REGISTRAR OF THE HONG KONG INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS v. CHAN YUI HANG

CACV 528/2020

[2022] HKCA 805

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 528 OF 2020

(ON APPEAL FROM D-16-1196C, D-17-1235C)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  This is Mr Chan’s appeal against (i) the decision of the Disciplinary Committee (“the Committee”) of the Hong Kong Institute of Certified Public Accountants (“the Institute”) on 13 November 2019 that five complaints preferred by the Registrar of the Institute (“the Registrar”) against him were proved, and (ii) the further decision of the Committee on 3 September 2020 relating to sanctions and costs.

2.  On 7 March 2022, this Court directed, with the consent of the parties, that the appeal shall be disposed of on paper. For the purpose of the appeal, Mr Chan has filed Skeleton Submissions dated 25 April 2022[1] and Reply Submissions dated 17 May 2022, and the Registrar has filed Written Submissions dated 10 May 2022.

BASIC FACTS

(i)  Background

3.  Mr Chan was a certified public accountant. Leco Watch Case Manufactory Limited (“the Company”) was a private company incorporated in Hong Kong on 8 July 1988.

4.  On 26 November 2012, the Company commenced creditors’ voluntary winding up, and Mr Chan was appointed as provisional liquidator of the Company, pursuant to s 228A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (then known as the Companies Ordinance[2], hereinafter referred to as “the Ordinance”).

5.  On 14 December 2012, Mr Chan was appointed as sole liquidator of the Company at the first meeting of the creditors of the Company. The creditors also resolved at that meeting not to appoint a committee of inspection.

6.  The liquidation of the Company continued for more than one year, and was continuing during the period of time covered by the five complaints against Mr Chan. By 24 June 2013, Mr Chan had received the total sum of about HK$4.7 million as liquidator’s fees.

7.  By a letter dated 11 September 2017 (“the Complaint Letter”), the Registrar submitted five complaints (“the Complaints”) to the Council of the Institute (“the Council”) against Mr Chan for failing to observe various provisions of the Ordinance, and failing or neglecting to observe, maintain or otherwise apply professional standards as provided in ss 500.5(e), 500.40 and 500.43 of Chapter E (titled “Specialized Areas of Practice”) of the Code of Ethics for Professional Accountants (“the Code”):

(1)  The First Complaint alleged that Mr Chan failed to convene annual creditors meetings and report his conduct and dealings in relation to the liquidation of the Company for 4 years, or alternatively 3 years, since the date of liquidation of the Company, in breach of s 247 of the Ordinance.

(2)  The Second Complaint alleged that he failed to file liquidator’s statements of account for the Company in time, in breach of s 284 of the Ordinance.

(3)  The Third Complaint alleged that he failed to retain overall control of the work delegated to a consulting firm, ADGS Advisory Limited (“ADGS”), during the Company’s liquidation.

(4)  The Fourth Complaint alleged that he failed to obtain the approval of the creditors of the Company in respect of his liquidator’s fees, in breach of s 244 of the Ordinance, and also failed to report openly and transparently to those with an interest in the outcome of the liquidation.

(5)  The Fifth Complaint alleged professional misconduct on his part by reason of his repeated failure to comply with legal and ethical requirements while conducting the liquidation of the Company.

(ii)  The Complaints

8.  The First Complaint concerned Mr Chan’s failure to convene annual creditors’ meetings in breach of s 247(1) of the Ordinance, and s 500.5(e) of Chapter E of the Code.

9.  Section 247(1) of the Ordinance states as follows: “In the event of the winding up continuing for more than 1 year, the liquidator shall summon a general meeting of the company and a meeting of creditors at the end of the first year from the commencement of the winding up, and of each succeeding year, or at the first convenient date within 3 months from the end of the year or such longer period as the Official Receiver may allow, and shall lay before the meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year.”

10.  Under s 500.5(e) of Chapter E of the Code, an insolvency practitioner shall “comply with relevant laws and regulations and avoid any conduct that the professional accountant knows or should know might discredit the profession”.

11.  The winding-up of the Company commenced on 26 November 2012. Mr Chan was required by s 247(1) of the Ordinance to convene annual creditors’ meetings of the Company as follows -

Anniversary date	Annual meeting to be held on or before (3 months from anniversary date)
26.11.2013	25.2.2014
26.11.2014	25.2.2015
26.11.2015	25.2.2016
26.11.2016	25.2.2017

12.  Upon the Registrar’s inquiry with Mr Chan, he was unable to provide any evidence (eg gazette notices, meeting minutes, etc) to show that such annual meetings had been convened. Mr Chan alleged that 3 creditors’ meetings had been convened on 4 December 2012, 4 October 2013 and 10 June 2016 respectively. The Registrar did not, however, accept that those meetings were relevant or satisfied the requirements of s 247(1) of the Ordinance, for the following reasons:

(1)  In respect of the meeting on 4 December 2012, it was in fact the first creditors’ meeting held pursuant to s 228A of the Ordinance, and not an annual creditors’ meeting held pursuant to s 247(1) of the Ordinance.

