SECURITIES AND FUTURES COMMISSION v. CHIU SIN MING, JASON

HCMA867/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.867 OF 1999

(ON APPEAL FROM WSC 27174 OF 1998)

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R E A S O N

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1. The appellant was convicted on 29 June 1999 after trial of one charge of aiding and abetting, counseling and procured another to act as a dealer's representative without that other being registered as a dealer's representative under the Securities Ordinance, contrary to sections 50(1) and (2) of the Securities Ordinance, Cap.333 and section 89 of the Criminal Procedure Ordinance, Cap.221. The appellant was fined the sum of $2,500 on 29 June 1999 and was ordered to pay the prosecutor's investigation costs of $18,687 together with the costs of the prosecution, estimated to be in the region of $350,608 with costs to be taxed by the Registrar of the District Court if not agreed. He appeals both the conviction and sentence and order for costs.

2. There are two grounds of appeal. Firstly, that the Securities and Futures Commission ("SFC") has not lawfully commenced the prosecution by laying an information against the appellant within the time fixed for the laying of such information, that is within 12 months after the first discovery thereof of the offence by the SFC, pursuant to section 148A of the Securities Ordinance, Cap.333. And secondly, that the SFC were wrongly permitted by the magistrate to adduce evidence that was hearsay in relation to the appellant. Further, this "evidence" was wholly inadmissible, and that the learned magistrate erroneously ruled that the "evidence" was admissible on a contingent basis as suggested by counsel for the respondent; that the contingency never arose and the "evidence" which was considerable in terms of quantity and quality was wholly irrelevant. Its admission in the circumstances of this case was a material irregularity. The respondent concedes that this appeal must succeed in respect of the first ground.

3. On 2 November 1998, the SFC laid three information against the appellant and one against one Li Chin Yu, Molly, the person in respect of whom the appellant was said to have aided and abetted, counseled and procured that she acted as a dealer's representative of Quest Stockbrokers (HK) Limited ("Quest") without her being registered as a dealer's representative under the Securities Ordinance.

4. In the information, it was alleged that the offence took place between 3 February 1997 and 29 April 1997. During the trial, the dates of the information were amended to read "from 31 January 1997 to 29 April 1997". The defendants were tried separately. The appellant being convicted whilst the other defendant, Ms Molly Li, was acquitted.

5. Section 148A of the Ordinance provides :

"1. Notwithstanding section 26 of the Magistrates Ordinance, Chapter 227 an 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 three years after the commission of the offence or within twelve months after the first discovery thereof by the prosecutor, whichever expires first.

2. This section should not apply in relation to an offence committed before the commencement of the Securities (Amendment) Ordinance 1991(6) of 1991."

6. The chronology of the events which gave rise to this prosecution revealed that the matter had been originally brought to the attention of the SFC by a letter of complaint dated 15 June 1997 from one Ms Wong. Annie Kwong, an SFC investigator, gave evidence that she had commenced investigation on 22 October 1997 when she received a number of documents from the Stock Exchange of Hong Kong ("SEHK"), including the original letter of complaint. These documents had been delivered by hand to the SFC under cover of a letter dated 22 October 1997 from Mr David Cheung, Assistant Director of Regulation of the SEHK, to Mr Paul Bailey, Senior Director of Enforcement. Ms Molly Li and the present appellant were interviewed and denied the existence of any contract of employment between them, and also the payment of any remuneration.

7. On 2 July 1998, the SFC issued a notice to banks to obtain bank documents of Molly Li and the appellant. On 13 July 1998, the Standard Chartered Bank and the Bank of China supplied bank statements of Molly Li and the appellant which showed that three cheques issued from the appellant's account had been deposited into the account of Molly Li.

8. The SFC's argument in respect of this matter was that until they had received the bank documents in July 1998, there had been no discovery of the fact of payment to Molly Li by Quest, a material fact which had to be proved.

9. It is without doubt that where a time limit is imposed for the commencement of proceedings or for the laying of an information, it is for the prosecution to prove, if necessary, that the prosecution has been brought or the information laid within the time limit. Having said that, however, it is also clear that where the facts of the alleged commission of offence emerged over a period of time, it may be sometimes difficult to determine the exact point at which the period within which prosecution must be brought for an information laid commences. In R. v. Yau Hing-ping and Another [1992] 1 HKCLR 188, Yang CJ held :

"The issue here is when it was that the [prosecutor] first discovered the offence. In other words, when it was that he was informed of the offence."

10. In R. v. Beaconsfield Justices, ex parte Johnson & Sons Limited (1985) 149 JP 535, Stuart-Smith J adopted the proposition of McNeill J in the earlier unreported case of John Charles Brookes v. Club Continental Limited, delivered on 13 October 1981, and held :

"I think it is sufficient for the purposes of this case, to say that the word 'discover' means no more in this context than that all the facts material to found the relevant charge under the Act were disclosed to the appropriate officer. The word 'discovery' here does not import any investigation by the officer. It is simply his knowledge, from disclosure to him in some way, of the material facts which would found the offence."

It is argued that the word 'discovery' does not infer any investigation, and that Beaconsfield is therefore authority for the proposition that knowledge of the material facts should not be confused with confirmation of those facts and that the time started to run from a date when the prosecutor had no serious doubts as to the veracity of the complainant who had produced the relevant documents. It was held that at that time the prosecution had all the relevant and material facts in hand for time to commence to run.

11. In the appeal before me, the original complaint was made prior to 2 November 1997 and thereafter interviews took place with the parties and relevant witnesses and with the appellant himself. Trading histories were provided and the appellant's commission rebates had been provided. Some of the documents relating to the dealings of Molly Li and the appellant's clients had been provided. This detail was all included in a report provided under cover of a letter dated 22 October 1997 from Mr David Cheung, Assistant Director of Regulation at the SEHK and delivered to the Senior Director of Enforcement of the SFC. This report clearly concluded that in the view of the SEHK, there was suspicion that Quest aided unregistered dealings by Molly Li. The appellant then faced a charge of aiding and abetting unregistered dealings by Molly Li. By that time, therefore, the appellant was suspected of the offence upon the basis of materials in the hands of the prosecuting authority rather more concrete than the claims of the original complainant. And it is from the delivery of the letter dated 22 October 1997 to Mr Paul Bailey of the SFC that the appellant argues that the period of one year within which the prosecution was to be brought commenced to run. With that I agree.

12. I am referred to the case of Morgans v. Director of Public Prosecutions [1999] 1 WLR 968, where Kennedy LJ stated :

"Mr Blackman contends that the words 'sufficient in the opinion of the prosecutor to warrant the proceedings' are merely descriptive of the evidence, and that the prosecutor would not have to form his opinion before time begins to run. I accept that submission because otherwise the prosecutor, in full possession of all relevant information, can prevent time from running simply by not applying his mind to the case."

In the matter before me, the prosecutor herein was in a position, upon receipt of the report from the SEHK, to apply his mind to the laying of charges and it was at that point, in my view, that the period of one year commenced to run.

13. The appeal against conviction is allowed. The orders for payment of a fine for investigation costs and the costs of the prosecution are set aside. The fine paid by the appellant be paid by the respondent to the appellant. The appellant have costs in the trial below, to be taxed by the Registrar of District Court unless agreed and the appellant to have the costs of this appeal, to be taxed if not agreed.