TAN FO KING v. THE INSIDER DEALING TRIBUNAL

1997, No. AL49

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMINISTRATIVE LAW LIST

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J U D G M E N T

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1. These two applications for judicial review arise out of an Insider Dealing Tribunal (the "Tribunal")which was set up in September 1990 and sat in 1996 into share dealings in a company that was called Paragon Holdings Limited. There are only slight differences between them and so I shall treat them together. Mr McCoy S.C. appears for the 1st applicant (T.L.M.) and Mr Harris for the 2nd (T.F.K.).

Statutory Provisions

2. The Tribunal is established under the Securities (Insider Dealing) Ordinance, Cap.395. Part II deals with how insider dealing occurs, and Part III establishes the Tribunal.

3. It is important to recognize that in order to establish a finding of insider dealing, the evidence can range over the connection one person who has relevant information has with others who acquired or are counselled to acquire securities. In some respects, the range of evidence approximates to the criminal charge of conspiracy. The structure of the Ordinance emphasizes three points :

(1) Although it inquires into matters, it is a statutory tribunal which has a specific object, under s.16(3) which reads-

" (3) The object of an inquiry shall be to determine at the conclusion of the inquiry or as soon as is reasonably practicable thereafter, ......

(a) whether insider dealing in relation to a listed corporation has taken place;

(b) the identity of every insider dealer; and

(c) the amount of any profit gained or loss avoided ..."

It makes a determination and not merely a recommendation.

(2) Because of this, it is quasi criminal in nature with the standard of proof close to that of the criminal standard.

(3) The orders it can impose are severe. Under section 23, it can order a person to pay to the Government an amount not exceeding the amount of any profit made or loss avoided - so if a person has made, for example, a profit of $5 million, it can order that to be repaid. And an order imposing on that person a penalty of an amount not exceeding three times the amount of any profit - so not only do you pay back the $5 million, you are liable to a penalty of $15 million. Also an order that the person be banned from taking part in the management of a listed or any other specified company for a period not exceeding five years.

4. The orders under s.23 were a dramatic change to the law as found before in the Securities Ordinance. The previous practice was found in s.141G of the Securities Ordinance and it was under that Ordinance that a long inquiry was held in 1986 into a number of well-known Hong Kong persons who were found ultimately to be insider dealers. At that time there was no power to prescribe any penalties at all, or to impose any sanctions, and no doubt because it was realized that there was no teeth in the legislation, these amendments later came into being. (See Applications by Chow Chin-wo & others [1987] HKLR 73.)

5. It is clear from a reading of the Ordinance and the Schedule that the public nature of the Tribunal is emphasized. It sits in public, with all matters taking place in public, unless it is necessary to have a meeting in private, and members of the public and the press can attend. Anyone listening to the evidence or picking up a transcript would know what had happened. As a hearing may be long, some people may turn up on some days and others on others, but everyone would know exactly what was going on. The Ordinance makes it clear that it is the Tribunal which determines issues. Under the Schedule, counsel can be appointed to act as counsel for the Tribunal but they are not the Tribunal :

11. The chairman shall convene such sittings of the Tribunal as he thinks necessary for the efficient performance of its functions.

12. The chairman shall preside at all sittings of the Tribunal and no sitting shall be held unless the other 2 members are also present.

13. Every question before the Tribunal shall be determined by the opinion of the majority of the members except a question of law which shall be determined by the chairman.

14. Every sitting of the Tribunal shall be held in public unless the Tribunal considers that in the interests of justice a sitting or any part thereof should not be held in public in which case it may hold the sitting or part thereof in private.

15. The hearing of an application to the Tribunal to hold a sitting or part thereof in private shall be held in private.

16. A person whose conduct is the subject of an inquiry or who is implicated, or concerned in the subject matter of an inquiry shall be entitled to be present in person at any sitting of the Tribunal relating to that inquiry and to be represented by a barrister or solicitor.

17. For the purposes of paragraph 16 the Tribunal shall determine whether the conduct of any person is the subject of the inquiry or whether a person is in any way implicated or concerned in the subject matter of the inquiry.

18. The Tribunal may appoint a legal officer nominated by the Attorney General, a barrister or a solicitor to act as counsel for the Tribunal.

19. In paragraph 16 "sitting" does not include any meeting of the Tribunal which is held for the purpose of deliberating on any question before the Tribunal.

A meeting of the Tribunal means exactly that. When the Tribunal is meeting rather than sitting, for the purposes of deliberation, it is the members of the Tribunal who are meeting.

6. Although, s.31 gives a right of appeal to the Court of Appeal (a) on a point of law, or (b) with leave on a question of fact, the report has been to the Financial Secretary, but not published. Judicial review is the appropriate procedure to prevent publication and to raise public law issues.

The applications

7. In these two applications, serious and numerous allegations have been made against the Chairman of the Tribunal, Mr Justice Yam, and counsel for the enquiry, Mr Peter Davies. Their conduct, it is said, has broken elementary rules of fairness not only to those implicated but also to the public. Large portions of the inquiry have been held in secret. In other words, nobody knew about them and they were never disclosed. Their existence has only been known for a few months. It is submitted that the Chairman has disregarded the important principle of open justice and has provided a result so flawed that it should be quashed. Mr McCoy S.C. sums up his submissions in this sentence when he says -

"This case presents an unprecedented collection of serious and fundamental public law errors."

8. These are, as I said, serious charges. The Tribunal was established in September 1994 following share dealings in 1993. From the first meeting to the sending of the report was 18 months. The public expense must have been very substantial. Further, the Chairman is a High Court Judge. I confess I have found this a troublesome case which has given me personal discomfort which, in the 12 years I have been sitting in Hong Kong, I have never experienced. However, I must make a decision on what is placed before me. I have had the benefit of most able submissions, a large amount of detailed analysis of the alleged errors of judgment and procedure, and the assistance of Mr Peter Graham who acted as Amicus Curiae (a friend of the court).

