郭文贵破产案 · ORDER · ECF #1409-6

# Exhibit 6

# F.n.C. Co. Ltd and Others

Plaintiffs (Respondents)

## AND

#### The Chase Manhattan Bank, N.A.

Defendant (Appellant)

(Court of Appeal) (Civil Appeal Nos. 65 and 131 of 1984)

Sir Alan Huggins, V.-P., Yang and Silke, JJ.A. 24th·27th September and 17th October 1984.

Sir Alan Huggins, V.-P., Yang and Silke, JJ.A. 24th·27th September and 17th October 1984.

E

D

Commercial and business law-banking-obligation of secrecy-injunction to prevent disclosure--whether obligation applies to Hong Kong branch of foreign bank-whether obligation subject to territorial limits-relationship between obligation and disclosures required in ordinary course of business between foreign branch and head office.

Courts practice and procedure-s-whether order of foreign court has extra-territorial effect in Hong Kong-principles of comity applicable.

Conflict of laws-principles of judicial comity applicable to resolve conflict of jurisdiction between Hong Kong court and foreign court.

G

The defendant Bank (the "Bank") has its head office in the U.S.A. and local branches in Hong Kong. The plaintiffs were two Hong Kong companies and a Panama company. Each of them held one or more accounts with the Bank in Hong Kong.

H ., The United States Internal Revenue Service wanted to inspect the Hong Kong bank accounts of the plaintiffs in connection with an investigation into other U.S. taxpayers. The I.R.S. served notice on the Bank's U.S. headquarters and obtained court orders for production \_ \_ 4 • (Court of Appeal) (Civil Appeal Nos. 65 and 131 of 1984)

D

Commercial and business law-banking-obligation of secrecy-injunction to prevent disclosure-s-whether obligation applies to Hong Kong branch of foreign bank-whether obligation subject to territorial limits-relationship between obligation and disclosures

~. .. ... .. .

17

Held:

4.

foreign law.

because of a financial obligation.

*s.*

6.

- 1. The appeals would be dismissed. The interim injunction would not be discharged. The interest in preserving the confidence between the Bank and its customers was not outweighed by other interests to which the' law attaches importance. - 2. The contracts between the plaintiffs and the Bank were governed by Hong Kong law. The court was concerned here not with the relationship between a foreign bank operating in Hong Kong and its customer, but with the relationship between a bank registered in Hong Kong and a customer in Hong Kong, their relationship being governed by Hong Kong law. I - 3. There was an implied term imposing an obligation of secrecy upon the Bank, whereby the Bank should not divulge to third persons either the state of the customer's account or any of his transactions with the bank or any information relating to the customer acquired through the keeping of his account unless (1) the disclosure was under compulsion of law, (2) there was a public duty to disclose, (3) the interests of the bank required disclosure or (4) disclosure was made by the express or implied consent of the customer. *(Tournier* v. *National Provincial and Union Bank of England* [1924]1 KB 461 applied.) ( [ - 4. The first exception applied only to Hong Kong law and did not include a foreign law.

E

I

E

- *s.* The third exception meant only the interests of ordinary banking practice, such as when it is necessary to sue upon an overdraft or matters of that kind, and not to the case where it would be in the interests of the Bank to disclose because of a rmancial obligation. - 6. Under the laws of Hong Kong all the banks carrying on their banking business in Hong Kong owe the same obligations to their customers irrespective of where their head officeshappen to be. F - 7. All persons opening accounts with banks in Hong Kong, whether local or foreign banks, are entitled to look to the Hong Kong courts to enforce any obligation of secrecy which, by the law of Hong Kong, is implied by virtue of the relationship of customer and banker. G - 8. The Hong Kong branch of the Bank should for present purposes be considered as a different entity separate from the head office in New York. (R. v. *Grossman* (1981)73 Cr App R 302 followed.) - 9. Although the orders of the U.S. courts were in fact addressed to the Bank in New York, they were aimed unashamedly at information which is within the jurisdiction of the Hong Kong courts and they were therefore intended to have H o.......n\_.A--:..\_\_ :"'I ....f'-"- --- - - r - - -- a -- ---e-·---,,- *"",,"'......J* **upu..** ..u~ **....au... ' \"** - whereby the Bank should not divulge to third persons either the state of the customer's account or any of his transactions with the bank or any information relating to the customer acquired through the keeping of his account unless (1) the disclosure was under compulsion of law, (2) there was a - public duty to disclose, (3) the interests of the bank required disclosure or (4) disclosure was made by the express or implied consent of the customer. *(Tournier* v. *National Provincial and Union Bank of England* [1924]1 KB 461 applied.)

The first exception applied only to Hong Kong law and did not include a

The third exception meant only the interests of ordinary banking practice, such as when it is necessary to sue upon an overdraft or matters of that kind, and not to the case where it would be in the interests of the Bank to disclose

Under the Iaws of Rona Kona lllll th.. h..nlr" "Q...~,;n,. nn ".4:\_ "~\_I.:-- ^L : \_

- A opened. But there might be circumstances (for example a special investigation into a suspected fraud) in which the ordinary course of business would be extended and require that such details be sent to another office of the same bank. H the bank were a foreign bank, that might even involve sending the details out of Hong Kong. - B 12. The Bank could not avoid its obligation of secrecy by sending details of the plaintiffs' accounts to the head officein NewYork, arguing that this was not a disclosure to a third person. The Bank would not be allowed to make an internal transfer of information which it would not make in the ordinary course of banking business when that transfer was designed for no other C purpose than to bring the information within the jurisdiction of the foreign court. The Hong Kong courts could enjoin the Bank against disclosing information to the U.S. Government in Hong Kong and could restrain a transfer wbicb was notbing more nor less tban a device to avoid tbe enforcement in Hong Kong of the orders of a foreign court. - D 13. Tbe court would not be influenced by tbe fact tbat its order migbt result in tbe Bank being in breach of tbe orders of tbe U.S. court. The Hong Kong court was not bound to hold back from enforcing the law of Hong Kong at the dictate of a foreign power. - 14. The relevant term implied in a contract between banker and customer can be E stated either as a positive covenant to maintain secrecy or as a negative covenant to maintain secrecyor as a negativecovenant against disclosure. Tbe effect is the same and the customer is entitled to the appropriate remedy, whether tbat be expressed as a mandatory injunction or as a restrictive injunctione . In either case, the injunction will usually be granted even tbougb F no damage isshown,

Appeals dismissed.

