Challenging a Search Warrant? Easier said than done.

 

A recent challenge¹ to the seizure of various digital devices by the Securities and Futures Commission, or SFC, pursuant to two search warrants, failed in the Hong Kong courts.

Background

During the course of an investigation² , the SFC applied to the Magistrates Court for search warrants authorising the SFC to search for, seize and remove records and documents from numerous premises of the applicants.

During the searches, the SFC seized various digital devices, including mobile phones, tablets, notebook computers and desktop computers from the premises, and issued various notices under section 183 of the Securities and Futures Ordinance (Cap 571) ("SFO") to compel the applicants to provide the passwords to access the digital devices and their email accounts.

The applicants sought to challenge the SFC's actions on the grounds that:-
 

1. the SFC's seizure of the digital devices in the course of execution of the search warrants and thereafter their retention were -

• ultra vires (that is, beyond the powers of) the SFO or the search warrants
• unlawful and/or
• unconstitutional

2. the SFC's issuance of section 183(1) notices to the applicants requiring them to provide passwords were -

• ultra vires the SFO or the search warrants
• unlawful and/or
• unconstitutional; and

3. the search warrants were unlawful and invalid for want of specificity.

 

Issue 1

On the first point, the applicants argued that the decisions to seize the digital devices were ultra vires, because the digital devices were not "records" or "documents" under section 183(1) as a matter of statutory construction³ .

This argument was dismissed by the Court. The Court ruled that the words "records" and "documents" were given very wide meanings in the SFO, and are not confined to records or documents in paper or traditional form, but include⁴:-
 

1. any record of information "however compiled or stored";
2. information "which is recorded otherwise than in a legible form but is capable of being reproduced in a legible form";
3. any document, disc, tape, sound track or other device in which sounds or other data (not being visual images) are embodied "so as to be capable (with or without the aid of other equipment) of being reproduced"; and
4. "any form of input or output into or from an information system", and any other document or similar material "whether produced mechanically, electronically, magnetically, optically, manually or by any other means".

 

The Court said that it would be "totally out of touch with reality" to exclude digital devices from the meaning of "records" or "documents", given the way information and data are created and stored nowadays.

The argument that the seizure disproportionately interfered with the right to privacy⁵, and was thus unlawful or unconstitutional, also failed. The Court pointed out that the right to privacy is not absolute; in this case, there was a legitimate aim (the SFC investigation) to which the seizures and retention of the devices was rationally connected and no more than reasonably necessary. In addition, the SFC had proposed to use keyword searches to filter out personal or irrelevant information and therefore the applicants would not have suffered an unacceptably harsh burden.

Issue 2

Some of the applicants argued that the section 183 notices issued to them were ultra vires the provisions of the SFO, because they were required to produce vast amounts of materials which were irrelevant to the investigation⁶. They further argued that to permit the use of section 183(1)(a) in this way would be disproportionate and a violation of the right to privacy. Finally, they also claimed that the SFC had no power under the relevant search warrants to access email accounts, mobile phones and tablets.

The Court rejected all of these arguments. The Court noted that storage of information and records nowadays is mostly in electronic form in email accounts and digital devices; inevitably there would be large amounts of personal⁷ materials and security protection by way of login IDs and passwords⁸ . Seizing the entire device or having access to the entire email account is practically inevitable⁹ , and as the SFC had offered to do keyword searches to protect the privacy of the applicants, the Court did not agree that the section 183(1) notices were ultra vires, unlawful or unconstitutional.

Issue 3

The applicants also challenged the search warrants for lack of specificity, in that¹⁰ :-
 

1. they failed to specify or limit the scope of the search, seizure and removal;
2. they failed to identify any particular offence; and
3. parts of the warrants were vague and unspecific.

The Court's view is that what needs to be stated on a search warrant depends on the empowering statute. In the current case, the search warrants were issued pursuant to section 191 of the SFO, which requires the search warrants to specify various things, but there is no requirement that they must specify the specific offence committed¹¹ . In any event, the Court noted that the warrants did specify the general grounds, albeit a large number of possible offences were covered by those grounds. The applicants' arguments were rejected.

Key Takeaways

Do think carefully before deciding to challenge a search warrant or the SFC's use of its various investigation powers under the SFO; weigh up the pros and cons before proceeding.

In the meantime, recognise that the SFC's current practice to seize electronic materials and digital devices to assist in their investigations, will continue. Here are some general preparatory tips to minimise the adverse impact on your business and the privacy of individuals -
 

• Make sure you have a list of all devices used by your company so that you can keep track of these if they are seized.
• Ensure you have back-up records so you can continue to do business.
• Any document over which legal privilege can be asserted should be clearly titled or, ideally, kept in a separate folder or device so it is easy to identify. Claim legal privilege over those documents.
• Do filing regularly, so there is clear separation of personal or irrelevant materials from work matters. Ideally, each project should have its own file.
• Consider, and then have and enforce internal policies, regarding the use of personal devices for work purposes (and vice versa).
• Treat emails, digital messages, etc. with the same care as you would hard copy documents.

- Jill Wong & Kevin Leung
_______________________________________
[1] The applicants were Cheung Ka Ho Cyril, To Hang Ming, To Lung Sang, To Man Choy Jacky, Wan Wai Lun, HCAL 2132, 2133, 2134, 2136 & 2137/2018 [2020] HKCFI 270.
[2] The facts can be found at paragraphs 5 to 13 of the judgment.
[3] See judgment at paragraph 37. The applicants also argued that if the digital devices fall within the definitions of "records" and "documents", any provisions in the SFO authorising the SFC to require production of digital devices without a warrant would be unconstitutional. This point was dismissed by the Court in paragraph 49 for being irrelevant, because in all the searches, the SFC had valid search warrants.
[4] See judgment at paragraph 41.
[5] Under Article 30 of the Basic Law and/or Article 14 of the Bill of Rights.
[6] Thus falling outside the remit of any record or document which "is, or may be, relevant to the investigation" under section 183(1)(a) SFO.
[7] Albeit irrelevant.
[8] See judgment at paragraph 68.
[9] And generally in line with previous cases, see paragraphs 65 to 72 of the judgement.
[10] See judgment at paragraph 75.
[11] See judgment at paragraphs 78, 87 to 92

 

 

 

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