KOON WING YEE v. THE SECURITIES & FUTURES COMMISSION

HCAL 7/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 7 OF 2007

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J U D G M E N T

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Introduction

1.  On 28 December 2006, Mr Koon received a notice requiring him to attend an interview by an Investigator of the Securities and Futures Commission, (SFC).  The notice informed Mr Koon that he was a person under investigation in respect of offences of false trading and stock price rigging and/or stock market manipulation, or that persons may have been engaged in false trading and stock price rigging and/or stock market manipulation.

2.  The notice required Mr Koon to both attend at a specific time on a specific date, and to answer questions relating to the matters under investigation.

3.  Mr Koon has been granted leave to bring judicial review proceedings in respect of the issue of notice and the requirement to answer questions.

4.  Counsel for Mr Koon contends that the notice is in breach of the Hong Kong Bill of Rights Ordinance, Cap 383, in two respects:

(a)	under Article 11(2)(g), which guarantees to every person the right not to be compelled to testify against himself or to confess guilt in the determination of any criminal charge against him; and
(b)	under Article 10, which provides that in the determination of any criminal charge against a person or of his rights and obligations in a suit at law, everyone should be entitled, into a the, to a fair hearing by an impartial tribunal.

Also relevant to the proceedings is Article 14, which provides that no one shall be subject to arbitrary or unlawful interference with his privacy, and that everyone has the right to the protection of the law against such interference.

The relief sought:

5.  As the proceedings progressed, the relief sought, principally as to the declarations Mr Koon invited the court to make, were amended.  In their final format they were as follows:

“1A	Declarations that:
	(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 may incriminate him.”

6.  The relevant provision of the Securities and Futures Ordinance, Cap 571, requiring Mr Koon to answer the questions put to him by the SFC investigators is s 183.  This provision requires, inter alia, that the person under investigation must attend before the investigator at the time and place the investigator requires, and answer any question relating to the matters under investigation that the investigator may raise with him.  By s 184, it is an offence, without reasonable excuse, to fail to attend before the investigator as required all to answer questions.

7.  In simple terms, the effect of s 183 is to take away from a person the right that is commonly referred to as the “right of silence”, by compelling answers, on the pain of penalty.

The proceedings are premature:

8.  Mr Bell argues that the proceedings are premature, and that issues as to the abrogation of the right to silence, or the impartiality of the Market Misconduct Tribunal, have not yet arisen. 

9.  He submits that the investigation being undertaken by the SFC may result in three different scenarios.  In fact, there are five different scenarios because in two of Mr Bell’s three scenarios there are two subcategories.  The scenarios and subcategories that may result from the investigation are:

(a)		the investigation may conclude and no criminal charges be brought against any person nor may any person or matter be brought before the Market Misconduct Tribunal;
(b)	(i)	criminal proceedings may be brought against Mr Koon;
	(ii)	criminal proceedings may be brought against persons other than Mr Koon;
(c)	(i)	Market Misconduct Tribunal proceedings may be brought against Mr Koon;
	(ii)	Market Misconduct Tribunal proceedings may be brought against persons other than Mr Koon.

10.  At the present time no person faces any criminal charge, neither does any person face proceedings in the Market Misconduct Tribunal. 

11.  There is nothing in the Bill of Rights, Mr Bell says, to give any person protection from legislation requiring that person, on pain of penalty, to answer questions put by an investigating authority.  What the Bill of Rights does do, Mr Bell says, is 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 him.

The argument is unanswerable on the authorities:

12.  It is quite plain that Mr Bell is right.  Mr Koon has not been charged with any offence, and at the time at which he will be interviewed he will not face any criminal charge in relation to the matters on which he is to be interviewed.  Neither have any proceedings been instituted in the Market Misconduct Tribunal against him, and they may never be instituted.

13.  It has been clearly established in HKSAR v Lee Ming Tee & Anor [2001] HKLRD 599 CFA, that Article 11(2)(g) of the Bill of Rights only applies to persons who face a criminal charge: see Ribeiro PJ at 635F, (a judgment with which all other members of the court agreed). The decision makes it clear that the protection provided by Article 11(2)(g) is a testimonial immunity only, and much narrower in scope than the common-law privilege against self-incrimination.