General conclusions

9. My general conclusions are as follows :

1. From shortly before the Tribunal sat, in substantive hearing, on 25 March 1996, the Chairman referred at a meeting on 28 February (not attended by the public or interested persons) to an inquiry in England conducted over a period of three years by a very eminent judge Sir Richard Scott. From that moment, the Chairman appears to have become fixated, indeed mesmerized, by that inquiry. Even if its procedure was of any help, he misapplied it.

2. After the public hearing began, the Chairman adopted a procedure deliberately designed to exclude the public and parties from important decisions and discussions relating to the inquiry.

3. The Chairman used the counsel to the Tribunal to such an extent that they became part of the Tribunal.

4. Up to the time when the public hearing substantially finished in August 1996, he was encouraging counsel to draft the report.

5. From the conclusion of the public hearings in August 1996, the Tribunal received evidence which was never disclosed to the parties and he secretly evaluated the evidence with counsel until the end of the year.

6. When the Tribunal began to write the report, it secretly received comments from counsel and evidence from some parties.

7. The Tribunal in effect conducted an inquiry which breached the basic rules of fairness and openness and although the Chairman was warned about his unusual procedures, he nevertheless continued with them.

The procedural irregularities are so numerous that I do not consider it necessary to identify them all. The degree of unfairness was substantial. The worse aspect to this sorry saga was that what should have been a public inquiry became instead a private and secret hearing between the Tribunal and its counsel. It was justice behind closed doors.

The discovery of the Minutes

10. None of this would have been revealed if the Tribunal had not decided to launch a prosecution, which I would categorize as spiteful, against T.L.M. The hearing was on 30 and 31 October 1997 and it was then that Mr Peter Davies, Senior Counsel to the inquiry when giving evidence in the Magistrates' Court, partially disclosed the fact of the secret meetings. He was cross-examined by Mr McCoy and I quote from the official transcript. I should add that I have read in full the transcript of this Magistrates' Court hearing.

"Q : Doing your best on many occasions since 16 August 1996 when the tribunal adjourned sine die, how many occasions did you as counsel meet with the Tribunal in the absence of the parties and their lawyers?

A : Three times. That's a guess.

Q : Yes, and a record would be kept for those meetings?

A : Yes, the meetings were minuted.

Q : Is it a fact that all meetings and sittings of the Tribunal were recorded?

A : Yes.

Q : Were there any private sittings of the Tribunal during this inquiry, i.e. when the present public were excluded?

[I should add that there is provision in the Schedule to have what are called private meetings, these are, for example, when matters of such a sensitive nature occur that the press and public are excluded, but the parties of course are still there.]

A : Yes. When I answered your question earlier "three times", I was referring to these private sittings. The way the procedure is set up is under the Ordinance, the Tribunal can either sit in public or in private. When it sits in private, that is when the press is excluded. Now in addition to that, there were meetings when only the Counsel to the Tribunal and the Tribunal itself is present and that is when housekeeping matters are dealt with as part of the inquisitorial procedure and it was such a meeting that took place on 30 October."

And then Mr McCoy says : "Should we label them 'informal meetings'." When the minutes are examined, it is clear that they were only dealing with "housekeeping matters" in part.

11. The answers from Mr Davies were far from accurate. It may be it was not thought that these minutes would be scrutinized, but a reading of the minutes demonstrates to my mind that Mr Peter Davies was being very conservative with the truth. The Magistrate very properly threw the prosecution out on a submission of no case, but I later, on Mr McCoy's application, said that discovery ought to take place of all these secret meetings and the secret correspondence between the Chairman and Mr Davies, and the Chairman and a number of other parties.

12. Mr McCoy refers to this prosecution as the event which opened, as he describes it, "the can of worms".

13. From a reading of the minutes and the correspondence which has been disclosed, this Tribunal completely failed to have regard to the Ordinance that it should hold a public inquiry. It was not only unfair to the public, but also to those who appeared before it and to these two applicants.

14. I wish I could say no more, but as I am quashing a long and expensive inquiry and I am critical of the conduct of its Chairman and Counsel, I should set out some of the major considerations which have driven me to conclude as I have.

The role of Counsel for the Insider Dealing Tribunal

15. It is important to recognize the difference between this statutory Tribunal with its power of punishment and other tribunals, such as the recent Garley fire inquiry, held under the Commission of Inquiries Ordinance which makes recommendations either to a senior civil servant or the Chief Executive. Professor Wade in his Administrative Law 7th Ed. at p.910 contrasts the tribunals and the inquiries :

"In principle there is a clear contrast between the function of a statutory tribunal and that of a statutory inquiry of the kind discussed in the next chapter. The typical tribunal finds facts and decides the case by applying legal rules laid down by statute or regulation. The typical inquiry hears evidence and finds facts, but the person conducting it finally makes a recommendation to a minister as to how the minister should act on some question of policy, e.g. whether he should grant planning permission for some development scheme. The tribunal need look no further than the facts and the law, for the issue before it is self-contained. The inquiry is concerned with the local aspects of what will usually be a large issue involving public policy which cannot, when it comes to the final decision, be resolved merely by applying law. Tribunals are normally employed where cases can be decided according to rules and there is no reason for the minister to be responsible for the decision. Inquiries are employed where the decision will turn upon what the minister thinks is in the public interest, but where the minister, before he decides, needs to be fully informed and to give fair consideration to objections. In other words, tribunals make judicial decisions, but inquiries are preliminary to administrative or political decisions, often described as quasi-judicial decisions."

16. The Insider Dealing Tribunal is there to inquire into specific events and to that extent, it has an inquisitorial procedure. Nevertheless, it has a judicial function to determine whether persons are proved to be insider dealers and if so, to prescribe penalties, and that is why there is a High Court judge who sits as its Chairman.

