NOMURA INTERNATIONAL (HONG KONG) LTD AND OTHERS v. SECURITIES AND FUTURES COMMISSION

CACV 34/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 34 OF 1998

(ON APPEAL FROM AL 108 OF 1997)

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J U D G M E N T

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Liu, J.A.:

1. This appeal involves the unwinding of a trading company's arbitrage position on the Australian stock and futures markets. The 1st and the 2nd respondents are members of the Nomura group of companies, a Securities House operating internationally on a regional and global basis. The 2nd respondent is a London based company and the 1st respondent is a registered Securities Dealer conducting its business from Hong Kong. The 3rd respondent is a director of the 1st respondent. He is, himself, a registered Securities Dealer and a Commodity Dealer's Representative in Hong Kong. The 4th and the 5th respondents are traders in Hong Kong, both registered here as Securities Dealer's Representatives and Commodity Dealer's Representatives. The 1st respondent company and the individual respondents, namely, 3rd, 4th and 5th, are and have at all material times been subject to the control of our Securities and Futures Commission (Hong Kong SFC), the appellant. The 2nd respondent company is and has at all material times been subject to the control of the United Kingdom Securities and Futures Authority (London SFA). It was the 2nd respondent's trading in the Australian Stock and Futures Markets on 29 March 1996, executed via Hong Kong by the 1st respondent company, in particular, its traders, the 4th and the 5th respondents, that had given rise to regulatory enquiries in three jurisdictions, Australia, London and Hong Kong. The objectionable strategy staged involved selling the 2nd respondent's cash position more or less at the same time as its futures position expired. The conduct of all the respondents was said to be prejudicial to the interests of the Australian markets and investors in those markets. Shortly put: it was an alleged improper market manipulation for gain. The 3rd respondent, as a director of the 1st respondent company, was accused of having allowed senior staff with his company to engage in such activities. The concerns aroused in Hong Kong could be broadly divided into conduct allegedly unbecoming of these Hong Kong respondents in the trading executed on 29 March 1996 (the trading issue) and that of the 3rd respondent director in supervising his subordinates (the supervisory issue). The central issue with respect to the trading on 29 March 1996 was: what measures could legitimately be taken by the respondents in international arbitrage trading? As between all the respondents and the regulatory authorities in the three jurisdictions, there exists a difference of interpretation about the propriety of the trading strategy adopted on 29 March 1996, which is being sought to be condemned as market manipulation detrimental to the Australian Securities and Future markets and the investors in those markets.

2. The Australian Securities Commission (Australia ASC) commenced an action in the Federal Court of Australia against the 2nd respondent company which submitted to jurisdiction. The London SFA brought disciplinary proceedings against the 2nd respondent company and agreed thereafter not to proceed without serving a four weeks' notice. The Hong Kong SFC refused to stay its disciplinary proceedings against the 1st respondent company and the 3rd, 4th and 5th individual respondents. Pursuant to leave granted, all the respondents took the Hong Kong SFC to Stone, J. for judicial review. The respondents in the Hong Kong SFC disciplinary inquiry complained of prejudice in their defence of these proceedings and the 2nd respondent made a similar complaint in respect of its defence in the Australia ASC action. The judge stayed the disciplinary proceedings of the Hong Kong SFC until the end of the litigation preparation for the Australia ASC action i.e. up to 31 May 1998. The stay granted took the form of an Order of Prohibition. Hong Kong SFC feels aggrieved and now appeals against the Prohibition Order. The respondents also feel aggrieved and appeal against the short stay granted only to 31 May 1998. The respondents maintain that without further stay, the 1st, 3rd, 4th and 5th respondents would continue to suffer prejudice after 31 May 1998 in their defence of the Hong Kong SFC disciplinary proceedings and the 2nd respondent in its conduct of the Australia ASC action. The procedural time frame in the Australian action has shifted by a month on account of delay. The respondents invite this court in their cross-appeal to extend the stay to the judgment of the Australian action or at least by a further month.

3. It is necessary to refer to some of the chronological steps taken by Australia ASC, London SFA and Hong Kong SFC for the trading strategy put in place for 29 March 1996. Australia ASC took the first offensive initiative against the Nomura group. They sued the 2nd respondent. The matter was first brought to a head in Australia by a letter of Australia ASC dated 16 April 1996. On 30 Mary 1996, the 2nd respondent company signed a Co-operation Agreement with the Australia ASC. Between 10 to 14 June 1996, the 2nd respondent company allowed its officers to be interviewed by Australia ASC. On 12 July 1996, telephone transcripts were supplied to Australia ASC. On 3 August 1996, Australia ASC announced its conduct of an enquiry and finally instituted an action in the Federal Court of Australia against the 2nd respondent on 25 February 1997. The action was grounded on various sections of the Australian Corporation Laws. The trading of Nomura on 29 March 1996 was alleged, inter alia, to have created "a misleading appearance of a transaction between a genuine seller and buyer whereas in fact it would be a sale by Nomura to itself", "an appearance of large supply which would counter balance the appearance of large demand through the bid basket and thus conceal from the market whether Nomura was going to unwind the hedge by selling its physical stock on that day", "a false or misleading appearance of active trading in those securities on the stock market [having the effect of reducing] the market price in those two securities", "the misleading appearance, or alternatively [to have done] an act likely to create a misleading appearance or [to have done] acts intended to create and likely to create an appearance that Nomura was a genuine seller of those shares at that price [with] the sole purpose or actuating purpose to ensure that the last sale in the top ten stocks would be registered on the lower bid side rather than on the higher, offer side of the market", and "a false or misleading appearance as to the price for dealings in futures contracts on a futures market". Australia ASC further accused Nomura in the following terms :

"Further, a constituent element of Nomura's strategy on 29 March, 1996 was to generate a fall in the [All Ordinaries Index]. Therefore, Nomura's selling of its shares contravened section 998(1) and section 1260(1) of the Corporations Law."

"Although full regard has been had to all of the explanations given so far, the [Australia] ASC's view is that the fall in the level of the [All Ordinaries Index] was not merely a consequence which Nomura foresaw as a result of its selling, but in fact became both an objective and a strategy by means of which Nomura sought to maximise the profits which it stood to make on the day."

"The [Australia] ASC considers that the conduct of Nomura in selling 2620 additional March [Share Price Index Futures] contracts during 29 March 1996, and in particular during the last hour, when viewed together with the London bid side and offer side sell orders, and the bid and ask baskets, disclose an overall strategy of Nomura to depress the market."

4. In the Australian action, directions were given and finally pleadings were closed by the 2nd respondent company filing a defence to the Amended Statement of Claim on 17 July 1997. On 28 November 1997, the 2nd respondent company agreed with Australia ASC a timetable for proceeding with the action. On 7 August 1996, Nomura's expert report was furnished to Australia ASC. Now in 1998, expert statements, affidavit and witness statements are all soon to be submitted on behalf of the 2nd respondent company. The procedural time table has slipped by a month to June, but nevertheless the trial of the Australian action is still being scheduled to commence on 27 July 1997.

5. Turning to London SFA, on 23 May 1996, it served a notice of investigation on the 2nd respondent company. London SFA received the tapes of Australia ASC interviews on 28 June 1996. On 7 August 1996, Nomura's expert report was also furnished to London SFA. In between September to October 1996, Nomura allowed its officers to be interviewed by London SFA. In mid January 1997, London SFA notified the 2nd respondent company of its preliminary findings of breaches. London SFA agreed to a stay of its disciplinary proceedings by a letter dated 23 October 1997. Insofar as it related to the stay, the letter read :

"[London] SFA has considered Nomura's submissions with regard to a stay. .......We do not accept that multiple jeopardy is itself necessarily a reason for granting a stay in respect of disciplinary proceedings once instituted, nor the potential loss of the ability to negotiate a settlement. We do however recognise that this is not a case where the public interest in the speedy resolution of regulatory discipline is in conflict with the pursuit of private law remedies: this case is highly unusual in that the three sets of actual or potential proceedings are all regulatory in nature."

6. Finally, I come to Hong Kong SFC. By October 1996, it had received the Australia and the London interviews and the Nomura's expert report. In November 1996, Hong Kong SFC interviewed officers of the Nomura group. On 30 May 1997, Hong Kong SFC sent a Letter of Mindedness to the 1st, 3rd and 4th respondents and on 17 July 1997 an identical Letter of Mindedness to the 5th respondent. These Letters of Mindedness gave an outline of material facts relied upon by Hong Kong SFC and the preliminary conclusions it had reached. These Hong Kong respondents were invited to respond. On 21 July 1997, the 1st, 3rd, 4th and 5th respondents requested a stay of the trading issue in the disciplinary proceedings but made submissions on the supervisory issue. The stay requested was refused by Hong Kong SFC. On 19 November 1997, leave was granted by Stone, J. to judicial review the refusal of Hong Kong SFC. Hearing of the application for judicial review took place before the same judge between 9 to 11 December 1997 and judgment was delivered on 22 December 1997.

7. The Letters of Mindedness were served on these respondents over 14 months and over 15 1/2 months respectively after the March trading in Australia. It was some 6 months from the Letter of Mindedness to the 1st, 3rd and 4th respondents and nearly 5 months from the Letter of Mindedness to the 5th respondent that the application for judicial review was heard by Stone, J. The hearing was over 20 months from the March trading in Australia and nearly 5 months from the last pleading filed in the Australian action i.e. Nomura's defence. The facts stated in the Letters of Mindedness to the 1st, 3rd, 4th and 5th respondents were not queried. The response invited by Hong Kong SFC to its Letters of Mindedness served on these respondents could only converge on their purpose and intent which would appear to be the outstanding issue in the investigation. No one has sought an oral hearing at this stage of the Hong Kong SFC disciplinary proceedings. Determinations of Hong Kong SFC in the disciplinary proceedings have yet to be made and sanctions after any adverse decisions have yet to be imposed. Thereafter, the 1st, 3rd, 4th and 5th respondents would have a statutory right to appeal to a tribunal appointed by the Securities and Futures Appeals Panel for a full hearing with oral evidence and cross-examination. But the Hong Kong SFC disciplinary proceedings have yet to reach the stage at which these respondents need to consider lodging an appeal. The Nomura group had supplied its expert report since early August 1996. The group had allowed officers concerned to be interviewed in all three jurisdictions. The Nomura group had committed itself in its defence to the claims of Australia ASC. The factual scenarios had also been succinctly reconstructed in the Letters of Mindedness from Hong Kong SFC, which were not sought to be disturbed. As against such evidently undisputed background and in the surrounding circumstances, it would appear to be onerous for the 1st, 3rd, 4th and 5th respondents to establish before the judge any injustice for deferring the Hong Kong SFC disciplinary proceedings.

