THE SECURITIES AND FUTURES COMMISSION v. NEW CHUAN KONG INVESTMENT CO. LTD AND ANOTHER

Magistracy Appeal No. 31 of 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPELLATE JURISDICTION

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J U D G M E N T

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1. I begin this judgment by thanking counsel for their assistance, and by saying that I would have liked to give judgment earlier. However, on the very day following the hearing of this appeal, I started presiding in a particularly long and involved murder trial which only finished on the day before yesterday.

2. This is an appeal by way of case stated. It comes before me from a prosecution brought in the Magistrate's Court. The Appellant was the prosecutor, the Securities and Futures Commission ("the SFC"). There are two respondents, who were the two accused. The 1st Respondent is a company by the name of New Chuan Kong Investment Co. Ltd ("the Company"); and the 2nd Respondent is one of its directors, a Mr Fok Hiu Tong ("the Director"). They each faced an information laid under the Leveraged Foreign Exchange Trading Ordinance, Cap. 451 ("the LFETO").

3. The offence in respect of which an information was laid against the Company was of carrying on a business of leveraged exchange trading without a licence, contrary to s.3(1)(a) and (2)(b). As for the Director, the offence in respect of which an information was laid against him was of aiding and abetting the Company in the commission of that offence or counselling and procuring it to commit the same, contrary to those provisions and s.89 of the Criminal Procedure Ordinance, Cap.221.

4. Those two informations came on together for hearing before J. Brennan Esq. sitting in the Eastern Magistracy on 4th December 1997. For reasons which I will come to in due course, the learned Magistrate dismissed both informations, acquitting both accused and awarding them costs. This appeal by way of case stated is brought by the SFC to challenge the correctness in law of those acquittals.

5. I should mention that each information took a separate case number in the Magistrate's Court and that the learned Magistrate has stated a separate case in respect of each respondent. But the two stated cases have been considered together in a single appeal, and this judgment covers both of them.

6. This matter first came before me in May last year upon a motion taken out by the respondents for a declaration that the appeal be dismissed and/or deemed abandoned by operation of s.110(3) of the Magistrates Ordinance, Cap.227, for default in completing a recognisance within the prescribed time. For the reasons which I gave in the judgment which I delivered on 27th May 1998 and need not repeat here, I dismissed the respondents' motion. That left the way clear for the SFC's appeal to proceed. For one reason or another, there has been some delay in its coming on for hearing. Eventually it came on for hearing before me on 25th January 1999; and I am now delivering my judgment in this appeal.

7. I will now deal with why the learned Magistrate dismissed the informations and acquitted the respondents.

8. It is an undisputed fact that no information was laid or complaint made in relation to either respondent within the time mentioned in s.67 of the LFETO, namely "any time within 3 years after the commission of the offence or within 12 months after the first discovery thereof by the prosecutor, whichever period expires first."

THE SFC'S ARGUMENTS

9. The SFC's arguments are set out in the stated cases.

10. In the case which he stated in respect of the Company, the learned Magistrate says:

"5. It was contended on the part of the [SFC] that:-

(1) section 67 of the LFETO applies only to summary offences and does not apply to indictable offences whether triable summarily or on indictment;

(2) an offence under sections 3(1)(a) and 3(2)(b) of the LFETO is an indictable offence which is triable summarily or on indictment; and

(3) accordingly, section 67 of the LFETO does not apply to an offence under sections 3(1)(a) and 3(2)(b) of the LFETO.

6. I, however, being of the opinion that section 67 of the LFETO applied to summary and indictable offences (whether triable summarily or on indictment) and in particular, to an offence under sections 3(1)(a) and 3(2)(b) of the LFETO, ruled I had no jurisdiction to hear the summons in ESS14948/97 since the information was time barred by virtue of section 67 of the LFETO and determined to dismiss the information, to find the defendant not guilty and to acquit the defendant and to award costs to the defendant, to be taxed by the Registrar of the District Court."

11. Exactly the same thing is said in the case which the learned Magistrate stated in respect of the Director, save that the reference was to the summons in ESS14949/97, being the one against the Director rather than ESS14948/97 which is the one against the Company.

THE COMPANY AND THE DIRECTOR'S ARGUMENTS

12. The arguments presented on behalf of the respondents are set out in their skeleton argument which consists of six short paragraphs which I will set out in full:

"1. The Respondents rely on the argument made by Leading Counsel before the Learned Magistrate.

2. S3 and S67 Leveraged Foreign Exchange Trading Ord Cap 451 need to be examined.

3. S3(2) divides jurisdiction into 'conviction upon indictment' and 'on summary conviction'.

4. An indictable offence may be determined summarily. But an indictable offence tried summarily is commenced by a charge not a summons.

5. As the SFC commenced the proceedings by a summons (which can only ever be a pure summary offence) the prosecution in this case did not lay an indictable offence which they elected to be heard summarily but a pure summary offence.