(2)  In respect of the alleged meeting on 4 October 2013, Mr Chan stated in his letter to the Institute dated 31 August 2017 that the meeting was cancelled because “No body attend”. It was unclear whether no meeting was held because nobody turned up, or it was cancelled before the appointed time. Even if it was the former situation, (a) the proposed meeting was not held within 3 months of the anniversary date of the commencement of the winding-up, (b) there was no evidence that notice of the meeting had been sent to the creditors as required by r 114(2)[3] of the Companies (Winding Up) Rules, Cap 32H (“the Rules”), (c) no minutes of the meeting were drawn up and kept as required by r 130(1)[4] of the Rules, and (d) the meeting should have been (but was not) adjourned to a date within a specified period in accordance with r 123(2)[5] of the Rules.

(3)  In respect of the meeting on 10 June 2016, (a) it was not held within 3 months of the anniversary date of the commencement of the winding-up, (b) the meeting was not gazetted in accordance with r 114(1)[6] of the Rules, and (c) no minutes of the meeting were drawn up and kept as required by r 130(1) of the Rules[7].

(4)  Accordingly, Mr Chan had failed to convene all 4 annual creditors’ meetings by the time of the Complaint Letter.

13.  The Second Complaint concerned Mr Chan’s failure to file liquidator’s statements of account in time, in breach of s 284(1) of the Ordinance, and s 500.5(e) of Chapter E of the Code.

14.  Section 284(1) of the Ordinance states as follows: “If where a company is being wound up the winding up is not concluded within 1 year after its commencement, the liquidator shall, at such intervals as may be prescribed, until the winding up is concluded, send to the Registrar a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in and position of the liquidation.”

15.  Rule 181 of Rules provides that: “In a voluntary winding up, the statements with respect to the proceedings in and position of a liquidation of a company, the winding up of which is not concluded within a year after its commencement, shall be sent to the Registrar of Companies twice in every year as follows - (a) the first statement commencing at the date when a liquidator was first appointed and brought down to the end of 12 months from the commencement of the winding up, shall be sent within 30 days from the expiration of such 12 months, or within such extended period as the court may sanction, and the subsequent statements shall be sent at intervals of half a year, each statement being brought down to the end of the half-year for which it is sent…”

16.  Six out of seven of Mr Chan’s statements of account were filed late:

Reporting period	Deadline for filing	Date of actual filing	Length of delay
26.11.2012 - 25.11.2013	25.12.2013	13.01.2014	19 days
26.11.2013 - 25.05.2014	24.06.2014	30.07.2014	36 days
26.05.2014 - 25.11.2014	25.12.2014	11.02.2015	48 days
26.11.2014 - 25.05.2015	24.06.2015	10.12.2015	169 days
26.05.2015 - 25.11.2015	25.12.2015	26.11.2015	-
26.11.2015 - 25.05.2016	24.06.2016	24.10.2016	122 days
26.05.2016 - 25.11.2016	25.12.2016	16.01.2017	22 days

17.  By reason of his delay in filing the statements of account for the half-year period ended 25 May 2015, Mr Chan was charged with an offence for failing to comply with s 284(1) of the Ordinance in the Eastern Magistrates’ Courts on 7 November 2015 (ESS3734/2015). He pleaded guilty to the charge, and was convicted and fined HK$5,000 for the offence.

18.  In his letter dated 29 May 2017 to the Institute, Mr Chan explained that the delay was the result of “misunderstanding” on the part of ADGS in relation to notice(s) from the Companies Registry and his instruction(s), and he was considering to change ADGS’s appointment as his agent.

19.  On the other hand, in his subsequent letter to the Institute dated 31 August 2017, Mr Chan stated that the delay was due to a lot of “unexpected legal action” and other “undisclosed serious matters found or happened during year 2013 to 2016”.

20.  The Registrar considered that Mr Chan’s excuses could not absolve him of the breaches of s 284(1) of the Ordinance.

21.  The Third Complaint concerned Mr Chan’s failure to retain overall control of the conduct of his engagement as liquidator of the Company, in breach of s 500.43 of Chapter E of the Code, which provides that: “If any appointment necessitates the employment of agents, an insolvency practitioner shall exercise care to retain overall control of the conduct of the engagement…”

22.  The factual basis of this complaint has been set out in §§16-19 above. The Registrar considered Mr Chan’s allegation that the fault for the late filing of the statements of account lay with ADGS, and not with him, was clear evidence that Mr Chan had failed to exercise care to retain overall control of the liquidation.

