SECURITIES AND FUTURES COMMISSION v. TIGER ASIA MANAGEMENT LLC AND OTHERS

HCMP 1502/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1502 OF 2009

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BETWEEN

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D E C I S I O N

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1.  On 21 June 2011 I handed down my decision in respect of the Defendants’ application to strike out the Re-Amended Originating Summons. I concluded, for the reasons appearing in the decision, that the Re-Amended Originating Summons did not disclose a reasonable cause of action and should be struck out.

2.  Following the hearing on 1 and 2 June the Commission had asked to be allowed to address the Court on the form of order if I found in the Defendants’ favour.  On 11 July 2011 a hearing took place to consider the terms of the order.  This is my decision.

3.  The Defendants’ position is straight forward. They say that it follows from my substantive decision that the Action should be struck out with costs.  The Commission accepts that paragraphs 1 to 1H of the Re‑Amended Originating Summons should be struck out, but not paragraph 1I.

4.  The Commission argues that paragraph 1I is a self-contained application, which is unaffected by my decision handed down on 21 June 2011.  Mr Westbrook accepts that he did not argue at the hearing before me on 1 and 2 June 2001 that paragraph 1I is self-contained and unaffected by the arguments advanced by the Defendants in support of their strike-out summons.  He does so now, for the following reasons.

5.  Paragraph 1I seeks orders pursuant to section 213(2)(a) of the Securities and Futures Ordinance, Cap. 571, (“Ordinance”) that the Defendants be restrained from, amongst other things, trading in Hong Kong listed securities or their derivatives (“Orders”).

6.  Section 213(2)(a) provides:

“(a) an order restraining or prohibiting the occurrence or the continued occurrence of any of the matters referred to in subsection (1)(a)(i) to (v).”

7.  The Commission argues that it seeks the Orders on the basis that it can bring itself within section 213(1)(b) of the Ordinance: “it appears ….. to the Commission that any of the matters referred to in paragraph (a)(i) to (v) has occurred …”.  I have already noted that Mr Westbrook accepts that he did not argue before me that the relief in paragraph 1I was sought on the basis that the Commission could bring itself within section 213(1)(b).  It was my impression during the hearing that this paragraph was premised, as was the rest of the Re-Amended Originating Summons, on the assumption that the Court was asked to determine that an actual contravention had taken place.  The argument is, therefore, an afterthought introduced to try and save the proceedings.

8.  As I explained in paragraph 25 of my judgment section 213(1)(b) does not mean that the Court may act on a recital from the Commission of its belief.  The Commission must establish a prima facie case of contravention of a relevant provision.  Mr Westbrook argues that if the Commission can establish a prima facie case then the Court has jurisdiction to make final orders of the type sought in paragraph 1I.  There need not be a determination of a contravention by the Market Misconduct Tribunal.  In the present case the Commission does not intend to make a report to the Financial Secretary under section 252(8) of the Ordinance.  It intends to come directly back to Court to ask for final orders.

9.  I do not accept that the Court has jurisdiction to make the final orders sought in paragraph 1I on an application by the Commission under section 213(1)(b).  I do not accept that the legislature can have intended that final orders that determine a defendant’s substantive legal rights could be made by the Court on the basis only of prima facie evidence of a contravention rather than proof of an actual contravention.  In my view to read the language of the relevant sections in the manner suggested by the Commission is unrealistic, artificial and gives no weight to the impact of other provisions of the Ordinance and the regime which, as I explain in my substantive decision, the Ordinance establishes.  As I explained in paragraph 26 of my substantive decision section 213(1)(b) is clearly directed to interim civil orders pending determination of a substantive complaint.

10.  I also have difficulty in seeing how such applications would in practice be argued and determined.  It is one thing to determine an application for an interlocutory injunction on the basis that the Commission has adduced prima facie affidavit evidence of a contravention, but I find it difficult to see how this approach would work in the case of an application for a final order.  I asked Mr Westbrook during argument whether he envisaged a trial and oral evidence.  He replied that it would be up to the Court to make such directions as it saw fit.  If one were to have a trial it would be highly artificial to proceed on the basis that what is in issue is not the actual occurrence, or otherwise, of a contravention, but rather whether the Commission had adduced prima facie evidence of a contravention.

11.  In my view the proceedings should be struck out and the costs of the application and the proceedings paid by the Commission.