8. I will first dispose of the ground principles before turning to deal with these respondents' application for judicial review. To begin with, in granting a stay, the court is exercising its discretionary power. The exercise of a discretion could not be interfered with unless the judge can be shown to have misdirected himself in principles, taken into account matters which he ought not to have taken or failed to take into account matters which he ought to have done or he can be shown to have given a decision which is plainly wrong. See The Abidin Daver, [1984] 1 AC 398 at p. 320 B-C, per Lord Brandon of Oakbrook. It is not suggested that the judge was wrong with regard to these first principles. But had he taken into account matters irrelevant or failed to take into account matters which he ought to have taken into consideration? Is his decision therefore plainly wrong?

9. No tribunal should follow or be allowed to adopt a procedure which is unfair. As to this, the limb of procedural impropriety in the Wednesbury's principles may be invoked but basically it is not Wednesbury's unreasonableness. See R. v. Take-Overs Panel, ex parte Guinness plc, [1990] 1 QB 146, at p. 184 C-D, per Lloyd LJ. In this case, what it really boils down to is this: whether the continuation of the Hong Kong SFC disciplinary proceedings would seriously prejudice the conduct of a fair hearing in Australian. At the same page 184, Letters D-E, the Lord Justice observed :

"Of course the court will give great weight to the tribunal's own view of what is fair, and will not lightly decide that a tribunal has adopted a procedure which is unfair ....... But in the last resort the court is the arbiter of what is fair."

10. This case does not call for a consideration of the blurring of the boundaries of illegality, procedural impropriety, irrationality and perhaps proportionality within the Wednesbury's principles, nor their often overlapping application.

11. A level playing field is not always possible to maintain. Not every unfairness in a procedure followed or adopted by a tribunal could be questioned, and not all unfair procedures would warrant a stay. Refusal to adjourn or grant a temporary stay falls within the realm of procedural unfairness. What then was the test for the judge as an arbiter in the administrative law field? Broadly speaking, a court may intervene in concurrent proceedings "to prevent injustice where the continuation of one set of proceedings may prejudice the fairness of the trial of other proceedings." Put another way: a court may not intervene unless the prejudice arising from multiple litigation is so serious as would likely lead to injustice. Thus, a probable cause for injustice is to be decided objectively on serious prejudice. In R. v. Panel on Take-Overs & Mergers, ex parte Fayed & Others, [1992] BCC 524, at p. 531E-F, Neill LJ issued this warning note: "But [the power to stay] is a power which has to be exercised with great care and only where there is a real risk of serious prejudice which may lead to injustice." (Emphasis supplied). In an application for a stay or adjournment, what lies at the root of a justified intervention for preventing injustice is, therefore, "a real risk of serious prejudice". Steyn LJ posed the same question, perhaps more compendiously in terms of injustice: "Whether there is a real risk of injustice". See p. 537 C/D. Avoidance of injustice in multiplicity of litigation is the goal, but it is often more orderly to start with matters of prejudice or serious prejudice. What must first be shown is a real risk of serious prejudice which may lead to injustice. In R. v. Institute of Chartered Accountants in England and Wales & Others, ex parte Brindle & Others, [1994] BCC 297, at p. 306, Nolan LJ embraced the same test, but in Letters A-B, the Lord Justice also took to what I would describe as the short form: "A real risk of prejudice or injustice". Speaking of injustice writ large, serious prejudice is implicit. Hirst LJ stressed the need for "strong" serious prejudice to support a stay which is to be given, so the Lord Justice advised, only in exceptional cases. At p. 310C-E, this is what Hirst LJ said:

"..... that the power to intervene should be most sparingly exercised, and that it is only in exceptional cases that the disciplinary process ...... should not be allowed to go ahead unhindered. ....... and that, heavily though the scales will initially weigh in the institute's favour, there may be cases where the considerations of serious prejudice to the member are so strong that they will prevail."

12. With a real risk of serious prejudice, the court would have to turn to consider what Nolan, LJ regarded as "the critical question" i.e. "whether [the] continuation [of the proceeding sought to be stayed] at this stage would delay, impede and prejudice the [parties in the other proceedings] in the conduct of their defence ....... to an extent which cannot be justified in the public interest." See p. 308 E-F, per Nolan, LJ. At p. 316 G-H, Sir Roger Parker saw it as a finely balanced decision, having regard to overall justice.

"There are two further points to be mentioned with regard to Neill LJ's propositions: first, although he refers to possible injustice in the fair trial of the other proceedings, it is in my view also necessary to consider the fairness or otherwise of the proceedings which it is sought to restrain. The power to intervene could in my view be properly exercised in cases where the fair trial of such proceedings might itself be open to criticism, and where it might be prejudiced by the continuation of both sets of proceedings."

It was more rationally put as the ultimate balancing exercise in R. v. Executive Counsel of Joint Disciplinary Scheme, ex parte Hipps, the judgment of which was delivered in the Queen's Bench Division by Dyson, J on 12 June 1996. At p. 9 of his approved judgment, Dyson, J. referred to the initial stage as one for finding "a real risk of serious prejudice which may lead to injustice", without which, a stay had to be refused. That, he said at p. 14, is the threshold test. At the stage following the finding of a real risk of serious prejudice which may lead to injustice, the court would have to balance that risk against the countervailing considerations, including public interest. I need hardly repeat that the power to stay disciplinary proceedings must be sparingly exercised.

13. As the power to stay is discretionary, its exercise would entail an examination of all the material considerations. In his skeleton argument, Mr Bleach, leading counsel for Hong Kong SFC, concedes the need to have regard to "all the evidence" up to the hearing. In R. v. Chance, ex parte Smith and Others, [1995] BCC 1095, delivering judgment of the Divisional Court, at p. 1100 G-H, Henry LJ spoke of this evidentiary aspect as follows:

"And in that balancing exercise the court will take into account all the evidence before it, including such evidence as relates to matters subsequent to the respondent's decision not to stay the proceedings."

14. Mr Thomas, leading counsel for the respondents, does not invite this court to abide strictly by the guidelines for forum non conveniens. As clearly stated in Ground 9 in support of the relief sought in the Notice of Application for judicial review, the respondents merely seek to invoke forum non conveniens by analogy. Features in the choice of forum germane to an alleged injustice ought not to be ignored. Forum non conveniens deals with the selection of a more or most appropriate tribunal for adjudicating upon the same issue. In multiplicity of litigation, a comparison is made, whenever permissible, of like with like and ultimately globally in the selection process. But for disciplinary proceedings, the criterion for staying is the existence of a real risk of serious prejudice which may lead to injustice, and not really the weighing of advantages against disadvantages. The list of factors relevant to matters at issue before Lockhart, J. for the selection of a more appropriate forum in Sterling Pharmaceuticals Pty Ltd. v. The Boots Company (Australia) Pty Ltd. (1992) 34 FCR 287 is illustrative of the submitted analogous approach. That list is :

"(i) Which proceeding was commenced first.

(ii) Whether the termination of one proceeding is likely to have a material effect on the other.

(iii) The public interest.

(iv) The undesirability of two courts competing to see which of them determines common facts first.

(v) The circumstances relating to witnesses.

(vi) Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted.

(vii) The undesirability of the substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.

(viii) How far advanced the proceedings are in each court.

(ix) That the law should strive against permitting multiplicity of proceedings in relation to similar issues.

(x) A general balancing of the advantages and disadvantages of each party."

(i) Prior commencement of proceedings loses much of its significance when Australia ASC and Hong Kong SFC are both required in this case to proceed with their respective disciplinary proceedings with diligence; (ii) Termination of one proceeding can bring about no material effect in the case under consideration; (iii) Public interest is a crucial consideration for the balancing exercise in the second stage; (iv) There is no question of Australia ASC and Hong Kong SFC competing to produce the first determination; (v) Unusual problems with witnesses are certainly to be taken into account; (vi)& (vii) Duplication of work and effort may similarly cause exceptional difficulty; (viii) & (ix) There is really no multiplicity of proceedings in its true sense; (x) It is not a case of having advantages pitted against disadvantages; a court is required to balance the risk of serious prejudice against countervailing considerations, including public interest.

15. There is nothing fundamentally objectionable in running parallel proceedings. In The Abidin Daver, [1983] 1 WLR 884, at p. 892G Dunn, LJ stated the obvious that a pending action in the foreign land "is not of itself a bar to the plaintiffs claiming in this country against the defendants for damages arising out of the same collision as is being litigated [overseas] ......". At p. 537E in Fayed, supra, Steyn, LJ readily accepted as the usual hazards the inconsistent decisions in concurrent proceedings:

"First, it was said that the disciplinary tribunal and the civil court may arrive at inconsistent conclusions. Where concurrent proceedings take place, there is always a risk of inconsistent decisions. This risk in unavoidable."

16. In Smith, supra, the Divisional Court made a similar observation at p. 1104 D-E:

"First the risk of inconsistent decisions is raised. Where two fact-finding tribunals are considering the same issue, there will always be the risk of inconsistent decisions. That risk can only be avoided by a procedure under which there is one determinative fact-finding exercise. Under our law as it is, disciplinary proceedings are necessary both in order to ensure that regulatory questions arousing public concern are addressed within a reasonable time-scale, and that they are addressed by a body with power to deal with them by way of fine and disqualification. Both the Community and Parliament have seen the need for such proceedings, and they would not be properly efficacious if they had to await the resolution - whether by compromise or otherwise - of civil proceedings, which might happen long after the event. And, given the nature of the disciplinary scheme in this case, there is no warrant for assuming that such proceedings would arrive at an erroneous conclusion."

Before I leave Smith, a passage at p. 1101 F-H is worth noting:

"...... this court should give great weight to the views of those persons or bodies, and should not lightly decide that that person or body has acted or proposes to act unfairly ..... And where there is such public concern, there is an obvious need for that concern to be met with all speed consistent with justice. If the disciplinary proceedings designed to address that concern are stayed pending resolution of the civil proceedings, we are doubtful whether that public concern will often be met when it has to await the prior resolution of those civil proceedings. Even where the civil proceedings are focused on the area covered by the regulatory functions, the remedies of fine and disqualification that may be required to meet the public concern are not available in those proceedings. Often the civil actions will settle without pronouncement by the court and a long time after the events that initially caused the concern. By then it may be too late for the disciplinary proceedings to play their allotted role in meeting that concern. When dealing with public concern as to the auditing process, there will usually be a considerable degree of factual overlap between the likely issues in civil proceedings and under the disciplinary scheme. But this should not in our judgment be allowed to blur the different functions and different objectives of the two types of proceeding."

17. It should be mentioned that on 12-13 February 1997, there was an attempted mediation in Sydney in the Australian action.

