Deputy Judge Julia Livesey condemned the ICAC for violating Basic Law provisions which safeguard privacy and legal privilege and called on legislators to curb some powers of the anti-graft body to prevent a recurrence.

''Legislators also need to introduce the regulations required for lawful covert recording as was originally envisaged under the Basic Law with all due haste, so that the guarding of the guards is not just left to the Judiciary,'' she said.

''[The ICAC] must make sure they do not overstep the bounds of what is right in their enthusiasm for ridding Hong Kong of corruption.''

Shum Chiu, 68, director of Rickson Engineering; Wong Hung-ki, 53, director of Mpower Engineering; Yu Chi-wai, 45, and Ann Wong, 37, respectively president and financial controller of ABB, were charged with two counts of falsifying accounts and two counts of offering bribes to a public servant.

Nearly HK$2 million was alleged to have been offered to Housing Authority officers in order to win contracts.

Proceedings were stayed against all four when Livesey said the defendants were not able to have a fair trial because the means by which evidence was gathered ''set a dangerous precedent.''

However, Yu and Ann Wong had their bail extended to face trial on false accounting charges.

Lawmaker Audrey Eu praised the ruling. Hong Kong is fortunate that ``we have judges who would be able to speak robustly when they see what they regard as a flagrant breach of rights by enforcement agencies,'' she said. Eu called on the government to respect the ruling.

``It's unfortunate that this administration somehow doesn't seem to respect judicial decisions as much as they ought to and sometime you get the feeling if the judgment is not convenient they think of ways to get round it,'' she said.

ICAC spokeswoman Valentina Chan wrote in an e-mailed statement that the agency is ``very concerned with the judgment.''

She went on: ``We always conduct our investigations in accordance with the law to maintain justice in the interest of the public. The ICAC and the Department of Justice will study the judgment in detail to decide if the interests of justice require an appeal.''

Livesey was harsh in her ruling, calling the ICAC's behavior so ``unworthy or shameful that it would be an affront to the public conscience to allow the trial to proceed.''

The case began unraveling June 24 when defense lawyer Senior Counsel Peter Duncan told the court that the ICAC had taped a privileged legal conservation between Yu and Louis Fung and Geoffrey Booth, two lawyers from Haldanes, at Amaroni's restaurant in Festival Walk in November 2002.

It was revealed in court that the ICAC had authorized a former suspect in the case, Tang Hop-sing, to act as an ``undercover agent'' to record the entire 90-minute lunch meeting between defendant Yu and his two lawyers. Tang was a junior colleague to Yu and a prosecution witness against him had the trial been allowed to proceed.

Duncan submitted that the taping violated the fundamental right to confidential legal advice and undermined the rule of law and he asked the case to be thrown out.

Livesey said ICAC officers ``knew'' that Yu would be meeting with his lawyers, and it was a ``blatant and flagrant'' infringement on his right to due process.

``There was no need to carry out the covert recording of this meeting,'' Livesey said.

The case marks the first time in collective memory that the courts have ruled on matters of legal professional privilege.

Livesey said the use of a ``covert monitoring device'' on Tang was illegal and went against fundamental rights in Articles 29, 30 and 35 of Basic Law.

The case's collapse spurred calls for a review of the ICAC's powers.

``I would urge the legal department and the security bureau and other law enforcement agencies to set up an inter-party working group to look into this [case],'' Democratic Party legislator James To, also a solicitor and chairman of the Legislative Council's security panel, told The Standard.

``I wouldn't have dreamed any law enforcement agency would have mistaken that they can lawfully tap the phone or record confidential legal conversations between lawyer and client.''

A Security Bureau spokesman said: ``We shall be studying the judgment when it becomes available.''

In a statement, the Department of Justice said it is studying the ruling to decide whether to appeal.

In an unrelated case in April, District Court Judge Fergal Sweeney ruled that the use of eavesdropping devices by the ICAC violated Article 30 of the Basic Law, which protects the right to private communication and no legal procedures existed that allowed officers to secure a warrant from judges for such bugging.

``Since no legal procedures have been set up for judges to grant such a warrant, citizens have no protection against the arbitrary power of the ICAC or other departments,'' Sweeney said.

doug.crets@singtaonewscorp.com