L. Hoffman, Q.C. and R. Tong, instructed by Denton Hall Burgin and Warrens, for the plaintiffs. G M. Saville, Q.C. and R. Ribeiro instructed by Johnson, Stokes and Master, for the defendant.

*Separate judgments were delivered* by *members of theCourt 0/Appeal.*

### H Cases cited in tbe judgments:

AU",""A" nA"'A..,,1 " ~Jf;,.LTl'" ^A ... ^t D"'I",,,,, rn R, <:nnth 'Q""t.'rn D"'h"",, rn fl11';:7\ T» :l course of banking business when that transfer was designed for no other

C purpose than to bring the information within the jurisdiction of tbe foreign court. The Hong Kong courts could enjoin the Bank against disclosing

was not bound to hold back from enforcing the law of Hong Kong at the

covenant to maintain secrecyor as a negativecovenant against disclosure. The effect is tbe same and tbe customer is entitled to the appropriate remedy, wbether tbat be expressed as a mandatory injunction or as a restrictive

14. The relevant term implied in a contract between banker and customer can be

E stated either as a positive covenant to maintain secrecy or as a negative

information to tbe U.S. Government in Hong Kong and could restrain a transfer wbicb was notbing more nor less tban a device to avoid tbe

enforcement in Hong Kong of the orders of a foreign court. D 13. Tbe court would not be influenced by tbe fact tbat its order migbt result in tbe Bank being in breach of the orders of tbe U.S. court. The Hong Kong court

dictate of a foreign power.

Kleinwort, Sons & Co. *v,* Ungarische Baumwolle Industrie Aktiengesellschaft [1939]2, KB 678, [1939]3 All ER 38 Lister *v,*Romford Ice & Cold Storage Co. Ltd. [1957] AC 555, [1957]1 All ER 125 Liverpool City Council v. Irwin [1977] AC 239, [1976]2 WLR 562, [1976]2 All ER 39

R. *v.* Grossman (1981)73 Cr App R 302 Societe Intemationale Pour Participations Industrielles et Commerciales, S.A. v. Rogers (1958)357 US 197

Toumier v. National Provincial and Union Bank of England [1924]1 KB 461 X A.G. *v,* A Bank [1983]2 All ER 464, [1983]2 Lloyd's Rep 535

# Sir Alan Huggins, V.-P.:

The plaintiff companies brought actions in which the principal relief sought was an injunction to restrain the defendant Bank from disclosing details of their accounts with the Bank. They then applied for, and obtained from the judge in chambers, interim injunctions to restrain I disclosure pending trial. It was against those interim injunctions that the Bank appealed. By consent of the parties this court has agreed that:

- "1. The hearings of the motions for an interlocutory injunction and for an order discharging that injunction before Clough, J. be treated as having been the I trial of the action. - 2. The affidavits sworn on the motions be treated as evidence given at the trial and the interlocutory injunction granted by the judge be treated as a final injunction made at trial."

Two of the plaintiffs are companies incorporated in Hong Kong and the third is a company registered in Panama.

The Bank has its head office in the United States of America and maintains local branches in Hong Kong. Each of the plaintiffs opened one or more accounts with the bank in Hong Kong. The particulars of those accounts are not material. It is alleged by the plaintiffs that, ( by virtue of the relationships of customer and banker which exist between them and the Bank, the Bank:

"Owes the plaintiff/s / duty of secrecy and confidence in respect of/the accounts/, or transactions thereto, or securities in respect thereof and all documents and 1 informatioo arisinz therefrom or relatino thereto" .

Sir Alan Huggins, V.-P.: The plaintiff companies brought actions in which the principal relief sought was an injunction to restrain the defendant Bank from disclosing details of their accounts with the Bank. They then applied for, and obtained from the judge in chambers, interim injunctions to restrain I disclosure pending trial. It was against those interim injunctions that the Bank appealed. By consent of the parties this court has agreed that:

trial of the action.

"1. The hearings of the motions for an interlocutory injunction and for an order

2. The affidavits sworn on the motions be treated as evidence given at the trial and the interlocutory injunction granted by the judge be treated as a fmal

discharging that injunction before Clough, J. be treated as having been the I

F

- A plaintiffs first heard ofthe proceedings in the United States, they wrote to the Bank and sought an undertaking that there would be no disclosure. The Bank replied that it was defending the proceedings in the United States and that for the present it did not intend to produce the records demanded. However, the Bank was not prepared to give an undertaking the observance of which might constitute a breach of the United States' law. It was upon receipt B of this refusal that the actions were commenced in Hong Kong. - It is not in dispute that the first and fundamental issue to be decided is as to the terms of the several agreements between the plaintiffs and the Bank. As is usual when a company opens a bank account, the plaintiffs passed in respect of each account a resolution in a form prescribed by the Bank. This form was designed merely to set out the authority of the Bank to act upon - C instructions purporting to emanate from the customer: the parties did not otherwise expressly agree any of the terms upon which they were contracting. For such terms one has to inquire what terms are implied by the domestic law of Hong Kong, it being an agreed fact that the contracts are governed by Hong Kong law. It is common ground that the terms include one imposing an obligation of secrecy upon the Bank, but it is the extent of that obligation which D is in issue.

On behalf of the plaintiffs Mr. Hoffman has placed great emphasis on the distinction which was drawn in two cases in the House of Lords between terms which are implied in all contracts between persons entering into a special relationship such as that of banker and

customer and those which are implied in a particular contract in order to give it business E efficacy. The first of these cases was Lister v, Romford Ice & Cold Storage Co. Ltd. [1957] AC 555, where one of the issues was whether in a contract of employment between a lorry driver and his master there was an implied term that the driver would be entitled to be indemnified by his master in respect of damages payable by the driver as a result of his negligence where his master was in fact insured or was required by law to be insured or F where , as a reasonable and prudent person, his master ought to have been insured. It was held

that no such term should be implied. In the course of his speech Lord Simonds said at p. 576:

