KOON WING YEE v. THE SECURITIES & FUTURES COMMISSION

CACV 369/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 369 OF 2007

(ON APPEAL FROM HCAL NO. 7 OF 2007)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from a judgment of Saunders J given on 2 November 2007.  The matter before the judge was an application for judicial review.  The judge dismissed the application.  At the conclusion of the hearing of this appeal, this appeal was dismissed with reasons to be given in writing.

Background

2.  The application for judicial review in this matter concerned a notice, dated 28 December 2006, issued under section 183(1) of the Securities and Futures Ordinance Cap. 571 (“the Ordinance”), to attend an interview on 8 January 2007.  The notice had been issued by an investigator under section 182(1) of the Ordinance who had been directed by a delegate of the Securities and Futures Commission to investigate matters relating to false trading and/or price rigging and/or stock market manipulation that may have occurred during or around the period from 26 August 2004 to 5 November 2004 in relation to dealing in shares of CITIC 21CN.

3.  The applicant had attended one interview with the investigator on 27 December 2006.  At that interview the applicant had not been accompanied by a lawyer.  He had, however, refused to answer any questions and stated that he wished to have the interview postponed until after the hearing of his appeal to the Court of Final Appeal in relation to insider dealing which had taken place in 2000.  It would appear that immediately following that interview the notice that was the subject of this application was served.  On the same day the applicant’s solicitors sent a letter to the Commission, seemingly in relation to an earlier letter from the Commission, in which it was stated that the proposed interview and questioning was unconstitutional as it breached the Bill of Rights and the Basic Law.  It is to be assumed that what was referred to was the interview which did in fact take place the previous day.

4.  There then ensued further correspondence between the applicant’s solicitors and the Commission.  The applicant did not attend the interview on 8 January 2007 and on 16 January a summons was issued requiring the applicant to answer the charge that he had failed to answer questions raised by the investigator on 27 December 2006.  Two days later, the application seeking leave to apply for judicial review to quash the “notice to attend an interview dated 28 December 2006” was issued.

5.  The first basis on which the application for judicial review was put was that the assertion by the delegate of the Commission that he had reasonable cause to believe that designated offences had been committed did not satisfy the requirements of the Ordinance for the institution of the investigation because, as it was put in the grounds for relief, it was for the Commission itself and not a delegate to hold the requisite belief.  The application for leave to bring judicial review proceedings was supported by an affirmation of the applicant the relevant paragraph of which read:

“I am advised by my legal advisers, and verily believe, that the said Notice is defective because the preceding Direction to Investigate purportedly issued under section 182(1) of the Ordinance is invalid as the statutory pre-requisite for such a Direction to Investigate is lacking, namely, under section 182(1) of the Ordinance, that the Commission has reasonable cause to believe that, the alleged offences have been committed.  I am advised that it is neither sufficient in form nor substance for an officer of the Commission, as a delegate thereof, to say that he has the requisite belief.”

6.  Not surprisingly when the application for leave to apply for judicial review was heard before the judge below, the judge rejected that ground as unarguable.  It would seem, however, that the argument then ranged on the second proposition under the grounds for relief.  As a result the judge granted leave to apply for judicial review, limited to the question as to whether or not the removal of the right to silence in relation the requirement to answer questions pursuant to a Notice issued under section 183(1) of the Ordinance, and in relation to proceedings before the Market Misconduct Tribunal, is in breach of Art. 11(2)(g) of the Bill of Rights: see paragraph 32 of the judgment of 1 February 2007.

7.  The form 86A was amended and that part of the grounds on which relief was sought relating to the question of delegation was struck out and what remained were assertions that because the person subject to a notice was compelled to answer questions and the right of silence had been abrogated under the Ordinance there was a breach of the Bill of Rights because orders that could be made by the Market Misconduct Tribunal could be penalties and thus in effect the proceedings would be criminal in nature.

8.  It is to be noted that the relief sought still remained the same, namely to quash the notice to attend an interview.  Perhaps more importantly, there was no new founding affidavit and hence the only evidence from the applicant related to his belief that the delegate was not empowered to form a belief because that was the province of the Commission.

9.  When the matter came to be argued in October 2007 the point was raised that the appellant’s argument was premature, primarily because there were no Market Misconduct Tribunal proceedings then on foot and there might never be any.  In order to counter that argument the appellant’s counsel sought to add further relief to that which was claimed namely 4 declarations which were as follows:

“   (I)    Proceedings in the Market Misconduct Tribunal as provided for by the Securities and Futures Ordinance, Cap 571, are criminal in nature for the purposes of the Hong Kong Bill of Rights Ordinance, Cap 383, by reason of which the guarantees and requirements set forth in Article 11 of the Hong Kong Bill of Rights Ordinance are of application to the protection of persons subject proceedings in the said Tribunal.