17. The historical background of the provision and use of Counsel at inquiries can be found from inquiries in England conducted under the Tribunals and Inquiries Evidence Act 1921. This Act came into being because of the allegations that had been made by a Member of Parliament in England against the Minister of Munitions. In 1936, there was an inquiry into the leaking of the improper disclosure of taxation changes in the Budget. The Attorney General, together with other persons, decided to be present at the inquiry. The Tribunal had eminent lawyers conducting it. The Attorney General however refused to cross-examine any of the persons called before the Tribunal and junior counsel also refused to cross-examine. The Tribunal therefore itself had to descend into the arena and ask questions. This of course gives the appearance of the Tribunal being hostile towards persons and losing that impartiality which always ought to be present either in a judge or a tribunal member. It was obviously wrong in principle for the Tribunal to have to undergo the cross-examination. I read now from the Royal Commission on Tribunals of Inquiry in 1966 set up under the Chairmanship of Salmon LJ., when he said this at paragraph 16 :

" This assumption of the cross-examining role proved to be a heavy burden for the Tribunal to bear. Moreover it had the inherent disadvantage that it tended to make the Tribunal appear hostile to the witnesses whose conduct was being investigated. Accordingly, the procedure was reconsidered when allegations of bribery of Ministers and other public servants were investigated by the Tribunal presided over by Mr. Justice Lynskey in 1948."

"17. This assumption of the cross-examining role proved to be a heavy burden for the Tribunal to bear. Moreover it had the inherent disadvantage that it tended to make the Tribunal appear hostile to the witnesses whose conduct was being investigated. Accordingly, the procedure was reconsidered when allegations of bribery of Ministers and other public servants were investigated by the Tribunal presided over by Mr. Justice Lynskey in 1948. The Treasury Solicitor on behalf of the Tribunal instructed a team of counsel, headed by the Attorney-General, to present the evidence and to ascertain the facts by examination and cross-examination of the witnesses. The Attorney-General himself first examined in chief and then cross-examined the most important witnesses. Counsel who were acting on behalf of other witnesses were then given an opportunity of cross-examining, and if the witness giving evidence was represented by counsel, his counsel was then given an opportunity of examining him; in conclusion, there was a final examination by one of the counsel appearing for the Tribunal.

18. The procedure adopted by the Lynskey Tribunal was generally followed in the inquiry in 1957 presided over by Lord Justice Parker (as he then was) into allegations of improper disclosure of information relating to the raising of the Bank Rate.

19. In 1962, a Tribunal consisting of Lord Radcliffe (who presided), Mr Justice Barry, and Sir Milner Holland, Q.C. was appointed with wide terms of reference to inquire into the circumstances in which the spy Vassall had been employed in the Admiralty and '... allegations ... reflecting on the honour and integrity of persons who as Ministers, naval officers and civil servants were concerned in the case.' In this inquiry the procedure which had already evolved was further developed. The team of counsel representing the Tribunal included in addition to the Attorney-General an independent leading counsel who dealt with any evidence which, because of its political character, might have been embarrassing to the Attorney-General. Nor did the same counsel for the Tribunal both examine and cross-examine the same witness. So far as possible the witnesses who appeared to be prejudicially affected by statements in the Press or by statements obtained by the Treasury Solicitor were informed before they gave evidence of the substance of the allegations which might be made against them.

18. It can be seen, therefore, that historically the principle role of counsel to an inquiry was their usual role, that is, examining and cross-examining witnesses and making submissions. In Hong Kong, the position is somewhat different in that there is no Treasury solicitor nor civil servant appointed to operate as a solicitor. It is wrong in principle for the Tribunal to interview witnesses, visit banks and other financial institutions and gather evidence, and so three counsel here were appointed. They could diversify their activities. It is obviously desirable and indeed necessary for the Tribunal and counsel to meet before the inquiry opens and to discuss the procedure, relevant lines of inquiry and potential problems and for the counsel to interview witnesses or investigate various avenues of importance. Once the inquiry starts, the position changes. Although they are counsel to the inquiry, they are in a special position. They must not abuse this special role and become part of the Tribunal. Although therefore matters of investigative nature and procedural matters may be the subject of discussion with the Tribunal, they should be rare. Further, they must not frustrate the public nature of the inquiry and have discussions behind closed doors unless it is essential. Put simply, counsel are under a duty not to get involved in the judicial function of the Tribunal, or the decision-making process and to ensure that all things are done openly, publicly and fairly, unless, as I said, it is essential to have a meeting in the absence of the parties and the public.

19. The Chairman, in his opening statement at the preliminary hearing of the Insider Dealing Tribunal, said this : (of the three Counsel)

" They have been nominated by the Attorney General and then appointed by this Tribunal to act as counsel for the Tribunal. Their function is to present objectively to the Tribunal the relevant evidence, regardless of which way that evidence falls - whether in support of, or against, any allegation of insider dealing. Counsel's function is to assist the Tribunal, to cause to be carried out such investigation or further investigation which the Tribunal requires, to research and present relevant laws and to liaise with witnesses and their legal representatives. For the aforesaid purposes, the Tribunal regularly liaises with counsel."

20. Unfortunately, as will be clear later on, he used them for quite different purposes. I do not agree that a Tribunal should regularly liaise with counsel. Prior to the inquiry opening, that may be the position, but afterwards, the occasions should be rare. Once the evidence is all finished, counsel should be kept at arm's length. They have no role in the decision-making process. They are not the Tribunal. They do help by preparing written submissions and a closing address, and it may be if the Tribunal does not want to do the work, they can prepare chronologies and check facts. The Tribunal however is under duty to make a decision and not merely a recommendation and it must not abrogate, nor be seen to be abrogating, that important duty. This really is a matter for judicial common sense. Anyone entrusted with making a decision which may have consequences of fining a person many millions of dollars and branding that person an insider dealer ought to know that it is his responsibility and that he cannot delegate it to another. In Professor Wade's book on Administrative Law, is found at p.347 :

"An element which is essential to the lawful exercise of power is that it should be exercised by the authority upon whom it is conferred, and by no one else. The principle is strictly applied, even where it causes administrative inconvenience, except in cases where it may reasonably be inferred that the power was intended to be delegable. Normally the courts are rigorous in requiring the power to be exercised by the precise person or body stated in the statute, and in condemning as ultra vires action taken by agents, sub-committees or delegates ..."