"... the real question becomes, not what terms can be implied in a contract between two individuals who are assumed to be making a bargain in regard to a particular G transaction or course of business; we have to take a wide view, for we are concerned with a general question, which, if not correctly described as a question of status, yet can only be answered by considering the relation in which the drivers of motor-vehicles and their employers generally stand to each other. Just as the duty of care, rightly regarded as a contractual obligation, is imposed on the servant, or the H duty not to disclose confidential information (see *Robb* v, *Green* [1895]2 QB 315; 11 **uauA.** a",,,,v\lYII.";'"u'i~ puuudJ.~.:J j.J"" l)V--v1& t'1Ji::»~~"V1~t.~'ir,""g.l'X)o ...4.-Ja.t- ....C".i"'\A".JJ....~J":!L~~ aoJ by the Bank. This form was designed merely to set out the authority of the Bank to act upon C instructions purporting to emanate from the customer: the parties did not otherwise expressly agree any of the terms upon which they were contracting. For such terms one has to inquire what terms are implied by the domestic law of Hong Kong, it being an agreed fact that the contracts are governed by Hong Kong law. It is common ground that the terms include one imposing an obligation of secrecy upon the Bank, but it is the extent of that obligation which D is in issue. On behalf of the plaintiffs Mr. Hoffman has placed great emphasis on the distinction which was drawn in two cases in the House of Lords between terms which are implied in all

contracts between persons entering into a special relationship such as that of banker and customer and those which are implied in a particular contract in order to give it business E efficacy. The first of these cases was Lister v, Romford Ice & Cold Storage Co. Ltd. [1957] AC 555, where one of the issues was whether in a contract of employment between a lorry driver and his master there was an implied term that the driver would be entitled to be ;nA4rnn;f;4A h" h;" m""t<'T ;n TP"nprt nf thmlll1Pl1 nllVllhlp. hv the driver a~ ^a result of his

evidence given by the parties and the fact that the action is brought without the A assent of the employers shows at least *ex postfacto* how they regardedthe position. But this is not conclusive; for, as I have said, the solution of the problem does not rest on the implication of a term in a particular contract of service but upon more generalconsiderations."

LordTuckerexpressed the sameviewin thesewords at p. 594:

"Some contractual terms may be implied by general rules of law. These general rules, some of which are now statutory, for example, Sale of Goods Act, Bills of Exchange Act, etc., derive in the main from the common law by which they have C become attachedin the course of time to certain classesof contractual relationships, for example, landlord and tenant, innkeeper and guest, contracts of guarantee and contracts of personalservice. Contrasted with such cases as these there are those in which from their particular circumstances it is necessary to imply a term to give efficacy to the contract and make it a workable agreement in such manner as the D parties would clearly have done if they had applied their minds to the contingency which has arisen. These are the 'officious bystander' type of case, to use Mackinnon, LJ.'s well-known words. I do not think the presentcase reallycomesin that category, it seemsto me to fall rather within the first class referredto above."

In Liverpool City Council v. Irwin [1977] AC 239 it was decided that in contracts oftenancy relating to flats there was, in the absence of express provision, an implied term that the landlord wouldtake reasonable care to keep essentialmeans of accessin reasonable repair and usability and that this appliedto local authority lettings.

Mr. Saville argues that this is a very different approach from that adopted in the leading F case on the obligationof secrecy imposed on a banker,Tournier v. National Provincial and Union Bank of England [1924]1 KB 461. The plaintiff, a customer of the defendant bank, received a cheque drawn in his favour by another customer of the same bank. Instead of having it credited to his own account the plaintiff endorsedit to a third person, who paid it into his account with another bank. The plaintiff's account was overdrawn and, when the G cheque was returned to the defendant bank, the manager inquired of the third person's bank who the third person was. He was told that the cheque had been paid to a book-maker, and this information was disclosed to the plaintiffs employers. The question was whether the defendantbank was in breachof its impliedobligation of secrecy. All the LordsJusticeswere of opinionthat it was an impliedterm of a contractbetween a bankerand his customer that the H bank wouldnot divulge to thirdnersonseither the stare of the (,l1<1tnmp.r' <I ",('('nunt ^M on" r:f h;" ruies, some ot whlcn are now statutory, tor example, Sale of Goods Act, BIlls of Exchange Act, etc., derive in the main from the common law by which they have C become attachedin the course of time to certain classesof contractual relationships, for example, landlord and tenant, innkeeper and guest, contracts of guarantee and contracts of personalservice. Contrasted with such cases as these there are those in which from their particular circumstances it is necessary to imply a term to give efficacy to the contract and make it a workable agreement in such manner as the D parties would clearly have done if they had applied their minds to the contingency which has arisen. These are the 'officious bystander' type of case, to use Mackinnon, LJ.'s well-known words. I do not thinkthe presentcase reallycomesin

that category, it seemsto me to fall rather within the first classreferredto above."

In Liverpool City Council v. Irwin [1977] AC 239 it was decided that in contracts of tenancy relating to flats there was, in the absence of express provision, an implied term that the landlord wouldtake reasonable care to keep essentialmeans of accessin reasonable renair and B

E

- A facts of the particular case. Lord Justice Atkin at p. 486 also spoke of the difficulty of hitting upon a formula which would define the maximum of the obligation which had necessarily to be implied. He expressed the obligation not to disclose without the customer's consent as being: - B "subject to the qualification that the bank have the right to disclose such information when, and to the extent to which it is reasonably necessary for the protection of the bank's interests, either as against their customer or as against third parties in respect of transactions of the bank for or with their customer, or for protecting the bank, or persons interested, or the public, against fraud or crime." - C

He expressly refrained from giving any final opinion on the practice of bankers to give one another information as to the affairs of their respective customers, "except to say ... that if it is justified it must be upon the basis of an implied consent of the customer". Nevertheless his reference to the practice of bankers seems to me a clear indication that the Lord Justice D thought such practice was a material consideration and that could only be on the basis that the parties to a banking contract were assumed to know the practice of bankers and would be assumed to have agreed to be contracting subject to that practice in the absence of express provision to the contrary. As it seems to me there is no material distinction between Tournier v. National Provincial and Union Bank of England [1924]1 KB 461 and the later cases, and E where one is considering the implication of a term into a contract the basic element is always that the parties must necessarily be presumed to have intended to contract on the basis of the suggested term. That element will be present both where the term is necessary in order to give the contract business efficacy and also where there is some established practice which a person entering into that type of contract is presumed to accept.