14.  The decision is conclusive and binding upon me.  It is unfortunate that in the course of argument this passage was not drawn to my attention, the decision in Lee Ming Tee having been cited by both counsel for other purposes.  Had I been referred to that passage it is highly likely that the hearing may have been drastically shortened.

15.  It may well be that at some stage in the future Mr Koon will face criminal proceedings in relation to the matters on which he will be interviewed.  In that circumstance Mr Koon will be entitled to the protection of s 187(2) of the Ordinance, which renders his compelled answers inadmissible in those criminal proceedings.  The testimonial immunity contained in the Bill of Rights is accordingly preserved in the event of a criminal prosecution under the Ordinance.

16.  It is no argument to say that the compelled answers may result in derivative information being obtained.  Lee Ming Tee establishes that while the compelled answers may not be admissible, derivative use of information gained from those answers is admissible.

17.  But at the present time Mr Koon faces no criminal charge and the provisions of the Bill of Rights are simply not engaged.  As may be seen from the scenarios set out in para 9 above, in only one of the five options, that of proceedings in the Market Misconduct Tribunal, is there in it possibility that Mr Koon’s compelled answers may be given in evidence against him.

18.  Mr John J E Swain mounted a strong, possibly even compelling, argument that the terms of the Ordinance are such that proceedings before the Market Misconduct Tribunal constitute criminal proceedings.  The essence of the argument is that the introduction into the Ordinance of a statutory civil remedy for any person who has suffered a loss as a result of market misconduct, means that any disgorgement order that may be made by the Market Misconduct Tribunal constitutes a penalty, because a person facing disgorgement order is in fact liable to pay twice.

19.  There is no similar restriction in the Ordinance, to that in relation to criminal proceedings, on the use of any answers Mr Koon may be obliged to give to an investigator in subsequent Market Misconduct Tribunal proceedings.  Compelled answers are, apparently, admissible before the Market Misconduct Tribunal.

20.  If it should transpire that Mr Koon is brought before the Market Misconduct Tribunal the issue as to the use of his answers in that forum will arise for consideration and must be considered then.  The arguments made by Mr Swain as to the criminal nature of proceedings before the Market Misconduct Tribunal will then arise for consideration by the courts.

21.  However that argument is no answer to the notice requiring him to attend for interview, when Mr Koon faces neither a criminal charge nor proceedings in the Market Misconduct Tribunal, both of which may never eventuate.

The Article 10 argument and impartiality of the Tribunal:

22.  The position must be precisely the same in respect of the Article 10 argument which revolves around a contention that the inquisitorial nature of the Market Misconduct Tribunal offends Article 10 which requires that the Tribunal be impartial.

23.  Again until such time as proceedings commenced in the Market Misconduct Tribunal, no issue has arisen for consideration.  It will only be in the event that proceedings are so commenced that the question will arise.

The historical position:

24.  Although much less comprehensive than s 183, its predecessor, s 33(1) Securities and Futures Commission Ordinance, Cap 24, (now repealed), is to precisely the same effect.  Under that old provision a person under investigation was obliged to attend to interview and give answers on pain of penalty for refusal to answer. 

25.  In R v Securities and Futures Commission Ex Parte Lee Kwok Hung, (Unreported, CA, Civ 7/1993), (unfortunately not cited in the course of argument), in which Sir John Swain SC appeared as counsel for the appellant, the Court of Appeal found that that provision did not offend either Article 11(2)(g) or Article 10 of the Bill of Rights.  Just as in the present case, the subject of the notice in Lee Kwok Hung was not, at the time of receipt of the notice, facing either criminal or Insider Dealing Tribunal proceedings.

26.  Nothing was mounted in the argument to persuade me that the circumstances have changed since Lee Kwok Hung.  Until such time as proceedings are brought in the Market Misconduct Tribunal no issue arises for consideration under the Bill of Rights.

Conclusion:

27.  There is no merit whatsoever in the application for judicial review which is dismissed.

28.  Mr Koon must pay the costs of the Securities and Futures Commission.