23.  In relation to Mr Chan’s suggestion, in his letter to the Institute dated 31 August 2017, that “the control of the works is proper and up to the budgeted time schedule”, the Registrar considered that the timesheets prepared by ADGS and relied upon by Mr Chan only showed that billing records of some kind had been kept, but did not and could not show that Mr Chan had retained adequate control of ADGS’s work.

24.  The Registrar also took into account the fact that there was no evidence that Mr Chan had done any other work or taken any other step so as to exercise care to retain control, or to “remedy” the alleged default on the part of ADGS.

25.  Overall, the Registrar was of the view that Mr Chan was in breach of s 500.43 of Chapter E of the Code.

26.  The Fourth Complaint concerned Mr Chan’s failure to obtain proper approval by the creditors of his liquidator’s fees, in breach of s 244 of the Ordinance, and ss 500.5(e) and/or 500.40 of Chapter E of the Code.

27.  Section 244(1) of the Ordinance states as follows: “The committee of inspection, or if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator or liquidators”.

28.  The provisions of s 500.5(e) of Chapter E of the Code have already been set out in §10 above. As for s 500.40 of Chapter E of the Code, it states as follows: “An insolvency practitioner in the role as office holder has a professional duty to report openly to those with an interest in the outcome of the insolvency or liquidation. An insolvency practitioner shall report on his acts and dealings as fully as possible having regard to the circumstances of the case, in a way that is transparent and understandable. An insolvency practitioner shall bear in mind the expectations of others and what a reasonable and informed third party would consider appropriate.”

29.  As earlier mentioned, Mr Chan had received HK$4.7 million as liquidator’s fees by 24 June 2013. The issue was whether the fees had been properly “fixed” by the creditors under s 244 of the Ordinance. In his letter of 27 March 2017 to the Institute, Mr Chan stated that his liquidator’s fees had been approved by the “major creditor” of the Company at the first meeting of the creditors held on 14 December 2012. In his further letter of 31 August 2017 to the Institute, Mr Chan referred to the “minutes” of the first meeting of the creditors (“the Minutes”), and said that the amount of HK$4,720,943.18 was paid according to “timesheet and billing”. In the Minutes, it was recorded that the creditors resolved, inter alia, that “the remuneration of Liquidator is 50% of the realise[d] assets of the Company excluding the investigation cost of Liquidator”. There is a dispute as to when Mr Chan first produced the Minutes to the Institute.

(1)  According to Mr Chan, he sent a copy of the Minutes to the Institute by fax on 19 June 2017, and further enclosed a copy of the same in his letter to the Institute dated 31 August 2017.

(2)  On the other hand, according to the Registrar, the Institute did not receive any fax at all from Mr Chan on 19 June 2017, and the Minutes were not enclosed with Mr Chan’s letter of 31 August 2017. Instead, Mr Chan produced what appeared to be a “summary” of the “voting result” at the first meeting of the creditors, which showed that 2 resolutions were voted on - one for the appointment of Mr Chan as liquidator of the Company (which was passed), and the other for the setting up of a committee of inspection (which was not passed). There was nothing in the summary to show that the creditors had given approval of his charge out rate, or the fee of HK$4.7 million paid to him. The Registrar’s position is that the Minutes were only produced by Mr Chan at the first substantive hearing of the disciplinary proceedings on 16 January 2019. In any event, the Registrar considered that the Minutes could not show that the liquidator’s fees of HK$4.7 million received by Mr Chan were properly “fixed” under s 244(1) of the Ordinance, for the reasons set out in §§21-34 of the Complainant’s Submissions to the Committee dated 22 March 2019. It is unnecessary to analyse those reasons in this judgment because, as will be seen later, Mr Chan has not appealed against the substantive decision of the Committee that the 4^th Complaint was proved. His appeal relates, instead, to a procedural aspect which will be considered under Ground 1 below.

30.  The Registrar further considered Mr Chan had breached s 500.40 of Chapter E of the Code, in that he did not report openly to those with an interest in the outcome of the liquidation in respect of his liquidator’s fees. The Registrar did not consider the disclosure of the liquidator’s fees of HK$4.7 million in the statement of account for the period ended 25 November 2013 to constitute compliance with the requirement of s 500.40, because:

(1)  The section required practitioners to report his acts and dealings “as fully as possible”, in a way that was “transparent” and “understandable”.