- F In Tournier's case the English Court of Appeal indicated four qualifications to an otherwise absolute obligation of secrecy. Although Mr. Saville contends that the plaintiffs are seeking to widen the ambit of the resulting obligation, as it seems to me his argument seeks to narrow it. It does so by construing the first qualification (disclosure under compulsion of law) as including an order of a foreign court to produce documents which are in Hong Kong. Such - G a construction was never within the contemplation of the judges in Tournier's case and in my view a term so construed would not be reasonable. The plaintiffs contracted with the Bank in Hong Kong and it was intended by both sides that the accounts would be kept in Hong Kong. I adopt the view of the English Court of Appeal in R. v. Grossman (1981)73 Cr App R 302 and conclude that the Hong Kong branch of the Bank should for present purposes be - H considered as a different entity separate from the head office in New York. Anyone opening -- \_M~nV.:11..MSI1\l\.al(.m'(J.·~l~.y.jl''V'".f;l} a t inj.b.....QWiUIl..l~ *f'.J:)'1.T.i1l"* pf\_bn.~C1l;: \_thp TP.rI)TCh: persons interested, or the public, against fraud or crime." C He expressly refrained from giving any final opinion on the practice of bankers to give one - another information as to the affairs of their respective customers, "except to say ... that if it is justified it must be upon the basis of an implied consent of the customer". Nevertheless his reference to the practice of bankers seems to me a clear indication that the Lord Justice D thought such practice was a material consideration and that could only be on the basis that the parties to a banking contract were assumed to know the practice of bankers and would be assumed to have agreed to be contracting subject to that practice in the absence of express

provision to the contrary. As it seems to me there is no material distinction between Tournier v. National Provincial and Union Bank of England [1924]1 KB 461 and the later cases, and E where one is considering the implication of a term into a contract the basic element is always that the parties must necessarily be presumed to have intended to contract on the basis of the suggested term. That element will be present both where the term is necessary in order to give thp. r.nntrnr.t b usiness efficacv and also where there is some established oractice which a

plaintiff's accounts anywhere but in Hong Kong. Had the Bank in the ordinary course of business sent details of the plaintiffs' accounts to its head office in the United States of America the Bank could not properly have volunteered information about the accounts to the United States Government, but Mr. Hoffman concedes that he would then not have been able properly to ask the courts of Hong Kong to restrain production in New York in the face of the orders for production made by the United States courts. As things are, the information is not in the United States of America and it is not suggested that the information is needed in the United States of America in the ordinary course of banking business: it is required by the head office solely for the purpose of its being disclosed to theUnitedStatesGovernment.A B

Mr. Saville's argument involves the contention that, by sending details of the plaintiffs' accounts to the head office, the Hong Kong branch would not be disclosing the information to a third person and that there would therefore be no breach in Hong Kong of the duty of secrecy which could properly be restrained by an injunction of the Hong Kong courts. Although that argument has a superficial attraction, I do not think it can be right. I think it would be closing our eyes to the reality of the situation to allow the Bank to make an internal transfer of information which it would not make in the ordinary course of banking business when that transfer is designed for no other purpose than to bring the information within the jurisdiction of the foreign court. Although the orders of the United States courts are in fact addressed to the Bank in New York, they are aimed unashamedly at information which is within the jurisdiction of the Hong Kong courts and they are therefore intended to have extra-territorial effect. That is the basis of the Attorney General's intervention in the proceedings in the United States of America, where he has indicated that there are alternative procedures which would be open to the United States Government and which would not infringe the sovereignty of the Crown in right of Hong Kong. Mr. Saville argues that orders are commonly made for discovery of documents lying within other jurisdictions, but that is a very different thing from ordering production. The Hong Kong courts could enjoin the Bank against disclosing the information to the United States Government in Hong Kong and I am satisfied that they can restrain a transfer which is nothing more nor less than a device to avoid the enforcement in Hong Kong of the orders of a foreign court.C D E F

It is then argued that in the exercise of our discretion we ought not to issue an injunction which would place the Bank in the appalling situation that, if it obeyed the injunction, it would be in breach of orders of the courts of its own country. I am not unsympathetic to the difficulty in which the Bank finds itself, but the question is whether we are to treat that difficulty as an overriding factor. In so saying I do not overlook the contention of Mr. Hoffman that in the end the difficulty will be found to be more apparent than real because the existing orders of the United States courts (which are under appeal) will be held to have been wrongly made. . . .\_ .. \_ \_ . For-0-"'-'" my part .u. I am not V&. VO> willing to embark upon review of the iuolZmenls.unon • ..uv vVUL"'UI.1VU .mu, uy :senwng OeUll1S orme p amurts accounts to the head office, the Hong Kong branch would not be disclosing the information to a third person and that there would therefore be no breach in Hong Kong of the duty of secrecy which could properly be restrained by an injunction of the Hong Kong courts. Although that argument has a superficial attraction, I do not think it can be right. I think it would be closing our eyes to the reality of the situation to allow the Bank to make an internal transfer of information which it would not make in the ordinary course of banking business when that transfer is designed for no other purpose than to bring the information within the jurisdiction of the foreign court. Although the orders of the United States courts are in fact addressedtotheBankinNewYork,theyaimedunashamedlyG H C D

in the

extra-territorial

proceedings

procedures

infringe the

within the which would be open to the

sovereignty

effect.

jurisdiction

of the Hong Kong

United States of

> of the Crown in right of Hong Kong.

That is the basis of the

America, where he has

are

> courts and they are

United States

Attorney at

General's

indicated that there are

Government

Mr. Saville argues that orders

therefore

> and which would not

information

in the

intended to have

intervention

which is

alternative

A Kong courts to enforce any obligation of secrecy which, by the law of Hong Kong, is implied by virtue of the relationship of customer and banker. The obligation is implied for the very reason that it is fundamental to that relationship. Mr. Hoffman submits that on the principles stated in Doherty v, Allman (1878)3 AC 709 by Lord Cairns, L.C. the plaintiffs are entitled asof right to an injunction. He said at p. 720:

B

C

"If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury - it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves."

