DR PETER PO FUN CHAN v. THE HONG KONG SOCIETY OF ACCOUNTANTS

HCAL 176/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 176 OF 2000

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J U D G M E N T

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1. The Applicant has sought leave to apply for the judicial review of two decisions of the Respondent, the Hong Kong Society of Accountants ('the Society'). Both decisions relate to the institution of disciplinary proceedings by the Society against the Applicant.

2. Although applications for leave in terms of O. 54, r. 3 of the Rules of the High Court may be considered without a hearing, in this instance the Court directed that there be an oral hearing and that an opportunity be given to the Society to appear and be heard.

A brief history

3. On 29 July 1999, the Society received an undated, anonymous letter. Enclosed with the letter was a set of company accounts. These accounts had been prepared by the Applicant's firm for one of its clients. The letter read:

"I write to draw the Society's attention to the professional standard of practising accountants in Hong Kong.

I have a Master's degree in Accountancy and hold memberships of both the Australian Society of Certified Public Accountants and the Hong Kong Society of Accountants (the "Society"). I am now working as an assessor at the Inland Revenue Department.

In an assessment of the accounts of a limited company (see attached), I found that the quality of the financial reports far below standard, in particular when (sic) the "group accounts" and "revenue" items are concerned. They are basically not in compliance with the requirement of the Statements of Standard Accounting Practice of Hong Kong. This is the reason for my sending this letter and the relevant materials to the Society.

It is hoped that the Society would handle this case with the spirit of enhancing the standard and status of the professional accountants. I will carry on providing information about other sub-standard accountants to the Society."

4. If, as professed, the author of the letter was employed by the Inland Revenue Department and if, as alleged, the accounts had been received by that department in support of a tax return, then the author was committing a criminal offence by making the accounts public. In this regard, section 4(1) of Inland Revenue Ordinance, Cap. 112, reads:

"Except in the performance of his duties under this Ordinance, every person who has been appointed under or who is or has been employed in carrying out or in assisting any persons to carry out the provisions of this Ordinance shall preserve and aid in preserving secrecy with regard to all matters relating to the affairs of any person that may come to his knowledge in the performance of his duties under this Ordinance, and shall not communicate any such matter to any person other than the person to whom such matter relates or his executor or the authorised representative of such person or such executor, nor suffer or permit any person to have access to any records in the possession, custody or control of the Commissioner."

5. Section 81 of the same Ordinance provides that any person who acts contrary to the provisions of section 4(1) or who 'aids, abets, or incites any other person' to act contrary to the provisions of that section shall be guilty of an offence.

6. The anonymous letter was given to the Registrar of the Society who, being aware of the secrecy provisions of the Inland Revenue Ordinance, wrote to the Commissioner of Inland Revenue. His letter of 6 October 1999 was couched in the following terms:

"The Society has received an anonymous letter from a person who claims, inter alia, to be a member of the Society and an assessor of the Inland Revenue Department. Attached to that letter is a copy of the accounts of the above Company with auditors' report. A copy of the letter together with a copy of the accounts of the Company are enclosed.

In the letter, the complainant claims that he or she came across the accounts whilst assessing or auditing the accounts of the Company. We take this statement as referring to the complainant coming across the accounts of the Company whilst acting as an assessor of the Inland Revenue Department.

Under the Professional Accountants Ordinance, the Society is empowered to hold inquiries into the conduct of professional accountants. However, the Society is mindful of Section 4 of the Inland Revenue Ordinance which imposes a duty on assessors to preserve and aid in preserving secrecy with regard to all matters relating to the affairs to any person that may come to their knowledge in the performance of their duties under the Ordinance.

As the letter was anonymous, the Society is not in a position to come to a view as to whether it would be appropriate for the Society to make use of the accounts in the exercise of its regulatory powers under the Professional Accountants Ordinance.

We should be grateful if you would look into this matter and let us know whether you would have any objection to the Society making use of the accounts in the exercise of its regulatory powers under the Professional Accountants Ordinance in such manner as the Society may deem appropriate."

