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

FACC No. 6 of 1999

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 6 OF 1999 (CRIMINAL)

(ON APPEAL FROM HCMA 31 OF 1998)

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J U D G M E N T

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Chief Justice Li :

1. I have read the judgment of Mr Justice Ching PJ in draft and agree with it.

Mr Justice Litton PJ :

2. I agree with Mr Justice Ching PJ's judgment, and would add only a few words to his observations concerning the second certified question.

3. The question turns upon the proper construction of s.67 of the Leveraged Foreign Exchange Trading Ordinance ("LFETO"). If that section were free-standing, the magistrate would have been right to conclude that he had no jurisdiction to hear the information, it having been laid more than 12 months after the first discovery of the offence by the prosecution. But the opening words "Notwithstanding section 26 of the Magistrates Ordinance" make it clear that it is not free-standing. What the section does in effect is to enlarge the time limit of 6 months in s.26 of the Magistrates Ordinance for the laying of informations in relation to summary offences under the LFETO. And when one turns to s.26 itself it can be seen that the time limit of 6 months does not apply to indictable offences. Without doubt the offence of carrying on a business of leveraged foreign exchange trading in contravention of s.3(1)(a) of the LFETO is an indictable offence triable summarily, and is outside the scope of section 26 altogether. It follows that the judge was right to have reversed the magistrate on this point - if she had the jurisdiction to do so.

4. We end up with this ironic situation on this appeal: The magistrate erred when he found that he had no jurisdiction to hear the informations before him. The judge in turn erred when she found she had the jurisdiction to entertain the SFC's appeal.

5. As to what the precise legal consequences flowing from this might be, we have not been addressed by counsel and it would not be appropriate to say any more about it.

Mr Justice Ching PJ :

6. By section 65(1) of the Leveraged Foreign Exchange Trading Ordinance, Cap. 451, (the LFETO) it is provided that,

The Commission referred to is defined by section 2(1) as being the Securities and Futures Commission (the SFC). It brought two prosecutions in the Magistrates Court. The facts and the law in each were the same. In each of the Courts below and before this Court the summonses were therefore dealt with as one. The first was against the 1st appellant for having carried on a business of leveraged foreign exchange trading without being licensed during the period 1 August 1995 to 30 April 1996 contrary to sections 3(1)(a) and 3(2)(b). The other was against the 2nd appellant for aiding, abetting, counselling and procuring the offence alleged against the 1st appellant contrary to the same two sections. The informations were laid on 5 August 1997, and the summonses were issued on the same day.

7. When the summonses came before the magistrate the appellants took a preliminary objection that the prosecutions were out of time. Section 26 of the Magistrates Ordinance, Cap. 227, provides that,

Section 67 of the LFETO provides, however, that,

The SFC conceded that if these time limits were applicable it was out of time. Put shortly, the magistrate found that section 67 applies to all offences under the LFETO whether they be summary offences or indictable offences whether triable summarily or upon indictment. He therefore found that he had no jurisdiction to hear the summonses and dismissed them.

8. The SFC then applied to the magistrate to state a case on a point of law under section 105 of the Magistrates Ordinance. In accordance with established practice, the magistrate asked the SFC to draft the case for his approval. This it did, following the specimen form which is to be found as Form 97 of the Magistrates (Forms) Rules. It included paragraph 2 of the specimen form which, so far as is relevant to the present appeal, includes the words,

The magistrate required a few amendments to the draft. These were effected and it was returned to the magistrate who signed it and delivered it to the SFC still containing the words to which reference has been made. When the case stated was sent to the appellants they asked the SFC to provide them with copies of the recognizances. The SFC replied that they had entered into none, whereupon the appellants moved the judge in the Court of First Instance to declare that the SFC was deemed to have abandoned its appeal. The motion was based upon sections 110(1) and 110(3) of the Magistrates Ordinance which provide that,

Subsection (4) provides for the payment of fees in relation to the stating of the case and subsection (5) provides that the section is not to apply where the application is made by or on behalf of the 'Attorney General', now to be read as 'the Secretary for Justice.'

9. The judge in the Court of First Instance refused the motion of the appellants with costs. She held that section 110(3) contemplates the existence of an order to enter into a recognizance, there was no such order and therefore there was no recognizance into which the SFC could enter. She rejected the submission that the magistrate had been 'wrong-footed' by the inclusion of the words in paragraph 2 of the draft case that the SFC had duly entered into the recognizance. Subsequently, the appeal by way of case stated was heard by the same judge. The only question to be decided in those proceedings was the application of the time limitation provided in section 67 of the LFETO. The judge found that the magistrate was wrong in his conclusion and remitted the summonses back to him for them to be tried. She ordered the appellants to pay the costs of those proceedings. She then refused an application to certify that points of law of great and general importance were involved in her decision under section 32(2) of the Hong Kong Court of Final Appeal Ordinance, Cap. 484.

10. Upon an application to the Appeal Committee of this Court leave to appeal against the decisions in both the appellants' motion and in the appeal of the SFC was given and two questions were certified, namely,

11. The requirement to give a recognizance applied to the SFC. It was a mandatory requirement and no provision exists empowering any magistrate or other court to waive it. One of the submissions put to us by Mr Ismail, who appeared for the SFC, was that the magistrate clearly has a discretion as to the amount of the recognizance. He argued that it would become an absurdity if, in properly exercising that discretion, the magistrate were to order so low an amount that effectively no security was ordered at all. Cases such as that may occur. The argument fails, however, for a number of reasons. First, as already noted, the wording of section 110(1) is mandatory and there exists no provision for a waiver. Secondly, one of the purposes of the recognizance is to ensure that the appellant prosecutes his appeal with diligence. Thirdly, the importance of the recognizance is emphasised by the provisions of section 110(3) which, on any reading, deems the appeal to be abandoned if default is made in entering into the recognizance. Finally, it may be noted that in any event there can be no question of waiver in the present appeal. In the face of the words in paragraph 2 of the case stated both as drafted and as signed it would appear that the magistrate thought, for whatever reason, that a recognizance had in fact been provided by the SFC but this is immaterial.