6. As admitted by the Appellant if the proceedings instituted against the Respondents' are a pure summary offence then the summonses were laid out of time. Therefore the Learned Magistrate was entirely correct."

THE LEGISLATION

13. Section 67 of the LFETO provides that:

"Notwithstanding section 26 of the Magistrates Ordinance (Cap. 227), any information or complaint relating to an offence under this Ordinance may be tried if it is laid or made, as the case may be, at any time within 3 years after the commission of the offence or within 12 months after the first discovery thereof by the prosecutor, whichever period expires first."

Section 26 of the Magistrates Ordinance provides that:

"In any case of an offence, other than an indictable offence, where no time is limited by any Ordinance or statute for making any complaint or laying any information in respect of such offence, such complaint shall be made or such information laid within 6 months from the time when the matter of such complaint or information respectively arose."

14. As can be seen from s.26 of the Magistrates Ordinance, the time limit which it lays down does not apply to indictable offences. Section 2 of the same ordinance provides that unless the context otherwise requires "indictable offence" means any crime or offence for which a magistrate is authorised or empowered or required to commit the accused person for trial before the court."

15. Sections 91 and 92 of the Magistrates Ordinance provides for the summary trial of indictable offences.

Section 91 provides that:

"Whenever any person is accused before a special magistrate of any indictable offence except an offence specified in the Second Schedule, the magistrate, instead of committing the accused for trail before the court, may deal with the case and convict the accused summarily, and on conviction may sentence the accused to imprisonment for 6 months and to a fine of $50,000.

Provided that nothing in this section shall affect the provisions of section 94 or any lesser punishment specifically provided in any other Ordinance."

Section 92 provides that:

"Whenever any person is accused before a permanent magistrate of any indictable offence except an offence specified in Part I of the Second Schedule, the magistrate, instead of committing the accused for trial before the court, may deal with the case and convict the accused summarily, and on conviction may sentence the accused to imprisonment for 2 years and to a fine of $100,000.

Provided that nothing in this section shall affect any greater or lesser punishment specifically provided for in any other Ordinance."

16. Therefore, subject to the exception laid down by ss. 91 and 92, indictable offences are triable either way: on indictment or summarily.

17. Looking at the Second Schedule to the Magistrates Ordinance, one sees that it does not include any offence under the LFETO. And indeed s.3 of the LFETO expressly contemplates the trial of offences under the section either way, for it reads:

"(1) No person shall, whether as principal or agent -

(a) carry on a business of leveraged foreign exchange trading; or

(b) describe himself, or otherwise hold himself out, so as to indicate, or be reasonably construed to indicate, that he is carrying on such a business,

unless one of the conditions mentioned in section 4 is satisfied.

(2) Any person who contravenes subsection (1) commits an offence and is liable -

(a) on conviction upon indictment to a fine of $10,000,000 and in addition in the case of an individual person, to imprisonment for 7 years; or

(b) on summary conviction to a fine of $500,000 and in addition in the case of an individual person, to imprisonment for 6 months."

THE AUTHORITIES

18. There are a number of Hong Kong authorities bearing on what I have to decide.

19. The first of these is Pickering J's unreported decision in AG v. Wong Chi Keung & Ors, Criminal Appeal No 1105 of 1974, 28th February 1975. Pickering J, hearing an appeal by way of case stated from the Magistrate's Court, had to consider the effect of s.26 of the Magistrates Ordinance. At the top of p.4, he said:

"The offences are indictable offences and they remain indictable offences despite any decision that they be tried in a summary manner, so that when s.26 excepts indictable offences that exception embraces all such offences whether tried upon indictment or tried summarily."

Towards the bottom of the same page, he said:

"As I see it even if the words 'other than an indictable offence' had been omitted from s.26 the time limit laid down by that section could not apply to indictable offences for the section occurs in Part II of the Ordinance handed "Procedure In Respect Of Summary Offences" and the offences with which we are concerned are not summary offences but indictable offences, the fact that they are triable summarily not robbing them of that character. However the words do appear in s.26 thus making assurance doubly sure."

20. Next I come to O'Connor J's unreported decision in R. v. Chi Wing Fan, Magistracy Appeal No. 633 of 1985, 24th September 1985. O' Connor J held at p.22 that s.26 of the Magistrates Ordinance "only applies to offences triable solely summarily."

21. Finally I come to the Court of Appeal's decision in R. v. Wong Chi Man [1990] HKC 196, a magistracy appeal referred by the High Court to the Court of Appeal. The offence in question was common assault. Kempster JA delivered the judgment of the court. He noted that s.40 of the Offences Against the Person Ordinance, Cap. 212, made common assault "a misdemeanour triable summarily". Then he noted that s.89(3) of the Interpretation and General Clauses Ordinance, Cap. 1, provided that misdemeanours triable summarily were "triable either on indictment or summarily." And he then said:

"Accordingly, the offence of which the appellant was convicted was an indictable misdemeanour and not, therefore, requiring complaint or information to be made or laid 'within six months from the time when the matter of such complaint or information respectively arose', pursuant to s.26 of the Magistrates Ordinance."