7. By letter dated 8 October 1999, the Commissioner replied:

"I have looked into the matter and would inform you that I have found no evidence indicating that the anonymous complainant is an officer of this Department or that the copy of accounts came from this Department. I regret that we cannot be of further assistance."

8. In light of this reply, the Society's Director of Professional Conduct wrote to the Applicant (who is a member of the Society) to inform him that the Society had come into possession of the accounts prepared by his firm. The Director then sought the Applicant's comments on a number of observations that had arisen from his review of the accounts. No mention was made in that letter of exactly how the accounts had come into the Society's possession; that remained an open question.

9. Correspondence then ensued between the Applicant and the Society related essentially to the merits of the accounts under review. This culminated in a letter dated 8 March 2000 from the Society advising the Applicant that the Registrar had filed a complaint concerning the manner in which the accounts had been prepared and that a hearing of the Disciplinary Committee of the Society may take place in due course. A copy of the Registrar's complaint was made available to the Applicant.

10. In response to the letter of 8 March 2000, the Applicant sought to learn the manner in which the Society had come into possession of the accounts. His letter of 9 March 2000 read (in part):

"My legal advice preliminarily is that you must have lawful access to that Report [the accounts] before you may lawfully make the complaint. You do not have to tell me now how you got the Report or how the Report came into your hands (which I will request before the hearing). If the Report was secured by unlawful means, the person making the complaint has to be criminally liable. Please make sure to let me know as soon as convenient that the Report comes to your hands in a lawful manner, so that I will begin to prepare my defence."

11. The Society then supplied a copy of the anonymous letter together with copies of its correspondence with the Commissioner of Inland Revenue.

12. At about that time, it appears that the Applicant himself agreed with the Commissioner that the origins of the anonymous letter could not be known. First, by letter dated 30 October 1999 he had informed the Society that he had been forced to request 2 qualified members of his own staff to seek work elsewhere, one of whom possessed Australian qualifications. The authorship, therefore, may have lain elsewhere than in the Inland Revenue Department. Second, on a general basis, in a letter dated 15 March 2000 the Applicant wrote:

"The anonymous letter may be originated anywhere. Government departments and regulating authorities, such as ICAC, SFC, Commercial Crimes, receive this kind of letters by tens and tens a day. The view of the Inland Revenue is obviously correct." [my emphasis]

The decisions that the Applicant seeks to quash

13. The Society is a creature of the Professional Accountants Ordinance, Cap. 50. Its statutory objects are set out in section 7 of the Ordinance and broadly encompass powers of regulation of the accountancy profession in Hong Kong. These powers of regulation include the power to discipline members. In this regard, section 34(1)(a) reads:

"(1) A complaint that -

(a) a professional accountant -

(i) ...

(ii) ...

(iii) ...

(iv) has been negligent in the conduct of his profession; ...

shall be made to the Registrar who shall submit the complaint to the Council which may, in its discretion ... refer the complaint to the Disciplinary Panel."

14. As to the manner in which complaints made under section 34(1) of the Ordinance are to be processed, Rule 3 (1) and (2) of the Disciplinary Committee Proceedings Rules, made pursuant to section 51 of the Ordinance, reads:

"(1) A complaint under section 34(1) of the Ordinance ... regarding a respondent shall be in writing and signed by the complainant, and shall be made to the Registrar who shall submit the complaint to the Council.

(2) The Council may require the complainant to set out the grounds of his complaint and, except where the complaint is in writing under the hand of a public officer, supported by one or more statutory declarations as to the facts of the case."

15. The Ordinance, however, envisages another means by which reports of misconduct or negligence may be referred to the Society's council. In this regard, section 34(1A) reads:

"Where the Registrar has reason to believe that subsection (1)(a) or (b), applies to a professional accountant ... he shall submit the facts to the Council which may, in its discretion, refer the complaint to the Disciplinary Panel."

16. Section 37 of the Ordinance, which governs the matter of legal representation at hearings of the Society's Disciplinary Committee, clearly contemplates these two separate processes of complaint, the one by a complainant and the other by the Registrar. In this regard, subsection (1) reads:

"(1) At the hearing of a complaint -

(a) the complainant, or his solicitor or counsel; or

(b) the Registrar or his solicitor or counsel or some other person appointed by the Registrar to represent him

...

shall present the case against the accountant whose conduct is the subject of proceedings under section 35."

