KOON WING YEE v. INSIDER DEALING TRIBUNAL AND ANOTHER

FAMV No. 1 of 2010

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 1 OF 2010 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV No. 358 of 2005)

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DETERMINATION

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Mr Justice Ribeiro PJ:

1.  We dismissed this application for leave to appeal with reasons to be given later.  These are our reasons.

2.  The applicant was found by the Insider Dealing Tribunal (“IDT”) to have engaged in insider dealing under the now repealed Securities (Insider Dealing) Ordinance (“SIDO”).[1]  A disgorgement order was made under s 23(1)(b) of that Ordinance in respect of the profit attributable to him from the insider dealing, assessed at $31,367,553.00.  He was also disqualified from acting as a director and from taking part in the management of any listed or limited company for a period of five years. 

3.  The applicant seeks leave to appeal against those orders and submits in the first place that leave should be granted as of right under section 22(1)(a) of the Court’s statute.  We do not agree.  The principles have been laid out in China Field Ltd v Appeal Tribunal (Buildings) (No 1)[2] and in WLK v TMC[3] and require no repetition here.  Disgorgement orders under SIDO were based on the IDT’s assessment of profits gained or loss avoided attributable to the insider dealing and fall outside both limbs of section 22(1)(a).  They involve neither a liquidated monetary claim nor a claim to a proprietary right.

4.  Alternatively, the applicant seeks leave on the basis of section 22(1)(b), contending that a series of questions of the requisite great general or public importance arise.  We will consider each point in turn. 

1^st issue: breach of Article 10

5.  The applicant endeavours to argue that the IDT was institutionally or structurally in breach of the requirements of Article 10 of the Bill of Rights in that it lacked or gave the appearance of lacking independence and impartiality.  He contends that the IDT gave the appearance that it was acting simultaneously as investigator, prosecutor and judge.  In his written submissions, he states:

“The Financial Secretary (a member of the executive and not the judiciary) sets an SFC investigation in train (the SFC also being part of the executive), then appoints the majority of the members of a court of inquisition, which then delegates its powers of inquisition to its own counsel, with a view to collecting an award from a member of the public – in this case, the applicant.  In that court of inquisition, confessions that were previously coerced from the citizen by the executive (the SFC) are used by that tribunal through its counsel to prove culpability and liability to pay money to the executive.”

6.  We cannot accept that argument.  In the first place, it does not fairly describe the features of the statutory scheme.  When the Financial Secretary initiated an inquiry, it was placed in the hands of the tribunal chaired by a judge of the Court of First Instance who was appointed to the tribunal by the Chief Executive on the recommendation of the Chief Justice.[4]  The two other members were indeed appointed by the Financial Secretary, but the Ordinance excluded public officers from sitting.[5]  Questions of law were determined by the chairman alone.[6]  While the lay members could be removed from office by the Chief Executive for incapacity, bankruptcy, neglect of duty or misconduct, the chairman could not be so removed.[7]  The IDT decided for itself whether it needed investigative help and if so, it authorized the SFC to conduct the investigation.[8]  It could appoint a legal officer nominated by the Secretary for Justice to act as counsel for the tribunal.[9]  The person whose conduct was the subject of inquiry, had the right to be heard, to attend in person and to be represented by counsel or a solicitor.[10]  In our view, given this statutory scheme, it is a tendentious distortion to paint a picture of the IDT as a tribunal whose proceedings were controlled from start to finish by the executive.  It was a statutory tribunal set up with features enhancing its independence, impartiality and fairness while adopting an inquisitorial procedure.  We do not regard the complaint about a lack of independence and a lack of impartiality as arguable.

7.  Even if, contrary to that view, the applicant’s contention were in some degree arguable, his attack on the institutional structure of the IDT crucially fails to take proper account of the availability of an appeal to the Court of Appeal.  The Ordinance provided for an appeal both against the findings and determination of the tribunal (as to the incidence of insider dealing, the identity of those involved and the profits thereby gained or losses thereby avoided)[11] and against its orders (of disqualification or “disgorgement”).[12]  The appeal against findings was as of right on a point of law and with leave of the Court of Appeal on a question of fact.  There was an unqualified right of appeal against adverse orders. 

8.  As explained in Lam Siu Po v Commissioner of Police,[13] it is not a requirement of Article 10 that every element of a fair hearing be present at every stage of the process whereby the individual’s rights and obligations are affected.  The Article is complied with if the fair hearing requirements are met by the process taken as a whole, in particular, where a court of full jurisdiction (as explained in our decision) functions as part of the scheme.  An appeal to the Court of Appeal was part of the SIDO scheme.  That court is unquestionably an independent and impartial tribunal and was able to make good any actual or perceived deficiency on those grounds.  It had full power to deal with the tribunal’s factual findings and orders including, where necessary, to quash any unfair decision of the IDT and to remit it for inquiry afresh.[14]  In those circumstances, the suggestion that the IDT was institutionally or structurally in breach of Article 10 is unarguable. 