18. The judge seemed to have fallen into a conceptual error when he rejected every conceivable consideration in a forum non conveniens scenario, but in this case such factors for forum selection as would also bear upon the question of injustice, were largely featured in the matters that the judge had to take into account in his balancing exercise for setting off what he perceived to be a risk of serious prejudice against countervailing considerations. This conceptual error alone would therefore bring the respondents no comfort. As to any real risk of serious prejudice which might lead to injustice, the judge allowed himself to be overwhelmed by the inherent difficulties of having to cater for parallel proceedings in Australia and Hong Kong. In effect, he took into account matters irrelevant to the question of serious prejudice. The Nomura group naturally wished to "throw [all their] efforts into full-scale preparation for the Australian civil action". Taking the two sets of proceedings one at a time would infinitely be less distasteful to most litigants, but was there any real risk of serious prejudice? There was no total eclipse in the issues, albeit both regulatory in nature and arising from the same trading. The Australian action was primarily concerned with the statutory impact of trading while the Hong Kong disciplinary proceedings with the traders' motive and intent for deciding if these respondents are fit and proper registered persons to be amidst our operators. The Securities and Futures Appeals Panel has yet to appoint the appeal tribunal and some of the concerns expressed by the Hong Kong respondents and the Nomura group must be too remote. The judge was right in rejecting these respondents' attempt to link the appeal tribunal to their submitted grievances for a stay. It is simply premature to speculate on the next phase in the Hong Kong SFC disciplinary proceedings or as to what prejudice would arise from it. That should be deferred until the appeal procedure is launched. By itself, duplication of works is not unusual. Multiplicity in litigation occurs almost as a rule in some disputes, e.g. in intellectual property cases. International trading houses must expect to face possible sanctions in more than one jurisdiction. The commitment in this case was little more demanding. There was no "unassumingly race to judgment between respective courts or tribunals". It was not demonstrated that Hong Kong and Australia shared like market standards and practices. Even on the regulatory side, there was no evidence that the aims and functions of Hong Kong SFC and Australia ASC were identical or closely matched. In this case, at least their objectives seemed dissimilar and their sanctions were different. The question for Hong Kong is plainly one whether, by the standards required of our registered traders, the conduct of these respondents in their trading strategy for 29 March 1996 was censurable and their motive or intention repugnant. In Australia, it is statutory violations. Nomura's success in defending the Australian action would not necessarily vindicate their trading propriety on or for 29 March 1996. In essence, Mr Thomas leans heavily on "a situation recognised as inherently undesirable" in the co-existing proceedings in Australia and Hong Kong, which the judge regarded as having given rise to the "hard-headed practical considerations thrown up by the parallel progressions, within different jurisdictions, of regulatory activity arising out of the same incident." These submitted difficulties were just inherent irritations emanating from concurrent proceedings. No special features or exceptional circumstances were identified for any risk of serious prejudice. The judge was unduly impressed by the alleged concerns over "difficulties and risk of being required to fight on two fronts at the same time". That was not enough and was not the correct approach. Fear of exchange of information between Australia ASC and Hong Kong SFC was ultimately alleviated by an appropriate arrangement. It was wrong to attach "considerable weight to the difficulties and problems which [were] inherent within, and a function of, the existence of parallel proceedings." The need to submit "a full defence" in the disciplinary proceedings in Hong Kong took the matter no further. For these inherent difficulties and problems, the judge allowed the respondents a "breathing space". It is not suggested that the usual hardships in having to defend concurrent proceedings could never, in their totality, bring about a risk of serious prejudice but such cases must be rare. The erroneous approach below was compounded in the judge's balancing exercise against public interest by the focus placed on the individual respondents' departure from Hong Kong. Criteria such as public concern, Hong Kong's image, market integrity, effective control and sanction particularly for deceiving conduct and the need for a speedy resolution were overlooked.

19. Mr Thomas directs our attention to the advanced stage of the Australian action which would demand and continue to demand attention and input, but that cannot override the urgent call for the Hong Kong regulatory authority to expeditiously discharge its own statutory and supervisory functions. Regulatory enforcement objectives ought to be and be seen to be actively pursued. London SFA has given its brief reasons for undertaking to stay its disciplinary proceedings. The Hong Kong SFC did not fail to pay regard to all the circumstances and the concession so made in London, but nevertheless it took a firm stand and refused to stay. The Hong Kong SFC had not taken this decision lightly, which should be respected unless there were exceptional circumstances or sound reasons for sapping its will to address questions which had aroused public concern within a reasonable time-scale. Hong Kong SFC is our regulator and always has its finger on the pulse of the local market. Great caution must be exercised before interfering with this decision it made. Our Securities and Futures Exchanges through Hong Kong SFC owe a duty to their members and the public to act swiftly to correct transgressions and to discipline their registered traders. It was such a wider concept of public interest, that triggered the enquiry of Hong Kong SFC. It is also not to be forgotten that Hong Kong prides herself as a world finance centre, and Hong Kong's reputation was at stake. Our market is known to be relatively volatile and sensitive, and Hong Kong SFC disciplinary proceedings must be allowed to be brought to an early conclusion without delay.

20. Before the judge, these respondents voiced their grievances such as "traverses much of the same ground", "inevitably involves a prejudgment of issues in dispute in proceedings before [Australia] ASC", "the complexity of the issues", "same pool of resources, the same witnesses, the same information, the same management resources, to a significant degree the same advisers", "the preparation is complicated by the logistical problems arising from proceedings in Australia and documents and individuals in London and Hong Kong", "demands of one case will necessarily conflict with the demands in the other; as a consequence, the defence of each will be compromised", "[generates] documents discoverable in [the Australia] ASC action", "the potential impact, on one proceeding, of steps taken in and resources devoted to the other matters require constant consideration by Nomura and all its advisers", "the risk of prejudice to the 1st applicant and the 3rd applicant is that their position in the [London] SFC proceedings will be affected by the problems created for Nomura and the individuals generally by having to fight proceedings concurrently on the trading issues", "[Australian determinations] will in practice likely remove many of the issues between the parties", "requires considerable attention throughout the preparation phases", "places an oppressive and unfair burden on Nomura and the individuals", "it is unfair to request a detailed breakdown of the steps that are being taken, or will be taken, to prepare the defence of these proceedings ..... in any event, such projections would be speculative in the extreme" etc. It is not, as a matter of course, that the "outcome of the [Hong Kong] SFC disciplinary proceedings may in some way influence the outcome of the [Australia] ASC or [London] SFA proceedings", and vice versa. It is inconceivable that given the information and time they had, these respondents could not explain in details their difficulties, hardships or exceptional circumstances for a stay, and if their projections could not be taken beyond speculation, they could hardly complain if the court was not satisfied that there existed any real risk of serious prejudice that might lead to injustice.

21. In Smith, supra, at p. 1106 C, the English Divisional Court warned "that it should require strong evidence before the judge granting leave [for judicial review] concluded that there was an arguable case for the court to intervene before the disciplinary procedures were complete." The cogency of the evidence in support of an application for a stay must necessarily depend on the degree of public concern aroused by the gravity of the complaints. In this case, charges of deception by our Hong Kong registered corporation and registered traders did arouse considerable public concern and compelling evidence would be required for a stay.

22. I have rehearsed the core arguments advanced on behalf of the 1st, 3rd, 4th and 5th respondents. They do not offer any exceptional circumstances, special features or great hardship over and above the usual inherent difficulties in conducting a defence of parallel proceedings. These respondents had sufficient time to collect and collate material and information, to reflect on their stance and to align their defence in Australian action. They have failed to show any real risk of serious prejudice which may lead to an injustice for staying the Hong Kong disciplinary proceedings.

23. After all, the Hong Kong SFC is enjoined to discharge statutory functions, including taking all reasonable steps to safeguard the interests of persons dealing in securities or trading in futures contracts (section 4(1)(e), Cap. 24), promoting and encouraging proper conduct amongst securities dealers, futures dealers and other registered persons (section 4(1)(f)), suppressing illegal, dishonourable and improper practices in dealing in securities and trading in futures contracts (section 4(1)(g)), promoting and maintaining the integrity of registered persons (section 4(1)(h)) and co-operating with and assisting authorities or regulatory organisations, in Hong Kong or elsewhere, that are concerned with securities and futures (section 4(1)(ka)).

24. It is quite unnecessary to pass on to the second stage for the balancing exercise. These statutory functions must be borne in mind in the overall evaluation of the material considerations, including the relevant features in the forum non conveniens principle. Clearly, no case has been made out of a real risk of serious prejudice that may lead to injustice for staying the Hong Kong disciplinary proceedings. If a balancing exercise had had to be undertaken on the view taken of prejudice by the judge, regard should have been paid to the wider concept of public good, particularly in a case of alleged deceiving and misleading conduct, and the crucial countervailing considerations could not have been overridden.

25. The judge was swayed by the need of the Nomura group to face litigation on two fronts, involving major commitments in the preparation of the Australian action and the submission of a full defence to Hong Kong SFC. A "breathing space" was accordingly given to the Hong Kong respondents. But the submissions made on prejudice to the judge as they are rehashed before this court, suffer from lack of details and specifics. At no stage did Nomura or any of the individual respondents even disclose precisely what work had been done on the matters raised before the judge or this court and what remained to be done. There is no strong nor cogent evidence which would warrant the intervention of the court. In refusing a stay, Hong Kong SFC was conscious of the need to be cautions so as to ensure that the steps and decisions it took would not unfairly prejudice the 1st, 3rd, 4th and 5th respondents or Nomura's conduct of the Australian proceedings. In the analysis I have endeavoured to make, the Prohibition Order would appear to be plainly wrong. The decision taken by the Hong Kong SFC to continue with the disciplinary proceedings could not be justifiably overturned. I would allow the appeal and set aside the Prohibition Order and the order for costs.

26. As to the cross-appeal, there is much in Mr Thomas' contention that the judge had departed from the assessment of litigation difficulties he made. The duration of the Prohibition Order granted by the judge up to the end of May 1998 is hardly supported by the judge's own view that the preparation of the Australian litigation was not "a static linear exercise ..... practical and strategic decisions require to be taken, the weighing of options often needs to be anxiously confronted ......". Such unceasing activities were anticipated and it is debatable that the stay granted should have been, on the judge's rationale, extended beyond 31 May 1998. But there clearly existed no concrete evidence for considering a stay. The timetable has now shifted by a month. The Australian trial is but a few months away. The original time limit set for responding to the Letters of Mindedness has been overtaken by events. At the conclusion of this appeal, the Hong Kong disciplinary proceedings will be re-activated and Hong Kong SFC shall have to realistically re-adjust its procedural time table. The respondents' cross-appeal therefore fails. I would also dismiss the respondents' cross-appeal. I would make an order nisi for costs in favour of the appellant in the appeal and cross-appeal and similarly for the costs below, including those incurred for the granting of leave at the inter partes hearing.

Rogers, J.A. :

The Facts

27. The relevant facts of this case are set out in the judgment of the Court below and in the judgment of Liu, J.A. There is no need for me to repeat them. I wish only to draw attention to two matters.

