LAU LUEN HUNG THOMAS v. INSIDER DEALING TRIBUNAL AND ANOTHER

HCMP 1017/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1017 OF 2008

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JUDGMENT

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Hon Ma CJHC:

1.  For the reasons contained in the judgments of Tang VP and Stock JA, I too would dismiss the applications for extensions of time to appeal.

Hon Tang VP:

2.  On 8 September 2006, the applicant was identified as an insider dealer by the Insider Dealing Tribunal (“the Tribunal”).  The applicant was ordered to pay $15,301,676 to the government under section 23(1)(b) of the repealed Securities (Insider Dealing) Ordinance Cap. 395 (“SIDO”), which was the total profit gained as the result of insider dealing, all being attributable to the applicant.  The applicant was in addition ordered to pay to the government a penalty of $15 million under section 23(1)(c) of SIDO.

3.  The Tribunal’s order was registered with the Court of First Instance on 14 December 2006.  The applicant has paid the penalty.

4.  On 18 June 2007, the applicant applied by summons in HCMP 1161/2007 for leave to appeal out of time.  That application followed the decision of this court (Ma CJHC, Tang VP and Stone J) in Koon Wing Yee v Insider Dealing Tribunal and another, unreported, CACV 358/2005 and CACV 360/2005, dated 30 May 2007.  Koon Wing Yee was an insider dealer, who had been ordered by the Insider Tribunal to pay the total profit gained as a result of insider dealing as well as a penalty under section 23(1)(c) of SIDO.  His appeal to the Court of Appeal was allowed, and the orders made by the Tribunal were set aside in their entirety. 

5.  On 5 September 2007, Cheung JA granted the applicant leave to appeal the Tribunal’s order out of time.  On 14 September 2007, the Financial Secretary applied to set aside leave granted.  On 28 February 2008, this court (Ma CJHC and Stock JA) set aside the leave that had earlier been granted.

6.  On 18 March 2008, the judgment on appeal from the Court of Appeal in Koon Wing Yee v. Insider Dealing Tribunal and another, was handed down by the Court of Final Appeal.  The Court of Final Appeal set aside the order made in the Court of Appeal and:

“(3)   In lieu thereof allow the appeals to the Court of Appeal in part and –

(a)     declare that s.23(1)(c) of SIDO is invalid;

(b)     restore the adverse findings made by the Tribunal against the respondents; and

(c)     restore the orders made by the Tribunal under ss 23(1)(a), 23(1)(b) and 27 of SIDO.”

7.  On 26 March 2008, by notice of motion in HCMP 1751/2007, the applicant applied for leave to appeal to the Court of Final Appeal from the decision of the Court of Appeal made on 28 February 2008.

8.  On 9 May 2008, the Court of Appeal (Ma CJHC, Stock JA) dismissed the application. 

9.  In response to the applicants’ solicitors’ letter of 25 April 2008, by letter dated 29 April 2008 the Financial Secretary has refused to refund the penalty. 

10.  By this application, which was made on 30 May 2008, the applicant seeks leave to appeal in order to quash the penalty of $15 million, essentially, because of the declaration by the Court of Final Appeal that section 23(1)(c) of SIDO is invalid.  The declaration made by the Court of Final Appeal operated retrospectively as the Court of Final Appeal recognized. 

11.  The relevant principles in granting leave to appeal out of time are to be found in HKSAR v Hung Chan Wa and Anor [2006] 9 HKCFAR 614, a decision of Court of Final Appeal.  In his judgment (which had the concurrence of the other members), the Chief Justice said the time limit for appeals:

“21.   … is an important feature of any criminal justice system.  It is in the interests of society for there to be finality in the criminal process.  But the time limits for the purpose of achieving finality are not absolute.  The courts have the discretion to relax the time limit where this is considered to be justified in the circumstances of an individual case.”

12.  However, whether time should be extended for an appeal against conviction, although a matter of discretion for the courts, would depend on the existence of exceptional circumstances:

“22.   … The burden is on the defendant to justify exercise of that discretion in his favour. …”,

and the well-established principle is that:

“24.   … time should not be extended for appeal only on the ground that an authoritative judgment subsequent to the conviction has held the previous understanding of the law to be incorrect. … In adopting this principle, the courts recognize the practical necessity for finality in the criminal process.”