(2)  To report on fees which had already been paid out more than 6 months ago could not be regarded as reporting “as fully as possible” - there was simply no opportunity given to the creditors to object to the fees paid out to Mr Chan.

(3)  Neither was the report “transparent”, because there were no particulars whatsoever as to the sum of HK$4.7 million paid out to Mr Chan.

(4)  Mr Chan said that the fees of HK$4.7 million were paid according to “timesheet and billing”. However, there was no evidence that the timesheets enclosed with Mr Chan’s letter to the Institute dated 31 August 2017 were ever provided to the creditors before any approval or payment of the fees.

31.  The Fifth Complaint was based on the matters complained of under the First to Fourth Complaints which the Registrar considered gave rise to “professional misconduct” on the part of Mr Chan under s 34(1)(a)(vi) of the Professional Accountants Ordinance, Cap 50 (“the PAO”). That section states as follows:

“A complaint that … a certified public accountant … has been guilty of professional misconduct … shall be made to the Registrar who shall submit the complaint to the Council which may, in its discretion …, refer the complaint to the Disciplinary Panels.”

32.  The Registrar took the view that Mr Chan’s conduct referred to in the First to Fourth Complaints clearly constituted professional misconduct because:

(1)  There were breaches of at least 3 provisions of the Ordinance concerning the liquidation of the Company, 2 of which constituted criminal offences.

(2)  The breaches were repeated over multiple years concerning the holding of creditors’ annual meetings (4 times) and the late filing of statements of account (6 times).

(3)  Any breach of criminal law would necessarily bring about discredit to the accountancy profession, not to mention the fact that the breaches in this case were repeated over many years and Mr Chan had actually been prosecuted by the Registrar of Companies.

(4)  The failure to obtain creditors’ approval of his liquidator’s fees was a serious breach.

(5)  There were also breaches of the Code, including ss 500.40 and 500.43 of Chapter E of the Code.

(6)  The excuses put forward by Mr Chan were lame and unconvincing. He sought to shift the blame to the contractor (ADGS) appointed by him, seemingly oblivious to the principle that he remained responsible for the work and should retain overall control of it, and later tried to blame other “unexpected” legal action for causing the delay in filing statements of account.

(7)  Many of the allegations he put forward were simply not valid defences at all, or utterly unsupported by the evidence submitted by him. Mr Chan’s competence in carrying out liquidation work was also in doubt, as shown by his ignorance of different legal requirements concerning the holding of creditors’ meetings which he had comprehensively breached.

(iii)  The Decision on Liability

33.  The hearing of the Complaints took place before the Committee on 16 January and 20 May 2019. By a decision dated 13 November 2019 (“the Decision on Liability”), the Committee found that the Complaints preferred by the Registrar against Mr Chan were all proved.

34.  In respect of the First Complaint, the Committee held that:

(1)  The meeting held on 14 December 2012 was irrelevant because the first annual meeting of the creditors should have been held within 3 months of the anniversary date of the winding up of the Company (ie between 26 November 2013 and 25 February 2014). Further, that meeting was in fact the first meeting of the creditors as stated in the gazette notice, and not an annual creditors’ meeting.

(2)  In respect of the alleged meeting on 4 October 2013, even if one assumed that it actually took place but nobody attended the meeting, (a) it was not “held” within 3 months of the anniversary date of the winding-up of the Company, (b) Mr Chan had failed to produce any minutes of the meeting which were required to be kept under r 130 of the Rules, and (c) there was no evidence that r 123(2) of the Rules was complied with.

(3)  The meeting of 10 June 2016 was invalid, because (a) it was not held within 3 months of the anniversary date of the winding-up of the Company, (b) the meeting was not gazetted pursuant to r 114(1) of the Rules, and (c) there were no minutes of the meeting pursuant to r 130 of the Rules.

(4)  Mr Chan’s case concerning the 3 meetings was also not credible as no sufficient evidence was produced to support his case.

(5)  Accordingly, the 1^st Complaint was established (see §§32-37 of the Decision on Liability).

35.  In respect of the Second Complaint, the Committee found, based on the Companies Registry’s records in respect of the statements of account filed by Mr Chan, that 6 sets of accounts were filed after the statutory deadline imposed by s 284 of the Ordinance and r 181 of the Rules. The Committee further considered Mr Chan’s attempts to justify his failure to file the accounts on time to be blatant excuses which could not absolve him of his duty (see §§40-41 and 47-50 of the Decision on Liability).