28. In the first place, the 2nd Applicant chose to conduct its affairs the subject of the investigations complained of through the other Applicants in Hong Kong. The 2nd Applicant being a United Kingdom company, in wishing to trade on the Australian securities markets, chose not to use any of the companies within the group to which it belonged which had a presence in Australia to conduct the business which now is the subject of scrutiny in three parts of the world. On the contrary, the 2nd Applicant chose to use the first Applicant and specifically the employees and officers thereof, and in particular the 3rd, 4th and 5th Applicants, to give the instructions to various brokers outside the group of companies to which it belonged. The 2nd Applicant chose Hong Kong as a place from which its instructions were to be forwarded to the relevant dealers in Australia. The actions and motives of the 1st and 3rd to 5th Applicants in formulating and forwarding those instructions is now a matter which gives rise to the investigations which have been carried out by the Appellant and which the Appellant seeks to continue to carry out.

The application for judicial review

29. In the application for judicial review a number of orders were sought. In the first place, an order was sought restraining the Appellant from proceeding with disciplinary action threatened in various letters dated the 30th May and 17th July 1997 to the 1st and 3rd to 5th Applicants pending the determination of proceedings in the Federal Court of Australia which had been commenced by the Australian Securities Commission against the 2nd Applicant. There was also an application for certiorari to quash a decision of the Appellant to reject the Applicants' stay application. That decision was said to have been communicated in a letter between solicitors dated the 23rd October 1997. A declaration was sought that that decision was void and/or unlawful. Then an order for prohibition was sought to prevent the Respondent from proceeding against the 1st and 3rd to 5th Applicants under Section 56 of the Securities Ordinance and against the 3rd to 5th Applicants under Section 36 of the Commodities Trading Ordinance until the determination of the Federal Court proceedings in Australia.

30. In the Court below, the order that was granted was an order for prohibition whereby the Respondent (the Appellant in this Court) was prevented from requesting responses to the respective "letters of mindedness" prior to 31st May 1998.

31. Although the matter was not argued on the appeal and therefore I do not propose to base my decision thereon, I consider that there are strong grounds for considering that the order was wrong in principle. If the Court had come to the conclusion that it was wrong for the Appellant to proceed under Sections 56 and 36 respectively, it would in my view have been appropriate for the Court to grant such order as prevented the Appellant from proceeding in a manner which breached the rules of natural justice or fairness, but it would not be appropriate for the Court to make what, in effect, was a detailed interlocutory order concerning the conduct of proceedings before a statutory body.

The appeal

32. It was not in dispute that because the grant of a remedy on judicial review is a matter of discretion, the Appellate Court must not interfere with it merely upon the ground that its members would have exercised the discretion differently. The function of the Appellate Court is initially that of review only. It is entitled to exercise an original discretion of its own only when it has come to the conclusion that the Judge's exercise of his discretion was based on some misunderstanding of the law or of the evidence before him or if the decision arrived at was so plainly wrong that no Judge could in considering the matter have reached it. It is only if and after the Appellate Court has reached the conclusion that the Judge's exercise of his discretion must be set aside that it becomes entitled to exercise an original discretion of its own.

33. In my view, each of those circumstances applies in this case and this Court is therefore entitled to exercise its own discretion.

The principle to be applied

34. As was observed by Lloyd, L.J. in R. v. Panel on Take-overs and Mergers, ex parte Guinness PLC [1990] 1 Q.B. 146 at 183, the question which the Court had to decide is whether the persons or bodies who were exercising powers which could adversely affect individuals were acting in accordance with what could be regarded as natural justice or fairness. Such a question may arise for example in cases where an adjournment is sought.

Two sets of proceedings

35. Questions have arisen in cases where there have been 2 more separate proceedings arising out of the same facts or incidents and the Court has been asked to exercise its power to intervene to prevent injustice because it was said that the continuation of one set of proceedings may prejudice the fairness of the trial of one or other of the proceedings. Frequently, although not exclusively, the question has arisen in cases where there are disciplinary proceedings at the same time as either criminal or civil proceedings. The scope for alleging prejudice is not confined to one set of proceedings or another and the prejudice complained of may occur in either of the proceedings. A number of cases have been cited to us including R. v. Panel on Take-overs and Mergers ex parte Fayed [1992] BCC 524; R. v. the Institute of Chartered Accountants in England and Wales and others ex parte Brindle [1994] BCC 297, and R. v. Solicitors Disciplinary Tribunal ex parte Gallagher (30th September 1991); all are decisions of the Court of Appeal in England. What is clear from those cases and from the cases which are referred to in those authorities including Jefferson Limited v. Bhetcha [1979] 1 W.L.R. 898 and R. v. British Broadcasting Corporation, ex parte Lavelle [1983] 1 W.L.R. 23, is that the Courts will interfere to prevent a serious injustice occurring only in very clear cases in which the Applicant shows that there is a real danger - and not merely a notional danger - that the continuation of the proceedings would cause a miscarriage of justice.

36. Whilst the judgment in the Court below at page 17 reiterates a test in a form of words which is similar, but not the same as, those used in some of the cases, as Mr. Thomas S.C. pointed out during the course of his address, the test propounded by the Judge that there should be "a real risk of prejudice which may lead to injustice in one or both of those proceedings" might lead to the notion that the use of the word "risk" in relation to prejudice somehow implied some indefiniteness, as might the use of the word "may" in relation to "lead to injustice".

37. In my view, however, in propounding the test, it is not a mere matter of semantics that the use of the word "serious" which was used, for example, by Neill L.J. in the ex parte Fayed case in relation to the word "prejudice" or indeed by Woolf J. in the ex parte Lavelle case in relation to the word "injustice" has been omitted. The fact is that in all the cases the Courts have applied a very stringent test. The Courts have not been satisfied with mere hypotheses. The Courts have looked carefully at the relevant proceedings and examined whether there really has been prejudice in the sense of the complaining party being unable to put forward its case.

38. Just because criminal proceedings are on foot it does not mean that civil proceedings must come to a halt or that a Defence may not be filed. If there is no real danger, for example, that a jury may be prejudiced by learning the facts or outcome of disciplinary proceedings, both proceedings have been allowed to proceed.

39. The Courts have on more than one occasion noted the public importance of disciplinary proceedings. The public concern which such disciplinary proceedings as the SFC can bring is only addressed if those proceedings are dealt with promptly. It is for that reason that the Courts have paid considerable attention to those charged with responsibility for the proceedings and the disciplinary proceedings will only be stayed in exceptional circumstances.

40. When the Judge below approached the question of examining whether there was likely to be prejudice, he rejected first the argument based on a comparison with applications for stay of civil proceedings on the basis of forum non conveniens or lis alibi pendens. He also rejected the argument based on the possibility of an inconsistency in findings on either fact or law as between proceedings in the Australian Court and the proceedings in Hong Kong. The Judge referred to the possibility of the 2nd Applicant's losing its advantage in Australia by having to disclose its case in Hong Kong before it would have to in Australia.

41. In my view, he was clearly right in respect of those matters. The doctrine of forum non conveniens in my view has no application, if what is sought to do is to stay disciplinary proceedings by a regulatory authority. The proceedings in the Federal Court in Australia are different in nature and issues from the proceedings by the SFC in Hong Kong. Furthermore, the parties are different. Whereas some questions to be decided in the Australian proceedings may overlap what needs to be decided in Hong Kong, the issues are not identical. When it comes to matters of ethics and propriety of trading arguments based upon the need to be secretive about one's real case are likely to be unpersuasive. The SFC may legitimately take the view that the sooner the Applicants' case and justification for their actions is revealed the better. In my view the Applicants are in no position to demand sympathetic treatment to allow them to keep their justification for their actions secret for any length of time.

42. In coming to his conclusion, the learned Judge used the words "sufficient prejudice" in two places, one on page 25 and the other on page 26 where he refers to the possibility of consequent injustice. The basis upon which he seems to have come to that conclusion was that there were parallel proceedings in the two jurisdictions, but, even then, he does not identify the difficulties which those engender which he considered determinative. Indeed he said that the "general difficulties do not require elaboration".

43. The Judge said that the SFC's request for a detailed projection as to time and resources likely to be involved in an explanation as to how that expenditure of time and resources would impact on the defence of the SFC disciplinary action was not warranted. In so doing he said "for my part, I do not think in the particular situation prevailing, that such expectation with regard to a detailed break-down was or is reasonable." That, in my view, highlights the wrong approach taken by the Judge. Not only do I consider that such a break-down was reasonable, I consider that in view of the arguments that were being put forward, as I shall refer to below, something in the nature of such a breakdown was almost certainly essential for the Applicants to establish their case of serious prejudice. It was not surprising therefore that, as is apparent from the bottom of page 27 of the judgment, Mr. Thomas S.C. had evidently argued that the determination of the SFC to press on bordered on the oppressive. That, in view of the arguments which were being put forward, is the sort of standard which the Applicants should have had to establish. But the Judge, in rejecting Mr. Thomas's argument, said "that, in my view, puts the case too high. Possibly Mr. Thomas was nearer the mark when he commented that the current SFC position was 'against good sense and good judgment'."

44. That in my view was applying far too low a test to warrant the exercise of the Court's discretion to stay disciplinary proceedings by a regulatory authority.

The evidence relating to prejudice

45. The first observation which I would make of the evidence is that there is scarcely any real evidence which was filed on behalf of the Applicants. The affidavit evidence filed by the Applicants in support of its application consisted almost entirely of argument.

46. As I have already referred to, the Judge rightly rejected a number of arguments which were put forward by the Applicant as constituting matters of prejudice. The matters which the Judge took into account appear to have been the "difficulties and risks" of being required to fight on two fronts at the same time: see page 23E of his judgment. The Judge at first alluded to the necessary preparation of the Australian case and the difficulty of having to respond to the letter of the Appellant within 30 days. He referred to the possibility of material filed in Hong Kong finding its way to the Applicants' opponents in the Australian litigation and went on to say that the effect of responding to the present proceedings would be to put at risk the tactical advantage which the Applicant had and when taken together with all the problems of preparing the evidence would constitute an unnecessary fetter on what should be untrammelled preparation for a major trial.

47. Then at page 26, having said that he considered that the submissions of a "sufficient risk of prejudice" had been established, the Judge went on to say that he had attached considerable weight to the difficulties and problems which resulted from parallel proceedings in two jurisdictions. It is noteworthy however that he appears to have relied upon dicta cited by Mr. Thomas to support proposition and then goes on to say "but in my view, general difficulties of this nature do not require great elaboration." After rejecting the Appellant's approach that there should be a detailed assessment of the resources likely to be involved in the preparation of the various proceedings and the time that would take, the Judge went on to say :-

"It is patently not, as Mr. Thomas, S.C. said, simply a question of 'dashing off' a few submissions in response to the letters of mindedness. Nomura were entitled to present the Hong Kong regulators with the fullest range of material, including statements from all relevant witnesses together with experts' reports supporting Nomura's argument as to the propriety of the trading strategy adopted, and also evidence of Australian law and Australian market practice; in other words, a full defence, and this not least in a situation in which the regulators appear to have formed some firm ideas about the propriety of his clients' actions, a concern with which Mr. Dykes' bald statement that 'we have made our findings of fact' did nothing to allay."