D

E

F Mr. Saville replies that the undertaking to maintain secrecy is a positive covenant and not a negative covenant. The relevant term implied in a contract between banker and customer can be stated either as a positive covenant to maintain secrecy or as a negative covenant against disclosure. The effect is the same and the customer is entitled to the appropriate remedy, whether that be expressed as a mandatory injunction or as a restrictive injunction. In either case the injunction will usually be granted, even though no damage is shown, although in special circumstances the court may refuse an injunction and award damages in lieu under the power now granted to it by statute. That is in accordance with the previous Chancery practice stated by Lord Cairns, L.C. in Attorney General v. Mid-Kent Railway Co. & South EasternRailwayCo.(1867)LR3ChApp100,103:

> "It is true that in many cases where the injury has been trifling, where there has been improper delay, or where the injury is transitory, this Court has left the complainant to his remedy at law".

> > injunction

does nothing more than give

convenience

to the

restrictive

or

is shown, although

covenant

appropriate

injunction.

in lieu under the

Chancery

-

inconvenience,

either

in

..

against

remedy,

practice

In

G

C

D

E

I

accept that the court has to decide in the particular circumstances of this case whether the interest in preserving the confidence between the Bank and its customers "is outweighed by other interests to which the law attaches importance": British Steel Corporation v. Granada Television Ltd. [1981] AC 1096, 1169A. I am not persuaded that it is.

H I would dismiss the appeal. .

thing shall not be done; and in such case the

#### the sanctiontheparties.

negative

disclosure.

be stated either as a positive

whether

case the

special

DOwer now granted to it by statute.

covenant.

that be expressed

The effect is the same and the customer

injunction

circumstances

of the process of the Court to that which already is the contract between

It is not then a question

will usually be granted,

the court may refuse an

term

> to maintain

mandatory

That is in

covenant

as a

or of the amount of damage or of injury - it is the specific performance. by the Court, of that negative bargain which the parties have made, with their eyes open, between

of the balance of

themselves." Mr. Saville replies that the undertaking to maintain secrecy is a positive covenant and not a Therelevantimpliedincontractbetweenbankerandcustomercan

a

injunction

secrecy or as a negative

injunction

accordance

is entitled

> and award damages

with the previous

or as a

even though no damage

#### 286 HONG KONG LAWREPORTS[1990]1HKLFCase 22-50073 Doc 1409-6 Filed 01/30/23 Entered 01/30/23 10:03:34 Page 11 of 17

New York has a somewhat different relationship withits customers to that of a bank withits A head office in say Paris or Tokyo, unless some specific agreement is otherwise reached between the two parties to govern theirrespective rightsandobligations. A customer opening an account with any bank in Hong Kong is entitled to assume that the usual rules about confidentiality as stated in Tournier's case apply. He might well have chosen to bank in Hong Kongrather than somewhere else because of the protection our banking law offershim B by insisting that the bank should keep any information about him confidential. There is no reason for him to suspect that the extentof suchconfidentiality mightvaryfrom bank to bank depending on where its headofficeislocated. Whatweare concerned withhereis not,as Mr. Saville put it, the relationship between a foreign bank operating in Hong Kong and its customer. The relationship under consideration is between a bank registered in HongKong C anda customer in HongKong, theirrelationshipbeinggovernedbyHongKonglaw.

Secondly, it is worth citing Kleinwort, Sons & Co. v. Ungarische Baumwolle Industrie Aktiengesellschaft [1939]2 KB678 where du Parcq,L.J. said(atp.699):

"I do not say for a moment thata sovereign statemay not legislate to control the acts D of its subjects beyond its borders. Of course it may. Nothing can prevent a sovereign state from so legislating, and it is a matter with which theseCourtshave no concern. But it is right that it should be understood that, if a sovereign state legislates so as to interfere with the acts of its subjects outside its own territory and, in a sense, its own jurisdiction, then it cannot expect - and I suppose that no state E would expect - that the courts of another country will enforce that legislation at the expense of their own laws. Primarily it is our business to see thatEnglish contracts are observed and carriedout according toEnglish law."

Mr. Hoffman arguesthatour caseis a dispute between Hong Kong courts andUnitedStates F courts. With respect to him, I do not see the problem quite in that light. The question is simply oneof applying our ownlaw in our owncourts.

Thirdly, the factsof R. v. Grossman (supra) are so apposite that it mightbe usefulto refer to them at some length, though for the purpose of the presentcase I need not go further than repeating the headnote of the report:

~Cl

y U1~

anda

in a sense, its own

are

would

expense of their own laws.

legislates so as to

expect - that the courts of

observed and jurisdiction,

interfere with the acts of its

carriedout

then it cannot expect - and I

Primarily it is our

according to

another

"By s. 7 of the Bankers' Books Evidence Act 1879: 'On an application of any party to legal' proceedings a court or judge may order that such party be at liberty to inspectand take copies of any entries in a banker's book for any of the purposes of such proceedings. An order underthis section may be made either with or without H summoning the bank or anv other nanv llnrl llh~l1 hp <,p",~il n:-- tho h~\_I••1. . - ' ----; . VU~ n, we- reiauonsrup between a roreign bank operating 10 Hong Kong and Its customer.Theunder

relationship consideration is between a bank registered in HongKong customer in Hong Kong, theirrelationship beinggoverned by HongKong law. Secondly, it is worth citing Kleinwort, Sons & Co. v. Ungarische Baumwolle Industrie Aktiengesellschaft [1939]2 KB678where du Parcq,L.J. said(at p. 699): "I do not say for a moment thata sovereign statemaynotlegislate to control the actsof its subjects beyond its borders. Of course it may. Nothing can prevent a sovereign state from so legislating, and it is a matter with which these Courtshave noconcern.Butitisrightthatitshouldbeunderstoodthat,

country will

English law."

subjects

business to see

outside its own

enforce that

if a

suppose that no state

thatEnglish

stateand,

contracts

sovereign

legislation at the

territory G

C

D

A B disclosing or permitting inspection of the numbered account aforesaid. The Revenue then decided to apply to the English courts under the Act of 1879 to facilitate the proceedings in Wales and sought an order from an English High Court judge addressed to the English bank's London address. The application was made *ex parte* and the judge granted it, permitting thereby the inspection by the Revenue of the S.I.B. account relating to J.B.K. S.I.B. sought to set aside that order by applying for leave to be joined as a party to the proceedings and then appealed to the Court of Appeal to have the judge's order set aside.