    (II)   Further, the requirements of Article 10 of the Hong Kong Bill of Rights Ordinance in respect of a fair hearing by an impartial tribunal established by law are not satisfied by the Market Misconduct Tribunal.

    (III)  The abrogation of the privilege against self-incrimination of a person the subject of investigation as effected by Part VIII of the Securities and Futures Ordinance is disproportionate, by virtue of the matters declared in (I) and (II) above and Article 14 of the Bill of Rights Ordinance.

    (IV)  By reason of the matters declared in (III) above, it is lawful for a person the subject of an investigation under Part VIII of the Securities and Futures Ordinance to refuse to answer any question on the grounds that such uncertain (presumably “answers”) may incriminate him.”

10.  Whilst Sir John Swaine, who appeared on behalf of the applicant, maintained that the relief of certiorari was still sought, it was clear that the declarations had been sought in an attempt to obviate the difficulty raised by the objection that the application was premature and hypothetical; Sir John Swaine said that the declarations had been sought as a “springboard” to certiorari.

11.  The judge accepted that there were many possible outcomes to an investigation by the investigators of the Securities and Futures Commission (“SFC”).  Amongst those alternatives, which are set out in paragraph 9 of his judgment, are that there might be no proceedings bought before the Market Misconduct Tribunal or proceedings might be brought against persons other than the applicant.  The judge held, on authority, that there was nothing in the Bill of Rights which gave a person protection from legislation requiring him, on pain of penalty, to answer questions put by an investigating authority.  What the Bill of Rights did was to give a person protection from his answers being used in criminal proceedings against him or from being compelled to give evidence in criminal proceedings against himself.  As the judge pointed out, the applicant was not subject to a criminal charge or proceedings in the Market Misconduct Tribunal, at any rate at present.

12.  On this appeal, Sir John Swaine sought primarily an order that the matter should be remitted to the Court of First Instance for the matter to be decided on the basis that the judge wrongly came to the conclusion that the application for judicial review was premature.  In my view, had this court disagreed with the judge as to his conclusion in this respect I would have considered it the function of this court to reach its own conclusion on the judicial review application.

13.  In my view, the judge was correct in his conclusion that the application for judicial review, even on the basis on which it was ultimately presented, was premature and hypothetical.  The SFC was using its statutory powers to conduct an investigation and that it was perfectly entitled to do.  If and when any attempt were made to use material in a manner which the applicant considered would be in breach of the Bill of Rights, then that would be the time when some objection could be taken.  Likewise, if it were considered that any future proceedings before the Market Misconduct Tribunal were criminal in nature by reason of the orders that could be made and that the proper safeguards for those subject to such proceedings were not in place, then, again, appropriate proceedings might be taken.  But that is not the case here.  It is no exaggeration to say that if the SFC were to be prevented from asking questions of the applicant, its role in an investigation might be stultified.

14.  I would also add that the course these proceedings have taken is in itself questionable.  In essence, the proceedings were started on the basis that the SFC had no grounds for issuing a notice and requiring the applicant to answer questions.  That was the basis of the original application, and the basis of the founding evidence.  The basis of the proceedings has been changed.  The basis now is not that the SFC does not have grounds for issuing the notice but rather, impliedly, that there must be strong grounds because the applicant is liable to incriminate himself by any answers he gives.  It is pertinent to observe that nowhere has the applicant attempted to justify such fears.

Hon Le Pichon JA:

15.  I agree.

Hon Stone J:

16.  I also agree.

17.  In light of recent authorities, I confess that I wrestled with what I might term the ‘prematurity argument’, which is that which found favour with the learned judge in the court below.

18.  Nor do I think that the success of this contention, both in this court and below, is likely to prove any more than a Pyrrhic victory for the regulator, in that clearly the issues raised will fall to be decided sooner rather than later, albeit I express no view as to whether such will, or will not, occur within the context of any application by this particular applicant in the instant proceedings.

19.  In the event, however, I came to the conclusion that the judge was entitled to take the view that he did, although at the same time I would respectfully venture the observation that, if a case-study ever was to be required in order to demonstrate how judicial review proceedings ought not to be conducted, this particular case would fit the bill admirably.

20.  Fortunately it is not a frequent event that a significant part of an appeal is occupied, as was the situation in this instance, by the court attempting to elicit from counsel precisely that which procedurally had occurred below; nor, if I may respectfully   say so, is it entirely clear why in the circumstances it was thought necessary, on 28 February 2008, to grant a stay of execution, pending the hearing of this appeal, of the Order dated 2 November 2007 dismissing the judicial review application.

21.  Be that as it may.  In my judgment it was appropriate that this appeal should have been dismissed with costs, for the reasons adumbrated by the Vice President.