That it seems was the sum total of the "evidence" relating to prejudice insofar as such evidence existed which the Judge relied upon.

48. In argument before us, Mr. Thomas relied upon the fact that the Applicants had found themselves in a novel factual situation consisting of the rights and wrongs of the manner in which they proposed to relieve the 2nd Applicant of the problems posed by holding the derivative instruments which it held. He said that the background was complex. He said it was wrong for those who had incurred merely secondary responsibility, at best, to have to put forward a full defence long before their principal, namely the 2nd Applicant, was required to prepare its defence in Australia; it would be a consequent waste of effort, time and expense if two sets of proceedings had to be followed and there would be double burdens on witnesses who would have to attend in Australia and in Hong Kong. The risk of adverse findings in Hong Kong different from Australia was a risk of injustice. He went further and said that the risk that the Applicants would be put in jeopardy on the basis of presenting an inadequate defence was likewise a matter of injustice.

49. None of the above points seem to me to come anywhere near establishing any real prejudice in the sense that the Applicants could not present their cases adequately in either jurisdiction. It is obviously true that time and expense would have to be spent. At any rate at this stage, I would not dispute the appropriateness of filing expert evidence on Australian law and practice. But none of that would be beyond the capacity of the Applicants nor would it be so burdensome that it would prejudice them in the conduct of either proceedings. Moreover, oral evidence would not be required in Hong Kong unless and until there were any appeal under Part III of the Securities and Futures Commission Ordinance. That in itself would be a long way off. The risk of different findings in Australia and Hong Kong is not something which I consider should deter the Appellant from continuing with its work.

50. For my part, I can see no valid or proper evidence to support the suggestion that the Applicants would be prejudiced either in Australia or in Hong Kong by the 1st and 3rd to 5th Applicants being required to answer the letters of mindedness from the Appellant. During the argument, Mr. Thomas sought to establish that the Applicants had a valid defence to the accusations which were being made against them and that they could put forward sound reasons which were acceptable in law and in practice in Australia for the conduct of which complaint is made. Therefore, far from being in a position of not knowing what their defence was, it is quite clear that the Applicants knew very well what their defence was likely to be. Indeed, it would be surprising that if two years after the events complained of, when the matter was raised by the SFC within days of those events, the Applicants did not know what their stance would be.

51. Although Mr. Bleach, S.C. on behalf of the SFC disputed the necessity to produce evidence of Australian law and practice, I can see no overwhelming difficulties in the Applicants producing such evidence as they wished to rely on. Indeed, nothing in the papers which were before this Court or indeed in the submissions of Counsel indicate that there are any real difficulties in this regard.

52. In the letter from the Applicants' solicitors to the SFC of the 7th August, it is said that the preparation of the material in the Australian proceedings which would include "extensive discovery", "substantial witness statements from a number of the individuals", "wide ranging expert evidence" and "a lengthy trial" would require some weeks of work time on the part of each individual. The letter then goes on to say the SFC proceedings would involve further weeks of work time for each of the individuals.

53. In a letter of the 6th September, the Applicants' solicitors said "In circumstances of actual or pending litigation and disciplinary proceedings we think it is unfair to request a detailed break-down of the steps that are being taken, or will be taken, to prepare the defence of those proceedings, to the extent of identifying with specificity the nature of the individual's involvement and the time such involvement will take. In any event, such projections would be speculative in the extreme. We do not, therefore, propose to provide the detailed projections who have asked for."

54. With such broad and general statements devoid of any particularity, the Applicants set about their application for judicial review. The basis of that in Mr. Levy's lengthy affidavit again consisted of generalised and unparticularised statements such, for example, as the difficulty and time involved in producing the material which the Applicants would require. Again, reference to "some weeks of work" features here. In paragraph 79 of that affidavit it was said that will "typically" be required over that period for major witnesses in the Australian proceedings involving very substantial work by the legal team. It was then said that if the Appellant were to proceed on its proposed course of conduct that would involve duplication and "substantial work". Again this is far removed from serious prejudice leading to injustice.

55. In my view, if it is sought to rely upon the difficulties of preparing a case and adducing evidence as constituting grounds of prejudice, it is necessary to provide sufficiently precise factual evidence to satisfy the Court as to what those difficulties are and how they arise. It would be necessary to show whether they are permanent difficulties or simply temporary. It would be necessary to show with some precision that the alleged difficulties are not just matters of inconvenience encountered in any disciplinary proceedings. It would also be necessary to identify the real risk of prejudice. If the facts adduced in support of the application do not themselves establish this, the Applicant cannot seek to do so simply by repeating until tiredness sets in, expressions such as "oppressive", "burdensome", "duplicative" and "unfair". Nor does reference to the 7th century B.C. law giver of Athens achieve anything: there is nothing harsh about the course upon which the SFC proposes to proceed.

56. If, for example, it is intended to show that the preparation necessary for the Hong Kong proceedings would require more time and effort than is possible, given the existence of other proceedings, it would be necessary to adduce evidence as to the resources available, the resources and time which would be required both to comply with the letters of mindedness and the proceedings in the other jurisdiction. It does not suffice simply to show that similar issues may arise in the two sets of proceedings. Nor to speculate as to whether some time and trouble will be saved by awaiting the outcome of one set of proceedings before continuing with the other. Still less, is it sufficient to say that some weeks of work will be typically required for one or other set of proceedings.

57. Mr. Thomas, S.C. on behalf of the Applicants, accepts that he cannot show the sort of prejudice as was shown in ex parte Brindle but he says that the principle in that case should nevertheless be applied. In my view what has been sought to be relied upon comes nowhere near being prejudice which the Court should contemplate as leading to injustice. Inconvenient it may be for the Applicants, but that inconvenience does not go to show that they are likely to be treated unfairly whether in Hong Kong or another jurisdiction.

The exercise of the Court's discretion

58. I have thus come to the conclusion that the Judge below has not only applied a test involving a lower standard than is correct and has taken into account factors as establishing a serious risk of prejudice which do not amount to that. It is, therefore, open to this Court to apply its own discretion in this matter. As I will indicate below, in doing so, it is apparent that the decision of the Judge below was clearly wrong.

59. The SFC is established under the Securities and Futures Commission Ordinance, Cap. 24. The functions of the SFC are set out in Section 4 of that Ordinance. Amongst those are the functions in Section 4(1)(f), (g) and (h) :

"(f) to promote and encourage proper conduct amongst members of the Exchange Companies and clearing houses, and other registered persons;

(g) to suppress illegal, dishonourable and improper practices in dealing in securities, trading in futures contracts, entering into property investment arrangements, and the provision of investment advice or other services relating to securities, futures contracts and property investment arrangements;

(h) to promote and maintain the integrity of registered persons and encourage the promulgation by registered persons of balanced and informed advice to their clients and to the public generally;"

60. These are important functions and they relate to the integrity of the Hong Kong securities industry. Quite apart from any effect which the matters of which complaint is made might have had upon the markets in Australia, the SFC is under a duty in respect of what takes place in Hong Kong. It has to be appreciated that it is a public body, undertaking public duties, in the public interest. To stop that body conducting what are indisputably proper functions is thus a serious matter. The Court has no business in preventing such a body carrying out its statutory and public duties unless there are clear and strong grounds for doing so.

61. The functions which the SFC is discharging are of considerable importance. The suggestion that the public interest is adequately satisfied if disciplinary proceedings are commenced and then await the outcome of the Action in Australia, clearly, in my view, overlooks the importance of the proceedings as regards the SFC's public and statutory functions. Speed of action is of considerable importance in financial regulation. The effectiveness of disciplinary proceedings is undoubtedly diminished if delay is occurred. This is perhaps the more so in the financial sector in Hong Kong.

62. As I have already indicated I see nothing in the evidence which would lead to the conclusion that the preparation of the material to be submitted in response to the Letters of Mindedness would be excessively burdensome. Furthermore, it seems that some at least of the arguments put forward on behalf of the Applicants are directed not to the immediate steps which the SFC proposes to take but to steps that might be taken by the 1st and 3rd to 5th Applicants under Part III of the Securities and Futures Commission Ordinance.

63. There is nothing to show, particularly in view of the undertaking not to provide material to the Australian authorities, that the Applicants would be unable to present their case properly in both jurisdictions or would lose any juridical or procedural advantage. That is quite apart from the question as to what tactical advantages are appropriate in a situation when it can only be in the public interest for the Applicants to reveal the whole truth and consistently in each jurisdiction.

64. As has been referred to by Liu J.A. it is not uncommon in intellectual property disputes that litigation is conducted simultaneously in a number of jurisdictions. In the case of patents for example the issues may differ in the separate jurisdictions making it necessary for the parties to take different stances in different places depending on the facts involved and the law in those jurisdictions. Even then, there is nothing to prevent the continuation of a multiplicity of proceedings and the suggestion that a Plaintiff should be debarred from proceeding in one jurisdiction because of such difficulties occasioned to the Defendant would meet with derision.

65. It is now some two years since the events which are the subject of the SFC's inquiries took place. Those events were not fortuitous. Even on the Applicants' own admissions they were planned. The trading involved may only have taken half an hour or a little longer, nevertheless, the Applicants appear to have decided on their course of action well before that half hour. In those circumstances, they well knew what they were doing and any suggestion that, after two years, they should not be in a position to explain not only what they did but why they did it and to provide every justification which they considered appropriate for their course of action defies logic.

66. The Applicants' efforts over the last year so far as the SFC proceedings are concerned appear to have been directed solely to achieving a delay of those proceedings and there is no overt evidence of any action having been taken by the Applicants or on their behalf to address the real issues which are the subject of investigation by the SFC.

67. In my view, there is no merit in the suggestion that the SFC should await the outcome of the Australian proceedings. Not only are they different parties but even if the SFC were to come to a different conclusion from that arrived at, either in law or as to Australian practice, by the Federal Court of Australia that is hazard to which the Applicants would have been the subject in any event.

68. In my view, the appeal should be allowed and the cross-appeal by the Applicants should be dismissed.

69. I would make the same orders nisi for costs as those proposed by Liu, J.A.

Seagroatt, J.:

This is an appeal by the Securities and Futures Commission against a decision by Stone J., upon an application for judicial review whereby he stayed their disciplinary proceedings against the 1st, 3rd, 4th and 5th applicants for a period which would allow the civil suit in Australia against the 2nd Applicant only, the U.K. Company, to continue on its own.

The proceedings arise out of Nomura (H.K.)'s trading activity in respect of its stock index arbitrage in Australia. The effect was to cause the Australian Ordinaries Index to fall 12.3 points i.e. approximately 0.5%. Investigation suggested a deliberate intention to manipulate the market price of the stock downwards.