13.  The Chief Justice went on to say:

“25.   … it is not feasible for the Court on this occasion to attempt to define what constitute exceptional circumstances except to say that the circumstances must be so exceptional that the occasions when they would be held to exist would be very rare.  Cases where the defendant had pleaded guilty would not fall within this exception.  No opinion is expressed about the correctness of the decision in R v. Kwok Hing-man [1994] 2 HKCLR 160 in relation to the extension of time for an appeal against conviction for a non-existent offence.”

14.  The authorities referred to by the Chief Justice in his judgment included R v Thomas [1990] 1 SCR 713, a decision of the Supreme Court of Canada.  Thomas was concerned with a person who had been convicted of second degree murder.  The application for leave to appeal was made 3 years after the prescribed time of appeal.  The court regarded the applicants as having been convicted:

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“… under a provision which has since been declared invalid, …”

15.  Sopinka J in delivering the judgment of the court said:

“In a case in which the applicant alleges that he or she was convicted under a provision which has since been declared invalid, he or she should not be placed in a worse position than any other applicant. …”

The court then proceeded to treat the applicant in the same way as an applicant who was applying for an extension of time to appeal on the ground that an authoritative judgment subsequent to the conviction has held the previous understanding of the law to be incorrect.

16.  Mr McCoy for the applicant relied on R v Kwok Hing-man [1994] 2 HKCLR 160.  The court was there concerned with a person who was convicted:

“… for being in possession of 11 cartons of cigarettes reasonably suspected of being stolen or unlawfully obtained contrary to s.30 of the Summary Offences Ordinance (Cap 228). He was placed on probation for 12 months.”

17.  He was convicted on 5 September 1991. 

“On 19th May 1993, the Privy Council in Attorney General of Hong Kong v Lee Kwong-kut [1993] AC 951, held that s.30 of Cap 228 had been repealed by s.3(2) of the Bill of Rights Ordinance. Such repeal takes effect from the commencement of that Ordinance, i.e. 8th June 1991. When the information was first preferred against Lee Kwong-kut it was dismissed by the magistrate, s.30 being in his view inconsistent with the Bill of Rights. Having appealed to this Court, which upheld the magistrate, the Attorney General then appealed to the Privy Council.”

18.  Apparently, since 8 June 1991, 386 persons had been convicted under section 30.  Kwok Hing-man was selected as a test case and legal aid was granted to him and the application for leave out of time was made direct to Court of Appeal pursuant to the order of the Chief Justice made on 29 March 1994.  After referring to R v Thomas and stating that that decision, although not binding, was of high persuasive authority, Nazareth JA said:

“… We think that the relevant principle to be derived from it is best expressed in the last words of the report of R v Ramsden ([1972] Crim.L.R. 547) at p.548, i.e. in the last analysis, it is in every case a matter of discretion for the court.”

19.  Nazareth JA then turned to consider to the exercise of the discretion.  He quoted an extract from the judgment of Geoffrey Lane LJ in R v Mitchell [1977] 1 WLR 753 at page 756H:

“‘If we were to refuse him the extension of time in which to appeal against conviction, we should be keeping him in prison, so to speak, when we as a court were convinced that he had not committed an offence. That again is not an attractive proposition, and it is one from which this court resiles. This seems to us therefore to be the very rare case where the court should exercise its undoubted discretion to allow the extension of time and grant leave to appeal against conviction.’

Nazareth JA went on to say:

“Few of those convicted of s.30 offences will still be serving their sentences; however, they continue to be subject to the stigma of the conviction, and more than that to bear the consequences of subsisting records of such conviction. In that regard we pause to say that we are not impressed by Mr Bailey's information that this is mitigated by an endorsement upon such records that s.30 has been repealed.

Not all of the 386 persons convicted are likely to apply for leave; nonetheless the present application is unlikely to be a rare or exceptional one. We do not think that would justify us in refusing leave given the situation plainly produced by the legislation, i.e. a subsisting conviction of a non-existent offence. We accordingly grant leave, treat the hearing of the application as that of the appeal, allow the appeal and set aside the conviction and sentence.