22. The decisions of O' Connor J and the Court of Appeal to which I have just referred are cited - accurately in my judgment - for this succinctly stated proposition in "Andrew Bruce: Criminal Procedure, Trial on Indictment" (1997) at p.I 105, para 401: "where an indictable offence is triable summarily, section 26 [of the Magistrates Ordinance] does not impose a time limit even where the matter proceeds summarily."

23. The position in England is worth looking at. Section 127 of the Magistrates' Courts Act 1980 is the English equivalent of s.26 of the Magistrates Ordinance here. The first two subsections of s.127 of the 1980 Act provide that:

"(1) Except as otherwise expressly provided by any enactment and subject to subsection (2) below, a magistrates' court shall not try an information or hear a complaint unless the information was laid, or the complaint made, within 6 months from the time when the offence was committed, or the matter of complaint arose.

(2) Nothing in -

(a) subsection (1) above; or

(b) subject to subsection (4) below, any other enactment (however framed or worded) which, as regards any offence to which it applies, would but for this section impose a time-limit on the power of a magistrates' court to try an information summarily or impose a limitation on the time for taking summary proceedings,

shall apply in relation to any indictable offence."

24. For an English provision of the same nature as s.67 of the LFETO here, it is useful to look at s.731(2) of the Companies Act 1985 which reads:

"Notwithstanding anything in section 127(1) of the Magistrates' Courts Act 1980, an information relating to an offence under the Companies Acts which is triable by a magistrates' court in England and Wales may be so tried if it is laid at any time within three years after the commission of the offence and within 12 months after the date on which evidence sufficient in the opinion of the Director of Public Prosecutions or the Secretary of State (as the case may be) to justify the proceedings comes to his knowledge."

25. In R. v. Thames Metropolitan Stipendiary Magistrate, Ex Parte Horgan [1998] 2 WLR 799 the Divisional Court was concerned with the result reached when s.731(2) of the 1985 Act was read together with s.127 of the 1980 Act: just as I am concerned in the present case with the result reached when s.67 of the LFETO is read together with s.26 of the Magistrates Ordinance. The material circumstances of that case and the circumstances of the case before me are the same.

26. What the Divisional Court decided and why it so decided may be taken from the headnote (at pp 799-800):

"An information was laid against the defendant alleging that he had failed, as a director of a company, to preserve accounting records contrary to section 222(6) of the Companies Act 1985, which was an offence triable either way. It was accepted that the information had not been laid within 12 months of evidence sufficient in the opinion of the Director of public prosecutions to justify the proceedings coming to the director's knowledge, as required by section 731(2) in respect of an offence "triable by a magistrates' court." The metropolitan stipendiary magistrate, relying on section 127 of the Magistrates' Courts Act 1980, held that he had jurisdiction to try the defendant on the basis that section 731 applied solely to offences which were triable only summarily.

On the defendant's application for judicial review of the magistrate's decision:-

Held, dismissing the application, that section 731(2) of the Companies Act 1985 and section 127 of the Magistrates' Courts Act 1980 should be rend together, and since, by virtue of section 127(2) of the Act of 1980, section 127(1) applied exclusively to offences triable only summarily, on their true construction the words "triable by a magistrates' court in section 731(2) of the Act of 1985 did not apply to offences triable either way; that section 127(2) of the Act of 1980 in any event excluded the application of section 731(2) in indictable offences, which included offences triable either way; that the effect of section 731(2) was therefore to extend the time limit in respect of offences under the Act of 1985 which were triable only summarily but not to create time limits for offences triable either way; and that, accordingly, the information had not been laid out of time and the magistrate had jurisdiction to hear it."

THE "PURE" SUMMARY OFFENCE ARGUMENT

27. What remains is the respondents' argument that the SFC has, by proceeding by way of summons rather than charge, laid the offence under s.3(1)(a) and (2)(b) of the LFETO as a "pure" summary offence rather than an indictable offence triable either way: so that the six-month time limit contained in s.26 of the Magistrates Ordinance applies even though the offence is actually an indictable offence triable either way.

28. In my view, this argument is unsound. As I have already pointed out, the legislation makes this offence an indictable one triable either way. I do not think that it can be turned into something else by the way in which the prosecution is initiated even assuming that it had been initiated in a procedurally inappropriate manner.