The Minutes

21. When the minutes are read, it is clear that from the beginning, that the Chairman wished to give Counsel substantial work to do and was using counsel for what was his responsibility.

22. On 8 February, when the Chairman made his public statement, Senior Counsel present, Mr Ronny Tong took the opportunity to address a number of procedural points which he had not quite understood and to make a statement on behalf of his client who was alleged to be an insider dealer and he said this :

"Any findings by this Tribunal would result in a kind of order even with no penalty to be dished out, it may well run into hundreds and millions of dollars."

His clients was said to have made a profit of $170 million and was liable, therefore, to a penalty of $500 million and he says this :

"For that reason, both the clients and their lawyers are very concerned that they should be in a position properly and fully prepared to deal with the allegations to be levelled against [us]."

This Senior Counsel, very experienced, gave warning to the Tribunal that they would assume that all these matters would be dealt with fairly. He also made a statement as far as his client was concerned.

23. On the very first day (25 March), when evidence was given and Counsel were present, there was a short hearing and immediately thereafter, the Tribunal and its counsel went into a secret meeting which is found at p.120 when the Chairman said this :

"The Chairman found the opening statement of counsel representing Mr WONG startling in relation to the argument that any price sensitive information about the take-over of Paragon by CNPC was generated by Mr WONG, and was therefore not insider dealing. Mr Davies would write a short analysis to the Chairman pointing out the fallacy of the argument."

This demonstrates that counsel were intended to be used from the very word "go" to take part in the process which ultimately would lead to the decision.

The irregularities

24. I now set out chronologically many of the irregularities, some may be classified as minor, but most are significant and substantial as to the use of counsel and the reception of new evidence -

(1) during the taking of the evidence;

(2) after the taking of the evidence and up to the beginning of the writing of the report; and

(3) during the writing of the report.

(1) I have been provided with a "core bundle" which contains all the important documents relating to this matter and I intend to go through some of these.

At p.124, there was a meeting when a reference was made to Mr Gill and on 3 April, matters relating to compilation of summary evidence was going to be given.

At p.133, the Tribunal had not met in public, but in private, the Chairman said this :

" The Chairman said that the purpose of this meeting was to have a 'mid-trial' assessment of the evidence against Mr Felix WONG the Tribunal had received so far. He asked Counsel to give him a summary of the evidence before the Tribunal resumed its hearing on Wednesday, 22nd May."

It was clear that the Chairman wished to use counsel for his own purposes which, in my judgment, really was his own responsibility. Evidence came in in that meeting. Mr McCoy classifies these occasions as 'evidence through the backdoor'. It seems to me an appropriate phrase to use.

At p.138 is found this (and we are only in May) :

" To assist the Tribunal in writing the report, the Chairman asked Counsel to summarize in the form of a table what each witness had said in chronological order with reference to his or her statement and transcripts of evidence. Counsel would distribute the work amongst themselves."

At p.144 is found this :

" The Chairman said that he would prepare the first draft of the report in August. The draft would be sent to Counsel to the Tribunal for comment, possibly at the end of August."

At p.150 and 151 this was said :

"Hearings of the inquiry would probably finish on the second or third week of August. Counsel would then prepare the written submission and assist in the writing of the report."

[In other words, he was giving them this dual role. Their normal role would be to provide submissions but he was then telling them that it was their job to assist him in the writing of the report.]

"The Chairman would take leave during that period."

At p.159, the Chairman said this :

" The Chairman said that he would take leave in September while Counsel were preparing their submissions. He would need Counsel's contribution and assistance in writing the report."

It is this attitude which is, if I may say so, a consistent attitude that the Chairman considered that it was counsel's duty to involve themselves in this most important aspect of the inquiry. So it goes on. I do not refer in every detail but he continually refers to counsel having to assist him.

25. The hearing was adjourned "sine dic" on 16 August when all the evidence was substantively in.

(2) I turn then to the second section dealing with irregularities after the conclusion of the evidence and I emphasise of course, that nobody knew about this - no members of the public knew about it, the press did not know about it and the parties did not know about it.

26. On 19 August, the Chairman discussed the list of the issues and counsel made very detailed submissions on the role of Mr Wong, which I do not think I should read out in public, but they were matters which were not just an evaluation of the evidence but appeared to me to be conclusions being pushed upon the Tribunal. There were matters of evidence discussed, e.g. "we find this". Mr Davies drafted the letter to the National Commercial Bank, requesting it to disclose all financial arrangements between the Bank and Mr Wong since the 1980s and if they revealed an overdraft more than the financial arrangement, then why was that so. This was a clear instance of the Tribunal not really understanding that it could not discuss or deliberate upon new evidence. The impact might have been mitigated had anyone been told that evidence was being collected in this manner.

27. The list of issues was important. This indeed was all part of the decision-making process. In order to arrive at a decision, the Tribunal had to examine the evidence supporting the connections or relationships that one person had with the other.

28. We come to a letter (p.174 - 176) written on 20 August when all the evidence had finished. Mr Peter Davies was now very troubled and he wrote a letter which starts off by saying this :

"Yesterday morning's meeting of the Tribunal came as something of a surprise to me, (I thought your reference on Friday to a Monday morning meeting was part of a 'banter' between you and Paul), and it is only now that it is over that certain worries have crystallized in my mind in regard to what matters are currently in hand and the way we should proceed.

It may not be apparent but Counsel to the Tribunal have been under severe pressure over the last few weeks. This is due to the accumulated effect of 71 days of 'live' evidence and also the necessity of latterly extending cross-examination from 9 a.m. to sometimes between 4 and 5 p.m. ......

