KOON WING YEE v. SECRETARY FOR JUSTICE

CACV 245/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 245 OF 2011

(ON APPEAL FROM HCMP NO. 327 OF 2006)

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J U D G M E N T

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Hon Kwan JA:

1.  I agree with the judgment of Fok JA.

Hon Fok JA:

Introduction

2.  The appellant was the subject of proceedings before the Insider Dealing Tribunal (“IDT”) established under the Securities (Insider Dealing) Ordinance, Cap. 395 (“SIDO”).[1]

3.  By its Report published on 19 January 2006, the IDT (consisting of three members, namely McMahon J as Chairman, Professor Lui Yu-hon and Mr Phil Chan Kin-fung) made findings in relation to the appellant of insider dealing and determined that there should be imposed on the appellant a disqualification order (under s. 23(1)(a)), a disgorgement order (under s. 23(1)(b)), a penalty (under s. 23(1)(c)) and an adverse costs order (under s. 27).

4.  The background facts relating to the inquiry into insider dealing leading to the publication of that report are set out in paragraphs 1 to 16 of the Judgment of Tang VP (as he then was) in CACV 358/2005[2] dated 30 May 2007.  It is unnecessary to set out those background facts in this Judgment.

5.  Those findings and orders of the IDT were drawn up into an Order (“the Order”) which was registered as a judgment pursuant to s. 29 of the SIDO on 10 February 2006 in HCMP 327/2006.  That section provides as follows:

“(1) An order of the Tribunal may be registered by the Tribunal, in such manner as may be prescribed, in the Court of First Instance and shall, on such registration, become for all purposes an order of the Court of First Instance made within the jurisdiction of the Court of First Instance.

(2) An order of the Tribunal under section 23(1)(a) or 24(1) shall be filed by the Tribunal-

(a) with the Registrar within the meaning of section 2 of the Companies Ordinance (Cap 32); and

(b) as soon as is reasonably practicable after the order is made.”

6.  Having failed by other means to have the findings and consequential orders set aside,[3] apart from the penalty under s. 23(1)(c),[4] the appellant now seeks, by summons dated 30 June 2010, a stay of the proceedings in which the order has been registered, and the striking out of its registration.

7.  The summons sets out the following grounds on which the appellant seeks the stay and strike out orders:

(1)  The registration of the Order amounted to the purported exercise of judicial power of the Hong Kong Special Administrative Region (“HKSAR”) by the IDT which it was not entitled to exercise.  Further or alternatively, the IDT was not empowered to adjudicate on the subject matter of the inquiry or to make the orders that it did because in doing so it was purporting to function in a judicial capacity acting as a court; and

(2)  Since s. 15(3) of SIDO did not require the Chairman of the IDT to be a judge, insofar as judicial power was purported to be vested in the Chairman, that purported vesting was unconstitutional and of no legal effect.

8.  By her Judgment dated 18 October 2011, Deputy High Court Judge Teresa Cheng SC dismissed the appellant’s summons, holding that the court had no jurisdiction to stay the proceedings in HCMP 327/2006 or to strike out the Order.  She also held, on an obiter basis,[5] that the appellant’s constitutional challenge failed, concluding that the IDT in exercising its decision-making power under the SIDO was not exercising judicial power.  In respect of s. 29 of the SIDO, the Deputy Judge held that this did not give the IDT power to enforce, the power being given to the Registrar to register orders of the IDT, and it did not render the IDT a body exercising judicial power.  In any event, she further held that, even if she was wrong on the interpretation of s. 29, the enforcing power under that section was separable from the decision-making power so that the orders of the IDT remain valid.

9.  The appellant now appeals to this Court from the Deputy Judge’s dismissal of his summons.

The issues on appeal

10.  The first issue in this appeal is whether there is jurisdiction for the court to entertain the appellant’s summons to stay or strike out the proceedings in which the IDT’s order was registered.  In this regard, the issues of whether the appellant can rely on the perfection rule or the residual discretion after perfection to seek a correction of an error or to reopen the proceedings are also raised.

11.  If there is jurisdiction to do so, it follows that it will be necessary to consider the constitutional issues of whether the IDT proceedings constituted an unconstitutional exercise by the IDT of judicial power of the HKSAR or whether the registration of the Order was an unconstitutional exercise of such power.

The jurisdiction issue

12.  The appellant’s application was made under the inherent jurisdiction of the Court of First Instance (“CFI”) and s. 16(3) of the High Court Ordinance, Cap. 4, which provides:

“Nothing in this Ordinance shall affect the power of the Court of Appeal or the Court of First Instance to stay any proceedings before it, where it thinks fit to do so, either of its own motion or on the application of any person, whether or not a party to the proceedings.”

13.  In paragraph 18 of the Judgment, the Deputy Judge said:

“On the application for a stay of proceedings, I agree with the Secretary for Justice’s arguments: the order of the Tribunal has been registered and converted into a court order; there is nothing in these proceedings to be stayed. The Applicants are not contending for a stay of execution, the proceedings of which has not been commenced. Given that the registration proceedings have been completed, an application for stay is misconceived. I dismiss the application to stay.”