17. The formal complaint submitted by the Registrar to the Council of the Society was dated 28 February 2000. It is a comprehensive document which states at the outset that it is made by the Registrar to the Council in terms of section 34(1A) of the Ordinance, the allegation being that the Applicant has been negligent in the conduct of his profession in terms of section 34(1)(a) of the statute.

18. The two decisions sought to be quashed by the Applicant are, first, the decision of the Registrar to file a complaint and, second, the decision of the Council to refer the complaint to the Society's Disciplinary Panel, both decisions being made pursuant to section 34(1A) of the Ordinance.

Grounds upon which the Applicant seeks relief

19. The Applicant's first ground is focused on sections 4(1) and 81 of the Inland Revenue Ordinance. Section 4(1) imposes an obligation of secrecy on persons employed by the Internal Revenue Department. Section 81 makes it a criminal offence to breach section 4(1) or to aid, abet or incite a person to commit such a breach.

20. In light of this, it is the Applicant's contention that, by acting upon material received from a person purporting to be an assessor with the Inland Revenue Department, the Society has aided and abetted the commission of a crime under section 4(1) of the Inland Revenue Ordinance. It is further contended that, as the purported assessor had undertaken to send more sets of accounts, the Society's decision to act on that first set amounted to an incitement to commit further breaches. In case I have done an injustice to the Applicant by incorrectly summarising his first ground, I set out below the relevant portion of his 'amended grounds' for judicial review:

"When these steps were taken both the Registrar and the Council were aware that the source of the complaint was a person purporting to be a Revenue Assessor and thus acting in contravention of S. 4, Cap. 112.

The anonymous complainants purpose has been aided and abetted by the Respondents actions. Further the anonymous complainant has expressed an intention to commit further breaches of S. 4, Cap. 112 "I will carry on providing information about other sub standard accountants to the society". The Respondents actions are an incitement to further breaches of the Ordinance.

In making the decisions complained of the Respondent has acted on information it could only believe to have been illegally obtained and has itself acted in a manner which suggests a breach of S. 4, Cap. 112."

21. In summary, it would appear that the first ground is based upon the principle of 'legality'. However, although it was not argued as such, I have also considered the matter with reference to 'procedural propriety'.

22. The Applicant's second ground, as I understand it, alleges that the Registrar, having received a complaint, albeit anonymous, was under a statutory obligation in terms of section 34(1)(a) of the Professional Accountants Ordinance as read with Rule 3(1) and (2) of the Disciplinary Committee Proceedings Rules to ensure that the complainant was identified, that the grounds of complaint were stated and that he or she signed the written complaint. By proceeding under section 34(1A), the Registrar had either acted ultra vires the statute or had committed an act of procedural unfairness warranting judicial review. In this regard, the Applicant's amended grounds read:

"Construing Section 34(1), 34(1A) and Rule 3 as a whole, it is clear that the power of the Registrar to act as complainant is intended to cater for the case where matters come to the attention of the Registrar other than by way of complaint. Section 34(1A) is not intended for use where there is an anonymous complainant.

In making a complaint under Section 34(1A) the Registrar was deliberately circumventing Rule 3(1) which requires that complaints shall be in writing and signed.

Section 34(1A) specifies that when making a complaint to the Council under Section 34(1A) the Registrar shall submit the facts. Rule 3(4) reiterates this requirement. It follows that when the Council exercised its discretion to constitute a Disciplinary Committee upon the complaint of the Registrar it was in full possession of the facts upon which the Registrar made his decision.

By exercising its discretion to constitute a Disciplinary Committee on the basis of an anonymous complaint made by the Registrar in circumvention of the Rules, the Council itself acted in breach of the Disciplinary Committee Proceedings Rules."