Nomura (U.K.) conceived a strategy of shares/futures arbitrage in respect of its holdings. It despatched two dealers from the United Kingdom to Hong Kong to be employed by Nomura (H.K.) in carrying out the trading in Australia from the Hong Kong base.

With international activity of this nature it seems to me to be a matter of common sense that since three regulatory jurisdictions are involved those who conceive and/or execute the planned trading must be prepared for investigation in those jurisdictions if their activities are suspect. They are not, as a matter of fairness and common sense, entitled to dictate the pace or initiative of such inquiries. The efforts and cost likely to be involved in explaining and defending such activities are easily to be foreseen. They cannot be heard to complain that the investigations have set in train costly time and energy consuming procedures.

The trading has been called into question. Three sets of proceedings have resulted. There are civil proceedings in Australia against the U.K. company for breaches of the company law. In England there have been initiated proceedings, also against the U.K. company, by the SFA disciplinary body. Finally there have been initiated proceedings by the SFC against the H.K. company and three identified traders who carried out the "deals". These are not parties to the proceedings in Australia. Nor have the two traders who left the haven of employment with the U.K. company to join the H.K. company been subjected to the SFA investigation in England as parties, although they are subject to its jurisdiction.

The U.K. company is an applicant in these proceedings, though it is not of course subject to regulatory procedure in H.K., because it wishes to protect the position of the H.K. Company and the traders concerned but more particularly its own position in Australia. The three traders are potential witnesses for the U.K. company in Australia.

The SFA have agreed to stay its proceedings, for the time being, against the U.K. Company upon the latter's representation that it was experiencing problems and prejudice. Mr. Michael Thomas S.C. on behalf of the applicants, has prayed in aid that fact as supporting the applicants' argument that there was a real risk of serious prejudice possibly leading to injustice. I do not see how one can draw any such inference from the decision, provisional as it is. We do not know what deliberations or considerations led to that decision. It may equally have been because the SFC had indicated that it would not stay its proceedings against the traders and company directly concerned. We just do not know.

The second applicant is therefore facing a civil action in Australia and its associate company and former employees are facing disciplinary proceedings in H.K. There is therefore not a multiplicity of proceedings although that expression has been freely used in the arguments in support of the applicants. There are two proceedings - one, a civil suit in Australia, the second a disciplinary inquiry in Hong Kong. I will return to the ambit of those two sets of proceedings shortly.

Another somewhat misleading aspect of the applicants' case is the reference to the S.F.C. Appeals committee. This is a body differently constituted. It has scope for oral evidence and representation. It is irrelevant to our consideration, and, was irrelevant to the Learned Judge's consideration at first instance. Of course, if the SFC were to make a finding adverse to the 1st, 3rd, 4th or 5th Applicants with a sanction imposed, then there clearly is a right of appeal. But that is speculative and is a diversion in this application, which is not to be entertained.

The Respondent's chronology prepared for its use in this appeal was referred to by Mr. Thomas to support the contention that the S.F.C.'s interest in Nomura's activities in Australia from its H.K. base was late in developing. Although this chronology was more or less in line with that prepared by the appellants it was noticeable that in so far as it catalogued the involvement of the S.F.C., it did not begin until 3rd August 1996 with the entry "SFC announced conducting inquiries". In fact the SFC were concerned within a week of the Sydney Futures Exchange's (SFE's) complaint to Nomura International Plc on the 9th April 1996 when a meeting took place with compliance representatives of Nomura H.K., and， were involved from that time in the inquiries in general, and gathering of material.

On the 25th February 1997 the ASC instituted proceedings against the 2nd Applicant, Nomura (U.K.). It had given notice of its intention to do so on 11th November 1996. On the 30th May 1997 the SFC issued "Letters of mindedness" to the 1st Applicant, Nomura (H.K.) and the 3rd and 4th Applicants. That to the 5th Applicant was issued on the 17th July 1997. The Applicants made a formal request to the SFC for a stay of its inquiry proceedings on the 21st July 1997. On the 23rd October 1997 the SFC rejected the request. Coincidentally perhaps, on the same date, the SFA agreed to stay its proceedings pro tem against Nomura U.K.

The test

Although this was an application for judicial review of the SFC's decision to refuse a stay on its proceedings, the principle involved is not the rather circumscribed one of unreasonableness of the Associated Picture Houses Ltd v. Wednesbury Corporation 1948 1 K.B. 233, but that of fair and just procedure, or writ large, that of natural justice.

Before the Learned Judge, upon the hearing of the application, consideration was given to a number of decisions where a multiplicity of proceedings was confronting the applicants concerned in those cases. As I have earlier indicated the appeal before us is not concerned with a multiplicity of proceedings but an examination of those cases is relevant and this has been conducted before us.

In R. v. Institute of Chartered Accountants of England and Wales & Others, ex parte Brindle, & Others B.C.C. p. 297 [C.A.] the Institute's decision to proceed with disciplinary proceedings against Price Waterhouse as auditors of B.C.C.I., was reviewed in the light of the firm's contention that for the Institute to proceed with the inquiry before the determination of various actions against it would result in unfairness. The Institute's argument was that there was no such unfairness and in any event a stay of its inquiry would "effectively abdicate [its] function as the principal regulator of auditors and would fail to deal with public concern at the audit of B.C.C.I." The Institute's handbook stated that disciplinary proceedings must be deferred if they were likely to interfere with the course of justice but that even where there was a case for adjournment, it would continue with disciplinary proceedings where not to do so would be, or appear to be, inconsistent with its duties as a regulator or professional body, for example where the Institute was the prime regulator of the conduct in question. An additional issue, and an important one in the context of that particular case, was the Institute's refusal to put the inquiry under the new disciplinary scheme although the Court of Appeal did not adjudicate on that aspect since it decided the principal issue in the firm's favour.

The main concern of the firm was that the Institute's disciplinary committee should "hold its hand until the trial at first instance of the main proceedings brought in this country ... has been concluded". - [my underlining]. But there was a number of other actions proceeding against the firm: there was an action in the Q.B.D. by depositors; the liquidators in the United Kingdom were suing in the Chancery Division; there were two sets of contribution proceedings involving the firm and Ernst and Whinney. In California there was a consolidated class action by B.C.C.I. depositors, dismissed at first instance but the subject of appeal. There was also a similar action in Texas. In the Cayman Islands and Luxembourg liquidators had commenced actions; in respect of the former there was evidence that this was particularly complex and onerous and on a scale with the liquidators' action in England. The firm was also heavily engaged in assisting the S.F.O. and U.S. regulatory authorities in their investigations.

The Institute's disciplinary proceedings provided for oral evidence and representation. The extent of the burden upon the firm can be gauged from the indication that only six partners and senior managers, who had already given evidence to Lord Justice Bingham's Inquiry, were involved in dealing with the affairs of B.C.C.I. prior to its collapse. The demands upon them in "so many different contexts" were clear enough.

Another important fact was that the Audit Registration Committee, following an investigation by the Joint Monitoring Unit (an agent of the English and Welsh, and Scottish Institutes,) announced in a news release, that "no regulatory action has been proposed as a result of any of these inquiries". As Hirst L.J. put it at p. 313(F), the lessons to be learnt from their auditing of B.C.C.I. "do not affect the fitness or qualification of Price Waterhouse to continue to act as auditors of large public companies, in view of the clearance they have since received from the JMU."

There is readily apparent a substantial difference in virtually every respect, between the position of Price Waterhouse in ex parte Brindle and that of Nomura (H.K.) and others in this appeal. It is not necessary therefore to consider the specific points advanced in that case. The "critical question" from which a general principle can be extracted is as Nolan L.J. expressed it, "whether [the] continuation [of the inquiry] at this stage would delay, impose and prejudice the appellants in the conduct of their defence in civil proceedings to an extent which cannot be justified in the public interest." Nolan L.J. touched upon a number of matters, which had to be taken into account. "The court should be slow to interfere with the assessment of risk carried out by a body such as the committee in the present case ... [It] will be considering matters of enormous complexity and ... undefined scope under a procedure which is ... unhelpful to the appellants. ... This is not a case in which it can be expected that the inquiry can be completed fairly promptly and without impinging upon the appellants' preparations for the civil proceedings.... it must have a distracting and delaying effect upon the other proceedings....".

Yet "these considerations might count for little if the committee of inquiry had been set up to consider allegations of misconduct against the appellants or any of their staff since the need to discover whether the allegations were well-founded would, in the circumstances, plainly command a high degree of priority. If that were the case the public interest would take precedence over the private concerns of the appellants, however pressing and numerous.... There is no such allegation". The position of the Applicants before us is readily and fundamentally distinguishable from that of Price Waterhouse.

The balancing exercise can clearly be seen in the matters set out so as to demonstrate how the principle is to be applied. The judgment of Hirst L.J. at the outset concentrates on this. In confirming the underlying principle to be applied he referred to the approach of the Court of Appeal in R. v. Panel on Takeovers and Mergers, ex parte Fayed 1992 B.C.C. 524 (Neill L.J. at p. 531)

"It is clear that the court has power to intervene to prevent injustice where the continuation of one set of proceedings may prejudice the fairness of the trial of other proceedings ... But it is a power which has to be exercised with great care and only where there is a real risk of serious prejudice which may lead to injustice" - [my underlining]. That power, Hirst L.J. added: "Should be most sparingly exercised, and that it is only in exceptional cases that the disciplinary process... should not be allowed to go ahead unhindered ... heavily though the scales will initially weigh in the institute's favour, there may be cases where the considerations of serious prejudice to the member are so strong that that will prevail."

However he re-inforced the public importance of disciplinary bodies:

"It will also be necessary to evaluate the degree of public importance of the case under consideration, the seriousness of the allegation of professional incompetence and/or professional misconduct, and the urgency of their resolution in the disciplinary context, for example, allegations of dishonesty or other professional malpractice which, if proved, would be likely to lead to the striking off of a member, must clearly weigh heavily or perhaps even overwhelmingly on the institute's side of the scale."

Sir Roger Parker in ex parte Brindle (at p. 316) examined the two propositions in the statement of principle by Neill L.J. in the ex parte Fayed case: that there is power to intervene to prevent injustice where the continuation of one set of proceedings may prejudice the fair trial of other proceedings and secondly, that power should be exercised only where there is a real risk of serious prejudice which may lead to injustice. He took the view that it was also necessary to consider the fairness or otherwise of the proceedings which it is sought to stay. He categorised the Institute's inquiry into Price Waterhouse's actions in relation to the B.C.C.I. audit as "a general unstructured enquiry".