14.  With respect, I entirely agree with the Deputy Judge’s analysis of the application for a stay.  The Order had already been registered under s. 29 of the SIDO.  By that registration, it was converted into an order of the court and became, for all purposes, an order of the CFI made within its jurisdiction and so there was nothing to be stayed.  The appellant was not applying for a stay of execution.

15.  So far as the application under s. 16(3) of the High Court Ordinance is concerned, the Deputy Judge said:

“22. Section 16(3) of the High Court Ordinance plainly does not confer any power on the court to strike out. It confers power on the court to stay any proceedings before it. Neither the Applicants nor the Secretary for Justice have drawn my attention to any other authorities or legislations by which the Court has jurisdiction to strike out the Order in such circumstances. Once a registration is made, the Order attains the legal effect of a court order and I know of no power of a division of the same court to strike out such an order. It is not a question of taking the strike out application to a higher court but the lack of authority for such a power per se. Had there been such authorities, given the clear position taken by the Secretary for Justice in contending my lack of jurisdiction to deal with such applications, it would no doubt be drawn to the Court’s attention by the Applicants. As a result, a strike out application, based on what was before me, is not the proper procedure by which to challenge the registration or to remove the legal effect of the Order.” (Underlining added)

16.  The above passage, in particular the sentence underlined, is, in my view, plainly correct and the Deputy Judge simply had no jurisdiction to strike out the Order.

17.  In the face of these difficulties as to jurisdiction, the appellant advanced two further arguments to support the existence of an inherent jurisdiction on the part of the court to set aside the Order.

18.  First, the appellant contended that it was open to the Court to correct an error on the basis of the “perfection rule” as identified in HKSAR v Tin’s Label Factory Ltd (2008) 11 HKCFAR 637 at §16, namely:

“For a court of record, it is a well-established rule that until the point of time when its order is finally recorded, it has the power to recall and vary a decision it had earlier made. That moment marks the cut-off point after which the power to change an earlier decision ceases. The final entry of the order in the record is known as the perfection of the order and it will be convenient to refer to that rule as the perfection rule. Such a power is implicit in the court’s power to determine the matter in controversy. To identify the point of demarcation represented by the final recording of the order, it is necessary to examine the statutory provisions establishing the court and governing its operation and, where required, any relevant court practice.”

19.  I agree with the submission of Mr Peter Duncan SC, counsel for the Secretary for Justice, that the point of demarcation of an order registered pursuant to s. 29 of the SIDO is to be gleaned from s. 2(2) of the Securities (Insider Dealing) (Registration of Orders) Rules (Cap. 395A)[6] which provided:

“(1) To effect registration of an order in the Court of First Instance, the Tribunal shall cause the order and a copy thereof to be produced to the Registrar.

(2) The Registrar shall, on production of an order and a copy thereof-

(a) register the order in the Miscellaneous Proceedings Register kept in the High Court; and

(b) seal and date the copy of the order and return it to the person producing it on behalf of the Tribunal.”

20.  The Order as produced to this Court is sealed with the seal of the High Court and dated 20 February 2006 and there is no evidence that it was not returned to the person producing it on behalf of the IDT.  Nor is there any evidence to suggest that it was not registered in the Miscellaneous Proceedings Register of the High Court.  The provisions of s. 2(2) of the Rules have therefore, prima facie, been complied with so that the Order has passed the cut-off point for the operation of the perfection rule.  I therefore agree with Mr Duncan’s submission that the perfection rule does not assist the appellant.

21.  The second alternative argument advanced by the appellant in support of the inherent jurisdiction of the court to set aside the Order was by reference to the principle that the Court of Appeal, or the CFI when acting in an appellate capacity, has a residual discretion, even after an order has been perfected, to re-open proceedings that are complete, in accordance with the procedures laid down in Taylor v Lawrence [2003] QB 528 at §§26, 50 and 54-55.  The headnote to the report summarises the ambit of the principle which is:

“that the Court of Appeal had an implicit jurisdiction to do what was necessary to achieve its two principal objectives of correcting wrong decisions and ensuring public confidence in the administration of justice; that, therefore, it could take the exceptional course of reopening proceedings which it had already heard and determined if it was clearly established that a significant injustice had probably occurred and that there was no alternative effective remedy; that, before exercising such a power, the court would consider the effect of reopening the appeal on others and the extent to which the complaining party was the author of his own misfortune; and that where the alternative remedy would be an appeal to the House of Lords the Court of Appeal would only give permission to reopen an appeal if it was satisfied that leave to appeal to the House of Lords would not be given”.