The test to be applied in deciding whether to grant leave

23. Litton JA (as he then was) in R. v. Director of Immigration, ex parte Ho Ming-sai, Civ. App. No. 162 of 1992, said that plainly it is not intended that, in dealing with an application for leave under O. 53, r. 3, the court should anticipate the outcome as if all the relevant evidence was already before the court. It is not intended that the court should, at this threshold stage, entertain elaborate arguments on the facts and the law. In this regard, he cited Lord Diplock in Inland Revenue Commissioners v. National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617 at 643H-644B where he said:

"The whole purpose of requiring that leave should first be obtained to make the application for judicial review would be defeated if the court were to go into the matter in any depth at that stage. If, on a quick perusal of the material then available, the court thinks that it discloses what might on further consideration turn out to be an arguable case in favour of granting to the applicant the relief claimed, it ought, in the exercise of a judicial discretion, to give him leave to apply for that relief. The discretion that the court is exercising at this stage is not the same as that which it is called upon to exercise when all the evidence is in and the matter has been fully argued at the hearing of the application."

24. The test laid down in R. v. Director of Immigration, ex parte Ho Ming-sai supra directs that I must, at this threshold stage, ask myself only whether the material before me has disclosed matters which, on further consideration, might demonstrate an arguable case for the grant of the relief claimed.

A consideration of the Applicant's first ground

25. The Applicant's first ground is propounded on the basis that, in acting on materials accompanying the anonymous letter, the Society 'could only believe' that the materials had been communicated to it 'illegally'; that is, in contravention of the secrecy provisions of the Inland Revenue Ordinance.

26. I disagree. By the time the Registrar acted on the materials accompanying the letter, he had taken positive steps to discover whether or not the author was an employee of the Inland Revenue Department. Officers of that department had conducted an investigation into the matter and had reported that there was no evidence that the author was a tax assessor or that the materials had emanated from the department.

27. A bald assertion in an anonymous letter is not evidence of the truth especially when the author has compelling reasons to disguise his or her true identity. Even the Applicant has accepted that to be the case. If there was, therefore, no evidence that the author of the letter had been bound by the provisions of section 4(1) of the Inland Revenue Ordinance there could be no evidence that there had, in fact, been a breach of that section. Quite properly, in my judgment, the Society did no more than treat the anonymous letter as the neutral vehicle by which the set of accounts was delivered to it.

28. But in any event, even if it was shown that the author of the anonymous letter was an assessor, that would not indicate that the Society had aided and abetted in the commission of an offence under section 4(1). The actus reus of the offence would have been committed at the time that the assessor sent the materials to the Society. When the Society - in ignorance of its contents - opened the anonymous letter and studied those contents, the offence would already have been committed. For a statement of the basic principle, see, for example, Blackstone's Criminal Practice 2000, page 69, where it is said that 'aid' and 'abet' are generally considered to cover, respectively, assistance and encouragement given at the time of the offence, whereas 'counsel' and 'procure' are more apt to describe advice and assistance, given at any earlier stage.

29. In my judgment, it is not tenable to suggest that the officers of the Society - with the requisite mens rea - acted in any way as accessories to the commission of an offence under section 4(1). Nor is it tenable to suggest that, by studying the materials; seeking representations from the Applicant and then deciding on disciplinary proceedings, the officers of the Society were in any way knowingly inciting further breaches of section 4(1). Other than an allegation of dubious authenticity, there was no evidence that the author of the anonymous letter was in a position to breach section 4(1). In my opinion, it is plain that the Society intended to do no more than fulfil its statutory obligations under the Professional Accountants Ordinance. The Society was not reckless as to whether or not the author of the letter was bound by section 4(1) of the Inland Revenue Ordinance. It had already taken rational and positive steps to assure itself that there was no evidence linking the author of the letter to the Inland Revenue Department.

30. What then of the question of procedural propriety? May it be argued that, in accepting the set of accounts for consideration when they had been delivered by such dubious means, the Society had offended contemporary standards of fairness by undermining the Applicant's legitimate expectation that any complaint made against him would emanate from an identifiable source whose motives could (and should) be the subject of scrutiny?