> Held, that in criminal matters an order can be made under s. 7 of'the Bankers' Books Evidence Act 1879 for inspection of the account of a bank's customer even though he is not a party to the proceedings; but only in exceptional circumstances. It was important that the Court should respect the confidence of a bank account and only if the public interest in helping the prosecution outweighed the private interest of confidentiality should inspection be ordered. In the instant case as the English bank's branch in the Isle of Man was subject to Manx law and regulations it was to be considered as a different entity from its headquarters branch in London; thus it should be considered as a foreign bank and, therefore, not subject to the Court's jurisdiction. Accordingly, the Court in its discretion, should not order the English bank's head office to produce the documents in question, although it could be done. The judge's order should be discharged."

E

C

D

It is interesting to note how the English court viewed the English bank in the Isle of Man with its head office in London: a situation which might be compared with the position of Chase in Hong Kong with its head office in New York.

#### F

E

## Silke, J.A.:

On 28th January 1984 there were issued three writs with statement of claim endorsed. The first by F.D.C. Co. Ltd. - "F.D.C." - the second by Garpeg Ltd. - "Garpeg" - and the third by G Vanguard International Manufacturing Inc. - "Vanguard". I shall refer to these entities generally as "the companies". The defendant in each case was Chase Manhattan Bank N.A. - "Chase". Each sought, *interalia,* injunctive relief.

The injunction sought was in these terms:

The judge's order should be discharged."

rh~QP in Hnna Kono with its head office in New York.

H "An injunction to restrain the defendant whether by itself, its servants or agents or ~·~~u\ne..br""""'99Jla"..W-tn .nd'~a\_..n~,,~inJT1\" lIi,,"1 o:1n *a* .. (,1U1Qina tn nrnill1r.p. Books Evidence Act 1879 for inspection of the account of a bank's customer even C though he is not a party to the proceedings; but only in exceptional circumstances. It was important that the Court should respect the confidence of a bank account and only if the public interest in helping the prosecution outweighed the private interest of confidentiality should inspection be ordered. In the instant case as the English bank's branch in the Isle of Man was subject to Manx law and regulations it was to D be considered as a different entity from its headquarters branch in London; thus it should be considered as a foreign bank and, therefore, not subject to the Court's

> jurisdiction. Accordingly, the Court in its discretion, should not order the English bank's head office to produce the documents in question, although it could be done.

It is interesting to note how the English court viewed the English bank in the Isle of Man with its head office in London: a situation which might be compared with the position of

On 30th January 1984F.D.C.and Garpegfiled summonsseekingan interiminjunction. On A 22nd February 1984Vanguardfiled a similarsummons. Mayo,J. granted*ex parte*injunctions in favour of Garpeg and F.D.C. on 30th January, and a further *ex parte* injunction in similar termswas obtainedfrom Mayo,J. by Vanguardon 14thFebruary.

Garpeg and F.D.C. are both companiesincorporatedand having their registeredoffice and place of business in Hong Kong. Vanguard is a company incorporated in Panamaand having B a registered office and its place of business in Hong Kong. All three are customersof Chase maintaining various accountsat a Hong Kongbranchof that Bank. It is agreedthat the banker customercontractsare governedby HongKong law.

The *inter partes* hearing took place before Clough, J., who made an order continuing the injunctions,until the trial or further order, on 3rd April 1984. He gave his reservedreasonson C 24th April. Noticeof appealagainsthis orders was filed by Chase on 17thApril.

On 30th July Chase, as the result of matterswhich had taken place in the United States and to which I shall refer in a moment, applied to Clough, J. for an order discharging the injunctions on the ground of change of circumstance. On 7th August Clough, J. refused the application. A notice of appeal was filed on the same day against that refusal. D

By consentbefore us, it was agreed:

action.

trial.

- (1) that the hearings of the motions for interlocutory injunction and for an order discharging that injunction before Clough, J. be treated as having been the trial of the action. - (2) the affidavits sworn on the motions be treated as evidence given at the trial and the E interlocutory injunction granted by the judge be treated as a final injunction made at trial.

This was an eminently sensible course in that there was no further evidenceto be adduced and all relevant matters were before Clough,J. If we were to accede to the courseagreed by counsel, the delay which would be necessitated by a trial and possible subsequent appeal F would be obviated. We agreed that we should take this course and that we should treat this appealas an appealfrom a final order.

These proceedings stem from the investigations of the Internal Revenue Service of the United States - "I.R.S." - into the affairs of Gucci Shops Inc. and of Mr. Aldo Gucci. The I.R.S. claim that the three companiesin Hong Kong are really the creatureof Aldo Gucci and G Gucci shops and that they have been used as conduits for income of the Gucci interests in order to evadeUnited States tax liability. I do not think it necessary to go into the background of that belief in any detail.

Followingon that belief and in order to further its investigations,the I.R.S.issuedsummons under the relevant United States legislation to Chase requiring it to produce bank records, H documents and information relating to dealings with Gucci and Aldo Gucci. The summons \_ •• \_ ....~. *y\_'* .vw ..v ......e. .VVA 1'"""'" u"'~u.., vlUU~ll, J., WllU IlIitUe l:Ul uroer conunulng me injunctions,until the trial or further order, on 3rd April 1984. He gave his reservedreasonson C 24th April. Notice of appealagainst his orders was filed by Chase on 17thApril. On 30th July Chase, as the result of matterswhich had taken place in the United States and

to which I shall refer in a moment, applied to Clough, J. for an order discharging the injunctions on the ground of change of circumstance. On 7th August Clough, J. refused the application. A notice of appeal was filed on the same day against that refusal. D By consentbefore us, it was agreed: (1) that the hearings of the motions for interlocutory injunction and for an order

discharging that injunction before Clough,J. be treated as having been the trial of the

(2) the affidavits sworn on the motions be treated as evidence given at the trial and the E interlocutory injunction granted by the judge be treated as a final injunction made at

This was an eminently sensible course in that there was no further evidenceto be adduced

~ntl **'.:111** ...~l~"'3nt **rnn.tt.:uon n,o..a 1-..8.&',........ r"1".....-L ^T** T~ '\_ \_ ....- - - - .. • . ¹

(Silke, J.A.)

A records from Hong Kong but could not give an assurance that such records would not be produced in the future.

