Gagging Orders

Consistent with the maxim “justice should not only be done, but should manifestly and undoubtedly be seen to be done”, Hong Kong courts prefer that their work take place in public and open to public scrutiny. As a result, as a general principle, publicity of litigation leading to potential embarrassment and inconvenience or economic damage generally falls short of justifying confidentiality. Nevertheless, where justice so demands, Hong Kong may grant orders, such as gagging orders and anonymity orders.

Gagging orders restrain parties from revealing or disclosing information about proceedings which are taking place or will take place. Typical gagging orders prohibit:

• disclosure of the existence of the proceedings,

• disclosure of the fact that applications were made to commence the proceedings,

• disclosure of the orders made as a result of those proceedings

• disclosure of all information filed with the court in connection with those proceedings

• warning other persons that any other proceedings may be commenced arising out of those proceedings.

Gagging orders will normally provide for disclosure to the extent necessary to comply with orders made in connection with the proceedings and to take legal advice in respect of those proceedings.

In contrast to gagging orders, anonymity orders provide for hearings of proceedings to take place in private, for the sealing of court files in relation to those proceedings and for the suppression of the names of the parties to those proceedings in the court registry.

Basis for Gagging Orders

The High Court Ordinance, s. 21L and the court’s inherent jurisdiction provide the basis for gagging orders. Section 21L states:

• The Court of First Instance may by order (whether interlocutory or final) grant an injunction… in all cases in which it appears to the Court of First Instance to be just or convenient to do so.

• Any such order may be made either unconditionally or on such terms and conditions as the Court thinks just.

Hong Kong courts regard gagging orders as exceptional remedies and will only grant such orders when there are compelling reasons based on clear and cogent evidence. What amounts to compelling reasons will depend upon the facts of the case, but might include the real prospect that where a suspected wrongdoer is put on notice of a court order or the proceedings giving rise to the order, they would take steps to defeat the order’s purpose. As the court stated in A v. B [2002] HKFCI 1080:

• Were the wrongdoer or wrongdoers to be forewarned that action was about to be taken or was being taken against them by the plaintiff, this might cause them to embark on an activity that may well prove to be prejudicial to the plaintiff.

Assuming compelling reasons for a gagging order have been established, the court will then ask whether there are any factors that should militate against such an order being made? In this regard, the court must ensure that the order can be granted in terms which are reasonable, non-prejudicial and proportionate.

As the specific prejudice which a person affected by the order may be hypothetical or speculative at the stage where the order is granted, the order often provides for liberty to apply so that a person who may be prejudiced by the order can apply to court to modify the order as justice may require.

Equally, a gagging order will often provide for specific limitations in duration. This limitation may take the form of a specific date or expiration once an alleged wrongdoer has been served with the court order in the underlying proceedings which are the subject of the gagging order.

Gagging Orders in Aid of Discovery

Gagging orders are frequently sought in conjunction with a Norwich Pharmacal application to obtain information. Such orders prevent the persons from whom information is sought from tipping off suspected wrongdoers of the application to obtain such information. In the paradigm case, a victim of fraud seeks information from the bank maintaining the account to which the victim paid monies. Such information may include the balance and transactions on the account with a view to determining whether it may be worthwhile to pursue the fraudster and if so, to trace the monies paid. However, the victim does not wish the bank to warn the fraudster that he is making an application for such information. As a result, the victim applies for a gagging order.

To ensure that whenever possible parties have an opportunity to be heard by the court, an application for a gagging order and an application for information should be split into 2 distinct steps. Under this 2 step procedure:

• A gagging order should be sought on an ex parte basis (i.e. without notice to the person from whom information is sought) before the application for information.

• Once the gagging order has been granted, the application for information should then be heard on an inter partes basis (i.e. with notice to the person from whom information is sought).

Under this procedure, the person from whom information is sought has the opportunity to contest the application for information but is prohibited from disclosing the application to the wrongdoer.

In Asiya Asset Management v. Dipper Trading [20019] HKCFI 1090, the Court specifically frowned upon the practice of making an ex parte application both for a gagging order and a Norwich Pharmacal order. The court noted that the starting point is that “natural justice requires all parties to be heard save in the most exceptional circumstances where extreme secrecy or urgency so requires” and stated as follows:

• [This 2 step procedure] provides a balancing of interests between the party seeking the information from the bank and the bank’s customers. These safeguards cannot be avoided in the name of convenience or to save costs. While it is understandable that victims of fraud and their advisers rightly wish to be able to obtain information as quickly and as cheaply as possible, this cannot override the safeguards required to protect the interests of the parites not before the Court.