KOON WING YEE v. INSIDER DEALING TRIBUNAL AND ANOTHER

CACV 358 & 360/2005

CACV 358/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 358 OF 2005

(ON APPEAL PURSUANT TO SECTION 31 OF THE
SECURITIES (INSIDER DEALING) ORDINANCE
(“THE ORDINANCE”), CAP. 395
FROM DETERMINATIONS OF AN INSIDER DEALING TRIBUNAL
IN RELATION TO
EASY CONCEPTS INTERNATIONAL HOLDINGS LTD. AND
EASYKNIT INTERNATIONAL HOLDINGS LTD.)

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BETWEEN

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REASONS FOR DECISION

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Hon Ma CJHC :

1.  The Appellants in both appeals made applications seeking leave to appeal to the Court of Final Appeal from the judgment of this court handed down on 8 June 2009. The applications are brought under both limbs of section 22 of the Hong Kong Court of Final Appeal Ordinance, Cap. 484 (the HKCFAO) : the “as of right” limb (section 22(1)(a)) and the “great general or public importance, or otherwise” limb (section 22(1)(b)). Following counsel’s submissions on 9 December 2009, we dismissed both applications with costs.

2.  It is unnecessary for present purposes to go into the facts of each appeal (they are set out in our earlier judgment). It is sufficient only to refer to the fact that both appeals were from a Final Report of the Insider Dealing Tribunal (the IDT) dated 19 January 2006 in which the Appellants were found to have engaged in insider dealing under the now repealed Securities (Insider Dealing) Ordinance, Cap. 395 (SIDO). Various consequential orders were made against the Appellants, among them disgorgement orders under section 23(1)(b) of SIDO, whereby the profits attributable to them from the insider dealing were assessed at (in the case of the Appellant, Koon Wing Yee) $31,367,553 and (in the case of the Appellant, Chan Kin Shing Sonny) $5,090,219.

3.  It is contended by the Appellants that an appeal to the Court of Final Appeal lies as of right under section 22(1)(a) of HKCFAO by reason of the amounts that were assessed by the IDT under section 23(1)(b) of SIDO, they being in excess of $1 million. In my view, section 22(1)(a) is simply not engaged : ‑

(1)  As the Appeal Committee of the Court of Final Appeal has made clear in China Field Ltd v Appeal Tribunal (Buildings)(No 1) [2009] 2 HKLRD 135 and also in its recent decision in WLK v TMC, unreported, FAMV 50/2009, 3 December 2009, it is only in exceptional and extremely limited circumstances that appeals will lie as of right and accordingly, section 22(1)(a) must be construed narrowly.

(2)  On analysis, only the first part of section 22(1)(a) is relevant for our purposes.  Here, it is clear that only liquidated, as opposed to unliquidated, claims are covered.  Where damages are assessed by a court, the claim is necessarily an unliquidated one.

(3)  By analogy, the amounts assessed by the IDT under section 23(1)(b) of SIDO do not enable section 22(1)(a) of the HKCFAO to be engaged.  The relevant “matter in dispute” was merely the assessment made by the IDT of the profits attributable to the insider dealing that was found to exist.  This is far from being a liquidated amount or even akin to one.  The amounts assessed by the IDT can be said to be analogous to an assessment made by the court, whether of damages or some other amount (such as the amount of ancillary relief ordered by a court : see WLK v TMC).

(4)  It was also contended by the Appellants that the second part of section 22(1)(a) was engaged, namely, that a “civil right” amounting to or to the value of over $1 million was involved.  This “civil right” was said to be the disgorgement order made by the Tribunal.  With respect, this is misconceived : the order made by the IDT under section 23(1)(b) (in the same way as an order to pay damages) is not a “civil right”.  The words “property or some civil right” in section 22(1)(a) refer to proprietary rights : ‑ see WLK v TMC at paragraphs 9 and 12 (per Ribeiro PJ); WLK v TMC, unreported, CACV 339/2008, 30  September  2009, at paragraphs  12 ‑ 13 (per Le Pichon JA).

4.  For the purposes of section 22(1)(b) of HKCFAO, six grounds are identified in the Notice of Application for Leave to Appeal in CACV 358/2005, said to be matters of great general or public importance. Four of these grounds are relied on by the Appellant, Sonny Chan in CACV 360/2005. The six grounds are : ‑

“(i)  Whether the proceedings before the Tribunal were in breach of Article 10 of the Bill of Rights Ordinance, Cap.383, on the basis that:

(a)  The Tribunal could not be seen to have been impartial; and

(b)  The Tribunal failed to accord to the Appellant a fair hearing.