22.  In Seray-Wurie v Hackney LBC [2003] 1 WLR 257, it was held (at §17) that the English High Court (equivalent to the CFI), when sitting as an appeal court, possesses a similar jurisdiction to reopen its decisions in exceptional circumstances in order to avoid real injustice and, in R(AM (Cameroon)) v AIT [2008] 1 WLR 2062, it was held that this principle could be invoked by one first instance judge to set aside an earlier order of another first instance judge in order to avoid a serious injustice.

23.  The principle was applied in this court in Aqua-Leisure Industries Inc & Anor. v Aqua Splash Ltd (No. 2) [2003] 2 HKLRD 422 and, in particular, it was stated that the procedure laid down in paragraph 56 in Taylor v Lawrence should be followed (see §2).  That procedure requires the party seeking to reopen a decision of the Court of Appeal to apply in writing to do so.  The application is considered on the papers and only allowed to proceed if, after considering the papers, the court so directs.  There is no right to an oral hearing of the application, unless the court directs this, and if the court refuses the application, it may further direct that it will not entertain oral submissions on the application.  As Lord Woolf observed[7]:

“The court should exercise strong control over any such application, so as to protect those who are entitled reasonably to believe that the litigation is already at an end.”

24.  In HKSAR v Tin’s Label Factory Ltd (above), Li CJ observed that the principle merited serious consideration for adoption in Hong Kong but sounded the caution that:

“… it is plain that the residual discretion is a wholly exceptional jurisdiction and the occasions when it may properly be invoked would be extremely rare.”[8]

25.  The appellant relied on this line of authority as an exemplar of the inherent jurisdiction of all courts of record to correct an error made by another court.  Can the appellant pray in aid the residual discretion in the present case in order to challenge the Order?

26.  In my judgment, for the following reasons, the plain answer to this question is that he cannot.

27.  First, the residual discretion is wholly exceptional and I am not persuaded that the criteria for its exercise as identified by Lord Woolf in Taylor v Lawrence (at §§54 to 55) are satisfied here.  The residual jurisdiction is to be used “to avoid real injustice in exceptional circumstances” where it is established that a “significant injustice has probably occurred and that there is no alternative effective remedy”.  As the Deputy Judge noted in the Judgment (at §19), the appellant had an opportunity to mount a challenge or judicial review either after the making of the IDT’s orders but before the Order was registered or also after the registration of the Order.  He would, of course, have had to do so timeously but it is clear that ample opportunity existed for this.  In a judicial review of the decisions of the IDT (whether (i) to proceed to determine the matters referred to it by the Financial Secretary,[9] or (ii) to make its findings or determinations in its Report, or (iii) to seek to register its orders under s. 29 of SIDO) the Court would have had jurisdiction to grant appropriate declaratory relief and/or injunctive relief based on the alleged unconstitutionality of the IDT proceedings or the registration of its orders under s. 29.  Alternatively, the appellant could have commenced judicial review proceedings against the Registrar in respect of his decision to register the Order and to seek an order to quash that decision together with appropriate declaratory relief.  In addition to these prior opportunities, the appellant has also had an earlier opportunity to raise a constitutional challenge to the IDT proceedings against him, either in the appeal in CACV 358/2005 when it was first heard in May 2007 or in the appeal from that judgment to the Court of Final Appeal in FACV 19/2007.  In these circumstances, it is hard to see how the appellant has suffered any significant injustice or that the present case is so exceptional as to warrant the exercise of the residual discretion.

28.  Secondly, the facts in R(AM (Cameroon)) v AIT, on which the appellant relied as an example of the exercise of the inherent power of a court to reopen an earlier decision, are distinguishable.  There, the court had made a mistake and failed to follow an earlier direction by a judge that an application for permission to apply for judicial review should be heard together orally with an application for the tribunal to reconsider its decision under s. 103A of the Nationality Immigration and Asylum Act 2002.  The latter application was dismissed on the papers and, when the application for permission to apply for judicial review was heard, it was dismissed on the basis that the application under s. 103A of the Act was the appropriate means of reviewing the tribunal’s decision and its dismissal on the papers was final.  In those circumstances, the English Court of Appeal allowed the claimant to reopen the s. 103A decision notwithstanding that it was final and held that the judge dealing with the judicial review application should have set aside the judge’s dismissal of the s. 103A application to avoid the serious injustice that otherwise would flow from the finality provision in s. 103A.

29.  Thirdly, the appellant did not ask the Judge to challenge the Order on the basis of the residual jurisdiction but sought instead an outright stay or striking out of the Order.  In this context, the application to this Court by a summons taken out in June 2010 to challenge the Order dated in February 2006 on this basis is unquestionably late and that is a further reason for declining to allow the appellant to do so.

30.  At this point, it is convenient to address the question of lateness since the Deputy Judge addressed a section of the Judgment (from §§24 to 29) to the timing of the application.  She held that the application was “extremely late from any perspective”.

31.  Mr John J E Swaine, counsel for the appellant, submitted that this was an incorrect view arrived at by the Deputy Judge because she regarded the complaint as one arising in public law, thus suggesting the strict time constraints for the bringing of a judicial review.  He submitted instead that the application involves the issue of whether the court’s own process had been misused and therefore the existence of these proceedings in HCMP 327/2006 were just as offensive to the conscience of the High Court today as they were when they were commenced in 2006.