It remains to address Mr Sarony's plea that this Court make some pronouncement that may prompt the executive to set aside the convictions and expunge the relevant records of the 385 other persons who remain convicted. This Court is of course addressing only the present application, and since each application is a matter for the discretion of the court dealing with it, there is limited room for any. pronouncement that may assist in other cases. However, we feel bound to say this, that where, as in this case, the resulting situation is that a person has been convicted of what can be plainly seen to have been unquestionably a non-existent offence, it is difficult to see how his application could be refused in the absence of some special circumstances e.g. a realistic possibility of the court substituting a conviction for a related offence, or an informed election not to appeal in the knowledge that the offence-creating statutory provision was likely to be struck down. Bearing in mind that such applications for leave will be a matter for the discretion of the particular court concerned, we have consulted the other members of this Court, each of whom has concurred in the foregoing approach.”

20.  Mr McCoy relies, in particular, on the statement that where a person has been convicted of a non-existent offence,

“… it is difficult to see how this application could be refused in the absence of some special circumstances …”

and the fact that it had the agreement of the other members of the court.

21.  In Hung Chan Wa, the Court of Final Appeal expressed no opinion on the correctness of Kwok Hing-man in relation to the extension of time for an appeal against conviction for a non-existent offence.  It emphasised, however,

“25.   … the occasions when (exceptional circumstances) would be held to exist would be very rare. …”.

22.  Mitchell was an unusual case.  In that case Mitchell had pleaded guilty to two offences of possessing a quantity of leaves, stalks and clean seeds of cannabis (clean seeds being seeds without their husks which contained no resin) and was found guilty of two offences of possessing them with intent to supply.  He was sentenced to a term of imprisonment.  He appealed against sentence.  But after a decision of the Court of Appeal that leaves and stalks were not cannabis within the definition of section 37 of the Misuse of Drugs Act 1971, he applied for an extension of time in which to apply for leave to appeal against conviction.  In the case of the clean seeds the Court of Appeal in Mitchell held that clean seeds of cannabis were also not within the relevant definition of cannabis.

23.  Geoffrey Lane LJ said in the judgment of the court (within this passage is the extract referred to in para. 19 above):

“… but the present case is unusual if not almost unique, for these reasons: there is first of all or was here already in existence a properly constituted application for leave to appeal, albeit only against sentence, which was granted by the single judge. Consequently, if we were to refuse the extension of time which is prayed for in order to allow this man to appeal against conviction, we should be faced with the totally unreal task of endeavouring to determine what the correct sentence was for an offence which had not been committed. That is not a task which we would relish. The next matter which makes this something of an extraordinary case is this: this man is in prison. It is true he is serving a concurrent sentence, as I have endeavoured to point out, of nine months for other offences, but that sentence, assuming that he has earned his full remission, should by now be over or almost over. If we were to refuse him the extension of time in which to appeal against conviction, we should be keeping him in prison, so to speak, when we as a court were convinced that he had not committed an offence. That again is not an attractive proposition, and it is one from which this court resiles. This seems to us therefore to be the very rare case where the court should exercise its undoubted discretion to allow the extension of time and grant leave to appeal against conviction. We wish to make it clear however that this is not to be taken as an invitation to all and sundry who have been convicted of this type of offence to present applications to this court for leave to appeal out of time, because they will not be greeted with very much enthusiasm.”

24.  It is clear from this passage that whether or not leave to appeal out of time should be given will depend on the particular circumstances of the case.  In Mitchell, the circumstances were described as “unique”.  It follows from this, the fact that a person is in prison can be but just one factor to be taken into account.

25.  Nor would the fact that the appeal is likely to succeed a sufficient exceptional circumstance for leave to be granted, although lack of merits or substantial merits in an appeal would be a good reason to refuse leave.  As Nazareth JA said in Kwok Hing-man:

“… it by no means suggests that exceptionally high or certain prospects of success demand that leave be given.”

26.  The line between a non-existent offence and a misunderstanding of the ambit of the offence may be a fine one.  Many would find it difficult to understand why a conviction under a misunderstanding of the ambit of an offence should be treated differently (if that be the case) from a conviction under a non-existent offence.  In both cases, absent other considerations, the appeal would be allowed if time to appeal is extended.  But if Mr McCoy is right, only the latter is an exceptional circumstance.  In Mitchell, was the conviction a conviction under a non-existent offence or a misunderstanding of the ambit of the offence?  One might say that it was never an offence to possess leaves of cannabis although there was in law an offence to possess some other parts of a cannabis plant. 

