Digital Devices and SFC Search Warrants: Cheung Ka Ho Cyril and others v Securities and Futures Commission [2020] HKCFI 270

Government law enforcement agencies have long seized mobile phones and computers (with and without warrants) where they could contain material relevant to their investigation. The seizure of such items is common, for example, in upskirting and drug-trafficking investigations. In this case the SFC’s seizure of such items was challenged by five applicants for a judicial review on a number of search warrants authorising the SFC to search premises and related decisions made by the SFC arising from the execution of the search warrants.

Facts and Issues for Determination

Following a referral from the Stock Exchange, the SFC started an investigation into possible breaches of the Securities and Futures Ordinance, Cap. 571 (the “SFO”). The SFC applied to a Magistrate for search warrants authorising the SFC to seize and remove records from various premises of the applicants. During the execution of those warrants the SFC seized various digital devices including mobile phones, laptops, tablets, notebooks and desktop computers. Using their investigative powers in the SFO, the SFC also issued notices to the applicants requiring them to provide passwords to access the various devices and email accounts. The issues for determination were:

  1. Whether the decisions of the SFC to seize various digital devices belonging to the applicants during the execution of the search warrants and thereafter to retain them were ultra vires the SFO or the search warrants, unlawful and/or unconstitutional;
  2. Whether the subsequent decisions of the SFC to issue notices pursuant to s. 183(1) of the SFO (requiring the applicants to provide the passwords to their email accounts/digital devices) were ultra vires the SFO or the search warrants, unlawful and/or unconstitutional; and
  3. Whether the search warrants were unlawful and invalid for want of specificity.

Decision

On the first issue the applicants argued that the digital devices were not, as a matter of statutory construction “records” or “documents” and that their retention was therefore ultra vires. Mr. Justice Anderson Chow dismissed this argument noting that in s. 1 of Part 1 of Schedule 1 to the SFO “record” or “document” are given very wide meaning and “[h]aving regard to the way or manner in which information and data are nowadays being created, transmitted, kept and stored by digital devices…it would…be wholly out of touch with reality to read [the provisions of the SFO] as excluding such digital devices from the scope of those provisions.” An additional argument that the seizure of the items interfered with the right to privacy (as the devices contained private and personal data not relevant to the investigation) was also rejected as the right to privacy is not absolute; the seizures were rationally connected to the legitimate aim of the SFC investigation and were no more than was reasonably necessary. Further, the SFC had offered to use keyword searches to identify only relevant material.

On the second issue the applicants argued that by issuing s. 183(1) notices, the applicants were required to produce vast amounts of materials which were irrelevant to the SFC investigation and were therefore ultra vires; and to construe s. 183 as permitting the SFC to require the production of large amounts of irrelevant materials would give rise to a disproportionate restriction on the right to privacy. Mr. Justice Chow determined that most storage of information and records is nowadays in electronic form in email accounts and digital devices and it was inevitable that there would be large amounts of personal material. To seize the entire devices and have access to the entire email account is in practical terms inevitable. The offer of keyword searches to safeguard the privacy of the applicants also represented “a practical and reasonable compromise of the conflicting interests of the SFC and the applicants”.

Finally the applicants had argued that the warrants lacked specificity in that they failed to specify or limit the scope of the search, seizure and removal authorised by the warrants; they failed to identify any particular offence and certain parts of the warrants were vague and unspecific. In considering s. 191 of the SFO, Mr. Justice Chow rejected this argument, as s. 191 did not require an offence to be identified: all that was required under s. 191 (satisfaction on information laid on oath; persons authorised to execute; the premises; the scope of the authorisation; the validity period) had been complied with.

Comments

  1. The extra teeth provided to the SFC by s. 183 of the SFO, in this case giving them the power to require passwords to be given for digital devices, should circumvent the need for lengthy/delayed examination by forensic computer experts.
  2. Given that SFC investigations are often likely to involve the seizure of hand-held phones and computers, there is a practical need to maintain back-up systems so that businesses can remain operational when their offices are raided. Although this is often remedied by the provision of a clone by the investigating agency, it is not guaranteed.
  3. Although legal professional privilege (LPP) was not in issue in this case, and there is provision in the Citic case for the correct procedure to be adopted in the event of a claim of LPP, the case demonstrates that LPP documents could be disclosed unintentionally by the wide-ranging scope of examination of materials seized by the SFC. Documents over which LPP could be claimed should be clearly marked, password protected, and kept separately within digital systems.
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