..... However, you have now directed that the same time counsel assist the Tribunal with its judicial function of writing the report. At long last, counsel had recognized that they were coming embroiled into the function of the Tribunal which is called the judicial function. This is a radical departure from the procedure in earlier inquiries. As you know, I earlier expressed doubts that we could do this. It is my view that though counsel is appointed to assist the Tribunal, he must to some extent remain apart."

That is an understatement, but he recognized that this had never happened before. Warning bells should have sounded in everyone's mind. If people want to have new procedures in Hong Kong, whether it be in a Court or a Tribunal, they ought to check up and find out what the old procedures were and why they are adopting these new ones and this was the first indication that Mr Davies wanted to know whether counsel can lawfully become involved in the judicial aspects of an inquiry.

29. I think he was being timid. A counsel of substance would have said "I am not going to get involved in your function" and would have taken a strong attitude to the Tribunal to be persuaded to act in the way the Tribunal was now seeking. It is a great pity, quite frankly, that he allowed himself and his team to get involved.

30. On 21 August, there is now a section of the minutes headed "Counsel's role :

" Mr. Davies explained his letter of 20th August to the Chairman in relation to the part concerning Counsel's role at the present stage of the inquiry. He said that he had consulted his senior colleagues in the AGC, including Mr. Joe Pethes who assisted Mr. Justice Stock in conducting the first insider dealing inquiry, who advised him against participating in the deliberation of the Tribunal in writing its report after the conclusion of the inquiry. ..."

That was a warning again being given, through the Attorney General's Chambers who have experienced counsel in them, counsel who have been assisting in Tribunal and here was a gentlemen, Mr Joe Pethes, an experienced counsel, categorically telling Mr Davies not to get involved. What happened was the Chairman then said this :

"The Chairman referred to the report of inquiry on the Iraqi arms sales by Sir Richard Scott and said that the set up of Sir Scott's inquiry team was very similar to that of the Tribunal. There was no logical reason why Counsel could not assist in the drafting of the report. ..."

He said counsel had two roles : to ask questions on behalf of the Tribunal and to assist it in carrying out its inquisitorial function.

31. As I said earlier, the Chairman was obviously mesmerized by this Scott inquiry and thought that that procedure was appropriate to have in Hong Kong. In this meeting, all sort of matters of evidence come in, but Mr Davies unfortunately was not resolute. He allowed himself to be used in this manner and thereafter there were a series of meetings, he thought there were three, there were in fact twelve, occupying some 20 hours of deliberation. At p.181 is found a discussion at length of two persons in respect of the management of a company in the takeover of the Paragon shares and it says this : "Major observations by the Tribunal included ...". In my judgment, these were conclusions on the evidence that the Tribunal was arriving at. All of these meetings in my judgment were really deliberations of the Tribunal which the Ordinance entrusted to the Tribunal and to no one else. I do not go through every incident. At p.183 is found evidence coming in without anyone knowing about it, also at p.187, and p.195.

32. There was a portion of evidence given in the inquiry about a date and a witness said that he could recollect something because it had been raining. The Tribunal had heard from one for its counsel who said as follows :

" Miss CHAN said that, according to the Royal Observatory, it rained all day in Admiralty and Tsim Sha Tsui on 20th April 1993, but virtually no rain was recorded on 17th May 1993. ..."

Now that in itself appears insignificant. It is what then follows that assumes importance.

"The Chairman said that Counsel should ensure that this piece of information, together with other additional evidence recently presented before the Tribunal, should be made available to all parties."

The Chairman then recognized that what he had been doing was indeed receiving evidence in private and he obviously realized that it ought to be made available -

it never was. Nothing ever happened. All these matters, as I said, took place in secret, behind closed doors.

33. The next important event is that the Chairman now goes on his holiday. When he came back, there is a meeting on 7 October 1996, an hour and a half meeting (at p.197). At the forefront of the minutes is found this :

" Scott Inquiry

The Chairman said that whilst he was on leave in London, he had met with Mr Christopher Muttukumaru, Secretary to the Scott Inquiry who provided him with useful references for the conduct of an inquiry. Mr Muttukumaru, who is a very experienced barrister, sent letters on behalf of the Inquiry in the name of Secretary to the Inquiry. The Chairman said that, if appropriate, the Tribunal would follow this practice and send letters to the parties through Secretary to the Tribunal in those areas where it was not appropriate for Counsel to the Tribunal to send letters to the parties.

The Chairman went on to say that one of the cardinal considerations of the Tribunal is the question of fairness. Tribunal inquiries are inquisitorial in nature, not adversarial. Following the practice of Scott's Inquiry, the Chairman intended to adopt the procedure of sending the 1st draft report to persons under criticism. This would enable the persons in question to have the earliest opportunity to comment on the content of the report. The Tribunal could then consider all possible points raised in their submissions before publication of the final report. This would be an effective way to avoid unnecessary appeals in future. ..."

The Chairman said that one of the cardinal considerations of the Tribunal was the question of fairness. What he actually achieved was the exact opposite. In his affidavit, the Chairman said that he had also met Miss Baxendale Q.C., counsel to the Inquiry.

34. Unfortunately, the Chairman failed to appreciate that the Scott inquiry was a report to the Ministry of Trade. It had taken place over a long period of some three years. It interviewed and had dealings with very senior Cabinet Ministers. It criticized persons but it did not find them guilty of anything. As I said, it was a vast inquiry over three years and it ranged over a variety of topics. The Insider Dealing Tribunal has specific objects and decisions to make. He also misapplied what he considered to be a fair procedure as will be seen later.

35. I should indicate at this point that the two applicants before me today were Malaysian citizens who lived in Malaysia. They did not come to Hong Kong, they had solicitors on the record and communications took place between the solicitors and the Tribunal. They made it clear that their clients were unwilling to come to Hong Kong. They had given a statement and been interviewed by the Securities and Futures Commission and that report was before the Tribunal.