27.  Ultimately, in my view, as Nazareth JA said:

“… in the last analysis, it is in every case a matter of discretion for the court.”

I do not believe that the exercise of such discretion should depend on legal niceties arising from the fine distinction to which I have alluded.

28.  No doubt appropriate weight must be given to the fact that a person has been convicted of a non-existent offence.  Depending on all the circumstances, an appeal out of time may be granted. 

29.  I have to consider whether in this case an extension of time should be granted.  Here the delay (about 20 months) is substantial.  In considering delay, time must run from the date of the order, and not (as Mr McCoy suggested) from the date of the subsequent decision which the applicant wished to rely on.

30.  Nor is this the first application for leave to appeal out of time.  In the first application which was made after the decision of the Court of Appeal in Koon Wing Yee, leave was refused by this court. 

31.  Here, the applicant was throughout represented. 

32.  In the affirmation made in support of this application it was said that:

“10.   Prior to the above decision of the Court of Final Appeal, the Applicant was never advised by his legal advisers that section 23(1)(c)of the SIDO might be struck down or that the ‘civil’ nature of insider dealing proceedings under the SIDO would or could be preserved by striking down section 23(1)(c) of the SIDO.”

33.  It may be that the precise argument was not alighted upon by the applicant’s legal advisers.  However, it is quite clear that the vice of section 23(1)(c) of SIDO was that it was criminal in nature.  In the Court of Final Appeal the relevant questions identified as arising on the appeal were:

Question (1)(a)      Was there a criminal charge by reason of the power to impose a penalty?

Question (1)(b)      Was there a criminal charge by reason of the power to order disqualification?

Question (2)(a)      Was there a breach of the right to protection against self-incrimination or the right to silence?

Question (2)(b)      Was the Tribunal obliged to apply the criminal standard of proof beyond reasonable doubt?

Question (4)          Did the Court of Appeal err by not confining the remedy to an order that the statutory power to impose a fine was a breach of the BOR and so invalid?

34.  Sir Anthony Mason NPJ stated (with the concurrence of the other members):

“107.   In the result, subject to the consideration of the appropriate remedy, my answers to the questions identified as arising in these appeals, coincide with the conclusions reached by the Court of Appeal.

……

119.    … It was simply a matter of determining what was the appropriate order to be made in the light of violations of the BOR upheld at the instance of the respondents.”

35.  The Court of Final Appeal decided that the appropriate order to be made was a declaration of invalidity of section 23(1)(c).

36.  Indeed, although the earlier decision of this court refusing leave was handed down on 28 February 2008 and had predated the decision of the Court of Final Appeal in para. 10 of the judgment, the court recorded Mr McCoy’s submission that:

“… another exceptional circumstance was the fact that the Appellant had effectively being convicted of a non-existent offence (a direct reference to the final sentence of paragraph 25 of the judgment in Hung Chan Wa where the Chief Justice left open the question of whether a conviction of a non-existent offence might constitute an exceptional circumstance). The present case is not within this situation at all.”

37.  So, although the court in Koon Wing Yee had not said explicitly that the applicant had effectively been convicted of a non-existent offence, Mr McCoy argued it had in substance this effect.  This was rejected, as the above passage shows.  The fact that this is the applicant’s second attempt for leave to appeal out of time is also a relevant consideration. 

38.  I agree with Mr McCoy that we are concerned with a substantial sum of money.  It is also true that the Financial Secretary has refused to repay it.  Mr McCoy has not conceded that unless leave to appeal is extended, the amount would not be recoverable in civil proceedings.  Indeed, he suggested the contrary.  As to that, I express no view.  The amount is substantial but it has to be viewed in the context of the amount of profit which was held to have been attributable to the insider dealing by the applicant.  Moreover, the authorities show that the fact that a person may be serving a long term of imprisonment might not by itself be a sufficient reason for an extension of time to appeal to be granted. 