36.  In respect of the Third Complaint, the Committee considered that Mr Chan’s explanation for the late filing of the statements of account (namely, misunderstanding on the part of ADGS’s staff) showed that he had failed to retain overall control of the work delegated to ADGS, and Mr Chan’s breach was serious because the delay in filing the accounts would have deprived creditors of the Company of the opportunity to review the process of the liquidation on a timely basis. The Committee further considered that the timesheets prepared by ADGS and relied on by Mr Chan could not show that Mr Chan had retained overall control of the liquidation, because the timesheets merely showed that billing records had been kept. The Committee concluded that Mr Chan had breached s 500.53 of Chapter E of the Code (see §§55-57 of the Decision on Liability).

37.  In respect of the Fourth Complaint, the Committee found that there was a lack of approval by the creditors of the liquidators’ fees received by Mr Chan contrary to s 244 of the Ordinance, and considered that the lack of approval was aggravated by the failure to hold annual creditors’ meetings (as established under the First Complaint), which meant that the creditors were kept in the dark about the progress and development of the liquidation and the actual fees charged by Mr Chan. The Committee considered that Mr Chan’s breach of the law and the manner in which the liquidator’s fees were obtained would bring discredit to the accountancy profession, and thus Mr Chan had also breached ss 500.5(e) and/or 500.40 of Chapter E of the Code (see §§76-77 of the Decision on Liability).

38.  Finally, in respect of the Fifth Complaint, the Committee took into account that Mr Chan had (a) breached 3 provisions of the Ordinance (ie ss 244, 247 and 284) with regard to his duties as liquidator of the Company, and the breaches occurred repeatedly (in particular, he failed to hold 4 creditors’ annual meetings, and filed the statements of account late 6 times), (b) committed a major breach by failing to obtain prior approval from the creditors of the Company with regard to his liquidator’s fees which was a very serious breach of his obligations as the fees amounted to about 48% of the Company’s total assets, and (c) breached fundamental provisions of the Code (namely, ss 500.40 and 500.53 of Chapter E thereof). As a result of his misconduct, the creditors had been left in the dark over the course, progress and development of the liquidation. Mr Chan’s repeated failure to comply with relevant legal requirements demonstrated his disregard for his duties as liquidator, including the duty to protect the interests of the Company’s creditors and safeguard the creditors’ funds. His excuses for the breaches, which were wholly unsupported by evidence, showed a blatant disregard for his obligations. Mr Chan had also acted in breach of criminal law thereby bringing disrepute to the profession, and was actually prosecuted by the Registrar of Companies for a criminal offence. The Committee concluded that Mr Chan was guilty of professional misconduct under s 34(1)(a)(viii) of the PAO (see §§82-88 of the Decision on Liability).

(iv)  The Decision on Sanctions and Costs

39.  By a further decision dated 3 September 2020 (“the Decision on Sanctions and Costs”), the Committee ordered that:

(1)  Mr Chan be reprimanded under s 35(1)(b) of the PAO;

(2)  Mr Chan do pay a penalty of HK$100,000 under s 35(1)(c) of the PAO;

(3)  the practising certificate of Mr Chan be cancelled under s 35(1)(da) of the PAO with effect from the 42^nd day of the date of the order;

(4)  a practising certificate shall not be issued to Mr Chan for a period of 12 months under s 35(1)(db) of the PAO[8]; and

(5)  Mr Chan do pay the costs and expenses of and incidental to the proceedings of the Registrar and the Clerk to the Committee in the total sum of HK$215,187 under s 35(1)(iii) of the PAO.

NOTICE OF APPEAL/SUPPLEMENTAL NOTICE OF APPEAL

40.  By a Notice of Appeal dated 29 September 2020, Mr Chan appealed against the Decision on Liability and the Decision on Sanctions and Costs on the ground that the Committee “has erred in law in reaching its decision and also fails to consider material issues of law and evidence. The sanctions order was clearly wrong and clearly excessive and the costs order was also wrong and excessive”.

41.  By his Supplementary Notice of Appeal dated 22 February 2021, Mr Chan raises 2 specific grounds of appeal:

(1)  the Committee failed to ensure fairness to him by directing that no witness could be called at the hearing when the testimony of such a witness or witnesses could undermine the Registrar’s case and/or support his case; and

(2)  the Committee failed to consider or sufficiently consider all relevant circumstances which were beneficial to him when imposing the sanctions on him and/or the sanctions imposed were excessive.

42.  It can be seen, from Mr Chan’s Skeleton Submissions dated 25 April 2022 and Reply Submissions dated 17 May 2022, that he is relying upon the 2 specific grounds in the Supplementary Notice of Appeal, instead of the general ground(s) in the Notice of Appeal, for the purpose of the present appeal.