36. There had been considerable discussions between the Tribunal and its counsel about whether counsel should go to Malaysia and then whether the Tribunal should go there. However, Mr Davies said the Tribunal had no legal status in Malaysia. It could only sit informally and evidence could not be taken under oath. There was no jurisdiction to enforce the attendance of the witnesses and no sanction against any witness who left in the course of the hearing. His personal view was that the Tribunal should abort the trip to Malaysia. Unfortunately the Chairman took, again, no notice of these warnings that kept coming his way. The minutes record : "After some discussions the Chairman concluded the trip to Malaysia was necessary and justified."

37. It is conceded by Mr Ma S.C., although it is not necessary to make any specific findings, that this domestic Tribunal had no legal right to sit in Malaysia. This, in my judgment, is another instance of the Chairman taking a dogmatic approach to something that really was impossible to achieve. There were then communications between the solicitors and the Tribunal. In my judgment, there was a very substantial waste of time over this aspect.

38. On 22 October 1996, there was an important meeting of just over two hours when the Chairman and members and counsel met again, and this is what the minutes are headed : "The Chairman said that the purpose of the meeting was to discuss the evidence of Tan Leong Min and Tan Fo King". There is a discussion about giving evidence in Malaysia. But the Tribunal discussed at length the evidence of the 1st applicant and they set out a number of matters. At the very end of this section, it says "All the aforesaid points suggested that TLM was the beneficial owner of the 760 million shares and thus connected with persons in Paragon."

39. This appears to me to be a clear finding of guilt before closing submissions in the absence of the parties, indeed this was Counsel taking part in the essential issue that was before the Tribunal. On this ground alone, I would be entitled to quash this decision.

40. The Chairman asked counsel to sum up all the evidence including the page numbers in note form to support the allegation that the 1st applicant was the beneficial owner and other persons were simply his nominees. Then we have a paragraph which is a matter of important evidence coming in through the backdoor, this is what it says :

"According to Immigration Records, the applicant and another person were in Hong Kong whenever significant events concerning Paragon took place. On one occasion they arrived on 9th March and left on the 10th, the two days when resolution of minutes were passed and two other persons appointed as directors. The Tribunal noted that the lady went to Beijing and the applicant departed for China on 27 March. Miss Chan, his counsel, would draft an authorization to the Immigration Department to find out which city the applicant went to."

It is not only a discussion on the evidence, it is giving counsel authority to get new evidence in which would be taken on board, and as I said, no one knew anything about this. The position I have postulated earlier about some member of the public or the press looking at the official transcript would not find anything about these matters here.

41. There is a reference in one of these meetings to the Chairman asking counsel to do research on how penalties should be handed out among a number of insider dealers. I wonder why he wished to have that done at that time.

42. There is another remarkable change of procedure with regard to closing submissions. The Tribunal discussed at length whether the question of fairness would arise if counsel gave their submissions to the Tribunal by installments. The Chairman said that counsel for the Scott Inquiries sat with the Tribunal and even sent a notice to invite comments and statements from the parties. The final decision of course rested with Sir Richard Scott himself. The Chairman emphasized that the role of counsel at this stage was to assist the Tribunal probing the truth of matters but not to form part of a panel which decided the guilt of the implicated person. That is what he said. That is not the appearance, in my judgment, that these minutes give.

43. Then comes a matter which is obviously praying on everyone's mind - Mr Davies had raised it - about the role of counsel and it says this :

"After some discussions, it was agreed that the Tribunal should remove any possible false impression the parties might have. Mr Davies is to redraft the letter to dispel any misunderstandings of the role of counsel to the Tribunal."

I do not know, because there is no evidence placed before me, how the parties knew what was going on. Whether indeed it was rumours that were getting back to the Chairman that there were substantial disquiet about what was happening, I know not, but it was obviously a matter which was on their minds that now the parties were going to have to be written to to tell them about the role of counsel. There was no letter ever sent.

44. There was then a meeting on 30 October there was a discussion about Mr Felix Wong - who was an implicated person - and deliberations and conclusions were being reached about his connection with the applicants.

45. There were conclusions about TLM and TKF (p.217 and 218) :

" TLM

5. TLM was very closely connected with TKF. They were so-called 'brothers' and TLM called TFK 'son'. They shared the same office premises. TLM was present at the first dinner. Some of the proceeds of sale of shares eventually went to his account. There were strong indications that TLM :-

(a) supplied information to TFK as a tipper;

(b) was involved in the funding for the purchase of Paragon shares; and

(c) received some of the proceeds from the sale of shares.

6. Apparently TLM, TFK and FW were involved in the deal and TFK learnt about the takeover proposal from both TLM and FW. If TLM tipped TFK, TLM would be a tipper and an insider dealer under the Ordinance.

TFK

7. Assuming both TLM and FW passed to TFK the relevant information, TFK's role in the purchase of Paragon shares might fall within one of the following scenarios :-

(a) he bought on his own as a principal;

(b) he bought as an agent on behalf of TLM/FW; and

(c) a mixture of the above, i.e. he acted as an agent for TLM/FW and bought some shares on his own.

46. The Malaysian trip was still being discussed. The Chairman then said at p.219 on future procedures -

"The Chairman informed Mr Davis that the Tribunal wished to review the draft submission that Mr Paul Shieh was working on. Mr Davies said that this was not the proper procedure."

In other words, the Chairman himself was now going to look at counsel's written submission, not only was counsel going to do the Chairman's job apparently, but the Chairman was going to do counsel's job and Mr Davies quite rightly said this was not proper. Then he says :

"In any event, there was a disagreement between him and Mr Paul Shieh on the approach to the evidence. The Chairman questioned what the Tribunal should do in such a case where counsel disagreed."

Again, it is a clear indication that the Chairman did not realize what his responsibilities were. How a judge or a Tribunal member could think that he could influence what these supposedly independent counsel were saying in their closing submissions, I find very surprising.

47. [The final meeting on 25 November showed how unhappy counsel were with this procedure.]