32.  I do not accept those submissions and I agree with the Deputy Judge’s view that the appellant’s attempt to avoid the consequences of the Order is extremely late.  The paragraphs in the Judgment dealing with the timing of the application do not disclose that the Deputy Judge saw the complaint exclusively as a public law one, that being the substance of the contention advanced on behalf of the appellant.  In particular, at paragraph 26 of the Judgment, she said:

“There are sound reasons why an aggrieved party should act promptly on any challenge against a decision or administrative act whether the grounds be constitutional or otherwise. …”

33.  I agree that this shows that the Deputy Judge was not confining her analysis of lateness to the sphere of public law.  But even if she were, I think she would have been right to do so since, for the reasons addressed below in relation to the constitutional issues, I think it is right to regard the IDT proceedings and the registration of the Order as administrative acts judicially reviewable in public law rather than exercises of judicial power of the HKSAR.

34.  In this context, in answer to Mr Swaine’s submission that it is a matter of constitutional obligation and not discretion for the courts of the HKSAR to examine whether legislation enacted by the legislature or acts of the executive authorities are consistent with the Basic Law and, if found to be inconsistent, to hold them to be invalid (see Ng Ka Ling & Others v Director of Immigration (1999) 2 HKCFAR 4 at p. 25H-J), it should be noted that the argument that the principle of finality (stated in HKSAR v Hung Chan Wa (2006) 9 HKCFAR 614) is not engaged in extending time in an application for judicial review which involves the constitutionality or legality of a statute was not accepted by the Appeal Committee in Clarence Chan v Commissioner of Police (2010) 13 HKCFAR 462 at §§5-6.

35.  It is a matter of plain fact that, notwithstanding that the Order was registered in February 2006, it was only during the resumed hearing of CACV 358/2005 in May 2009 that the appellant sought to mount a constitutional challenge to the IDT, which could and should have been mounted long before then.  To describe a delay of over three years as making the application “extremely late from any perspective” was, in my view, apt.

36.  For the above reasons, I would affirm the decision of the Deputy Judge as to the lack of jurisdiction to entertain the appellant’s summons.

37.  Strictly, that conclusion renders it unnecessary to consider the constitutional issues sought to be raised.  This is all the more so when one notes that the replacement of the IDT with the Market Misconduct Tribunal set up under Part VIII of the Securities and Futures Ordinance, Cap. 571, has meant that there is a “dwindling number of cases still being handled by that Tribunal”[10], so the importance of the constitutional questions raised may be open to question.  On the other hand, the outcome of those issues (if decided against the appellant as the Deputy Judge held) would provide a complete answer to the application for a stay or striking out of the Order and demonstrate that there was no injustice requiring the Court to reopen the Order.  Since the Deputy Judge dealt with these issues at the request of both parties,[11] I think that it is likewise appropriate for this Court to address them in this appeal.

The constitutional issues

38.  By way of preliminary point, the appellant submitted that it was a recognised principle of public law that no estoppel can legitimate action which is ultra vires, nor can it give a tribunal wider powers than it possesses.[12]  I do not understand the Deputy Judge to have proceeded to decide the constitutional issues on the basis of estoppel, nor does the Secretary for Justice contend that any such estoppel applies in this case.  Furthermore, there is no suggestion the IDT claimed jurisdiction on the basis of any estoppel.  In the circumstances, I agree with Mr Duncan’s submission that the question of estoppel simply does not arise.

39.  In support of his case as to unconstitutionality of the IDT, the appellant relies on articles 80, 19(2), 83, 88 and 92 of the Basic Law, the effect of which is to preclude the IDT from exercising any judicial power.  Those articles materially provide as follows:

(1) BL80:[13]

“The courts of the [HKSAR] at all levels shall be the judiciary of the Region, exercising the judicial power of the Region.”

(2) BL19(2):

“The courts of the [HKSAR] shall have jurisdiction over all cases in the Region, …”.

(3) BL83:

“The structure, powers and functions of the courts of the [HKSAR] at all levels shall be prescribed by law.”

(4) BL88:

“Judges of the courts of the [HKSAR] 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.”

(5) BL92:

“Judges and other members of the judiciary of the [HKSAR] shall be chosen on the basis of their judicial and professional qualities and may be recruited from other common law jurisdictions.”

40.  The appellant contended that BL80 and BL19 grant exclusively to the courts of the HKSAR all the judicial power of the Region with the consequence that judicial power cannot constitutionally be exercised by any body which is not a court within the meaning of the Basic Law.

41.  The appellant also relies on the fact that two of the three members of the IDT, namely Professor Lui and Mr Chan, were appointed by the Financial Secretary pursuant to s. 15(2) of the SIDO and therefore not in accordance with BL88.  The appellant further contends that those two members of the IDT were not chosen on the basis of their judicial qualities as required by BL92.