GROUND 1: THE COMMITTEE’S DIRECTION THAT NO WITNESS COULD BE CALLED TO GIVE EVIDENCE AT THE HEARING

43.  Under Ground 1, Mr Chan complains about the (alleged) direction given by the Committee on 14 September 2018 that no witness could be called at the hearing.

44.  The witnesses that Mr Chan proposed to call to give evidence were (i) Ms Amy Lo and (ii) Ms Joanne Cheng, who were representatives of two creditors (“Gar Shun” and “Tarong”) who had previously lodged complaints with the Institute against him in September 2016 and January 2017 respectively. Ms Lo complained that Mr Chan had failed to (a) properly convene and conduct creditor’s meetings of the Company, (b) seek proper approval for payment of liquidator’s fees, (c) promptly prepare the liquidator’s statement of accounts, (d) report the conduct of the liquidation of the Company, and (e) explain the basis of distribution to be made to the creditors of the Company, while Ms Cheng complained that Mr Chan had failed to (a) report the conduct/progress of the liquidation of the Company, (b) explain the nature of certain expenses in the liquidator’s statement of account, and (c) disclose the breakdown of income and expense of the liquidation to the creditors. Subsequently, the two creditors withdrew their complaints against Mr Chan in July 2017. It was Mr Chan’s position that the complaints by the two creditors were not genuine complaints but were steps taken “to force [him] to compromise and recover their debts fully”[9].

45.  Mr Chan considered that Ms Lo and Ms Cheng could give material evidence in relation to the 4^th Complaint, in particular on the issue of whether he had sought approval from the creditors in respect of the liquidator’s fees[10]. In the Checklist of the Respondent dated 8 August 2018, he said it was necessary for them to appear and give evidence at the hearing. In relation to the specific issue or issues in respect of which he considered Ms Lo and Ms Cheng could give evidence, Mr Chan stated -

“1. All the statements produced by the aforesaid witness are full of misrepresentation.

2. The intention of those witness [sic] in initiating this complaint case is merely to put pressure on respondent to 100% recover their debt.”[11]

Mr Chan also stated that he could produce witness statements of the witnesses prior to the hearing. He did not request for the issue of any summons to compel Ms Lo and Ms Cheng to attend the hearing.

46.  On the other hand, the Registrar did not intend to rely on the evidence of Ms Lo and/or Ms Cheng in support of the Complaints, and did not propose to call any witness to give evidence at the hearing[12].

47.  The parties attended a directions hearing before the Committee on 14 September 2018. At that hearing, the Committee gave, inter alia, the following directions:

“2 No witness is to be called at the forthcoming substantive hearing (‘Hearing’).

4 The Respondent is at liberty to make application to file additional evidence before the Hearing. The Complainant will be given an opportunity to respond to the Respondent’s application.”[13]

48.  Mr Chan argues that (a) Ms Lo and Ms Cheng could give crucial information on the resolution passed at the first meeting of the creditors regarding the remuneration to be paid to him as liquidator of the Company, and the failure to call the witnesses “has deprived the parties and the Disciplinary Committee the opportunity to examine the disputed fact”[14], and (b) the witnesses’ knowledge of the remuneration agreed to be paid to him would affect the Committee’s view that there was a continuous lack of approval of the liquidator’s fees paid to him[15].

49.  In our view, this ground of appeal is unsustainable.

50.  First, it is clear from the directions given by the Committee on 14 September 2018 that the Committee did not preclude Mr Chan from applying to adduce further evidence from Ms Lo and/or Ms Cheng, or to call them to give evidence at the hearing. Although the Committee did direct that no witness was to be called at the hearing, it also expressly provided that Mr Chan was at liberty to apply to file additional evidence before the hearing and the Registrar would be given an opportunity to respond to such application. This was in addition to the general power of the Committee under Rule 11 of the Disciplinary Committee Proceedings Rules (“the DCP Rules”) “in their discretion and at any stage of the proceedings, on request of the parties or on their own motion, … [to] make such directions for the conduct of the proceedings as they consider appropriate”.

51.  Second, the actual directions given by the Committee cannot be faulted in the circumstances of this case. In this regard, it is important to bear in mind that the disciplinary process of the Institute is intended to be based primarily on written submissions presented before the oral hearing, and the parties are required to fully set out their respective cases in writing (see Hong Kong Institute of Certified Public Accountants v Ng Kwok Ching [2021] HKCA 1821, at §24). Rule 17 of the DCP Rules provides that the parties shall submit written Cases setting out their respective submissions on all material matters and annexing all documentary evidence on which they rely, while Rule 22 provides that, unless the Chairman or the Committee orders otherwise, the parties’ Cases and Replies (including annexed documentary evidence) shall constitute submissions of the parties in the proceedings and evidence in the proceedings.