31. I accept there may be cases where arguments of procedural impropriety (or a breach of natural justice) may be founded on such arguments. But here, an I have said, it is plain that the Society's officers placed no reliance on the contents of the anonymous letter other than to adhere to its request to study the set of accounts. It was instead the set of accounts itself which was the focus of their attention. They sought comments on it from the Applicant and in light of those comments, and their own observations, the Registrar exercised his discretion to refer the matter to the Council.

32. The Society has a statutory obligation to ensure that professional standards are adhered to by its members. A failure to do so could result in the profession falling into disrepute. In order to discharge its responsibility to ensure the preservation of standards, the Society - acting through the Registrar - is empowered to consider any matter coming to its attention other than by means of a formal, identifiable complaint. That power comes from section 34(1A) of the Ordinance which enables the Registrar to refer any matter that he 'has reason to believe' reveals professional misconduct or negligence on the part of a member. If he was not so entitled, there would be no need to define his powers in section 34(1A); section 34(1)(a) alone would suffice.

33. The fact that in the present case, in terms of section 34(1A), the Registrar has used his powers to peruse materials coming to his attention, has then expressed his concerns to the Applicant and has given the Applicant a full opportunity to reply cannot, in my opinion, begin to approach anything smacking of procedural impropriety or a breach of contemporary standards of natural justice.

A consideration of the Applicant's second ground

34. I trust I have not adopted too simplistic an approach when I say that the Applicant's second ground is founded on the contention that the Registrar only has an unfettered discretion to refer matters himself to the Society's Council when such matters come to his notice other than by way of complaint. If, however, they have come to his attention by way of complaint - whatever the form of that complaint - he is obliged, in terms of Rule 3(1) and (2) of the Disciplinary Committee Proceedings Rules, to ensure that the complainant is identified and not only signs a formal complaint but proceeds to prosecute the matter before the Disciplinary Committee. With respect, I consider that to be an artificial reading of the Ordinance and the applicable Rules.

35. If Rule 3(1) and (2) is to be read as reasonably giving effect to section 34(1), it must mean that it is only complaints made by persons who are prepared to prosecute such complaints that are to be reduced to writing and signed with the grounds of complaint being detailed. Why? Because, as the prosecutors of their own cause, fairness demands that the complainants identify themselves and state their complaint.

36. But if a complainant is not prepared to be identified or is not prepared to proceed further with the matter then, in my judgment, in terms of section 34(1A), if the Registrar believes that the complaint has substance, he may take the matter over and become the prosecutor of the cause. The Registrar must then - his identity being known - state the details of his complaint. I say that because by then it has become 'his' complaint. Section 34(1A) is expressed in broad language. Such language is necessary to encompass the wide range of circumstances in which matters may lawfully be brought to the Registrar's attention. If that was not the case, it would undermine the clear intent of the legislation. A simple analogy will illustrate the point:

37. An articled clerk in a firm of accountants presents the Registrar with evidence that members of his firm have been guilty of serious misconduct. However, the articled clerk does not wish to prosecute the matter himself. He has fears concerning his career and the reaction of his peers. He asks the Registrar to consider the evidence and, if he deems fit, to take it further ...

38. Now, if the Applicant's contention is right, in these circumstances the Registrar would have no power in terms of section 39(1A) to take the matter over and prosecute it himself, no matter how disastrous the possible consequences to the profession. Either the articled clerk must prosecute the matter himself, including the prosecution before the Disciplinary Committee, or the complaint goes by default and cannot be investigated further. That, in my judgment, cannot be the meaning and intent of the legislation. Nor, frankly, does it even begin to accord with an ordinary reading of it.

Conclusion

39. I am satisfied that the material placed before me by the Applicant has not demonstrated that, upon further consideration, he might have an arguable case for the grant of the relief claimed. The application for leave must therefore be refused.

40. I have not heard the parties on the question of costs. Even though the Court asked for an oral hearing with the Respondent present, such requests are not uncommon in judicial review matters. I can see no reason, therefore, why costs should not follow the event and be awarded to the Society. I will, however, make that a nisi order, liberty granted to the Applicant to apply within 14 days for the matter of costs to be argued. If no such application is made, the order will then be final, costs to be taxed if not agreed.