42.  Further, the appellant contends that, having regard to the wide definition of “judge” in s. 2, s. 15(3) of the SIDO did not require the Chairman of the IDT to be a judge of the HKSAR so that, insofar as judicial power was purportedly vested in the Chairman of the IDT, that purported vesting was unconstitutional and of no legal effect.

Did the IDT exercise judicial power of the HKSAR?

43.  This is a critical question that arises since, if the IDT purported to exercise such power, it was not disputed by the Secretary for Justice that it would have been acting unconstitutionally. Furthermore, the appellant’s contentions as to the membership of the IDT (set out in the preceding two paragraphs) would have to be accepted as correct.

44.  Mr Swaine submitted that the concept of judicial power is a broad one and he relied on the following passages from the judgment of Griffith CJ of the High Court of Australia in Waterside Workers’ Federation of Australia v J.W. Alexander Ltd (1925) 25 CLR 434 at 442-444, namely:

“Without attempting an exhaustive definition of the term ‘judicial power,’ it may be said that it includes the power to compel the appearance of persons before the tribunal in which it is vested, to adjudicate between adverse parties as to legal claims, rights, and obligations, whatever their origin, and to order right to be done in the matter.

…

... the duties which are to be declared by a tribunal consequent upon a legal obligation are matters for the exercise of judicial power.

…

It is not disputed that convictions for offences and the imposition of penalties and punishments are matters appertaining exclusively to that power.”

45.  He also relied on The Shell Company of Australia Limited v Federal Commissioner of Taxation (1930) 44 CLR 530 where, in giving the opinion of the Privy Council, Viscount Dunedin LC said, at 542-543, of the words “judicial power” in s. 71 of the Constitution of the Commonwealth of Australia, that they mean:

“… the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action.”

46.  Mr Swaine submitted that the IDT plainly purported to function as a court.  In addition to the nature of its activities, which amounted to adjudicating, Mr Swaine relied on the fact that the IDT’s orders: were immediately binding upon the person affected by them once written notice of them was given to him, notwithstanding any pending appeal (s. 23(5) of SIDO); and became for all purposes an order of the CFI “made within the jurisdiction of the [CFI]” once registered by the tribunal in the CFI (s. 29(1)).

47.  Mr Swaine relied on the observation of Hartmann J (as he then was) in Lai Hung Wai v Secretary for Security, unrep., HCAL 1596/2001, 9 September 2002, at §38 that:

“It has not been disputed that the Basic Law is founded on what is commonly called the Westminster model. As such, the powers of the legislature, the executive and the judiciary are separate. In terms of Art. 80, judicial power is vested in those appointed to hold judicial office. That being so, what the legislature cannot do, consistent with the separation of powers, is to place judicial power in the hands of the executive.”

48.  I do not regard that observation as controversial, nor was the constitutional duty of the court as stated in Ng Ka Ling & Others v Director of Immigration (above) at p. 25H-J in dispute.

49.  It will be necessary to come back later in this Judgment to consider the Court of Final Appeal’s declaration of invalidity in respect of the power to impose a penalty under s. 23(1)(c) of the SIDO.  But, stripped of any criminal characterisation (as held by the Court of Final Appeal), did the IDT proceedings constitute the exercise of judicial power of the HKSAR?

50.  In my judgment, and looking first at the decision-making power of the IDT leading to the Report containing its findings and determinations, the IDT proceedings did not constitute the exercise of such power and were therefore not unconstitutional by reason of inconsistency with the various Basic Law articles relied upon.

51.  Considerable assistance in the appropriate analysis by which to address the question posed is provided in Luk Ka Cheung v Market Misconduct Tribunal [2009] 1 HKLRD 114, a decision of the CFI consisting of Hartmann JA and A. Cheung J (as the Chief Judge then was) in which the court considered whether the Market Misconduct Tribunal was exercising judicial power of the HKSAR. The court held that it was not.  Although not binding on us, I consider that the reasoning in the judgment in that case is highly persuasive in the present context.

52.  In his judgment, with which Hartmann JA agreed, A. Cheung J stressed (at §§29-30) the importance of context in interpreting the Basic Law and observed (at §31) that it was unsafe to simply borrow and apply Australian jurisprudence on the separation of powers in general, and on judicial power in particular, without first recognising the rationale behind the Australian approach, which was a strict one based on its federal system.

53.  Thus, at §33, A. Cheung J quoted from an article by Sir Anthony Mason[14] in which he wrote:

“Quite apart from political differentiations, there are doctrinal differences, such as those mentioned above. These doctrinal differences, which are not always based on political differentiations, present obstacles to the importation of principles based on different doctrinal foundations. Take, for example, the separation of powers. The United States and Australian Constitutions incorporate a separation of powers, as does the Constitution of Canada (at least impliedly), while United Kingdom public law also asserts a separation of powers. But the content of that separation varies across the four jurisdictions. Although the United States and the Australian separation of powers is similar in some respects, the difference between the presidential system and the Westminster system, with its doctrine of responsible government, means that there is a substantial cleavage between the two systems. Neither in Canada nor in the United Kingdom has the doctrine been taken as far as it has in Australia, let alone the United States.