52.  In Schedule 1 (Form of Notice of Commencement of Proceedings) to the DCP Rules, it is stated that:

“The principal purpose of the oral hearing is to allow the Committee to question the parties and clarify matters. Whilst the procedures allow for oral submissions to be made by the parties, all relevant matters should have been fully addressed in the written submissions and it is therefore anticipated that oral submissions (to the extent they are necessary at all) will be brief.

The parties will be permitted to express their views as to whether witnesses should attend and give evidence by way of the checklist procedure. However, it will be up to the Committee to direct whether witnesses are to give evidence and, if so, in respect of which particular issues. The Committee will only generally direct witnesses to attend and give evidence when their evidence is necessary to resolve disputed issues of fact or the Committee requires expert evidence on a particular point.”

53.  Further, Schedule 3 (Form for Respondent’s Case) to the DCP Rules expressly states that:

“… To the extent the Respondent disputes the facts asserted by the Complainant, the Respondent shall here identify the facts in dispute, state what the Respondent considers to be the true position, and identify the evidence upon which the Respondent relies to prove such assertions, by reference to the documentary evidence where appropriate…

The Respondent shall annex to the Respondent’s Case all documentary evidence on which the Respondent relies (including, if the Respondent chooses to rely on such materials, any statements from witnesses), other than evidence already annexed to the Complainant’s Case …”

54.  In the present case, in Mr Chan’s Checklist, he stated that it was necessary to call Ms Lo and Ms Cheng as witnesses to give evidence at the hearing, and indicated that he could produce witness statements of the witnesses prior to the hearing. However, he failed to identify precisely the facts in dispute, or what relevant evidence Ms Lo and/or Ms Cheng could actually give in relation to any disputed facts. Neither did he ask for any summons to be issued to compel Ms Lo or Ms Cheng to attend the hearing to give evidence. Notwithstanding the Committee’s directions that no witness was to be called at the hearing, Mr Chan was expressly told that he was at liberty to apply to file additional evidence before the hearing and the Registrar would be given an opportunity to respond to such application. If and when Mr Chan was able to produce witness statements of Ms Lo and/or Ms Cheng, the Registrar would be able to assess whether there was any dispute of their evidence and whether it was necessary for them to be called as witnesses at the hearing. As it was, Mr Chan never produced any witness statements of Ms Lo and Ms Cheng. There was thus no basis for the Committee to grant general leave to Mr Chan for Ms Lo and Ms Cheng to be called as witnesses at the hearing. In any event, the decision under challenge is a case management decision made by the Committee. It is well established that the court would not interfere with a case management decision save in wholly exceptional circumstances, such as where the decision involves an error of law or principle, or will give rise to clear injustice, or is irrational, or is otherwise plainly wrong. No such exceptional circumstances exist here.

55.  Third, even up to now, Mr Chan has not been able to show what evidence Ms Lo and Ms Cheng can give in support of his case. The fact that “Gar Shun” and “Tarong” have withdrawn their complaints against Mr Chan cannot be taken to mean that Ms Lo and/or Ms Cheng would give evidence in his favour. Mr Chan has failed to show that he has suffered any prejudice by reason of the absence of Ms Lo and Ms Cheng as witnesses at the hearing.

56.  For the above reasons, Ground 1 is rejected.

GROUND 2: SANCTIONS AND COSTS

57.  Under this ground, Mr Chan complains that (i) the sanctions imposed on him were clearly excessive, and (ii) the Committee failed to consider or sufficiently consider relevant circumstances in his favour when making the Decision on Sanctions and Costs.

58.  In respect of the complaint that the sanctions imposed were clearly excessive, it is well established that the court would not interfere with the sanction imposed by a specialist tribunal whose members consist of members of the same profession such as the Committee in this case, unless the sanction is plainly wrong, excessive or disproportionate. So long as the sanction imposed falls within the reasonable range of options, the court will not intervene (see Registrar of the Hong Kong Institute of Certified Public Accountants v Leung Kam Man Victor, CACV 37/2016 (17 January 2017), at §§11-16).