39.  So in all the circumstances, I would refuse an extension of time to appeal out of time.

Hon Stock JA:

Some procedural history

40.  Before addressing the merits of the application, I wish to make a brief note, for the sake of completeness, about the history of these proceedings and in particular about the essential reasons for some of the decisions thus far taken:

(1)     The first application for leave to appeal out of time (granted by Cheung JA but set aside by this Court in February 2008) and referred to by the Vice-President at para 5 above, was premised on the Court of Appeal’s finding in Koon Wing Yee that the appropriate standard of proof was the criminal standard whereas that had not been applied in the applicant’s case, which pre-dated that finding.  In setting aside leave, this Court concluded that the type of exceptional circumstance envisaged in Hung Chan Wah was not established in this case and noted as well that the applicant had specifically deposed to the fact that he had originally taken a conscious decision, after legal advice, not to pursue an appeal on the standard of proof issue.

(2)     The application for leave to appeal from the decision of this Court setting aside leave (see para 7 above) proposed questions for submission to the Court of Final Appeal that were not based upon the standard of proof - which as a result of the Court of Final Appeal’s decision in Koon Wing Yee could no longer be a live issue - but rather on the invalidity of s 23(1) (c) of SIDO.  Thus, when this Court, on 9 May 2008, dismissed that application for leave (see para 8 above) it did so on the basis that the questions posed did not arise from the Court’s February 2008 determination.

(3)     The present application for leave is therefore the second application for leave to appeal out of time but is, necessarily, restricted to the change effected by the Court of Final Appeal in Koon Wing Yee when declaring that s 23(1) (c) of SIDO was invalid.

41.  The written argument presented on behalf of the applicant on this occasion suggested that in its Reasons for Judgment (dated 19 May 2008) for refusing, on 9 May, leave to appeal to the Court of Final Appeal, this Court, as constituted by the Chief Judge and myself, “indicated that the Applicant should apply afresh to the Court of Appeal for leave to appeal out-of-time ... based on the decision of the CFA in Koon Wing Yee” and that “in this way, the effect of the repeal of s 23(1) (c) [of SIDO] … could be argued for the first time before the Court of Appeal.”  It should be made clear that we said nothing of the sort.  We were dealing with an application for leave to appeal to the Court of Final Appeal but the ground of the application for leave to appeal to that Court did not arise from this Court’s earlier decision.  Rather, the matter of complaint was a new issue, namely, the striking down by the Court of Final Appeal in Koon Wing Yee of s 23(1) (c).  Any attempt by this applicant to benefit from that aspect of Koon Wing Yee had to be made (‘if so advised’, we expressly said) by a fresh application for leave to appeal out of time.  That was merely a statement of the correct procedural steps be taken if the applicant, upon advice, which to pursue that particular point.  It was not an indication that the applicant should take that course.

The merits

42.  The established principle is that time should not be extended for appeal for the reason only that an authoritative judgement has overturned a previous understanding or interpretation of the law : see Hung Chan Wah, para 24.  In stating this principle, the Chief Justice in Hung Chan wah cited in its support a series of authorities some of which post-dated and were not referred to in Kwok Hing Man.

43.  R v Thomas 1990 1 SCR 713 evidences a somewhat hard-edged test in Canada which is whether or not the accused, in a criminal case, is still in the judicial system.  Also cited by the Chief Justice was R v Unger [1977] 2 NSWLR 990 (not referred to in Kwok Hing man) in which the court said:

‘There is no difference in principle between a subsequent judicial decision which has the effect of exposing a prior misconception in relation to the principle of law which was properly regarded as well founded at the time of trial, and a subsequent judicial decision exposing the invalidity of regulations that were wrongly treated as valid at the time of the trial.  The trial having been concluded and the time for appeal having gone by, the general principle is that the matter is regarded as at an end.  It is to be borne in mind that the effect of conviction in a criminal court, no less than a verdict of judgment in a civil court, is to merge in a conventional judgment, as the case may be, all of the material upon which to proceeded.’