12. The importance of the recognizance is established by authorities both in Hong Kong and in England. The decision in Mok Kit Wan v. R (unreported, Criminal Appeal No. 32 of 1947) is referred to in Lam Kuen v. R [1954] HKLR 216. In the former, as set out at page 218 of the latter, Gould J held that the then provisions in section 118(E)(2) of the Magistrates Ordinance were mandatory. That section read,

In the course of his judgment Gould J, is reported to have said of the provisions,

These words were endorsed in Lam Kuen and I fully endorse them here. Of the English decisions it is only necessary to mention Walker v. Delacombe [1894] 63 LJMC 77. There the relevant provision was that a case was to be stated 'after the recognizance had been entered into.' The recognizance was entered into the day after the case was stated and it was held that the procedure laid down by the legislature had not been fulfilled with the result that the Court could not deal with the case.

13. An appellant, other than the Secretary for Justice, wishing to avail himself of an appeal by way of case stated must obviously comply with the necessary conditions. It is not for the magistrate to remind the applicant to apply for the fixing of a recognizance. It may well be, especially in the case of an unrepresented appellant, that the magistrate through his clerk may take it upon himself to remind the appellant that he needs to do so but there is no duty upon him to do this. The fact that a magistrate or his clerk may have mistakenly thought that a recognizance had already been entered into or had even overlooked the question is irrelevant. It is the appellant's duty to ensure that the provisions of the Ordinance have been fulfilled. The judge in the Court of First Instance was wrong to hold that because no recognizance had been ordered there was no recognizance into which the SFC could enter. That would be to hold that the SFC could take advantage of its own default and that, in turn, would be to hold that the provisions in section 110(1) are not mandatory. In these circumstances the decision of the judge to refuse relief on the appellants' motion must be reversed with costs both here and below.

14. That would be enough to dispose of these appeals for it follows that the summonses ought never to have been remitted to the magistrate for trial upon the hearing of the case stated. If the judge had come to the correct determination upon the appellants' motion the case stated would have become otiose. The second question certified, however, is one of great importance and it is right that we should give our considered finding upon it. Section 14A of the Criminal Procedure Ordinance, Cap. 221, provides that,

Two things are to be noted from this. The first is that there are only two types of offences, namely those which are summary and those which are indictable. The category of the offence is established upon its commission. Secondly, while summary offences can only be tried in a summary way, indictable offences may be tried either summarily or upon indictment. Indictable offences are sometimes tried summarily when, for instance, the gravity of the acts does not call for the process of, or heavier penalty that may be imposed on, indictment. It has been clearly and rightly established that the manner of trial does not determine whether the offence is a summary one or one which is indictable. So, in A.G. v. Wong Chi Keung (unreported, Criminal Appeal No. 1105 of 1974), the Court was concerned with indictable offenses of assault occasioning bodily harm which were brought before a magistrate. The magistrate found that, as the informations were laid more than six months after the offence, he had no jurisdiction. On appeal by way of case stated to the Supreme Court, Pickering J, said,

Among the arguments advanced to us by Mr McCoy, who appeared for the appellants, was one based on the fact that the prosecutions were brought by the SFC. As the SFC can only prosecute offences in a summary way, he argued that the offences must be summary ones. That is not an argument that can be accepted.

15. Section 3 of the LFETO provides that,

Having regard to the provisions of section 114A of the Criminal Procedure Ordinance, this clearly creates an indictable offence which may be tried summarily. Subsection (2) falls well within the words in section 114A, '... the offence is declared to be ... punishable either on summary conviction or on indictment, the offence shall be triable either on indictment or summarily'. Mr McCoy advanced to us an argument, albeit faintly, that since each of the summonses alleged the offences to be contrary to sections 3(1)(a) and 3(2)(b) those offences must be summary ones. The answer to that is that the manner of trial does not determine the category of the offence.

16. There is no time limit generally imposed for the prosecution of indictable offences. Given that section 3 of the LFETO creates an indictable offence the answer to the second certified question depends entirely upon the proper construction of section 67 of the same Ordinance. It begins with the words, 'Notwithstanding section 26 of the Magistrates Ordinance ....' That section deals exclusively with offences other than indictable offences which are mentioned only to remove them from its ambit. That being so, the opening words of section 67 show that it, also, is dealing with offences other than indictable offences. It is also to be noted that it appears to have been the policy of the legislature to extend the time for prosecutions under the LFETO having regard to the complexities usually involved. Any construction of section 67 that it includes both summary and indictable offences necessarily means that a time limit has been introduced to the more serious offences fit to be tried on indictment, which will presumably be even more complex, when none existed before. It would also mean that the gravity of cases fit to be tried summarily and those fit to be tried upon indictment has been equated. That construction cannot be accepted. The Judge was right in her conclusion.

17. The first question certified must be answered in favour of the appellants and the appeal is upheld on that ground with costs both here and upon their application on motion to the judge in the Court of First Instance. They fail on the second question certified but, on the basis that the motion should have been granted and that the case stated should never have been heard, they will also have their costs on the case stated. They have not sought an order for their costs in the magistracy and none is ordered.

Mr Justice Nazareth NPJ :

18. I agree with the judgment of Mr Justice Ching PJ.

Lord Hoffmann NPJ :

19. I agree.

Chief Justice Li :

20. The Court unanimously allows the appeal with costs both in this appeal and in the proceedings before the Court of First Instance.