59.  In the present case, the Committee took into account, inter alia, the following matters when deciding on the sanctions to be imposed on Mr Chan:

(1)  Mr Chan had repeatedly breached 3 provisions of the Ordinance (namely, ss 244, 247 and 284) with regard to his duties as liquidator of the Company over a substantial period of time;

(2)  Mr Chan’s failure to obtain prior approval of the Company’s creditors with regard to his liquidator’s fees was a very serious breach as the fees of HK$4.7 million amounted to about 48% of the Company’s total assets;

(3)  Mr Chan has acted in breach of fundamental provisions of the Code (namely, ss 500.40 and 500.43 of Chapter E);

(4)  as a result of his misconduct, the creditors were left in the dark about the progress and development of the liquidation of the Company;

(5)  Mr Chan made repeated excuses for his breaches in an attempt to shift the blame, and his explanations were wholly unsupported by evidence;

(6)  Mr Chan had shown blatant disregard for legal requirements during the 4-year period while he was liquidator of the Company;

(7)  his breaches of criminal law clearly brought disrepute to the accountancy profession, and his prosecution undoubtedly damaged the reputation of the profession; and

(8)  the totality principle.

60.  In our view, the sanctions imposed on Mr Chan fell well within the reasonable range of options open to the Committee. There is no basis for the Court to interfere with the sanctions imposed in this case on the ground of excessiveness.

61.  In respect of the complaint that the Committee failed to consider or sufficiently consider relevant circumstances in his favour, Mr Chan relies on the following matters:

(1)  there was no positive evidence that creditors’ interests were harmed in consequence of the matters complained of against him;

(2)  having regard to the fact that he is 65 years old and near the age of retirement, an order that no practising certificate be issued to him for 12 months would in effect force him to retire early and terminate his career; and

(3)  the Committee’s heavy reliance on his conviction was misplaced, in view of the fact that in another case involving an offence of dishonesty (theft), the Committee only awarded a sanction of reprimand plus a monetary penalty of HK$5,000 (Case No D-16-1162H).

62.  As for (1), the Committee considered that: “As a result of the Respondent’s misconduct, the creditors were left in the dark over the course of the liquidation period as no annual creditors’ meeting was held for 4 years, the liquidator’s statements of account were filed late, and no proper approval of the Liquidator’s Fees has been obtained. Thus, the creditors have been oblivious to the progress and development of the liquidation of LECO” (see §11 of the Decision on Sanctions and Costs). It is plain that the Committee was of the view that creditors’ interests were harmed in consequence of Mr Chan’s misconduct. We consider that the Committee was entitled to come to such view.

63.  As for (2) and (3), the Committee in fact gave consideration to the matters relied on by Mr Chan in the Decision on Sanctions and Costs:

“[15] On the other hand, the Committee considered the submission of the Respondent that the element of dishonesty was not involved in the 1^st - 4^th Complaints and the Respondent was born in 1957 and will turn 63 next year.

[16] Although the Committee notes that the Respondent was recently ordered that his practising certificate to be cancelled for 24 months in the disciplinary proceedings number D-17-1231P/1231C (which is currently under appeal by the Respondent), the sanction that he is to receive in these proceedings should properly reflect the seriousness of the complaints in these proceedings only.”

64.  It was a matter for the Committee to decide what weight, if any, to give to those matters. Mr Chan was 62/63 years of age at the time when the Committee gave the Decision on Liability and the Decision on Sanctions and Costs. There is no proper basis to suggest that an order that no practising certificate be issued to Mr Chan, a professional accountant, for a period of 12 months would in effect force him to retire early.

65.  In so far as Mr Chan relies on the sentence given in Case No D-16-1162H where dishonesty was involved, the circumstances there are vastly different from the present case. In that case, the respondent was convicted of the offence of theft of a mobile phone in a restaurant. He reported the conviction to the Institute, admitted the complaint against him, did not dispute the facts as set out in the complaint, and the checklist procedure and substantive hearing were dispensed with. In deciding on the sanction to be imposed, the Committee took into account the respondent’s expression of deep regret, and considered that a reprimand and a financial penalty would be adequate in the circumstances. As the Committee correctly reminded itself, “every case of professional misconduct is different based on facts and circumstances such that the previous decisions as to sanctions imposed are of reference value only” (see §7 of the Decision on Sanctions and Costs). We do not consider the sanction imposed in Case No D-16-1162H should be regarded as setting a reference point for the sanction to be imposed in the present case.

66.  In all, Ground 2 has no merits and is rejected.

DISPOSITION

67.  Mr Chan’s appeal is dismissed with costs to the Complainant. Taking into account the total lack of merits of the appeal, and the fact that the Institute is a public body defending this appeal in the general interests of the accountancy profession with funds contributed by its members, there is no reason why it should be out of pocket for the difference between costs on a party-and-party basis and costs on an indemnity basis (see Lie Han Ji v The Registrar of the Hong Kong Institute of the Certified Public Accountants, CACV 265/2009 (24 April 2012), at §§10, and 15-17). Accordingly, we make an order that Mr Chan shall pay the Complainant’s costs of and incidental to this appeal, to be taxed on an indemnity basis if not agreed.