(ii)  Whether the financial order made by the Tribunal against the Appellant ostensibly under Section 23(1)(b) of SIDO was wrong in law in that:

(a)  The ‘notional profit’ rule – notwithstanding the decision of the Court of Final Appeal in Insider Dealing Tribunal v Shek Mei Ling (1999) 2 HKCFAR 205) – should not operate to create what is, in essence, a penalty;

(b)  Where, as here, the finding of insider dealing was that of ‘counselling and procuring’ another to deal, the ‘profit gained’ was, on a true view of SIDO, not that of the Appellant but, rather, that of the person he was found to have counseled and procured, who, even as agent, was the person who dealt in the shares in question.

(iii)  Whether the Court of Appeal discretion to refuse the Appellant’s 2 applications to further amend his Notice of Appeal under Order 59 rule 7 of the Rules of the High Court extended to circumstances outside the established practice, namely that such leave to amend is to be granted, unless: the amendments raise issues which are not open on the pleadings; the facts necessary to sustain the point of law concerned have not been established in the court below; or the granting of leave to amend would give rise to significant prejudice to the other party.

(iv)  If the answer to (iii) above be no and the Court of Appeal ought to have allowed either or both the aforesaid applications to amend; whether the Tribunal was empowered to adjudicate upon the matter of the inquiry or to make the orders that it did consequent thereon, in that the Tribunal purported in those connections to function in a judicial capacity acting as a court, whereas:

(a)  By Article 80 of the Basic Law, the courts of the Hong Kong Special Administrative Region at all levels shall be the judiciary of the Region, exercising the judicial power of the Region;

(b)  By Article 19 of the Basic Law, the courts of the Hong Kong Special Administrative Region shall have jurisdiction over all cases in the Region;

(c)  By Article 83 of the Basic Law, the structure, powers and functions of the courts of the Hong Kong Special Administrative Region at all levels shall be prescribed by law;

(d)  By Article 88 of the Basic Law, judges of the courts of the Hong Kong Special Administrative Region shall be appointed by the Chief Executive on the recommendation of an independent commission composed of local judges, persons from the legal profession and eminent persons from other sectors;

(e)  By Article 92 of the Basic Law, judges of the Hong Kong Special administrative Region shall be chosen on the basis of their judicial and professional qualities;

(f)  Pursuant to Section 15(2) of SIDO, two of the three members of the Tribunal, being those other than the Chairman, and comprising the majority of the Tribunal, were to be appointed by the Financial Secretary, and were therefore not to be appointed by the Chief Executive or otherwise in accordance with Article 88 of the Basic Law as aforementioned;

(g)  Further, the said two members of the Tribunal were not chosen on the basis of their judicial qualities, as required by Article 92 of the Basic Law as aforementioned.

(v)  Whether the requirement of leave from the Court of Appeal contained in section 31(1)(b) of SIDO to appeal on questions of fact is unconstitutional as a disproportionate restriction upon an appellant’s right of access to the Court of Final Appeal.

(vi)  Whether the Tribunal was or is empowered by Section 23(1)(a) of SIDO to order that the Appellant shall not, without the leave of the Court of First Instance, be a director or a liquidator or a receiver or manager of the property, or in any way, whether directly or indirectly, be concerned or take part in the management of, any limited company in Hong Kong, other than a listed company, without naming or otherwise identifying such company.”

The Appellant in CACV 360/2005 relied on the first four of these grounds (insofar as they were applicable to him).

5.  In my view, none of these grounds come anywhere near the requisite threshold for leave to appeal under section 22(1)(b), whether as points of “great general or public importance, or otherwise” : ‑

(1)  The first and fifth grounds, said to be constitutional in nature, have been dealt with at length in our judgment, and in my view, were quite hopeless.  It would be wrong to grant leave in these circumstances.

(2)  The second ground involves this court having to depart from the decision of the Court of Final Appeal in IDT v. Shek Mei Ling (1999) 2 HKCFAR 205.  This is obviously a matter for which this court cannot grant leave.

(3)  The third ground (on which the fourth ground was dependent) involves an exercise in discretion and case management by the court in refusing leave to the Appellants to raise a wholly new ground of appeal late in the day.  No point of great general or public importance is involved here.

(4)  The sixth ground raised another hopeless argument.

6.  For the above reasons, the applications for leave to appeal to the Court of Final Appeal were refused.

Hon Tang VP :

7.  I agree.

Hon Stone J :

8.  I agree.