In R. v. Chance ex parte Smith & Others 1994 B.C.C. p. 1095, ex parte Brindle was distinguished on its own facts. A well-known firm of accountants seeking judicial review before the Divisional Court was involved in four inquiries or investigations conducted by the Department of Trade and Industry, the Serious Fraud Office, the House of Commons Social Security Committee, and by the ARC and JMU. It was also a defendant or third party in four claims, one of which had actually been initiated, and two others had delivered draft statements of claim.

In the judgment of the court delivered by Henry L.J. the test applied was that enunciated by Neill L.J. in ex parte Fayed (ibid) with a balancing exercise, weighing the public interest in the prompt and efficient operation of the disciplinary proceedings against the risk of serious prejudice to the fairness of the trial of other proceedings, which may result in injustice. The court will take into account all evidence before it, including that relating to matters subsequent to the decision not to stay the proceedings.

Consideration of the public concern received a more detailed approach by Henry L.J. (p. 1101 E-H.) than is apparent from the decision in ex parte Brindle but that may well have been because in that case the clearance by the ARC and JMU indicated that "there was no cause for public concern about Price Waterhouse retaining its registration [as auditors] under the Act". (- Nolan L.J. at p. 305 H.) Henry L.J. said -

"If the disciplinary proceedings designed to address that [public] concern are stayed pending resolution of the civil proceedings, we are doubtful whether that public concern will often be met when it has to await the prior resolution of the civil proceedings. Even where civil proceedings are focused on the area covered by the regulatory functions, the remedies of fine and disqualification that may be required to meet the public concern are not available in those proceedings. Often civil actions will settle without pronouncement by the court and a long time after the events that initially caused the concern. By then it may be too late for the disciplinary proceedings to play their allotted role in meeting that concern. When dealing with public concern as to the auditing process, there will usually be a considerable degree of factual overlap between the likely issues in civil proceedings and under the disciplinary scheme. But this should not in our judgment be allowed to blur the different functions and different objectives of the two types of proceeding."

It is apparent that although the Divisional Court in ex parte Smith agreed with Hirst L.J.'s view in relation to the sparing exercise of the power to intervene to stay the disciplinary process and his approach to the balancing exercise, it was less than happy with the second gloss on Neill L.J.'s statement of the test in ex parte Fayed propounded by Hirst L.J. viz:

"It is inherently unfair that two tribunals should contemporaneously be considering the same issue (citing Conteh v. Onslow-Fane)."

It rejected that as a general proposition:

"we would not accept that any presumption against duplication expressed in those proceedings must apply in proceedings where the public law interest in the prompt resolution of the disciplinary proceedings is as strong as we take this interest to be,"

and thought that it did not sit easily with his acceptance of the submission that "the power to intervene should be most sparingly exercised" [p. 310 D.]. I respectfully agree with the Divisional Court which had given careful consideration to a number of factors including their acceptance of the evaluation of the seriousness of the allegations in, and the degree of the public importance of, the disciplinary proceedings.

The Divisional Court went on to consider the matters raised on behalf of the applicant and I shall deal only with the most pertinent of these affecting the case on appeal before us, because the basis upon which the case was put in ex parte Smith is the same - having to defend parallel proceedings, disciplinary and civil, at the same time brings with it a real risk of serious prejudice that may lead to injustice.

There is always a risk of inconsistent decisions. "But disciplinary proceedings are necessary both in order to ensure that regulatory questions arousing public concern are addressed within a reasonable time - scale, and that they are addressed by a body with power to deal with them by way of fine and disqualification. Both the [European] Community and Parliament have seen the need for such proceedings, and they would not be properly efficacious if they had to await the resolution - whether by compromise or otherwise - of civil proceedings, which might happen long after the event."

Although the applicants in ex parte Smith had to fight a battle on two fronts with other inquiries and investigations increasing the demands on three named individuals and the consequent strains upon them, such "must be greatly reduced by the fact that they have the support of their employers (and of their considerable resources)." In referring to the overlap Henry L.J. observed that its extent "will mean that the proper preparation for defence on the one front will also serve as the defence on the other front." There was nothing in the information before the Divisional Court that would justify it "concluding that the additional burden of the disciplinary inquiry might be the last straw that would prevent a proper defence being made to the civil proceedings."

Henry L.J. also dealt with a matter which may be relevant to the appeal we are considering; although I am not certain as to whether it does play some part in the applicants' argument, out of excess caution, I think it worthwhile repeating Henry L.J.'s succinct disposal of it:

"Complaint is made that the disciplinary proceedings would generate their own documents which may be used to the applicants' disadvantage in the civil proceedings .... before us were the transcripts of what the individuals might say in relation to the issues in interviews conducted under the scheme, and in evidence before the tribunal. If there was a real inconsistency between what they then said and what was said in the civil proceedings thereafter, then the reason for that inconsistency would have to be investigated. If there was an explanation for it, the inconsistency would not harm them. If there was no such explanation, the inconsistency would be rightly taken into account. There would be no injustice in that ........ Surprise is the enemy of justice, and we see no likely injustice in having to give two different accounts on oath of the same incident." [Pp. 1104 A - 1105 B.].

Dyson, J. reviewed the authorities to which I have referred in his decision in R. v. The Executive Joint Disciplinary Scheme ex parte Hipps & Ors (the "Polly Peck" case) which concerned the well-known chartered accountants, Stoy and Hayward, and set out the legal principles. He too approached the question at issue by deciding whether he was satisfied that there was a real risk of serious prejudice. If there was not, that was an end of the matter and there would be no stay. If there was, then the balancing exercise was to be conducted, and a court would give great weight to the view of the body responsible for the decision as to the factors militating against the stay and the weight to be given to them, though the court remains the arbiter of what is fair.

The test and the approach to be adopted was therefore clearly identified by the authorities under review.

The judgment at first instance

The learned Judge clearly identified the principle upon which he should approach the application i.e. the fair and just approach of a court encapsulated by Lloyd, L.J. in R. v. Panel on Take-overs and Mergers, ex parte Guinness ple 1991 1 Q.B. 146 at 183H.

Mr. Thomas referred to The Abidin Diver 1984 1 A.C. 308 at p. 320B-C (Lord Brandon) and the statement that the appellate court can only interfere with the discretionary decision of the judge of first instance,

1) where the judge has misdirected himself with regard to the principles in accordance with which his discretion had to be exercised.

2) where the judge in exercising his discretion has taken into account matters which he ought not to have done or failed to take into account matters which he ought to have done, or

3) where his decision is plainly wrong.

That clearly is the basis upon which we have to approach the decision of the learned Judge.

What was the state of play of the civil proceedings in Australia and the regulatory proceedings in Hong Kong? We can take this easily enough from the judgment. (pp. 7-g (pp. 5-8 of the original)). In the Australian case pleadings, discovery and interlocutory matters were concluded by the end of November 1997. As a result of a directions hearing on 28 November 1997 Nomura (U.K.) was to serve all witness statements by 9th April 1998 whilst the Plaintiff (the ASC) was to serve statements in reply by 9th May 1998. There is a further directions hearing on 29th May 1998. The trial is listed for the 27th July to 28th August 1998.

On the 30th May 1997 and 17th July 1997 the S.F.C. issued its letters of mindedness following its investigation. They contain provisional conclusions as to whether the four applicants subject to its regulation and discipline are "fit and proper" to be registered, and the sanctions likely to be imposed on a confirmed finding. The applicants were invited to make representations by a given date. The SFC however made it clear in due course that that date was flexible. It was against this progress that the Applicants sought the stay and sent a 43 page letter as their argument. That letter is in many respects a repetitive document, long on the general and short on the particular. It was of course prepared on the basis of three concurrent proceedings but by the time of the hearing before Stone J. the SFA (UK) had acceded, pro tem, to the request of Nomura (U.K.).

This letter from Clifford Chance, which is in effect the applicants' argument in general, was succeeded in due course by an extensive affirmation by Mr. Philip Levy, the in-house lawyer of Nomura, and I will come to that in due course. The letter is a somewhat exaggerated statement of problems facing the applicants which I, for my part, find to be no different from the difficulties likely to be encounted by any company active in the international sphere which is alleged to be guilty of wrongdoing in its financial activities, in jurisdictions in or from which it operates. The phrases "oppressive effect of multiple investigations" and "multiple jeopardy", even if they were not overstatements simply reflect the likely state of affairs for such a company and such activities.

It correctly identifies the different subject matter of the three proceedings, only two of which are now to be considered: breaches of company law in Australia, and misconduct in H.K., the "fit and proper" criterion being independent of any statutory breaches in any other jurisdiction.

It describes the S.F.C.'s action as "draconian and out of all proportion to the conduct alleged" but it has not yet tried to answer the provisional findings. It is inappropriate to make any such comment at this stage and it is irrelevant to the court's consideration of the real issues which were in danger of being clouded by such an approach.

Before it proceeds to consider the "real risk of serious prejudice" in the later part of the letter it makes a number of statements which are straightforward matters of fact and do not fall within the category of risk to be considered. It is true that the findings against one individual or entity in one forum potentially affect those in another. The resources to deal with both sets of proceedings are drawn from the same pool and there is an overlap of issues and evidence. None of these three factors either individually or collectively poses any risk, let alone a severe risk.

Reference is made on at least two occasions to the SFC proceedings prejudging the issues before the Australian courts. This is not and cannot be so. The issues despite a factual and contextual overlap are not identical nor can the regulatory body in H.K. be said to be prejudging any issue. It has not yet adjudicated, whatever its provisional "minded state" may be, on any issue within its jurisdiction, and when it has received the submissions it will proceed to judge the disciplinary issues on the material before it. It is not seized of any of the Australian issues - it cannot be. Therefore any suggestion of a prejudgement is a distortion of language.

Some time is taken up with arguing in relation to the effect or practicable value or otherwise of the sanctions which may or may not be imposed by the SFC on the individual applicants. This is not material to the issues.

The test is wrongly stated at paragraph 16 (page 732). The test is whether there is evidence of a "real risk of serious prejudice which may lead to injustice". If there is, then the balancing exercise as to whether that risk outweighs the countervailing public interest has to be conducted. It is not to be diluted and in my view the applicants' approach is a dilution.

The argument is predicated on a number of general points: Nomura (U.K.)'s case in Australia will be hampered as will that of the individual applicants in the SFC proceedings, and their ability to provide evidence in each of the two proceedings. There is no detail to support these general propositions. I do not see any substance in them and the conclusion drawn that the defence or participation in these two sets of proceedings will be compromised has no basis. There will be some duplication, and expense involved but that is to be expected whenever two or more proceedings involving common evidence are afoot. I do not regard the strain as oppressive or even other than to be expected in any proceedings. There is a non-sequitur in the analogy drawn with the doctrine of cause of action estoppel referred to in paragraph 31. It is entirely unhelpful.

Another argument raised is identified in paragraph 38 as follows - "nor is there any question of dishonest or deliberately misleading unlawful trading." Yet subsequent paragraphs go on to identify clearly the elements of deception and dishonesty in the allegations. This is concerned of course with the merits of the defence which we need not consider.