Proceedings for enforcement and matters ancillary thereto took a somewhat convoluted path before the United States courts. It is normal procedure, when persons fail to comply with an I.R.S. summons of this nature, that the Attorney General of the United States makes

B application to a District Court, a Superior Court in the Federal System, for an order enforcing the summonses. Such proceedings were begun in the Second Circuit in the New York District Court. Both Chase and the companies intervened in those proceedings as they were entitled to do.

On 27th March 1984 Goettel, OJ. made an enforcement order in respect of the F.D.C. C account. Chase has appealed this enforcement order.

On 23rd March 1984 Sweet, OJ. made a similar enforcement order in respect of the Garpeg account, cutting down to some extent the width of the I.R.S. summons. Both Garpeg and Chase have appealed against this order.

On 6th July 1984 Sweet, OJ. made an enforcement order in respect of the Vanguard D accounts. That order has also been appealed by both Chase and Vanguard.

On 7th June 1984, subsequent to the *inter partes* hearing on the interlocutory injunctions in Hong Kong, the Attorney General of the United States filed motions for contempt orders against Chase for its failure to comply with the enforcement orders as to the Garpeg and ED.C. accounts.

E On 10th July 1984, after a contested *inter partes* hearing, Sweet, D.J. adjudged Chase to be in contempt on the Garpeg account summons and fined Chase the sum of US\$lO,OOO per day. The order as to the fine has been stayed. It was this contempt order which led to the application by Chase before Clough , J. to discharge the injunctions.

On 16th August 1984, again after a contested *inter partes* hearing, Goettel, D.J. adjudged F Chase in contempt for non-compliance with the F.D.C. summons and imposed upon Chase a fine ofUS\$5,OOO per day. Again, the order has been stayed.

All the several appeals in the United States are pending and it is worthy of comment that the Crown, with the consent of all parties, has submitted an *amicus curiae* brief and it will seek to be represented before the United States courts at the hearing of the consolidated G appeals - that is the consolidated appeal against the Garpeg and F.D.C. enforcement orders.

The enforcement orders made by the United States District Court are final and conclusive orders. They can only be altered by an appellate court. The contempt orders are also final and conclusive though they also may be altered upon appeal.

It will be seen from this brief resume of matters which occurred prior to the hearing of this H appeal that Chase are in a very difficult position. They are caught between the upper ft"lm"trm", of th.. ;n;nnl't ivf>. OTtif>.T~ made in Honz Konz and the nether one of the orders made On 27th March 1984 Goettel, OJ. made an enforcement order in respect of the F.D.C. C account. Chase has appealed this enforcement order. On 23rd March 1984 Sweet, OJ. made a similar enforcement order in respect of the Garpeg

account, cutting down to some extent the width of the I.R.S. summons. Both Garpeg and Chase have appealed against this order. On 6th July 1984 Sweet, OJ. made an enforcement order in respect of the Vanguard

D accounts. That order has also been appealed by both Chase and Vanguard. On 7th June 1984, subsequent to the *inter partes* hearing on the interlocutory injunctions in Hong Kong, the Attorney General of the United States filed motions for contempt orders

against Chase for its failure to comply with the enforcement orders as to the Garpeg and

E On lOth July 1984, after a contested *inter partes* hearing, Sweet, OJ. adjudged Chase to be in contempt on the Garpeg account summons and fined Chase the sum of US\$lO,OOO per day. The order as to the fine has been stayed. It was this contempt order which led to the

armlication bv Chase before Clough. J. to discharge the injunctions.

F.D.C. accounts.

relationship whichexists betweenthem a term so wide so that it wouldextend confidentiality A to documents in the possession of a United States bank in defiance of an order of a United StatesCourt.

Mr. Saville has, in a very interesting argument, submitted that the test to be applied as to the existence and scope of such an implied term is the specific one - necessity. He further submitsthat even if the termis as wide as that soughtby the companies, then the performance B by Chase of its obligation has in the United States become unlawful and the Bank is thus excused. If we are against him on his general propositions he advances the further argument that the scope of the injunctionsought shouldbe narrowed and, further, that in any event this is not a suitablecase for the Court to give injunctive relief to the companies.

Mr. Hoffman, Q.C., with him Mr. Tong, who represents the companies, argues for a C general, not a specific, test of that which is the scope of the implied term - the distinction being between a specific term which the court must be satisfied was necessarily within the contemplation and intention of the parties at the time of their entry into the contract as contrasted with a general impliedterm which is a part of the generallaw and mayor may not necessarily have been in contemplation. I acceptthat wheresuch distinction is madedifferent D principles applyas to the test of the existenceof such a term,

Generally, on an implied term, we have been referred by counsel to Tournier v. National Provincial and Union Bank of England whichis the *locusclassicus* on the matter. It is only necessary for me to refer to that portionof the headnote at p. 461 which says:

"It is an implied term of the contract between a banker and his customer that the banker will not divulgeto thirdpersons, withoutthe consentof the customerexpress or implied,either the state of the customer's account, or any of his transactions with the bank, or any information relating to the customeracquired through the keeping of his account, unless the banker is compelled to do so by order of a court, or the F circumstances give rise to a public duty of disclosure, or the protection of the banker's own interests requiresit."

And,further, to that whichBankes, LJ. said at p. 471:

"At the presentday I think it may be assertedwith confidence that the duty is a legal one arising out of contract, and that the duty is not absolute but qualified. It is not possibleto frameany exhaustive definition of the duty. The most that can be done is to classifythe qualification, and to indicateits limits."

Thatsuccinctly exp,resses the position. . . \_ \_ .

I~ IIUl a suuaoie case ror tne court to grvetnjunctive relief to the compames. Mr. Hoffman, Q.C., with him Mr. Tong, who represents the companies, argues for a C general, not a specific, test of that which is the scope of the implied term - the distinction being between a specific term which the court must be satisfied was necessarily within the

contemplation and intention of the parties at the time of their entry into the contract as contrasted with a general impliedterm which is a part of the general law and mayor may not necessarily have been in contemplation. I acceptthat wheresuch distinction is madedifferent D principles applyas to the test of the existence of such a term, Generally, on an implied term, we have been referred by counsel to Tournier v. National

Provincial and Union Bank of England which is the *locus classicus* on the matter. It is only

"It is an implied term of the contract between a banker and his customer that the banker will not divulgeto thirdpersons, withoutthe consentof the customerexpress or implied,either the state of the customer's account,or any of his transactions with . - -

necessary for me to refer to that portionof the headnote at p. 461 whichsays:

E

H

G

A take whatever measures they think fit to grant relief to its own national in its own courts. I think it would be quite wrong for us to seek to in any way interfere with their jurisdiction.