48. At p.221 to which I shall come to later concerning the Malaysia trip, is also found another strange procedure - that the Chairman wanted written submissions to be exchanged. This was a most odd thing to happen. How could members of the public know what was happening if everything was just to be done in writing and indeed how could the parties know what was being said unless the proper procedure is followed.

49. I well understand, in this type of inquiry or long cases, people wanting written submissions. But, nevertheless, they must still be public : they can be highlighted, when the press is there. The press may want to know what is happening, how the case is going on. And the Chairman said this about these conferences :

"The Chairman explained that his understanding was that these conferences were incidental and conducive to the Tribunal in the writing of its report after conclusion of the evidential part of the inquiry. The question there and then raised was in the context of the propriety of counsel to attend these conferences."

Again these matters were obviously troubling everybody. How this was precisely getting back, I am not quite sure, but counsel must have been deeply troubled, no doubt by discussions with fellow members of the Attorney General's Chambers about what was really going on here. And the Chairman says this :

"Once Counsel has handed in their closing submissions, the Tribunal would deliberate on the findings by itself. Counsel were never expected to take part in the deliberation of the Tribunal in reaching its findings of fact."

That unfortunately just did not happen. There is clear evidence which I shall demonstrate, that the Tribunal was actively involved in discussions with Mr Davies once the report was being written.

50. The minutes of 4 November might be read in full for its full impact.

51. And so the matters go on. I do not refer to all in detail, but the end of the year came and these meetings stopped in November 1996 and the Chairman says in his affidavit that he started writing the report sometime in January 1997.

(3) The Chairman had publicly stated at a public hearing that he would send a first draft report to the implicated persons and the persons likely to be criticized - there had been a short meeting for some evidence and then the Tribunal was closed. So when everyone went away, the parties, the public and the press knew that the Chairman was on record as saying that a first draft would be sent out. Whey he wanted a first draft, I fail to understand, but I suppose this was because he thought it was in line with the Scott inquiry. What then happened was that on 21 March (at p.281) he has a communication with Mr Peter Davies :

"I am instructed to enclose herewith the first draft report. Please go through these chapters. The Chairman would like your team of counsel to check the accuracy of all the basic or primary facts."

A number of matters are set out. The answer comes (a six-page letter) at p.301 which makes comments upon a number of matters. Mr Davies had been asked to deal with penalties, obviously someone has warned him off this subject, because he said :

"I should state here it is my present view that apart from providing assistance when requested, it would not be proper for me to make any submissions in respect of penalties to be imposed.

With regard to para.2 it would not be proper for me to comment on primary facts. These are the sole province of the Tribunal in commenting upon the draft report, I have reminded myself at all times that I must not get involve with judicial process."

Obviously someone is telling Mr Davies to be very careful about what was happening. He makes a number of comments, which can be read in these pages, on that draft report.

52. I should have added that of course when the inquiry was closed, the written submissions were just handed in. It was not done in the proper manner so that counsel would know precisely what was going to be alleged against their clients.

53. On 9 April, the Chairman wrote back :

"The Tribunal is grateful for your useful and constructive comments and is taking the appropriate steps in its deliberation. Incidentally the Tribunal finds it entirely appropriate for you as counsel to express your views even on those secondary findings of fact by way of inference as you did in your letters."

He then sent out the first draft report, or portions of it, to some persons. He does not send it to the people he publicly announced would get it, that is these two applicants never received it. The Chairman says in his affidavit that whilst writing his report, he changed his mind. It is a great pity he never told anyone about it. Anyone picking up the transcript would know that he was sending it to the two applicants. He said he changed his mind. That is not even a correct statement, because he did send a portion to Mr Wong who was one of the implicated person.

54. At p.335 comes an important letter. A portion of this draft report had now gone out. As I said the applicants knew nothing about this at all. They did not know what was happening, but another firm of solicitors had become involved, Baker & McKenzie, a well known firm of Hong Kong solicitors, acting for someone (I am not going to give his name) who is criticized and they gave evidence and made submissions on behalf of this person. They dealt with matters of evidence and on 23 April Mr Davies says this (referring to the latest draft letter from the Chairman) :

"With regard to the draft letter to Baker & McKenzie, I feel there is danger of considerable confusion unless the Tribunal first ascertains what is intended by the letters. The main point being the Tribunal only expects them to comment upon evidence already adduced and not to seek to re-open the inquiry by introducing new evidence."

He had obviously recognized that this is in fact what was happening. Baker & McKenzie wrote a letter saying that the letter can be made available to Mr Wong's solicitors and counsel and other interested parties generally. This just did not happen.

55. And then at p.361 (we are now in May), a letter to Mr Davies from the Tribunal :

"The Tribunal would like you to proof-read the whole report give us your comment thereto which you consider appropriate for you as counsel to the Tribunal."

I would have thought that would mean proof-reading in the sense of correcting grammatical errors or very minor matters. The answer comes at p.368 which is a nine-page detailed document, nothing to do with proof-reading and he deals with a number of persons. He deals with a person whose name I do not wish to refer to in public "W", and he heads it. "But why does this man not receive criticism" and makes his comments and detailed submissions to deal with the applicants and it is as far removed from proof-reading as one could possibly find.

56. At p.389, the Chairman sent off the report but it does not contain the penalties as is prescribed in the Ordinance.

57. I have only identified certain parties of the Minutes. To get the complete picture of what was happening they must read in full.

58. Now what does all this amount to.

59. Apart from the role of counsel acting as the Tribunal, much has been hidden because of this private correspondence. The applicants have never been given the draft report despite the Chairman saying that they would. The exchange of written submissions was not only unusual, it was unfair. Nobody knew about them. This was a public inquiry and the public should have been informed of what was said. While written submissions are useful, a summary could have been given in open court. The applicants were not there, but this does not mean that their interests should not be protected. Indeed, it might be said that a Tribunal or a Judge should protect a person's interest more closely, when they are absent. They did not know about these matters :

(1) all the new evidence the Tribunal received;

(2) the written submissions;

(3) the draft report;

(4) Mr Wong who was sent an extract and made comments, they did not know about his comments;

(5) the comments of the criticized persons;

(6) the Baker & McKenzie letters and their submissions on the evidence which may well have affected them.