Under the heading of "Risk of Serious Prejudice to Nomura and Individuals", the letter purports to set out in three sections the nature and extent of the prejudice allegedly involved. In fact they contain a repetition of the generalities of "complex and lengthy proceedings" with the same "extensive evidence"; "having to fight parallel battles will hamper .. ability to defend the ASC proceedings"; "unnecessary complications in obtaining evidence from the individuals"; "commitment of time and resources will be very substantial", "disruptions to the relevant part of Nomura's business" "duplication of strain and disruption for Nomura and the witnesses is oppressive and very likely to compromise the defence in all proceedings". There is much repetition of these themes.

The affidavit of Mr. Levy is in similar vein. I question the appropriateness of an affidavit for this purpose. It is not meant to be a vehicle for advocacy and argument. The deponent takes an oath as to the facts contained within his knowledge or belief.

I have dealt with these two documents because they contain most of the argument advanced before us by Mr. Thomas on behalf of the applicants. At the end of the second day of the appeal Mr. Thomas set out in fairly succinct form the defence of the applicants in relation to their trading, stripped of the complexity and much of the esoteric technicalities. I found difficulty in understanding precisely what problems there could possibly be for the applicants in presenting that to the SFC in the form of written submissions as requested. At this stage, and this is all we are concerned with, there is no question of oral evidence or cross-examination. The SFC are already in possession of transcripts of interviews and other documents and records.

Against this picture the learned Judge found that there was prejudice - not, it is clear from his judgment, "serious" prejudice. He rightly in my respectful view, assessed the applicants' submissions as being that the concurrent progress of the two proceedings "is creating very considerable problems" but he was presented with no more particularity than emerged from the two documents to which I have referred. Similarly the submission that "consideration of fairness and justice point unequivocally to the desirability of the prior determination of the issues in the Australian forum" is some way short of the "real risk of serious prejudice which may lead to injustice", though in terms of advocacy alone it is a comfortable and beguiling phrase. Earlier in the documentary arguments, reference had been made to the possible or probable benefit to the SFC of having the Australian decision available for it to consider. That is not a criterion in this case and the "desirability" argument is simply a broader statement of the same.

The submission that "it is inherently wasteful in terms of time, effort and money" may be valid but it does not constitute the "real risk of serious prejudice". The "virtual total eclipse" argument (see ex parte Brindle p. 311A - per Hirst L.J.) whilst an exaggeration in the appeal we are considering, is but a factor and is of course subject to the reservations expressed by Henry L.J. in ex parte Smith p. 1103 H to 1104C.

The learned Judge also appears to have accepted as valid in the assessment of the "real risk" the point made frequently, but I regret to say without any merit, that the appeal from the SFC's decision, which has not yet been given, will necessarily involve oral evidence, the attendance of the individual applicants, and cross-examination. It is the point which has underpinned the persistently advanced notion of parallel proceedings, the alleged consequent prejudice and the "virtual total eclipse" analogy with ex parte Brindle, and is the main flaw in that argument.

The alternative argument, seeking to make a comparison with the "lis alibi pendens" or "forum non conveniens" was rightly, with respect, rejected by the learned Judge, although he appears to have accepted the contention that Herbert Smith, solicitors for the S.F.C. recognised the situation - "parallel proceedings involving two different jurisdictions and two different sets of regulators" - as inherently undesirable. I think that is a gloss upon the contents of the letter which is not justified. "More onerous than dealing with one set of proceedings at a time" was what they wrote - a simple statement of obvious fact which could not be relied upon as a significant concession aiding the appellants' argument.

The learned Judge also rejected the argument as to inconsistent findings and reflected the thinking of Henry L.J. (ex parte Smith at p. 1104 D-E). What then is left of any substance to support the alleged "real risk of serious prejudice"? At page 23E of the judgment the learned Judge expresses it as "the difficulties and risks of being required to fight on two fronts at the same time." This is, in my view nowhere near the test to be adopted, and is in fact a commonplace. After further consideration of the submissions which are built around such references as "sheer volume of vital preparatory work" "significant tactical disadvantage", and "an unnecessary fetter on what should be untrammelled preparation for a major trial," which were no different in their general form from the insubstantial earlier contentions, the learned Judge again posed the test as he saw it (page 25Q of the judgment) - "a sufficient risk of prejudice if the present regulatory proceedings in Hong Kong proceed in accordance with the SFC's timetable".

I think the sheer weight of documentary material, tediously repetitive in form and heavily referenced to the general rather than the particular has led to this dilution of the test. The learned Judge in stating that the test was satisfied - "a sufficient risk of prejudice, and the possibility of consequent injustice". - misdirected himself. The basis of his decision was the "considerable weight" he attached "to the difficulties and problems which are inherent, and a function of ... parallel proceedings'." In doing so he referred back, "on a broad view of the papers", to the relevant correspondence and the affidavit evidence, and the submissions which amplified the alleged difficulties. I would be traversing the same material if I were to repeat my earlier findings. There is nothing, apart from the most general claims and assertions, which relates to the fairly stringent test of "real risk of serious prejudice". In my judgment therefore the learned judge erred in attributing to run of the mill problems and difficulties a status which was not supported by evidence.

He misdirected himself in respect of the test to be applied because he diluted that test to the level produced by any situation in which two or more actions are confronting parties. By taking into account matters which were merely difficulties and problems "inherent in, and a function of parallel proceedings" and fell well short of the real risk of serious prejudice, he wrongly exercised his discretion in the applicants' favour. The decision that the material presented and reasons advanced met the high test was in my respectful view plainly wrong within the criteria in The Abidin Diver. Accordingly it is not necessary to entertain a balancing exercise since no real risk of serious prejudice was shown. However I propose to consider that aspect nonetheless because the public interest or concern is of substantial importance in any exercise which considers a restraint upon the proper progress of disciplinary proceedings.

The balancing exercise

The learned Judge held (at p. 29E-J of the judgment) that the public interest (in the disciplinary proceedings) would not be damaged, if, "the relevant inquiries having now taken place, the disciplinary element of the procedure is now to be placed on hold for a limited period" it having been served already by prompt initiation and assiduous pursuit of inquiries. He placed reliance upon the fact that the trading under scrutiny had taken place some 20 months earlier, that the main traders concerned, had left the jurisdiction some time earlier and the third trader was about to do so, and that requests to deregister had been made, though understandably refused. In so doing he had formed the view that there was no immediate threat or concern to the investing public, "aside possibly from the desire to uphold matters of principle". He had earlier accepted Mr. Thomas' comment (as "nearer the mark") that the current SFC position was "against good sense and good judgment." With respect to the learned judge I do not consider it was open to him to form such views which constitute a misconception of the purpose and status of such a regulatory body.

At an earlier stage of his judgment (p. 13 P-S) the learned Judge had referred to the letter of the 23rd October 1997 from Herbert Smith, solicitors for the S.F.C., as "a tightly argued document". In a passage not cited directly by the Judge but no doubt in his mind when he considered the arguments of Mr. Philip Dykes S.C. in reply, is a succinct and in my view unarguable expression of the S.F.C.'s function and duties:

"As noted above, the matters of concern to the SFC are prima facie serious ones. The public interest in Hong Kong lies in seeing them dealt with and appropriate action (if any) being taken as soon as is possible. The public interest generally lies in seeing that the SFC acts independently and efficiently in pursuing disciplinary proceedings where appropriate. The registration system supervised by the SFC is a comprehensive one and the SFC must necessarily be free to operate it independently from those in other jurisdictions in order to protect the public interest in Hong Kong. This is clearly what is intended by the SFCO, the SO and the CTO. The proceedings which you say must be given priority are in another jurisdiction and involve other parties, albeit part of the Nomura group. In any event, however, having obtained registrations in Hong Kong, the Nomura group must expect the SFC to act independently and timeously."

This was the approach heavily, and in my view, properly relied upon by Mr. John Bleach S.C., on behalf of the Appellant.

It is I think relevant to advert to the judgment of Henry L.J. in ex parte Smith (p. 1103 D-E) when he considered the balancing exercise. His comments have a broad application and were, I am sure, so intended otherwise he would not have expressed them in the way he did, nor cited Hirst L.J.'s approach in the Bank of England case [A & Ors v. B - (Governor of the Bank of England intervening) 1991 1 Bank L.R. 60 at p. 68.]:

"But in our evaluation of those matters, we should not lightly depart from the views of the person or body entrusted with that evaluation, the respondent. We see no reason for not accepting his evaluation of the seriousness of the allegations and the degree of the public importance of the disciplinary proceedings in this case. As Hirst J said in another context in A & Ors v B (Governor of the Bank of England intervening) [1991] 1 Bank LR 60 at p. 68):"

"I cannot stress too strongly the importance which should be attached to the Bank of England having, within the limits laid down by the Act and general law, unfettered and unimpeded scope for the exercise of their most important public duties of regulation in the interests of the public, who are surely entitled to rely on the Bank of England to exercise those powers with integrity."

In appearing to confine his view of the S.F.C.'s role as the need to uphold matters of principle, the learned Judge put far too narrow a construction upon the role of the disciplinary and/or regulatory body operating within its jurisdiction in respect of a corporation and its employees registered in and operating from Hong Kong. Accordingly I consider he failed to take into account the public interest and concern.

For my part I question whether it can ever be appropriate to review the disciplinary body's decision to proceed, in the absence of any argument as to unfairness of system itself or its procedure. But I remind myself that one should never say "never" in an evolving and developing legal process. Again in ex parte Fayed Steyn L.J. (as he then was) said

"In the developing field of judicial review it is usually unwise to say "never". But it seems to me that, in the absence of fraud, corruption or mala fides, judicial review will not be allowed to probe a decision to charge individuals in criminal proceedings. The law must take a practical view of the limits of judicial review. It would be unworkable to extend judicial review into this field. If this reasoning is sound, a similar approach seems applicable to the initiation of disciplinary proceedings."

A fortiori, I would add, in the circumstance where properly constituted proceedings by a disciplinary body are the only proceedings afoot in that particular jurisdiction.

For the reasons set out I would allow this appeal and quash the order. In view of the time that has elapsed since the applicants were notified of the S.F.C.'s intention I would not interfere with the timetable in any respect leaving the SFC to make its own judgment and arrangements as to the progress.

I have read the judgments of Justices of Appeal Mr. Justice Benjamin Liu and Mr. Justice Anthony Rogers and with respect agree with their conclusions. I also agree that the cross-appeal fails by reason of the appeal succeeding. The appellant should have its costs of this appeal, of the cross-appeal and of the hearings below.

Liu, J.A.:

70. We allow the appeal and dismiss the cross-appeal. The Prohibition Order and the order for costs are set aside. We make an order nisi that costs of the appeal and the cross-appeal as well as costs below, including costs incurred at the inter partes hearing for leave be costs for the appellant, Hong Kong SFC.