I would make but this one comment. It seems a little strange that: (a) in the light of the evidence as to foreign law before us and of the law to which Leggatt, J. made reference in X A.G. v. A Bank [1983]2 All ER 464 (b) in the light of the restatement cited by Sweet, DJ. in B his opinion in the contempt proceedings which reads:

"Section 420(2) :

If disclosure of information located outside the United States it is prohibited by a law or regulation of the State in which the information or prospective witness is C located.

- (a) the person to whom the order is directed may be required by the court to make a good faith effort to secure permission from the foreign authorities to make this information available; - (b) the court may not ordinarily impose the sanction of contempt, dismissal or D default on the party that has failed to comply with the order for production, except in cases of deliberate concealment or removal of information or of failure to make a good faith effort in accordance with paragraph (a) ...."

*(Restatement (proposed) of Foreign Relations Law of the United States (Revised)(Tent.* Draft No.3, 15th March 1982»

E

E

adopted or not by the Second Circuit; (c) in the light of the decision of the United States Supreme Court in Societe Internationale Pour Particfpations Industrlelles et Commerciales, S.A. v, Rogers (1958)357 US 197, Sweet, D.J. should, in the contempt proceedings, have held that because "foreign compulsion" and "good faith" had been raised in F the course of the enforcement proceedings, they were not therefore available to Chase as a

defence in the contempt proceedings.

Whether the United States courts do or do not wish to place that which appears to be an intolerable burden on an American bank operating outside the confines of the United States is of course entirely a matter for those courts.

G It seems to me that our considerations here are in the context of a banker customer relationship existing in Hong Kong between customers in Hong Kong and a bank in Hong Kong. This is the relevant matter for the purposes of the laws of Hong Kong and in that compendious description I include that which is the basis of all law, the common law, and such statutes as may exist. Chase is, in this context, a Hong Kong bank.

- H If the documents, the production of which is now sought by the I.R.S., not from the **1",** u.a.~""lv~w~",,· **VA. · ul...t,.a.d.aloo&-v,,"•** .....~~~ -.c:- ..,.;, -\..rJ -""",&-",-~""v-\_ ..L.t»\_v1P:"";4'1~':-o", C law or regulation of the State in which the information or prospective witness is located. (a) the person to whom the order is directed may be required by the court to make a - D good faith effort to secure permission from the foreign authorities to make this information available; (b) the court may not ordinarily impose the sanction of contempt, dismissal or default on the party that has failed to comply with the order for production, except in cases of deliberate concealment or removal of information or of failure to make a good faith effort in accordance with paragraph (a) ...."

adopted or not by the Second Circuit; (c) in the light of the decision of the United States Supreme Court in Societe Internationale Pour Parttclpattons Industrielles et ,., .... \_ .... ....1........ C' *A.* **.. . ^D \_\_....\_L"I** 110C'O\'1(,~ **TTC** 10~ **CnlAAt T\ ^T** ~hnnlrf **in** th~ **I"nnt#'tnnt**

*(Revised)(Tent.* Draft No.3, 15th March 1982»

*(Restatement (proposed) of Foreign Relations Law of the United States*

Mr. Saville has said that the "legal compulsion" exception is the compulsion of American *A* law - the domiciliary law - which would excuse Chase's compliance with its implied contractual obligations. It is also his contention, though not made with the same strength, that the interests of the Bank necessitate disclosure.

On the first point, it is implicit in the judgment of my Lord Vice-President that compulsion of law does, and in particularin the circumstances here must, relate to the compulsion of Hong B Kong law and I agree. While I fully accept that the financial implication of this and of the foreign proceedings, on the face of it, would suggest that it would be in the interests of the Bank to disclose and therefore to excuse them under a Tournier exception from the performance of their obligation, I do not read that exception to be in reality such cover. It must mean in the interests of ordinary banking practice, such as when they find it necessary to C sue upon an overdraft or matters of that kind. The issues here are very much wider than those narrow interests of the Bank as I see them to be.

We are not directly concerned and I do not intend to deal with the issue of the enforcement of foreign revenue proceedings in this jurisdiction. There might well be further argument on this aspect in other applications and it might well be that such enforcement could be a D complete bar. But that is by the way.

In Tournier, Scrutton, L.J. at p. 480 referred to In re Comptoir Commercial Anversois and Power [1920]1 KB 868 a decision upon which Mr. Saville relies and said of it:

"The contract is alleged in the claim as 'implied', and according to the decision of E this Court in *In Re reComptoir Commercial Anversois andPower,* implied terms are a question of law for the Court, the jury finding such facts as are necessary or material to enable the Court to judge of the implication. The Court will only imply terms which must necessarily have been in the contemplation of the parties in making the contract. Applying this principle to such knowledge of life as a judge is F allowed to have, I have no doubt that it is an implied term of a banker's contract with his customer that the banker shall not disclose the account, or transactions relating thereto, of his customer except in certain circumstances."

I have no doubt at all that in the circumstances of this case such an implied term as I have G indicated necessarily exists and I do not think there are any circumstances on the evidence before us which would dilute it. I equally have no doubt that the terms of the injunction sought are not too wide . For to allow Chase now to transfer any of the records or documents sought by the Internal Revenue Service to their Headquarters in the United States whether in the course of normal banking practice or not, would be to violate the confidentiality which H exists as between Chase in Hong Kong and its customers in Honz Konz.

perrormance or tneir onngauon, 1 do not read that exception to be in reality such cover. It must mean in the interests of ordinary banking practice, such as when they find it necessary to C sue upon an overdraft or matters of that kind. The issues here are very much wider than those

narrow interests of the Bank as I see them to be. We are not directly concerned and I do not intend to deal with the issue of the enforcement of foreign revenue proceedings in this jurisdiction. There might well be further argument on

> "The contract is alleged in the claim as 'implied', and according to the decision of E this Court in *In Re reComptoir Commercial Anversois andPower,* implied terms are a question of law for the Court, the jury finding such facts as are necessary or material to enable the Court to judge of the implication. The Court will only imply

this aspect in other applications and it might well be that such enforcement could be a D complete bar. But that is by the way.