29. What is more, I do not accept that these prosecutions have been initiated in a procedurally inappropriate manner. It is asserted by the respondents that an indictable offence tried summarily is commenced by a charge not a summons. But what does the Magistrates Ordinance say as to this? Part II of the Ordinance is headed - and deals with - "Procedure in respect of Summary Offences". Part III of the Ordinance is headed - and deals with - "Indictable Offences". Section 8(1) in Part II provides that:

"In every case where a complaint is made to or an information laid before a magistrate or an officer of a magistrate's court who is authorized in writing for that purpose by a magistrate, being a complaint or information in respect of which a magistrate has power to convict summarily or to make an order for the payment of money or otherwise, it shall be lawful, subject to this Part, for a summons to be issued by a magistrate or an officer of a magistrate's court who is authorized under this subsection."

And s.76 in Part III provides that:

"The provisions with reference to summonses contained in Part II in relation to offences punishable on summary conviction shall apply equally, mutatis mutandis, to summonses under this Part."

30. I should mention that counsel for the respondents did not suggest that the position was affected by s.65(1) of LFETO which provides that where the SFC prosecutes an offence in its own name, the offence shall be tried before a magistrate as an offence which is triable summarily. The provisions creating the offences alleged against the respondents make them offences triable either way. This is not altered by the fact that they were tried summarily as indeed they had to be since they were being prosecuted by the SFC in its own name. Section 67 of the LEFTO and s.26 of the Magistrate's Ordinance deal with offences in general terms and not with how any particular instance is eventually dealt with: whether by being prosecuted in the name of a particular body or in a particular court. The concern is with the offence as committed (if committed) and not with what happens afterwards. Otherwise every offence triable either way could be said, once it is prosecuted in the Magistrate's Court, to be triable summarily only, since that is the only way in which it can be tried is that court. But the cases show that an offence does not cease to be an offence triable either way for time limit purposes just because it is prosecuted before a magistrate who can of course only try it summarily.

THE EFFECT OF SECTION 67

31. In my judgment, the effect of s.67 of the LFETO, read together with s.26 of the Magistrates Ordinance is as follows. In regard to any offence under the LFETO triable only summarily (namely sections 14(7), 23(10), 47(6), 48(2) and 63(7)) the time limit for making a complaint or laying an information is not the six-month period provided for by s.26 of the Magistrates Ordinance but is instead the 3 years or 12 month-period provided for by s.67 of the LFETO. But in regard to offences triable either way, on indictment or summarily, there is no time limit: neither under the Magistrates Ordinance generally nor under the LFETO specifically. There is of course the jurisdiction to prevent abuse of process by staying stale prosecutions which by reason of delay are incapable of being tried fairly. But that is a different matter and not one with which I am concerned in this appeal.

ANSWERS TO THE QUESTIONS POSED IN THE STATED CASES

32. I answer the questions posted by the learned Magistrate for the opinion of the Court as follows:

(1) Question: Whether I was correct in construing section 67 of the LFETO as applying to summary and indictable offence (whether triable summarily or on indictment) and in particular, to an offence under sections 3(1)(a) and 3(2)(b) of the LFETO;

Answer: You were incorrect.

(2) Question: Whether I was correct in ruling that section 67 of the LFETO only extends the period within which proceedings under the LFETO may be brought from 6 months, as specified in section 26 of the Magistrates Ordinance (Chapter 227), to 3 years or 1 year after discovery of the offence, whichever period expires first, for all offences contained in the LFETO and not purely for summary offences contained in the LFETO.

Answer: You were incorrect.

(3) Question: Whether I was correct in ruling that section 67 did not relate to purely summary offences because it was not so specifically stipulated.

Answer: You were incorrect.

(4) Question: Whether I should have found that the express reference to section 26 of the Magistrates Ordinance (Chapter 227) in section [67] clearly showed an intention to require section 67 to relate purely to summary offences.

Answer: You should have so found.

(5) Question: Whether I was correct in ruling that I must give effect to the grammatical and ordinary or, where appropriate, the technical meaning of words in the general context of the LFETO and must also determine the extent of general words with reference to that context and therefore section 50 of the Securities (Disclosure of Interest) Ordinance (Chapter 396), section 148A(1) of the Securities Ordinance (Chapter 333), section 7B of the Protection of Investors Ordinance (Chapter 335), section 8 of the Commodities Exchanges (Prohibition) Ordinance (Chapter 82) and section 114A(1) of the Commodities Trading Ordinance (Chapter 250) were irrelevant to the interpretation of section 67 of the LFETO.

Answer: Your ruling was wrong. The correct ruling does not however depend on any of those other Ordinances.

(6) Question: Whether I was correct in my determination to dismiss the information, to find the defendant not guilty and to acquit the defendant.

Answer: You were incorrect.

RESULT

33. In the result, I allow this appeal and, pursuant to my powers under s.119(1)(d) of the Magistrates Ordinance, reverse the learned Magistrate's decision and remit the matter to him with my opinion thereon as expressed above, for him to try the case in accordance therewith.