The consequence is that judicial decisions on the separation of powers need to be treated with great care before they can be imported from one jurisdiction to another.  This proposition has significance for Hong Kong.  The Basic Law incorporates a separation of powers.  So far, however, the courts of the HKSAR have not had occasion to consider what the doctrine may entail in Hong Kong.  It would not follow that the Basic Law, when construed in the light of its context and the preservation of the English common law by Article 8 of the Basic Law, necessarily mandates a separation of powers that conforms either to the United States or Australian model.”

54.  For this reason, it is necessary to apply a considerable degree of caution before importing the dicta in the Australian authorities relied upon by the appellant as to the meaning of the exercise of judicial power.  A similar sentiment was more recently expressed by Lam J (as he then was) in Lee Yee Shing Jacky & Anor v Board of Review & Anor, unrep., HCAL 40/2008, 22 February 2011,[15] at §86:

“… for the reasons given by A Cheung J at paras. 29 to 36 of his judgment in Luk Ka Cheung, it is unsafe to simply borrow and apply the Australian jurisprudence on the meaning of judicial power without regard to the difference between the strict Australian constitutional approach to separation of power based on the United States federal model and the constitutional order in Hong Kong enshrined in the Basic Law. For this reason, it is more pertinent for our purposes to have regard to the purpose of the relevant articles in the Basic Law dealing with access to the courts as explained by Ribeiro PJ in New World. His Lordship pinpointed continuity with the previous legal system practiced in Hong Kong as one of the objectives.”

55.  In terms of the context, it is important to note that, both at the time the Basic Law was promulgated (4 April 1990) and when it came into effect (1 July 1997), “administrative bodies and tribunals had become prevalent and they performed or discharged numerous functions that had superficial resemblance to the judicial process”: per A. Cheung J in Luk Ka Cheung at §34.

56.  Hence, at §36, A. Cheung J said (and I respectfully agree):

“It is plain that in a modern society like Hong Kong, administrative tribunals and bodies have an important role to play. This is not a new phenomenon. It was already the case before the Basic Law was promulgated. Given the theme of continuity, it would be very surprising if the effect of the Basic Law, upon its proper interpretation, were to outlaw these administrative tribunals and bodies for ousting the jurisdiction or usurping the judicial functions of the courts of judicature of the HKSAR. Or put another way, the Basic Law should be interpreted in such a way as to enable, so far as violence is not done to the principle of separation of powers as understood in the tradition of English common law, the continued existence and development of administrative tribunals and bodies. This calls for a flexible and realistic, as opposed to an idealistic, approach to the doctrine of separation of powers, and a purposive and contextualised interpretation of the scope and meaning of ‘judicial power’ in the Basic Law, rather than following indiscriminately the strict interpretation adopted by the Australian courts towards their own Constitution, which was written under very different circumstances in order to serve its own unique purposes.”

57.  Furthermore, the idea that statutory tribunals might exercise a sort of judicial power without the judicial power of the state being exercised was alluded to by Robert Walker LJ (as he then was) in General Medical Council v British Broadcasting Corporation [1998] 1 WLR 1573 at p. 1580, cited with approval by Ribeiro PJ in Stock Exchange of Hong Kong Ltd v New World Development Co Ltd & Ors (2006) 9 HKCFAR 234 at §85.

58.  Next, in addition to context, it is necessary, when construing the relevant provisions of the Basic Law to have regard to the important theme of continuity provided for between the pre-existing and present courts and judicial systems, i.e. “continuity with what went before”: see Stock Exchange of Hong Kong Ltd v New World Development Co Ltd & Ors at §§43 and 45.  As A. Cheung J noted in Luk Ka Cheung (at §37), the IDT, which was the predecessor of the Market Misconduct Tribunal, was already in existence for some years before 1997.

59.  In this regard, I find myself in complete agreement with the observations of A. Cheung J in Luk Ka Cheung where he said:

“40. … the (pertinent) philosophy behind the Basic Law is one of continuity, and it would be a very surprising suggestion indeed if anybody were to suggest that the Insider Dealing Tribunal, which had been established before 1997 to deal with a particular type of evil affecting the financial markets that had been identified by the Executive/Legislature, had suddenly become a usurper of judicial authority after the coming into force of the Basic Law.

41. This is a highly relevant background fact, in the sense that how, historically, the subject matter under discussion has been dealt with and how the present regime came into being are material to determining whether the judicial power of the State is involved …”.

60.  Similarly, it is pertinent that the subject matter of insider dealing, an “insidious mischief” and “very serious misconduct” (per Sir Anthony Mason in FACV 19/2007 at §§45 and 46), is not one which has traditionally or historically been the subject of adjudication by the courts of judicature. Instead, insider dealing is novel to the common law and is not a common law offence: see Luk Ka Cheung at §§42-43.  It is not a subject matter which has been removed from the jurisdiction of the courts and given to a statutory tribunal to be dealt with.