9.  The applicant also seeks to suggest that there was actual unfairness in the hearing that he received before the IDT.  This involved reiteration of the distorted complaint about the tribunal acting as prosecutor, judge and jury.  Submissions were also made regarding the tribunal’s inquisitorial powers to obtain evidence and information.  A complaint was made about the late disclosure of the nature of the case the applicant had to meet, but that was a matter aired before and dealt with in the Court of Appeal.  We are not persuaded that there was arguably any unfairness at the hearing.  The applicant erroneously equates an inquisitorial procedure with unfairness.  That is obviously untenable. Numerous States subscribing to the European Convention on Human Rights utilise similarly inquisitorial procedures without being in breach of Article 6(1) of that convention.  An inquisitorial procedure by a specially constituted tribunal is appropriate since the insider dealer’s misconduct damages the market as a whole and does not generally give rise to a lis between the insider and another person which is susceptible to adversarial civil litigation.

2^nd issue: “Profit” for the purpose of the disgorgement order

10.        The applicant suggests that leave should be given to allow him to challenge the correctness of the Court’s decision in IDT v Shek Mei Ling,[15] his argument being that the remarks of Lord Nicholls of Birkenhead NPJ regarding the assessment of profits resulting from insider dealing where there is a delay in disposing of the shares were merely obiter.  That decision rests on the Court’s construction and application of the statutory language requiring ascertainment of the profits which resulted from the insider dealing and it suffices to state that we cannot detect any arguable basis for questioning its correctness.

3^rd issue: question regarding exercise of the “judicial power”

11.        The applicant seeks leave to challenge the constitutionality of the IDT itself, contending that it had somehow improperly usurped exercise of the judicial power while not a court.  This was a point which the Court of Appeal refused leave to argue since it was first raised only at the hearing itself and on an obviously poorly prepared basis.  That was an entirely proper exercise of the Court of Appeal’s discretion. 

12.        As we stated in Flywin Co Ltd v Strong & Associates,[16] the Court’s practice, save in highly exceptional circumstances, is to refuse to entertain a point not argued before the Court of Appeal, particularly where it involves a major point of law.  This practice must be followed in the present case.  We might add that even if the applicant were correct in the contention that the IDT was exercising the judicial power, it does not follow that in doing so it was acting unconstitutionally.  We express no view as to the correctness or otherwise of Luk Ka Cheung v Market Misconduct Tribunal[17] in this context.

4^th issue: “specified corporation”

13.        The IDT found that the applicant’s breach of his duties as chairman of Easyknit and Easy Concepts was very substantial:

“Koon’s insider dealing was premeditated and sophisticated.  He had no hesitation in using associates and companies he and they controlled in order to achieve his purpose.  He used the funds of a subsidiary of the listed company of which he was chairman to deal as an insider.”

 [18] 

On that basis, it ordered that he should not without leave of the Court be a director, etc “of a listed company or any limited company” or be concerned in the management of the same for a period of five years.

14.        The applicant seeks leave to argue that it was incumbent on the IDT by virtue of the words “specified company” in SIDO section 23(1)(a) to have named all the companies which were made subject to the disqualification order.  The Court of Appeal held that “specifying” the corporations concerned did not mean that they had to be individually named and that the order made it sufficiently clear that all limited companies came within its ambit.  We agree with that construction of the section, taking into account the provision that the applicant is at liberty to seek the court’s leave to become a director, etc, of any particular company during the period of disqualification.  An order designed to enable the court to consider whether, on the insider dealer’s application, the disqualification should be disapplied in relation to any particular company in the light of the applicant’s record of misconduct, has the attraction of practicality.  The alternative of requiring orders to be made which list exhaustively beforehand, every conceivable class of company formed or to be formed where the applicant’s participation on its board may be objectionable, has little to commend it.

15.        For the foregoing reasons the application was dismissed with costs.

[1]    Cap 395.

[2]    [2009] 2 HKLRD 135.

[3]    FAMV 50/2009, 3 December 2009.

[4]    SIDO, section 15(2).

[5]    Ibid.

[6]    SIDO, Sch §13.

[7]    SIDO, Sch §6.

[8]    SIDO, section 18.

[9]    SIDO, Sch §18.

[10]   SIDO, Sch §16.

[11]   SIDO, section 31(1).

[12]   SIDO, section 31(2).

[13]   [2009] 4 HKLRD 575.

[14]   SIDO, section 32.

[15]   (1999) 2 HKCFAR 205.

[16]   (2002) 5 HKCFAR 356 at 369.

[17]   (2009) 1 HKLRD 114.

[18]   Report p 193.