Introduction

On 12 December 2025, the Hong Kong Court of Appeal (the “CA”) handed down judgment[1] in two related appeals arising from the Competition Tribunal’s (the “Tribunal”) case management decisions in enforcement proceedings concerning alleged cartel conduct in the air-conditioning maintenance sector. The CA dismissed both appeals, upholding the Tribunal’s orders that: (i) without prejudice privilege communications between the Competition Commission (the “Commission”) and respondents who settle disputes with the Commission on anti-competition allegations must be disclosed to non-settling respondents; and (ii) the determination of pecuniary penalties against a settling respondent under the Kam Kwong procedure may be adjourned until after trial of the non-settling respondents.

Background

The proceedings arise from two related enforcement actions commenced by the Commission against multiple undertakings and individuals for alleged price-fixing, market sharing and bid-rigging in the supply of air-conditioning works, in contravention of the First Conduct Rule under section 6 of the Competition Ordinance (Cap 619) (the “Ordinance”).

ATAL Building Services Engineering Ltd (“ATAL”), the 1^st Respondent, admitted liability and entered into Cooperation Agreements with the Commission, together with two of its employees. The non-settling respondents, i.e., the 2^nd Respondent to the 4^th Respondent (collectively, the “JC Parties”), did not admit liability.

At the first case management conference on 29 August 2023, the President of the Tribunal ordered disclosure of the correspondence and communications and directed that the Kam Kwong penalty determination be adjourned until after trial or until all respondents had agreed to a Kam Kwong settlement (the “Decision”).

However, ATAL objected to disclosure to the JC Parties the correspondence and communications with the Commission leading up to the entering of the Cooperation Agreement. Accordingly, ATAL sought leave to appeal the disclosure order. The Commission also sought leave to appeal the adjournment ruling. The President refused leave afterwards and the applicants renewed their applications before the CA, which directed a rolled-up hearing of the leave applications and, if leave granted, the appeals themselves.

Main issues

Disclosure of communications

ATAL appealed against the Tribunal’s order that correspondence and communications relating to the Cooperation Agreements between the Commission, ATAL and its two employees be disclosed to the JC Parties. ATAL argued that such materials were protected by without prejudice privilege and were confidential. It contended that the President erred in holding that the Without Prejudice Rule (“WP Rule”) does not apply to “successful” settlement communications, and failed to have regard to the mandatory considerations under Rule 24 of the Competition Tribunal Rules (Cap 619D) (“CTR”), including confidentiality, balancing of interests, and necessity for fair disposal of proceedings.

The JC Parties submitted that the “warts and all” principle applicable to accomplice evidence overrides or displaces without prejudice privilege, and that disclosure was necessary to enable them to assess the credibility and reliability of the cooperating accomplices’ evidence.

Sentencing of penalties

The Commission appealed against the President’s order that the Kam Kwong penalty determination be adjourned until after the trial of the JC Parties. The Commission argued that the Decision was irrational and erred in principle. The Commission also contended that disparity in penalties is not a legitimate concern, as penalties are determined on different factual bases and the Tribunal is not bound by findings in the Kam Kwong proceeding when sentencing non-settling parties.

The JC Parties resisted the appeal, arguing that consistency in penalties and judicial efficiency favour a single sentencing hearing, and that an early Kam Kwong determination would deprive them of the opportunity to make submissions on common issues.

Ruling

Disclosure of communications

The Court held that the correspondence and communications are discoverable and not protected by without prejudice privilege in the circumstances.

The CA reaffirmed that the WP Rule is founded on public policy encouraging settlement, but is not absolute. The Court endorsed the President’s application of the “warts and all” principle derived from criminal jurisprudence, which requires that the circumstances in which an accomplice cooperated with the prosecuting authority, including the terms of any immunity or leniency, be disclosed to the defence to enable proper assessment of credibility. The CA found that ATAL and its employees are accomplices cooperating with the Commission, not informers, and that their dealings with the Commission are relevant to evaluating the veracity of information relied upon by the Commission against the JC Parties.

The Court rejected ATAL’s contention that the WP Rule continues to apply post-settlement. Once a settlement has been concluded and the cooperating party has agreed to assist in prosecuting other alleged cartelists, the rationale for protecting without prejudice communications diminishes. The CA further held that ATAL’s bare assertion of confidentiality, without substantive evidence, was insufficient to resist disclosure. While acknowledging the importance of the Commission’s Leniency Policy and the need to encourage cooperation, the Court emphasised that this must yield to the non-settling respondents’ fundamental right to a fair trial.

Sentencing of penalties

The Court held that the President’s decision to adjourn the Kam Kwong penalty determination was a proper exercise of his case management discretion, and that he was not purporting to lay down a rigid rule of general application.

The CA acknowledged the importance of the Kam Kwong procedure in facilitating expeditious settlement of competition disputes and recognised that, as a matter of general principle, such applications should ordinarily be determined without unnecessary delay. However, the Court found that the circumstances of this case justified the adjournment. The consent summons sought a single pecuniary penalty covering two separate sets of proceedings at different procedural stages, raising novel legal and procedural questions regarding the propriety of a composite penalty and the interaction between consent orders in distinct proceedings. The President, being seized of both cases, was best placed to determine that it was more appropriate to determine liability first and address penalty after trial or settlement of all respondents.

The Court rejected the Commission’s submission that the President erred by analogising to criminal sentencing practice. While competition proceedings are not criminal in every respect, the President was entitled to draw upon established procedural principles to achieve consistency and efficiency.

Takeaway

This judgment confirms that without prejudice privilege will not shield settlement communications with the Commission once the deal is done and the settling party is wheeled out as a witness against others. For practitioner, if your client has cooperated and agreed to give evidence, expect the entirety of their dealings with the Commission, warts and all, to be placed before the Court. A bare assertion of confidentiality or privilege may not suffice.

On Kam Kwong timing, the CA has made clear that there is no automatic right to early sentencing. While delaying a penalty determination should not become routine, the Tribunal retains a broad discretion to adjourn where the procedural landscape is complex or where waiting makes case management sense.

 

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2026