61.  A further factor identified by A. Cheung J in Luk Ka Cheung as an indicator that the Market Misconduct Tribunal is not exercising judicial power is the fact that, notwithstanding the creation of civil liability for market misconduct by s. 281 of Cap. 571, that tribunal does not decide civil liability (see §§48-49). The same point can be made in respect of the IDT, which likewise does not decide civil liability.  Indeed, evidence given in proceedings before the IDT, whilst admissible for the purposes of the SIDO, “shall not be admissible against that person in any civil or criminal proceedings in a court of law by or against him” (save for perjury): see SIDO s. 19.

62.  Lastly, and before turning to the question of the effect of the Court of Final Appeal’s judgment in FACV 19/2007, I would observe that it is at least surprising that the suggestion that the IDT was unconstitutionally exercising judicial power in breach of the provisions of the Basic Law was not an argument raised in the appeal against the findings and orders of the IDT in the first hearing of CACV 358/2005 in May 2007 or in the appeal from that judgment to the Court of Final Appeal in FACV 19/2007. Furthermore, as will be seen, the Court of Final Appeal, having concluded that the proceedings before the IDT were criminal by reason of the power to impose a penalty, declared s. 23(1)(c) invalid but expressly restored the adverse findings and orders of the IDT under ss. 23(1)(a), 23(1)(b) and 27.  It would have been surprising, to put it at its lowest, if the Court of Final Appeal would have done so if it thought there was any reason to think that the IDT had been unconstitutionally exercising judicial power in breach of the Basic Law.

63.  The conclusion of A. Cheung J in respect of the Market Misconduct Tribunal in Luk Ka Cheung was:

“54. In my view, to a substantial extent the Tribunal is performing a function comparable to that performed by a regulating body or disciplinary tribunal established to self-regulate a particular type of activity amongst a specific class of people in society. Of course, like solicitors disciplinary proceedings, the public at large has a stake in the matter in the sense that solicitors are here to provide legal services to the public and it is in the interest of the public that professional misconduct of solicitors be investigated into and dealt with accordingly. Likewise, the Tribunal is there to regulate the conduct of those involved in the financial markets in Hong Kong. The investing public and the reputation of Hong Kong as a serious financial centre all have a stake in it. But it is very different in nature from, say, the determination of a criminal offence by a criminal court, or the adjudication of civil disputes before a civil court. The functions performed by the courts in those cases are qualitatively different from that performed by the Tribunal. Maybe this is just another way of putting the distinction between exercising the judicial power and exercising a judicial power of the State.”

64.  In my judgment, the same analysis applies to the IDT and I reach the same conclusion in respect of the IDT, namely that it is not exercising the judicial power of the HKSAR.

65.  I turn to deal with the effect of the Court of Final Appeal’s decision in FACV 19/2007.  As I have already noted, the result of that decision is that the Court of Final Appeal, having concluded that the proceedings before the IDT were criminal by reason of the power to impose a penalty, declared s. 23(1)(c) invalid.  Mr Swaine submitted that, consequently, it has already been conclusively determined that the IDT functions as a court of law.

66.  With respect, I disagree.

67.  Although the Court of Final Appeal concluded (at §66) that the proceedings involved the determination of a criminal charge, this was by reason of the power to impose a penalty under s. 23(1)(c).  The Court of Final Appeal therefore declared that provision invalid and by reason of that declaration of invalidity the true character of the proceedings as civil emerged.  Importantly, in this regard, Sir Anthony Mason said:

“117. … The remedy brings about a situation which is entirely consistent with what the legislative intention would be in the circumstances which now prevail. From the perspective of the legislature, the remedy is appropriate. From the perspective of the appellant, the remedy is both appropriate and just because it has the effect of preserving the findings made by the Tribunal and the orders which it made other than the imposition of penalties, including the orders for disgorgement of gain and disqualification.

118.     Whether the remedy is appropriate and just from the perspective of the respondents is a more difficult question.  The remedy is less satisfactory to them than the relief granted by the Court of Appeal because it preserves the findings made by the Tribunal and the orders for disqualification.  The Tribunal made its findings by applying the civil standard of proof not the criminal standard of proof which was the relevant standard in the light of the criminal character of the proceedings which flowed from the presence of the power to impose the penalty.  If, however, the correct outcome of the proceedings is that s.23(1)(c) is declared to be invalid, then the reason for characterizing the proceedings as criminal is eliminated.  It then follows that the true character of the proceedings in the light of the relief granted is civil and the Tribunal was correct in applying the civil standard of proof.”

68.  The Court of Final Appeal did not suggest that the nature of the IDT’s functions changed by virtue of the declaration of invalidity of s. 23(1)(c).  Instead, as indicated in the passages cited in the preceding paragraph, the effect of the declaration of invalidity is that the character of the proceedings before the IDT was civil from the outset and was always civil.  This does not go to the nature of the functions of the IDT.