44.  Further cited was R v Knight [1998] 1 NZLR 583 where at 588-589, the Court said:

‘On its face that “still in the system” approach would seem to preclude granting extension of time thereafter even when the applicant was serving a long term of imprisonment.  Finality and certainty are very important values but in this society there must in our view be room for recognizing that circumstances particular to the case of the applicant no longer in the conviction appeals system may lead to the conclusion that justice requires that leave be given.  It may be difficult to decide where to draw the line and expressions such as “the very rare case” and “exceptional case” are no doubt intended to counsel against ready resort to the discretion.  In Alofa v Department of Labour [1980] 1 NZLR 139 at 146 Cooke J observed that the expression “the very rare case” might be unduly restrictive if applied literally, but went on immediately to emphasise that “at least special circumstances must be shown to justify departure from the principle of the finality of the results of court proceedings”…

‘… the starting point must be the principle that a conviction obtained according to law as it was then understood and applied should stand.  Leave to appeal out of time on the ground that there has been a restatement of the applicable law should be granted only where special circumstances can be shown to justify a departure from the principle of finality.  The applicant must demonstrate some special feature or features particular to the case that lead to the conclusion that in all the circumstances justice requires that leave be given.  Amongst the considerations which will also be relevant in that overall assessment are the strength of the proposed appeal and the practical utility of a remedy sought, the length of delay and the reasons for delay, the extent of the impact on other similarly affected and on the administration of justice, that is floodgates considerations, and the absence of prejudice to the Crown.’ ( Emphasis added)

45.  In Ballinger [2005] 2 Cr App R 433, also cited, reference was made to yet another case mentioned by the Chief Justice in Hung Chan wah, namely, Hawkins [1977] 1 Cr App R 234.  In Ballinger, Scott Baker LJ said at 437-438:

‘The court had [according to Lord Bingham CJ in Hawkins] traditionally been reluctant to grant an extension except where the extension was relatively short and a good reason was shown for the failure to apply in time.  He [Lord Bingham] observed that indulgence had traditionally not been shown where the defendant acting on advice pleaded guilty or where he had taken a conscious decision not to appeal.  He went on to say that the court had to be satisfied that good reason existed for giving leave to appeal out of time pointing out that a change in the law had not usually been regarded as a good reason (see R v Mitchell (1977) 65 Cr App R 185 at 189 and 190). Following the general practice the question was whether the defendant had suffered a substantial injustice or injury.

Lord Bingham CJ,at p 240B, described the rationale for the practice:

“The practice may on its face seem harsh.  On the other hand, the consequences of any other rule are equally unattractive.  It would mean that a defendant who had roundly and on advice accepted that he had acted dishonestly and fraudulently, had pleaded guilty, or had been found guilty and chose not to appeal could after the event seek to reopen convictions.  If such convictions were to be readily reopened it would be difficult to know where to draw the line or how far to go back.”’

46.  The applicant in this case is well out of the parameters envisaged by the phrase "still in the system," and the cases cited by the Chief Justice in Hung Chan wah illustrate just how exceptional must the circumstances be to enable an applicant to re-enter on the ground of a change in the interpretation of the law. 

47.  What the applicant relies on is the suggestion that the Court in Hung Chan Wa left open the possibility that a rare and extraordinary circumstance would arise where a person had been convicted for an offence which a higher court later held to be non-existent.  It is true that in so far as the Court stated that it expressed no opinion about the correctness of a decision to that effect in Kwok Hing Man, the door was not closed but, even so, there are a number of factors that distinguish this situation.  This is not a case that involves the liberty of the subject nor, following the very decision of which the applicant seeks now to make use, is it a case involving a criminal conviction and it is also not a case in which such stigma as might attach to a finding of insider dealing is at stake, for this application for leave to appeal out of time is not directed at that finding.  Moreover, it would appear that in Kwok hing man, the appellant was not legally represented at the time of his trial: he was a person who, as the Court commented at p162, was “young and somewhat illiterate” and “could not be expected to spot the inconsistency of s 30 with the relevant articles of the Bill of Rights, or to have anticipated the court's decision." By contrast, this is a case in which the applicant has at all material times been legally represented and who, as was pointed out in the judgment of the Chief Judge in this particular case on 28 February 2008, had been specifically advised on the issue which it fell for the Court of Final Appeal in Koon Wing Yee to determine.  The fact that the Court of Final Appeal alighted upon a result which was not anticipated by those advising this applicant must be beside the point.  The consequences of extending time in this particular case would not only be to open the door to repayments in a myriad of instances of those found to be culpable insider dealers, where the findings cannot be the subject of any justifiable attack, but would also significantly lower the threshold of true exceptionability designed for circumstances peculiar to specific rare cases.

48.  For these reasons, I too would dismiss this application.