reject that argument in the Yuen v Ho Case, it may be argued that even if documents were privileged, that privilege could not be asserted to prevent production of such documents to trustees in bankruptcy, who have stepped into the shoes of the bankrupt and are therefore allowed to view privileged material.
Both cases serve as a reminder to legal practitioners and other parties holding information relating to or belonging to a bankrupt that arguments of confidentiality, privacy or privilege are unlikely to be successful in resisting disclosure of such materials, and there could be adverse costs consequences if requests for the provision of such materials by trustees in bankruptcy are rejected and proceedings are commenced to compel the handover of those materials.