Was the registration of the Order an exercise of judicial power?

69.  I have set out above the provisions of s. 29 of the SIDO and s. 2(2) of the Securities (Insider Dealing) (Registration of Orders) Rules.  The appellant contends that the Tribunal has converted its order into an order of the High Court by simply registering it and that this therefore must be an exercise of judicial power.  Reliance is placed on the fact that registration is automatic and is initiated by the IDT rather than the court.  This, says the appellant, is a critical distinguishing feature of this case from that of Luk Ka Cheung.

70.  In this connection, it was submitted by Mr Swaine that the reliance on the principles underlying the Australian case of Brandy v Human Rights and Equal Opportunity Commission (1994-1995) 183 CLR 245, on which the court relied in Luk Ka Cheung, “virtually” require a conclusion that the IDT does exercise judicial power, namely the power of the tribunal to enforce its own orders.

71.  However, as A. Cheung J held in Luk Ka Cheung (at §57), Brandy v Human Rights and Equal Opportunity Commission does not lay down a rule that if an order by a tribunal is automatically registrable as an order or judgment of a court, the tribunal must be exercising the judicial power of the State.  I would respectfully agree with his further observation:

“In my view, taken at the highest, that is only a pointer, albeit an important one, that what is being exercised is the judicial power of the State.”

72.  Further, it should also be noted that in Brandy, the Commission was required by the relevant legislation to lodge its determination with the registry of the Federal Court as soon as practicable. In contrast, the IDT has a discretion whether or not to seek the registration of its orders under s. 29.

73.  But even if registration under s. 29 is regarded as being automatic, it remains relevant to consider the theme of continuity and whether, since that provision was in existence well before 1 July 1997, the Basic Law intended “to create a sea change in terms of regulating insider dealing in Hong Kong” (Luk Ka Cheung at §60).  For my part, I do not think it did.

74.  Consistent with the conclusion in Luk Ka Cheung (at §61), albeit a conclusion in relation to the discretionary power to register under s. 264(1) of Cap. 571, I would hold that the registration provision in s. 29 of SIDO is simply a convenient aid to execution of the IDT’s orders and determinations and does not affect the substance of the matter, namely that the IDT “is established to police and regulate market behaviour” and not to exercise the judicial power of the HKSAR.

75.  An additional factor that supports this conclusion, in my view, is that the actual registration of the IDT’s order is not carried out by the IDT itself but rather by the Registrar of the High Court.  The IDT is not itself exercising any power under s. 29, which is reserved to the Registrar.  I respectfully agree with the Deputy Judge who said (Judgment §78):

“The Tribunal’s power to seek and perhaps even to expect its orders to be converted into a court order does not amount to a right or power on the part of the Tribunal to enforce its own orders.”

76.  Unlike the Deputy Judge, however, I do not consider that the Registrar is engaging in an adjudicative function in deciding to register the IDT’s order as an order of the High Court.  On the contrary, in my view, the Registrar is performing an administrative act or making an administrative decision in proceeding to register the IDT’s orders and determinations as an order of the High Court.[16]  In my view, that decision is judicially reviewable under RHC O.53.  It is at that stage that the supervisory jurisdiction of the High Court is engaged and, in this case, would have enabled the appellant to mount the constitutional challenges he has sought to raise in this application.  As pointed out above, the time for invoking that supervisory jurisdiction is long past.  Insofar as the Deputy Judge thought that registration might take place without the affected party being aware of it (Judgment §76), this fact would, in my view, simply go to the question of whether time for any application to apply for judicial review should be extended.

Miscellaneous points

77.  In the Judgment (at §§30 to 31), the Deputy Judge addressed the standard of proof and suggested that the appellant had to demonstrate unconstitutionality to a standard of proof beyond reasonable doubt.

78.  With respect, I do not think it is appropriate to refer to resolving issues of consistency with the Basic Law in terms of a particular standard of proof.  The issue of compatibility with the Basic Law in this case turns on the proper construction of the relevant provisions relied upon and not on any finding of fact, to which reference to a standard of proof might be relevant.  However, since I conclude that the Deputy Judge was correct in her conclusions that neither the IDT’s decision-making nor the registration of its order under s. 29 was an unconstitutional exercise of judicial power of the HKSAR, nothing turns on the Deputy Judge’s error in this regard.

79.  It is therefore also not necessary to resolve the question of whether the Deputy Judge’s approach amounted to imposing a presumption of constitutionality, an argument described as controversial,[17] and which Mr Duncan confirmed he was not advancing in this case.

Conclusion

80.  For the reasons set out above, I would dismiss this appeal.

81.  As to costs, I see no reason why these should not follow the event and I would therefore make an order nisi that the appellant pay the respondent the costs of this appeal, to be taxed if not agreed.

Hon Barma J:

82.  I agree with the judgment of Fok JA.