I should add that the draft report was destroyed. These were serious irregularities about which the applicants can justifiably complain. They just were not treated fairly.

60. I deal now with four other matters.

(1) The prosecution of the 1st applicant Dato Tan Leong Min

61. The minutes indicate that the Tribunal was getting fed up with the fact that he and the other applicants stayed in Malaysia as, of course, they were entitled to do. The discussion about the Tribunal going to Malaysia was a complete waste of time. The Tribunal had from an early time taken what might be described as a hostile attitude to them both. It appeared to prejudge the case against them. I do not consider it necessary to make any specific finding on this. There are so many other grounds on which I can strike this decision down, but I find that the issue of a witness notice that was given to the applicant T.L.M. at Kai Tak Airport appears to have been motivated by spite because of the Tribunal's attitude of what it thought was a lack of co-operation with it. This notice which was on plain paper, not even on headed note paper, was given to T.L.M. on his way back to Malaysia. The Tribunal, as it is clear from the minutes, for some reason, had authorized the Securities and Futures Commission who have authority to order airlines to disclose passenger lists and had discovered that this man would be going through Hong Kong. From where the Tribunal gets this power, I am not quite sure. The notice was in reality a sham, designed, I consider to cause T.L.M. embarrassment and to suffer a potential criminal penalty. This aspect of the case does not affect my decision, but the subsequent prosecution was unjustified. Fortunately for him, he was acquitted and unfortunately for the Tribunal and its counsel, it has led to the revealing of what had been going on behind closed doors and how unfairly the parties and public had been treated.

(2) Authorities

62. Numerous authorities have been cited about the role of counsel or legal adviser to a tribunal.

63. Mr Ma S.C. cites Dale v. New South Wales Trotting Limited [1978] 1 NSWLR 551 for his proposition that counsel can assist in any way as long as the decision is that of the Tribunal; and counsel do not behave improperly. This was a "bias" case, but as was said at p.558 :

" I can see, for example, not the slightest objection to a committee calling upon its legal assistant to analyse the evidence, and to give advice on questions of credibility. All this can be done by him and the committee in conclave together. His Honour expressly held that Mr Conti was technically at fault in conferring with the Committee in the absence of the plaintiff's representatives. In my opinion, this is to misconcieve the role which an assistant in this position performs. If the Committee wants its advisers to confer with it privately on any matter arising in the course of appeal, it is entitled to have that assistance.

As this is a consensual tribunal, and the plaintiff has agreed to submit himself to an appeal conducted in accordance with the rules, he cannot object to the Committee taking any steps which are consistent with the rules and cannot, in objecting, rely upon other methods and other standards required in tribunals which have a statutory or non-consensual basis."

The Insider Dealing Tribunal is a statutory tribunal.

64. Mr McCoy S.C. cites Stollery v. Greyland Racing Control Board [1973] 128 CLR 509, and Murdoch v. New Zealand Mill Board [1982] 2 NZL 108 when the Court struck down instances when the legal adviser became involved.

65. All these cases turn on their particular facts, the type of tribunal and the statutory instrument under which they are held. If they demonstrate one thing, it is this - counsel to an inquiry must be treated with caution so that they do not become, nor are seen as becoming, part of the tribunal.

66. Further, older cases utilise phrases such as "natural justice". Nowadays, the phrase used is simply "fairness". Has the applicant been given "fair play" - see R. v. Chief Constable Ex P. Cotton [1990] 1 IRLR 344.

67. I have also had regard to useful analyses - a full chronology, dates and times when the Tribunal sat in public and voluntary particulars given by Mr McCoy of instances of the Tribunal evaluating the evidence and taking on board new evidence in the absence of the parties, and of private communications between the Tribunal and Mr Davies and other persons.

(3) Writing of the report

68. There is no doubt that the Chairman, as he says in his affidavit, did write the report. The challenge however is to the process which led to the report. The applicants submit it was "ghost-written" by counsel. I do not have to come to any decision on this, but I find that counsel did have a substantial input into the contents of the report, not just factually but also with regard to the conclusions of those adjudged to be insider dealers. This aspect, however, is not a ground of challenge.

(4) The attitude of the Tribunal

69. The more modern practice when various tribunals are subject to judicial review is for them to take a neutral role, and to provide the court with as much information as possible, so that a just result follows. Here the Tribunal has taken an aggressive attitude to justify the strange procedure it adopted. It might have been better had the Financial Secretary conducted the opposition to this challenge rather than the Tribunal itself. However, counsel for the Tribunal, Mr Geoffrey Ma, is a well respected Senior Counsel and he has presented his submissions with moderation. Also, I have had the benefit of Mr Peter Graham. Most of his conclusions coincide with mine. The only criticism I make is that the Tribunal fought long and hard to prevent these minutes being disclosed. This was wrong. They are under a duty to assist the court and as has been said, should put all their cards on the table. See for example, R. v. Lancashire County Council Ex-p. Huddlestone [1986] 2 AER 941. It may be that someone recognized the serious impact these minutes would have once they were disclosed.

CONCLUSION

70. The only beneficial matter to come out of this case is that it highlights the important principle that before a person can be convicted at this type of Tribunal of insider dealing, or at a criminal court on a criminal charge, the evidence is presented and considered openly, and a person will always be dealt with in a fair manner. Although the phrase "justice must be manifestly seen to be done" is often quoted, it is nevertheless a fundamental cornerstone of our legal system and its importance must never be eroded. This principle was ignored by the Tribunal. I must not permit the findings of the Tribunal to stand. I therefore quash them.

71. What action the Financial Secretary now wishes to take is a matter for him. I shall listen to counsel to see what orders I should make, but essentially I quash all the findings of the report given by the Tribunal. If the Financial Secretary considers that he wishes to have another inquiry, it should be before a differently constituted Tribunal.